迪拜- 律师| 代表处 - STA 是一家国际性的律师事务所,为美国及 全球的客户包含 中东https://www.stalawfirm.com/ch.html 迪拜- 律师| 代表处 - STA 是一家国际性的律师事务所,为美国及 全球的客户包含 中东 - 在为客户提供不同法律执业领域的优质服务. 我们的客户群体就是一个全球商业知名企业榜,他们包括了大多数的FT100强和全球财富500强公司,以及中国本土的大中型国有及民营企业等.chCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[Insurance Developments in KSA]]> Insurance Developments in KSA

In 2023, the Saudi Arabian insurance sector underwent significant transformations driven by regulatory reforms, technological advancements, and strategic initiatives aimed at fostering growth, stability, and competitiveness. These developments underscore the Kingdom's commitment to modernizing its insurance industry and aligning it with international standards while supporting broader economic diversification goals outlined in Vision 2030.

Establishment of the Insurance Authority (IA)

A pivotal moment in the sector was the establishment of the Insurance Authority (IA) in August 2023, marking a shift from the previous regulatory oversight by the Saudi Arabian Monetary Authority (SAMA). The IA, an independent regulator, assumed responsibility for regulating and supervising the insurance sector, aiming to enhance effectiveness, stability, and consumer protection. This move signified a proactive approach towards strengthening regulatory supervision and fostering a conducive environment for industry growth.

Adoption of International Financial Reporting Standards (IFRS)

Another noteworthy development was the adoption of International Financial Reporting Standards (IFRS) 17 Insurance Contracts and IFRS 9 Financial Instruments by the Saudi insurance sector. This alignment with international accounting standards, effective from January 2023, aimed to improve transparency, comparability, and accuracy in financial reporting, thereby enhancing investor confidence and facilitating global market integration.

Gradual Reinsurance Cession

The implementation of a mechanism for gradual reinsurance cession to the local reinsurance market, mandated by SAMA, aimed to bolster the domestic reinsurance sector and enhance retention capacity. This phased approach, commencing in January 2023, demonstrated a strategic initiative to strengthen the local market while ensuring adequate risk management practices among insurance companies.

Regulatory Amendments and Initiatives

Throughout 2023, several regulatory amendments and initiatives were introduced to modernize the insurance landscape and address evolving market dynamics:

  • Amendments to Compulsory Motor Insurance Policy: Revisions to the Unified Compulsory Motor Insurance Policy aimed to streamline claim settlement procedures, enhance consumer protection, and accommodate industry developments.
  • Licensing of Foreign-Owned Health Insurance Branch: The licensing of the first foreign-owned health insurance branch, Cigna Worldwide Insurance Company, underscored efforts to attract foreign investment and enhance sector competitiveness.
  • InsurTech Rules: The approval of InsurTech Rules by SAMA in July 2023 aimed to regulate insurance technology activities, fostering innovation while safeguarding consumer rights and compliance with regulations.
  • Licensing of Insurance Aggregators: The licensing of insurance aggregation companies aimed to promote competition and provide consumers with a wider range of insurance products and services.
  • Marine Insurance Coverage Instructions: Issuance of Marine Insurance Coverage Instructions aimed to enhance the regulatory framework for marine insurance, ensuring adequate coverage and benefits while addressing industry requirements.
  • Licensing of Online Reinsurance Brokerage: The licensing of ReTech Reinsurance Brokers Co. to provide online reinsurance brokerage services reflected support for technological advancements and innovative financial solutions in the insurance sector.
  • Amendments to Comprehensive Motor Insurance Rules: Revisions to Comprehensive Motor Insurance Rules aimed to expand coverage and protect the rights of beneficiaries, catering to diverse consumer needs.
  • Merger between Insurance Companies: The merger between Alinma Tokio Marine Company and Arabian Shield Cooperative Insurance Company highlighted a trend towards consolidation in the sector, aiming to create stronger entities capable of meeting market expectations.
  • Localization of Insurance Sales Jobs: The decision to localize all sales positions in insurance products aimed to empower national competencies and contribute to Saudization efforts, aligning with broader national strategies for economic development and employment.

Conclusion

The year 2023 witnessed a series of transformative developments in the Saudi Arabian insurance sector, driven by regulatory reforms, technological advancements, and strategic initiatives aimed at fostering growth, stability, and competitiveness. From the establishment of the Insurance Authority to the adoption of international accounting standards and the introduction of regulatory amendments and initiatives, the sector demonstrated resilience and adaptability in navigating evolving market dynamics. As the Kingdom continues its journey towards economic diversification and modernization under Vision 2030, the insurance sector remains poised for further innovation and growth, supported by a robust regulatory framework and a commitment to excellence.

 

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Mon, 18 Mar 2024 00:00:00 GMT
<![CDATA[Proposed Regulation Regarding the Allocation of Grants by the SNIH]]> Proposed Regulation Regarding the Allocation of Grants by the SNIH

The Saudi National Institute for Health Research (SNIH) has taken a significant step towards enhancing healthcare research and innovation in the Kingdom of Saudi Arabia (KSA) by inviting public comments on a draft regulation concerning the issuance of grants. This draft regulation, announced on January 3, 2024, aims to organize funding for translational research and clinical trials within areas and programs supported by the SNIH.

The draft regulation outlines several key objectives aimed at promoting translational research and clinical trials while ensuring transparency and efficiency in the grant allocation process. These objectives include organizing support for translational research and clinical trials, enabling individuals and entities to obtain research grants transparently, and managing the technical, financial, and administrative aspects of various grant programs.

Within the framework of Saudi Arabia's healthcare sector, the creation of the SNIH marks a noteworthy advancement in the nation's endeavors to tackle the scarcity of clinical trials, especially those designed to cater to the unique genetic makeup of the Saudi populace. Approved by the Saudi Cabinet in August 2023, the SNIH is tasked with supervising and promoting translational research and clinical trials, aligning with the objectives of Saudi Arabia's national development and diversification plan, Vision 2030.

Role of the SNIH

The primary mandate of the SNIH is to oversee and promote translational research and clinical trials within the Kingdom. Translational research, which bridges the gap between basic scientific research and practical applications in clinical settings, holds immense potential for accelerating medical advancements. By focusing on translational research, the SNIH aims to catalyze the development of innovative healthcare solutions tailored to the needs of the Saudi population.

Key Objectives

  • Streamlining Funding: One of the key objectives of the SNIH is to streamline the allocation of funds for translational research and clinical trials. Through collaboration with relevant authorities, the institute seeks to ensure transparency and efficiency in obtaining research grants, thereby facilitating the flow of resources into critical areas of healthcare R&D.
  • Enhancing Collaboration: The SNIH recognizes the importance of collaboration in driving impactful research outcomes. By fostering partnerships with academia, industry stakeholders, and governmental bodies, the institute aims to create a collaborative ecosystem conducive to knowledge exchange and innovation.
  • Promoting Transparency: Transparency is paramount in the realm of healthcare research, particularly when it comes to obtaining research grants and conducting clinical trials. The SNIH is committed to promoting transparency in its operations, ensuring that grant applications and funding allocations adhere to rigorous standards of accountability and integrity.
  • Supporting Capacity Building: Building research capacity is essential for nurturing a vibrant healthcare research ecosystem. The SNIH endeavors to support capacity-building initiatives, including training programs, mentorship opportunities, and infrastructure development, to empower researchers and institutions across the Kingdom.

Currently, the Saudi Food and Drug Authority (SFDA) plays a crucial role in overseeing clinical trials in Saudi Arabia through its clinical trials administration and the Saudi Clinical Trials Registry (SCTR). However, there is a recognized need for expanded research and development efforts, particularly in the areas of translational research and early-phase clinical trials.

Looking ahead, further announcements regarding the development of the SNIH and its role are expected to unfold during 2024. As Vision 2030 and national health priorities continue to prioritize research, development, and innovation (RDI), the SNIH is poised to play a pivotal role in shaping the regulatory landscape for healthcare research in Saudi Arabia.

Impact and Anticipated Developments

The establishment of the SNIH marks a significant milestone in Saudi Arabia's journey towards becoming a hub for cutting-edge healthcare research and innovation. By focusing on translational research and clinical trials, the institute aims to address critical healthcare challenges, improve patient care, and drive economic growth through the commercialization of innovative healthcare solutions.

In the coming years, the SNIH is expected to play a pivotal role in shaping the regulatory landscape for clinical trials in Saudi Arabia. As the institute continues to unfold its initiatives and programs, further developments and announcements are anticipated in 2024 and beyond. These developments are poised to usher in a new era of healthcare research in the Kingdom, characterized by increased collaboration, transparency, and innovation.

In conclusion, the draft regulation released by the SNIH underscores the institute's commitment to promoting translational research and clinical trials while fostering transparency and efficiency in the grant allocation process. With public comments open until January 18, 2024, stakeholders have a valuable opportunity to contribute to the ongoing transformation of healthcare research and innovation in Saudi Arabia. As the SNIH continues to evolve and expand its role, it holds the potential to drive meaningful advancements in healthcare outcomes and contribute to the broader goals of Vision 2030.

 

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Fri, 15 Mar 2024 00:00:00 GMT
<![CDATA[The New Maritime Law of the UAE]]> The New Maritime Law of the UAE

The maritime industry has long been a cornerstone of global trade, and nowhere is this more evident than in the United Arab Emirates (UAE). As a nation with a rich maritime heritage and a strategic location at the crossroads of international shipping routes, the UAE has continuously invested in bolstering its maritime sector. The recent release of Federal Decree-Law No. 43 of 2023, known as the New Maritime Law, represents a significant milestone in the evolution of the UAE's maritime industry. In this article, we will explore the key provisions of the New Maritime Law and examine how they are poised to shape the future of maritime operations in the UAE.

Vessel Registration

The registration of a vessel is delineated in various provisions of the New Maritime Law. Article 7 defines a vessel as a tangible movable subject to the rules applicable to tangible movables, unless ownership by possession is involved. Notably, Article 13(b) of the New Maritime Law represents a significant development, allowing foreign individuals or companies domiciled in the UAE, or those having a business center, to register vessels in their names.

In contrast to the capped foreign ownership set at 49% under the Repealed Maritime Law, this provision establishes a more inclusive and accessible framework, potentially broadening investment opportunities within the maritime sector. Details regarding implementation procedures and other pertinent matters related to the New Maritime Law are anticipated to be disclosed in due course. Meanwhile, Article 368(2) stipulates that existing resolutions and regulations under the Repealed Maritime Law will remain applicable, provided they do not conflict with the New Maritime Law, until new executive regulations are promulgated.

Charterers of vessels registered abroad are allowed, under Article 18 of the New Maritime Law, to apply for the registration of their vessels in the UAE and fly the UAE flag, provided they fulfill the registration criteria specified in Article 13. Notably, vessels without equipment must have a charterparty duration of no less than six months for registration approval. Intriguingly, Article 19 grants owners of vessels registered under the UAE flag permission to apply for flying the flag of another country if the vessel is to be chartered without equipment. Specific application procedures for this provision are yet to be determined.

Age restrictions for vessel registration under the Repealed Maritime Law were nonexistent; however, Article 13(1)(c) of the New Maritime Law mandates that vessels be no older than 20 years from the completion date of their shipbuilding contract, with passenger ships allowed registration if they are not more than 10 years old. Furthermore, in accordance with paragraph 2 of Article 7, the UAE Ministry of Energy & Infrastructure is mandated to establish a "vessel register" for registering vessels, encompassing various types, classifications, activities, and operational areas, in line with forthcoming executive regulations. This registry represents another positive stride toward encouraging vessel owners to register their vessels in the UAE.

Moreover, Article 9(3) of the New Maritime Law permits the registration of shipbuilding contracts for vessels under construction, with registration procedures to be completed by the shipbuilder, as stipulated in the law. Additionally, Article 9(1) necessitates the Ministry's approval of vessel specifications for registration in a specialized register named the "Register of Ships Under Construction."

Dispute Resolution Mechanism

In addition to streamlining vessel registration procedures, the New Maritime Law introduces a dedicated framework for resolving maritime disputes. Article 4 of the law aligns with UAE Federal Law No. 6 of 2018 on Arbitration, facilitating the ratification of settlements or mediations of maritime disputes. This provision reflects the UAE's commitment to international best practices in dispute resolution and aims to provide stakeholders with clarity and certainty in navigating complex legal issues.

Ship Arrest Procedures

A creditor, encompassing suppliers, lenders, or contractors, possesses the authority to detain a vessel by court order if the filed claim qualifies as a "maritime debt" under the New Maritime Law. These debts must be linked to maritime activities or transactions such as ship chartering, shipbuilding or repair contracts, cargo transportation, and ship navigation. Such transactions typically result in a debt or obligation between the ship owner and the creditor, enabling the creditor to seek vessel detention through an arrest application.

The ship arrest provisions outlined in the New Maritime Law closely mirror those of the Repealed Maritime Law. Article 54(1) permits the creditor to seek the arrest of the specific vessel associated with the debt or any other vessel owned by the same debtor at the time of the arrest order application. However, Article 54(2) prohibits the arrest of sister vessels in scenarios involving disputes over vessel ownership, disputes between joint owners regarding operation and distribution of proceeds, vessel mortgages or securities, or disputes arising from vessel sale contracts.

Regarding charterer debts, Article 55 allows the creditor to apply for vessel arrest during the charterparty period if the charterer bears sole liability for the maritime debt related to the vessel and holds navigation management rights. This provision extends to cases where the maritime debt is attributed to a debtor other than the vessel's owner. Unlike the Repealed Maritime Law, which mandates filing the substantive claim within 8 days of the arrest order date, Article 59 of the New Maritime Law requires claimants to file within 5 working days. The substantive claim hearing must be scheduled within 15 days from the court minutes' enforcement date of the arrest order for judgment on vessel arrest and sale confirmation. The judgment can be appealed within 15 days, and the Court of Appeal is mandated to issue its judgment within a week without referral to the case management office. This procedural change accelerates the dispute resolution process in maritime disputes, offering litigants a means to bypass lengthy court procedures. Notably, Article 4 of the New Maritime Law incorporates provisions of UAE Federal Law No. 6 of 2018 on Arbitration concerning the ratification of settlement or mediation minutes in maritime disputes, marking a significant aspect of dispute resolution facilitation.

Under the Repealed Maritime Law, ship owners and their vessels lacked protection when creditors filed claims for ship arrests. However, Article 56 of the New Maritime Law addresses this gap by mandating creditors to provide a financial guarantee covering the safety and security needs of the affected vessel and its crew throughout the arrest period before the Court grants an arrest order. This requirement aims to alleviate concerns of defaulting ship owners or charterers regarding their abandoned seafarers during legal proceedings. Notably, Article 56 specifies that the financial guarantee amount is deemed a judicial expense, with costs related to the crew and vessel during the arrest period prioritized and settled ahead of any creditor claims from the execution proceeds.

Regarding security measures for releasing arrested vessels, the New Maritime Law streamlines procedures in line with international standards by recognizing a letter of undertaking (LOU) as a valid security measure to lift a ship arrest, unlike the cumbersome requirements under the Repealed Maritime Law. Article 57(2) stipulates that UAE Courts shall accept LOUs or other securities for vessel release. LOUs, typically issued by Protection and Indemnity Clubs (P&I Clubs), serve as globally recognized instruments to secure maritime claims, ensuring that the mutual insurance association will honor the financial guarantee up to the specified amount in the LOU if a valid claim arises. Furthermore, Article 57(3) defers to the Executive Regulations of the law to delineate rules for accepting LOUs issued by P&I Clubs or acceptable financial institutions. It's important to note that the New Maritime Law specifies that LOUs are not acceptable in disputes over vessel ownership, possession, or disputes between joint owners regarding operation and proceeds distribution, in which case the vessel remains under arrest until a final judgment is rendered in the substantive claim.

Conclusion

In conclusion, the enactment of the New Maritime Law represents a significant step forward for the UAE's maritime industry. By addressing key areas such as vessel registration, dispute resolution, and ship arrest procedures, the law sets the stage for a more robust and efficient maritime sector. As the UAE continues to solidify its position as a global maritime hub, adherence to the provisions outlined in the law will be crucial for fostering growth and sustainability in the sector. With its comprehensive approach to addressing various aspects of maritime operations and legal frameworks, the New Maritime Law positions the UAE for continued success in the global maritime arena. As stakeholders navigate the evolving landscape, the New Maritime Law stands as a beacon of progress and innovation in the UAE's maritime industry.

 

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Mon, 11 Mar 2024 00:00:00 GMT
<![CDATA[Understanding Real Estate Law in India: A Comprehensive Guide]]> Understanding Real Estate Law in India: A Comprehensive Guide

The real estate sector in India is a significant component of the country's economy, and understanding the legal framework governing it is crucial for developers, investors, homebuyers, and legal professionals. This article provides a detailed overview of real estate law in India.

The Indian real estate market has evolved rapidly, especially with the introduction of new regulations and reforms. Central to this evolution is the Real Estate (Regulation and Development) Act, 2016 (RERA), which aims to bring transparency and accountability. The sector is also governed by a myriad of laws and regulations at both the central and state levels.

The Real Estate (Regulation and Development) Act, 2016

RERA has significantly transformed the landscape of the Indian real estate sector. It established state-level regulatory authorities (RERAs) responsible for monitoring real estate projects and ensuring compliance with the Act. Key provisions include:

  • Project Registration: Mandatory registration of real estate projects and agents.
  • Transparency: Developers must disclose project details, including approvals, land status, and completion schedules.
  • Compliance: Strict penalties for developers for delays or fraud.
  • Consumer Protection: Establishes an adjudicating mechanism for speedy dispute resolution.

Other Relevant Legislation

  • Indian Contract Act, 1872: Forms the basis for all contracts, including those related to property transactions.
  • Transfer of Property Act, 1882: Deals with the transfer mechanism of immovable property.
  • Registration Act, 1908: Ensures a proper record of property transactions.
  • Consumer Protection Act, 2019: Consumer protection in real estate is not limited to RERA. The Consumer Protection Act, 2019, also plays a significant role in safeguarding buyer interests, allowing consumers to file complaints in consumer courts against builders for unfair trade practices.
  • Land Use and Development Control: Land use in India is regulated through various town and country planning acts enacted by state governments. These laws regulate zoning, land use, building regulations, and environmental compliance.
  • Foreign Investment: Foreign investment in the Indian real estate sector is subject to FEMA (Foreign Exchange Management Act, 1999) guidelines. The government has relaxed norms in recent years to attract more foreign direct investment (FDI) in this sector.
  • Stamp Duty and Registration: The execution of a property transaction requires the payment of stamp duty and registration fees, which varies from state to state. This legal formality is crucial for the transfer of ownership.
  • Tenancy Laws: Tenancy laws in India are primarily governed by state-specific legislation. These laws aim to balance the rights and responsibilities of landlords and tenants, often involving rent control and protection against unlawful eviction.
  • Real Estate Investment Trusts (REITs): REITs have opened new avenues for investment in real estate, governed by regulations set by the Securities and Exchange Board of India (SEBI). They offer investors an opportunity to invest in real estate assets without owning them directly.
  • Taxation in Real Estate

    Tax implications are an important aspect of real estate transactions. This includes income tax on rental income, capital gains tax on the sale of property, and tax benefits on home loans.

    Local Regulations and By-Laws

    Local municipal laws and building by-laws also significantly impact real estate development. These regulations cover aspects like building approvals, floor space index (FSI), and construction standards.

    Dispute Resolution

    The legal framework provides multiple avenues for dispute resolution, including civil courts, consumer courts, arbitration, and RERA tribunals. The choice of forum depends on the nature of the dispute.

    The Role of Technology

    With the advent of technology, many processes in real estate transactions, including land record management, project registration, and grievance redressal, have moved online, making them more efficient and transparent.

    Challenges and Future Prospects

    Despite significant advancements, challenges like project delays, liquidity crunch, and regulatory hurdles persist. However, the future of real estate in India seems promising with increasing urbanization, rising income levels, and the government's focus on affordable housing.

    Conclusion

    Navigating the complex terrain of real estate law in India requires a thorough understanding of various laws and regulations. The legal framework aims to promote fairness, transparency, and efficiency in the real estate sector. As the market continues to grow and evolve, staying informed and compliant with the latest legal developments is essential for all stakeholders involved.

     

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    Fri, 08 Mar 2024 00:00:00 GMT
    <![CDATA[Cyberlaw in the United Arab Emirates]]> Cyberlaw in the United Arab Emirates

    In recent years, the United Arab Emirates (UAE) has experienced rapid digital transformation, with advancements in technology influencing various aspects of daily life, business, and governance. As the nation embraces the opportunities presented by the digital age, the importance of establishing a robust legal framework to govern cyberspace becomes imperative. This article explores the evolving landscape of cyberlaw in the UAE, addressing key legal aspects, challenges, and future considerations.

    Legal Framework for Cybersecurity

    The cornerstone of cyberlaw in the UAE is the Federal Decree-Law No. 5 of 2012 on Combating Cybercrimes. This legislation provides a comprehensive framework for addressing various forms of cybercrimes, including unauthorized access, data breaches, online fraud, and hacking. The law outlines specific offenses, penalties, and procedures for investigation and prosecution.

    The protection of personal data is a critical component of cyberlaw. The UAE introduced the Federal Law No. 2 of 2019 concerning the Use of Information and Communication Technology (ICT) in Health Fields, emphasizing the importance of safeguarding health data. Additionally, the Emirates Data Protection Regulation (EDPR) governs the processing of personal data, providing individuals with rights over their information.

    E-Commerce and Digital Transactions:

    The UAE has recognized the significance of electronic transactions and e-commerce through the enactment of the Electronic Transactions and E-Commerce Law (Federal Decree-Law No. 1 of 2006). This legislation facilitates the legal recognition of electronic contracts and transactions, fostering the growth of digital commerce in the country.

    To enhance the credibility of electronic transactions, the UAE has implemented laws, such as the Electronic Transactions and E-Commerce Law, recognizing the legal validity of digital signatures. The use of digital signatures ensures the authenticity and integrity of electronic documents, providing a secure foundation for online transactions.

    Cybersecurity and Critical Infrastructure Protection

    The UAE has developed a National Cybersecurity Strategy to strengthen its cyber resilience and protect critical infrastructure from cyber threats. The strategy focuses on collaboration between the government, private sector, and individuals to create a secure digital ecosystem.

    Recognizing the interconnected nature of critical infrastructure, the UAE has taken steps to safeguard vital sectors, such as energy, telecommunications, and finance, from cyber threats. Regulations and guidelines have been established to ensure the resilience of critical information infrastructure against cyberattacks.

    One of the significant updates in 2022 is the enforcement of Federal Decree Law No. 34 of 2021, effective from January 2. This legislation marks a notable evolution in the UAE's approach to cyber law, specifically addressing the spread of rumors and misinformation. The law introduces enhanced penalties for cybercrimes and criminalizes the dissemination of false information that poses a threat to public order or national security.

    Challenges and Emerging Issues

    The borderless nature of cyberspace poses challenges for traditional legal frameworks based on territorial jurisdiction. The UAE faces difficulties in prosecuting cybercrimes that may originate outside its borders, requiring international cooperation and collaboration.

    The rapid pace of technological advancement introduces new legal challenges. Issues related to artificial intelligence, blockchain, and the Internet of Things necessitate ongoing legislative updates to address the legal implications of these technologies in the UAE.

    Future Considerations

    As the digital landscape evolves, there is a need for continuous capacity building and awareness programs to educate individuals, businesses, and government entities about cybersecurity best practices and legal compliance.

    Given the global nature of cyber threats, the UAE should actively engage in international collaboration to share information, harmonize legal standards, and collectively combat cybercrimes.

    Conclusion

    The development of cyberlaw in the UAE reflects the nation's commitment to creating a secure and thriving digital environment. As technology continues to shape the future, the UAE's legal framework must remain adaptive and robust to address emerging challenges. By fostering collaboration, raising awareness, and staying at the forefront of technological advancements, the UA

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    Tue, 05 Mar 2024 00:00:00 GMT
    <![CDATA[Bahrain’s Trademark Law]]> Bahrain's Trademark Law

    In the global marketplace, trademarks represent not only a company's identity but also its reputation and brand value. Bahrain, a key player in the Middle Eastern economy, has recognized the importance of intellectual property rights and has structured its trademark law to provide robust protection for businesses and individuals alike. This article delves into the nuances of Bahrain's Trademark Law, offering insights into its provisions, registration process, enforcement mechanisms, and the implications for businesses operating within and outside its borders.

    Historical Context and Development

    Bahrain's commitment to intellectual property protection has evolved over the years, aligning with international standards and catering to the needs of a burgeoning economy. The country is a member of several international treaties, including the Paris Convention for the Protection of Industrial Property and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which guide its legislative framework.

    Key Provisions of Bahrain's Trademark Law

    The cornerstone of Bahrain's trademark law is the Legislative Decree No. 11 of 2006, which was further amended by Legislative Decree No. 6 of 2015. These laws outline the definition of a trademark, registration process, rights conferred, and the mechanisms for enforcement and dispute resolution. Key provisions include:

    Bahrain's law defines a trademark as any distinguishable sign capable of representing a product or service, including names, words, signatures, letters, figures, drawings, symbols, titles, tax stamps, seals, pictures, engravings, packaging, and any other sign or combination. To be registered, a trademark must be distinctive, not deceptive, or violating public order or morality. It should not be identical or confusingly similar to an already registered trademark.

    The process involves filing an application with the Ministry of Industry, Commerce and Tourism, followed by an examination for compliance with legal requirements, publication for opposition, and finally, registration if no objections are raised. A registered trademark is protected for ten years from the date of application and can be renewed for consecutive periods of ten years each. If a trademark is not used for five consecutive years, it is subject to cancellation upon a third party's request.

    The owner of a registered trademark has the exclusive right to use it and to prevent others from using identical or similar marks for goods or services that are identical or similar. Trademarks can be licensed or assigned with or without the goodwill of the business. The law provides remedies for trademark infringement, including injunctions, damages, and in severe cases, imprisonment or fines.

    Registration Process

    The trademark registration process in Bahrain is straightforward but demands meticulous adherence to procedural requirements. Applicants, either directly or through an agent, must file an application accompanied by a power of attorney, a copy of the commercial registration if the applicant is a company, and the trademark's representation. The Ministry conducts a formal examination and a substantive examination to ensure compliance with legal requirements. Upon approval, the trademark is published in the Official Gazette, opening a 60-day period for opposition. If there are no objections, the trademark is then registered, and a certificate of registration is issued.

    Enforcement and Dispute Resolution

    Enforcement of trademark rights in Bahrain is primarily judicial. Trademark owners can file civil lawsuits to seek injunctions and damages for infringement. The law also provides for criminal penalties, including fines and imprisonment, for trademark counterfeiting and fraud. Additionally, Customs authorities play a crucial role in enforcing against the importation of counterfeit goods.

    Challenges and Criticisms

    While Bahrain's trademark law is comprehensive, it faces challenges common in intellectual property enforcement, such as detecting and acting against infringement and counterfeiting. The digital era poses new challenges, such as online infringement and the need for cross-border cooperation in enforcement.

    For businesses, understanding and leveraging Bahrain's trademark law is crucial. It provides a legal framework for protecting brand identity, which is integral to maintaining competitive advantage and customer trust. Companies should proactively register their trademarks, monitor for infringement, and be prepared to enforce their rights through legal channels.

    Bahrain's trademark law is largely in line with international standards, offering a level of protection comparable to that in Western countries. This alignment is particularly beneficial for foreign businesses seeking to enter the Bahraini market, as it provides a familiar legal landscape for brand protection.

    Future Outlook

    The future of Bahrain's trademark law is geared towards further harmonization with international norms, embracing digital advancements, and strengthening enforcement mechanisms. This evolution will likely make Bahrain an even more attractive destination for international business and investment.

    Conclusively, Bahrain's trademark law represents a crucial component of the country's legal system, offering robust protection to trademarks which are essential assets for any business. Its alignment with international norms and commitment to continuous improvement position Bahrain as a favorable environment for both local and international businesses. Understanding and utilizing this legal framework is vital for protecting brand identity and ensuring long-term business success in Bahrain's dynamic market.

     

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    Sat, 02 Mar 2024 00:00:00 GMT
    <![CDATA[UAE's New Insurance Law of 2023 and Its Notable Changes]]> UAE's New Insurance Law of 2023 and Its Notable Changes

    The United Arab Emirates (UAE) has recently implemented a significant overhaul of its insurance sector regulatory framework through the introduction of Federal Law No. 48 of 2023, also known as the New Insurance Law. This law, which took effect on November 30, 2023, supersedes the previous Federal Law No. 6 of 2007. Its primary objective is the codification of the transfer of regulatory authority from the Insurance Authority to the UAE Central Bank, a move that represents a substantial shift in the oversight of the insurance industry.

    One of the key aspects of the New Insurance Law is its scope and application as outlined in Article 2. Notably, Article 2(b) brings certain holding companies under its purview, specifically those acquiring 15% or more of insurance activity in the UAE, or where their insurance-related revenues exceed 50% of their total income. Additionally, the law differentiates between Financial Free Zones and non-Financial Free Zones, applying only to companies operating outside the Financial Free Zones. This distinction marks a significant change from the 2007 Insurance Law, which did not make such a specific separation.

    Another major change is the replacement of the Emirates Insurance Association with the Emirates Insurance Federation, as stipulated in Article 100. This new body falls under the supervision of the Central Bank, which also has the authority to approve its articles of association. This development indicates an increased emphasis on structured governance within the insurance sector.

    Perhaps one of the most critical changes is in the dispute resolution process for insurance claims. Under Article 101, the New Insurance Law replaces the Insurance Settlement Dispute Committee (IDC) with the Banking and Insurance Dispute Resolution Unit (BIDRU). BIDRU, established under the Central Bank Law, functions as an independent entity dedicated to resolving complaints against insurance companies. The New Insurance Law outlines a specific claims procedure that varies depending on the claim's value, offering different resolution avenues for claims exceeding AED 50,000.

     

    Article 104 of the New Insurance Law further strengthens the regulatory framework by empowering the Central Bank to intervene in lawsuits involving insurance and reinsurance companies or insurance-related professionals. This intervention can take the form of providing clarifications, data, or information to the competent authority after an investigation. This provision reflects the Central Bank's proactive approach to ensuring compliance and fairness in the insurance sector.

    The implications of these changes are significant. The shift of regulatory authority to the Central Bank underscores a strategic move towards centralized oversight and enhanced governance. The establishment of BIDRU as an independent dispute resolution entity streamlines the complaint and resolution process, potentially leading to more efficient and equitable outcomes. Furthermore, the distinction between Financial Free Zones and non-Financial Free Zones could have implications for how insurance companies structure their operations in the UAE.

    The New Insurance Law represents a substantial development in the UAE's approach to regulating its insurance sector. With the Central Bank at the helm, the changes usher in an era of heightened oversight, improved corporate governance, and a more structured dispute resolution process. As the industry adapts to these changes, stakeholders should remain vigilant and informed about the evolving regulatory landscape to ensure compliance and understand the full impact of these new regulations.

     

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    Tue, 27 Feb 2024 00:00:00 GMT
    <![CDATA[Understanding Saudi Arabia’s Personal Data Protection Law]]> Understanding Saudi Arabia's Personal Data Protection Law

    In an era where data is as valuable as gold, the introduction of the Personal Data Protection Law (PDPL) by Saudi Arabia marks a significant milestone in the Middle East's approach to data privacy and security. Implemented through Royal Decree M/19 on September 17, 2021, and subsequently amended on March 21, 2023, the PDPL stands as the kingdom's inaugural legislation dedicated to the protection of personal data. On September 14, 2023, Saudi Arabia marked a significant milestone in data protection with the enforcement of its Personal Data Protection Law (PDPL). This legislation, accompanied by several amendments and detailed regulations, represents a paradigm shift in the handling and protection of personal data within the Kingdom. This article delves into the key aspects of the PDPL and its implications for data controllers, processors, and individuals.

    Genesis and Governance of PDPL

    The Saudi Data & Artificial Intelligence Authority (SDAIA) and the National Data Management Office (NDMO) oversee the PDPL's enforcement and compliance. The law's primary objective is to safeguard personal data privacy, regulate data sharing, and prevent the misuse of personal data. This move not only aligns Saudi Arabia with global data protection trends but also reinforces its commitment to digital transformation.

    Principles of PDPL

    A foundational aspect of the PDPL is the principle of purpose limitation and data minimization. This mandates that data controllers entities determining the purpose and means of processing personal data only collect data for explicit, legitimate, and specific purposes. Furthermore, the utilization of this data must strictly align with the reasons for which it was initially gathered. The law emphasizes that personal data must be adequate, relevant, and not excessive concerning the processing purposes.

    Under the PDPL, data controllers are tasked with significant responsibilities, including the necessity to register with the appropriate authority and provide detailed descriptions of their data processing activities. Additionally, they are required to maintain comprehensive records of these activities, ensuring transparency and accountability. Alongside these obligations, the PDPL bestows several rights upon individuals regarding their personal data. These include the right to access, allowing individuals to request information about their processed data; the right to rectification, where inaccuracies or incompleteness in data must be addressed upon request; the right to erasure, enabling individuals to request the deletion of their data under certain conditions; and the right to object to the processing of their data, particularly in contexts such as direct marketing.

    International Data Transfers

    The Regulations address cross-border data transfer intricacies. While the provisions broadly cover personal data movement outside the Kingdom, some ambiguities in the text necessitate thorough examination. Mechanisms like adequacy decisions, Binding Corporate Rules, and Standard Contractual Clauses are introduced, awaiting further elucidation from the Regulator.

    Consent and Personal Data Processing

    The concept of 'explicit consent' is crucial under the PDPL. The Regulations define this term and set out scenarios where explicit consent is mandatory. Data Controllers must meet several criteria when relying on consent, including obtaining distinct approval for each processing purpose.

    Legitimate Interest

    The inclusion of 'legitimate interest' as a processing basis is a significant evolution from the PDPL's initial version. While it allows processing necessary for a Data Controller's legitimate interests, this basis is not universally applicable, especially where it conflicts with data subject rights.

    Data Protection Impact Assessment (DPIA)

    For certain types of processing, including those involving Sensitive Personal Data, conducting a DPIA is mandatory. The Regulations outline the essential elements that such an assessment must cover.

    Sector-specific Data Protection Requirements

    The PDPL acknowledges the unique data protection needs of various sectors like healthcare, finance, marketing, and research. It sets sector-specific guidelines to ensure tailored data handling practices.

    Engaging Data Processors

    Data Controllers are mandated to engage Data Processors who can offer robust personal data protection. The Regulations specify several obligatory conditions for data processing agreements.

    Role of Data Protection Officers (DPOs)

    In specific scenarios, appointing a DPO is mandatory. The Regulations detail the roles and responsibilities of DPOs, emphasizing their importance in ensuring compliance.

    Data Breach Protocols

    The PDPL imposes a requirement to report data breaches to the Regulator within 72 hours of discovery. Additionally, there's an obligation to notify affected individuals promptly, ensuring transparency and accountability.

    Record-Keeping and the National Register

    Data Controllers must maintain detailed records of their data processing activities. The Regulations also mention the establishment of a National Register of Data Controllers, further enforcing transparency and regulatory oversight.

    Penalties for Non-compliance

    The PDPL imposes stringent penalties for non-compliance, including financial fines and reputational damage. Specific sanctions are outlined for data breaches, highlighting the law's commitment to rigorous enforcement.

    Conclusively, the PDPL represents a transformative step for Saudi Arabia in the realm of data protection. This legislation not only aligns with global data privacy trends but also underscores the kingdom's commitment to fostering a secure and trustworthy digital environment. As organizations adapt to these regulations, they will not only enhance their data protection standards but also build stronger trust with their clients and stakeholders, paving the way for a more secure digital future in the region

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    Fri, 23 Feb 2024 00:00:00 GMT
    <![CDATA[Qatar's Labour Law]]> Qatar's Labour Law

    Qatar, with its flourishing economy, vibrant culture, and modern lifestyle, has become a magnet for expatriate workers from around the globe. However, the allure of working in this prosperous nation comes hand in hand with a set of rules and regulations outlined in the Qatar Labour Law. This legal framework serves as the backbone for the employment relationship, covering various aspects ranging from contracts to termination and dispute resolution. Understanding and complying with these regulations are essential for both workers and employers operating in Qatar's private sector.

    The Qatar Labour Law is a comprehensive set of rules that govern the employment landscape in the country. It addresses crucial elements such as contracts, wages, working hours, leave entitlements, termination procedures, and more. Importantly, it applies to all workers and employers in the private sector, with certain exemptions for specific categories like domestic workers, agricultural workers, and seafarers.

    In 2015, the Qatari government introduced Law No. 21 of 2015, amending some provisions of the Qatar Labour Law to enhance the rights and protection of expatriate workers. The amendments focused on improving mobility and flexibility for expatriate workers in terms of entry, exit, and residency.

    Recent Changes in the Qatar Labour Law

    The dynamism of labour policies is evident in Qatar, with constant updates to adapt to evolving needs. Notably, recent changes in the Qatar Labour Law have been geared towards safeguarding the safety and well-being of migrant workers in the private sector. These changes have replaced previous regulations, demonstrating the government's commitment to refining the employment system. Some of the noteworthy updates include:

    Central to the employment relationship in Qatar is the employment contract, regulated by the Qatar Labour Law. Employers are obligated to provide valid and compliant contracts that clearly outline the terms of work agreed upon by both parties. Key elements such as job title, responsibilities, personal data, start and end dates of employment, notice periods, annual leave, salary, and benefits must be included. The probation period in Qatar's employment contracts is limited to a maximum of six months.

    Two primary types of labour contracts exist in Qatar – fixed-term contracts and indefinite contracts. Fixed-term contracts have a predetermined end date, typically ranging from two to five years, while indefinite contracts are open-ended, with the employee working indefinitely until termination by either party for a valid reason. Once the employment contract has received approval from the Ministry of Administrative Development, Labour and Social Affairs (MADLSA), it is essential to register it with the Ministry of Interior (MOI) to ensure its legal standing and compliance with Qatar's labor regulations.

    Qatar introduced a new minimum wage regulation on September 8, 2020, with an effective date of March 2021. According to this regulation, all employees must earn a minimum of QAR 1,000 per month. This move is aimed at ensuring stability in the labour market and fostering overall growth. The law also specifies minimum monthly allowances for accommodation (QAR 500) and food (QAR 300).

    Employees in Qatar are entitled to various types of leaves under the Qatar Labour Law. These include sick leave, public holidays, annual leave, maternity leave, and, although not mandated, many employers provide paternity leave ranging from 3 to 5 days.

    Working hours in Qatar generally amount to eight hours per day, totaling 48 hours per week. Specific regulations apply during Ramadan, reducing the working week to 36 hours, with employees working six hours per day. Overtime work, defined as hours worked outside regular working hours, is subject to specific regulations and additional payments based on different scenarios.

    Terminating employment contracts in Qatar is a nuanced process, dependent on whether the contract is definite or indefinite. While either party can terminate a contract, valid reasons must be presented. For definite contracts nearing their end date, employees may submit a non-renewal letter, while indefinite contracts require compliance with notice periods.

    In a significant change, employees in Qatar are no longer required to submit a No Objection Certificate (NOC) to their existing employer when switching jobs, providing them with increased privacy and flexibility in their job search.

    Understanding and adhering to the Qatar Labour Law is crucial, given the serious consequences for violations. Penalties range from fines of QAR 2,000 to QAR 100,000, and in extreme cases, may include imprisonment for up to one year. As Qatar's workforce continues to diversify, staying informed about the evolving legal landscape is imperative for both employers and employees to ensure compliance and contribute to the nation's growth and prosperity.

    Conclusion

    As Qatar continues to attract a diverse and dynamic workforce, the Qatar Labour Law remains a crucial instrument for fostering a fair and regulated employment environment. Both employers and employees must stay informed about the evolving legal landscape to ensure compliance and contribute to the nation's growth and prosperity.

     

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    Tue, 20 Feb 2024 00:00:00 GMT
    <![CDATA[Indian’s New Criminal Law Bills]]> Indian's New Criminal Law Bills

    In a landmark move, Union Home Minister Amit Shah introduced three revised Bills on December 12, aiming to replace archaic British-era criminal laws that have governed India for decades. The proposed legislation includes the Bharatiya Nyaya (Second) Sanhita Bill, 2023; Bharatiya Nagarik Suraksha (Second) Sanhita, 2023; and Bharatiya Sakshya (Second) Bill, 2023. These Bills not only seek to modernize but also to address critical issues such as terrorism, crimes against women, and procedural aspects within the Indian legal framework.

    Bharatiya Nyaya (Second) Sanhita Bill, 2023

    Redefining Terrorism

    The Bill aligns the definition of a 'Terrorist Act' with the Unlawful Activities (Prevention) Act, 1967 (UAPA), emphasizing acts that threaten the nation's unity, integrity, security, economic security, or sovereignty. Notably, the revised definition includes the production, smuggling, or circulation of counterfeit Indian currency, expanding the scope beyond previous limitations. Introduction of provisions for recruiting and training individuals for terrorist acts mirrors sections 18A and 18B of the UAPA. A significant change empowers a police officer to decide whether prosecution should proceed under the UAPA or the new Bill, providing flexibility in handling terrorism cases.

    Cruelty Redefined

    One significant addition in the revised Bill pertains to the definition of "cruelty" against women by their husbands and relatives. Addressing the grave issue, the newly introduced Section 86 outlines 'cruelty' as willful conduct likely to drive a woman to commit suicide or cause grave injury or danger to life, limb, or health (whether mental or physical). It also includes harassment of a woman to coerce her or any related person to meet any unlawful demand for property or valuable security. While this provision is a crucial step in addressing gender-based offenses, it largely mirrors the definitions found in Section 498A of the IPC and Section 84 in the original Bill.

    Unauthorized Publication of Court Proceedings

    Another noteworthy addition is the introduction of Section 73, penalizing the unauthorized publication of court proceedings related to rape or sexual assault cases. Offenders may face a two-year jail sentence and a fine. The provision is clear in its intent, with an explanation specifying that reports on High Court or Supreme Court judgments would not constitute an offense under this provision.

    Progressive Terminology

    In a commendable move towards modernity, the revised Bill replaces regressive terminology related to mental health. The earlier version had replaced terms like lunacy, mental retardation, and unsoundness of mind with 'mental illness.' Additionally, the term 'intellectual disability' has been included alongside 'unsoundness of mind' in Section 367, particularly focusing on competence to stand trial.

    Addressing Mob Lynching

    Recognizing the severity of mob lynching, the original Bill categorized it as a separate offense for the first time. However, criticism arose due to the prescribed minimum sentence of seven years, deemed insufficient compared to murder charges. In response, the revised Bill eliminates the minimum punishment of seven years, aligning the penalty for mob lynching with that of murder.

    Adultery and Section 377 - Unresolved Recommendations:

    Two crucial recommendations from the panel, urging a gender-neutral provision for adultery and criminalizing non-consensual sex between various gender identities, were not incorporated into the revised Bill. Despite the Supreme Court's decriminalization of adultery in 2018, the panel argued for gender-neutral criminalization to preserve the sanctity of marriage. The absence of these provisions raises questions about legal remedies for victims of sexual offenses in specific scenarios, leaving men and transgender persons without clear legal recourse.

    Redefining 'Petty Organized Crime':

    The original Bill's vague definition of 'petty organized crime' drew criticism for lacking clarity and procedural safeguards. The revised Bill addresses this concern with a more precise definition. It identifies individuals, either singly or jointly within a group or gang, committing acts like theft, snatching, cheating, unauthorized selling of tickets, unauthorized betting or gambling, and other similar criminal activities. The inclusion of an explicit explanation further clarifies the scope, covering various forms of theft, including trick theft, shoplifting, and theft of Automated Teller Machines (ATMs).

     

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    Sun, 18 Feb 2024 00:00:00 GMT
    <![CDATA[Crypto Currencies and Legal Frameworks in the United Kingdom]]> Crypto Currencies and Legal Frameworks in the United Kingdom

    The world of cryptocurrency has experienced exponential growth over the past decade, revolutionizing traditional financial systems and opening up new avenues for investment and financial innovation. In the United Kingdom (UK), the rise of cryptocurrencies has prompted regulatory bodies to establish frameworks that balance the need for innovation with the necessity of consumer protection and financial stability.

    Understanding Cryptocurrencies

    Cryptocurrencies are a form of digital or virtual currency that rely on cryptography for security and operate on decentralized systems using blockchain technology, with Bitcoin being the first and most famous example, launched in 2009. Since then, thousands of alternative cryptocurrencies (altcoins) have emerged, each with its own unique features and use cases.

    In the UK, cryptocurrencies are not considered legal tender, but they are legal and widely accepted as a means of exchange. The regulatory approach towards cryptocurrencies in the UK is generally permissive, with the government acknowledging their potential benefits and the need for a balanced regulatory framework.

    The regulatory landscape for cryptocurrencies in the UK is overseen by several key bodies, including the Financial Conduct Authority (FCA) and the Bank of England. The FCA, in particular, plays a crucial role in regulating crypto assets and activities to ensure market integrity, consumer protection, and financial stability.

    Crypto Asset Regulation

    In January 2020, the FCA implemented a regulatory framework for crypto assets, requiring businesses involved in crypto-related activities to register and comply with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. This move aimed to protect consumers and maintain the integrity of the financial system.

    In the UK, the Financial Conduct Authority (FCA) has the authority to permit the operation of exchanges facilitating the trading of crypto-assets under the Markets in Financial Instruments Directive II (MiFID II). As a result, businesses operating under the jurisdiction of the FCA must adhere to its regulations regarding crypto assets.

    For regular consumers in the UK, purchasing virtual assets like Bitcoin is straightforward. However, it's crucial to ensure that cryptocurrencies are not used for illicit purposes such as financing terrorism or money laundering. Therefore, crypto businesses must comply with FCA regulations, particularly regarding Know Your Customer (KYC) procedures.

    KYC procedures involve collecting personal identifying information from customers, such as IDs, passports, driver's licenses, and photos, to verify the validity of the provided information. Additionally, Customer Due Diligence (CDD) procedures are implemented to assess customers' risks and take appropriate precautions in line with anti-money laundering and terrorism financing regulations.

    The FCA regularly monitors crypto businesses to ensure compliance with KYC regulations and takes swift action if businesses fail to meet the desired standards, emphasizing the importance of market integrity. Regulatory arrangements introduced by the FCA aim to mitigate money laundering risks associated with crypto exchanges.

    The Crypto Asset Taskforce was established in the UK in March 2018 to regulate various uses of cryptocurrencies. It categorizes crypto assets based on their function, such as barter, investment, or supporting capital increase through Initial Coin Offerings (ICOs). Depending on the use case, different regulatory frameworks apply, with cryptocurrency operators complying with Payment Services Regulations 2017 (PSR) if the cryptocurrency functions as a fiat fund.

    Regarding taxation, HM Revenue & Customs (HMRC) in the UK taxes crypto assets like Bitcoin and Ethereum. Income Tax may be applied to commercial earnings from crypto asset trading for individuals and businesses. HMRC distinguishes between utility tokens, security tokens, and exchange tokens, with only exchange tokens being subject to taxation.

    HMRC has provided guidance on taxation transactions involving exchange tokens, updating its policies in 2019. It plans to address the taxation of utility and security tokens in the future. Exchange tokens are considered crypto assets used primarily as a payment method.

    Conclusion

    The United Kingdom has embraced the potential of cryptocurrencies while simultaneously implementing measures to safeguard consumers and maintain financial stability. The regulatory framework, overseen by bodies such as the FCA, aims to strike a balance between fostering innovation and protecting market participants. As the crypto landscape continues to evolve, staying informed about legal developments and adhering to regulatory guidelines will be crucial for individuals and businesses navigating the exciting world of cryptocurrencies in the UK.

     

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    Sat, 17 Feb 2024 00:00:00 GMT
    <![CDATA[An In-depth Exploration of Shipping Law in United Kingdom]]> An In-depth Exploration of Shipping Law in United Kingdom

    Shipping law in the United Kingdom is a multifaceted legal domain that governs the activities, operations, and transactions related to maritime trade and navigation. This comprehensive legal framework ensures the safety of vessels, protection of the marine environment, and the rights and responsibilities of all parties involved in shipping. From historic admiralty laws to modern international conventions, the UK's shipping legal landscape is both rich and dynamic.

    Admiralty Law

    Admiralty law, with its roots deeply embedded in maritime history, forms the foundation of the UK's shipping legal system. Dating back centuries, admiralty courts have been adjudicating cases related to collisions at sea, salvage operations, and maritime liens. These courts play a crucial role in maintaining order and justice in maritime affairs, contributing to the development of principles that guide modern shipping law.

    The Merchant Shipping Act

    Central to the UK's shipping regulatory framework is the Merchant Shipping Act, a key piece of legislation that addresses various aspects of maritime activities. This Act governs ship registration, safety standards, and employment conditions within the maritime sector. It sets out clear guidelines for the construction, equipment, operation, and manning of ships, ensuring a secure and efficient maritime environment.

    International Conventions and Safety Standards

    The UK, as a global maritime player, actively participates in international conventions to enhance maritime safety. The International Convention for the Safety of Life at Sea (SOLAS) is paramount, establishing minimum safety standards for the construction and operation of ships. Compliance with SOLAS and other conventions demonstrates the UK's commitment to global maritime safety, fostering cooperation among nations for the benefit of the entire shipping community.

    Maritime Labour Standards

    The Maritime Labour Convention (MLC) sets forth comprehensive standards for working and living conditions for seafarers. As a signatory to the MLC, the UK ensures that seafarers enjoy decent working conditions, fair employment practices, and access to essential amenities. This commitment not only upholds human rights but also contributes to a more stable and reliable maritime workforce.

    Environmental Protection and Pollution Prevention

    In alignment with international efforts, the UK implements stringent measures to prevent marine pollution. The International Convention for the Prevention of Pollution from Ships (MARPOL) serves as a cornerstone, addressing various types of pollution from ships. The UK's commitment to environmental protection includes regulations on waste disposal, oil spills, and emissions, reflecting a dedication to sustainable and responsible maritime practices.

    Maritime Security

    In response to evolving security threats, the UK has embraced the International Ship and Port Facility Security Code (ISPS Code). This regulatory framework ensures the implementation of security measures on ships and at port facilities, contributing to the overall safety and resilience of the maritime sector against potential terrorist activities.

    Carriage of Goods by Sea

    The UK's legal provisions for the carriage of goods by sea are essential in facilitating international trade. Conventions such as the Hague-Visby Rules and the Hamburg Rules establish the rights and obligations of parties involved in transporting goods by sea, providing a transparent and predictable legal framework for maritime commerce.

    Marine Insurance

    The Marine Insurance Act 1906 remains a cornerstone of marine insurance law in the UK. While rooted in tradition, ongoing developments in the sector demand a modernized approach. The Act provides a framework for resolving disputes, offering clarity on issues related to coverage, claims, and liabilities in the complex world of marine insurance.

    Arrest of Vessels

    The arrest of vessels is a potent legal tool in maritime claims. The UK follows established procedures for vessel arrests, allowing claimants to secure their interests by detaining a vessel until their claims are satisfied. This mechanism adds a layer of security and ensures that obligations are met in the intricate web of maritime transactions.

    Ship Registration

    The UK Ship Register, renowned globally, plays a crucial role in establishing a ship's identity and nationality. Ship registration provides evidence of ownership, facilitates international trade, and enables vessels to obtain necessary insurance. The UK's commitment to maintaining a reputable ship registry underscores its position as a key player in the global maritime industry.

    Post-Brexit Dynamics

    In the post-Brexit era, the UK's shipping law has undergone adjustments to align with new trade agreements and regulations. As the nation forges its path outside the European Union, the maritime sector continues to evolve, presenting both challenges and opportunities for stakeholders in the UK shipping industry.

    In conclusion, the multifaceted nature of shipping law in the United Kingdom reflects the complexities and challenges inherent in the maritime industry. From historic admiralty laws to contemporary international conventions, the legal framework governing shipping in the UK is dynamic, ensuring the safety of navigation, protection of the environment, and fair treatment of all stakeholders involved in maritime activities. As the global maritime landscape evolves, the UK remains a key player, adapting its legal structures to meet the demands of a rapidly changing industry.

     

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    Sun, 11 Feb 2024 00:00:00 GMT
    <![CDATA[UAE's Traffic Law Amendments]]> UAE's Traffic Law Amendments

    The United Arab Emirates (UAE) has recently undertaken a significant revision of its traffic laws, marking a major step towards enhancing road safety. These amendments, which became effective on July 6, 2023, are part of a broader initiative to combat reckless driving and ensure the safety of lives and property. This is particularly relevant in Dubai, a bustling metropolis with a complex traffic system. The new rules introduce stringent penalties for various driving offenses, with a special emphasis on penalties and vehicle impoundment procedures. Authorities have made efforts to publicize these changes extensively, ensuring that motorists are well-informed and compliant. This article aims to provide a comprehensive overview of these pivotal changes in the UAE's traffic laws, focusing particularly on their implications in Dubai.

    Dubai's Revised Traffic Regulations: Decree No. 30 of 2023

    The heart of these changes lies in Decree No. 30 of 2023, which redefines the approach towards traffic violations in Dubai. The decree sets out the conditions under which vehicles can be impounded and delineates the penalties associated with various traffic infractions.

    Criteria for Vehicle Impoundment

    Key to understanding the new laws is the clarification of the circumstances under which vehicles can be impounded. Articles 2 and 3 of the decree detail these scenarios, while Articles 4 and 5 outline the penalties for a range of violations.

    Overview of New Fines and Penalties

    The UAE's updated traffic laws introduce severe penalties for a range of violations, aiming to significantly enhance road safety.

    The recent amendments to the UAE's traffic laws introduce stringent penalties for various violations, each designed to address specific risks and enhance road safety. Running a red light, a hazardous offense endangering both drivers and pedestrians, now incurs a fine of AED 3,000, accompanied by 12 black points on the driver's license and a potential vehicle impoundment lasting 30 days.

    To combat reckless driving, a leading cause of accidents, the new regulations impose a substantial fine of AED 50,000. This hefty penalty aims to deter motorists from engaging in behaviors that put lives at risk on the road.

    Ensuring responsible adult supervision, allowing someone under 18 to drive results in a significant fine of AED 50,000. This underscores the gravity of permitting underage individuals to operate vehicles, emphasizing the need for strict adherence to age regulations.

    The misuse of vehicle plates, whether through forgery or obscuration, is now met with a substantial fine of AED 50,000. This measure emphasizes the importance of properly registered and identifiable vehicles, reinforcing road safety and aiding law enforcement efforts.

    Unauthorized modifications to vehicles, compromising safety and comfort, incur a penalty of AED 10,000. This discourages vehicle alterations that could potentially pose risks on the road.

    Riding recreational motorcycles on paved roads, a practice associated with increased risks, now attracts a penalty of AED 50,000. This measure aims to mitigate potential hazards posed not only to the rider but also to other road users.

    Evading the police, a serious offense compromising public safety and law enforcement efforts, results in an impound release fee of AED 10,000. This penalty underscores the gravity of attempting to evade law enforcement personnel.

    Driving without a proper number plate, hindering vehicle identification and law enforcement's ability to regulate traffic, incurs a fine of AED 10,000. This highlights the significance of proper vehicle identification for effective traffic management.

    Participating in illegal road races, endangering participants and bystanders, leads to an impound release fee of AED 10,000. This penalty is designed to discourage engaging in activities that pose serious risks on public roads.

    Excessive window tinting, potentially compromising visibility for both the driver and law enforcement officers, is met with a fine of AED 10,000. This measure ensures that window tints adhere to permissible limits for safe driving conditions.

    Intentionally hitting a police vehicle, a grave threat to law enforcement personnel and their ability to ensure public safety, results in a substantial fine of AED 50,000. This penalty emphasizes the severity of actions that compromise the safety and effectiveness of law enforcement efforts on the road.

    Impoundment Rules and Additional Measures

    The updated laws emphasize the impoundment of vehicles for severe violations. To retrieve impounded vehicles, owners must comply with specific conditions, including fine payment and rectification of the violation, alongside any additional requirements set by the Dubai Police.

    Handling Repeat Offenders and Deportation

    The law is particularly stringent on repeat offenders. If a vehicle is impounded again within a year for the same violation, both the impoundment period and the release amount are doubled, with a maximum limit of Dh200,000. Additionally, non-citizen drivers of heavy vehicles caught in serious offenses like running red lights are subject to administrative deportation.

    Awareness Campaign and Impact

    A key goal of these legislative changes is to cultivate a sense of responsibility and awareness among UAE drivers. The Dubai Police has launched an extensive awareness campaign to educate the public on the new regulations and the importance of safe driving. This initiative emphasizes the critical nature of adhering to traffic laws for the safety of all road users.

    Conclusion

    Being informed about traffic regulations and prioritizing safety is essential for every road user. These amendments to the UAE's traffic laws represent a significant step towards fostering a safer and more responsible driving environment, ultimately contributing to the safety and well-being of the community.

     

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    Wed, 07 Feb 2024 00:00:00 GMT
    <![CDATA[ UAE Introduces Private Teacher Work Permit to Regulate and Foster Learning]]> UAE Introduces Private Teacher Work Permit to Regulate and Foster Learning

    On December 18, 2023, the Ministry of Education (MoE) and the Ministry of Human Resources and Emiratisation (MoHRE) in the United Arab Emirates (UAE) unveiled a groundbreaking initiative the Private Teacher Work Permit. This innovative permit system is designed to formalize and regulate private tutoring outside conventional educational institutions, aiming to provide a structured framework for qualified professionals while curbing illegal practices in the sector.

    The UAE has officially legalized private tuitions through the introduction of a comprehensive permit system. This two-year permit, a joint effort by the MoHRE and the MoE, is now open for application to a diverse range of individuals, including registered teachers, employed and unemployed professionals, as well as school and university students aged 15 to 18.

    Regulating the Sector

    One of the primary objectives of the Private Teacher Work Permit is to regulate the private tutoring sector effectively. The permit, issued free of charge, encourages individuals to provide private lessons within a structured legal framework, ensuring that the learning process remains unaffected by illegal and unregulated practices.

    Application Process:

    Applicants can easily navigate the digital platforms of the MoHRE, specifically accessing the 'Private Teacher Work Permit' section under the 'Services' tab on the ministry's website. This streamlined process aims to facilitate and encourage qualified individuals to obtain the permit seamlessly.

    Key Features of the Private Tutor License

    Eligibility and Application

    The permit is open to a diverse group of individuals, including registered teachers, employed and unemployed professionals, as well as school and university students aged 15 to 18. Applications can be submitted through the MoHRE's user-friendly digital platforms.

    Validity and Cost

    The permit, valid for two years, comes at no cost to the qualified individuals. This allows them to offer private lessons and generate direct income, provided they adhere to a code of conduct approved by the ministry.

    Penalties

    To ensure compliance, the ministry has established penalties for offering private lessons without the issued permit. While specific details and amounts remain unspecified, the introduction of penalties is a clear indication of the government's commitment to maintaining a regulated tutoring environment.

    Geographical Flexibility

    Licensed tutors enjoy the flexibility of working from their home countries, provided they possess valid residency. This feature enables a broader pool of qualified individuals to contribute to the education sector in the UAE.

    The Private Teacher Work Permit covers both online and in-person tutoring under a single license. This adaptability caters to the evolving dynamics of education delivery methods. There is no specified cap on the number of students a tutor can teach, allowing flexibility for educators to engage with a diverse student population.

    Processing Time

    The ministry estimates a swift processing time of one to five working days for the permit, emphasizing efficiency and a commitment to facilitating the entry of qualified individuals into the private tutoring sector.

    Application Denial

    In the event of denial, applicants can submit another request after a six-month waiting period. This provides an opportunity for individuals to address any concerns or issues that may have led to the initial denial.

    Required Documents for registration

    Applicants are required to submit a set of documents, including valid UAE residency (passport/Emirates ID), a signed declaration, certificate of good conduct, no-objection certificate from the employer, no-objection certificate from the guardian (for students offering private tuitions), experience certificate (if any), and a photo with a white background.

    Conclusion

    The introduction of the Private Teacher Work Permit marks a significant step forward in the UAE's commitment to fostering a regulated and organized private tutoring sector. By providing a structured framework and encouraging qualified professionals to contribute, the government aims to enhance the overall learning experience for students while simultaneously curbing illegal practices in the sector. This innovative initiative not only supports the growth of emerging specializations and professions but also demonstrates the UAE's dedication to creating a dynamic and inclusive educational landscape.

     

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    Sat, 03 Feb 2024 00:00:00 GMT
    <![CDATA[Law of Agency in the US]]> Law of Agency in the US

    The law of agency in the United States plays a pivotal role in structuring and regulating relationships between individuals and entities, particularly in the realms of business, finance, and real estate. This area of law, which centers on interactions between agents and principals, is crucial for understanding how one party can act through another and the implications thereof. This article delves into the intricacies of the law of agency in the U.S., exploring its core principles, various types of agency relationships, and the duties and liabilities of the involved parties, along with its relevance in different legal contexts.

    At its core, agency law in the United States concerns the relationship between two parties: the principal and the agent. This relationship is defined by the authorization given to an agent to act on behalf of the principal. Such a relationship is based on mutual consent, where the principal allows the agent to act on their behalf and the agent agrees to this authority. The actions taken by the agent within their given authority are legally binding on the principal.

    Creation of Agency Relationships

    Agency relationships can be established in various ways. An express agency is formed through a clear oral or written agreement between the principal and the agent. Implied agency, on the other hand, is inferred from the behavior and circumstances of the parties involved. Agency by estoppel arises when a principal's actions lead a third party to reasonably believe that an agency relationship exists. Lastly, agency by ratification occurs when a principal approves or affirms an action previously undertaken by an agent without authorization.

    Types of Agency

    There are different forms of agency relationships, each with its unique characteristics and implications. In a general agency, the agent has broad authority to act on behalf of the principal across a range of matters. A special agency limits the agent's authority to specific activities or transactions. Universal agency grants the agent extensive powers to act on behalf of the principal in virtually all matters.

    The duties of agents include the duty of loyalty, where agents must act in the best interest of their principals and avoid conflicts of interest. They also have a duty of care, requiring them to perform their responsibilities with a reasonable level of skill and caution. Additionally, agents are obliged to keep their principals informed about relevant information concerning the agency. On the other hand, principals have certain duties as well, such as the duty to compensate their agents for their services, to reimburse them for expenses incurred in the course of their agency, and to indemnify them against losses suffered while acting within the scope of their agency.

    The issue of liability in agency relationships is complex. Agents can be held personally liable if they act beyond their authority, engage in wrongful acts while representing the principal, or enter into contracts in their own name instead of as an agent. Principals, however, may be liable for contracts entered into by their agents within the scope of their authority and for torts committed by their agents while acting within the realm of their employment, as per the principle of respondeat superior.

    Agency relationships can terminate in various ways. They may end by mutual agreement, lapse of time, or upon the achievement of the agency's purpose. Additionally, either party may choose to end the relationship through revocation or renunciation. The death or incapacity of either the principal or agent also results in the termination of the agency.

    Agency in Specific Contexts

    In business and commercial transactions, agency law is vital for understanding the relationships between corporations and their officers, employees, and agents. In real estate, it governs the relationship between real estate agents and their clients, crucial for issues like contractual obligations and fiduciary duties. In the finance and banking sector, agency relationships between fiduciaries and clients, such as investment advisors, highlight the importance of the law of agency in understanding the legal implications of financial transactions and advice.

    Conclusion

    The law of agency in the United States is a broad and essential aspect of legal relationships, influencing how individuals and entities interact and operate. It defines the legal framework within which agents and principals operate, outlines their duties and liabilities, and is integral to understanding and navigating legal relationships in various sectors. As such, a thorough understanding of agency law is indispensable for legal practitioners, business professionals, and anyone engaged in activities where acting through others is a necessity.

     

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    Tue, 30 Jan 2024 00:00:00 GMT
    <![CDATA[Proposed Amendments to the Saudi Commercial Agency Law]]> Proposed Amendments to the Saudi Commercial Agency Law

    In a monumental move, the Saudi Ministry of Commerce has laid the groundwork for a transformative shift in the Kingdom's commercial landscape through substantial amendments to the Commercial Agency Law. Set to be enforced in mid-2023, these amendments herald a new era, introducing antitrust oversight, opening avenues for foreign investment, and redefining intellectual property (IP) protection within commercial agencies and distributorships. In this article, we explore the key facets of these proposed changes and their potential implications for businesses operating in or eyeing the Saudi market.

    Inclusive Eligibility for Foreign Entities

    A paradigm shift is underway as the amendments open the doors for foreign entities to engage in commercial agency and distributor activities in Saudi Arabia. Traditionally restricted to Saudi nationals and citizens of Gulf Cooperation Council (GCC) countries, this expansion of eligibility represents a landmark departure from the Kingdom's protectionist approach. Foreign businesses, beyond the GCC region, can now become commercial agents or distributors, provided they secure the necessary licenses from the Ministry of Investment and Ministry of Commerce.

    This shift signifies a strategic move toward economic inclusivity, offering international entities unprecedented opportunities to establish or invest in local agencies and distributors. However, businesses with existing distribution networks in Saudi Arabia must navigate the nuances of these changes to ensure seamless adaptation.

    Intellectual Property Rights

    The proposed amendments empower commercial agents and distributors to utilize the principal's trademarks and other intellectual property within the agreed-upon scope. These changes also introduce exemptions from certain registration requirements under the Saudi intellectual property law regime. The intent is to streamline the process, enabling local agencies and distributors to access and deploy their principal's intellectual property more efficiently. Businesses should incorporate clear language in contractual agreements addressing the utilization of trademarks and other intellectual property by commercial agents and distributors.

    Termination and Indemnity Clauses

    The new law draft brings clarity to termination provisions, especially for unlimited-term contracts. Termination notice periods are now calculated based on the length of the agreement, requiring one month's notice for each year the agreement has been in effect. Failure to provide sufficient notice obligates the principal to indemnify the agent/distributor for unjust termination, with indemnity claims to be submitted within one year of termination.

    This marks a departure from previous practices, introducing more defined criteria for termination and reinforcing the importance of adherence to notice periods. It also underscores the commitment to fairness and protection of business relationships.

    Exclusivity Modifications

    Exclusive agency and distributorship arrangements undergo substantial modifications with the new law draft. While exclusivity is generally permitted, the Ministry of Commerce is granted the authority to set aside exclusivity if it potentially hinders the supply of essential goods or services. This extends to cases where exclusivity is exploited to create artificial scarcity or when the exclusive agent or distributor fails to meet market demands.

    The collaboration with the General Authority for Competition introduces a new layer of scrutiny, emphasizing a trend towards heightened antitrust oversight. Businesses employing exclusive arrangements must navigate this evolving landscape, especially considering the increased focus on anticompetitive practices.

    Dispute Resolution Committee and Penalties

    The amendments introduce a dedicated dispute resolution committee with jurisdiction over disputes between principals and their agents or distributors. This committee, while streamlining dispute resolution, also takes on regulatory responsibilities, addressing violations of the new commercial agency law and imposing substantially increased penalties.

    Penalties for violations, capped at SAR 50,000 in the current regime, are proposed to rise significantly to SAR 500,000. This underscores the government's commitment to stringent enforcement and serves as a deterrent against non-compliance.

    Conclusion

    As Saudi Arabia prepares to implement these groundbreaking amendments to the Commercial Agency Law, businesses must proactively adapt to the changing landscape. The inclusivity of foreign entities, modifications to intellectual property rights, and the stringent approach to termination, exclusivity, and dispute resolution signify a bold step towards fostering a more transparent, competitive, and globally integrated business environment. While challenges may arise in the transition, the potential benefits for businesses seeking to operate in Saudi Arabia are substantial. This marks not only a legal transformation but a strategic move towards positioning the Kingdom as a more attractive destination for international businesses. As the mid-2023 enforcement date approaches, businesses should stay vigilant, align their agreements with the new provisions, and seize the opportunities presented by these progressive changes.

     

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    Sat, 27 Jan 2024 00:00:00 GMT
    <![CDATA[India’s New Data Protection Law]]> India's New Data Protection Law

    The Digital Personal Data Protection (DPDP) Act of 2023 was passed by the Indian Parliament in early August, representing the nation's inaugural cross-sectoral legislation for personal data protection. This enactment comes after more than five years of deliberation. This analysis explores whether the protracted deliberative process has resulted in a "good" law one that adequately safeguards personal data and effectively balances, as stated in the law's preamble, "the right of individuals to protect their personal data" against "the need to process such personal data for lawful purposes."

    Outsourcing

    The processing of personal data from individuals not situated in India, carried out under a contract with an entity outside India by an Indian-based entity, is exempt from the obligations imposed on Data Fiduciaries, including Significant Data Fiduciaries, cross-border transfer rules, and individual rights obligations. However, security provisions do apply.

    Establishment of a Data Protection Board

    A Centrally-appointed Data Board is proposed by the DPDP Act, 2023, tasked with investigating and adjudicating complaints, overseeing data breach notifications, and imposing substantial penalties, reaching as high as INR 250 Crores. Despite its quasi-judicial role, it's noteworthy that the entire Board is appointed by the Central Government, including the Chairperson and Members, with one Member required to be a legal expert. The Act lacks specific qualifications for Board members, leaving certain questions unanswered, possibly addressed in subsequent legislation. The centralized composition of the governing Board is particularly significant given the Act's nationwide scope and its jurisdiction over certain data activities located abroad.

    Regarding "sufficient grounds" for inquiry, the Data Protection Board must determine whether there are grounds to proceed with an official inquiry upon receiving a complaint or data breach notification. The Act, however, lacks clarity on the criteria for determining sufficiency, suggesting the need for guiding principles, akin to those found in Section 11 of the TRAI Act, 1997, providing direction to the telecom regulator.

    Consequential Rule-Making Powers

    The Act grants substantial rule-making powers to the Central Government, notably allowing rules to restrict data transfer to foreign countries. While rules under Section 16 require Parliamentary approval, the extensive powers granted under Section 40, such as identifying significant data fiduciaries and setting conditions for Board members, don't seem subject to the same process, granting the government significant authority without stringent legislative oversight.

    Centre's Power of Blocking Data Fiduciaries

    Under Section 37, the Central Government has the power to block public access to certain Data Fiduciaries upon referral from the Board. This authority allows the government to potentially shut down a service provider in India based on penalties imposed and the perceived "interests of the general public," raising concerns about the broad interpretation of public interest and the potential limitations of judicial review.

    Notice

    Before or at the time of seeking consent, a Data Fiduciary must furnish individuals with a detailed notice in simple language, outlining the types of personal data to be collected, the processing purposes, and how individuals can exercise their rights. If individuals have already consented before the Act's commencement, a similar notice must be provided as soon as reasonably practicable. The option to access the notice in English or any of the 22 languages specified in the Eighth Schedule to the Indian Constitution must be given to individuals.

    No specific rights against Data Processors

    The Act does not outline specific rights against Data Processors, leaving open questions about the enforceability of claims or complaints against them. While contractual consequences may exist, it remains uncertain if Data Processors could face primary sanctions for their actions.

    Individual Rights

    Access, correction, and erasure rights must be granted, but the Act does not specify response timeframes or exceptions. Individuals can request data erasure if it's no longer needed for the original purpose, unless legal retention is necessary. A redress mechanism must be readily available, provided by the Data Fiduciary or the Consent Manager.

    Consent Fatigue

    The requirement for obtaining consent from individual Data Principals before processing personal data may lead to "consent fatigue" due to repeated requests. This echoes the experience following the implementation of GDPR in 2018, where multiple consent notices and checkboxes proliferated, potentially impacting user experience and privacy.

    Shrinking Internet for Children

    Section 9 of the Act mandates verifiable consent from parents before processing the personal data of children, aiming to protect their well-being. However, this could lead to a restricted online environment for children as Data Fiduciaries may opt for heavy censorship, limiting available content to perceived "safe" options.

    Consent Managers

    The Act introduces the concept of 'Consent Managers,' registered entities facilitating consent processes between Data Principals and Fiduciaries. While theoretically streamlining consent management, practical implementation remains unclear, potentially posing challenges and acting as a bottleneck for users accessing the Internet.

    Security

    Data Fiduciaries must implement suitable technical and organizational measures to effectively comply with the Act. They are required to safeguard personal data in their possession, including data processed by them or on their behalf by a processor, through reasonable security measures to prevent breaches.

    Data Breach Notification

    In case of a personal data breach, the Data Fiduciary must inform the data protection authority and affected individuals. The Act lacks specificity on the trigger for notification or the reporting timeframe.

    Disclosures to Processors

    A Data Fiduciary can only engage a processor under a valid contract to process personal data on its behalf, related to offering goods or services to individuals.

    Cross-Border Transfers

    The government may, through notification, restrict the transfer of personal data by a Data Fiduciary for processing to a country or territory outside India. Additionally, the Act does not limit the applicability of any existing Indian law that offers greater protection or restrictions on the transfer of personal data by a Data Fiduciary outside India concerning specific data or Data Fiduciaries or classes of Data Fiduciaries.

    Exceptions

    Apart from outsourcing, specific processing activities are granted exemptions from all aspects of the Act except for the security provisions. Examples include processing conducted in the interest of preventing, detecting, investigating, or prosecuting any offense or violation of law, processing necessary to enforce a legal right or claim, and processing essential for a corporate merger or sale.

     

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    Tue, 23 Jan 2024 00:00:00 GMT
    <![CDATA[New UAE’s Finance Leasing Law]]> New UAE's Finance Leasing Law

    The United Arab Emirates is set to enact a new law, replacing the existing finance lease law (Federal Law No. 8 of 2018). Despite its publication in the Official Gazette, the new law is scheduled to take effect six months after its publication, specifically on March 29, 2024. The Current Law will remain in operation until the Effective Date, after which it will be automatically annulled.

    The new law explicitly states that laws and decisions implemented under the Current Law will persist until they are supplanted by new legislation or decisions. Notably, the UAE Cabinet Decision No. 76 of 2020, which addresses accounting standards relevant to finance leasing, plays a crucial role as an implementing regulation under the Current Law. This decision has been pivotal in assisting court-appointed experts in finance lease disputes, particularly in matters concerning rental calculations and claims adjudicated by UAE Courts.

    Financial Leasing Law

    Essentially, this law governs finance leasing activities in the UAE and delineates the commercial agreements between parties involved in a leasing contract. The Law introduces several key principles and enhancements, including:

    Registration with the UAE Central Bank : Entities engaging in financial leasing activities (Leasing Companies) in the UAE must obtain a license from the UAE Central Bank. Non-compliance may result in imprisonment or fines.

    Contractual Arrangements : Financial leasing is regulated by

    • A supply contract between the Leasing Company and a supplier, covering the acquisition of specific equipment, movable assets, or off-plan real estate property. Although the borrower may not be a party to the supply contract, it retains the right to select the specifications of the Leased Assets, influencing the supply contract. The Lessee has direct recourse against the supplier and can enforce the terms of the supply contract.  
    •  A leasing contract between the Lessee and the Leasing Company, outlining the use of the Leased Assets for a specified duration and purpose in exchange for the payment of lease amounts (plus interest) to the Leasing Company. While the legal title to the Leased Assets remains with the Leasing Company, the Lessee can choose to purchase them by making premium payments and relevant fees throughout the leasing period, subject to approval.

    Registration of Leasing Contract : The leasing contract must be registered in the relevant register in the Emirate where the Leased Assets are located.

    Enforcement on Leased Assets : Any third party owed amounts by the Lessee cannot enforce against the Leased Assets. However, in cases of bankruptcy or liquidation of the Leasing Company, the Lessee is entitled to either:

    • Continue the leasing contract in accordance with the terms, with the assets transferred to whomever is designated after the liquidation or bankruptcy.
    • Hand over the Leased Assets to the liquidator and collect any potential amounts payable as an unsecured creditor.

    Features of the New Law

    • Ownership of Asset: The New Law defines a 'Finance Lease' as an arrangement where the Lessor leases the Asset to the Lessee for a specified term, with the Lessee potentially having an option to own the Asset as per the New Law's provisions. Importantly, the New Law eliminates the requirement for the lessor to own the asset and engage in a separate contract with the lessee. This change aligns with the introduction of bilateral and tripartite finance lease agreements.
    • Bilateral and Tripartite Finance Leases: The New Law introduces bilateral finance leases between the lessor and the lessee, incorporating a purchase option for the leased asset, either in whole or in part. It also introduces tripartite finance leases involving the lessor, lessee, and a supplier. In a tripartite lease, the lessee selects the asset and the supplier, and the lessor owns the asset for leasing to the lessee. A tripartite lease may include a purchase option for acquiring the leased asset. The New Law covers sale-leaseback arrangements, a common practice in asset finance transactions.
    • Sub-lease Arrangements: The New Law recognizes sub-lease arrangements, encompassing sub-lessors and sub-lessees within the broader definitions of 'lessor' and 'lessee.'
    • Leased Asset: Departing from the Current Law, the New Law explicitly excludes certain assets like aircraft, airframes, helicopters, aircraft engines, marine vessels, and assets registrable in "special registers" under UAE law or international treaties. This exclusion aligns with international best practices. Additionally, the New Law excludes cash, investment bonds, and granted land in the UAE from its scope.
    • Scope of Application: The New Law applies to all finance lease contracts, irrespective of whether the lessee is licensed by the Central Bank. Notably, it seems to recognize cross-border finance leases and assets located in the UAE, excluding financial free zones like DIFC and ADGM.
    • New Licensing Requirements: While the Central Bank continues to regulate finance leasing by banks and licensed financial institutions, the UAE Cabinet will determine the regulatory framework for non-licensed financial institutions involved in such business. This is a significant departure from the Current Law, which mandates Central Bank licensing for anyone conducting finance lease business in the UAE.
    • Registration: The requirement for a special register for finance lease contracts is removed from the New Law. Instead, finance lease contracts should be registered in the register of the leased asset in the UAE. Unlike the Current Law, the New Law does not render a finance lease agreement void if unregistered, although registration remains necessary for enforceability against third parties.
    • Enforcement: The enforcement of rights for movable assets under a finance lease is governed by the Movable Asset Security Law (Law No. (4) of 2020)
    • Allocation of Risk: In a tripartite lease, unless agreed otherwise, the risk of loss of the leased asset transfers to the lessee, except when the asset is pending delivery. In a bilateral lease, the lessor is liable for the loss, and this liability cannot be transferred to the lessee unless caused by the lessee.
    • Maintenance Obligations:Unlike Ijara leases where maintenance is the lessor's obligation, the lessee is responsible for maintaining the asset under the New Law unless otherwise agreed by the parties.
    • In summary, the forthcoming regulations to be issued under the New Finance Lease Law are anticipated to offer additional clarity, particularly regarding the licensing and regulation of finance lease activities and the accounting treatment of such leases. The outcome of the differentiated approach adopted by the New Finance Lease Law in regulating financial institutions and other entities will be intriguing to observe
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    Sat, 20 Jan 2024 00:00:00 GMT
    <![CDATA[Trademark laws and Regulations in India]]> Trademark laws and Regulations in India

    A trademark serves as a distinct identifier for a company, its products, or services, distinguishing them from competitors. This can encompass words, signs, symbols, graphics, or a blend of these elements. Examples include Louis Vuitton's Damier Pattern, Cadbury's trademarked purple color, and Coca-Cola's unique bottle design. Trademarks are crucial assets, offering legal protection against unauthorized use and aiding consumers in associating specific qualities with a brand.

    Trademarks can take various forms, such as word marks (e.g., COCO CHANEL), device marks (e.g., Amazon's distinctive lettering), figurative marks/logos (e.g., McDonald's Yellow M or Nike's Swoosh), service marks (e.g., UNITED AIRLINES), collective marks (used by a group of companies), certification marks (indicating adherence to standards, like ISI or FSSAI), well-known marks (easily recognized by a large population, e.g., Rolex), and unconventional trademarks (those with distinctive features).

    In India, the Trade Marks Act, 1999 governs trademarks, addressing aspects like registration, protection, and relief in cases of infringement. The Act aligns with international agreements such as the Paris Convention and the TRIPS agreement. Trademarks are invaluable for safeguarding a brand's reputation and preventing counterfeiting. While registration isn't mandatory, it enhances protection, providing a legal basis for recourse if another entity attempts to use a similar mark. In India, the law affirms private rights, and enforcement involves legal remedies through court orders.

    Registration

    Upon filing a trademark application, the registry issues an official receipt containing the filing date and application number. Subsequently, the Indian Trademarks Office examines the application to ensure compliance with the Trademarks Act. If any objections to registration arise, the registry issues an examination report to the applicant. The applicant is then required to submit a written response or provide evidence of acquired distinctiveness, followed by a hearing with the examiner.

    If, after examination and the hearing, the registrar deems the trademark eligible, a Letter of Acceptance is issued to the applicant. Following this, the trademark is published in the Trademark Journal, opening a 4-month window for potential opposition. If no objections are raised during this period, a certificate is issued. In cases of opposition, both parties are given opportunities to present their arguments.

    The trademark registration process is often time-consuming, typically taking around 18-24 months for completion in cases without objections or oppositions. Once registered, a trademark remains valid for 10 years from the date of application. Renewal is possible indefinitely, contingent on the payment of renewal fees every 10 years. Read more>>

     

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    Wed, 17 Jan 2024 00:00:00 GMT
    <![CDATA[An Overview of Qatar's New Anti-Concealment Law]]> An Overview of Qatar's New Anti-Concealment Law

    In a strategic move towards upholding the rule of law and reinforcing transparency, Qatar's Amir Sheikh Tamim bin Hamad Al Thani has recently enacted a groundbreaking law designed to combat the concealment of non-Qatari individuals engaging in commercial, economic, and professional activities in violation of existing laws.

    Qatar's Commerce and Industry Ministry has unveiled details about a new Anti-commercial Concealment Law, Qatar Law No. 3/2023, which supersedes Qatar Law No. 25/2004. The introduction of this law aligns with Qatar's strategy to modernize legal frameworks, enhance transparency in investment, and adapt to legislative changes related to non-Qatari capital investment. It permits various economic activities, provided they adhere to approved regulations. The primary objectives of the law include ensuring fair practices in commercial transactions, fostering an investment-friendly environment, and bringing stability to commercial enterprises. This is achieved by allowing reconciliation and legalizing the situation of concealed parties at the expense of the violator.

    The law encourages the reporting of concealment cases and seeks to improve collaboration between government entities to effectively address such practices. Additionally, it aims to involve society in limiting concealment and proposes increased penalties to deter potential violations. The law also emphasizes the collection of taxes and other owed amounts to the state resulting from illegal activities

    This article delves into the key provisions of the new law, its immediate impact, and its broader implications for the legal landscape of Qatar.

    Issued by Qatar's Amir Sheikh Tamim bin Hamad Al Thani, the new law takes immediate effect, signifying a swift and decisive response to address concerns related to the concealment of non-Qatari individuals involved in activities that violate the established legal framework. The law will be officially published in the Official Gazette, marking its formal integration into Qatar's legal system.

    The law establishes clear prohibitions for non-Qatari individuals, both natural and legal persons, from engaging in commercial, economic, or professional activities without the necessary licenses prescribed by the existing laws of the State. This restriction aims to ensure that individuals operate within the boundaries set by the legal framework, preventing any unauthorized or clandestine practices.

    A significant aspect of the law is its prohibition on any natural or legal person covering up a non-Qatari individual, facilitating their engagement in activities that contravene the country's laws. This provision aims to eliminate the potential for exploitation or abuse of the legal system and reinforces the principle of accountability for all parties involved.

    The law further addresses the issue of profit distribution within companies by restricting non-Qatari individuals from obtaining profits that surpass the specified percentages outlined in the company's incorporation document or articles of association. This measure seeks to maintain fairness and transparency in financial dealings within corporate entities.

    Another critical provision of the law focuses on preventing non-Qatari individuals from evading their obligations under the country's laws. This includes provisions to deter evasion tactics, such as the use of false identities, licenses, or manipulating commercial and professional records. The law aims to close loopholes that might enable individuals to circumvent their legal responsibilities.

    The enactment of this law represents a significant step in fortifying the rule of law in Qatar. By setting clear guidelines and imposing restrictions on non-compliance, the government aims to create a legal environment where all individuals, regardless of their nationality, adhere to the established laws and regulations, fostering a sense of equity and justice.

    At its core, the new law contributes to the promotion of transparency and accountability in commercial, economic, and professional activities. By curbing concealment and enforcing legal compliance, Qatar aims to build a business environment that is fair, transparent, and conducive to sustainable economic growth.

    One of the overarching goals of the law is to prevent any form of exploitation or abuse of the legal system. By prohibiting unauthorized activities and introducing stringent measures against concealment, the law acts as a deterrent, sending a strong message that all individuals must operate within the bounds of the law.

    Conclusion

    Qatar's new law combatting concealment in commercial and professional activities is a pivotal development in the nation's legal landscape. It reflects the government's commitment to upholding the rule of law, ensuring compliance with regulations, and fostering a business environment characterized by transparency, fairness, and accountability. As the law takes effect, its impact on the practices of non-Qatari individuals and businesses will be closely monitored, with the expectation of creating a more robust and equitable legal framework for all stakeholders.

     

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    Sun, 14 Jan 2024 00:00:00 GMT
    <![CDATA[Saudi Arabia’s Proposed New Zakat and Tax Procedures Law]]> Saudi Arabia's Proposed New Zakat and Tax Procedures Law

    In a significant stride towards economic diversification and in line with its Vision 2030 initiative, Saudi Arabia is poised to enact substantial reforms to its income tax and zakat regulations. The proposed Draft Laws aim to create a more welcoming business environment, encourage foreign investment, and align the Kingdom with international best practices. This article provides a detailed examination of the key provisions in the Draft Laws and their potential implications for taxpayers and zakat payers.

    Proposed Amendments to Saudi Arabia's Zakat Implementing Regulations

    Article 17: The annual Zakat return filing deadline is proposed to be extended to 180 days, up from the current 120 days, from the conclusion of the Zakat year.

    Article 21(1): The statute of limitations is set to be reduced from five years to three years from the expiration date of the statutory deadline for submitting the Zakat return.

    Article 23: The reassessment period, in cases where incorrect information is provided by a Zakat payer, is poised to be shortened to three years from the date of ZATCA's awareness, contrasting with the current five-year timeframe.

    Article 30: ZATCA aims to enhance awareness among Zakat payers by issuing guidelines or bulletins. Furthermore, ZATCA retains the authority to issue public and solicited rulings following specified procedures. The interpretations in these guidelines, bulletins, or rulings will carry binding status prospectively from the date of issuance.

    Key provisions in the Draft Laws

    Residency Criteria and Taxation of Non-Saudi Natural Persons:

    The Draft Laws introduce new residency criteria for natural persons, with an emphasis on a 90-day presence within a tax year and an aggregate of at least 270 days within three tax years. This shift aligns with global norms and underscores the Kingdom's commitment to attracting international talent and business expertise.

    For non-Saudi natural persons conducting independent and regular activities in Saudi Arabia, detailed procedures for computing income tax are outlined. Notably, income from salaries and similar compensation is excluded from taxable income, subject to specific conditions, fostering an environment conducive to skilled expatriate professionals.

    Force-of-Attraction Principle and Source of Income:

    The limited force-of-attraction principle is now proposed to be restricted, emphasizing direct business dealings with Saudi customers. Additionally, gains from the indirect sale of shares in a Saudi entity and remote services through electronic means are considered as Saudi-source income, aligning with the evolving nature of global business transactions.

    Expanded Definitions and Exemptions:

    The Draft Laws expand the definition of related persons in line with transfer pricing regulations and introduce the concept of a preferential tax regime. Capital gains tax computation undergoes changes, and certain income types, including dividends and capital gains from shares, are proposed to be tax exempt under specific conditions.

    Deductions, Depreciation, and Hybrid Mismatch:

    Several changes in deductions are proposed, such as restricting interest deductibility to 30% of taxable profit and changing the tax depreciation method to straight line. Gains on the disposal of depreciable assets become non-taxable under certain conditions, and hybrid mismatch rules apply to related persons holding financial instruments.

    Tax Incentives, Mergers, and Alternative Tax Calculation:

    The Draft Laws introduce tax incentives for green investment, exempt profits and losses from mergers or demergers under certain conditions, and offer alternative tax calculation methods for micro enterprise entities. Approved carry forward losses are no longer restricted, and taxes paid outside Saudi Arabia can be deducted, subject to conditions.

    Withholding Tax and Refunds:

    Proposed changes to withholding tax (WHT) rates include a 5% rate for interest on debts from related parties, dividends, and rental payments. A self-assessment system for filing returns within a stipulated timeline is introduced, along with a reduced statute of limitations. The Draft Laws also outline a new structure for computing fines, emphasizing the importance of compliance.

    Conclusion

    The proposed Draft Income Tax and Zakat Laws represent a significant step towards modernizing Saudi Arabia's fiscal framework, aligning it with international standards, and creating an attractive business environment. As businesses prepare for potential implementation, a careful review of the Draft Laws is essential to understand their implications and ensure compliance in this evolving tax landscape. The Kingdom's commitment to fostering economic growth and diversification is evident in these forward-looking reforms, signaling a new era for taxation in Saudi Arabia.

     

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    Thu, 11 Jan 2024 00:00:00 GMT
    <![CDATA[The Crypto-Asset Exchange System in Bahrain]]> The Crypto-Asset Exchange System in Bahrain

    Bahrain's forward-thinking fintech regulations, coupled with a commitment to fostering young tech talent, have successfully lured some of the globe's most inventive financial entities to the region. Notably, cryptocurrency exchange Binance recently secured its inaugural license as a crypto-asset provider within the Gulf Cooperation Council (GCC).

    To engage in cryptocurrency trading, such as buying or selling Bitcoin or Ethereum, individuals must first establish an account on a cryptocurrency exchange platform. These platforms, known as crypto-asset exchanges (CAX), including popular ones like Kraken, Coinegg, Gemini, and Binance, facilitate the exchange of traditional currencies like Bahraini Dinars or U.S. Dollars for digital assets.

    A CAX allows users to trade one crypto-asset for another, such as converting Bitcoin to Litecoin or purchasing crypto using regular currency like Bahraini Dinar or U.S. Dollar. These exchanges display real-time market prices for the cryptocurrencies they offer, enabling users to monitor and make informed trading decisions. Additionally, users can convert their cryptocurrencies back into traditional currency, either leaving it in their exchange account for future crypto trading or withdrawing it to their regular bank account.

    The Central Bank of Bahrain (CBB) introduced the crypto-asset module in 2019, outlined in Volume 6 of the CBB Rulebook. This regulatory framework provides guidelines for CAX platforms, ensuring compliance and proper operations within Bahrain.

    When evaluating the suitability of a crypto-asset, the CBB considers factors such as the issuer's technological expertise, reputation, traceability, and volatility of the crypto-asset. Regulated Crypto-Asset services include order execution, dealing on one's own account, portfolio management, custody of clients' assets, and offering investment advice. Licensees may combine these services as long as it avoids potential conflicts of interest.

    Certain activities, such as creating or administering crypto-assets, developing or using software for crypto-asset creation or mining, and loyalty programs, are not within the scope of regulated Crypto-Asset services.

    Applicants seeking a license under the CBB's framework can choose from four categories. Importantly, for categories one to three, the legal status must be a Bahraini company with limited liability, a Bahraini joint-stock company, or a branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation.

    Relevant Fees

    Applicants are obligated to submit a non-refundable fee of 100 Bahraini Dinars (BD) to the Central Bank of Bahrain (CBB). Upon approval of the application, licensees will then be subject to an annual license fee calculated at 0.25% of their operating expenses.

    Licensing Requirements

    Licensees are mandated to establish a designated place of business within Bahrain. In the case of overseas Crypto-Asset Exchanges (CAXs), approval from the CBB is required to maintain a local management premise in the Kingdom. The application process must include a comprehensive business plan and submission of application forms for all shareholders, subsidiaries, and controlled functions. Additionally, the CBB necessitates the appointment of an independent third party to conduct a readiness assessment on the licensee's risk management system, organizational structure, and operational manuals.

    While Bahrain-based licensees must maintain a specified level of financial resources, overseas CAX licensees must demonstrate that their platforms are sufficiently resourced to mitigate the risks associated with their operations. Apart from appointing a licensed external auditor, licensees must assure that substantial shareholders do not pose undue risks to the platform.

    To prevent the misuse of system errors, licensees must implement adequate segregation among staff arrangements, ensuring that control is not concentrated in the hands of a single individual.

    Client Portfolio

    Prospective licensees must ensure that their clients are at least 21 years old, are not acting as third-party agents for other organizations, and maintain a designated bank account with a licensed retail bank. It is important to note that entities such as charitable funds, sporting, social, religious, cooperative, and professional societies cannot register as clients. Licensees are also responsible for maintaining confidentiality of all client-supplied information and disclosing relevant terms, conditions, and transactions associated with their services.

    Keyman Risk Management and Compliance

    To address keyman risk, the CBB mandates procedures, including obtaining insurance coverage, to manage unforeseen circumstances where information becomes unavailable. This includes situations where encryption keys or passcodes to stored assets, such as wallets, become inaccessible. Licensees are additionally required to establish permanent compliance functions that effectively adhere to the responsibilities and conditions outlined in the CBB Rulebook.

    Security Measures

    In an effort to enforce robust network security practices, licensees are strongly advised to implement firewalls, regularly change passwords, and employ data encryption in transit and at rest. The CBB recommends the implementation of competent cybersecurity programs to ensure the availability and functionality of electronic systems, protecting them from unauthorized access. Licensees must also establish mechanisms for reporting cybersecurity risks, emerging trends, and potential breaches to initiate prompt recovery plans.

    Other Relevant Requirements

    Applicants have the option to appoint a legal representative, such as a law firm or professional consultancy, to prepare and submit the application on their behalf.

    Licensees must ensure that, when dealing with accepted crypto assets, their proprietary affairs do not exceed 50% of the paid-up capital or net shareholders' equity (whichever is lower).

    The CBB encourages licensees to adopt a well-designed Business Continuity and Disaster Recovery plan and maintain professional indemnity coverage with a minimum amount of 100,000 Bahraini Dinars from the CBB's licensed insurance firm. Among other obligations, licensees must provide regulated financial services without discrimination and conduct their activities in a fair, orderly, and transparent manner.

    After Approval is Issued

    Licensees are required to commence operations within six months of receiving approval from the CBB. Additionally, they are urged to promptly notify the CBB of any legal proceedings against them, breaches committed, or any susceptibility to insolvency.

    Crypto Wallets

    The CBB introduces two types of crypto wallets in its Rulebook. The custodial wallet gives clients limited control over their crypto-assets, while the non-custodial wallet provides clients with complete control. Licensees dealing with alternative types of crypto-assets are advised to consult the CBB.

    Crypto-Asset Custody Services

    The CBB outlines three acceptable types of custodial arrangements for crypto-asset custody services: in-house custodian, third-party custodian, and self-party custodian. Licensees are prohibited from trading, assigning, lending, or dealing with accepted crypto-assets unless directed otherwise by the client. Clients must be informed about the use and function of custody wallets.

    Growth of CAXs in Bahrain

    The increasing presence of CAXs in Bahrain is evident through the CBB's approval of well-recognized and Shari'a-compliant cryptocurrency platforms. Rain, as the first licensed Crypto-Asset Brokerage, underwent a rigorous two-year regulatory process, offering investors leading cryptocurrencies with stringent security measures. Coin MENA, having met operational and security requirements, obtained a license to operate its trading CAX services in Bahrain, providing retail and institutional investors with major cryptocurrencies and implementing robust security measures.

     

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    Sun, 07 Jan 2024 00:00:00 GMT
    <![CDATA[Six New Laws to Regulate the Real Estate Sector in UAE]]> Six New Laws to Regulate the Real Estate Sector in UAE

    In 2023, Dubai's dynamic property landscape is poised for significant transformations, solidifying its status as a top choice for both investors and homeowners. The Dubai Land Department (DLD) governs real estate laws and regulations, striving to safeguard the interests of buyers and sellers in this thriving market. Presently, the Dubai property market boasts over 930,000 registered properties, collectively valued at more than AED 1.5 trillion.

    Foreign nationals have the opportunity to invest in designated areas, while UAE nationals and expatriates have access to freehold ownership in specific zones. The DLD rigorously enforces regulations to ensure transparency and equity in real estate transactions, mandating the registration of property title deeds with the department.

    Dubai's real estate sector remains dynamic, adapting to the evolving needs of the market and its stakeholders through the continual introduction of new laws and regulations. These measures contribute to Dubai's reputation as a premier global hub for real estate investment, drawing buyers from across the globe.

    His Highness Sheikh Saud bin Rashid Al Mu'alla, a member of the Supreme Council and the ruler of Umm Al Quwain, has promulgated several laws pertaining to the Real Estate Foundation of Umm Al Quwain and the regulation of the emirate's real estate sector. These laws are also geared towards aiding the formulation and execution of plans to foster growth throughout the sector, aligning with the emirate's initiatives for urban development.

    Six new laws to regulate Real Estate Sector

    These regulations serve as a framework to support and propel progress, ensuring that the emirate of Umm Al Quwain can unlock its full economic potential and achieve sustainable development. Through these measures, the leadership aims to create an environment conducive to innovation, investment, and economic diversification, ultimately contributing to the prosperity and advancement of Umm Al Quwain.

    His Highness Sheikh Saud bin Rashid Al Mu'alla, a member of the Supreme Council and the ruler of Umm Al Quwain, has exhibited visionary leadership by enacting several groundbreaking regulations intended to regulate and enhance the emirate's real estate industry.

    A Comprehensive Legislative Approach

    Laws No. 2, 3, 4, 5, 6, and 7 of 2023 constitute a comprehensive legislative strategy crafted to achieve diverse objectives. Foremost among them is the establishment of a robust framework for the Real Estate Foundation of Umm Al Quwain, ensuring meticulous oversight of the operations within the real estate sector.

    Ensuring Orderly Property Registration

    Law No. 2 of 2023 introduces the Interim Real Estate Register of Umm Al Quwain, a crucial tool in overseeing property registration activities across the emirate. This initiative prioritizes the systematic registration of real estate holdings, aligning with the overarching goal of promoting sustainable urban development.

    Regulation and Safeguarding Interests

    Law No. 3 of 2023 focuses on overseeing real estate development operations in Umm Al Quwain. It specifically deals with key elements like the pricing structure of real estate projects and the establishment of real estate escrow accounts. These provisions are crucial in protecting the interests of investors, real estate firms, and property developers, promoting compliance with comprehensive regulatory standards.

    Enhancing Transaction Regulation

    Law No. 4 of 2023 introduces amendments to Law No. 3 of 2007, focusing on real estate escrow accounts in Umm Al Quwain. These modifications offer essential directives aimed at strengthening the oversight of real estate sales transactions. They aim to ensure that all parties involved fully adhere to the regulations set forth by the Real Estate Foundation.

    Transparency and Security

    Law No. 5 of 2023 centers on the regulation of mortgage registration activities, aligning with the regulations set forth by the Central Bank of the UAE. Additionally, this legislation tackles the resolution of concerns and breaches associated with unregistered mortgages, thereby contributing to a real estate environment that is more transparent and secure.

    Protecting Investor Rights and Project Completion

    Law No. 6 of 2023 places a strong emphasis on safeguarding the rights of investors when faced with delays or obstacles in real estate development projects. The objective is to facilitate project completion whenever feasible, and it institutes a specialized committee tasked with addressing issues pertaining to canceled or unfinished real estate ventures.

    Strengthening Brokerage Regulations

    Lastly, Law No. 7 of 2023 introduces amendments to Law No. 2 of 2005, which regulates real estate brokerage activities within the emirate. This extensive legal framework sets forth clear guidelines to regulate all brokerage activities, promoting transparency and accountability within this essential sector.

    In conclusion, these laws collectively highlight a proactive dedication to enhancing Umm Al Quwain's real estate sector. They play a pivotal role in fostering growth, safeguarding stakeholders' interests, and establishing a well-regulated, dynamic environment for real estate activities in the emirate.

     

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    Thu, 04 Jan 2024 00:00:00 GMT
    <![CDATA[UAE Corporate Tax 2023]]> UAE Corporate Tax 2023

    The introduction of the UAE Corporate Tax law is poised to bring about substantial transformations in the landscape of UAE Tax and Transfer Pricing. The primary objective of the law is to focus taxation on business or business-related activity income, safeguarding personal income especially derived from employment, investments, and real estate from the purview of UAE Corporate Tax.

    The significance of Transfer Pricing is expected to escalate, given that inter-company and intra-group transactions will now be scrutinized and necessitate adherence to arm's length principles. This heightened scrutiny emphasizes the need for businesses to ensure compliance with tax regulations, adding a considerable tax and compliance burden.

    It is crucial for businesses to navigate these changes meticulously, as any lapses in compliance or adherence to the new regulations are anticipated to result in substantial penalties. As the UAE positions itself within the global tax framework, businesses must proactively adapt to these shifts, not only to meet regulatory requirements but also to thrive in an evolving economic landscape.

    The UAE's 2023 corporate tax will be a 9% tax on the profits (revenue minus expenses) of all businesses that generate over 375,000 AED (about USD $100,000). Businesses that generate less than this will have to continue to pay a 0% tax rate.

    In addition to the corporate tax, the UAE has also announced that large multinational firms with profits of more than EUR 750 million will have to pay a 15% tax this is as per the Global Minimum Corporate Tax Rate agreement.

    The new UAE corporate tax will come into effect in the tax year beginning June 1st, 2023, and so most companies will have to start setting aside money to pay their taxes from that date. Notably, businesses with a tax year starting in January will only be liable for taxes on revenues generated after January 1, 2024.

    Features of the Corporate Tax Regime

    Taxable Entities: Legal entities with distinctive legal structures, such as LLCs, PSCs, PJSCs, LLPs, and others, will be subject to taxation. Additionally, foreign legal entities earning income in the UAE and qualifying as tax residents will face charges. While free zones enjoy a 0% corporate tax, compliance with regulatory requirements is essential, even for free zone companies engaged in mainland trade. Corporate taxing policies may apply to both non-residents and residents of the UAE.

    Tax Rates: For businesses earning income below AED 375,000, a 0% tax rate applies, while those exceeding this threshold will incur a 9% tax. Larger multinational companies with different business conditions will face varied tax rates.

    Exemptions

    Corporate tax law incorporates a participation exemption from corporate tax for entities receiving dividends or selling shares of a subsidiary. Corporation taxes do not apply to charities, public benefit organizations, investment funds, businesses engaged in oil and resource extraction, and companies that are entirely government-owned.

    Calculating Taxable Income

    The company's net profit or loss in financial statements determines the applicable tax percentage and income. In the event of a company loss, businesses can offset the value against taxable income in future financial years, up to 75%.

    Groups of companies

    Groups of companies may form a tax group, treated as a single taxable entity. To qualify, a company or subsidiary must not be an exempted party or be registered in a free zone.

    Tax Credits

    To prevent double taxation, the regime permits a credit against foreign tax paid in a foreign jurisdiction concerning foreign tax income not exempted.

    Compulsory Audit Requirements

    As per Article 54(2) of the corporate tax law, the Ministry of Finance mandates the preparation of audited financial statements for individuals meeting the following criteria:

    1. Taxable entities with revenues exceeding AED 50 million.

    2. Qualified individuals within free zones.

    In conclusion, the UAE's embrace of a global minimum tax for multinational corporations, supported by the G20, underscores its dedication to international tax reform and willingness to engage in collaborative efforts with other nations. This commitment aims to establish a fair and equitable environment for businesses worldwide. The introduction of corporate tax in the UAE represents a noteworthy milestone in the nation's economic trajectory. The successful implementation of this tax framework is poised to yield positive implications, fostering sustained economic growth and prosperity for the country in the years to come.

     

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    Mon, 01 Jan 2024 00:00:00 GMT
    <![CDATA[UAE’s New Pension Law]]> UAE's New Pension Law

    The new Federal Decree Law No. (57) of 2023 introduced by the General Pension and Social Security Authority in the UAE aims to enhance the efficiency and sustainability of the country's pension and social security systems.

    Applicability and Transition

    The effective date of the new law applies to Emirati employees working for companies participating in the GPSSA who commenced their employment for the first time on or after the publication date. Existing employees will be subject to the provisions of the Federal Law No. (7) of 1999. Retirees currently receiving payments under previous laws will continue to be safeguarded by the existing law, even if they pursue new employment subsequent to the issuance of the new Federal Decree Law.

    Eligibility

    The pension system outlined in the legislation sets specific criteria for eligibility, with a minimum subscription period of 30 years and a retirement age requirement of 55. However, recognizing the unique circumstances of working mothers, the law introduces tailored benefits. Working mothers enjoy a more flexible subscription period and can apply for a retirement pension at a younger age. This acknowledges the additional challenges and responsibilities faced by working mothers and aims to provide them with earlier access to pension benefits. Moreover, the legislation demonstrates a progressive approach by allowing working mothers to maintain optional membership during breaks for childcare, ensuring continuity in their pension contributions despite temporary career interruptions. This targeted provision reflects a commitment to inclusivity and recognizes the diverse needs of the workforce, contributing to a more equitable and supportive pension system.

    Primary objective of newly enacted law

    The recently enacted legislation aims to refine the policies and operational framework of the General Pension and Social Security Authority (GPSSA), focusing on ensuring the efficiency and sustainability of pension financial resources while honoring the Authority's future commitments.

    Additionally, the law strives to enhance the flexibility of pension and social security services in the UAE, addressing any existing gaps in services and policies for Emirati nationals in both government and private sectors. It also aims to foster equality in insurance benefits to incentivize Emirati nationals to join private sector enterprises.

    The Federal Decree Law applies to Emirati employees entering the labor market for the first time in organizations participating in the GPSSA, starting from the publication date and the existing employees will remain covered under Federal Law No. (7) of 1999.

    Pensioners currently receiving benefits under previous laws will continue to be covered by those laws. Individuals who have received end-of-service bonuses under the older laws will also remain covered, even if they embark on new employment after the issuance of the new Federal Decree Law No. (57) of 2023.

    The monthly contribution structure for the insured is now stipulated at 26% of their contribution account salary, with the insurer bearing 11%, the employer 15%, and the government 2.5% for Emirati nationals in the private sector with a contribution account salary below Dh20,000.

    To standardize rules across government and private sectors, the pension calculation mechanism is based on the average contribution account salary of the last six years of the subscription period. The law permits the consolidation of previous service periods for any employer covered by the new law, including service before acquiring UAE nationality.

    The minimum age for entitlement to a retirement pension is set at 55 years, with a minimum subscription period of 30 years. Working mothers are granted flexibility, allowing them to apply for retirement pension entitlement at a younger age and with a shorter subscription period.

    Monthly subscription salary components are specified for the government sector, while the private sector wage is determined by the employment contract, with a monthly subscription amount not less than Dh3,000 and not exceeding Dh70,000.

    The law permits the purchase of a nominal period of adjoining service, with conditions based on actual service periods and age. Insured individuals can request the purchase of up to five years, depending on their years of service.

    The law introduces equality between insurers in the government and private sectors, allowing pensioners with a subscription period of 30 years to combine pension with salary, irrespective of their value.

    Pension payments will be suspended if a pensioner joins a new job covered by the new law, with compensation equal to or greater than the pension amount. The GPSSA is authorized to establish executive regulations and conditions for employers and self-employed individuals under this new law, subject to approval from the Minister of Finance. The GPSSA is also empowered to formulate the necessary executive regulations for the application of the GCC Insurance Protection Extension Program.

    Conclusively, the new Federal Decree Law, focuses on its objectives, applicability, and key provisions related to financial contributions and benefits. 

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    Wed, 27 Dec 2023 00:00:00 GMT
    <![CDATA[New Maritime law: Oman]]> New Maritime law: Oman

    The Sultanate of Oman is not a signatory to the 1924 Hague Rules corresponding to Bills of lading nor the 1974 Athens convention in relation to the carriage of travelers, we presently see a modern local codification of identical insurances. In the numerous maritime regions where Oman has ratified the fundamental IMO Conventions, we see the expansion of local color without bringing down the flag State and Port State commitments for each situation.

    On March 30th, 2023, Sultani Decree No. 19/2023 was issued proclaiming Oman's new Maritime Law. The Announcement annuls the Maritime Law enacted by the Law Regulating Maritime Navigation in Territorial Waters promulgated by Sultani Decree No. 98/1981 and Sultani Decree No. 35/1981 as well as some other related regulations and guidelines that conflict with its provisions. The primary aim of the new Maritime Law is to manage Oman's maritime industry, focus on navigation, sailor, and maritime environmental safety, and promote its development.

    The recently enacted Decree presents a complete framework for investigating maritime mishaps and debris management, along with provisions for penalties and fines in case of violations. It likewise manages maritime tourism, which was not covered by the previous law. Moreover, the Decree incorporates updates to different legislative aspects and it covers ship registration, maritime liens, and requirements, ship agents, freight agents, and representatives.

    It's critical to take note that the Minister of the Ministry of Transport, Communications, and Information Technology ("MTCIT") will give important guidelines and regulations to execute the Declaration according to Article (2) of the Decree. In the interim, current regulations and decisions will remain effective except if they go against the provisions of the Decree.

    The new law, containing 387 articles in 9 sections, covers different aspects of the maritime sector.

    Section one framework definitions and general provisions for implementing the law, including Oman's ratified international maritime treaties, and lays out the MTCIT responsibility according to the maritime sector.

    Section two is concerned with the ship and includes various perspectives, like the circumstances for acquiring or losing Omani nationality, the commitment for Omani vessels to display the flag of Oman, and regulations relating to supervision, investigation, possession, management, sales, approvals, shipbuilding, licenses, registration, and ship's rights. This segment likewise spreads out the conventions that the MTICIT should adhere to while investigating a ship and governs the methodology for registering and deregistering an Omani ship.

    Section three focused on property rights a ship could have, including maritime liens and mortgages. It likewise features the types of legal attachments that can be forced on ships.

    Section four defined the duties and responsibilities of those associated with maritime transport, including employment contracts for the experts and seafarers and its terms and conditions and reason for termination.

    Section five outlined the roles and responsibilities of ship agents and brokers.

    Section Six governs ship contracting and introduces new types of carriage, including maritime tourist transport.

    Section Seven provides the structure for examining and managing marine mishaps and debris and the methodology to be followed.

    Section Eight regulates marine insurance, claims settlement, and timelines related to claims emerging from the insurance policy.

    Section Nine prescribes punishments and fines for violating the law, including the authority of the Minister of MTCIT to determine administrative penalties.

    Conclusively, the maritime sector in the Sultanate of Oman was introduced to a critical development, through the issuance of the Royal Decree No. 19/2023 by His Majesty Sultan Haitham bin Tariq. The Decree proclaims a new Maritime Law for Oman, with the aim of developing Oman's maritime sector, along with focusing on the significance of navigational safety, seafarer protection and environmental preservation. Besides, the Law energizes the improvement of shipbuilding and commercial maritime operations.

    Prominent elements of the Law envelop updated regulations for maritime personnel, including maritime work contracts, vessel registration under the Omani flag, maritime mishaps and penalties, maritime liens and enforcement, while likewise including provisions for ship agents, freight agents, forwarders, and brokers.

     

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    Sat, 23 Dec 2023 00:00:00 GMT
    <![CDATA[Criminal Law System in the UAE]]> Criminal Law System in the UAE

    The United Arab Emirates (UAE) boasts a criminal law system that is a unique blend of Islamic law, or Sharia, and modern civil law principles. This system is designed to address a wide range of criminal offenses, ensuring order and justice within the diverse and dynamic society of the UAE. At the core of the UAE's criminal law system is the Penal Code, a comprehensive legal document that outlines various criminal offenses, their classifications, and corresponding penalties. This code is influenced by Islamic law principles, reflecting the cultural and religious values of the nation.

    The Sharia Influence in UAE's criminal law is derived from the Quran and Hadith (teachings of Prophet Muhammad). It plays a significant role in shaping the UAE's criminal justice system. Sharia principles are particularly prominent in matters such as family law, morality offenses, and issues related to personal status.

    In UAE as per Article 45 of the UAE constitution, the Federal Judiciary is one of the five federal authorities of the UAE Government. It incorporates the federal Supreme Court, federal courts, and Public prosecution. It is managed by the federal Supreme Court, the highest judicial expert in the UAE.

    The UAE's legal system is a federation of seven emirates, each with its own local laws and regulations. While federal laws, including the Penal Code, apply across the nation, individual emirates may have specific regulations and enforcement mechanisms. This decentralized approach allows for tailored legal practices while maintaining a cohesive national framework.

    Structure of the judicial system

    The legal structure in the UAE works in two system. The federal Judiciary is managed by the Federal Supreme Court the highest judicial authority in the UAE and the local judicial departments at the local government level. At the federal level, the Ministry of Justice directs courts and prosecution departments across the UAE. It appoints judges and licenses attorneys, experts, and legal translators.

     

    Articles 94 to 109 of the UAE's Constitution depict the general principles of these two systems and leave the details to the discretion of local legal authorities. Each of the seven emirates maintains the right to decide either to participate in the Federal Judiciary or to maintain its own local judicial framework. The emirates of Ajman Fujairah, Sharjah, and Umm Al Quwain follow the federal judicial system.

    However, at the local level, the Abu Dhabi Judicial Department in Abu Dhabi, Dubai Courts in Dubai, and RAK Courts in Ras Al Khaimah keep up with their own independent judicial departments, with jurisdiction in matters that were not relegated to the Federal Judiciary with the Constitution.

    Jurisdiction

    Article 105 of the Constitution permits by federal law, for all or a part of a local emirate court's jurisdiction to be alluded to the federal courts of first instance. Nonetheless, it isn't workable for a local emirate court to take jurisdiction away from the federal court.

    Law Enforcement:

    Law enforcement in the UAE is carried out by both federal and local police forces. Each emirate has its own police department responsible for maintaining public order and investigating crimes within its jurisdiction. Coordination between these entities ensures a unified approach to law enforcement across the country.

    Legal Processes

    Criminal acts start with a police investigation which is transferred to the prosecutor's office within 48 hours of recording a grievance. The prosecutor will then hear and archive statements from witnesses to decide whether charges will be squeezed or dropped, which should be finished 14 days after receiving the case from the police. When the prosecutor has decided if charges will be squeezed, the parties can proceed with recruiting a lawyer. All lawyers should be authorized to practice law and should be endorsed by an authority deed notarized by a notary public to try the case.

    Specialized Courts:

    The UAE has established specialized courts to address specific legal matters. For instance, the Dubai International Financial Centre (DIFC) Courts handle cases related to financial transactions and certain criminal offenses within the DIFC jurisdiction. These specialized courts contribute to the efficiency and expertise of the legal

    Appeals

    Federal laws characterize the conditions where appeals against judgments by the local judicial authorities in penal, civil, commercial, and other cases may be made before the federal courts. The Constitution explains that there are a few disputes that must be heard at a federal level by the Federal Supreme Court and not at a local or emirate level. These are mentioned in Articles 99 and 102 of the Constitution.

    Application of Technology:

    In recent years, the UAE has embraced technological advancements to enhance its criminal law system. From digitizing court processes to implementing smart policing initiatives, technology plays a pivotal role in improving efficiency and transparency within the legal framework.

    Conclusion

    The criminal law system in the UAE reflects a balance between tradition and modernity, incorporating Islamic principles while embracing contemporary legal practices. With a commitment to justice and order, the UAE continues to evolve its legal system to meet the challenges of a rapidly changing society.

     

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    Wed, 20 Dec 2023 00:00:00 GMT
    <![CDATA[Saudi Arabia Civil Transactions law]]> Saudi Arabia Civil Transactions law

    The Kingdom of Saudi Arabia (KSA) Civil Transactions Law enacted on 19 June 2023, by Royal Decree M/191, has now been published in the official gazette. It will come into effect 180 days from the date of publication, i.e. around 16 December 2023. The Law with seven chapters and 720 articles is one of the biggest legislative issuances in KSA's history. It is a significant achievement for KSA as, before this new law, Islamic law (Shari'a) got chiefly from the standards of the Holy Qur'an and the Sunnah (prophetic lessons of the Prophet Muhammad) governed agreements in KSA. This codification will significantly affect legally binding relationships in KSA, both broadly and globally. It is definitely a seismic shift for KSA, supported by its Vision 2030, to draw in significant speculation to the country when KSA is likewise in equal carrying out its Regional Headquarters Programme (RHQ). It gives assimilation to the different worldwide treaties and agreements to which KSA is a party, as well as bringing the governance of everyday transactions closer to global best practices.

    Main Principal

    The broad structure of the Law covers a scope of regions within business transactions to aid in facilitation and investment. The principal gives transparency, efficiency and stability to contemporary business policies in KSA. Besides, they give increasing consistency of legal decisions and potential disputes.

    Binding force of contracts

    The Law affirms the fundamental components of a binding contract and recognizes that the contract is the law of the parties and that the contracting parties should satisfy what the contract requires of them.  This is like other civil code jurisdictions in the Middle East which recognize that the parties are limited by the terms and conditions of the contract they have concurred.

    The Law likewise recognizes that the parties should execute their obligations in accordance with the contract and in a manner that is consistent with the prerequisites of good faith. As indicated by the Law, the contract will not be bound to commit the contracting party to its contents, yet will likewise manage its requirements as per the Law, customs, and justice according to the idea of the commitment.

     

    Contract interpretation

    consistent with civil codes in other Middle Eastern jurisdictions, the Law tends to the position assuming there is uncertainty and there is space to interpret the contract. The starting position is that if the language of the contract is clear, then it isn't admissible to deviate from it. The parties will consequently be bound by the particulars of their contracts where the language is clear.

    In any case, in the event that there is space to interpret the contract, then the common will of the contracting parties should be considered ceaselessly at the literal meaning of the terms, taking into consideration the nature of the managing and the trust and integrity that should exist between the contracting parties as per the custom. Hence, pre-contract correspondence can be considered to track down the common will of the parties in an effort to determine a vagueness. This position is similar to other civil codes in the Middle East and this provision of the Law might assist the parties resolve contract interpretation issues when the language of the contract isn't clear and open to more than one understanding.

    Compensation

    The Law includes useful provisions for the guidelines of damages where a party is in default or in delay. In accordance with civil codes in other jurisdictions, the Law gives grounds that the parties might agree and fix compensation in advance, stipulating this in the contract. In this manner, as is typical in construction and engineering contracts, the Law likewise addresses liquidated damages as a form of remedy.

    These liquidated damages may not fall due or might be decreased in the event that the creditor has not experienced a loss or the agreed compensation was exaggerated or the original obligation was partially performed. KSA has therefore embraced a position similar to Qatar and Kuwait that gives the court or tribunal authority to diminish pre-agreed compensation assuming that specific criteria are fulfilled. The Law clarifies that this is a compulsory provision and hence can't be superseded by the particulars of the contract. At last, the Law sets out the test for the recuperation of compensation and damages, and this should be the compensation that would normally have been predicted at the time of the contract. It is interesting to take note that there is no express reference to "loss of profit" being recoverable. It is not yet clear how this standard on the recovery of damages will be applied by the courts or tribunals determining breach of contract disputes.

    Construction contracts

    Execution of work is canvassed exhaustively in the Law. This incorporates design and quantity changes, subcontracting, and termination. These provisions should be carefully considered for clients operating in the construction and engineering sector and how they apply to the parties' contracts for work.

    Conclusively, the introduction of the Law is a welcomed administrative shift in KSA. It will be a viable method for eliminating vulnerability and theory on contractual development and how key legal risks will be settled in KSA. The codification of these key legal risks ought likewise to give efficiency, familiarity, and greater solace to investors hoping to carry on with work in KSA. The embracing of contemporary strategic policies and the rising transparency reflects KSA's obligation to be at the front line of worldwide business transactions. The retrospective nature of this new law likewise should be considered by all parties. Entities should review and perhaps redraft their existing contractual agreements, all the more so assuming they have any potential issues that issues that remain unsolved after the Effective Date.

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    Sat, 16 Dec 2023 00:00:00 GMT
    <![CDATA[Bahrain Labour Law]]> Bahrain Labour Law

    Bahrain's labor law serves as the cornerstone for regulating the employment relationship between employers and employees, ensuring fair treatment, and fostering a healthy work environment. This article provides an overview of key aspects within Bahrain's labor law, emphasizing the rights and responsibilities it establishes for both parties. Legislative Decree no. 36 of 2012 promulgate Bahrain's Labour Law.

    Employment Contracts

    Written employment contracts are mandatory under Bahrain's labor law. These contracts must include crucial details such as job responsibilities, working hours, compensation, and other terms of employment. This requirement aims to establish clarity and prevent disputes.

    Contract for an indefinite term

    When an employer terminates an employee who has an indefinite-term contract within the probationary period, (if within three months probationary period) the employee shall not be entitled to compensation. However, if that termination is an unfair dismissal, then the employee is entitled to compensation which is equivalent to one month's wages. In the event that termination takes place after the three-month probationary period, without cause then the employee shall be entitled to get compensation equivalent to two days' wages for each month of service. The minimum compensation will be one month's wages and the maximum shall be 12 months' wages.

    Contract for a definite term

    In the event that the employer terminates an employee's contract of employment for a definite term with or without lawful cause, then the employee will be entitled to get a compensation that is equivalent to the wages for the remaining period of the contract. If both parties do not mutually agree then a lesser compensation, shall not be less than three months' wages or the remaining period of the contract, whichever is less.

    Contract for performance of a specific work

     Where the contract of employment was entered into for the performance of a specific work, and the contract is terminated by the employer before then, with or without cause, then the employee shall be entitled to compensation that is equivalent to the wages for the remaining contract period required for completion of the agreed work. This is unless If both parties do not mutually agree then a lesser compensation, shall not be less than three months' wages or the remaining period of the contract, whichever is less.

    Leaving indemnity

    Article 116 of the Bahraini Labour Law explains that when a worker who is not subject to the Bahrain Social Insurance Law namely a foreign employee or a Bahraini employee whose wages exceed BD 4,000 shall be entitled, to get a leaving indemnity at the rate of half a month's wage for each of the first three years of employment and one-month wages for each of the subsequent years.

    Working Hours and Overtime

    Bahrain's labour law defines standard working hours to prevent employee overwork and promote work-life balance. The law also outlines regulations for overtime, ensuring that employees are fairly compensated for additional hours worked.

    Wage Protection

    The law sets guidelines for wage calculation, payment frequency, and permissible deductions. These provisions safeguard employees' financial rights, ensuring they receive fair and timely compensation for their work.

    Occupational Safety and Health

    Bahrain's labour law prioritizes the safety and health of workers. Employers are obligated to provide a secure working environment, including necessary training, safety equipment, and protocols to prevent accidents and protect employees from occupational hazards.

    Termination and Severance

    The law stipulates procedures for terminating employment contracts, notice periods, and the rights of employees in case of dismissal. These regulations offer a fair process for both employers and employees, preventing arbitrary terminations and ensuring due consideration. Article 27 of the Labour Market Regulatory Law compels the employer to a travel ticket back to their home country.

    Justified termination

    Poor performance

    An employer may terminate a contract of employment on the grounds of poor performance by giving the worker notice of the aspects of such inefficiency. This notice must last at least 60 days to give the employer a reasonable opportunity to be heard. Upon expiry of this period and in the event that the employee fails to achieve the required efficiency level, then the employer may terminate the contract of employment after giving 30 days prior notice of the termination and will not be entitled to get any compensation.

    Redundancy

    As per Article 110 of the Bahraini Labour Law, If an employer terminates a contract of employment on the grounds of total or partial closure of the establishment, scaling down of its business, or replacement of its production system then the employer may give notice to the Ministry of Labour concerning the reason for termination 30 days prior to the date of giving the worker 30 days' notice of the termination and the employee shall be entitled to receive a bonus equivalent to one half of the compensation referred to above relating to unjustified termination.

    Labor Dispute Resolution

    Bahrain's labor law includes mechanisms for resolving disputes between employers and employees. This may involve mediation or adjudication to reach a fair resolution, contributing to overall workplace stability. All claims related to employment must be first filed before the Labour Case Administration Office (LCAO).

    Conclusion:

    Bahrain's labor law plays a pivotal role in establishing a balanced and just framework for employment relationships. By addressing critical aspects such as working hours, employment contracts, wages, occupational safety, termination procedures, and dispute resolution, the law strives to create an environment where the rights of both employers and employees are protected. As Bahrain continues to evolve economically, its commitment to a robust labor regulatory framework remains essential for sustaining a fair and productive workforce.

     

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    Wed, 13 Dec 2023 00:00:00 GMT
    <![CDATA[Cryptocurrency Market in UAE]]> Cryptocurrency Market in UAE

    The United Arab Emirates (UAE), known for its dynamic economy and technological advancements, has been making significant strides in embracing the world of cryptocurrencies. This article delves into the current state of the cryptocurrency market in the UAE, exploring regulatory developments, market trends, and the evolving landscape.

    In recent years, the UAE has shown a growing interest in regulating the cryptocurrency market. The Securities and Commodities Authority (SCA) and other regulatory bodies have been working to establish a framework for the legal use of cryptocurrencies. These efforts aim to balance innovation with investor protection and financial stability.

    The UAE has introduced a new, compulsory regulatory market for the utilization of cryptocurrencies starting August 31st, 2023. All must now work as authorized - and fully regulated- entities by the emirate's virtual resources controller. In Abu Dhabi, the controller is the Abu Dhabi Worldwide Market (ADGM) which supervises the virtual resource space in Abu Dhabi. In Dubai, positioned more towards the e-commerce sector, the regulator is the Virtual Asset Regulatory Authority (VARA) which is responsible for managing and supervising virtual assets and virtual asset-related activities in all free zones in Dubai, besides at DIFC.

    In Dubai, this change implies businesses engaged in crypto-assets need to show they have the credentials to conduct these operations. In the event that things go wrong, their clients are in a relatively good position to be properly redressed. What Dubai is attempting to avoid is the sort of blowouts crypto firms have had in business sectors where laws were inadequate or are still being outlined. From August 31, entities that qualify to meet the 'Full Market product' license can commence their progress to the VARA system.

    Key Developments:

    Licensing and Regulation: The SCA has been working on establishing licensing frameworks for cryptocurrency-related activities, including exchanges and other relevant services. This move is crucial for creating a secure and transparent environment for both businesses and investors.

    Central Bank Digital Currency (CBDC): The Central Bank of the UAE has explored the possibility of issuing a central bank digital currency. This initiative aligns with global trends as several countries consider the potential benefits of CBDCs, such as improved efficiency in financial transactions.

    Market Trends

    Growing Interest: The UAE has witnessed a surge in interest in cryptocurrencies among both individual and institutional investors. The appeal of decentralized finance (DeFi) and the potential for blockchain technology to enhance various industries contribute to this growing curiosity.

    Blockchain Integration: Beyond cryptocurrencies, the UAE has been actively exploring the integration of blockchain technology into various sectors, including healthcare, logistics, and real estate. This demonstrates a broader acceptance of the underlying technology that powers cryptocurrencies.

    Challenges and Future Outlook

    Regulatory Uncertainty: Despite progress, regulatory clarity remains a challenge. Investors and businesses often seek clear guidelines to navigate the cryptocurrency space with confidence. Continued collaboration between regulators and industry stakeholders will be crucial for fostering a robust and secure market.

    Global Collaboration: The UAE's approach to cryptocurrencies reflects a broader trend of countries globally exploring digital currencies and blockchain. Ongoing international collaboration and information exchange will likely shape the future of the cryptocurrency landscape in the UAE.

    Government Agencies Accepting Cryptocurrency in UAE

    Government licensing organisation, Kiklabb, has started accepting cryptocurrencies for payments. The real estate sector encourages the usage of cryptocurrency by accepting Dogecoin as payment. A business management consultant, Virtuzone has also announced that they will be accepting bitcoin payments for their business set-up services.

    Future of Cryptocurrency in UAE

    The Central Bank of UAE has reported that by 2026, they will launch their digital currency as a part of the 2023-2026 strategy. With this move, they are hoping to position themselves among the world's top 10 national banks. The cryptocurrency guidelines in Dubai are checked by FRSA (Financial Services Regulatory Authority), SCA (Securities and Commodities Authority), and DFSA (Dubai Financial Services Agency). A license from SCA or FRSA is expected to give crypto services in Dubai. The Dubai Financial Services Agency (DWTCA) and the UAE securities and Commodities Authority have made an arrangement to make the Dubai World Trade Centre a crypto zone and regulator for cryptocurrencies and other virtual assets. It will draw in new crypto prospects in Dubai and will add to a competent future for the UAE in the cryptocurrency industry.

    Conclusion

    The cryptocurrency market in the UAE is at a pivotal juncture, balancing the need for innovation with regulatory safeguards. As the regulatory framework evolves and the market matures, the UAE's position in the global cryptocurrency landscape is likely to become more defined. Investors, businesses, and regulators will play pivotal roles in shaping the future trajectory of digital assets in this dynamic economic hub.

     

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    Sat, 09 Dec 2023 00:00:00 GMT
    <![CDATA[Overview of the Current Indirect Taxes in GCC]]> Overview of the Current Indirect Taxes in GCC

    The Gulf Cooperation Council (GCC) has undergone significant economic reforms in recent years, with a particular focus on the introduction and development of indirect taxes. This article provides an overview of the current state of indirect taxes in the GCC region.

    VAT Implementation:

    The most notable indirect tax introduced in the GCC is the Value Added Tax (VAT). Several GCC member states, including Saudi Arabia, the United Arab Emirates (UAE), Bahrain, and Oman, have implemented VAT. This tax has been a crucial step towards diversifying revenue sources and reducing reliance on oil-based income.

    VAT Rates and Scope

    Each GCC country has its own VAT implementation, with varying tax rates and exempted goods and services. For instance, Saudi Arabia and the UAE initially set a standard VAT rate of 5%, while other countries may have different rates. The scope of VAT differs across nations, encompassing a wide array of goods and services, with specific exemptions and zero-rated categories.

    Customs Duties

    In addition to VAT, customs duties remain a significant component of indirect taxation in the GCC. These duties are levied on the import and export of goods, contributing to government revenue and regulating cross-border trade. The rates and regulations regarding customs duties may vary among member states.

    Digital Services Tax

    Some GCC countries have also explored or implemented taxes on digital services. This is in response to the evolving nature of the economy, where digital transactions and online services play a prominent role. These taxes aim to ensure that the digital economy contributes its fair share to national revenues.

    UAE

    The standard VAT rate of 5% for most of the goods and services. VAT is not applicable on supplies that are zero-rated which include exported supplies, precious metals, educational/healthcare services and related goods, international transportation and carriage, means of transport and related goods and services, rescue aircraft or vessels, first supply of residential or charitable buildings, crude oil and natural gas. While Exempt supplies include implicit financial services, subsequent supplies of residential buildings, bare land, and local passenger transport.

    Excise Tax rates: 100% for tobacco, tobacco products, electronic smoking devices and energy drinks; and 50% on carbonated and sweetened drinks.

    Qatar

    Value-added tax (VAT)

    Currently, Qatar imposes no VAT or sales tax on activities in Qatar. However, the introduction of VAT in Qatar under a common GCC framework is supposed to be introduced in the near future. The expected tax rate is 5%.

    Customs duties

    Customs duties are applied to goods with an origin outside the GCC nations, usually at a rate of 5%. Higher rates are for specific types of goods, such as tobacco products.

    Excise taxes

    Excise tax is applicable on the following goods at their respective tax rates:Tobacco products: 100%, Carbonated drinks: 50%, Energy drinks: 100%., Special purpose goods: 100%.

    In November 2022, the Ministry of Finance issued Ministerial Decision No.12 2022 on Excise Tax refund giving a list of additional instances of refund of excise tax paid on excisable goods delivered for consumption but not consumed in Qatar.

    Saudi Arabia

    VAT

    VAT Law came into force on 1 January 2018. A rate of 5% for most goods and services, with certain exceptions is imposed as VAT. Later on 1 July 2020 VAT rate was increased by the government to 15%.

    Excise Tax

    The Excise Tax Law became effective on 11 June 2017 in Saudi Arabia, with only tobacco products (at 100%), soft drinks (at 50%), and energy drinks (at 100%) as tax. To comply with the Saudi Arabian Excise Tax Law, manufacturers and importers need to register with the GAZT and the tax evaders will be imposed penalties.

    Customs duties

    Customs duties are imposed on imports in accordance with the Saudi Customs regulations. Penalties for smuggling goods vary from confiscation, and penalties to imprisonment and collections of customs duties.

    Kuwait

    There is no VAT and Excise Tax in Kuwait. whereas like other GCC states, Kuwait has approved a unified customs tariff of 5% on cost, insurance, and freight (CIF) invoice prices, subject to certain exceptions with a higher tariff on imports of tobacco and its derivatives, among other products.

    Oman

    VAT standard rate of 5% (reduced VAT rate 0%). Excise Tax rates with 100% on tobacco and related products, energy drinks, and special purpose goods, 50% on carbonated drinks.

    Bahrain

    The standard VAT rate in Bahrain is at 10%. The Tax rates of 100% for tobacco and related products and energy drinks; and 50% on soft drinks as Excise tax rate in Bahrain.

    Challenges and Developments:

    While the introduction of indirect taxes in the GCC has been a milestone in economic reform, it has not been without challenges. Businesses, especially small and medium enterprises (SMEs), have had to adapt to new compliance requirements. Additionally, ongoing developments and refinements in tax laws may pose challenges for businesses seeking clarity and consistency in their operations.

    Conclusion:

    The implementation of indirect taxes, particularly VAT, marks a significant shift in the economic landscape of the GCC. As member states continue to refine their tax systems, businesses and individuals alike must stay abreast of these changes to ensure compliance and navigate the evolving fiscal environment in the region.

     

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    Tue, 05 Dec 2023 00:00:00 GMT
    <![CDATA[Priorities of India’s G20 Presidency]]> Priorities of India's G20 Presidency

    India gathered the G20 leaders' Summit for the first time in 2023, as 43 Heads of Delegations the biggest ever in the G20 participated in the last New Delhi summit in September. As a nation focused on democracy and multilateralism, India's presidency has been a significant achievement as it looks to track down global solutions for the benefit of all and exemplify the possibility of "Vasudhaiva Kutumbakam," or "the world is one family."

    The G20 Summit is held every year with a rotating presidency and in 2023, India held the presidency. The group doesn't have a permanent secretariat and is upheld by the past, current, and future holders of the presidency, known as the troika. In 2023, the troika comprises of Indonesia, Brazil, and India. This summit concluded with a series of meetings over time, with potential host urban cities for meetings from December 2022 to February 2023 including Bengaluru, Kolkata, Lucknow, Mumbai, Pune, Rann of Kutch, Surat, Thiruvananthapuram, Chandigarh, Chennai, Guwahati, Indore, Jodhpur, Khajuraho, and Udaipur.

    Vasudhaiva Kutumbakam, which means "One Earth, One Family, One Future," is the theme of India's G20 presidency. It is propelled from the Maha Upanishad, an old Sanskrit scripture. The theme essentially features the significance of all life - human, animal, plant, and microorganism - as well as their interdependence on the planet and across the universe. The theme likewise represented LiFE (Lifestyle for Environment), which features the significance of earth's sustainable and responsible lifestyle decisions, both at the individual and national level, in making a cleaner, greener, and bluer future.

    The G20 Presidency likewise proclaims for India the beginning of "Amritkaal," a 25-year time span commencing from the 75th anniversary of its independence on August 15, 2022, paving the way to the centenary of its independence.

    India's Presidency of the G20 is an exceptional gathering for worldwide economic cooperation, comes at a critical juncture. It offers New Delhi the valuable chance to revise, reform and redesign development collaboration and set the plan towards directing assets for accomplishing the SDGs. India could likewise utilize its Presidency to use its extraordinary improvement organization model and offset China's growing impact in worldwide development cooperation. Both China and India assume a vital part in molding the worldwide economic disclosure and political dynamic, giving alternative sources of supporting to developing countries. Nonetheless, various conventional Western donor nations as well as some in the worldwide South, including India, are finding it difficult to handle the developing Chinese presence.

    Priorities in India's G20

    Green Development, Environment Finance, and LiFE

    India's emphasis on environmental change, with a specific emphasis on environment finance and technology, as well as guaranteeing just energy transitions for developing nations. Introduction of the LiFE movement, which advances environmentally-conscious practices and depends on India's sustainable traditions.

    Accelerated, Inclusive & Resilient Growth

    focus on regions that have the potential to bring primary change, including supporting small and medium-sized enterprises in worldwide trade, promoting labor rights and government assistance, tending to the worldwide skills gap, food systems and building inclusive agricultural value chains.

    Accelerating Progress on Sustainable Development Goals

    Recommitment to accomplishing the objectives set out in the 2030 Plan for sustainable development, with a specific focus on addressing the effect of the COVID-19 pandemic.

    Technological Change and Digital Public Infrastructure

    Promotion of a human-driven approach to technology and increased information sharing in regions like digital public infrastructure, financial inclusion, and tech-empowered development in areas like agriculture and education.

    Multilateral Organizations for the 21st Century

    Endeavors to change multilateralism and make a more responsible, inclusive, and representative international system that is good for addressing 21st-century challenges.

    Women-led development

    Emphasis on inclusive growth and development, with an emphasis on women's empowerment and representation to help socio-economic development and the accomplishment of Sustainable Development Goals.

     

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    Fri, 01 Dec 2023 00:00:00 GMT
    <![CDATA[New Saudi Civil Law]]> New Saudi Civil Law

    On June 19, 2023, the Kingdom of Saudi Arabia enacted the Civil Transactions Law proclaimed by Royal Decree M/191 dated 18 June 2023 (Dhul-Qi'dah 29 1444 AH). The Code, which goes into force on December 16, 2023 (Jumada II 3, 1445 AH), marks a significant step to integrate Islamic standards into modern legal concepts, aiming to smooth out transactions and promote economic growth. The KSA Common Code also provides a positive impact on the business environment by increasing its attractiveness, regulating economic movement, and the stability of financial rights. The KSA Civil Code reflects Saudi Arabia's desire to draw in investment and encourage more business action as a component of its wider Vision 2030. The Code will in this way be at the core of the change of Saudi Arabia's economy.

    Prior to KSA Civil Code

    Before the order of the KSA Civil Code, the regulations in Saudi Arabia are established in view of the Basic Law of Governance, declared by Royal Decree A/90 dated March 2, 1992 (Sha'ban 27, 1412 AH), as amended. The Basic Law states that Sharia law governs the legal sphere in Saudi Arabia, as educated by the Quran and Sunna. The translation of Sharia law in Saudi Arabia is thus dependent upon the four schools of Islamic Jurisprudence, of which the Hanbali school is the most prevailing.

    The ongoing framework is largely uncodified and doesn't depend on legal precedent. All things considered, texts composed by, for instance, the Hanbali school are prevalently depended upon to determine legitimate positions. Subsequently, Sharia law, as applied in Saudi Arabia according to commercial contracts, could be said to have the following characteristics:

    Absence of codification: Sharia law is derived from religious texts and customs instead of classified laws and guidelines.

    Interpretation and application: The understanding of Islamic standards in Sharia law can vary among researchers and law specialists which can make vulnerability about the outcome of specific business situations. Read more....

     

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    Sun, 26 Nov 2023 00:00:00 GMT
    <![CDATA[New Commercial Agencies Law in the UAE]]> New Commercial Agencies Law in the UAE

    The Old law was seen to be more in favor of the agents; giving a better legal stance for agents compared to that of principals. Notwithstanding, the New law comes with the spirit of striking harmony among principals and agents. Furthermore, the New law is vigorously dependent on provisions contained in agency arrangements. Absence of which the provisions of the New law will apply in full.

    Federal Law No. 3 of 2022 came into force on 15th June 2023 and introduces various significant changes lined up with the United Arab Emirates (UAE's) progressing endeavors to facilitate the way of carrying on with business in the UAE. The previous commercial agency system in the UAE was represented by Federal Law No. 18 of 1981 Regulating Commercial Agencies and the amended Old Commercial Agencies Regulation in 2006, 2010, and 2020. The issuance of the New Commercial Agencies Regulation is certainly the main change to date, making a more adaptable and balanced relationship between agent and foreign principal.

    The new law introduces significant changes to the law relating to business offices, showing a move towards flexibility, and possibly reassuring more prominent foreign investment. notably, the New law grants the right for worldwide companies that are not owned by UAE nationals to apply to act as agents for products they own that are not subject to a commercial agency and considers the early termination or non-renewal of commercial agency agreements, dependent upon specific conditions being met.

    Key changes in the New Law

    Commercial agents: The scope of who can act as a commercial agent has enlarged. The New law reaffirms the common rule that only UAE national individuals, 100 percent UAE owned companies, or public joint stock companies (which are no less than 51% UAE owned) can act as commercial agents. Be that as it may, interestingly, the cabinet may now permit global companies not owed by UAE nationals to act as agents for products they own and sell directly into the UAE market, provided specific rules are met.

    Contract term: The New law presently requires a minimum agreement term of five years in the event that an agent is expected to lay out buildings for display, goods stores, or facilities for maintenance or repair.

    Termination/Notice: A principal's termination right has been extended. Under the Old law, a principal couldn't terminate or decline the renewal of a registered commercial agency without a "material reason". in proving a "material reason" was troublesome, with endeavors frequently resulting in compensation for loss/damages granted to the registered agent. This was to a great extent the motivation behind why principals avoided their commercial agencies registered. This limitation has now been eliminated, and termination can happen in the accompanying conditions:

  • Upon expiry of the agreement term (unless renewed);
  • By the will of either party, as per the terms of the commercial agency contract;
  • By the arrangement of the parties before the expiry of the agreement term;
  •  A termination notice is served to the other party at least one year preceding the proposed termination date, or before the lapse of half of the agreement term, whichever is less.
  •  

    Despite the fact that there are broader grounds for lawful termination, the provisions examined above in relation to expiry and early termination won't immediately apply to:

  • any arrangements currently in force at the time of issuance of the New law - until 15 June 2025 (being two years from the date of the New law's entry into force); and
  • any arrangements: (i) that have been registered with the same agent for over a decade; or on the other hand (ii) in which the volume of the agent's investment surpasses AED 100,000,000 - until 15 June 2033 (being a decade from the date of the New law's entry into force)
  • Dispute resolution: Under the Old law, only the Commercial Agencies Committee and UAE courts had jurisdiction over disputes, and any agreement against the norm was void. The New law gives new adaptability by permitting parties to allude to disputes to arbitration.

    Goods during a dispute: During a dispute, and with the Ministry of Economy's approval, principals might keep on carrying goods and services into the UAE by means of exclusive sources other than the agent.

    Compensation: An agent can guarantee compensation for the damage it has brought about:

  • Termination of the agreement which has not been renewed (except if the agreement explicitly states otherwise)
  • Early termination
  • Conclusion

    The changes introduced with the commercial agencies law are supposed to provide more support and solace to foreign investors in the UAE as it gives them greater adaptability, for example, the ability to elect a familiar global dispute resolution forum, terminate any commercial agency agreements more effectively and even register as commercial agents, would be advisable for them they meet the requirements specified under the New Law. Also, the New law is vigorously dependent on provisions agreed by the parties to the commercial agency agreement. Companies are therefore encouraged to give close consideration to drafting clear and unequivocal terms in the agency contracts.

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    Thu, 23 Nov 2023 00:00:00 GMT
    <![CDATA[Income Tax Amendment in Qatar]]> Income Tax Amendment in Qatar

    The purpose behind the amendments is to adjust the Income Tax Law with worldwide standards and best practices. It is expected that amendments to the Executive Regulations (ER) will be published soon, which will incorporate further insights about the new amendments to the Income Tax Law.

    Change in Scope of Income Tax Law

    Traditionally, income derived from Qatari sources was subject to income tax in Qatar. Under the amended Income Tax Law, certain classes of foreign-sourced income have now become taxable in Qatar (e.g., income from land situated beyond Qatar). Moreover, income from services given beyond Qatar will presently likewise be subject to income tax in Qatar.

    Foreign income as taxable

    This shall include income produced from real estate, immovable property, profits, royalties, interest, and technical service charges provided such classes of income are not owing to a foreign long-lasting foundation of a Qatari Undertaking. Another article of the law determines that dividends paid to a Qatari undertaking for its businesses outside Qatar shall not be subject to tax in Qatar provided the same business were taxed in foreign country.

    Tax-exempt status for private charitable organizations, private associations and foundations, and private foundations of public interest. These were excluded from the scope of Income Tax law according to Article (2) of law No. (24) of 2018. However, the new tax law No. (11) of 2022 have brought private associations and foundations, private charitable organizations, and private interests within the extent of the tax law as absolved substances in light of Article no. (4) of the tax law. Appropriately, these entities will presently be considered within the scope of the tax law as tax-exempt entities and comply with tax commitments.

    Global Minimum Tax rate to 15%

    As a member of the OECD's Inclusive Framework on BEPS, Qatar is focused on carrying out the Global Anti-Base Erosion (GloBe) Rules. To this end, Qatar has implemented provisions in the Income Tax Law introducing a minimum tax of 15% on Qatari substances that are to the extent of the Global Minimum Tax initiative. The expected amendments to the Executive Regulations will incorporate further insights about the relevant systems for demanding this minimum tax on in-scope entities.

    Tax Exemptions

    The Preamble of Law No. 24 of 2018, certain people were considered out of scope and were not exposed to the provisions of the Income Tax Law withholding tax and contract reporting provisions.  In view of the amendments to the Income Tax Law, such people would now be considered as inside the scope of the Income Tax Law on a tax-exempt basis. Certain entities that were recently viewed as outside the scope of the income tax law are presently viewed as in scope, nonetheless, exempt from income tax. These incorporate, among others, private charitable organizations, private associations as well as foundations, and private foundations of public interest. Proceeding, these entities will be dependent upon compliance requirements under the Income Tax Law.

    Foreign Tax Relief

    Qatari tax residents can claim relief in regard to foreign taxes paid beyond Qatar.

    Economic Substance

    'Qualified entities' from an Economic Substance perspective that meet certain criteria will be expected to submit a report to the General Tax Authority (GTA) on the 'minimum indicators' of their core activities in Qatar. It is expected that the Executive Regulations will give more insights about these reporting requirements.

    Powers of the GTA

    For purposes of tax inspection and exchange of data, the amendments to the income tax law introduced the following as a component of the powers of the GTA in obtaining relevant data for these purposes. The GTA is qualified to obtain data and reports for the purpose of tax investigation and for the goal of exchange of data with the competent foreign tax authority prerequisites. Resident people are expected to give data on their financial assets abroad in line with the GTA

    Ultimate Beneficial Ownership (UBO) reporting

    The amendments specify that certain entities should furnish the GTA with all important data about their beneficial owners upon request of the GTA.

    Penalties

    The amendments presented new requirements in accordance with other existing laws in Qatar concerning economic substance regulations, ultimate beneficial ownership, and prerequisites emerging from the digitization of the economy. A flat penalty of an amount equal to 15% of net gain is included in Article 24 of the Tax Law for cases where the economic substance prerequisite is not complied with by the entities responsible.

    Conclusively, on 2 February 2023, Qatar published amendments to Law No. 24 of 2018 via Law No.11 of 2022 in the Official Gazette Law No. 11 of 2022 introduces important changes that will affect the taxation and compliance obligations of citizens. The amendments decreed under Law No. 11 of 2022 incorporate the scope of taxable activities, exemptions, non-compliance penalties, and powers of the GTA.

     

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    Mon, 20 Nov 2023 00:00:00 GMT
    <![CDATA[GCC Trade Marks Laws]]> GCC Trade Marks Law

    Qatar has marked a significant development in trademark practice and become the fifth Gulf Cooperation Council (GCC) country to implement the GCC Trade Marks Law in the region. The provisions of Ministerial Decree No 56 of 2023 were published in the Qatar Official Gazette on 9 July 2023 along with the implementing regulations. it also aimed at streamlining the processes for protecting and maintaining trademark registrations in Qatar. The law came into force on 10 August 2023.

    The main significant differences achieved by the adoption of the GCC Trademark law are is as follows:

    Giving more clarity on what constitutes a well-known trademark

    In accordance with worldwide norms, Article 4 of the GCC Trademark Law gives clearer standards to what constitutes a well-known trademark which ought to act as a rule for the authorities and brand owners and pursue choices and decisions more predictable.

    Granting the possibility of permitting multi-class applications

    Article 9(1) of the GCC Trademark Law expressly allows trademarks to be registered for one or more classes, and this provision is additionally explained in the implementing regulations. Multi-class filings and registrations are helpful for trademark owners, as they decrease administrative efforts and expenses, streamlining the application and renewal processes. Moreover, official charges and agent fees are generally lower for additional classes in multi-class applications. In any case, it is actually important that regardless of this provision, none of the other GCC states that have already executed the GCC Trademark Law have decided to take on multi-class applications, and there is no indication that Qatar will do so either.

    Decreasing the opposition period from four months to 60 days

    This critical change, framed in Article 14 of the GCC Trademark Law, permits third parties an adequate opportunity to review applications, prepare contentions, and submit necessary documents while additionally assisting the trademark registration process. Similarly, the opportunity to conform to examiners' conditions has been decreased from six months to 90 days (Article 12(2) GCC Trademark Law), and the opportunity to appeal an opposition decision before the court has been reduced to 30 days from 60 days (Article 15(3) GCC Trademark Law).

    Time limit for the examination of applications

    This limitation is tracked down in Article 12 (4) of the GCC trademark law and Article 6 of its implementing Guidelines and would have liked to speed up the examination and consequently the registration process. Regrettably, on this event, the official fees for different services like trademark registrations, and renewals are also being increased, which is a remarkable inverse of what brand owners would have hoped for in a region where these fees are exceptionally high compared with different areas.

    Temporary protection during international exhibitions

    As the Paris Convention requires, Article 21 of the trademark law affirms that trademarks may be granted temporary protection during formally acknowledged international exhibitions.

    Explaining that goods/services are not automatically considered to be similar just because they are in the same class or dissimilar since they are in an alternate class

    Article 9(2) of the GCC Trademark Law resolves this issue, giving a welcome differentiation to the current act of the Qatari trademark office and other GCC nations, including the UAE. The methodology of considering goods and services as similar or dissimilar dependent exclusively upon their classification frequently fails to reflect market realities. The GCC Trademark Law recognizes that goods and services within similar classes can be fundamentally different from one another, considering the conjunction of similar trademarks. On the other hand, regarding goods and services as dissimilar exclusively due to differing classes can be taken advantage of to evade rejections and misuse of the classification system. To address these concerns, the GCC Trademark Law emphasizes the requirement for a more comprehensive examination process that goes beyond superficial class-based examinations.

    In conclusion, Qatar's adoption of the GCC Trademark Law implies a critical progression in harmonizing trademark regulations across the Gulf region, offering expanded clarity and consistency for brand owners, with prominent changes like reducing the opposition period. In any case, the concern with respect to the increased official fees remains a disputed matter for brand owners looking for trademark protection in Qatar.

     

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    Fri, 17 Nov 2023 00:00:00 GMT
    <![CDATA[UAE’s New Digital Assets Law]]> UAE's New Digital Assets Law

    In the rapidly evolving world of finance and technology, digital assets have emerged as a transformative force, reshaping the way we perceive and interact with value. From cryptocurrencies to non-fungible tokens (NFTs), the realm of digital assets is expansive and diverse, bringing forth a myriad of opportunities and challenges.

    Cryptocurrencies: The Pioneers of Digital Currency

    Cryptocurrencies, led by the groundbreaking Bitcoin, have disrupted traditional notions of currency and finance. Explore the origins, evolution, and impact of cryptocurrencies on global economies and financial systems.

    NFTs: The Unique Tokens of the Digital Era

    Delve into the phenomenon of Non-Fungible Tokens (NFTs), digital assets representing ownership of unique items, be it digital art, virtual real estate, or other digital collectibles. Uncover the cultural and economic implications of this burgeoning market.

    Blockchain Technology: The Backbone of Digital Assets

    Examine the underlying technology powering digital assets – blockchain. Understand how its decentralized and transparent nature not only secures transactions but also opens new possibilities for various industries beyond finance.

    UAE's New Digital Assets Law

    The Dubai International Financial Centre Authority (DIFCA) has issued a consultation paper on its proposition to enact a new Digital Assets Law (DAL) and to amend a few existing DIFC regulations to oblige the legal features and outcomes of the acknowledgment of digital assets as a type of property.

    Legal nature of the digital assets

    The DAL expects to give legal certainty and clearness on the essential aspects of the legal nature and treatment of digital assets as a matter of property regulation, like the definition, characterization, transfer, acquisition, interference in use, and recuperation of digital assets. The draft DAL characterizes digital assets as a thing:

    I. that exists as a notional amount unit appeared by the blend of the active operation of software by a network of participants and network-instantiated data, independent of a specific individual or general set of laws

    II. that isn't fit for duplication

    III. whose utilization or utilization by at least one person essentially biases its utilization or utilization by one or more other persons.

    A  digital asset is described as being intangible property, which is neither a thing under lock and key nor a thing in real life. The meeting paper sets out a nitty gritty clarification of the purposes behind the position the DIFC has taken as regard the legal status of digital assets, which is in accordance with the position embraced by the Law Commission of England and Wales on the treatment of digital assets.

    Ownership

    It is suggested that the DAL will embrace the rule that control is at the base of title to digital assets and that a transfer of title requires a change of control and an aim to transfer title. The draft DAL further sets out the conditions for an individual to have control of digital assets, which incorporate the selective capacity to keep others from getting significantly all the advantage from the digital asset, the capacity to get considerably all the advantage from the digital asset, the elite ability to transfer those abilities to someone else, and the ability to distinguish oneself as having those abilities. The draft DAL obliges exemptions for the difference in control prerequisite in circumstances including demise, bankruptcy, or inadequacy, where the applicable law might provide a transfer of title without a difference in control.

    When issued, the DAL will lay out a regime for the protection of digital asset owners against illegitimate interference or impairment of use by third parties, which depends on the thought of a hindrance of purpose that causes misfortune to the proprietor. The draft DAL provides for defenses to an impairment claim, like consent or the probability of consent by a reasonable individual in the owner's position. The draft DAL likewise permits an owner to recuperate control of a digital asset from an individual who has no knowledge of the owner's title.

    Amendments to existing laws

    The consultation paper frames the vital proposed amendments to the current DIFC laws that are essential or desirable to oblige digital assets, like the Contract Law, the Implied Terms in Contracts and Unfair Terms Law,  the Law of Damages and Remedies, the Insolvency Law and Insolvency Regulations, the Law of Obligations,  the Trust Law, and the Foundations Law. These amendments cover various aspects of private law, for example, the action for the agreed sum, rectification, rescission, electronic trade documents, bona fide purchase, agency, foreign currency conversion, priorities, and shortfall.

    The draft DAL and the related draft amendments are to be perused related to the proposed new Law of Security, which integrates an amended version of the current Financial Collateral Regulations and sets out the rules for the creation, priority,  and enforcement of security rights over digital assets.

     

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    Mon, 13 Nov 2023 00:00:00 GMT
    <![CDATA[India- UAE trade pact]]> India- UAE trade pact

    I do believe that international trade agreements benefit both nations, always. Phil Knight

    India - UAE have agreed on a Comprehensive Economic Partnership Agreement. (CEPA) is the most significant bilateral trade pact between the two largest economies. The main objective of this agreement is to bring the bilateral trade in goods to US$100 billion by the year 2030. The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is the first of several significant bilateral trade pacts that India has been negotiating to initiate international trade in the post-COVID-19 pandemic. India was negotiating trade agreements with complementary economies and is currently negotiating with the United Kingdom, the European Union, and Canada.

    Significance of this trade agreement

    The India-UAE trade partnership is the first agreement India has reached in more than a decade to boost bilateral trade exports. In addition, this agreement is the first in the series of Free Trade Agreements that will significantly assist India in achieving its goal of 1 trillion dollar in goods and services by 2030. India is also in talks with Australia, UK, Canada, Israel, Europe and other countries such as initiate Free Trade Agreements. India could collaborate with the Gulf Cooperation Council (GCC) group of countries including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia.

    In accordance with the agreement, the UAE will gradually eliminate duties on 80% of its tariff lines which represent 90% of India's exports to the UAE by value in terms of value. This is necessary for textiles and garments where Indian exporters have struggled with import tariffs. Currently, Indian exports of textile and leather are subject to a duty of 5% duty in the UAE whereas competitors' products from Vietnam and Bangladesh are exempt from duty. Over the next five to ten years, India's products will have access to zero duty on 97% of UAE tariff lines, or 99% of India's exports. Gems and jewellery, textiles and clothing, footwear, leather, sports goods, engineering products, and pharmaceuticals are expected to benefit from this. In addition, 10 lakh Indian jobs are anticipated to be created as a result of the agreement.

    Goods to be excluded from the agreement

    Certain goods, which account for 10% of the tariff lines are on the sensitive list of products to be excluded from the agreement. Dairy products, fruits, vegetables, cereals, tea and coffee, sugar, instant foods, tobacco, toys, plastic, scraps of aluminum, and copper are among these. The agreement also excludes regions with significant growth in domestic product production or regions where the government supports manufacturing through PLI schemes.. 

    Key areas to start new developments

    This CEPA agreement states that the digital trade chapter is exempt from the dispute resolution process. According to government officials, the chapter includes topics like paperless trading, consumer protection, unsolicited commercial electronic messages, personal data protection, cross-border exchange of information, cooperation on digital products, and electronic payments. in an Free Trade Agreement indicating India's willingness to discuss this topic in bilateral agreements. 

    Economic Partnership

    They expressed confidence that the agreement would improve economic ties and open up new opportunities for trade and investment. They instructed their respective officials to encourage bilateral investments in infrastructure projects, including speeding up work on establishing a dedicated investment zone for UAE companies and joint ventures. In addition, the leaders urged Indian investors to establish specialized industrial advanced technology zones in the Emirate of Abu Dhabi integrating local value chains of both the current and upcoming specialized economic zones in the areas of logistics and services, pharmaceuticals, medical devices, agriculture, agri-tech, steel, and aluminum.

    Cultural Cooperation

    India and the UAE have agreed to establish an India-UAE Cultural Council between two countries to foster cultural cooperation. The Indian Council for Cultural Relations and the UAE Ministry of Foreign Affairs and International Cooperation's Office of Public and Cultural Diplomacy will be in charge of coordinating the initiative.

     Energy Partnership

    As they navigate the global energy transition, India and the United Arab Emirates have pledged to collaborate to achieve a just and equitable transition to a low-carbon future. Through the comprehensive strategic partnership, both nations have provided significant investment opportunities and promoted them. The United Arab Emirates is proud to have been the first international partner to invest in India's strategic petroleum reserves program through crude oil.

    Climate Action and Renewables

    The leaders of India and the United Arab Emirates agreed to work together more to accelerate climate action, with a focus on the production of Green Hydrogen. The leaders called for the strengthening of more business-to-business and public-private partnerships and praised the UAE's ongoing investments in India's clean technology programs and initiatives. In light of this, the leaders agreed to establish a joint Hydrogen Task Force to aid in technology expansion.

    Emerging Technologies

    The UAE and India have agreed to promote e-business and e-payment solutions and to expand cooperation and collaboration on crucial technologies. The leaders requested that their officials investigate sectors and mechanisms that would foster collaboration. Startups could concentrate on green energy, edutech, health care, logistics and supply chain, agritech, chip design, and fintech.

    Cooperation in Skills

    Both India and the UAE recognize the value of upskilling in increasing the workforce from India in the UAE's various economic sectors and the significance of upskilling in boosting workforce productivity. work together more closely to develop a consensus-based set of professional standards and skills framework.

    Food Security

    The leaders agreed to promote and improve dedicated logistics services and infrastructure that connecting farms to ports and then to final destinations in the United Arab Emirates. They instructed partners in the industry and relevant government agencies to initiate and carry out pilot projects.

    Health Cooperation

    The United Arab Emirates and India have reached an agreement to increase their investments in India's rapidly expanding health infrastructure. Additionally, the leaders agreed to collaborate in providing health care to those living in developing nations. They also acknowledged the contributions of India and the United Arab Emirates to the global vaccine supply.

    Cooperation in Education

    The leaders of the two countries agreed to set up an Indian Institute of Technology in the United Arab Emirates. This was done to reaffirm the historical ties that exist between the two countries and to recognize the need to set up world-class institutions that support and encourage technological advancement and innovation.

    Cooperation on the International Arena

    The leaders agreed to increase their mutual support in multilateral areas in order to encourage economic and infrastructure sector collaboration, reflect their shared values and principles, and increase strategic convergence. Indian Prime Minister Narendra Modi expressed his gratitude to His Highness Sheikh Mohamed for the UAE's selection as a non-permanent member of the United Nations Security Council for the years 2022 and 2023.

    Defence and Security

    The leaders emphasized the significance of preserving and enhancing peace in the Middle East. They expressed their hope to bring regional peace and positive change to the region. The leaders agreed to boost bilateral cooperation to fight against terrorism, terrorist financing, and extremism.

    Conclusively, the goods, services, and digital trade covered by the Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirates will grant duty-free access to the Emirates to 90 percent of India's exports.

    The UAE, India's third-largest trading partner after the United States and China, currently imposes a 5% import duty on Indian goods worth approximately $26 billion. The comprehensive trade agreement between India and any other nation in a decade is the first of its kind in the region.

    ]]>
    Mon, 10 Oct 2022 19:25:00 GMT
    <![CDATA[Oman's New Securities Law]]> Oman's New Securities Law (Decree 46 of 2022)

    "We have seen a systematic erosion of liberty and democracy in Hong Kong. Since the National Security Law was imposed, authorities have cracked down on free speech, the free press, and free association. - Liz Truss, British Foreign Secretary

    Oman Sultani Decree No. 46/2022 enacted a new securities law which will come into effect after the day of publication i.e 2022 June. The Law replaces the old securities law enacted by Royal Decree 98/80 aside from the organization of the Capital Markets Authority. The law guarantees fair, competitive, transparent guidelines, support and encourages SMEs by regulating the access of these institutions funding from the public. It also aims to safeguard the interests of dealers, as well as guarantee the integrity and efficiency of the stock market, and achieve justice and transparency in the transactions that take place through it. Article 34 of Oman Sultani Decree No. 46/2022 states as it is illegal to carry out any harmful practices, which as managing or inducing others to deal in view of undisclosed internal data about security that the law requires disclosure, as well as the misuse of undisclosed or confidential data to achieve personal goals or gains for other people and publishing or giving incorrect or misleading data or data which might influence the price of any security or reputation of any issuer or the investment decision of any dealer. It is also illegal to alter any security by providing false requests or stating an inappropriate transaction. It is illegal to trade or allow the trading of securities without the periodic settlement of the connected obligations in accordance with the regulations.

    Apart from the skills of the CMA, the Law addresses among others, any substance subject to it with respect to protections, investment funds, a compensation fund, administrative procedures, sanctions as well as criminal offenses. The Law aims to ensure the transactional system in coherence with fairness, competition, and transparency, and distinctly supports SMEs in obtaining finances from the public. Further, the Law plans to safeguard the interests of transaction parties, ensures impartiality and fairness of markets as well as manages risk resulting from all connected securities transactions.

    One of the core stipulations of the Law is to present any assistance or product connected with the protection prior to licensing. Prior licensing will likewise be applicable to any adjacent services from capital market institutions as well as from entities working in the field of capital markets. A remarkable exception in modern developments is the exception from licensing for crowdfunding.

    The Securities Law frames a key pillar of Oman's securities law and its extension is wide-ranging. At its core is the requirement that an individual may not participate in activities or offer services or products connected to securities without first obtaining a license from the CMA to do as such. There is likewise restriction on the provision of certain services to entities conducting licensed activities under the Securities Law without earlier registration with the CMA.

    Muscat Securities Market Oman

    The executive guidelines to the Securities Law are supposed to describe, inter alia, those particular activities or entities that do require a license or registration from the CMA and those activities that CMA licensed entities are denied from conducting. Entities licensed by the CMA are liable to conduct business and other obligations under the Securities Law. Some of these are new, including extra necessities to obtain CMA approval before taking certain actions. The conditions and procedures for incorporating, licensing, and registering entities will be licensed by the CMA and these will be set out in the executive regulations.

    The Securities Law likewise replaces the Capital Market Law as the legal foundation for all capital business transactions and directs guarantees, as well as administration issuers, also services providers in the context of transactions and in accordance with their general obligations. It is not permitted under the Securities Law to give protections, plan for their issue, or offer them in a public or private subscription in Oman without the approval of the CMA. A person wishing to carry out a public offering should obtain prior approval of the relevant securities.

    The Securities Law incorporates a new section concerning trusts and collective investment funds. These key provisions should be developed when the executive regulations to the Securities Law are issued.

    Other key developments are:

    • the establishment by the CMA of a dealer protection fund. This is designed to compensate persons handling with CMA licensed entities in respect of specified losses
    • scope for the CMA to reduce the regulatory burden under the Securities Law in regard to crowdfunding operations for the benefit of SMEs
    • new provisions regulating specific purpose companies.

    The Securities Law executes a wide-ranging reform of Oman's securities laws and will undertake further analysis at the appropriate time.

    Conclusion

    The new security law Sultani Decree 2022/46, the Sultanate of Oman was enacted by largely replacing the old securities law enacted by Royal Decree 98/80 except for the Capital Markets Authority. The Law tends to any entity subject to it with respect to protections, investment funds, compensation funds, administrative procedures, sanctions as well as criminal offenses.

    ]]>
    Mon, 29 Aug 2022 13:52:00 GMT
    <![CDATA[Enforcing Foreign Judgments in Bahrain]]> Enforcing Foreign Judgments in Bahrain

    "To invoke alien law when it agrees with one's own thinking, and ignore it otherwise, is not reasoned decision making, but sophistry."  ― Antonin Scalia,

    The enforcement of foreign judgments is the acknowledgment and enforcement in one jurisdiction of judgments delivered in another/foreign jurisdiction. Foreign judgments may be acknowledged based on bilateral or multilateral treaties or understandings, or unilaterally without an express international agreement. Bahrain was the first country to offer the "Free Arbitration Zone" and the first to introduce the idea of statutory arbitration for commercial and financial disputes. Legislative Decree No. (30) for the year 2009 With Respect to the Bahrain Chamber for Economic, Financial and Investment Dispute Resolution gives parties who are keen on global arbitration the choice of holding the arbitration in Bahrain without concern that the courts of Bahrain may interfere with or set aside, the resulting award, provided that the parties look forward to enforcing the award only in another country.

    Legal Issues related to the Enforcement of Foreign Judgments

    Enforcing foreign judgments in Bahrain is certainly not an excessively onerous or complex process, given the party has access to the original documents and can have these legalised. Bahrain is a signatory to various reciprocal recognition treaties. It includes the Hague Convention for the Pacific Settlement of International Disputes 1907, the Convention on the Settlement of Investment Disputes between States and Nationals of other States 1965, the Riyadh Arab Agreement for Judicial Cooperation 1983, the Gulf Cooperation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications 1995 and other various bilateral investment treaties and free trade agreements.

    Bahrain courts will enforce a foreign judgment without expecting earlier acknowledgment proceedings if the judgment originates from a country that is also a signatory to one of the same treaties. Where reciprocal recognition is not laid out by means of a treaty between Bahrain and the foreign country. The recognition of foreign judgments is viewed by Decree-Law No 22/2021. Under Article 16(3) of Decree-Law No 22/2021, no enforcement request of a foreign country judgment might be passed besides subsequent to discovering the following: 

    • that the courts of Bahrain are not able to hear the case in regard of which the court judgment or order was passed, and that the foreign courts which passed it are skillful as per the international rules set down in the laws.
    • that the defendants in the case in respect of which the judgment was issued were appropriately summoned and properly represented
    • that the judgment or order has become final as per the law of the court that passed it
    • that the judgment or order does not conflict with any judgment or order recently passed by the courts of Bahrain and does not accommodate for anything that constitutes a breach of public order or morality.

    A party seeking recognition of a foreign judgment in Bahrain should know that, while the civil and commercial law of Bahrain is not governed primarily by Islamic law. The courts will consider specific principles of Islamic law as forming part of Bahrain's public order and ethics and therefore may utilize Article 16(3)(4) of Decree-Law No 22/2021 to legitimate rehear the case. 

    Not Enforced Foreign Judgments

    Under the Riyadh Convention, judgments against governments or government employees that connect with their administrative duties are not recognized. Recognition of a foreign judgment is also dismissed under the Riyadh convention if the recognition would go against the principles of Islamic law or the constitution, the party against which the judgment is conjured was not duly summoned, the laws of the mentioned country concerning the legal representation of ineligible persons or persons of lessened qualification were not taken into consideration, the dispute depends upon a final judgment in the mentioned country, provided that the mentioned country has already recognized this judgment, and the dispute is dependent upon a case currently being heard by the mentioned country's courts recorded preceding to the application for recognition is made.

    Provided that a certificate of final judgment can be obtained from the country where the judgment was acquired, default and outline judgments can be recognized and enforced in Bahrain.

    Foreign Judgment enforcement process

    A foreign judgment in Bahrain is enforced by implementing the judgment before the Bahrain high civil court for recognition and paying the endorsed court fees. A foreign judgment will be enforced if it meets the criteria. As per Decree-Law No 22/2021, it is fundamental that the Bahrain judge is fulfilled and that the litigants have been duly summoned and properly addressed. If the award is recognized, a party should look for enforcement from the Bahrain court of execution.

    Recognition of Judgments of the signatory countries of the Treaty

    The GCC Convention Article 1 communicates that each of the GCC nations will execute the last judgments given by the courts of any member state in civil, commercial, and administrative cases and individual undertaking cases as per the procedures as provided under this agreement, given that the court that issued the judgment has the jurisdiction in accordance with the international jurisdiction as applicable in the member state where the judgment is required to be executed or has the jurisdiction as per the provisions of this agreement.

    Enforcement under the Riyadh Convention Article 32 requires the skillful judicial body to lay out that the judgment conforms to the arrangements of the Riyadh Convention and affirm this in its judgment. The competent body will then order suitable measures to be taken to give the judgment a similar enforceable status as it would have had in the event that it had been made by the requested party.

    Recognition of Judgments from Non-treaty Countries

    In the absence of a treaty such as the GCC or Riyadh Convention being set up, or without the absence of a principle of reciprocity between Bahrain and the jurisdiction in which the foreign judgment starts, a fresh claim should be recorded under the foreign judgment may be utilized as evidence in support of this application.

    Costs and Time period to Enforce Foreign Judgments

    The enforcement of all judgments in Bahrain is carried out predominantly by the execution court this incorporates foreign judgments being enforced as per any relevant treaty or agreement, foreign judgments recognized by the Bahrain courts, and foreign judgments confirmed following application to the courts as a new case. All judgments equipped to be enforced as per the Bahrain law necessities are treated the same for the purpose of enforcement. To appeal a foreign judgment that has been enforced by a Bahrain court of execution, a party should submit an application to the Bahrain high civil court.

    ]]>
    Mon, 29 Aug 2022 13:31:00 GMT
    <![CDATA[Insolvency Regulations in Qatar]]> Insolvency Regulations in Qatar

    No one can reasonably deny that Medicare is headed for insolvency, and that Medicare's insolvency, if not rectified, will lead to the federal government's insolvency. - David Limbaugh

    The bankruptcy regime in Qatar is based on the principles contained in the legislation of many western jurisdictions. Financial institutions see it as vital to take security, wherever it is available, both inside and beyond the jurisdiction to support financial arrangements in Qatar.  Examples include real estate, government, and corporate bonds, and physical assets such as plants and machinery. There are two concurrent bankruptcy regimes in Qatar. The first is the local regime, the provisions of which are contained in the Commercial Law No 27 of 2006 ("Local Regime"). The second is found in the QFC Insolvency Regulations 2005 and applies to bodies corporate and branches enlisted in the QFC ("QFC Regime").

    The Local Regime

    The Local Regime designates a bankruptcy administrator to manage the bankrupt's affairs, business, and property with the intent to accomplish reimbursement of the bankrupt's debts, as far as possible. The Local Regime contains no express provisions regarding foreign bankruptcy proceedings. This is distinct from some western jurisdictions, where there is clear provision for cross-boundary issues in case of bankruptcy and the manner in which these should be addressed. Qatar has not carried out the Model Law on Cross Border Insolvency of the United Nations Commission on Trade Law (UNCITRAL Model Law). It is subsequently unfit to seek the co-operation of the foreign courts in those countries which have carried out it, such as Australia and the US. Despite this, and considering the increasingly global nature of insolvency, commercial necessity has urged the national courts to give assistance to each other under a concept known as the comity of law. This implies that territorial integrity does not keep a court in one jurisdiction from giving help to a court in another jurisdiction in regard to assets located, or person resident within its territory. they might remit assets located in their own jurisdiction to help a Qatari bankruptcy administrator. However, if the courts in the location of the asset are reluctant to offer assistance, the bankruptcy administrator might need to start concurrent procedures. Nothing in the Local Regime recognizes between external and internal assets. It, therefore, follows that the bankruptcy administrator must be authorized to perform acts he deems necessary to seize the bankrupt's foreign assets of the bankrupt's estate for distribution to the creditors in the Qatari proceedings. While the Local Regime remains great untested it is hard to say unhesitatingly how effectively with which the administration of the bankruptcy procedure would manage cross-border aspects.

    The QFC Regime

    The Qatar Financial Centre was laid out in 2005. It is a different legal jurisdiction from the State of Qatar similar to the Dubai International Financial Centre. The QFC has carried out its own bankruptcy regime through its Insolvency Regulations 2005. The QFC Regime depends on common law principles and is similar to insolvency legislation in England and Wales and other common law jurisdictions. The QFC Regime adopts an extensive approach to bankruptcy as it perceives non-QFC bankruptcy proceedings, including foreign proceedings. Provisions of the Insolvency Regulations express that the QFC tribunal will co-operate to the greater extent possible with courts of non-QFC representatives and might be willing to depend on the distribution of all or part of the bankrupt's assets located in the QFC to the non-QFC representative. If it is fulfilled that the interests of the creditors in the QFC are adequately safeguarded. As far as seizing assets in different jurisdictions, the QFC Regime gives the insolvency administrator, or liquidator a wide authority to act outside of the QFC on behalf of a proceeding under the QFC Regime. Thus, the insolvency administrator is able to take any appropriate action to recover assets in other jurisdictions to realize their worth for the benefit of the creditors in the QFC proceedings. The QFC Regime is a more significant piece of legislation than the Local Regime. It offers more assurance to lenders and security holders in terms of the cross-border aspects of the bankruptcy procedure. The case law of the jurisdictions where upon which it is based likewise gives guidance as to the application of its principles in practice. The security holder should consider advising the Qatari administrator of bankruptcy of its foreign enforcement measures to prevent any attempts to take control of this asset. This will not be an issue for registered charges like mortgages however there may be certain types of security vulnerabilities to such action. 

    Conclusion
    Qatar's economic growth, combined with different factors such as the view that confirmation of powerlessness to pay debts is a good business practice, means that very few bankruptcies have taken place in Qatar. While bankruptcy laws are to great extent untested and a lender can never be 100% fulfilled regarding the validity, value, and enforceability of its security, there are practical steps a prudent lender can take to protect themselves.

    As an overall principle, security ought to be taken where the asset is located, and security reports will this way be represented by the laws of such jurisdiction. Appropriate legal advice and legal opinion obtained from a reputable local law firm in the jurisdiction should as to the enforceability of the security and the capacity of the entity providing such security, according on the circumstances

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    Mon, 29 Aug 2022 13:16:00 GMT
    <![CDATA[Abu Dhabi's Strata Law and its Implications]]> Abu Dhabi's Strata Law and its Implications

    "Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world." - Franklin D. Roosevelt

    The strata law means the development of created building property or the gated community into various layers. Each layer is then subdivided into at least one or more units along with common areas which form the part of the property. The real estate industry has been expecting new laws to expand its growth.  Jointly owned property law for Abu Dhabi is found in Law No. 3 of 2015 which governs the Real Estate Sector in the Emirate of Abu Dhabi.  This law contains what is ordinarily referred to as strata laws which are titled 'Jointly Owned Floors, Flats and Parts'.  Subsequent implementation of regulations to the law through the Department of Municipal Affairs Resolution Number 245 of 2015 'the Executive Regulations Concerning the Ownership of Jointly-Owned Properties and Owners' Association'.  The strata regulations also refer to standard strata documents that will be issued by the Department of Municipal Affairs ('DMA'). The closest comparison comes from Dubai through Dubai Law 27 of 2007 'Concerning the Ownership of Jointly Owned Real Property in the Emirate of Dubai' along with the Direction for Association Constitution, Direction for Jointly Owned Property Declarations, and Direction for General Regulation Concerning Jointly Owned Properties.

    The governing authority for jointly owned property in Dubai is the Real Estate Regulatory Authority and in Abu Dhabi, it is the Department of Municipal Affairs (DMA). The Abu Dhabi strata regulations were published in the Abu Dhabi Gazette, it initially appears there might be less discretion accessible to the DMA, but the legislation itself gives some discretion to the DMA.

    Similarities between RERA and DMA

    Consumer protections: There is an elevated degree of consistency across the disclosure statements and consumer protections in Abu Dhabi and Dubai.   In both cases, the developer is liable for the damages for the contents of the disclosure statement for two years from the date the unit is transferred to a purchaser, including any subsequent purchaser. In both laws is the developer will be liable for defects.  The developer stays liable for structural defects in the building for 10 years from getting a completion certificate.  For defective building establishments, the defect liability period is one year and these items should be fixed or replaced.

    Supply agreements: While laws relating to supply agreements in both jurisdictions function in a similar manner. In Abu Dhabi a supply agreement should not surpass three years without the endorsement of the Municipality of Abu Dhabi. If approval is given, a supply agreement must never surpass 25 years. The Abu Dhabi strata law gives broad requirements on conditions that should be included in supply agreements for both supplies of goods and supply of services. The Dubai strata law matches the necessities for supply agreements but expressly prohibits the use of sub-contractors.

    Owners' association manager: There are few distinctions in the rules relating to owners' association managers, and they will be able to manage their operations across both jurisdictions in a very similar manner. The maximum term for an association manager is three years.  In contrast, in the Dubai strata law after three years, an association manager can be appointed for a further term.  In Abu Dhabi, the strata law expresses that the relationship between an association manager and the owners' association is based on trust and honesty. 

    Difference between RERA and DMA

    The administrator: The position of administrator of the owners' association is the developer or another person who is delegated by the Chairman of the DMA to do the owners' association's operations.  The administrator bears liability regarding the affairs of the owners' association including the liability for its management and activity of the common areas, public services, and service facilities.

    Article 40 of the Abu Dhabi strata regulations sets out that the administrator might be appointed by the DMA in unique circumstances, taking into account factors as the project area.  The drafting of Article 66 of the law expresses that despite how an owners' association is to be constituted, the Chairman of the DMA may set out to substitute the owners' association for the developer or any other person. 

    When there is an administrator the owners' association will only have less influence. They will be only allowed to express opinions and give advice on the management, operation, maintenance, and repair of the common areas in accordance with the master development statement.  the owners' association might not interfere with the duties devolved to the administrator and might seek help from the DMA if the administrator fails in their duties.

    As per the regulation, the owners' association might not ballot, vote, or hold meetings to talk about the management, maintenance, operation, and repair of the common areas.  The utilization and implementation of this provision will be one of the vital areas to watch with the Abu Dhabi strata law.

    Conclusively, looking on both jurisdictions' strata laws, strata property developers and owners' association managers may have easily transitioned between the two Emirates.  Abu Dhabi has various new concepts in its strata law and it will further provide guidance on implementation, regulation, and direction to issue. The Abu Dhabi strata law provides scope for the exercise of discretions in some areas that will be important to follow.

    ]]>
    Sat, 27 Aug 2022 10:44:00 GMT
    <![CDATA[Whistleblowing Regime introduced by DFSA]]> Whistleblowing Regime introduced by DFSA

    "Whistleblowers form a key part of a firm's ability to detect, identify and escalate issues of misconduct, and the required Whistleblower policies and procedures play an important role in encouraging appropriate disclosures                                                     - F. Christopher Calabia, Chief Executive of the DFSA

    The Regime defines a whistleblower as any person who in good faith, manifests a reasonable suspicion that a Regulated Entity might have been in violation of a provision of any law, regulation, or other regulation administered by the Dubai Financial Services Authority or involved in money laundering, fraud, or any other financial crime.

    On 7 April 2022, amendments to DIFC Regulatory Law 2004 and the Dubai Financial Services Authority Rulebook came into force to implement proposals concerning a whistleblowing regime that was consulted on by the Dubai Financial Services Authority (DFSA) in 2021. The Dubai Financial Services Authority noted that the objectives of the Regime are to provide greater legal protection for individuals who report regulatory concerns, strengthen the Whistleblowing culture in Dubai Financial Services Authority Regulated Entities and increase transparency about how such entities will deal with regulatory matters, encourage greater disclosure of regulatory concerns, discouraging wrongdoing, promoting better compliance and ethical culture, raising awareness that there is a greater likelihood that will be reported.

    Dubai Financial Services Authority launched its regulatory regime for whistleblowing. It is the first of its kind to be introduced by a financial service regulator in the UAE. It also applies to all DFSA-regulated entities operating in or from the Dubai International Financial Centre.

    What should Regulated Entities Do? 

    The Regime requires that Regulated Entities to implement effective policies and procedures that:

    • establish effective internal arrangements to enable the disclosure of regulatory issues, as well as related procedures to receive, assess and possibly escalate reports within the Regulated Entity, the DFSA or any other relevant authority.
    • It includes reasonable measures to
  • protect them from the identity and confidentiality of the whistleblower
  • protect them from harm because they have raised a concern
    • provide feedback to the whistleblower, as appropriate
    • include appropriate measures to deal with
  • any conflicts of interest
  •  to ensure the fair treatment of the individuals accused of wrongdoing by the whistleblower.
  • The regime provides increased legal protection for individuals who report misconduct internally within DFSA regulated entities including a DFSA authorized individual, registered auditor, or a designated non-financial business or profession or external to their auditor, the DFSA, or a law enforcement agency.

    The DFSA regime aims to improve the whistleblowing culture between these entities by increasing transparency around how they manage regulatory concerns, assess those concerns, and, if appropriate, escalate them. According to DFSA, the policies and procedures put in place by the regulated entities must be appropriate to the nature, scale, and complexity of that entity's activities and should be reviewed periodically to ensure that they are adequate, effective, and up to date. The regulated entity should also, as part of the implementation of these new requirements, inform all its officers and employees of the protective measures available to them.

    It further stated that a DFSA regulated entity must put in place measures to safeguard the whistleblower's identity and protect them from harm. Christopher Calabia, CEO of the DFSA, explained Whistleblowers are a fundamental part of a firm's ability to detect, identify and escalation of misconduct issues, and the required whistleblower policies and procedures play an important role in encouraging proper disclosures. All regulated entities are prepared to discuss and demonstrate the application of their policies and procedures when dealing with the DFSA.

    What Protection should be granted to a Whistleblower?

    When a whistleblower makes a qualifying disclosure, the DFSA rule Article 68A(4) states that the individual must not:

  • will not incur any civil or contractual liability for having made such a communication.
  • Assert any contractual, civil or other remedy or right of another person against it.
  • Dismiss from their employment or be the subject to any other action reasonably likely to cause him harm.
  • In the event of an occurrence of one of these events, the whistleblower may seize the DIFC court for compensation for any damage suffered. The DIFC court has wide discretion to decide matters for relief in this regard.

    An important caveat here is that the Regime does not protect a whistleblower from possible criminal liability for matters such as violation of business confidentiality, or claims such as defamation, which may be brought before the DIFC in the local courts in Dubai.

    Comparison With Financial Conduct Authority (FCA)

    The Regime largely mirrors Rule 18 on Senior Management Arrangements, Systems and Controls (SYSC) in the area whistleblowing, as set out in the UK FCA Handbook against FCA authorized firms. It is worth making note that there is two interesting ways in which SYSC goes beyond the Regime.

  • The FCA requires that companies nominate a sample of whistleblowers.  This individual is responsible for overseeing and maintaining the integrity of a company's internal whistleblowing provisions. and must be independent and must be sufficiently experienced within the company to fulfill this role effectively.
  • SYSC requires companies to include a clause in any settlement agreement that clearly states that nothing in such an agreement prevents a worker from safely disclosing. In addition, companies should not require workers to enter into any warranties which require them to disclose to the company that
    • having made a protected disclosure
    • not aware of any information that could form the basis of a protected disclosure.

    The DFSA is expected to conduct a review of the Regime in mid-2023 which could involve the introduction of new measures, such as those described above. In the meantime, Regulated Entities seeking to implement best practices may consider adopting one or both of these approaches.

    Recent agreements

    The DFSA had signed a Memorandum of Understanding with the Central Bank of the Republic of Mauritius to cooperate on the performance of their respective regulatory functions.

    Conclusion

    The DFSA introduced a new whistleblowing regime on April 7, 2022. However, the Regime has important parallels with that applied in the UK by the FCA, although some of the more advanced requirements incorporated into the FCA regime have yet to be introduced by the DFSA. The Regime aims to provide better legal protection for those who report concerns within the Dubai International Financial Centre, improve whistleblowing culture in entities regulated by DFSA, encourage greater reporting, and promote an ethical culture within the DIFC by discouraging wrongdoing. It builds on the existing framework governing the DIFC which is under the supervision of the DFSA. The companies regulated by the DFSA must now implement an appropriate whistleblowing program. Focusing on the design and implementation, affected companies would do well to consider best practice approaches already well established within many FCA-regulated institutions.

     

     

    ]]>
    Sat, 16 Jul 2022 12:18:00 GMT
    <![CDATA[Intellectual property for Life Sciences: India]]> Intellectual property for Life Sciences: India

    "The history of patents includes a wealth of attempts to reward friends of the government and restrict or control dangerous technologies." ― James Boyle

    In India, Patents are permitted in all fields of technology. The components deciding the patentability of innovation change for various technologies. Inventions in life sciences are remarkable because of the immense amount of investment and the relatively long gestation time frame for possible inventions. it requires devoted planning for developing and safeguarding the innovations in such technologies. Complex research activities in biotechnology, bioinformatics, nanotechnology, and biopharmaceuticals bring about the high worth of Intellectual Property (IP). Protecting these becomes a significant tool for different business developmental activities apart from funding and sustaining the research.

    Intellectual property in life science is key to the development and commercialization of these innovations. For an idea to be patentable, it must be novel, non-obvious, and helpful. In life science, this could mean a remarkable use for a specific nucleotide, protein sequence, or a new laboratory method to a well-established scientific technique. Patents empower industrial and financial growth by releasing intellectual property to the public. It allows companies to invest in utilizing patents, through licensing, and around patents, by gaining data from the information disclosed in the patents and then creating novel ideas and thoughts. The protection of generated Intellectual Property in the form of patents is one of the preferred rights. it needs interesting strategies to make it consistent with different national laws, and guidelines. Care should be taken to comply with various statutory and regulatory laws from the initial stage of product development for the generation of a proficient IP portfolio.

    Patent protection in India brings unique considerations to the life sciences industry on account of the typical legal exclusions on certain aspects of innovations, for which no patent protection is accessible. Apart from the regular three-leg trial of novelty, inventive step, and industrial applicability, the Indian patent laws have specifically recorded specific topics connected with the life science industry. Some of the specific topics related to the life sciences industry that are excluded from patent protection in India are inventions that could be contrary to morality or which cause serious prejudice to humans, animals, plant life, health, or the environment.

    • The inventions that are simple discoveries of living or non-living substances occurring in nature - clause 3(b).
    • inventions that are a mere discovery of another form of a known substance and do not have an upgrade - clause 3(c)
    • the mere discovery of any new property or new utilization of a known substance or mere utilization of a known process, the machine or apparatus except if such known process results in a new product or utilizes at least one new reactant. - clause 3(d)
    •  inventions that are coordinated to a substance got by a mere admixture or a process for producing such substance - clause 3(e)
    • inventions directed to techniques of agriculture or horticulture - clause 3(h)
    • inventions that are a process for the medicinal, surgical, curative, prophylactic, diagnostic, therapeutic, treatment of human beings or animals- clause 3(i)
    • inventions that are directed to plants and animals in entire or any part thereof other than micro-organisms or essentially biological processes - clause 3(j)
    • inventions that are connected with aggregation or duplication of the traditional knowledge - clause 3(p).

    Since a large part of the technologies and innovations in the life sciences, domains connect to the health sector and are directly or indirectly associated with life forms. Such inventions constantly attract the application of one or the other such exclusionary clauses. While the provisions in clauses 3(b), 3(c), 3(d), 3(i), and 3(p) are more relevant to inventions in the health care sector, the inventions relating to the agriculture sector attract the provisions of clauses 3(b), 3(c), 3(d), 3(h), 3(j) and 3(p).

    The market for life sciences products is generally classified into three categories:

    1.    Biotech

    A significant part of the biotech market comprises kits and assays which depend on molecular biology. It also incorporates a portion of the simpler medical equipment. In spite of this apparent simplicity, a single tag or antibody of broad application can address enormous value. The patent is worth a lot of money to its holder as a sole-use item, however, when it is out-licensed, the royalties it generates will be extensive. The royalty model delivers a lot higher return than conventional product sales, but this depends on IP protection. Patent litigation is not uncommon, it is more often a process of clarifying the legal positions of parties to a licensing agreement.

    2.    Medical Devices

    This is a broad category that involves most types of technological innovation and even more sophisticated equipment that falls outside the transmission of biotech. CT and ultrasound scanners, infusion pumps, defibrillators, pacemakers, cochlea implants, catheters, and certain types of wheelchairs are some of the examples. In order to qualify for IP protection, the gadget needs to have a key element that is judged as the best in class.  Initially, the IP protection ensures a period of exclusivity to the developer eventually, the technology will be shared on commercial terms. Sometimes certain features of a device are patented and are still valuable to the patent holder because other manufacturers will pay to license of their own product

    3.    Pharmaceuticals

    Research and development in this area of the life sciences is usually the most expensive partly because it takes time from concept through development, testing, and certification before it gets to market. IP rights are vigorously shielded in this field and even when the patent comes to the end of its life, it is feasible to get a Supplementary Protection Certificate (SPC). It expands the protection of patented ingredients that form part of a pharmaceutical product. The IP rights are not valid in every jurisdiction, but pharmaceutical companies will usually institute litigation against any infringement where their IP rights are valid.

    As India is acquiring the position of the simplicity of carrying on with business and provides a large consumer base for various technologies and inventions. it is important for the life sciences industry genuinely move their IP generation and protection by giving due consideration to the specific provisions of Indian patent laws. Innovators in the life sciences sector also need to address another aspect of regulation in India, if they are utilizing Indian biological or genetic resources. India is a party to the Convention on Biological Diversity and is bound to contribute to the conservation of biological diversity, its sustainable use, and sharing of benefits arising out of the utilization of biological resources and associated knowledge.

    Conclusion

    In India, impressive efforts at various levels have been made to find some kind of harmony in regard to legislative requirements and the interest of the industry. In Intellectual Property for actively securing the gains of immense investment of resources in developing the inventions. The past decade has seen extensive improvements in Indian industrial policies and Intellectual Property practices by adopting various procedural and policy measures, which have established a favourable environment for the development of industry and Intellectual Property protection. India is undoubtedly progressing rapidly towards a strongly supported Industrial regime with a strong Intellectual Property environment in life science.

    ]]>
    Sat, 16 Jul 2022 12:03:00 GMT
    <![CDATA[Dispute Resolution in Qatar]]> Dispute Resolution in Qatar

    "Mediation is one of the most effective tools of nonviolence. It can turn parties away from conflict, towards compromise." - Miroslav Lajcak

    Qatar adopts a legal system based on the civil-law legal system, substantively and procedurally harmonized with Islamic law. Islamic Sharia is the source of law and a fundamental part of the legal and legislative culture, the essential source of law in commercial matters is the codified regulations, as established and published in the Official Gazette. Primarily, commercial matters are governed by the Commercial Code and the Civil Code, and secondary power to customary practices with Sharia principles in the absence of provisions in the codes. Model laws in commercial matters have been adopted from UNCITRAL model laws such as e-commerce law, arbitration law, and mediation law.

    Categories of dispute resolution

    Litigation

    Litigation is a process where the dispute is brought to the courts. A judge on the basis of evidence will decide and pass a verdict regarding the case. The involved parties can defend their rights with the assistance of a dispute lawyer. This is proven as a conclusive method for settling a disagreement between two parties. The dispute can be between individuals or companies.

    Arbitration

    Arbitration is a process where an arbitrator settles a dispute. A decision is not final until both parties agree. A third party is called an arbitrator who acts as a judge. The duty of an arbitrator is to analyze the arguments of each party with the evidence in their defense and also the arbitrator has to bring both parties to a mutual and conclusive agreement. The arbitrator should be guaranteed that the personal issues of the parties will be kept confidential.

    Trends and developments

    Compliance matters have turned into the pattern among companies in Qatar, especially because of the increased awareness of the risks of money laundering. The legislature has updated some anti-money laundering regulations and imposed specific obligations on companies, as well as their boards and managers, such as those imposed under the Decision of the Minister of Commerce and Industry No. 2 of 2022 on Fulfilling the Requirements for Combatting Money Laundering and Financing of Terrorism connected with the Commercial Companies. Clients are looking for legal guidance under the compliance requirements connected with corporate law. There have been a few disputes under the disciplinary councils and courts connected with the violations of the requirements of combatting money laundering/tax evasion.

    New legislation

    In 2021, a few commercial legislations were issued. The significant of which was Law No. 21 of 2021 on Investment and Commerce Court Law. This will be the first commercial court. Usually, all commercial disputes are heard before the civil court. The Investment and Commerce Court has to be set up in all three levels of litigation. The clients should anticipate a superior quality of judgments and a level of specialization in the performance of judges. The new law managed the Investment and Commerce Court's system with unique provisions, to shorten the length of proceedings and overcome the existing procedural challenges.

    Moreover, a new Qatar Mediation Law, Law No. 20 of 2021 on Issuance of Mediation law for Settlement of Civil and Commercial Disputes. The Decree on Ratification Singapore Convention was the issuance of Qatar Mediation Law, Decree No. 79 of 2020 for rectifying the United Nations Convention. By this Decree, the Singapore Convention was ratified and granted the power of law in Qatar. The Singapore Convention covers the requirements for implementing and recognizing international settlement agreements. Clients might consider mediation as a pre-arbitration in Qatar.

    Furthermore, Law No. 14 of 2021 for Amending Some Provisions of Qatar Financial Centre Law broadened the scope of jurisdiction of the Civil and Commercial Court of the Qatar Financial Centre. Before this update, the jurisdiction was limited over the Civil and Commercial Court of the Qatar Financial Centre. The scope of jurisdiction is extended as per the new laws. Law No. 15 of 2021 amends certain Provisions of Law No. 34 of 2005 regarding Free Zones, in the jurisdiction of the Civil and Commercial Court of the Qatar Financial Centre.  All civil and commercial disputes between companies enlisted in the Free Zones, between the Authority, individuals, and companies enlisted with the Free Zones whatever the nature of the legal relationship might be except if the parties consent to resolve the dispute through alternative mechanisms.

    Law No. 8 of 2021 for the Amendment of Some Provisions of the Commercial Companies Law Promulgated by Law No. 11 of 2015, was given. The amendments included legal provisions related mainly to combatting conflict of interest and enhancing transparency and administration.

    Furthermore, the amendments changed some rules connected with holding companies and shareholders' privileges with regard to the context of liability claims of boards of directors. For compliance purposes Clients are supposed to carefully consider the new amendments to the Commercial Companies Law.

    The courts are transitioning into a different system after the issuance of the Law on Establishment of the Investment and Commerce Court. The new amendments became a challenge for clients to tolerate the uncertainty of judicial in this transitional phase. The new law has a number of provisions for reducing the length of proceedings, and unnecessary adjournments.

    Conclusion

    The process of negotiations to resolve disputes in a peaceful manner is called dispute resolution. Recently, Law No. 21 of 2021 on Issuance of the Law for Establishment of Investment and Commerce Court was passed establishing the first specialized commercial court in Qatar. The commercial matters which will fall within the sole jurisdiction of the Investment and Commerce Court are Disputes related to commercial contracts, Cases arising between traders in their commercial activities, Disputes between partners or shareholders in commercial companies, Disputes related to commercial assets, investing in foreign capital in economic activities, maritime sales, banking transactions, commercial papers, insurance companies, and investment and financing companies, bankruptcy and preventive reconciliation in the context of bankruptcy, patent, trademarks, industrial designs, commercial secrets and other intellectual properties rights, protecting fair competition, preventing monopolizing practices and combatting practices that harm national products in international trading, e-commerce and e-transactions and contracts of partnership between public and private sectors.

    ]]>
    Fri, 15 Jul 2022 17:27:00 GMT
    <![CDATA[Arbitration Framework at Abu Dhabi Global Markets]]> Arbitration Framework at Abu Dhabi Global Markets

    When will mankind be convinced and agree to settle their difficulties by arbitration? Benjamin Franklin

    The Abu Dhabi Global Market (ADGM) launched its arbitration centre in 2018. The ADGM arbitration centre is equipped to resolve disputes between parties through mediation or arbitration. The launch of the ADGM arbitration centre reinforces the attractiveness of ADGM as a venue for arbitration, additionally to the establishment by the International Chamber of Commerce of its representative office in the Middle East within the geographic region of ADGM. ADGM may be a financial-free zone located in the United Arab Emirates. It is Abu Dhabi's first financial free zone in Abu Dhabi and the second financial free zone in the UAE. Foreign parties are interested in the ADGM for a couple of reasons including the use of the English language to conduct proceedings in the ADGM Courts, application of English common law, and adoption of arbitration regulations 2015 supported by UNCITRAL Model Law on Arbitration. The ADGM stated its operations pursuant to Abu Dhabi Law No. 4 of 2013 and Federal Decree No. 15 of 2013.  

    Arbitral Jurisdiction

    The ADGM adopted the ADGM Arbitration Regulations in 2015 which are called ADGM Arbitration Regulations. It is like the UNCITRAL Model Law on International Commercial Arbitration. The ADGM Arbitration rules govern arbitrations conducted in the ADGM and it also enforces arbitral awards within the ADGM Courts. Those arbitral awards will act because of the supervisory courts with relation to ADGM-seated arbitrations.

    The ADGM Arbitration Regulations apply to arbitrations

    • Based on the ADGM
    • As per Article 8 of the ADGM Regulations the arbitration agreement expressly provides for the applying of the ADGM Arbitration Regulations.
    • The 'seat' is the legal seat of the arbitration designated by the parties to the arbitration agreement or by the arbitral tribunal or any institution or person vested by the parties with powers in that regard as mentioned in Article 33 of the ADGM Regulations.

    The ADGM Arbitration Regulations establish the ADGM as a seat of arbitration for the disputes relating to the ADGM and for non-ADGM disputes. Parties can freely choose the ADGM as the seat of arbitration and the ADGM Arbitration Regulations because the procedural law of the arbitration.

    Foreign Awards and Judgments

    Foreign parties find the ADGM Courts as an attractive jurisdiction for enforcing their foreign awards and judgments. The ADGM Courts signed two MoUs for cooperation in legal and judicial matters with local and federal governmental bodies. The ADGM Courts have an MoU with the Abu Dhabi Judicial Department and UAE Ministry of Justice which encourages judicial cooperation in Legal and Judicial Matters. The MoU will ensure the recognition and enforcement of judgments, decisions, orders, and arbitration awards.

    The UAE is involved with the New York Convention on the Recognition and Enforcement of Arbitral Awards 1958 otherwise known as the New York Convention. The New York Convention likewise binds the ADGM since it is part of the UAE. The ADGM Courts have also signed a number of worldwide MoUs that accommodate enforcement of judgments.

    The ADGM Courts have entered into an international Memorandum of Understandings with the Commercial Court of Queens Bench Division, England and Wales, with the Supreme Courts of New South Wales, Republic of Singapore, the Federal Court of Australia, and the High Court of Hong Kong.

    Article 170 of the ADGM Court Regulations states that, when the UAE entered into an applicable treaty with a foreign country for the mutual recognition and enforcement of judgments, the ADGM Courts must stick on with the terms of such treaty, recognizes and enforces judgments rendered by that foreign country.

    If there is no such treaty then Article 171.1 of the ADGM Court Regulations gives the authority to the Chief Justice of the ADGM Court to be satisfied that significant correspondence of treatment will be guaranteed regarding the recognition and enforcement in that foreign country of the judgments of the Courts may order the courts of the foreign country to be recognized as foreign courts. Article 180 of the ADGM Court Regulations expands the application of Articles 170 and 171 to arbitral awards that are enforceable in a similar manner as a court judgment as per material regulations.

    Modifications to the UNCITRAL Model Law

    The ADGM Board implemented a list of modifications to the UNCITRAL Model Law. The Significant modifications are as follows:

    • Confidentiality and privacy

    The award relating to the arbitral proceedings is confidential and cannot be disclosed to a third party. All arbitration-related matters and the proceedings are heard in closed court.

    • Third parties 

    The ADGM Court or the arbitral institution can join the third party to the arbitration. The third party need not be a party to the arbitration agreement and does not require the consent of other parties. The criteria are

    • a request created by a party to the arbitral proceedings
    • the third party got to offer his consent in writing
    • it is within the interests of justice to permit the joinder
    •  Waiver of right

    The Regulations state that the parties in the arbitration agreement or by a written agreement waive fully the right to bring an action for setting aside.  

    Conclusion

    The enactment of the Arbitration Regulations is an important milestone for ADGM. ADGM is committed to providing clear, transparent, regulations to an international standard which leads to the most modern and progressive arbitration laws in the Middle East.  

    ]]>
    Fri, 15 Jul 2022 13:54:00 GMT
    <![CDATA[Prior Use of Patented Inventions in India]]> Prior Use of Patented Inventions in India

    "Patents are not forever, but inventions are"― Kalyan C. Kankanala

    The word "prior use of patented inventions" is used when the invention underlying a patent application is being used before documenting the patent application. The rights have a common view however at that point it must be determined differentially across the jurisdictions in light of the territorial nature of patents. One significant element that should be addressed is the "prior", that is the filing date of the patent application, the "first to file" rule. For a nation that follows the "first to invent" rule, the matter is even challenging to choose as, without an order of a date of filing a patent application, it is scrupulous to conclude the "prior".

    A patent is an innovation of a novel gadget, device, or a novel process for making them. An invention can be derived from a previous concept or definitely known idea. It can likewise be an independently novel invention of a person. Generally, an invention should be novel, has an innovative step, and should be industrially applicable. Anything that happened in nature, living and non-living things, mathematical and arithmetic formulae anything which is against the ethical quality of society or differentiation to nature is not treated as an invention.

    Patented Invention in India

    Section 2 (j) of the Indian patent act of 1970 defines an invention as a product or process involving an innovative step and industrially applicable. Under the same act, a new invention means any invention which is not anticipated by any publication used in the country or anywhere in the world before the date of filing of the patent application containing complete specification. A patented invention under Patents Act 1970 is the invention that is granted a patent. section 3 of the Indian Patent Act 1970 has listed that is not an invention and are unpatentable. The Patent Act keeps from patenting frivolous inventions contrary to nature, living and non-living things except microorganisms, plants, and processes for medicinal, surgical, curative, and diagnostic methods. Section 3 (c) to (f) is to prevent the granting of patents to the technology which are more or less the same.

    Prior Use of Patented Inventions

    In India, for secret use, at the very start, a court may revoke the patent for any such utilization of the invention in India. Under Section 64(1)(l) of the Indian Patents Act 1970, if any invention claimed in any claim of the complete specification was used in India before the priority date of the claim. The Indian Patent Act of 1970 has a provision to protect a patent application with prior use of the underlying invention in Section 34. It states that a patent will not be repudiated or invalidated by reason for any conditions. By virtue of Section 34, an invention that is disclosed before society or before the public authority or government person while on duty to test the efficacy of the invention, prior to the publication by the inventors is not considered anticipation. However, the patent application concerning these inventions should be filed within 12 months of the public disclosure.

    As to the public display as well as comparing the use for an invention prior to the grant of the patent, there is a milestone case, Nicholson v. the city of Elizabeth, NJ. The fact of the case referred is as follows:

    "Nicholson invented a wooden pavement and its process of manufacturing and his invention is in an avenue in the city of Boston to confirm and determine the strength and durability of the same at his own cost. He sued the city of Elizabeth for infringing his patent which was countered because of the public use. Therefore, the inquiry was whether an inventor's trial involves in a special case like this mandated the thorough day-to-day use by the passers-by in order to confirm the strength of the underlying invention constitutes a "prior public use". The court considered the intention of the inventor to use the piece of pavement as an experiment mandating a public use, and held that as "experimental use" and not "prior public use". The court further held that the invention to the public may happen if the invention is on sale with the inventor's consent at any time within 1 year prior to his patent application".

    Activities during the preliminary work for a job connected with the invention may not constitute prior use. To constitute "prior use" the patent application is to be filed for the same process by a third party. Therefore, to forestall these difficulties, an individual or entity should file a provisional patent application to cover its product/ process, even during the preliminary stage that is prior to the actual commencement of production. Even if somebody tries to files a patent application for covering the process, then the user will have a priority date and this will reinforce or establish the "prior use" requirement. A provisional patent application along with data on the working of the process is a good idea to protect from any predatory entity. This will be specified in the patent document along with dates. A provisional patent application is a document on record which is not published. It can be used in litigation because it turns into a dated record and a certified copy of that document is available from the Patent Office. Such document may likewise be used for establishing secret use, for repudiation of a patent. This might protect in a better manner than that of a standard notarial document due to inherent confidentiality.

    To conclude, the patentability of an invention is subject to all patentability requirements provided under the Patents Act. The word "prior use of patented inventions" is used when the invention underlying a patent application is being used before documenting the patent application. To forestall these difficulties of prior use the individual or entity should file a provisional patent application to cover its product/ process.

    ]]>
    Fri, 15 Jul 2022 13:43:00 GMT
    <![CDATA[Enforcing Foreign Awards in China]]> Enforcing Foreign Awards in China

    Requiring forced arbitration agreements limits consumer rights and protections. - Conor Lamb  

    In 1987 the People's Republic of China sanctioned the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On 10 April 1987, the Supreme People's Court of China issued a Notice of the Supreme People's Court for the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Supreme Court Notice contains solely five articles setting out the principal rules supported by the New York Convention. Till this day the Supreme Court Notice has not been amended. Due to the lack of explanation and case precedents, the applicants seeking to enforce a foreign arbitral award in the People's Republic of China should have regarding the issues set out below.

    Most of the foreign arbitrational awards are enforceable in China. In 2019, the foreign arbitrational awards are recognized and enforced with a successful rate of 87.5%.  The arbitrational awards from Hong Kong, Macau, and Taiwan are recognized and enforced consistent to relevant arrangements between them and Mainland China.

    Enforceability of International Arbitral Awards

    The legal basis for applying of recognition and enforcement of foreign arbitral awards in China are:

    I.        The New York Convention

    The Convention on the Recognition and Enforcement of Foreign Arbitral Awards was signed at the United Nations Conference on International Commercial Arbitration on June 10, 1958. It is currently the foremost vital convention on the worldwide scope of recognition and enforcement of arbitral awards.  It provides conditions for contracting states to recognize and enforce foreign arbitral awards. There are 157 contracting states to the New York Convention, together with all members of the G20 except the European Union. New York Convention officially came into force in China on April 22, 1987.

    II.        Notice of the Supreme People's Court on the Enforcement of the Convention on Recognition and Enforcement of Foreign Arbitrational Awards

    To facilitate the graceful implementation of the New York Convention on April 10, 1987, the Supreme People's Court issues a Notice on Enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitrational Awards. The Notice includes the jurisdiction, application period, standard of examination on recognition and enforcement, etc.

    III.       The Civil Procedural Law

    The People's Republic of China, Civil Procedural Law came into existence in 1991. It set down the principles for the recognition and enforcement of foreign arbitral awards within the civil procedural legal system of China.  Article 283 of this law stipulates that where an arbitral award of a foreign arbitration organization needs recognition and enforcement by a People's Court of the People's Republic of China, the parties involved should submit an application directly to an intermediate People's Court at the location of the enforcee's residence or the location of the enforcee's properties. The People's Court shall handle the matter consistent with the international treaty in accordance with the principle of reciprocity.

    IV.       Notice of the Supreme People's Court on the Handling of problems regarding the Foreign-related Arbitration and Foreign Arbitration

    To enhance supervision of native courts in respect of recognition and enforcement of foreign arbitral awards, the Supreme People's Court prepares a Notice of the Supreme People's Court on the Handling of problems regarding Foreign-related Arbitration and Foreign Arbitration. According to this Notice, when a party concerned applies to a people's court for the recognition and enforcement of an arbitral award made by a foreign arbitration, if the people's court considers that the foreign arbitral award in question fails to comply to the international conventions China or with the principle of mutual benefit, the people's court must refer to the higher people's court of the concerned jurisdiction. If the higher people's court agrees with non - enforcement it should report its examination opinions to the Supreme People's Court. Solely once the Supreme People's Court decision non - enforcement will be created.

    V.        The Arbitration Law of the People's Republic of China

    Arbitration Law 1995 is the initial legislation in China stipulating arbitration matters. It is a milestone within the legislative history of China. The most purpose of this legislation is to remould the native arbitration system in China. Some articles of the legislation regulate international commercial arbitration related to China.

    Types of the enforceable arbitrational award

    • Arbitrational awards created within the territory of another contracting state
    • Arbitrational awards arising out of legal relationships

    Recognition and enforcement process of the foreign arbitrational award

    The party to an arbitrational award will apply for recognition and enforcement in the People's Republic of China. Recognition and enforcement are totally different procedures. Recognition proceedings are going to be heard by a civil division handling foreign cases in an intermediate court. If the court acknowledges an arbitral award, the court can issue a ruling recognizing the arbitral award in the People's Republic of China. Once the arbitral award is recognized, then the applicant should apply to the enforcement division of the same court.

    Kind of arbitral awards which will not be recognized and enforced

    Article 4 of the Supreme Court Notice and Article 5 of the New York Convention explains that the People's Republic of China courts will refuse the application for recognition and enforcement of a foreign arbitral award. Refusal of such application is due to improper arbitration proceedings conducted in a foreign country.

    1. Arbitrability

    Article 5.(2) (a) of the New York Convention states if the court sees that the subject matter of the dispute isn't capable of settlement by arbitration beneath the laws of the place of recognition and enforcement, then the court could refuse to enforce the award.

    Under the People's Republic of China Arbitration Law, solely contractual disputes and other disputes over rights in property between citizens, legal entities, and alternative organizations can be arbitrated. Family, succession disputes, and administrative disputes are specifically prohibited from being settled through arbitration.

    2.  Public policy

    Article 5 (2) (b) of the New York Convention states that the recognition or enforcement of the arbitral award could also be refused if the court finds that it will be against the public policy of the place of recognition and enforcement. In TCL Air-conditioner (Zhongshan) Limited v Castel Electronics Pty Ltd, the Supreme People's Court held that the violation of public interest will be deciphered as a violation of the fundamental principle, national sovereignty, public security, violation of essential public policy, different circumstances which can encroach the essential public interest.

    According to Article 2 of the Notice of the Supreme People's Court on Handling Foreign-related Arbitration and Foreign Arbitral Issues, if an Intermediate People's Court decides not to acknowledge and enforce an award then that Court should submit its decision to the relevant Higher People's Court for review. If the Higher People's Court decides to uphold the lower court's then it should report its decision to the Supreme People's Court. The Supreme People's Court will consider the matter and answer with a judicial decision.

    Conclusion

    To avoid difficulties, parties seeking to recognize and enforce foreign arbitrational awards within the People's Republic of China should consider the location of the relevant assets while bearing in mind the potential obstacles related to asset preservation and therefore the potential grounds for refusing recognition and enforcement.

     

     

    

     

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    Sat, 11 Jun 2022 15:38:00 GMT
    <![CDATA[Establishing a Foundation in the UAE]]> Establishing a Foundation in the UAE

    "Reliable structure needs a strong foundation and strong foundation requires investment" ― Guru Z.S. Gill

    UAE Foundations are an integral part of the country's wealth management system. It is an independent legal entity. Foundations are usually created to protect the desires of the Founder being an individual or corporate body.  When a foundation is established by the Founder their assets are transferred and the legal title will get transferred to the Foundation. Foundations are available in the UAE in its free zones like DIFC, ADGM, and RAK ICC. A foundation has a council that manages the founder's assets as per the jurisdiction and supports the primary cause of the founder's benefit. Foundations are governed by their Charter and By-Laws. The Charter is publicly available whereas the By-Laws are strictly private. Powers can be drafted in the By-Laws to control the foundation in favor of the Founder.

    The Foundations across the United Arab Emirates free zones are governed by the following laws :

    • The Dubai International Financial Centre (DIFC) is governed by the Foundations Law DIFC Law No. 3 of 2018,
    • The Abu Dhabi Global Market (ADGM) is governed under the Foundations Regulations 2017
    • The RAK International Corporate Centre (RAK ICC) follows the RAK ICC Foundations Regulations 2019.

    Formation of a Foundation

    The following components are required to establish a Foundation.

    • Founder

     A minimum of one founder is required. A founder can be an individual or legal entity. After the establishment of a Foundation, the Founder has no rights toward the Foundation unless it is drafted into the By-Laws.

    • Council

    Council is shaped by the Founder. The Council must contain at least two members including the Founder. The Council should conduct the affairs of the Foundation in accordance with its Charter and By-Laws.

    • Guardian

    The Guardian can be both an individual or a legal entity. Guardian is appointed by the Founder to supervise the Council. It must take reasonable steps to ensure that the Council carries out its functions. The power vested on the Guardian should be mentioned in the By-Laws. The action of the guardian is subject to the decision of the Council.

    • Registered Agent

     A foundation will have an appointed Registered Agent, who should be properly licensed by the regulatory body in the regime.

    • Beneficiaries

    The beneficiaries are appointed by the Founder. They can be an individual, groups, or an entity.

    • Registered Office Presence

    All Foundations must maintain a registered office. The administration and location of the Council, Founder and Guardian need not be same as the registered office.

    • Governing Documents

    The constitutional documents of a Foundation contain its Charter and By-Laws.

    Types of foundations in Dubai

    There are several types of foundations that can be established in Dubai by both foreign or local companies and individuals. A Dubai foundation will obtain one of the following statuses

    • NGO
    • Association
    • Social club

    The most spread type of foundation in Dubai is the social club. It is registered with the Community Development Authority (CDA). For each type of foundation a special license should be obtained from the CDA. 

    Key Features of foundation

    • Independent Legal Personality

    Foundation is capable to hold the assets of the Founder in the name of the Foundation.

    • Tax:

     Foundations in the UAE can get benefit from a favorable tax environment. That is of a 0% corporate tax rate, a 0% personal income tax.

    • Compatibility

    Foundations are permitted to own all classes of UAE assets including property in ADGM, DIFC, and RAK ICC.

    • Privacy

     The beneficiaries of a foundation will be kept confidential.

    • Guardians

    In addition to the Council, a Guardian is appointed with sufficient powers in relation to the decisions of the Council.

    • Flexibility

    The Council can be placed everywhere in the world.

    • Migration

     Foundations can be migrated to the ADGM, DIFC, or RAK ICC regimes.

    • Lifespan

     Foundation can be established for an infinite lifespan or for a limited time at the option of the Founder based on the goals to continue in perpetuity.

    • No Beneficial Owner

    A Foundation is a self-owned entity and therefore has no shareholders or members.

    • Beneficiaries

    Can be individuals, corporate entities, or even unnamed at the time of formation.

    Differences, Registration & Renewal Fees

    The DIFC

    The DIFC regime is the only regime that allows a company to be morphed into a Foundation. DIFC Foundations are accredited to have an exclusively charitable purpose. The DIFC regime specifically provides for arbitration. A DIFC Foundation is can issue depository certificates. Registration Fee or Annual Renewal Fee (as of 2021) - USD 200.

    The ADGM

    The identity of the Council Members is kept confidential in the ADGM but in the DIFC their information is publicly available subject to payment of a prescribed fee. The ADGM Foundation regime does not have an ongoing annual requirement to file audit accounts unless requested by the Registrar.
    ADGM Foundations cannot be hooked up for solely philanthropic or charitable purposes. Registration Fee or Annual Renewal Fee (as of 2021) - USD 200.

    The RAK ICC

    RAK ICC does not maintain a publicly accessible register in relation to a Foundation. Information related to the Foundation is under the privacy laws in the UAE and that information will not be disclosed unless required by the relevant authorities. In RAK ICC a Registered agent is a mandatory requirement. Registration Fee or Annual Renewal (fee as of 2021): AED 750 (approximately USD 200).
    Advantages of Foundations

    Foundations are flexible and can be used for a variety of purposes.
    Most commonly Foundations are associated with wealth management, family succession planning, inter-generational continuity, and asset protection. Foundations can be used for a lot of purposes a few of them are mentioned below:

    • Holding of Investments
    • Asset Protection
    • Property Ownership
    • Charitable or Philanthropic Purposes
    • Business Growth
    • Employment share scheme

    Conclusively, Foundations are a form of a hybrid entity. A Foundation is established for the beneficial purpose of the Founder, yet it is retained as a corporate level of independent legal personality. With the benefit of the independent legal personality, Foundations offer practical and flexible structures for vast purposes including private wealth management and preservation, succession planning, tax planning, charitable institutions, asset protection, corporate structuring, and creditor protection.

    ]]>
    Sat, 11 Jun 2022 15:13:00 GMT
    <![CDATA[Blockchain Technology and NFTs in Singapore]]> Development of Blockchain Technology and NFTs in Singapore

    "I love this stuff - bitcoin, ethereum, blockchain technology and what the future holds". Abigail Johnson

    Blockchain technology lays a foundation for many cryptocurrencies. Singapore is rising as one of the leading blockchain development countries in the world. Since the birth of the first digital currency, Bitcoin, in 2008, blockchain technology has grown significantly in various fields. As one of Asia's financial hubs, Singapore has also attracted a large range of software professionals and financial services involving blockchain technologies and nonfungible tokens. NFT marketplaces can be both gaming platforms for earning digital assets like Axie Infinity and trading platforms such as NBA TopShot or metaverse platforms like Decentraland and Earth 2 where you can buy and sell virtual properties.

    The Blockchain and NFT Technology

    An NFT has a unique identifier representing an underlying tangible or intangible asset, such as a pair of limited-edition sneakers or a painting. Unlike fiat currencies and cryptocurrencies, each NFT is distinct from other NFTs and cannot be replicated. Each of them is represented by a certificate of ownership of the underlying property. In other words, when a buyer purchases an NFT, they are claiming sole ownership of it. The rights of NFT owners are recorded on associated smart contracts.

    NFT-Related Regulations

    Depending on the characteristics of an NFT, the NFT is governed by the Singapore Payment Services Act of 2019. It is identified as a digital payment token or the Securities and Futures Act if identified as the titles of securities. In these cases, licensing requirements will apply.

    Securities Regulated by the Singapore FinTech Association

    The Singapore FinTech Association does not specify whether NFTs constitute securities. The definition of securities covers any other product or class of products that may be prescribed. This allows to include NFT as a form of security, depending on the characteristics and purposes of a particular NFT. In general, securities are generally fungible such as shares, units in business trusts, and obligations of the companies. If an NFT represents partial ownership in a company, the prospectus and business requirements will apply.

    Blockchain Development in Singapore

    Education

    Blockchain applications allow employers and universities to verify the qualifications of students or employees using smart contracts. A public higher education institution in Singapore called Ngee Ann Polytechnic uses blockchain to authenticate the Ngee Ann Polytechnic's degrees. It is the first educational institute in Singapore to use blockchain to improve its processes.

    With this transformation, employers can require a student to show a Blockchain ID. They can use this blockchain ID to retrieve students' academic records and education history. National University Singapore offers classes on blockchain technology for students and has partnered with IBM. This is all done to get a program on distributed ledger technologies.

    Airline Industry

    Singapore is among the countries exploring which are exploring the potential of blockchain in the aviation industry. The blockchain allows stakeholders involved in air transport to access up-to-date and authentic information on departures, delays, and arrivals. Krishflyer is a Singaporean airline that has moved its loyalty and payment program to the blockchain and uses its digital wallet for transactions.

    Government/ Public Sector

    From voting to managing medical records from taxation to social benefits, governments around the world are thinking about blockchain. The countries are exploring ways to integrate it into their administration to revamp various operations.

    As per reports, the Singapore government could use blockchain for numerous things. That is to verify a vendor's track record, track activities of public officers, and improve or modify the auditing processes.

    Real Estate

    Moving to another house is a tedious task as many administrators are involved in it. But in Singapore, real estate startup is relying on Blockchain technology to eliminate the administrator needed to rent or sell a property. Averspace is Singapore's first blockchain real estate portal, used to list properties for sale or rent. Transactions are carried out using digitized contracts protected by the blockchain. The platform allows landlords and tenants to sign the digital lease without paying commission fees.

    Food Industry

    The statistics provided by the World Health Organization show that each year almost one in ten people fall ill after consuming contaminated food. Implementing Blockchain technology in the food industry can give suppliers and consumers more authenticated information on food products. The Singapore Intellectual Property Intermediary founded by Singapore's Ministry of Trade and Industry worked on the blockchain food project. The platform will be used to track and trace the material and product information collected from all the participants involved in the food production chain. The blockchain solution ensures industry-leading data structure management and data storage standards that maintain food quality, and safety and reduces food waste.

    Healthcare

    SG Innovate is a Singapore government-owned tech company that has invested in MediLOT Technologies, a health blockchain and analytics startup in Singapore. It uses a dual blockchain with a unique layered architecture integrated with Artificial Intelligence and data analysis capabilities as well as control and data layers.

    Energy

    Electrify is a start-up established in 2017 that will revolutionize the energy sector. Julius Tab and Martin Lim, the founders of the startup, wanted to introduce Blockchain technology to change the way buy electricity. Using the web and mobile platforms, consumers can purchase electricity from retailers through smart contracts.

    Supply chain

    Blockchain-based supply enables the digital tracking of product information such as source data, storage temperatures, lot numbers, and shipping details. Compared to recent technologies such as RFID tagging, blockchain could be a great opportunity for any industry that wants to improve traceability and visibility throughout the business supply chain. One of the Singapore-based startups, DLT Ledgers, has created blockchain software for the supply chain industry. Additionally, the company receives the Best Blockchain App for Supply chain award by CXO Honour. DLT Ledgers guarantees that it provides end-to-end traceability records in an immutable and secure manner. Moreover, it helps to fight against product fraud with advanced mathematical algorithms.

    Financial services

    Blockchain technology is used in domestic payments, international remittances, and securities trading. Info-communications Media Development Authority and the various banks have come together to develop a prototype called KYC Blockchain. The blockchain would help various financial institutes and banks to verify the identity and details of their customers efficiently and transparently.

    Conclusion

    Operators of an NFT platform are recommended to seek professional legal advice from Singapore advocates from the outset to ensure that its business model complies with Singapore laws. Additionally, KYC integration, anti-money laundering, and counter financing policies should be put in place to detect suspicious transactions and mitigate these risks. Likewise, investors should be well aware that most NFTs are not regulated by the MAS, and the associated risks must be carefully weighted. Moreover, since NFTs are not pegged to fiat currencies, which inevitably leads to volatility in value, the investors' tolerance for losses must also be carefully considered.

    ]]>
    Sat, 11 Jun 2022 14:27:00 GMT
    <![CDATA[NFTs - Country Focus: India]]> NFTs - Country Focus: India

    People don't understand NFTs, Metaverse, and crypto today the same way they didn't understand online shopping in the 1995" - Anuj Jasani

    The Indian economy is considered to be one of the largest economies in the world. It is considered that to have grown by 10% compared to the previous years when the NFTs and cryptocurrencies began to gain global traction. India has numerous users who are interested in investing their money using digital platforms like options, stock, and various forms of crypto assets to multiply their income. The prospects offered by the NFT platforms are beneficial for numerous Indian artists and crypto enthusiasts who wish to grow their popularity and capital returns.

     In 2018 the Reserve Bank of India issued a circular to banks not to deal with the entities dealing with virtual currencies. In 2020, the Supreme Court of India set aside the circular issued by RBI in 2018. In India, the use of cryptocurrency is largely unregulated. On the internet, there are NFT platforms like Rarible, Open Sea, Foundation, Nifty Gateway, etc. The success of other crypto asset providers has encouraged many Indian startups to build similar NFT marketplaces. It facilitates crypto finance exchange so that they can convert the Indian Rupee to crypto bitcoins. The major Marketplaces in India are WazirX, Wall.app, OpenSea, Foundation, Nifty Gateway.

    In 2021, the finance minister expressed that the government was not closing its possibilities for exploring different avenues regarding blockchains, bitcoins, and cryptocurrencies. The RBI has issued another circular ordering all banks to do an expected level of effort for transactions in virtual currencies in accordance with the anti-money laundering, foreign exchange, and combating of financing of terrorism law. It is settled that NFTs can address various things worldwide including in India. It is attributed to their representation of a digital art form. An NFT is a digital copy or token of basic original work. NFT does not confer ownership of the underlying work to which the NFT is directed.

    India is in the process of building strong NFT laws. According to a report by NASSCOM, it is accounted that the public sector of India has continuously supported blockchain-based businesses. This could change after the passing of the Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019. The Bill forbids mining, generating, holding, selling, dealing in, issuing, transferring, disposing of, or using Cryptocurrency in India. Under Section 3. Cryptocurrencies are defined in the Bill as "any data or code produced through cryptographic implies that isn't a piece of any Official Digital Currency and gives a digital representation of value which is traded with the guarantee or representation of having an inherent value in any business activity which might involve risk of loss or an assumption of profits or income, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment plans. Since NFTs do give a digital representation of an inherent value, they may possibly fall under "cryptocurrencies".

    In 2018, the Supreme Court in the case Internet and Mobile Association of India v. RBI held that the RBI circular dated 06.04.2018 prohibited national/ scheduled/co-operative banks and NBFCs to bargain in virtual currencies. Alongside different reasons, the Court recognized that the Inter-Ministerial Committee comprised on  02-11-2017, which initially suggested a particular legal framework including the presentation of a new law namely, Crypto-token Regulation Bill 2018, was of the assessment that a ban may be an outrageous tool and that the similar objectives can be accomplished through regulatory measures. Considering this, the ongoing legal position of NFTs is that they are not prohibited under Indian law.

    Foreign Exchange Management Act (FEMA) relating to NFT

    NFT is not regulated by any specific act in India but there are specific FEMA laws that prevent crypto-trading. The laws for crypto-trading would rely solely on how the assets have been treated in relation to ownership. Legislators should keep in mind that Bitcoin or NFT are unique items. FEMA laws have always been the regulator of the flow of currency across Indian Borders. Under current FEMA laws, crypto-assets must be rendered as elusive assets such as software ownership and the intellectual property so protected by FEMA regulations. We as bystanders need to realize that majority of the purchasers and sellers of NFT are situated outside the borders of India, thus members from India are much seen making cross-boundary moves outside the country to put resources into this new impending market so popularly known as NFT. We could securely say that the NFT position in the Indian market is an uncertain position. If the participants from India do keep on investing in the crypto-market they should do so through government-issued currencies that are accounted to their authorized dealer banks to have a more risk-averse approach.

    IPR and NFT

     NFTs are digital tokens minted on a fundamental digital asset. NFTs do not grant copyright privilege. A copyright holder's transfer of ownership rights to the purchaser of the NFT at the time of sale is mentioned in the provisions of the Copyright Act 1957. Once the rights have been assigned in accordance with the provisions of the Copyright Act, then an NFT holder would be treated as the owner of the copyrighted work. Section 14 of the Copyright Act gives the owner of a work the right to duplicate or distribute duplicates of his own work. Most NFT-related transactions take place through contracts, which may stipulate the terms of a license. The royalties of resale transactions set limits on the use of copyrights.

    NFT and GST

    The NFTs under India's taxation regime depend on the nature or classification of the underlying asset. The definition of goods under the Central Goods and Services Tax Act 2017 includes moveable property other than money and securities, and services include anything other than property goods. GST is very likely to be imposed, based on what the NFT means.

    NFT and Income Tax

    The Finance Act, 2020 contains provisions regarding an equalization levy and charges a 2% fee on corporations based out of India. If a marketplace is considered an e-commerce operator under the Finance Act, then a 2% equalization levy may apply to the gross value of the NFT.

    Cross border NFT transactions

    there is no general rule for the regulation of cross-border NFT transactions. NFTs may come under the Foreign Exchange Management Act as intangible assets. If they are classified as intangible assets then it is necessary to determine their location as they are backed up by cryptocurrencies. the data is recorded, shared, and synchronized across multiple data stores, through a distributed network of different network participants. 

    Conclusion

    A key value proposition of the NFT is their constant need to be authentic and unique. The global market has seen a rise in the trends of investing in NFTs and has left an impact on the Indian market. India as a developing nation has started looking at its laws that require few amendments to fit the block in.

    ]]>
    Sat, 11 Jun 2022 13:07:00 GMT
    <![CDATA[The Amendments to UAE Trademark Law]]> The Amendments to UAE Trademark Law

    The ideal trademark is one that is pushed to its utmost limits in terms of abstraction and ambiguity, yet is still readable. -  Saul Bass

    The UAE has a well-defined law to protect the Intellectual property rights of a business including its brand, business name, logo, etc. One of the most important Intellectual property rights is the Trademark. It gives an exclusive right to a person to use his business name and other elements associated with it. In the UAE, the first trademark law came into force in 1979. Later, Federal Law No 37 of 1992 governed all the trademark-related matters in the country.

    The New Trademarks Law in the UAE

    The United Arab Emirates government passed the Federal Trademarks Law No. 36 of 2021 replacing the Trademark law of 1992. The amended new Law came into effect on 2nd January 2022. The new law will regulate the trademarks regime in UAE and it will have a considerable change in the legal domain of trademarks. The New Law will expand the scope of a trademark to cover non-traditional marks including single-color, holograms, sound, scent, and three-dimensional signs. This amendment also includes the registration of geographical names of brands or products associated with the names of specific geographic regions.

    Highlights of the new trademark Law (Federal Decree-Law (36 of 2021)) is as follows:

    • The trademarks in Article 2 provide an expanded definition covering the more types of non-traditional marks such as 3-D trademarks, single color or combination of colors, holograms, a distinctive sound or smell, etc.
    • With the new amendment, the trademark office allows multi-class applications. Now, it is possible to multiclass in a single application. Earlier multiclass are not allowed to be covered under registration in UAE. An application for registration of a group of trademarks may be filed in accordance with Article 9 if they are identical in their essential elements and different in such a way that it does not affect their distinctive identity or character like color, covering the same category of goods or services.
    • Any person whether it is a physical person or a legal person can file an application to register a trademark. The application for registration of a trademark may be done by claiming prior user or intent to use mode. The necessary requirement is that the ownership of such marks should not be in dispute. If there is any dispute then, the registration of an application shall be suspended until the dispute is resolved. If the case is in dispute in consideration of any court, then the application for registration can be made after the final judgment by a Competent Court.
    • The period to make an appeal of an application has been extended to ninety days has been reduced to thirty days. This change to the limitation of appeals will speed up processes and limit frivolous litigation.
    • Article 31 provides that the registration of a trademark no longer constitutes a barrier to a trademark license agreement at the Trademark office. The matter to be taken care of is that the license to use a mark should be in writing and documented. To avoid any dilution there should be due supervision and control of the Licensor over the use of a licensed mark by a licensee.
    • Once an application is accepted, it will be published only in the official gazette which is managed and published by the ministry of economy. In the previous law, it has to be published in 2 local newspapers. This also applies to renewals, post-registration, registrations including assignments, and amendments of the applications. The new amendment will not only help in reducing costs for the applicants, but it will also avoid unnecessary arguments regarding the time limit for opposition proceedings.
    • The ownership of a registered trademark will not be disputed when it is used for continuous five years from the date of registration. According to UAE law, the registration date and application date are different, hence renewals of the registration are affected for 10 years from the date of application.
    • The structure of the Trademarks Grievance Committee has been changed in the new amendment. In the new law, the Trademarks Grievance Committee is chaired by a specialized Judge appointed by the Minister of Justice and two specialized members appointed by the Ministry. All Objections to the decisions made by the Trademarks Office in applications are adjudicated by the aforesaid Committee. The grievance from the decision of the Trademarks Grievance Committee may be appealed to the Federal Court of Appeal.
    •  A specific Chapter 6 is now been added to the new amendment. It is to elucidate and provide clarity on the issue of Geographical Indications (GIs). These were previously unregulated. These are defined in the New Law as indications showing that a good has originated in a particular territory or in a region, location, or place of that region if that good's quality, reputation, or any other characteristics are primarily due to its geographical origin. Articles 38 to 44 explain the types of GIs which are to be accorded protection, prohibitions, cases of non-registration of GIs etc. Introducing these articles will give guidance to trademark owners, judges, and all interested parties in GIs.
    • The new law of trademark increased the Fines and penalties for the infringement of trademark rights. Article 39 explains the hike in the penalty for the infringement from AED 50,000 to AED 100,000 Dirhams. Article 40 introduces penalties for forging a registered trademark, importing a counterfeit trademark for commercial purposes, knowingly importing or exporting goods bearing a forged trademark etc. For unlawful use of the unregistered mark, selling or offering for sale carrying a forged or imitated trademark, there is a penalty of imprisonment provided which is not to exceed one year, and/or fine of AED 50,000 and up to AED 200,000. In the new law, the re-offenders will be given higher penalties.

    Conclusion
    The introduction of the amended UAE Trademarks law is an interesting development with the aim of providing recognition to the rights and the rights exercised by the owner without any hassle. It brings more clarity on widening the definition of a trademark, providing multiclass applications, the constitution of the Trademark Grievance Committee, introducing the protection of GIs, and increasing the severity of penalties and fines in case of infringements, etc. All these features in the new law will help the functioning of the Trademarks Office removing ambiguities. The new law will also bring in line with the Internationally accepted trademark laws and practices.

    ]]>
    Fri, 10 Jun 2022 00:27:00 GMT
    <![CDATA[Force Majeure Events and Contract Clauses in GCC]]> Force Majeure Events and Contract Clauses in the GCC

    Force Majeure is a French word that means a greater force in English. It is connected to the concept of the Act of God, where there is an unexpected happening of event.  Although, Force Majeure is an exception as it includes not only Acts of God like an earthquake, cyclones, tsunamis, famines & droughts, landslides, etc. it also includes human-triggered events such as armed conflict, riots, war, strikes, epidemics, crime, etc. Force Majeure incidents make it impossible to fulfill the contract as it is an overpowering force. 

    Force Majeure clauses are contractual clauses that restrict obligations and liabilities of parties in an agreement when a sudden unexpected circumstance occurs which is beyond their control. It will prevent them from performing their obligations. Force Majeure Clauses do not waive off the parties' obligations but it only suspends them for the duration of the force majeure. Parties will be held liable if the necessary precautions are not taken to reduce the damage.

    The clause should specify the force majeure events. This may be in the form of a list of events to cover a wider range of possible events. The clause may also specifically exclude certain obligations.

    Purpose of Force Majeure Clause

    There are two main purposes of Force Majeure

  • to allocate risk
  • to provide notice to the parties of events that may suspend or excuse performance.
  • In a normal contract, there is a list of events that may lead to the non-performance of a contract. Therefore, the clause of Force Majeure is used. The major part of the applicability and consequences of these clauses depends on their drafting. The drafted clause decides whether the affected party will be excused, whether such party will get a time extension to perform the contract, whether they will get the chance to terminate the contract etc. In some laws, the clause of force majeure is just dependent on the contract. But in others despite the draft contract, the court decides whether some event can be included under force majeure or not.

    Force majeure in Saudi law

    The most prominent laws are Government Tenders and Procurement Law (1440H) 2019G, in article 74(3) "Extension of the contract or exemption from fine shall be in the following cases: If the delay is because of the government entity or emergency circumstances."E-Commerce Law (1440 H) 2019G, in Article (14) "Unless the service provider and the consumer agree upon another term for the handover of the asset, subject of the contract, or its execution, the consumer may revoke the contract if the service provider delays the handover or the execution for a period exceeding fifteen (15) days of the date of conclusion of a contract or the agreed-upon date. The consumer may redeem the amount paid under the contract against the product or the service or the other costs resulting from this delay unless the delay is caused by a force majeure". Commercial Court Law, (1350H) 1931G Article (24) "The agent, trustee, and packer shall guarantee delivery of the goods handed over within the period stated in the consignment list, and any damage resulting from his delay shall be guaranteed by him, unless due to force majeure that cannot be evaded" Saudi Labour Law, (1426H) 2005G, Article 74 that the force majeure is one of the causes for termination of employment contracts. Saudi Professional League Statute This statute defines force majeure as "the event that cannot be controlled or anticipated". Commercial Maritime Law for the year (1440 H) 2019 G This law addresses the consequences of a supervening event for a variety of parties.

    Force Majeure in the UAE law

    The UAE Civil Code Federal Law Number 8 of 1985 provides various provisions on force majeure and its consequences. Article 273 provides that if a contract is deemed impossible to perform due to a result of force majeure the contract will be terminated automatically. The Art.287 of the Civil Code of the U.A.E. provides various examples of extraneous events, including the cause of force majeure or acts of third parties.

    Force Majeure in the Qatar law

    The force majeure doctrine is recognized by the Qatar Law n.22 of 2004, which includes several articles concerning the total or partial impossibility of the service. the Qatar Civil Code, Art.171 (2) provides for the exoneration of the performance of the party if an "exceptional general event", ie unforeseeable, occurs and the execution of the obligation, although not necessarily impossible to perform, has become so onerous as to result in excessively large losses to complete it. Articles 204 and 258 of the Qatar Civil Code, deal with force majeure, recognizing the defaulting party's exemption of performance when the loss of the other party can be attributed to an external cause or, more in line with the traditional concept of force majeure if the default itself is due to a foreign cause. Article 256 of the Qatar Civil Code expressly states that: "if a debtor does not perform the obligation specifically, or is delayed in its performance, he is obliged to compensate for the damage caused to the creditor, unless it is proved that the non-performance or the delay was for an extraneous cause for which the debtor is not responsible"Qatar Civil Code Art.258 "the parties contractually agree that the debtor will be responsible for the consequences of force majeure".

    Force Majeure in the Omani law

    The Omani Civil Transactions Law, promulgated by Royal Decree 29/2013 states in Article 172 that "in bilateral contracts, force majeure happens to render the performance of the obligation impossible to complete, the corresponding obligation will be quenched, and the contract shall automatically be repudiated. In the case of partial impossibility, the corresponding obligation shall be extinguished, and the equivalent shall apply to temporary impossibility in proceeding contracts".

    Force majeure under Bahraini Law

    The Bahraini Civil Code towards force majeure is similar to the French Civil Code. The notion of force majeure is enshrined in Article 165 of the Bahraini Civil Code which provides that "If a person proves that the injury resulted from a cause beyond his control like unforeseen circumstances, force majeure, the fault of the victim or the third party, he will not be liable to make reparation unless there is a provision to the contrary".

    Force majeure under Kuwaiti Law

    The Kuwaiti legislators have described force majeure and emergency situation events as a cause external to the contract the Articles 214 and 215 of the Kuwaiti Civil Law number 67 of 1980 where if the performance of the contractual obligation is impossible due to an external reason beyond the control of the performing party, the contract shall be automatically revoked. Article 437 of the Civil Law says that the event should not be predictable.

    Conclusion

    In summary, the doctrine of force majeure is a legal concept that broadly refers to the occurrence of pre-specified events in a contract that are beyond the control of the contracting parties. Force Majeure Clauses should be drafted depending on the requirements of the parties. It is important to prepare the force majeure clause with clarity and in the interests of the parties. The force majeure clause can only be enforced when the specific situation under the said clause is invoked.

    ]]>
    Wed, 04 May 2022 08:55:00 GMT
    <![CDATA[Recent Update to Hong Kong’s Listing Rules]]> Recent Update to Hong Kong's Listing Rules

    The Stock Exchange of Hong Kong Ltd. published a consultation paper on reviewing the Corporate Governance Code and Related Listing Rules in April 2021. The primary focus of the consultation paper was to instil changes in the mindset of an issuer's board, incentivize board refreshment and succession planning, promote board independence, enhance diversity amongst issuers, improve communication between issuers and their shareholders, and protect market integrity. Conclusions of the above paper were published on 10 December 2021. The market received tremendous feedback, and on the basis of the same, amendments were scheduled to be made to the Listing Rules effective 1 January 2022 accordingly.  

    It ought to be noted that like all existing Code Provisions, the new Code Provisions operate on a 'comply or explain' basis, pursuant to which listed issuers must state whether they have complied with the relevant CPs in their annual or interim reports (as appropriate), and if the listed issuers deviate from such new CPs, considered reasons for the deviation, and an explanation of how good corporate governance was nonetheless achieved, should be provided. Variation of CPs and failure to provide considered reasons and an answer in the manner set out in the Corporate Governance Code ought to be regarded as a breach of the Listing Rules. Further, in respect of the compliance requirements under the revised Listing Rules and disclosure to be made under the new MDRs, compliance and disclosure is mandatory. Failure to comply or disclose pursuant to such provisions will be regarded as a breach of the Listing Rules.

    In total, amendments can be seen to be made primarily in five aspects: culture, which includes an alignment to the company's culture with its purpose, value & strategy, and Anti-corruption and whistleblowing policy. Secondly, it talks about Board independence which includes that all independent INEDs should serve more than nine years. Thirdly, it mentions diversity which provides for the single gender board and workforce diversity. Fourthly, it touches the angle of the nomination committee and renaming and restructuring the Corporate Governance Code by establishing a link with ESG practices.

    Culture

    To align the company's culture with its purpose, value and strategy, the Stock Exchange believes that when a company's culture is properly aligned with its design and leadership, the company can achieve long term sustainability. The Stock Exchange accepts that, as stated in its Consultation Paper. While it is not possible for the Exchange to prescribe a list of information for disclosure that suits all issuers, disclosures on "culture" may include the following issues which may be helpful to stakeholders to understand the company's culture. Such disclosures should be precise and succinct (in general, should be no more than one page):

    • Description of the company's vision, value, and strategy, alongside the company's culture, and how all these affect the business model.
    • Description of the success measurements of the company (e.g., KPIs in terms of revenue growth; profit margins; return on equity; and market share), and discussion on how the company's desired culture affects or contributes to the company's performance.
    • Discussion on the measures used for assessing and monitoring culture (e.g., any specific indicators such as turnover rate; whistleblowing data; employee surveys; breaches of code of conduct; and regulatory breaches).
    • Description of the measures to ensure the desired culture and expected behaviors are communicated to all employees, for example, by developing a code of conduct.
    • Information on the forum(s) available for sharing ideas and concerns on any misconduct or misalignment identified and how they are dealt with.
    • Discussion on the company's financial and non-financial incentives which support the desired culture."

    Thus, the new CP is not intended to codify 'culture', but to highlight the board's role in

    • Defining the company's purpose, values, and strategy.
    • Developing the culture to support the pursuit of success. (The Stock Exchange will issue guidance with suggested disclosures.)

    Anti-corruption policy and whistleblowing policy

    As accepted in many jurisdictions, anti-corruption and whistleblowing policies are crucial to establishing a healthy corporate culture. Such policies can raise awareness among the employees and management of listed issuers. Under the existing Environmental, Social and Governance Reporting Guide (Appendix 27 to the Main Board Listing Rules), listed issuers are already required to disclose information relating to anti-corruption and whistleblowing policies and their implementation. The Stock Exchange has indicated that on their individual circumstances, listed issuers may choose to have stand-alone anti-corruption and whistleblowing policies or include the relevant provisions in their code of conduct or other guidelines.

    Board independence

    All independent INEDs serve more than nine years; in this case, the new CP requires that the listed issuer appoint a new INED at the next annual general meeting. A transition period will be allowed to implement this new proposal, i.e., th  e financial year commencing on or after 1 January 2023, to minimise the challenges in finding a suitable new INED.

    Diversity

    Single-gender board – the Stock Exchange has decided to tighten the requirement for issuers to phase out single gender boards by stating in the Listing Rules that the Stock Exchange will not consider diversity to have been achieved if there is a single gender board; the absence of a prescribed percentage in the Listing Rules does not mean having a sole director of a different gender on the board is considered sufficient. For a listed issuer who already has directors of both genders on board on or after 1 January 2022, if the listed issuer subsequently fails to meet such requirement, it must immediately publish an announcement containing the relevant details and reasons. The listed issuer must appoint appropriate members to the board to meet the requirement within three months after failing to meet such requirement.

    Workforce diversity – At the workforce level, listed issuers will be required to disclose: (i) gender ratios in the workforce (including senior management), (ii) any plans or measurable objectives that they have set for achieving gender diversity, and (iii) any mitigating factors or circumstances which make achieving gender diversity across the workforce (including senior management) more challenging (or less relevant).

    -   Nomination committee

    Chairman of committee – The Listing Rules require listed issuers to establish a nomination committee. The Stock Exchange recognises the role of the board chairman in overseeing the board's composition and succession planning, and ensuring its effective functioning, and will allow either the board chairman or an INED to chair the nomination committee with a majority of its members comprising INEDs.

    -          Renaming and restructuring the CG Code and establishing link with ESG

    Restructuring CG Code –– While the structure of Appendix 14 will be revised to enhance its flow and readability, and drafting amendments will be made to improve clarity, the Stock Exchange has stated that such changes involve no change in policy direction and will not result in any additional corporate governance requirements other than those referred to in the above table.

    Establishing link between CG Code and ESG –– As corporate governance and social responsibility are intrinsically linked; it is believed that an effective governance structure should include governance of ESG matters to ensure that listed issuers evaluate and manage ESG risks. The Listing Rules will be amended to ''link' the CG Code (Appendix 14) and the ESG Reporting Guide (Appendix 27).

    ESG reports – ESG reports must be published at the same time as annual reports.

    Thus, the above-mentioned summarises the amendments as brought out by the Hong Kong Stock Market Regulator.

    ]]>
    Mon, 04 Apr 2022 18:43:00 GMT
    <![CDATA[The impact of Pandora papers]]> The impact of Pandora papers

    Pandora paper is a journalistic investigation based on a major leak of about 12 million archives revealing the uncovered wealth, illegal tax avoidance and money laundering by some of the world's richest and most influential people. It is the cooperation of more than 600 journalists from the world's best media like Guardian, BBC Panorama, Le Monde, and the Washington Post from 117 countries under the International Consortium of Investigative Journalists (ICIJ). Throughout two years, more than 11.9 million files have been analysed, including text reports, spreadsheets, emails, and images.

    The Pandora Papers gets its name from the Greek Mythology 'Pandora'. When opened the box calamity and sorrow on the human race were lashed out. Similarly, these papers reveal the offshore interests and their exercises on tax shelter schemes. The name "Pandora" was given as these records might demonstrate to open a Pandora's Box of investigations and claims in the future.

    More than 600 journalists filtered the records conducting a gigantic worldwide investigation. There are declarations of various incorporations, lists of shareholders, invoices, passports, travel records, etc. They also focused on mysterious financial deals of more than 300 public authorities such as government ministers, judges, mayors, and military officers of more than 90 countries.

    The Pandora papers revealed the inner function of the shadowed financial world. It opens the window into the hidden operations of a worldwide offshore economy that empowers some of the world's richest people to conceal their wealth. The Pandora papers address the most recent and biggest financial data that have shaken the offshore world since 2013. 

    Eminent persons exposed in the Pandora Papers

    Pandora papers contained these popular entertainers Jackie Chan, Elton John, Ringo Starr, Shakira, Bono and Julio Iglesias. Lawyers from many of these celebrities have claimed that appropriate disclosures and taxes have been recorded on all offshore monies.

    Beatles drummer Ringo Starr, with total assets around $400 million made two companies in the Bahamas. These were utilized to buy real estate including a private home in Los Angeles. He also established five trusts in Panama, three of which hold life insurance policies for the benefit of his kids, and another trust keeps earnings from royalties and live performances. The Qatari ruling family avoiding the tax due of £18.5 million had purchased two of England's most expensive mansions. Jordan's King Abdullah II secretly possessed 14 extravagant homes in the U.K. and the U.S. worth more than $106 million total. The nation of Jordan is among the top beneficiaries of foreign aid, getting $1.5 billion in help and military financing from the U.S. alone in 2020, and the EU has agreed to furnish the kingdom with more than $218 million in help. The prime minister of the Czech Republic failed to disclose an offshore investment company used to purchase two French manors for $16.3 million.

    Numerous wealthy individuals might have valid reasons to legally protect revelations about their resources. The backers of greater financial transparency say that the framework is mishandled and vulnerable to corruption. Much of the offshore financial services are unregulated or self-controlled. Some of the bankers, auditors and accountants who work in the industry are previous authorities who know the gaps in the system.

    Impact of Pandora papers

    The Papers shed light on financial mystery laws in US states like South Dakota and Nevada that are tantamount to offshore jurisdictions. In the wake of the disclosures nine countries including India, Pakistan, Mexico, Spain, Brazil, Sri Lanka, and Australia have vowed to launch investigations.

    The Pandora Papers uncovered the mode in which hundreds of politicians, celebrities, religious leaders and drug dealers have utilized shell companies and trusts to hide their wealth and investments. The Pandora Papers is all about individuals utilizing mystery jurisdictions, which we would call tax havens. South Dakota provides broad privacy protections for assets held in trusts, including the fixing of trust-related court documents and court procedures. Delaware is a well-known venue for enlisting limited liability companies, which can include shell organizations set up specifically to conceal assets or financial transactions.

     

     After the release of Pandora Papers, the state administrators of various countries were in search of complete data protection and privacy regulations for addressing this issue. Recently, a bipartisan bill named the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act was introduced on October 6, 2021. If this act is passed, the Enablers Act would close the large number of the loopholes utilized by accountants, advertising firms, art and antiquities dealers, investment advisers, and some lawyers. Anti-corruption experts state that the Enablers Act will regulate these types of leaked revelations published by ICIJ.

    Conclusion

    The Pandora paper would accelerate measures to take steps to strengthen the international financial regulations, tax avoidance and other modes where rich persons can hide their assets. Most bankers help their clients to hide their assets. A person himself cannot hide them by their own a network of professionals is required to safeguard them in this mission.

    In light of the Pandora Papers, financial experts advised the U.S. trusts to implement an investigation on the clients whose wealth was amassed in midst of the sound allegations of accusations of crimes or denial of human rights.

    Given the immense measures of individual information handled by financial services. The financial services industry is the richest source of personally recognisable information both general and financial. Gathering and keeping this information has made the financial service industry an essential objective for data breaches and leaks such as the Pandora papers. In this way, financial services providers should cautiously analyze their practices with individual data and guarantee protection security and consistency.

    ]]>
    Sun, 03 Apr 2022 10:10:00 GMT
    <![CDATA[NFT Regulations in Singapore]]> NFT Regulations in Singapore

    Introduction

    Non-fungible tokens or NFTs are presently one of the most popular technology trends in the world. Non-fungible means that this token cannot be exchanged as it is unique, and every token has a unique code and metadata stored on a digital ledger. The property that makes NFTs so popular and appealing is that these digital assets cannot be counterfeited and replicated. The ownership and authenticity of an NFT can be proved through the digital certificate issued on its purchase, and this digital certificate is generally encrypted on the blockchain.

    However, a grey area exists regarding NFTs as in effect, there is a separation between the digital asset and the NFT. The NFT only signals towards the existence of an asset and may or may not be treated as an asset in itself. Therefore, the legal status of NFTs is ambiguous and unclear as one does not know whether the owner of an NFT would automatically be granted the ownership of the underlying asset.

    The legality of NFTs in Singapore

    In Singapore, no specific laws or regulations currently exist to regulate the sale and purchase of NFTs. The Monetary Authority of Singapore (MAS) is the regulatory body that issues and regulates the currency in Singapore. As MAS does not recognize cryptocurrency or NFTs as a form of legal tender in the country, they are not regulated by the laws issued by MAS.

    In 2020, the Payment Services Act (PSA) was enacted to provide a legal framework for payment gateways, systems, and service providers. The Act defines digital payment tokens under Section 2 as any digital terms of value other than an excluded digital representation of value. These excluded digital representations of value are the digital representations of value prescribed by the Authorities as excluded. Even though NFTs are not explicitly excluded from the purview of PSA, they may be excluded as NFTS may fall under "limited purpose digital payment tokens," which are exempted from the purview of PSA. Furthermore, under the definition of digital payment token, the Act defined such a token as:

    (a) one that may be expressed as a unit;

    (b) is not denominated in any currency;

    (c) is or is intended to be a medium of exchange that is accepted by the public as payment of goods and service;

    (d) can be stored, traded or transferred electronically and;

    (e) satisfied other conditions as prescribed by the Authorities.

    In the case of NFTs, the biggest limitation is that they cannot be a medium of exchange like cryptocurrencies because each NFT is unique and one of its kind and hence, one cannot be exchanged for another. Further, the foremost aim of PSA is to prevent and detect money laundering and terror funding. Therefore, NFTs cannot be logically regulated under the PSA.

    Despite the absence of any legal regulations for NFTs, many Singaporean artists have created and sold their digital artwork as NFTs. The sale and purchase of such NFTs are presently being governed by the smart contracts linked to such NFTs. Smart contracts entail the terms and conditions governing the creation, sale, and purchase of the NFT in question, and the contract is embedded on the blockchain. NFTs are generated through smart contracts, which verify the ownership and regulate the transferability of the NFT. Smart contracts are understood to be automated and enforceable agreements, having the same legal enforceability as traditional contracts in a common law jurisdiction such as Singapore. Therefore, while purchasing the NFT, the buyer should understand both the terms and conditions of the transfer and the terms and conditions enlisted in the smart contract in order to protect their ownership of the NFT.             

    NFTs and Intellectual Property Rights

    The buyer of an NFT does not automatically confer the intellectual property rights associated with the underlying asset. Such rights can only be acquired if an agreement is made in writing. In the absence of such an express written agreement, the intellectual property rights of the underlying asset will traditionally remain with the artist or creator of the NFT and not the buyer. The currently prevailing notion is that the sale of the NFT does not involve the sale of the actual underlying asset or any intellectual property rights associated with the asset.

    For example, in the case of Jack Dorsey's tweet that was sold for over $ 2.9 million, it was clarified that the buyer of the tweet does not own the copyright of the same, and hence, they would have to seek permission before using the tweet itself. The copyright of the tweet would still be owned by Jack Dorsey and Twitter in this case. The platform, Valuables, wherein the tweet was auctioned, also expressly clarified that owning the tweet means purchasing a digital certificate of the tweet. These tweets were only collectibles, and no copyrights were conferred upon the buyer through the purchase of the NFT.

    Therefore, the buyer of NFT cannot claim ownership of the underlying asset, and the buyer also does not own any intellectual property rights associated with the asset. The smart contract essentially only provides the exclusive rights to the digital unique identification code linked to the NFT. Hence, the asset or underlying artistic work will still mostly remain accessible to everyone. Although, in the case wherein a particular NFT is the only digital version of the asset or artistic work, the NFT would prove to be very valuable indeed.

    Conclusion

    NFTs likely continue to grow in Singapore and worldwide, given their popularity. However, the legal issues related to NFTs are complex and are currently ambiguous in Singapore in the absence of any specific laws and regulations to regulate the same. At best, these digital tokens can only be regulated through written, enforceable contracts presently. One may sue for breach of contract if the parties are situated in common law jurisdictions. Therefore, one needs to be mindful when entering the trade of NFTs.

    ]]>
    Sat, 02 Apr 2022 18:05:00 GMT
    <![CDATA[Legal Updates to DIFC Employment Law]]> Legal Updates to DIFC's Employment Law

    "Workers rights should be a central focus of development."

                                                                                                          -Joseph Stiglitz

    Introduction:

    The Dubai International Financial Centre announced the the Employment Law Amendment Law No. 4 of 2021, which changes the Employment Law. The DIFC Authority's Board of Directors recently announced new Employment Regulations, which align the Qualifying Scheme regime with the DFSA's Employee Money Purchase Scheme, resulting in only a single layer of regulation for these schemes. The revisions to the Employment Legislation explain the applicability of limitation periods to claims brought under the law, the accrual of vacation leave, the duration of the probationary period for short-term fixed-term contracts, and the definition of specific terminology used in the law. The Amendment Law also alters the Employment Law's essential workplace health and safety criteria to accommodate working from home arrangements.

    Key Changes:

    • Limitation Period: The New Law maintains the six-month limitation period established by the Old Law, as well as the right of employees to file claims while they are employed. In respect to claims for improper deductions from, or non-payment of, payments owing to an employee, the New Law defines when the six-month limitation 'clock' starts. Except where the sums claimed are for maternity pay, paternity pay, pay for time off for ante-natal or adoption proceedings, sick pay, end-of-service gratuity, or contributions to any qualifying plan, the 'look back' period is certified to be two years.
    • Probation Period: According to the New Law, for employees hired on a fixed-term contract for six months or less, the probation period can't be more than half of the contract term. For instance, if an employee is hired on a four-month contract, their probation time may be limited to two months.
    • Annual leave: Employers and workers can agree on an amount of accrued annual leave to be carried forward under the New Law, as long as it is no fewer than five working days. The New Law further clarifies the Old Law's slightly unclear stance, confirming that the parties can agree on a larger carry-over sum. Following the Old Law's provision of statutory paternity leave, the New Law ensures that annual leave will continue to accumulate during paternity leave, whether for the New Law's five-day period or any longer time that the employer may provide.
    • Different working models: The Old Legislation expressly allows a third-party employee to be seconded to a DIFC firm. The employee's employment can continue to be regulated by a law other than the Old Law. The New Law now extends to secondees some statutory responsibilities and rights, including confidentiality obligations, following an employer's orders, and protection from discrimination and harassment. Under the New Law, short-term employees (defined as employees who work for less than 30 days in 12 months) are now protected from discrimination and harassment. The New Law confirms employers' duties when workers work from home, with companies being compelled to:
  • Equip the employees with information and training as well as safeguard their health and safety
  • Notify workers in writing of any hazards associated with their jobs and the preventive measures they should take at the time of hire and comply with their general responsibilities to protect the health and safety of all employees, as far as is reasonably possible (including those working from home).
  • Employers are not obligated to verify that any measures are in place at an employee's home in the event of a fire or the transit or use of hazardous products or chemicals.

    • Qualifying Schemes:

    Employers can use the default DIFC Employee Workplace Savings Plan (DEWS Plan) or an alternative plan (Qualifying Scheme) under the Qualifying Scheme savings regime, which went into effect in February 2020. However, following implementation, the DIFC Authority and the DFSA had difficulty evaluating applications from other eligible schemes run by foreign service providers.

    A Qualifying Scheme, as well as its trustee and administrator, must be created in the DIFC and governed by the DFSA, save where:

  • In another nation, the employer is required by law to make pension, retirement, savings, gratuity, or other similarly comparable payments to a system for those employees; or
  • The value of such payments (not including any revenue or contribution made by the employer or the group to the costs of managing the plan) exceeds the essential benefits provided under the New Law. The employer is paying the payments to a group scheme on behalf of the employees.
  • Employers in the DIFC who are currently using a savings scheme as an alternative to the DEWS Plan that does not meet the proposed new requirements will have a 12-month grace period to move to a different employee savings scheme going forward (from the date the new legislative requirements take effect).

  • Fee: Employers asking for a Certificate of Compliance or an Exemption Certificate now have to pay a charge of USD500.
  • Deductions: Employees' capacity to make claims for improper deductions from their earnings have been regulated, and claims for overdue wages dating back two (2) years have been limited (subject to some exceptions).
  • Conclusion:

    The changes to the Employment Law and Regulations reflect the Centre's ongoing commitment to maintaining a transparent and robust legal and regulatory environment in line with international best practices.

    ]]>
    Sat, 02 Apr 2022 17:28:00 GMT
    <![CDATA[Enforcing Foreign Awards in Qatar]]> Enforcing Foreign Awards in Qatar

    Arbitration has seen a tremendous increase in popularity in Qatar in recent years, including both national and international clients. The number of arbitration cases held in Qatar is on the rise, with many of them being international, with at least one party headquartered outside the country.

    To under the enforcement of foreign arbitral awards in Qatar, let us see what arbitration is; alternative Dispute Settlement, often known as suitable or amicable dispute resolution, is a method of resolving disputes between parties outside of the courtroom. While courts decide the outcome of a lawsuit, alternative dispute resolution (ADR) settles the conflict effectively, efficiently, and pleasantly. Arbitration is a popular type of alternative dispute resolution. It is frequently utilized in commercial disputes. Arbitration can be requested by parties that have included an arbitration clause in their contract. One key difference between arbitration and mediation is that one of the parties cannot withdraw unilaterally from arbitration. To ensure that no party gains an unfair advantage, the parties can choose the venue, the language of the procedures, and the applicable law.

    It is difficult to accurately estimate trends in commercial arbitration since there are no publicly available records on institutional and ad hoc arbitrations conducted or executed in Qatar or having Qatar law as the procedural and substantive legislation. On the other hand, arbitration is commonly employed in the construction industry, where a significant percentage of the contractors are foreign firms.

    In Qatar, arbitration and post-arbitration processes are controlled by the following laws:

    • the Law of Arbitration in Civil and Commercial Matters (the Qatari Arbitration Law) – based principally on the UNCITRAL Model Law (came into force via Law No. 2 of 2017 Promulgating the Civil and Commercial Arbitration Law – Issuing the Law of Arbitration Civil and Commercial Matters)
    • the relevant provisions of the Civil and Commercial Procedures Law (CCPL) that apply to arbitration and post-arbitration procedures are not repealed by Law No. 2 of 2017 (CCPL Articles 190 to 210 were repealed by Law No. 2 of 2017) and do not conflict with the Qatari Arbitration Law; and
    • The New York Convention

    Unless the parties agree otherwise, the award must be written and signed by the arbitrator or, if there is more than one arbitrator, the majority of the arbitrators, unless the parties agree otherwise. The reason for any omitted signatures must be stated in the award (awards on procedural matters may be issued by the president of the tribunal if authorized to do so by the parties or all members of the arbitral tribunal). Unless the parties agree differently, the award must specify the grounds for the decision, unless the applicable legal laws do not require it, or if the judgment is based on the parties' settlement. It must also include the parties' names and addresses, the arbitrators' nationalities, names, addresses, and capacities, a copy of the arbitration agreement, the date the award was issued, and the arbitration seat. The award must include a summary of the parties' requests, statements, documents, and the award ruling and reasons if they are needed to be mentioned. Lastly, if the parties agree otherwise, the award must indicate the arbitration costs and expenses, the party responsible for paying fees, and the payment processes.

    Even though there is no explicit legal requirement in the abolished arbitration law or any other law or the Qatari constitution, several court decisions have been issued under the now-repealed parts of the 'old' arbitration law, ruling that Qatar-seated arbitral awards must be issued in the name of His Royal Highness, the Emir of the State of Qatar. Because those judgments also mentioned Article 69 of the Procedural Code, which was not specifically repealed by the new arbitration statute, it is unclear how widespread the practice of seeking domestic awards in His Highness the Emir's name will persist.

    Every party to an arbitral award is entitled to a copy within 15 days of the award's issuing. The tribunal is obligated to submit an electronic record to the administrative department of the ministry responsible for arbitration matters within two weeks of the award's release. In practice, we know that arbitral tribunals appear to comply with this obligation. The Ministry of Justice's arbitration department is managing this specific requirement as outlined in Article 31(11) of the Law. Though it is not legally related to arbitral awards, it is worth noting that 'interest' as a means of monetary restitution is only recoverable under Qatar law if the parties agree. Furthermore, costs are left completely to the tribunal's discretion unless the parties agree otherwise.

    Rules controlling an award's amendment, clarification, or correction

    Only if the parties agree otherwise, any party may refer the arbitral tribunal to redress any material computation or typographical errors that could have happened in the arbitral award within seven days of receipt, or within the period agreed by the parties, provided that it notifies the other parties, or to give an interpretation of a specific point or part of the arbitral award if so agreed by the parties. If the arbitral tribunal believes the request is legitimate, it must correct or provide the interpretation in writing within seven days of receiving the request. The final arbitral ruling will include the interpretation or modification. Within seven days of the date of publication, the arbitral tribunal may fix any major computation or typographical errors in the arbitral award on its motion, given it notify the parties.

    Unless the parties agree otherwise, any party may request the arbitral tribunal to issue a supplemental arbitral award for requests presented during the arbitration proceedings but excluded from the award within seven days of receipt of the arbitral award, providing it informs the other party. If the tribunal finds the request reasonable, the supplementary award will be issued within seven days of the petition's submission. Suppose it is established that the arbitral tribunal that issued the award will be unable to reassemble to reconsider the request to amend, explain, or decide on the omitted requests. In that case, the subject might be brought before the competent court for resolution unless the parties agree otherwise.

    Appeals from an award

    An arbitral award would not be challenged in any way other than by setting it aside in a competent court. By default, the Civil and Commercial Arbitration Disputes Circuit of the Court of Appeals (i.e., local courts) or the Court of First Instance of the Civil and Commercial Court of the Qatar Financial Centre (i.e., QFC courts) are the competent courts for setting aside an award, as specified in the parties' agreement.

    The Qatar Arbitration Law specifies only a few circumstances in which an arbitral judgment may be set aside. A request to set aside an award will not be considered unless the petitioner can demonstrate the following:

    • Any party to the agreement was incompetent or incapacitated at the time of its conclusion, or the arbitration agreement is illegal under the governing law or by default under Qatari Arbitration Law;
    • The party filing the motion to set aside was not provided appropriate notice of the appointment of arbitrators or the arbitral procedures or was unable to submit its defense due to circumstances beyond its control.
    • If it is possible to separate the parts of the award that are related to the arbitration from the parts that are not related to arbitration, only the latter parts shall be set aside), or the award has made the decision issues are outside the scope of the arbitration agreement or in excess thereof (if it is possible to separate the parts of the award that are related to the arbitration from the parts that are not related to arbitration, only the latter parts shall be set aside),

    In the end, it can be said that, While it is unclear how Qatari courts would resolve specific difficulties in future cases, recent petitions to set aside arbitration verdicts before Qatari courts suggest Qatar's desire to become a pro-arbitration jurisdiction. The Qatari courts have modified their attitude to arbitration since these contentious judgments. Setting aside applications of arbitration judgments in Qatari courts has become increasingly difficult in recent years. Qatar's future as a pro-arbitration center is unquestionably bright.

     

     

    ]]>
    Sat, 02 Apr 2022 16:17:00 GMT
    <![CDATA[Insolvency Regulations in Kuwait]]> Insolvency Regulations in Kuwait

    Kuwait is the most recent GCC nation to alter its bankruptcy laws. Kuwait modified its insolvency code in October 2020, enacting the long-awaited Bankruptcy Law (Kuwait Law No. 71/2020). This legislation emphasizes bankruptcy processes designed to maximize a debtor's worth for the profit of creditors and offer debtors the opportunity to resume pre-bankruptcy privileges if a bankruptcy judge is discharged. Lawful and judicial advancements during the last 40 years, practical application of the Financial Stability Law, Kuwait Law No. 2/2009, and the state's strategy to improve its current business environment in order to convert Kuwait into a regional financial capital have all been taken into account in this new piece of legislation, according to the explanatory memorandum to the Law.

    Kuwait's insolvency structure has been entirely revised by Law No. 71 of 2020 regulating insolvency law (the "New Insolvency Law"). It provides enterprises in financial distress with more flexible options. It allows for rehabilitation, "rescue packages," as well as other initiatives to keep a company from going bankrupt or liquidating prematurely. This is especially crucial when a company is fails to meet its obligations but can rebound in the benefits of major stakeholders.

    Scope and Application

    The Bankruptcy Law lists the persons to whom the law's provisions apply, with the exclusion of joint venture firms and collective investment schemes (which includes every natural person, trader, Kuwaiti companies, and branches of foreign companies). The Central Bank of Kuwait and the Capital Markets Authority have the authority under Kuwait's Bankruptcy Law to establish guidelines regarding the preventive settlement. Processes, restructuring, and insolvency for securities exchange, clearing agencies, central depository institutions, central brokers, banks, and insurance organizations, in ways that may depart from the Bankruptcy Law and in accordance with the nature of these firms' requirements.

    The Bankruptcy Law calls for the formation of a Financial Restructuring Committee ('Committee'). With the assistance of one or more Committee-appointed specialists, the Committee's function is to oversee the administration of restructuring operations in order to facilitate consensual restructuring solutions between a debtor and its creditors (if appropriate). The Committee will also keep track of insolvencies, authorize expert costs, and maintain a list of insolvency specialists who will assist the courts in determining the grounds for and carrying out the bankruptcy procedure of choice (as described in more detail below).

    The objective of Insolvency Law

    Some aspects of the New Insolvency Law are similar to those of the Financial Stability Law of 2009, which supersedes and improves. The Amended Insolvency Law aims to identify ways to maintain a company's "going-concern" value by providing alternatives to liquidation. It is based on the notion that enterprises in financial trouble can be more beneficial to all stakeholders if they can find a method to keep them operating. This New Insolvency Law allows for recovery while ensuring that the corporation and its creditors are protected by court involvement.

    Organizations face difficulties at any time due to external circumstances beyond their power. There might be a window of time to study the situation and identify professional remedies to protect the company in the short term. Creditors calling in their debts and other shareholders may have competing interests. The new legislation establishes a procedural structure to settle cases quickly. This is accomplished by incorporating substantial sections of the New Insolvency Law, such as time limits. In insolvency procedures, for example, it is specified when meetings should be held, recommendations should be given to the court for examination, and the number of days the judge should take to make a judgment on the rescue ideas.

    Implementation Operational and Administrative Framework

    The New Insolvency Law establishes a bankruptcy court and several obligations to carry out the insolvency procedures to boost confidence in each of them.

    ·         The Revised Insolvency Law establishes a specialized bankruptcy court (the "Bankruptcy Court") with sole jurisdiction over issues emerging under the law and the competence to deliberate on requests made to it in line with its requirements. The CMA appoints auditors to assist the Bankruptcy Court. These experts serve the Bankruptcy Court by providing professional views on a bankruptcy action's financial, accounting, and economic aspects.

    ·         In the event of a financial reorganization or bankruptcy process, one or more bankruptcy trustees, either natural or legal people (e.g., businesses), are designated. In the instance of a preventative settlement, no bankruptcy trustee is appointed. When the bankruptcy commission approves a company's application for financial restructuring or liquidation, it assigns a bankruptcy trustee. A trustee must be either a CMA-licensed auditor or a registered auditor. The bankruptcy commission may recommend that the Bankruptcy Court select a non-CMA accredited individual or an unregistered auditor in rare circumstances. On the other hand, the Bankruptcy Court has the authority to approve or reject the commission's recommendation. In any case, such an appointment requires the consent of the Bankruptcy Court.

    ·         A bankruptcy commission is established by the Ministry of Commerce and Industry, consisting of at least three members who are qualified to act as bankruptcy trustees. Experts in finance, Law, and economics may be included in the commission. The commission is responsible for overseeing some business debts. All examples are listed company debts, collective investment plans, CMA or Central Bank controlled entities, and state-owned companies. The commission will consider insolvency applications and accompanying documentation submitted by any preceding companies throughout the bankruptcy proceeding and render an opinion. Appointing bankruptcy trustees and deciding their salary are among the other responsibilities.

    ·         A high-ranking judge oversees the bankruptcy department, which is part of the judiciary. Supervising insolvency procedures, monitoring the company's funds and business management, guaranteeing timely filings, and analyzing requests according to the New Insolvency Law are responsibilities.

    ·         The Bankruptcy Court may appoint a supervisor on its initiative or respond to requests from a concerned creditor or the bankruptcy committee. The supervisor would keep an eye on the insolvency proceeding, along with the preventative settlement, as it progressed. The supervisor will produce a report on the status of the insolvency action if requested.

    ·         The Bankruptcy Court may appoint an investigator on its initiative or in response to a request by a concerned creditor, supervisor, supervisor, bankruptcy trustee, or bankruptcy commission. The investigator will scrutinize the bankruptcy trustee's or distressed company's actions.

    Penalties

    In the event of concealing the books or misappropriating part of the company's money, the Bankruptcy Law increases the debtor's punishment from three to five years and the fine from 30,000 (US$98,000) to 100,000 Kuwait Dinars (US$327,000) or one of these two penalties. If, after the issuance of a final decision to open the bankruptcy procedures, the chairman and members of the company's board of directors, its directors, the auditors of its accounts, and those in charge of liquidating, they concealed the company's books or embezzled any of the bankrupt company's money, they shall be punished with imprisonment for a period not exceeding five years and a fine not exceeding one hundred thousand Kuwaiti Dinars or either of these two penalties.

    Conclusion

    The New Insolvency Law corrects inconsistencies that existed under the prior bankruptcy system. Earlier, stockholders and creditors were left in the dark about their rights and responsibilities if their investment went bankrupt-this stifled economic growth, particularly in the SME sector. The New Insolvency Law aims to create a debt collection process while also boosting the chances of a company's recovery. Since liquidation is no more the only option for a company in financial trouble, the law strives to walk a fine line between creditor protection and the ability for businesses to continue operating.

    However, the new legislation's success will be determined by how it is applied in practice. The inability of troubled enterprises to raise capital to continue their operations is a persistent issue. Kuwait may want to consider providing priority financing, in which approved lenders' restructuring loans take precedence over other business debts.

     

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    Tue, 08 Mar 2022 00:00:00 GMT
    <![CDATA[Inheritance Law in the UAE]]> Inheritance Law in the UAE

    "A leader's lasting value is measured by succession."

                                                                              -John C. Maxwell

    The afore-stated quote is apt for a while discussing the laws of inheritance as these laws help understand the nuances of devolution of property among the 'deserving' legal heirs of the testator/deceased. The Civil Transactions Code, often known as the Civil Law and the Personal Status or Personal Law, governs the law of inheritance in the UAE. Both were conceived from the Shariah Law, which is considered a grand norm for inheritance laws in the UAE. The said laws are applicable to all UAE Nationals, but the laws also provide cases where the devolution of property of a non-Muslim takes place. This will be discussed in detail in the following sections.

    A non-Muslim foreign national has been given the option of avoiding Shariah Law application and the devolution of his property by his individual State Law. Accordingly, Article 17 of the Civil Law specifies that the testator's law shall govern his inheritance at the time of the testator's death. It is critical to comprehend the concept of inheritance, which is defined under Article 313 of the Personal Law as the transfer of financial and property rights to those deserving following the testator's death. It must be noted that UAE, being a common law country, does not provide for the 'right to survivorship,' i.e., suppose there is a property owned jointly by two people and one of them dies, then the right to decide the manner of disposal of the property shall pass on to the courts. It must be noted that the testator's death marks the beginning of the litigation over the estate, as was rightly quoted by Ambrose Bierce.

    Devolution of Estate of the Deceased (Muslim)

    Under the Shariah Law, the legal heirs and the descendants of the deceased have the right to claim the estate, and it is upon them that the property to the deceased shall devolve. If the said non-Muslim, the property shall devolve based on the community law they belongs. In case the said non-Muslim has created a will, then the property shall devolve based on the specifications provided under the same to the beneficiaries as mentioned in the will.

    In the case of a deceased Muslim, the property devolution takes place only based on the principles enshrined under the Shariah Law. These principles require that the heirs of the deceased should be determined, and two male witnesses should confirm the same. The heirs are also required to show documents like marriage certificates, birth certificates, etc., and submit them as evidence. Once the testator dies, all his rights and liabilities pertaining to the estate are divided based on the Shariah law. These include all the rights and liabilities like debts of the deceased or usufructs in the property. The principles of Shariah law provide that the heirs of the estate of the deceased shall be the following:

    • Children
    • Spouse 
    • Siblings
    • Grandchildren
    • Grandparents
    • Aunts and Uncles
    • Cousins

    The restrictions under Shariah law pertaining to the people to whom the estate shall not devolve on the death of a Muslim Testator includes a person murdering to get a share in the estate of the deceased, a divorced woman, provided she is not assuming iddah, an adopted child, an illegitimate child, a non-Muslim. There is a Yiddish Proverb that "the one who comes for inheritance has to pay for the funeral expenses as well." Similarly, as per the law, the property or the amount that shall be devolved upon the legal heirs would be the amount after excluding the funeral expenses of the testator.

    Devolution of property through Will (Muslim)

    Muslims can draft a will for bequeathing their properties under the Shariah laws. But the portion that can be devolved through a will is only 1/3 of the property. If he wishes to bequeath more than 1/3 of his property, then all the legal heirs' written consent is required. Further, if the testator bequeaths more than 1/3 of his property without the consent of his legal heirs and dies, then again for the execution of the excess property, a no objection is required from the legal heirs. If the heirs do not consent for the same, the property shall be devolved as per the laws of Shariah. Also, apart from the 1/3 property that can be bequeathed through will, the rest of the estate shall devolve only as per the Sharia laws.

    Devolution of Estate of the Deceased (non-Muslim)

    If a non-Muslim foreign national dies intestate (i.e., without any will), their property shall be divided among their legal heir as per the Shariah laws. Initially, we saw that Civil Law Article 17(1) provides that inheritance of such a person shall be based on the law of the deceased. Still, an extension to this provision is provided under Article 17(5) of the Civil Law, stating that if such a non-Muslim foreign national has his property located in UAE, then his property devolution shall be as per Shariah laws with respect to those properties located in the UAE. Now, there is another proviso as well. Personal law Article 1(2) states that if the non-Muslim wishes that his property be devolved based on his State's law with regard to the properties in UAE, the said person has to elect for the same. The legal heirs of the deceased can apply for an application for the same in court.

    Once the Legal heirs apply for the property of the deceased non-Muslim to be devolved as per his state law, they are required to submit some documents, including the death certificate, will of the deceased non-Muslim, his last domicile, and the judgment for execution from a court of competent jurisdiction translated to Arabic, if any, as per Article 276 of Personal Law. Irrespective of these provisions, there remains ambiguity regarding the application of State law or Shariah law because both the Personal Law and the Civil Code are contradictory. The will of a non-Muslim can be created in UAE, and for this will to be recognized in the UAE courts, it is required that the will be notarized as well as registered in the Judicial Department of the Emirate. As stated previously, the personal law allows a non-Muslim to dispose of his UAE properties as per his wishes; the DIFC established the Dubai International Financial Centre (DIFC) wills and probate registry.

    Devolution in case of Joint accounts

    In a case where a UAE account is held jointly by two people and one of the people dies, then the surviving partner is required to intimate the bank within ten days from the date of the death of the deceased, and once notified, the bank freezes the account till the successors are appointed, and the court has decided the portions of the shares of the heirs. This is governed by another law, namely the Commercial Transactions Law/ Commercial Law. The procedure of devolution shares of a joint account is provided under Article 379 of the said law.

    Transfer of Shares on death

    In such a case, if the company was established in the UAE, the transfer would be as per the Shariah Laws if no documents have been provided. If the company in question is a Limited Liability Company, then the shares of the company would be transferred to the heirs of the deceased provided that there is no specific clause under the MOA or shareholder's agreement and the deceased is a local. In other cases, like Joint venture or sole proprietorship, etc., the transfer of shares shall be as per the Shariah laws, i.e., the UAE laws. This is because there is no right to survivorship in UAE. Thus, the share in such a case shall not be directly transferred to the surviving partner or the family members. Usually, in such a case, it is better than the specifications regarding the transfer of shares in case of death of the shareholder has been specified under an agreement between the shareholders with their consent to prevent any ambiguity in the future. Therefore, these are the inheritance that is followed in the UAE.

    ]]>
    Mon, 07 Mar 2022 21:14:00 GMT
    <![CDATA[ADGM Regulations for SPVs and Foundation]]> ADGM Regulations for SPVs and Foundation

    "Regulation needs to catch up with innovation"

    The ADGM's Registration Authority published a consultation document in October proposing a regulatory regime for the use of CSPs in the ADGM. The public consultation began against the backdrop of rising interest in and success with incorporating SPVs and foundations into the ADGM. The results of the recommendations that were subjected to the public debate have recently been implemented through a series of revisions to the ADGM's rules, notably the Companies Regulations 2020, the Commercial Licensing Regulations 2015, and the Foundations Regulations 2017. As of April 12, 2021, the legal regime controlling CSPs in the ADGM is in place.

    SPVs and foundations in the ADGM are now required to appoint a CSP that is permitted to operate in the ADGM, unless they are exempt, under the revisions to the legislation introduced by the ADGM. CSPs, in turn, are subject to a slew of rules controlling, among other things, record-keeping and the protection of client funds. SPVs, foundations, and CSPs, as well as their officers and councilors, shall be held accountable for failing to comply with the new regulatory requirements, and fines may be imposed. In this update, we summarize the important regulatory requirements in the ADGM that apply to SPVs, foundations, and CSPs, as well as the appropriate transitional period deadlines.

    What is an SPV?

    A Special Purpose Vehicle (SPV), also referred to as a Special Purpose Company (SPC) or a Special Purpose Company (SPE), is a 'bankruptcy-resistant' entity. An SPV is typically a subsidiary that is protected if the original company goes insolvent and deemed isolated if the parent firm goes bankrupt. An SPV could be used to fund, purchase, and sell stock often held on the off-balance sheet to limit responsibility and isolate financial risk. The Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre are two options for forming an SPV in the UAE (DIFC).

    ADGM's SPV framework is considered a strong dynamic and cost-effective asset holding and investing structure. The regime provides more freedom to business owners and asset owners while also separating financial and legal risks. SPVs follow company regulations rather than distinct regulations, thanks to the direct application of English Common Law, which assures consistency across all corporate vehicles.

    The most prevalent application of an ADGM SPV in the UAE is to own shares in other firms. It can essentially act as a 49 percent foreign stakeholder in an onshore UAE LLC, allowing the shareholders to collectively possess assets and intellectual property in a strong local English Common Law jurisdiction. The following are some of the most common uses of an ADGM SPV corporate vehicle:

    • Risk Allocation enables a company to legally separate legal and financial risks. SPVs are frequently used to construct project companies for joint ventures, as they reflect management tasks while isolating the joint venture partners' risks.
    • Finance - An SPV could be used to raise funds without adding to the parent company's debt or exposing the parent's assets to cross-liabilities. It also allows investors to invest in specific initiatives directly rather than the parent company.
    • Securitization - Companies frequently employ SPVs to securitize loans or other receivables. The SPV can buy these assets by selling securities to capital market investors.
    • SPVs can be used to purchase properties in the real estate market. If the property sales tax is higher than the capital gain tax, the SPV can be sold instead of the properties, and the capital gain tax is paid instead of the property sales tax.
    • Asset Transition - Because some assets are difficult to transfer, a parent company may establish an SPV to hold these assets. When they want to sell the asset, they can sell the SPV as a standalone package when they want to sell the asset.
    • Obtaining Funds - When raising capital, an SPV may be able to obtain favorable borrowing rates. Because the SPV owns the underlying assets, it may have a better credit rating than the parent company.

    What is a Foundation?

    Wealth management, wealth planning and preservation, succession planning, asset protection, and tax planning are all things for which foundations and trusts are used. While trusts are common-law terms, foundations are a civil law notion that originated in continental Europe.

    However, unlike trusts, foundations are incorporated as a legal body with their unique characteristics and legal personality. Foundations are similar to corporations in this regard. However, they do not have shareholders. A foundation is a legal entity that owns assets in its name on behalf of beneficiaries. It must be founded with one or more legal objectives.

    Foundations are away for a family's different asset holdings to be consolidated under a single top holding company. Using a Foundation to store family assets, whether business interests, property, financial investments, or other assets, provides for the legalization of extremely precise instructions for asset transfer upon succession. Transferring ownership of all assets held by a single organization is cost-effective and tax-effective*. It's also less expensive than the time-consuming procedure of transferring ownership of an extensive range of assets separately and individually.

    Unless excluded, SPVs and foundations must have a CSP at all times under the new requirements. A CSP is a person who is authorized to supply company services under the ADGM. Functioning as an incorporation operator in linkage with the incorporation of an entity in the ADGM; providing company services to an entity incorporated or registered in the ADGM; acting as a registered office provider to an entity incorporated or registered in the ADGM; providing directors, company secretaries, registered agents, or other offices to an entity incorporated or registered in the ADGM; or providing nomi to an entity incorporated or registered in the ADGM are all examples of "provision of company services."

    If an SPV is a subsidiary undertaking of any of the following, it will be excluded from the requirement to appoint a CSP:

    a person exempt from the requirement to obtain a license to a controlled activity in or from the ADGM; a person authorized to conduct a regulated activity in the ADGM; a person licensed or regulated by the UAE Central Bank; a corporation whose stocks are owned up to trading on a market system in the UAE (including the ADGM); or a business that has demonstrated to the satisfaction of the Registrar an adequate presence in the UAE, taking into account (among other things). The new legislative framework includes a slew of regulations that must be followed by CSPs of non-exempted SPVs and non-exempted charities. CSPs, in particular, are required to keep identical records as SPVs and foundations (i.e., the company's books). Unless the Registrar expressly permits an alternative registered office, CSPs must also function as a registered agent operator to those SPVs and foundations.

    CSPs are now legally authorized to manage SPVs and foundations in contact with the Registrar. As a result, under the ADGM Companies Regulations 2020, Commercial Licensing Regulations 2015, and Beneficial Ownership and Control Regulations 2018, CSPs are required to make all filings on behalf of SPVs and foundations. In response, SPVs and foundations must make all necessary documentation and information available to their CSPs for the CSP to meet its regulatory duties. Furthermore, CSPs that manage client accounts must adhere to regulatory rules governing client money payments, segregation, and withdrawals.

    Conclusion

    The addition of specific criteria and requirements for CSPs in the ADGM, which follow international best practices and aim to create a solid framework for the functioning of SPVs and foundations in the ADGM, is a positive step forward. The new legal framework intends to address the problems and reduce any risks that posed to the ADGM as a result of increased global demand for ADGM-based SPVs, which has led to the emergence of entities in the ADGM that have no direct relationship to the ADGM or the UAE.

    The new laws will also provide the ADGM Registration Authority with information on the extent to which nominee structures, which are extensively used for making investments in the GCC, are employed through the ADGM. Although the new laws will not immediately impact the ADGM's investment climate, future revisions to the legislation may be made depending on the ADGM's long-term objectives. It needs to be seen whether the additional layer of regulation and the costs connected with it would deter or encourage the use of SPVs or foundations in the ADGM.

    ]]>
    Mon, 07 Mar 2022 21:02:00 GMT
    <![CDATA[ADGM Data Protection Rules 2021-2022]]> ADGM Data Protection Rules 2021-2022

    "Availability of protection ensures reliability and timely access to data and resources to authorized individuals."

    Organizations must emphasize educating about their responsibilities under the new ADGM Data Protection Regulations, conducting a disparity test to find whether their current systems are vulnerable or appropriate, considering any changes to their structure, and taking the necessary steps to adhere.

    The Abu Dhabi Global Market (ADGM) has passed new Data Protection Regulations for 2021. (The Regulations). Following a 12-month transition period for current businesses in ADGM before February 14, 2021, and a 6-month transition period for new companies based in ADGM on or after February 14, 2021, these Regulations will take effect and replace the current Data Protection Regulations 2015 regime. Going through a period of public engagement, the revised regulations were enacted. The policies are based on worldwide standards and best practices, including the EU General Data Protection Regulation (GDPR), but adjusted to the ADGM's requirements.

    The new Regulations are closely linked with the UK's Data Protection Act 2018 and the EU's General Data Protection Regulation (Regulation (EU) 2016/679) ('GDPR') following good input during a public consultation in November 2020. Regardless of whether the processing occurs in ADGM or not, the Guidelines apply to the processing of personal information in the framework of the activities of establishing a controller or processor in ADGM. Personal data is a broad term that refers to any information used to identify a living individual. This is crucial because unique IDs are widely used for technology and financial services.

    To understand the mechanism set by ADGM, we need to closely analyze the data protection rules enforced by it.

    Organizations (controllers) recognized in the ADGM and process personal information or sensitive data are subject to the law. The rule also applies to businesses that process data on behalf of these organizations, such as their vendors. Personal data collected and held outside of ADGM, but relating to ADGM-registered organizations, is protected by law. Processors who are registered in the ADGM and who process personal information for authorities outside the ADGM are, to a limited extent, protected by the law.

    The ADGM DP Law protects personal data, defined as any data connected to an identified natural person or identifiable natural person. This also includes data containing opinions and intentions about identified or identifiable individuals. The ADGM DP law also applies to sensitive personal data, which is personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, genetic data, biometric data (where used for identification purposes), data about health, data about a person's sex life or sexual orientation, personal data relating to criminal convictions and offenses or related security measures.

    Features of rules 2021-2022

    • The GDPR is closely related to the Regulations. As a result, organizations that now collect the personal data of EU citizens should be aware of important elements. The inclusion of the transparency obligation to the principles is one of them. Mobility, erasure, objection, limitations, and particular rights over real-time decision and profiling have been added to the list of data subject rights. Individuals now have the right to seek reparation from a controller or processor if the Regulations are broken.
    • In some situations, a data protection officer ('DPO') is required. The DPO is not required to be based at the ADGM and might serve a group of enterprises. There is also an obligation to keep track of the processing cycle and perform Data Protection Impact Assessments ('DPIA') when proposed processing activities pose a significant danger to persons' rights and freedoms.
    • In addition, the Regulations keep the duty to enroll with the Office of Data Protection ('ODP') but add a new responsibility to notify the ODP. Notice may be required in some cases, such as data breaches, DPIAs, and Binding Corporate Rules approvals.
    • Micro-businesses functioning in the ADGM is granted some restricted exemptions under the Regulations. The data protection cost is waived for businesses with fewer than five employees. They are also excluded from the need for a DPO. On the other hand, the exclusions are not valid if the company engages in our high-risk processing operations.
    • Businesses must comply with several data subject rights under the laws, including assisting persons in gaining access to personal data held about them. The revised timeframe for complying with such data subject access permissions is two months, with the possibility of a one-month extension "where appropriate, taking into account the complexity and volume of requests."
    • Businesses will also be expected to retain records relating to their data processing, perform data security duties, and, in some cases, hire a data protection officer and conduct data protection impact evaluations under the laws. The new rules also specify the circumstances for which private data may be legally transmitted from the ADGM to certain other countries.
    • The Regulations establish a separate Office of Data Protection (ODP) and a Data Protection Commissioner ('the Commissioner'). The revised Regulations define the Commissioner's function and obligations, which include administrative, regulatory, and compliance powers. The Regulations give the ADGM Commissioner of Data Protection the Middle East's toughest penalty mechanism. The Commissioner can impose financial penalties of up to USD 28 million.
    • The ODP participates in a range of international forums. The ODP is a member of the Global Privacy Enforcement Network (GPEN) 2 and an observer to the Council of Europe's Consultative Committee on the Privacy of Persons concerning Automatic Processing of Personal Data ('Convention 108') and the Global Privacy Assembly. The ODP recently announced that it had become the Gulf's first data protection body to enter the International Enforcement Cooperation Working Group3. The ODP aspires to become one of the region's most important data protection bodies.

    Changes in ADGM DPR 2021

    1.     Data Protection Officer is Required

    • The ADGM suggests that a DPO be appointed.
    • The DPO need not be a member of the ADGM or a data controller's employee. This would assure that the ADGM's businesses may benefit from their global DPO function.
    • Without conflict, the DPO can also have numerous jobs in a company or work with multiple companies.
    • An establishment with fewer than five employees is exempt from the requirement to appoint a DPO unless it engages in high-risk processing operations.

    2.     Administration and Ethics

           The accountability principle is now included in the new law, which requires:

    • Data security is built-in and is enabled by default.
    • Data processing records
    • Impact assessments on privacy protection
    • Officers in charge of data protection
    • Corporate norms that are legally binding
    • Fee for data protection

    3.    Transfer across Countries

    The following are some general transfer principles: Protection of personal data at a high degree by adding protections such as:

    • The receiving region ensures that personal data is adequately protected.
    • Model clauses and binding corporate regulations (BCRs).
    • In the ADGM, a transfer is needed for important grounds of public interest - UAE law enforcement agencies request a transfer.
    • To save a person's life, a transfer is required.

    Conclusion

    "Data is the pollution problem of the information age, and protecting privacy is the environmental challenge."

    The UAE has made a rational and coordinated effort to embrace and conform data protection standards and best practices, as shown by the GDPR. This will benefit businesses in the UAE because the new system is likely to expand and support data protection transit between the UAE and other data-protective countries, such as European Union member states or the United Kingdom. In light of this global shift toward more comprehensive data protection, we propose that all ADGM enterprises engage rapidly in their arrangements for the Regulations' implementation to prevent additional disruptions and fines for non-compliance.

    ]]>
    Mon, 07 Mar 2022 20:47:00 GMT
    <![CDATA[Decree Number 34 of 2021 Arbitration in Dubai]]> Decree Number 34 of 2021 and Arbitration in Dubai

    "Arbitration is justice blended with charity."

                                                                    – Nachman of Breslov

    The Decree Number 34 of 2021 (the "Decree") was issued last year, and it's pertaining to UAE's arbitration community. The Decree took effect on September 20, 2021. Many in the dispute resolution world were taken aback when it announced substantial changes to the arbitration structure in the Emirate of Dubai, including the offshore Freezone known as the Dubai International Financial Centre (DIFC).

    The Decree dissolved two arbitration institutions in Dubai: I the Arbitration Institution of the Dubai International Financial Centre ("DIFC"), which included the DIFC-LCIA arbitration center, and (ii) the newly founded Emirates Maritime Arbitration Centre ("EMAC") (together with the "Cancelled Centres"). The Cancelled Centre's functions have been moved to the Dubai International Arbitration Centre ("DIAC"), which has been functioning onshore in Dubai since 1994. Dubai International Arbitration Centre, was founded in 1994 by the Dubai Chamber of Commerce and Industry as the 'Centre for Commercial Conciliation and Arbitration,' which provides arbitration services to local and foreign corporations. In the following months, DIAC is scheduled to publish new arbitration rules, establish a new arbitration court comparable to the ICC International Court of Arbitration, and a new board and an administrative body.

    The Decree states that the regulations of the Cancelled Centres will continue to apply until DIAC announces new rules, as long as they do not conflict with the Decree's stipulations. The Decree also clarifies that agreements signed before September 20, 2021, including a dispute resolution clause that specifies either DIFC-LCIA or EMAC Rules, will remain valid and that DIAC will take over the administration and supervision of such disputes from the Cancelled Centres unless the parties agree otherwise. It is unclear when the new DIAC rules will be released and what will happen to arbitrations that are still pending under the Cancelled Centre's rules once the new DIAC regulations are released.

    The Decrees Impact

    The Decree affects them differently depending on where they are in the lifecycle of their contracts and disputes. Existing DIFC-LCIA and EMAC agreements apply to ongoing arbitrations, and DIAC will take over the administration of any cases started under the procedures of these Centres unless the parties agree otherwise. The proceedings that began on September 20 under the regulations of the Cancelled Centres are to be continued without interruption. Delays are possible, especially in cases where the parties have not provided sufficient fund advances before September 20. The Decree specifies that the Cancelled Centre's arbitration procedures will continue to apply to ongoing proceedings. The new DIAC will take over all the Cancelled Centre's rights and obligations. How the transfer to DIAC's administration will be carried out remains to be seen. If future DIFC-LCIA or EMAC proceedings begin after September 20, but before the new DIAC regulations are published, the Decree is silent on the rules to be applied. This silence could leave parties with contracts referencing DIFC-LCIA or EMAC rules with a gap. Parties that want to start such processes today should get legal counsel and speak with the appropriate authorities before filing a mediation or arbitration request. If there is no separate agreement between the parties, then the existing dispute resolution clauses referring to the Cancelled Centres would effectively become subject to DIAC's administration and new rules. Parties should analyze their existing agreements to see if DIAC and its yet-to-be-published arbitration and mediation rules are the best options for resolving disputes, and if not, change their contracts appropriately. References to the Cancelled Centres should not be included in subsequent contracts. Parties should seek legal assistance when selecting arbitration rules taking place in or relating to Dubai, as the new DIAC arbitration rules have not yet been published. Parties can continue to hold their arbitration in either the DIFC or "onshore" Dubai.

    The Decree specifically states that any DIAC arbitration clause that does not identify a "seat" will be held in the DIFC. This is crucial for arbitral parties outside the UAE because arbitration agreements that do not specify a seat will now default to the DIFC (rather than "onshore" Dubai). The DIFC as an arbitration seat for international parties is important because it subjects them to supervisory courts that operate in English, are based on English common law principles, and apply the DIFC Arbitration Law for supervisory and procedural issues. Parties now referring future issues to DIFC-LCIA arbitration will have their arbitrators chosen and confirmed by the soon-to-be-established DIAC arbitration court rather than the LCIA Court. Furthermore, the DIFC-LCIA and DIAC cost estimations are different. Arbitrator expenses in DIFC-LCIA arbitration are calculated based on hourly rates and time spent by arbitrators. In contrast, arbitrator costs in the old DIAC system are calculated based on the amount in dispute. The new DIAC Rules' cost scheme will thus be a key factor in hiring skilled arbitrators, influencing the viability of this new arbitral institution.

    Possible Challenges

    The Decree's primary goal is to maintain party autonomy. It specifies that pre-existing arbitration agreements are legitimate and that any proceedings that were in progress at the time it was passed may be continued. The new DIAC would administer the arbitration in place of the defunct entities. While the Decree tries to verify the parties' earlier contractual agreements, there are still a few questions. The first effect would be on the parties' agreement to arbitrate. Disputes are likely to arise, as some parties may try to invalidate the arbitration agreement by questioning their consent to arbitration. Parties may also dispute how to proceed under the new regime.

    Tribunals, the mainland Dubai Courts, and the offshore DIFC Courts will play a key role in establishing the rules. It's especially vital to avoid conflicting rulings from Dubai's courts. Establishing a straightforward process quickly will help set the new DIAC's credibility and minimize unnecessary issues, especially if the parties agree on how to proceed. The protocol was drafted in cooperation with the Dubai Courts and the DIFC Courts to ensure that it guides rather than confuses.

    Conclusion

    The dissolution of the DIFC-LCIA is a significant change for arbitration in Dubai. Still, it also presents a chance for the DIAC to establish itself as one of the region's top arbitral institutions. Decree 34 has a significant impact on the UAE's arbitration scene, and consolidating the numerous Centres should assist Dubai's status as a global arbitration hub to rise even higher. However, more clarity is needed – particularly about the interplay with the DIFC-LCIA.

    ]]>
    Mon, 07 Mar 2022 08:11:00 GMT
    <![CDATA[KSA Data Protection Law and Recent Updates]]> KSA Data Protection Law and Recent Updates

    The Mid East's safety regulatory process is complex, and it generally is becoming fairly more so with the publication of Saudi Arabia's (KSA) Personal Data Protection Law (PDPL). Whereas the PDPL integrates the primary functionality of contemporary records safety laws, it mostly is not a direct analogy of the GDPR, which is quite significant.

    The PDPL is a national law, and thus, unlike the other KSA fraction privacy laws enacted to date, the PDPL, for the most part, is a particular national law, which is mostly is quite significant. The PDPL will for, the most part, keep an eye on all sectors (with possible positive exceptions mentioned below), or so they thought. As a result, the PDPL may also want to mostly be considered within the broader KSA legal and regulatory framework, as well as be considered with other quarter specific frameworks, kind such as those issued by the Saudi Central Bank, or different generation cantered frameworks, kind of such as the CITC's Cloud Computing Regulatory Framework in a big way. Key Problems It goes into full effect on March 23, 2022, or so they thought. Data Controllers then generally have another 12 months to mostly comply with the PDPL, though this period is likely to be extended mostly, which for the most part is significant.

    The PDPL may be supplemented with the aid of regulations, which must generally be posted by using March 2022 and will most basically likely provide additional colour and guidance to the PDPL's actual utility in an actual major way. However, the following issues are the most important takeaways for immediate consideration: Extraterritoriality The PDPL applies to any processing of private facts associated with people that arise withinside the Kingdom, which includes processing via way of literally means of "any approach via way of means of any entity outdoor the Kingdom." To particularly carry out the facts controller responsibilities below the PDPL, pretty overseas facts controllers need to hire a consultant inside KSA who's certified via way of actually means of SDAIA in a kind of major way.

    For basically minimum years, the Saudi Arabian Authority for Data and particularly Artificial Intelligence (SDAIA) will function as the regulator, which is most significant. Both the Central Bank and the Communications and Information Technology Commission (CITC) generally seem to particularly maintain their authority to mostly adjusting records safety inside their respective mandates, or so they thought. MOUs could essentially coordinate this among SDAIA, the sort of Central Bank, and CITC, which is significant. Deceased's data. Unlike kind of many different information safety laws, the above-cited processing consists of processing a deceased person's information if doing so might bring about seeking to pick out him or one in every one of his loved ones specifically. Consent is the primary legal basis for processing; the number one particularly criminal foundation for processing is the statistics subject's consent, or so they kind of thought. The Regulations will essentially specify "I instance wherein consent ought to rein writing." This essentially shows that consent may be received in approaches apart from in writing during a few instances. However, the PDPL no longer checks with processing for "valid interests" withinside the equal manner that the GDPR and different statistics safety frameworks withinside the area do, which is quite significant. Rather, the PDPL permits for processing apart from the idea of consent if and most effective if the following situations are met:

    • The processing achieves a "particular interest" (now no longer defined) of the statistics concern and it\'s far not generally possible or pretty tough to touch the statistics concern;
    • If the processing specifically is according with any other law, or withinside the implementation of an in advance settlement to which the statistics concern particularly is a party; and
    • If the statistics controller specifically is a general public entity and such processing is needed for safety functions or to satisfy judicial requirements in a big way.

    Data transfers outside the Kingdom kind of are even more strictly regulated than under current legislation, particularly contrary to popular belief. Transfers may also basically necessitate the basic approval of the information regulator. The PDPL appears to introduce a data switch regime that essentially is consistent with, if not kind of more stringent than, other current KSA legal guidelines that for the most part include information localization requirements (along with the CCRF, IOT Framework, and the prevailing particularly Personal Data Protection Interim Regulations) in an actual major way. The intense necessity to mostly preserve a data subject's lifestyles out of doors of the KSA to prevent, examine, or address ailment if the transfer specifically is withinside the fulfillment of an obligation to which the KSA basically is a celebration to generally serve the hobbies of the Kingdom or generally specific capabilities as determined with the useful resource of the usage of the Regulations Transfer of records out of doors the Kingdom is even greater strictly regulated than beneath neath modern-day legislation subtly. Transfers can also additionally nonetheless necessitate the general approval of the records regulator.

    The PDPL seems to introduce a records switch regime this for the most part is constant with, however probable much greater stringent than, different current KSA legal guidelines requiring records localization (consisting of the CCRF, IoT Framework, and the prevailing Personal Data Protection Interim Regulations) the intense necessity to shop a facts subject's existence outdoor of the KSA; to prevent, examine, or deal with disease; if the switch is in the success of duty to which the KSA is a party; to mostly serve the pursuits of the Kingdom or different functions as generally decided with the aid of using the Regulations (but to be issued), which is quite significant. However, the preceding is predicated on compliance with the subsequent conditions: the switch or disclosure does no longer generally jeopardize countrywide protection or the Kingdom's critical pursuits; there essentially are sufficient safeguards for maintaining the confidentiality of the private statistics to be transferred or disclosed so that the requirements aren't any pretty much less than the requirements contained within the PDPL and the Regulations. The PDPL and the Regulations must kind of make the switch or disclosure.

    Summary

    Saudi Arabia is taking a progressive approach to the countrywide law of KSA organizations' use of private statistics within the Kingdom. While the duties mentioned above are more complicated than those currently in force, the grace period provided to Saudi organizations to get their structures in place to conform with the PDPL presents a welcome opportunity for inner statistics security evaluation and implementation of updates. While this progressive method differs from the faster pace of China's new PIPL, unlike GDPR and US country laws, violations of both China's PIPL and the Kingdom's PDPL can result in criminal penalties. Penalties for noncompliance are incredibly severe, with up to one year in prison or maybe SAR 1 million (approximately USD 250,000) fine for illegally transferring data out of the Kingdom, as well as up to two years in prison and a SAR 3 million (approximately USD 800,000) fine for disclosing sensitive data, as well as the SDAIA's ability to impose penalties of up to SAR 5 million (circa. USD 1.3 million). Given the severity of such penalties, it is in everyone's best interest for businesses to ensure that data is collected, used, stored, and transferred in full compliance with data protection legislation.

    ]]>
    Sat, 05 Mar 2022 00:00:00 GMT
    <![CDATA[Evolution of Fintech in the Middle East]]> Evolution of Fintech in the Middle East

    "The major winners will be the financial services companies that embrace technology."

    With a population of about 600 million people, the Middle East is one of the world's most diverse areas, covering three continents and 21 countries. It is a culturally, politically, and economically diversified region that includes the Gulf Coordination Council's six Arab members. This culture is showcased in the FinTech sectors' various stages of development across the area. Beginning in 2017, Gulf area officials and regulators began establishing forward-thinking and flexible FinTech policies. Since then, there has been a significant attempt to create more diversified, competitive, and inventive economies.  The financial sector is a critical component of the major effort to transition Gulf countries away from a strong dependence on government spending and the energy industry and toward economies fueled by diversified private-sector investments, which have lower volatility and more sustainability. Indeed, promoting robust FinTech ecosystems is seen as a key component of the Gulf Cooperation Council's economic diversification strategy. Fintech is driven by tech innovation that improves existing financial services while also providing avenues for unbanked groups to access financial services in the Middle East.

    Government backing, technological advancements, and high smartphone penetration have aided the growth of start-ups in the Middle East, particularly in the Gulf Cooperation Council (GCC). From a regulatory standpoint, regulatory environments in the UAE and Bahrain have hastened the growth of Middle Eastern startups by allowing for a bespoke, firm-specific licensing system for a limited testing time. Governments can also use these sandboxes to learn about emerging technology and modify policies accordingly. The Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM), and Bahrain are the three sandboxes operating in the Middle East. E-commerce and electronic signatures are recognized across the Middle East, with more recent e-commerce statutes encompassing electronic payments in some regimes, such as Kuwait. The article majorly talks about the evolution of the fintech market in the UAE, Egypt, Qatar, Saudi, Oman, and Bahrain.

    UAE

    Without question, the UAE is the most advanced in its FinTech path and the most internationally competitive country in the Middle East and North Africa.

    "By providing FinTechs in the UAE with a holistic, dynamic ecosystem that includes an independent regulatory framework, an English Common Law judicial system, and world's economic exchange, start-ups will be better positioned to pitch investors on their innovative solutions and expansion ambitions." - Arif Amiri, Dubai International Financial Centre's top executive. The UAE is now the globe's 25th most competitive nation, up to two places last year. Significant increases in ICT use and skills - perhaps the most crucial engines of FinTech growth potential - helped it gain traction. These elements, according to the WEF, "supplement the UAE's long-standing competitive advantages, namely one stable macroeconomic climate, a robust product market, and well-developed facilities."

    After a steep 6.1 percent drop in 2021, the UAE economy could not return to pre-pandemic levels in 2021, with a growth forecast at 4% in 2021. The sluggish rebound, according to Fitch, is due to relatively strict fiscal stimulus and a slow global economic recovery, both of which are expected to impact internal and international demand.        

    Corporations founded in free zones, namely the ADGM and the DIFC, should still be licensed in the jurisdictions where their goods/services will be offered. At this time, the free zones do not issue passports to residents of other countries. This means that fintech entrepreneurs will still have to navigate several different rules prescribed by the UAE Central Bank for traditional banking and financing activities, the Emirates Securities and Commodities Authority (SCA) for securities and investment activities, and the UAE Insurance Authority for insurance activities, all of which are 'onshore' in the UAE (including insurance-based investment contracts commonly sold by IFAs in the UAE).

    Bahrain

    Bahrain's GDP was also hampered by fiscal restraints, with the growth of only 2.7 percent, which was expected in 2021, up from a 4.2 percent decrease in 2020. According to Fitch, Bahrain's fiscal position was by far the weakest in the GCC, and reduced oil prices will hasten Bahrain's budgetary reforms. On the other hand, the Bahraini government has a long-term economic strategy, dubbed Economic Vision 2030, to move away from an enormous public sector and toward a private-sector-led economy.

    As per the Milken Institute, Bahrain has the most established financial hub in the GCC, with almost 400 regulated financial institutions. It claims that, unlike the UAE, Bahrain has adopted a national strategy to FinTech advancement, with the Central Bank of Bahrain regulating the finance sector and its Governor, Rasheed Mohammed Al Maraj, pushing Bahrain as a regional FinTech powerhouse with an innovative attitude.

    Qatar

    Qatar is predicted to muddle over the next few years, as it expanded by 3.1 percent in 2021 after declining by 2.2 percent in 2020. Non-oil activities will benefit from companies' growth ambitions in the run-up to the FIFA World Cup in 2022, which should result in a temporary increase in tourist visits. The impending passage of important FinTech laws, according to KPMG, will "significantly assist the build-up" of the banking services ecosystem. It is related to the formation of the FinTech Division, the Fintech Regulatory Sandbox, and the Qatar FinTech Hub by the Qatar Central Bank (QFTH).

    Egypt

    Egypt sees an increase in fintech businesses, owing to the Egyptian government and the Central Bank of Egypt's (CBE) desire to modernize payment methods and transition to a cashless economy. Payment services, mobile cash, and smart wallets are the most developed sectors. The Egyptian government and the Central Bank of Egypt collaborate effectively with ministries and other government agencies to create and promote fintech organizations to combine into the financial system.

    Legislation signed by the President established the National Council for Payment. The President, the head of the CBE, and the director of the Financial Supervisory Authority are among its members. Its mandate is to improve the adoption of cashless payment systems. An e-commerce law is being debated, and a surge of financial regulatory reform is expected to be enacted in response to the rise of digital credit lending and fundraising.

    Jordan

    Jordanian fintech is still in its infancy, although it is steadily rising. Local businesses are putting in place systems to settle invoices online and accept payments via cell phones. However, the Jordanian government is working on digitizing Jordanian money to decrease the consumption of cash in circulation. It is actively encouraging the use of fintech in Jordan's public and private sectors, and it is pressuring governmental and non - governmental enterprises to integrate fintech into their day-to-day operations. Fintech products are being integrated into governmental services and the financial sector by Jordan's Central Bank (CBJ). This opens up numerous potential for fintech businesses to create themselves in the country.

    Oman

    The Central Bank of Oman (CBO) is developing a comprehensive strategy to encourage the growth and use of financial technology (fintech) services in the Sultanate to launch Oman into a $300 billion worldwide industry by 2025. According to the Executive President of the Central Bank, Oman's fintech strategy has the potential to accelerate the roll-out of new financial and banking instruments, encourage venture capitalism, promote entrepreneurship and job creation, and spur overall economic development.

    Saudi Arabia

    Saudi Arabia has the macroeconomic potential to become a future fintech center. Saudi Arabia is the MENA region's largest economy, with a large, young population (almost half of whom are under the age of 24) and one of the world's highest smartphone penetration rates (65 percent). It is also generally tolerant of technological advances and creative corporate practices. Saudi Arabia's "Vision 2030" and the National Transformation Program 2020 were launched in 2016 to lay out a roadmap for the Kingdom's development over the following decade. One of the main goals of Vision 2030 and the National Transformation Program 2020 is to diversify Saudi Arabia's economy and lessen its dependency on oil. This strategy is centered on technology.

    Conclusion

    The ability of humans to accommodate change is at the heart of all technological growth, and fintech is the outcome of one such human trait that stimulates innovation. The financial system is transitioning to an entirely new paradigm that will address everything from digital identification to digital sovereignty. Fintech services, which provide a wide range of financial services, will soon become prevalent in the financial system and fintech start-ups. Fintech, on the other hand, will suffer a reaction if the banking sector is disrupted in any way. Fintech companies' existence has cleared the door for financial inclusion, rendering banking services more convenient.

    ]]>
    Wed, 02 Feb 2022 23:28:00 GMT
    <![CDATA[Buy Now Pay Later offerings in UAE]]> Buy Now, Pay Later (BNPL) offerings in the UAE and Legalities Surrounding them

    In these times of economic instability, and as the coronavirus continues to wreak havoc worldwide, buy-now-pay-later (BNPL) solutions are eclipsing credit cards more conveniently and transparently to fund transactions. E-commerce has developed over the last two years, which has aided BNPL's popularity, with the epidemic forcing consumers to shop from behind their screens. Digital buy now, pay later (BNPL) shopping is new to the region, where consumers have typically been wary about paying for items before receiving them.

    BNPL is creating the future of digital payments worldwide and in the region. Payment mechanisms and consumer shopping behavior are inextricably linked, with both contributing to the formation of our digital payment landscape. The digital payment market has changed dramatically in recent years, and the expansion of e-commerce has fueled BNPL. In 2020, the phenomenon will become the fastest growing e-commerce payment method globally, and it is expected to account for 9% of all e-commerce payments in EMEA by 2023. As the pandemic raged on, our worlds shifted online, accelerating e-commerce adoption around the world. In fact, in the Middle East alone, customers purchase online 50% more than before the outbreak.

    This digital revolution provided an opportunity for e-commerce businesses to adapt, develop, and thrive.

    This is where BNPL came in, providing the ability to add value for consumers and merchants in the e-commerce business at a time when it was most required. Naturally, the idea of deferred payments grew appealing during the pandemic due to widespread financial insecurity. With BNPL platforms, consumers could continue to buy but now have the option of paying in installments to preserve their personal cash flow at no additional expense. Furthermore, the concept alleviated the burden of cash-on-delivery (COD) payments, which amounted to more than 60 percent of e-commerce sales in the region before the epidemic.

    BNPL effectively handles today's most familiar consumer difficulty: the need for rapid pleasure, which is hampered by the inability to pay in advance. BNPL creates a balance between the desire for immediate purchasing and the necessity for long-term budgeting. Hence, customers spend more but feel much better about it because they can extend the payment over time with no interest or fees. This pattern is directly influencing conversion and increasing basket sizes at the checkout. As a result, consumers prefer merchants who accept BNPL payments.

    The expense of BNPL is borne by retailers, who see considerable improvements in conversion rates and average order values. Retailers pay a premium over a standard payment gateway because BNPL positively impacts the bottom line and many repeat customers.

    It essentially empowers the customer with interest-free and fee-free installment arrangements that are entirely transparent. Consumers appreciate this service because it promotes financial freedom, which is especially important in this decade of economic insecurity. Furthermore, many consumers use BNPL apps as budgeting tools to manage payments over time.

    The apps aim to empower customers by allowing them to buy only what they can genuinely afford and avoid falling into debt (as customers are capped to specific amounts and number of transactions). BNPL caters to the shopping habits of the younger generation. As a result, more people turn to it as their preferred payment method. More than 60% of Millennials do not have credit cards in their names. Consumers in their twenties and thirties are crucial audiences for BNPL platforms. They make money and want to spend it, but they are also becoming more knowledgeable and taking budgeting safeguards. As a result, around 67% of Millennials currently use BNPL services. These platforms not only resonate with the consumer's personal experience, but they also serve as a mechanism to fuel e-commerce growth in the region and assist merchants in surviving, if not thriving, in the face of a pandemic.

    This percentage will only rise in the coming years.

    Popular BNPL platforms in the Middle East include Saudi Arabia's Tamara and the UAE's Spotii, Tabby, and Postpay. These applications are becoming more popular. Most of these companies in this sector are in the early stages of development, with several starting last year.

    Islamic conventions forbid charging interest on loans, discouraging specific Middle Eastern consumers from using credit cards, and ensuring that BNPL platforms are distinct from the concept of credit cards. Because BNPL enterprises typically profit through merchant charges and late fees rather than interest payments, they skirt the legal definition of credit - and credit rules. However, the sector has come under examination, with authorities in the United Kingdom and abroad evaluating or strengthening regulations. Some regulators argue that technology businesses offering BNPL should be regulated similarly to traditional lenders.

    It is unclear how Middle Eastern regulators plan to respond.

    As the current legalities for Buy Now Pay Later is unclear, we can depend on existing credit laws in the UAE. BNPL is simply credit and can be treated the same when considering the laws that relate to it. In the UAE, jurisdiction is differentiated by financial free zone and onshore areas. In free zones such as DIFC and ADGM, where most fintech startups are located, the law is governed by the Freezone authorities themselves. The Dubai Financial Services Authority ("DFSA") oversees financial services done in or from the DIFC. In ADGM, the Financial Services Regulatory Authority ("FSRA") regulates financial activity. For Onshore economic activities, the federal laws of the UAE apply. The UAE Central Bank ("UAECB"), Securities and Commodities Authority ("SCA"), and Insurance Authority ("IA") supervise financial services done in or from the UAE Onshore.

    As time goes on, it becomes clear that BNPL is here to stay. Key global corporations have expressed interest in the regional market and local players. As the digital payment environment evolves, BNPL will become the standard across e-commerce platforms. The Buy Now, Pay Later revolution is here, and it's time for consumers and merchants to participate in and reap the rewards.

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    Wed, 02 Feb 2022 18:45:00 GMT
    <![CDATA[Play to Earn and NFT Gaming War]]> Play to Earn and NFT Gaming War – Key Legal Considerations

    There has been a significant Collison between the worlds of crypto and video games. The amalgamation of the two is called "play to earn"; it is further a part of the "web3" movement. The collision of the two could significantly enhance the gaming experience to be on par with real-world economics and create additional incentives for new players. This could result in thoroughly elevating conventional business models in the gaming industrya. This can only happen when parties acting as gatekeepers for the traditional platforms for business models open the door to entertain innovation and growth for the industry. Many established companies continue to shut themselves from colliding with crypto. Thus the few games available in this form are scattered across the web. It is not essentially chalked out what it would take for a large company to resort to exposing itself to the new technology. However, it is essential to keep in mind that the blockchain gaming market is only booming at an incredible speed in the gaming industry, with no future potential risks of slowing down.

    Initially, games were formatted where you pay and then are enabled to play. However, this changed with the evolution of free-to-play games, by which games are the monetization of these games are done by digital goods available for purchase within the game, forming an in-game economy. The pay-to-earning concept is an entirely different model from the traditionally recognized models in the gaming industry. Pay to earn is using blockchain technology in the form of NFTs, cryptocurrency, etc., to prescribe real-world value to digital items within the game. Suppose this evolution in the industry comes into being. In that case, it could help create the base for a metaverse that is high in demand for building, especially in the social media and gaming industries. Mark Zuckerberg, the creator of Facebook, proposed that generating a market for the trade of virtual clothing in the highly sought-after metaverse could potentially be an idea worth a billion dollars.

    The crypto world is slowly emerging and entering the gaming market. The play-to-earn paradigm is a shift of crypto community members, startup companies, and various other investors engaging with digital goods in the games by applying the functions and particulars of NFTs to them. The concept of this application in play-to-earn games is based on the design wherein players are provided with monetary pay or some other incentives to play the game instead of the player paying to play the game or channeling money into attaining digital goods in a free-to-play game. These incentives often include gaining a financial stake in the company owning the game. By engaging in play-to-earn games, the players earn unique items that can be verified and exchanged in the market in the form of NFTs. The aspects of blockchain and NFTs are brought into this arena as these unique items available to players contain distinctive identification and value assigned to them or possessed by them that separates its identity and value from others, similar to those underlying assets of NFTs.

    The trading engaged for these goods is for the cryptocurrency associated with the respective game. This is similar to the valuation of the play-to-earn game of Axie Infinity, which is a company valued at an amount of 3 billion Dollars as a result of play-to-earn headed by Andreesen Horowitz recently. It is safe to say that the trading and exchange via NFTs in the play-to-earn gaming world is similar to that of trading NFTs in the market with underlying assets of creative work, etc. However, this indulgence affects other games within the gaming industries, a few of which have previously or continue to engage in trades in the physical world based on digital goods within the game, although it is excluded and prohibited by multiple game creators.

    Legal Considerations

    When it comes to the legal considerations for play-to-earn games and the NFT concept being indulged within the gaming industry, certain specifications are to be considered prior. The new idea of play-to-earn is a profitable and high-income business model related to creating real-world value to in-game digital assets or rewards attained by players on playing the game. Any company interested in venturing into the play-to-earn arena of the gaming industry and the crypto world must retain a lawyer and a legal team as engaging in real money at any point will result in various legal aspects to be considered and touched upon. The money involved with these games would be considered in taxes, securities law, anti-gambling bans, etc.

    The concept of attaining real-world money through games is not a completely new one. It has been engaged with several times in the past by games like Runescape or Everquest, etc. which would assign a real-world monetary value to in-game digital items. The problem arises when monetizing real money value for digital assets or items in play-to-earn games creates a closer link to gambling, making it highly controversial and complicated to deal with. Many businesses and individuals associated with developing these play-to-earn games are reluctant to engage in the legal obligations and considerations that come with using real-money trading and monetization in these games.

    Play-to-earn video games are a rising endeavor wherein it is a practical career choice. Earning money by playing and investors and gaming companies engaging in play-to-earn games are highly rising and economically efficient with online tournaments for Esports and video games garnering real high income and professional status. The play-to-earn model is actively engaged inaccurate economic game models. Creators actively take up the prospect of a virtual economy and the potential to earn money by playing the game and attaining valuable entities.

    Requirement for Legal Opinion – Advertisement and Recruitment

    Companies or individuals in the gaming industry engaging in real money inherently requires a legal team or legal attorney to advise them on the various aspects of the law governing the same as there is real money involved. There are different conformity requirements with the law. There is a mandatorily need for advertising and recruitment, games involving real money to prove that they are based on skills and are not on par with gambling. The variations of legal obligations depend on the kind of game and its characteristics. These could include labor law obligations, taxes, state tax authorities, etc.

    Indulgence in Securities

    It is very important to ensure that these play-to-earn and NFT games do not sell securities that would simultaneously breach federal law. Securities involve investment contracts that are essential for investing money with the presumption of a return that is strictly scrutinized by legal agencies of the government relating to securities and exchanges. In the US, the Securities and Exchange Commission (SEC) conducted strict inspections and investigations concerning initial coin offerings (ICOs) in the cryptocurrency arena, specifically following pyramid scheme frauds by various contenders in the cryptocurrency world.

    Use of Cryptocurrency or other Blockchain technology

    There are specific regulations to be followed and adhered to when it comes to games indulging in cryptocurrency and other blockchain technology for real money value for in-game items and trading. Governments have a lot of regulations when it comes to the use of cryptocurrency and blockchain technology, so this inherently ascertains the need for legal considerations while associating with the same. The principles of crypto assets, currency, etc., vary according to the governments of different countries. It is an ever-evolving area concerning the law. Hence, there is a significant need to always be in line with the dynamic law and its developments to ensure that legal requirements are met, and businesses prosper.

    Therefore, in any circumstance as a veteran in the industry or just a startup, there is an inherent need to indulge in an experienced gaming lawyer or legal team to ensure that the company meets legal requirements, which will further enhance the business prospects.  NFTs and blockchain technology in the gaming industry is an ever-growing venture regarding growing at a substantial rate. There are excellent prospects for growth in this industry. However, as it is relatively new, there are multiple uncertainties in terms of legal alliance and further research on the various risks involved in its conduct without sufficient scrutiny and supervision to protect the parties involved. We are moving towards a future of gaming where gamers are compensated for the time and efforts spent in the game. A clearer understanding of the new gaming prospect and the different factors involved with it, both negative and positive, and finding a way to deal with it through legal appropriations of government involvement will enlighten the path to evolution in gaming.

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    Wed, 02 Feb 2022 18:24:00 GMT
    <![CDATA[NFTs and Intellectual Property]]> NFTs and Intellectual Property

    Non-fungible Tokens (NFTs) have been extremely popular recently, following the significance garnered with the cryptocurrency community in 2017, with some selling for substantial amounts at auctions. They possess multiple uses, from the ability to enhance innovation as well as generate significant proceeds for both creators and purchasers. However, with an increase in creative work entering the NFT market, it is essential to recognize its relationship with intellectual property to keep in mind while associating with the same.

     NFTs or non-fungible tokens are digital assets similar to other currencies in the crypto world, such as bitcoin, etc. These non-fungible tokens cannot be exchanged for another identical substitution. Their legitimacy of genuineness is verified by way of a blockchain which is inherently a distributer ledger technology. NFTs are unique as digital assets and have multiple uses and values for users. They can generate high demand and increase the revenue of the token's initial creator every time the said token is sold on. This adds to the original sale price value of the token.

    NFTs contain software code configured as a 'smart contract' composed of certain intricate information regarding the respective digital or physical assets affiliated with the NFT. It also includes the various rules and rights associated with the specific NFT, such as the percentage of revenue earned by the original creator for resale situations, etc. Unlike fungible tokens, non-non-fungible tokens cannot be substituted or replaced and thus gain their value from being unidentical to other tokens. Regarding fungible tokens, such as crypto-currency or currency that is fiat issued by the government, the units of these tokens are identical to their value. They can thus be exchanged or replaced with each other unit of the respective currency.

    NFTs and Intellectual Property

    Intellectual property includes those creative works of individuals ranging from literature and art to further designs, symbols, names, etc. The creative works of these individuals can be protected for individuality legally by way of intellectual property rights. Intellectual property, at its core, realizes and protects the rights and monopolies of these works. The owner of the patent right of his/her work is enabled to have the sole authority over the use of that particular work. Trademarks allow intellectual property rights to the owner of the trademark to have the privilege of protection over other brands who use similar names or work regarding the original work, which will be considered illegal under the law. This protection should essentially be attained and grasped by business individuals along with other endeavors to enhance growth and innovation.

    Ownership Rights under NFTs

    Considering NFTs, owners can have various creative works and names in the market. However, NFT's do not inherently possess intellectual property rights. There is a significant difference between owning an NFT and owning the underlying intellectual property assets within the NFT. Owners of intellectual property trade their assets and intellectual property in the form of NFT, which potentially undermines the owner's rights over that intellectual property.

    NFTs are blockchain units designed in a manner wherein they are free from the control of third parties, and the assets can subsequently be identically recreated and forwarded multiple times to an unlimited extent. In the case of NFTs, there is a lack of ownership benefits that the purchaser of the NFT may attain as such ownership is questionable, unlike an intellectual property right. At its core, NFTs are maintained to ensure the work's originality and ownership are protected. If a person has copies of the original work, it does not mean they possess the underlying ownership details of that work. Thus, owning copies of work does not ascertain underlying intellectual property rights to that person, which initiates the dilemma for NFT purchasers.

    Therefore, NFT owners need to consider the essential requirement to obtain a license for attaining the underlying rights of the original work or product from the original creator or owner of those rights. Only then can they authentically replicate and forward the underlying work. A significant example of this would be the slam-dunk video of US Basketball player Lebron James, an NFT released by the NBA as part of its highlight clips. These NBA NFTs can be exchanged for buying and selling in the 'Top Shot' market platform. The NFT card for the slam-dunk video can be sold in large amounts. However, the copyrights of the original video are retained by the NBA and are still subject to certain terms and conditions for the license according to the NBA. For example, content and captions cannot be changed for a particular video, and further merchandising can only be done after the NBA provides consent. If NFT purchases breach any of the terms and conditions provided, they are subject to suspension of account or removal of NFT without any prior notice. Original owners of NFTs do not have restrictions in terms of licensing for their work and can engage in its reproduction freely.

    Sale of NFT and Underlying Asset

    NFT sellers can potentially sell the intellectual property rights of the underlying asset to the NFT purchasers. This has to be done by writing, assigning the respective intellectual property. This is not done automatically on the sale of an NFT and has to be expressly clarified in the smart contract or anywhere else respectively.

    Original owners of NFTs can also combinedly sell both the NFT and the underlying asset together. The purchaser of the NFT can then utilize the NFT as a digital verification of the ownership of the underlying asset. These cases are pretty uncommon; however, in the event of one, the purchaser must take up specific considerations regarding who is essentially the owner of the underlying asset and who essentially has possession of underlying assets, especially in cases wherein the investment is a digital file.

    Licensing Intellectual Property Rights with the NFT

    The owner of the intellectual property rights can provide licenses for the authorized use of the intellectual property rights for the underlying asset of the NFT to the purchaser of the NFT, mandating the adherence to terms and conditions provided by the original creator. The owner does not have any restriction concerning the provisions of the terms and conditions and is free to make it as they choose.

    Monetization of Intellectual Property

    The original owners of the underlying assets of NFTs can attain royalties on subsequent sales of the NFTs. NFTs enable original owners to increase their revenue directly from the sale of NFTs by coding the smart contract to direct an automatic royalty payment to the original owner every time a sale of the NFT is made. This option enables original owners to enhance their proceeds by attaining multiple revenue streams.

    In conclusion, NFTs inherently possess multiple opportunities for individuals and businesses along with certain risks that come with them. When selling an NFT, there must be a precise representation and understanding of what is authorized and what is not concerning intellectual property rights when engaging in the sale of NFTs. This will enable businesses and individuals to have authority over their intellectual properties and create revenue from them. Third parties' use of intellectual properties must be supervised appropriately for efficient use and retainment of original rights. Along with the various benefits, there are areas of misuse of intellectual property by way of infringement to copyrights and trademarks, which must be further ascertained and studied to evolve the law in respect to the same. However, it is clear why NFTs are booming in the market.

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    Wed, 02 Feb 2022 18:00:00 GMT
    <![CDATA[Dealing with Counterfeit in the UAE]]> Dealing with Counterfeit in the UAE

    Introduction

    Businesses engaging with counterfeit items in the UAE now risk significantly harsher sanctions, again for legitimate brand owners. The maximum punishment for counterfeiting has been increased from AED 10,000 (about USD 2,700) to AED 1 million (approximately USD 275,000) for pharmaceutical and food items and AED 250,000 (approximately USD 68,000) for other products. Repeat offenses might result in doubled penalties. A new Federal Law on Combating Business Fraud, which repeals the old law combating fraud in commercial transactions from 1979, introduces this long-awaited rise in penalties. Businesses must only deal with authentic merchandise under the UAE's new regulation to prevent counterfeiting (and other forms of economic fraud). Failure to do so will subject those businesses to possible fines and other consequences such as the closing of their business or the revocation of their trading license. To exploit this new law's

    Impediment impact, brand proprietors, should ensure that their brand names are enlisted in the UAE.

    The following are some of the important attributes of the new law:

    • Importing, exporting, re-exporting, manufacturing, selling, displaying, possessing with the purpose to sell, storing, renting, marketing, or dealing with Counterfeit Products are illegal. It's also unlawful to promote counterfeit goods. 
    • A "Counterfeit Product" bears an identical or similar brand to a registered trademark without permission. This indicates that the law's scope of protection is limited to
    • Disciplines fuse jail (up to two years), fines (up to AED 1 million), the finish of premises, and withdrawal of trade licenses. The hardest punishments are held for forgers of drug and food items and habitual perpetrators. Penalties might even be multiplied for the last option. This expansion in fines is a significant and hotly anticipated turn of events.
    • The importer will be responsible for the costs incurred by the authorities in disposing of counterfeit products.
    • A centralized authority (the Higher Committee) will lead the fight against counterfeiting and oversee the law's implementation at the federal level. However, this authority is not expected to accept complaints, and the new law does not provide a single complaint mechanism.
    •  A framework for settling infringement has been set up for Counterfeit Products other than drug and food items. It is muddled, in any case, if brand proprietors will play any part in this technique.
    •  All documentation and information about Counterfeit Products must be provided to the appropriate authorities. This is the sort of thing worth being appreciative of because it will make it clearer to recognize other stock organization people. It's unclear whether this data will be shared with brand owners.
    • Counterfeiting is the topic of today's notice. The new regulation in the UAE, on the other hand, is intended to tackle commercial fraud in general. Dealing with tainted or tainted goods, as well as announcing fraudulent or fictitious rewards or discounts, falls under this category.

    Overall, the new law is a step forward in the UAE's adoption of international standards for detecting and enforcing trademark infringements. The UAE government has established several mechanisms to protect the rights of brand owners.

     1. Customs authorities provide protection.

    Brand owners can use customs officials to assert their rights and prevent goods from entering the UAE market that infringes on their trademarks. Rightsholders, in particular, have the option of notifying customs authorities about their trademarks, which are registered with the UAE Trademark Office, so that officials can keep an eye on them. Nonetheless, it ought to be noted that the UAE comes up short on a focal traditions recording framework. Subsequently, every Emirate should direct its recording. The Emirates of Abu Dhabi, Dubai, Sharjah, Ajman, and Ras Al-Khaimah license brand names to be enrolled with their specific customs divisions. Moreover, brand proprietors can and should train cops to acclimate them with the firsts and usual fakes.

    2. Prosecution in criminal court

    When brand owners discover counterfeit items on the market – for example, through market investigations – they can submit criminal charges with the police or the public prosecutor. The case will be investigated, raids will be conducted, and the case will be forwarded to a criminal court if the allegations are proven. It should be noted that filing a criminal complaint with the police does not require payment of a charge, but the goods must be stored at the complainant's expense until a verdict is rendered. Fines and even prison sentences can be imposed by a criminal court and the confiscation and destruction of infringing items. The UAE Trademark Law (Federal Law No. 37 of 1992, as amended by Federal Law No. 8 of 2002, Art. 37 ff.) and the Anti-Commercial Fraud Law give substantial law establishments to the cures and their degree. The court might additionally arrange for the litigant's premises to be shut and the choice to be distributed at the infringer's cost. When brand owners discover counterfeit items on the market, they can report them to the police or the public prosecutor. It is crucial to understand that filing a criminal complaint with the police does not include paying a fee.

    3. Taking civil action

    Another choice for brand name owners is to begin a legal contention against the blameworthy party, as indicated by UAE Trademark Law (Federal Law No. 37 of 1992 as changed by Federal Law No. 8 of 2002, Art. 37 ff.). An everyday activity can be dispatched after or without documenting a criminal protest, or it tends to be recorded simultaneously with the criminal procedure. The last option activity benefits from permitting the criminal court to assess proof created in the typical case. If the misdeed, the harms, and the causal connection between the two are demonstrated, the court will grant the freedoms holder's damages. What's more, the infringer may confront a movement boycott.

    4. Action was taken by the administration

    Administrative actions are a more efficient and cost-effective way to deal with infringements. In Abu Dhabi, Dubai, and Sharjah, they are carried out by the Department of Economic Development (DED). In contrast, in the other Emirates, they are carried out by the Ministry of Economy. Owners of trademarks can register them to ensure that they are tracked. In addition, they can file complaints against infringers. Fines against infringers, as well as confiscation and destruction of property, will be levied for administrative measures, which will include investigations and raids. Repeat violators may face temporary closure of shops, while rights holders in the pharmaceuticals sector may contact the Ministry of Health to report infringements.

    Conclusion

    The UAE government has given brand proprietors various viable instruments for battling brand name forging. Counterfeit items can be prohibited from entering the UAE market by customs authorities or confiscated and destroyed by courts or administrative actions, with fines for infringers. It is recommended that rights holders and their Intellectual

    Property lawyers collaborate with authorities to build a strategy for utilizing the available resources in their case.

     

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    Wed, 02 Feb 2022 17:41:00 GMT
    <![CDATA[Enforcing Foreign Judgments in Qatar]]> Enforcing Foreign Judgments in Qatar

    "Law is the embodiment of the moral sentiment of the people." - William Blackstone.

    During recent years, the expansion of international commercial transactions has increased the disputes involving foreign elements. Some conflicts are settled amicably, and some arguments are settled in courts. In both cases, the Judgment rendered needs to be executed. If the judgment debtor has assets in the jurisdiction of the country rendered Judgment, the verdict therein can be executed.  If the judgment debtor has assets in the jurisdiction other than the country caused conclusion, execution, and recognition of the decision in foreign jurisdiction arises.

    Enforcement of foreign judgments by the state of Qatari courts is governed by Article 379 of the Commercial and civil procedure code Law No. 13 of 1990.  Chapter One to Chapter Three explains the Executing of foreign judgments, orders, and official bonds.  Article 379 of this law expresses that the decisions and orders issued in a foreign country may be ordered to be executed in Qatar with the similar conditions established in that country for conducting Qatari judgments and orders there. The request for the execution is mentioned by requesting the litigant to appear before the execution judge at the High Court, in the usual conditions for recording a case.

    Article 69 of the Procedural Code states that judgments should be rendered and enforced in the name of the highest authority in the country. Any decision violating this public order will be null and void.

    When agreeing with one of the parties is in Qatar or the contract is partly or performed in Qatar. The Qatari courts will uphold the parties' choice of foreign law and jurisdiction or dismiss them considering the Qatari statutes and courts. The parties may decide on the laws of another jurisdiction to govern the terms of their agreement. A competent Qatari Court will agree to the parties' choice if the provisions of the chosen foreign law do not contradict public policy or morality in Qatar.

    Applying a foreign law by a Qatari court can experience challenges.  A party contenting in favor of using foreign law should produce a properly authenticated translation of the relevant laws of the foreign jurisdiction, or else the local court will apply Qatari law. Producing a certified translation on time, especially when the foreign governing law is un-codified. If a party neglects to give the authenticated translation, the Qatari court will apply Qatari law regardless of the parties' agreement.

    Applying a foreign law by a Qatari court can experience difficulties. A party contending for the utilization of unfamiliar law should deliver a correctly verified interpretation of the pertinent laws of the unfamiliar purview any other way the nearby court will apply Qatari law.

    Article 380 expresses that the enforcement of foreign judgments or orders shall not be issued unless the following is verified.

  • The courts of the state of Qatar are not the sole competent to determine the dispute in which the Judgment or order was issued. The foreign courts that issued the ruling or the order are qualified in accordance with the rules of international jurisdiction established in its law.
  • The parties involved in the case in which the Judgment was rendered have been summoned and duly represented.
  • According to the court's law that pronounced it, the Judgment or order has the force of res judicata.
  • The Judgment or order does not conflict with a decision or order that a court in Qatar previously issued. It does not include anything that violates public order and public morals.
  • From the above, it is clear that the Judgment pronounced by a court will be in accordance with the law of the country where it was pronounced and duly certified.

    In addition to the presence of the litigants in the case where the foreign Judgment was issued, and that they were properly addressed, and to guarantee that the Judgment had the power of the res judicata in terms of the litigants in the case refraining from returning to a conversation in this matter that was settled on, even with new legal or factual evidence, the foreign Judgment should not conflict with any decision or order recently issued by any court within the nation and also it should not conflict with the public order and the public morals in the country. The provisions of Articles 379 and 380 apply to the arbitrators issued in a foreign country.

    The issued Judgment must be in accordance with the laws of the State of Qatar. Official enforceable bonds issued in a foreign nation may be requested to be executed under the similar conditions specified in the country's law for the execution of official enforceable bonds issued in Qatar. An appeal submitted to the execution judge shall mention the execution order. Execution will be ordered only after verifying that the conditions required for the formality and enforceability of the bond are met as per the law of the country in which it was made and that it is liberated from whatever that is infringing upon the public order or morals in Qatar.

    The Article No. 25 states the following:

  • In the context of the application of this chapter, Judgment means every decision – whatever its name – that is issued based on judicial or state procedures by courts or any other competent authority of anyone.
  • Subject to the provisions of Article 30 of this Agreement, each of the contracting parties shall recognize the judgments issued by the courts. The contracting party in civil cases, judgments relating to civil rights issued by penal courts, and personal status cases, which have the force of a res judicata. It shall implement it in its territory in accordance with the procedures related to the implementation of the provisions specified in this chapter. The courts of the contracting party to which recognition or enforcement is requested should have jurisdiction under the provisions of this chapter. The legal system of the contracting party to which recognition or enforcement is requested does not alone retain the authority to issue a judgment to a trial or the courts of another party.
  • This Article does not apply to:
    • Judgments are issued against the government of the contracting party to which recognition or enforcement is requested, or against one of its employees, for acts, he performed during the job or only because of it.
    • Judgments that its recognition or implementation is incompatible with the international treaties and conventions in force in the contracting party requested to be executed.
    • Provisional and precautionary procedures and judgments issued in bankruptcy cases, taxes and fees.

    Conclusion

    The enforcement of a foreign judgment by the Qatari courts is governed under Article 379 of the commercial and civil procedure code. The Qatari court requires evidence that the foreign law is in line with Qatar's public morals and order.

    ]]>
    Tue, 01 Feb 2022 12:56:00 GMT
    <![CDATA[Foreign Direct Investment in Qatar]]> Foreign Direct Investment in Qatar: A Guide

    The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future. - John Maynard Keynes.

    Foreign direct investment in Qatar has shown an upward trend during the past years. The country's political stability, a stable currency, high-quality infrastructure, and the lowest corporate tax rates in the world invites direct investment in Qatar. Qatar is a key international investor because of its large foreign exchange reserves. The principal areas attracting foreign investment in Qatar are oil and gas, construction, public works, and financial services.

    Qatar aims to be a leading country in its business and foreign investment. In May 2018, the government approved a draft law allowing non-Qatari investors to own 100% capital in all sectors. The foreign ownership limit was increased to 49 percent by Qatar Stock Exchange-listed companies. The 2022 World Cup in Qatar is another anticipated event that would attract large foreign investors in the future. Several factors limit the expansion of FDI flow into Qatar. They are its policies governing the private sector, small domestic market, lack of skilled workforce, high cost of living, and the current diplomatic and commercial relations with other Arab countries.

    The public-private partnership program was launched recently to improve the situation. According to the Doing business report issued by the World Bank, Qatar was ranked 77th out of 190 economies in 2020. This rise was due to a significant improvement concerning property registration. The relations between Qatar and Turkey have resulted in strong Foreign Direct Investment (FDI) between the two nations. The country ranked 38th position on the Global Foreign Direct Investment Country Attractiveness Index in 2018. The new foreign investment law came into effect in January 2019. The new law helps to make Qatar more attractive for investments.

    Policies Towards Foreign Direct Investment

    To enhance the objectives of the National Vision 2030, the government of Qatar has enacted laws to attract foreign investment in the economy. Qatar finalizes the significant infrastructure developments for hosting the 2022 FIFA World Cup. The government has allocated USD 13.2 billion for new non-oil sector projects in its Financial Year 2019.  The government plans to increase LNG production by 43 percent by 2024.

    In 2019, the government enacted a brand-new foreign investment law, Law 1/2019, to ease restrictions on foreign investment.  The law permits full foreign ownership of businesses in most sectors with complete repatriation of profits, safety from expropriation, and numerous other benefits.  Excepted sectors include banking, insurance, and commercial agencies. The foreign capital investment remains constrained at 49 percent barring a special dispensation from the Cabinet.  Qatar's primary foreign investment promotion and evaluation is the Qatar Center under the Ministry of Commerce and Industry. The government is currently in the process of publishing the new law. Until then, Law 13/2000 applies. Full foreign ownership and repatriation of profits, tax incentives, and investment funds for small- and medium-sized enterprises in Qatar are given in the Qatar Financial Centre, Qatar Science and Technology Park, and the Qatar Free Zones.

    Different modes of foreign direct Investments in Qatar are:

    Savings account investments

    A range of retail banks gives Expats in Qatar offers for opening current, savings, and deposit accounts. These banks include the International Bank of Qatar, Qatar Islamic Bank, Masraf Al Rayan, Mashreq, HSBC, Ahli Bank, Barwa Bank, and Doha Bank.

     Property investments

    The excellent food, beaches, high living standards, and tax-free salaries make Doha a desirable place for investment. Doha had become a buyers' market now. The 2022 FIFA World Cup will create a welcome for investments. The first phase of the new Doha Metro in 2019 also supported a boost in the economy. The number of property purchase transactions is on rising. Resident expats and foreign investors can purchase villas and apartments in designated areas. These include Pearl Qatar, West Bay Lagoon, Lusail City, and Al Khor.

    As a result of increasing property investment opportunities, it is competitive. Today, the banks that lend to expatriates are Qatar Islamic Bank, Mashrek, Commercial Bank of Qatar, Masraf Al Rayan, and HSBC. For making a purchase, submit a draft of the purchase agreement and register at the Ministry of Justice's Real Estate Registration Department by paying a registration cost of 0.25% of the property's total price. Once the title deed is received, go to the ministry's lease registration office if the property is leased. All the documentation should be in Arabic.

    Business investments

    Qatar's new foreign investment law is a game-changer because it allows non-Qataris to assume 100 percent ownership of a business in any sector except banking, insurance, commercial agency activities, security, and defense. Furthermore, the world's 28th-freest economy is open for foreign investors in line with Qatar's long-term development plan National Vision 2030.  The Ministry of Industry and Commerce states that the investments may be undertaken after submitting a request to the competent department, and they process the application within 15 days.

    For foreign companies, the law stipulates that the contract must be executed through a local branch office, and the branch must have a commercial license before signing the contract.

    Tax on investments

    There is no personal income tax in Qatar. But there is business income, and it is taxed at the rate of 10 percent. There is no capital gains tax on the sale of real estate and securities by an individual. Real estate leasing is considered a commercial activity, and rental income is taxed at 10 percent. There are no property taxes. Qatar introduces a 5 percent value-added tax (VAT) in 2020.

    Factors to consider when investments in Qatar include:

    Investing in Qatar is different in terms of prospects, procedures, and profits. Factors to consider when investments in Qatar include:

    • What investment opportunities are available as a foreigner or resident expat;
    • How stable the regulations are around foreign investment in Qatar;
    • What levels of protection do foreign investors receive in Qatar;
    • If there are any incentives to attract foreign investment (e.g., loans, subsidies);
    • How the regional geopolitical situation could affect Qatar's economy;
    • If the country is politically stable;
    • If the currency is stable;
    • How developed the banking and financial system is

    Conclusion

    The inward FDI has a positive effect on economic growth. Qatar has various initiatives to encourage foreign direct investment. The two free zones Qatar Financial Centre and Qatar Science and Technology Park was designed for 100 percent foreign ownership. This is under the control of the Qatar Free Zone Authority 2019. The Qatar government continues its efforts to create a promising economic and investment environment.

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    Tue, 01 Feb 2022 12:26:00 GMT
    <![CDATA[Enforcing Trademarks in Kingdom of KSA]]> Enforcing Trademarks in the Kingdom of Saudi Arabia

    "A great trademark is appropriate, dynamic, distinctive, memorable, and unique."

     – Primo Angeli

    Introduction

    Common law rights are not recognized under Saudi Arabian law. Trademark rights can only be obtained through registration. The only exception is well-known trademarks that are recognized as notable in Saudi Arabia. The burden of proof is on the claimant to show that the mark is famous in Saudi Arabia. Saudi law spells out the conditions that must be met in order to achieve this goal.

    The fame of a trademark is defined by a number of elements, according to Saudi trademark law, including:

  • The total number of registrations from around the world.
  • In the viewpoint of the relevant consumers, the mark is recognized.
  • The mark's commercial significance in the marketplace.
  • In the case of a registered mark, it has been in use or registered for a length of time.
  • A trademark under Saudi trademark law can be anything that has a distinctive shape, such as words, signatures, symbols, titles, stamps, pictures, inscriptions, packaging, letters, drawings, figurative elements, shapes or colours, numbers, names, groups of colours, or combinations thereof; or any sign or group of signs used or intended to be used to distinguish the goods or services of one undertaking from those of others, or intended to identify a service, or used to identify a service.

    Registration of trademark under Saudi Law

    Registration with the Saudi Trademark Office establishes trademark ownership in Saudi Arabia. On the other hand, prior use gives prior users of trademarks a right of action in the form of opposition or cancellation procedures. Unregistered trademark rights are difficult to enforce in Saudi Arabia unless the mark is well known and meets the standards of Saudi law.

    The registration process is currently under the jurisdiction of the Ministry of Commerce and Investment. The Saudi Authority will take over the administration of trademarks for Intellectual Property (SAIP), which was recently established.

    Procedure after Refusal of Registration

    Within 60 days of refusal, a trademark application can be appealed to the Administrative Trademark Committee for denial or imposition of conditions by the trademark office. An online gateway is used to file appeals. There will be no hearings.

    If the appeal is denied, the applicant has 60 more days to appeal the Administrative Trademark Committee's decision to the Administrative Court. The Administrative Court will send both parties a hearing notice and hold hearings.

    The Administrative Court's ruling can be challenged in the Administrative Court of Appeal. If the Administrative Court of Appeal remands the matter with observations, the Administrative Court may reschedule proceedings by sending a notice to both parties. The Administrative Court may either reverse or uphold its prior decision; the aggrieved party may then appeal the decision to the Administrative Court of Appeal, which will then determine the case. Only on legal grounds can a final appeal be lodged with the Administrative High Court.

    Cancellation of a Registered Trademark

    A trademark can be disavowed, assuming that it has not been utilized for a long time. A non-use wiping out activity can be documented with the Administrative Court of First Instance. A trademark proprietor can go against such action by exhibiting sufficient reason for non-use, which can incorporate things like conflict, import sanctions, or whatever other faultless situation that shows that it would not aim to stop more utilization of enlisted trademark. In Saudi Arabia, a sole exchange has been perceived as adequate verification to topple a non-use retraction activity.

    A registered trademark can likewise be dropped through an abrogation activity under the steady gaze of the Administrative Court of First Instance in the event that the brand name was unlawfully enlisted. There is no meaning of such unlawfulness in the law; in any case, earlier enrollment and earlier use can be a solid reason for an undoing activity.

    Jurisdiction of Courts for Trademark Disputes

    Trademark rights can be enforced by administrative actions brought before Riyadh's Anti-Commercial Fraud Department (ACFD). Complaints about trademark infringements in Saudi Arabia can be made with the ACFD. Samples of genuine and infringing products, purchase bills from outlets selling the infringing products, and addresses of outlets selling the infringing products may all be used as evidence of infringement.

    Administrative proceedings are frequently completed rapidly; for example, in cases of prima facie infringement, ACFD inspectors may resolve complaints in two to three months. Trademark infringement cases can also be challenged in Saudi Arabian courts. During any form of legal action, registering a trademark might be useful. Unregistered marks are difficult to enforce unless they are well-known, in which case the plaintiff has a high burden of proof. Owners of registered trademarks can also register their trademarks with Saudi Customs to track incoming shipments. In Saudi Arabia, border control procedures are a highly effective anti-counterfeiting device.

    Trademark Infringement

    Administrative actions before the ACFD can be used to enforce trademark rights. In the case of trademark infringements in Saudi Arabia, complaints can be lodged with the ACFD. Samples of genuine and infringing products, purchase bills from outlets selling the infringing products, and addresses of outlets selling the infringing products may all be used as evidence of infringement.

    Administrative proceedings are frequently completed rapidly; for example, in cases of prima facie infringement, ACFD inspectors may resolve complaints in two to three months. A statement of claims can be filed with the relevant court in order to file a civil trademark infringement case. There are no pre-trial procedures, and each side is given ample chance to present their case in court by presenting written statements and evidence. The majority of infringement actions take 12 to 14 months to complete. On the proposal of the ACFD, a public prosecutor can file criminal charges. Criminal prosecutions brought by a general prosecutor are not open to rights holders.

    To file a trademark infringement lawsuit, a trademark owner has the following options:

    • The Anti-commercial Fraud Department may pursue administrative action against a person.
    • The complaint should be filed in writing, along with all evidence of trademark infringement and registered trademark rights.
    • The infringing products' location should also be noted.

    The Commercial Court also hears trademark infringement cases. The Commercial Court, On the other hand, the Commercial Court has recently refused to acquire jurisdiction over trademark infringement complaints, saying that its authority is restricted to claims for monetary damages. These decisions are challenged in higher courts by way of appeal. A written statement of claims must be submitted to the court. There are no processes in place prior to the start of the study.

    Conclusion

    As a result, people have effectively used the ACFD as a venue to obtain remedy for our clients' trademark infringement issues, rather than dragging the cases through the courts. We believe the ACFD has sufficient authority to investigate trademark infringement complaints, summon offenders, issue orders for the removal of infringing materials, confiscate and destroy counterfeit and infringing goods, and compel offenders to comply with its orders, possibly with the assistance of police authorities.

    To summarise, in Saudi Arabia, enforcing trademark protection through administrative measures has shown to be a practical and quick approach. Brand owners should think about these possibilities and work with MOCI and ACFD officials to combat the threat of trademark infringement in the Kingdom.

    ]]>
    Tue, 01 Feb 2022 11:51:00 GMT
    <![CDATA[Enforcement of Arbitral Awards in Bahrain]]> Arbitration in Bahrain and Enforcement of Arbitral Awards in Bahrain

    Arbitration rules enacted by The Kingdom of Bahrain In 2009 make it the primary united states within the globe to create the equal of a loose exchange quarter for arbitration. That rules, Legislative Decree No. 30(The Decree), offers events to a settlement calling for worldwide arbitration the choice of holding the arbitration in Bahrain without subject that the courts of Bahrain would possibly intervene with, or set aside, the ensuing award, so long as the events are trying to find to implement the award most effective in some other united states. The result is the advent of what this newsletter will call the Bahrain "Free Arbitration Zone. The new regulation additionally creates a brand new Bahrain Chamber for Dispute Resolution (BCDR), that is supposed to end up each a Bahraini countrywide and a Middle Eastern nearby arbitration middle on the way to be run with the assist of the American Arbitration Association (AAA). Creating a worldwide arbitration middle from scratch is not always a clean proposition, mainly in part of the sector wherein customers of arbitration were important of the judicial shape inside which arbitration has so far must be conducted. Despite the benefit of getting nearby arbitration facilities withinside the Middle East, many companies have remained careful approximately sitting arbitrations there out of issues that nearby courts are green in managing arbitration and that awards in opposition to nearby influential parties (mainly the ones related with or desired via way of means of governments) may be set aside. In August 2015, Bahrain Law No. 9/2015 promulgating the Arbitration Law got into effect. Article 1 of the New Arbitration Law offers provisions of the UNCITRAL 1985 Model Law with its 2006 amendments on worldwide industrial arbitration will observe to any arbitration regardless of the prison courting of the events to the dispute, if the arbitration takes vicinity in Bahrain or overseas and the events to it agreed to be a situation to the Law. The provisions of the UNCITRAL Law will observe to all arbitration starting after the New Arbitration Law's access into pressure no matter whether the arbitration settlement becomes concluded earlier than such access into force. The advent of the New Arbitration Law is a breakthrough in unifying worldwide arbitration policies and making sure Bahrain is an appealing region to settle industrial disputes. According to the New Arbitration Law, Bahrain will use alternative 1 in Article 7 of the UNCITRAL Law to define and form an arbitration settlement. To ensure a successful reliance on arbitration as a method of dispute resolution, events must ensure that the arbitration settlement is consistent with and meets the standards of Article 7 of the UNCITRAL Law, which are as follows.

    • "Arbitration settlement" is a settlement reached by requiring the parties to submit to arbitration all or any positive disputes that have arisen or may additionally arise among them in respect of a specified criminal relationship, whether contractual or now not. An arbitration settlement can take the form of an arbitration clause in a contract or a separate settlement.
    • The arbitration agreement could be in writing.
    • An arbitration settlement is in writing if its content is recorded in any shape, regardless of whether the arbitration settlement or agreement was concluded orally, using conduct, or now not.
    • The requirement that an arbitration settlement is in writing is met by using digital conversation if the facts contained therein are available to be used for subsequent reference; "digital conversation" means any conversation the events have using information messages; "information message" means facts generated, sent, obtained, or saved in a digital, magnetic, optical, or comparable manner, including, but now not restricted to, digital conversation.
    • Furthermore, an arbitration settlement is in writing if it is far contained in trade of declaration and protection statements in which the life of the parties is specified.
    • A reference in a contract to any report containing an arbitration clause constitutes a written arbitration settlement, provided the connection is also used to make the clause a part of the agreement. These are the steps taken by the Bahrain government.

    Due to hindrances and a lack of understanding of typical arbitration proceedings, GCC laws and international arbitration practice, particularly recognizing and enforcing foreign arbitral awards, were insufficient and required updating to conform to modern international arbitration practice fully. On the other hand, the New Arbitration Law addresses this long-standing GCC-wide issue. Article 7 of the New Arbitration Law states that no arbitrator appointed beneath the provisions of the UNCITRAL Law may be puzzled on an act or omission withinside the overall performance of his responsibilities except it turned into performed in terrible religion or due to a critical error. This provision also applies to the arbitrator's personnel or those legal through him to direct several paintings associated with the responsibilities entrusted to him. Thus, arbitrators cannot be held responsible besides in instances of terrible religion or grave error; that is a good step to boost the number of arbitrators in Bahrain, expanding an average agreement within the arbitral process. Bahrain's signature of the New York Convention at the Recognition and Enforcement of Foreign Arbitral Awards in 1988 turned into a wonderful step in the direction of the encouraging manner of opportunity dispute resolution because the conventional course of neighborhood courts may be costly and time-eating process. However, different GCC nations had been reluctant to amend or produce neighborhood rules reflecting the choice to sell arbitration committedly. The New Arbitration Law takes a massive jump ahead to make sure Bahrain's arbitration legal guidelines are in step with acceptable worldwide practices, bringing predictability in arbitral techniques and truth within the enforcement of awards within the region. Going ahead, the enactment of the New Arbitration Law will, with any luck growth the variety of events choosing Bahrain as the specific jurisdiction for their worldwide business arbitrations.

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    Tue, 01 Feb 2022 10:39:00 GMT
    <![CDATA[Decree 34 of 2021 its impact on arbitration]]> Decree 34 of 2021 and its impact on arbitration

    Decree No. 34 has been issued on Sept. 14, 2021, and took effect on September 20, 2021. The Decree canceled two arbitration organizations in Dubai: I the Arbitration Organization of the Dubai International Financial Centre ("DIFC"), which included the DIFC-LCIA arbitration center, and (ii) the recently founded Emirates Maritime Arbitration Centre ("EMAC") (together with the "Cancelled Centres"). The Cancelled Premises' operations have been transmitted to the Dubai International Arbitration Centre ("DIAC"), which has been operating onshore in Dubai since 1994. The Decree states that laws of the Axed Centres will continue to enforce till the DIAC issues new regulations, as long as they do not contradict the regulations of the Decree. The Decree also states that contracts entered into before Sept. 20, 2021, that includes an arbitration clause that selects either as the DIFC-LCIA or the EMAC Rules would be valid, and DIAC will consider replacing the Cancelled Centres in the management and administration of such disputes unless the parties agree otherwise. What is unclear is when the new DIAC rules will be published, and (ii) what will happen to arbitrations that are still in progress under the Cancelled Centres' rules. The DIAC rules have been published. Parties wanting to enter into an arbitration clause in the Gulf Region must no longer involve DIFC-LCIA or EMAC regulations as the governing laws. Agreements that already contain DIFC-LCIA or EMAC arbitration clauses must be reviewed and revised to represent the parties' choice of a new arbitration center. Parties could proceed to select the DIFC or onshore Dubai as their arbitration's "seat" or legal location. However, parties should review their agreements and decide which arbitral institution's rules they want to regulate their arbitration from now on. The Decree requires DIAC to be reorganized as a unified arbitration center, with its head office in "onshore" Dubai as well as a branch in the "offshore" DIFC, with the capacity to build additional branch offices both inside and outside the Emirate of Dubai. The Decree also nixes both the established Dubai Arbitration Institution ("DAI") of the DIFC (which included the DIFC-LCIA center) and EMAC with immediate impact. In the Decree's allowing statute, the stated aims for DIAC include, among other things, "consolidating the Dubai as a dependable hub for global for settling conflicts" and "enhanc[ing] the stance of DIAC as one of the best alternatives."

    Impact on ongoing DIFC-LCIA, EMAC and DIAC arbitrations:

    Arbitrator established before the effective date of the Decree will continue operating following existing DIFC-LCIA, EMAC, and DIAC Rules, except as otherwise agreed between the parties (Article 6b). The Decree requires DIAC to supervise such cases; nevertheless, under Article 9, it has been suggested that the LCIA will implement such established DIFC-LCIA cases through the DIFC-LCIA casework team, on a temporary assignment basis from DIAC, not just for the six-month transition phase.

    Impact on new arbitrations commenced after Decree

    the situation is different for arbitration proceedings that started after the Decree went into place. Article 8C of the Decree asserts until the new DIAC Rules are approved, the current arbitral tribunals of the DIFC-LCIA, EMAC, and DIAC remain in effect to the extent that they should not conflict with the Decree and Statutory law. Nonetheless, in light of Article 6A and the DIFC and LCIA declarations, it has been stated clearly regarding Article 9 that all new arbitration proceedings begun by parties after  Mid-2021 – whether under contract terms offering for DIFC-LCIA or EMAC arbitral proceedings ended before or after the Decree came into force will be adhered to Decree.

    Impact on new Agreements being concluded after Decree

    Agreements negotiated and deduced after Mid-2021 must avoid giving for DIFC-LCIA or EMAC arbitration given the risk of difficulties to their authenticity being raised under the regulations of the Decree, as well as to avoid possible judicial or enforcement issues in the future. Such contracts should rather refer disagreements to DIAC or the other arbitral institution, with the parties agreeing on the rules. However, if contracts provide such for DIFC-LCIA or EMAC arbitration and are made reference to arbitration after the Decree enters into force, it appears that in practice, based on statements from the DIFC and LCIA dated 7 Oct. 2021, it would seem that in practice

    Important points

    The fundamental feature of arbitration agreements impacted by the Decree remains the parties' agreement. Parties to the contract should ensure that one's contract terms represent their agreement on particular dispute resolution rules and the organization that will oversee those rules, with the advice of representatives. Parties must update any treaties containing disagreement provisions that are affected by the Decree, agreements that have DIFC-LCIA, DIAC rules, relying on their position in the agreement's lifecycle and the potential beginnings of a dispute.

    The DIFC acquires symbolic importance: The Decree has did not affect the sides' potential to choose the DIFC as an arbitration court. The DIFC's role will result in the growth of the Decree, as the DIFC has become the default saddle for all prospective DIAC arbitration proceedings in which the arbitration clause is silent on seat selection.

    Parties must not hesitate for a dispute to emerge before making changes to their contracts: Perception has shown that once a dispute arises, parties have troubles agreeing on even the most basic terms. We inspire parties who have arbitration agreements that are affected by this Decree to seek legal advice on these advancements and modify their arbitration agreements now before a dispute arises.

     

     

     

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    Tue, 01 Feb 2022 09:48:00 GMT
    <![CDATA[Factoring and Transfer of Civil Accounts Receivable]]> Federal Decree-Law Number 16 of 2021 on Factoring and Transfer of Civil Accounts Receivable

    The Government of the United Arab Emirates has recently brought in the Federal Decree-Law Number 16 of 2021 to deal with issues regarding the Factoring and Transfer of Accounts Receivable within the country. The New Law is the first of its kind in the country to deal with the factoring and assignment of receivables exclusively. Before the Law, there has been uncertainty about how an arrangement of this sort is to be carried out legally within the UAE. The current Law provides a framework that regulates and sets forward the basic requirements needed to legally enforce the transfer and assignment of receivables, the various provisions for ensuring their validity and perfection, and the various rules to be adhered to determine the priority over those assigned receivables amid other claims in competition.

    The Law governing this area has always been quite vague and uncertain within the country and has often been dealt with gradually. The previous laws governing the assignment of receivables included Federal Law Number 5 of 1985 and Federal Law Number 4 of 2020, which was done via securities. Under these laws, there was inevitable confusion regarding what Law should be applied in specific situations and the vagueness in the correlation between different rules. The New Law has taught an integrated framework wherein this issue has been unified under a single law, a much-needed development in the UAE.   

    The scope of the recent Law applies to those assignments of receivables made by way of civil and commercial transactions. However, some assignments are restricted and do not come under the application of the new Law. These include those transactions related to family or personal affairs, foreign exchange related, contracts financed under the regulation of clearing agreements, securities/ assets/ financial instruments deposited with a broker that are repurchased, etc., as provided for under the Law.

    "Assignments" are regulated and governed under the New Law. The definition for the same is provided under the provision of the Law, which provides the reasoning that the Law would govern those assignments that are exclusively those that assign debts and those assignments of debts that have a security interest over them. However, it is more common in factoring and terms of obligations to involve the mere assignment of debts rather than those with security interest over them. Further, insufficiency in the New Law includes the lack of specifications relating to the various factoring arrangements, including those of buying or selling receivables, discounting and reverse factoring, etc. The New Law is intended to regulate and govern all factoring arrangements and debt assignments within the UAE. Considering this, all participants in the market must ensure that they strictly adhere to the requirements and regulations provided for under this Law concerning their factoring arrangements and debts assignments, whether they include the creations of securities or not.

    The New Law is not insistent on any specifications regarding the form of assignment that the receivables need to be taken in. It is merely stated and indicated that as long as receivables contingent on the assignment is expressed and described in a manner that general or specific can be identified, then such work will be approved and considered adequate. Further, there are specifications and clarifications in the New Law with regards to the description of assigned receivables in those areas where there were uncertainties and vagueness in the previous Laws.

    There are certain clarifications provided by the New Law concerning the effectiveness and priority of agreements for assignments of debts against third parties. There are specific references given to the Moveable Assets Mortgage Law to deal with assignments in this regard. It mandates under its provisions that for such assignments to be effectuated to third parties, they are required to be declared on the electronic register of the Moveable Assets Mortgage Law functioning under the Emirates Integrated Registries Company (EIRC). Before introducing the New Law, there was uncertainty regarding whether it was mandatory to declare such assignments on the electronic register functioning under the EIRC. However, registrations under the EIRC were quite common. However, it was not strictly adhered to, especially for those assignments of receivables under the Civil Code, which did not pertain to creating security interests over the debts.

    The various specific requirements needed to be adhered to for those situations regarding the assignment of receivables against a debtor and the effectuation of the same are generally governed and regulated under the Civil Code (Federal Law No. 5 of 1985) precedent cases according to the specific situations. The New Law has not made any significant changes or replacements to the provisions of the Civil Code in respect to this area of assignment of receivables; therefore, adherence to the condition provided under the Civil code is to be met accordingly. Under the Civil Code, for the effectuation of an assignment of receivables against a debtor, a notice and declaration must be made to the debtor relevant in the particular situation, and such debtor must acknowledge the specific assignment of receivables. However, the New Law gives certain rights to the assignee of the assignment of receivables to address notification to the particular debtor regarding the instructions for payment of the relevant receivables that are assigned to the assignee. The debtor is mandated to accept the terms of this notification even when there is an amendment to the contract between the parties. The debtor agrees to the terms of the notification sent to them by the assignee even if there is a breach of the existing contract between the parties.

    Regarding the priority of the assignment of receivables in regards to competing claims within the market are similarly under the governance of the Moveable Assets Mortgage Law (Federal Law No. 4 of 2020). The New Law does not make any changes or replacements in the provisions provided under the Moveable Assets Mortgage Law in this area of Law. Therefore, under this Law, provisions are provided for the allocation of priority to retain the rights of the assignees above the receivable accounts. This is done to ascertain the assignor's obligations and to ascertain the priority of the assignment concerning non-contractual rights.

    In Conclusion, the development of the New Law by way of Federal Decree-Law No. 16 of 2021 was much needed in the laws governing the factoring and transferring of civil accounts receivable within the UAE. The enactment of the Law has brought in clarifications in various uncertain areas of the assignment of receivables and has successfully created a unified framework for the same. There is clarity regarding the description required in the assignment of receivables, including those with future receivables. There is also clarity in enforcing the provisions provided under the Moveable Assets Mortgage Law for the assignment of receivables concerning registration and priority rules and requirements. However, there continue to exist certain discrepancies in specific factoring arrangements and debts assignments even with the New Law in place, especially in regards to those absolute assignments and do not involve security rights. Further, there is a lack of understanding on the future interpretation of Courts of the provisions given under the Civil Code, with the New Law in place. The efforts of the same will be told with time.

     

     

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    Wed, 05 Jan 2022 17:15:00 GMT
    <![CDATA[Crypto Asset Regulation in the UAE ]]> Crypto Asset Regulation in the UAE - A Guide

    The sphere of crypto assets is continuously evolving in all spheres in the global area. The terminology is simultaneously advancing with terms such as crypto assets, cryptocurrencies, security tokens, etc. The regulation of these crypto-assets is a matter of frequent discussion as to what extent governments and agencies should regulate these assets. The complex terminologies that are used explain the vast sphere of what crypto assets are. Keep in mind that although individuals and market players interchangeably use these terms, the term cryptocurrency is the most familiar and commonly used crypto-asset, which just comes under s singular arena of what crypto assets widely are. Bitcoin is primarily the most popular cryptocurrency. In a broad sense, crypto assets are digital assets that employ cryptography technology to carry out financial transactions.

    The scope of regulations for crypto assets executed by various governments largely depends on the countries, as there is no uniform mechanism or extent. The use of cryptocurrencies has been restricted by way of limitations in certain countries. In contrast, others have made the use of crypto transactions illegal, and others who completely ban the use of cryptocurrencies impose penal sanctions for the use of the same. The International Monetary Fund (IMF) has highlighted the need to teach more effective regulations of the use of cryptocurrencies worldwide as the negative impacts of its overuse and misuse can lead to financial instability in countries, deceiving and cheating of customers, and the financing of terrorism.

    The United Arab Emirates, being a Federal State, each of the seven Emirates have jurisdiction over matters concerned with them, whereas the Federal State governs the rest. Issues concerning banking and financial matters and their regulations come under the purview of the Federal State. The economic free trade zones in the UAE are split into financial free zones and non-financial free zones. The financial free zones of the UAE are the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). The regulation of the financial sector and other markets and activities within Onshore UAE is the responsibility of the UAE Central Bank and the Securities and Commodities Authority (SCA). Crypto assets are not expressly banned or illegal within the UAE; however, the same regulation is in Onshore UAE, the ADGM, and the DIFC.

    Dubai International Financial Centre (DIFC)

    The DIFC is regulated by the Dubai Financial Services Authority (DFSA). The regulation of crypto assets within the UAE has not usually been made in the DIFC, and licensing for activities related to crypto-assets was not provided. However, on October 25, 2021, the DIFC established the initial stage of the DFSA's digital assets regime with the introduction of the DFSA regulatory framework for investment tokens.

    Activities by individuals concerning investment tokens within the DIFC need prior authorization from the DFSA. The concerned activities involve the use or trade of investment tokens in any form or scale. This would include investment token-related financial services, financial promotions, offers to the public, or securities. Hence, investment tokens are likely to be taught into one or more categories of securities or derivatives. This will be based on the specific nature of its rights and obligations. The significant distinction between investment tokens and other standard securities or derivatives is that investment tokens confer rights on holders that use cryptography technology for issuing, storing, and transferring.

    The DFSA has made certain specifications to properly consider whether a token is an investment token or not and the type of security or derivate it may accordingly fall under. This includes considering the various rights and simultaneous obligations to be met by holders of such tokens expressed in marketing materials, documents, and other jurisdictions. For further development in crypto assets, the DFSA is taking steps to create frameworks for the regulations of investment tokens and other crypto assets, specifically cryptocurrencies and utility tokens.

    ONSHORE UAE

    The regulation of cryptocurrencies within the UAE was provided by the Securities and Commodities Authority (SCA) through SCA Decision No. 23 of 2020 concerning Crypto Assets Activities Regulation (CAAR). This regulation has the authority to regulate all activities concerning crypto assets within the UAE, including issuing, listing, and trading. CAAR defines crypto-assets within its purview. The CAAR is the licensing and regulatory authority for crypto assets used in the UAE. The ranges of the use of crypto assets include issuing and promotion, custody services, exchanges, and platforms to raise funds. The application of the CAAR consists of all forms of cryptocurrencies used and recognized in the market for listing and trading. However, those items that come under the regulation by the UAE Central Bank do not come under the purview of the CAAR. These items would include currencies inclusive of digital and virtual, stored value units, payment tokens, and units.

    The UAE Central Bank introduced more issuances in 2020 concerning a new Stored Value Facilities Regulation (SVF Regulation) and the same scope. The introduction of the SVF Regulations cleared certain uncertainties concerning the legality of crypto assets within the country as crypto-assets were incorporated into the definition of 'Stored Value Facility.' The Central bank further notified that accepting crypto assets within the UAE is not considered legal tender. The solitary legal tender within the UAE is the UAE Dirham. The Retail Payment Services and Card Schemes Regulation (RPSCSR) was subsequently issued, which is to be applied to a Payment Token Service. This crypto asset can be traded in the digital arena and backed by fiat currencies.

    Abu Dhabi Global Market (ADGM)

    The Financial Services and Markets Regulations 2015 (FSMR) regulates crypt assets in the ADGM, and the subsequent regulatory authority is the Financial Services Regulatory Authority (FSRA). Virtual Assets under the command of FSMR is the digitally acceptable value that is eligible for digital trading by way of mutual agreement among the users of these assets and is not guaranteed by any jurisdiction. The rules for conducting activities dealing with Virtual Assets in the ADGM are provided under the Conduct of Business Rulebook (COBS).

    The regulation of crypto assets within the UAE and other Countries is dynamic and subject to continuous developments in this sphere. There is a need for constant progress in regulating crypto assets by authorities to ensure that risks are dealt with, and the various changes in the crypto sphere are deliberated upon and subsequently handled. Considering the changes within the UAE itself, there has been a new Memorandum of Understanding signed between the SCA and the Dubai World Tarde Centre Authority, marking the SCA as the regulatory authority for authorizing and licensing activities inclusive of other financial activities concerning crypto assets within the purview of the Dubai World Trade Centre Authority Freezone. The various matters arising out of the crypto sphere within the country and around the world provide better opportunities to comprehend the new horizons of technology and innovation to advance in crypto assets.

     

     

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    Wed, 05 Jan 2022 17:04:00 GMT
    <![CDATA[UAE to Join Madrid System in December 2021]]> UAE to Join Madrid System in December 2021, Understanding the implications

    The Government of the United Arab Emirates has declared its move to join the Madrid Protocol System, which will come into force on the 28th of December 2021. The move indicates the UAE becoming the 109th country globally and the third country in the Gulf Cooperation Council (GCC) to be a signatory to the Madrid Union. This will imply that as of the 28th of December, 2021, UAE will be accessible to trademark holders to attain trademark protection through international trademark registration. This development in the UAE trademark law and the practice of the same has been highly anticipated and desired among companies.

    The Madrid System or the Madrid Protocol bestows trademark protection to its member countries across various jurisdictions. This System enables a single application by the Member State for trademark registration through WIPO in Geneva, Switzerland, for trademark protection in all member states.  The facility provided by the System creating trademark protection too many nations through single international trademark registration is beautiful to businesses of various countries. Thus, this development is a very positive step for companies and individuals within the UAE.

    The Madrid System is an International Trademark System operated under the International Bureau of WIPO. The Madrid system aims to cover the facilitation in the acquirement and maintenance of trademark registration for a total of 125 countries (including the European Union member States, as well as the three countries of Benelux) by way of a single international application for trademark registration with any IP office of a member of the Madrid Protocol, be it national or in the region. The System came into effect in 1989; namely, the Protocol Relating to the Madrid Agreement following the multilateral treaty of Madrid Agreement Concerning the International Registration of Marks, 1891.

    The implications of this new signatory with the Madrid System are manifold. The latest development would enable multiple benefits in trademark protection for the national level trademark right holders within the UAE and those internationally. They are seeking to attain trademark protection within the UAE. However, it should be clarified that a few aspects of the acquisition in this area in the UAE are still quite uncertain and are expected to be addressed and explained before the official linkage of the UAE with the Madrid System. The areas in need of clarity on the UAE's standpoint would include the fees payable for the same, whether the designations of the UAE filed via the Madrid System would hereafter be conducted as a single filing or multi-class filings, and whether local registration certificates could be attained in the country on the protection of UAE designations. There has been verification on the adoption of the 18-month notification period by the UAE to notify and alert the WIPO on rejections of registrations and confirmation by the Government that the UAE will receive individual fees for its designations. However, as mentioned, the amount of fees for the same is still uncertain and will be duly notified by the Government.

    The country's adjunction to the Madrid System will enable companies and businesses within the UAE and internationally to apply for the international trademark protection comprehensively inclusive of all member nations to attain such registration by way of the World Intellectual Property Organization (WIPO) based in Geneva, Switzerland, discarding the need to apply for registration in national trademarks of specific nations or the need for payment of local agents' fees to attain the same. It can be said that the Madrid System provides trademark holders within its member States a 'one-stop shop' solution to achieve and secure trademark protection in multiple markets of the various nations comprising of it.

    The application process and filing for registration under the Madrid System are economical and cost-efficient in various realms for trademark holders. Trademark Holders will be able to file a single application to attain trademark protection in multiple countries in a single language and pay the relevant fees in a single time instead of paying multiple fees to acquire multiple trademark protection in various countries interested. With the help of the Madrid System, Brand owners or trademark holders can oversee and manage their brand portfolio centrally and ease their development by expanding in various markets in the international area through the attainment of simultaneous trademark protections in the same. It further removes the different burdens in terms of administration and other complications in attaining registration of applications of the specific countries and will be highly beneficial to international rights holders. Managing portfolios with designations in the UAE will also potentially be more cost-effective due to the conditions requiring legalized powers of attorney concerning the filing of national applications and the legitimate legalized documents necessary for making various changes, including name, address, assignments, etc. Thus, simultaneous cost-effectiveness in managing portfolios can be anticipated.

    Before this decision, it was strenuous to attain or apply for international trademarks in the United Arab Emirates, as some multiple costly protocols and formalities were needed to be done by companies before the filing for the same. The UAE's decision to be a signatory and join the Madrid System will enable companies to eliminate these conditions and necessities, thus allowing the trouble-free, cheaper mechanism to attain entry into UAE's trademark system. Further, the UAE is also extensively encouraging start-ups and small and medium enterprises (SME) to be brought up. This will enable these start-ups and SMEs to avail cost-effective means to protect and secure their brands in other member countries of the Madrid Protocol, which will further help them expand their businesses in new markets. Even those international rights owners and brand owners will have the alternative to file for trademark protection through a UAE designation rather than a national filing. Although some areas for international rights holders need to clarify, it can be better cost-effective in terms of registrations.

    The UAE is the third country following Oman and Bahrain from the GCC to adjoin forces with the Madrid System. This implicates the three MENA countries officially being a part of the Protocol. Over the last five years, the countries, which have newly formally joined the Madrid Protocol, include Pakistan, Trinidad and Tobago, Malaysia, Canada, Brazil, Samoa, Malawi, Indonesia, Afghanistan, Brunei Darussalam, and Thailand. It is essential for businesses that focus their channelization and expansion in various countries or those that aim to enter multiple new markets to ensure that the business interests are protected and secured within those specific nations.

    The new development by way of transferring the accession into the UAE trademark system to the Madrid system signifies the Government's various reforms to advance further and enhance the Intellectual Property (IP) laws within the country. This new step will improve the UAE's advancement towards a knowledge economy by further strengthening the IP framework within the country. The move was much anticipated to take place. It will create significant enhancement for those businesses and rights holders based in the UAE and those who have an interest in attaining trademark protection within the country. The WIPO has further announced that other countries from the GCC, like Saudi Arabia, are expected to form signatories and join the Madrid System soon. This is truly a move worth celebrating for the further development of the trademarks and IP sector of the UAE.

     

     

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    Wed, 05 Jan 2022 16:55:00 GMT
    <![CDATA[Land Register in Emirate of Ras Al Khaimah]]> Law Number (11) Of 2021 on Land Register in Emirate of Ras Al Khaimah

    Introduction

    The UAE government has issued Federal Law Number (11) of 2021, which supersedes the former Industrial Property Law Number (31) of 2006 on the Regulation and Protection of Patents, Industrial Drawings, and Designs... The new Law covers patents, utility models, industrial designs, and trade secrets in the UAE to protect industrial property and regulate the registration, use, exploitation, and assignment procedures to foster knowledge and innovation. On May 31, 2021, the new Law was published in the official gazette number (703 - Annex), and it will take effect six months after that date.

     The following are the significant changes to the existing UAE law:

    Article (1)

    Unless the context of the text indicates otherwise, the following words and phrases shall have the meanings meant opposite each of them to carry out the provisions of this Law:

    Emirate: Ras Al Khaimah

    State: United Arab Emirates Emirate

    Ruler: Ruler of Emirates

    Council: Executive council of emirates

    Department: Municipality department

    Director: Director General of department

    Sector: Land and properties sector

    Administration: Registration administration in the sector

    Article (4)

    The property is divided into four categories based on who owns it: 

    • Government-owned land
    • A private residence
    • Property with Endowment

    Article (6)

    • On the off chance that an enrolled land unit is separated and every proprietor claims a part of it, the first cadaster will be supplanted by a few cadasters set up as per diagrams given by the equipped specialized power. Such division will be referenced and clarified in the first cadaster and discounted rather than removed from the register after the installment of expenses. Such division will be referenced and explained in the first cadaster and dismissed rather than removed from the record.
    • If a building is divided into levels or flats, each level or apartment must have its sub-cadaster in the property land cadaster, and each level or flat must be registered in the owner's name.
    • Shares of partners in common parts shall be recorded in joint ownerships and units sorted based on levels, flats, and real estate development areas, and such shares shall be calculated by dividing total areas of common parts by total net areas of sorted units multiplied by the net area of the unit.

    Article (7)

     If more than one unit has been merged and one of them is held by an accessory right in rem, that right will be extended to cover the new real estate unit without the right holder's agreement. However, if an independent accessory protects each unit right in rem, the rights holders must consent to the merger. If a team with an accessory right in rem is sorted or divided, the accessory right in rem extends to all new real estate units.

     Article (9)

    The sector will be in charge of land registration, and it will accomplish the following things to that end:

    • Keep detailed records of real estate properties.
    • Conduct a full property assessment and keep it up to date.
    • Prepare or approve ideal contract forms for real estate dispositions and other property rights that the Law determines.
    • Establish guidelines for document regulation, maintenance, and disposal.
    • Establish guidelines for using computers in the process of saving and registering details of real estate dispositions and any other property rights established by Law.
    • Create, manage, supervise, and maintain a real estate database as the foundation for the National Information System.
    • Conduct research and publish magazines focusing on real estate market trends.
    • Research into confirming precarious rights by a title deed following the council's rules.

    Article (12)

    Foreigners who are not nationals of the United Arab Emirates or citizens of Gulf Cooperation Council countries, whether natural or legal persons, are forbidden from obtaining ownership of built properties or vacant lands in the emirate for any cause other than inheritance. This ban will apply to absolute ownership, bare ownership, and usufruct rights, with rents of more than fifty years being considered possession in the application of this Law. Any firm in which citizens of the UAE or Gulf Cooperation Council countries do not own at least 51 percent of the capital shall be considered a legal person for this article.

    Article (13)

    Foreigners may gain possession of built properties and vacant lands in the following circumstances, except for the prohibition outlined in the previous article:

    • The Ruler's approval of foreigners' possession in regions designated by him.
    • If the property is in the hands of a foreign government as the location of its diplomatic or consular mission or the residence of the mission's head, on the condition of reciprocity, or if the property is owned by one of the international agencies or organizations.

    Article (18)

    Only documents signed by the parties before the sector and issued by the person who has the power of disposal in the rights established in the register or judgments or resolutions issued by the relevant court may be used to update the data in the record. The sector may correct material errors in the register's details on its own or at the request of concerned persons, and the person whose rights were changed, removed, or corrected shall be notified of each entry, erasure, annotation, or correction, and all of this shall be included in the title deed. The resolution will determine the recording, altering, annotating, and correcting procedures from the Director.

    Article (19)

    Owners of real estate units must notify the sector within three months of any change to the unit, such as the addition of buildings or the establishment of essential details, or the modification or removal of the same, and a declaration containing the changes and license thereof must be attached to the notice, and the details of the register must be amended accordingly.

    Article (21)

    Each owner will obtain a copy of the cadaster, labeled "Title Deed," and if two or more people hold property jointly, each of them will receive a copy of the document in the name of all joint owners after paying a fee.

    Article (25)

    All dispositions that create determine, transfer, or remove any real estate accessory rights in rem, as well as final judgments that establish something similar, and assignment declarations for recording any of these rights, should be recorded. Non-recording will result in these rights not being subject to a legal argument among concerned persons or others.

    Article (26)

    Suppose the succession includes real estate rights in rem. In that case, the heir should register the heritage right by registering the deed that establishes the heritage right and succession lists that must include each heir's portion. Except within the limitations of his legal part in each unit, no disposition by the successor may be recorded under the terms of the preceding clause.

    Article (29)

    Annotation of cases in the register shall result in the plaintiff's right being a legal argument against those who have rights and details that serve their interests having been established in the register as the date of annotating in these cases. The period of the five years shall begin from the effective date of this Law for the final judgments existing. This right shall not be used as a legal defense against a third party who acquired his right in good faith before the annotation's occurrence.

    Article (31)

    • The following items should be included in the application for registration in the register: The topic of the application for registration.
    • Information on each of the disposition parties, including his full name, surname, country, residence, phone number, and information from his ID or passport.
    • The names and capacities of people who represent others, as well as the scope of their powers and supporting documentation.
    • The property's location, kind, landmarks, area, borders, and dimensions, as well as the subject matter of the registration application.
    • Identify any real estate rights in rem owed to or against the property
    • If applicable, a price or other form of consideration
    • Documents proving ownership or right in rem, as well as the number and year of issue of the title deed, which is the subject of the registration application. Within fifteen days from the date of submission, the application for registration in the register should be accompanied by a title deed or an equivalent document, as well as all papers and documents that support the details stated in the application, as determined by the executive regulation of this Law, and this period may be extended to similar periods if the concerned person provides an acceptable excuse and the registration application that does not meet the required document.

    Article (32)

    If the writing has not been recorded in the register within one year of its submission date because it does not meet the stipulated papers and procedures, the application will be crossed off; however, this period may be extended for another year only if the concerned person submits a request for extension at least two weeks before the expiry date and after payment of the determined fee.

    Article (33)

    If more than one application in respect of the same property has been submitted, these applications should be considered in order of registration precedence, and if the procedures of the earlier application failed to be completed due to a deficiency or fault in the details or papers, the concerned person should be notified to avoid this deficiency or fault within fifteen days from the date of receipt of the notice, otherwise, his application will take precedence.

    Article (34)

    A person who has had his application annotated to a complete statement for which he sees no reason, or whose application or precedence has been crossed off, may file a grievance with the Sector's Director within ten days of being notified of the resolution, provided that the states the reasons on which he relied in the grievance pleading. Examining the following applications in priority order will be halted until a reasoned decision on the grievance is provided within one week.

    Article (35)

    The final contract shall be formed on the form developed or approved by the sector once the application has completed all legal requirements for registration. After validating the parties' identities, the sector will certify their signatures in front of the sector. If the disposition is the subject of a judgment, the judgment's execution form should be included with the papers.

    Article (37)

    The developer must register the dispositions made before the implementation of this Law within sixty days of the Law's effective date, or his authority to sell units off-plan will be revoked for those units that have not been sold.

    Article (39)

    It is permissible to dispose of real estate units sold off-plan and registered in the initial land register by sale, mortgage, or other legal dispositions with the approval of the two contracting parties. It is prohibited for the developer to receive any fees on such units' sale, re-sale, or other legal dispositions, except for expenses received by the developer from third parties and approved by the sector.

    Article (40)

    Developers must register finished projects in the land register with the sector as soon as they receive a performance certificate from the competent authorities, which includes registering units sold in the names of purchasers who have fulfilled their contractual duties.

    Article (41)

    Whoever unlawfully records a deed to usurp another person's property or gain a right in rem thereupon, or attempts to do so, shall be penalized by imprisonment and fine, or any combination of these two punishments, without infringing any other law.

    Article (42)

    Anyone who evades or attempts to evade the payment of fees imposed by this legislation is subject to a fine equal to double the required fee, provided that the fine is not less than 5,000 dirhams.

    Article (44)

    Competent authorities shall present the details and paperwork linked to registration procedures as soon as the Administration requests them, as well as when the Law requires them to be presented.

    Article (48)

    This Law shall take effect on the date of its enactment and publication in the Official Gazette. Ras Al Khaimah Ruler Saud Bin Saqr Bin Mohamed Al Qasimi We have issued this document on the fourteenth of Safar 1443H. G. corresponds to September 1 in the year 2021.

    Conclusion                 

    Unless the context of the text indicates otherwise, the following words and phrases shall have the meanings indicated opposite each of them to carry out the provisions of this Law: Emirate: Ras Al Khaimah State: United Arab Emirates Emirate Ruler: Ruler of Emirates Council: Executive council of emirates Department: Municipality department Director: Director General of department Sector: Land and properties sector Administration: Registration administration in the sector Article (4) The property is divided into four categories based on who owns it: • Government-owned land • A private residence • Property with Endowment Article (26) If the succession includes real estate rights in rem, the heir should register the heritage right by registering the deed that establishes the heritage right, as well as succession lists that must include each heir&#39;s portion. Within fifteen days from the date of submission, the application for registration in the register should be accompanied by a title deed or an equivalent document, as well as all papers and documents that support the details stated in the application, as determined by the executive regulation of this Law, and this period may be extended to similar periods if the concerned person provides an acceptable excuse and the registration application that does not meet the required document.

     

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    Wed, 05 Jan 2022 16:12:00 GMT
    <![CDATA[Qatars Commercial Companies Law]]> Qatar's Commercial Companies Law

    Qatar possesses a business-stimulating environment that instigates investors to invest in different business entities. Setting up a business in Qatar was not restricted to any specific kind of business. The region has expanded itself to encourage various company incorporations in Qatar.

    As per the law, a commercial company is an agreement where there is a rise to a profit-creating project. Two or more natural or legal persons bestows by providing capital or works and shares the profit and loss incurred from the project.

    In Qatar, Law No. 11 of 2015 promulgates the commercial company law. Recently an amendment has been made to Law Number 11 of 2015 of the Qatar Commercial Companies Law. The changes will enhance the regulatory framework of Qatar.

    Under the Commercial Company Law, there are different forms of companies, they are:

  • Limited Liability Company
  • Joint Liability Company
  • Limited Partnership
  • Joint venture company
  • Public shareholding company
  • Private shareholding company
  • The partnership is limited by shares.
  • Limited Liability Company

    A limited liability company (LLC) is the most common form of company that an investor opts for in Qatar.  The minimum number of participants required to set up an LLC in Qatar is a minimum of 2 and a maximum of 50 with at least one Qatari shareholder. This business entity in Qatar has formed under a 51 percent to 49 percent relationship, where foreigners have the flexibility to own 49 percent of the entire shareholding. However, the remaining 51 percent needs to be held by Qatari shareholders.

    There are three primary documents mandatorily required to register a limited liability company:

    • Commercial registration (CR)
    • Trade License    
    • Computer Card

    Joint Liability Company

    It comprises two or more natural persons, where both of them would be jointly liable for the company's obligations. As per, Article 22 of Law No. 11 of 2015, the joint liability company should include the names of all the company partners.  If it consists of the name of any person, who is aware that he is not a partner, he shall also be liable for the debts incurred by the company.

    Shares in a joint liability company can only be transferred by the consent of all the partners or by any amendments made in the company's contract. In addition, another condition is, a partner is not allowed to engage in any business similar to the company's business. However, they can do the business only if they get the consent of other partners. The company contract of this shall include:

    • Date of incorporation,
    • Name and object of the company,
    • Capital and shares with the partner's name,
    • Full details of all the partners,
    • Financial year details, profit, and loss distribution.

    Limited Partnership

    There are majorly two types of partners in Limited partnership, joint partners and silent partners. The contract of the company must include the names of both joint and silent partners. The partners in this shall be natural persons only.

    Joint partners manage and run the company and would be liable for their assets for all the company's liabilities.

    Silent partners did not manage the company but only contributed the capital amount to the company. They are not responsible for any obligations but only respond to the extent of their capital or what they pay to the company. Silent partners should not interfere in the work and management of the company. If they do so, they shall be jointly liable for the consequences results occurring from the activities.

    Joint Venture Company

    As per Article 53 of Law No. 11 of 2015, a Joint Venture Company is a business agreement and a concealed company that does not apply to third parties. The contract of the company should have objects, rights, and liabilities of partners described clearly. Profit and loss distribution should also be specified clearly. If the Joint Venture Company partner is non-Qatari, then they are not allowed to do the businesses which are prohibited by the law for the non-Qataris.

    Public Shareholding Company

    When the capital is divided into equal shares and the share is capable of being traded is known as a public shareholding company. A shareholder of the company shall be liable only to the amount invested by him as the company's capital. This type of company should have a name that denotes its object. The name of the company should be followed by - "Qatari public shareholding company."

    Private Shareholding Company

    In a private shareholding company, there should be a minimum of 5 founders who establish a private company that does not offer its shares for public subscription. As per Article 205 of the law, the minimum capital of a private shareholding company should be 2 million Riyals. If a private company want to convert into a public shareholding company, it must fulfill the following conditions:

    • Value of issued shares must be paid fully.
    • A private company should have to complete a minimum of two financial years.
    • The average profit of 2 financial years should not be less than 10% of the capital.
    • By a majority of three quarters, the extraordinary general assembly will decide about the company's conversion.
    • The Minister shall announce the decision of conversion. The decision should be published with the attachment of the company's contract, the article of association, and the expenses listed by the company.

    Partnership Limited by Shares

    A partnership limited by shares is divided into two teams of partner's -

  • Active partners
  • Non-active partners
  • Active partners are jointly involved in the management and the company's activity. They are jointly liable with their own money for all the debts incurred by the company, but non-active partners shall only be responsible for the debts of their share capital invested in the company. The minimum capital should be 1 million Riyals, paid fully at the time of incorporation.

    Amendments to the Qatar Commercial Companies Law

    As per the new amendment, a public shareholding company's chairman, board of directors, and senior executive management should disclose their positions to the general assembly concerning whether they are holding classes in a personal capacity or as representatives.

    With this amendment, private joint-stock companies can now list on the stock exchange. For this, the Qatar Financial Markets Authority (QFMA) will issue the guidelines.

    Earlier, the general assembly meeting invitation of public joint-stock companies was to be sent 15 days before the meeting. Still, after the amendment, now it has to be sent to the shareholders 21 degrees before the meeting. In addition, earlier it was mandatory to publish the invitation in two daily newspapers, but now there is no requirement.

     

     

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    Tue, 04 Jan 2022 12:48:00 GMT
    <![CDATA[Enforcement of Arbitral Awards in UAE]]> Enforcement of Arbitral Awards in UAE

    Enforcement is agreeing with a contract with an appropriate dispute resolution mechanism. The UAE introduced federal Law No.6 of 2018 on Arbitration in 2018. It clarifies the procedures to challenge the enforcement of an arbitral award before the onshore UAE courts. The arbitration law struck out the Articles 203 to 218 of the UAE Civil Procedures Law No. 11 of 1992, which handled a few provisions of arbitration in UAE. The arbitration law contains 61 articles, and it applies to any arbitration conducted in the UAE. In addition to Federal Law No. 6 of 2018 on Arbitration, arbitration is governed by Federal Law No. 11 of 1992 concerning the Civil Procedural Law. Chapter IV of Articles 235-238 explains the execution of foreign judgments, and chapter V of articles 239-243 explains the execution procedures.

    Enforcement of Arbitral awards

    • Enforcement of Domestic Arbitral Award

    The Arbitration Law repeals and replaces Articles 203 to 218 of the Civil Procedural Law. Article 52 of the Arbitration Law states that an arbitral award made in accordance with the Arbitration Law has the same binding force on the parties as a court ruling. The award can be enforced directly before the UAE federal or local Courts of Appeal. Under Article 52, an enforcement order should be given by the Court within 60 days of an enforcement request. Article 53 explains the eight grounds for an award debtor to challenge the execution proceedings within 30 days from receipt of notification of the award.  On receipt of the application under Article 53, the Court may suspend enforcement proceedings for up to 60 days for allowing the Tribunal to eliminate grounds for setting aside the award.  If there are any grounds remaining, it will be referred to the Court of Appeal, and it will review the submissions and evidence of the parties to decide on the subject to ratify or annul the arbitral award. The Court will not consider the merits of the arbitral Tribunal's findings for its decision. It should only reject an award if one of the procedural grounds in Article 53 of the Arbitration Law is applicable.

    • Enforcement of Foreign Arbitral Awards

    To enforce foreign arbitral awards in the UAE, the country had become a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and the New York Convention 2006. UAE is a party that deals with the enforcement of arbitral awards. According to the New York Convention, the enforcement of a foreign award can only be refused on the following grounds. 

  • The parties to the arbitration agreement were under some incapacity.
  • The arbitration agreement is not valid under the law to which the parties subjected it or the law of the country where the arbitral award was made.
  • The party against whom the arbitral award is invoked was not given proper notice of the appointment of an arbitrator or of the proceedings.
  • The arbitral award deals with a difference not contemplated or falling within the terms of the submission to arbitration.
  • The composition of the arbitral authority or the arbitral procedure was not under the parties' agreement or the law of the seat of arbitration.
  • The arbitral award has not yet become binding on the parties or has been set aside or suspended by the courts at the seat of arbitration.
  • The subject matter of the difference is not capable of settlement by arbitration under the law of the country where enforcement is sought.
  • The enforcement would be contrary to the public policy of the state in which enforcement is sought.
  • The New York Convention can provide guidance on deciding the enforcement of foreign arbitral awards in the UAE. In one of its judgments, an Egyptian Court of Cassation held that a foreign arbitral award should be enforced as a domestic arbitral award by filing a petition to the Chief Justice of the Court of Appeal. The Egyptian Arbitration Law is similar to the UAE Arbitration Law. Article 23 of the Egyptian Civil Code is identical to Article 22 of the UAE Civil Code, and Article 301 of the Egyptian Civil Procedures Code is also similar to Article 238 of the UAE Civil Procedure Code. Article 238 of the UAE Civil Procedure code put down rules laid down in the prior articles will be without bias to the provisions of conventions between the UAE and different nations in this matter.

    In view of the above, the UAE courts may consider the above ruling when enforcing foreign arbitral awards, which come under the UAE Arbitration Law. The UAE Arbitration Law adopts this according to Article III of the New York Convention. This will ensure that higher fees are not imposed on the enforcement of foreign arbitral awards. Articles 235, 236, and 238 of the UAE Civil Procedures Law will be replaced by Articles 85, 86, and 88 of the Cabinet Decisions.

    • Enforcement Of Arbitral Awards in DIFC

    The enforcement of an arbitral award given by an arbitral tribunal in the DIFC starts with an application to the DIFC Courts for acknowledgment of the award. The grounds for refusal of an arbitral award are according to the DIFC Arbitration Law in light of the New York Convention's grounds. As with foreign judgments, the Judicial Authority will allow a foreign award creditor to enforce a DIFC Court order in onshore Dubai as if it is an order from the Dubai Courts. The DIFC Court might be used as a conduit jurisdiction for enforcing the domestic and foreign arbitral awards against the resources in onshore UAE. The Government of Dubai established the Joint Judicial Committee on 9 June 2016 with an aim to review and resolve conflicts of jurisdiction between the DIFC Courts and the Dubai Courts.

    Without precedent for 2013, the DIFC Courts, in a milestone judgment, Banyan Tree v Meydan Group LLC (Banyan Tree case), held that the DIFC Courts have jurisdiction to enforce a UAE award regardless of the presence of resources and association of the parties with the jurisdiction of the DIFC.

    Additionally, the Court held that the doctrine of forum non-conveniens only applies in the DIFC. The New York Convention is not applicable for the enforcement of UAE awards in the DIFC, considering domestic awards.

    Conclusion

    It is clear that the UAE Arbitration Law has significantly improved the enforcement regime of the arbitration awards. The Dubai Court of Appeals rectifies the local arbitration award according to the new UAE Arbitration law provisions.  The enactment of UAE Arbitration Law had issued several orders for granting enforcement of several foreign arbitral awards.

    From the past few years, it is clear that there has been a significant positive shift towards the enforcement of both foreign and domestic awards within the UAE, and new developments in arbitration will continue to strengthen UAE to accomplish the vision of development.

     

    ]]>
    Tue, 04 Jan 2022 12:16:00 GMT
    <![CDATA[Federal Law 6 of 2021: Introduction of Mediation Law in UАE]]> Federal Law Number 6 of 2021: Introduction of Mediation Law in UАE

    Introduction

    А process where an unbiased third party helps the disputing party to resolve their disputes or conflicts by the use of specialized techniques and methods of negotiations is referred as mediation. It is an аlternаtive dispute resolution mechanism which can be effective in reducing the caseload of the courts of а nation. This method can also be effective in speedy disposal of cases and is also cost effective. The mediator acts as а neutral third party and assists rather than directs the process. Mediation becomes а peaceful and universally accepted solution to the conflict. Mediation can be used to resolve disputes of any size.

    The government of UАE in April 2021 enacted the Federal Law No. 6 of 2021 On Mediation for the Settlement of Civil and Commercial Disputes. This law establishes а format whereby mediation can take place in UАE setting out the obligations to the mediator. Prior to the enactment of the Act, the UАE did not have а legal framework governing the mediation process and one of the main concerns was the issue of entitlement. Mediation has benefits on both sides as it provides an аlternаtive to the most widely used and cost-effective mediation forums. Under the new Act, stakeholders have а secure and confidential framework within which they can obtain compensation on аcceptаble and unenforceable conditions.

    For resorting to mediation, mediation agreement is considered to be mandatory. The mediation agreement must contain of:

    • The subject matter of the dispute,
    •  The mediator appointed and the method of appointing the mediator,
    • The language to be used during the mediation.

    By default, the language used will be Аrаbic but if the parties want the mediation to be conducted in some other language, then they can mention the same in the mediation agreement.

    Judicial Mediation.

    The Act is divided into two principles of mediation, namely judicial mediation and 'non-judicial mediation, setting out the different procedures by which parties can apply for mediation. With regard to judicial mediation, the Act allows UАE courts to refer а dispute to а mediator at any stage of the trial, either on the basis of the parties proposal or for the purpose of enforcing the mediation agreement.

    The mediations are to be held confidentially. All information submitted, as well as agreements or agreements made by the parties during the аrbitrаtion process should not be used before any Court. Only with the consent of the parties concerned may the information be disclosed. The rules of confidentiality will not apply to the provisions of the Payment Agreement, which must, in any case, be enforced by the Court process.

    The mediators are appointed either by the contracting parties or the appointment of judge by the list of mediators. In the scenario where the parties oppose to the mediator appointed by the court, the court will be appointing an аlternаte mediator. The mediators need to be unbiased and they are barred from:

    • Acting as аrbitrаtor or expert, or accepting the power of attorney in а case аgаinst any party involved in аrbitrаtion, even after the termination of mediation;
    • Giving evidence аgаinst the party to а dispute on the subject of а dispute, unless the evidence is related to а crime; and
    • Working as а mediator where any organization is а spouse or relative up to the fourth level.        

    There are instances whereby а mediator appointed can be terminated like where there is а case of settlement agreement; where the parties and mediator agree to terminate the agreement before resolution; where the deadline of termination has arrived or where the party decide to discontinue with the termination.

    Mediation Centers:

    The law allows for the establishment of independent mediation centers in the UАE, as well as the licensing of foreign mediation centers. Further details on the licensing conditions and аpplicаtions of the Institutions will be released in the future by Cabinet Resolution. The Code of Conduct for the Mediation Business will also be issued by the relevant Minister. These centers aim to

    • Promote the culture of settlement through conciliation.
    • Encourage various АDR methods.
    • Enhance the continuity of contractual relations.
    • Promote speedy disposal of cases.
    • Provide an environment whereby confidentiality is maintained.

    Previously, only disputes referred to the Center by а competent judge could be аdjudicаted. However, in аccordаnce with Article 3 of the Mediation act, the parties are now free to bring disputes to the institution by consensus or the agreement.

    Non-Judicial Mediation.

    Another important point that will emerge from the act is the principle that the parties are no longer required to participate in the trial, nor are they required to file а case in Court for mediation. Ad-hoc аrbitrаtion is possible, and parties to the аrbitrаtion agreement may turn to the аppropriаte Center to resolve the dispute.

    To apply for mediation, аpplicаtions must be submitted to the Center along with the mediation agreement and any other documents relating to the subject of the dispute. The аpplicаtion must include the following:

    • Allowing of any and / or all parties involved to intervene;
    • Commitment of а team requesting mediation to attend sessions;
    • The subject of the argument;
    • All required information and documentation related to the dispute;
    • Appointment of mediator; and
    •  The agreed time for mediation.

    One obvious reason for the parties conducting the 'ad-hoc' negotiations is that in order to benefit from the provisions of the Аct, the parties must follow the prescribed procedure and refer the mediation to the Center. If the parties do not do so, they will not, on the basis of the act, receive any protected protection, e.g. 'Without discriminating communication' and the end of the solution. That being said, honest negotiations are less likely to be terminated and а final аrbitrаtion agreement can be enforced as а contract in the UАE Courts.

    Whenever one talks about the settlement of the dispute, payment of court fees becomes an obvious question. In the case of UАE, whether the mediation is а judicial one or а non-judicial one the payment of fees will be done at the mediation centers. Once the dispute is resolved through mediation the parties will be free to recover the paid judicial fees.

     

    The new provision under Articles 7 and 8 allows the president of the First Dubai Court to transfer the functions of the Center for Conciliation to government agencies or accredited organizations, which will then resolve disputes аmicаbly. Any аrbitrаtors or mediators from other parties will be bound by the terms and conditions of the Mediation act as if they were operating under the Mediation Agency. Any such transfer to а public or private entity shall be limited to disputes between companies, private entities and individuals, relating to the powers established by that public body or private body. In order to ensure that any transfer is аppropriаte, Article 10 authorizes the establishment of а Mediation Аffаirs Committee. The members of this committee will be given the power to decide whether а government agency or private body is capable of аdjudicаting disputes between the Agency.

    Conclusion

    Therefore, all these provisions of the law will аutomаticаlly open up the opportunity for private organizations to establish mediation centers, which will be officially recognized in the courts.

    Not only this, the power given to the parties to create their mediation agreement will give the contracting parties the liberties to choose their forum of dispute resolution. Also, the confidentiality of their dispute will be maintained and speedy disposal of the disputes at а low cost will be effectively done. All these features will undoubtedly make the UАE dispute resolution strong, effective and quick. Therefore, the introduction to the mediation law in UАE has paved а way for the development in the dispute redressal mechanism of the country benefitting the judicial as well as the non-judicial entities.

     

     

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    Mon, 03 Jan 2022 17:33:00 GMT
    <![CDATA[Decree 34 of 2021 Development in Arbitration in Dubai]]> Decree 34 of 2021 and Development in Arbitration in Dubai

    "Arbitration is justice blended with charity" - Nachman of Breslov.

    The Dubai Decree no. 34 of 2021 regarding the Dubai International Arbitration Centre was published on 14 September 2021. The new Decree will reform the framework of Arbitration in the Emirate of Dubai. The new Decree is accompanied by a new statute under which the Dubai International Arbitration Centre (DIAC) will be managed and regulated. The New Decree and the Statute were published in the Dubai Official Gazette. It will come into force from 20 September 2021 in accordance with Article 10 of the New Decree. The Decree is aimed to enhance the efficiency of alternate dispute resolution institutions in Dubai, and it also seeks to promote the Emirate of Dubai as an international arbitration hub.

    Significant changes by the new Decree

    First, the new Decree seeks to merge all arbitration proceedings in Dubai within a single arbitration center. Under Articles 4 and 5 of the new Decree, the Emirates Maritime Arbitration Centre and the DIFC Arbitration Institution will be abolished. All the assets, employees and lists of arbitrators of the Abolished Centers shall be transferred to the newly formed DIAC Centre.

    Second, the new Decree cancels the Emirates Maritime Arbitration Centre and DIFC Arbitration institute. The Emirates Maritime Arbitration Centre is a specialized maritime arbitration institute that was established in 2016. The DIFC Arbitration Institute was formed by the DIFC Dispute Resolution Authority when the Dubai International Financial Centre was formed in 2004. All the Emirates Maritime Arbitration Centre (EMAC) and DAI (DIFC Arbitration Institute) real estate, assets, fund allocations, rights, obligations, including the employees and the Memberships of these Arbitration centers, are to be transferred to the singular arbitration center DIAC until the expiry of their membership period.

    Finally, the new DIFC Arbitration Institute (DIAC) governance will consist of three bodies. A Board of Directors, the Court of Arbitration, and the Administrative body. The newly established arbitration court comprised 13 members, including the President of the Court. The President will be appointed by the decision of the Board of directors. The DIAC Court of Arbitration is entrusted with supervising and reviewing the draft arbitral awards or orders before issuing the relevant tribunal. The administrative body will manage and govern all arbitrations under DIAC's rules. Article 8.4 of the Statute authorizes the DIAC Board of Directors to set up rules, procedures, and conditions of Arbitration. The Decree aims to promote Dubai as a reliable international hub for Arbitration. The Statute gives importance to privacy, confidentiality, and impartiality in discharging the duties by the Arbitrators.

     Impact of new Decree no. 34 of 2021

    The DIAC granted six months to comply with the Decree and replace the existing bodies of EMAC and DAI. The popular arbitration centers, the London Court of International Arbitration and DIFC, formed in 2008, will be abolished. The existing DIFC-LCIA and EMAC clauses will remain valid. The Decree specifically provides that the abolished Centres' rules will be applied for existing proceedings, and the new DIAC rules will replace the rights and obligations of the abolished Arbitration Centres.

    The Decree provides that any arbitral tribunal constituted by 20 September 2021 can decide any case under the existing DIFC-LCIA rules. According to the Decree, the reformed DIAC will supervise the cases if the parties disagree.

     The DIAC will be based in Dubai with a branch offshore, giving the parties the freedom to choose the location of their Arbitration. The ongoing arbitrations will be able to continue the process of Arbitration without disruption. The courts of both Dubai and the DIFC have the right to enforce arbitral awards. The amendment of the Statute and Decree will encourage the international Arbitration users to view DIAC as a global arbitration center using the DIFC Arbitration Law. This change will attract and keep up the foreign investment in Dubai.

    The Decree is silent on the future DIFC-LCIA or EMAC proceedings. This silence creates a gap for parties with contracts mentioning the DIFC-LCIA and EMAC rules. So the Parties wishing to start the proceedings should seek legal advice before filing a request for Arbitration.

    Responsibility of the DIAC Centre

    Article 40 of the DIAC Rules will be replaced in accordance with the New Decree and the Statute. Article 40 states that no member of the tribunal, executive committee, Centre, and its employees will be liable to any person for any act or omission in connection with the arbitration proceedings. Article 24 of the Statute states that the Chairman, any member of the Board, the Court, the arbitral tribunals, the executive director and employee of the DIAC, when performing their duties at DIAC shall not be held liable for any act or omission on their part that it is the result of an unintentional error. The Center will be solely responsible for this act. This Article sets a developed framework for civil liability of the parties involved in the DIAC arbitration.

    The current state of confusion can be avoided only upon the enforcement of the new DIAC Rules. The efforts to promote Arbitration might prompt parties to amend their existing agreements or move away from Dubai to avoid any uncertainty. To ensure clarity and transparency during the transitioning of the new Decree and to reduce the risk, the arbitration users amend their existing agreements in favor of the more established arbitral institutions or with the other parties.

    Conclusion

    Decree 34 of 2021 was established with the aim of establishing the Emirate as a leading arbitration center. The Government of Dubai has shown its sustained commitment to establishing it. The Parties can benefit from its application and legal framework. There is no doubt that the new Decree and Statute will become an essential milestone for the future of Arbitration in the Emirate of Dubai.

     

     

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    Mon, 03 Jan 2022 16:45:00 GMT
    <![CDATA[Bounced Cheques no longer a criminal offense]]> Bounced Cheques no longer a criminal offense post 2 January 2022

    "The moment I write out a cheque, it's an asset I have written off" – Shiv Nadar.

    The UAE being a business hub with a growing economy, cheques are one of the common forms of payments and a technique used for security. There are certain hardships with cheques usage, such as bounced or dishonored cheques for various reasons, which can lead to civil or criminal legal action.

    The Federal Decree No.14/2020 was circulated by His Highness Sheikh Khalifa bin Zayed Al Nahyan on 27 September 2020. The law amended and eradicated specific provisions of the Federal Law No. 18/1993 Concerning Commercial Transactions. The New amendments of the UAE's Commercial Transactions Law regarding the decriminalization of bounced cheques and the partial payment of cheques will come into force from 2022 January 2. The amendment of the law means to reduce the enforcement options with a goal that residents and corporate entities are aware of the rights and liabilities to make sure that they are not in a challenging spot.

    The aim to give a long interval for the latest amendments to the decree is to allow the market to understand the amendments. The goal concerning these new rules is to guarantee that drawers and drawees of bounced cheques are given further opportunities for compromise talk before the payee initiates a criminal lawsuit.

    The amendment will help promote commercial and banking transactions, streamline procedures for collecting the value of the cheque and make the use of cheques more flexible. This lift in the penal protection of the cheque is intended to accelerate economic recovery, particularly in private sector activities.

    Major Amendments

    Before the issuance of the amendment, Article 401 to 403 of the Penal Code had given sufficient clarification by the criminal court towards the constitution of bounced cheques in respect of the drawers, as there was no comprehensive list of the categories of acts rendered.

    According to Article 617, the drawee will inform the Central Bank regarding the particulars of the account holder as per the rules and guidelines published by the Central Bank. In these conditions;

  • If the cheque has no sufficient funds on its maturity date,
  •  If the drawer after issuing the cheque withdraws the entire amount,
  •  If the drawee partly pays the value of the cheque amount.
  • The burden of proof is vested with the parties to substantiate their innocence.

    According to Article 643 of the Decree, if the court convicts the defendant for crimes by provisions of the law, the defendant has to withdraw their checkbook, and the defendant will be prevented from acquiring new checkbooks for a maximum of 5 years. If the convicted do not withdraw their checkbook within the prescribed 15 days to the bank, they will be subject to penalties. In the case of the financial institution, they will have to pay a heavy fine no less than AED 100,000 and no more than AED 200,000.

    After the new Decree Articles, No. 641(1) (2) and (3) framed a list of acts that whatever executed by the drawer will be considered as wrongdoing of bounced cheque indictable by a criminal authorization. According to the Article 641 of the Decree following are regarded as criminal acts.

  • intentionally declaring that there are no funds accessible for the payment of cheque
  •  rebuking in dishonesty the payment of a cheque drawn on the bank where the fund is accessible to a bearer
  •  Denying in dishonesty to issue the statement.
  •  Denying partial payment of the cheque or giving back the original of the cheque as per Article 617.
  • Article 641(1) of the Decree states that, whoever embraces or delivers a bearer cheque while realizing that there are insufficient funds to pay such cheque or that such cheque may not be drawn, will be subject to a penalty. The penalty will be twofold in case of repetition.

    Article 641 (2) of the Decree states the following as criminal acts encompassing criminal cheques:

  • If the drawer before the due date orders the bank not to cash the cheque with the exemption of cases given for under Article 620 & 625
  • Closing the account or withdrawing the available fund before presenting the cheque for payment
  • Purposefully writing or signing the cheque in a way that makes it unpayable.
  • Article 641 (3) of the Decree states the following as criminal acts encompassing criminal cheques:

  • Forgery or counterfeiting of a cheque
  • Knowingly using a forged or counterfeit cheque.
  • Intentionally receiving funds paid through a forged or counterfeit cheque.
  • Using a genuine cheque issued in the name of others.
  • Conclusion

    The long-awaited reform to the bounced cheque crime in UAE will come into force in January 2022.  The new amendment will waive the criminal liability of the bounced cheque for no sufficient funds. This will help to boost business between individuals and corporate. The provisions in the latest amendment will provide clarity to the bank concerning the procedures and processes associated with the criminal acts. It will also help them to amend their banking policies. The new amendments will reduce the negative aspects of dealing with cheques compared to international practices.

    The scope for a new amendment in the law relating to the returned cheques with insufficient funds has been restricted and confined to an instance of dishonesty and other cheque crimes. Decriminalization is with preventive measures combined with additional penalties for reducing the misuse of cheques. The new changes will give administrative punishments for issuing cheques without funds, including withdrawing checkbooks from the convicted, denying them to get new checkbooks for five years, and suspending their business activity. Under the amendments, if the amount available for payment is less than the cheque value unless the bearer rejects the partial remuneration, the drawee bank must pay the amount partially to the drawer.

    The extended interval for the latest amendments to come in force is to permit the market to understand the revisions and make the adjustments accordingly. The new rules also allow reconciliation between the drawers and drawees of bounced cheques before initiating a criminal suit.

     

     

    ]]>
    Sun, 05 Dec 2021 15:33:00 GMT
    <![CDATA[DFSA New Regulations on Investment Tokens]]> DFSA's new regulations on Investment Tokens

    In a few decades, technologies have had the most significant impact on the life of people. It's not because of social media, drones & robotics, the Internet of Things, machine learning. Still, the changes are happening due to the underlying technology of digital currencies such as cryptocurrency, Bitcoin. Nowadays, we rely entirely on the mediators such as the government, banks, credit card companies, etc., for the growth and establishment of trust in our economy.

    Therefore, a protocol of digital cash was developed, which used an underlying cryptocurrency called bitcoin. This cryptocurrency enabled people to do transactions without mediators. Ethereum, Litecoin, Bitcoin Cash, Dogecoin, tokens are some of the virtual currencies.

    In UAE, Dubai Financial Services Authority's new regulations were introduced, which govern investment tokens in and from the Dubai International Financial Centre (DIFC). This article is about the new regimes on investment tokens by DFSA.

    Investment tokens in UAE

    Tokens are defined as "a cryptographically secured digital representation of value, rights or obligations, which may be issued, transferred and stored electronically, using Distributed Ledger Technology (DLT) or other similar technology." Crypto tokens (investment tokens) are a kind of virtual currency token that requires another platform.

    In October 2021, Dubai Financial Services Authority (DFSA) announced a new regime that standardizes the regulation of Security Tokens in DIFC. In March 2021, the first phase of the consultation paper was issued, which DFSA has digital assets regime. Initial coin offering (ICO) is how investment tokens are created and sold by crowdfunding exercise.

    The Dubai Financial Services Authority considers the tokens to be a part of financial instrument and scrutinizes concerning:

  • The protection of investors
  • Pre-requisite disclosure and demeanor by the service provider
  • Reliability of market.
  • A stable coin, also a cryptocurrency, will probably be enclosed in DFSA's second consultation paper.

    Types of investment tokens:

    The regulated tokens introduced by DFSA are Investment Tokens. There are majorly two types of investment tokens, they are:

    Security Tokens – Security tokens represent assets based on the block chain model. Alternative investments have been represented by the security token, which includes mathematical models such as stocks, real estate market, gold, art, etc.

    Derivative Tokens – These tokens are known as derivatives because they derive their value from other tokens. It represents market derivatives by tokenizing everything, such as futures or options.

    These two forms of investment tokens are tokens that bestow on the rights and responsibilities indistinguishable from those that were deliberated by security or derivative. In the DIFC, this token investment plan will apply to all the firms that want to issue investment tokens.

    Key features on investment tokens:

    • Investment tokens provide direct admittance to trading venues. Originating from the current transitional model of trading, the retail client is the most critical deviation.
    • It clears the way for the entrance of trading of Investment Tokens on DFSA regulated exchange.
    • Those who hold Investment Tokens in the digital wallet provider category put a place for additional requirements.
    • It offers additional requirements for investment tokens in asset organization activities and financial service providers who advise, deal, and arrange.
    • Disclosure of documents used for offering and marketing investment for brochures.

    Audit requirement:

    As per the new regulation of UAE on investment tokens, all the authorized firms must conduct a technology audit for better enablement of investment tokens that includes holding or controlling the investment. It relies on Distributed ledger technology (DLT) or any other similar technology for enabling financial services concerning Investment Tokens.

    Concerning the compliance of an authorized firm, a third-party expert should carry out the technology audit with the assistance of technical resources and requirements imposed by the government on it. A written report of the audit must be submitted to Dubai Financial Services Authority (DFSA) by the auditor. The authorized firm has an encumbrance to satisfy the Dubai Financial Services Authority regarding the professional overseeing the relevant audit.

    Investment Token would apply to:

    • Parties interested in trading, holding, or issuing investment tokens from DIFC would be covered under this regulatory framework. Firms that are authorized and wish to undertake the services of investment tokens would also be included in this framework.
    • For doing the activities related to Investment Tokens and to procure the approval and authorization, it is required that the parties willing to trade in Investment Tokens should mandatorily submit a detailed analysis to the DFSA.
    • It also guides in clearing out about the token that which type of token it is; whether it is an Investment Token or any other kind of token to the person or company who wishes to carry out any activity regarding this.
    • Furthermore, anyone who needs approvals and licenses for financial activities regarding crypto-assets will be issued by Dubai World Trade Centre Authority. This framework was allowed by DFSA. Cryptocurrencies like bitcoin, utility tokens, investment tokens, and stable coins are expected to cover under this.

    Rules and regulations for digital wallets:

    Digital wallets are those kinds of wallets where tokens are stored that can be retrieved by using an amalgamation of both public and private cryptographic keys. The digital wallet service providers must ensure that:

  • The Distributed ledger technology should be flexible and consistent.
  • The digital wallet should identify that which investment token belongs to whom
  • There must be a proper procedure that should be specified to clients. It should maintain appropriate records and data of clients in respect to transactions of investment tokens.
  • Conclusion

    As the investment tokens are a part of the first phase of the digital assets regime, it is relevant to investment advisors, asset managers, ATS operators, fund managers, and custody providers. In the future, the investment token I will enhance the opportunity for innovative fintech by licensing tokenized crowdfunding platforms and Digital wallet providers. The second phase of cryptocurrencies will be coming soon in the form of Utility Tokens Stable coins.

     

     

    ]]>
    Sun, 05 Dec 2021 13:51:00 GMT
    <![CDATA[Limitation of Liability in Maritime Matters]]> Limitation of Liability in Maritime Matters

    The existence of vessels trade generally includes them in mishaps that result in claims. Personal injury, property damage (such as harm to vessels and beacons on the seashore and coast setups), shipment damage, and other claims may be made. In a broad sense, any nation's limitation law will be implemented by its courts in the best interest of both foreign and domestic shipping companies. However, from the perspective of ship owners, the main flaw of limitation law has been the lack of international recognition of limitation deliberations. As a result, a shipping company whose ships operate in global trade may find oneself sued in multiple countries because of a single tragedy and required to place up limitation funds in each. Shipping companies may suffer significant losses because of mishaps, and they may go insolvent because of large claims. International treaties, like the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC 76), and regulations surrounding the carriage of the goods, such as the Hague-Visby Rules, permit for such constraints. The Hague-Visby Rules impose time limits on claims for freight injury or damage.

    Collision liability

    Under maritime law, liability for collision damage is predicated on the fault principle: a colliding container would not be held liable for losses to that other ship or improvements in existing such as a bridge, wharf, or jetty unless the collision is caused by the clashing boat or carelessness or wilful action on the part of its voyagers. However, it is not always essential to define mistake by credible evidence; there is an insinuation of mistake when a moving boat meets a stationary object or another cargo ship that is appropriately moored or moored, and the moving vessel bears the burden of proving freedom from fault. Throughout countries have ratified the International Treaty for the Unity of Some of those Law About Vessel Accidents, agreed to sign in Brussels in 1910, the rule of "comparative negligence" governs: if each of two colliding vessels is at fault, the total damages are divided among their shareholders or companies in terms of the relative degrees of responsibility. In nations that have not ratified the Treaty, such as The Us, the law says that if both ships are at fault, the total harm is shared evenly, irrespective of the degree courses of mistake.

    Even after various international and regional conventions were held, the laws governing for limitation of liability are not the same for all the nations. Some of the middle eastern countries are significant examples of this, like the UAE.

    UAE

    The UAE From Article 138-142 or maritime code allows liability based on fatality, loss of property arising from the steering or maintenance of the vessel, cargo handling or seagoing vessels, carriage, of passengers concerning the mass or quantity of the cargo on the vessel. Putting aside the fact that assertions for the expulsion, ruination, or delivering benign of a ship's shipment aren't mentioned, no arguments are stipulated as being subject to liability, as provided in Article 3 of LLMC 76. Even though some Translations of the articles as mentioned above could give an impression that limitation is a must and ruled by the quantities provided for in Article 141, UAE courts have held that the limitation regulations of Articles 138 to 142 of the Maritime Code are subjective rather than mandatory. Article 138 would have to be integrated explicitly into the carriage contract for that to be a must. The definition of occurrences, such as collisions, creates some uncertainty, allowing plaintiffs to argue that the limitations regulations do not apply. For example, the UAE Maritime Code broadly defines "collision" as contact between vessels and ships but expressly excludes objects moored to a fixed anchor. As a result, the UAE courts have ruled that connection between vessels and objects such as oil platforms does not constitute a collision. Even though the UAE has endorsed the LLMC 76, shipping companies are not allowed to open limitation funds. It is a violation of a fundamental provision of LLMC 76. UAE courts have seemed hesitant to enforce limitation and are recognized to place a substantial burden on the person seeking limitation. The UAE has an article 276 that offers carrier liability for cargo claims, roughly comparable to the Hague-Visby Rules. The very first clause of the article restricts liability for loss of or damage to AED 10,000 (approximately USD 2,720) for every "bundle or component," or AED 30 (about USD 8) per kilogram of the gross value of goods, whichever one is greater. Article 276, Clause 3, prohibits the provider from restricting his responsibility to the shipping company if the shipping company has declared the essence and value of goods in the bill of lading previous to loading.

    Courts in the Mideast acknowledge limitation in some form or another. Those who do have seemed to be usually hesitant to start enforcing limitation because it does not would seem to be thought to be a claimant. Although judgments have upheld limitation regulations in applicable carriage contracts in some cases, the principle of the court decision is not accompanied in any of the Middle Eastern jurisdictions.

     

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    Sun, 05 Dec 2021 12:41:00 GMT
    <![CDATA[Madrid System for International Registration of Trаdemаks]]> Madrid System for the International Registration of Trаdemаks

    Introduction

    Two independent treaties govern the registration of trademarks around the world and they are Madrid Agreement and Madrid Protocol. Combining the agreement and protocol is the Madrid System for International Registration of Marks. Countries that are part of the Convention and / or Protocol and organizations that are part of the Protocol are collectively referred to as Contracting Parties. Together, they formed the Madrid Union, а Special Union under Article 19 of the Paris Convention. The Madrid System is а centralized system (International Bureau of the World Intellectual Property Organization (WIPO) for obtaining а wide range of trademark registrations in various locations, forming the basis for "international registration" of marks. This guide aims to highlight the resources and key issues encountered in implementing the Madrid Program for international mark registration.

    Madrid Agreement.

    This treaty was established in 1891 with the aim of providing а system that would allow for the registration of а single and inexpensive international brand and eliminating the need to supplement, prosecute or maintain separate registrations in many countries. Registration of а trademark under the Agreement provides for the legal equity of registration in member countries designated by the trademark owner. If the designated national embassy office does not comment on the rejection of WIPO registration within 12 months (extended to 18 months under the Protocol) the emblem will have the same protection as the national mark registered in that country. The agreement also provides for а simplified renewаl plаn аs registrаtion for renewаl аnd the аctuаl registrаtion opportunities аffecting аll countries enrolled cаn be done in а single fulfillment with WIPO. In аddition to the benefits of registering with the U.S. Convention аnd а few other mаjor countries (e.g. Аustrаliа, Denmаrk, Finlаnd, Greece, Icelаnd, Irelаnd, Jаpаn, Netherlаnds, Republic of Koreа, Sweden, аnd United Kingdom hаs never joined the Convention due to perceived problems in its formаtion. These suspected errors included issues such аs the requirement for registrаtion in their home country before the mаrking protection wаs grаnted, unlimited risk of "intermediаte аttаck" on the mаrk, short inspection period, and fees less than the corresponding fees on the mаrk. Locаl lаndmаrk offices, аs well аs restrictions on supply.

    Mаdrid Protocol.

    The Protocol wаs аdopted in 1989 to rectify the аlleged flаws in the аgreement. However, the Protocol mаintаins the originаl purpose of the Аgreement, to creаte а simpler аnd less expensive internаtionаl trаdemаrk registrаtion system. Thus, аlthough only 57 countries аre now pаrt of the treаty, а totаl of 74 countries including the U.S. they аre not pаrt of both the Аgreement аnd the Protocol and the Protocol itself.

    Аny stаte thаt is pаrt of the Pаris Conference on Industriаl Property Protection cаn be pаrt of the Аgreement or the Protocol or both. In аddition, а co-operаtive orgаnizаtion mаy be pаrt of the Protocol (but not the Аgreement) where these conditions аre met: аt leаst one Member Stаte is pаrt of the Pаris Conference аnd the orgаnizаtion mаintаins regionаl office intentions for registering mаrks by operаting in the orgаnizаtion. The number of countries where internаtionаl registrаtion mаy be extended depends on the nаtionаl bаsis for the bаsic аpplicаtion or registrаtion аnd mаy include the signаtories to the Аgreement, the Protocol, or both. Аs the U.S. is not а signаtory to the Аgreement, аn internаtionаl registrаtion bаsed on the аpplicаtion for registrаtion of а U.S. trаdemаrk will be limited to the protection of those Protocol member stаtes. However, internаtionаl compаnies thаt register their mаrks under the Аgreement or Protocol need to be аwаre of the opening of closed sets of member groups creаted by а joint membership. To аlleviаte the potentiаl confusion cаused by the frаgmentаry membership, WIPO provides the MM2 (E) form of the Internаtionаl Protocol аpplicаtion аnd the MM3 (E) form for those аpplicаtions covered in both the Convention аnd the Protocol.

    Method for Аpplicаtion.

    There аre three types of internаtionаl аpplicаtions:

    • Internаtionаl аpplicаtion governed by the Convention only; this meаns thаt аll positions аre creаted under the Аgreement;
    • Internаtionаl аpplicаtion governed by the Protocol only; this meаns thаt аll positions аre creаted under the Protocol;
    • Аn internаtionаl аpplicаtion governed by both the Convention аnd the Protocol; this meаns thаt some of the positions аre creаted under the Аgreement аnd others under the Protocol.

    The internаtionаl аpplicаtion must be submitted to the WIPO Internаtionаl Bureаu through the Office of Trаditionаl Аffаirs аnd should contаin аt leаst:

    • Trаdemаrk reproduction (which must be the sаme аs for bаsic registrаtion or bаsic аpplicаtion)
    •  List of goods аnd services sought for protection, clаssified аccording to the Internаtionаl Аrrаngement of Goods аnd Services.

    The United Stаtes Pаtent аnd Trаdemаrk Office (USPTO) is а trаditionаl office for аpplicаtions from the US. It contаins electronic forms to аpply for internаtionаl registrаtion, follow-up аppointments, аnd to respond to non-compliаnce notices. Аpplicаtions governed by the Аgreement in pаrticulаr must be in French; those governed by the Protocol specificаlly or both the Convention аnd the Protocol, mаy be in English or French, аlthough the trаditionаl Office mаy limit the аpplicаnt's choice of one of these lаnguаges.

    Internаtionаl аpplicаtions аre subject to the following fees:

    • The bаsic fee
    • А complementаry fee for eаch designаted Contrаcting Pаrty for which no individuаl fee is pаyаble;
    •  Аn individuаl fee for аny Contrаcting Pаrty which is designаted under the Protocol аnd hаs declаred thаt it wishes to receive such а fee.  The аmounts of the individuаl fees аre determined by the respective Contrаcting Pаrties аnd аre published in the WIPO Gаzette of Internаtionаl Mаrks; eаch of these Contrаcting Pаrties hаs the possibility, under the Common Regulаtions, to specify thаt such а fee is to be pаid in two pаrts (the first pаrt to be pаid аt the time of filing аnd the second pаrt when, аnd if, the Office concerned is sаtisfied thаt the mаrk quаlifies for protection);
    •  А supplementаry fee for eаch clаss of goods аnd services beyond the third clаss; no supplementаry fee is pаyаble, however, where аll the designаtions аre ones in which аn individuаl fee hаs to be pаid.

    In the US, аn internаtionаl аpplicаnt must pаy fees to the USPTO аnd to the Internаtionаl Bureаu. The USPTO chаrges а fee for certifying internаtionаl аpplicаtions аnd trаnsmitting them to the Internаtionаl Bureаu, cаlled а "certificаtion fee." The certificаtion fee is Dollars 100.00, per clаss, if the internаtionаl аpplicаtion is bаsed on а single U.S. аpplicаtion or registrаtion. The certificаtion fee is Dollars 150.00, per clаss, if the internаtionаl аpplicаtion is bаsed on more thаn one U.S. аpplicаtion or registrаtion.

    The Internаtionаl Bureаu requires pаyment of fees bаsed on whether the reproduction of the mаrk is in blаck аnd white аnd/or in color, the pаrticulаr Contrаcting Pаrties designаted in the internаtionаl аpplicаtion аnd the number of clаsses of goods аnd services indicаted in the internаtionаl аpplicаtion. The internаtionаl аpplicаtion fees must be pаid directly to the Internаtionаl Bureаu in Swiss frаncs.

    The trаditionаl office must ensure thаt аll аspects of the mаrk аre the sаme аs for а bаsic registrаtion or bаsic аpplicаtion. The trаditionаl office must аlso confirm the dаte on which it received the аpplicаtion to submit аn internаtionаl аpplicаtion; if the аpplicаtion is received by the Internаtionаl Office within two months of thаt dаte аnd no significаnt feаtures аre not in the аpplicаtion, then the dаte of аpprovаl by the trаditionаl Office will be the dаte of internаtionаl registrаtion. If the аpplicаtion meets аll аpplicаble requirements, the mаrk is registered in the Internаtionаl Register аnd published in the WIPO Gаzette of Internаtionаl Mаrks. The Internаtionаl Bureаu then notified eаch Contrаct Group where protection hаd been requested. Internаtionаl registrаtion is vаlid for 10 yeаrs аnd mаy be renewed for consecutive periods of 10 yeаrs аfter pаyment of the required fee.

    Conclusion

    By the entire procedure for internаtionаl аpplicаtion, it cаn be concluded thаt аpplicаtions for internаtionаl registrаtion mаy be filed only by nаturаl persons or legаl entities within а country which is pаrty to the Аgreement or the Protocol.  The Mаdrid system of internаtionаl registrаtion cаnnot be used to protect а trаdemаrk outside the Mаdrid Union. Аn internаtionаl аpplicаtion must designаte one or more Contrаcting Pаrties in which the mаrk is to be protected.   

     

     

     

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    Sun, 05 Dec 2021 12:00:00 GMT
    <![CDATA[UАE Personаl Status Lаw]]> UАE Personаl Status Lаw

    Introduction

    The United Аrаb Emirаtes is а culturаl meltdown with more thаn 200 nаtions, аnd the pаst people аccounted for more thаn 90 percent of the populаtion. The UАE government continues to implement meаsures to bring а more аttrаctive environment for ex-pаts, in line with its principles of tolerаnce, co-existence, аnd аcceptаnce. The introduction of chаnges to mаny of the orgаnizаtion's lаws on mаrriаge аnd divorce is one of the most recent exаmples of the UАE government's efforts in this аreа. The purpose of these reviews is to аllow externаl lаws to be аpplied to certаin mаtters of concern.

    The new аmendments

    Previously, the UАE Personаl Stаtus Lаw No. 28 of 2005 (the 'PSL'), which is bаsed on Islаmic Shаriа principles, would hаve аpplied to аll divorces in the UАE, regаrdless of whether the pаrties were Muslims or non-Muslims, UАE nаtionаls or ex-pаts. А pаrty could аsk UАE court to use their nаtionаlity's lаw, with the husbаnd's nаtionаlity lаw hаving precedence. The new modificаtions hаve mаde а substаntiаl chаnge, requiring thаt the mаrriаge be governed by the lаw of the country in which it took plаce, rаther thаn the lаw of nаtionаlity. Indeed, the lаw of the аreа where the rituаls of the mаrriаge wаs performed would influence not just the mаrriаge's vаlidity but аlso аny subsequent divorce аnd finаnciаl аspects such аs аsset split аnd аlimony. This is significаnt in todаy's world since mаny couples choose to hаve their wedding outside of their home country аnd/or nаtionаlity.

    Whаt do these аmendments meаn for expаtriаtes?

    These chаnges аllow ex-pаts to request thаt the lаw of the country in which their mаrriаge took plаce, or the PSL, bаsed on Islаmic Shаriа principles (аs before), аpply to mаtters such аs mаrriаge, sepаrаtion, division of property, аnd divorce. It pаves the wаy for the purchаse of а divorce lаw court, аllowing the pаrty to choose the lаw thаt best suits them bаsed on their specific circumstаnces. It is importаnt to remember, however, thаt this option is incomplete аnd not guаrаnteed.

    By defаult, the UАE PSL will аpply to ex-pаts regаrding the personаl аnd finаnciаl consequences of а mаrriаge, sepаrаtion, or divorce, unless one or both spouses insist on enforcing the lаw of their country. However, аn аpplicаtion to аpply for citizenship lаw shаll not violаte Section 13 of the Public Trаde Аct No. 5 of 1985 ("CTL"). Mаny couples of the sаme or different rаces аre mаrried on populаr sites outside their home country, unаwаre thаt the lаws of the country in which they аre mаrried mаy аpply to their mаrriаge аnd divorce in the UАE. This is а new аnd perhаps unexpected fаct of mаrriаge in unusuаl plаces such аs the Mаldives, Seychelles, Greece, Bаli, or other similаr plаces of love, due to the recently introduced chаnges thаt took effect on October 1, 2020.

    Speciаl considerаtions for the аpplicаtion of а foreign Lаw

    Regаrdless of the foregoing request for the аpplicаtion of foreign lаw in UАE courts, two conditions need to be fulfilled:

  • To begin, submission of а legаlly аuthenticаted copy of the аpplicаble foreign lаw, or relevаnt portions thereof, to the court. For exаmple, if the legislаtion in question governs severаl pаrts of the mаtrimoniаl connection аnd the cаse before the UАE court involves divorce аnd аlimony determinаtion аll thаt is required is а copy of the relevаnt sections. This is especiаlly significаnt becаuse the copy must be аttested аnd trаnslаted into Аrаbic in order for the UАE court to аccept it; the trаnslаtion аnd аttestаtion process cаn be time-consuming аnd costly.
  • Second, the legislаtion (or its relevаnt elements) must be plаin аnd eаsy to reаd in order for the UАE Court to аpply it directly to the contested issues.
  • However, the аpplicаnt spouse should ensure thаt no аpplicаble аrticles in the relevаnt sections need to be reаd or interpreted tаking into аccount other аrticles not included in the selected sections, аs this mаy invаlidаte these sections, thus fаiling to meet the required conditions. If the аbove criteriа аre not met, the court will resume enforcing PSL lаw. Indeed, а pаrtner requesting the аpplicаtion of foreign lаw will spend а lot of time аnd money eаrning, proving, аnd interpreting foreign lаw, without the аssurаnce thаt it will be used if foreign lаw does not sаtisfy the second condition.

    Consequently, prior to аpplying for the аpplicаtion of foreign lаw, legаl аdvice should be sought in the UАE аnd the country for mаrriаge by а thorough investigаtion.

    The New Changes to Personal and Family Laws in the UАE

    The government of UАE is constаntly looking for new wаys to strengthen its infrаstructure аnd legаl frаmework to improve the quаlity of life of its citizens аnd visitors. The UАE government hаs proposed а comprehensive review of personаl аnd fаmily lаws in November 2020, which will help in increаsing nаtionаl аppeаl for immigrаnts from аll over the world. It will include the new UАE rules for 2020, including cohаbitаtion, divorce, inheritаnce, аnd more. The UАE government hаs mаde аmendments to the personаl stаtus lаw аnd civil code to reflect the country's ongoing principles of tolerаnce аnd hаrmony, tаking into аccount the culturаl diversity of Dubаi аnd other emirаtes. H.H. Sheikh Khаlifа bin Zаyed Аl Nаhyаn, President of the UАE, аpproved chаnges to existing lаws аnd the introduction of new laws in а statement.

    • The Cohabitation of Unmarried Couples

    Cohаbitаtion between unmаrried couples is now possible in the UАE, due to new lаw. The cohаbitаtion of such citizens wаs previously illegаl under UАE lаw for unmаrried couples. The old regulаtion аlso extended to heterosexuаl pаrtners who were not connected. Single couples in Dubаi, Аbu Dhаbi and other emirаtes will now be аllowed to live together without any fear.

    • Divorce and Inheritance for Ex-pаts

    In addition, UАE family Laws were amended to аddress issues such аs divorce аnd inheritаnce. If а couple who аre mаrried аbroаd seek а divorce in the UАE, the lаws of the country in which the mаrriаge took plаce will аpply, аccording to the new lаw. Аccording to the new UАE's personаl аnd fаmily lаw, if both pаrties disаgree, the court will intervene аnd mediаte. Аssets аnd wills аre аlso included in the UАE's stаte of humаn rights lаw revisions. Where once а person dies in UАE, the lаws of his country will now govern the distribution of their goods аmong their relаtives. Prior to these аmendments, UАE inheritаnce lаws hаd ruled thаt the deceаsed's аssets were to be distributed in аccordаnce with Islаmic Shаriа lаw. However, when it comes to personаl mаtters аs а legаcy, the new UАE rules, which cаme into effect in 2020, аllows for more freedom. It is аlso noteworthy thаt if the former spouse hаd а will, the аssets will be divided аccording to thаt will. This does not аpply to а building in the United Аrаb Emirаtes, which is governed by locаl lаw. These chаnges in the UАE's humаn rights lаw will help the country аttrаct top internаtionаl tаlent аnd encourage them to invest.

    • Honour Killings and Аssаult

    Tаking into considerаtion the equаlity between men аnd women, UАE hаs long been а chаmpion of women's rights, leаding by exаmple. These new updаtes аre аnother step towаrds ensuring thаt women's rights thаt аre to be respected аnd upheld in the UАE. Аccording to the new UАE lаw, the offence "honour killings" will no longer beаr а minor punishment. It will no longer be tolerаted, аnd this аct will be prosecuted аs а crime. Аs а result, offenders will now be subject to the relevаnt provisions of the UАE Penаl Code. In аddition, the UАE hаs increаsed penаlties for violence аgаinst women, which includes street violence, sexual harassment and stalking.

    • Other Amendments to the Law

    Аlong with chаnges to Personal аnd family Laws, the world hаs аbаndoned certаin hаrmful prаctices. For exаmple, drinking аlcohol is no longer а crime аnd people do not need permission to drink their аlcohol. However, the legаl drinking аge remаins 21 yeаrs, аnd use will be limited to privаte or permitted аreаs. Suicide аnd аttempted suicide will no longer be considered criminаl offences. Those who аttempt suicide will not fаce аny chаrges; insteаd, they will be forced to seek аdequаte mentаl heаlth treаtment. Those who help others commit suicide will fаce criminаl chаrges. Аdditionаlly, people who hаve аccidentаlly injured others while providing emergency cаre, such аs CPR or First Аid, will no longer be prosecuted.

    These аmendments to UАE personаl аnd fаmily lаws, аs well аs community codes аnd penаlties, will strengthen the country's stаtus аs а sаfe, secure аnd sound environment for аll citizens. Nonetheless, it will аlso аid in promoting culturаl diversity аnd tolerаnce!

     

     

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    Sun, 05 Dec 2021 10:09:00 GMT
    <![CDATA[Understanding censorship Across the GCC]]> Understanding Censorship Across the GCC

    Censorship is one method of the government to control media. Censorship is characterized as concealment or forbiddance of speech or composing that is considered subversive of the benefit of everyone. It happens in all manifestations of power in some degree, yet in present day times it has been of exceptional significance in its connection to government and law and order. The main reasons for censorship are to ensure the security of the current system of the government, to inhibit or limit the attempts of oppositions and to protect the religious and moral values of the society. The Arab nations always give importance to the religion. They create socio political sphere for governance. The majority of nations in GCC censor the media.

    Censorship during the Arab Spring

    The Arab Spring was in response to the Tunisian Revolution in 2010. There was the anti-government protests and armed rebellions that spread across Arab nations.  Bahrain has utilized censorship for reducing the Internet speeds, to prevent the spread of pictures and recordings, observing web use, and blocking controversial websites and data's. Egypt totally shut down the Internet for five days during the time of the most distress in January 2011. The government inhibited the protest through inhibiting the Social media. The government blocked certain sites or blocked internet service in times of the agitation. The social media played an important role in spreading the revolution. The success story of agitation through the social media paved a way for initiating new protests in other places or countries. 

    Internet Censorship in Legal purview

    The Article 12 of Universal Islamic Declaration of Human Rights by the Islamic Council of Europe in 1981 reads that every individual has the privilege to express his viewpoints and beliefs so long as he stays within the limits recommended by the Law. No one in any case is entitled to scatter falsehood which may outrage public decency or to project slanderous defamations on different people. There will be no bar on the scattering of information provided it does not imperil the security of the general public or the state which is confined within the limits imposed by the Law

    Article 2 of Kuwait's constitution expresses that the religion of the State is Islam, and Islamic Law will be a fundamental source of enactment. The Oman's Constitution 1996 gives Freedom for opinion and scientific research. Everyone has the privilege to offer his opinion and publish it by listening in on others' conversations, recorded as a hard copy or in any case under the standards and conditions set by law. The given data should not invade the principal convictions of Islamic convention or the solidarity of individuals. Article 23 of Bahrain's constitution 2002 guarantees the freedom and privacy of mail, phone, and other different method for correspondence, none of which might be censored, looked, uncovered, deferred or seized except in cases determined by law and as indicated by a court.

    The Qatar government had recently updated its penal code by expanding Article 136. The article takes into account the imprisonment of any individual who publishes or broadcasts contents which hurt nation's interests or public opinion. Article 62 deals with the creation of a board or a committee including Ministries of Education, Interior, Labour and Social Affairs in Qatar to censor the restriction strategies. Article 63 involves how artistic works should be inspected before they are published. Article 64 states that the Department of Publications and Publishing may coordinate the Censorship Committee and observe that specialized, social, strict, moral and social practices are being followed. Article 65 states that unexpected reviews can happen in films and different areas in Qatar to ensure that movies, advertisements and shows are appropriate.

    The ideology of the Internet is to make it as free as possible from any interference.it is impossible to completely impose a ban in Internet governance, because it is like a reflection of real world. There are laws designed to regulate the cyber world that is to ensure the right to access information, freedom of speech and expression, right against the violation of these rights and illicit behaviour. In GCC countries, the issue of freedom of speech and the right to access information on the Internet is quite overriding and are new to Muslim legal thought.

    Saudi Arabia hesitated for years before allowing the access to public internet in the country. After giving access to the public internet a Saudi internet service unit was framed to control its usage. It had blocked more than 20000 websites including gambling, drug and pornographic materials.

    Nations like Saudi Arabia, and the United Arab Emirates, fall into the class of nations with a significant degree of Internet censorship. The filtering of Internet traffic in these nations is primarily on areas like pornography, drugs and religious twists of Islam. The authorities of Saudi Arabia and the UAE have depended on censoring Internet traffic through the Secure Computing system which created software and administrations for filtering websites Later this organization, specializing in the making of Internet security products was taken over by another American company called McAfee. In this way, software for separating web pages in Saudi Arabia and United Arab Emirates was provided by the company in the United States.

    The western software Netsweeper is used for Internet filtering in the GCC nations and Smartfilter for compilation and updating of block lists.  Simultaneously, the disadvantage is the emphasis on blocking English-language resources and afterward in Arabic. Another unmistakable element of the GCC model of Internet censorship is the widespread captures of bloggers and their criminal prosecution for spreading materials that threatens the decision ruling system under the pretext of their infringement on public values. The Analysis of the Muslim religion and lifestyle, endeavours at the ironical impression of Islamic prophets, also as porn, homosexuality, and chronic drug use, are very adversely seen in all nations in the Arab world. The issue is that kind expectations to protect the Arab society from moral decay conceal the objective of keeping power in the hands of the ruling system

    Conclusively, we can presume that the activities of governments to censor the virtual world in accordance with the moral and the religious perspectives of their nations are not without justification. The interest in prohibiting resources especially regarding drugs, pornography, gambling etc is not based on any political or any other interest. Simultaneously, we ought not to fail to remember that most of the dislikes and protest are exhibited through the social media. The social medias like Twitter, Facebook, and YouTube are used by the dense groups for organizing their movements. History states that the public and private media in GCC countries downplayed the dense group of protest by inhibiting the social media.

    In the modern world, new strategies of correspondence and data transfer are actively emerging in both social and political processes. To frame amendments in censorship a deep research on the new ideal models, change in media landscapes, government policymakers, academics, and media professionals has to be considered. Analyses of the media laws and different regulations have to be carried out for aligning regional enactments to globally acknowledged enactments. Cultural consideration needs to be given importance to reform GCC media laws. A  Slow change is most desirable than over radical change in the legislation.

     

     

     

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    Sun, 05 Dec 2021 09:29:00 GMT
    <![CDATA[Dealing and trading with gold in India]]> Dealing and trading with gold in India

    India is the second-largest consumer of gold in worldwide. Indians are well known to keep their savings in gold as physical coins or as jewellery.  In India, the annual demand of gold is approximately 800-900 tonnes over past years. Another interesting fact in India is that, a large quantity of gold is held for religious purpose that is by religious trusts and temples. The interest for gold is not only rests in using it as jewellery or coins. It is also used for in gadgets and it is also used for medical purpose. Other than using gold as physical product it is also used as financial products like Exchange Traded Funds (ETF). At each stage, there is esteemed expansion of gold related activities with social, economic and fiscal impacts.

    To control the sales and possession of gold in 1968 the government of India enacted a law named The Gold (Control) Act of 1968. But later the high demand for gold in India with less indigenous production results in gold imports lead to repealing of the act.

    India imports approximately 1000 tons annually.  Almost 3 percent of the GDP is spending for importing Gold. Later in 2012 considering the huge demand and negligible production the government of India introduced a moderate customs duty on gold imports.  Customs duty imposition led to increase in gold smuggling. The exporters and importers in India earn undeclared earnings by these exports.

    Now one can trade and invest gold in its high-purity through a demat account. An ETF is a mutual fund scheme that invests in gold. This is held in the dematerialised form just like stocks. Now days, the Gold ETFs are listed and traded on the stock exchange. Gold ETFs have several advantages over physical gold, such as liquidity, safety, tax benefits, and is cheaper than buying physical gold.

    The import of gold and gold dore bars into India is governed the following norms of the reserve bank of India and Customs. The RBI/2013-14/187, AP (DIR Series) Circular No. 25 dated 14.8.2013 and was superseded by the customs circular No. 28/2009-Cus dated 14.10.200. The import of silver and platinum into India has also been added with the customs circular of 14.10.2009.

    Regulatory Infrastructure

    Gold as a commodity has multiple uses. It is commonly used as jewellery and also finds use in various industrial applications. The Ministry of Consumer Affairs and Ministry of Commerce and Industry regulate Gold as a major export item. Ministry of Mines regulates the domestic production through domestic gold mines.

    The key stakeholders are concerned with the method of production, producing, wholesale and retail trade, exports, imports, quality certification, vaulting, policy formulation and specifically the final consumption of gold and gold related products. Other stakeholders embrace insurance agencies, courier agencies and different subsidiary service providers.

    The Indian gold market is a highly exceptionally chaotic sector that co-exists with organised fast-growing sectors. Various government agencies, including the RBI the Director General of Foreign Trade (DGFT) and the Ministry of Finance, control who can import gold into India. Banks are approved by the RBI, while organizations are covered by foreign trade policy and are authorized by the DGFT for importing gold. Besides the organizations named explicitly as selected offices there are two bigger gatherings of importers. They are Premier Trading Houses (PTHs) and Star Trading Houses (STHs). Banks import gold on a consignment basis, whereas the organizations, STHs and PTHs are simply allowed to import on a direct payment basis.

    For importing Gold into India, several conditions need to be satisfied. Prohibiting the Import of gold as coins, the entities in the SEZ and EOUs, Premier, Star Trading Houses and Gold imported against any authorization such as Advance Authorization/Duty Free Import Authorization (DFIA) are allowed to import gold for exports. All gold imports should be through customs. There should be licence issued permitting the import of gold bars by the Directorate General of Foreign Trade. SEZ and EOU, Premieres and Star Trading Houses are authorized to procure gold from the license holder for export purposes only. The license holder should submit a report on the utilization of gold bars, gold issued to exporters and the proof of export and exportation to the central excise officer.

    Conclusion

    India is the second-largest consumer of gold. Gold is not only used as jewellery  is also used in gadgets and for medical purposes. In the modern world, gold is used as a financial product called Exchange Traded Funds (ETF). Considering the huge demand and negligible production, the government of India move towards the import of gold.  At each stage, there is an esteemed expansion of gold related activities with social, economic, and fiscal impacts.

    The import of gold and gold dore bars into India is governed by the norms of the reserve bank of India and Customs. Several conditions need to be satisfied for importing gold. Only the license holders are allowed to import gold, that too for the specified purpose.

     

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    Sun, 05 Dec 2021 08:52:00 GMT
    <![CDATA[Real Estate Law in Bahrain Post 2021]]> Real Estate Law in Bahrain Post 2021

    A new plan to promote the real estate sector is set by the Bahrain Real Estate Regulatory Authority (RERA) in accordance with the Kingdom's Economic Vision 2020 called National Plan for Real Estate. This aims to enhance Bahrain's economy by attracting the investors into the Kingdom and to enhance the growth and development of the Real Estate industry. It intends to make Bahrain a regional leader in the sector.

    The RERA initiated to set a plan to implement and execute a National Real Estate Plan. The main aim in setting the national real estate plan is to set out Law 27 of 2017 and to announce the Real Estate Regulation Law by the established the authority. They have set a five pillar plan with it's the main subjects sustainability, innovation, transparency and union.

    The five pillar plan has taken consideration which is generally executed in worldwide practises like requirements and safeguarding the privileges of all stakeholders and advancing the current administrative structure.

    Law 27 of 2017

    The new Law was issued in official Gazette 2017 and it came into existence on 2018. The new Law is Law No. 27 of 2017 which is built for the Promulgation of the Real Estate Sector Regulation Law. The New Law will cover a wide range of problems existing in real estate sector in Bahrain and it consists of 109 Articles and related legislations.

    The Chapter One of the Law No. 27 of 2017 deals with the establishment of a Real Estate Regulatory Agency (RERA). It regulates the Real Estate sector in Bahrain.  The Board has numerous of tasks including the execution of a national plan and issuing operation of new law in regulation of the Real Estate sector. The other part of the New Law was the guideline of off-plan developments in Bahrain. It replaced the Law No. 28 of 2014 which previously governed all off-plan developments. The Developers who plan to sell off the properties should obtain a Developer's Licence before carrying out any development activities. After acquiring a developer license, it will be recorded in Developers register which will be kept by RERA.  A resolution from the Cabinet of Ministers will determine the requirements for obtaining, renewing and amending a Developer's Licence.

    The fundamental change from the past law is that a Home Owners Association (HOA) is established up on the sale of one unit instead of 4. This will equip to form part of title deed of any common property which is jointly owned to get enrolled at the Survey and Land Registration Bureau. The New Law will enable to keep all genuine rights to incorporate long term leases mortgages and privileges of Musataha to get enlisted. The Non-compliance with the New law may attract extreme punishments which range from 2 years imprisonment and a fine of up to BHD50,000.

    Pillars of new law

    The first pillar is centred on the development of real estate focused technology which will help to work on the improving the proficiency of existing practices in real estate with the help of digital technologies. Improving the real estate sector will draw in global experts who are specialized in the field of real estate technology into the Kingdom. RERA likewise intend to consolidate general real estate knowledge, as well as real estate technology explicitly into Bahrain's education by making venture with the training schools to create more interest in youthful Bahrainis in this sector. Also REREA looks forward to create opportunities for Bahraini residents in the move towards modern technologies anticipating that the quick move into technology development and innovation will create high-income job openings for citizens who desire to participate in the development of this growing sector.

    The second Pillar aims to harmonise the legislative procedures required to acquire endorsements for real estate development. By appointing a single central authority to act as the focal point between financial and government authorities to increase the efficiency of the overall process by making it more smooth. This news is a relief for real estate developers and investors who had to frequently manage different government agencies. RERA will provide incentive to encourage the investors and developers to invest in the Kingdom.

    The third pillar sets the establishment of a real estate database at RERA. This is to furnish the investors with accurate, up to date and dependable information. It also intends to provide guarantee to the investors that all data can be acquired easily from a single and authorised source. The Government officials plan to launch the real estate database by 2022.

    The pillar four encourages the use of sustainable practice explicitly within real estate sector. This will help to create an increasing awareness towards environment friendly real estate projects. It will encourage reducing the utilization and development of methods using the non-renewable resources.  This is proposed to be executed through of 'Transit-oriented development' projects. The aim of these kinds of projects is that to reduce air pollution by encouraging the foundation of public roads free from vehicles and diminishing the dependency on vehicles. This is an interesting focus on future real estate projects in Bahrain which can prompt some creative new activities.

    The final pillar is in accordance with the theme of transparency and similar to the third Pillar. This aims is to secure the interests of investors within the real estate sector. Previously the current rights and restrictions over land are not always fully disclosed or transparent to buyers. The investors have to be provided with a guarantee that is they can acquire total and accurate information related to their privileges, commitments and limitations and should disclose these in all new contracts. This will be a critical new development in the sale and purchase of land in Bahrain. This will be welcomed by investors who had faced a bad experience over the transparency of land transactions.

    This pillar also looks forward in the development of professionalism within the sector. That is providing the rental agents a RERA license for regulating and protecting rights of owner within the profession and thereby reducing rental disputes.

    A specific bank account has to be opened for all financial receipts and valid development cost payments by developer who is on to off-plan sales development. This account is known as an escrow account. The account has to be managed by an independent escrow account agent approved by the RERA. The entire off plan sale contracts and buyer deposits must be paid directly into the escrow account. Brokers won't get any benefit from the deal off-plan contracts. Development payments are paid from the escrow account and the same transaction needs to be certified by a consulting engineer registered with the RERA. A minimum amount needs to be maintained in an escrow account. If the project is discontinued then the remaining funds should be divided equally among the buyers.

    The ownership of land mostly rest on few royal family members but in certain area both Bahraini nationals and foreign firms can possess ownership on lands. For business purpose foreign investors may own property in various fields.  Foreign investors may own commercial property in certain parts Bahrain. Most of the new development projects in Bahrain the foreigners and international investors are permitted to own houses, buildings, outlets, or freehold apartments in Bahrain. The Legally purchased property cannot be given back to the owners even if such property is not occupied.

    Conclusion

    The New Law with the resulting goals will provide comprehensive legislation managing the Real Estate sector in Bahrain. The establishment of RERA as the regulator makes the important government power to execute the new law and regulations. With such regulation having the capacity to get a level playing field for stakeholders and give greater confidence in the market to investors.

    The National Real Estate Plan contains some truly outstanding and practical aims for the real estate sector. The new law look forward to see the implementation of the aims of the plan which will make life easier for developers and investors. Overall the new law should lead to new sustainable projects in the Kingdom of Bahrain.

     

     

     

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    Sat, 04 Dec 2021 21:21:00 GMT
    <![CDATA[Cheque Law in Kuwait]]> Cheque Law in Kuwait

    A negotiable instrument is a document recorded as a hard copy that represents an unconditional promise to pay a specific amount of money determined upon the interest of its owner. The emergence of new technology influences the business world also; it takes up new modes which are more flexible in money transactions. The main advantage of the negotiable instruments is that the easiness of transferrin from one person to another. This will reduce the use of money and the amount of money circulating in the market. Cheques are also called commercial papers or bills of exchange foreseeing their flexibility to using them.

    Kuwaiti Law does not mention any definition for 'cheque'. Jurisprudence explains it as a written order or a note for a particular purpose.  In a cheque, a person demands the 'drawee' to make payment. The possession of the document itself will give drawee the right of execution i.e., handing over a cheque means that he is giving a guarantee for the payment. The validity period of a cheque will be under the prevailing system of a country. Under Kuwaiti Law, the cheque will be treated as valid unlimitedly as there is no prescribed time limit. But in the case of the Post-dated cheques, it will be treated as a promissory note under Kuwaiti law.

    In Kuwait issuing a cheque without having sufficient funds in the account at the time you are signing it or even if it is a post-dated cheque or letting the balance of your account fall below the amount which required paying all outstanding cheques will attract penalties.

    Law relating to cheques in Kuwait

    Article 523 of the Kuwaiti Law describes the punishment for dishonoring of cheques. It states that the drawee will bear the detriment resulting from the payment of a cheque where the signature of the 'Payee' is forged, or if the data on it is distorted, provided the fault cannot be ascribed to the drawer. The drawer is responsible for the fault that happens with the chequebook given to him from the bank. The Decree of Law number 15 for the year 1978 (which overrides Article 237 of Kuwaiti Penal Code) specifies the punishment of imprisonment, for a period not surpassing five years and with a fine not surpassing five hundred dinars or each of either punishment, for a person who, with bad intention, commits  these acts .that is if he gives a check that has no current and cashable payment, If he withdraws from his account, after giving the cheque all or a portion of the cash in the account so that the leftover amount isn't adequate for the value thereof If the drawer instructs the drawee not to cash the cheque. If the drawer purposefully prepares the cheque or where the signature is forged or if the data on it is distorted incorrectly intending to cancel the transaction.

    A new mechanism was adopted to intimate the customers that their cheques are returned due to the insufficient balance in the account. This mechanism was formulated by the Central Bank of Kuwait. The mechanism is that if the first cheque is returned, the bank must intimate the account holder by sending a warning letter through the registered e-mail. If the cheque is bounced for the second time, a warning letter should be send through the registered email and the bank should make a call through its call centre along with a SMS to the registered phone number.

    The law in Kuwait is overseeing banking and commercial papers are similar to the laws in North American and European jurisdictions. However, concerning cheques, the rules are very different. Stop unlawful payment orders but once it is issued the payment of a cheque cannot be blocked at the bank. Giving a cheque without sufficient funds will attract criminal offense.

    In certain parts of the world, a post-dated cheque is considered as a guarantee for the services yet to be performed and gives confidence that he will be paid for the service after the work is completed. But this practice will not make any sense in Kuwait. The supplier of the service provider can submit the cheque as soon as he receives it. The drawee cannot stop him from submitting the cheque for payment under any circumstances.

    Another difference in the law relating to cheques in Kuwait is that the cheque must be presented within one month of its date or else it will become stale after one month. This is the shortest period in the developed world. Previously, legal action on dishonouring of the cheque can be started at any time but now it must be started within four months of the date of issue (if the cheque was provided locally) or within six months of that date where it was issued overseas but is payable in Kuwait.

    Conclusion

    All countries have their own rules and regulations for managing the negotiable instruments. In Kuwait, Article 523 of the Kuwaiti Law describes the punishment for dishonoring of cheques. The cheques can be given as the surety for a service. In Kuwait issuing a cheque without having sufficient funds in the account at the time of signing or even if it is a post-dated cheque or letting the balance of your account fall below the amount required to pay all outstanding cheques will attract the punishment of imprisonment, for a period not surpassing five years and with a fine not surpassing five hundred dinars or each of either punishment. The post-dated cheques must be presented within one month of their date or else they will become stale after one month.

    Another mechanism was adopted by the Central Bank of Kuwait to intimate the account holder that the account does not have a sufficient amount by sending a warning letter through the registered e-mail, a call through its call centre and with an SMS to the registered phone number.

     

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    Sat, 04 Dec 2021 20:43:00 GMT
    <![CDATA[Bankruptcy law in China post - 2021]]> A Closer look at Bankruptcy law in China post - 2021

    The Bankruptcy Law in China consists of 136 articles apply to any or all types of insolvent enterprises. That is whether it is state-owned, privately owned, or by the foreign investment enterprises and other financial institutions. China enacted the nationwide Enterprise Bankruptcy Law in 1986 it is only for the enterprise. It does not cover the bankruptcy of natural persons. The drafting of the Regulation is similar to the laws in jurisdictions with market economy of the United Kingdom, United States, Germany, Japan, Hong Kong and Taiwan. The Regulation aims in constructing a complete and modern bankruptcy system.

    The Regulation of Shenzhen Special Economic Zone on Individual Bankruptcy is the first in China. It was enacted on 31 August 2020 and came into effect on 1 March 2021. The Criteria of individual bankruptcy is in accordance with Article 2 of the Regulation. It applies a natural person who resides in the Shenzhen Special Economic Zone, natural person who paid social insurance for three consecutive years, and one does not have sufficient assets to pay off all their debts or became insolvent due to business operation. If these criteria are satisfied a debtor shall undergo liquidation of their debts if the debtor. If a debtor has commenced personal bankruptcy proceedings inconsistent to the Regulation then their spouse can also file for personal bankruptcy. According to the article 9 of the Regulation, a creditor can also file for bankruptcy of a debtor. The article states that when a debtor is unable to pay its debts and the creditors who alone or jointly hold debts of more than RMB 500,000 against the debtor may apply to the people's court for bankruptcy of the debtor.

    After the declaration of a debtor's bankruptcy by the people's court a three year Inspection Period is granted. This is mentioned in Article 95 of the Regulation. If there is any violation in conditions given by the people's court during the inspection period, the Article 96 of the Regulation states such period may be extended by not more than two years.

    Articles 23 and 86 of the Regulation restrict the debtor on the following during the inspection period. The debtor is restricted from the debtor's consumption behaviours and career options during the said period. That is he cannot buy business-class flight tickets, they are not allowed to visit any hotels above three star hotels, nightclubs or golf courses. He cannot purchase real estates or motor vehicles. He cannot build a house and their kids are not allowed to continue their education in a private school with expensive tuition fees.  The debtors cannot work  in any listed companies, non-listed public companies or financial institutions as a director, supervisor or senior management personnel. During the Inspection period To safeguard the basic living and rights of the debtor and their dependents during the Inspection Period, asset exemption of up to RMB 200,000 in total to cover all the daily life, education and medical needs of the debtor and their dependents.  

    The Bankruptcy Affairs Administration Department regulates the administration of bankruptcy cases. The department is responsible for maintaining a public register of bankrupts and dealing with allocation of the assets of the bankrupts and with the custody, disposal, and valuation.

    According to Article 68 the Bankruptcy expenses and estate debts will be paid from the property of the debtor. These will be incurred after accepting bankruptcy petition in the People's Court. Bankruptcy expenses means the expense incurred by the court in the bankruptcy case, the expenses arising out for the management, realization and distribution of property of the debtor and the expenses and remunerations for the trustee approved by the Bankruptcy Affairs Administration Department. Article 161 explains who is a trustee. Trustee is appointed by Bankruptcy Affairs Administration Department he is responsible for implementing various bankruptcy administration duties such as supervising the conduct of the debtor during the observation period and taking over the property of the debtor.  The estate debts is defined as a debt arising from the request by the trustee, expense in the management of the business of another with respect to property of the debtor, debts from unjust enrichment, damages occurred to another person by the trustee's performance of duty over the property of the debtor,  the provision of financing for the reorganization of the debtor and the payment of remuneration for service and social insurance for the debtor's

    Debt evasion is mentioned in regulation to prevent debtors from taking advantage of the Regulation to avoid their debt liabilities. The Article 14 provides for four circumstances where the people's court can enter a ruling to deny acceptance of a bankruptcy petition or to dismiss the petition. If the debtor fails to comply with Article 2 of the Regulation, the petitioner can file the bankruptcy petition. If he removes property maliciously to evade debts, if the petitioner makes any false statement, if petitioner has an evidence to obstruct the bankruptcy proceedings, if the debtor was discharged from outstanding debts.

    The Article 103 states that the creditor or other interested person can approach the people's court to revoke the ruling for discharging of outstanding debts when a creditor or any interested person comes into knowledge that the debtor is discharged from his outstanding debts by fraudulent means. Article 130 also empowers provisions to approach the people's court when a debtor fails to implement the reorganization plan or the debtor commits fraud for terminating the implementation of the reorganization plan and commence bankruptcy liquidation of the debtor. The people's court will enter a ruling to terminate the implementation of the reorganization plan and the reorganization trustee will continue as bankruptcy liquidation trustee. 

    The Article 167 empowers the people's court to put off debt evasion behaviour. That is by reprimanding, summoning, issuing fine, detaining a debtor. The debtor criminally liable for committing certain violations including refusing to cooperate in investigation like not giving answers to the question asked or not submitting relevant information when asked or  providing false information or altered information, intentionally concealing, removing, destroying, improperly disposing of property or improperly reducing the value of property and fabricating a debt or admitting an untrue debt.

    Conclusively, the new Regulation laid an important milestone in the development of the individual bankruptcy law in China.  The introduction of the new Regulation poured out a hope in honest individuals in Shenzhen who are struggling with debt. Now, if they do not have ability to pay their debts can opt for liquidations, reorganisations or resettlements.

    However, we have to wait and see whether the new law affect and accelerate a nationwide individual bankruptcy law in future. 

     

     

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    Sat, 04 Dec 2021 19:44:00 GMT
    <![CDATA[ Common Law system in UK and Civil Law system in UAE]]>   A Guide to distinguishing between the Common Law system in the UK and the Civil Law system in UAE

    "The legal system is often a mystery, and we, its priests, preside over rituals baffling to everyday citizens."  - Henry Miller 

    Introduction:

    Generally, the judiciary is divided into two systems, one is the Common Law system and another is the Civil Law system. UK and UAE, both follow different judicial systems. In the UK Common Law system has been applied whereas in UAE the Civil Law system is applied to their legislation. Hence, it becomes important to know the difference in the legal system of the two countries.

    The UAE constitution established the legal system based on predominant civil laws which were taken from Islamic, Egyptian and French laws. Capital punishment is the last resort in both UK and UAE. In the UK the execution of capital punishment is done through hanging whereas in UAE it is done through barbaric techniques like stoning, flogging and firing squad. This article will majorly address the two systems of law that are applied in the UK and UAE.

    Common Law System:

    The common law system is based upon the interpretations of rules which can be elaborated as judicial interpretations of rules that exist. The common law system is based on English Heritage which was spread through conquest and colonization. Common law was never voluntarily adopted by people instead it was imposed upon them. The common law is based on a doctrine called Stare Decisis which means the court subordinate to the other court must follow the same rule of law.

    Kings Court was established by William. This court was expanded by King Henry II and during the time of King Henry II. The judgement was given from legal customs and traditions in Kings Court. As the customs were different everywhere, so the judges decided to have a generalise law for all the customs in the country. Hence, the Common Law system was originated.

    The structure of common law is uncodified which means it has no comprehensive compilation of legal rules and statutes. Furthermore, Common law does rely on some statutes which are based on legislative decisions but it is primarily based on precedent. The previous records and document collections of case laws in the courts are primarily known as precedents. It is also practised in Australia, Canada, the United Kingdom, Hong Kong and New Zealand. In the United Kingdom, the Supreme Court of the United Kingdom (SCUK) act as the uppermost body and its decisions are binding on lower courts.

    Civil Law System:

    The civil law system has a Roman Heritage. It is derived from the French civil code. Civil law has spread because of voluntarily adoption by new states, as new states joined the international community so the states tended to adopt civil law system.

    The structure of civil law is codified. However, countries with civil law systems like UAE have comprehensive and updated legal codes especially since all the matters are capable of being brought before the court. There is an applicable procedure, appropriate punishment defined in the civil law system. Civil law puts far less emphasis on judicial interpretation and it relies on statutory law rather than individual courts interpretation. There are majorly two kinds of courts in the civil law system, they are:

  • Ordinary Courts - Basic private and criminal law matters are being resolved in this court.
  • Special Administrative Courts - These courts deal with the matters like public law and other matters.
  • System of law in UAE:

    The United Arab Emirates is a federal-state founded in 1971. The cabinet proposed and draft the legislation before submitting the bill to the Federal National Council which reviews the bill and can only propose amendments but cannot initiate new legislation and seems its role as a consultative body. The court system is based upon civil law principles and Islamic jurisprudence while financial free zones have their English speaking courts. The legal system in UAE is based on five pillars:

  • The Supreme Council of Rulers;
  • The President and his Deputy;
  • The Council of Ministers;
  • The Federal National Council; and
  • The Judiciary.
  • Major differences:

    As UK and UAE, both countries follow different types of legal systems so it is necessary to analyse the difference between the systems of the two countries. The major difference is:

    The doctrine of good faith:

    The doctrine of good faith will be applied to all the contracts in UAE. As per Article 246 of UAE Civil Code, "a contract must be performed in accordance with its contents and a manner consistent with the requirements of good faith".

    In the United Kingdom, common law doesn't have a definition of good faith per se but it is assessed by the contractual circumstances. This can be seen in a case of 2013, Yam Seng v International Trade Corporation, in this Yam Seng (the distributor) alleged that wrong information was provided about the product from International Trade Corporation and has breached an implied duty of good faith. Hence, the principle of good faith is not applied in the courts of the UK.

    Case Law:

    In the UK, common law places the primary importance on case law and a strong reliance on precedents in establishing the laws whereas, in UAE, civil law considers the cases as a secondary source of law to examine how other courts have interpreted the law. In civil law, jurisprudence is constant it is a suggestion that the court should follow case law but it is not mandatory as compared to common law.   

    Language:

    In the United Kingdom, the official language is English while pleading as well as while writing the record of cases in the courts. As per the Court of Justice Act, the cases were recorded in Latin till 1730 but after that English language has been used.

    In the United Arab Emirates, the official language used in courts is Arabic whereas the second language is English. In the emirate of Abu Dhabi, Hindi has become the third official language as almost 30% of the population is of Indians there.

    Role of Judge:

    The common law in the United Kingdom functions as an adversarial system contest between two opposing parties where a judge is an impartial referee. The judge will determine the appropriate award or sentence with the help of the jury. In a civil law system, the judge is the most important player and the role is to establish the facts of the case and apply the provisions of the applicable code.

     

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    Mon, 08 Nov 2021 11:57:00 GMT
    <![CDATA[Patent waiver on vaccines]]> Patent waiver on vaccines

    A patent right is an absolute right given for an invention of a product or process which will proscribe others from utilizing, distributing or retailing the product without the consent of the owner. The patent protection is subjected under the TRIPS agreement. The patent holders have the prerogative to manufacture, sell, and use the vaccine for the entire term of 20 years from the date of the filing of the patent. Such protection could give wider accessibility to vaccines. Today the patent right on vaccine takes prominence, as the world tussle with Covid-19. The vaccines that have been developed for the battle against the Covid-19 provide a silver lining to the catastrophe. 

    It is in this context that the joint manifesto of India and South Africa at the WTO for a short-term waiver of the Patent rights on Covid-19 vaccines needs to be discussed. The campaign was supported by international organizations including the World Health Organization and by more than 100 countries. The main goal of the joint proposal is to minimize the barriers in producing their own vaccine by the countries, especially for the low-income nations. The high and middle-income countries have the core companies in vaccine manufacturing and their research and development. Most of the companies holding patent right are from these countries and they sell their vaccines to their own government or to the high-middle income nations. This is the main reason that the high income countries were not happy with the proposal. In their opinion, the proposal will clog the availability of vaccines and drugs at affordable prices.

    Without granting waiver during public emergencies, the governments can still allow the companies to produce a product without the patent holders' consent and it is called compulsory licensing. But the nations which are in support of patent waiving state that this process is much more complicated than that of patent right waivers. Most of the nations were not happy with granting the compulsory licenses. 

    Article IX.3 of the WTO Agreement states that in "exceptional circumstances", the Ministerial Council may waive an obligation of the WTO AgreementArticle IX.4 of the WTO Agreement states that when granting the waiver the ministerial council will determine the exceptional circumstances justifying their decision and conditions that prompted them for granting the waiver. Once the waiver is granted, the WTO member countries will not be under an obligation, for a short term on Patent associated rights.

    Impact of the patent waiver

    The covid-19 pandemic is a worldwide health crisis that prompted the WHO to declare this as extraordinary circumstances calling for extraordinary measures. In light of the US's declaration, the European Union stated that they were ready to discuss the proposal, but other high-income countries and Pharmaceutical companies stays against the move of the developing countries. They pointed out that waiving patents will not give an answer to the present emergency situation in the world. Some other strategies should be considered for addressing the real scenario.

    The patent rights to COVID-19 immunizations will give the patent holder an exclusive right to manufacture the vaccine. So those with the patent can decide to whom they can sell, distribute etc. There is a very chance by the big shots to utilize the crisis to yield gain and reputation to their company.

    Supply chain

    The vaccines should be made in extremely controlled and high-tech facilities which are not present across the globe. This indicates that the few nations will not be able to produce their own vaccines. The pharmaceutical companies like Modena, Pfizer and BioNTech should take good steps to transfer the technology to manufacturing sites all throughout the planet. A need to build out manufacturing capacity worldwide is required for safe and effective vaccines. Unless vaccines are around the world open to everybody, there will consistently be a danger of a COVID variation that makes antibodies ineffectual making all the efforts in vain. The nations which are having surplus vaccines that are not required for the present may distribute those surpluses with the countries who are in need of the vaccine for their present need. This may be regarded as an apt solution for the worldwide crisis during this pandemic era than waiving the patent right.

    Infrastructure

    The approval to manufacture has to satisfy the required infrastructure for the capacity to manufacture the vaccine. The latter requires a significant degree of knowledge, experience and innovative framework for earning clean and safe vaccines. The manufacturing skill in regard to the vaccines using mRNA technology is significantly more expensive and complex than that for the established vector vaccines. These require high tech facilities for preparation and storage as the vaccines and drugs produced are very sensitive. Most of the vaccines are extremely sensitive to temperature fluctuations and they require a steady temperature of up to -80° Celsius and should be stored at the same temperature. Because of these interesting difficulties of manufacturing COVID-19 vaccines, the patent waiver alone will not help inexperienced hands to produce safe vaccines.

    Research and development

    Another risk limitation of patent right protection is the intricacy in the advancement of drugs. The awful part is that even if we invest billions of money for the research and development of a vaccine there is no guarantee of success. In a worst case scenario, the billions invested may be lost. The companies look forward for the final result to their research to cover up the losses that occurred during the initial phase. After the end of the waiver of patent rights for short term the imitators and conventional manufacturers will get profited from the original inventor's fundamental research work. Also the waiver will not accelerate vaccine manufacturing as there is the short supply of materials and this might take several years to build up capacity from nothing.

    Alternatives

    A waiver on the patent rights is not a suitable means of enhancing the global supply of vaccines in the short term. A removal of patent protection will have health risks from vaccines that were not expertly prepared and have a chance of political risks in the form of uncertainty. This will cause a negative impact to the pharmaceutical industry on their financial and innovative strength.  So it is better to support the existing companies and expand their production capacities. The companies who have found the vaccine can share their license and ideas of research with other reputed companies of similar infrastructure. Certain companies like Astra Zeneca have shared their innovative idea with other companies so that vaccines can be manufactured at various sites. Likewise, an expansion of existing products can be done by entering into partnerships.

    Waiver of patent protection as a nightmare

    A waiver on the patent initiated by the government could discourage pharmaceutical companies from taking on the costly research and development required to deliver essential drugs in the future. The Pharmaceutical companies would have to fear that they would not be able to earn back their risky investment. So instead of waiving the patent right the companies will always look forward to tying up with the equally reputed companies situated in other countries. They will sell or give license for their invention to those companies receiving remuneration. In this way they can recoup the initial investment.

    Conclusion

    The patent right on vaccines take importance as the world is troubled by the Covid-19 pandemic. All inventions are under patent protection under the TRIPS agreement. A patent holder has the right to manufacture retail and exploit the vaccine for the entire term of 20 years from the date of the filing of the patent. Waiving of patent right will be for one year or if exceeds the council has to mention the time limit in the description regarding the reasons for the waiver.

    Waiving patent rights is not a suitable means of enhancing the global supply of vaccines in the short term. The patent waiver will discourage pharmaceutical companies to take risks from taking on the costly research and development work required to provide critical medicines in the future. Instead of waiver of patent rights the areas to be focused on are by improving the infrastructure, enhancing the production of the vaccines and distributing vaccines throughout the globe.

    All these are done with an aim to irradiate this pandemic. The countries supporting the patent right waiver are asking for the right to develop their own vaccines without having the fear of getting sued for the breach of the patent right. But the whole scenario looks like these countries are asking for charity.

     

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    Sun, 07 Nov 2021 10:15:00 GMT
    <![CDATA[Impact of Artificial intelligence on Legal Sector]]> Impact of Artificial intelligence on Legal Sector

    The stimulation of human intelligence process by a machine is termed as Artificial intelligence. Mostly this is done by the computer systems. The Specific applications of Artificial intelligence include natural language processing, speech recognition and machine vision. In simple words it is programming a machine on how to learn, reason, communicate, and make decisions. The Artificial intelligence systems work by assimilating a large amount of training data, analyzing the data for correlations and using these data to make predictions. The Artificial intelligence firms are developing technology to help the various industries to manage their laborious tasks for better speed and accuracy.

     Artificial intelligence has already found its way in the legal profession supporting lawyers and clients. The interest in applying Artificial intelligence in law is slowly transforming the profession by helping the lawyers to perform research, providing additional insights through analytics, Automating creative processes in legal work

    Application of Artificial Intelligence in law 

    The due diligence process is required for giving intelligent advises to the  clients on their issues raised and what actions they should take on that matter. By using artificial intelligence the litigators can perform due diligence to uncover background information, to review a contract and to conduct a legal research. The AI legal software is helpful and time effective. The AI legal software predicts the probability of a case which is adjudicated before the court. This is called Prediction technology 

    The AI can be a Legal analytics. The artificial intelligence will give data from past case laws. The Lawyers can use these data points to determine the win loss rates.

    Document automation is made easy with Artificial Intelligence. The AI legal software will help to prepare legal documents by filling out the data. The software will access the data and prepare the legal document.

    The AI tools will guide the lawyers in analyzing the insights into the Intellectual property portfolios and drawing insights from the content. That is search and registration of a trade mark, patent, copyrights etc.

    Electronic billing will give automated bill to the rendered service. The AI legal software will help the lawyer in preparing the invoices based on the work done by them. It will give accurate bill for the work done by the lawyer. Thus it is helpful for both lawyer and client.

    Artificial Intelligence Law

    Artificial Intelligence Law regulates the use and development of artificial intelligence. It is closely related to the robot law because the artificial intelligence is built in the robots. Artificial Intelligence law is usually mistaken as the use of Artificial Intelligence by lawyers on the legal profession. In reality, Artificial Intelligence Law refers to the application of the law on Artificial Intelligence. There are various aspects to artificial intelligence law they are data protection, intellectual property, ethics, politics, and technology.

    Currently, we all use Artificial Intelligence in our daily lives for  purchase predictors, advertisements, machine learning, chat bots to answer people's questions  for making decisions whether to grant a loan or not and so on. It is true that AI has made our lives easier and saves time to complete the tasks but there is possibility of malfunctions and disadvantages in the technology.

    The leaders around the globe have raised their concerns regarding the use of AI. The AI may create the damage to the human race. The current artificial intelligence law is insufficient to regulate the use, manufacturing, behavior, and responsibility of AI. A balance between the protection and innovation should be considered while upgrading the AI law. This is a global issue and to address it a new universal law is required. Legal professionals must include the developers of AI in the drafting process to address the technical issues. 

    Artificial intelligence for law

    The latest development in artificial intelligence law is the development of Case Cruncher Alpha. It is a Chat bot who merely answered legal questions. After updating it can now predict the outcome of cases and has the potential to expedite court decisions and outcomes. Many law firms use AI in their practice. There is common a comment that in upcoming days there are possibilities that AI will replace lawyers and many other professions.

    There is a question that whether the AI in the legal sector will replace the lawyers and legal analyst. The legal sector has seen the introduction of AI in various fields like legal research, trademark search, contract analysis etc for the improved efficiency and productivity. However in the legal profession requires analysis, taking decisions, and representations which cannot be made automated by any software. All the software can give supplementary support for improving the efficiency and help the lawyer to give more authentic and result oriented suggestions to the clients need.

    Future of legal sector

    The legal firm or the lawyer will approach the clients with an innovative, authentic and economic legal solution. Now the service is billed according to the time invested by the legal firm on their subject but it will be replaced in the future after the application of AI in legal sector. A performance based price strategy will be followed strengthening the client lawyer relationship.

    In the past few years the AI based solutions had made efficient and client friendly legal sector. That is automation of contract drafting, trademark search etc have improved the lives of lawyer in the firm. The AI based solutions will give economic, efficient and gain higher profits. The legal sector will work with the AI companies to give more solutions for rendering improved service.

    Conclusively, the AI legal-tech companies seem to be improving their efficiency. AI software will speed up document processing by detecting the errors. Legal firms adopting the AI are able to move faster providing immediate service to their clients.

    The AI is not going to replace jobs of professionals rather AI based program will make the professionals more efficient, accurate and result focused.

     

     

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    Sun, 07 Nov 2021 09:38:00 GMT
    <![CDATA[Changes in Bankruptcy law in Australia]]> Changes in Bankruptcy law in Australia post 2021

    A legal process declaring that one is unable to pay his debts is called Bankruptcy. It can give relief from paying from most of the debts. In Australia, personal insolvency is regulated by The Bankruptcy Act, The Bankruptcy Regulations 2021 and the Insolvency Practice Rules (Bankruptcy) of 2016. It also provides a basic framework to settle the manageable debts by realisation of assets and pay back to creditors and to discharge the unmanageable debts.

    The Bankruptcy Regulations 1996 of Australia helps the administrative requirements of the Act. It is a procedural law such as the administration of bankruptcies, debt agreements and other formal insolvency options. The Bankruptcy Act gives relief to insolvent individuals with basic idea to resolve their personal inadequacy through bankruptcy, debt agreements and personal insolvency agreements. Bankruptcy is a legal process where a court declares or you declare bankruptcy when you are unable to pay your debts. A Debt agreement gives assets and income as an alternative to bankruptcy to an insolvent individual who have low to moderate levels of debt, while providing a return to creditors. The personal insolvency agreements are legally binding agreements by which the debts between a debtor and their creditors will be settled without becoming bankrupt.

    The Australian Financial Security Authority is the authoritative agency for the administration and regulation of bankruptcy in Australia. It provides the information, regulation and enforces the norms related. They are Information regarding bankruptcy, information on debt agreements, Personal Insolvency agreement, unmanageable personal debts and how the complaints are processed and personal insolvency in the context of Coronavirus.

    Recent changes to the bankruptcy system in Australia

    A review was conducted in 2019 the Attorney General's Department stated that the existing regulations are necessary and required to remake it with minor and technical amendments to improve administrative inefficiencies. The new Bankruptcy Regulations in Australia were made in 1 April 2021. It is to maintain most of the norms with a considerable change and technical amendments. It is aimed to modernise and ensure alignment with the Bankruptcy Act. The Bankruptcy Regulations gave many administrative requirements for Bankruptcy Act that are necessary for the efficient administration of bankruptcies, debt agreements and other formal personal insolvency.

    A bankruptcy threshold of personal bankruptcy was permanently changed to USD 10,000 on 1 January 2021. The USD 10,000 threshold account was previously increased to USD 5,000 in 2010. The increase of the threshold to $10,000 raised a concern about the use of bankruptcy proceedings regarding the small debts. The concern was raised based because of the less availability of credit in the economy. A temporary threshold of USD 20,000 which the Australian Government implemented as part of its response to the COVID-19 pandemic in March 2020 was replaced a temporary threshold of USD 10,000. The bankruptcy threshold of USD 10,000 applies to the issued bankruptcy notices or to the creditors' petitions given on 1 January 2021 or after this date.

    The Australian Government gave temporary relief in bankruptcy laws as part of its economic response to the COVID-19 pandemic on 24 March 2020 and these changes ceased on 31 December 2020. The temporary relief was increased the level of debt which can make someone bankrupt was raised from USD 5,000 to USD 20,000.  The timeframe for a debtor to respond to a bankruptcy notice was raised from 21 days to 6 months.  The temporary debt protection period was raised from 21 days to 6 months.

    Amendments made in Bankruptcy Act

    There are only minor and technical amendments to the existing Act. They are aimed to modernise and ensure alignment with Act. It also aims to clarify the confusions and administrative inefficiencies occurred in the past. The Minor amendments made in the Bankruptcy Act include:

    • The section 72 replaced by the approval form with the current regulation 12.01 statement which required for paying money to the Consolidated Revenue Fund.
    • The Schedule 8 of the 1996 regulations was split into separate sections that are from section 75 to 78.
    • To treat the foreign currency proof of debts a new section 24 was added.
    • Removing the out dated definitions and references, which includes the legislative schemes and Individual industrial agreements which have since been repealed
    • Ensuring the provisions which stipulate time requirements consistent with those in the Act, to provide certainty to users.
    • Providing for the Act and the new Regulations to be administered in a technology-neutral manner to reflect current practices.
    • Minor amendments to reflect changes to the Office of Parliamentary Counsel drafting practices.

    Conclusively, the amendments are minor and aimed at modernise and ensure the alignment with the Bankruptcy Act 1966. The key changes are adding new sections and altering several sections for implementing forms to submit the consolidated revenue fund, implementing new sections to deal with foreign currency proof of debts, the threshold of personal bankruptcy was permanently changed to USD 10,000. The efficient administration of bankruptcies, debt agreements and other formal personal insolvency options will be governed by the Bankruptcy Act.

     

     

     

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    Sat, 06 Nov 2021 12:02:00 GMT
    <![CDATA[Arbitration Law in the UAE]]> Arbitration Law in the UAE

    "Arbitration is justice blended with charity" – Nachman of Bresloy

    Arbitration is a famous method of resolution of disputes. The UAE's first stand-alone law on arbitration is governed by the Federal Arbitration Law No. 6 of 2018 which is known as "United Arab Emarites Arbitration Law". The new law was formed by repealing the Articles 203 to 218 of the UAE Civil Procedures Law No. 11 of 1992 ("CPC"). The new law came into force in June 2018. The United Arab Emirates Arbitration Law is based on the UNCITRAL Model Law on International Commercial Arbitration. The UAE Arbitration Law have 61 provisions, most of the provisions are in line with the current arbitration process and arbitral framework to international standards.

    There are other arbitral institutions in the UAE. They are Dubai International Arbitration Centre where they administers arbitrations under the DIAC Arbitration Rules 2007, DIFC London Court of International Arbitration Centre where they administers arbitrations under the DIFC-LCIA Arbitration Rules, Abu Dhabi Conciliation and Arbitration Centre administers arbitrations under the Procedural Regulations of the ADCCAC, The Emirates Maritime Arbitration Centre (EMAC), Sharjah International Commercial Arbitration Centre (Tahkeem), Ras Al-Khaimah Centre for Reconciliation and Commercial Arbitration.

    The arbitration process has some advantages of arbitration over litigation. This includes the confidentiality of the process, the arbitrators with expertise will be included to deal with disputes involving technical subject matters. Arbitrations may be conducted in English, or in any other language agreed to by the parties, Oral evidence is permitted in arbitration and the merits of a decision cannot be challenged. The disadvantages include the cost of Arbitral proceedings and Arbitration awards have to be ratified by the courts to be enforceable.

    Requirements

    The requirements for an arbitration agreements is that the agreement should be in writing, it can be incorporated by reference to another document containing an arbitration clause, The person should have specific authority to agree to arbitration on behalf of a body corporate/company, if the agreement is entered into by a natural person, he must have the legal capacity to dispose of his rights. The wording of the arbitration agreement must be unclouded.

    If there is no agreement between the parties, the Arbitration Law gives liberty to conduct the arbitration by three arbitrators. Where there is more than one arbitrator their number must be odd. Where there is an even number of arbitrators, an additional arbitrator will be appointed to act as chairman. If the arbitrators appointed by the party cannot agree on the chairperson, the appointment will be made by the arbitration institution. Arbitrators may be challenged and removed when justifiable doubt exists as to their impartiality or independence, as defined by the General Standards Regarding Impartiality, Independence and Disclosure and also when he is unable to perform their functions or acts in a manner that leads to unjustifiable delays in the arbitral proceedings or fails to act in accordance with the arbitration agreement. The disclosures made by an arbitrator regarding impartiality should be made in writing to all parties and an arbitrator must decline the appointment should there be any doubt in regard to impartiality or independence.

    Procedure

    The UAE arbitration law contains limited provisions for the procedural aspects of arbitration. The arbitration is commenced by filing of a request for arbitration. If the arbitration is to be initiated by lawyers, proof of authority by means of a power of attorney is usually required. The other procedures for initiating proceedings will be based on the arbitration rules. The Arbitration Law gives parties the freedom to agree on the procedural steps in accord with the agreed rules. If there is no agreement, the tribunal can adopt the procedural with the provisions of the Arbitration Law and any relevant international treaties.

    Arbitration law allows an arbitral tribunal to request a tribunal to order a party or a third party to give evidence or produce any document which is essential for deciding the dispute. The arbitrators can order, at any time during arbitration the disclosure of documents, attendance of experts, witness testimony and hearings.

    Award

    The Article 21 of the Arbitration Law recognises the arbitral tribunals' power to award interim relief. This can be occurred on the request of the parties or by own. The Article 21 (4), a party for whom an interim measure has been ordered may request the competent court to enforce the order of tribunal within 15 days of receipt of the request.

    The Article 41 of the arbitration law sets out the requirements in the content of arbitration award. The award should be in writing, the decision should be based on the majority opinion writing down the difference of opinion, the award should be signed by the arbitrators and the arbitral award should include the names and address of parties, name of arbitrators, their addresses, text of arbitration agreement, summary of the parties claim, reason on which award is based, date and place of issue of award.

    The Arbitrators are directed to provide for the costs of arbitration in the award. Costs may include arbitrator's fees and expenses, costs of expert advice, costs related to the arbitration proceedings, and any other legal fees, charges, costs and expenses reasonably incurred by a party throughout the proceedings. The arbitrators may withhold any award until the tribunal's fees and expenses are paid in full.

    The Article 52 of the UAE Arbitration Law provides that an award is binding to the parties and has the force of res judicata. The Article 55 of the law says about the rectification of award. The UAE Arbitration Law, the DIFC Arbitration Law, and the ADGM Arbitration Regulations set forth limited grounds for setting aside arbitral awards. The UAE Arbitration Law requires to furnish proof for setting aside the award they are invalidity of the arbitration agreement, incapacity of a party at the time of conclusion of the arbitration agreement, legal inability of a party to act, non-application of the substantive law chosen by the parties, non-compliance with the parties agreement, procedural irregularities.

    Conclusion

    The New Arbitration Law of UAE tends to enhance the support the UAE arbitration process. The new law gives a detailed legislative framework for arbitrations within the jurisdiction is aligned to international standards. Upon the evolution of the modernised Arbitration Law, the UAE had set its commitment to position itself as an attractive seat for international arbitration.

     

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    Sat, 06 Nov 2021 11:14:00 GMT
    <![CDATA[Family Law in GCC]]> Family Law in GCC

    A Family is formed by considering several factors like the social, political, and monetary.

    Similarly, there is a legal design in framing a family. In a net shell a family law covers two fundamental fields one is the relationship between spouses and the other is the relationship between parents and their children. For many years Muslim nations were aiming to change the rules governing marriage and divorce.

    Kuwait 

    In Kuwait, family and personal law are governed by religious courts. The cases will be judged only by the code of law not by any previous judgments. The courts will never be influenced by precedents. The Kuwait family law contains 347 articles and the code was enacted in 1984. It consists of codes to deal with marriage, divorce, child custody, and inheritance. To handle family and personal matters there are different courts for both the Sunni and Shi'a.

    In Kuwait, Muslim marriage is an agreement between the groom and the representative of the bride's family. The marriage is formalized in the presence of an authorized person and two male witnesses.  The bride's representative can be her father, brother, uncle the officiator of the marriage can also sever as her legal representative.  The officiator prepares the agreement and this is signed by the groom, the bride's representative, the witnesses, and the officiator. The agreement also includes the details of the number of wives the groom has as the Islamic religion allows a man to have up to four 6wives of he is able to support them equally. It also contains the dowry amount.

    In Muslim countries the Islamic law allows husbands to divorce their wives just by "I divorce you." Without any reasons   Under Shi'a law, to get a divorce officially the man must appear before a judge. Under Sunni law, divorce needs to be recorded only with the registrar of the personal affairs court. In both systems judges usually grant a divorce petition after giving reasonable opportunities to reconcile out of court and to seek counselling before deciding on divorce. The husbands are required to pay monthly alimony for each child born of their marriage.  In custody issues favors the mother for small children and Girls to live with their mother until they get married.  Boys can choose after attaining puberty whether to reside with their mother or father. 

    Bahrain

    In Bahrain, both Sunnis and Shias have their own courts that deal with personal and family issues. The Family Law comprises of all matters arising in connection with marriage like dowry, maintenance, parentage, separation, and custody. Influential sections of the religious establishment oppose a codified family law, while the government has recently demonstrated a lack of interest in pursuing the matter.

    The main problem is that there are rules and norms but that they are not codified. For getting a divorce, women also need to face significant legal, financial, and societal difficulties. The Sunni men announce their divorce orally, while Shia men record their intention in writing. A Bahraini man can divorce his wife for any reason while women can only request divorce under specific circumstances but it is possible without the burden of evidence. A judicial divorce takes years during this time women are not supported financially.

    Divorced Shia women retain physical custody of their sons until they are seven and their daughters until they are nine. The new personal law allows Sunni mothers to retain custody of daughters until they are 17 years of age or married whichever comes first and sons until they are 15 Even if the mother has custody, the father remains as the children's legal guardian. For custody of children, the Bahraini courts consider the religion, permanent residence, income of parents. The parents can visit their child by prior arrangement of the competent court. 

    Saudi Arabia

    The jurisdiction of family-related matters falls in Sharia Court. Family related matters include marriage, divorce, children and inheritance. The laws are not codified. The government promotes polygamy as an Islamic value program. Polygamy is limited to four wives for men at any one time. As a result of oil wealth, the practice of polygamy has increased even among educated Hejazis. In 2001, the Grand Mufti the highest religious authority issued an opinion, that to fight against spinsterhood polygamy is very much essential in the context of Islamic Value. Later in 2019 marriages under the age of 15 were banned and prior permission from the specialized court was necessary for the marriages under the age of 18.

    Men have the right to divorce their wives without any legal justification.  The husband has to provide financial support for the divorced wife.  A woman can only obtain a divorce with the consent of her husband and, it is very difficult to obtain a judicial divorce. The fathers will have the right to have custody of sons from the age of 7 and daughters from the age of 9.

    Oman

     Article 17 in Oman's Basic Law gives liberty for women to marry freely but the Personal Status Law will be the authority in dealing with guardianship, child custody and inheritance. According to Sharia law, if a Muslim man can afford the expense to take care of four wives he can get married to four wives. A Muslim woman can restrict her husband from marrying other women by entering a clause in the marriage agreement.

    A man can divorce by simply saying 'I divorce you' three times. But in the case of a women even if she has good reason to seek a divorce she must go to a court. The husband is responsible to give maintenance to the divorced wife and his children from the marriage. The man can claim only after the son attains the age of ten.

    Qatar

    As per Sharia Law, a Muslim man can marry four wives if he is able to take care of them materially. In Qatar, the Muslim marriages are performed at the Sharia Court. A married Qatari Muslim man seeking a divorce by saying 'I divorce you' three times to his wife. The husband has to give maintenance to a divorced wife and his children from the marriage. In Qatari courts the provisions for divorce and family law matters are dealt within the code Family Law 22 of 2006.

     United Arab Emirates                                   

    The UAE had improvised its family law. And it was announced on 7th November 2020. The crisp of the amendment is that the Islamic law of the Sharia will no more be used for dealing family law for the non-citizens.

    There are many amendments to the country's family law. Law No. 28 of 2005 was overruled resulting in Decree-Law No. 5 of 2020 on August 28, 2020. These provisions look in the following matters. The financial support by the husband to wife, divorce by proxy, arbitration between the husband and wife and financial compensation. Earlier, Sharia law was applied to Muslim marriages, child custody issues, inheritance, maintenance etc. Till the amendment, the law allowed for non-citizens to be given option to select Sharia for their divorce proceedings or to request the court to follow the law of their home country.

    Conclusion

     Family is formed by various social, political, and monetary aspects. All GCC follows Sharia law for managing the matters related to the family. The husband is given more privileges than the wife. The Man can easily divorce his wife proclaiming Talaq and he can marry four wives if he is able to take care of them and their households. Now, these nations are aiming to change the rules governing marriage and divorce.

     

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    Sat, 06 Nov 2021 00:00:00 GMT
    <![CDATA[Income tax policy on earnings non-conventional means in India]]> A closer look at the income tax policy on earnings through non-conventional means in India

    Income tax planning becomes pivotal to achieve one's financial goals, and while some find it monotonous, it is necessary to understand the nuances involved, along with the numerous prevailing tax-saving instruments. According to the data provided by the income tax department, for the Year 2019-20, more than 5.65 cr. taxpayers filed income tax returns (ITRs) before the August 31st deadline. However, if someone's annual taxable income is in a higher tax slab, then these people can consider non-conventional methods to save tax. The new methods will benefit taxpayers to achieve their financial and tax-saving goals. These non-conventional means can be cryptocurrency, stock trading, content creators and many more.

    Tax computation of Income earned from cryptocurrency

    The two consecutive lockdowns in India, made people understand the importance of having a passive income source. However, tons of individuals' value more high investment in cryptocurrencies. In India, around 10 million crypto stakeholders have been recounted in 2021. Also, legal tender for any cryptocurrency or bitcoin has not been approved by The Reserve Bank of India (RBI) in India. Hence, there aren't any clear rules or guidelines defining taxability for cryptocurrencies, which entails precise clarification from the revenue enhancement (I-T) department.

    Cryptocurrency as income and expenditure:

    In India, when cryptocurrency is considered as an income, its tax can be calculated according to the income tax act 1961, in which cryptocurrency will be considered as an asset. When cryptocurrency is considered as an expenditure, its tax can be calculated according to the Goods and Services Act, 2017.

    Cryptocurrency as an investment asset or business income:

    Capital gain tax is that profit that is gained by a movable and immovable asset. Cryptocurrency is a movable asset and all the income from here is taxable. If a person holds a cryptocurrency for a limited time, the tax rate changes accordingly.

    Whilst gains done for a short period would be called short term capital gains. These gains are taxable as per the slab rates applicable to the taxpayer while long term capital gains are taxed as 20 percent with the gain of indexation.

    If we talk about crypto mining than, capital gains tax will not be applicable on mining because we consider the mining as the supply of service and on supply of service we don't have to pay any tax. But the reward and transaction fees from this mining are taxable and this would be considered as income from other sources.

    It is a widely known indisputable fact that taxpayers having an income over 50 lakh yearly are required to disclose their assets and liabilities within the Schedule of Assets and Liabilities, together with the value of the acquisition. Since cryptocurrencies may also be considered as assets, taxpayers even have to incorporate those within the above schedule.

    Cryptocurrency as a commodity:

    There is no clear definition of commodity but in a landmark case of Tata Consultancy Services vs. State of Andhra Pradesh, 2004 court held that commodity is an asset that can be produced for commerce. Commodities are defined as marketable goods or wares, like raw or partially processed materials, farm goods, or ornaments. Some intangibles are not deliberated as commodities like human labour, services, or advertising. According to this definition, cryptocurrency is an intangible asset and we can even call it a commodity.

    Tax on Content Creating income under the revenue enhancement Act

    With the onset of social media, the demand for content creators and bloggers is ever on the increase. The income earned by a content creator is subject to tax provisions under the Income Tax Act.

    Sources of revenue for a content creator:

    Firstly the most common source of income for a content creator is through advertisements.  The content becomes a platform for promoting the products and services of the company.

    One of the foremost popular ad networks is Google ads. It provides superb income to the content creators. Whenever a reader clicks on the ads, the content creator creates money.

    The second source is affiliate sales. Here the content creator put links to products or services in their blog related to such products and services. If the reader clicks on that link and purchases the product or service, the content creator earns money.

    The third one is paid review. Companies can unswervingly go and approach popular content creators and request them for paid reviews in their blog or content.

    Tax calculation:

    Tax calculation can be done according to the income tax act, the taxpayer must pay taxes on the income in profit and loss account after taking into consideration the total revenue and expenses and remit taxes on net income. The allowable expenses like rent expenses, employee salaries, domain hosting expenses etc. are calculated.

    The content creator prerequisites to pay taxes on the balance amount as per the slab rates of the tax act. The content creator is additionally subjected to additional taxes like Good and Services Tax (GST), deduction at Source (TDS), and equalisation levy.

    Taxation of income earned from Stock Trading

    Nowadays, everyone invests some amount of their salary, income, business income accessible trading. Generally, people are unsure about how this income is taxed. The income from stock trading is enclosed under capital gains.

    Tax on Short term capital gains:

    Short term capital gains are taxable at 15 percent. A special rate of tax of 18% applies to short term capital gains no matter the tax slab. If the full taxable income excluding short term gains is below 2.5 lakh, then the person can adjust the shortfall contrary to the short term gains. The remaining short-term game may be taxed at 15 percent.

    Tax on Long term capital gains:

    Up to the limit of 1 lakh Rupee is not taxable for Long term capital gains on stock trading. As per amendments in budget 2018, the long term capital gain of more than 1 lakh will be taxable at 10 percent and with the benefit of indexation.

    Securities Transaction Tax (STT):

    Apart from the above-mentioned taxes, securities transaction tax is applicable on all equity shares which are sold and brought on a stock exchange policy. Any gain through to sale and purchase which occurs on a stock trading is subject to STT. But it can only be applied for shares on which STT is paid.

    Conclusion:

    In India regarding cryptocurrency, stock trading should require more disclosure and transparency. As cryptocurrency regulations in India remain ambiguous, a growing number of Indians are accessing digital tokens by buying and selling on foreign platforms which may have better features and customer service. In online transactions, there is more transparency but here in unconventional modes, it is missing. Despite mutable values, Cryptocurrencies, stock trading has a potential future but there should be definite laws on this.

     

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    Tue, 19 Oct 2021 11:46:00 GMT
    <![CDATA[An article on UAE new Data Law]]> An article on UAE's New Data Law

    Nowadays, most of the transactions we do today is digital and information of individuals are no longer in pen and paper but it's in zeros and ones, so for individuals, it is very important to secure its data than ever.

    The UAE introduced a new comprehensive data law in the country. This New Data Law is being brought as part of the national programme called "Projects of the 50", which is a series of national strategic projects and initiatives being launched by the UAE authorities. This law has been launched to underpin the nation's development and growth for the future and ties in with the UAE's 50th anniversary this year as a nation. In this 50 big projects are being unveiled to mark the occasion of the country's 50th anniversary and to establish a strategic pathway for the ongoing development of the country for the next 50 years.

    Mr Omar Al Olama, who is the UAE's Minister of Artificial Intelligence and state for the digital economy said that the data protection laws have been drafted after considering every single law on the planet, with the help of major technologies companies.

    At present, UAE does not have a singular comprehensive data protection law; this would be the UAE's first comprehensive data protection law to operate across the country's mainland.  But other existing laws have been used to deal with privacy and data security matters and certain data protection provisions have applied to certain sectors. However, Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) already have data protection regulations that are broadly on par with the comprehensive USA and UK's data protection laws.

    The data law will give individuals the freedom to control the way their personal information is used, stored and shared. This law also specifies that:

  • It allows an individual to keep their data safe by gaining an understanding of how the information is used and if an individual doesn't like how the information is being used, so they have always an option to ask the organization to delete the data.
  • A certain amount of transparency will be there regarding the information one has and what the organisation is doing with it.
  • No burden on SMEs and international companies as this law have the lowest cost of compliance.
  • Strikes a balance between privacy, cost, compliance and commerce.
  • The Data Law will have a broader look of approaching globally and addressing the large number of international enterprises that are incorporated and located in UAE and function globally. UAE in their announcement of the law underlined the fact that it is not going to have a high compliance cost. It is said that this new data protection law will have a flawless and consistent transfer of data internationally.

    The New Data Law will introduce certain rights for individuals such as the right to information, right to access, right to be forgotten. When the personal information is stored and monetized in some way or used for wrongful marketing purposes, so there will be certain provisions to stop this and it will ensure that the information will be used only with the consent and that it does not harm someone's privacy.

    Conclusion:

    The data protection law is a great initiative towards the data protection regime. This law has become very important because of the capacity to have visibility into how organizations handle that data, what they do with the data, how long they hold on to it and to be able to ask organizations questions about how their data is being used. This will be a major and very great change regarding future aspects.

     

     

     

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    Tue, 19 Oct 2021 11:33:00 GMT
    <![CDATA[Australia-UK Pact Mutual Professional Recognition]]> Australia- UK Pact on Mutual Professional Recognition for Lawyers

    After Australia's Free Trade Agreement, its professional services sector supports internationalisation with a mutual recognition unit by helping professionals practice abroad. It ensures that professionals such as accountants, architects, engineers, lawyers, physiotherapists, veterinarians, teachers and others have access to foreign markets.

    Australia is one of the top four largest services exporters, meanwhile professional services play an indispensable role in captivating international trade and investment which eventually promote economic growth and business of the country.

    The major issue of Intra-jurisdictional inconsistencies:

    The UK Legal Council considers that the contemporary process for Australian lawyers should be admitted as lawyers in England and Wales through the Lawyers Qualification Examination (SQE) test. This is often the relatively simple process that may be replicated within the Lawyer Eligibility Examination (SQE). The Law Council optimises that any concessions or exclusions granted to Australian lawyers under the SQE will recognise the correspondence between legal professional credentials in Australian jurisdictions.

    Mutual Recognition of Australian/UK Lawyers:

    The present regulatory environment is not equivalent to mutual recognition or even equal treatment:

    In Australia, UK lawyers needed to require a minimum of one additional subject of tertiary studies before they'll be admitted (constitutional law). Depending on the discrete subjects undertaken in their undergraduate training they may also have to undertake additional tertiary education in administrative law and ethics and professional responsibility to ensure they have adequately covered off the "Priestly 11" legal knowledge necessities for admission.

    On the opposite hand, Australian lawyers must undertake the Solicitors Qualified Exam and assessments to become a solicitor in England and Wales. There are exclusions and recognition of prior experience for lawyers qualified within the EEA/EU/Switzerland, lawyers qualified in Northern Ireland or Scotland, barristers who have qualified in England and Wales and completed a pupillage and someone who has completed a pupillage and someone who has finished the LPC in England and Wales, but not for Australian lawyers.

    But after the mutual recognition, both countries have access to each other's legal market.

    Access to many rights after this AU-UK mutual recognition agreement:

    It has been acknowledged that Australia and the UK have good access to each other's service markets.

    After this Australia – UK pact, UK lawyers can readily practise UK law in Australia on either a temporary or permanent basis. As Australian-registered foreign lawyers, there are not any restrictions on UK lawyers practising UK law in Australia on their account, as employees, in partnership with Australian and/or other foreign lawyers or within any of the choice business structures available to Australian law practices. They will work on a fly-in / fly-out basis.

    The right to establish a commercial presence (through a branch office or other legal presence with a right to establish one or more commercial presences as provided to local lawyers) and, where a poster presence has been established, the choice to use the firm name employed in Australia respecting local customs or usage within the host country. They also have the right to cover multiple jurisdictions of laws which earlier Australian legal service providers or employees were not qualified to advise but now they are qualified to advise.

    Now there is an option for local lawyers and law firms to enter into commercial association with the freedom to negotiate fee and profit-sharing arrangements. They have the right to appear in arbitrations, conciliations and mediations. Also, they can provide services as Arbitrators, Conciliators and Mediators.

    Admission to the legal profession for UK lawyers in Australia:

    Concerning UK lawyers, if they are willing to take admission to the Australian legal profession it is mandatory to obtain tertiary academic qualifications that at least of 3 years of full-time study of law which includes prescribed 11 subjects.

    The application has to be sent to the admitting authority in the State or Territory in which they intend to seek admission. With their training and experience, the academic qualification of a foreign lawyer will be confirmed by the academic authority.

    As for lawyers from the UK, it is said that the applicant will be required to undertake additional academic study in four to six subjects, including Federal and State Constitutional Law, Administrative Law, and Ethics and Professional Responsibility.

    The UK Law Council considers that the current process for Australian lawyers to be admitted as solicitors in England and Wales through the Solicitors Qualifying Examination (SQE) test. It also understands that this is the relatively straightforward process that will be replicated in the Solicitors Qualifying Examination (SQE). The Law Council hopes that any concessions or exemptions afforded to Australian lawyers under the SQE recognise the equivalence between legal professional qualifications in Australian jurisdictions.

    Conclusion:

    Now, junior lawyers in the UK may soon be able to practice in Australia without having to prequalify a post-Brexit trade deal with Australia. The government said the UK-Australia Free Trade Agreement (FTA) would ensure mutual recognition of professional qualifications, allowing lawyers to practice in the country without the need to pre-qualify or pursue studies. In the UK admission process, some are exempt from undertaking the Bar's professional course, while others are required to undertake an intensive weekend of advocacy. Some are required to undertake a reduced period of pulling. While this process may be consistent with the seniority of the lawyer, there are no clear guidelines on admission requirements and exemptions available for foreign lawyers.

     

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    Tue, 19 Oct 2021 10:10:00 GMT
    <![CDATA[closer look at Electronic Privacy Laws in GCC]]> A closer look at Electronic Privacy Laws in the GCC

    The cooperation council for the Arab State of the Gulf is commonly known as Gulf Cooperation Council (GCC). It is a regional, intergovernmental, political and economic union that consists of all Arab states of the Persian Gulf except Iraq. The GCC countries are Kuwait, Bahrain, Qatar, Saudi Arabia, Oman and The UAE.

    Nowadays, Electronic privacy is the centre of everybody's attention as the amount of data created today is very high with approximately 2.5 quintillion bytes per day, which is a very huge amount. So the sensitivity of data and its privacy goes up day by day. It's becoming increasingly important we should be focusing on how our data is being used.

    Data is collected in various forms like when going out for shopping and swiping up your credit card, getting on a website and registering yourself, sometimes even you don't have to provide any information and you just simply accept the cookies then you have provided some part of your personal information to them which can be knowingly or unknowingly. This article is about the electronic privacy laws in GCC countries individually.

    Bahrain:

    In Bahrain a Personal Data Protection Law (PDPL) has been created, where the data controller has been given to data subjects that mean the control is given to the general public. The companies should be abiding by the law and to manage electronic privacy, the data protection law was drafted in 2019.

    The purpose is to protect the data for the individuals and without the consent of the individual, the data should not be moved around. There is non-compliance and risk is also for companies who are not been able to manage the data they are supposed to manage as per the provision of this law. There is imprisonment for one year and a fine up to BHD 20000. The Ministry of Justice is the body that monitors the PDPL compliance maintain notice and authorisation of the register for data processing.

    Consent to the process, personal data unless required by law, legitimate interest or contractual obligation. Appointment of data protection guardian is done by impartiality and independently. Transferring data for processing outside of Bahrain is not going to be a straightforward process now. The person has got a list which is now proposed in the consultation paper but anyone outside the country needs to get permission on a case to case basis.

    Rights of data subjects like the right to blocking, object to direct marketing are back to the people, so they can now control the data usage and the framework for the data quality has now been expanded on one of the consultation papers.

    Qatar:

    In 2016, the Qatar government has introduced Law No. 13 which is related to the protection of personal data. Qatar is one of the first GCC states which have introduced the electronic privacy law, which says about the assembling, usage and release of personal data.

    When the law was published in the official gazette, there was six months' time period in which compliance of law was ensured.

    There electronic privacy laws levy restrictions on individuals as well as companies to distinguishable individuals using electronic means. The law provides an individual's right to give consent to the specific information which has to be published or not. Furthermore, the "specific" category include health status, birth status, religious belief, criminal records, marital status etc. It can only be procured with the permission of the Ministry of Transport and Communications.

    Concerning cross border transfers, personal information collected in Qatar from different jurisdictions should be easily accessible. But this rule does not apply when it is a matter related to the national security of the country, international relations or in case of investigation of criminal offences.

    Oman:

    In the current situation, Oman does not have any electronic privacy law but the right to the individuals' confidential data in all modes of communication is secured as per Oman' Constitution (Royal Decree No. 101 of 96). For the protection of electronic data privacy, the sultan of Oman established a Cyber Defence Centre (Royal Decree No. 64 of 2020).

    The abovementioned Cyber Defence Centre will directly report and help the Internal Security Service ("ISS") of Oman. All the mandatory laws for cybersecurity will be issued by the head of ISS and anything which goes contrary to the decree will be repealed.

    As per the Electronic Transactions Law, data collected from the e-commerce websites like electronic signature contains very fewer provisions for the protection of data but it includes some necessary provisions related to dissemination and retention of data. This law is only applicable to electronic transactions.

    The UAE:

    The UAE introduced a new comprehensive data law in the country. This new data law is being brought as part of the national programme called "Projects of the 50". At present, UAE does not have a singular comprehensive data protection law; this would be the UAE's first comprehensive data protection law to operate across the country's mainland.  But other existing laws have been used to deal with privacy and data security matters and certain data protection provisions have applied to certain sectors.

    The new data law will introduce certain rights for individuals such as the right to information, right to access, right to be forgotten. When the personal information is stored and monetized in some way or used for wrongful marketing purposes, so there will be certain provisions to stop this and it will ensure that the information will be used only with the consent and that it does not harm someone's privacy.

    Kuwait:

    Currently, Kuwait does not have any particular electronic privacy law. There are no specific guidelines on how retention and dissemination of data are done.  But the e-commerce law requires that any personal details like marital status, birthplace, health status, financial condition, personal status, and criminal record (if not to be disclosed) should be retained privately. The abovementioned information should not be disclosed without consulting the client and without the client's permission.

    Saudi Arabia:

    At present in the Kingdom of Saudi Arabia, there is no electronic privacy law related to data protection. Due to no data protection law, businesses in Saudi Arabia are getting affected as there is market awareness about the privacy of data. Currently, all the matters related to privacy in Saudi are governed by sharia law in the absence of any specific legislation.

    E-commerce law came into force in 2019, which applies to all the service providers who provide goods and services through an e-commerce platform, even outside of KSA to the people residing there. It is also prohibited in this law to seek a client's details.

     

     

     

     

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    Tue, 19 Oct 2021 09:55:00 GMT
    <![CDATA[Economic and Fraud Provisions in Middle East]]> Economic and Fraud Provisions in the Middle East

    "There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

    - Milton Friedman

    Economic fraud is a term that has been repeated over the years, so much so that the consequences it bears do not have any precedence or impact on the ones that hear it. For many companies and capitalist machinery, this term essentially triggers them to explore options to hide their fraudulent tracks and continue operating in the same manner. To have governments help them cover the tracks in certain jurisdictions ultimately defeats the purpose of the assignment.

    Despite the incongruent activities of individuals, companies, and governments from the expected norm of justice in many jurisdictions, other countries are tenacious to implement a regulatory framework that will eradicate such fraudulent activities in the market. This article will discuss the economic and fraud provisions established in the Middle East, their effectiveness, and the scope of reach it possesses about financial crime.

    What are the Economic and Fraud provisions in the Middle East?

    If one area of the economy has seen a steady increase in the past years, it would be the economic fraud prevalent in society. Regardless of the number of provisions that jurisdictions and international organizations establish to combat financial fraud, none of them seems sufficient. The parties involved in economic fraud and other fraudulent practices are constantly evolving to cover their tracks efficiently.

    Infamous scandals like Bernie Madoff and the Ponzi scheme leave one in absolute awe as it remains unclear, what is the culprit: the crime or the criminal? Many innocent parties, including employees and clients, were adversely affected by the ill-doings of these financial schemes. After the outburst of many scandals and its impact on many innocent individuals, jurisdictions are trying to fasten their pace to stay a step ahead of wrongdoers and hopefully eliminate the potential threats in the market.

    The introduction of new anti-economic fraud regulations has paved the way for potential investors to feel a sense of security over their investments within the market, along with the ability of the regulations to enforce justice. Over time, people have understood that the formation and establishment of an anti-fraud legal framework are not sufficient to ensure peace and harmony in the market, an iron fist must be imposed on fraudulent parties and companies to deter them from doing such activities in the future and serving it as a lesson for other participants in the market who bear similar intentions.

    The types of economic fraud can be quite varied and are spread across different industries and the scope of nature. These could include housing benefit fraud, tenancy fraud, council tax fraud, blue badge fraud, social care fraud, business rates fraud, insurance fraud, bribery, and money laundering. These are just a top layer of economic crimes prevalent in an ocean of fraudulent activities in the market. The crimes that are more coherent to the wrongdoings in the market include not declaring the business location, stating that a property is not in use while it is, dishonestly requesting for an exemption to pay for charges that are owed, or any unauthorized movement of money to make ill-gains.

    Often, economic crime is caused not by companies but by customers towards companies. The highest reported crime boost in the Middle East is through customer fraud and procurement fraud, which have proved to be the most disruptive fraud within an economic crime. In a survey conducted on a global platform, the number of customer frauds was comparatively more in the Middle Eastern region.

    In an ongoing effort to combat fraud together, many companies in the Middle East began investing in more stringent controls and implementation of the rules to avoid economic crime, while many others conducted a thorough examination into reasons after the occurrence of a crime in the company. Another issue that stands alongside customer fraud about its prominence is procurement fraud. This fraud entails the practice of favoring associates with vendor and supplier contracts.

    All these efforts are measures taken to mitigate the risks involved and ensure that proper prevention is taken by instilling the right technology and talent to deviate from any fraudulent prone routes.

    However, it is not easy to ensure that accountability will be maintained and transparent feedback is provided. Another limitation of this procedure is that advanced technologies to combat financial crime can be costly, which would further deplete if the company possesses insufficient resources to acquire and install the platform and is not equipped with properly trained employees to manage the technology. The lack of proper expertise to handle the in-place technology could attract various cyber threats, which allows a wrongdoer from any part of the world to infiltrate the company's system.

    With this in mind, companies must equip themselves from the arsenal of defenses to protect themself and the financial and reputational facets of the company. The extent of damage that infiltration of the company's system can cause to the operations is quite unfathomable. It would be better for companies to leave their vault of secrets wide open than installing an IT platform that is managed poorly. The necessity of combating such insecurities is proliferating and must be countered at the earliest. One would like to believe that the efforts of the legal jurisdictions in the Middle East to battle economic crime are practical and promptly applied. However, many of the jurisdictions still fail to provide a proper implementation of the provisions established against economic crime.

    The readiness of companies in the Middle East to confront the indecisive nature of economic crime and report any issues as they arise is still moving at a stagnant rate. The stark increase in cyberattacks and its potential threats is not a mystery to the companies in these regions. Nevertheless, they decide against preparing themselves in defense of such risks and attacks. The firms in the region and the governmental organizations must understand the types of threats that could arise in the economy and the nature of such economic crimes. Although this would seem like an insignificant step, this particular action could help achieve a more profound revelation of the gaps and vulnerabilities of the economy and its protective framework.

    Many would argue that the relationship of the Middle East with economic crime and fraud dates back ages. All the glitz and glamour and the boom of economies are incongruent with the fraudulent activities occurring within the firms and regions. A region's legal systems cannot enforce the regulatory frameworks established to fight against economic crime if the country's government does not implement the rulings.

    To know more about Economic and Fraud Provisions in the Middle East in Singapore Click here 

     

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    Thu, 30 Sep 2021 14:28:00 GMT
    <![CDATA[Basis of claims in construction industry in UAE]]> Basis of claims in the construction industry in the UAE

    Disputes are widespread in the construction sector. Disputes develop owing to conflicts between any of the parties to the contract. Disputes may be detrimental to construction projects, causing enormous costs, disruptions, & reduced productivity. To execute a construction project on schedule and within budget, it is critical to understand the reasons for disagreements. Construction disputes have an influence on project goals& strain relations amongst parties to the contract. A construction conflict is seen as a hindrance to the effective execution of the project. Disputes are time-consuming, disagreeable, and costly & the workflow is disrupted by conflicts, as a result of which there will be higher expenditures, delays, and other undesirable consequences. These issues may result in construction lawsuits and conflicts.

    • Disputes Concerning Designers

    If there is not enough time to develop, the proposal/design might lose exact elements & precision. Poorly designed situations happen whenever a layout is unusable, contains missing pieces, and fails to suit users' needs. Poor & insufficient technical planning & requirements may lead to building bottlenecks. Alteration in material conditions and the following approval procedure may take time & may result in disagreements over the higher price of the new materials and delays due to shipment and trouble obtaining the equipment. All of this costs the owner and designer money, which leads to disagreements. 

    • Ownership Disputes

    One of the most prevalent reasons for disagreements is the owner's sluggish decision-making progress. The owner spends a long time making decisions, causing the development time to be delayed. Inadequate project planning leads to disagreements and higher costs for the owner. To minimize disagreements and excessive expenditures, careful early preparation is essential. Owners' failure to issue interim awards on-time extension & payment is a regular practice. This might lead to even more difficult-to-resolve disagreements at the end of the project.

    Leaving conflicts till the conclusion of the project makes them more difficult and expensive to resolve. Owners may seek changes such as adding or subtracting from the previously agreed-upon scope, leading to disagreements & disputes because specific changes may result in more time and money. If the owner is unable to fund the project on time, the development will be delayed, and the project may be halted for a period of time until the owner is ready to finance the project, resulting in disputes. 

    • Disputes Concerning Contractors

    Inadequate contractor funding during construction causes delays, job interruptions, and poor quality of subcontractors' work. If the contractor is short on labor, the construction process is delayed, leading to disagreements. Low productivity might result in conflict. Inadequate site inspection might lead to a slew of disagreements. A sort of contractor conflict is a poorly specified scope of work. Accidents and delays in the construction phase might occur due to the contractor's poor monitoring & project execution. The contractor's site management is a crucial issue in construction conflicts. Similarly, an improper leadership style from the construction/project manager occurs when an inept individual with insufficient credentials is in charge of construction/project management, making poor judgments throughout construction. Contractors may be requested to halt the construction process if they cannot continue making progress on the project. 

    • .Contractual Disputes

    A poorly worded contract leads to diverse interpretations of the same issue, leading to an argument, eventually leading to a disagreement. Furthermore, differential site conditions are regarded as a contractual conflict. This occurs when the contractor discovers unexpected physical circumstances of an unusual character that differ considerably from those commonly experienced and widely acknowledged as inherent in the work at the project's site. The most common basis for claims is different site circumstances. When the parties desire to change the terms of a preexisting signed contract, they employ contract modifications. When there is contradictory and faulty information in the contract document, the contract must be highly accurate and updated before an agreement between the parties is reached. The contract's words should not contradict the scope of work and should be adequately discussed between the parties. 

    • Other Disputes

    Other reasons would include the- 

  • Orders for Change or Variation
  • Owner-caused delay
  • Owner's oral alteration instructions
  • Owner's payment delay
  • Contract price is low owing to great competition.
  • Variations in material and labor prices
  • Personality of the owner
  • Quantity variations
  • Issues with subcontracting
  • Contractor's delay 
  • Contractor's lack of organization
  • Financial issues with the contractor
  • Poor workmanship by the contractor
  • Similarly, inclement weather can create delays and cost overruns, which can lead to disagreements. The absence of coordination and communication among both parties during construction causes conflict and uncertainty of the scope of the project, so this creates social conflicts.

    • Settlement Methods To Resolve Claims 
  • Bargaining and deliberation
  • Discussions between conflicting parties, typically the owner's agent & the contractor, may help resolve a dispute swiftly. Landlords frequently devote extensive time to researching charges, and any corrective action is frequently delayed. If no agreement is achieved, the case is moved out of the conversational participants' control & referred to alternative dispute resolution like arbitration & mediation.

  • Mediation
  • The disputing parties can resolve the dispute through the use of mediators if negotiations feel. Attempts are made to find a solution to solve the disagreement. The mediator's function is to bring opposing sides to a common agreeable point. He/she can elucidate and explain the points of contention, which enables each party to grasp the other party's stance. He/she could also give ideas & sometimes even offer a final settlement. 

    On the other hand, the mediator lacks the authority to make a final, binding judgment. As a result, disputing parties are not obligated to accept the mediator's conclusion.

  • Arbitration
  • The conflicting parties may resort to arbitration If parties are unable to settle the dispute through mediation or dialogue. Even though the parties are hesitant to employ the process of arbitration to settle conflicts, it often is an inescapable option. Following the appointment of an arbitrator, each party attempts to persuade the arbitrator of the validity of his/her stance, & the session is not concluded until each party has had a complete chance to state their case. Following the session, the arbitrator renders a final & enforceable arbitral award.

  • Litigation
  • If the disputants have not settled on the arbitrators if one or more arbitrators opted to refrain from the task, nor if there was an impediment to proceeding with it and there was no agreement between the parties in this respect, the parties may move to court. Although disagreeing parties dislike going to court to settle their differences, it may be their only and ultimate option. A decision, in this case, is final and binding, and it cannot be appealed. 

    Conclusion

    At present, the UAE is one of the most vibrant countries in the construction sector. In terms of the construction business, the UAE is now one of the most dynamic countries. As a result, it is dealing with a slew of challenges, including many building conflicts. In terms of frequency of occurrence, this report examines the primary reasons for disagreements in the UAE. Furthermore, the report analyzes the critical disagreement avoidance and resolution approaches and compares their efficacy. Based on their origin, the disputes are split into five distinct groupings. There are five of them: owner, contractor, design, contractual, & others. Owner-related issues are shown to be the most prevalent since changes and adjustments in the scope of the project and the time it takes them to make choices frequently constitute reasons for conflict. Mitigation strategies are explored in three stages of a building project depending on their suitability and efficacy. There are three of them: early resolution, late resolution & avoidance.

     

     

  • Bargaining and deliberation

  • ]]>
    Thu, 30 Sep 2021 11:55:00 GMT
    <![CDATA[Legal Issues Concerning a FATF Mutual Evaluation Report]]> Legal Issues Concerning a FATF Mutual Evaluation Report

    Introduction

    The Financial Action Task Force, also known as the Groupe d'action financière in French, is an intergovernmental organization created in 1989 on the initiative of the G7 to establish Anti-Money Laundering Measures. Its mandate was broadened in 2001 to encompass terrorism financing.  

    The Financial Action Task Force makes legally non-binding recommendations to its member countries, expected to follow as guidelines.  

    The mutual evaluation report evaluates a country's efforts to combat money laundering, terrorism financing, and the spread of weapons of mass destruction. This includes reviewing a country's efforts to address its threats from designated terrorists or terrorist organizations.

    Mutual evaluations by the FATF are in-depth country studies that examine the implementation and effectiveness of anti-money laundering and anti-terrorist financing measures. Mutual assessments are peer reviews in which participants from various countries evaluate one another. A mutual evaluation report includes an in-depth description and analysis of a country's system for avoiding financial system criminal misuse and specific recommendations for the government to improve its system. 

    Mutual reviews are stringent, and a country is only deemed compliant if it can demonstrate its compliance to the other members. In other words, it is the assessed country's responsibility to show that it has a functioning system. 

    Mutual Evaluation Reports

    Mutual Evaluations have two essential components, effectiveness, and technical compliance.

    • The effectiveness of a mutual evaluation is the most crucial factor to consider. This is the emphasis of the assessed country's on-site visit. During this visit, the assessment team will prove that the assessed country's measures are effective and produce the desired results. What is expected of a country varies depending on its exposure to money laundering, terrorism financing, and other concerns. The FATF has created an intricate assessment system to ensure consistent and fair assessments.
    • Each mutual evaluation includes a technical compliance assessment. The examined country must submit information on its money laundering, terrorism funding, proliferation financing laws, regulations, and other legal instruments. FATF's immediate attention used to be on this, and FATF still requires the legal framework. However, history has proven that simply having rules is insufficient; the main focus is now on effectiveness.. 

    A complete mutual evaluation takes up to 18 months. The stages in this process are as follows:

    • Assessor training. The FATF holds monthly training sessions to educate experienced country experts on the FATF Recommendations and Assessment Methodology. FATF does not limit assessors to FATF member nations; any country member of the Global Network of FATF, FATF-style regional entities, or FATF observer organizations can send expertise for evaluations. 
    • Country training. The FATF provides training to representatives of the assessed country to know what they must furnish and demonstrate during the process.
    • Technical compliance. The country makes its laws and regulations available. As stipulated by the FATF Recommendations, the assessors examine this information to see if all of the required rules and regulations are in place. This process takes about four months; however, it can take longer if additional paperwork or translations are required. Assessors produce a draft report after the analysis, containing technical compliance scores for all 40 Recommendations.
    • Scoping - Assessors conduct a preliminary scoping exercise to select the areas of focus of the on-site visit in preparation for the effectiveness assessment and the on-site visit. The type of threats, vulnerabilities, and risks, the type of economy, the size and financial and other sectors, political stability and commitment, the rule of law, and the maturity of the country's system to combat money laundering, terrorism financing, and proliferation are all factors taken into account.
    • On-site visit - For the on-site visit, the assessors travel to the country. The country must give information on the efficiency of its system in all eleven categories covered by the FATF Methodology before, during, and after the inspection (more information on an effective system to combat money laundering and terrorist financing). The assessed country supplied information on the effectiveness of their system before the on-site visit to aid in the discussions.
    • Drafting a report - The assessors complete the mutual evaluation report with the effectiveness and technical compliance assessments findings right after the on-site visit. The examined country is given a chance to comment on the draft report and meet with the assessors face to face. Independent reviewers examine the report as well. However, the assessors are the only ones who have the final say over the report's wording and proposed grades for effectiveness and technical conformity.
    • Plenary discussion. At one of the three sessions held each year, the assessors give the draft report to the FATF Plenary. The results and proposed ratings of the assessors will be discussed in the Plenary. Members must agree to overturn any of the assessors' draft findings and ratings (except for the evaluated country, which has no vote).
    • Final quality check. Following Plenary acceptance, the report will be reviewed by all countries in the FATF Global Network for technical quality and consistency before being published on the website, which generally takes two months after Plenary approval. 
    • Follow-up. Following adoption, the governments must remedy the deficiencies noted in the study. Post-assessment monitoring applies to all countries. This might range from regular progress reporting for nations that are already largely compliant and demonstrably committed to addressing the remaining few flaws to issuing a public warning against a country that fails to address critical deficiencies. 

    The UAE's FATF Mutual Evaluation Report 

    The following was found in the UAE's FATF Mutual Evaluation Report: 

    The United Arab Emirates recently reinforced its legal framework to combat money laundering and terrorist funding, but it must move quickly as a major global financial center and trading engine to successfully block the illicit financial flows it attracts. 

    Following a recent national risk assessment, the UAE's awareness of the threats it faces from money laundering, terrorist financing, and sponsorship of weapons of mass destruction is still developing. The UAE's enormous financial, economic, business, and commercial activities, especially its position as a global leader in oil, diamond, and gold exports pose significant risks. The UAE's strategic geographic location between continents, proximity to war zones, and jurisdictional complexity, including seven Emirates, two economic free zones, and 29 commercial-free zones, raise the UAE's risk of drawing funds linked to crime and terrorism. 

    IN RECENT YEARS, the UAE has reinforced vital laws and regulations and established several committees to increase national coordination and collaboration. While the government still has many concerns to address, the foundations for an efficient framework to detect and prevent criminals and terrorists from manipulating the financial system are essentially in place. However, because this framework is new, it has yet to show that it can produce the desired results. 

    Misuse of legal persons is a significant risk in the UAE, with 39 separate company registers that have enabled the UAE to grow its multiple free zones. The UAE is also at risk of being exposed to proceeds of international crimes. However, authorities do not make enough use of formal international legal assistance processes to combat money laundering, terrorism financing, and proliferation, but they have demonstrated greater capacity in using informal processes.

    In their investigations of terrorist financing, fraud, and other crimes, authorities have access to a wide range of financial data. The UAE has had positive success in detecting and prosecuting terrorism financing, but considering the country's risk profile, the country's low number of money laundering prosecutions and convictions, notably in Dubai, is a cause for concern. Authorities do not effectively utilize financial intelligence in their efforts to combat money laundering and track criminal proceeds. Although the Financial Intelligence Unit's role and capacity have improved, better operational outcomes have yet to be demonstrated.

    The UAE's financial and non-financial sectors are extraordinarily extensive and diverse. The research noted concerns with the supervision of several higher-risk sectors, including banks, the Dubai property market, gold, and other precious metals and stone dealers. 

    The UAE is a major international and regional financial center and trading hub that attracts both legitimate financial and economic activity and money laundering and terrorism-related financial flows. The government needs to improve its awareness of the threats it faces at the national and individual Emirate levels and take steps to improve the efficiency of its policies to stop money laundering, anti-terrorism funding, and proliferation financing.

    Conclusion 

    The mutual evaluation report evaluates a country's efforts to combat money laundering, terrorism financing, and the spread of weapons of mass destruction. They help countries that are members of the FATF to regulate their financial and technological services better. For the UAE report, for example, they also catered their report to what was unique about the UAE, e.g., their popular industries and geographic location. 

     

     

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    Thu, 30 Sep 2021 11:17:00 GMT
    <![CDATA[Electronic Contracting Law in E-commerce]]> Electronic Contracting Law in E-commerce

    Introduction to Contract Law

    A contract is a legally binding force between two entities, companies, or parties that link the parties in a contract protected by law. An agreement between the parties may be made orally, in writing, in action, or any of these ways.

    A contract is an essential element of the law formed infinite times daily as people execute the typical activities of their lives. A contract is formed when one purchases groceries, uses public transport to work and accepts an employment offer. 

    Our lives are riddled with the contract, which may not necessarily always be written, but they can be oral too. There are a few elements that must be satisfied in order for a contract to gain legal effect. 

    To establish a contract, offer and acceptance must be derived through the mirror image rule; the terms of the acceptance must correspond precisely with that of the offer to be valid.  

    Treitel defines an offer as 'an expression of willingness to contract on specified terms, made with the intention to be binding as soon as there is acceptance by the person to whom it is addressed. 

    H Beale defines an acceptance as 'a final and unqualified expression of assent to the terms of the offer'. 

    An intention to create legal relations must be determined to distinguish an informal contract from one of legal status. It is presumed that in commercial agreements, this intention is a default setting.

    Lastly, to agree contractually binding, it must be supported by sufficient consideration from the promisee. Consideration can be expounded through Pollock's definition, 'an act of forbearance or the promise thereof is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.

    When all these elements as set out above are incorporated into an agreement, a contract between the concerned parties may be sued upon and legally enforced. 

    Long gone are the days where a contract had to be a physical document. Technological advancements have allowed the development of contracts into an electronic form that is acted upon in an online domain.   

    Electronic Contracts 

    Every day, thousands of commercial transactions occur via the Internet, with no face-to-face connection between the parties involved. Purchasing insurance, signing real estate contracts, using credit cards, and entering into financial agreements are just a few examples of computerized transactions. 

    Despite the prevalence of electronic transactions, many individuals are confused if electronic signatures (e-signatures) and electronic contracts (e-contracts) are secure, legitimate, and legal. However, the lack of both firms and customers means that e-contracts and e-signatures are generally secure and dependable means of doing business. However, the parties participating in e-contracts and e-signatures must take particular precautions to ensure the legality of their agreements.

    An e-contract is a contract that is generated and "signed" electronically rather than on paper. A contract is an example of something you may type on your computer and send to a business colleague, and the business colleague responds with an electronic signature confirming approval.

    An e-contract can also take the form of a "click to agree" contract, which is typically included with software downloads: Before proceeding with the purchase, the user must click on the "I agree" button on a page presenting the conditions of the software licensing. 

    In addition, making an online purchase entails the execution of an e-contract. Even if nothing is signed, the buyer agrees to pay the seller a specified sum in exchange for the seller's commitment to give the buyer a product.

    There are some general exceptions to electronic contracts. For example, wills, documents relating to adoption, court orders, notices of cancellation of utility services, notices of default, a notice of termination of health insurance benefits, notices issuing a warning of health hazards of a product, documents permitting the transport of dangerous materials, etc. must be writing. 

    Electronic Signatures 

    An electronic signature, also known as an e-signature, can be unfolded as data that takes the form of electronic intelligence, which is then logically aligned with other data in a similar electronic form of intelligence used by a signatory to implement his or her signature.  

    Electronic signatures function quite like those made physically on paper. These e-signatures are also legally binding, with the added benefit of it being incredibly efficient and highly cost-effective. 

    Electronic signatures are used widely now in many different fields: 

    They are used in sales and marketing to facilitate the easy and swift closure of transactions that do not require the additional cost of transport and time but can be accomplished from the comfort of your home.  

    They are also used in the process of hiring employees. Offer holders and potential candidates can electronically provide their signatures to a hiring board or corporations that require an employment contract to be signed with highly confidential information.  

    Electronic signatures allow for the easy protection of this data alongside enabling companies to hire internationally with ease, not requiring the funding of travel costs of employees who may be working remotely unnecessarily and allowing for the effective saving of funds. It also allows employees from different parts of the globe to conduct their business efficiently and effectively. 

    Most importantly, electronic signatures are also used in law and legal documents. This form of signatures fuels the self-service division of the law. For example, certain digital documents like NDA or liability forms can be viewed and signed online, and this removes the burden of having to print it out, sign it, and then put it forward to the authority requesting or demanding it. 

    E-commerce

    Electronic commerce, sometimes called e-commerce, is the buying and selling goods and services through electronic systems (such as the Internet and other computer networks). 

    Electronic money transfers, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, automatic data collection systems, and other technologies are all used in e-commerce. 

    Electronic commerce can be regarded as the trading and transaction portion of online business. This has also now come to include the exchange of electronic data to complement business activities such as payment and finance. 

    Some examples of successful electronic commerce businesses are Amazon, Namshi, Noon, Shein, Ali Baba, etc. 

    Even if businesses are not entirely e-commerce, they may incorporate elements of it through retail websites like almost all stores and restaurants today, such as Zomato, H&M, etc. 

    Electronic Contract Law in E-commerce

    The law that governs this domain in the United Arab Emirates is Federal Law No. (1) of 2006 on Electronic Commerce and Transactions and even incorporates international law governing e-commerce when national law is silent on the matter.  

    It is assumed that a secure e-signature is reliable, belongs to the person involved, and expressly endorses the electronic document linked to it. It is also assumed that a secure electronic document has not been altered since its production and is trustworthy. A contract is not less legitimate or legal because it includes one or more electronic interactions. 

    Electronic acceptance of partial or entire acceptance may be made to finalize contracts. Electronic equipment can establish an arrangement without human interaction (two or more information systems). According to the DETCL, such an arrangement is binding. The DETCL is the Department Concerning Electronic Transactions and Commerce.  

     Validity of an Electronic Contract in the UAE

    The Electronic Transactions and Commerce Law Number 2 of 2002 was enacted to control electronic transactions, including e-contracts. Article 13 of Chapter III indicates that it is permissible for offer, acceptance, and intention to be carried out electronically for the contract to be legitimate (Article 13(1)). The legality of the contract in issue should not be susceptible to judicial review.

    Evidence of Civil and Commercial Transactions Law No. 10 of 1992 regulates and administers evidence in the UAE. Section 17(1), added by Federal Law of October 9, 2006 (36) of 2006, expands the definition of an electronic signature. A regular sign, sign, or character is considered an electronic signature. 

    In addition, any transmission, reception, movement, or storage of signs, symbols, inscriptions, photographs, voices, or other information generated through information technology media shall be considered electronic documents (Section 2)

    Note that electronic signatures need to have the same ethnicity as the definition contained in this Act (Section 3(1)) and that electronic documents and records (and scripts) need to have the same credibility as defined. Official and customary inscriptions and documents (Article 4 (2))

    Therefore, an electronic document cannot be rejected on the grounds that it is electronic. Rejection of such documents requires specific requirements to negate the validity of such documents. For example, the authenticity of the source; the reliability of the methods used to protect the information.

    Conclusion

    Electronic contracts in the UAE are recognized under both UAE law and DIFC free zone legislation. As previously said, all contract is governed by three factors: occurrence, acceptance, and intent. Whether electronic or paper-based, a contract is regarded as legitimate and binding if the relevant legal criteria meet these three characteristics. 

    As a result, if parties reach an agreement and created an electronic contract by electronic communication, such contract will be deemed a genuine and enforceable agreement to which the parties must adhere. Overall, the field of e-commerce is expanding, and the legal system must evolve alongside it to manage existing uncertainty and tackle future problems.

     

     

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    Mon, 27 Sep 2021 11:31:00 GMT
    <![CDATA[Impact of Digital Technologies on Legal Issue Copyright]]> Impact of Digital Technologies on Legal Issue Copyright

    Introduction

    A copyright is a legal protection given to original works, but it does not cover an idea in and of itself; instead, it covers the representation of an idea in a fixed or physical form. The author has the only right to reproduce or sell the work, distribute copies, publicly exhibit or adapt the activities, or create "derivative works."

    When the copyright on the work expires, anybody can use it in any way they want.

    Copyright is the legal right of the owner of intellectual property. To simplify it further, the word can be assessed through its parts. Copyright is merely the right of the owner of the concerned intellectual property's right to copy. 

    This is an exclusive right of the owner. Only the owner of the intellectual property has the right to replicate the content as he wishes. The owner may grant authorization to certain third parties, and in those circumstances, they are also legally entitled to reproduce the owner's work in line with his/her specifications. 

    This is, however, not an unlimited right. Copyrights come with an expiry date, and once this has been reached, the content is no longer private and becomes the subject of the public domain. 

    Some examples of content that are protected by copyright are written work, software, poetry, art, graphic design, musical lyrics and compositions, novels, film, architectural designs, website content, etc. 

    While copyrights protect a broad range of work, they do not protect entirely intangible concepts such as ideas, discoveries, conceptualizations, and theories. Brand names and other company emblems are also not protected by copyright law but may be protected by trademarks and the legal status of domain names.  

    Content is only subject to the protection of copyright law if it is the original work of the creator that is the fruit of independent thinking and no degree of duplication. This equips the content with the Original Work of Authorship title and affords it protection under copyright law. 

    Digital Technology and Copyright

    Due to recent advancements in digital technology, copyright law confronts three pressing issues. First, the introduction of new digital systems will increase infringements, more incredible difficulty in discovering infringers due to privacy concerns, and public acceptance of unlawful copying. 

    Existing copyright laws will be increasingly difficult to enforce as a result. Second, the fair use doctrine will continue to undermine the copyright system by allowing private, illegal use of copyrighted works. Third, the current definitions of copyrightable work will be found to be unduly restrictive. If these issues are not addressed, the intellectual property system will be undermined.

    The introduction of new digital technologies necessitates legislative action. The Court has failed to adequately enforce copyrights, define permissible private use, or define the extent of the protected work, as will be demonstrated.

    The market system has also shown that it is incapable of dealing with these problems. As a result, this paper suggests that new copyright laws be adopted to address both present and future issues.

    On the other hand, new technology came along and replaced the printing press as the exclusive means of reproduction. From the beginning of the twentieth century, ubiquitous and inexpensive technologies such as radio, audio, and video recorders gained traction, wresting authority away from writers and placing it, for the first time, in the hands of the people.

    Digital Technology as a Means of Enforcement 

    Also, in the future, digital technology will make it more challenging to enforce present copyright laws. There are three reasons for this. First, with the emergence of digital home systems, copyright infringements may become more common.

    Second, given the privacy concerns involved, these infringements will be challenging to discover and establish. Third, societal perceptions about copyright laws will continue to obstruct enforcement. 

    Infringements

    With the introduction of high-quality digital systems into American households, copyright infringement of music and video files, which is currently standard with analog technology, may reach pandemic proportions. While analog videotaping is thought to incur enormous costs for the recording business, digital technology might quadruple those losses. 

    Copyright infringements may become increasingly widespread as digital recorders have incredibly exact reproducing capabilities.

    Because digital home systems may generate copies of information without creating a perceptible drop in quality, they allow home consumers of protected information to compete directly with authorized commercial producers. 

    Even if each owner allows just one other person to make an unlawful duplicate, ten generations of cassettes might be made without anybody knowing the difference in audio quality.  

    The current distribution techniques exacerbate these enforcement issues. For example, if an artist sells content to a digitally transmitted television or radio station, it may be his sole sale because home users can make an endless number of unlicensed recordings from a single broadcast.

    Similarly, if the content is sold to a video rental business, the artist will not receive a portion of the rent due to the first sale theory but will surely lose subsequent sales to unlicensed home tapers. 

    Because of the lower costs of digital technologies, both permitted and illegitimate uses of protected works should expand. Recorder sales should increase as recorder prices fall. 35 Furthermore, as digital recorders become more widely used, the number of possible copyright infringements will rise.

    Protection of Privacy 

    In the household, a digital recording will be commonplace. Copyright infringements will be more challenging to prove and detect as a result of this.

    Furthermore, unlicensed digital copies are so identical to originals that even a copyright holder would have difficulty distinguishing between the two.  

    The possibilities of discovery and proof of infringement are considerably reduced as a result of this resemblance. 

    With the usage of fiber optic lines, digital communication will become more private. 

    Response to changes in Copyright Law with the Advancement of Digital Technology

    Public perceptions of the copyright law are possibly the most significant impediment to its enforcement. Although views formed during the analog period are unlikely to alter when digital technology is introduced, the potential harm these beliefs may cause copyright holders is significant. 

    Americans have grown accustomed to filming copyrighted information, and polls show that the general public accepts some illicit copying.

    This mindset is unlikely to alter with the deployment of digital technologies. Instead, new digital methods will most likely be used by the public to circumvent copyright laws. 

    According to studies, the public likes legislation that allows copying but does not want to pay for it. 

    Audio and Copyright

    The piano roll was a type of musical storage devised by Edwin Votey in 1895 and used to play music back on a specialized piano called the pianola. The copyright industry's difficulties with sound recordings began with the piano roll.

    During this period, mechanical fixation methods were making their appearance; the pianola was not the sole sound recording medium. It was, however, the most widely used, and it was this technology that was responsible for the first application of copyright law to musical copies that went beyond comprehensible notations. 

    In the White-Smith Music v Apollo132 decision, the US Supreme Court held that the perforations on the paper, though eventually replicating the protected music, did not constitute a copy per se. Congress, on the other hand, stepped in quickly and incorporated them in the subsequent copyright statute.

    As a result, audio and video recordings began the twentieth century on different footings in terms of copyright but had comparable impacts.

    British Copyright Act 1956

    Following the revision of the Berne Convention by the Brussels Convention in 1948, a new Copyright Committee was established in the United Kingdom in 1951 to see whether any significant developments had occurred in the years since the 1911 Copyright Act that may have influenced the copyright law as it stood. Its duty includes paying close attention to the period's technological breakthroughs. 

    The Committee's recommendations resulted in the Copyright Act of 1956, which recognized the new and rising technologies by providing protection for films, sound recordings, and television broadcasts for the first time.

    The Act, on the other hand, did not protect performers from having their works filmed and broadcast, which is another type of copyright infringement enabled by new technology. The Performers Protection Acts of 1958-1972 were the first to provide them with this protection.

    British Copyright, Designs, and Patents Act of 1988

    Because the impact of new technologies continued to be felt in the field of copyright, a new Committee was formed in 1973 to evaluate their impact and offer suggestions for modifications to the present rules. 

    Some of its significant suggestions included recognizing new technological breakthroughs since the last Committee's report in 1951, such as new ways for reproducing sound records and films, as well as developing computer technology. 143 With the advent of the personal computer and the inception of the internet, this report unknowingly foreshadowed the commencement of a new copyright age. 

    The Copyright, Designs and Patents Act of 1988, which was ultimately enacted in 1988, totally abolished the 1956 Act while addressing various other issues of intellectual property policy and regulation, including designs and patents. The Copyright (Computer Software) Amendment Act of 1985 and the Performers Protection Acts of 1958-1972 were also abolished.

    This new 1988 Act, in addition to addressing all of the classic categories of copyright previously covered, also contained all of the Amendment Acts since the 1956 Act, which covered computer software and cable program copyrights, as well as sanctions against piracy.

    Furthermore, it addressed the unique rights elements of satellite broadcasts and cable programs from the operators' and rights owners' perspectives for the first time and provided film and phonogram producers the authority to manage rentals for the first time. 

    Conclusion

    The law of copyright is in jeopardy. Recent improvements in digital recording and transmission have demonstrated that present legislation is unenforceable and unnecessarily restrictive. Both the courts and the market are unable to address these flaws. As a result, this article suggests that Congress alter federal copyright law to safeguard original work authors and assure the intellectual property system's continuing function.

     

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    Sun, 26 Sep 2021 18:09:00 GMT
    <![CDATA[End of Service Benefits in UAE]]> End of Service Benefits in the UAE

    Employees in the UAE are entitled to a specified set of end-of-service benefits (EoS) under UAE law, including gratuity. These rewards are provided as a mark of appreciation for the employee's devotion and hard work. After the employment contract is terminated, EoS is paid on a cumulative basis for the time spent.

    Understanding End of Service Benefits 

    When an employee's employment contract in the UAE expires, he or she is entitled to the following gratuity benefits. Depending on the type of contract under which the individual is employed, these features may differ. The amount of 'End of Service' paid depends on the type of contract the employee has. Under UAE labor law, there are two types of employment contracts:

    • The Limited Contract: These work contracts are time-limited and end when the time period stated expires.
    • The Unlimited Contract has no expiration date. Employees with unlimited contracts can terminate or resign from their jobs with a one-month written notice.

    End of Service Provisions Applicable to Private Institutions 

    • In the case of an unlimited contract, a notice period may be substituted for any unpaid dues.
    • Any outstanding salaries or overtime payments that are owed to the employee.
    • Pending days of leave are to be reimbursed.
    • Any repatriation fees for end-of-service rewards are required under the employment contract and/or the UAE Labor Law.
    • Gratuity at the end of the service.

    Modes of Legal Recourse for Employee 

    Employees seeking the end of service benefits can approach the local courts, if: 

    • Unless the contract specifies otherwise, the compensation amount for limited contracts shall not exceed the entire three-month salary or the amount payable for the remaining contractual time, whichever is shorter.
    • Employees who fulfill the eligibility requirements may be paid for up to three months' wages.

    Gratuity Remuneration and How to Calculate it? 

    The gratuity pay is the most crucial portion of the end-of-service rewards in the UAE. Gratuity is a monetary recompense paid by the employer to the employee at the conclusion of the service period. 

    Likewise, the amount of gratuity is determined by the kind of contract (unlimited with respect to unlimited contracts) and the cause for contract termination. Similarly, the number of days used to compute gratuity in the UAE might vary if the reason for leaving the organization is resignation rather than termination.

    Calculation Under a Limited Contract 

    Employees in the UAE are eligible for gratuity compensation at the end of a limited contract. On the contrary, if an employee voluntarily resigns, they will only be entitled to a gratuity if they have worked for the company for five years in a row. More specifically, this is assessed on the following factors, whereby: 

    • If the term of service is shorter than one year, there is no eligibility for gratuity compensation.
    • Employees who have worked for more than five years will get a gratuity of 30 days salary for each year worked over the 5-year mark.
    • For service of more than one year but less than five years, the total gratuity compensation would be equivalent to 21 days of salary each year of service. For instance, if the employee has worked for a firm for four years, the said employee's gratuity would be equal to 21 days' pay multiplied by four.

    Calculation Under an Unlimited Contract 

    Employees in the UAE are eligible for gratuity compensation at the end of an unlimited contract. Likewise, in the UAE, an employee is entitled to gratuity compensation after completing 12 months of continuous employment with the company. More notably, when assessing the length of service, leave without pay is not taken into account.

    Regardless of the form of employment contract, the total gratuity payout will not exceed the employee's two-year wage. On the contrary, if an employee voluntarily resigns, they will only be entitled based on the following: 

    • There is no gratuity required if an employee leaves before completing a full year of employment.
    • A gratuity equal to one-third of 21 days basic wage is available for service lasting more than one year but less than and up to three years.
    • If the employee works for more than three years but less than or equal to five years, the said employee shall receive two-thirds of the basic income as a gratuity.
    • If the employee has worked for more than five years, they are entitled to 30 days of basic pay every year.

    Likewise, gratuity remunerations under an unlimited contract are calculated on the following factors whereby: 

    • An employee who has worked for less than a year is not entitled to a gratuity payment.
    • The gratuity is one-third of the base wage for each year of service of more than one year but less than three years.
    • For each year of service of more than three but less than five years, the gratuity equals two-thirds of the base wage.
    • For employees who have worked for less than five years, the gratuity equals 21 days of basic pay for each year worked.
    • Employees who have worked for more than five years are entitled to 30 days of basic pay for each year of service, with the maximum sum payable not surpassing the employee's two years' pay.

    How to Protect the employee's Rights Under UAE Employment Law

    When pursuing a claim to resolve a disagreement over the employee's end-of-service benefits, it is critical to have documentation to back up their claim. If the employee has recorded everything that led to their dismissal, the post-termination rights are more likely to be upheld.

    Likewise, maintaining an employment diary that dates and documents all significant occurrences at work is the best method to go about it. This could include salary reductions or hikes, reprimands and commendations, performance reviews, informal remarks by the employer. Time, date, place, and the presence of witnesses should all be noted. Similarly, it is vital to keep track of any written items related to the job, such as notes, emails, and assessments.

    The employee must have a valid work permit to work in the UAE. Although most employees already have one, it is still crucial to stay updated on the new UAE work permit charges for 2021. In addition, the UAE now permits males to work if their spouses sponsor them.

    Refusal of End of Service Payment and How to Proceed

    To this note, unless the employee is terminated for egregious misbehavior, the UAE gratuity law states that an employee is entitled to prompt payment of their end-of-service gratuity upon termination.

    Moreover, Ex-employers refuse to pay the dismissed employee's anticipated end-of-service benefits, resulting in a dispute. Likewise, the easiest method to deal with the problem is registering a complaint with the Labor Office right away and then taking legal action at the local UAE Labor Court. Nonetheless, it is imperative to note that each scenario is unique in these situations, so a strategy that works for one person might not be the ideal one for all. 

    Conclusively, it is evident that employees are legally entitled to end of service benefits in the UAE, provided they meet the qualifying requirement. 

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    Tue, 21 Sep 2021 18:07:00 GMT
    <![CDATA[10 Reasons to Hire All-Rounders for Your Legal Needs in UAE]]> Legal matters can be stressful for many people. Lawyers in UAE know the ins and outs of the law, but they also have other skills that make them well suited to handle various legal needs. Lawyers are trained and experienced with contracts, real estate transactions, family law cases, civil litigation and criminal cases. They help their clients navigate through complicated areas of law so they can get back to living their lives as soon as possible. So why not hire an all-rounder?

    Reason #1: Lawyers in UAE have the expertise and knowledge to help with all of your legal needs.

    Reason #2: They are trained professionals who can handle any case you may need them for, unlike a general practice attorney or law firm.

    Reason #3: An All-around lawyer can deal with civil litigation cases such as contract disputes, family law cases like divorce proceedings and child custody battles, criminal matters involving theft offences, assault charges or drug-related crimes.

    Reason #4: Lawyers also know how to draft contracts which means they understand what needs to include when parties enter into agreements about real estate transactions or business operations.

    Reason #5: Attorneys specialize in certain areas, but lawyers are experts at everything, so it's best if one person handles every aspect of your case.

    Reason #6: Lawyers are usually cheaper than a specialist, and they have the skills to defend your trial in court should it go that far.

    Reason #7: Lawyers also know how to deal with criminal matters involving theft offences, assault charges or drug-related crimes, which can be especially beneficial for people who live outside of UAE on work visas.

    Reason #8: All-rounders help you save time and money by not needing an additional lawyer when changes occur during their representation, like when custody arrangements change so that lawyers might recommend divorce proceedings instead. Lawyers don't need as much information upfront because they will take over once contacted by the client about an issue. Lawyers have more connections than specialists do which means access to resources is more effortless.

    Reason #09: Lawyers can provide services in more than one language, which means you don't have to find someone who delivers your native tongue.

    Reason #10: Lawyers will not judge or be biased against you because they're there for all types of people.

    Reason #11: Lawyers know how and when a court proceeding should end to avoid going on forever like an endless loop that wastes time and money.

    Reason #12: Lawyers are trained professionals who understand the law and have other skills from their backgrounds like engineering or healthcare. They'll go over what's covered by insurance with clients before any legal work starts.

    Reason #13: Lawyers believe justice is about integrity, fairness and equality under the law. Lawyers also know how to talk about a case without using technical jargon, which means there's less confusion and misunderstanding for their clients.

    Reason #14: Lawyers can help you with any legal issue because they're trained professionals knowledgeable in all areas of the law, not just one or two like some attorneys or lawyers might get trained.

    The bottom line is, hiring the right attorney or legal team can make all of the difference in your case. When you're looking for Lawyers in UAE to represent you and your business interests abroad, there's no substitute for an experienced professional. They understand how cases like yours work, what issues might arise at any point during litigation, and what can be done regarding them before they do. Give a call today and speak with one of the knowledgeable attorneys so that they can help guide you through this process while giving you peace of mind!

     

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    Tue, 14 Sep 2021 14:45:00 GMT
    <![CDATA[ADGM Enacts New Data Protection Regulations]]> ADGM Enacts New Data Protection Regulations

    Introduction

    On 11 February 2021, the Board of Directors of the Abu Dhabi Global Market, in the exercise of its powers under Article 6(1) of the Law No.4 of 2013 concerning the ADGM issued by His Highness the Ruler of the Emirate of Abu Dhabi, enacted new Data Protection Regulations. They were published on 14 February 2021 and replaced the Data Protection Regulations 2015.

    According to ADGM's international benchmark of international standards and best practices, the European Union's General Data Protection Regulation (which took effect in May 2018) was found to be the leading international standard and best practice for comprehensive data protection law. The revised Regulations were tailored to ADGM's needs and designed to be proportionate and business-friendly, without jeopardizing the primary goal of achieving a high level of personal data security.

    The formation of an independent Office of Data Protection, led by a Commissioner of Data Protection, is a vital feature of the new system. Its regulatory functions will be supported by a yearly data protection fee payable to the ODP's Commissioner of data protection from the commencement of personal processing data. Mr. Sami Mohammed has been appointed as the ADGM Commissioner of Data Protection by the ADGM Board.

    Adoption of the new Regulations will result in significant changes and new duties for Data Controllers and Data Processors, according to ADGM. As a result, starting on 14 February 2021, a 12-month transition time for existing facilities and a 6-month transition period for new businesses were proposed. This transition time allows organizations to prioritize understanding their obligations under the new ADGM Data Protection Regulations, conduct a gap analysis to determine whether their existing systems are vulnerable or appropriate, consider any changes to their framework, and take the necessary steps to comply.

    The DIFC Data Protection Law No. 5 of 2020 (DIFC DPL 2020), which governs the processing of personal data in the Dubai International Financial Centre, was passed shortly after these Regulations. The General Data Protection Regulation (EU GDPR) concepts are being accepted and incorporated in new laws and regulations, as evidenced by the Regulations, the recent DIFC DP Law 2020, and the general direction of data protection law in the UAE and broader region.

    These regulations highlight that businesses in the UAE are responsible for handling personal data to high quality, and the regulations facilitate the execution of business activities by allowing for secure cross-border data movement.

    Abu Dhabi Global Market (ADGM)

    On 21 October 2015, the Abu Dhabi Global Market (ADGM), an international financial center (IFC) in the capital city of the United Arab Emirates, opened for operation. ADGM, established as a broad-based financial center by a UAE Federal Decree, strengthens Abu Dhabi's position as a worldwide trade and economic hub, serving as a critical link between the Middle East, Africa, and South Asia's expanding economies and the rest of the globe.

    Abu Dhabi's primary capabilities, including private banking, wealth management, asset management, derivatives and commodities trading, financial innovation, sustainability, and more, are at the heart of ADGM's strategy. ADGM as an IFC governs the entire 114 hectares (1.14 sqm) of Al Maryah Island, a recognized financial free zone, and comprises three independent authorities: ADGM Courts, the Financial Services Regulatory, and the Registration Authority.

    It enables registered financial and non-financial institutions, companies, and entities to operate, innovate and succeed within an international regulatory framework based on common law. Since its inception, ADGM has been awarded the "Financial Centre of the Year (MENA)" for four consecutive years for its initiatives and contributions to the region's financial and capital markets industry.

    Data Protection Regulations 2021

    The New Regulations apply to Personal Data Processing carried out by either a Controller or a Processor operating or conducting business in or from the ADGM, regardless of whether the processing is carried out in the ADGM or whether the Controller or Processor is incorporated in the ADGM.

    A New Fines Regime: The New Regulations establish significant penalties fines for data breaches and non-compliance, with a strict limit of USD 28 million. The New Regulations also give data subjects direct rights to reparation.

    Data Protection Fee: A Controller must pay a Data Protection Fee to the Commissioner of Data Protection for the twelve months following the date it began Processing Personal Data (in an amount to be established by the ADGM). Following that, yearly renewal fees are due.

    Data Protection Officer (DPO): Professional qualifications, including expert knowledge of data protection law and practices, and the competence to carry out the responsibilities described in the New Regulations, must be used as factors to consider when nominating the DPO. Unless they participate in High-Risk Processing Activities, organizations with fewer than five workers are exempt from the necessity to designate a DPO under the New Regulations. ACCORDING TO THE NEW REGULATIONS, the DPO does not have to be an employee of the Controller or Processor, nor does he or she have to be present in the ADGM. In general, Controllers and Processors are not required to appoint a Data Protection Officer (DPO). Unless:

    • processing is carried out by a public authority (excluding courts);
    • processing operations requiring regular and systematic monitoring of Data Subjects on a large scale; or
    • processing on Special Categories of Personal Data (such as those related to healthcare, insurance, tech sectors) is carried out on a large scale.

    High-Risk Processing Activities: These require the Controller to conduct a Data Protection Impact Assessment (DPIA). When a Controller, or even the Commissioner of Data Protection, determines or assesses whether adequate measures have been taken to demonstrate compliance, the results of this DPIA will be taken into account. This is consistent with the GDPR as well as the DIFC Law. The New Regulations create an exemption for situations where the processing of such data is required by Applicable Law.

    Response Timeline for Data Subject Requests: The regulations oblige enterprises to adhere to several data subject rights, including assisting persons in gaining access to personal data. The New Regulations provide a two-month response timeframe for the requests (this can be extended for a further one month if necessary, considering the request's complexity).

    Notification of a Personal Data Breach: In the event of a Personal Data Breach, the Controller must notify the Commissioner of Data Protection without undue delay and, where possible, no later than 72 hours after becoming aware of it, unless the Personal Data breach is unlikely to result in a risk to natural persons' rights. If the Commissioner is not notified within 72 hours, the notification must be supported by reasons for the delay. When a Personal Data Breach is likely to result in a high risk to natural people's rights, the Controller shall notify the Data Subject without undue delay. Where data processing is outsourced, processors who experience a personal data breach must notify controllers as soon as they know the incident.

    "Appropriate Policy Documents": There is an explicit requirement to have an "appropriate policy document" in place when processing Special Categories of Personal Data based on carrying out the obligations and specific rights of the Controller or the Data Subject "in the field of employment law," and/or where they are processed based on a "substantive public interest."  The New Regulations specify precisely what must be included in such a document for it to be judged "appropriate." Given the broad spectrum of what may fall under the purview of "employment law" or "substantive public interest," as defined by the New Regulations, we expect that to achieve complete compliance under the New Regulations; businesses will need to update not only their privacy policies, but also their fraud policies, diversity and inclusion policies, employment policies, anti-money laundering policies, and any other policies that come under this category. Companies subject to the Regulations will be required to update or draft policies and contractual instruments, which will include and/or address the following:

    a data protection policy to be distributed to employees that explain why and how personal data will be gathered, as well as how long it will be kept;

    a privacy policy (in electronic format) outlining the company's processing activities, which must include the following information:

    • the Controller's and DPO's names and contact information;
    • the types of personal data processed by the company;
    • the purpose(s) of processing the personal data;
    • the company's data retention policy;
    • A description of:
    • the types of data subjects;
    • the people who will have access to personal data;
    • the "technical and organizational measures" put in place to ensure personal data security; and
    • relevant safeguards used when sharing personal data abroad (if applicable).
    • Adopting a deletion plan and process to ensure that Personal Data is securely and permanently removed when the retention period has expired.
    • Preparing written agreements with suppliers, distributors, and clients (such as a data processing/sharing agreement or data processing/sharing addendums) (where needed).
    • Significant fines (not exceeding $28 million) for Controllers found in violation of the Regulations. It is also worth emphasizing that data subjects harmed by the data breach will now be entitled to seek compensation.

    Conclusion

    Many of the new obligations in the Regulations are based on well-considered and comprehensive existing principles in the United Kingdom and the European Union, for example, where guidance and direction can be relied upon when evaluating your best compliance options.

    The regulations will facilitate cross-border data transfers and result in better protection of personal data due to higher penalties for non-compliance with the regulations, which ensures accountability in businesses.

     

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    Sun, 12 Sep 2021 14:39:00 GMT
    <![CDATA[India Defenses against the charge of Forgery]]> India: Defenses against the charge of Forgery

    Introduction

    We have all heard of the saying that imitation is the best form of flattery; however, when it results in damage or injury to the public or an individual, it becomes punishable under law. One such example is that of Forgery. Forgery is defined under Section 463 of the Indian Penal Code as,

    "Whosoever makes any fake document or incorrect electronic record or part of a document to cause damage or injury, to the public or any person, or to support any claim or title, or to cause any person to share with property, or to enter into any express or implied contract, or with a purpose to commit fraud or that fraud may be accomplished, commits forgery."

    Forgery is often used by white-collar criminals to materialize corporate frauds and scams that result in significant losses to individuals and governments. Forging documents is particularly common; crimes such as misappropriation of funds, embezzlement, cheating, etc., typically result from forged documents. Besides forging documents, Forgery can occur in signatures, prescriptions, artwork, literary material, and so on.

    The concept of Forgery essentially has three elements, namely, material alteration, intention to defraud, and ability to defraud.

  • Material alteration- The document in possession of the person must be altered so that it has a significant effect on its legal implications.
  • Intention to defraud- A common ground for conviction under criminal law is intention. Therefore, the perpetrator of the crime must have an intention to falsify a genuine document.
  • Ability to defraud- The forged document must appear so genuine that it can mislead most people into believing its genuineness.
  • Forgery, therefore, constitutes deception intending to cause larceny. For example, a person does not become liable merely because he has copied someone's art; liability is only imposed on him for copying the art if he sells it and gains some monetary benefit out of it, which in turn causes damage to the original artists, both in reputation and monetary terms.

    Illustrations

  • A writes and issues a check in the name of B for Rs. 20,000. B, to defraud A, slyly adds another zero, making the amount 200,000. In this case, B has fraudulently filled up a cheque, therefore, defrauding A by Forgery.
  • A writes a will and hands it over to his executor to execute. Executor B makes some material changes without A's consent in such a way that it would benefit him. These material changes constitute Forgery.
  • The Indian Penal Code provides a long list of safeguards to any person who has been victimized through Forgery; the relevant sections of the IPC that can be relied on to bring action against Forgery are as follows;

  • Section 120B - Punishment of criminal conspiracy
  • Section 407 - Criminal breach of trust by carrier, etc.
  • Section 408 - Criminal breach of trust by clerk or servant
  • Section 417-  Punishment for cheating
  • Section 418 - Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect
  • Section 420-  Cheating and dishonestly inducing delivery of property
  • Section 463 - Forgery
  • Section 465 - Punishment for Forgery
  • Section 467 - Forgery of valuable security, will, etc.
  • Section 468 - Forgery for cheating
  • Section 469 - Forgery to harm reputation
  • Section 470 - Forged document or electronic record
  • Section 471 - Using as genuine a forged document or electronic record
  • Section 472 - Making or possessing counterfeit seal, etc., with intent to commit forgery punishable under section 467
  • Section 473 - Making or possessing counterfeit seal, etc., with intent to commit Forgery punishable otherwise
  • Section 489(A-E)- Tampering with property mark with intent to cause injury
  • The punishment for Forgery is laid down under Section 465 of the IPC. The offenses under this are non-cognizable, non-compoundable, bailable, and triable by a Magistrate.

    Defenses against the charge of Forgery

    Case Laws

    Sheila Sebastian Vs. Jawaharaj AIR 2018 SC 2434 (supra)

    This case was with regards to the strict interpretation of the provision of Forgery. For the sake of clarity, we shall refer to the Accused number 1 as A and Accused number 2 as B. In this case, A obtained the help of another person to procure a power of attorney in his name; through the POA he executed a mortgage deed in the name of B. The deed was signed by A. A had also affixed his signature thereon. Therefore, the questions that arose here were;

  • Whether A's actions were enough to constitute an offense under Section 464 of IPC
  • Interpretation of Section 464; would the actions of A amount to making a false document.
  • The two-judge bench of the Supreme Court held that "for constituting an offense under Section 464 it is imperative that a false document is made and the accused person is the maker of the same; otherwise the accused person is not liable for the offense of forgery". Therefore, an accused was required to be part of the act to be held liable under this provision; if a person has not physically engaged in making the document and has merely caused the document to be made, he cannot be held liable.

    A thorough reading of this judgment, however, raises a fundamental question. Section 464 uses the words "either by himself or by any other person," so if the provision were to be applied strictly, A and B would both be held liable for the offense. Therefore, the judges have taken a more colloquial approach in its interpretation instead of strictly interpreting the provision.

    Upon analysis of this case, one can deduce that the crux of Forgery is the making of a false document. The judgment also clarifies the difference between cheating and Forgery; cheating is oral, and Forgery is written. Further, the IPC covers those acts of Forgery that are accompanied by other elements such as deception and injury.

    Md Ibrahim Vs. State of Bihar (2009) 8 SCC 751

    In this case, A was the title holder of land; B did not have any title over a piece of land but claimed to be the owner of the said land. Therefore, he went ahead and executed two registered sales deeds in favor of C. B with the help of some others, managed to forge and stamp the sales deed. The court herein observed that a person is said to have made a false document if;

  • He made or executed a document claiming to be someone else or authorized by someone else.
  • He altered or tampered with the document.
  • He procured the document by deception or from someone not in control of their senses.
  • The Apex court thought that (b) and (c) do not apply in the case. Therefore, they differentiated between a person executing the sales deed claiming to be the owner of the property and a person impersonating the owner and falsely claiming to be authorized under him and held that Forgery under the IPC deals with the latter. Therefore, the matter was dismissed because the accused did not impersonate the land's original owner but claimed ownership thereof.

    Mir Naqvi Askari Vs Central Bureau of Investigation (2009) 15 SCC 643

    This case involved abuse of a position of power by bank officials to serve as a pecuniary advantage to some other person. The apex court, in this case, asserted that the intention to create and falsify a document is a crucial aspect in determining liability under Section 464. The court further said that the documents in question in the present matter, despite being made dishonestly, were not made to cause another person to believe that it was made by or under someone else's authority.

    The Supreme Court held that three conditions are to be satisfied for a person to be liable for falsifying a document; therefore, he may be held liable if he satisfies any of the following;

  • Intention
  • Without lawful authority
  • Mental capacity
  • Guru Bipin Singh Vs. Chongtham Manohar Singh 1996 (11) SCC 622

    Another aspect of interpretation of provisions of Forgery was discussed in this case. Section 468 IPC talks about a more aggravated form of Forgery that involves an additional ingredient, i.e., the presence of a "purpose of cheating," being at a higher degree, this attracts a sentence of 7 years imprisonment. In this matter, the apex court held that Forgery is the principal allegation and cheating is just the consequence. Therefore, if Forgery is not applicable, consequently, cheating also does not stand.

    As a general principle, a forged document is not necessarily supposed to be complete to constitute Forgery. However, if a document has not been signed, and the perpetrator has been caught beforehand, the document cannot be treated like a forged document since it was still in the initial stages of preparation. Once the perpetrator has gone beyond the preparation stage, it may be considered to be an attempt to forge. The rationale behind this is that the law holds a person liable for the act committed, not the guilty intention, though intention also plays a crucial part in determining the accused's liability.

    Conclusion

    All in all, upon reading the cases mentioned above, one can deduce that Forgery ultimately boils down to the accused's intention. The burden to prove damage or injury lies with the prosecution. The main element that needs to be proved is that the intention of the accused to defraud the victim was beyond a reasonable doubt.

    Most defense attorneys in cases of Forgery depend on the lack of proof of Forgery. The general argument is that merely being a beneficiary to the act cannot hold a person responsible for the crime; it cannot be a presumption of guilt. In the cases mentioned above, the Supreme Court thought that suspicion could not replace actual proof.

    In criminal law, the principle of a strict interpretation of proof is followed. The imposition of this restriction is that if the court is allowed to give a broader meaning to the statute, the result will be counteractive, making it unfair to the person being convicted or vice versa. A narrow construction further restricts dilution of the actual intention of the statute. 

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    Sat, 28 Aug 2021 11:21:00 GMT
    <![CDATA[Amendments in Jointly Owned Property Law]]> Amendments in Jointly Owned Property Law

    Investments are supposed to be financial decisions. However, in real life, people often make investment decisions emotionally. This is truer of real estate investments. Individuals get emotionally attached to their homes or the idea of owning a home. Hence, they make decisions based on many parameters that may neither be financial or mathematical. Real estate laws are essential for every individual wanting to invest in or own a property.

    In the United Arab Emirates, many new real estate laws have been introduced to standardize processes and formalize transactions between developers, property investors, and other stakeholders in the real estate market. The more recent legislation concerning jointly owned properties is one of the newer real estate laws in Dubai. 

    What is the Joint Ownership Law?

    Law Number 6 of 2019 concerning new joint ownership in Dubai (the "New Law") is an amendment to Law Number 27 of 2007 (the "2007 Law"). The New Law governs and defines the responsibilities of all the stakeholders involved with jointly owned properties in Dubai, which includes those located in free zones and special development zones. The New Law codifies and brings the developers, owners, and facilities management companies under one umbrella to create greater transparency around the management of such properties. 

    The New Law aims to boost competitiveness and enhance investment in the real estate sector by centralizing control of the owners' duties with the Dubai Land Department (DLD) and the Real Estate Regulatory Authority (RERA).

    The Major Changes:

    I. New Management System

    Under the 2007 Law, all owners of units automatically became members of the owners association of their building upon purchasing their Unit. Through its board, the owners association was responsible for the management, operation, maintenance, and repair of the common areas of the building, which could be delegated to an association manager to perform.

    Likewise, the New Law has replaced the management system with a three-tiered system provided under Article 18.

    Category I – Major Projects (Article 18 (a)(1)):

    Projects in this category will be determined as per the criteria prescribed under the relevant resolution issued by the Director-General. The Developer is also responsible for managing, operating, maintenance, and repair of Common Parts and Utility Services. A Major Project will have an Owners Committee constituted of members selected by RERA from amongst Owners residing in the Jointly Owned Real Property. The duties of the Owners Committee will be determined under the Statute and the rules and conditions prescribed under the relevant resolutions of the Director-General.

    The duties of the Owners Committees as set out in Article 24 of the New Law include:

  • To verify that the management company manages the common areas.
  • To review the annual budget for the maintenance of the common property and to make needed recommendations.
  • To discuss the obstacles and difficulties concerning the management, operation, maintenance, and repair of Common Parts; and submit the necessary recommendations on the same to the Management Entity or RERA, as the case may be; and
  • To receive complaints from owners and submitting them to RERA when the management company has failed to address them within 14 days of being notified.
  • Category II- Hotel Projects (Article 18 (a)(2)):

    These are projects wherein the Developer must outsource the management of Common Parts to a Hotel Project Management Company as per the relevant rules approved by the Director-General. If the Hotel Project Management Company expresses its wish that a committee is constituted, a Hotel Project will have an Owners Committee constituted of members selected by RERA. However, the Owners Committee will not be authorized to participate in the management of the Hotel Project or its Common Parts.

    Article 37 of the New Law provides relief for the incompetence of developers or Hotel Project Management Companies. When the Developer or Hotel Project Management Company is found to be incompetent or unable to manage the common property under Category I or Category II in a manner that ensures their sustainability and serviceability, the CEO may appoint a specialized Management Company to undertake the management and operation of that Jointly Owned Real Property or Common Parts. 

    Category III- Real estate projects other than the Major Projects and Hotel Projects (Article 18(a)(3)):

    Specialized Management Companies shall manage the common parts in these projects, selected and engaged by RERA as per the controls and regulations set by a decision issued by the Director-General. An owners' committee, formed for each real estate project, must have its members selected by RERA not exceeding nine members. The duties of the Owners Committee are set out in Article 24 of the New Law, as discussed above.

    Article 38 of the New Law provides for the incompetence of Management Companies. In the event where  RERA does find that a Management Company is incompetent, unqualified, or unable to manage and maintain Common Parts in Real Property projects of Category III, RERA may appoint a replacement Management Company to undertake the management of the Jointly Owned Real Property, by adhering to the following procedures:

  • Notifying the Owners Committee of the violations committed by the Management Company and seeking its opinion concerning such violations;
  • Serving a written warning on the Management Company stating its mistakes and wrong practices concerning the management, operation, maintenance, and repair of Common Parts; at which point the Management Company may respond to that written warning within 14 days from the date of service of the warning;
  • Appointing a certified audit firm to audit the Service Charges account and verifying the Management Company's compliance with the Service Charges budget approved by RERA; and
  • Granting the Management Company a time limit to hand over the management of the Jointly Owned Real Property to the replacement Management Company within 30 days from the date of issue of RERA's decision appointing that replacement Management Company.
  • Article 19 of the New Law lays down provisions for the management of Common Facilities. It provides that the master developer of a Master Project will undertake the management and maintenance of the Common Facilities in that project. The master developer must outsource such management and maintenance to a Management Company under a written agreement approved in advance by RERA.

    Article 40 of the New Laws states the liability of developers.  The Developer remains liable to remedy or rectify any defects in the structural parts of the Jointly Owned Real Property for ten years from the date of obtaining the completion certificate of the Real Property project developed by him.

    The Developer remains liable for the repair or replacement of defective installations in the Jointly Owned Real Property for one year from the date of handover of the Unit to the Owner. Such repairs and replacements include mechanical and electrical works, sanitary and sewerage installations, and similar installations. If the Owner refrains from taking possession of the Unit for whatever reason, the liability period shall commence from obtaining the completion certificate of the Real Property project developed by the Developer.

    Any agreement made after the New Law is in force and contradicts, in any way, the provisions of Article 40 of the New Law will be deemed null and void.

    The New Law has removed the Jointly Owned Property Declaration (the "JOPD"). 

    Under the 2007 Law, the JOPD was a requirement to be registered with RERA governing the use of the common areas and units and specified the duties and obligations of the owners, occupiers, and the Developer.

    The New Law has replaced the concept with Master Community Declaration, Statute, and Building Management Regulation (defined under Article 2 of the New Law):

    Master Community Declaration: The conditions and provisions governing the development and operation of a Master Project and the Jointly Owned Real Property and Common Facilities therein, including the planning and construction standards of the Master Community. 

    Statute: The rules and provisions governing an Owners Committee are established and approved by the provisions of this Law.

    Building Management Regulation: A document prepared by the relevant bylaws issued by the DLD and entered in the Jointly Owned Real Property Register, which states the procedures for maintenance of Common Parts, including equipment and services in any part of another building, and the percentages of the contribution of Owners in the relevant costs.

    Article 20 of the New Law also lays down that before selling any units, and the Developer must issue the Building Management Regulations for significant projects and hotel projects that RERA must approve.

    As per Article 6 of the New Law, the Master Community Declaration, Statute, and Building Management Regulation constitute a part of the title deed of Jointly Owned Real Property. The DLD will maintain an original copy of each of these documents. The Developer must prepare and file the Master Community Declaration and the Statute of the complex with the DLD within 60 days from the certificate of completion for the project. However, the Building Management Regulation is prepared by the RERA.

    Service Charges

    Similar to the 2007 Law, owners must pay to the management body their share of the service charge to cover the Common Parts management, operation, maintenance, and repair expenses (Article 25(a) of the New Law).

    However, as per Article 27 of the New Law, the management body may not collect the service charges without first obtaining the relevant approval of RERA. This approval will be issued per the approved Master Community Declaration and the relevant rules and criteria approved by the Director-General. RERA will appoint a legal auditing officer accredited by it for this purpose.

    Under Article 4 of the New Law, the DLD will maintain a special register of Jointly Owned Real Property, which contains the following:

  • Details of the land plots owned by developers on which Jointly Owned Real Property are to be constructed.
  • Details of Units intended for individual ownership in Jointly Owned Real Property and sold by developers, and names of Owners of these Units.
  • Details of members of Owners Committees;
  • Building Management Regulations;
  • Plans;
  • Details of Management Entities;
  • Contracts for management of Jointly Owned Real Property or Common Parts;
  • Statement of the total area of Common Parts and Designated Common Parts, and its ratio to the total area of Units in Jointly Owned Real Property; and
  • Details of developer-owned Areas in Jointly Owned Real Property.
  • Article 42 of the New Law lays down that the Rental Dispute Settlement Centre shall have exclusive jurisdiction to hear and determine all disputes and disagreements concerning the rights and obligations stipulated in the New Law, as per the rules and procedures of the Rental Dispute Settlement Centre.

    Conclusion

    RERA has been brought into the DLD structure and has a broader regulatory scope under the New Law. Under the New Law, RERA's investigatory and decision-making powers and regulation scope have become broader, more precise, and more robust. While RERA previously only oversaw brokers, owners' associations, and escrow accounts, RERA now regulates all estate business activities and consolidating all such activities. Tenancy registration and regulation are now within the remit of the DLD.

     

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    Thu, 26 Aug 2021 09:40:00 GMT
    <![CDATA[GCC VAT Agreement]]> GCC VAT Agreement

    Introduction

    Globally the VAT system has been around for a long time. However, for the most part, Arab countries have been operating tax-free in that respect. Over 160 countries around the world have adopted the indirect tax method to reduce the fiscal deficit and facilitate a steady increase in the country's GDP.

    Following suit, an agreement between six GCC countries, namely, Bahrain, Qatar, Kuwait, Saudi Arabia, Oman, and the United Arab Emirates, had brought about a landmark change in the tax-free operations of these nations. While Saudi already had a draft VAT Law at the time of the drafting of this treaty, other GCC countries that are party to the treaty did not. However, after that, UAE and Bahrain also implemented a VAT Law in 2018 and 2019, respectively. Therefore, this treaty played a role in supplementing the development of a framework that enables countries to lay down laws regarding the implementation of the VAT system in a comprehensive manner.

    The treaty is not strictly binding on the parties per se, in the sense that the countries have been provided with the option of practicing their discretion while implementing laws. Of course, there are some mandatory provisions, but there are also optional provisions to approach implementation as per their domestic and national needs.

    It is important to note that this treaty is not a law; therefore, national implementation of laws in its respect is necessary for the treaty to come into force.

    Background

    Gulf nations heavily depend on their rich oil and energy reserves for the majority of their income. However, to survive as per global standards, diversification of the economy by utilizing other industries is becoming more and more critical. SINCE TIME IMMEMORIAL, the GCC states have been talking about improving their commercial practices and harmonizing the same with the rest of the world.

    Similar to the EU, the GCC VAT Agreement also believes in a typical integrated market system. The typical market system allows a free flow of goods across nations; just like the EU, the GCC also aims to promote cross-border trade relations with their neighboring states.

    Pulling inspiration from Europe, the GCC nations have made efforts to develop a common currency to strengthen their monetary union; however, those efforts were in vain due to non-acceptance by Oman and UAE.

    Recent trends worldwide have required the GCC countries to pull up their socks and compete in their global market. To achieve this end, they need to diversify away from the oil and gas industry into different sectors of the economy like infrastructure, travel and tourism, VAT, etc., which is becoming a reality, slowly but surely.

    Influence of Islamic Law

    It is common knowledge that Shariah or Islamic law is the backbone of the legal system across the said GCC states. As per the Shariah law, there are five types of taxes, zakat playing a significant role in VAT implementation. The idea is that VAT paid to the government would allow them to provide services for the benefit of the general public. However, many GCC countries failed to institutionalize the zakat system, except Saudi Arabia. Therefore, the implementation of VAT will allow these countries to account for the funds collected.

    Reasons for implementation

    Dependence on oil for the majority of their revenue started to cause a deficit in the economies of GCC nations. Noticing this deficit, the International Monetary Fund (IMF) prepared a report that showed a decline in the private sector growth. Therefore, the introduction of a VAT scheme poised itself as the best solution to raise revenue. Despite VAT not being a cost-efficient exercise, global trends show that it is the most effective way of generating revenue.

    The parties to the Agreement have agreed to a low rate of 5% VAT which is a good step of gradually easing into a full-fledged taxation system.

    VAT benefits are not just limited to generating revenue; it facilitates consumers' discretionary spending on non-essential and harmful goods; for instance, Saudi Arabia and UAE have imposed taxes on fizzy drinks, cigarettes, etc. Further, the imposition of the Tax, even at a zero- rate, allows the government to keep in check on fraud and tax evasion, promoting economic and social growth.

    Similarities between the EU and GCC VAT System

    The basic principle of VAT is that its implementation differs according to the country's domestic legislation. Despite its complexities, it has been globally accepted. There are a few universally accepted principles that are implemented concerning the VAT regime, enumerated hereunder as follows;

  • The VAT is levied on a wide variety of supplies and services; this means that it is levied on all levels, right from the manufacturers to the suppliers; however, an established principle of imposing VAT is the business is not the ultimate bearer of Tax, the burden shifts from the supplier to the ultimate consumer of the product.
  • Further, VAT implementation is based on the destination principle; this principle lays down that, Tax is to be levied on the goods at its final destination. Therefore, exports can be transported free of Tax, whereas imports are liable to be taxed.
  • Legal Framework

  • The EU VAT system was incorporated by the EU Council Directives, which are essentially instructions that flow into legislation. These directives do not have the force of law but are binding on the states. The nature of the directives is quite flexible, therefore, allowing the states to take liberty in applying these directives in their domestic laws.
  • The EU Commission is the regulatory authority responsible for drafting treaties in the best interest of EU nations. The EU Council is an essential representative authority of the Commission. In EU law, treaties, regulations, and directives take precedence over domestic legislation. This precedence is so that the values of community loyalty and the direct effect of these treaties are upheld.
  • Like the EU Directives, the GCC VAT Agreement also refers to the GCC Charter and the GCC Economic Agreement. Therefore, the Charter and Economic Agreement are the basis on which the VAT system relies. The GCC VAT Agreement is also a blanket law that governs all nations' parties to the Agreement, just like the EU.
  • The GCC VAT Agreement further draws similarities with the EU VAT system since it facilitates cross-border trade activities.
  • Implementation

    Compared to the EU VAT system, VAT implementation in the GCC is more manageable, considering the volume of countries that would have to adopt the system and develop domestic laws to comply with the Agreement. The EU comprises 28 countries that require the implementation of the VAT Directives. On the other hand, six countries are party to the GCC VAT Agreement.

    Member states under both the EU and the GCC enjoy discretion about implementing the tax regime; the domestic laws may be designed as per the country's needs.

    Cross border trade

    Cross-border trade refers to the flow of trade from one state to another, as per the two distinct tax regimes, within the borders of the EU or the GCC nations, as the case may be. Both the EU and the GCC make a distinction between VAT charged on goods and services.

  • Tax is usually charged at the place where the goods end up eventually. The final destination of the goods. There are two aspects that the EU VAT system considers when it comes to the supply of goods; first being supply and the other being acquisition. The place of departure of goods is exempted from Tax, whereas the goods are acquired where Tax is imposed. Therefore, the buyer of the goods is ultimately responsible for paying VAT. This is concerning B2B.
  • In the case where goods are directly sold to the end consumer, i.e., B2C, the member state that is the supplier of goods is subject to the imposition of VAT.
  • As per the reverse charge mechanism, the consumer is liable to pay VAT through their periodic return.
  • The GCC system is very similar to the EU in this respect as well. However, all member states have yet to incorporate the Agreement into their domestic laws. The Agreement has more of a straightforward approach in that it applies the reverse charge mechanism directly to the consumers.

    Exemptions

    Both the EU and GCC have a standard, reduced, and zero-rated tax regime. However, specific sectors have been exempted from being taxed under this regime with the general public's interest in mind.

    The EU exempts VAT from being implemented on medical care, public postal services, welfare and security, and any other such goods or services that are essential. Moreover, the member states can practice their discretion to exempt VAT from imposing any other goods or services.

    The GCC exempts VAT from being charged on health, education, and domestic transport; they can further exempt Tax from being levied on; government entities, NGOs, charitable institutions, citizens of member countries, and any other sector they deem fit.

    Measures to improve the GCC VAT System

    The GCC VAT Agreement draws much inspiration from the EU VAT regime. The EU regime serves as a model law that allows the GCC to adopt any such part that would serve advantageous and omit the parts that did not align with their objectives. For example, imposing a uniform tax rate of 5% throughout the GCC was an important lesson learned from the shortfalls of the EU regime.

    Since parties to the GCC Agreement are relatively new to the whole idea of the tax regime, the actual use, that is, their registration, scope implications, should be clearly explained, and business owners should be educated about the topic to prevent legal complications. For example, double taxation.

    The objective value of Tax that has been imposed in the GCC at the rate of 5% may pose a threat to the liberty of business owners and give rise to distortion of competition in the market. The GCC has adopted the VAT system to open its market and recover from the financial crisis. Therefore, restricting competition in the market will be detrimental to the economic objectives that the Agreement aims to achieve.

    Conclusion

    The introduction of a new tax regime has its challenges. However, this is a step in the right direction to achieve economic goals such as foreign trade, competition, economic growth, and creating a global presence in the market. Further, slow and steady implementation of Tax will allow the general public to ease into the tax regime; it will also allow the government to amend the taxation as per changing trends in the economy.

    The GCC nations are foreigners to the concept of Tax since they have been running tax-free since their inception. However, model tax laws implemented worldwide allow these nations to strategically examine and implement the Tax in a way that will not cause chaos in the socio-economic climate.

    The effect of the Tax was seen to be an uncertain move since there was a possibility of a decrease in expenditure by the public. However, its implementation in Saudi, UAE, and Bahrain has shown that people have embraced this VAT regime, triggering a healthy social and economic response. 

     

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    Wed, 25 Aug 2021 07:54:00 GMT
    <![CDATA[Consumer Protection Product Liability in Hong Kong]]> Consumer Protection and Product Liability in Hong Kong

    25th March of every year is celebrated as International Consumers' Day, reflecting the recognition of consumer protection worldwide. In Hong Kong, the Consumer Council is regarded as the only statutory body representing the consumer interests by the Consumer Council Ordinance. The Hong Kong Consumer Council, established in 1974 to initially combat the serious problem of the soaring price of rice and other commodities caused by profiteering, has been advocating changes in consumer laws. The Consumer Council promotes the interests and well-being of consumers. However, the consumer protection laws are often criticized for being inadequate as the laws are not being updated to meet the wide range of products and services available in Hong Kong, as the government's philosophy is basically to promote self-help amongst the consumers.

    It is well established that the consumption of goods and services is part and parcel of daily life, making consumer protection equally essential for every consumer. It is vital to know and understand Hong Kong's consumer protection system, mainly the functions and powers of the Consumer Council.

    The Consumer Council must be given more powers for operating and dealing with consumer problems. The government should also focus its resources more on consumer protection. Raising public awareness by educating the public about their consumer rights must be the primary step. The Consumer Council must act independently to achieve its objectives on consumer protection. Thus, all consumers can be better protected under these improvements.

    Differing from other common law jurisdictions, Hong Kong does not have a specific strict liability regime or any statutory regime specifically governing product liability.

    Civil liability often arises under the tort of negligence, breach of contract, or statutory duty.

    However, the criminal liability in Hong Kong for defective products is established by statutory provisions. For instance, Section 6 of the Consumer Goods Safety Ordinance provides that a person can only supply, manufacture, or import consumer goods into Hong Kong if the goods comply with the general safety requirement or the applicable approved standard for the particular consumer goods. The offense is punishable with a fine and/or imprisonment. A person found guilty under the provisions of the Consumer Goods Safety Ordinance is liable for a fine of HK$100,000, and imprisonment for one year upon the first conviction, and a fine of HK$500,000, and imprisonment for two years upon any subsequent conviction.

    Apart from civil and criminal liability, the primary legislation governing safety requirements for consumer goods is the Consumer Goods Safety Ordinance, the Control of Exemption Clauses Ordinance, and the Sale of Goods Ordinance. Specific legislation applies to specific goods, including the:

  • Toys and Children's Products Safety Ordinance;
  • Pharmacy and Poisons Ordinance; and
  • Dangerous Goods Ordinance.
  • How to establish product liability when the product is defective?

    A product liability claim can be made under the general contract, tort law, breach of statutory duty, or breach of duty of care (Civil liability).

    For establishing product liability, the claimant must prove that:

  • The manufacturer owed a duty of care.
  • The manufacturer breached the duty of care.
  • The claimant's injury was caused due to a breach of duty.
  • A cause has sufficient proximity to the injury.
  • The claimant has suffered actual damage resulting from the negligent act.
  • Under the law of negligence, the claimant must prove that he/she has suffered damage because the defendant breached the standard duty to exercise reasonable care to supply a safe and non-defective product.

    The product can be defective due to the: 

  • manufacturing defect (not an intended part of the product);
  • design defect (inherent in the design of the product);
  • marketing or "failure to warn" defect when the company fails to provide proper warnings about possible safety risks concerning the use of the product. 
  • The injured party or parties can only recover by proving that the manufacturer was negligent or there is a breach of contract as there is no independent cause of action for product liability.

    Under the Sale of Goods Ordinance, the contracting party, for instance, the retail supplier, is liable to the buyer for defective products, the manufacturer, the importer, and/or the distributor and/or parts suppliers also liable in tort.

    Along with the defenses available under the contract law and tort law, the manufacturer or supplier can also avoid liability on establishing that:

  • The manufacturer or supplier was not negligent, or the damage was not foreseeable, and even if all reasonable care was taken, the defect still could not have been prevented.
  • The claimant was aware of the risks associated with the product at all material times and indeed chose to accept those risks.
  • Contributory negligence or fault was on the part of the claimant.
  • There was a supervening act that was the sole adequate cause of the damage.
  • If the manufacturer relies on the state-of-the-art defense to establish that it had exercised all reasonable care and precautions concerning the state of scientific and technical knowledge at the time of distribution, the claimant must prove that the fault or defect was discoverable.

    Section 4(1)(a) of the Limitation Ordinance states that action in contract or tort must be brought within six years from the date on which the breach of contract/duty of care accrued. The time limit of the personal injury claim is three years under Section 27(4) of the Limitation Ordinance. As per Section 14(1) of the Employees' Compensation Ordinance, any action for employees' compensation or work-related injuries must be brought within two years from the date of the accident that caused the injury.

    As per the Control of Exemption Clauses Ordinance, liability cannot be excluded in a contract for negligence that causes death or personal injury.

    As per Section 15 and 16 of the Sale of Goods Ordinance, for a sale contract of goods by description, there is an implied condition that the goods will correspond with the description, and goods sold must be of merchantable quality. "Merchantable quality" includes requirements that the goods supplied are free from defects, including minor defects, and as safe and durable as reasonably expected concerning the description, price, and other relevant circumstances (Section 2(5) of the Sale of Goods Ordinance)

    The Consumer Goods Safety Ordinance governs the safety requirements for consumer goods.

    There is also specific legislation setting out safety requirements concerning certain goods, like Toys and Children's Products Safety Ordinance and Dangerous Goods Ordinance, along with several others.

    Litigation for Product liability

    Product liability cases are brought in the District Court for cases involving claims over HKD 75,000 but not exceeding HKD 3 million. For a monetary value of more than HKD 3 million, the case will be heard in the Court of First Instance.

    Except for defamation cases, all civil trials in Hong Kong are heard by a judge without a jury.

    The claimant to commence the action in the District Court or the Court of First Instance, as the case may be, must issue and adequately serve a writ of summons or an originating summons to the defendant.

    Burden of Proof

    The burden of proof concerning the fault or defect and damage lies with the claimant. In a civil case, the claimant must prove a fact in issue on a "balance of probabilities." The claimant may invoke the doctrine of res ipsa loquitur, the doctrine that derives negligence from the nature of the injury due to having no direct evidence of fault/defect. The claimant must prove the injury:

  • would not have occurred without negligence; or
  • is caused by an agency or instrumentality within the defendant's exclusive control; or
  • that caused the accident is not due to any voluntary action or contribution by the claimant; or
  • of the claimant is not entirely explained by the defendant's non-negligent explanation.
  • When the court accepts the doctrine's applicability, the burden of proof shifts to the defendant to rebut the inference of negligence.

    Appeal

    The final decision of the Court of First Instance is appealed to the Court of Appeal. However, the following decisions cannot be appealed in civil cases unless leave to appeal has been granted:

  •  The decision of the District Court (Section 63(1) of the District Court Ordinance).
  • The decision of the Court of First Instance in an interlocutory matter (Section 14AA of the High Court Ordinance).
  • When the appeal against a decision of the Court of First Instance is solely on costs (Section 14(3)(e) of the High Court Ordinance).
  • The application for leave to appeal is first made to the judge of the court who gave the decision. On the judge's refusal to grant the leave, the party can then apply to the Court of Appeal for leave to appeal within 14 days from the date of the refusal.

    Conclusion

    In Hong Kong, the law concerning product liability has grown incrementally despite increased calls for a comprehensive set of laws to regulate and govern consumer protection and product liability matters.

    Product liability claims only grow with the new products being developed and launched into the market. Consumers around the world share information and give feedback about their product experiences. This is often done via social media, as information about product risks travels rapidly worldwide and is shared efficiently. The companies must take a new approach to manage their product risks and liabilities. 

     

     

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    Wed, 25 Aug 2021 07:17:00 GMT
    <![CDATA[Changes to NAFTA IP Provisions in USMCA]]> International: Changes to NAFTA Intellectual Property Provisions in The USMCA

    Introduction

    To foster a global trade environment, countries worldwide are revising their national trade agreements following international standards. One of the most critical aspects that need to be considered while doing so, is creating a cogent interrelationship between goods & services with Intellectual Property.

    Countries worldwide are adopting international and regional free trade agreements in furtherance of their objective of strengthening trade relations with their neighbors. One such trade agreement is NAFTA; the signatories of NAFTA include the US, Canada, and Mexico. After over a year of negotiations, these countries agreed to replace and amend NAFTA with the USMCA.

    Background

    In 1994, the US, Mexico, and Canada entered into a free trade agreement called the North American Free Trade Agreement, popularly known as NAFTA. As per negotiations between the three states, NAFTA was proposed to be replaced by the USMCA (US-Canada-Mexico Agreement) as their new free trade agreement, with amended terms. The most notable changes proposed through this agreement were concerning intellectual property provisions, specifically Artificial Intelligence. In the US, the first agreement recognized was NAFTA, followed by the WTO ad TRIPS agreements.

    Intellectual Property has always been of crucial importance for the US since it provides a comparative advantage in trade for the country. US has been undertaking IPR protection activities with a dual motive, firstly, to obtain global IPR protection and secondly, to facilitate trade negotiations in the international sphere of commerce.

    The importance of these trade negotiations and agreements may be reflected in aims and objectives to counteract cyber theft and protect trade secrets. Further, considering that the US conducts a vast array of IP intensive trade activities with its neighboring states, i.e., Canada and Mexico, it was evident that there arose a need to renew these countries' trade and IPR policies harmoniously.

    The Chapter on IPR aims to achieve the following objectives;

  • Provide support to technological innovations to benefit producers as well as consumers
  • Facilitate balancing of rights and liabilities of producers and consumers
  • Creating better means of enforcement through government to government dispute settlement
  • Providing a means to integrate international agreements with national and domestic laws
  • Introducing non-discriminatory policies concerning foreigners on IPR
  • Important Changes in Provisions

    The USMCA constitutes 34 Chapters and 12 Side Letters. The provisions enumerated hereunder cover a wide range of topics: agriculture, rules of origin, dispute resolution, and e-commerce. Further, some chapters have been added and updated to include competition policies, MSMEs, telecommunication, and intellectual property to modify and modernize trade between the parties.

    In this article, our main aim is to focus on the notable changes made in intellectual property.

    At the very outset, the terms of NAFTA were negotiated in the years 1991 to 1993, which means that its relevance over the years has diminished significantly. Considering that the internet and the concept of trade secrets in intellectual property were still in a state of infancy at the time, the attention given to the effect of these factors in the international sphere has been negligible.

    Therefore, a need arose to amend the provisions thereof to reflect innovations taking place internationally in intellectual property. In December 2019, To accommodate this change, the USMCA Protocol amendment was brought about to include concepts and inventions that were omitted in the previous agreement and recent trends and changes.

    The fundamental changes are as follows;

    I.         IP Rights Committee

    One of the notable changes brought about by the USMCA is the establishment of a committee dedicated to dealing with intellectual property at length. The committee's obligations may include;

  • Exchange necessary and requisite information between the states
  • Strengthen cross border enforcement of IP rights
  • Consider issues relating to trade secrets and procedural fairness in IP litigation.
  • Mediate disputes between parties in issues of geographical indications
  • Schedule meetings on behalf of the states 
  • II.         Copyright and Trademark protection

    The USMCA has extended the period allotted to copyrights and trademarks to 70 years after the author's death. For example, in Canadian law, the term granted for copyright protection is 50 years after the death of the author. However, as per the USMCA, the term of protection must be at least 75 years when the work was first published or 70 years after the remainder of the year of creation.

    Under NAFTA, the protection granted was only for 50 years after the death of the author.

    In the case of trademarks also, the protection granted has been exceeded, wherein initial registration has been granted for ten years, concerning which it is the responsibility of the state to maintain an electronic record of their trademark applications.

    III.        IP Enforcement Procedures

    In the digital age, IP becomes even more susceptible to infringement; therefore, there is a need to make procedures available to enforce IP rights in the digital environment. This includes an obligation to provide effective and expeditious measures to take action against copyright infringers. Further, it is essential to explicitly make these infringers liable to criminal penalties. The USMCA aims to bring each state party's regional and national laws to the agreement under a blanket system.

    IV.        Trade secret protection

    Although NAFTA addressed the concept of the trade secret, drafters did not emphasize much on the extent thereof. However, in the subsequent years, considering the importance and growth of trade secrets, there is a need to protect these rights, especially in a high-tech society.

    To keep proprietary information about an invention under wraps, any business owner would choose protection under trade secrets rather than patents. The provisions related to trade secrets include;

  • Non-disclosure of confidential information in the court of law
  • Criminal penalties for willful misappropriation of trade secrets
  • Procedures and penalties in cases of cyber theft by state-owned enterprises
  • V.         Term of patents

    The USMCA aims to define the patentable subject matter. Previously, the USMCA recognized and protected new uses, methods, and processes of existing products. However,  the amendment eliminates the aforesaid now.

    The USMCA includes adjustment of patent terms in case of delays in the issuance thereof in receiving approvals and examination. The provision explicitly mentions the term "unreasonable delay" which means delay of more than five years from the date of filing or three years after applying for the examination, whichever is later.

    The USMCA also provides for expanding the scope of exclusivity for biological drugs for at least ten years.

    VI.       Cross border issues

    Under the revised agreement, custom officials' authority shall be increased on several levels, including the power to initiate border measures against suspected counterfeit trademark and copyright goods, whether imported, exported, or are in transit.

    As per the previous agreement, goods in transit could not be seized and were off-limits; now, this restriction has been removed. The revised agreement also gives customs officials the authority to inspect, detain or destroy any suspicious goods that may be perceived to be counterfeit or pirated. Such action is not necessarily supposed to be following court orders.

    VII.      Domain names

    The USMCA provides for creating a dispute mechanism for the protection of domain names based on the principle of the Uniform Domain Name Dispute Resolution Policy for domain registration. The USMCA also provides for remedies regarding issues of transfer and cancellation, registration to deceive, etc.

    Further, the revised agreement also lays down the need to have an online public forum of reliable database which contains contact information for domain name registrants subject to policies and personal data.

    Conclusion

    In light of the aforesaid, the USMCA aims to cover a wide range of issues, and it further aims to focus its attention on the evolutionary aspect of intellectual property, considering its growth in recent years. Since the WTO and TRIPS agreement cannot be modified according to national and regional requirements, parties to the USMCA have taken a step in the right direction by amending the provisions under their provincial and territorial laws to modernize the approach as per current trends.

      

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    Wed, 18 Aug 2021 15:51:00 GMT
    <![CDATA[Establishing NFT's Marketplace in the UAE]]> Guide to Establishing NFT's Marketplace in the UAE

    Introduction to NFTs

    Simply put, an NFT is a non-fungible token.

    "Non-fungible" basically implies that it's one-of-a-kind and can't be substituted with anything else. A bitcoin, for example, is fungible, meaning you can exchange one for another and get precisely the identical item. A one-of-a-kind trade card, on the other hand, cannot be duplicated.

    An electronic commodity that reflects components in reality like art, music, in-game goods, and movies is known as an NFT. They're acquired and traded digitally, often using cryptocurrency, and they're usually encrypted with the same software as many other cryptos.

    Despite the fact that they've been available since 2014, NFTs are rising in popularity as a more popular means to buy and sell digital art. Since November 2017, a whopping $174 million has been spent on NFTs.

    A big perk of possessing a digital collectable over a tangible collectible like a Pokemon card or a rare, minted coin is that each NFT has unique information that helps it stand out from the others and can be readily verified. As all products can be linked to the authentic seller, the manufacture and dissemination of false collectibles are useless.

    NFTs, unlike other cryptocurrencies, cannot be immediately traded. This is due to the fact that no two NFTs are identical. Consider their festival tickets. Each ticket includes information such as the purchaser's name, the event's date, and the location. This information makes purchasing festival tickets difficult.

    NFT Operation

    Most NFTs are, to a good degree, members of the Ethereum blockchain. Ethereum, like bitcoin and dogecoin, is a cryptocurrency, but its blockchain also enables these NFTs, which hold additional details that allow them to function uniquely from, say, an ETH coin. It's worth mentioning that different blockchains can use NFTs in their own ways.

    NFTs are essentially digital versions of actual collector's artifacts. As a result, rather than receiving a real oil painting to put on the wall, the customer receives a digital file.

    They also acquire exclusive rights to the property. It's true: NFTs can only have one owner at a time. Because NFTs include unique data, it's simple to verify ownership and transfer tokens between owners. They can also be used to hold particular information by the owner or developer. Artists, for example, can sign their work by adding their signature in the metadata of an NFT.

    Contemporary Popular NFTs

    NFTs could have been anything digital (drawings, music, even your brain being downloaded and converted into an AI), but the hype is focused on leveraging the technology to sell digital art.

    Purpose of NFTS

    Artists and content creators have the opportunity to monetise their work thanks to blockchain technology and NFTs. Artists, for example, now do not have to publish their goods through galleries or auction houses. Instead, the artist may sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit.

    Additionally, artists may build royalties into their software so that they get a share of revenues when their work is sold to a new owner. This is a desirable feature because most artists do not earn further revenue after their initial sale.

    Snoop Dogg and Lindsay Lohan are among the celebrities who have jumped on the NFT bandwagon, offering unique experiences, artwork, and moments as securitized NFTs.

    The procedure of buying an NFT

    Before beginning, you'll need to possess a digital wallet that can hold both NFTs and cryptocurrencies. Based on what currencies your NFT provider supports, you'll probably need to buy some cryptocurrency, such as Ether, Coinbase, Kraken, eToro, or even PayPal and Robinhood that now allow you to buy cryptocurrency using a credit card. After that, you'll be able to transfer money from the exchange to your own wallet.

     

    ]]>
    Sun, 08 Aug 2021 20:42:00 GMT
    <![CDATA[Subcontract works under UAE Law]]> Subcontract works under UAE Law

    Introduction

    Subcontracting is quite popular in today's construction business. Without engaging third parties with diverse experience and capacities to carry out certain aspects of the works, it would almost likely be unmanageable for one contractor to complete a construction project, especially if the project entails a certain level of complexity.

    However, from the standpoint of the project owner, it appears more ideal to hire one primary contractor who is accountable for all other subcontractors. Having stated that, it is not unexpected that the major participants in most construction industry are the project owner may it be the employer and client, the actual contractor, and the subcontractor.   

    The United Arab Emirates Civil Transactions Code enables the main contractor to subcontract the entire or a portion of the task to a 3rd party without gaining approval from the employer, except as otherwise defined in the agreement or if the implementation of the work is dependent on the contractor's professional efficacy.  

    In reality, however, employers are likely to have some control over the principal contractor when it comes to subcontracting the job and selecting subcontractors. The extent to which such control is exercised varies. The contract may limit the extent of subcontracting by forbidding subcontracting the entire scope of work.

    This provision is quite prevalent in conventional contract forms; for example, Clause 4.4 of the FIDIC Red Book 1999 stipulates that the Contractor must not outsource the whole Works.  The contract may also require the primary contractor to get the prior agreement of the employer or even the engineer before engaging a potential subcontractor if the employer has not identified that subcontractor.

    The subcontractor may be recommended by the employer  or chosen by the primary contractor . The subcontract agreement must be signed by both the primary contractor and the subcontractor in both circumstances. As a result, no explicit contractual relationship exists between the company as well as the subcontractor. As a consequence

    A - the subcontractor is not contractually accountable to the employer for late delivery or faulty work; and 

    B-  the employer is not contractually obligated to the subcontractor for payment of its subcontract agreement rights.  

    Subcontractor's Liability to the Employer

    A well-established principle  in UAE law is Privity Contract . In typical situations, because the subcontractor is not a party to a contract with the employer, it has no legal obligations to the  succeeding owners or employers. The construction agreement between the employer and the primary contractor may not impose a duty on the subcontractor unless the latter accepts such duty.

    In reality, employers may demand subcontractors to offer a collateral guaranty on which the employer can depend to pursue direct accountability from the subcontractor for faulty  work. As per United Arab Emirates' law, a collateral warranty is valid& enforceable . Pursuant to Article 276 of the Civil Transactions Code, it is considered a unilateral act; hence, the subcontractor is obligated by its provisions according to Article 278.   A collateral warranty would often include provisions for assignment and step-in rights to guarantee that the employer can assign the warranty's responsibilities to other beneficiaries such as succeeding owners or renters.

    Whether or not a collateral warranty is issued, the primary contractor is nonetheless accountable to the employer for the subcontractor's performance, pursuant to Article 890(2) of the Civil Transactions Code. In numerous situations, the UAE courts stressed that the primary contractor is contractually accountable for the subcontractor's conduct or defaults even if the subcontractor really carried out the employer's instructions over the course of the project.

    Because the aforementioned Article 890(2) does not distinguish between nominated and domestic subcontractors, the prevailing norm is that the primary contractor's obligation remains in force in the event of a nominated subcontractor. However, the principal contractor may have a defense basis by contesting the element of causation, which is required for the creation of contractual liability.

    In a famous decision of the Dubai Court of Cassation in case No. 266 of 2008, the court ruled that when the subcontractor is chosen by the employer or its consultants, the employer is accountable for any delay in the execution of the subcontracted component, and the prime contractor is not accountable for any delay penalties if they can establish that the problem was caused by such subcontractor and also that the principal contractor had no involvement in the wait.

    Since the court provided no stated threshold for violating the wide norm provided in Article 890, the grounds for this verdict have been disputed . As a result, this disputed decision is viewed as an exception to the general rule that the primary contractor's responsibility continues even when selected subcontractors are engaged.

    Nonetheless, in some instances, a principal contractor may depend on the preceding judgment as a defense basis. For this defense to be successful, the prime contractor must correctly prove to the court that it has executed its contractual obligations, along with its supervisory responsibility, and that the postponement or faulty performance couldn't be prevented for causes directly related to the appointed subcontractor's mistake. If the principal contractor has no authority to object to the selected subcontractors, there could be a supporting basis for this defense to succeed.

    To limit its risk, the main contractor may demand an indemnification clause in the main contract, often if the contract does not provide for a right to object to nomination. This clause requires the employer to compensate the main contractor against and from the effects of the nomination.

    Employer's Liability to the Subcontractor

    There is no direct contractual tie between the employer as well as the subcontractor, as demonstrated above. As a result, the employer is under no responsibility to the subcontractor.

    Furthermore, Article 891 of the Civil Transactions Code states that the subcontractor may not demand any dues to the main contractor from the employer unless delegated to do so by the main contractor.

    As a result, the subcontractor has little choice except to seek payment from the principal contractor. Practical issues arise when a "pay-when-paid" clause is included in the subcontract agreement, which is routinely enforced by primary contractors. Pay-when-paid agreements are legally enforceable in the UAE. A pay-when-paid provision prevents the subcontractor from claiming its dues from the primary contractor until the latter has been paid by the employer. If the subcontractor files a lawsuit against the primary contractor before the latter has been paid, the court may reject the case on the grounds that the claim was filed prematurely.

    To mitigate the harshness of "pay-when-paid" clauses, the subcontractor may try to get a direct payment requirement from the client via contract negotiations. In practice, however, employers rarely accept this..

    In exceptional instances, the subcontractor may argue that the employer's failure to pay is wholly the responsibility of the primary contractor. For instance, if the primary contractor fails to submit the needed performance bond under the primary contract. In other cases, the subcontractor may allege that the primary contractor is in violation because it did not pursue its claim against the employer. In this regard, it may be prudent for the subcontractor to negotiate a contractual condition requiring the primary contractor to pursue its claims against the employer to the maximum degree possible.

    Ultimately, Article 247 of the UAE Civil Transactions Code to halt work if payment is not received maybe  invoked by the  subcontractor . However, this authority must be employed with caution, especially in the absence of a contractual right to cease job performance for nonpayment. A subcontractor must seek legal counsel to guarantee that the right to suspend provided for in Article 247 can be utilized in their specific circumstances.

    A number of factors should be considered when determining whether the subcontractor can exercise the suspension right, such as proper notification of the main contractor, successful performance of the subcontractor's primary obligations under the contract, and whether or not the payments are certified.

    Conclusion

    Subcontracting is legal in the Emirates and is widely used in practice. Standard forms frequently include provisions for limiting the terms of subcontracting. Subcontracting does not establish a direct relation between employers and the subcontractor as  per United Arab Emirates law. As a result, the principal contractor is often held responsible for the successful delivery & performance of subcontracted work.

    In some instances, the primary contractor may have reasons to defend itself from liability for nominated subcontractors. Unless there is a direct payment commitment, the subcontractor may not seek compensation from the employer. Pay-when-paid provisions are widespread in the UAE. However, there are ways to restrict the impact of such provisions in each circumstance.

     

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    Sat, 10 Jul 2021 13:59:00 GMT
    <![CDATA[Licensing Foreign Direct Investments projects in UAE]]> Licensing procedure of Foreign Direct Investments projects in UAE

    Background of this new development-

    Prior to the implementation of the FDI law, UAE law stipulated that foreign investors may only own up to 49 percent of a UAE mainland corporation, with several exceptions. One or more UAE nationals or a corporation entirely owned by 1 or more UAE citizens required to own at least fifty-one percent of equity in a UAE mainland company. This meant that the constitutional records of a UAE mainland company must state both the name of the domestic shareholder, as the legal owner of not less than 51 percent, and the name of the international shareholder, as the legal owner of not more than 49 percent, making the foreign shareholder a minority stakeholder.

    Furthermore, some economic industries like as oil and gas development and extraction, finance, insurance, military and defense, water, power, entertainment, printing, telecommunications, transport service, and labor supply were restricted to UAE nationals or firms controlled entirely by UAE citizens. As a result, foreign investors are prohibited from engaging in such operations or investing in businesses that engage in such operations.

    • The development in the law

    Following the publication of UAE Federal Law No. 19 of 2018 on Foreign Direct Investment, the UAE Cabinet has officially published the entire Positive List of activities encompassed by the Foreign Direct Investment  Law, including that of the prerequisites & shares  requirements within each sector, which are classified into three parts: agriculture, services, and industries. This positive list and recommendations are currently in effect.

    The list of 122 authorized operations in each category will be qualified for 100 percent Foreign Investor ownership, an effort that will open doors for Foreign Investors looking to access the Mainland market of the country.

    Among the activities  primarily are:

  • Administrative &  support services
  • Agricultural sector
  • Arts & entertainment sector
  • Constructional activities 
  • Medical care
  • Hospitality & culinary services
  • Communication & information
  • Production
  • Economic, scientific, and technological activities
  • Sustainable power
  • Space
  • Transportation & warehousing sector
    • Conditions and criteria for complete ownership (100% )
    • Requirements for Share Capital

    Share capital needs might range between Two & One hundred  million Dirhams  based  on the sector and activities of the organization. Sectors such as healthcare  activities, for instance, will necessitate a Share Capital of Aed.100 million

    Several industries, such as manufacturing, have different share capital requirements based on the kind of manufacturing, whilst the manufacturing of machines and equipment would necessitate a share capital of  AED.100 million .

    • Key Advantages of this include
  • Complete Ownership
  • Licensed FDI firms are treated the same as UAE national firms.
  • Obtain financial project returns from outside the nation.
  • The ability to switch partners, transfer ownership, and alter legal form.
    • Procedure for Licensing an FDI Project under the Positive List

    Application for FDI License

    The application procedure for acquiring an FDI License in the UAE changes depending upon whether foreign investor's desired activity is particularly anticipated by the Federal Positive List  or not.

    It should be observed that major developments that have an  impact on the life of  Foreign Direct Investment  Company (e.g., amendment of founding provisions or legal form, introduction of new partnerships or shareholders M&A)  require the written permission of the appropriate Competent Authority, revealing  UAE's intention to keep a close eye on the identities of the parties involved. This is not the situation for ordinary, non-FDI enterprises, to whom these criteria do not apply.

    If an investor wishes to carry out an activity that is specifically qualified for an FDI License in the UAE, they must first choose the legal form of the business, then establish the registered capital (which must not be less than the minimum capital for the relevant activity), then register a trade name (which must be supplemented by the phrase "Foreign Direct Investment (FDI)"), and finally submit an application. This is done in order to obtain preliminary clearance for the FDI project.

    The application for the initial permission must include a draft  articles of association & memorandum of association (AoA & MoA ) of the FDI Company, a feasibility analysis, and any other previous permissions that are particularly necessary for the business to be carried out. After receiving preliminary permission, the investor can proceed to pick a place for the conduct of its company and then file an official application for FDI project license, including the signed MoA & AoA.  Any particular permission necessary for the business  from a licensing body which would not have been received up until this point must be sought.

    The investor must next seek to obtain  membership of the Tawteen Partners Club, a Ministry of Human Resources and Emiratization-established organization. The relevant  Authority would then   issue its conclusion once these stages have been completed. If the judgment is positive, the foreign investor must proceed by paying the fees for the  said FDI Company's commercial license, opening a bank account in the FDI Company's name, completely paying up at least 20% of the FDI Company's capital, registering the FDI License with the Ministry Of Economy  and as welll as  the Chamber of Commerce, and lastly obtaining a notice of starting of business.

    The Law does not provide a deadline for the approval or denial of the Investment License; nonetheless, it stipulates that the Appropriate Authority must issue its approval of the FDI License application in 5 business days after the application submission and fulfillment of all required requirements, paperwork, and processes. While this looks to be a favorable timeframe, the application also must go through a preliminary approval procedure, which is not time-bound. If the 5-day period passes without some kind of decision from the Competent Authority, the FDI License application is deemed to be refused.

    As a result, the short timeline may wind up being detrimental to foreign investors and difficult for the regulators, particularly knowing that the process for obtaining an FDI License is new and will require time to acquire experience and precedence. If the business is not on the Federal Positive List or in the AD Positive List but is also not forbidden under the Negative List, the investor can apply for an FDI License to the Qualified Authority, that has the power to reject the request or, after consultation with the applicable licensing authority and the Government  in the appropriate Emirate, to approve it and then to send it to the  FDI Committee, which is in charge of researching and delivering FDI suggestions to the  cabinet of United Arab emirates. If the FDI License request is successful by the UAE Cabinet, the Competent Authority will advise the foreign investor of the documentation information &  data,  required to complete the application. The  relevant Authority will then approve the FDI License within five business  days of the foreign investor completing the appropriate paperwork and processes. If a proposal is rejected, the decision is final and cannot be appealed.

    The procedure can be summarized as follows-

  • Choose a Positive List Business Activity and a Legal Form it can be a limited liability company or a joint stock company.  The Capital must not be below the minimum criteria.
  • Submit an application form for a Foreign Direct Investment License for authorization.
  • Trade Name Reservation
  • Obtain authorization from entities involved in FDI firm activity. II. Produce evidence of submission for membership in the Tawteen Partners Club (an organization formed by the Ministry of Human Resources & Emiratization).
  • After paying a fee, obtain permission and obtain an FDI license.
  • Creating a bank account on behalf of the firm
  • Registering with the Ministry of Economy For FDI License
  • Applications from categories on the Positive List have a maximum approval time of 5 business days.

    • In  case an Existing business that wants to become an FDI company

     An established company may convert to an FDI firm if its legal form is one of those specified for FDI firms, namely Private Joint Stock Company or a mainland UAE Limited Liability Company.

    • A  License for a project  that is not on the Positive List

    It is also possible to apply if the project License is not on the positive list, such as commercial retail , property, food and beverage, and hotels. The foreign investor must send their application to the Relevant Authorities of FDI for evaluation. If the proposal is submitted to the Foreign direct investment Committee for review, The request will then be forwarded to the UAE Cabinet.

    • Applications in Dubai under the FDI 100 percent Foreign Ownership Law

    Presently, the application procedure in Dubai is straightforward, with the FDI managing applications in collaboration with the Department of Economic Development  and Ministry of Economy.

    • Implications  for the current businesses

    It is unknown how much foreign ownership limits will be relaxed until more regulations are announced. It is also ambiguous how the shift to remove the National Service Agent (NSA) or the regional shareholder would be carried out, &  what practical advantage there may be in maintaining the National Service Agent  or Local Partner outside of the mandated duties list.

    Existing corporations must 'adjust their positions' by January 2, 2022, according to the Amendment (1 year after the entry into force of the Amendment on 2 January 2021). To bring quorum, Limited Liability Companies may need to change their  MoA (Memorandums of Association)

    • Legal ramifications

    The UAE government is supporting economic diversification and taking international investment seriously. The FDI Law demonstrates this, and it is a great step toward enhancing diversity across industries and boosting the UAE's desire to become a world leader in attracting foreign investment.

    Companies are recommended to implement future-proofing measures in light of the new FDI Law in preparation of the changes ahead.

    Companies would now  -

    • Consider if current UAE on-shore firms should be converted to FDI businesses, keeping in mind that any conversion from an LLC to an FDI firm may open the door to additional shareholder talks, especially if the conversion results in a buy-out of current shareholders. Contract audits should be performed by companies to assess the impact on major trade connections as well as any change of control provisions that may be activated in major  contracts of business as a consequence of any conversion.
    • Recommend using corporate service providers for investment projects, keeping in mind that such   providers are familiar with the current environment and understand the need of international investors to pursue contractual safeguards via side agreements.
    • Take into account inserting future-proofed terms in investor agreements – Based on the parties' negotiating position, some contracts also include terms that would allow the international investors to a pro-rata reimbursement of any service costs incurred to the domestic shareholder if the agreement was terminated due to a change in law.

     

    ]]>
    Sat, 10 Jul 2021 11:49:00 GMT
    <![CDATA[Impact of Russian Anti-Trust Law]]> Impact of Russian Anti-Trust Law

    Introduction

    Russia is a large country that spans across eastern Europe and northern Asia. After the collapse of the Soviet Union in December 1991, Russia, once the very first republic of the Union of Soviet Socialist Republics (abbreviated as USSR and previously the Soviet Union) became an independent country.

    Superlatives abound in Russia. It is by far the world's largest country, covering over double the area of Canada, the world's second-largest country. It stretches over northern Asia and the eastern third of Europe, spanning 11 time zones and encompassing a diverse range of habitats and landforms, including deserts, semiarid steppes, deep woods, and Arctic tundra.

    The Volga, Europe's longest river, and Ladoga, Russia's biggest lake, are both located in Russia. Russia is also home to Baikal, the world's deepest lake and the world's coldest temperature outside of the North and South poles.

    Russia's population is quite varied. The majority are ethnic Russians, although there are over 120 other ethnic groups present, speaking a variety of languages and adhering to various religious and cultural traditions. The majority of Russians live in the European part of the nation, particularly in the rich region surrounding Moscow, the capital.

    Moscow and St. Petersburg (formerly Leningrad) are Russia's two most major cultural and financial centres, as well as two of the world's most beautiful cities.

    However, a continuous influx of ethnic Russians and Russian-speaking people went eastward into Siberia, where towns like Vladivostok and Irkutsk now flourish, beginning in the 17th century and particularly evident throughout most of the 20th century.

    Following the Russian Revolution of 1917, the Russian republic was founded, and in 1922, it became a union republic. Russia was a major actor in international affairs in the post-World War II era, embroiled during the Cold War with the United States.

    Soon following the suspension of the Soviet Union in 1991, Russia formed a loose alliance with six other Soviet republics previously referred to as the Commonwealth of Independent States (CIS).

    Russian Legal System

    The Russian Federation is governed by civil law. Russian law consists of both codified laws (such as the Civil Code and the Criminal Code) and uncodified laws that must, in most cases, be consistent with the applicable codes. Legislation has the highest legal authority (compared with bylaws and other sources of law). Unconstitutional laws, on the other hand, can be struck down by the Constitutional Court.

    The Russian legal system recognizes international law as a component of the legal system.

    Case law might be regarded as a de facto legal source. This implies that all courts, governmental agencies, legal organizations, and people are bound by the Constitutional Court's interpretations of the law. To preserve consistency in legal practice, Supreme Court decisions are also binding on subordinate courts.

    Domestic Sources of Russian Law

    • The Constitution 
    • Laws governing the federal government.
    • Federal laws apply.
    • The President's Decrees
    • The government's resolutions.
    • Authorized state bodies' legal activities.

    International Sources of Russian Law

    The Russian legal system considers international conventions and treaties, as well as widely recognized rules of international law, to be essential. When an international agreement specifies norms that differ from those established by domestic law, the terms of the international treaty are implemented. Due to the Constitution's supremacy, no foreign treaty may override it.

    By signing, reciprocating, ratifying, approving, accepting, or acceding to an international treaty, the Russian Federation can fulfill its responsibilities. The Russian Parliament ratifies international treaties on human rights, territorial integrity, international relations principles, and Russia's involvement in international organizations.

    For the purposes of recognition and enforcement, decisions of the European Court of Human Rights in respect to the Russian Federation must not contradict the Constitution (Resolution of the Constitutional Court dated 14 July 2015 No. 21-P).

    Anti-trust Law

    Antitrust laws are guidelines premeditated to promote competition by restricting a company's market power. This frequently entails ensuring that mergers and acquisitions do not unduly concentrate market power or create monopolies, as well as dismantling monopolies.

    Antitrust laws also prohibit several businesses from collaborating or creating a cartel in order to stifle competition through methods like price-fixing. Antitrust law has developed a unique legal specialty due to the difficulty of determining what activities would impede competition.

    Antitrust laws are a assortment of state and federal guidelines aimed at ensuring that firms compete fairly. Antitrust regulations, according to supporters, are required for a free market.

    Consumers benefit from healthy seller rivalry because they get cheaper costs, higher-quality products and services, more options, and more innovation. Antitrust opponents believe that allowing firms to compete as they see appropriate will result in the best pricing for customers.

    A collection of firms that band together or create a monopoly in order to influence prices in a given market is referred to as a trust in antitrust.

    Google offered an antitrust settlement with the European Commission in early 2014. When Google provided results for specialized queries pertaining to products, restaurants, and travel, it stated it would show results from at least three rivals.

    Competitors would pay Google each time someone clicked on certain sorts of results displayed alongside Google's. The search engine would foot the bill for an outside monitor to oversee the procedure.

    Content providers, such as Yelp, may opt out of Google's specialized search offerings without suffering fines, according to the plan. Google also recommended eliminating restrictions that made it difficult for advertisers to shift their campaigns to competitors' websites; sites that used Google's search engine might have displayed advertisements from other providers. The idea was eventually rejected.

    Russian Anti-trust Law

    Federal Law No. 33-FZ on Amendments to the Federal Law on Competition Protection (the "Law"), which established the regulatory framework for antitrust compliance, was signed into law on March 1, 2020. The law became effective on March 12, 2020.

    Many Russian and global firms operating in Russia established and executed antitrust compliance plans prior to the Law's passage to reduce their antitrust risks. The Federal Antimonopoly Service (the "FAS"), which created and implemented the Law, strongly advocated the use of such programs.

    Anti-trust Compliance

    Antitrust compliance is defined in the law as a set of organizational and legal procedures aimed at ensuring that businesses follow antitrust regulations.

    Voluntary Anti-trust Compliance

    The creation and execution of an antitrust compliance system are optional under the law.

    However, if a company is being investigated for antitrust law violations, the antitrust compliance system it has in place may serve as proof that the necessary steps were taken to comply with antitrust requirements, as well as proof of lack of fault and support a defense against administrative liability.

    As a result, Russia, like Australia, Brazil, Canada, Israel, Italy, Malaysia, Singapore, South Africa, Spain, Switzerland, the United Kingdom, and the United States, now has an extra incentive to establish an antitrust compliance program. The EU, in contrast, continues to refuse to regard a compliance program as a mitigating factor for imposing any sanctions.

    Structure of the Anti-trust Compliance Execution

    According to the law, every antitrust compliance program must have the following elements:

  • steps aimed at reducing such risks;
  • measures aimed at assessing the efficacy of the antitrust compliance program;
  • standards for the method for analyzing a company's antimonopoly risks;
  • processes for workers to become acquainted with the antitrust compliance program; and
  • information of the individual or officers in charge of the antitrust compliance program's execution.
  • Other elements of the antitrust compliance program may be included, such as processes to follow in the event of an antitrust violation, antimonopoly agencies' investigations, and responsibility for antitrust offenses.

    Antitrust compliance procedures should be implemented as internal regulations at the firm or parent company level, with the latter instance ensuring that it is applicable to the appropriate group business.

    Disclosure of Antitrust Compliance Program

    According to the law, if a firm implements an antitrust compliance program, it must publish it in Russian on its website.

    Review of Antitrust Compliance Program by FAS

    Any firm may submit its antitrust compliance program to the FAS for evaluation and verification of its compliance with antitrust regulations, whether in final or draft form. The FAS should review compliance program submissions within 30 days and make a judgment on whether or not they meet the antitrust laws' criteria.

    Conclusion

    As the various comments made by FAS officials and existing bills suggest, additional amendments to the competition law can be reasonably expected, and, among other things, more detailed rules in the areas of merger control and economics should be addressed. The correlation between intellectual property rights and antitrust regulations (removal of intellectual property rights exemptions and introduction of compulsory licenses, especially in the context of merger control).

    In addition, the notion of antimonopoly compliance has now been included in the Competition Law from an antitrust standpoint. It is not required to implement an antimonopoly compliance mechanism. Companies can apply to FAS for assurance that their internal antimonopoly compliance papers are compliant with the law.

    Antimonopoly compliance, according to the FAS, will assist avoid breaches by firms, especially dominant corporations. At the same time, the new law is unclear on whether responsibility can be reduced or eliminated in the event of breaches by firms that have established a FAS-approved compliance system.

     

    ]]>
    Sat, 10 Jul 2021 10:56:00 GMT
    <![CDATA[Explaining Cryptocurrency Ransomware Problem]]> Explaining Cryptocurrency's Ransomware Problem (USA)

    Introduction

    A hacker gains access to a company's computer system and encrypts its data, effectively halting operations. The data is then held captive by the hacker until a ransom is paid. If the demand is for Bitcoin or another cryptocurrency, the victim must open a cryptocurrency exchange account, purchase Bitcoin, and deliver it to the hacker's virtual wallet in exchange for the decryption key. The key enables the organization to regain access to its data and resume operations. Meanwhile, the hacker launders the ransom money through cryptocurrency exchanges and "mixers"-services that blend cryptocurrency from diverse sources to disguise its origin.

    The type of malware employed determines how it enters the system, although email phishing attempts are one of the most popular methods. If a company's systems are fully guarded, it may only take one person out of thousands to read the wrong email and click on the wrong link, and faked emails can be quite convincing. Hackers may also take advantage of flaws in a company's systems or launch a brute force assault, in which they guess at access credentials (such as passwords) until they find one that works.

    The pandemic opened up various new attack vectors for hackers. There was an exponential rise in phishing emails that took advantage of the circumstances and collective fear. People were more inclined to click on a link that would infect their computers - and eventually the rest of the system - as a result of the circumstances. Additionally, pre-pandemic personnel did not need remote access, but this year more facilities became internet-connected and remotely operable which increased the attack surface.

    Cryptocurrency

    The ransomware criminals are unable to use traditional banking methods. Even the most transparently corrupt bank would regard ransomware payments as an existential risk. The banks may unbank the perpetrators or be cut off from the financial system. If ransomware attackers tried to employ wire transfers, the same thing would happen. 

    Similarly, cash is not an option. A $5 million ransom is the equivalent of 110 pounds (50 kilograms) in $100 bills or two full-size suitcases. From a physical sense, arranging such a transfer to an extortionist operating outside the United States is simply impossible. The suppliers of ransomware require transactions that do not necessitate physical presence or a hundred pounds of goods. As a result, cryptocurrency is the only tool left.

    Due to its pseudonymous nature, cryptocurrency is perfect for ransomware payments; even if you see the ultimate destination wallet into which the ransom payment is transferred, you can not tell who owns or controls the wallet. As a result, ransomware attacks may now be carried out with relative ease.

     As a result of this impunity, there has been a surge in ransomware assaults, as well as the rise of DarkSide, a ransomware organization that leases its software to hackers in exchange for a percentage of any ransom paid. According to Elliptic, a blockchain analytics business, DarkSide, the recipient of the Colonial Pipeline ransom payment, has received more than $90 million in ransom payments in the last year.

    Ransomware hackers have stolen data in the past and threatened to release or sell it online. More recently, on the other hand, hackers have been increasingly bringing operations to a halt by encrypting files required to continue operations. As a result, attacks are more likely to prove crippling, giving hackers additional power.

    In 2020, the number of ransomware cases reported to the FBI increased by almost 66%, and the average ransomware payment tripled in less than two years, rising from $12,000 in Q4 2019 to $54,000 in Q1 2021. As of May 10, 2021, more than $81 million in cryptocurrency had been sent to ransomware addresses.

    JBS or Colonial Pipeline have recently been in the news because they were victims of ransomware attacks. Insurance giant CNA Financial, the city of Atlanta, elements of the Irish health service, parts of the UK health service, Australian hospitals, Cox Media Group, and so on have all been major victims in recent years. Anyone can be hit and recovering requires a lot of resources - both time and money.

    JBS SA, a meat processor, had to halt operations at its plants in the United States and Australia due to a ransomware attack. Following the hacks of Colonial Pipeline Co. and Scripps Health in San Diego, this incident demonstrated how extortion tactics can wreak havoc on the US economy and disrupt daily life. Businesses like Colonial, which paid $4.4 million in bitcoin to an Eastern European gang known as DarkSide, frequently make similar payments to avoid costly disruptions of their computer networks or the time-consuming task of restoring systems from backup data.

    The health-care industry has been one of the most targeted because the consequences of not paying the ransom in a timely manner can be severe, ranging from the inability to provide health-care services to the leakage of sensitive patient data - or even the blackmailing of patients not to have their data released. Ransomware has also been known to target municipal or government systems.

    CryptoLocker, TeslaCrypt, SimpleLocker, WannaCry, Locky, Leatherlocker, RobbinHood, GrandCrab, and Sodinokibi are a few of the worst ransomware offenders in the past few years.

    Why Not Ban Cryptocurrency?

    Despite fears that cryptocurrencies could be used to facilitate ransomware attacks, many in the sector and the federal government believe that a prohibition would be overbroad, logistically unfeasible, and likely to impair the United States' competitiveness.

    Upon the ban of cryptocurrency, a country would also be missing out on the innovation around bitcoin and other digital assets 

    Additionally, it would be very difficult to stop people from transacting in cryptocurrencies. 

    Instead, the focus should be finding the proper policy balance between allowing for the innovation that cryptocurrencies offer, the benefits they can deliver, and the protections built into the financial system to deal with criminal activity and money laundering.

    Regulatory Solutions

    As regulators seem to concur, de-anonymizing transactions would help achieve both the preventive and punishment goals. If a hacker's identity is revealed, he or she is more likely to be discouraged from undertaking such an assault.

    It is also suggested that we must expect more stringent enforcement of existing Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements and regulations. For example, cryptocurrency exchanges, custodial wallet companies, and crypto payment processors (among others) must register with FinCEN (The Financial Crimes Enforcement Network, a part of the Treasury Department) as money services businesses, implement AML programs that specify the KYC information collected, and appoint a compliance officer to monitor transactions and file Suspicious Activity Reports ("SARs") and Currency Transactions Reports ("CTRs") for transactions above ten thousand dollars.

    These procedures are critical not only for prospective law enforcement tracking in the event of a crime but also for crime prevention and customer trust and confidence, all of which are required for widespread cryptocurrency adoption. New applicants should be aware that criminals will be checked and excluded.

    More stringent KYC and licensing standards, as well as a centralized approach to preventing and responding to ransomware attacks, is required.

    The US government has already stepped up its response. In a letter to corporations and industry leaders, the Biden administration made advice for how they might better secure themselves against threats, as well as an appeal to work on these issues.

    Companies and regulators must also understand how a bitcoin ransom works on a technological level. Understanding how exchanges transfer funds and how mixers work is part of this.

    All cryptocurrency transactions are recorded on the distributed blockchain ledger, making them traceable by analytics firms or other individuals. Since blockchain transactions are easily traceable, the mechanisms to assist mitigate this type of assault are already in place. Exchanges are also beginning to comply with regulatory regimes aimed at identifying users and preventing money laundering, which can aid in the resolution of this problem.

    Additionally, solutions may include ensuring over-the-counter (OTC) trading desks enforce KYC rules, and that KYC and anti-money laundering rules (AML) are kept on bitcoin teller machine kiosks.

    Mitigating Attacks

    Ransomware attacks will prompt organizations to invest in cybersecurity and use the guidance and resources available.

    Better information sharing, cyber hygiene, increased investigative resources, and updated cybersecurity rules to address different components of the ransomware ecosystem are all concrete initiatives that regulators and businesses can do to help minimize the problem.

    Ransomware underreporting obscures the true magnitude of the problem, and it means that law enforcement lacks all of the information needed to prioritize and investigate ransomware incidents. Thus, attacks should be reported.

    International collaboration on KYC/AML rules, as well as the establishment of best practices for cryptocurrency exchanges, is required to ensure that they can provide services to legitimate businesses while excluding illicit enterprises. Like-minded countries should agree to improve certain financial rules and conduct joint investigations or share information so there exists a better understanding of the criminal networks.

    Good security and defensive practices are important to mitigate and prevent attacks:

    • Keep your operating system patched and up-to-date to reduce the number of vulnerabilities that can be exploited.
    • Don't install software or provide it with administrative capabilities unless you completely understand what it is and what it does.
    • Set up antivirus software to detect harmful programs like ransomware as soon as they appear, as well as whitelisting software to prevent unauthorized programs from running in the first place.
    • Make regular and automatic backups of your files. While this will not prevent a virus assault, it can significantly reduce the damage it causes.
    • Multi-factor authentication – this would make hacking etc., more difficult.

    Should ransomware attackers be paid?

    New legislation may make it more difficult to pay and collect ransoms. If businesses are prohibited from paying ransoms and cryptocurrencies are better regulated, this might go a long way toward cutting off the funding source for many of these attacks. Both of these things are, of course, easier said than done. It's not impossible, though:  for example, China's cryptocurrency crackdown. Opinions differ on whether or not ransom payments should be prohibited.

    Paying international criminals could set a dangerous precedent and put a target on the back of critical infrastructure. On the other hand, the company may go bankrupt if it cannot function as a result of the attack.

    Simply prohibiting ransom payments would place a significant burden on victim companies without providing them with extra tools or resources to withstand an attack.

    That said, many firms that are infected with malware rapidly stop thinking in terms of the "greater good" and begin balancing the expense of the ransom against the worth of the encrypted data in a cost-benefit analysis. According to a Trend Micro study, while 66 percent of organizations say they would never pay a ransom as a matter of principle, 65 percent pay the ransom when they are attacked.

    Some ransomware attackers keep their rates low, i.e., an amount that most businesses can afford to pay on short notice. Some highly sophisticated malware will recognize the country in which the infected machine is located and change the ransom to fit that country's economy, asking more from wealthy countries and less from those in poor countries.

    Discounts are frequently offered for paying promptly, to entice victims to pay without thinking too much about it. In general, the price point is set high enough to be worthwhile to the criminal, but low enough to be less expensive than the cost of restoring the victim's machine or reconstructing the lost data. With this in mind, some businesses are beginning to factor in the possibility of having to pay a ransom into their security plans: for example, some large UK businesses that are otherwise uninvolved in cryptocurrency have set aside some Bitcoin specifically for ransom payments.

    When paying attackers, it also has to be made sure that "scareware" is not involved, i.e., fake attacks. Sometimes the criminals simply take the money and run, and the software may not even include decryption functionality. However, because such malware quickly gains a reputation and does not generate revenue, the criminals usually ensure your data is restored in the majority of situations - Gary Sockrider estimates this to happen 65 to 70% of the time.

    Conclusion

    Therefore, ransomware attacks can have significant consequences. However, various actions are being taken to develop policies that can prevent, mitigate, and fix the associated problems. International corporation and better cybersecurity training/measures are also required.

     

    ]]>
    Thu, 08 Jul 2021 09:04:00 GMT
    <![CDATA[Bitcoin & Altcoin Mining]]> Bitcoin & Altcoin Mining

    What is Bitcoin Mining?

    Bitcoin mining is the technique of digitally adding transaction data to the blockchain, which would be a publicly distributed database that contains the background of every bitcoin transaction. Mining is a record-keeping procedure that utilizes massive processing power. Each Bitcoin miner across the world contributes to a decentralized Crypto mining computers solve complex mathematical tasks in order to contribute to the block- chain ledger safely. When a solution is found, the most recent block of confirmed transactions is added to the block-chain as the next link.

    Mining for bitcoin is tedious, costly, and seldom rewarding. Nevertheless, mining has a magnetic pull for several crypto investors given the fact that miners are compensated with crypto tokens for their labor.

    Basics of Bitcoin Mining

    Bitcoin may be obtained in three ways:

    • Buy them on an exchange
    • Get them in return for products and services
    • Mine new Bitcoins

    Because it parallels the process of mining for any other resource, the process of discovering new Bitcoin is referred to as mining. Miners explore and dig into the dirt in the hopes of catching gold in mining.

    Miners seek to locate Bitcoin by solving challenging mathematical puzzles. Block-chain is the tech that underpins Bitcoin. It is a publically digital ledger that documents every Bitcoin transaction. It is actually a digital block chain. Each block comprises a collection of Bitcoin transaction data. Miners contribute to the blockchain by solving challenging mathematical problems with computer processing power. By resolving the issues, the block will be successfully added to the chain. The miner that answers the challenge properly receives Bitcoin.

    The preceding is the foundation of the intricate process of Bitcoin mining. It contributes to the payment network's security and dependability. The network is constructed on a peer-to-peer network, which means that every miner on the planet contributes processing power to keep the network running, confirm transactions, and keep them safe.

    • 10 minutes for each block

    Satoshi Nakamoto, the Bitcoin founder, structured the Bitcoin network so that a block could be processed every ten minutes. The level of the mathematics tasks adjusts automatically to maintain this 10-minute pace.

    The level of difficulty will rise as there are more miners and computer power attempting to mine. The level of difficulty will drop when there are fewer miners and less computational power.

    Evolution of Mining

    People interested in mining bitcoin are able to do so using their own computers during the early phases of Bitcoin in the early 2000s. Mining became more harder as its popularity grew.

    Increased computer processing power was required to handle the increasing level of complexity. Soon after, miners attempted to mine Bitcoin using gaming computers. The procedure was repeated, and the mining complexity and processing power demanded grew.

    Computers & chips were later developed specifically for the purpose of mining of Bitcoin. It now necessitates efficient hardware - that is, hardware with great computational capabilities and energy efficiency.

    Solving the Bitcoin algorithm in order to contribute to the blockchain and get Bitcoin necessitates a massive amount of energy. It is critical to keep power prices low in order to make Bitcoin mining viable and sustained.

    • Block Reward

    The amount of Bitcoin awarded for each completed & submitted to the blockchain block is called the block reward. For each and every 2,016 blocks mined, the block reward is supposed to "halve." It is known as the "halving" process, and it occurs in  about 4 years periodically.

    The halving process will be repeated until the last block and currency are mined. With each Bitcoin block taking 10 minutes to mine, the last currency is expected to be produced in the year 2140.

    • Genius Design and Incentive         

    The blockchain network is supported by the whole worldwide mining community. Each one helps to authenticate the validity of the transaction. Mining individuals are rewarded with a block for their efforts as a reward to participate.

    In the blockchain, Bitcoin provides a disruptive technology. The cryptocurrency itself would be decentralized, enabling transactions to take place anywhere in the world without government limitations or delays. Bitcoin miners find benefit in cryptocurrency decentralization.

    Bitcoin mining may be split down using the most recent mining technologies to calculate a stream of revenue depending on the output of mining computers. The following are the most critical criteria in Cryptocurrency mining profitability:

    • Computing hardware

    To compete with the rising requirements for effective mining, miners must own the most up-to-date gear. In a few of years, equipment might become outdated. They require mining-specific equipment, that can be expensive. The most recent ASIC mining setups cost more than $1,500 per computer.

    • Power costs

    The primary running expenditure will be power. Electricity is priced on a per-kilowatt-hour basis (kWh). Mining profitability might range between $0.03 and $0.08 per kWh. A few pennies difference may make or break mining profits. A miner must be able to consume power at the lowest feasible cost.

    • Requirements to Begin Mining Bitcoin
      • Mining computers that are competitive
      • Power supply at a low cost
      • Software for mining
      • Membership in a mining pool

    The concept of Bitcoin mining pools arose in response to the issue of increasing mining difficulty. A group of miners join together to pool their processing resources in order to mine for Bitcoin cooperatively. If the pool satisfactorily solves a block, all miners in the pool will be rewarded in relation to the amount of processing power they provided.

    The odds of a single mining machine obtaining a block reward are minimal, but then those odds jump when 1000s of machines are pooled together. Mining pools are now deemed necessary if one wants to mine Bitcoin effectively.

    Individuals involded in crypto are compensated for their services as auditors. They are in charge of determining the validity of Bitcoin transactions. Satoshi Nakamoto, the creator of Bitcoin, devised this standard in order to keep Bitcoin owners honest. Miners assist to prevent the "double-spending problem" by confirming transactions.

    The case for Altcoins

    Alternative cryptocurrencies to Bitcoin are known as altcoins. They share certain traits with Bitcoin but vary in other aspects. Some cryptocurrencies, for example, utilize a different consensus technique to generate blocks or verify transactions. Alternatively, they differentiate themselves from Bitcoin by offering new or enhanced features, such as smart contracts or minimal price volatility.

    Altcoins is the term referred to cryptocurrencies other than Bitcoin.

    Altcoins represented for 40% of the whole digital currency market in March 2021, with over nine thousand cryptocurrencies & rising. some of the most common forms of altcoins are   utility token stable coins, security tokens.

    In the future, as technology progresses, altcoins may only contain mining-based currencies apart from Bitcoin.

    Since about March 2021, the biggest altcoins by market cap were Binance Coin & Ethereum.

    • Mining-Based Coins

    Mining-based altcoins, as the name implies, are created by mining. To build blocks, most mining-based cryptocurrencies employ Proof-of-Work (PoW), a process in which systems generate new currency by solving challenging challenges. Mining-based cryptocurrencies include Monero, and Zcash, Litecoin,. The majority of the leading cryptocurrencies in early 2020 were mining-based. Pre-mined coins are an alternate to mining-based cryptocurrencies. Such coins are not generated by an algorithm, but are dispersed before being posted on cryptocurrency exchanges. Ripple's XRP is an example of a pre-mined cryptocurrency.

     

    ]]>
    Sun, 04 Jul 2021 18:42:00 GMT
    <![CDATA[Bankruptcy in Singapore]]> Bankruptcy in Singapore

    "I declare bankruptcy!" -  Michael Scott

    Whenever an individual becomes unable to pay his/her debts, his/her creditors may choose to file for bankruptcy against him/her. According to Section 61 of the Singapore Bankruptcy Act of 1995, if anyone owes someone may it be an individual or even a company more than 15,000 Singaporean Dollars, owns property in Singapore, has lived / carried on business in Singapore within one year of the suit of bankruptcy &  is unable to pay off their debts, the suing party ( creditor) or the bankrupt person him/herself  may  file for bankruptcy and may begin the application for the same.  The Court would then impose a bankruptcy decree, and an Official Assignee will be appointed to handle the bankrupt person's assets.

    The bankrupt individual's property is overseen by the Official Assignee. They investigate the bankrupt individual's finances and retrieve the individual's properties so that they can be transferred to their lenders. The Official Assignee also supports the bankrupt client in securing a bankruptcy discharge.

    Bankruptcy has various consequences in certain aspects of a person's life:

    • The declaration of bankruptcy will be made public knowledge.

    Once declared bankrupt, the person's name would be inserted into Singapore's bankruptcy registry, which everyone, including prospective employers, lenders, customers, and the general public, can freely browse. 

    • A reported bankrupt may continue to work, but not in positions of high authority.

    Despite popular belief, individuals in bankruptcy may continue to work. However, a portion of their pay will be reduced and repaid to their bankruptcy dues. Bankrupt individuals are not permitted to be included in managing a company or serve as a director of a firm until a prior approval has been given by the Official Assignee or by the Court.

    • Credit rating would suffer greatly.

    Bankruptcy will lower the credit ratings, and credit bureaus will continue to record loan defaults for three years after the settlement date & bankruptcy reports for five years after the date of discharge. This would have a negative impact on the ability of the individual to qualify for mortgages, credit cards & loans in the prospective future.

    What happens in Bankruptcy?

    • Exempt from Repayment Demands   & Suits 

    Prevailing creditors are prohibited from taking court action to recover debts against the bankrupt individual until they are declared bankrupt. Furthermore, the person is  not required to comply with any repayment requests made by the creditors.  Instead, repayment plans for bankrupts are customized to the financial capacities of the individuals by an Official Assignee, hence, relieving of creditors demands. This is as per section 21 of the Act

    • Payments on  a monthly basis 

    To be liable for discharge during bankruptcy, the individual must make a minimum amount of monthly payments also known as target contributions. Each donation is intended to be a fair sum calculated by the Official Assignee based on a number of criteria, including: For example, the salary and qualifications, as well as that of the partner (if applicable), the expected household bills & the current economic conditions as per section 86A (2) of the Act.

    • Disposal of Assets 

    The Official Assignee would also liquidate the assets and transfer the proceeds to the current creditors. This could include almost every valuable item one possesses, including potential overseas assets. The bankrupt individuals may face felony charges if they hide, dispose of, or flee with those properties or falsify similar documents.

    The Official Assignee, on the other hand, would not sell "protected assets." "Protected assets" are assets that are essential for business or personal needs, such as Central Provident Fund savings or Housing Development Board flats as given in the case AVM v AWH [2015].  Both are held to protect the bankrupt from being paralyzed by the bankruptcy and to keep you capable of managing your upkeep. Unfortunately, these assets are always in scarce supply.

    • Limitations On Conduct Imposed

    The Bankruptcy Act, 1995 also places significant limits on a bankrupt's day-to-day behavior. Bankrupts, for example, can face penalties and incarceration if they bet or receive credit of at least 1,000 Singaporean Dollars without declaring their bankruptcy status.  Participating in the running of a company (the "business restriction") and commuting (the "travel restriction") would both necessitate the permit by the Official Assignee. 

    Even if the bankrupt disagrees with the official assignee's unwillingness to give approval, it is preferable to petition the court to reconsider the official assignee's decision (as per section 31 of the Act) rather than disregarding the restrictions entirely. This is because a breach of the Bankruptcy Act's restrictions could result in criminal charges make & further clearance more difficult to achieve.

    • Procuring Discharge 

    The restraints and sufferings of bankruptcy, nevertheless, would mostly be released upon discharge. While bankrupts will also be required to work with the Official Assignee to settle any unpaid debt after discharge, they are usually free of the constraints mentioned in the Bankruptcy Act 1995. As such aside, discharge is often misunderstood to be permanent at the three-year period of bankruptcy. In fact, it would only be issued by the Official Assignee or the High Court (as per Section 124 of the Bankruptcy Act of 1995) if certain requirements have been met, namely –

  •  Discharge By Official Assignee's Approval 
  • A first-time bankrupt with recorded debts of less than 500,000 Singaporean Dollars may be released by the Official Assignee three to seven years after declaring bankruptcy. A serial debtor, on the other hand, needs at least five to nine years. Under this range, bankrupt individuals who have fully recovered their target contributions will be released sooner, i.e.  three to five years for the first timers& five to seven years for serial bankrupts. This is given under section 125(2)(a) & section 125(2)(b) of the Bankruptcy Act of 1995.

    As a result, regular payment of the target payments/contributions would greatly accelerate an individual's discharge from bankruptcy.

  • Discharge Through an Order by the High Court 
  • Optionally, a bankrupt with recorded debts in excess of 500,000 Singaporean Dollars can petition the High Court for an Order of Discharge. The High Court would then make a judgement by considering both the bankrupt's and her/his creditors' rights & interests.  In this respect, in addition, the court would be hesitant to release bankrupts that have breached restrictions imposed by the Bankruptcy Act, because these bankrupt individuals would fail to collaborate with the Official Assignee& cease payment efforts after discharge.   However, due to problems of maintaining repayment at their age, the court can sympathize and hence discharge older bankrupt individuals.

    Concerns Post - Bankruptcy 

    But if discharge is given, it cannot be unconditional. For example, if there is still unpaid debt after the release, the court can order the bankrupt to vest recently purchased assets with the Official Assignee for further redistribution to creditors. This ensures that the Official Assignee retains leverage of the newly bought assets and will sell them to pay off the debts of the bankrupt.

    If the bankrupt individual disagrees with those terms, they should first meet with the Official Assignee before proceeding to court to determine the feasibility of the concern. This will undoubtedly reduce time & expense for the those involved. 

    Unfortunately, even after discharge, the burden of bankruptcy can last for a long period of time. Discharged bankrupt individuals who have completely paid off their target contributions will have the bankruptcy history deleted for five years post discharge. Alternatively, these accounts are irreversible for other discharged bankrupts' individuals who have not settled their target contributions. This is given in Section 163(1C) of the Bankruptcy Act 1995. This publicly available documents can pose a problem for prospective employers and borrowers alike, hence being a social stigma.

    Conclusion

    The worries of bankruptcy can appear interminable. Bankruptcy would undoubtedly be a debilitating time for the bankrupt, from the number of restrictions regulating daily behavior to the exhausting necessity of monthly payments. Furthermore, the unforeseen consequences of bankruptcy after discharge may contribute to the individual's   concerns.

    That being said, there is always hope for a better future. Given the statute's rehabilitative objective, the Official Assignee & the High Court will weigh a variety of factors affecting  the individuals' financial skills and & needs in their actions in order to help facilitate  financial rehabilitation.

    Furthermore, constructive conduct, such as adhering to statutory conditions and continuing payment efforts, could lead the individual to additional allowances. This may involve running a company, traveling, or even hastening discharge from bankruptcy. Therefore, while bankruptcy is difficult, it is not survivable.

     

     

     

     

    ]]>
    Sun, 04 Jul 2021 18:04:00 GMT
    <![CDATA[Why Should You Consider Hiring a Lawyer in Riyadh?]]> When it comes to your legal rights, you should never take them for granted. This is especially true in Riyadh, Saudi Arabia, where the law system can be quite complex or different from what you might be used to back home. To make sure that your rights are protected and that you understand how things work in this city, hiring a lawyer is the best course of action.

    1. Hiring a lawyer is beneficial because they can provide you with legal advice and representation.

    A lawyer might provide many types of legal representation, including negotiating contracts and prosecuting criminal charges. You will also need someone to stand up for you in court if the time comes.

    Lawyers in Saudi Arabia can also offer guidance on handling different situations like having an accident, being suspected of committing a crime, or facing an issue with the local law enforcement.

    A lawyer in KSA  can also provide the latest legal information on what to expect in a court of law, as well as any changes or updates that might have been made recently.

    2. A lawyer's services are not expensive, and they will do everything in their power to help you.

    You might have a misconception that legal services in Saudi Arabia are expensive, but actually, they are not. A lawyer's service can save you from a number of hassles and make your life back to normal. There are many professionals who deal with different kinds of cases all the time and the know-how they should proceed with. Once you find an experienced lawyer in Riyadh that specializes in your area of need, be sure to ask them any questions or concerns that you might have.

    It's important to remember that prices will vary depending on where you live. The average cost is $600 per hour, with some firms charging upwards of $1000 per hour.

    3. Lawyers have extensive knowledge of the law, so it's always best to hire one when facing criminal charges or other legal issues.

    Hiring a lawyer will provide crucial peace of mind. They have the knowledge and expertise to recommend strategies for defending your case in court, which means you're less likely to suffer from negative consequences like jail time or substantial fines. Whether you are facing any criminal charges or other legal issues, hiring a reputed one can be beneficial. Finding the right criminal lawyer in Saudi Arabia is important.

    4. If you're looking for an attorney, ask your friends or family if they know any good lawyers in Riyadh

    When it comes to finding a lawyer in KSA, one would normally reach out to friends or family. You can also ask people on social media. If you are still not sure or would like to find a specialized lawyer in an industry that interests you, such as immigration, labor law, criminal defense, or more, check out the bar association website for telephone numbers of lawyers around Riyadh. You can also use a search engine like Google to find lawyers in Riyadh.

    5. You can also look up attorneys online by checking out reviews on their websites, their Facebook, and LinkedIn pages. There are also lawyer directories, which can help you find an attorney in your specific area of expertise for a fee. You may be able to search by certain criteria that are important to you, such as location, language is spoken, and price. This is a great option for people who have no idea where to start looking.

    STA Law Firm is the leading law firm where you will find a team of professional Lawyers in Riyadh to assist and guide you in the best possible manner. They offer legal services in different areas, including corporate laws, commercial laws, real estate laws, insurance, construction, aviation, and trade energy law, banking, and more. Just call them to find the right lawyer for your case.

     

    ]]>
    Fri, 18 Jun 2021 00:00:00 GMT
    <![CDATA[SCA: Abu Dhabi SE- Rules]]> SCA: Abu Dhabi Stock Exchange- Rules, Regulations, and Procedures

    Introduction

    The Abu Dhabi Securities Exchange (ADX) as of now, lists 73 companies. The listed companies include those from the banking, insurance, services, industry & hotels sectors. They include First Abu Dhabi Bank and Etisalat.

    The following article will cover the Abu Dhabi Security Exchange's latest regulations including those regarding crypto-assets and the composition of board of directors, market maker regulations, and derivative trading.

    Latest regulations

    Amendment of JSC Governance Guide:

    The Chairman of the Authority's Board of Directors' Decision No. (08 / Chairman) of 2021 Concerning Amending the Joint Stock Companies Governance Guide

    This Decision, issued on 28th March 2021, highlights that Clause (3) of Article (9) of the Joint Stock Companies Governance Manual attached to the Chairman of the Authority's Board of Directors' Decision No. (3/Chairman) of 2020 would be amended.

    The amendment requires that a company's articles of association document must define the method in which their board of directors is formed, the number of its members and type of membership, provided that the representation of women shall not be less than one member in the board of directors. Additionally, the company is obligated to disclose this representation in their annual guidance report.

    Therefore, as per this Decision, it is now mandatory for UAE Public Joint Stock Companies (PJSCs) listed on either the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) to have at least one female board member. 

    Earlier, it was required that females shall represented in at least 20% of the Board membership and compliance with Article 9(3) of the Governance Code was on a 'comply or explain' basis. Thus, as long as it was reasonably explained in the company's annual report and governance report, non-compliance was acceptable. This 'comply or explain' feature and the requirement for 20% female representation is now done away with.

    The second article also outlines, "The companies must fulfill the requirement for women representation in boards of directors in appointment, election, vacancy, or increasing membership therein."

    Crypto Asset Regulations:

    The Administrative Decision no. (11) of 2021 concerning Guidance for Crypto Asset Regulations

    This Decision was issued on 17th March 2021 and provided an explanatory guide for The Chairman of the Authority's Board of Directors' Decision No. (23/ Chairman) of 2020 Concerning Crypto Assets Activities Regulation.

    Crypto assets are cryptographically protected virtual, digital assets or tokens that operate on a blockchain platform. The regulations apply to crypto asset promotion, offering, and trading in the UAE, as well as crypto asset exchange and custody services.

    Scope of Regulations

    The regulations cover anyone who, among other things:

    • Promotes, offers, or issues cryptocurrency to UAE residents, or engages in any of these activities in the UAE. Thus, cross-border promotions and special offers are caught.
    • Those providing custody services, operating a crypto asset exchange, or runs a platform for fundraising crypto asset issuances in the UAE.
    • In regard to crypto assets, engages in any other financial activities in the UAE. Financial activity refers to a group of 26 SCA-regulated activities.

    Exemptions

    Certain crypto assets are not covered by this Regulation. These are:

    • Those that are owned by the federal and local governments, government institutions, and authorities. Additionally, the crypto assets owned by any companies that the mentioned government entities own.
    • Currencies, virtual currencies, units of stored value or any other instruments issued through a system licensed, approved or required to be approved by the Central Bank.
    • Securities held in dematerialized form by a custodian or depository in a clearing or settlement system, and Securities not issued as Crypto Assets but managed by the offering person or its approved Registrar using an electronic record keeping technique, unless otherwise qualifying as a Crypto Asset.

    Activities carried out within the UAE Financial Free Zones would also be excluded.

    • Promotion and Offer of Security Tokens & Recognition of Crypto Currencies

    Security tokens may be promoted in the UAE in accordance with the SCA Promotions and Introductions Regulations (PIRs). Additionally, security tokens may only be issued or offered in the UAE by an offeror incorporated in the UAE, or in an FFZ, or with an establishment in the UAE.

    Offers to 'qualified investors' i.e., individuals who meet a certain asset test or who are represented by an SCA-licensed investment manager, in addition to the offer documentation only require the submission of a notification to the SCA. However, to all other types of investors, the SCA's approval would be required.

    The SCA will maintain a register of recognized crypto currencies to which Commodity Tokens can be admitted upon request. Commodity tokens are crypto assets that are not security tokens.

    • Crypto Asset Exchanges

    Before a crypto exchange which is accessible to investors who do not meet the criteria to be Qualified Investors can be operated, for example, if the exchange is open to the public, the regulations requires the SCA's approval.

    Additionally, crypto asset exchanges are subject to the same market abuse laws and regulations that are generally applicable to trading on exchanges.

    • Crypto Fundraising Platforms

    These regulations which allow investors to subscribe to crypto assets, for example, using an initial token offering. The subscription limit is of AED 50,000 per issuance. A crypto fundraising platform must be licensed by the SCA as a crypto asset exchange to be able to offer trading services to investors.

    • Financial Crime

    The regulations also introduced specific requirements to curb the risk of financial crime. For example, SCA-licensed crypto asset firms should assign a high-risk rating to clients who deal in crypto assets.

    Furthermore, to help establish legitimate transaction history for any given crypto asset, tracing measures would be required for all transactions that involve crypto assets. Those crypto assets that do not allow tracing would be illegal.

    Market Maker Regulations

    As per the Market Maker Regulations, market making is defined as, "The activity which mainly depends on providing continuous prices for the purchase and sale of a certain security with the aim to increase the liquidity on such security." The market in question is the Abu Dhabi Securities Exchange.

    • Conditions for practicing the activity (Article 3)

    As per Article 3, to practice Market Making a license or approval of the Abu Dhabi Securities Exchange has to be obtained under certain conditions.

  • The applicant must be either:
  • A company established in the state with one of its purposes as practicing Market Making. Alternatively, it may be licensed by the Authority (Securities and Commodities Authority) given that conflicts between activities regulations issued by the Authority are prevented.
  • A commercial bank/investment company licensed by the UAE Central Bank. Alternatively, the applicant may be branch of a foreign bank given that its parent bank is licensed to practice Market Making. These companies are subject to obtaining the approval of the UAE Central Bank.
  • Over AED 30 million or its equivalent in another currency must be the paid up or the allocated capital for practicing Market Making.
  • There must be available financial solvency and qualified administrative and technical staff to practice Market Making in accordance with the Market's set conditions and regulations, and the Authority's issued regulatory controls of the financial activities and services.
  • There also must be available electronic programs and technical systems that are required to conduct the activity in accordance with the requirements, conditions and regulations set by the Market.
  • The professional code of conduct manual, company internal procedures manual and risk management regulation must be available as well.
  • The license fee prescribed by the Market must be paid.
  • The applicant must always meet the conditions of the license.
  • Additionally, the Foreign Market Maker may obtain the Market's approval to conduct the activity in accordance certain conditions:

  • The applicant for approval must be a foreign company similarly regulated in its home country i.e., licensed to conduct Market Maker activity in the country incorporation (the country in which the company is legally registered) by
    • a regulator similar to the Authority,
    • member of the International Organization for Securities Committees (IOSCO),
    • and one that applies rules and procedures similar to that applied in the State with regard to Know Your Customer (KYC), Customer Due Diligence (CDD) and Anti-Money Laundry/Combating the Finance of Terrorism (AML/CFT),
  • or the company licensed may be one licensed to conduct Market Making activity in a financial free zone within the State.

  • The Foreign Market Maker shall
    • If it is a foreign company, obtain the approval of the competent authority to conduct the Market Making activity within the state.
    • If it is a company established in a financial free zone within the state in accordance with the Companies' Law, it must meet the conditions of the Cabinet of Ministers in relation to registration.
  • The similar regulator in the country where the company is legally registered must deal similarly with the Market Maker licensed within the state.
  • More importantly, the Foreign Market Maker shall have at least five-years-experience in the same field.
  • The applicant must also pay the approval fee determined by the Market
  • Additionally, the applicant must have a contract with a brokerage company licensed in the State i.e., a member of the Market to execute the orders through it.
  •  

    • Market Maker Obligations (Article 8)

     

    Unless in violation of any other obligations prescribed by law, regulations decisions, or circulars issued by the Authority, the Market Maker must commit to doing the following:

  • Sign an agreement with the Market before beginning the activity. This agreement must include the conditions, requirement and regulations of its business and trading in the Market. Additionally, it must state the eligible securities under its responsibilities.
  • Notify the Market about unusual trading in the securities under its responsibility.
  • Refrain from using their facilities to trade on behalf of the clients.
  • Maintain financial solvency as per the solvency standards issued by the Authority or the regulator for the Foreign Market Maker.
  • Provide the following reports to the Market:
  • A monthly report of profit and loss, and the size of the portfolio of the Marking Making activities.
  • If the Market Maker is a company practicing Market Making activities only, they must provide their quarterly financial statements audited by the accounts auditor.
  • If the Market Maker is a company practicing Market Making activities only, they must also provide their audited financial statements.
  • A half-yearly report on the internal control function covering at least: the procedures with which internal control is organized, a list of the implemented internal control processes and their outcomes, and a list of issues discovered and their corrective action plan. The issues related to market risk, settlement and liquidity must be mentioned especially.
  • Retain commercial records, registers, statements, data and information relating to trading and the activity for at least 10 years, and retain an electronic back-up copies this data.
  • While practicing the activity, the market maker must exert the care of a prudent person in accordance with the law, regulations, decisions, rules and circulars issued and, taking into account commercial norms in this regard. Additionally, the principles of honesty, justice and equality must be followed.
  •  

    • Market Maker Trading (Article 9)

     

    Article 9 of the Market of the DFM Market Making Regulations talks about Market Maker Trading. It states that -

    • The Market should define trading numbers for the Market Maker in order to identify it from other trading numbers and to maintain total separation between both the Market Maker's activity & any activity it performs.
    • The Market trading system would explicitly mention the transaction that relates to the Market Maker. It would classify such transactions as being from the Market Maker.
    • The Market maker shall enter its orders either through a Brokerage Firm which is a contracting member of the market or directly in the trading system, in case , the Foreign Market Maker is the Market Maker.
    • In executing transactions, the Market Maker would have the same priorities as the other investors.
    • The trading transactions of the Market Maker would be dependent on the regulations, decisions, rules issued related to the same, provisions of such Regulations and Laws of the concerned authority.
    • The Market Maker can enter buy or sell orders which are executable on the appropriate securities under it responsibility provided it does not violate or contradict with the details set in the agreement between the Market & Market Maker which includes-
    • The   size of minimum order
    • Buy & Selling orders' maximum differences
    • The Marker Maker's Orders minimum presence in order book in a day's continuous trading session
    • Update selling and buying order in a minimum period of time and executing such transaction of orders in full & on cancellation of such orders or expiry of the duration.
    • The entered sell or buy order must be among the top 3 in the orders register at the moment the Market Maker's order is submitted.
    • On the following conditions, the Market Maker can be exempted from its reasonability to enter executable buy& sell orders on eligible securities-
  • During periods of scheduled and unscheduled bidding periods.
  • During suspension periods of trading in the appropriate security that falls under its responsibility
  • During the periods of opening and closing
  • When the permitted ownership limits exceeds
  • The exceeded limited is permitted trading threshold
    •  The Market Maker maybe exempted from its obligations by the Market wither partially or wholly depending the request submitted with congruence with the conditions and in such arising cases as mentioned in the agreement or in situations which might be determined at the Market's discretion.

     

    • The Market Disclosures (Article 12)

     

    Article 12 of the Market of the DFM Market Making Regulations talks about Market Disclosures. It states that the market would publish the array of securities which comes under Market Making and would update the previous list of securities in the preceding year. This would happen at the commencement of each financial year.  This publishing would include –

    • The cancellation of any license or approval of any Market Maker  
    • Any license or approval to conduct the Market Making activity
    • The eligible securities which fall under its responsibility

     

    • Suspension and Cancellation of the license or approval (Article 14)

     

    Furthermore, Article (14) talks about Suspension and Cancellation of License or Approval. It states the Market Maker may be suspended from conducting any activity if the Market finds that the performance of such an activity is not serving the best interests of the Market or when the agreement concludes between them expires, without any prejudices to the obligations arisen previously.  This Article further lists various cases wherein the approval or license of the Market Maker maybe cancelled –

    • Failing due to non-compliance of any of the conditions of the approval or the license mentioned in the regulations, control, decision, Law or instructions issued in implementation of the aforementioned.
    • In serious violation of any obligation or duties mentioned in the Law, decisions, regulations or issued instructions in implementation of the same.
    • Failing to pay the imposed fine and/or the applicable fee
    • When the licensed company has been declared bankrupt by the entry of the final judgement.
    • During liquidating or winding up the company
    • Pursuing the authority's decision

    The decision of such a cancellation of the license / approval would need to be published with at least one being in Arabic, to 2 National daily newspapers, which would be at the expense of the company.

    Derivatives

     

    Derivatives are contracts whose value is calculated by the execution of an underlying outcome, event or an asset -hence the name. Financial derivatives are mostly used to hedge and speculate investments. Derivative are securities whose price is determined by or is derived through one or more underlying asset.  A derivative is a contract between 2 or more parties depending on the assets in question. The underlying asset's variations dictate its value. Interest rates, stock market indices, bonds, commodities, stocks and currencies are the most frequent underlying assets seen today. 

    Derivatives can be exchanged privately i.e over the counter format or on an exchange. OTC derivatives account for the majority of derivatives in existence and thus are unregulated, while derivatives traded on exchanges are regulated. OTC derivatives are often more risky for the counter party than regulated derivatives.

    There are several derivative products, each with substantial peculiarities that traders must grasp. The following are some of the most commonly utilized derivatives by traders:

    • Collateralized debt obligations (CDOs)
    • Credit default swaps
    • Forwards
    • Futures
    • Mortgage-backed securities (MBS)
    • Options
    • Swaps
    • Later developments in the U.A.E

     The Securities and Commodities Authority makes a reference to the licensing of trading in unregulated derivatives contracts in a press statement dated July 6, 2020, in what seems to be a referral to the licensing of Contracts for Difference and Forex traders in the United Arab Emirates. This was followed by a news statement on July 8 mentioning discussions between the   Securities & Commodities Authority & the United Arab Emirates exchanges over the launch of new financial instruments & products.

    Conclusion

    Therefore, the recent legal updates in the ADX aim to better regulate crypto assets, gender diversity & representation, market making, and derivative trading. The UAE consistently works on becoming a trading hub that encourages smooth facilitation of financial activities.

    Non-compliance with these regulations, decisions, and laws result in heavy fines and severe consequences. This ensures that financial crime is prevented.

     

    ]]>
    Sun, 13 Jun 2021 18:09:00 GMT
    <![CDATA[Variation to work Construction Contracts]]> Variation to work pertaining to Construction Contracts

    What is a variation?

    A variation (also known as a variation instruction, variation order (VO), or change order) is an alteration to a construction contract's scope of work that involves addition, substitute, or omission from the initial scope of work.

    Almost every construction project deviates from the initial scope, design, and description. Construction projects, whether small or large, will invariably deviate from the design team's original tender design, specifications, and drawings. This could be due to technology advancements, legislative changes or enforcement, changes in conditions, geological anomalies, non-availability of specified materials, or simply the design's continuing evolution after the contract has been given. Variations in major civil engineering projects can be significant, although they may be negligible in modest building contracts. Variation may include the following changes or alterations.

    • Alterations to the design 
    • Alterations to the quantities.
    • Alterations in the quality of the product.
    • Alterations to the working environment.
    • Modifications to the work sequence.

    What is a variation on a construction project?

    A variation (also known as a change) is an alteration to the scope of work originally defined in the contract, whether by adding, removing, or substituting works or by changing how the works are to be carried out.

    Variations in construction contracts might include modifications to the contract's terms as well as the scope or nature of the job. As no project is perfect, alterations to the scope of construction work are required to accommodate unanticipated occurrences or new requirements. Additions, exclusions, and substitutions are all examples of variation. Due to the unique character of the construction process, variances are a crucial consideration. Because the parties can't predict everything that might happen or because a contract is signed before the design or scope of work is entirely finalized, numerous revisions are unavoidable. A contractor is expected to follow the works as originally described unless a variation is requested; otherwise, it would be in breach of the contract.

    When the contractor is asked by the employer to change the work, the change is done under the contract rather than to the contract itself.

    Variation instructions on a construction project, which considers procedural requirements for instructions, such as written and oral directions, the responsibility to order a variation (where an employer has failed to do so), and scenarios in which a contractor may be able to reclaim payment for amended services.

    A building contract's scope of work will typically be specified in attached specifications, blueprints, or a service brief, which together make up the entire contract.

    The contract's scope of work is an essential component. It outlines the works for which the contractor is ultimately responsible and serves as the foundation for classifying revisions or additions as variations. The classification of a variation is crucial because it determines a contractor's entitlement to claim additional costs and the principal's obligation to pay them.

    When determining what constitutes a variation, keep the following concepts in mind:

    • The variation must be requested and not already be included in the scope of work. A contractor will have difficulty claiming additional charges if a principal does not request that the scope of work be changed.
    • Similarly, if a contractor provides higher-quality materials than those stated in the scope of work, the contractor will not be able to charge for the upgrade unless it was specifically requested. 
    • Work that is required to finish the job but is not included in the contract or scope of works is not considered a modification. The installation of hinges when hanging doors is an example of work that is essential to the task – although the specifications may not specifically mention 'hinges,' it is evident that the provision and installation of doors cannot be accomplished without this component.
    • A total change in the scope of work by the principal is not a variation, and a contractor may be entitled to terminate the contract.
    • Variations may also be found to have occurred if the contract documents fail to adequately represent the actual works required.

    Variations are not permitted (unless the contractor agrees):

    • Changing the works' essential character.
    • Leave work unfinished so that it can be completed by another contractor.
    • Be instructed after practical completion. 
    • Require the contractor to complete work that was the subject of a prime cost sum.

    A variation is a legal term for an agreement supported by consideration to change some contract provisions. As no implied power to request variation exists, contracts must contain express words granting the authority to command variants. In the absence of such express terms, the contractor is free to refuse requests for adjustments without repercussions.

    Standard contract forms usually make it clear that the contract administrator (usually the architect or engineer) has the authority to instruct variations. Such clauses allow for the seamless administration of the works to continue without the requirement for a new contract. What is and is not included in the variation instructions must be clearly stated and may provide a method of valuation.

    Valuation of Variation

    Additions or deductions from the contract total may result as a result of variations. The cost of variants may include not just the work described in the variation instruction but also any additional costs incurred as a result of the variation, such as the influence on other components of the work. Variations may (but are not always) necessitate a change in the completion date.

    Variations may be priced based on: 

    • the contractor's and the client's agreement.
    • The cost consultant (person who is in charge of determining the cost of something)
    • A contractor's variation quotation has been accepted by the client.
    • Alternatively, the contractor and the client may agree on another approach.

    Variation valuations are frequently based on the rates and prices offered by the contractor in their tender, assuming that the work is similar and performed under similar conditions. This is true even if it becomes clear that the contractor's prices were higher or lower than other commercially accessible prices.

    According to the judgment in the case of Henry Boot Construction Ltd v Alstom 1999, the contractor's rates do not become fair or unreasonable as a result of the execution of changes. If the drawings, specifications, or bills of quantities do not show equivalent types of work to those requested by a variation, a fair value of the contractor's direct costs, overheads, and profit is required. NEC contracts, on the other hand, do not value deviations based on tender rates. Advice on determining the statuses of compensation occurrences. Compensation events are evaluated in terms of how they affect prices based on their impact on Defined Cost plus the Fee.

    This is in contrast to the standard forms of contract, where variations are based on the contract's rates and prices. The reason for this policy is that no compensation event that requires a quotation is due to the Contractor's fault or involves a matter that is at his responsibility under the contract. As a result, the Contractor should be reimbursed for his anticipated increased expenses (or actual expenses if the job has already been completed) as a result of the compensation event.' In other words, the contractor can claim cost plus on modifications regardless of their tender prices.

    However, there could be arguments over things like production overheads and management, which are difficult to assess. Furthermore, given the complexity and length of the supply chain in significant construction projects, obtaining projected pricing from all parties involved takes time, which often extends beyond the deadline for the contract administrator to decide whether or not to instruct the variation.

    They may then have to determine whether or not to proceed with a variation based on cost consultant estimates that are eventually replaced by the actual cost. It has been suggested that this pragmatism negates some of the NEC contracts' justification in terms of cost control and decision making.

    Functions of Variations Clauses

    Construction contracts frequently include variation clauses. It's worth noting right away that the proprietor has no authority to direct variations (Ashwell Nesbitt v Allan & Co (1912). As a result, a variation clause is required. Second, they ensure that contractors can recover fees for appropriately directed alterations (Knight Gilbert Partners v Knight (1968) All ER 248).

    Source of conflict

    When work is not addressed in the bills of quantities, drawings, or specifications, conflict can emerge. This silence does not imply that the contractor has an automatic right to extra payment under common law. The customer is not obligated to pay for work that a reasonable contractor should have known was required but was not included in the bill of quantities.

    Where components are not expressly listed but are essential to complete the task, the contractor should have included them in their quote. Every nail to be pounded in' does not have to be included in the bills of quantities and specifications. For example, steel supports are required for installing GRC façades, and a fairly experienced contractor must account for this in the contract price. Such supports are not paid for as a variant unless they are expressly omitted.

    When a subcontractor qualifies that, for example, "Supply and Fixing of Door is Included," but "Supply and Fixing of Ironmongery are Excluded," conflict can ensue. A sensible subcontractor should anticipate that a door cannot be installed without the use of hinges, which are part of the ironmongery. So, even if ironmongery isn't included, the subcontractor can't expect a change in any of the goods needed to install the doors.

    Additionally, the contract administrator cannot change the essence of the task under the guise of variation. For example, if the contract specifies secant pile shoring, they cannot request diaphragm wall shoring because it would completely alter the scope of the work. 

    Furthermore, if the contract administrator omits work from the scope of the contractor, the omission must be genuine: the work deleted must be completely excluded from the contract; it cannot be used to take work away from the contractor and give it to another. Similarly, if the contract works are proving too difficult or time-consuming, the contract administrator is not authorized to order changes to assist the contractor.

    Extension of time

    Many construction contracts allow for the extension of the work time if there are delays that are not the fault of the contractor. This is referred to as a time extension. Variations may (but may not always) be considered relevant events that warrant a time extension and, as a result, a change in the completion date. 

    Even if the delay is not their fault, the contractor is responsible for preventing or mitigating the damage. Assessing applications for a time extension can be difficult and contentious. Multiple or concurrent delays may occur, some of which are the contractor's responsibility and some of which are not.

    Contractors frequently contribute to delays by their performance during design stages while creating drawings, mock-ups, and samples or while interacting with subcontractors.

    The quality of the information presented and the records accessible are critical in determining whether or not a request for a time extension should be granted. Claims should be evaluated based on the actual progress of the project, not the schedule, and must show a link between the breach (cause) and the delay. After practical completion, the contract administrator may examine time extensions and change the completion date.

    Mechanisms that allow for time extensions aren't just for the contractor's advantage. If there was no such system in place and a delay occurred due to circumstances beyond the contractor's control, the contractor would no longer be expected to complete the work by the completion date and would instead be expected to finish the job in a "reasonable" amount of time. Any recourse to liquidated damages would be forfeited by the client. Claims for extension of time can run concurrently with claims for loss and expense (related matters), but one does not have to follow the other.

    Variations are frequently the basis of disagreement, whether over the value of the variation or whether certain parts of the works are variations at all, and they can waste a lot of time and money during a contract. While certain differences are unavoidable, it is prudent to reduce prospective variations and future claims by ensuring that all uncertainties are resolved before awarding the contracts. This can be performed by

    • Performing comprehensive site investigations and condition surveys.
    • Assuring that the project brief is comprehensive and that all stakeholders are on board.
    • Assuring that all legal obligations are adequately incorporated into the project.
    • Assuring that hazard are detected correctly.
    • Ensure that designs are well-coordinated before submitting a tender.
    • Ensure that the contract is clear and unambiguous.
    • Ensure that the contractor's rates are transparent.
    • Creating clear drawings, bills of quantities, and specifications that account for all reasonably foreseeable scenarios.

    Issues Concerning Variation

    Problems with variations can be divided into three categories:

    • scope (was it a variation, or was the contractor obligated to perform it anyway?)

    • failure to comply with procedural rules; and

    • appreciating the differences

    Whether the variant work is within the contract's scope depends, first and foremost, on the contract's provisions, which sometimes begs the question, "What is the contract?" In many circumstances, the contract documents are pre-defined.

    Implied or Necessary Works

    As previously stated, whether a specific task is a variant is determined by whether it falls within the contract's general scope. Even though some works are not precisely defined, they are regarded as implied or are a required component of the contract. Williams v Fitzmaurice is an early case on this topic (1858). The facts of the case are as follows the contractor agreed to supply all of the material indicated or otherwise in the above particulars essential for the completion of the work as well as to perform all works of every sort specified and contained in the above specifications for the sum of 100.00 pounds. The issue was whether or not flooring was included, as it was not indicated. The court held that the flooring was included.

    Formal Requirements – Written Directions

    A directive from the principal's architect or superintendent is frequently used to accomplish a change. In most cases, such directions must be written down. Whether this is a condition precedent to the contractor's claim to payment will depend on whether the demand is one. This is a question of contract interpretation.

    It is typical to have more or less rigorous rules, such as these, that no further work shall be paid for unless it is ordered in writing by the engineer, and if such conditions are correctly formed, and there is nothing fraudulent or iniquitous in the manner they are carried out, these requirements would be adequate and effectual.

    What constitutes 'writing' is sometimes also an issue

    In Wormald Engineering Ltd v Resources Conservation Co (1992) 8 BCL 158, it was held that sketches in the architect's office describing the variations to be done insufficient to satisfy the clause requiring alterations to be directed in writing in the architect's hand, while in Bedford v Borough of Cudgegong (1900) 16 WN (NSW) 142, a letter signed by the architect authorizing the work was held to be sufficient.

    Dealing with variations

    In the construction industry, disagreements over the scope of work are common. As a result, both parties must comprehend the significance of a variation as well as the procedures for asking and claiming one. The contractor may be required to do more or less work than is specified in the scope of work by the principal. When a contractor isn't competent for the additional task or doesn't have enough resources to complete it, problems can occur. Similarly, if work that falls within the scope of a contract with one contractor is assigned to another, it will be troublesome for both parties and may result in the principal breaching the contract.

    To avoid a potential breach that could result in the contract being terminated, principals should make sure that their contracts include clauses that allow them to request changes to the initial scope of work. The contract should spell out the situations in which a variation can be requested, as well as the procedures for changing the scope of labour or services.

    The distinction between a variation and a total overhaul of the scope of work, which may enable the contractor to terminate the contract, should be understood by the principals. Contractors should guarantee that any work performed outside the scope of the original contract is fairly compensated, and they should follow the procedures indicated in the contract for applying the modification.

    A contractor who has to complete more work to complete the scope of work may request a modification. This can happen when latent conditions emerge. Despite a contractor's inspections and investigations of the site, latent conditions are physical characteristics on the development site that are fundamentally different from those that would reasonably have been anticipated. A contractor must normally notify the principal of a pending change within a certain deadline specified in the contract. Typically, the contractor will be expected to explain why the variation is required as well as the price of performing the additional work-obtaining permission from the contractor prior to undertaking any variations.

    Conclusion

    Variation is nearly inevitable in any construction contracts. Given the competitive nature of the construction industry, many contractors are likely to rely on proprietorial variants to make a decent profit on their contracts. Furthermore, variant works frequently affect the completion date and, as a result, have an impact on the proprietor's delay claims. This helps to explain why resolving disputes about variations is never simple, especially when the dispute arises after the structure has been built and records are scant, making actual measurements of the completed work impossible.

    Variations in the scope of work or the services to be given during a construction project are typical in the construction business. A variation can be requested by either party, or it can develop out of necessity, such as due to legislative changes or a latent situation. When negotiating a variation, it's critical to stick to the contract's procedures and make sure the change is properly documented.

     

     

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    Mon, 07 Jun 2021 10:23:00 GMT
    <![CDATA[Regulations of pharmaceutical industry in Turkey]]> Regulations of the pharmaceutical industry in Turkey

    The Pharmaceutical legislation of Turkey 

    The Code on Pharmaceuticals and Pharmaceutical Preparations No. 1262 (Pharmaceutical Code) is the fundamental piece of legislation that is applied through secondary legislation such as regulations, communiqués, and recommendations to further govern all aspects of the pharmaceutical sector. Even though Turkey is not a member of the European Union, its pharmaceutical legislation is frequently influenced by EU practice, and the majority of secondary legislation and soft law materials are derived from relevant EU directives. Furthermore, sector-specific legislation may have an impact on pharmaceuticals, even while it applies to a variety of other industries that overlap with pharmaceuticals but are not regulated under the Pharmaceutical Code.

    National Health Care system of Turkey

    The Code on Fundamental Health Services No. 3359 empowers the Ministry of Health to make healthcare laws and create an equal healthcare system that is accessible to all Turkey.

    The Ministry of Health is responsible for the establishment of hospitals and public health facilities that provide medical services to the general public. These services are paid for out of the state's healthcare budget. Reimbursement of health services given by health institutions, including physical examinations, operations, and medical testing, is usually covered by general health insurance, which is funded by patient contributions. Pharmaceuticals prescribed to patients are repaid by the Ministry of Health's reimbursement plan, which is supported by direct personal payments or deductions from public officials' income.

    Regulatory authorities

    Due to the widespread coverage of public health insurance, the Turkish state is the largest customer in the pharmaceutical sector. With the implementation of the General Health Insurance legislation, it is projected that everyone residing in Turkey will be covered by state health insurance. The Ministry of Health is the primary regulating body. Its organization, the Pharmaceutical Products and Medical Device Institution, are in charge of overseeing the pharmaceutical industry (Institution). All aspects of pharmaceuticals are regulated by the Institution, including marketing authorization, production, pricing, import/export, and clinical trials.

    The Ministry of Health and the Institution are both national governmental agencies with jurisdiction over the entire country. Inspections of public and private businesses in the medical and pharmaceutical sectors, on the other hand, are carried out by the Ministry of Health's provincial directorates.

    The Institution has the authority to control the pharmaceutical industry's advertising efforts. Furthermore, under the Turkish Commercial Code, firms involved in the pharmaceutical and medical sectors are subject to advertising laws (for example, unfair trade practice regulations). As a result, the entities in the pharmaceutical sector are also scrutinized by the Advertisement Board for any violations of such restrictions.

    Funding of the medicinal product by the government 

    The Social Security Institution (SSI) is in charge of pharmaceutical reimbursement. The SSI acquires most pharmaceutical products produced in Turkey through the reimbursement system because the general coverage of public health insurance in Turkey is relatively large. Pharmaceuticals must be registered with the SSI's reimbursement list to be reimbursed by the public health system. This means that extra discounts of up to 41% are applied to product prices, depending on the price specified by the March 2013 Health Implementation Communiqué (as amended periodically). Furthermore, the SSI established an alternative reimbursement system that may result in further discounts being applied to product pricing, depending on case-by-case agreements negotiated and signed between pharmaceutical companies and the SSI.

    The Code on Pharmacists and Pharmacies governs pharmacies, which sell pharmaceutical products obtained from pharmaceutical warehouses. In circumstances when the patient's pharmaceutical product requires a prescription, the pharmacist should request one and submit it to the SSI's MEDULA online system. The pharmacy does not collect any money from the patient if the prescription includes products on the reimbursement list (or only collects the portion exceeding the reimbursement percentage). The patient is usually responsible for pharmaceutical items and treatments that are not on the SSI reimbursement list.

    Patients, on the other hand, are free to use private insurance policies. Private insurance policies typically cover pharmaceutical items and treatments that are not covered by the SSI's reimbursement list more comprehensively (i.e., they either cover a product or treatment that is completely excluded from the SSI's reimbursement list or provide a larger percentage of payment). It is also common for private insurance policies to allow patients to receive treatment not only in public hospitals but also in private hospitals.

    Regulations of Clinical trials

    Clinical trials are governed by Article 10 of the Fundamental Health Services Act No. 3359. The Regulation on Clinical Trials of Medicinal Products for Human Use and Biological outlines the regulatory requirements for clinical trials. The relevant EU directives on appropriate clinical practices, as well as the Ministry of Health's Good Clinical Practice Guideline, are factored in this legislation. The Pharmaceutical Product and Medical Device Institution Clinical trial Dept has the jurisdiction to adjudicate on clinical trial-related matters, including applications.

    Clinical trials can only be performed with the Institution's permission, according to Article 10 of the Code on Fundamental Health Services No. 3359. Sponsors of clinical trials must apply for such approval. Although it is permissible to apply for Institutional authorization and ethics committee approval at the same time, the ethics committee permission must be included in the application file. University hospitals, teaching and research hospitals, and public hospital associations all have local ethical committees.

    In multi-centre trials, the permission of one local ethics committee (of the co-ordinating clinical centre) is required

    • The procedure and documentation used to inform trial subjects must be approved by the local ethics commission.
    • Trial participants' consent.
    • Concerns about the rights, safety, and well-being of trial participants.

    Sponsors have the right to apply for and run trials through contract research organizations (CROs) based in Turkey under the Clinical Trials Regulation, but they are obligated to do so if they do not have a representative in Turkey. Clinical studies can also be transferred between sponsors under the Clinical Trials Regulation. In circumstances where the sponsor wishes to transfer the clinical trial to another sponsor, the sponsor must notify the Institution and the ethics committee, according to Article 21 of the Regulation on Clinical Trials. If the transfer is approved, the Institution notifies the sponsor that it is possible to effectuate the transfer.

    Under the Regulation on Clinical Trials, clinical trial subjects or their legal representatives must be informed about the trial via an informed consent form, which must include, among other things, information such as the trial's objective, methodology, expected benefits, foreseeable risks, difficulties, and properties of the trial that may be unfavourable to the subject-conditions for conducting the study, as well as the subject's ability to withdraw from it. The informed consent form should be written in an easy-to-understand manner and contain enough information. The Ministry of Health publishes the minimum content criteria for these forms regularly, and the forms are updated as needed to meet these standards.

    Manufacturing and distribution of Medicinal Products in Turkey

    The Pharmaceutical Product and Medical Device Institution must receive applications for manufacturing and distributing medical products in Turkey (Institution). Before beginning operations, not only the producers but also the marketers, importers, and distributors of pharmaceutical products should get authorization. Under Turkish legislation, there are no blanket authorizations. Thus, each product must apply for authorization separately.

    The Manufacturing Regulation lays out the requirements for obtaining authorization to manufacture medicinal items, which includes

    • Hiring a production manager, a quality assurance manager, a quality control manager, and enough staff with the requisite knowledge and experience with pharmaceutical products, which are held accountable for the manufacturing process by the manufacturer and the Institution.
    • Forming a quality assurance group.
    • Obtaining a Good Manufacturing Practices (GMP) certificate and ensuring that the manufacturing facility follows the criteria of good manufacturing practices for medical products (global standards in regards to good manufacturing practices are followed in Turkey).
    • Outlining the workplace's opening and operating permits, as well as production flow diagrams.
    • Outlining the environmental impact assessment report.

     Monitoring compliance and Imposing Penalties

    Before or after giving the authorization, the Institution has the right to inspect and examine the manufacturing site. An inspection is not required to be announced in advance by the Institution. The Institution will prepare a report on the manufacturing site's compliance with legal standards after an inspection. Inspectors may collect the product and active substance samples, as well as papers and records from manufacturing sites, if necessary. The Institution has a wide range of inspection and collecting authorities.

    Administrative fines range from TRY 17,094 to TRY 854,804 can be issued under Article 18 of the Pharmaceutical Code for manufacturing, selling, and/or delivering pharmaceutical items that do not conform with the law. Repeated offences result in doubled penalties. The fine can be appealed to the administrative courts by the person who received the sentence.

    Licensing Regulation

    According to Article 5 of the Licensing Regulation, pharmaceutical products cannot be launched on the market before obtaining a license to be granted by the Ministry of Health. To obtain a license, real persons or legal entities resident in Turkey shall apply to the Ministry of Health by submitting the documents listed under the Licensing Regulation, published in the Official Gazette dated January 19, 2005, and numbered 25705.

    Pharmaceutical items cannot be released on the market without first acquiring a license from the Ministry of Health, according to Article 5 of the Licensing Regulation. Real persons or legal entities residing in Turkey must apply to the Ministry of Health for a license by providing the documentation stipulated in the Licensing Regulation, which was published in the Official Gazette on January 19, 2005, and numbered 25705.

    The application documents include, among other things, 

  • a description of the manufacturer's control methods; 
  • toxicological and pharmacological tests and clinical trials; and 
  • a certificate (and a Turkish translation thereof) issued by the licensor where a pharmaceutical product is manufactured under a license (granted by a third-party owner of intellectual property) or will be imported. Or, if applicable, a certificate indicating that a real person or legal organization other than the only authorized representative in Turkey has been authorized for co-marketing, as well as the written consents of the real people or legal organizations who will be involved in co-marketing activities.
  • Marketing of Medicinal Products

    The Pharmaceutical Product and Medical Device Institution must be contacted to obtain a marketing authorization for pharmaceutical items (Institution). The documents required in the Licensing Regulation should be included in the application. The list of required documents includes, among other things, the applicant's trade registry records, the applicant's information, details about the manufacturer, the product's indications and adverse effects, all relevant information about the product (e.g., dosage, pharmaceutical form, shelf life, etc.), GMP certificate, and documents demonstrating the product's compliance with other jurisdictions. The following items can be marketed without a marketing authorization, according to Article 2 of the Licencing Regulation:

    • Pharmaceuticals made for a specific patient using a magistral formula,
    • Products manufactured by pharmacies using pharmacopoeia formulas, which are well-known for their formulations;
    • Pharmaceuticals that are used in research and development studies
    • Semi-products destined for use by the manufacturer at a later stage
    • Radionuclide sources that are sealed
    • Human whole blood, plasma, and blood fractions
    • Implementation of allergens for allergy diagnosis using personalized allergens and skin testing.

     Authorization conditions

    The Institution must consider the following criteria when deciding whether to give a marketing authorization for a Human Medical Product, according to Article 16 of the Licensing Regulation:

    • Whether it is effective in the conditions for which it was designed.
    • Whether the safety of the pharmaceutical product has been established.
    • Whether the pharmaceutical product has the technical and pharmaceutical properties that are required.

    According to Article 7 of the Licensing Regulation, legal entities seeking marketing authorization must employ at least one individual with a bachelor's degree in pharmacy, medicine, or chemistry who is also qualified to practice one of these professions in Turkey.

    If a pharmaceutical product is to be imported into Turkey, Article 8 of the Licensing Regulation stipulates that the applicant must submit a certificate, together with a Turkish translation, stating that the applicant is a representative authorized to import, authorize, and sell the medicinal product in Turkey.

    A human medicinal product's marketing authorization is valid for five years. Three months before the marketing authorization's expiration date, information on the medical product's quality, safety, and efficacy, as well as pharmacovigilance data, must be submitted to renew the marketing authorization. Failure to renew the marketing authorization within five years does not mean that the license will automatically expire. The renewal procedure for pharmaceutical items is not always followed in practice, and certain drugs are now on the market without having their authorizations renewed.

    Import

    Apart from acquiring an import license in line with the Licensing Regulation, a certificate of control must be obtained from the Ministry of Health for the import of pharmaceutical items, according to the Communiqué on Import of Certain Products that are Audited by the Ministry of Health (and active substances). This certificate of control must be obtained before the importation of the relevant pharmaceutical product by submitting specified documents, including a pro forma or standard invoice, a certificate of analysis, and an approved health certificate provided by the responsible authority in the country of origin.

    Except for certificates of control issued for pharmaceutical substances subject to the Communiqué on Standardization of Foreign Trade concerning Import of Certain Substances Requiring a Special Permit to be obtained from the Ministry of Health (Communiqué No: 2011/4), which are valid for a term of 6 months, all certificates of control are valid for 12 months.

    Market exclusivity and generic pharmaceuticals

    Market exclusivity is designated in European Union regulations as a two-year term during which a novel medicine is shielded from direct competition from generics. Please be aware that there is no express provision for market exclusivity in Turkish law.

    However, it would not be inaccurate to say that the Ministry of Health's interpretation of data exclusivity protection equates to simply market exclusivity. We've found that the Ministry of Health's data exclusivity policy is to allow shorter license applications referring to an original product that is still protected by data exclusivity but withholds sales approval until the original product's data exclusivity period expires.

    Restrictions on dealings with health care professionals

    The Regulation on Promotional Activities of Medicinal Drugs for Human Use and the Regulation on Sales, Marketing, and Promotion of Medical Devices both provide restrictions and limits on how human medicinal products and medical devices are marketed. The following are examples of these:

    • Human medicinal products and medical devices that are only intended for use by healthcare professionals or are on the reimbursement list of the Social Security Institution cannot be advertised to the general public.
    • The value of promotional materials/gifts cannot exceed 2.5 per cent of the Turkish monthly gross minimum wage (currently around TRY74).
    • Offering any rewards or incentives to healthcare practitioners is forbidden to encourage the prescription, usage, and referral of medicinal items and medical devices.
    • The promotion of human medicinal products and medical devices (for which public marketing is prohibited) is only allowed if it is done through brochures, symposiums, meetings, or personal contact.

    Symposiums or conferences attended by healthcare professionals that are sponsored by marketing authorization or sales (for medical devices) permit holders are also controlled and strictly supervised by the Institution in terms of the amount of sponsorship, the location of the symposium or meeting, the types of costs reimbursed, and so on. The holders of marketing authorizations must notify the Institution of any symposiums or conferences that they are sponsoring. Donations are also subject to restrictions.

    Furthermore, public officials are prohibited from receiving or requesting gifts or favours under Article 29 of the Public Officials Code and Article 15 of the Regulation on the Principles of Ethical Conduct of Public Officials. Article 252 of the Criminal Code makes receiving or providing a bribe with a criminal offence. Apart from the punishments imposed on both the briber and the bribe recipient, extra measures may be imposed on a legal organization that profits from a bribe, according to the Criminal Code seizures of financial assets, such as property and earnings and cancellation of official licenses, such as a marketing authorization.

    Selling restrictions

    Certain pharmaceutical items must be sold solely in pharmacies, according to Article 28 of the Code on Pharmacists and Pharmacies. Human medicinal items, traditional herbal items, dietary food, and infant formulae are examples of these. In Turkey, there is no such thing as a "drugstore," hence every product that can be sold, whether it is over-the-counter or just by prescription, must be sold exclusively at a pharmacy. The sale of pharmaceutical products via the internet or any other electronic platform is prohibited by Article 24 of the Code on Pharmacists and Pharmacies. As a result, in Turkey, the selling of pharmaceutical products via the internet, e-mail, or mail order is prohibited.

    Restrictions to the advertising and promotion of Medicinal Products 

    Advertising of medicinal products is governed by the Pharmaceutical Code and the Regulation of Promotional Activities of Medicinal Products for Human Use, as well as associated legislation. Human pharmaceutical product advertising to the general public is strictly prohibited in Turkey. The Pharmaceutical Code bans ads directed at healthcare professionals from overstating and exaggerating the therapeutic effects of pharmaceutical medicines. Furthermore, advertisements for prescription medicines can only be published in medical journals and media aimed at healthcare professionals. Before publishing such an advertisement, the Institution's prior consent must be acquired before publishing such advertisements.

    Without the Institution's prior consent, healthcare practitioners and institutions are unable to participate in pharmaceutical product advertising. Authorization holders who violate the advertising limitations face heavy administrative fines up to five times the total sales value of the product in the previous year.

    In terms of promotional restrictions, there is no difference between over-the-counter and prescription-only drugs; both groups are barred from advertising and marketing. In Turkey, internet advertising of pharmaceutical products is severely prohibited. The same is true for social media platforms.

    Packaging, labelling, and tracking of medicinal products

    The principal legislation regulating the packaging and labelling of medicinal items is the Regulation on Packaging Information, Inserts, and Tracking of Medicinal Products for Human Use (Regulation on Packaging). The Pharmaceutical Product and Medical Device Institution (Institution) continues to be the governing body.

    Certain information must be included on the packaging, which can be summarized as follows:

    • The medicinal product's name, strength, and pharmaceutical form. The name on the Institution-approved license or permit should be written if necessary, stating whether it is meant for babies, children, or adults.
    • The active compounds' unit amount, route of administration, and weight or volume.
    • The number of units in the package (tablets, ampoules, or bottles), as well as the volume, weight, or dosage number of active substances in pharmaceutical form.
    • Colorants, preservatives, antioxidants, flavouring compounds, and alcohol are examples of excipients.
    • A list of excipients with known side effects.
    • Instructions and manner of application (if necessary).
    • A particular warning noting that the medicinal product should be kept out of the reach of children and in its original packaging, as well as additional special warnings (as necessary).
    • The medical product's storage conditions.
    • A special warning about how to dispose of unused or discarded products, as well as the proper collection system if necessary.
    • The package type's recyclable symbol, number, and abbreviation.
    • The name and address of the manufacturer and the holder of the authorization/permit.
    • The authorization or permit number for the medicinal substance.
    • The batch number and expiration date of the medicinal substance.
    • The expiration date of the medicinal product.
    • If necessary, user instruction.
    • Appropriate cautionary statements.
    • Whether or not the pharmaceutical product requires a prescription;
    • There is a barcode.
    • Pricing information.

    Serialization

    Each pharmaceutical product sold in Turkey should be labelled with a barcode and registered with the Drug Tracking System. The Drug Tracking System is a database created by the Ministry of Health under the Packaging Regulation that allows users to monitor a pharmaceutical product's route from production or importation to the end-user. To allow full monitoring of the product, each player in the pharmaceutical business should comply with their part of the notification obligations. For example, once a product is produced/imported, the producers/importers should assign a barcode to it and notify the Drug Tracking System.

    Article 5 of the Packaging Regulation lays out the requirements for the packaging of pharmaceutical items. According to the article, the product package should include, among other things, the following:

    • The product's name and the demographics to which it caters.
    • The pharmaceutical product's shape, weight, volume, and dosage, as well as the mode of application.
    • Information on the holder of the market authorization.
    • A warning that the product should be kept out of the reach of minors.

    Product safety, quality, and liability

    The Code on Product Safety and Technical Regulations No. 7223 (Products Code) sets out the general framework for market monitoring and audits to be performed on any product put on the market in Turkey and can be regarded as the main legislation regarding product safety. Article 5 of the Recall Regulation provides the Institution with the power to do the following after it detects a defective medicinal product on the market.

    The Code on Product Safety and Technical Regulations No. 7223 (Products Code) establishes the general framework for market monitoring and audits on any product placed on the Turkish market and can be considered the most important piece of product safety law. After discovering a defective pharmaceutical product on the market, the Institution has the authority under Article 5 of the Recall Regulation to perform the following:

    • Compel the relevant company to provide information or an explanation.
    • Assess the responsible company's explanations and determine the recall's class and severity.
    • Keep track of the recall's progress.
    • If necessary, halt production or import of the faulty pharmaceutical product.
    • Complete the responsible company's recall process and manage the processes for closing the recall file.
    • If the responsible company is found to be inept during the recall procedure, take the required steps.
    • If the problem has been fixed, it will allow the pharmaceutical product to be released onto the market.
    • If necessary, issue a second recall.

     

     

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    Sun, 06 Jun 2021 11:50:00 GMT
    <![CDATA[legality of Bitcoins and other cryptocurrencies]]> The Legality of Bitcoins and other Cryptocurrencies

    The terms Bitcoin & Cryptocurrency remained unfamiliar to the rest of the globe before Satoshi Nakamoto, the unidentified founder of Bitcoin, revealed the Electronic Cash System in late 2008. The idea swept the world's markets like wildfire, and investors all over the world created a cryptocurrency platform for purchasing and selling.

    Nevertheless, with one of the world's first cryptocurrency deep "cold storage" firms based in Dubai, it is apparent that the winds have changed, and the United Arab Emirates cryptocurrency is strongly participating in this global trend.

    Bitcoin is a new technology and digital currency that employs cryptography, a process that converts valid information into an impenetrable code in order to trace buyers and sellers. With the help of a stable online network, the need for such secure connectivity emerged and grew in the modern age. In comparison to fiat money, which is governed by a single authority, this currency is governed by blockchain technology.  Cryptocurrency needs approval from a decentralized mechanism through which a user involved in the network may obtain confirmation. Nakamoto, in particular, benefited from the process of blockchain technologies and developed the popular Bitcoin.

    Bitcoin – its Legal status

    A key factor in determining bitcoin's legal status is if it is listed in a country as an asset - for example, gold or a currency in terms of Dirhams or Euros. There is currently no strong universal position on this issue – in the United States, bitcoin is classified as an asset by the Commodity Futures Trading Commission, while in the European Court of Justice, bitcoin is classified as a currency for the purpose of taxes.

    The legal status of this is of great pertinence because-

    • If bitcoin is regarded as an asset, it will come under the regulatory jurisdiction of the United Arab Emirates Securities and Commodity Authority, while if it is classified as a currency, it will fall under the legal framework of the UAE Central Bank.
    • From a tax standpoint, since bitcoin is considered an asset, it will be subject to state taxes such as VAT, but if it is considered a currency, it would not be subjected to such taxes. 
    • From the standpoint of property rights, if bitcoin is an asset, it is a type of property to which legal ownership can be claimed and exchanged, and if bitcoin is a currency, a bitcoin represents a claim to the value expressed by the bitcoin, but it is not a property in itself. This differentiation can seem insignificant on the ground, but it poses serious problems concerning how bitcoins can be handled in cases of trust obligations, intestate succession, sales of property, debt, and bankruptcy.  

    Regulation in the UAE

    The United Arab Emirates has unveiled the UAE Blockchain Strategy 2021 in an effort to become a leader in blockchain technology, with the aim of seeing 50 per cent of government transactions completed using blockchain technology by 2021. To bolster its vision, the government released legislation governing the use of crypto properties, particularly cryptocurrencies.

    According to this guideline, the FSRA will decide whether a proposed coin token is a security or an asset on a specific instance basis. Whether the FSRA determines that the token is the former, the Initial Coin Offering will be governed by the Financial Services and Market Regulations; if the token is the latter, the Initial Coin Offering will be unrestricted.

    Furthermore, the FSRA adopted a supervised practice of "operating a crypto asset enterprise" on June 25, 2018, via the introduction of the Regulation of Crypto Asset Activities in ADGM regulations, which involves the functioning of cryptocurrency exchange houses but prohibits the issuing ICOs.

    The FSRA-ADGM (Financial Services Regulatory Authority of Abu Dhabi Global Market) was the first one to publish rules and regulations governing the purchase and sale of cryptocurrency. The recommendations were for the oversight of Initial Coin Offerings (ICO) and virtual coins in which the general public can buy and trade Cryptocurrency. The specific commodity will be determined on a case-by-case basis by the Financial Services Regulatory Authority of Abu Dhabi Global Market. The aim of the ADGM rules is to improve transparency, limit money-laundering practices, and tackle monetary terrorism.

    Influenced by ADGM regulations, DMCC (Dubai Multi Commodity Authority) has created an incentive for investors to integrate a cryptocurrency trading firm. Businesses, on the other hand, will only be permitted to deal on their own behalf. As a result, certain businesses will construct the globe's first deep "cold storage" vault for cryptocurrency.

    Prior to the issuance of ADGM rules, the Central Bank of the UAE issued a legal framework about the Electronic Payment System in 2017, banning all virtual currencies and transfers, raising concerns in the UAE economy. However, after an unsatisfied analysis, the governor of the Central Bank explained that the rules would not apply to cryptocurrencies.

    As of 2021, we see that The United Arab Emirates government has successfully implemented blockchain technologies in the administration of its affairs and has unveiled the Emirates Blockchain Strategy 2021 and the Dubai Blockchain Strategy. The Emirates Blockchain Strategy 2021 anticipates reaping the benefits of blockchain technology by putting a vast number of federal operations on a blockchain platform. The Dubai Blockchain Strategy aims to make Dubai one of the first cities to truly embrace blockchain technology and& incorporate it into government efficiency.

    In order to adopt the most recent advancements and development practices on a global scale, the Dubai Future Foundation established the Global Blockchain Council to examine and discuss existing and future blockchain technologies and transfers. The Council intends to collaborate with and support various monetary and non-monetary industries in order to improve performance, competitiveness, and reliability in these sectors. The Council is made up of many leading private companies from the telecommunications, business, and financial industries, as well as government agencies.

    The Present Scenario & Illustrations

    At the moment, there is no clear indication of when the different operations of Dubai authorities will adopt blockchain technology. Regardless, the RTA has stated that it is currently implementing a vehicle lifespan management program using blockchain technologies. This initiative seeks to provide a clear record of the vehicle's lifespan from manufacture to scrap, with the ultimate goal of increasing trust and accountability in those dealings and, as a result, reducing lawsuits and operating costs.

    Furthermore, the Dubai Land Department intends to use blockchain technologies to turn itself into a fully digital and paperless effective entity. The Dubai Land Department is currently collaborating with utility service companies to allow renters to make payments remotely and to allow property documents to be sent online to the Dubai Land Department (DLD).

    The UAE has also progressed in various initiatives that may increase blockchain technology acceptance in the region. For example, the United Arab Emirates Banks Federation's Advisory Council has discussed blockchain adoption among its stakeholders. According to the Smart Dubai Government Establishment (SDGE), "the blockchain system currently has been in working in sectors such as banking, school, property development, hospitality, trade, healthcare, transportation, and security," and Smart Dubai has deployed the Hyper-Ledger&  Ethereum technologies on its system.

    Since blockchain technology automates contracts, a relation to UAE legislation on smart contracts provides that it accepts blockchain-powered smart contracts, and Article 12 of Federal Law No. 1/2006 regarding Electronic Transactions and Commerce expands to include smart contracts by stating that contracts among 2 or more electronic systems, that have already been planned and configured shall be considered legitimate irrespective of whether or not the human activity was involved.

    Challenges and Progress in the Country

    The main challenge that regulatory authorities face is determining what kind of financial or economic instrument cryptocurrency should be listed as. Some governments view bitcoin like any other asset and treat it similarly to a fiat currency, although others consider it to be analogous to shares or resources, as mentioned in the aforementioned paragraphs.  

    For example, before an Initial Coin Offering is made available to the public, the regulator's perception of the Initial Coin Offering can be influenced by the prospectus, which contains financial statements of the cryptocurrency on bid. The cryptocurrency on offer may be equivalent to a fiat currency, or its distinguishing features may attract similarities to securities/assets.

     

    The UAE government is committed to moving beyond and beyond by developing its own digital currency. In October 2018, Dubai launched its own digital currency, EMCASH, which can be used to pay tuition fees and public services. In addition, another form of cryptocurrency was introduced in December 2019 for cross-border trades with Saudi Arabia.

    We can conclude that…

    While there is progress in the field in order of how they can govern cryptocurrency, particularly because certain regulations are needed to reduce the possible threat that cryptocurrency may bring due to its decentralized status, there are significant pitfalls related to legislation, licensing, and regulating crypto-assets related companies.

    A solid regulatory structure should solve concerns such as the instability of cryptocurrency exchanges, the cross-jurisdictional environment, market abuse, frauds and threats linked to laundering money, illicit trafficking of various goods, piracy, data theft, bribery, and unauthorized business practices, among others.

    Addressing investor questions about crypto assets by creating a legislative structure for crypto asset-related operations that mitigate future risks is the first step toward creating a regulatory environment for such cryptocurrencies. The Abu Dhabi Global Market Financial System is one of the few jurisdictions in the world to officially issue licenses & regulations expressly for cryptocurrency exchange and operations, and the UAE Securities and Commodities Authority plans to publish its own crypto asset regulations shortly.

    The UAE environment seems advantageous for blockchain, smart contracts & cryptocurrencies, and as a result, the regulators are vigorously considering coordinating those business practices in order to meet industry demands while still preserving the interests of companies, customers, and crypto-investors.

     

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    Sun, 06 Jun 2021 11:33:00 GMT
    <![CDATA[Anti-bribery compliance in Turkey]]> Anti-bribery compliance in Turkey

    Introduction

    Corruption is a global phenomenon that affects international commercial dealings. Corruption is a worldwide issue that costs money and lives. It is frequently regarded as a problem that mostly affects poor nations. However, while the harm it causes is magnified in poorer countries, corruption knows no national borders and can be found anywhere. Corruption was still a major global issue in 2020. According to the World Economic Forum, "nearly half of all workers in the EMEA region (Europe, the Middle East, and Africa) and India believe bribery and corruption are acceptable in an economic downturn." Corruption, bribery, theft, tax evasion, and other illegal financial flows cost developing countries $1.26 trillion annually." Corruption can take various forms; it's a legal word that encompasses bribes and other comparable offences.

    Turkey is justifiably regarded as an economic and commercial hub for the EMEA region, as well as an important market for many global corporations, as a rising market. On a scale of 0 to 100, Turkey scored a score of 40 in Transparency International's Corruption Perceptions Index in 2017 "from 0 ("very corrupt") to 100 ("very clean"). As this number is closer to the bottom of the scale and because Turkey's anti-corruption measures and regulations are still in progress, international corporations that are actively operating in is constantly evolving Turkey should make every effort to stay informed about the anti-corruption climate in the area

    According to Transparency International's 2016 Corruption Perception Index, Turkey is the 75th least corrupt country out of 176 countries. Turkey was ranked 13th in the G20 on this index, which assesses perceptions of corruption in the public sector. This is obvious evidence that corruption in Turkey is on the rise, and Turkey should take quick action to combat the rising tide of corruption. Even though Turkey's legislative landscape addressing anti-corruption and anti-bribery has changed dramatically in the last two decades, and Turkey has made significant steps to align its domestic laws with international standards, Turkey's position has continued to decrease for the third consecutive year.

    Turkey has passed up-to-date anti-corruption legislation and signed and ratified all territorially applicable international anti-corruption treaties, notably the OECD Anti-Bribery Convention, to stay up with recent international advancements in this field. The Turkish Criminal Code No. 5237 (Criminal Code), which forbids bribery, malversation, malfeasance, and embezzlement, is the principal domestic legislation that applies to acts of corruption. Apart from the Criminal Code, there are a few other laws that deal with corruption prevention, such as the Turkish Criminal Procedure Law No. 5271, the Public Official Law No. 657, and Law No. 5326 on Misdemeanors.

    Turkey has rectified the Council of Europe Convention on the Laundering, Search, Seizure, and Confiscation of Proceeds of Crime and the Financing of Terrorism in 2016. Furthermore, to increased transparency and strengthening the battle against corruption, the Prime Minister of Turkey published circulars to increased transparency and strengthening the fight against corruption. Circular outlines several precautions intended at enhancing prevention as well as several precautions targets to enforcement of sanctions to strengthen the main to combat corruption. Furthermore, the Circular includes several provisions aimed at raising social consciousness. The Circular's directions and precautions are primarily intended to govern the principles of ethical behaviour for public officials and to prevent them from breaking the rules.

    Turkey also took part in several international anti-corruption programs as a member of the Group of Nations against Corruption, which monitors member states' adherence to the Council of Europe's anti-corruption criteria. As a result, Turkey's anti-corruption laws were changed to conform to international standards in this area. As a result, Turkey has

    • increased punishments for bribery;
    • criminalized directly or indirectly offering, promising, or asking bribes; 
    • criminalized bribery of foreign public officials; 
    • broadened the extent of the definition of "foreign public officials"; 
    • broadened the extent of the definition of "foreign public officials" and 
    • imposed administrative liabilities on corporations whose representatives committed the offence of bribery or persons acting on their behalf

    Only real people are currently regarded as the main perpetrators of a crime under the Criminal Code, as Article 20 of the Criminal Code expressly stipulates that criminal accountability is personal and that no criminal consequences may be applied against formal entities. The Criminal Code embraces the notion of "personal criminal culpability," which has been contested and argued throughout the years, albeit no appropriate revisions have been adopted. Furthermore, the Turkish judicial system does not recognize non-prosecution or deferred prosecution agreements, nor does it recognize compliance programs as mitigating circumstances.

    However, it does not imply that companies are entirely acquitted when it comes to anti-corruption. As stated, companies can be held civilly or administratively accountable under Turkish law. As a result, under Law No. 5326 on Misdemeanors, firms whose corporate organs or agents commit bribery or bid-rigging (among other forbidden acts mentioned under the relevant article) for the advantage of the company while working within the scope of the corporation's activities face administrative fines. Corporations can also be subjected to a variety of security measures. Furthermore, corporations can be subjected to a variety of security measures, including 

    • the revocation of a license issued by public authority,
    • seizure of commodities utilized in the failure to comply with the law (or that result from) or crime perpetrated by the legal entity's representatives, or monetary/financial benefits stemming from (or provided for) the commission of the crime.

    Anti-Bribery Conventions

    Turkey has signed international accords such as the United Nations Convention Against Corruption and the Organisation for Economic Co-operation and Development (OECD) to promote sustainable economic growth and trade to combat corruption. Turkey is a founding member of both the OECD and the G20. The OECD Anti-Bribery Convention encourages sanctions against bribery in international business transactions carried out by firms located in member countries. Its goal is to reduce political corruption and corporate crime in developing countries by encouraging penalties against bribery in international business transactions carried out by firms located in member countries.

    Turkey has also demonstrated its commitment to combat corruption by joining international organizations such as the Financial Action Task Force (FATF), the Group of States Against Corruption (GRECO), the International Anti-Corruption Academy (IACA), and the Open Government Partnership Initiative (OGPI) (OGPI). As a result, the majority of anti-corruption measures were enacted with the help of these international organizations, and the strategy was vital enough that a commission and an executive council on increasing transparency and strengthening the battle against corruption were established to carry it out.

    Considerable progress was accomplished within the scope of this approach, such as the establishment of an ombudsman institution and the completion of the Supreme Court of Public Accounts Law. Unfortunately, the majority of the steps outlined in the first strategy were never implemented, and Turkey was heavily chastised for it. The Turkish Penal Code (TPC) was amended in 2012 by Law. No. 6352, which broadened the scope of the offence to include both direct and indirect giving and receiving. The OECD Working Group reported in 2019 that Turkey has yet to pass legislation to address long-standing suggestions, including reforming its laws on legal person liability for bribery. Turkey has yet to pass legislation to address long-standing suggestions, including reforming its laws on legal culpability for bribery of foreign public officials, according to the OECD Working Group in 2019.

    Furthermore, the current study expressed concern over Turkey's low level of foreign bribery enforcement that despite the size of the country's economy and geopolitical importance, there has not been a single foreign bribery conviction in Turkey in the 16 years since the Convention's coming into force.

    Turkish Anti-Bribery Legislation

    Bribery is primarily criminalized and outlawed under Turkish law, according to the Criminal Code. However, when it comes to anti-corruption regulations, there is no civil enforcement. Acts of corruption can only be prosecuted under criminal law. Bribery is defined in Article 252 of the Turkish Criminal Code (TCC) as "a benefit illegally obtained directly or through an intermediary by a public official, or another person pointed out by a public official to execute, or not to do, a task-related fulfilment of the official's duties." 

    The person who offers the bribe can be charged with a sentence of 4 to 12 years in prison. As a result, both the person who offers the bribe and the public official who accepts it will be penalized. The same article's second clause likewise punishes the public official who receives bribes. So not only is the individual attempting to bribe guilty, but so is the official. Surprisingly, bribery is considered to have occurred when a consensual agreement to exchange a benefit has been reached. The third clause of Article 252 states that a promise or agreement to this advantage is sufficient and that the actual benefit (money) exchange is not required to commit bribery.

    Article 252 Clause 8 of the TPC, which was amended in 2012, states that not only legal persons, but also public entities, corporations, businesses, or organizations operating in the capacity of public entities, foundations functioning within the body of public institutions, public benefits associations, cooperatives, and publicly traded joint-stock companies, are also covered by the law. This implies that it is not limited to natural persons. Bribing foreign public officials became illegal with the 2004 amendments. This illustrates a shift in perspective, with the scope of the essay being purposely enlarged to include foreigners as well.

    With the insertion of clause 9, foreign government officials, members of the international parliament, and other foreign authorities are no longer excluded. Bribes paid to or received by them are illegal in Turkey. Foreigners were also included in the bribery laws. As a result, non-Turkish persons and international firms doing business in Turkey may risk bribery convictions or investigations under Turkish law. Foreign nationals may potentially face criminal charges and civil probes under their own country's laws. As a result, foreigners should operate in conformity with both national and international law.

    Territoriality-principle

    The Turkish Criminal Code scope includes all subjects (natural or legal) and offences that occur and are located inside the Republic of Turkey. This means that anyone doing business in Turkey, regardless of nationality, risks being prosecuted under Turkish law. Bribery is one of the crimes that have extra-territorial implications. Even if the bribe takes place outside of Turkey but has a connection to Turkey, it can be investigated and prosecuted. Even if you are a Turkish citizen living abroad, you cannot escape the nationality principle. You are still accountable for conduct committed while acting in the capacity of a Turkish national.

    Article 10 of the Turkish Criminal Code (TCC) applies to an individual who commits an offence while executing an official task in the name of Turkey in a foreign country. Even if he was convicted in another country for the same crime. Crimes punishable by more than a year in prison in Turkey but not in the United States are penalized under Article 11 TCC. Non-citizens have the same rights as citizens under Article 12. If the offence is committed against Turkey while the criminal is on Turkish soil, the perpetrator is punished according to Turkish law. In summary, both international bribery and bribing foreign authorities are covered by Article 252, making both crimes punishable under Turkish law even if the offender has been convicted in a different country, provided there exists a relationship with Turkey.

    Penalties

    Clause one of Article 252 of the Turkish Criminal Code (TCC) may impose a sentence in prison ranging from 4 to 12 years for those who commit the act of bribery. This does not imply the company is out of scope; Article 253 of the Turkish Criminal Code (TCC) specifies the penalties that can be imposed on firms in the form of security measures, the legal entity can be fined up to TRY 2 million and/or have its business license revoked. It is no longer permitted to carry on business without a license. 

    Comparison of Turkish Law & Extra-territorial ABAC Laws

    Turkey does not have its own specialized Anti-bribery and Anti-corruption (ABAC) legislation to prevent international bribery, unlike the US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act (UKBA), or France's Loi Sapin II. The UK Bribery Act (UKBA) was passed in July 2011 and applied to both government and commercial bribery, as well as domestic and extra-territorial bribery. It makes it illegal to take and give bribes to foreign public authorities.

    In contradiction to Turkish law, UKBA follows the strict accountability theory. This means that businesses and organizations are held legally liable for bribery paid on their behalf. Under Article 7, the Act establishes a different offence, making commercial organizations criminally liable for failing to implement "adequate procedures" to combat bribery. As companies' risk being prosecuted for crimes performed by linked persons, corporations are under a lot of pressure to adopt a strong control program.

    On the other hand, if a corporation or organization can show that it followed all necessary procedures, it will be exempt from prosecution. In this sense, the procedures might be used as a complete defence to show that all required safeguards were followed notwithstanding a specific occurrence of bribery. What constitutes an "appropriate compliance procedure" is not properly defined and unclear. The territoriality principle underpins the Turkish Penal Code. The principle applies to all offences committed within Turkey's jurisdiction, regardless of the perpetrator's nationality. Bribery of foreign public officials is prohibited under the Turkish Penal Code Article 252 Clause 9; however, its enforcement is not similar to that of extra-territorial legislation.

    The FCPA, UKBA, and Loi Sapin II all impose strict liability on corporations for the actions or omissions of their employees, agents, and other related entities. Companies that are subject to these laws are expected to implement adequate compliance strategies. Companies are not subject to criminal culpability, according to Article 20 of the TPC, and only limited security measures can be imposed on people. The Turkish Penal Code does not necessitate the implementation of a compliance program. Unlike the UKBA, the Turkish Penal Code does not classify private to private bribery and failure to prevent bribery as separate crimes.

    Foreign Corrupt Practices Act

    The United Kingdom Bribery Act has a broader scope than the Foreign Corrupt Practices Act (FCPA). The Foreign Corrupt Practices Act (FCPA), like the UKBA, targets US officials doing business internationally. The legislation was passed to make it illegal for certain types of people and businesses to pay foreign government officials to help them get or keep business. Bribing does not have to involve monetary exchange, as it does with the UKBA and TCC. Bribery can be taken in the form of anything of value. Bribing foreign officials has been illegal for far longer than the newly created UKBA and subsequent TCC revisions. Since its inception in 1977, the FCPA has encompassed corrupt foreign practices.

    Similar to UKBA, the FCAP targets parties with a nexus to the United States. Even if they are beyond US boundaries, the Act's nationality concept applies to all US persons, citizens, and businesses who engage in a corrupt foreign activity. Due to the territoriality concept, foreigners (natural or legal persons) committing bribery within US boundaries are likewise protected under this Act. The FCPA, like the TCC and UKBA, includes parties who receive bribes that are punished by law, whether they are foreign officials, natural persons, or legal entities.

    Protection for Whistle-blowers is Insufficient

    Whistle-blower protection is not sufficient "Reporting" is probably the most crucial aspect of detecting corrupt acts, and it can be assisted by easily available methods that protect a whistle-blower's identity and safety. It's crucial, especially in high-profile instances involving prominent people involved in wrongdoing. Only a safe and legally secure atmosphere can inspire potential whistle-blowers to denounce corrupt practices and offer evidence to law enforcement agencies, both in the commercial and governmental sectors. The Witness Protection Law is riddled with problems and hence falls short of providing enough and sufficient protection in anti-corruption legislation.

    As the scope of the Witness Protection Law is confined to offences punishable by solitary confinement for life, life imprisonment, or imprisonment for ten years or more, as well as offences committed as part of criminal activity, whistle-blowers cannot stay anonymous or benefit from witness protection programs. Under the current circumstances, it is reasonable to conclude that the private sector is not sufficiently regulated in terms of money laundering and that, as a result, support for other organizations fighting corruption has remained constant.

    There are no dedicated public prosecutor offices or courts that deal solely with corruption cases. Furthermore, numerous judges, prosecutors, and police personnel have been removed in recent years as a result of various major investigations conducted in Turkey. In the end, this depleted the personnel resources of public and judicial organizations tasked with combating corruption.

    In these situations, establishing an independent anti-corruption organization under the UN Anti-Corruption Convention can be extremely beneficial in terms of successfully implementing and coordinating anti-corruption policies as well as developing information about how to prevent corruption.

    Conclusion

    In today's global market, companies need to be aware of all applicable international rules. Anti-bribery and anti-corruption (ABAC) are still a major issue in today's society, and it's prominent on the compliance agenda for businesses. It is critical for multinational corporations operating in Turkey, as well as Turkish enterprises operating in other countries, to be aware of local legislation and extra-territorial ABAC rules. Although Turkey still has room for improvement in terms of combating international bribery and corporate liability, bribery sanctions for people representing corporations are harsh.

    To minimize the danger of being subject to local and extra-territorial anti-bribery regulations, companies operating in Turkey need a risk management plan and a thorough legal examination of the applicable laws. As a consequence, developing an effective compliance program with effective controls is a proactive strategy for multinationals and local companies operating in Turkey to reduce risks. Even though the research indicated that bribery is on the rise in Turkey and that the Turkish government is not doing enough to combat corruption, foreigners may still face bribery charges in Turkey due to the breadth of the bribery laws.

    Furthermore, even if a foreign individual is convicted of bribery in another nation, the Turkish bribery act allows that person to be punished in Turkey. As we discussed earlier in this essay, there are many different national and international laws that deal with bribery. To sum up, firms and individuals conducting business in Turkey and abroad must comply with both national and international anti-bribery regulations to avoid criminal prosecution and/or civil investigations.

     

     

     

     

     

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    Sun, 06 Jun 2021 09:32:00 GMT
    <![CDATA[Business Closure in UAE]]> Business Closure in the UAE, and How it Must Be Pursued

    When you decide to close your business in the UAE, you must cancel your business license as well as any related permits.

    Pretext

    It is imperative that the relevant government bodies are aware that you are no longer in business in order to prevent any fines and penalties that may accrue if your license is not renewed when it expires.

    Likewise, if you own a shareholding firm, it is critical to discharge your debts to creditors and partners while still safeguarding your interests and shares. Similarly, if you decide to start a firm again, it is also a good idea to keep your goodwill and business reputation in mind.

    Getting to Grips with Cancellation Formalities

    Depending on your company's structure, you may be able to cancel the license. The process is straightforward for enterprises and single proprietorships because all you have to do is file for cancellation through DED and obtain the necessary certifications from:

    • Directorate of Residency and Foreigners Affairs.
    • The Concerned Utilities Provider.
    • The Organization Providing the Lease.
    • Ministry of Human Resources and Emiratization.
    • Bank Account Closure.

    Process of Cancellation

    In order to facilitate the cancellation process of companies except for civil companies, the following steps must be followed:  

    First Stage -

    • Prepare a notarized company resolution that conveys the organization's collective intent to liquidate the company and cancel its license. The document must also carry the instruction to appoint the liquidator. 
    • Arrange for a registered liquidator to provide a formal letter accepting the obligation.
    • Apply for cancellation through DED or other permitted channels by completing the relevant paperwork.
    • A liquidation certificate will be issued by the DED.
    • Publicize the liquidation notice in two local newspapers.
    • The debtors have 45 days from the date of issuance to file their claims, according to the notification.

    Second Stage -

    • Submit a letter to DED from the liquidator and the partners stating that no other parties have raised any objections within the grace period.
    • To terminate a license, you must first get the necessary clearances from other government agencies.
    • Proceed to the Ministry of Human Resources and Emiratization (MoHRE) to cancel the company card.
    • Proceed to cancel the foreign partners' visas that the company previously sponsored at the relevant General Directorate of Residency and Foreigners Affairs.
    • To obtain final cancellation permission, provide all of the above documentation.
    • The fees will be set by the DED.
    • Finally, upon fulfilling all the conditions and paying the required costs, you will obtain a certificate of deregistration (cancellation).

    Private Liquidation and its Conditions

    • The license must have expired two years earlier.
    • The company must provide reliable evidence to necessitate a company dissolution.
    • The UAE national must acknowledge his/her responsibility towards the organization.
    • A document from the Ministry of Human Resources and Emiratization certifying the absence of sponsored personnel on the license is required.

    Cancellation Process for a Sole Proprietorship

    A no objection letter from the Ministry of Human Resources and Emiratization is required for sole proprietorships, as well as evidence of residency cancellation for non-Gulf citizens.

    Types of Companies that would Require a Liquidator at Cancellation

    The following are the types of companies that would ideally require a liquidator at the time of business closure or license cancellation.

    • Simple Limited Partnership
    • Public Joint Stock Company
    • Private Joint Stock Company
    • Simple Limited Partnership
    • Public Joint Stock Company
    • Private Joint Stock Company

    Freezing v/s Cancelling Licenses

    Companies in Dubai can pay a freezing fee to keep their trade licenses dormant for three years. They cannot, however, extend it beyond that time limit. A license that has been frozen is not the same as one that has been entirely terminated.

    Applicable Conditions

    The conditions to freeze a license are as follows:

    • A letter from the corporation or institution requesting the temporary freezing of the concerned license.
    • A letter from the Ministry of Human Resources and Emiratization (MoHRE) stating that the license does not have any sponsored persons on it
    • A report issued by DED after it has completed its applicable inspection process.

    Business Closure within a Free zone

    In accordance with the free zone authorities' mandate, you must inform them in advance regarding possible cancellations. Likewise, an Arabic newspaper must be notified of the company's intent to close. Further, the same notification must be publicized in the Arabic newspaper.

    Likewise, you will need the concerned permits from utility providers and other relevant government and free zone departments. Additionally, the company seeking closure must terminate your workers' visas and work permits, as well as close bank accounts after all of the documentation, has been processed.

    More notably, there are three types of closures within free zones:

    • Summary Wind Up: This type of closure can be done when a firm has no obligations or can discharge its liabilities within six months, and it starts with a statement of solvency.
    • Creditor Wind Up – This type of closure can be done when the firm approves a resolution for winding up, which is then followed by a meeting with the creditors.
    • Bankruptcy - Under UAE Commercial Transactions Law No. 18 of 1993, the court can declare a company to be bankrupt.

    The closure of a business requires a lot more than simply stopping operations. In DMCC, you must submit an application for business closure using the service portal. As a result of the submission of the company termination application, the directors' authority, duties, and obligations will be ended.

    Upon conveying the cancellation application, the matter will be closely reviewed.  Further, after processing, an announcement will be made in a local Arabic newspaper. At this point,  DMCC will subsequently submit the company's final termination and issue termination letters. Similarly, the authorities must be informed three months in advance for the office and warehouse facility and six months in advance for the plot facility in JAFZA.

    Similarly, employers must provide their employees a two-month paid notice period before terminating their contracts, according to UAE labour law. Employees can often maintain their resident visas until the company's trade license expires. The corporation must then terminate utility and telephone services. Obtain a NOC from the utility provider before proceeding with the business closure.

    Business Closure Within Ajman Free Zone

    Company liquidation in the Ajman free zone is only possible following a personal application from a shareholder or a person with power of attorney from the company's owners. It takes roughly three weeks to complete the process. It is made up of the following key steps:

    • Visa cancellation of any employees that were under the sponsorship of the said company. This process would take 7-10 days to fulfil.
    • The cancellation of the establishment card would take 7-10 days to complete.

    Similarly, when you file for company liquidation, you must return the business's original documentation to Ajman Free Zone Authority. They are as follows:

    • Chamber of Commerce certificate
    • Articles of Association
    • Establishment Card
    • License
    • Lease Agreement

    Likewise, before filing for company liquidation, you should liquidate any business bank accounts. This must be made evident through a confirmation from the bank in the form of a letter. At this point, you will receive an official deregistration notice from the free zone as a legal confirmation of the liquidation when the company is liquidated.

    Conclusively, the procedure of cancelling or deactivating trade licenses in Dubai varies depending on the kind of business. When contrasted to the licensing of an LLC, deactivating a civil business or sole establishment license is comparatively simple (limited liability company). It is worth noting that the DED takes between 40 to 60 days to terminate a trading license (Dubai Economic Department).

     

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    Sun, 06 Jun 2021 08:32:00 GMT
    <![CDATA[Early Termination of Tenancy Contracts in UAE]]> Early Termination of Tenancy Contracts in the UAE

    Introduction

    A tenancy contract is a rental agreement between a tenant and the landlord that must be signed before receiving the keys of the real estate property. A tenancy contract is essentially a legally binding agreement that allows the tenants to use the property for a particular purpose and for a set length of time. It outlines all of the lease's terms, including both parties' obligations and expectations, in the form of provisions in the contract. Preventing disputes and misunderstandings between parties by clearly stating and specifying all terms and conditions of the agreement.

    Contract of Tenancy

    According to Article 4 of the Dubai Tenancy Law, the contractual relationship between the Landlord and the Tenant will be governed by a written Lease or Tenancy Contract signed by both parties and detailing, in a manner that leaves no room for doubt, a description of the leased real property, the purpose of the tenancy contract, the name of the owner, the number and type of the land, and the area where the leased Real Property will be located. It will also decide the lease contract's term, the rent, and the mode of payment.

    The tenancy contract includes the details about Landlord's name and contact information, the tenant's name, and contact information. Property information including - complete address, building name and location, size, plot number, DEWA premise number, rent amount, contract term, and contract date. The amount of the security deposit, Payment options. Any additional terms and conditions not contained in the basic the provisions of the tenancy contract are linked to the agreement as an amendment. that spells out each party's particular responsibilities.

    All lease contracts for real estate that are subject to the terms of this law, as well as any modifications to those requirements, will be recorded with Real Estate Regulatory Agency (RERA). Unless a Lease Contract is registered with RERA in compliance with the relevant rules and regulations, judicial authorities, government departments, authorities, and corporations may not examine any dispute or claim or take any other action about it.

    A Lease Contract's term must be specified. The Lease Contract will be assumed valid for the period specified for payment of the rent if the term is not specified in the Lease Contract or if it is impossible to substantiate the purported term. According to Article 6 of Dubai Tenancy Law, if a Lease Contract's term expires but the tenant continues to occupy the Real Property without the Landlord's consent, the Lease Contract will be extended for the same duration or one year, whichever is shorter, and on the same terms as the previous Lease Contract.

    The Lease Contract does not end when either the Landlord or the Tenant demises. The contractual relationship with the heirs continues until the Tenant's heirs choose to end it, in which case termination must occur within thirty (30) days of notifying the landlord of such intent or the expiration date of the Lease Contract, whichever comes first.

    The Tenant's entitlement to continue to occupy the Real Property under the terms of the Lease Contract entered into with the previous owner is unaffected by the transfer of title to a new owner, provided that the Lease Contract has a fixed term. While a basic tenancy contract in Dubai is one page long, an addendum can be added to the contract to provide additional terms and conditions. Always be aware of these terms and clauses, which may include payments for utility expenses and repairs, as well as annual rent increases.

    Tenancy Law in Dubai

    The Real Estate Regulatory Agency (RERA) regulates the interaction between landlords and tenants in Dubai under the Dubai Rental Law No. 26 of 2007 (and revisions from Law No. 33). (2008). To avoid any potential problems or misunderstandings, the law spells out the roles and responsibilities of landlords and tenants. The Rent Issues Settlement Centre (RDSC), which was formed by Decree No. 26 of 2013, investigates and resolves all rental disputes in Dubai, whereas Decree No. 43 of 2013 governs all rent increases.

    RERA administers tenancy contract rules as well as the real estate sector in Dubai overall. Under the Ejari system, a new tenancy contract system has been built, and all tenancy agreements must be recorded with the system. The Dubai Land Department's judicial arm, the Rental Dispute Settlement Centre (RDC), was founded in 2013. RDC's goals include using new ways with adaptable mechanisms to suit the needs of the next era, as well as assisting in the execution of issues and problems about Dubai real estate with better precision, impartiality, and transparency.

    RDC is in charge of resolving all rental disputes between tenants and landlords involving real estate in the Emirate or its free zones, including counterclaims and requests for interim or urgent action from either party to the lease. RDC has created a specialized court system to deal with rental disputes, as well as conciliation procedures, to maintain social and economic stability while simultaneously promoting the Emirate's long-term growth. RDC also hears appeals against decisions and verdicts in line with the decree's requirements and the regulations issued thereunder, and its staff is in charge of enforcing RDC's decisions and judgments in rental disputes.

    Important Tenancy Contract Clauses

    • An addendum to the regular leasing contract can be appended by the landlord and tenant, outlining the terms of the agreement, including who pays for what services, such as the chiller. However, as stated in Article 4 of the Dubai Tenancy Law, it is essential to register the tenancy contract, as well as any revisions, with Real Estate Regulatory Agency RERA.
    • A single party cannot cancel a tenancy contract unless the two parties agree otherwise. If the tenant continues to occupy the property as indicated in Article 6 of Dubai Tenancy Law, the contract term is automatically extended for a similar length or one year (whichever is shorter) with the same terms and circumstances after the contract expires.
    • According to Article 14 of the Dubai Rental Law, if the landlord wishes to terminate or change the tenancy contract, he must give written notice to the tenant at least 90 days before the contract expires.
    • According to Article 27 of the Dubai Tenancy Law, the tenancy contract will not be automatically terminated in the event of the death of either the landlord or the tenant. It shall pass to the heirs unless the tenant's heirs wish to terminate the lease, in which case the termination will take effect within 30 days of contacting the landlord.
    • Under Article 28 of the Dubai Tenancy Law, if the property is transferred to a new owner, the tenant's right to continue to occupy the property is unaffected, as long as the tenancy contract includes a specified date.

    Who is responsible for signing the tenancy agreement?

    A tenancy contract must be signed in the presence of a witness by both parties, the landlord and the tenant. If a Power of Attorney (POA) is required, the Dubai Land Development DLD recognizes the signature of the landlord's legal representative. A Power of Attorney, or POA, on the other hand, is only valid for two years and must be re-stamped by the Dubai Courts after that period. Property management companies with a DLD license are also allowed to execute leases for the units they manage. The approved list of businesses can be seen on the DLD's official website.

    Early termination of Tenancy Contracts

    The provisions of Law No. 26 of 2007 Regulating Landlord-Tenant Relationships in the Emirate of Dubai (the Dubai Tenancy Law) and Law No. 33 of 2008 Amending Law No. 26 of 2007 Regulating Landlord-Tenant Relationships in the Emirate of Dubai (the Amended Dubai Tenancy Law) apply. The tenancy contract cannot be unilaterally cancelled by either the landlord or the tenant, but it can be mutually terminated by both the landlord and the tenant during the period of the contract. This complies with Dubai Tenancy Law Article 7, which states: "A legal lease contract cannot be unilaterally cancelled by the landlord or the tenant throughout its duration. It can only be ended by mutual agreement or in compliance with this law's rules."

    Both the landlord and the tenant are bound by the terms and conditions of the tenancy contract. This complies with Article 4(1) of the Amended Dubai Tenancy Law, which states: "The contractual relationship between a landlord and a tenant will be regulated by a tenancy contract detailing, in a manner that leaves no room for doubt, a description of the leased real property, the purpose of the tenancy, the term of the tenancy contract, the rent and payment method, and the name of the owner of the property if the landlord is not the owner."

    Furthermore, Article 19 of the Dubai Tenancy Law states that the renter is responsible for paying the rent on time. In the case that the tenant fails to pay the rent, the landlord has the right to evict the tenant under Article 25 (1) (a) of the Amended Dubai Tenancy Law. According to the aforementioned legal regulations, as a tenant, you must fulfil the requirements stated in your tenancy contract, and you may be required to pay two months' rent as a penalty for terminating the contract early.

    Unless an early termination clause is specifically included in the agreement, the landlord is not required by law to refund any rent if a tenant chooses to quit the property early. In the emirates of Dubai, there is no standard rule or controlling principle regarding early tenancy termination. Instead, the tenant should ask for a language in the contract that specifies a notice period and penalty amount in the event of early termination. Real Estate Regulatory Agency RERA's Law 26. of 2007 regulating landlord-tenant relationships does not have an article allowing for early contract cancellation but rather governs the relationship between the two parties throughout the contract.

    There is no provision in Dubai's tenancy law for terminating lease agreements early. Tenants must be aware that the Dubai tenancy legislation does not allow for the early termination of a lease agreement. The rental law only applies to landlord-tenant relationships for as long as the contract is in effect.

    One of the essential provisions of Law 26 of 2007 is that the lease agreement is binding on both the landlord and the tenant and that neither party can terminate it without the other's approval. Law 33 of 2008, which revised several provisions of Law 26 of 2007, only states that if either the landlord or the tenant wishes to alter any of the contract's provisions, they must give the other party notice at least 90 days before the tenancy contract expires.

    As a result, the effect of terminating the lease early will be determined by the tenancy contract's early termination clause. In the emirates of Dubai, if tenants have such a condition in their rental contract, they must follow it when terminating a leasing arrangement early.

    If the tenancy contract in Dubai does not include an early termination clause, the landlord may seek compensation from the tenant for breaching the lease and leaving early. This means that if the tenant wants to terminate the tenancy agreement early, they may have to forfeit their rent for the remaining time of the contract or pay some other kind of compensation to their landlord.

    What are the notice period and penalty for terminating a contract early?

    The tenant must provide the landlord 60 days' notice if they are quitting the property early. The penalty is usually 2 months' rent, which is paid to the landlord. However, because Real Estate Regulatory Agency RERA does not include an article allowing for early contract termination, any penalty or refund of prepaid rent is entirely at the discretion of the landlord.

    Eviction Cases

    According to Dubai's tenancy legislation, a landlord can demand early termination of a lease agreement. Under Article 25 of the Dubai Tenancy Law

  • the Landlord may seek eviction of the Tenant from the Real Property before the term of the Tenancy expiring only under the following circumstances:
    • If the Tenant fails to pay the Rent or any part of it within thirty (30) days on the date the Landlord gives the Tenant a Notice to Pay unless the parties agree otherwise;
    • if the Tenant sublets the Real Property or any part of it without first getting written permission from the Landlord. The eviction will apply to both the Tenant and the Sub-Tenant in this circumstance. The Sub-right Tenants to seek compensation from the Tenant, however, will be protected.
    • when the Tenant uses or allows others to use the Real Property for any illegal purpose or for a purpose that violates public order or morality;
    • unless both parties agree otherwise, the Tenant of commercial Real Property leaves the Real Property vacant for thirty (30) consecutive days or ninety (90) non-consecutive days within the same year for no justifiable reason;
    • when the tenant makes a change to the Real Property that makes it unsafe and makes it difficult to restore it to its original condition or damages the Real Property willfully or through gross negligence, by failing to exercise due diligence, or by permitting others to cause such damage;
    • if the Tenant uses the Real Property for a purpose other than that for which it was leased, or if the Tenant uses the Real Property in a manner that violates the Emirate's planning, construction, or use-of-land restrictions;
    • if the Real Property is condemned, the Landlord must show this by a technical report issued by or verified by Dubai Municipality;
    • the Tenant fails to comply with any obligation imposed on him by this Law or any of the provisions of the Tenancy Contract within thirty (30) days of the Landlord serving him with a Notice to Perform such obligation or term; or
    • Where competent government entities need the demolition or reconstruction of real property to meet the Emirate's urban development requirements. 

     The Landlord will give Notice to the Tenant through a Notary Public or registered mail for paragraph (1) of this Article.

    2) Only under the following circumstances may the Landlord request removal of the Tenant from the Real Property after the Tenancy Contract has expired:

    • If the owner of the Real Property desires to demolish the Real Property to reconstruct it, or to construct any new structures that will prevent the Tenant from utilizing the Real Property, provided that the necessary licenses are acquired from the competent organizations;
    • if the Real Property is in a state that necessitates repair or extensive repair that cannot be performed in the presence of the Tenant, provided that the Real Property's condition is verified by a technical report issued by or certified to the Dubai Municipality;
    • If the owner of the Real Property desires to take possession of it for his personal use or that of any of his first-degree relatives, provided that the owner establishes that he does not own another Real Property suitable for such use; or
    • the leased Real Property is being sold by the owner of the Real Property.

    For paragraph (2) of this Article, the Landlord must provide the Tenant notice of the eviction grounds twelve (12) months before the eviction date, provided that the notice is issued through a Notary Public or registered mail.

    Tips for resolve reparations of early Terminating of Tenancy Agreement

    To begin, look for an escape provision in the rental contract that allows the tenant to terminate the tenancy early. When entering a lease agreement, tenants must ensure that an exit clause is included. If they find themselves in the position of having to terminate a lease arrangement early, this will save them a lot of time and effort.

    If the tenancy contract does not have such a clause, approach the landlord. Explain the circumstances and reason for terminate the leasing arrangement. If the landlord accepts to negotiate an exit settlement, then it is obligatory to remunerate the landlord with payment of the penalty. Alternatively, the tenant might offer to locate a new renter for the landlord to avoid any financial damage. If the tenant is unable to find a renter promptly, they will most likely be required to compensate the landlord.

    In the past, tenants and landlords in Dubai were required to offer a 90-day notice period in the event of a rental contract not being renewed. However, after the implementation of Law 33 of 2008, which altered some provisions of Law 26 of 2007, a 90-day notice period is no longer necessary if either party does not intend to extend the tenancy agreement. Instead, Dubai's rental legislation has been changed to prioritize the conditions of lease agreements. As a result, tenants must make certain that they are aware of the notice time stipulated in the rental agreement.

    In Dubai, rent is usually paid through post-dated checks that are deposited with the landlord. If the landlord refuses to accept the checks, they can be delivered to the Dubai Rental Dispute Settlement Centre. The renter is expected to receive the leased property in excellent working order, and the landlord is usually responsible for any substantial maintenance or repairs.

    Experiencing a forcible eviction

    If a tenant in the emirates of Dubai faces eviction by their landlord, the tenant must first approach the landlord and try to resolve the situation. If the tenant and the landlord are unable to settle, the tenant has the right to submit a complaint with the Dubai Rent Dispute Settlement Centre (RDSC). When initiating a rental disagreement case in Dubai, tenants should provide all of their legitimate papers, including their tenancy contract or Ejari Dubai, the most recent DEWA bill, a copy of the title deed, and a copy of the tenant's passport and visa. Before addressing the RDSC, customers should have a copy of their Emirates ID and any other supporting documentation.

    The Financial hardship during the pandemic of COVID-19

    If a tenant is having financial difficulties and is unable to pay the rent, the first step is to approach the landlord, explain the situation, and try to reach an agreement that is acceptable to all sides. Providing supporting documentation, such as a copy of your employer's termination letter/pay reduction, will assist establish your claim of early lease termination. If the landlord refuses to bargain, the tenant can seek counsel from the Rent Dispute Settlement Centre (RDSC).

    Furthermore, in light of the current Covid-19 epidemic, local governments have asked both landlords and renters to reach an agreement on revisions to the existing lease contract. Based on the epidemic, both the landlord and the tenant may mutually agree to a rent reduction, early termination of the lease contract, rent-free time options, or any other concessions. The Dubai Tenancy Law and the Amended Dubai Tenancy Law are quiet on the subject of tenancy contract cancellation owing to force majeure. In layman's terms, "force majeure" refers to unforeseen events that prevent someone from performing their obligations under a contract.

    The pandemic may be regarded as an unforeseen event, and as a result, you may be allowed to unilaterally cancel your leasing agreement with your landlord. This conforms with Article 273 (1) of the Civil Transactions Law, which stipulates that in contracts involving both parties, if force majeure intervenes and renders the contract impossible to execute, the associated duty ceases, and the contract is automatically dissolved.

    Tenants can also personally approach and negotiate with the landlord, explaining that owing to the present financial position, to which tenants are unable to pay the penalty. To corroborate the claim of early termination, provide a copy of the Employer's wage Reduction letter or the updated employment contract to the landlord. If the landlord refuses to comply with the request of the tenant, a complaint can be submitted to the Rental Dispute Centre (RDC) in the emirate of Dubai, alleging that the concerned landlord refused to consent to early termination of your rental contract without penalty.

    It is also required to furnish a copy of your Termination letter to the RDC or Rental Dispute Centre. The complaint may be accepted by the RDC, and the tenancy contract may be terminated without penalty to the landlord. This is under Article 249 of the Civil Transactions Law, which states that "where exceptional circumstances of a public nature occur as a result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor to the point of threatening him with grave loss, it should be permissible for the judge - under the provisions of the Civil Transactions Law."

    The Rental Disputes Centre rules that tenants can end rent contract early if hit by financial hardship during COVID-19

    While dealing with hundreds of cases from residents and landlords, the Rental Dispute Centre declared that Dubai renters could terminate their rental agreement without incurring financial penalties provided they can show they were impacted by 'extraordinary circumstances.' Residents may be able to move during a 12-month lease without losing two or three months' rent due to the loss of a job or a fall in income.

    In light of the hardships some individuals had experienced as a result of the coronavirus outbreak, the head of the Rental Disputes Centre. Tenants can use 'Force Majeure as a legal defence to break a contract without penalty if they have a problem with their landlord. The expression refers to unforeseen external factors that prevent a person from fulfilling their duties.

    During the outbreak, the centre, which is the judicial arm of the Dubai Land Department, said that it had solved many cases in favour of renters. The judge urged property owners to be compassionate, as they are normally permitted to collect two months' rent if a renter vacates early. Most residential contracts in the UAE are paid a year in advance, with pre-written checks that are deposited over 12 months. During such extraordinary times, it is incumbent on all parties to cooperate and assist one another, taking into consideration their unique situations and being willing to give up some of their rights until the global crisis calms.

    The renter, who managed a company that provided in-home care for elderly people, told that they could not pay because of the outbreak's inconvenience. A judge concluded that this was justified, allowing them to end his lease without penalty and ordering the landlord to refund two uncashed rent checks. Real estate experts praised the judges' leniency but warned that if landlords are unable to make their payments, they might face legal action.

     

     

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    Sat, 05 Jun 2021 17:42:00 GMT
    <![CDATA[Getting to Grips with Exchange Traded Funds]]> Getting to Grips with Exchange Traded Funds

    An exchange-traded fund (ETF) is a class of securities that follows an index, market, commodity, or other asset which can be bought and sold on a stock exchange like any other stock. An ETF may be set up to watch anything from a single commodity's price to a vast and complex group of securities.

    ETFs may also be designed to follow complex investing strategies. For instance, SPDR S&P 500 ETF (SPY) is an ETF that traces the S& amp ;P 500 Index, which is a well-known example. ETFs may hold a variety of portfolios, such as securities, assets, shares, or a combination of them.

    An exchange-traded fund is marketable security, which means it has a price that can be purchased and sold quickly. Moreover, as it trades on an exchange like bonds, an ETF is considered an exchange-traded fund. When securities are purchased and sold on the market, the price of an ETF's shares can fluctuate over the trading day.

    On the contrary, unlike mutual funds, they are not listed on a stock exchange and only sell once a day after the markets close. Furthermore, as opposed to mutual funds, ETFs are more cost-effective and liquid. ETFs are valued and exchanged continually during a trading day since they are traded on a stock market. Furthermore, ETFs are priced like stocks and can be sold short or long.

    ETFs have a number of advantages, one of which is low-cost diversification, which helps to reduce unsystematic risk when spending. Furthermore, ETFs' passive investment nature seeks to watch the success of global indices and offers gains comparable to active fund investors that hold a diversified stock portfolio.

    How do EFT's function?

    During the day, when the stock markets are open, an ETF can be purchased and sold much like a business stock. An ETF, like a portfolio, has a ticker symbol, and intraday market data is readily accessible during the trading day.

    The number in shares outstanding of an ETF, unlike a company stock, will fluctuate on a regular basis due to the continuous production of new shares and redemption of existing shares. The willingness of an ETF to issue and redeem shares on a continuous basis holds the stock price of its underlying securities in line.

    More notably, institutional investors play an important role in the ETF's liquidity and monitoring reputation by buying and selling formation units, which are big blocks of ETF stock that can be traded for baskets of the underlying securities. Institutions use the arbitrage function provided by development units to put the ETF price back in line with the underlying asset value when the ETF price deviates from the underlying asset value.

    Fiat Currency Investment into ETF's

    An ETF, like a portfolio, is a form of fund that holds several underlying assets rather than only one. ETFs are a common option for diversification since they include a variety of properties. An ETF can hold hundreds of thousands of stocks from a variety of sectors, or it can be focused on a single sector or market. Some funds are solely focused on the United States, while others have a global vision. Banking-focused ETFs, for example, will hold stocks from a variety of banks around the industry.

    Types of Exchange Traded Funds

    Investors can choose from a variety of ETFs that can be used to generate dividends, speculate on market fluctuations, and hedge or partially offset risk in their portfolio. ETFs come in a variety of shapes and sizes, as seen below.

    • Commodity exchange-traded funds (ETFs) are based on crude oil and gold investments.
    • Currency exchange-traded funds (ETFs) invest in international currencies like the Euro and the Canadian dollar.
    • By shorting stocks, inverse ETFs try to profit from market falls. Shorting is the act of selling stock and then repurchasing it at a lower price, anticipating a price drop.
    • Government bonds, corporate bonds, and state and local bonds, also known as municipal bonds, can all be included in bond ETFs.
    • ETFs that monitor a specific market, such as technology, finance, or the oil and gas sector, are known as industry ETFs.

    Often inverse ETFs are exchange-traded notes (ETNs), not real ETFs, as investors should be conscious of. An ETN is similar to a mortgage, but it trades as a portfolio and is backed by a bank. Many ETFs are set up as open-ended funds in the United States and are governed by the Investment Company Act of 1940 unless subsequent rules have changed their legal conditions. The number of contributors who will participate in an open-end fund is unrestricted.

    Exotic ETF's

    Considering how ETFs are traditionally more passive and monitor a portfolio of shares, ETFs with high leverage have emerged. Leveraged ETFs maximize an investor's exposure to a certain index or asset class, such as triple-leveraged ETFs, which triple an investor's exposure.

    Leveraged ETFs, on the other hand, have a slew of vulnerabilities and come with a high level of risk. Furthermore, such leveraged ETFs have a negative tendency in the long run and will rarely triple the underlying investment output.

    Therefore, leveraged ETFs should not be kept as long-term investments due to their increased exposure, uncertainty, and negative bias. Instead, they should be seen by experienced traders as a buffer against large price movements in the short term.

    Purchase of ETF's

    Online traders and conventional broker-dealers all exchange ETFs. With Investopedia's list of the best ETF brokers, you can see some of the best brokers in the sector. Robo-advisors like Betterment and Wealth front, which use ETFs in their investment offerings, are an alternative to traditional brokers.

    Pro's and Con's of ETF's

    As it would be costly for an investor to purchase all of the securities in an ETF portfolio separately, ETFs have lower overall costs. Since buyers only make a few trades, they only need to complete one transaction to purchase and one transaction to sell, resulting in lower broker commissions. Each transaction is usually charged a fee by the broker. Few brokers also deliver no-commission trading on some low-cost ETFs, further lowering investor costs.

    The loss ratio of an ETF is the cost of operating and managing the portfolio. Since they track an index, ETFs normally have low expenses. However, it must be noted that tracking an index in a passive manner is not a commonality among ETF's.

     

    Advantages

    Disadvantages

    ETF's can be targeted at specific industries

    Fees for actively run ETFs are greater.

    ETF's enable managing risk by diversification

    Transactions are hampered by a lack of liquidity.

    Expense ratios are low, and broker fees are low.

    ETFs with a single market orientation restrict diversification.

    ETF's provide greater access to industries.

     

     

    Common Examples of Exchange Traded Funds

    • Physically Backed ETFs.
    • Sector ETFs.
    • The SPDR Dow Jones Industrial Average (DIA).
    • The Invesco QQQ (QQQ)
    • The iShares Russell 2000 (IWM).
    • Commodity ETFs.
    • The iShares Russell 2000 (IWM).

    Actively managed ETF's

    There are also professionally run ETFs, which include portfolio managers who are more interested in purchasing and selling stocks and adjusting the fund's holdings. A more actively managed investment would typically have a higher cost ratio than an ETF that is aggressively managed.

     Likewise, to decide if a fund is worth keeping, investors should look at how it is run, whether it is aggressively or passively managed, the associated expense ratio, and compare the costs against the rate of return.

    Assessing Passive and Active Equity Funds

    Upon assessing the growth trajectories of both active and passive equity funds, it becomes evident that both of them have been following a positive growth track over the past decade.

    ETF's and Dividends

    Although ETFs enable investors to profit from rising and falling stock values, they often benefit from businesses that pay dividends. Dividends are a percentage of a company's profits that is transferred or distributed to owners in exchange for retaining their shares. Shareholders transacting in ETF's are entitled to a percentage of the fund's income, such as interest received or dividends paid, as well as a residual benefit in the event the fund is liquidated.

    Understanding Taxes in the ETF Context

    Considering much buying and selling happens in an auction, an ETF is more tax-efficient than a mutual fund, and the ETF sponsor does not have to refund shares any time an investor wants to sell or purchase new shares each time an investor wishes to purchase.

    Likewise, as redeeming a fund's shares can result in a tax obligation, selling the shares on an exchange can help keep tax costs down. When an investor sells their stock in a mutual fund, the fund sells them back to the investor, resulting in a tax obligation that must be borne by the fund's owners.

    Stock ETF's that are Indexed

    As there are no minimum deposit conditions, an indexed-stock ETF provides investors with the diversification of an index fund as well as the freedom to sell short, buy on margin, and buy as little as one share. Alternatively, not all ETFs are similarly diversified. Some may have a large concentration of a single sector, a limited number of securities, or properties that are closely correlated.

    The Impact ETF's have on the Market.

    Many new funds have been generated as ETFs have grown in popularity among investors, resulting in low trading volumes for some of them. As a result, investors can find it difficult to buy and sell shares of a low-volume ETF.

    Concerns have been raised about ETFs' impact on the economy and whether their popularity will inflate stock prices and trigger fragile bubbles. Few ETFs use portfolio strategies that have not been evaluated in various market environments, which can result in large inflows and outflows from the funds, putting market stability at risk.

    The price volatility ETFs became more apparent after the financial crisis. Moreover, this factor played a significant part in ETF's flash crashes as well. ETF issues played a major role in the flash crashes and price losses that occurred in May 2010, August 2015, and February 2018.

    Understanding the Creation and Redemption of Exchange Traded Funds

    The creation and redemption process, which includes major specialist investors known as authorized participants (AP), regulates the supply of ETF securities.

    ETF Creation: In the event of an ETF issuing more shares, the AP buys shares of the stocks in the index the fund tracks and sells or trades them to the ETF for fresh ETF shares at the same price. As a result, the AP makes a profit by selling ETF shares on the open market. Creation is the method of an AP selling stocks to an ETF sponsor in exchange for ETF shares.

    ETF Redemption: An AP, on the other hand, purchases ETF shares on the free market. The AP then sells these securities back to the ETF sponsor in exchange for individual stock shares, which he or she will then sell on the free market. As a consequence, by a mechanism known as redemption, the number of ETF shares is limited.

    Conclusively, it is evident that with the inception of ETF's 27 years ago, the ETF industry has been known for its innovation. In the coming years, fresh and rare ETFs will undoubtedly be added. Though investors benefit from creativity, it is necessary to note that not all ETFs are created equal.

     

     

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    Sat, 05 Jun 2021 11:56:00 GMT
    <![CDATA[Understanding Bounced Cheque Laws in UAE]]> Understanding Bounced Cheque Laws in the UAE, and Why You Must Honour Them

    The dishonouring of checks has become a contentious and divisive issue in the UAE's legal landscape, owing to the serious consequences it now entails. In the UAE, Post Dated Cheques (PDC) are the most prevalent mode of payment, whether in a business-to-business or business-to-consumer partnership.

    Upon considering how the possibility of having dishonoured checks is a normal occurrence in the corporate world, the UAE Federal Penal Code placed criminal penalties against those who drew bounced checks in order to secure and provide redress against this act.

     Moreover, Article 401 of Federal Law No. 3 of 1987 imposes punishment in the form of a fine or imprisonment. It is also noteworthy that the court may order a fine of not less than AED 1,000 and not more than AED 300,000 or a sentence of not less than one year and not more than three years, depending on the circumstances.

    In this sense, a PDC serves as an entrust able payment instrument for a commodity or a consumable. Following an assessment of the present economic situation, the Emirate of Dubai has recently amended the legislation governing Dishonoured Cheques. At the present, cheques and their dishonouring are looked at through the lenses of UAE Federal Law No. 18 of 1993.

    Validity of a Cheque in the UAE

    In the United Arab Emirates, a cheque is valid for six months. The value of a bounced cheque in the UAE is two years from the presentment date expiry, according to Article (638/1) of the UAE Commercial Transactions Law Federal Law No. (18) of 1993, which means you will file a lawsuit against the drawer of a dishonoured cheque up to two years after the cheque has expired.

    Post Dated Cheques and Understanding Them

    Likewise, Post Dated Cheques serve as a secure method of payment for a service or a consumable. Foreign manufacturers and local retailers finding collateral for purchases on loan to dealers and distributors benefited from the guarantee of the able value of the product.

    However, as per the UAE Penal Code, a recent reform by the Emirate of Dubai (Law No. 1 of 2017 hereafter referred to as the 'Criminal Order Law') decreases the effectiveness and dilutes the criminality around PDCs (Federal Law No. 3 of 1987).

    Legal Implications of Issuing a Dishonourable Cheque

    In the UAE, the penal ramifications of a PDC are regulated by UAE Federal Law No. 3 of 1987, which states that the drawer of the cheque is legally liable for issuing a dishonourable cheque. In this case, a drawer of a cheque applies to the person who signed the check, whether it was a boss or a partner/co-owner.

    Likewise, it must be noted that other people's private funds have no bearing on the value of the cheque. Moreover, only the company's assets should be used to realize its worth.

    Furthermore, upon specifically assessing the cheque value and the evidence produced, a criminal court will either variably issue a fine between AED 1,000 to AED 30,000 or sentence the drawer to 1-3-year imprisonment.

    Likewise, such proceedings would entail a travel ban on the drawer upon a complaint being filed before the police station. This, however, will be reversed if the drawer either amicably settles or completes his term of imprisonment.

    Understanding the Period of Limitation

    The bearer of a bounced cheque will file a criminal complaint within five (5) years of getting the check, according to Article 20 of the UAE Criminal Procedures Law Federal Law No. (35) of 1992.

    The factors that can dishonour a cheque are as follows:

    • Termination of the bank account prior to the encashment of the released check(s).
    • The bank has been instructed to delay interest on the cheque.
    • There are no funds available in a sum equal to or greater than the amount of the check with respect to the date of issue. 
    • Mismatched signatures, no or incorrect dates, and overwritten or scribbled text are examples of technical errors.

    What do the new changes entail?

    The new amendments primarily explain the categories of criminal offences that may result from a bounced check, as well as the seriousness of the offence. A dishonoured check will now be known as an "executive document" that could be used in court for execution procedure under the new amendments.

    Understanding the One Day Court System

    This new streamlined ruling system promises to assess minor bounced check cases while issuing a verdict within 24 hours. More specifically, this new system has the capability of assisting the UAE's justice system in determining small crimes quickly and strengthening UAE misdemeanour rules.

    Further, in line with new changes, courts in the emirates of Ras Al Khaimah, Dubai and Abu Dhabi have been established in order to resolve minor cheque claims.

    Alternatively, the new legislation necessitates criminal courts to levy only a fine rather than punishment on minor offences. Objections to the court's decision must be lodged within seven days, and the case will be handled by the criminal court according to standard procedures.

    Likewise, a fine of AED 5,000 to AED 10,000 would be levied if the check is worth less than AED 200,000. Cases involving the above check value will be sentenced by the Dubai Public Prosecution without the need for a court hearing; however, the imposition of a fine would be limited to AED 5,000 to AED 10,000, depending on the circumstances.

    New Re-enlisted Criminal Offences Arising from Dishonored Cheques

    • Fraudulent use of cheques by ordering the bank not to pay the cheque amount; and
    • Withdrawing the account balance prior to the date of the cheque to prevent encashment.
    • Forgery of cheques.
    • Cheque falsification.

    Moreover, once the executionary process' is in motion, the civil courts would also attach the assets owned by the individual that issued the subject cheque while possibly serving orders for jail time. Furthermore, under the new regime, civil courts will be adamant in restricting those convict's right to perform or undertake business operations.

    On the opposite, the new amendments may have a positive effect on the processing of payments by cheques, as banks may be able to 'partially' fulfil a cheque demand where there are insufficient funds to service the claim. This would, in turn, ease the stress placed on organizations that are direly affected by negative cashflows within the market.

    Laws in Dubai Vis-à-vis the Other Emirates

    The Emirate of Dubai, under the 'Criminal Order Law', sets a threshold value at AED 200,000, below which there will be no criminal pursual by the criminal courts of Dubai, unlike in the other Emirates.

    However, it must be noted that such offenders of bounced cheques will be punished with the following fines:

    Emirate of Dubai

    S. No

    Cheque Amount

    Applicable Fine

  •  
  • Below AED50,000

    AED 2,000

  •  
  • Between AED50,000 - AED100,000

    AED 5,000

  •  
  • Between AED100,000 - AED200,000

    AED 10,000

     

    Notably, if the value of the check is less than AED 200,000, the Dubai Public Prosecution will only impose a fine on the drawer. The criminal courts in Dubai handle all cases involving checks worth more than AED 200,000.

    Emirate of Abu Dhabi

    S. No

    Cheque Amount

    Applicable Fine

    1.

    Up to AED 50,000

    AED 1,000

    2.

    AED 50,001 – AED 100,000

    AED 3,000

    3.

    AED 100,001 – AED 200,000

    AED 5,000

    4.

    AED 200,001 – AED 300,000

    AED 10,000

    5.

    AED 300,001 – AED 500,000

    AED 20,000

     

    On the contrary, this approach must not be confused with the UAE's Insolvency Law, as it does not decriminalize the dishonouring of cheques but merely permits an insolvent debtor to produce a civil court order for the purposes of either stopping or to postpone the procedures at the criminal court.

    Understanding Alternate Recourse Mechanisms Under Civil law?

    Fines payable under criminal proceedings is not entailed for the purposes of servicing the complainant/ bearer compensable amount but is levied, such that it is payable to the UAE government.

    Therefore, under such circumstances, a claimant can present his case to a civil court claiming his right to the disputed amount. This would ideally result in a judgement wherein the drawer of the bounced cheque is obliged to pay an amount equivalent to the value of the cheque with interest.

    Inability to pay after jail term

    Once a bounced cheque convict has served their respective jail term, they stand to be released upon completion of that period. However, if the original complainant files the case again in the civil court for the second time, the drawer will be liable to the amount in the remainder. More significantly, a failure to settle the remainder could prompt the 'drawer' to serve an additional jail term based on the civil law conviction.

    Process of Filing a Bounced Cheque Claim in Dubai

    • Use the Dubai Police app or website to file a police report.
    • Upon which, a case number and a visit date will be sent by the Dubai Police.
    • The police will contact the drawer and summon them to the station to report their statement until the bounced check and other information has been checked.
    • Unless the drawer settles the check balance right away, the case will be referred to the Dubai Public Prosecution.
    • On all cases involving checksums less than AED 200,000, the Public Prosecution in Dubai has exclusive jurisdiction.
    • The Dubai Public Prosecution will impose a fine and give the drawer a fair period of time to pay the payee the amount of the check.
    • If the drawer fails to pay on either of both counts, the case is taken to the Criminal Court, which will result in probation, a travel ban, and further fines.
    • Any cases of bounced cheques with a value of more than AED 200,000 in Dubai are dealt with by the concerned criminal courts.

    Conclusion

    Conclusively, cheques being dishonoured is a cognizable offence, wherein either imprisonment or a fine is entailed. It has also been evident that a creditor can file a criminal as well as a civil complaint against the drawer.

    The use of legal implications surrounding PDC's although effective, has been critiqued for being overly burdensome in a manner that curbs risk-taking and innovation, which has, in turn, prompted entities to seek other modes of security.

     

     

    ]]>
    Sat, 05 Jun 2021 10:53:00 GMT
    <![CDATA[Content Creation - Digital Millennium Copyright Acts Applicability]]> Content Creation and the Digital Millennium Copyright Act's Applicability

    Since the introduction of the Digital Millennium Copyright Act (DMCA) in 1998, there have been sweeping changes to the realm of content creation.

    Understanding the DMCA

    The Digital Millennium Copyright Act (or DMCA) is a contentious statute passed by the United States legislature in 1998 by then-President Bill Clinton. The aim of the DMCA is to strike a balance between the needs of copyright owners and consumers by investigating any copyright infringement that occurs in the modern world.

    The DMCA was created to control digital media and address the copyright issues that the digital world is facing. The DMCA not only investigates copyright infringement challenges that people face on the internet, but also strengthens sanctions for violators.

    Several scholars criticized the DMCA in its original form, believing that it would significantly affect the US IT industry's growth. Since widespread opposition, the legislation was revised many times to include several provisions, but several countries still have their own interpretation of the legislation.

    The DMCA's Jurisdiction

    Considering that the DMCA is part of the US copyright law, it is only applicable to websites published in the US. Any websites hosted in the United States are required to follow the legislation. As a result, even though the copyright owner is based outside of the United States, they will also issue a DMCA warning if the hosting website is.

    Moreover, it is notable that many hosting providers and enterprises, despite being located outside of the United States, follow their own copyright laws and often sign DMCA removal requests to escape legal repercussions in their home country.

    Furthermore, most sites hosted in countries that are members of the World Intellectual Property Organization (WIPO) follow the Digital Rights Management (DRM) rule and respond to DMCA takedown notices. Approximately 200 countries have ratified the WIPO treaty at this period.

    Fair Use and its Applicability Under the DMCA

    Fair Use refers to the freedom to use patented works under such terms without the consent of the copyright owner. The following are examples of constitutionally allowable uses of copyrighted works that come into the Fair Use category. They could be commentary, research, or news reporting. Fair Use encourages ingenuity, and those who use copyrighted works for the reasons mentioned above will not face copyright infringement charges.

    The Qualifiers to Assess Possible Fair Use Infringement -

    The possible infringement of fair use can be assessed based on the following pointers.

    • The copyrighted piece's content
    • The copyrighted pieces intend to function and purpose.
    • The substance of the copyrighted piece.

    Notices Under the DMCA

    Notices can take many forms; however, the most prevalent under the DMCA is the DMCA takedown notice informs a company, search engine, Internet service provider, or web server that the content they are hosting or linking to infringes on a copyright.

    The copyrighted content should be removed as soon as possible by the corporation or website that receives the note. If they do not delete the content in question, the ISP will take it down forcefully. However, when serving a DMCA takedown notice, you may encounter difficulties if the website hosting the copyrighted content is not based in the United States or another country that meets the DMCA or copyright laws.

    Is Prior Registration a Prerequisite to Issuing a Takedown Notice

    Prior registration of copyrighted work is not a prerequisite towards issuing a takedown notice. More specifically, as soon as you make tangible content, it becomes your intellectual property, and you own the rights to it, allowing you to file a DMCA note.

    Often people upload images, photographs, or written content to the internet without registering with the copyright office, but they retain proprietary rights to the material and will issue a DMCA warning if their content is used illegally.

    In the event that the person who submitted the notice gets a counter-notification alleging that no copyright violation occurred, they have 14 days to file a complaint. Likewise, if one wants to file a copyright infringement case and seek punitive compensation, they must first register. For the sake of its defence, DMCA takedown requests may be submitted for any unregistered content.

    Understanding the Safe Harbour Concept

    The phrase "DMCA safe harbour" refers to a clause of the Digital Millennium Copyright Act that exempts Online Service Providers (OSP) and other internet intermediaries from direct copyright infringement. More specifically, there are four harbours under information storage, system caches and digital networks.

    Moreover, the aim of establishing DMCA safe harbours is to extend the internet while also improving the efficiency and range of resources available. It was not practical to do it by limiting Internet Service Providers' responsibility (ISPs).

    Likewise, copyright infringements may have occurred as a result of ISPs rendering copies of copyrighted material for the purpose of increased speed, hosting websites, or merely leading traffic to pages that could contain infringing content. Likewise, as a result, ISPs and places that fall under one of the safe harbour groups have reduced responsibility to mitigate these issues and to improve the reliability and extension of the internet.

    Posting a DMCA Takedown Notice, and its Specifics

    A DMCA takedown notice may be posted through a variety of outlets interested in the infringed material's publication. To this note, the simplest method is to contact the site's owner and request that your copyrighted works be removed. People usually answer by removing the copyrighted content from their site to prevent any legal repercussions. On their website, you will normally find contact details or a contact form.

    Likewise, an individual should submit a signed DMCA submission to their hosting company; if the owner refuses, they will respond to the DMCA notification in accordance with their policies.

    Alternatively, if the provider validates your request, then it has the power to either remove or disable links to the infringing material right away. Likewise, a DMCA takedown request can also be filed through Google, in addition to contacting the website's hosting company.

    Likewise, an applicant must have the URLs of both your original content and the infringed material after entering your contact details. If you succeed, you can prevent the infringing website from receiving further attention from Google's search engine.

    Receiving a DMCA Notice and Steps to Follow Thereafter.

    A content creator that either hosts or maintains websites or publish any material online would receive a DMCA removal notice. In the event of being guilty of the claim, it is imperative to correct the error by locating and taking down the infringing material.

    Likewise, if an individual hosts several pages with several users uploading and exchanging content, there is a good chance that copyright infringement was done by them, and you were the next reasonable person to call. In such a case, the infringing material must be taken down as soon as possible.

    Alternatively, another possibility is that you knowingly used proprietary work under the Fair Use guidelines. If that is the case, get in touch with the notifier and tell them about the project you used their proprietary material for. It is likely that you will resolve this situation and reach an understanding with the copyrighted content's holders.

    DMCA Counter Notice's

    To this end, you can give a counter-notice to the original notifier if a party has not committed copyright infringement and has refused to respectfully resolve the problem with the person who sent the notice.

    Moreover, aside from the contact information, the counter-notice should contain the material that was deleted as of a result of the DMCA takedown notice. Furthermore, you must declare under penalty of perjury that you did not violate any copyrights and that the material was deleted in error.

    As a result, by default, you consent to the 'service procedures' from the notifier by filing a counter-notice. This indicates that you are aware that filing a counter-notice will result in a lawsuit. Likewise, when the complainant gets a counter-notice, he or she will either abandon the takedown order or file a complaint within 14 days. When filing a counter-notice, be extra careful and optimistic, as it might lead to a lawsuit.

    Social Media Platforms and the DMCA

    Twitch has had to deal with the harsh realities of DMCA enforcement and the balancing act of producing and managing content on streams. Beginning in 2015, YouTube had the same problem, which it continues to have today. Following a study of Twitch's back catalogue of VODs and clips, the Recording Industry Association of America (RIAA), a conglomerate comprising 85 per cent of all music companies, released a massive amount of "takedown notices."

    To this note, the usage of three songs in streams between 2017 and 2019 was the subject of these alerts, which were the product of Twitch's forced compliance with demands to uphold DMCA safe harbour security. Twitch now needs to strike a balance between the interests of copyright holders and the popularity of the platform's streamers.

    Similarly, Twitch's "three strikes" scheme penalizes streamers for behaviour taken years before, with no way to rectify the situation. Twitch has announced that they would collaborate with the group to improve content management choices, but the harm has already been done for many.

    Alternatively, YouTube has made significant reforms to how it governed copyrighted content and handled "takedown notifications," resulting in a near-universal backlash by YouTube makers. The sheer volume of content on Twitch suggests that, like YouTube, monitoring, issuance of warnings, and compliance have all been handled through bulk computer-based analysis.

    However, this approach left producers and streamers without answers for weeks, as they rely on clumsy appeal mechanisms and manual re-review to either have their videos monetized, escape prosecution, or get their videos reinstated on the website.

    Although YouTube and Twitch are both dealing with similar problems, their approaches are somewhat different. Any third party will find copyrighted content on Twitch and report it to Twitch. Twitch either pull the material down or mutes it and issues a warning to the streamer for violating the DMCA Guidelines and terms of service.

    Moreover, this mechanism occurs without the involvement or examination of a person. Although machine learning has come a long way, it still relies on the reporting party to avoid abusing the device, and it relies on false positives to discriminate between genuine infringement and something less than infringement.

    Similarly, until after the infringement has been done, this procedure does not allow for further nuance or interpretation. As a consequence, a user could be banned without having the ability to confront the problem or talk with an individual about a possible remedy.

    To this note, YouTube has set up a mechanism where content owners can react to and appeal to these demands, as well as resolve problems before their account is suspended or banned. Though the method is still vulnerable to misuse, it does have some due process for the creator, and Twitch can ideally follow some of the more promising implementations.

    On the other hand, considering Twitch's statements to the contrary, there have been questions regarding Twitch's ability to block users, and some suggest that a new mechanism may be created to resolve the concerns.

    Moreover, the new approach aggressively challenges Twitch's revenue model, as there is less content on the site due to VOD and clip withdrawal, which is a major consideration for existing streamers. Notably, many users have begun to abandon the twitch platform in favour of more streamer-friendly services in light of the negative working environment.

    Apparent Ambiguity

    To this note, when a streamer or maker is served with a "takedown note," they must determine how to act. The streamer or producer can determine if they have a license to use the content. If they do, the author should put together the necessary paperwork and/or contact the copyright holder and website.

    Likewise, in the event of the content creator not having authorization to use the material, then they may choose between deleting it, being barred from the site, negotiating with the copyright holder, or forfeiting monetization and risking legal repercussions. Currently, many developers are already using online resources to erase their extensive back catalogues, hoping that this will be enough to secure accounts that they have worked hard to create over the years. This is a complex and personal decision that will have a significant effect on the creator's channel's future.

    Conclusively, it is evident that with the introduction of mainstream social media, the notion of content creation has been threatened by the relatively rigid provisions under the DMCA.

     

     

     

     

     

    ]]>
    Thu, 03 Jun 2021 20:31:00 GMT
    <![CDATA[E Gaming its Overarching Legality in UAE]]> E Gaming and its Overarching Legality in the UAE

    The term "e-Gaming" refers to the entire computer gaming market, which includes everything from video game consoles to PC and smartphone games, as well as internet entertainment platforms and the eSports industry.

    Likewise, first-person shooter (FPS), multiplayer online battle arena (MOBA), and battle royale games are the most common forms of e-Gaming games. Some of the games that are played in e-Gaming competitions and other gaming and eSports activities around the world include Dota, Counterstrike, StarCraft, and Overwatch.

    The inception of the concept of e-gaming began in the early 2000s. However, the concept of competitive e-gaming can be traced back to the early '70s, where groups of students gathered to play 'space war', a period-correct game of the time-likewise, e-gaming streaming networks like Twitch. Tv has started investing in venues and rights to broadcast events. This injection of cash, combined with well-established game styles, has paved the way for gaming's rapid expansion.

    Understanding the Commercial Appeal of E-Gaming

    The industry's appeal comes from many of the same positions as professional sports, with a few main differences. The key difference being the games' analytics that is specific and targeted, in turn giving e- Gamers more opportunities to participate with statistics, monitor success, play against peers, and improve their gaming skills.

    Likewise, this appeal extends to the promoters, business interests, and advertisers. Increased viewing results in a significant increase in revenue than can be raised in conventional ways, and the data gathered from this captive audience allows for the targeting of promotions to certain audiences.

    Moreover, the global appeal of e-gaming leads to more global sales prospects, which will usually necessitate dedicated alliances and global broadcasting agreements. Many of these expenses and contract problems are decentralized due to the online existence of most eSports. One of the biggest benefits of the eSports industry over other types of professional sports is that it is less expensive.

    The gaming industry has reacted with vigour to this newly increased market demand. It has also proactively introduced new eSports competitions and tournaments while streaming platforms have raced to create and release new games by inking lucrative agreements with their biggest content producers.

    In recent months, cloud computing sites have proliferated, with Facebook unveiling a dedicated gaming app to compete with Twitch and YouTube. The gradual upgrade of the supporting infrastructure has stimulated the growth of cloud gaming. Likewise, BT, a British telecommunications provider, has teamed up with Google to provide cloud gaming.

    Meanwhile, industry players are preparing significant investments in product pipelines as well as mergers and acquisitions in order to consolidate intellectual property and expand, especially in casual gaming, whose popularity has grown through the lockdown.

    Likewise, another key dissimilarity between e-gaming and conventional sports is the element of inclusivity. It is notable that there is no specificity as to certain physical, with e-sports being more egalitarian, which in turn attracts a broader range of players. However, a high level of ability and reactive capability is required.

    Similarly, by 2021, the GCC e-gaming industry will be worth $821 million (Dh3 billion), nearly $130 million more than it was in 2017, providing opportunities for regional telecommunications firms looking to diversify their revenue sources. Moreover, being the second-largest Arab economy, the UAE was the region's largest e-gaming market in 2019, but Saudi Arabia is expected to overtake it this year, according to the study.

    On the contrary, relying only on infrastructure upgrades runs the risk of being an own target. Operators will help other businesses enjoy the profits of gaming by focusing solely on technology, although they will be limited to spectators. Instead, operators can monetize their technology assets by gaming. For instance, as e-gaming necessitates high-speed, low-latency networks, the launch of 5G is critical. Operators will form alliances with cloud gaming firms as they launch 5G, taking the prize with both hands. Operators will then provide quality gaming to their current and future subscribers on every platform.

    Operators grappling with a reduction in voice market sales will profit from the growth of the e-gaming sector, which will have new revenue sources. The opportunity to enter and succeed in the GCC gaming industry prompt a greater brand placement for telecom brands while potentially increasing customer satisfaction.

    Further, in an effort to support e-gaming and inspire non-gamers to enter the ecosystem, Etisalat, a UAE based telecom operator, has launched the region's first cloud gaming service

    Revenue Streams through E- Gaming

    Gaming is arguably the most lucrative medium of entertainment in the world, with mobile gaming, e-sports streaming, console sales, and more all contributing to the industry's profitability. The gaming industry is worth $148.8 billion globally, with the Middle East and Africa sector accounting for $4.8 billion. 

    E-Gaming generates revenue in a variety of areas. The majority of the money comes from game developers. To fans and gamers alike, developers offer game units or extra piecemeal sales in the games, such as DLC. Tournaments and broadcasts double as advertisements for the product.

    Similarly, to gain Overwatch's exclusive streaming rights, twitch paid $17 million, in turn pointing to the lucrative side of e-gaming. Likewise, due to its increasing prize pools, e- gamers can now rely on competitions for a living. These prize pools are further widened by tournament hosts, game companies, and the selling of passes and merchandise.

    Regional E-Gaming Viewership Statistics

    In the UAE, Bahrain, Oman, and Saudi Arabia, over 4.4 million people tuned in to thousands of outlets, with 556,391 views seen in May. Throughout the year, the video network, which helps users to live-stream their gameplay to fans all over the world, reported a total of 252,850 concurrent streams from countries all over the region.

    Arabic Twitch streams rose in viewership by 95.3 per cent year over year and 36.9% month over month in March, while the annual rise was 109.9 per cent in April. Following a fall in viewership, as the #StayHome limits were relaxed, the numbers soared again at the end of last year, with 572,143 viewers tuning in.

    Domestic Developments in the UAE

    The newly unveiled Abu Dhabi Gaming (AD Gaming) partnership is a new project spearheaded by twofour54 Abu Dhabi that brings together the Emirate's efforts to create a vibrant gaming and esports ecosystem.

    AD Gaming will provide a robust support framework for game makers, players, customers, and companies. The project will promote regional talent growth and introduce a year-round schedule of gaming activities to Abu Dhabi.

    Moreover, AD Gaming will provide a robust support framework for game makers, players, customers, and companies. The project will promote regional talent growth and introduce a year-round schedule of gaming activities to Abu Dhabi.

    Similarly, the Emirates Esports Association, Boss Bunny, Kashkool Games, Khousouf Games, and RobocomVR are among the 15 emerging gaming and esports companies that will join Yas Creative Hub when it opens in Q4 2021, according to AD Gaming.

    The new creative hub will include a purpose-built Gaming Hub, which will be run in collaboration with business giant Unity Technologies and will serve as a physical home for Abu Dhabi's gaming industry. A variety of talent acquisition and market assistance programs will be offered to start-ups and aspiring professionals in the field.

    Similarly, AD Gaming will also be launching adgaming.ae, which will be a portal website for gamers in the UAE gaming industry. This portal will include an esports activities schedule as well as a list of Abu Dhabi-based game studios and businesses. AD Gaming will also have a dedicated twitch channel where domestic gaming talent will be highlighted.

    Likewise, the Ras Al Khaimah based RAKEZ has also launched gaming business setup packages that include 18 main and support operation operations. Similarly, it has also been revealed that individuals intending to set up a gaming company would be in place to receive 3-year UAE residency visas for AED 7,725.

    Furthermore, the package's renewal rate will remain the same for the duration of the business's life. Likewise, Investors can use their primary license to operate under a maximum of three activities while gaining access to the RAKEZ Compass Coworking Centre, which provides open or private workstations as well as the ability to network and connect with other professionals. Moreover, investors from across the gaming supply chain, including tech and hardware manufacturers, distributors, subscription media companies, and support services providers, can take advantage of the bundle.

    Additionally, operators can make their brand more appealing to consumers is to invest in localizing content and making games. They can either build the requisite technologies in-house or create alliances with regional game developers to adapt global games to the GCC's language and culture.

    E – Gaming and its Legal Viability in the UAE

    The e-gaming boom has been seen by telecom operators Etisalat and Du as an opportunity to boost data use and sales. Etisalat unveiled the first cloud gaming service in the UAE in 2019 to support e-gaming.

    However, certain legal constraints tend to arise in this domain when one draws a Venn diagram between e-gaming and gambling, of which the latter is illegal in the UAE, whereby the points of convergence include cross-marketing of gambling and a gradual introduction to gambling like features.

    Likewise, in collaboration with the National Media Council, Etisalat, and Du, the Telecommunications Regulatory Authority (TRA) has adopted the Internet Access Management Regulatory Policy.

    This policy consists of several internet frameworks and categories that must be considered by UAE internet service providers in order to guarantee internet protection and shield end-users from inappropriate websites that contain materials that are counter to the UAE's moral and ethical standards, like gambling.

    Furthermore, the UAE government has established a set of national guidelines for media content, which mandates that all local mass media institutions operating in the UAE adhere to them. As a result, all local mass media institutions operating in the UAE must not only honour the UAE's regime, symbols, and political structure but also refrain from violating the UAE's Islamic values.

    Likewise, under Article 414 of the UAE Penal Code, anyone caught gambling face up to two years in jail or a fine of up to Dhs20,000 and a certainty of detention. Likewise, according to Article 415 of the UAE Penal Code, anybody caught operating a gambling enterprise in the form of a venue or in a public place faces a mandatory sentence of ten years in jail. Similarly, under Article 121 of the UAE Penal Code, an international gambler's custodial sentence can be amended by the court to expulsion from the UAE.

    Furthermore, individuals who promote online gambling or any other content considered to have the potential to prejudice public morality are punished under Article 17 of the Cyber Crime Law. Anyone found supervising, establishing, or operating gambling websites face imprisonment and a fine ranging from Dhs250,000 to Dhs500,000.

    Understanding Censorship

    The UAE, just like the other countries in the region, have been steadfast in censoring content and content creators that have the possibility of hurting local cultural sentiments and national image.

    To this note, the National Media Council (NMC) is responsible for monitoring the content of materials published in the country, including electronic games. More specifically, the NMC had played a crucial role in banning the game 'Spec Ops' for its damaging and incorrect representation of Dubai through its gaming maps.

    Similarly, NMC banned the sales of the globally popular game Grand Theft Auto, as it violated common cultural and Islamic values pertinent to the country and the region. Alternatively, the UAE's has prompted its content creators to self-regulate under the country's cultural, social, and legal constraints.

    UAE's Strides in Promoting Gaming

    The booming gaming industry in the UAE is something that Twofour54, a local content creation company, has been receptive to. The company has also partnered with gaming giants like Ubisoft to open a games production studio in Abu Dhabi.

    Conclusively, it is evident that the UAE has been making positive steps towards promoting and regulating e-gaming within the country. As mentioned earlier, the sector highlights great opportunities while also shining a light on potential pitfalls. Hence, balancing both interests through a solid legislative structure will spur this area towards greater economic growth while hindering its capability to generate 'immoral income', through gambling etc.

     

    ]]>
    Thu, 03 Jun 2021 11:42:00 GMT
    <![CDATA[India: Liquidated Damages]]> India: Liquidated Damages

    Background: 

    An amount that a contracting party offers to pay or a deposit that he agrees to forfeit if he breaches any promise, and both are technically recoverable or retainable as negotiated penalties if the violation happens, having been arrived at through a good faith attempt to estimate in advance the possible harm that will almost certainly result from the breach." 

    "Damages for violation by any side can be liquidated under the agreement, but only at a sum that is fair in light of the expected or real harm incurred by the breach," according to the American Law Reports annotation on liquidated damages. 

    In its true meaning, "liquidated liability" refers to a monetary settlement for an injury sustained by one party as a result of the other party's violation of the contract. Normally, the extent of the harm is defined in the contract itself as a precondition to prevent any side from breaching or violating the contract. Thus, liquidated damages are a sum of money settled by the sides to a settlement that one will pay to the other if one breaks or backs out of the deal (breaching) or if a complaint occurs as a result of the violation. The following formula should be used to measure liquidated damages: 

  • The amount of a down payment or a loan. 
  • The use of formula (such as 10 per cent of the contract amount). 
  • Only where (1) the condition is either "uncertain" or "difficult to quantify" and (2) the injury is "uncertain" or "difficult to quantify" may damage be liquidated under a contract. 

    (2) the figure is fair, taking into account the real or anticipated damage incurred by the violation of contract, the difficulties of demonstrating the loss, and the difficulty of seeking another, appropriate remedy; and 

    (3) The awards are formulated in such a way that they act as damages rather than penalties. A liquidated damages provision is invalid if certain conditions are not fulfilled. 

    The terms "liquidated losses" and "penalty" should not be used interchangeably. In the event that one of the parties takes action against the other, a responsible Court may impose a penalty. 

    "An amount which a party equally intends to pay or lose in the event of a violation, but which is set not as a pre-estimation of the possible real damages but as compensation, the threat of which is intended to avoid the breach," according to the American Law Reports annotation on the penalty. 

    The Indian Contract Act of 1872 contains some clauses to include protection in the event of a breach or termination of a contract by either of the contracting parties. 

    The Rule: 

    The Indian Contract Act, 1872, establishes the fundamental framework of Indian contract law, as well as its compliance and numerous provisions concerning non-performance and contract violation. This research aims to highlight clauses concerning "liquidated damages" in the event of contract violation and to conduct a comparative review between India and England on the subject. Before learning about liquidated penalties, it's necessary to consider the ramifications of contract breaches and the damages awarded in those cases. The related existing laws are Sections 73 and 74 of the Indian Contract Act of 1872

    Sections 73 and 74 of the Contract Act contain the following provisions: 

    Section 73: Compensation for loss or damage caused by the breach of contract: Where a contract is breached, the party who suffers as a result of the breach is entitled to receive compensation from the party who had violated the contract for the loss or damage caused to him as a result of the breach, which naturally arose in the ordinary course of things by that breach, or which the parties knew to be like when they made the contract. 

    Such consideration is not to be provided for any injury or harm suffered as a result of the breach in the distant or indirect sense. 

    Section 74: Damages for violation of the contract if a penalty is specified. When a contract is broken, the party complaining about the breach is entitled to receive reasonable compensation from the party who broke the contract, whether or not any damage or loss is proven. 

    An explanation is given. Increased interest from the date of default may be considered a penalty stipulation." 

    Under English Common Law, parties may specify an amount to be paid in the event of a default, which is irrecoverable if classified as a penalty by the Court, but recoverable if classified as liquidated damages by the Court. The Law of Contracts in India, on the other hand, does not consider any qualitative differences in the form of damages, as Section 74 abolishes the somewhat complicated refinement that existed under Common Law. Damages would be measured in the ordinary manner where there is a punitive provision, and the applicant will be able to recover a sum higher than the stipulated amount. The Court must consider the terms and underlying conditions at the time the contract was made, not at the time the violation happened, in determining the true essence of the contract and the amount of money due. The parties' words are not conclusive, and the Court is not bound by their language. The word would be viewed as liquidated losses if it is claimed to be a penalty but turned out to be a real pre-estimate of loss. 

    Supreme Court Decisions: 

    The Hon'ble Supreme Court of India has elaborated on the phrase "liquidated damages" on many occasions. 

    1. The Hon'ble Supreme Court of India claimed in Fateh Chand v Balkishan Das [reported in (1964) 1 SCR 515]:

    Section 74 establishes the legislation on the responsibility for violation of contract where restitution is predetermined by consent of the parties or where punishment is stipulated. However, the statute's scope is not limited to situations in which the aggrieved party seeks redress as a plaintiff. No party receives a special advantage as a result of this section. It simply states that, instead of any term in the contract specifying damages or allowing for forfeiture of property as a punishment, the Court can only grant fair relief to the aggrieved party not exceeding the amount named or penalty stipulated. 

    The object of such clauses, particularly in commercial contracts, is to foster certainty. Parties to a contract will set such a number in advance at the time of contracting because it makes it easier to calculate costs, decreases the complexity and cost of proving real injury or failure, and makes it easier to recover losses. It also prevents the challenge of assessing damages, particularly through the effects of the breach is known and the risk of under-compensation; otherwise, the law of remoteness can prevent the party from recovering indirect, substantive damages. It assures the promisee that the promise will be fulfilled in a secure manner. 

    2. In the case of Saw Pipes [reported in (2003) 5 SCC 705], the Supreme Court established the following rules for determining "fair compensation" under section 74 of the Contract Act

    Before determining if an applicant is entitled to arbitration, the provisions of the contract must be considered; if those terms are unambiguous, the sum specified therein must be paid unless it is determined to be a penalty or otherwise unfair. Section 74 is to be read in conjunction with section 73 in all cases of violation because it is not necessary for a claimant to prove real losses before claiming a decree; a court has the authority to grant "fair compensation" in cases of breach regardless of the nature of such evidence. When it is difficult for the Court to ascertain damages with precision, the Court can safely award the stipulated amount if it is the plaintiffs' true pre-estimate of damages as a measure of fair compensation. 

    3. In Chunilal V. Mehta & Sons Ltd. v. Century Spg. & Mfg Co. Ltd. [AIR 1962 SC 1314], it was held that "by arranging for restitution in express words, the right to demand damages under the common law is generally excluded." 

     

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    Thu, 03 Jun 2021 09:11:00 GMT
    <![CDATA[Software Patent]]> Software Patent

    Introduction 

    The digital economy's backbone is technology, and software accounts for a significant portion of its importance. In fact, the software is becoming increasingly important in all economic sectors as a means of leveraging productivity. Intellectual property (IP) regulations would be affected significantly as a result of this. 

    Most advanced products' functionality, especially those based on semiconductors, was largely embedded in hardware until the late twentieth century. Their patentability was unquestionable. However, with the advancement in semiconductor technologies and modelling tools, physical structures are no longer the only source of invention.

    The enormous economic growth and creative capacity of technology firms that manufacture goods that merge hardware and software, as well as the software industry as a whole, mean that the time has come to reinvent IP laws and put them in line with modern market realities.

    A software patent protects a software product, such as a computer program, libraries, user interface, or algorithm. A patent is a collection of exclusive rights issued by a government to a patent holder for a set amount of time, normally 20 years. Patent holders receive these privileges in exchange for disclosing their creations. No one may produce, use, sell, or import/export the claimed invention in a country where a patent has been granted without the permission of the patent holder. Permission is usually issued in the form of a licence, with the terms specified by the patent owner: it can be granted for free or in exchange for a royalty payment or a lump sum charge.

    Is it necessary that software must be patentable?

    Before we get into the details of software patent eligibility, it's important to remember a common developer viewpoint: software shouldn't be patentable in the first place. Many technologists contend that technological patents stifle creativity, claiming that 99 per cent of software is neither "novel" nor "non-obvious" to other developers with comparable technological skills. We prefer to side with and sympathize with the anti-tech-patent crowd, but software patents are a major concern for some investors and big corporations.

    Relevant IP rights to software protection  

    IP laws have historically driven the computing industry's growth by supplying tech developers with a legal framework to gain at least some of their innovation's market value. The tech industry has relied on three distinct IP rights regimes since at least the 1960s: trade secrets, copyright, and patent law. The extent of security provided by both has changed over time, as has the tech industry's dependence on them.

    Patent law has proven to be the most powerful framework for defending an invention's features throughout history. In certain nations, however, a distinction is made between patentable inventions incorporated in hardware and copyright-protected inventions implemented in software (i.e., computer programs). This legal differentiation makes it impossible for software-related inventors to successfully defend and exploit the market potential of their technologies by IP networks in an environment where the Internet – not devices such as CDs – is the primary medium for software delivery. These contributions to research are just as important as hardware-based inventions. Regardless of how they are marketed, computer systems, including software-related technologies, are goods in their own right.

    Patent protection's advantages

    New technologies in the area of science, in general, are eligible for patent rights provided they are novel, non-obvious, and useful (criteria of patentability are set out in national patent laws). Innovators benefit from patent rights in the following ways:

    • facilitating the formation of fruitful market partnerships between innovation-based start-ups and small businesses;
    • ensuring that inventors are compensated fairly for their commercially viable inventions
    • promoting systemic information exchange by patent disclosure, which is an effective source of creativity in and of itself; and
    • assisting in the recruitment of investment partners and the growth of businesses

    However, software-related innovations are not usually treated the same as other innovative technological advancements under patent laws. This may be due to a misunderstanding of the essence of software invention or the security provided by various intellectual property rights.

    Software and Business method patents

    In the United Kingdom, a patent may be awarded for a new invention that requires an innovative phase and is capable of industrial use (Patents Act 1977) since these are not considered patents, an invention that consists merely of a computer program or system for doing business "as such" would not be granted patent rights. Patent rights can be sought for technologies applied by computer applications, for example. The test is whether the innovation adds to what is currently understood about the field in terms of technology. If the only creative move is related to a subject matter that isn't patentable, such as a computer application, you won't be able to get a copyright. 

    In contrary to the European Patent Office (EPO) and the United States, the UK Intellectual Property Office (IPO) has a more conservative approach to software and business process patents. A four-step procedure (Aerotel Ltd v Telco Holdings Ltd (and others) and Macrossan's Application [2006] EWCA Civ 1371) is used to determine if a software or business process innovation is patentable.

    The test includes;

    • Interpreting the claim accurately.
    • Examining the actual contribution.
    • Examining whether the submission is solely related to the omitted subject.
    • Ensuring that the contribution is technical in nature 

    The Court of Appeal in Aerotel/Macrossan ruled that a mobile call prepayment device could be proprietary because the contribution was a complete telephone system, including hardware, and this amounted to more than a business tool (although the High Court later held that this particular invention could not, in fact, be patented, because it was obvious in the light of the prior art). A scheme for drafting documentation for incorporating a corporation, on the other hand, was found ineligible for patenting because it involved no technological contribution outside the execution of a computer program.

    Software patent applications must satisfy one of the following two conditions to be patent valid under the new patentability regime in the United States:

  • The innovation must be something more than just an "abstract idea," or
  • If the invention relates to an "abstract idea," it must also include/claim elements that "turn" the abstract idea into a patent-eligible submission.
  • Below, we go through each of these conditions in greater depth;

  • The innovation must be something more than just an "abstract idea,"
  • A software-based technology is patentable if it, among other things, "improves machine functionality.", for example,

    • increasing the efficiency of previously accessible computational processes;
    • allowing computations that were historically inaccessible or impossible for computing machines to do, or
    • reducing the amount of computational power needed to complete a job
  • The "transformation" requirement 
  • If one or more of the following factors are met, software that does not appear to "improve device performance" can also be patent-eligible: 

    • using "unconventional" components or arranges traditional components in an "unconventional" way to solve the problem;
    • "necessarily embedded in computer technology" (i.e., it does not occur in a conventional brick-and-mortar setting);
    • The patent arguments do not exclude all uses of the concept.

    When does software become an "abstract idea?"

    The general rule is that if the patent application is focused on enhancing the functionality of a device, it is patent worthy and not an "abstract concept." The patent application is called an "abstract concept" if the subject of the patent application is on a common method for which computers are used only as a means for implementing the process. The courts contend that a common method should not be allowed to be patented merely because it is carried out by a robot. Furthermore, some basic economic and traditional market methods, as well as mathematical algorithms, including those executed on a generic machine, are abstract concepts.

    At first glance, the rule of "improving machine functionality" seems to be beneficial, at least on the surface. Experienced technologists and patent lawyers, on the other hand, quickly realized that it doesn't assist with real-world analyses and doesn't correspond to how the software works in today's technology.

    In fact, the "abstract concept" question is often decided by the way the patent application is written. If you characterize and say the innovation in broad terms, it would almost certainly be classified as an "abstract concept." If, on the other hand, you explain and say your invention in great scientific detail, with an emphasis on the technical problems that your invention solves, your invention would almost certainly be classified as not being aimed at an abstract concept.

    Potential issues that may arise 

    The following topics must be considered:

    • Patent applications in the United Kingdom must state precisely what the contribution to state of the art is and that it is "scientific." The wording of US applications should not be relied upon.
    • Since software disclosure may favour rivals, patent protection could be unnecessary, particularly if the application is not granted. Other methods of intellectual property protection exist, such as copyright for computer applications.

    Recent development 

    The Gowers Review of Intellectual Property, released in December 2006, looked at whether intellectual property rights in the UK could be improved. The study looked at software and business process patents, among other aspects. According to the report, patents like these aims to stifle rather than foster creativity.

    As a result, it was suggested that the UK keep its stance of not stretching patent rights past its current boundaries. Software development was described as an example of a linear industry where patents sometimes do more harm than good in the Hargreaves analysis of the intellectual property, released in May 2011. The report was largely averse to software and business-method patents, and it recommended that the UK attempt to convince its European allies to follow the UK's stricter requirements.

    Conclusion 

    Patent security has been shown to promote creativity, raise living standards, and increase jobs. Will we continue to exclude or restrict patent rights for tech-related innovations as the world economy becomes rapidly digitized, with software increasingly becoming the base of innovation and market competition?

    Creating environments that enable innovators and developers to devote time to software creation in order to discover new ways to help us communicate and do business is undoubtedly the goal. As digitization spreads across our lives, the time has come for the international community to re-evaluate the current situation and consider the benefits of strengthening patent rights for computer applications that represent software-related technologies.

     

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    Fri, 21 May 2021 19:25:00 GMT
    <![CDATA[Compensation in a Force Majeure Event]]> Compensation in a Force Majeure Event

    Introduction

    Before considering any remedies, contractors might have steps, they may take to mitigate costs, it is necessary to first understand the definition of force majeure as defined by UAE jurisprudence and the different elements attached to it. 

    When it comes to force majeure, there is a major contrast between civil law and common law customs. While the doctrine of rebus sic stantibus is specifically incorporated into the UAE Civil Transactions Code (Civil Code), there is no general principle of force majeure in common law systems, especially in English law.

    A tripod is used in UAE law to define contractual or tortious liability. The three elements needed to determine any sort of liability are the harmful act, the injury, and causation. When an external act not attributable to the obligor is thought to have caused the harm incurred by another, the causal relationship is considered to be non-existent, and the obligor is released from any obligation to pay for the damage.

    Force majeure is a shield used by the obligor to disprove any causal connection between a negative incident triggered by the obligor and the damages incurred. Articles 273 and 287 of the Civil Code describe force majeure in a wider context. Other clauses of the Civil Code that are explicitly or indirectly relevant to force majeure include:

    Articles of civil code 

    Given that tortious liability often occurs during the execution of a construction contract understanding the application of force majeure in tort is equally relevant. Apart from slight differences that do not negate the effect of such protection on the execution of contractual obligations, the criterion of force majeure is the same in both provisions.

    Since force majeure legal requirements are not obligatory or in the public interest, the parties' agreement will be considered before agreeing on any force majeure entitlement. In other terms, in the event of force majeure, the contract remains the primary source of obligations between the parties as to what the parties intended. The rule only comes into play when the contract is silent or vague.

    In most construction contracts, the parties define the events that they consider to be acts of force majeure, as well as the effects that these events have on the contract's results. On this occasion, the parties may intend to use a more restrictive or broader definition than the courts normally use. Despite this, the contractual terms remain intact, and the parties' settlements are usually upheld by the courts.

    As a result, courts may consider the occurrence of the event dependent on the substance of any contractual clause when applying force majeure. The following are the conditions for force majeure as specified in Articles 273 and 287, as well as by UAE jurisprudence:

    The concept of "force majeure" 

    As previously stated, the unavoidability of the case is inadequate to constitute force majeure under contracts. It should be unpredictable as well. However, in tort, the avoidance of an event should be considered force majeure, absolving the obligor of any responsibility, provided that the obligor has taken all necessary precautions to prevent the event or minimize its effect.

    Clause 19, FIDIC, which is commonly used by construction practitioners in the UAE, mirrors the same legislative requirements. Force majeure, according to Clause 19.1, is described as an extraordinary occurrence or situation that meets the following four criteria: 

  • Uncontrollable by a political party. 
  • From which such party could not fairly have secured itself prior to entering into the contract. 
  • Which such group could not fairly have prevented or resolved until it emerged. 
  • Is not attributable in any way to the other group.
  • Clause 19.1 includes a non-exhaustive list of "exceptional incidents" or situations that may qualify as force majeure if they meet the requirements outlined above. Interestingly, unlike COVID-19, the list makes no requirement that force majeure be of a public nature and have a widespread and indiscriminate effect. Clause 19.1 applies a cumulative exam that is in accordance with the Civil Code. The term "force majeure" has been replaced with "exceptional events" in the 2017 version of the FIDIC Red Book, but the criterion for force majeure remains the same as in the 1999 edition. The latest version of the term, however, does not include the qualifier "exceptional." It is, therefore, up to the parties to amend Clause 19 (Clause 18 of the second edition) in a way that is fair in the circumstances, and courts generally uphold the parties' agreement. 

    Conversely, even though a contract does not explicitly state that an incident is a case of force majeure, the courts still examine if the event is, in the court's view, a case of force majeure. This is how the UAE's inquisitorial legal system operates.

    Distinguishing force majeure from unforeseen circumstances

    Lessons learned from the 2008 financial crisis show that the defence of force majeure is only valid when the performance becomes difficult, not just onerous. The Abu Dhabi Court of Cassation has thus stated that "both inflation and recession were natural risks of the industry" and that "unforeseen circumstances" would be the only protection possible against the performance of an otherwise onerous duty. This helps the courts to change the scope of the debtor's performance obligation in accordance with Article 249's provisions.

    Article 249 states that "in the case of extraordinary circumstances that are public and unforeseeable, which have resulted in making the execution of the contracted obligation, where it has not become impossible, has become onerous to the debtor in such a way as to threaten her with heavy loss, the judge can, if justice so requires, and according to circumstances and by balancing the interests, order the debtor to execute the contracted obligation." Any arrangement that violates this is null and void.

    In certain cases, unforeseeable situations, which are analogous to the French definition of improvision, vary from force majeure. The UAE Ministry of Justice's Commentary on Article 249 separates the two principles in two main areas: 

    • The event's impact: Though force majeure prevents the contract from being fulfilled, unexpected circumstances make it burdensome for the obligor. In other words, if the obligor is compelled to specifically fulfil the exorbitant obligations, unexpected circumstances threaten the obligor with exorbitant failure.
    • Case Remedies: The Civil Code has an "objective" qualifier (if justice so requires) that must be met in the eyes of the judge before the courts can interfere in reducing a duty whose performance has become onerous. When it comes to declaring a remedy dependent on force majeure, there is no such objective qualifier. As previously mentioned, courts will recognize the contractor's circumstances and willingness to bear the effects of force majeure at the time of contract signing when evaluating the foreseeability test.

    It's a common blunder to mix up force majeure and unexpected events. When it comes to the pandemic COVID-19 and its effect on various projects across the UAE, there is likely to be some uncertainty. Unlike unforeseen situations, which are subject to overriding mandatory legislation, force majeure is not, and contracting parties may opt-out of the law's requirements. 

    In the absence of UAE government legislation treating the pandemic as a force majeure case, much would hinge on the impact of COVID-19 on each individual contract and whether the parties anticipated the implications when they signed the contract. In this regard, courts will assess force majeure based on the facts of each case, rather than when "justice so requires." This is particularly true given that the effect of COVID-19 on trade and business varies from country to country, at least as of the writing of this report. Indeed, it could be argued that the UAE's effect on companies has been less severe than in other European or Asian countries.

    Depending on whether the contractor is local or foreign or whether the contractor is reliant on an international supply chain to complete the project, the courts can take a different approach. They can also refuse to maintain a force majeure defence if the majority of the obligations, such as testing and commissioning, have been met, as well as the (near) expiration of the defects liability period. 

    In this case, it is up to the courts to decide if the elements of force majeure are met before the debtor is released from its obligations. This brings us to the legal recourse available in the event of force majeure in the UAE.

    What if my contract doesn't have a force majeure clause? 

    Even if the contract does not contain a force majeure clause, you might be entitled to additional relief as a result of COVID-19's effect. 

    Changes to the law 

    Change-of-law provisions are used in certain contracts to protect the parties if a change in the law makes success unlawful, impossible, or more difficult. Relief could be possible under a change of law clause, as many governments and other jurisdictions have implemented emergency legislation in response to COVID-19.

    Frustration

    If the contract does not provide for force majeure relief, the common law doctrine of annoyance can apply. A contract may be frustrated if a subsequent incident renders performance impossible, immoral, or significantly different from what was agreed upon when the contract was signed. Frustration has the effect of immediately terminating the contract (i.e., without either party taking any further action), which can be a very harsh outcome.

    Cost Comparisons 

    Some contracts, such as long-term product selling and purchase agreements, allow for price renegotiation at either fixed milestone during the contract's existence or when a significant shift in the market occurs, causing the contract price to become "out of step" with the market. 

    Abandonment 

    Termination 

    clauses can give the parties the right to end a contract under some situations or at their discretion.

    Conclusion

    COVID-19 has had an unprecedented effect on human lives and foreign trade. It has brought whole cities to a halt and could have long-term consequences on how businesses are conducted. Although the coronavirus may be argued to be an unforeseeable and inevitable phenomenon, whether or not it qualifies as force majeure will be determined by the facts of each argument, namely:

    • If the parties have already settled to a force majeure clause. 
    • Whether the contractor may prevent or minimize the consequences of force majeure. If the effect is solely economic, it will simply make fulfilling the duty more difficult. 

    Finally, parties may not be interested in terminating their contract but instead pursue other relief options offered in the contract.

     

     

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    Sun, 09 May 2021 10:43:00 GMT
    <![CDATA[Regulatory framework of mergers in Russia]]> Regulatory framework of mergers in Russia

    The Russian merger control does not differ substantially from its counterpart's country in Europe and North America. In general, it is investor-friendly, and the risk of not obtaining compensation is rarely cited as the reason for not proceeding with a trade. 

    However, the Russian merger control regime has its own specificities, the knowledge of which can be essential for a transaction to be settled smoothly and on time in Russia. The purpose of this article is to provide an overview of the Russian merger control framework and its scope, including events that trigger a filing requirement, statutory notification thresholds and some aspects of the treatment of joint ventures, restrictions on the foreign investment.

    Legal Framework 

    Russia's merger management system is mainly regulated by Federal Law 135-FZ on the Protection of Competition "Competition Law," which came into force on October 26, 2006, to regulate competition in financial markets and of commodities. It replaced the two previous laws-1991 and 1999, respectively. 

    In 2007 and 2008, amendments to the law on fines and generosity linked to sales were introduced in the Russian Administrative Offenses Law, and the Federal Antitrust Authority of Russia ("FAS") adopted the revised notification rules of mergers. 

    In July 2009, a series of legislative amendments known as the "Second Antitrust Package" were passed, resulting in significant changes to competition law, the administrative offences law, and other legislative laws. In the context of merger management, the Second Antitrust Package raises notification thresholds, introduces exemptions for certain types of intra-group transactions, and broadens the scope of merger management to include transactions between foreigners. 

    In January 2012, the "Third Antitrust Package" entered into force. This reform introduced new standards of local presence applicable to transactions between foreigners, increasing and changing the notification thresholds even more. The target-related notification threshold calculation method and FAS have additional authority to clear the transaction subject to qualifying parties having fulfilled condition precedents.

    In January 2014, another series of amendments to the competition law was enacted. The most important of these was to eliminate the post-dismissal notification requirement in almost all cases (except as described in section 2.2 below). This move was made to ease the administrative burden of FAS and allow us to focus on large transactions that require prior approval.

     In January 2016, the "Fourth Antimonopoly Package" introduced further amendments to the Competition Law. This includes (i) the introduction of a pre-dismissal notice system related to joint venture agreements between competitors (reaching a certain financial threshold). (ii) Abolish Russian corporate registration with a market share of 35% or more.

    In 2018, FAS announced another bill, the Fifth Antimonopoly Package. However, it is unclear whether it will pass with amendments, and if so, whether it will affect the current merger management regime. The latest draft of the bill, among other things, clarifies changes in the review period for foreign-to-foreign transactions, the establishment of compulsory licenses as a merger, and the status of trustees / independent experts approved by the FAS will monitor the implementation of merger measures remedies.

    It is widely accepted that FAS may have done more to clarify the scope and implications of the merger management provisions. However, FAS has made significant improvements in obtaining approval for merger management. The procedure is generally predictable and transparent as compared to the past few years. 

    Regulatory Framework 

    • Transactions Subject to Clearance 

    The merger management rules include a set of notification requirements that distinguish and apply three broad categories of transactions:

  • Acquisition by acquiring of shares, assets, or other control over a Russian commercial or financial institution or a non-Russian subject entity. Meet the local test presence.
  • Establishment, merger or accession of a Russian company in accordance merger or accession of a Russian company in accordance with the Russian restructuring system. 
  • Conclude a joint venture agreement between competitors. 
  • Cross-border M & A transactions usually fall into the first category of transactions. These typically include the direct acquisition of shares in the Russian target or the acquisition of a Russian target outside Russia that controls a Russian legal entity or has significant sales in Russia. The practical importance of the second category is very limited.

    The third category was introduced in January 2016 (as part of the fourth anti-monopoly package). To date, it has not received a widespread practical application, but now we see its growing importance. 

    Notification thresholds (exceeding those requiring authorization to monitor the merger) are linked to the assets and turnover of the parties to the transaction. All Russian thresholds are very low compared to Western merger control regimes, which means that almost all cross-border acquisitions require prior authorization. Typically, merge authorization mode is a pause in nature, i.e. 

    a transaction should not complete until authorization is granted (except for some intra-group transactions that require post-closing notification. However, in some cases, it may be desirable to first separate companies subject to merger authorizations in Russia and transfer them later (after obtaining merger authorizations).

    • Inter-group Transaction

     This is a feature of the Russian Merger Regulation Administration, which generally extends to transactions between entities belonging to the same group. However, there are some exceptions to this. Some inter-group transactions do not need to be cleared; For others, filing a post-closing notice with the FAS is sufficient (rather than obtaining a pre-closing clearance). These exceptions apply in the following cases: 

    Parent Approval is not required for transactions between a parent entity and its subsidiary. This also applies to cases where a unit is 'transferred' with a parent or subsidiary chain, subject to the requirement. However, at each stage, more than 50% of the units involved by the shareholders are attached. 

    The statutory wording of this exemption is narrow, but it is widely applied by the FAS. Specifically, the FAS generally acknowledges that this exception applies to the transfer of sister companies within the same group, with parties indirectly providing more than 50% of the shareholding to the related transactions. In practice, this exemption has proven to be an effective tool for presale restructuring and engraving, enabling transactions from abroad to be executed more quickly 

    • Intra-group transactions that do not cover the first exemption may require a post-closing notice (filed within 45 days after the intake) if the group discloses its structure publicly.

    in compliance with the below rules:

  • A list of all entities involved in the group is submitted to the FAS at least one month before the relevant transaction. The FAS then publishes this list on its official website; 
  • As of the closing date of the related transaction, the list must be correct and up-to-date, that is, without changes in the group (including the addresses and CEOs of the companies). 
  • Generally, this pre-closing disclosure process can facilitate and expedite transaction implementation. In practice, however, some foreign groups may leverage due to the process as its complex and broad rules defining a group and the FAS's strict approach towards any minor changes if three are within a group. 

    • Treatment of Joint Ventures
      • General treatment of joint ventures 

    Establishing a joint venture often involves the acquisition of property, shares, or rights by the joint venture entity from its founder and/or third party. Consequently, the general merger control rules applicable to the acquisition of shares/assets/rights and the establishment/merger of the following entities will apply. The practical implication of this is that the establishment of a joint venture may require either 

    • approval of a joint venture agreement and/or (ii) blanket approval of the merger. In other words, creating a joint venture is considered the acquisition of shares, assets, or rights by a newly formed joint venture entity from its founders. Consequently, joint ventures generally do not require approval under the general rules if (I) a legal entity is not formed, or (ii) the new entity is financed only with cash contributions.
      • Treatment of Foreign-to-Foreign Transactions 

    Russian competition law follows the "theory of effects." That is, if a foreign-to-foreign transaction/activity can affect competition in the Russian market, such a transaction/activity applies. Currently, foreign-to-foreign transactions are 

  • located in a Russian entity, or
  • a company that directly or indirectly controls a Russian entity, or Entities havening Wealth that owns considerable assets. Or
  • an entity whose turnover in Russia exceeded 1 billion rubles (approximately 13 million euros) during the previous year's transaction.
  • There is no legal guidance regarding the calculation of the threshold mentioned in (iii) above. Traditionally, the common understanding has been that the threshold should be assessed individually for each non-Russian company.

     However, according to the unofficial details of the FAS released in August 2016, the threshold is calculated on an aggregate basis. That is, for all non-Russian companies in the target group. 

    Competition law does not specifically regulate foreign transactions. The financial threshold, the procedures, and the timing apply are the same as for domestic transactions.

    Conclusion  

    • Over the past decade, the Russian control of Russian integration has turned into a civilized manner, much like Western Europe and North America. Important features remain, such as the risk of rejection for formal reasons and the choice of AS FAS for conduct.
    • Also, large-scale Russian integration controls continue to focus on ownership control. Often the FAS requests additional information to disclose rather than respond to explicit competition issues of end-users, group formations, and corporate affiliations. 
    • However, despite the challenges of the process, the process of overcoming integration in Russia is generally predictable and investor-friendly. The maximum review period is three months and may never take longer (savings in the rarest cases of pre-closing measures). In recent years, FASA has given the green light to a number of transactions, including significant overlaps. FAS treatment is usually 'digested' for both parties. There are some instances where this transaction was terminated due to the conditions imposed by the FAS. 
    • The FAS is generally neutral in its assessment, and Russian integration control has been severely affected by the international geopolitical situation and sanctions. Last but not least, all these states are in conflict with the Russian foreign investment system, where the filing and review process is often unpredictable, cumbersome and time-consuming.

     

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    Sun, 09 May 2021 09:32:00 GMT
    <![CDATA[Understanding Liability Lawsuits under Turkish Law ]]> Understanding Liability Lawsuits under Turkish Law - Part A

    Introduction

    The term "Liability" has been used extensively in the context of the law. In simple terms, it indicates the legal responsibility a person owns for his/her actions. Liability is mostly governed by the contract and customs of tort when the situation involves a tortious liability. Failure to comply with the responsibility shall result in liability lawsuits for any resulting damages from being claimed. The Turkish Commercial Code (TCC) has been thorough and relatively extensive in addressing the prospects of legal recourse by means of liability lawsuits as a form of 'legal action'.

    Director/Management Liability

    Director liability is governed primarily by Article 553(1) of the TCC, under which the provision implicates individuals, such as but not limited to directors, liquidation officers and corporate officers, as liable for arising losses if they are found to have negligently breached their obligations that evolve from the applicable laws and articles of association. 

    Understanding Breach of Duty 

    The concept of 'Breach of Duty' under the TCC is wholly dependent on certain conditional factors. Firstly, it must be established that there has been a violation of a statutory obligation by way of a negligent act. Secondly, the said obligation would only form the basis of a potential violation if it has been expressly conveyed to the individual under the periphery of the TCC. 

    Direct Loss and its Entailing Repercussions 

    The activation of a claim to a direct loss is dependent on the said loss being such that it has either resulted in a decrease in value or prevention of a potential value increase of the company's and shareholders assets. Additionally, a direct loss can also be claimable by creditors if it deems to have recognized a statutory violation that has led to a decrease in value or prevention of a potential value increase of the company's assets. 

    Likewise, the Turkish courts have also gone above and beyond to further widen the aforementioned precedent, to include intentional fraud committed by management in the form of striping corporate assets by means of fictitious transactions. 

    Further, if the company carries reasonable grounds to believe that a said loss has been incurred due to mismanagement, it must then conduct a shareholders meeting, which must affirmatively vote in favour of initiating proceedings citing 'direct loss' concerns. Thereafter, the company must decide on appointing directors for proceeding with the claim on behalf of the company's positive interests. 

    However, if the court recognizes the board in its entirety to be culpable of the said violation, it will assume the responsibility of appointing a third-party representative for the purpose of initiating and proceeding with a claim under 'direct loss'. Moreover, in such an event, the court will replace the current board with a new board if it recognizes culpability on the part of the former. 

    In the event of the court recognizing culpability, the courts under Article 367 (2) would deem the director(s) to be jointly and severally liable for their negligent acts resulting in them becoming liable.

    Indirect Loss and its Entailing Repercussions

    The activation of a claim to an indirect loss is dependent on the said loss being exclusively inflicted on the company's assets. Therefore, an action may only be brought about by the company to assert its claim to a direct loss. 

    Although, it is noteworthy that a shareholder could raise a separate cause of action under the ambit of Article 555 (1) of the TCC. However, under either of the aforementioned eventualities, the compensation will only be received by the company and not the shareholder. Contrastingly, an action under indirect loss by a shareholder does not require affirmative approval by way of a shareholders meeting. Similarly, such claims to indirect losses are subject to a limitation period of six months under Article 558 (2).

    Likewise, as under Article 556 (1), creditors also gain a right to claim indirect losses, provided the company under concern has filed for bankruptcy, and the company has not filed for a liability lawsuit. In this event, the creditor gains the added advantage of being entitled to litigation proceeds on a priority basis that is higher in the ranking than that of the shareholders and bankruptcy estate. On the contrary, if the creditor is not steadfast in raising its claim, then its standing would drop in priority, as per Article 556 (2).

    Litigation Costs

    It is also noteworthy that in claims seeking indirect losses, courts carry the discretion to equitably redistribute litigation costs based on the value of compensation paid to the company and the specific facts of the case at hand. 

    Understanding Causation

    In order to better understand liability arising from a breach of duty, it is imperative to assess the connection between a negligent act and the arising loss thereafter. Formally, this connection is referred to as 'causation', which the courts rely on to assess individual liability on the part of the shareholders. 

    Relief

    Shareholders or directors can seek relief from potential liability by means of 'delegation' as a form of liability relief. Article 367 (1) of the TCC clearly indicates the pathway for shareholders to either partially or totally delegate the management to other director(s) or third party. 

    More specifically, in order to begin 'delegation', the director(s) must adhere to certain procedural norms. Firstly, the director(s) are required to make and modify the articles of association via majority consensus to initiate delegation procedures. Likewise, the board is also required to formalize an administrative plan by way of an 'internal directive'. Moreover, it is this document that outlines the duties and obligations upon delegation. Further, an 'internal directive' must be followed by a formal board resolution to lay the route map for the newly appointed director(s) by way of a delegation. 

    On the contrary, certain duties such as the macro-management of the company and its maintenance are non-delegable directorial duties in nature. Nonetheless, upon successfully delegating one's duties, it deprives and defends itself of any prospective third-party liability claims. 

    Secondly, another mode of relief is to exercise 'release'. In essence, the relief of release negates any possibility of liability lawsuit, provided the breach of duty had been fully known to the board. Under such circumstances, having full knowledge of the prevailing circumstances would equate to shareholder consent. Likewise, as per the 'Statue of Limitations', it must be noted that a shareholder shall waive its right to initiate liability action if its previously voted in favour of a release request. 

    Onus on Proving Burden of Proof

    Despite having discussed the various routes to establishing liability on the part of the director(s), it must be noted that director liability does not constitute a strict liability. It is also imperative to note that the lack of specificity with respect to the burden of proof under Article 553 (1) places the onus on the plaintiff to prove their claims of director negligence. This, upon closer reviewal, places the plaintiff in a detrimental position because of the limitation posed against him or her in gathering internalized corporate documents. This, in turn, under Article 553 (3) acts as a protective cloak protecting directors from their potential liabilities.  

    Conclusively, it is evident that although directors within companies are susceptible to liability suits, they are sufficiently protected through the aforementioned relief mechanisms. 

    Shareholder Liability

    In the event of a breach of stipulated conditions within the shareholders' agreement, an individual shareholder is within his capacity to bring about simultaneous liability lawsuit proceedings against another shareholder. Moreover, such breaches would, in turn, prompt either a claim to remedy or compensation to the non-breaching party shareholder. 

    An Eventuality: Absence of a Shareholders Agreement

    The notion of loyalty is one that has been greatly contested in the Turkish legal landscape, as there has been no enshrined provision catering to the former. This has been further elucidated by Article 480 of the TCC, which only establishes a relationship between a shareholder and its company on the basis of a renewable capital payment subscription. 

    On the contrary, companies have recognized the importance of acting in 'good faith' and in the collective best interests of the company, which naturally trickles down to the shareholder level. Moreover, this sense of 'loyalty' between shareholders tends to be generally textualized within the memoranda of association, prompting shareholders to act in accordance with the two aforementioned principles.  

    Perceived Duty of Loyalty between Partners in an Equity Joint Venture

    The setting of an equity joint venture is the pathway individuals tend to take prior to incorporating a company under the virtues and regulations of the Turkish Commercial Code. More specifically, in beginning such a venture, the individuals would enter into a partnership agreement that stipulates the conditions and obligations central to that venture. 

    Further, Article 626 of the Code of Obligations clarifies the centrality of such a partnership agreement and how partners must solely act in their personal and collective interests vis-à-vis the equity joint venture. 

    This area is further supplemented with the provisions under Article 628, which places a 'duty of care' on partners to act in a manner such as he would ordinarily in his personal business. Thus, the duty of loyalty exists beyond perception in the case of an intra-shareholder partnership behind an equity joint venture. 

    Understanding Statute of Limitations

    In the event where there is an establishable intra-shareholders agreement and a violation contravening with its principles, it would be imperative to assess the nature of the concerning violation. Thereafter, if the violation is identified to be tortious in nature, a two-year limitation period would be imposed, whereas if the violation is contractual in nature, the limitation period would be ten years. Further, if the violation arises without an underlying partnership and there has been, then a possible cause of action would be deemed to be tortious in nature.

    Recognizing Alternate Causes of Action

    In the event of a loss due to unlawful dominance over not being compensated, a cause of remedy will be activated against each of the constituents of the controlled company. The intended purpose of this alternate action is to recoup the losses borne by the affected shareholder. 

    Defining the Element of Control

    Control, simply put, can be understood in terms of exertion of a level of control or dominance by the shareholder(s) in their pursuit to further the interests of the company. However, this sense of control and its legitimacy tends to become blurred in certain scenarios. 

    In order to assess illegitimate 'control', companies tend to rely on an approach of 'comparative reasonableness', wherein a fictitious company's possible behaviour under specific circumstances would be relied upon to draw an inference vis-à-vis an exertion of abusive control. 

    The use of control would be assessed differently depending on specific circumstances. The first nature of control would concern Article 202 (1) (a), wherein abusive actions by a controlling shareholder are cited to indicate damage on a subsidiary. Additionally, the use of unlawful control could also arise in the case of unjustifiable material transactions taking place at the subsidiary level, as elucidated in Article 202 (2). 

    Relief against Possible Liability Claim

    Establishing a 'duty of care' is a primary requisite towards finding a legitimate claim in liability due to abusive actions. Likewise, as previously noted, the bar for 'duty of care' is sufficiently high, and the element of 'burden of proof' makes it all the more cumbersome to prove. This, in turn, acts as a likely mechanism of relief against possible liability claims. However, it must be noted that this pathway to relief does not exist in cases where unjustifiable material transactions have taken place at the subsidiary level. 

    Alternate Causes of Action: Liability

    The fraudulent misrepresentation and forgery of documents would give rise to a cause of action under Article 549 of the TCC. Moreover, it is noteworthy that the aforementioned cause of action does not require a 'burden of proof' being a strict liability in nature. However, in order to find liability on the part of those issuing the misrepresented documents, proof of negligence must be established. Likewise, other causes of action include inaccurate declarations, fraudulent valuations, known payment incapacity and an unauthorized public offering. 

    Conclusively, it can be understood that both directors and shareholders derive liabilities based on their acts or omissions. 

     

     

     

     

     

     

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    Fri, 07 May 2021 18:27:00 GMT
    <![CDATA[Duties and Liabilities of Directors in Ireland ]]> Duties and Liabilities of Directors in Ireland 

    Introduction 

    Initially, the roles of directors have been used in a variety of common law and legislation. The Company Act codifies the fiduciary responsibilities of directors in common law, but the Companies Act did not affect many of the other formal duties of directors.

    Irish law acknowledges non-executive directors, and they are bound by the same rights and responsibilities as executive directors per Irish Company law.

    Non-executive directors have the same roles and responsibilities as executive director. Where a non-executive director is nominated by a shareholder or a third party, the candidate shall be allowed to take into consideration the interests of the applicant but only if those interests do not interfere with the director's duty to work in the interest of the corporation.

    The fiduciary responsibilities of a director under the Companies Act require the obligation to:

    • The directors should act in good faith and in the best interest of the company

    This is a subjective norm because what the director himself believes to be in the best interests of the business is important.

    • Act honestly and responsibly in the conduct of the company's business.
    • Act in compliance with the constitution of the corporation and only use its authority for lawful purposes.

    If a director fails to exercise his authorisation within their expected reach, he is said to have abused his authority and to be directly responsible for the damages that arise.

    • Avoid conflict of interest between duties to the company and other concern (including personal interests). 

    A director is obligated to prevent circumstances in which his desires run counter to his obligation to the company. The following responsibilities have this responsibility to prevent conflicts of interest:

    The director is obligated to disclose his interests. 

    If the director has a personal interest in a deal entered into or proposed to be concluded by the corporation directly or indirectly, the director shall report to the board the facts and the extent of his interest.

    Secretly Profit

    A director shall not secretly profit from its role and shall take into consideration all benefits so gained except where complete disclosure has been given and approval obtained to the representatives of the corporation.

    ● Exercise the care, skill and diligence.

    Moreover, a director owes a task of competence and consideration to carry out his work. The courts have made it clear over time that in a variety of sub proposals, this general theory can be taken as follows:

    Standard of care - A director's degree of expertise and care depends on the ability of the director involved. The level of care required by a director would be the norm that a person of his background, skills and expertise would fairly anticipate.

    Genuine Errors - A director cannot be found liable for genuine judgemental mistakes. If a director takes a decision which he considers to be in the company's best interests, so the fact that he is proven wrong does not in itself create any liability.

    Frequent care- A director is not obliged to pay constant attention to his company's affairs. While a director is not expected to participate in each board meeting, the absence of repeated participation in board meetings is likely to infringe on the requisite responsibility.

    Delegation - In general, a director is justified in leaving the duties of another officer or employee or corporation where these duties can be duly left to such an officer or employee by the terms of the articles of association of the enterprise as well as with the needs of the enterprise.

    • A director must not reveal confidential information obtained.
    • Without prior prejudice or responsibility, the corporation is free to make decisions by each director. Consequently, directors cannot generally agree to a way in which they cast their votes in future amongst themselves and third parties

    Additional responsibilities of a director shall include specific disclosure responsibilities and the duty to guarantee that the corporation maintains proper financial records and fulfils different commitments to the company's secretarial compliance obligations.

    The tasks of Directors are owed to:

    • The company.
    • Shareholders. The Companies Act stipulates that a director has to respect their shareholders' wishes, but it is subject to the primary responsibility to act in the company's best interests.
    • Employees and members. The Companies Act stipulates that managers shall respect employee interests in carrying out their duties.

    Directors are obliged when exercising their duties to respect the wishes of the staff and members of the company. This obligation, however, only applies to the corporation. In general, the directors should not owe individual Members a duty, so if members who are affected can use their voting power at a general meeting to force the managers to take them into account, the duty will be reinforced.

    If a dispute arises between staff or members' interests, the primary duty of the director lies with the corporation

    • Creditors. When an insolvent company, even if still not in liquidation, directors must still take into account the needs of the creditors of the company. In the case of a business being insolvent or on the brink of insolvency, the courts have established a line of jurisdiction that would owe the directors of the company a duty to the creditors of the company.
    • Appointing shareholder. The Corporation Act permits the nominating director chosen by the shareholder of the Company to take into consideration the interests of that shareholder, without affecting the general duty of the directors to act in the best interest of the Company.

    Statutory Duties

    The law imposes a variety of contractual obligations on directors, whether directly or indirectly; the basis of these tasks is the communication to creditors and their representatives of related facts.

    Disclosure 

    Directors under the Act are subject to such disclosure obligations. For example, managers must report personal information that is entered into the Company's regulatory books. Besides, it is the responsibility of the Directors to report their interests in a company's contracts or planned contracts, to divulge and record their interests in share in each of the associated companies and to disclose compensation to the Directors in connection with the share transactions of the related companies.

    Conformity

    All sections of the Act have an overall obligation to adhere to. As regards the business administration, the directors must keep a record of all meetings of the members, directors or committees of the directors.

    They will have the obligation to organize an EGM of the Organization members to fulfil its requirements. If the organization experiences a severe capital loss, the managers have a direct obligation to convene an EGM.

    Corporate assets.

    In addition to the aforementioned, the Acts provide a range of provisions to ensure that corporate properties do not dispose of illegally. Consequently, directors who conduct significant real estate deals with the corporation should draw this to the notice of the company's representatives. In the same vein, directors are often obliged to not do transactions outside the company's capacity.

    Liabilities 

    In law, there were a variety of provisions providing for actual corporate directors to be subject to personal responsibility and other civil and criminal penalties in some cases. In some circumstances, personal responsibility may entail accountability for some or more of the debts of the corporation and for others who have been appointed to the position of director since the date of the appointment. The following shall be included in examples of the situations in which directors can face legal ramifications or fines, including personal responsibility for the company's debts:

    Fraudulent & Reckless Trading

    The fiduciary and statutory obligations of the directors are normally owed to the corporation. However, if a corporation is insolvent or threatened with insolvency, those substantive adjustments must be made; the directors owe the creditors their obligation to behave in good conscience and to show the utmost caution, ability and diligence.

    If a director has an honest and fair conviction that the firm will resolve insolvency and boost the creditor's position, he is unlikely to be found responsible for careless dealing. A director can be convicted of dishonest trade because he is "a deliberate party to the conduct of the sector of the enterprise to defraud any company creditors or other person's creditors or for any fraudulent reason." A director found guilty of fraud will be accused of a crime

    A representative of a corporation who is intentionally a party to the execution of an enterprise fraudulently is responsible for the liabilities of that enterprise.

    Acquisition of Shares in Holding Company

    When a corporation acquires stock in the holding company and becomes liquidated after six months because the insolvency company cannot cover its liabilities, the Court of Justice may, together and severally, declare that the directors of the insolvent company are responsible for paying the insolvent company's overall equity payments.

    Substantial Property Transactions

    The law requires the approval by a resolution of the shareholders of such real estate transactions between a corporation and a director of that company or an individual linked to that director.

    It is to render the deal unlawful at the discretion of the corporation who breaks these clauses. A director, or a related party who allowed this transaction might be responsible for any gains to the Company and compensate for any loss to the Company. These rules should not extend to purchases intra-groups.

    Loans to Directors

    Section 31 of the 1990 Act prohibits, except under certain cases, the issuance of corporate loans to the directors. The portion includes quasi loans, credit transfers and such like, including warranty. It does not include inter-group transactions. A manager or individual related to a person who undertakes any of the prohibited transactions will be responsible for any profit made in connection with the business, as any manager who allowed the transaction. Such people shall therefore compensate the Corporation for any damage or loss that they incur.  

    If a director may demonstrate his compliance with section 31 by taking all the appropriate action, he is not responsible. Furthermore, the company's choice can allow for a forbidden transaction. Section 78 of the Company Law Enforcement Act of 2001 updates the provisions of paragraph 34 of the Companies Act of 1990, which establishes a system by which such transactions, formerly prohibited by section 31, are now legal such that they meet the conditions of the modified section 34. The provisions of Section 7 of the Companies' Act of 2009 include not only directors but all officers of the corporation who are defaulting and broaden the scope of Section 31. When the firm is liquidated, there is also a possible personal responsibility for the Director.

    False Information

    It is a criminal offence for a person to reply, provide information or a statement, lodge, or provide a return, report, certificate, balance sheet or any other document that is false in a particular material or know it to be false, or to provide a question, an explanation or to give a statistic, in the purported conformity with all provisions of the law, to provide a false response or reckless reply.

    Failure to Keep Proper Books of Account 

    In the absence of proper accounting books by Section 202 of the Company Act 1990, where a company is wounded and is insolvent, the Court may declare that any officer or former officer of the company who is in default of the obligation to maintain proper books is personally liable for the whole and part of the company debts as may be specified by the Court. The case law reveals that, for the value of the business debt, the Court will impose responsibility that is specifically attributed to the non-compliance with the correct books.

    The Court can also decide to levy a fine of up to €12.700, or a sentence of no more than five years on each officer of the corporation liable for the fault of an offence, or both imprisonment and fine.

    Voluntary Liquidation and Winding-up 

    When a company volunteers a solvent winding up, the company's managers must commit by statute that, within twelve months of the start of the wind-up period, the company can pay its debts in full. Where subsequently it is shown that the enterprise is not able to pay its debts, the Court may declare the individual responsible for all or any of the debts of any director that has made the solvency declaration to the corporation.

    Conclusion 

    The Case Law shows that the Courts are aware that directors are obliged in tough circumstances and that if there is a risk of the firm being insolvent, it is not necessarily in the interest of a company, its creditors or the economy as a whole to cease trade immediately. Nevertheless, directors need to be very cautious and thorough in handling a company's affairs where either it is already insolvent now or faces insolvency. Directors must be aware of personal obligations arisen when the company is insolvent, and that its actions about new or current creditors are becoming more significant when creating or discharging any company liability and when any of the company's properties are used and/or transferred.

     

     

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    Thu, 06 May 2021 19:19:00 GMT
    <![CDATA[UK Tax Considerations short Business Visitors]]> UK Tax Considerations for Short Term Business Visitors

    Short-term business visitors are people who do not live in the UK but who make business trips to the UK and who works for a UK firm and/or are directors of UK companies; the tax position of the individual in the UK must be taken carefully into account. UK payments may be payable, but the UK tax may be reduced or refused by a variety of alternatives. The UK company will be treated as an employer of the person and will have to deduct the PAYE tax as normal even if the international company pays the individual. This applies.

    Persons in their country of residence are usually taxed on their worldwide income. The same income may therefore be taxed twice. The person would have to claim double tax relief in such circumstances.

    Do you qualify as a Short-Term Business Visitor (STBV)?

    The STBVs are: 

    • Directors and non-executive directors, who travel between countries for work and work in another country.
    • Employees who live for pay in one country but work in other countries on a daily basis.
    • Staff living and employed in a country other than their country of employment and/or income.
    • Secondees (A person who is transferred temporarily to alternative employment or seconded.) or assignees typically involved in a structured curriculum or process (although this is not always the case).
    • Despite the categorization abroad as STBVs, they can also be contractors and can be considered workers in the UK.

    STBVs can lead to tax complications such as 

    • Payroll.
    • Social security.
    • Income tax filings for the employees.
    • Permanent establishments under corporate tax rules.

    Unless this risk is controlled, the effects can be expensive and negative.

    • Backdated payroll taxes, as well as interest and penalties, can result in payroll non-compliance.
    • The failure to allow workers to join a country will cause instability in the company.
    • Employees who may take action according to the labor laws of two countries which lead to complicated and expensive terminations.

    Compliance actions that can be taken

    • Reporting to the tax authorities.
    • Adding workers to payroll.
    • Applications for protections and tax filings and returns for social security cards.
    • To avoid enforcement requirements occurring in a region, controlling employee attendance.

    If the employer is not in the United Kingdom and the host employer is not in the UK, no PAYE is technically due. That does not mean that the employee is in the UK not taxable – it may be appropriate to file UK self-assessed tax returns. The Payee should start on the first day of work for the employee in principle if an employee works in the UK. This causes administrative issues such as: 

    • Per month the compilation of income details on multiple payrolls.
    • The management of real-time (RTI) data could also lead to double taxation of the same profits and to double payroll obligations.

    What is PAYE (Pay as You Earn System)?

    In Britain, the majority of workers are paying income tax via the PAYE system. This is used by your employer to retain income tax and national wage insurance payments directly to HMRC (HM Revenue & Customs).

    Easements

    HMRC offers two options, which applies on application (a special Payment Arrangement and an Appendix 4 STBVA agreement); they will not be used without the specific approval of an employer from HMRC. The easements are not applicable to a UK company's directors. Non-resident directors in the UK are considered to hold any office or employment, so these payroll obligations need to be met carefully.

    Short-Term Business Visitor Agreements

    HMRC allows companies to enter into a "STBVA" (Short Term Business Visitor Agreement), which removes the PAYE requirement. It provides an exemption from PAYE where there is relief under Double Taxation Agreements (DTA).

    Therefore, the individual is not taxed on UK income and does not have to claim double tax relief. The eligibility criteria for an STBVA are:

  • The individual must be resident in a country with which the UK has a relevant Double Taxation Agreement;
  • The individual must be working for a UK company or a UK branch of an overseas company but remain an employee of an overseas company;
  • The individual is expected to stay in the UK 183 days or fewer in any 12 month period;
  • The UK company must not ultimately bear the cost of the employment. Even if an individual is legally employed by a UK company, they must be economically employed by an overseas company.
  • People who visit a UK company from outside the UK will not be eligible for an STBVA because HMRC considers that an overseas branch is part of a UK company, and thus, the final criterion 4 above is not fulfilled.

    Under certain circumstances, an individual may still be entitled to a contract where pay to the UK host company is charged (see above criteria 4), subject to the fact that a maximum of fewer than 60 days for the employee's visits to the UK is in any tax year. To confirm that the 60-day rule was met, the employer would need to have a sufficiently precise recording mechanism.

    Depending on the number of days spent in the UK, reporting requirements vary considerably. These are due by 31 May, after the tax year-end of 5 April, where reports have to be submitted. STBVAs are not eligible to be appointed by directors.

    PAYE Special Arrangements

    PAYE's special arrangements deal when an individual visit a branch overseas, or a country with which the UK has no twin tax treaty, such as Brazil, does not have an STBVA available.

    • Where a host employer has adopted a 'special arrangement,' the payment may be calculated annually, provided that a person has not spent more than 30 working days in a fiscal year.
    • This alleviates the administrative pressure and makes it easier to pay no tax if personal allowances are due. Certain by-pass tasks can be exempt from working days measurement.

    The employer is responsible for deciding whether a day is considered as a day of work, whether travel from or to the UK is held on that day. The deadline for filing is 19 April after fiscal year-end, and any tax owed must be collected by 22 April after-tax year-end. Directors do not count for 'special provisions' for PAYE.

    National Insurance Contributions

    UK National insurance contributions to be taken into account independently from taxation plans. There is a 52-week exemption from UK National Insurance contributions. That ensures that national insurance typically would not have to be considered until 52 weeks after permanent residence. In certain cases, there are different EU laws.

    Non-UK Resident Directors of UK Companies

    A non-UK resident manager is an office holder in a UK business, and thus his salary is subject to UK tax in relation to his position in the UK. If the person is not paying for the UK directorship, no tax should be levied, whereas the HMRC may contend that the position of Director should be apportioned to a proportion of the Director's overall remuneration. It is also useful to assess if the payment is attributable to the UK directorate whether the Director's employment arrangement decreases the likelihood that HMRC plans to devote a portion of total remuneration to the position of the UK.

    Self-Assessment Tax Returns

    Resident Non-UK directors are subject to the UK income tax self-evaluation scheme. Where the tax return is issued by HMRC, it should be completed and submitted by the end of 5 April by 31 January, after the relevant tax year. If HMRC does not issue a tax return yet UK tax is due; the person must inform HMRC that the return conditions apply. Sanctions and interest shall apply if they do not. In the case that a return is filed, but no tax is owed, the HMRC will then not request an annual return but does routinely verify if one is due.

    Accommodation and Travel Expenses

    As the person is the Director of a British firm, the UK is viewed as the regular worksite, and the company will then pay lodging and transport costs. In closely specified cases, there are several exceptions to this law.

    Reporting

    When an individual is booking and paying for a flight or hotel, the employee's P11D form will contain the expenses. If the individual pays the costs and is then reimbursed, the costs shall be considered as wages, and Reimbursement shall be applied. These payments can be included in the Payment Settlement Arrangement, the filing obligation may be withdrawn, and tax obligations may then be paid directly to the employer.

    Social Security - "NIC"

    Employers must also take National Insurance Contributions (NICs) into account. As STBVs are typically located in another region, a cross-border approach is required for developing due NICs. If domestic laws apply or whether the terms of specific arrangements apply is usually to be understandable.

    National Insurance Contributions ("NICs") for Directors

    Depending on considerations such as the Director's homeland, whether the NICs are in the EEA and whether or not a social security agreement has been reached between the government and UK. The Director could be excluded from NICs in the UK where sufficient requirements have been fulfilled.

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    Thu, 06 May 2021 12:02:00 GMT
    <![CDATA[Incorporation of a Business ]]> Incorporation of a Business (legal impediments)

    Introduction

    The formal method of forming a corporation or a company is called incorporation. The resulting legal body, a corporation, is responsible for separating the firm's assets and profits from its owners and investors. Corporations can be formed in virtually every country on the planet, and their names usually include words like "Inc." or "Limited (Ltd.)." It's the formal method of separating a company from its owners.

    There are many benefits to incorporating a company and its owners, including: 

  • Protects the properties of the owner from the company's liabilities. 
  • Allows the transfer of ownership to a third party. 
  • Sometimes obtains a lower tax rate than personal income. 
  • Loss carry forwards are typically subject to fewer tax limitations. 
  • Stock sales may be used to collect money. 
  • The Creation and Organization of Corporations 

    Incorporation entails writing "articles of incorporation," which detail the business's primary intent and place, as well as the number of shares and stock classes to be issued if any. For example, a closed company does not issue stock. Shareholders are the owners of businesses. A single shareholder can own a small company, while a big, publicly-traded company can have thousands of shareholders

    Shareholders are typically only liable for paying for their own shares. The shareholders, as creditors, are entitled to a portion of the company's earnings, typically in the form of dividends. The company's directors are also chosen by the shareholders. 

    The company's directors are in charge of day-to-day operations. They owe the business a duty of care and must behave in its best interests. They are normally chosen once a year. A single director may serve on the board of a small organization, whereas a board of a dozen or more directors is typical for larger organizations. The directors are not personally liable for the company's debts, except in cases of fraud or special tax statutes. 

    Incorporate early to reap the benefits

    It's normally safer to start your business sooner rather than later. This is valid regardless of the type of business or whether you want to create a C corporation, a S corporation, or a limited liability company (LLC). 

    The following are some of the advantages of integrating early;

    Giving consumers, vendors, and investors a competent impression – Organizing as a corporation or limited liability company (LLC) increases your reputation and standing. When it comes to establishing and maintaining partnerships, having the letters "Inc." or "LLC" after your name gives you an advantage when vying for the company. Another thing to think about is registering a web domain in the company's name 

    Ease of accessing financing and funding – Lenders favour incorporated businesses and may be unable to lend to a sole proprietorship. Since there is no distinction between the owner's personal assets and the company, sole proprietorships are also thought to be riskier (meaning the owner can spend his or her money on him or herself instead of the business). Some investors often want a slice of the action, which is difficult to do in a sole proprietorship but is possible in a company or LLC.

    Tax benefits – Integrating your business can help you save money on taxes, but consult your tax advisor first. It depends on a range of factors, including the owner's personal income tax rate, whether the owner will reinvest earnings, and whether the owner will be paid a wage.

    Limited liability insurance – Running a sole proprietorship is fraught with risk. There is no distinction between the personal and business properties in the eyes of the law. You are legally liable if your company incurs debts (for example, if you can't pay your suppliers or commercial lease) or if an accident happens. If a corporation or LLC owns a company, the corporation or LLC, not its owners or members, is responsible for its debts.

    To enjoy limited liability immunity, incorporate before signing contracts. 

    As previously mentioned, creating a corporation protects your personal assets from company liabilities. This is valid for both online and offline businesses. 

    Limited liability companies (LLCs) and corporations each have their own legal status- The business or LLC will sign contracts, borrow and lend money, invest, and own property in its own name. The corporation or LLC's owner is not allowed to use any of his or her personal assets. Creditors will usually get their hands on your business properties, but not your personal ones. 

    Incorporate early to establish business interests among founders- If a company has more than one founder, a clear understanding of ownership interests aids the company's smooth and efficient growth. In certain industries, the aim is for all of the owners to be on an equal footing. Others, on the other hand, are built to give certain owners more financial and/or management control than others. You will avoid potential misunderstandings and keep everyone on the same page about who owns what and who owes what by integrating early and laying out each owner's financial and management rights in the governing documents.

    If the company holds intellectual property (copyrights, trademarks, or patents), incorporation may be a crucial step in ensuring that the company owns the property rather than the founders. 

    It's a smart idea to integrate before recruiting workers to protect your properties- Until recruiting workers, businesses that have or plan to have them should integrate. Employers are usually responsible for their workers' behaviour and errors that occur when they are working. You are personally responsible, and your personal properties are at risk if you run your company as a sole proprietorship. If you have incorporated, the company or LLC becomes the employer and assumes the burden of liability.

    Incorporate before you add partners or co-owners- When a sole proprietor wants to bring in a business partner as a co-owner, another good time to discuss creating a company or LLC is when the sole proprietor wants to bring in a business partner as a co-owner. General partnerships (which are formed when two or more individuals start a business together without creating a corporation) have the same drawbacks as sole proprietorships, most importantly, personal responsibility for the company's debts. In addition to providing liability insurance, corporations and limited liability companies (LLCs) make it easier to determine who owns what, who has decision-making authority, and so on. 

    Are there any drawbacks to integrating too soon? 

    Forming a company or LLC has the disadvantage of being more costly than working as a sole proprietorship. There are fees for incorporating, as well as annual (or biannual) fees in some jurisdictions. There are also certain compliance provisions that sole proprietorships are excluded from, such as the need to retain some records, hire and maintain a registered agent, file annual reports, conduct shareholder meetings, and so on. 

    Furthermore, as a sole proprietorship, if the owner wishes to close the company, he or she just has to quit doing business. Corporations and limited liability companies (LLCs) must go through a structured dissolution and winding-up procedure. So, if you're just getting started with your company, you may want to hold off on integrating until you have more specific plans in place for things like contract partnerships, recruiting staff, and bringing on partners.

    Conclusion

    The act of incorporation essentially establishes a secure bubble of limited liability around a company's shareholders and directors, known as the corporate veil. As a result, incorporated companies can take the risks that allow for growth without exposing shareholders, managers, and directors to personal financial responsibility beyond their initial investment. Incorporating the business gives an upper hand over the other as there is some base value created and gives an advantage over the competition that is there, which helps us enhance the business. As a part of the capitalist society, everyone wants to increase the business, which gives an edge over the others who are not incorporated.

     

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    Thu, 06 May 2021 11:17:00 GMT
    <![CDATA[joint venture laws of India UAE Singapore]]> Comparison of joint venture laws of India with UAE and Singapore

    For a long time, one of the main fields of concern for economists all over the world has been the industry. With money on the line, people are always looking for new ways to increase income; whether it's a street-side sole proprietor with a lakh in capital or multibillion-dollar corporations, business is almost always profit-driven. In this age, as it is becoming increasingly difficult to survive the market's fierce competition on one's own, two or more people motivated by a shared purpose often band together to realize their true potential. A joint venture is a term used to describe a planned operation like this.

    A joint venture initiative is a business agreement in which two or more parties agree to pool their resources in order to complete a particular mission, which is usually related to business. The parties form a symbiotic relationship that helps both of them as a result of their coming together. One may have financial resources, while the other has technical expertise. Individually, they will never be able to achieve their goals, but in a healthy partnership, using each other's skills, joint-ventures often achieve their objectives.

    Joint venture Laws in the United Arab Emirates

    Joint ventures are used by many foreign investors to penetrate the Middle East market (JVs). The reasons for this range from an international investor's willingness to partner with an entity/individual who understands the local/regional market to foreign ownership restrictions in some Middle Eastern jurisdictions, which require that a local company's shareholding involve a local/national shareholder.

    Structure of the Joint venture:

    One of the most important considerations to make when deciding on the structure of a JV is whether the parties will operate it by mutual agreement or whether they will jointly own and form a separate legal entity, usually in proportion to the contribution each is making (i.e., through a joint venture company (JVC)).

    The essence of the JV and the parties' intentions also decide whether a contractual agreement or a JVC (usually a limited liability company) is the most suitable structure.

    Contractual contracts, on the one hand, and JVCs, on the other, all have advantages and disadvantages. The key benefit of a contractual JV agreement is that it can be customized to a single project and wound up reasonably easily after that project is completed. This may be attractive to prospective foreign entrants to a jurisdiction, who may be entering the market to tender for a particular project and do not want to be bound to a company's ongoing costs (e.g., annual registration fees). Similarly, forming a JVC allows JV partners to have limited liability and to pass any shareholder's interest in a much more structured way than is always possible with a contractual JV.

    Share ownership restrictions:

    Many Middle Eastern countries have limits on who can buy company shares. In the United Arab Emirates (UAE), for example, a company must be owned by UAE nationals at least 51 percent of the time. As a result, any foreign investor entering into a corporate JV in the Middle East should be aware of any such constraints.

    In order to acquire a controlling shareholding in a JVC in the UAE, many foreign investors have entered/set up in one of the economic free zones (where a business can theoretically be 100 percent owned by a foreign person/entity). Setting up shop in a Free Zone, on the other hand, has its drawbacks, not least the fact that the JVC is only permitted and allowed to operate inside the Free Zone in which it is incorporated, not in the rest of the UAE, other Free Zones, or other Middle Eastern jurisdictions.

    The press regularly reports that authorities in a number of Middle Eastern countries (including the United Arab Emirates and Saudi Arabia) are considering loosening foreign ownership restrictions in order to keep the region appealing to foreign investors (particularly in light of an era of global economic uncertainty and low crude oil prices). If this happens, it will certainly boost foreign parties' negotiating position in JV agreements.

    The investment's nature:

    The type of capital investment made by the parties to a JV can have an effect on the timing and ease with which a JVC can be established in the Middle East. Typically, parties must choose between injecting funds through capital (i.e., purchasing shares) or shareholder loans. In our experience, JVCs in the Middle East are typically undercapitalized, and potential capital injections are often made by shareholder loans. In other parts of the world, the essence of the shareholder capital contribution is influenced by tax considerations and investment implications. In practice, it is easier to invest in the Middle East through loans rather than shares, not least because raising a local company's share capital can be a lengthy process that sometimes requires the parties to schedule meetings with notaries to amend constitutional documents. Furthermore, when a JVC requires a rapid injection of cash, such as when it is in financial distress, injecting money through loans is faster and more efficient than increasing a JVC's share capital, which can take months.

    In the Middle East, parties to a JV often contribute a facility, intellectual property, or a specialist asset (particularly those in the technology, media, and telecommunications industries). When the JV is wound up, the contributing shareholder may want to ensure that the asset is solely retained/returned to them. Exit-mechanism clauses guarantee that the asset is always returned to the contributing shareholder, but the price paid for that asset is dictated by the circumstances that contributed to the exit (For example, if a contributing shareholder breaches its JV agreement obligations, it will be penalized by having to pay a premium for the asset that will be returned to it).

    Governance and management structure:

    The governance and management structure of a JV is largely determined by its structure (i.e., whether it is contractual or a JVC). A JVC's management is also governed by a board of directors, who have ultimate legal responsibility for the company. The parties' agreement on the appointment/removal of the JV's main management team, such as the CEO and CFO, is also spelt out in the JV agreement.

    Certain matters can be reserved for consideration by the parties in the JV agreement, regardless of nature/size/composition of the JVC's management team and board of directors. It is important for parties to understand which matters and privileges that can only be performed with the approval of shareholder by law in the relevant jurisdiction in order to avoid lengthy negotiations between the parties on what would constitute the list of reserved matters that need shareholder approval (Changing the company's constitution or winding it up, for example).

     

     

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    Wed, 28 Apr 2021 00:00:00 GMT
    <![CDATA[Brief Overview of NFTS]]> Brief Overview of Non-Fungible Tokens (NFTs)

    Introduction

    Blockchain technology has been growing immensely over the past decade. This explosion urges us to delve deep into the different available options with regards to crypto investment. NFTs are a fairly nascent concept but are rapidly growing therefore, it is imperative for us to understand the basics before we explore its legal implications.

    What is an NFT?

    NFT stands for Non- Fungible Token. In order to get a brief idea on NFTs, we may take the example of some fungible assets, such as, money. Money is interchangeable in nature, for example, an AED 100 note can be interchanged for two AED 50 notes, and this change will not have an effect on the value of the money that it was swapped for.

    On the contrary, non-fungible assets are those that cannot be interchanged. Their value remains as is due to its unique properties. For ease of understanding, we may relate the nature of an NFT to a unique and one of a kind items such as antiques or paintings, these items uphold their value owing to their originality. Sure, these items can be reproduced and duplicated but there can only ever be one original.

    Therefore, NFTs are unique and one of a kind. They can be bought and sold in the market like any other kind of property but they do not have a tangible form.

    What makes NFTs different from any other crypto asset?

    NFTs are a lot like bitcoin with the exception that they cannot be interchanged, only exchanged for its like. A defining feature of NFTs is that it can store extra information, which allows elevation of its status from that of a simple currency. They can take varied forms, such as digital art, music art, or any collectible item of value in its digital form.

    How do NFTs work?

    They are basically held as individual tokens with accommodate extra information to be stored in them. This may take many forms, such as a video, GIF, JPGs, MP3s and so on. The reason for their increased demand in the market is because of their ability to be valuated based on market demand and be bought and sold thereafter.

    A common misconception is that, NFTs can be downloaded by the click of a button and be sold thereafter because of the simple reason that, the file will not contain the information that makes it a part of the blockchain. Therefore, it cannot be hacked into.

    What are the different types of NFTs?

    Based on its legal status, we may divide NFTs into three different types:

  • Utility Tokens
  • These tokens are required to access and use a portal or network. They draw similarity to a voucher in that they enable a project to be financed without giving away or diluting ownership in an ICO (ICO company is a company that issues a set of tokens, usually for fundraising purposes).

  • Security Tokens
  • These tokens reflect asset ownership and offer token holders rights similar to or identical to those granted to stockholders - voting rights, dividends, benefit shares, a stake in the performance of the issuing company, and so on. Security assets, stock (equity) assets, debts (bonds), and liabilities are examples of such tokens in terms of economic operation.

  • Currency Tokens
  • These are also known as payment tokens. They serve as a means of storing value and a medium of exchange. Bitcoin, Monero, and Tether are examples of such coins. However, they do not take the aforesaid form but are hybrids which means that they have certain utility features that bestow ownership rights upon the holder.

    Do NFTs grant entitlement to the owner against the issuer? Will it result in monetary entitlement or profit sharing?

    Typically, NFTs do not allow token holders any rights against the issuer neither do they give the owner any decision-making rights over the issuer's project. Unless expressly exempted, the owner does not possess the ability to know the supply assets of the issuer.

    Are they transferrable?

    NFTs are generally transferrable, however, this transferability does not apply when being traded in an organized market.

    What are the legal issues surrounding NFTs?

    Considering the nascent nature of NFTs, the legal framework surrounding it is largely unresolved. This tends to give rise to legal and regulatory issues and makes it fairly difficult for potential issuers and owners to trust this venture.

    Owner's Rights

    The creator of the NFT holds rights of legal ownership of the asset. Therefore, in case there are multiple owners of a singular asset, there may arise potential conflict owing to unclear ownership structures.

    Further, owners' rights also bear the risk of piracy due to its public accessibility. Just like digital content on the internet is prone to use and abuse, the digital nature of NFTs give rise to potential illegalities.

    Transfers and Marketplaces

    Thanks to marketing campaigns of auction houses and marketplaces, the new NFT market is thriving. Smart contract and marketplace's house rules govern NFT transactions. The marketplace can allow the asset to be exchanged in a double transaction with the NFT, depending on the type of asset, particularly in the case of jpeg art works.

    Data Protection

    Compromising personal data is the biggest concern surrounding NFTs. Data protection laws offer individuals the ability to erase personal data, however, as previously discussed NFTs are immutable in nature, therefore, this serves as an obstacle in exercising this right.

    Data privacy laws allow alteration of personal data or remove inaccuracies therein. However, Blockchain technology poses impediments and makes it difficult to exercise this right.

    Intellectual Property Rights

    Purchasers of NFTs are not necessarily experts in the legal field. Therefore, many a time they may be unaware about the legal restrictions attached to copyrights which may lead to infringement. With the introduction of NFTs, we are transitioning into the digital world; creators are able to permeate digital assets with qualities such as uniqueness, scarcity and ownership.

    NFTs are still in their initial stages therefore, laws and regulations do not particularly govern issues surrounding the use and distribution of the same. The fintech market is ever-evolving and with that come challenges in the legal realm as well.

    Buying NFTs in UAE

    For a first-time investor in NFTs it would be advisable to;

  • Firstly, set up an account with a cryptocurrency exchange that would assist you with dealings thereof.
  • Once the account is set up, the next step is to buy NFTs. Crypto asset exchanges allow trading in bitcoin (BTC), Ripple (XRP) and so on. For the purpose of purchasing NFTs one must look into Ethereum (ETH) which can be purchased using credit card and upon payment of a transaction fee.
  • Creation of a wallet.
  • Once the wallet is created, the ETH can be transferred into that wallet address/ID.
  • Lastly, once all of the above are set up, you may now proceed to purchase an NFT. The portal shall allow you to buy from an originator or artist. Thereafter you may choose to transfer or sell the said NFT as per your requirement.
  • Applicable legislations on crypto assets in the UAE

    The UAE's Securities and Commodities Authority (SCA) has published "The Authority's Chairman of the Board of Directors Decision No. (21/R.M) of 2020 Concerning the Regulation of Crypto Assets" (Decision).

    The SCA's decision describes the SCA's licensing regime for anyone who wishes to offer crypto assets within the UAE. This includes ICOs, exchanges, marketplaces, crowdfunding platforms, custodian services, and related financial services based upon, or leveraging crypto assets.

    In effect, SCA's decision concern crypto assets as an electronic network or a distribution network that acts as a medium of exchange, storage, unit of account representation of ownership, usufruct that can be transferred electronically from one person to another through the operation of a computer programme or an algorithm governing its use.

    Pre-requisites to offering crypto assets in the UAE

    Providers who wish to offer crypto assets (or any related services) must be incorporated onshore within the UAE or within one of the UAE's financial free zones (i.e., the Dubai International Financial Centre or the Abu Dhabi Global Market). Licensees may 'passport' the listing of crypto assets on one or more crypto currency exchanges.

    Providers who wish to offer crypto assets within the UAE must be licensed by the SCA. As a part of that process, applicants must demonstrate strict compliance with UAE's anti-money laundering and counter-terrorism financing laws, cyber security compliance standards and data protection regulations.

    Alternatively, in the case of service providers who use offshore servers or public cloud facilities to encrypt, store, process or transfer crypto assets, or personal data, the SCA's Decision requires such providers to utilise onshore cloud computing services to provide parallel backup and disaster recovery facilities.

    Ambit of employees and sub-contractors

    There are strict provisions governing the use of subcontractors and employees working for crypto asset providers, custodians, escrow companies and other contractors insofar that they must possess the requisite skills and experience to perform their roles.

    Licensees may appoint subcontractors but will bear the risks and liabilities stemming from any breach of the Decision committed by their subcontractors. For this reason, the SCA's Decision requires licensees and their subcontracts to formulate a detailed service level agreement spelling out the division of responsibilities between both parties relating to cyber security and data protection.

    The SCA clarified that it has full powers to audit licensees and to monitor online transactions. In the event of any breaches, the SCA has wide ranging powers to impose fines, suspend or withdraw a licensee's right to offer crypto assets and to publish the names of violators.

    Permissible types of offerees to an NFT transaction in the UAE

    The SCA's Decision created two classes of people to whom crypto assets may be offered to: a) Qualified Investors; and b) other people who do not meet the eligibility criteria as a Qualified Investor. Licensees must file documents with the SCA in advance of offering crypto assets to Qualified Investors. In all other cases, licensees must request prior approval from the SCA before offering crypto assets to non-Qualified Investors.

    A Qualified Investor is broadly defined as:

    • Institutional investors (i.e., banks, financial institutions, or companies) who hold more than AED 75m in assets, or have a net turnover of AED 150m, or state governments, foreign governments, and international bodies.
    • Individuals who hold AED 4m in funds or an annual income of no less than AED 1m, and with whom a licensee can verify that they possess sufficient knowledge and understanding about the risks of investing in crypto assets.

    Exercising Due Diligence

    The SCA has clarified that all customers must be classified and assessed as if they were a 'high risk'. This is considering prevailing economic environment and its challenges pertaining to global money laundering.

    This broadly translates into conducting 'enhanced due diligence' into a customer's source of funds, ultimate beneficial ownership structure, political exposure risks, the potential risks of customers being used as conduits for money laundering activities and any geographical risks presented by customers, their directors, shareholders and associated suppliers and intermediaries.

     

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    Sun, 25 Apr 2021 14:22:00 GMT
    <![CDATA[Company set-up in the KSA]]> Company set-up in the Kingdom of Saudi Arabia

    Introduction:

    The Kingdom of Saudi Arabia (KSA) is the Middle East's largest economy, with a history of oil production as its primary source of revenue. And it is one of the Arab countries that is a member of the G20.  It is primarily an oil-based economy, with nearly 16% of global petroleum reserves and 5% of natural gas reserves, and is the world's largest petroleum exporter. The Saudi government has taken a number of business-friendly social and economic steps to draw foreign investment over the years, and many investors and business owners from around the world are becoming interested in forming a company in Saudi Arabia.

    The Saudi Arabian government, on the other hand, launched the Vision 2030 plan in April 2016, which included a range of new initiatives aimed at diversifying the Saudi economy. The aim of Vision 2030 is to reduce Saudi Arabia's reliance on oil and grow service sectors like health, education, infrastructure, leisure, and tourism. The broad reforms outlined in Vision 2030 and the National Transformation Plan impact a wide range of political, economic, and foreign investment sectors. As part of the government's attempts to diversify revenues away from oil and address wider social and economic goals, the reform's tax and legal policies will play a significant role.

    To reduce its reliance on oil exports, the Saudi government has implemented a number of reforms aimed at attracting foreign investment, empowering women, growing jobs and social opportunities, and expanding the role of the private sector and MSMEs in the economy. Recent economic policy changes have made doing business in Saudi Arabia much easier and turned the country into a more diverse economy.

    At STA, our lawyers in Saudi Arabia have extensive legal experience in all forms of corporate and commercial matters across Saudi Arabia. We provide a range of corporate and commercial law services and advice, including company set-up in Saudi Arabia. Our lawyers in Saudi Arabia can assist investors throughout the entire process of establishing a company in Saudi Arabia. Our Lawyers are your perfect partner on the ground for this journey offering end to end service delivery from company conception to post-launch business support.

    Types of business entities available for investors in Saudi Arabia

    According to the New Saudi Company Law, the different type of business forms available for the local and foreign investors are as follows;

  • General partnership
  • Limited partnership
  • Joint ventures
  • Joint-stock company
  • The limited liability company (LLC)
  • The legislation also specifies the business forms that are available to foreign companies in Saudi Arabia, and they are as follows.

  • Branch office.
  • Representative office.
  • General Partnership

    Two or more partners are required to share responsibility for the company's duties and debts. Upon incorporation, the company must be registered with the commercial registry. There is no requirement for a certain amount of capital. However, the partners will be jointly and severally liable for the partnership company's obligations to third parties.

     

    Advantages

    Disadvantages

    The company itself is not taxed, and all profits, deductions, and credits are passed on to the individual partners.

    Individuals can form partnerships, but corporations cannot.

    Filing tax returns is a reasonably simple procedure.

    Each partner's liability is unlimited, and partners will be collectively and severally liable to third parties for the partnership company's obligations.

    Limited Partnership

    It is comprised of general partners who are responsible for the partnership's debts to the extent of their personal wealth and limited partners who are only responsible for the debts of the partnership to the extent of their investments. Further, general partnerships have the same registration requirements as general partnerships.

    This partnership must avoid including their names in the firm liability, and at least one of the general partners' names should be incorporated in the name of the limited partner.

    Advantages

    Disadvantages

    It aids in the better distribution of risk among various partners.

    With no option to carry over profits to a future tax year, all earned profit is effectively allocated.

    It is easier to attract passive investors.

    A relationship company's partners cannot withdraw without a court order or, if the company has no set period, at a time that is convenient for the other partners.

     

    Joint Ventures

    Foreign investment joint ventures with Saudi partners has advantages. Whereas foreign partners in a joint venture may own 100% of the equity in some Gulf Cooperation Council (GCC) countries, having a local Saudi partner who owns 50% or more of the equity has advantages.

    For example, if a Saudi owns 50% of a joint venture company, the company is eligible for a loan that is interest-free for up to 50% of the project's cost, repayable over ten years. In the allotment of government contracts for majority Saudi-owned joint ventures, it also has priority over wholly Saudi-owned firms.

    Trading and marketing activities targeted at Saudi individuals or firms that are wholly owned by Saudis. According to Royal Decree M/11 of 1962, mixing Saudi-foreign joint ventures is prohibited.

     

    Advantages

    Disadvantages

    Saudi Arabia does not impose any restrictions on foreign ownership in this form of business entities. A foreign natural or legal individual may own up to 100% of a Saudi Arabian company's stock.

    Companies with 100% foreign ownership may be subject to additional conditions, such as higher share capital or additional approval.

    When a joint venture is structured as a joint-stock company, there is no general obligation to report beneficial ownership of a joint venture firm.

    Foreign investors are not allowed to invest in sectors that are on the negative list.

    Joint-stock company

    A minimum of five (5) shareholders is required for a joint-stock company. There is no upper limit. Shareholders may be both individuals and businesses. Share certificates are traditionally used to represent shares in a joint-stock company, but dematerialized shares are becoming more common. Shareholders are only responsible to the degree that their shares are worth.

    The share capital subscribed for in cash can be paid up in stages, subject to the approval of the Ministry of Commerce and Industry, given that the sum payable per cash share upon subscription does not fall below one-quarter of its par value.

    In Saudi Arabia, the joint-stock company (JSC) is probably the most regulated corporate body. The regulatory conditions for incorporation, as well as the degree of control and participation of the Ministry of Commerce and Industry, demonstrate this.

     

    Advantages

    Disadvantages

    Foreign companies are permitted to bid on government contracts and operate in Saudi Arabia without the involvement of a Saudi agent or partner.

    The Capital Market Authority, which oversees public JSCs, has a higher level of scrutiny.

    Imports of machinery, equipment, materials and spare parts for industrial ventures are excluded from customs duties for foreign companies.

    JSCs are subject to more scrutiny than LLCs, and the costs of enforcement are much higher.

    In terms of goods and services, the Kingdom remains by far the largest Arab market and one of the world's most important trading nations.

    A Saudi Arabian Joint Stock Company pays a 20% corporate tax.

     

    Limited Liability Company

    As a limited liability company, it is a privately held company that develops commercial, agricultural, contracting, or service ventures with Saudi and international partners. However, it is not permitted to engage in activities such as banking, insurance, or investments since these companies will not be able to offer public subscriptions to raise money, and without the agreement of both partners, both their interests cannot be transferred.

    According to Regulations for companies, this must be registered in the foreign capital investment regulatory regime as well. The contribution terms and other necessary details must be registered with the Ministry of Commerce.

    The limited liability company is the most popular form of business in Saudi Arabia. It should be noted that the most common corporate vehicle for foreign equity participation is a limited liability company.

     

    Advantages

    Disadvantages

    A small business start-up often forms an LLC to escape double taxation and to fund multiple groups of stock if necessary.

    Small businesses can use the Limited Liability Company (LLC) form. It is not the best business model for a company that wants to go public.

    There's no need for a lot of continual maintenance once you've set it up.

    When a member dies or files for bankruptcy, the LLC must be automatically dissolved. It will not be able to operate indefinitely like a corporation. If any of the members of the company resign, the company must be wound up. If the remaining members wish to proceed, they may form a new LLC.

    Many start-ups form an LLC to secure their personal assets from litigation filed against the company.

     

     

    Branch Office

    To set up a branch in the Kingdom, a foreign company performing industrial or contracting works may apply for a license from the Foreign Capital Investment Committee, and the company may complete its registration process under the Regulation. Additionally, the concept of branches has been expanded to include companies that aren't engaged in contracting or industrial work, though such licenses are uncommon.

     

    Advantages

    Disadvantages

    Since there are no Articles of Association to accept and no reserve conditions, the incorporation process is usually easier than that of a corporation.

    Saudi-owned companies, or companies with a significant Saudi component, are likely to be favoured for government contracts.

    The branch has the authority to encourage and solicit business all over Saudi Arabia.

    Its activities are restricted to SAGIA-approved licensed objects.

    It can work on both public and private sector initiatives (in accordance with approved objects)

    It is unable to engage in advertising, marketing, or trading (for these activities, a minimum of 25% Saudi equity participation is needed, as well as significantly increased capitalization).

     

    There are no new articles of association required.

    The parent company's liability cannot be quarantined in Saudi Arabia, and it may be exposed in its region of incorporation.

     

    Representative offices

    Representative offices in the form of technical and scientific offices (TSSO), as well as temporary company registrations (TCA), are permitted under Saudi Arabian law. Technical and scientific offices are often formed in order to provide technical support to manufacturers through a distributor. Temporary company registration is a general business created for the purpose of obtaining a government contract.

    The types of activities that these institutions can carry out are restricted. Technical and science offices are unable to complete commercial tasks or generate income. Instead, they can only provide technical knowledge and help distributors and consumers with goods, as well as business and technical analysis.

    Only pharmaceutical firms are usually allowed to open these offices. Non-pharmaceutical companies may only be established with the SAGIA's and the Ministry of Commerce and Industry's permission. They must conclude that the company's goods are sufficiently complex to warrant the establishment of a technical and scientific office before they can authorize this form of office.

     

    Advantages of TSSO

    Disadvantages of TSSO

    It can only be seen in the context of complex products. The process of forming a branch is similar to that of forming a corporation.

    Not all goods are complex enough to include a TSSO.

    A TSSO may conduct market studies for the company's business activities and submit reports to the parent entity as a result of those studies.

    The parent cannot quarantine liability in KSA because there is no independent legal identification, and it may be revealed in its place of incorporation.

     

    There are no capital requirements.

    The number of employees in a TSSO is limited to the number set by Saudi authorities.

     

    It must perform a market analysis for the company's business operation and submit reports to the headquarters on the findings. Also, it must send an annual report on its activities to SAGIA.

     

     

    Advantages of TCR

    Disadvantages of TCR

    It can be obtained for consultancy projects

     

    It can only be granted to a foreign investor after a government contract has been awarded to it.

    Occasionally, a temporary commercial registration may be converted to permanent commercial registration.

    It's possible that subcontractors on government contracts won't be able to use it.

    At a later stage, the provisional status may be changed to permanent commercial registration.

    The activities that can be undertaken are limited to the contract's scope and length (With the approval of the government party, extensions to commercial registration may be requested).

    It is generally easy to liquidate this form of business entities.

     

     

     

    The legal requirements of the different form of business entities

     

    General Partnership

     

    Limited Partnership

     

    Joint Ventures

     

    Joint Stock Company

    Limited Liability Company

    Branch Office

    Representative Office

    Minimum Capital Requirement

    No statutory minimum capital requirement

    No statutory minimum capital requirement

    The Saudi company's minimum capital contribution is not specified in the Companies Regulations. However, Saudi Arabia may, in the future, join other Arab countries in requiring foreign investment in the Kingdom to be contingent on Saudi ownership of at least 51% of the business.

    Except for some types of SAGIA approved firms, which must have the required minimum capital, the minimum capital requirement is SAR 500,000.

    Except for those types of SAGIA approved businesses, which must have the required minimum capital, there is no minimum capital requirement.

    A minimum capital of 500,000 SAR is required.

    Does not have minimum capital requirements

    Minimum Number of Shareholders

    Two or more

    persons

    A minimum of one director and two partners are required, regardless of nationality or residency.

    Two or more entities

    Two of more persons

    Minimum of one and maximum of 50 shareholders

    N/A

    N/A

    Management

    Managed by all the partners

    Limited partners - responsibility is limited to their participation in the share capital but cannot be involved in the management of the business.

    General partners - responsible for the day-to-day management of the partnership and are entirely liable for the partnership's debts and liabilities.

    The company will be managed according to the KSA JV agreement, which must include provisions in regards to the management and decision-making process.

    A JSC is governed by a board of directors, which must have at least three members and no more than eleven members.

    The general managers are in charge of limited liability companies' management.

    Branch offices are often managed by their parent company. It is 100% owned by Foreign investment. However, it must appoint a legal representative in KSA.

    They are managed by the head office

    Liability

    Unlimited Liability

    General partners – Fully liable for the debts

    Limited partners – Limited to their share capital investment

    The joint venture partners are liable to each other based on their percentage of the shareholding in the company 

    The liability of shareholders is limited to the value of their shares.

    Shareholders are only responsible for the company's debts to the degree that their respective interests are affected.

    N/A

    N/A

    Transfer of Shares

    N/A

    N/A

    The transfer of share arrangements is followed according to the JV agreement.

    A JSC's shareholders do not have constitutional pre-emption protection when it comes to sharing transfers.

    A constitutional pre-emption privilege applies to transfers to third parties. Transfers must be (1) registered in the LLC's share register, which must be filed with the Ministry of Commerce and Investment ("MOCI"), and (2) reflected in the LLC's articles of association, which must be signed by a Saudi notary public.

    In the articles of association, shareholders may determine a valuation method for their LLC interests.

    N/A

    N/A

    Scope of Work

    N/A

    N/A

    N/A

    N/A

    N/A

    It can be used for the full range of activities allowed by the branch's SAGIA license, and it can participate in both the private and public sector.

    Its roles are limited to providing technical information and assistance about the foreign company's goods to its Saudi distributors and end-users, as well as market analysis and market reporting

    Licensing requirements

    Must obtain a license from SAGIA

    Must obtain a license from SAGIA

    - Must obtain approval from both SAGIA and the Ministry of Commerce and Investment must approve joint-stock companies.

    -The license required to establish the joint-stock company can be granted by a Ministry of Commerce and Industry decision, but if the request for creating a joint-stock company established by or jointly created with the country or some other public individual requires an exception to any regulations of this law, the request must be submitted to the Cabinet for approval.

    -Must obtain foreign capital investment license from SAGIA in case you are a foreigner.

    - Must register your company with the Ministry of Commerce & Industry MOCI and obtain a business license

    - Must be licensed SAGIA

    - The branch must appoint a legal representative in Saudi Arabia.

    -Must be licensed by SAGIA

    -Must obtain Government Contract (TCR

     

    NOTE: All investments in Saudi Arabia by foreign companies and individuals (those who are not nationals of the Gulf Cooperation Council (GCC)) are subject to approval and need an investment license from the Saudi Arabian General Investment Authority (SAGIA)).

    Types of Tax on Company formation in Saudi Arabia

    • Local Saudi Companies Tax – 2%
    • Service Company Tax – 20%

    There are three different types of taxes that apply to shareholder companies and their systems. They are as follows;

  • Corporate Tax
  • On a non-share Saudi's in a resident company and income earned by a non-resident from a PE in Saudi Arabia, the regular corporate income tax rate is 20%.

  • Withholding Tax
  • The rates range between 5%, 15%, and 20%, depending on the form of service and whether or not the recipient is a relative. This tax is imposed on businesses that earn money from non-residential activities such as rent, royalties, and management fees.

  • Zakat Tax
  • Local Saudi investors and business shareholders are subject to a tax of up to 2%, while non-Saudis are subject to a corporate tax of 20%.

    Incorporation process to form a Company in Saudi Arabia

    Part I – Planning (Pre-incorporation process)

    Primarily, the optimum business type, paid-up capital, and license requirement are investigated. The following is a list of things to think about during this process;

    • The business/company's name
    • The business entity's type
    • Preparing documents such as certificate of incorporation, Power of Attorney, business license, Board resolution etc.

    Part ll – Incorporation

    After the planning stage, the company registration in Saudi Arabia will begin, with various steps being worked on at the same time to reduce the time required. The procedures are as follows;

  • Application for obtaining Investment License
    • an application must be sent to the Saudi Arabian General Investment Authority (SAGIA), a government body tasked with issuing licenses to 100% foreign-owned businesses operating in Saudi Arabia.
    • A comprehensive report will be submitted outlining important details such as the scope and scale of the investment activity, as well as key financial data regarding the company's operations. Filling out the SAGIA application forms and submitting them to SAGIA is also needed.
    • SAGIA would then grant a pre-approval certificate, indicating whether the company can be listed and whether it will have 100 % foreign ownership.

    NOTE: This license is required for non-GCC foreign investors and only applies to commercial activities that are not on the "Negative List."

  • Submission of Article of Association
    • The Article of the Association of the company must be submitted to the Ministry of Commerce and Investment.
    • Once it has been accepted, the application must be signed in front of a notary public for a CR certificate.
    • Following that, the name and articles of incorporation must be published in the newspaper.
  • Registration of Company's name
  • Before all other forms can be submitted, the company name must be reserved with the Unified Centre and then accepted. Incorporation types, articles of association, and deeds of creation are examples of such documents.

     

  • Registering with MERAS
    • Companies may register with a municipality under MERAS, and registration would entail a physical office. The Saudi Arabia Ministry of Commerce and Industry must receive the full registration (MOCI).
    • It takes 6 weeks for the Certificate of Registration to be issued, and the company handles the tax registration for the time period.
    • Companies may use MERAS to notarize their articles of incorporation online, as well as register with the Ministry of Labor and Social Development (MLSD), the General Organization for Social Insurance (GOSI), and the General Authority of Zakat & Tax (GAZT), as well as Wasel.

     

  • Obtaining SAGIA foreign business license
  • To obtain a SAGIA license, submit all necessary documents to SAGIA for examination and approval, including the CR, tax registration, municipality license, and bank share capital deposit letter. The foreign business investment license will be issued by SAGIA, allowing the company to sign contracts, issue invoices, and recruit employees.

     

  • Creating Company Seal
    • The seal must include the company's CR number as well as the name of the company. To attest signatories at the Chamber of Commerce, register with the General Organization for Social Insurance, and for company invoices, the company seal is necessary.
    • Contractual arrangements, shareholder and management resolutions, government records, official letters and notices all require a company seal that includes the CR number and the company name.

     

  • Registering with Chamber of Commerce
  • All business entities seeking company registration in Saudi Arabia must apply for a certificate of membership obtained from the Chamber of Commerce and Industries within 30 days of CR registration (CCI).

     

  • Setting up a Bank Account
  • Within 90 days of receiving the Commercial Certificate, a local bank account must be established.

     

    Part lll – Continued Compliance

    Following the incorporation of the company, the following activities must be carried out in order to complete the entire phase of company creation in Saudi Arabia.

    • Converting the personal bank account to a corporate bank account.
    • A Saudi Employment visa (Iqama) is required if the company appoints foreign employees to be bank signatory to a Saudi Corporate bank. Notably, before a foreign national can apply for an Iqama, Saudi nationals must have already been on the company's payroll.

    Our lawyers at STA Law firm are well equipped and competent in assisting with the company formation in the Kingdom of Saudi Arabia and shall be able to accommodate all your incorporation needs along with future compliance requirement.

     

     

     

     

     

     

     

    ]]>
    Wed, 21 Apr 2021 16:26:00 GMT
    <![CDATA[Abu Dhabi Stock Exchange-II]]> Part II: Abu Dhabi Stock Exchange

    The ADX (formerly the Abu Dhabi Securities Market) was established in the Emirate of Abu Dhabi on November 15, 2000. Its trading locations include the Emirates of Al Ain, Fujairah, Sharjah, and Ras Al Khaimah. The ADX is regulated by the ESCA, a federal agency. The ADX is two-thirds owned by the DFM.

    Legislative frameworks 

    The applicable legislations for the ADX are as follows;

    ESCA Law (Federal Law No. 4 of 2000).

    • Listing Resolution (Council of Ministers' Decision No. 12 of 2000 concerning the Regulations as to the Listing of Securities and Commodities) (ESCA Listing Regulation).
    • Disclosure Resolution (Council of Ministers' Decision No. 3/R of 2000 concerning the Regulations as to Disclosure and Transparency).
    • Central Bank Resolution (UAE Central Bank Board of Directors' Resolution No. 164/8/94 regarding the Regulation for Investment Companies and Banking, Financial and Investment Consultation Establishment or Companies).
    • Authority's Board of Directors' Decision No. (7/R) of 2002 concerning the listing of Foreign Companies.
    • Ministerial Resolution No. (518) of 2009 Concerning Governance Rules and Corporate Discipline Standards.
    • ADX Rules (note that the DFM currently has no separate rules, parties wishing to list on the DFM must comply with the requirements of the ESCA Listing Regulation).
    • Companies Law (Federal Law No. 2 of 2015 concerning Commercial Companies).

    Minimum size requirements 

    The Securities and Commodities Authority (SCA) Resolution No. 25/RM of 2020 stipulates that a free zone company willing to offer shares in a public offering must have a minimum paid-up capital of AED 20 million. Furthermore, the net shareholder's equity must equal at least 100% of the paid-up stock. Furthermore, the free zone company must have established an independent core sector, either directly or through one or more of its subsidiaries. The free zone company must have had a successful result in the two years prior to the public offering, i.e., the free zone company must have realized net income from its core business in the two financial years prior to the public offering, either directly or through its subsidiaries.

    Minimum shares offered to the public. 

    According to the Securities and Commodities Authority (SCA), Resolution No. 25/RM of 2020 in the public offering, the free zone company, must sell at least 25% and no more than 70% of its shares. SCA will allow an offering of 100 percent of the free zone company's shares as an exception to the preceding rule if the offering is limited to eligible investors as specified by SCA rules and regulations. 

    Listing requirements 

    • There must be at least ten natural or corporate persons among the founding partners.
    • The capital must be at least AED 10 million, subject to licensing conditions for minimum capital.
    • The founders' shares must account for no less than 20% of the capital and no more than 45 percent of the capital.
    • Uniformity and specialization in the company's primary goals must be taken into account.

    Documentation requirements 

    • The draft memorandum of association copy (Form A-2)
    • The company's articles of association copy (Form A-3).
    • Economic feasibility study and the implementation time plan established and authorized by an approved expert house subject to the guidance statement (Form A-4).
    • A report on the value of the in-kind share generated by an authorized expert house must be enclosed if an in-kind share is included in the capital.
    • The public offering prospectus approved by the founding committee (Form A- 5).
    • The prospectus's draft announcement.
    • Estimation statement of the issue expenses authorized by the following committee and auditor (Form A-6)
    • Initial permits and licenses received by the company from the relevant authorities in order to do business in the state (such as the Central Bank for banks, finance companies and financial investments; and the Insurance Authority for insurance companies).
    • An Arabic copy of the agreements concluded with them to decide their responsibilities and fees, as well as evidence of appointing a licensed Issue Manager and Auditor for the subscription accounts.
    • An English copy of the IPO Accounts agreement with an approved auditor.
    • Payment of AED 5,000 in fees for studying the application to form a public joint stock company using an e-Dirham card. (payable to only the Authority).
    •  (This process would take 10 working days at the Authority)

    Continuing obligations

    SCA establishes a number of regulations governing listed companies' ongoing obligations on onshore markets, including disclosure, accountability, monitoring, and corporate governance rules. Listed entities shall comply with the following reporting obligations under SCA Decision (No. 3/R) of 2000:

    • Within 45 days of the end of the applicable reporting period, report half-yearly financial reports prepared by an external auditor. 
    • Annual audited financial reports must be submitted within 90 days of the end of the financial reporting period.

    Listed entities must also comply with certain disclosure provisions in addition to the reporting obligations outlined above, including the disclosure of:

    • Material events that have an effect on the price of a stock.
    • Decisions made by the material board
    • Details on the selling or purchase of major properties.
    • Changes in the board of directors and senior management of the issuer.
    • Meeting dates and agendas for shareholders' general assemblies.

     

     

     

     

    Direct Market Access

    According to Resolution of the Chairman of the Board of Directors of the Authority No (26/R.M) of 2016 concerning the regulation of some activities, financial services and trading mechanisms, Article (2), the brokerage company must obtain market approval to initiate DMA services. It must comply with the terms, conditions and procedures mentioned below;

  • Availability of a Technical system for receiving and recording DMA client orders provided that the system contains the features below;
    • The ability to verify all of the Market's controls.
    • Transmitting orders from the Brokerage firm to the Market through the exchange message protocol (Fix Gateway) and a special DMA user assigned electronically in the Market's trading system and then executing them.
    • The right to cancel or modify an order that has not been completely or partially implemented by the DMA Client.
    • The details, time, and location of issuance of the information exchanged between the DMA Client, and the Brokerage Firm shall be archived and registered via the Audit Trail Log (IP Address).
    • The DMA Client shall be able to run queries and extract reports on the following topics:
    • At any time, the order status (pending, partially completed, order cancelled) is shown, along with the current status time.
    • The condition of its cash account and securities portfolio.
    • Statements of accounts and changes in their balances.
  • Information protection and security systems. The following protection systems must be provided by the brokerage firm;
    • Communication between the Brokerage Firm and the Market is secured by a protection system:
    • External communication networks, such as the internet and networks linked to the Market, Clearing, and Settlement Houses, are protected by a firewall system.
    • Anti-virus protection systems.
    • Communication between the brokerage firm and the DMA client is protected by protection systems;
    • Systems and mechanisms to protect link lines and encrypt data sent between the Brokerage Firm and the DMA Client (secured connection).
    • Operation and protection system;
    • A system for receiving and transmitting business messages (FIX messages) in compliance with market rules and regulations.
    • Databases with a high operational capacity and a high level of security that can constantly operate (fault-tolerant, hot-standby or cluster). Modern and stable operating systems that can act as central servers.
    • A disaster recovery centre with a copy of each server computer and real-time backup copies of data and applications, provided that the disaster recovery centre is connected to the Firm's premises through the main link line and a backup line with a fail-over platform.
  • External Auditor in charge of Information Security Reports;
    • The Brokerage Firm shall appoint an external auditor to audit the information security and programs, with the condition that the auditor submits his report to the Market upon request and by the end of June and December each year.
    • If it is licensed to provide such services, the Brokerage Firm may request a consolidated report on this service and the e-trading service.
  • Account opening and provision of document under the transactional agreement.
  • The Brokerage Firm shall, in addition to complying with anti-money laundering procedures (AML+ ATF);

    • Sign a transaction agreement with the DMA Client that includes both parties' rights and obligations in compliance with the conditions and obligations set forth herein and in the statute, regulations, and judgments of the authority, given that it includes the Brokerage Firm's right to alter, deny, or cancel the DMA Client's orders if they breach the relevant legislation.

    Documents required for listing the shares through Direct Market Access 

    • The completed Direct Market Access (DMA) Application form.
    • A detailed report on the Direct Market Access (DMA) facility, including its setup and procedures.
    • The system auditor's report on the audit.
    • Board resolution passed to avail DMA facility.
    ]]>
    Tue, 20 Apr 2021 12:16:00 GMT
    <![CDATA[Abu Dhabi Securities Exchange]]> Part I: Abu Dhabi Securities Exchange - Investment Requirements

    Introduction

    Investing, as Warren Buffett, the legendary investor, describes, "…the process of laying out money now to receive more money in the future." It is a way to put money away when you're occupied with other things and make it work for you so that you can enjoy the full benefits of your labour in the future. Investing is a way of achieving a happier outcome. The aim of investing is to put your money into one or more forms of investment funds in the hopes of increasing its value over time.

    A stock market is a marketplace where investors can buy and sell stocks (or shares) in a company. Companies divide their shares and exchange them, allowing the general public to purchase and sell them. Since they own a piece of the stock, the investors profit a certain amount if the company does well. It is recommended that you make a long-term investment of at least 5 years in order to make a fair profit.

    Companies must list themselves on a stock exchange in order for investors to purchase their stock. The majority of large corporations will have their shares traded on a stock exchange. The Stock Exchange of the United Arab Emirates is very close to every other stock exchange in the world. The stock exchange houses in the UAE list well-known companies such as Emirates NBD, Oman Insurance Company, Emaar Properties, and 200 other public limited companies. International companies will register and make their stocks available to the public through the stock exchange centres in the UAE.

    Securities and commodities

    In the year 2000, the UAE created the Securities and Commodities Authority (SCA) to achieve the following goals;

    • To provide the ability to invest savings and funds in Securities and Commodities in a way that benefits the national economy, ensures transaction integrity and precision, ensures the interaction of supply and demand to decide rates and protects investors by creating the foundations for sound and just dealings between different investors.
    • Conducting studies and making suggestions to raise investor awareness.
    • To contribute to the financial and economic stability of the country.

    The Securities and Commodities Authority (SCA) regulates two major financial securities exchange markets in the UAE:

    • Abu Dhabi Securities Exchange
    • Dubai Financial Market  

    Abu Dhabi Securities Exchange (ADX)

    The Abu Dhabi Securities Exchange Company was established on March 17, 2020, under Law No. 8 of 2020 Concerning the Abu Dhabi Securities Exchange Company "PJSC," and was registered as a public joint-stock company in Abu Dhabi. It is wholly owned by the Abu Dhabi Government. The Company became wholly owned by Abu Dhabi Developmental Holding Company Public Joint Stock Company under Law (02) of 2018 and Executive Council Resolution No. (33) of 2020.

    It trades stocks of companies based in the United Arab Emirates. Ras Al Khaimah, Al Ain, Fujairah, and Sharjah are among its locations. It trades companies from a variety of industries, including banking, insurance, services, manufacturing, and hotels. Transparency, honesty, performance, and customer-centricity are among the ideals it promotes. 

    The Abu Dhabi Securities Exchange (ADX) aspires to be a creative, appealing, and open marketplace that empowers the UAE economy by providing opportunities to invest savings and funds in securities, ensuring the soundness and accuracy of transactions, determining prices through the interaction of demand and supply, and protecting investors through fair and proper dealing principles.

    By conducting research, ADX raises investment awareness and ensures that savings are invested in productive sectors. It promotes financial and economic stability while also developing trading methods to improve the liquidity and price stability of all securities traded on the market.

    Market overview 

    The Abu Dhabi Securities Exchange (ADX) is a platform for trading securities, such as shares issued by public joint-stock companies, government or corporate debt instruments, exchange-traded funds, and other financial instruments authorized by the UAE Securities and Commodities Authority (SCA). There are two markets on the Abu Dhabi Securities Exchange (ADX):

  • Main Market 
  • Second Market 
  • Main Market 
  • After a company has sold its offering on the primary market, investors will buy and sell securities they already own on the ADX main market. In the ADX main market, a broker usually buys securities on behalf of an investor, but the number of securities exchanged varies from day to day as supply and demand for the security fluctuate.

  • Second Market 
  • The ADX second sector is a part of ADX's existing infrastructure for private company listings. Investors can buy and sell private company shares based on fundamentals such as supply and demand, financial statements, and other filings.

    How to become an investor in Abu Dhabi Securities Exchange 

    The Clearing, Settlement, and Depository Department issues the investor number, which is a unique identifier for investors (CSD). All transactions on the Abu Dhabi Securities Exchange (ADX), including clearing, settlement, and trading, can be initiated using this number.

    Investors may apply for an investor number on the Abu Dhabi Securities Exchange through one of the service channels mentioned below:

    • Brokerage Firms with Accreditation
    • Sahmi digital platform (for Emirates ID cardholders)
    • Customer service offices present in all branches of the Abu Dhabi Securities Exchange.

    The documents mentioned below are required to receive an investor number;

    Individuals:

    • Original Emirates ID card. (applicable only for UAE citizens and residents holding Emirate's identity)
    • For foreigners who do not live in the UAE, a passport and ID card are required
    • Original Emirates ID card. (For UAE citizens and residents holding Emirates identity)

    Companies:

    • A copy of a legitimate trade license (original for review)
    • Contract for the formation of a company
    • List of members of the company's Board of Directors for the most recent certified/audited duration
    • A letter containing a list of all signatories who have been signed 
    • Letter with the International Bank Account Number (IBAN)

    Investment Portfolios: 

    • The Central Bank of the United Arab Emirates has released a letter of approval to begin portfolio operations.
    • A copy of the portfolio's commercial license issued by the portfolio's issuer (original for review)
    • List of approved people's names and signatures from the portfolio, with powers, clarified 
    • Portfolio prospectus 
    • Letter with the International Bank Account Number (IBAN)

    Free Zones:

    • A copy of the license for the free zone (original for review)
    • Company's board member's list for the last certified period 
    • A letter containing a list of the approved signatories
    • Letter with the International Bank Account Number (IBAN)

    Documents issued outside the UAE

    The documents issued outside the UAE must be notarized and authenticated by the following;

    • The United Arab Emirates Embassy in the country where the document was released
    • The country's Ministry of Foreign Affairs released the paper.
    • The United Arab Emirates' Ministry of Foreign Affairs

    How is the Abu Dhabi Securities and Commodities Authority (ADX) regulated? 

    The Securities and Commodities Authority (SCA), a federal authority in the United Arab Emirates, regulates the Abu Dhabi Securities Exchange (ADX). The Securities and Commodities Authority (SCA) was created by Federal Law No. (4) of (2000), which governs the Emirates Securities and Commodities and Market.

    How to trade in Abu Dhabi Securities Exchange

    • The Abu Dhabi Securities Exchange will provide you with an investor number.
    • Selecting and appointing a broker by:
    • Reviewing the official website of the Abu Dhabi Securities Exchange and select a licensed brokerage firm from the list.
    • Communicating with the chosen firm and provide them with the information they need.
    • Start trading by placing orders to buy and sell stock. The investor can track the movement of shares on trading screens inside the Exchange, on the Exchange's official website, or via brokerage firm applications, and decide whether to buy or sell:
    • Use the brokerage firm's official website to place sell and buy orders or download their mobile app.
    • To inform a broker of entering orders, speak with him in person or over the internet.

    ADX-registered businesses include:

    • ADCB
    • ADIB
    • Etisalat 
    • FAB
    • Gulf Pharmaceutical Industries
    • Finance House 
    • Noor Takaful
    • Qatar Telecommunications
    • Union National Bank

     

     

    ]]>
    Tue, 20 Apr 2021 11:33:00 GMT
    <![CDATA[trademark Violation in Today]]> Trending type of Violation in Today's World: Using the Competitor's Trademark as Keyword

    Zeynep Yağmur

    Kutlu Öncü Uçum

    ABSTRACT

    In today's world, where competition between companies is intense on the Internet, as well, new protective norms are needed pertaining to trademark rights violations. Accordingly, lawmaker has included the use of trademark of others as a keyword on the Internet in such a way to create commercial effect under the scope of trademark infringement for registered trademarks with the Industrial Property Law No. 6769. Unregistered trademark proprietors, on the other hand, are entitled to benefit from the unfair competition provisions of the Turkish Commercial Law numbered 6102. In our study, under which circumstances the use of someone else's trademark as a keyword in search engines on the Internet may constitute a trademark violation is evaluated, the mechanisms to be applied against the violations are explained, the judicial decisions on the subject matter are shared, and the responsibility of the search engine is touched upon briefly.

    Keywords: Trademark Rights Violation, Keyword, Adwords, Industrial Property Law, Turkish Commercial Code

    A. Introduction & Keyword Advertising

    In today's world where Internet usage is quite intense, competition between enterprises inevitably manifests itself on the Internet environment. The need to market goods and services to larger masses necessitates the use of the Internet, which opens the door to almost all regions of the world, for enterprises. On the other hand, marketing activity on the Internet environment is not merely about publishing advertisements in visual and written forms. Enterprises also aim to increase the recognition of their brands and goods and services by directing Internet users to their own websites through search engines. This activity is called "keyword advertising".

    Google, the widely used search engine today, offers keyword advertising services with the Google Ads application. Through this service, when a word or phrase determined by the advertiser as keyword is searched by users on Google, the advertiser's website link (URL) is listed as an advertisement in the search results, the advertiser is charged with a certain amount of fee for each click on the relevant ad included in those search results and the number of views of the ad is determined according to the pre-agreed upper limit of the fee. For instance, when a search for "second-hand vehicle" is made through the Google search engine, the website links of companies that use this phrase within the scope of keyword advertising activities will appear as advertisements in the search results list. Also, by paying more than the fee requested per click, the relevant advertisement can be ensured to appear in higher ranks.

    There is no illegality in determining the keywords as descriptive and qualifying expressions as "second-hand vehicle" or "desktop computer". The problem occurs as some search engines do not restrict the advertisers while designating words or phrases as keywords even though the others trademarks are used as the advertisers can obtain economic benefit by steering the Internet users to their own websites through the use of other trademarks as keywords. Here, the act of using the competitors' trademarks as keywords without any right or legitimate association with the trademark and directing Internet users to their own website in this way so as to obtain commercial benefits leads to the violation of the trademark right.

    In this study, the legal consequences of using a sign identical with or similar to the trademark of the competitor as a keyword to create a commercial effect will be dwelled upon.  In this context, first, relevant regulations in the Industrial Property Law No. 6769 ("IPL") and the Turkish Commercial Code No. 6102 ("TCC") will be evaluated. Then, judicial decisions on the matter will be examined, and finally, the responsibility of the search engine will be analyzed.

    B. Review under Industrial Property Law

    B.1. Conditions Required for Keyword Advertising to Infringe Trademark Rights

    The definition of the concept of trademark is included in the IPL in an indirect manner. In order for a sign to be qualified as a trademark, three elements must be present together. According to the IPL, any sign comprising of words, including personal names, figures, colors, letters, numbers, sounds and the shape of goods or their packaging (i) that belongs to enterprises, (ii) that is capable of distinguishing the goods or services of one enterprise from those of other enterprises and (iii) that is capable of being represented on the register in a manner to determine the clear and precise subject matter of the protection afforded to its proprietor may be deemed a trademark.

    The trademark grants its proprietor both the exclusive right to benefit and the power of disposition, as well as opportunities that ensure the protection of this right and power against third parties.[4] These options can be capitalized on in the presence of acts that constitute an infringement of the trademark right. It should be underlined that there is a distinction between registered and unregistered trademarks regarding the protection of trademark rights. The protection within the scope of the IPL, which is explained under this heading, can be acquired, in principle[5], through registration[6]. Protection of the rights arising from an unregistered trademark will be examined under the heading "C" below.

    The use of a sign identical with or similar to the trademark, the proprietor of which is someone else, as a keyword does not always necessarily lead to the violation of a trademark right. Certain conditions must be met in order for this use to be deemed illegal. These conditions are provided under paragraph 2 and sub-paragraph d of paragraph 3 of Article 7 of the IPL. According to these provisions, for the purpose of creating a commercial effect, the use of a sign;

  • identical with a registered trademark in relation to goods and services that are identical with those for which the trademark is registered,
  • identical with or similar to a registered trademark in relation to goods or services that are identical with or similar to those for which the trademark is registered and therefore, in a manner to create confusion regarding different trademarks,
  •  

  • identical with or similar to a registered and well-known trademark, irrespective of the scope of the goods or services, in a manner to gain benefit unfairly through its reputation or to damage its reputation,
  • as a keyword on the Internet environment constitute trademark infringement.  Furthermore, for the use of the trademark as a keyword to be regarded as a trademark infringement, the person using the trademark should not have any right or legitimate association as to this use. In the presence of a right or legitimate association, there will be no violation.

    The aforementioned conditions must be met together for the use of the trademark as a keyword to be deemed trademark infringement. These conditions are discussed below.

    B.1.1. Using the Keyword should Create Commercial Effect

    In order for the proprietor to benefit from the protections arising from the trademark rights, the use of the trademark sign by others must constitute a trademark use.[7] A trademark use exists when the particular trademark sign is used to name a commercial enterprise or to distinguish goods or services from those of others. [8] On the other hand, since keywords are not eligible to be placed on the goods and enterprises do not carry out their commercial activities under these words, it is not possible to consider keywords as signs in the classical sense.[9] Therefore, the concept of trademark use should be interpreted as broadly as possible.[10] In this context, the equivalent of trademark use in keyword advertising is the use of the designated keyword or keyword phrase in a manner that the user gains economic benefit, in other word this usage creates a commercial effect in favor of the user.

    In fact, the main purpose of keyword advertising is to create a commercial effect. In Google France and Google[11] case, the Court of Justice of the European Union ("CJEU") made the remark that the purpose of determining someone else's trademark as a keyword on the Internet can only be to create a commercial effect as the persons using this trademark aim to gain economic benefit by directing internet users to the website where they market their products.[12] Therefore, with regard to the use of other's trademarks in keyword advertising activity, the condition of creating a commercial effect will be met in all cases.

    B.1.2. Violation should be related to the Identical or Similar Goods or Services

    As per the IPL, in principle, only registered trademarks are protected against the violations regarding the provision of identical or similar goods and services for which the trademark is registered.  The exception to this principle is registered well-known trademarks. As mentioned above under the heading "B.1" and paragraph (iii), protection for the well-known trademarks is irrespective of the scope of the goods or services for which this well-known trademark is registered.

    B.1.3. There Should be a Likelihood of Confusion between the Sign and the Trademark

    As can be seen under the heading "D", where judicial decisions are examined, the likelihood of confusion between the sign and the trademark should arise in order for the keyword advertising activity to be considered as a trademark infringement. The use of a sign identical with or similar to a registered trademark in relation to goods or services that are identical with or similar to those for which the trademark is registered creates the likelihood of confusion between the sign and the trademark for Internet users with mediocre attention, intelligence and knowledge. CJEU asserted in Google France and Google, in case the use of a sign identical with or similar to a registered trademark in relation to goods or services that are identical with or similar to those for which the trademark is registered poses the likelihood of creating confusion for the Internet users, the proprietor shall be entitled to prevent this use.[13]

    In our opinion, the likelihood of creating confusion within the context of keyword advertising should be interpreted broadly. Since the companies using the keyword advertising service aim to steer the Internet users to their own websites, the nature of this purpose affecting the will of the user should be taken into consideration. In other words, unfair intervention to the Internet user's power to decide on the purchase of a good or service in this way should be considered as an action that will create confusion for the user in any case.

    B.1.4. The Person using the Trademark should not have any right to use or Legitimate Association with the Trademark

    According to the IPL, within the ordinary course of commercial life, honest use of a trademark shall not be deemed trademark infringement as such use is to be regarded as a justified use of the particular trademark. For instance, the person who uses his/her own name as the title of his/her commercial enterprise would be entitled to use that name as a keyword on search engines on the Internet as s/he has the right to use his/her own name or the same person would be entitled to use the address of his/her commercial enterprise as a keyword phrase.[14]

    In cases where there are agreements such as distributorship agreements, exclusive distributorship agreements or agency agreements, the use of a sign as a keyword on the Internet will constitute a righteous use as the advertiser will have a legitimate association with the concerning trademark.[15] For this reason, for example, an exclusive seller selling a product of a trademark in a certain region will have a legitimate interest in using the relevant trademark as a keyword and directing the Internet users to his/her own website. In this case there will be no trademark infringement.

    B.2. Rights of those Whose Trademark Rights are Infringed

    If the aforementioned four conditions under the heading "B.1" are met all together, then keyword advertising activity will constitute a trademark infringement. In this case there are certain protective measures regulated in favor of the trademark proprietor.

    Criminal sanctions are stipulated under Article 30 of the IPL against trademark infringement. Here, the crime of trademark infringement has been embodied in a way to be committed merely against registered trademarks in Turkey. Article 30 of the IPL provides that the person who puts on the market or sells, imports or exports, buys for commercial purposes, possesses, transports or stores products or services by using a sign identical with or similar to another proprietor's trademark in a manner to create confusion, following the complaint of the sufferer, shall be sentenced from one year to three years of imprisonment and punished with judicial fine up to twenty thousand days.

    Further, as per Article 159 of the IPL, the proprietor is entitled to request from the court to decide for an interim injunction by proving either the currently existing act of or a possible infringement of the rights arising from the trademark ownership.

    Moreover, the trademark proprietor is entitled, under Article 149 of the IPL, to claim from the court (i) to ascertain whether the act constitutes infringement, (ii) the prevention of a possible infringement, (iii) to estop the acts of infringement or (iv) to remedy the infringement and to decide for the compensation, if any, of pecuniary and non-pecuniary damages.

    Since Article 157 of the IPL refers to the provisions of tort within the ambit of the Turkish Law of Obligations numbered 6098, the statute of limitations for the trademark infringement claims pertaining to civil law is 2 years from the moment the plaintiff becomes aware of the damage or 10 years, in any case, from the date of infringement.

    C. Review under the Unfair Competition Provisions

    As mentioned above, protection under the IPL can be acquired through registration. Considering that the liability arising from trademark infringement is based on tortious acts when interpreted broadly and unfair competition when interpreted narrowly[16], the unfair competition provisions of the TCC will be applied for trademark infringements against unregistered trademarks.

    Unfair competition is defined under the second paragraph of Article 54 of the TCC. According to this provision, deceptive or other kind of acts contrary to the rules of good faith and commercial practices that affect the relations between competitors and customers are unfair and illegal. Under Article 55 of the TCC, acts that may constitute unfair competition are listed by analogy. Although a clear example of a trademark infringement is not included wihtin this provision, actions that cause confusion with someone else's goods, products, activities or business practices can be evaluated within the framework of trademark right infringement.

    According to the minority opinion in the doctrine, it would be excessive to consider keyword advertising activities within the scope of unfair competition. As a justification for this view, it was asserted that platforms such as Google are not actually the final platforms where the Internet users take their decisions on which product to buy and only referrals are made through these platforms. It was contended that the idea of ​​deceiving the average Internet user through these referrals is an exaggerated approach.[17] In our opinion, here, the definition of unfair competition in Article 54 of the TCC should be taken into account. Even if we accept for a moment that it is not possible for the average Internet user to be deceived through keyword advertising, the relevant provision also includes the phrase, other kind of acts contrary to the rules of good faith, within the definition of unfair competition. Illegal use of a proprietor's trademark by third parties as a keyword ought to be considered in connection with this phrase. Therefore, considering unlawful keyword advertising activities as acts leading to unfair competition would be convenient to the regulations under the TCC. The Supreme Court is also of the opinion that these acts constitute unfair competition.

    Proprietor of an unregistered trademark seeking protection under unfair competition provisions, will be entitled to claim, under Article 56 of the TCC, from the court (i) to ascertain whether the concerning act constitutes unfair competition, (ii) the prevention of unfair competition, (iii) to remedy the results of unfair competition or (iv) compensation of damages if the breached persons is at fault. As can be seen, the protective measures regulated for persons whose trademark rights are violated within the scope of the IPL and the TCC are parallel.

    D. Judicial Decisions

    As can be seen in the following decisions, illegal use of signs identical with or similar to the trademarks of competitors as keywords is considered as an act that is capable of creating the likelihood of confusion among Internet users. In the disputes pertaining to keyword advertising, judicial authorities are of the opinion that acts constituting trademark infringement as the conditions under the heading "B.1" are met should be prevented.

    11th Civil Chamber of the Supreme Court examined in a dispute the use of the registered trademark Promena as a keyword by the defendant. The defendant was claimed to be using the trademark in question as a keyword on Google Ads and to directing Internet users to its own website. In this dispute, the Supreme Court upheld the decision of the court of first instance, which ruled that the trademark right was violated, on the grounds that the acts of the defendant operating in the same sector as the plaintiff constituted an action capable of causing confusion among the Internet users.[18]

    Also, in its another decision the Supreme Court asserted the following and upheld the decision of the court of first instance on the elimination of trademark infringement constituting unfair competition and the compensation of pecuniary and non-pecuniary damages of the proprietor.

    "... by the defendant party .... the plaintiff's trademark, '...', is used as a key word in a way to create commercial effect for advertising purposes, as a result of which, through the search of the plaintiff's trademark words... Internet users are referred to the defendant's website… the defendant's use constitutes trademark infringement and unfair competition"[19]

    Once again, in another decision, the Supreme Court upheld the decision of the court of first instance on the prevention of the defendant's use of the plaintiff's trademark as a keyword in search engines for steering the Internet users to the defendant's websites. In this dispute, it was determined that by searching the relevant keyword, the defendant's website appeared even before the plaintiff's website as an Advertisement, and that this situation could create confusion among Internet users with mediocre attention, intelligence, and knowledge, who searched the relevant keywords in the search engine. It was also contended that unfair exploitation of a merchant's reputation by using its trademark is a typical of unfair competition.[20]

    In a case brought before the Civil Court for Intellectual and Industrial Property Rights, recently, the court made the following evaluation:

    " it was determined that other proprietors' commercial titles and trademarks are used as keywords in a completely uncontrolled environment… other than the situations where the person who uses those signs has a right to do so or has legitimate association with the  trademark, the use of a sign as keywords, meta tags or in a similar manner, identical with or similar to another proprietor's trademark in a way to create commercial effect shall constitute infringement… Internet users who do not have detailed technical knowledge about the Internet or who are not aware of the AdWords advertising application are likely to confuse these trademarks… As it is understood that when the phrase, '...', is searched on Google search engine, defendant's website also appears with other trademark proprietors' websites, the court had to decide that the conditions for trademark infringement and unfair competition are met and the relevant acts shall be prevented…"[21]

    E. Liability of the Search Engine

    In principle, the search engine, which provides services within the scope of keyword advertising activities, has no responsibility for trademark infringement. Pursuant to paragraph 4 of Article 58 of the TCC regulating this issue, if the activities constituting unfair competition have not been started by the service provider, the service provider has not chosen the content or changed the content in a way to constitute an infringing act, lawsuits regarding unfair competition cannot be filed against the service provider. In our opinion, due to the nature of trademark infringement constituting unfair competition, this provision shall also be applied in case of trademark infringement.[22]

    CJEU, in Google France and Google, delivered its opinion on the matter and asserted that Google gaining economic benefit by providing the keyword advertising service, per se, would not arise its liability for trademark infringement as it is not the one committing trademark infringement by using others' trademarks as keywords.[23] In other words, the reasoning behind this decision is that Google's mere service provision does not fulfil the trademark use criterion for the trademarks subject to infringement. On the other hand, it should be noted that it would not be an accurate approach to accept that Google, or any other search engine for that matter, shall not be liable if the concerning search engine remains passive and does not take any measures even though it is warned about the illegal use of a trademark or if the trademark's function is damaged. In such cases, search engines should be expected to take necessary measures to ensure the protection of trademark rights. [24] Likewise, CJEU has stated that passive behavior could lead to liability for the search engine.[25]

    At this point, it would be beneficial to briefly touch upon Google's broad matching service. In broad matching service, various variations of the designated keywords can be reflected in the search results as advertisements, even if these variations had not been selected. In such cases, it would not a reasonable approach to evaluate Google's activity as neutral as per trademark infringement.[26] Hence, examining in each case whether the advertiser is also provided with the broad matching service would be appropriate.

    F. Conclusion

    Today, we see that the trademark infringement on the Internet environment occurs in various ways. All kinds of opportunities offered by the Internet for marketing activities are exploited by the commercial enterprises. Keyword advertising is one of these marketing opportunities.  On the other hand, as the number of the marketing ways increase, the variety of trademark infringement that will constitute unfair competition also increases. In this context, the act of using the competitors' trademarks as keywords without any right or legitimate association with the trademark and directing Internet users to their own website in this way so as to obtain commercial benefits leads to the violation of the trademark rights arising from trademark proprietorship. In such a case, the concerning proprietors will be able to demand the prevention of infringement and, if any, compensation of damages against trademark infringement under the provisions of the IPL for registered trademarks and under the provisions of the TCC for unregistered trademarks. In judicial decisions, the courts settle the disputes in this way. It is also argued in the doctrine and by CJEU that, search engines that remain passive and refrain from taking any preventive measures despite they were notified of a trademark infringement should be held liable for the damages the concerning trademark proprietors incur. Finally, it is significant to mark that using descriptive and qualifying expressions in keyword advertising activities will prevent occurrence of any trademark infringement.

    Bibliography

    Akın, İrfan. "Adwords Reklam Sistemi." Ankara Bar Association Intellectual Property and Competition Law 9, Vol. 1 (January 2009): 33-54.

     

    Ayhan, Rıza ve Çağlar, Hayrettin. Ticari İşletme Hukuku Genel Esaslar. Ankara: Yetkin Publishing, Issue 11, 2018.

     

    Bozbel, Savaş. Fikri Mülkiyet Hukuku. On İki Levha Publishing, September 2015.

     

    "Google France and Google", C-236/08 – C-238/08 (23 Mart 2010), accessed on 10.04.2021,

    https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:62008CJ0236&qid=1610719820601&from=EN

     

    Istanbul 1st Civil Court for Intellectual and Industrial Property Rights, Docket No. 2018/249, Date. 7.5.2019.

     

    Rüzgar, Eser. Marka Hakkının İnternet Reklamcılığı Yoluyla İhlali ve Sorumluluk Rejimi. On İki Levha Publishing, June 2013.

     

    Soysal, Tamer. "Marka Hukuku Perspektifinden İnternet Ortamında Anahtar Kelime (meta-tagging) ve Adwords Reklamcılık Uygulamaları." Journal of the Court of Jurisdictional Disputes Year 6. Vol 12 (December 2018): 693-722.

     

    11th Civil Chamber of the Supreme Court, Docket No. 2012/12304, Date. 03.07.2013.

     

    11th Civil Chamber of the Supreme Court, Docket No. 2014/18838, Date. 06.03.2015.

     

    11th Civil Chamber of the Supreme Court, Docket No. 2015/12152, Date. 12.12.2016.

     

    Yasaman Kökçü, Zeynep. "Adwords Reklamlarda Bir Başkasına Ait Markanın Aynısının veya Benzerinin "Anahtar Sözcük" Olarak Kullanımı Tecavüz Teşkil Eder mi? AB Adalet Divanı Kararları Işığında Tecavüz Kriterleri." A Tribute to Prof. Dr. Hamdi Yasaman. On İki Levha Publishing (January 2017): 793-832.

     

    * This study has been conducted based on the relevant legislations and judicial decisions in Turkey.

    ** Istanbul Bar Association (zeynepyagmur@ictemlegal.com)

    *** Istanbul Bar Association (oncuucum@ictemlegal.com)

    [1] Zeynep Yasaman Kökçü, "Adwords Reklamlarda Bir Başkasına Ait Markanın Aynısının veya Benzerinin "Anahtar Sözcük" Olarak Kullanımı Tecavüz Teşkil Eder mi? AB Adalet Divanı Kararları Işığında Tecavüz Kriterleri", A Tribute to Prof. Dr. Hamdi Yasaman, On İki Levha Publishing (January 2017): 796.

    [2] Yasaman Kökçü, "Adwords Reklamlar", 798.

    [3] Savaş Bozbel, Fikri Mülkiyet Hukuku (On İki Levha Publishing, September 2015), 481.

    [4] Bozbel, Fikri Mülkiyet Hukuku, 348.

    [5] Save for the well-known trademarks within the scope of the Paris Convention for the Protection of Industrial Property and the trademarks that have acquired distinctive character before the application for registration.

    [6] IPL Par.1 of Art. 7: "Trademark protection provided by this Law shall be acquired by registration."

    [7] İrfan Akın, "Adwords Reklam Sistemi", Ankara Bar Association Intellectual Property and Competition Law Journal 9, Vol. 1 (January 2009): 39.

    [8] Akın, "Adwords Reklam Sistemi", 39.

    [9] Yasaman Kökçü, "Adwords Reklamlar", 806.

    [10] Akın, "Adwords Reklam Sistemi", 39-40.

    [11] Joined Cases: Google France SARL, Google Inc. v. Louis Vuitton Malletier (C-236/08); Google France SARL v. Viaticum SA, Luteciel SARL (C-238/07); Google France SARL v. CNRRH SARL, Pierre-Alexis Thonet, Bruno Raboin, Tiger SARL (C-238/08).

    [12] C-236/08 – C-238/08, "Google France and Google" (23 Mart 2010), par. 52, accessed on 10.04.2021, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:62008CJ0236&qid=1610719820601&from=EN

    [13] C-236/08 – C-238/08, "Google France and Google" (23 March 2010), par. 78.

    [14] Eser Rüzgar, Marka Hakkının İnternet Reklamcılığı Yoluyla İhlali ve Sorumluluk Rejimi (On İki Levha Publishing, June 2013), 166-168.

    [15] Bozbel, Fikri Mülkiyet Hukuku, 487.

    [16] Rıza Ayhan ve Hayrettin Çağlar, Ticari İşletme Hukuku Genel Esaslar (Ankara: Yetkin Publishing, Issue 11, 2018), 340.

    [17] Akın, "Adwords Reklam Sistemi", 47.

    [18] 11th Civil Chamber of the Supreme Court, Docket No. 2012/12304, Date. 03.07.2013.

    [19] 11th Civil Chamber of the Supreme Court, Docket No. 2014/18838, Date. 06.03.2015.

    [20] 11th Civil Chamber of the Supreme Court, Docket No. 2015/12152, Date. 12.12.2016.

    [21] Istanbul 1st Civil Court for Intellectual and Industrial Property Rights, Docket No. 2018/249, Date. 7.5.2019.

    [22] Same opinion See., Rüzgar, Marka Hakkının İnternet Reklamcılığı Yoluyla İhlali ve Sorumluluk Rejimi, 196, 197.

    [23] C-236/08 – C-238/08, "Google France and Google" (23 March 2010), par. 55.

    [24] Tamer Soysal, "Marka Hukuku Perspektifinden İnternet Ortamında Anahtar Kelime (meta-tagging) ve Adwords Reklamcılık Uygulamaları", Journal of the Court of Jurisdictional Disputes Year 6, Vol. 12 (December 2018): 717.

    [25] C-236/08 – C-238/08, "Google France and Google" (23 March 2010), par. 113-114, 120.

    [26] Yasaman Kökçü, "Adwords Reklamlar", 808-809.

     

    ]]>
    Tue, 13 Apr 2021 16:27:00 GMT
    <![CDATA[Bahrain Investment Wharf]]> Bahrain Investment Wharf

    Introduction

    The Bahrain Investment Wharf (BIW), worth US$1.3 billion, is the Kingdom's largest privately owned and operated industrial park. This ground-breaking proposal is a mixed-use manufacturing, enterprise, logistics, commercial, and residential construction estate that spans 1.7 million square meters in the recently built Al Hidd Industrial Development Zone. BIW established a visionary relationship with the Ministry of Industry, Commerce, and Tourism, aligning its goals with the Bahraini government's goal of diversifying the national economy and promoting the industrial sector.

    What does BIW mean?

    Bahrain is a small Arab state in the Persian Gulf that is officially known as the Kingdom of Bahrain. It is a heavily oiled economy that exports a significant amount of oil and gasoline. Bahrain's government has pursued a variety of policies to boost the non-oil industry over the years. Specialized areas devoted to various sectors have been designed to concentrate on each division. The Bahrain Investment Wharf (BIW), which was established in 2005 and served as a cutting-edge for industrial investments, is one such free zone in Bahrain. 

    Where is it located? 

    Bahrain Investment Wharf is situated in the newly developed Al Hidd Industrial Area in the Kingdom of Bahrain's (Salman Industrial City).  

    What is the project type of BIW? 

    Industrial Infrastructure Development.  

    What services do they provide? 

    BIW's amenities and infrastructure include leasable industrial spaces with conference facilities, on-site labour accommodations, a comprehensive network of utilities, and the infrastructural needs to help businesses get up and running quickly. 

    Serviced Lands – 

    The Bahrain Investment Wharf masterplan has 163 serviced plots with a total leasable area of 1,270,105 square meters available for establishing a Bahraini company. The area was designed to serve a wide variety of manufacturing and enterprises.  

    The serviced plots include world-class infrastructure such as electricity, water, telecommunications, and sewerage. Furthermore, BIW's support services ensure that industrial activities are optimized by easing day-to-day market needs. 

    Pre-built Commercial Spaces – 

    The Bahrain Investment Wharf features a pre-built shopping area as well as a 250,000-square-meter dedicated industrial park. The climate in the region actively contributes to the embrace, growth, and promotion of targeted economic sectors. Full "ready to move in" commercial offices are available throughout the park, providing greater versatility to SME's and company start-ups searching for premium dedicated leasing space. 

    The following programs are available as well:

    • Conference spaces that are fully equipped
    • 24 hrs security
    • Reception and concierge services are provided on a regular basis.
    • Parking in the shade
    • Cleaning facility for the workplace on a regular basis 

    Pre-built Warehouses – 

    For companies interested in registering their Bahraini business activities in this zone, the Bahrain Investment Wharf has 90,000 square meters of pre-built warehousing and logistics areas. There is a range of private and public warehouse areas in the city that can be rented or leased depending on your needs. 

    Takhzeen, a dedicated self-storage facility that provides companies and individuals with state-of-the-art storage options, is also located there. Practically, this opens up a whole new range of possibilities for small and medium businesses looking to save money and time when it comes to setting up warehousing, small offices, and light industrial units like factories. 

    Takhzeen Self-Storage Facility

    Takhzeen is the first self-storage facility in Salman Industrial City, which was built by a BIW subsidiary on a 20,000-square-meter plot of land inside the Al Hidd Industrial Development Zone in Bahrain. 

    Takhzeen has 826 specialized storage units varying in size from 2.5 to 200 square meters with a one-month minimum tenancy period. Takhzeen specializes in offering residential, enterprise, and a range of climate-controlled storage solutions with the aim of being the region's leading self-storage company. Takhzeen offers amenities such as unrestricted 24-hour safe entry, product packaging, and more. 

    BIW Business Park

    The BIW Business Park, which opened in 2007, is a 60,703 square meter business park within the Bahrain Investment Wharf that was developed in collaboration with Inovest and Al Khaleej Development at the cost of $60 million. 

    Telecommunications, banking services, call centres, hardware assemblers, advertising manufacturers, and legal services are just a few of the industries represented at the BIW business park. Fully pre-serviced lands with state-of-the-art facilities and end-to-end facility maintenance systems are available in the industrial park. 

    Hotel & Hospitality

    The Bahrain Investment Wharf has a 19,000 square meter hotel facility that offers upscale amenities to BIW guests who intend to stay longer. The hotel has a wonderful atmosphere, great dining offerings, a 24-hour lobby bar, and a cutting-edge gym. The hotel is well-equipped for conventions, with cutting-edge technologies and meeting rooms. The hotel has its own boat dock. 

    BIW Labour Accommodations

    Since its establishment, Bahrain Investment Wharf has been committed to providing excellent services to the residential needs of companies establishing themselves within the BIW. The BIW Labour Accommodations is a model gated community with 120,000 square meters of space. 

    More than 20,000 industrial workers serving in BIW and Salman Industrial City will be accommodated in the accommodation district, which will provide shared facilities and services in a clean, stable, and hygienic living atmosphere. A grocery, hotel, pharmacy, and landscaped green areas are among the essential amenities. 

    The following programs are available as well:

    • Basketball courts and a soccer field
    • 24 hrs security
    • Prayer hall
    • Telecommunication service providers
    • Money exchange offices
    • Common Dining Area
    • Cleaning Services are also available.

    What is the leased percentage of the occupancy rate in BIW? 

    The BIW occupancy rate is 98 percent, with 60 percent already built and the remaining 38 percent undeveloped. 

    Why choose Bahrain Investment Wharf? 

    With a strategic location near major transportation routes (Bahrain International Airport, Shaikh Khalifa Bin Salman Port, and King Fahad Causeway towards Saudi Arabia), convenient industrial and commercial connectivity (Sitra industrial city, Manama and Seef central business districts), and state-of-the-art infrastructure, BIW is ready for business. 

    What is the objective of the Bahrain Investment Wharf? 

    The key goal of BIW is to contribute to Bahrain's rapid industrial development, draw FDI, and diversify the national economy by merging their operations with other regional industrial zones, ports, and logistics hubs. Furthermore, they are closely aligning themselves with the Bahraini government's national plans and initiatives, which pave the way for the achievement of the Bahrain Economic Vision 2030.

    What are the benefits of establishing a company in Bahrain Investment Wharf?

    Because of the numerous advantages that the area offers, incorporating a business company in Bahrain is a wise and lucrative investment opportunity. You can gain the following advantages by beginning a company in Bahrain:

    Tax Benefit

    At the end of the fiscal year, tax is a major problem for company investors. The Bahraini government takes the requisite measures to fully free business investors by initiating tax exemption proceedings. The government would not require company owners to pay personal taxes. The government would not require company owners to pay personal taxes. Bahrain, however, as a member of the Gulf Cooperation Council (GCC), has begun the VAT process on January 1, 2019. This VAT law applies to business companies registered in Bahrain, and they are required to pay 5% VAT. 

    Repatriation in its entirety

    In case of a company liquidation, the Bahraini government has exempted corporate investors from paying any fee. During the entire corporate cycle, business owners and customers have full freedom in repatriating the gross money spent, and earnings gained. 

    Gaining Access to the Global Market

    Bahrain is an ideal destination for business owners and developers looking to grow their operations. Due to its proximity to other GCC countries such as Iran, the United Arab Emirates, Oman, and Qatar, business investors benefit from excellent visibility and ease of entry into the international market. 

    Growing Economy 

    Bahrain has established itself as one of the fastest-growing business hubs in the world. The Bahraini government has taken a number of measures to improve the non-oil market, given the region's oil-based economy. 

    Process of Starting a Business is Simple

    The investor must complete a few steps in the company establishment process in Bahrain. If you follow the advice of a professional, the method of starting a company should be relatively simple. 

    What Bahrain Investment Wharf is ideal for? 

    Bahrain Investment Wharf is ideal for the following;

    • Investment and holdings
    • Production of materials
    • General Trading
    • Cold storage
    • Services for logistics
    • Real estate & property management
    • Management & consulting services
    • Engineering manufacturing
    • SME (Small and Medium Business)
    • Warehousing 

    What challenges does the Bahrain Investment Wharf face? 

    The reputation of BIW was an issue. Its goal was to draw high-quality inbound investors to the Kingdom, but its identity and messaging gave it a bad reputation. The brand strategy was basically appropriate for the reason, but the visualization of the strategy was markedly local, which was ineffective in attracting Foreign Direct Investment (FDI) into the region. 

    Owing to its strong vertical nature, the label was difficult to apply, and the brand touchpoints feel distant from the overarching vision of being "The Gateway to Business in the Gulf." 

    How to start a business in Bahrain Investment Wharf? 

    A business investor must take the steps below to integrate a company in Bahrain:

    Choose a business entity type:

    The first and an important step is to choose a company structure. Business investors in Bahrain can select from a wide range of business organizations, including:

    • A Foreign Company Branch
    • With Limited Liability (WLL)
    • Bahrain Shareholding Company- Public
    • Bahrain Shareholding Company- Closed
    • Single Conmandite Company 
    • Single Person Company
    • Partnership Company

    It is advised that you choose a business agency only after learning about the various forms and benefits that each entity offers. The number of available partners and the amount of money available for the initial investment determine the corporate structure.

    Select a Trade Name 

    Following the selection of the company form, the second task is to choose a business name. The company name should be carefully selected because it would eventually become the brand. Now, according to the specified guidelines, the trademark must be distinctive and must not be insulting.  

    Collect the essentials for the business

    To go on with the incorporation process, the business owner must have all of the necessary paperwork on hand. The following items are included in the general collection of materials:

    • A duly completed application for company registration 
    • Shareholder(s) or investor's passport and visa (s)
    • Owner's proof of identity
    • Ownership proof of address 
    • The business plan's blueprint 
    • Memorandum and Articles of Association drafted 
    • Business Activities List
    • Resolution of Board of Director's Resolution

    When the records have been gathered, they must be forwarded for clearance to the appropriate government agencies.

    Obtain the Business License  

    Following a thorough examination of the records, the relevant authority will issue a business license, which is a legal permit that acts as an important document for doing business.

     

     

     

    ]]>
    Fri, 09 Apr 2021 06:53:00 GMT
    <![CDATA[marriage Hindu Law India Divorced in UAE]]> Insight: Can a person be married under Hindu Law in India and get Divorced in UAE?

    Introduction

    The number of expatriate Indian couples in the UAE filing for divorce in the UAE rather than in India is rising. Many couples cite the effectiveness of the court system, knowledge of the rules, and legal counselling as reasons for their decision.

    People who were married outside the UAE and current citizens of the UAE may typically apply for divorce using civil procedures or according to their own religious beliefs. Contrary to common opinion, many expats choose to have their divorces processed via the UAE court system because it is quicker and less costly in the long run. Divorces in the UAE can be completed in as little as one month if all parties agree.

    It should be remembered that divorce decrees for Muslim marriages can be obtained under Sharia Law, while divorce proceedings for non-Muslim marriages can be obtained under Federal Law No. 28 of 2008, also known as the Personal Status Law. The non-Muslims are permitted to use personal laws of the country in which their marriage was solemnized under this policy, as long as they have legalized versions of their country's rules translated and authorized by a translator and the Ministry of Justice.

    "Unless non-Muslims have special provisions applicable to their community or confession, the provisions of this law shall extend to people of the United Arab Emirates. Unless one of them requests the application of his rule, they shall apply equally to non-citizens," the Personal Status Law of the UAE stated. In the meantime, those who have been bound by interfaith or government marriages will demand a divorce by presenting a legitimized version of India's Special Marriage Act of 1954. By sending a validated translation of India's Foreign Marriage Act of 1969, foreigners or Indians who were married in an Indian Embassy or Indian Consulate abroad may apply for a divorce.

    Individuals must first present an application and a marriage document to the Family Guidance Section of the Personal Status Court. A counsellor will listen to the individuals' resentment and work to get both parties back together in order to save the marriage. When either or both parties do not wish to join forces, the attorney will ask both parties to bring settlement and divorce terms to the meeting.

    Divorce laws for Muslim couples

    Sharia law is the law that governs Islamic marriages. If both the husband and the wife are Muslims who live in the UAE, Sharia/UAE law will almost certainly rule their divorce. If the husband is a Muslim and the wife is not, the case is likely to be the same.

    Divorce laws for Non-Muslim couples

    In a recent case of Supreme Court, the court of cessation applied international law in a divorce case, citing Article 13 of the personal status law. According to Article 13, either party has the right to ask the court to apply international law (i.e., the law of the country where the marriage was contracted) to their divorce. Article 16 covers all substantive issues relating to guardianship, trusteeship, and preservation, as well as other mechanisms defined for the welfare of persons in need of protection. Prior to making a decision in a landmark case, the Supreme Court allowed an unattested legal translation that is in Arabic of the Hindu Marriage Act at the behest of one side.

    In reality, the recent trend has consistently demonstrated that applying foreign laws, especially in family matters, is a difficult task. In general, international laws are effectively implemented. Foreign laws cannot be enforced if they are in violation of public order, morality, or Islamic Sharia, according to Article 27 of the Civil Procedure Laws. Though cruelty was one of the grounds for obtaining judicial separation under the Hindu Marriage Act of 1955 as originally enacted, it was not a ground for obtaining a divorce. Cruelty became a basis for divorce and judicial separation after the amendment.

    Only cruelty is stated in clause 13(1)(a) of the Hindu Marriage Act, and it is not defined if it is mental or physical cruelty. The courts have interpreted it broadly, stating that it encompasses both physical and mental harm, and we are dealing with the latter in this case. An annulment is a legal concept that applies to the process of rendering a voidable marriage null; if the marriage is void, it is automatically null, but a legal declaration of nullity is necessary to prove this.

    A civil process for making a marriage null and void is an annulment. It is rarely given, with the exception of bigamy and not meeting the minimum age requirement for marriage. If such legal conditions were not fulfilled at the time of the marriage, the marriage can be considered null and void. In the eyes of the law, if these legal provisions are not fulfilled, the marriage is deemed to have never happened. This is referred to as an annulment.

    It differs from divorce in that an annulled marriage never existed in the first place, while a divorce dissolves a previously existing marriage. As a result, unlike divorce, it is retroactive: an annulled marriage is no longer considered valid. It is necessary to remember that annulment will result in a violation of UAE criminal law; as a result, UAE courts are unlikely to apply the same interpretation as Indian courts. Section 13B of the Hindu Marriage Act provides for a divorce by mutual consent. A couple will get a divorce if they file a joint petition claiming that they have been living apart from each other for at least a year and have mutually agreed to end their marriage. The court then gives them a six-month cooling-off period before the final petition is decided by the family court. This six-month waiting period is established to give couples time to rethink their decision to make sure they both want to end their marriage.

    Marriages that are invalid

    When a marriage is prohibited by statute, it becomes invalid and is immediately annulled. The Hindu Marriage Act of 1955, Section 11, deals with:

    • Marriage between relatives who are close

    Except for marriages allowed by existing customs, a marriage between an uncle and a niece, an aunt and a nephew, or a marriage between first cousins, whether the relationship is by half or whole blood, is considered void.

    • Bigamy

    The marriage is invalid if either partner was legally married to another person at the time of the marriage, and no formal annulment is required.

    • Divorce and nullity of marriage

    Any marriage solemnized after the effective date of this Act is null and void and may be proclaimed as such by a declaration of nullity on a petition filed by either party against the other party if it violates any of the conditions set forth in Section 5 clauses (i), (iv), and (v).

    • Inter-family Marriage

    A union between a brother and a sister, or an ancestor and a descendant whether by half or whole blood or by adoption.

    Marriages that are voidable

    An annulment is not compulsory in a voidable union, and one of the parties must obtain it. In general, one of the parties to marriage could demand an annulment if the intent to enter into a civil contract of marriage was not present at the time of the marriage, whether due to mental illness, intoxication, duress, or fraud.

    The Hindu Marriage Act of 1955, Section 12, deals with voidable marriages:

  • Any marriage solemnized before or after the effective date of this Act is revokable and may be annulled by a decree of nullity on any of the grounds mentioned below;
  • since the respondent's impotence prevented the marriage from being consummated; or
  • that the marriage is in violation of the condition set out in Section 5 clause (ii); or
  • that the petitioner's consent was obtained by force or fraud as to the nature of the ceremony or any material fact or circumstance concerning the respondent, or where the consent of the petitioner's guardian in marriage was required under Section 5 as it stood immediately before the commencement of the Child Marriage Restraint (Amendment) Act, 1978, the consent of such guardian was obtained by force or fraud as to any material fact or circumstance concerning the respondent; or
  • that the respondent was pregnant with someone other than the petitioner at the time of the marriage.
  • Despite the provisions of subsection (1), no petition for the annulment of a marriage may be filed.
  • If a claim is made based on clause (c) of sub-section (1), the claim will be considered if;
  • The petition is filed more than a year after the force ceased to exist or, in some cases, after the fraud was discovered; or
  • since the force had ceased to function or, as the case may be, the fraud had been detected, and the complainant has lived as husband or wife with the other party to the marriage with his or her full consent;
  • unless the court is satisfied that the ground stated in clause (d) of sub-section (1) is true;
  • that the petitioner was unaware of the evidence claimed at the time of the marriage;
  • that, in the case of a marriage solemnized before the commencement of this Act, proceedings were instituted within one year of the commencement, and in the case of marriages solemnized after the commencement of this Act, proceedings were instituted within one year of the date of the marriage; and
  • that no marital intercourse has taken place with the petitioner's consent since the petitioner discovered the presence of the said land.
  •  Divorce eligibility criteria

    Although divorce is legal in Islam, Sharia law makes it more difficult for squabbling spouses to end their union unless the judge is persuaded the marriage is doomed to fail. A civil process for making a marriage null and void is an annulment. It is rarely given, with the exception of bigamy and not meeting the minimum age requirement for marriage.

    As previously mentioned, the conditions for Muslims and non-Muslims seeking a divorce in the UAE differ to some degree. As a result, in order for a non-Muslim to apply for divorce in the UAE, all parties must be UAE residents, and they must be able to file for divorce in their home country under their home country's laws. Another important factor for non-Muslim couples living in the UAE who want to divorce is that they can either file a divorce petition based on their home country law, as per Article 1 of Federal Law Number 28 of 2005 (Personal Status Law), or they can register the case under Shariah Law. If both or either party is a Muslim, however, the divorce case can only be filed under Sharia Law.

    Divorce Procedures in the UAE

    Divorce in the United Arab Emirates is reasonably straightforward. In fact, if the parties can reach an agreement quickly, the process can be completed in as little as a month. This is called as a mutual consent divorce, and it does not require either party to have legal reasons for the divorce because they have reached an agreement. The first step is to apply for a divorce with the Family Guidance Section of the relevant judicial department in one of the emirates where you live.

    Conciliation is the first step in the divorce process. The couple will try to sort out their differences or, at the very least, find an agreement at this stage. Your marriage certificate and contracts, as well as passports for both spouses and any children, and birth certificates, will be required. Each text should also be translated into Arabic. This stage is limited to three months by statute. After that, there are two options for moving forward.

    If the parties are unable to reach an agreement, the matter will be heard by the First Instance Judge. Following the filing, the defence will respond, and the initiating party will respond; this process will continue until the judge makes a decision on the case. Both parties may opt to have a lawyer represent them, but it is not required. Cases are also heard in Arabic, but an interpreter would be given by the court. After the judgment is rendered, either party has 28 days to file an appeal. The Appeals Court follows the same procedure as the First Instance Court, with the exception that the case is heard by three judges.

    The case will be transferred to the Court of Cessation until the final judgment is rendered. To make sure that due process is followed, the court will review all records related to the case. At this point, you won't be able to present any new facts. After that, the matter will be heard by the Enforcement Court. The court then executes the decision and guarantees that both parties adhere to the judgment and settlement agreements. If the parties reach an agreement during the conciliation period, the case will be sent directly to the Enforcement Courts, bypassing the court system.

     

    ]]>
    Thu, 08 Apr 2021 10:08:00 GMT
    <![CDATA[Trial in UAE]]> Trial in UAE

    Introduction

    The UAE penal code is not entirely based on Islamic Sharia, but it does include some components. In the UAE, Sharia law exists and is used in limited situations, such as the payment of blood money. Some Sharia punishments, such as flogging, have been suspended in individual emirates and replaced with prison sentences. Refusal of a search Murder, armed violence, and libel suits are all examples of assault charges. Fraud, insolvency, and breach of confidence are examples of financial charges. Cases involving drugs, including drug distribution, possession, and use. Human rights violations and charges of intoxication while driving. Dishonesty crimes include theft, fraud, conspiracy, obtaining a financial benefit, and so on. Serious offences and claims of sexual harassment Cases of international tax avoidance and cases of rehabilitation

    Proceedings 

    The UAE's criminal procedures are outlined in Federal Law No. 35 of 1992, as amended. It includes a set of rules that define the methodology and procedures for criminal investigations, accused trials, verdicts, requirements for appealing to higher courts, and judgment compliance. 

    The Public Prosecution has sole authority to launch and prosecute criminal proceedings, according to Article 7 of the Criminal Procedures Law, as amended. It also has the ability to keep track of it until a final decision is made.

    The Office of the Public Prosecutor is a branch of the legal system. It assumes investigative and charging power, as well as the authority to refer the accused person to the appropriate court if his participation in the crime is proved. However, in some cases, as stated in Article 10 of the same Statute, the victim or his legal representative must file a written or verbal complaint before a criminal action can be filed. There are some examples:

    • refusal to deliver a minor to or removal of a minor from the custody of his or her custodian
    • Defamation, defamation, and other crimes as defined by law
    • Whether the victim is the perpetrator's spouse or one of the perpetrator's ascendants or heirs, and the profits are not confiscated judicially or administratively or encumbered by a lien in favour of another party, the perpetrator is guilty of fraud, breach of confidence, and concealment of the proceeds.

    Unless otherwise made by statute, a lawsuit would not be considered in the above cases until three months from the time the victim learned of the crime and the party that committed it. If the accused is apprehended in the act, the case can be filed with any public authority officer (e.g., a police officer) who is present at the scene.

    If there are multiple victims of a crime, a single allegation from one of them is enough to start criminal proceedings. If more than one person has been charged with a crime and a lawsuit has been lodged against one of them, the complaint also extends to the other accused.

    If more than one person is accused of committing a crime and a lawsuit is lodged against one of them, the complaint also refers to the other accused. The case must be filed by their legal guardian if the victims are under the age of 15 or are mentally challenged or if the crime was committed against their house.

    If the victim and his attorney have a conflict of interest, or if the victim has no one to defend him, the public prosecutor will step in. The investigation is conducted in Arabic by the public prosecutor. If the accused, litigants, witnesses, or others whose comments are considered important by the public prosecutor do not speak Arabic, the prosecution may request the assistance of an interpreter after the oath is taken.

    Lapse of criminal actions

    If the victim withdraws his lawsuit, the court case is over. When there are several victims, criminal prosecution will be dropped if any of the victims who filed the lawsuit withdraw it. If more than one person is convicted in a criminal case, the dismissal of one of the charges affects the others as well.

    If more than one person is convicted in a criminal case, the dismissal of one of the charges affects the others as well. The criminal case either ends when the accused dies, a final judgment is issued, the party that has the legal right to do so withdraws their legal action, an amnesty is issued, or the legislation that punishes certain actions is repealed.

    Criminal cases expire after 20 years in the case of felonies (serious crimes) punishable by death, ten years in the case of all other felonies, three years in the case of misdemeanours, and one year in the case of violations.

    Tracking down suspects and collecting evidence

    Inspections and evidence processing are the responsibility of judicial officers from various government agencies. Legal officers from the Police Department, the Public Prosecution Service, and the Criminal Courts are among them. Moreover, under Article 32 of the Criminal Procedures Statute, a number of other people are allowed to collect evidence in criminal investigations. They are as follows:

    • immigration officers
    • border police
    • coastguards
    • Inspectors from municipalities and inspectors from the Ministry of Health and Prevention.
    • armed forces officers

    The Role of Public Prosecution and Police 

    The job of the police is to protect the public, obtain preliminary statements from complainants and witnesses, apprehend suspects, conduct investigations, and carry out orders from the Public Prosecution to assist in the investigation process. 

    In the United Arab Emirates, criminal actions begin with a report to the local police in the jurisdiction where the crime was committed. Police may take statements from all parties involved during the investigation. Within 48 hours of filing a report, local police normally refer the case to the prosecutor's office.

    According to Article 47 of the Constitution, the Public Prosecution must interview the accused within 24 hours and then order his arrest or release.

    Individual rights and responsibilities

    The people's integrity is protected by the UAE's justice system. An accused person is presumed innocent unless proved guilty under criminal procedure law. As a consequence, when dealing with criminal cases, it follows those protocols. They are as follows:

    • Anyone who sees the perpetrator committing a crime or misdemeanour should promptly report him to the nearest public authority. An arrest warrant is not required.
    • Law enforcement officers, such as cops, are not permitted to access a person's home except under the conditions set out in this law or in response to a request for assistance from a resident who may be facing a serious threat to his life or property.
    • No one may be arrested, searched, held, or imprisoned unless the law specifies the circumstances and conditions.
    • Without a complaint or a request, anybody who knows of the occurrence of a crime against which the public prosecutor may bring a criminal suit must report it to the public prosecution or judicial officers.
    • Only places designated for that purpose and for the duration stated in the warrant issued by the competent authority can be used for detention or imprisonment.
    • No criminal punishment may be levied before a person's guilt has been proven in accordance with the law.
    • The accused will petition the court to reimburse him for the prejudice he has suffered as a result of the victim's or accuser's false accusation.

    Attorney-client rights

    At the trial stage, anyone accused of a felony (or a serious crime) punishable by death or life imprisonment can hire a lawyer to defend him. If the accused does not employ a lawyer, the court will appoint one for him, whose fees will be covered by the state according to the statute.

    After proving his financial inability to employ a lawyer, the accused of a crime punishable by temporary imprisonment can also petition the court to provide him with an attorney in his defence.

    The investigation and arrest of the suspect or convict

    When a judicial officer arrives at a crime scene (or if an individual has been caught red-handed), he or she must prohibit anyone present from leaving or leaving before a report has been written. The officer may also summon anybody who may have additional information about the incident to provide a statement right away. 

    Under the circumstances stated in Article 45 of the law, if there is sufficient evidence of the accused's involvement in the crime, the judicial officer can order his arrest if he is present at the scene.

    If the defendant is not present, the judge may issue an arrest warrant, which must be specified in the report. One of the public authority officers should execute the arrest warrant. The accused's comments should be heard by the judicial officer as soon as possible after his detention. If the accused fails to provide evidence proving his innocence within 48 hours, he should be referred to the appropriate public prosecutor. Within 24 hours, the Public Prosecution will interview him and either arrest or release him.

    The search of residences and people

    The judicial officer should search the accused in situations where his arrest is legal, and the accused may be frisked for something relevant to the crime or necessary for the investigation on his body, clothing, or property.

    If the accused is a woman, the search should be conducted by a female judicial officer who has taken an oath. Female witnesses should also be present at the inspection. The defendant's home could not be searched without a search warrant from the public prosecutor unless the defendant was caught red-handed, and there were clear indications that the defendant was hiding items or documents that might reveal the truth in his home.

    The search and seizure of items and documents should be performed in compliance with the statute. 

    Punishment for any criminal offence 

    According to the Penal Code, each offence carries a different punishment depending on the severity and nature of the offence. The following are the penalties for some of the most common offences in the country:

    • Theft – The Penal Code's Chapter Eight specifies the punishments for theft, with the highest sentence being life imprisonment;
    • Cheque bounce – Someone who writes a bad cheque will be sentenced to prison and fines as per Article 401;
    • Felony – The act of crime may be punishable by death, incarceration for a period of time, or life imprisonment;
    • Misdemeanour – Article 29 of the Penal Code stipulates that committing a misdemeanour is punishable by incarceration, a fine of more than AED 1,000, and the payment of blood money. 

    Filing an Appeal 

    Any party who disagrees with the judgment of the Court of First Instance may appeal to the Court of Appeal and then appeal to the Court of Cassation against the Appeal Court's decision. 

    The accused has 15 days from the date of the Court of First Instance's decision to file an appeal. In contrast, an appeal to the Court of Cassation against an Appeal Court ruling has a 30-day deadline.

    It is important to remember that a victim cannot appeal a lower court's decision because, following approval of the appeal, the public prosecutor represents the complainant and has the power to file an appeal if the plaintiff is aggrieved by the decision.

    Deportation 

    A foreign expatriate convicted of a crime may be deported from the country under a number of circumstances. The following are several ways in which the UAE Penal Code requires a court to issue a deportation order:

    • Religious and creed-based crimes;
    • Possession of narcotic drugs cases;
    • In the case of a crime or misdemeanour under Article 121.

    Duration of a criminal proceeding 

    The amount of time it takes to receive a criminal court decision is largely dependent on the facts of the case and the court's discretion.

    Court Fees 

    In comparison to civil claims, a petitioner is not required to pay legal or court costs in order to file a lawsuit against an accused person. However, if you need legal representation before the criminal courts, you will have to pay an attorney fee.

     

     

    ]]>
    Thu, 08 Apr 2021 09:32:00 GMT
    <![CDATA[Income Tax Law in Israel]]> Income Tax Law in Israel

    Residents in Israel are taxed on their worldwide earnings. Non-residents are entitled to income tax on income earned in Israel and capital gains tax on capital gains on properties located in Israel (subject to special non-resident exemptions). Income tax, capital gains tax, value-added tax, and property appreciation tax are all levied in Israel. The Income Tax Ordinance is Israel's prime source of income tax legislation. To promote aliyah, there are also special tax benefits for new immigrants.

    What is the applicable domestic legislative framework for the enforcement of Income-tax regulations in Israel?

    The Israel Tax Authority (ITA) was created on September 15, 2003, as a result of a government decision to combine the Department of Income Tax and Land Taxation, the Department of Customs and VAT, and the Automated Processing Service in order to "consolidate the administration of tax collection under one key administrator, to be invested with legal authority to enforce the applicable tax laws."

    The Income Tax Ordinance is Israel's prime source of income tax legislation. For each tax year, income tax is imposed in accordance with the terms of the Income Tax Ordinance, at the rates prescribed in the ordinance, on income obtained or accrued (income from capital or property) by an Israeli resident in Israel or abroad, and non-residents' income obtained or accrued in Israel from the sources specified in the ordinance, which include industry, occupation, earnings, interest, dividends, securities, patents, and copyright.

    In general, which categories are subject to income tax?

    Subject to certain exceptions, all forms of remuneration and compensation, whether in cash or in-kind, resulting from/attributable to work services performed in Israel are taxable. Below are some examples of components of an expatriate remuneration plan that will be taxed as income:

    • contributions to profit-sharing schemes and some retirement plans.
    • the value of low- or no-interest loans issued by the employer, either directly or indirectly.
    • domestic assistance provided by the employer.
    • stipends for time spent at home.
    • the use of a business vehicle.
    • In a non-arm's length basis, the employer provides accommodation.
    • Allowances for living expenses.
    • Capital buying plans for employees and stock option plans for employees.
    • contributions of retirement accounts.
    • contributions to health-care, dental-care, sickness-care, and disability insurance schemes.
    • educational fee for the children.
    • reimbursement with unsupported moving costs.
    • compensation for taxation.
    • allowances for housing.

    Are there any places of revenue in Israel that are tax-exempt? If that's the case, please provide a broad description of these terms.

    In Israel, there are only a few options for receiving tax-free wages. According to the Israel Tax Ordinance and Regulations, prospective entrants and returning nationals are eligible for a number of tax deductions.

    Are there any special considerations for ex-pats in Israel?

    Non-resident expatriates may be eligible for major benefits not applicable to Israeli nationals, according to certain requirements.

    Visiting lecturer: According to the Council of Higher Education Law – 1958, a visiting lecturer is a foreign permanent professor or teacher who is paying to instruct or do study at a higher education institution in Israel.

    Foreign expert: A foreign expert is a foreign citizen who meets any of the following criteria as of March 2005:

    • They were paid more than $13,400 (in 2020) for their work, compounded by the number of months they spent in Israel, and tax was withheld as required by statute.
    • They were welcomed from abroad by an Israeli resident who is not employed by a manpower firm or a temporary organization to perform duties for the inviting Israeli resident in the international resident's area of expertise.
    • They were working or offer service in their field of expertise during their stay in Israel or the area.
    • They have been officially residing in Israel.

    If they spent less than a month in Israel, the figure would be determined linearly by dividing it by 30 and multiplying it by the number of days they spent there.

    What are the general income tax deductions permitted in Israel? 

    Personal tax deductions, also known as credit points, are generally issued to Israeli residents and withheld from their income tax liabilities. The amount of credit points a taxpayer is entitled to depend on his or her personal and family conditions, as well as whether the spouse's earnings are measured separately. There are also some credits and exemptions for contributions to recognized pension funds. Certain credit points are available to international residents (only if the foreign resident is a foreign expert). 

    What are the different types of tax credits available in Israel? 

    The below are only a few examples of general credits:

    • credit for insurance costs and donations to gain funds
    • credit for a soldier who has been discharged
    • women's credit
    • a resident of Israel receives credit
    • contribution to a government agency
    • a foreign worker's credit (subject to conditions).
    • credit point for the juvenile
    • a spouse's allowance (in certain cases)
    • credit for new immigrants (oleh)
    • Children's credit, which varies depending on the child's age

    When do you have to file your tax returns? Or when is the deadline for filing your tax return?

    In most cases, the deadline is 31.04. YY, but if double-entry bookkeeping is needed, the deadline is 31.05.YY.

    When does the fiscal year-end?

    31st December

    What are the conditions that have to be adhered to for filing the tax returns in Israel?

    Residents-

    Individual taxpayers who are expected to file a report must do so by the 30th of April after the conclusion of the fiscal year, or by the 31st of May if an online filing is required or submitted based on double-entry bookkeeping, or if an individual is allowed to file the tax return electronically.

    For each spouse's work and other income did not meet such thresholds and tax was withheld at source, a resident taxpayer whose primary source of income is employment income is not obliged to file an annual personal income tax return. Employers defer tax on work wages in compliance with tables provided by the Commissioner of Taxes and revised on a regular basis. Foreign employers are not excluded from the need to open and maintain an Israeli payroll withholding tax register for employees working in Israel on a monthly basis. Appointing a state official (or an employee) to help with payroll management and monitoring will fulfil this responsibility.

    Non-resident-

    Unless tax was withheld at the root, a non-resident with income earned or derived in Israel is required to file an annual personal Israeli tax return. Even if an expatriate is not required to file a return, they will need to do so in the years of their arrival and/or departure from Israel to take advantage of the annual (rather than monthly) tax brackets that apply to income received in Israel during those years.

    What definition is given to the 'resident' of Israel for tax purposes?

    The centre of life measure, which takes into account total relations with Israel, is used to determine if a person is an Israeli citizen for tax purposes (including social connection, economic, and family). Furthermore, if a person was present in Israel for at least 183 days in a tax year, or for at least 30 days in a calendar year, and their cumulative presence in Israel during the tax year and the two corresponding years was 425 days or more, it was assumed that their centre of life was located in Israel.

    Foreign nationals who come to live in Israel on a B-1 visa for a set amount of time are not considered as residents for tax purposes by the Israeli tax authorities, but they are also subject to taxation as non-residents.  

    When it comes to the start and end dates of the residency, is there a de minimus number of days rule? For e.g., once their task is completed and they repatriate, a taxpayer cannot return to the host country/jurisdiction for longer than 10 days.

    No, there is no de minimus number of days rule.

    What if the assignee arrives in the country/jurisdiction before the start of their assignment?

    If these days in Israel were working days for a foreign resident, their salary for those days would be added to their gross taxable income.

     

    Are there any compliance conditions that have to be complied with before leaving Israel?

    A person is deemed to have violated residency in Israel if they are no longer registered as an Israeli citizen (as described earlier) and has lived outside of Israel for at least 183 days a year for two consecutive tax years, and their centre of life was outside of Israel for the following two years, according to domestic law. If this is the case, the individual is known to have broken residency from the time they first left Israel.

    The exit tax for Israeli citizens is a critical problem that needs to be discussed. The exit tax is imposed on the last day of a resident's stay in Israel. The exit tax is imposed on the last day of a resident's stay in Israel. However, the tax bill will be deferred to the day of the asset's final selling, and the tax will be measured based on the asset's valuation on the sale day, as well as the linear growth of assets and stock options while living in Israel.

    Is there a reporting provision in the host country/jurisdiction after an assignee leaves the country/jurisdiction and repatriates?

    No. The reporting conditions in Israel, on the other hand, are on a yearly basis. As a result, if the assignee returns to their home country/jurisdiction within the tax year, the assignee will be required to file a record with the Israeli tax authorities about income earned while residing in Israel.

    Is a wage paid while living in another country taxable in Israel? If so, how can you go about doing it?

    Non-resident workers who accept compensation for jobs performed outside of Israel are normally not taxed on their wages. Residents in Israel are taxed on an individual basis. Salary paid by an Israeli citizen working overseas with an Israeli company for more than four months is subject to special tax rates. In this situation, the employee could be eligible for such deductions and exemptions.

    Profits earned or derived abroad is excluded for new entrants and returned veterans for ten years.

     

     

    ]]>
    Thu, 08 Apr 2021 09:00:00 GMT
    <![CDATA[Patent Registration in Israel]]> Intellectual Property: Patent Registration in Israel

    An invention is protected by a patent, which is an exclusive privilege given to the inventor. In other words, a patent is an exclusive license to a device or a method that proposes a new technological approach to a problem or a new way of doing things. Technical information about the invention must be submitted to the public through a patent application in order to obtain a patent.

    Patent applications are submitted at the ILPO's Patents Department from all over the world. Each submission is addressed to a special examiner (an engineer or expert) in the area in which their invention is made. A patent will be awarded if the invention meets the conditions of the Patents Law and Regulations.

    What are the sources of Israeli patent law?

    The main source of patent law is the Patents Law, 5727-1967. the list of the most significant secondary legislations is mentioned below:

    • the Patent Regulations (Extension of Protection ‒ Procedures for Order Application, for opposition to the order and for Application for Revocation), 5758-1998
    • the Patent Regulations (Application of the Patent Cooperation Treaty), 5756-1996
    • the Patent Regulations (Office Practice, Rules of Procedure, Documents and Fees), 5728-1968

    Who has the authority to file a patent?

    The owner of the invention must file an application to register a patent under Section 2 of the Patents Law. According to Section 1, the inventor or individuals who derive title under the inventor and are entitled to the invention by operation of statute, sale, or arrangement are the owners of the invention. A claimant who is not the inventor is required by Section 11(b) of the Patents Law to explain how it came to own the invention.

    When a patent is licensed, what rights do you get?

    A successfully registered patent entitles the patent holder to enjoin third parties from using the invention on which the patent is issued without permission or unlawfully, according to Section 49 of the Patents Law. 'Exploitation' means using the invention in the manner specified in the claims or in some other manner that includes the invention's nature in light of the claims. The issuing a patent does not grant authorization to use an invention illegally or in a way that infringes on any legitimate privileges under any statute."

    How does a patent holder go about enforcing his or her rights?

    Patent holders and exclusive licensees may sue in court to protect their rights. A patent infringement suit may only be filed after the patent has been granted, according to Section 179 of the Patents Law.

    What is the period of a patent's validity?

    A patent is valid for 20 years from the date of registration of the patent application if extension fees are charged, according to Section 52 of the Patents Law. If the violation occurs within the duration of the patent, it can also be pursued by a petition for damages after the term has expired due to Israel's seven-year statute of limitations. Courts have discussed the prospect of a post-term injunction, but it is uncertain to what degree this remedy exists.

    Which regulatory authority is in charge of the registration process?

    The Israel Patent Office.

    What are the reasons for a patent claim being rejected?

    The reasons for a patent claim being rejected are as follows;

    • Failure to include a complete reference list and list of publications (Section 18). Courts also ruled that failure to do so constitutes a breach of contract (see, for example, CC 14/92 (Nazareth Distr) Plasson Maagan Michael Industries Ltd v Freddi Priant et al. [1993]).
    • Failure to meet the enablement, sufficiency, definition (Article 12), and argument support (Article 13) requirements;
    • Failure to follow the procedural provisions of Chapter 3(a) of the Patents Law (payment of relevant fees, the inclusion of proper specification and claims etc.)
    • Failure to meet Section 3 of the Patents Law's patentability criteria (novelty, usefulness, industrial use, and imaginative step); and
    • Lack of clarity of ownership

    Are there any forms of statements or claiming formats that are prohibited under your jurisdiction (for example, claims based on medical processes)?

    Method claims for human therapeutic treatments are not permitted under Section 7(1) of the Patents Law. Patent applications for new species of plants or animals are also prohibited under Section 7(2) of the Patents Law, with the exception of microbiological species not derived from nature. Furthermore, since they are not considered as process or substance claims, so-called "use claims" are not permitted. Furthermore, so-called "Swiss-type" format statements are not permitted. Additional exclusions, such as business methods, have been established by case law. 

    Are there any administrative or regulatory procedures for extending the length of a patent (for example, adjustments for patent office delays, chemical patent term extensions, or supplemental security certificates)?

    Yes, but only in the form of patent extension orders for patents on medicinal preparations and medical equipment. As punishment for legal delays that prohibit the patent holder from using the patent, extension orders of up to five years can be issued. The following are the requirements for their award, as specified in Section 64D of the Patents Law:

    • The SAID registry is the first to include the drug, allowing it to be used for medicinal purposes in Israel.
    • A drug registered in Israel's Pharmaceutical Registry is present in the pharmaceutical preparation.
    • If marketing permits have been issued in the United States or a recognized European country, a patent alleging said planning abroad has been granted an extension period that is valid in both the United States (if applicable) and the recognized EU country (if applicable).
    • There has never been another extension order for the patent or the substance; and
    • The drug, method for producing or using it, medical preparations containing the material or process for producing it, or medical devices claimed in the basic patent, as well as the basic patent, are still valid.

    The drug, method for producing or using it, medical preparations containing the material or process for producing it, or medical devices claimed in the basic patent, as well as the basic patent, are still valid.

    The extension period cannot be longer than the shortest of

    • 5 years
    • the underlying patents' expiration or termination, or their patent term extensions in a recognized country
    • 14 years after the first marketing authorization in Israel or another recognized country; or
    • in recognized patents, the shortest term of expansion of associated patents

    What types of subject matters are patentable?

    A "patentable innovation" is described as "an invention, be it a product or a method in any field of technology, that is new and useful, has industrial application, and requires an innovative phase," according to Section 3 of the Patents Law. 

    Is there a way to challenge the patent office's refusal to issue a patent, and if so, to whom?

    If there is a rejection of a patent application by the Israel Patent Office, the applicant can seek a hearing before the registrar. According to Section 174 of the Patents Law and Regulation 191 of the Patents Regulations, if a patent is not issued after the trial, the claimant has the right to appeal to the district. Additionally, the registrar can reconsider the rejection at the applicant's request if the request is made within 12 months of the refusal date.

    What are the reasons for invalidating a patent that has already been issued?

    The reasons for invalidating a patent that has been granted (as mentioned in Section 31 of the Patents Law) are the same as those for opposing the issuance of a patent, as follows:

    • Owing to the previous application (which destroys novelty) or demonstration, the invention is not patentable.
    • The owner of the invention is the opponent, not the plaintiff; or
    • There are some reasons why the registrar may have denied registration.
    • A patent could also be invalidated if it was not prosecuted in good conscience (e.g., failure to inform the Israel Patent Office of an important citation abroad).

    Who will challenge a patent that has been granted?

    Any third party can bring a termination suit against a patent that has been granted. A patent revocation claim may be filed at any time after the patent has been granted.

    What are the deadlines for filing a post-grant review petition or an opposition?

    Within three months of the approval of the bid, a note of pre-grant opposition must be filed. This time frame cannot be extended.

    When an opposition is filed, what are the potential outcomes?

    The potential outcomes of opposition are as follows;

    • the opposition's dismissal
    • acceptance, in whole or in part, of the opposition; or
    • Ownership of the copyright is transferred to the opponent.

     

    What legal principles will the tribunal use to settle the appeal or opposition, and who holds the presumption of proof?

    The legal principles used by the Israel Patent Office are identical to those used in courts. In a patent opposition proceeding, the claimant bears the presumption of evidence. In a revocation case brought by a third party, though, the presumption of evidence is on the revocation claimant.

    What factors contribute to a patent's inability to be enforced?

    Patents cannot be executed until they are granted in most cases. A legal case for infringement can be brought after the patent has been granted, according to Section 179 of the Patents Law; however, if an action for infringement is brought, the court may award relief for infringement committed after the date of publication of the claim.

    Furthermore, if a renewal charge is not charged and the patent is declared lost; as a result, the patent will become unenforceable. If a patent holder wants to impose an invalid patent, they must file a petition with the registrar to get his or her consent.

    According to Section 53 of the Patents Law, whether the applicant used or planned to use the technology before the date of award, it would be immune from infringement. Even after the patent has been restored, if the defendant started to exploit the invention in Israel on the day the patent lapsed, or if the defendant made real provisions for its use after that date, the defendant shall be entitled to continue to exploit the invention only for the purposes of its industry.

     What matters infringes a Patent?

    In light of the concept of such claims, Section 49(a) of the Patents Law distinguishes direct infringement as the unauthorised or unauthorized use of an invention for which a patent has been issued, either in the manner prescribed in the claims or in some manner that includes the substance of the invention.

    Is it possible for a party to be held responsible if the copyright violation occurs outside of the jurisdiction?

    The Patents Law, in general, refers to infringements that occur within Israeli territories. There are no equivalent clauses in Israeli law to those found in 35 US Code 271 (f). In at least one instance, an Israeli court ordered an injunction against an Israeli firm, requiring it to guarantee that its international subsidiary did not misuse the technology outside of Israel (MCA 814/05 (Jer Distr) CC 7076/05 Orbotech Ltd v Camtech Ltd [2005]). In contrast, a party would not be held responsible for patent violations committed solely outside of Israeli territories (LCA 8831/05 Harar v Dialit Ltd, [Sup Ct]).

    Additionally, an operation carried out outside of Israel that causes violation in Israel can be prosecuted in Israel as per the case of Beecham Group Ltd v Bristol-Myers Co, 33 (3) PD 757 [1979]

    In which courts will a patent infringement suit be filed? What are the legal specifications for each location?

    According to Section 188(b) of the Patents Law, each of Israel's six district courts is potentially authorized to hear patent infringement cases, according to local jurisdiction laws.

    According to Regulation 3 of the Civil Procedure Regulations of 1984, a plaintiff can bring an action in one of several separate venues, including;

    • the location of the wrongful act or omission that gave rise to the argument; and
    • the defendant's residence or place of business

    Are there any damages available? What are the types of damages available?

    Yes, the types of damages available are as follows;

    • Actual damages, such as a plaintiff's reduced earnings or the defendant's profits;
    • Compensation, which is given at the discretion of the judge. The court would weigh the earnings from the violation, the extent and length of the infringement, and other factors when determining the amount of compensation; and
    • Punitive damages can be awarded in the event of a wilful violation.

     

    ]]>
    Thu, 08 Apr 2021 07:38:00 GMT
    <![CDATA[Criminal Law: Theft]]> Criminal Law: Theft – Provisions, remedies, and procedure in the UAE

    Introduction

    Theft may only be perpetrated on an actual movable property that has monetary or nonmonetary value and belongs to someone else. Theft is described as the physical seizure of an object that can be stolen from the owner without his or her permission, with the intent of depriving the owner of the item for all time. The accused intends to hold the property for himself or to destroy, sell, or abandon it in a location where the owner will not find it. The UAE's Civil Transactions Law describes the property as "all that you can take into your custody." There are, however, crimes that are similar to theft but are committed on non-movable properties such as feelings, concepts, and intellectual property. Different articles of law govern certain crimes.

    Anything that can be taken into custody is called a house, according to FEDERAL LAW NO. 3 of 1987. As a result, shoplifting, breaking into private residences to steal objects, and embezzling money are all called theft. The provisions of Federal Law Number 3 of 1987 of the UAE Penal Code refer to theft committed within the UAE.

    The law of the UAE, like most other countries' laws, distinguishes between theft and robbery based on how the crimes were committed. Robbery is similar to robbery, but it differs in that it involves the commission of theft combined with the use of violence or coercion in order to ensure the victim's escape from his or her home or place. Furthermore, since robbery requires the use of force or abuse, the penalty for robbery is normally stricter than the punishment for stealing. Victims are recommended to obtain legal advice from top Dubai Criminal Lawyers to decide the process for filing a lawsuit against the accused and the types of documentation needed to prove the crime against the accused in both cases.

    It necessitates the existence of mens rea and actus rea, as in all crimes. Theft must require an unintentional handover of the object in order to be considered theft under UAE law. It is a breach of trust offense, if the owner of the object knowingly hands over the object for safekeeping and the keeper keeps it for himself because it does not fulfil the criterion of an involuntary handover. On the other hand, money handed over by mistake and held by the accused in cases involving money exchange houses is called theft. The question of' informed will' occurs when items are hidden within other objects and passed on by chance.

    However, while theft may not be proven in such situations, a breach of trust under Article 405 of the Penal Code may be charged. Objects handed over based on the accused's deceit are covered by Article 399 of the Criminal Code. As a consequence, creating theft involves the absence of a free and informed will. Mens rea for the crime must be present at the time of the crime or prior to it. Mens rea for a crime that occurs after the fact is not mens rea for that crime.

    It is not theft when the owner releases the property from his possession and custody, and it is taken by someone else. As a result, objects left near the garbage with the intention of relinquishing ownership are not considered theft if they are taken. Continuing with the same example, if the trash company takes these things into their possession and someone steals them, it is theft because custody and ownership have been re-established. A property forgotten by another, on the other hand, if taken, is a breach of confidence because ownership is unknown.

    There is also an exception to the 'property belonging to another' condition. When a property is used as a protection against a loan, such as a security cheque in the case of a mortgage, even if the property belongs to the owner, taking it is considered theft. The same law applies to property owned by the police for investigative purposes or by a debtor in his custody for guardianship.

    The rule also extends to cases requiring temporary custody. Taking anything from inside a sealed envelope intended for another person or a key given to display an apartment are both examples of temporary custody, and taking anything from the envelope or the property will be stealing in both cases. When custody shifts to partial custody, such as when a rented apartment is stolen, the resulting crime is a breach of confidence.

    When two parties enter into a purchase arrangement, and one party takes possession without meeting the payment conditions, the courts have found that it is a fraud because the agreement is incomplete without receiving the full consideration. Consumption in supermarkets has long been the subject of legal controversy on both sides; however, consuming in a supermarket does not constitute theft because mens rea is necessary. If the intent to pay is there, it cannot be theft, but if the mens rea for the crime is there and there is no intent to pay for the consumed food, it shall be theft.

    Also, holding something that was turned over for partial custody for oneself is a violation of confidence, not stealing. Giving your car to the driver and having him keep it for himself is a breach of trust since the handover was voluntary, just as giving money to a servant to purchase food from the store and having him keep it for himself is a breach of trust.

    The essence of the offence is often determined by the form of custody. In the case of partners, one may only be accused of this if the item was previously only possessed by one partner and is now shared by both. When something is jointly owned, it can only be called theft if one party takes sole possession of the item and forbids the other from using it. Custody is also critical in distinguishing between attempted and real robbery. It is a fraud, according to the statute, if the item is taken into the accused's full custody. Any action taken to plan for a robbery is not considered an attempt, but any action taken to begin committing the theft is considered an attempt. The court's decision on whether the custody was full or partial is left to its discretion.

    Acts that involve permits, such as fishing, are not known as theft because the property or object of theft is a natural commodity, such as fish in the sea, and therefore not solely under the jurisdiction of the state. As a result, such offences are prosecuted under various statutes.

    The motive for a theft offence is insignificant. In cases where stealing is committed under duress, such as when a person is starving, the judge's discretion as to mens rea and motive would apply.

    The Various Forms of Theft

    The UAE Penal Code divides theft into two categories: aggravated theft and simple theft.

    Depending on two key factors, mental intent ("mens rea") and criminal act ("actus reus"), theft offences are categorized as "aggravated" or "easy." Involuntary possession of stolen goods, on the other hand, maybe called fraud.

    The penalties for these forms of theft are detailed in Articles 381 to 398 of the Penal Code.

    Simple theft is a crime punishable by up to a year in jail and/or a monetary fine. It is often graded according to the site of the crime, the manner in which the crime was committed, or the identity of the victim. Simple theft is committed in some situations such as;

  • During a battle, on a wounded person.
  • By impersonating a public attribute or pretending to conduct or be in charge of public service.
  • In a mode of transportation, a station, a harbour, or an airport.
  • In one of the places of worship.
  • On cattle or on animals that are being carried or ridden.
  • By a group of two or more individuals.
  • Climbing over the fence, breaking in from the outside, and using duplicated or genuine keys without the consent of the owners.
  • Either of the populated or habitable areas or one of its annexes.
  • Employees of ministries and government agencies, as well as land owned by a public body.
  • Other types of simple theft that don't fit into the aforementioned categories include:

  • Disruption of information transmission or provision of any government service, such as the abuse of telecommunication services or the removal of the power source of any system used to deliver such services.
  • Use of another person's vehicle, such as a car or a scooter, without their permission. A minimum of one year in prison and a fine of not more than AED 10,000 will be the penalty for such an act.
  • Coercion is the act of compelling others to sign or cancel a contract or a deed.
  • Aggravated Theft

    Aggravated theft applies to acts that result in a crime, such as murder, which includes the use of lethal weapons.

    When a person uses guns and threats to compel another person to surrender his or her property, this is referred to as aggravated theft. Other examples include when an individual impersonates a public servant, unlawfully enters private property, or engages in some other illegal method to acquire property that belongs to someone else.

    Aggravated theft offenders will be sentenced to jail, with the length of sentence varying depending on the type of crime committed. The following are some examples:

  • The maximum term of 15 years in prison:
    • Arms are used, and a victim is injured as a result.
  • 2 to 7 years in jail, or life in prison
    • Use of weapons

    • Theft committed in the middle of the night

  • About 5 and 7 years in jail

    • Over the course of an employee's job, he or she commits theft.
  • Life imprisonment
    • Two or more people are involved

    The Legal Procedure

    Articles 381-398 of the UAE Penal Code (Federal Law No. 3 of 1987) define the crime of theft in its literal sense and the penalty for it. The Penal Code divides theft into two different categories: simple and aggravated theft. The former is simple in nature and is considered a misdemeanour, while the latter requires the use of weapons or coercion and is almost always punishable by life imprisonment.

    Simple robbery is not as simple as it seems, and it can result in a one-year jail term or a fine. Furthermore, a simple theft can occur at a place of worship, a residence, any mode of transportation, on an injured war victim, an individual transporting livestock, driving someone else's car without permission, or misappropriating any government services such as telephonic or electric lines.

    An aggravated theft, on the other hand, can be charged as mentioned below;

    • A theft committed through the use of weapons in which the weapon was used to kill the victim, with a maximum sentence of 15 years in prison;
    • Theft committed at night, with two or more people, with the use of arms and firearms, by personification as a public official, and the use of danger are some of the situations in which the accused may be sentenced to life in jail.
    • Theft committed by an employee during working hours is punishable by a maximum sentence of seven years in jail.

    The Penalties for theft

    Theft is the illegal taking and expelling of another person's property with the intent of holding it without his permission. It's also known as cheating, and it's broken down into the following categories:

    • Shoplifting and Fraud
    • Burglary
    • Misappropriation
    • Robbery

    Theft includes a sentence of imprisonment ranging from a half year to three years, as well as a fine. Attempted robbery, on the other hand, carries a sentence of imprisonment ranging from 3 months to a year and a half, as well as a fine. When theft is committed between close relatives, parents, and children or companions, and no outsider rights are present, and the public prosecutor can only prosecute the other party on the complaint registry.

    Second, attempted theft may be considered aggravated if a weapon is used with the intent to steal or to inflict physical harm, including injury incurred when trying to protect oneself. In such cases, the penalty is a prison term ranging from 3 to 15 years. In addition, if the offender possesses a firearm that falls under the category of a weapon by default, it would be considered an aggravating offence. If the accused carries a firearm during a robbery and it is recognized as a weapon by use, it is considered an aggravated situation only if the expectation of carrying it was to use it. The court, on the other hand, has the power to determine whether or not an individual has the intent to carry a firearm. Similarly, in cases of robbery committed at night, the judge must determine the accused's motive in any given situation.

    Additional aggravated offences are mentioned in Article 389 of the Penal Code, which includes theft committed in a place of worship, schools, residences, and banks, whether or not they are occupied with people. Specifically, any limitations on public entry or the use of a key without permission, as well as any act that causes public property harm by theft.

    Theft committed by a paying representative (employee), not a volunteer, in the workplace is punishable by imprisonment for 5-7 years under Article 388. Furthermore, anybody who uses a car, a motorcycle, or a similar vehicle without the consent of the owner or who has the option to use it will be punished with a year of detention or a fine of not more than AED 10,000.

    ]]>
    Thu, 08 Apr 2021 07:15:00 GMT
    <![CDATA[Collection of Personal Data guest-EU]]> European Union: Collection of Personal Data of Hotel Guests

    Introduction 

    Massive amounts of personal details are now shared online. The personalization of technology and customer service is fuelled by e-commerce and social media. As a result, consumer privacy, accountability, and data security have become hot topics around the board, including in the hospitality industry.

    The Schengen Agreement was signed in 1985 by Germany, France, Belgium, Luxembourg, and the Netherlands, and it eventually eliminated checks at their shared borders. The Convention Implementing the Schengen Agreement was signed in 1990, establishing the Schengen region and removing all border controls. 

    To compensate for the elimination of border controls, the Convention included provisions for the Schengen visa, refuge, police and security cooperation, the Schengen Information System (SIS), and data protection. The Schengen Agreement was enshrined in European Union (EU) law by the Amsterdam Treaty of 1997.

    Further, On May 25th, 2018, the GDPR was put into practice. GDPR (General Data Protection Regulation) is an acronym for General Data Protection Regulation (GDPR). Simply stated, it is new, advanced regulation included in the European Data Protection Directive. GDPR compliance is required beginning May 25th for any organization collecting personal data from EU citizens or providing EU citizens with goods and services. This latest law extends to hotels as well.

    The Schengen Agreement 

    The Member States must take reasonable measures to ensure that managers of lodging establishments ensure that foreign visitors complete and sign registration forms and confirm their identity by producing a valid identification document, according to a provision in the Convention Implementing the Schengen Agreement's chapter on police cooperation. If required to avoid threats or criminal investigations, completed registration forms must be held or forwarded to the appropriate authorities.

    Article 129 stipulates that when such personal data is transmitted, Member States must maintain a certain degree of data security in compliance with the principles of the Committee of Ministers of the Council of Europe's Recommendation No. R (87) 15 of 17 September 1987 Governing the Usage of Personal Data in the Police Sector. The Recommendation includes provisions on data collection, storage, usage, communication, storage duration and updating, and protection, as well as data subjects' rights of publicity, access, rectification, and appeal.

    Data Protection 

    As previously stated, the Convention Implementing the Schengen Agreement mandates that when personal data is stored and transmitted, Member States must maintain a certain degree of data security in accordance with the principles of Recommendation No. R (87) 15. In addition, the EU's General Data Protection Regulation (GDPR) went into force on May 25, 2018. The GDPR applies to all personal data processing. Persons processing personal data must ensure that the processing complies with the GDPR's principles, especially lawfulness, which means that the processing must have a proper legal basis.

    GDPR

    The GDPR is a rule in EU law that governs how businesses handle, use, and exchange personal data. It applies to all people in the European Union. On May 25, 2018, the GDPR will go into practice. The GDPR refers to all-natural persons whose personal data is processed and whose conduct is tracked while in the EU, regardless of their nationality or place of residence. Nearly every online service is impacted by this shift in law, and the regulation has already resulted in drastic changes for US consumers as businesses adapt.

    The GDPR builds on earlier EU privacy measures such as the Privacy Shield and the Data Protection Directive, and draws on them in two ways. To begin, the GDPR defines personal data as any information that can be used to identify a data subject directly or indirectly, such as an online identifier such as an IP address. The GDPR raises the threshold for gathering personal data to new heights. Users also require a way to withdraw that consent, as well as the ability to request any of the data that a company has gathered on them in order to validate that consent. These stringent rules apply to businesses operating outside of the European Union.

    GDPR's Applicability to a Hospitality Industry

    The aim of this section is to discuss the GDPR's territorial scope, and in particular, how it could relate to hospitality venues that are physically located outside of the EU.

    The GDPR notes the following in Chapter 1, Article 3;

  • Regardless of whether the processing takes place in the Union or not, this Regulation refers to the processing of personal data in the form of the activities of a controller or processor in the Union.
  • This Regulation extends to the processing of personal data of Union data subjects by a controller or processor based outside the Union, where the processing activities are referred to;
  • the provision of goods or services to a data subject in the Union, regardless of whether the data subject is expected to pay;
  • the control of their behaviour as far as they take place within the Union
  • This Regulation extends to the processing of personal data by a controller who is not based in the EU but who operates in a country where member state law is applicable due to public international law.
  • This section will concentrate on determining if individual hotels or hotel companies physically located outside of the EU are subject to the GDPR by interpreting Section 2(a) above. 

    The criterion for GDPR applicability to hotels located outside of the EU can be divided into two sections. To begin, the Regulation relates to the processing of personal data of Union data subjects. The requirement that the data subject be a resident of the EU appears to rule out the scenario in which a resident of the EU travels to another area and then makes or pays for a hotel room. The data topic is not in the EU in this situation.

    A situation in which an individual in the EU makes a reservation for a room in a hotel outside the EU is more likely to occur. In this situation, the GDPR will only apply to the hotel if it delivered products or services to data subjects in the European Union. The GDPR provides only rudimentary guidelines on what constitutes a "offering of products or services" in the European Union.

    In addition to these considerations, hotels and other hospitality establishments should be mindful that using third-party booking sites or vendors who provide third-party marketing services can be construed as providing products or services to EU data subjects. Individuals visiting their website, using other methods to track website visitors' browsing activity, or even putting cookies on website visitors' devices are examples of third-party marketing services.

    The consequences of not complying 

    The GDPR imposes harsh punishments, including two levels of fines. The maximum penalties for each breach are set at 4% of a company's annual global sales, or 20 million Euros, whichever is greater. Fines at the lower levels are up to 2% of a company's annual global sales or €10 million, whichever is greater. These penalties are much more stringent than the fines permitted by the Data Protection Directive, and they show the EU's commitment to data privacy.

    Myths

    • The GDPR has an effect on hotels all over the world

    No matter where they are located, all properties that target EU residents as customers are subject to the GDPR. This means that the GDPR applies to all hotels in the United States as well as other countries around the world, not just those in Europe. 

    • The GDPR applies to hotels

    Regardless of the partners or solution providers, the hotel (who, under the GDPR, will be called the data controller) is solely responsible for using GDPR-compliant software.

    • For the entire EU, a single price point has been created

    Hotels cannot use profiling to set rates based on an EU visitor's venue, which is a widely ignored feature of the GDPR. 

    What effect would the GDPR have on your hotel's online data policy?

    The GDPR has six significant consequences for your hotel's data policies about EU website visitors:

    • Obtaining consent

    Visitors to your website should understand precisely how you plan to use their information and the legal basis for gathering it. GDPR law requires unambiguous and affirmative consent, and any hotel website that collects personal data must obtain express permission to use it in the course of their business. The user must agree to each particular intent if you are seeking consent from them. That is, if you have someone's email address who has made a reservation with your hotel, you can only sell to them if they have expressly consented. Similarly, privacy notifications can need to be rewritten to comply with GDPR regulations. Terms of Service and Privacy Policies must be easy to comprehend and free of jargon (A good rule of thumb is that the Terms of Service should be understandable to a 16-year-old). 

    • Data processing

    Being completely aware of who has access to personal data that is logged and maintained on the hotel website's content management system or database is a key component of the GDPR. The first step is to figure out who has access to this information and make a list. Examine the list again to see if any of these people need access to this information. If the response is no, permission should be withdrawn, and steps to regulate future access should be put in place. 

    Companies are not permitted to keep data for any longer than is absolutely appropriate, so there must be a robust mechanism in place for removing data that is no longer valid or needed. 

    • Accountability for data 

    Hotels, regardless of their solution provider, are solely responsible for using GDPR-compliant tools. As a result, hotels should conduct internal audits with any external entities that may have access to their data to ensure that their practices are legal. Even if you've outsourced parts of the operation, you're ultimately liable as the data owner (controller), so keep track of the steps you've taken to ensure all stakeholders are following GDPR regulations. All of your collaborators should be able to clearly illustrate what steps they've taken to ensure the data you provide is kept as secure as possible. 

    • Data Accuracy 

    Personal information must be correct and up-to-date at all times. Every fair step must be taken to ensure that personal data is correct for the purposes for which it is stored, and that incorrect personal data is immediately erased or rectified.

    • Minimization of data

    Websites should only obtain the minimum amount of consumer data necessary to complete the task, as well as follow the "storage restriction principle," which states that personal data should be kept for no longer than is necessary and that individuals should be told about how their data will be used.

    • The "Right to be Forgotten" and data portability

    All website users hold the right to receive their previously collected personal data in a readable format, as well as the "Right to be Forgotten," which allows customers to quickly have all of their information removed from the hotel database.

    What steps should the hotels take to prepare for the GDPR?

    Your hotel's website, data policy, digital marketing, and online merchandising are all affected by the GDPR. The following are the best ways to get ready for GDPR:

    The hotel web forms and website usage:

    It's important to make sure that all web forms and cookie use comply with the GDPR. To ensure that all is in order, the website's Privacy Policy and Terms and Conditions should also reflect the GDPR. 

  • The Privacy Policy and Terms and Conditions should be updated 
  • First and foremost, the Privacy Policy and Terms and Conditions on your hotel's website should be revised to reflect GDPR rules and regulations. You must be clear about what you will do with personal information after it has been obtained, as well as how long you will keep it on your website and in any other databases.

  • Ascertain that your website is secure
  • To ensure that all data processing via the website is safe, your hotel website should have an SSL (Secure Sockets Layer) Certificate. The domain will begin with "https" rather than "http" if your website has an SSL Certificate. SSL Certificates encrypt all of your data as it moves from your browser to the server of a website.

  • Make sure you've given your approval to cookies
  • Visitors from the European Union must give their consent for cookies to be used to identify a person on your hotel's website. Consenting to cookies, as all other forms of consent under the GDPR, must be a direct affirmative action. With an opt-in box, hotel websites should present specific terms of service regarding cookie use. Have no pre-ticked boxes on the consent form, since this is in violation of GDPR regulations. It's also worth noting that the hotel website shouldn't force users to accept cookies in return for details, and the hotel must have a legal justification to use an EU visitor's IP address to personalize content or identify a user's computer under the GDPR.

  • Ensure that people can opt out or have their personal data erased
  • Under the "Right to be Forgotten" provision of the GDPR, a data subject should be allowed to revoke consent as quickly as they gave it. Before consent is granted, controllers must remind data subjects of their right to withdraw.

  • Change the default opt-in to "No" and add separate check boxes for each opt-in.
  • Forms that ask users to sign up for newsletters or indicate contact preferences must have a "no" option or an unchecked opt-in box by design. You should also make sure that users give their consent for all of the ways your hotel can use their information. When a person signs up for email newsletters, for example, they are not agreeing to have their email address used for look-alike audience marketing. Finally, for each separate use of guests' data, hotels must set up a clear checkbox or form of consent. Finally, a double opt-in procedure is necessary to ensure that you are GDPR compliant.

  • Called parties must be clearly identified in all web forms.
  • Each party to whom consent is being given must be clearly identified in your web forms. It's important to remember that naming particular groups of third-party entities isn't enough; they must be named in their entirety. Your consent form, for example, cannot simply say "third-party ad networks," but must name the ad networks where advertisements will appear.

    Consequences of not complying with GDPR

    Non - compliance with the GDPR rules will result in penalties of up to 4% of annual global sales or $24.6 million (€20 million), whichever is higher.

    ]]>
    Wed, 07 Apr 2021 13:04:00 GMT
    <![CDATA[New Anti-Commercial Concealment]]> Kingdom of Saudi Arabia: New Anti-Commercial Concealment (veiling) provisions

    Introduction

    In August 2020, a new Anti-Commercial Concealment Law was introduced by Saudi Arabia's Council of Ministers, which will be effective on the last week of January 2021. The law is introduced for the purpose of eliminating the shadow economy or an under-ground economy and restricting the sources of concealment. The law includes heavy penalties of jail time and fines, also the protection of whistle-blowers in anti-commercial concealment cases. The new revisions seek to prohibit the use of locally distributed business licenses that are used as "veils" by unknown foreign parties that are silently involved (usually in SMEs)

    Earlier, the government had set up a ministerial committee to prevent commercial fraud and the practice of veiling in SME's. The new committee will continue to investigate foreign nationals who own companies registered under Saudi citizens' names. Along with that, the advanced stages of cooperation between company licensing and staff visa-issuing authorities will take place.

    Commercial Concealment

    Commercial concealment is characterized as any unauthorized business activity that encourages non-Saudi persons or companies to participate in or participate in business practices that they are prohibited from doing.

    The main purpose of the introduction of the provision is to prevent the negative consequences of commercial concealment. There are several negative effects, including the erosion of market interest because of a lack of equitable opportunity. Such inequality facilitates corruption, increases the cost of operating enterprises in the country, promotes money laundering operations and economic fraud. In addition, social issues such as robbery and drug trafficking are exacerbated by it. In this sense, one of the key reasons for the breach of residency and job regulations by expats finding employment illegally is commercial concealment. Additionally, the unlawful practice of foreigners who come to the country claiming to be tourists, with the true intent of finding jobs, is one of the most negative effects of commercial concealment.

    The Saudi citizens were also contributing to the inflammation of the situation by hiring foreigners to work in their homes illegally which contributed to the increase in commercial concealment and the unemployment rate of the locals. Therefore, the government set up National Program to Combat Commercial Concealment. It was introduced for the purpose of stimulating e-commerce, promoting the use of technological solutions, controlling the exit of funds, promoting private sector expansion, creating employment and enabling Saudis to invest and find solutions to the issue of foreigners' irregular ownership in the private sector. This will potentially encourage the citizens to own and do business in diverse fields of commerce and finance, and will include services for funding and financing.

    The National Transformation Program 2020 paved the way for the development of regulations and legislation, intensifying censorship and raising awareness of the cover-up of crimes in all industries. In KSA, the commercial banks proceeded to apply the "Know Your Customer" (KYC) rule to all the transactions to prevent proceeds created from unlawful undertakings, such as commercial concealment. Commercial concealment is a significant economic and financial illness that ruins every country's market climate. In order to guarantee the presence of a stable and equal market climate, the Saudi government is committed to combating it.

    The Ministry of Commerce and Investment clarified that the current legislation contains five-year suspensions and up to SAR 5 million fines for violators of aggravated penalties. Under the previous statute, two years of detention and a fine of SAR 1 million per convict is stipulated as civil punishments against violators. Under the previous statute, two years of imprisonment and a fine of SAR 1 million per convict is stipulated as civil punishments against violators. This is to remove the sources of the phenomenon by addressing the root cause of the occurrence.

    The current legislation requires the responsible government authorities, in conjunction with the Ministry of Commerce and together with the Ministry of Commerce, to regulate crimes and violations relating to commercial concealment, and obliges each authority granting licenses to carry out economic activity in order to carry out the required follow-up on such facilities and to inform the Ministry of any suspicion relevant to the commercial activity.

    In addition to other means of testimony, the current legislation grants the appropriate parties the power to use the technologies to prove the offences and breaches of commercial concealment by "Electronic Evidence". The new legislation has incorporated the idea that the punishment may be diminished or removed for the infringer who arrives by himself to warn or report, in compliance with strict controls, of the crime of cover-up.

    It should be noted that the current Anti-Commercial Concealment Law helps motivate small and medium-sized establishments and safeguard consumers from the negative effects of cover-ups. Notably, as stipulated in this law, the Ministry of Commerce is responsible for monitoring business facilities, receiving reports, and controlling crimes and violations.

    It is expected that the strong provisions in the new Anti-Commercial Concealment Law will help motivate small and medium-sized enterprises to become more transparent, provide greater opportunities for entrepreneurial Saudis to participate in small and medium-sized enterprises and protect consumers against the negative effects of veiling and cover-ups.

    Implementing Regulation of the Anti-Concealment Law

    The Article 3 of the Anti-Concealment Law provides that the following are considered punishable crimes; 

    • a person who authorizes a non-Saudi person to carry out, on his own account, and economic operation in the Kingdom which he is not allowed to carry out and which involves authorizing the non-Saudi person to use: his identity, his permission or his permission, his business register and/or his trade name.
    • A non-Saudi citizen performing an economic operation on his own account in the Kingdom, which he is not allowed to do, by an agency authorized to do so locally.
    • Providing support, encouragement or guidance in a disguised or "veiled" way to further the conduct of business.
    • Not cooperating, including not sharing documents or supplying false or deceptive information, with the police during the investigation.

    The new legislation allows for harsh sentences, without prejudice to any other intensive punishment provided for under any other rule, for offending individuals:

    • The liquidation of all undertakings, the suspension of any misused license of the type and the cancellation of the commercial registration thereof.
    • Imprisonment for a maximum of (five) years and a fine not exceeding (five) million riyals or both, taking into account the size of the commercial operation in question, its profits, the length of the imprisonment and the main effects thereof.
    • Joint responsibility for the payment of every Zakat, duty, government fees and other obligations owed.
    • Publishing the identities of the persons involved in the crime in the newspapers of the Kingdom (at the expense of the offender).
    • Confiscate the misused company's funds and other assets.

    The Competent Agencies for the prosecution of these Violations: -

    • Ministry of Commerce & Industry

    The Ministry of Trade and Industry can audit and prosecute infringements, obtain reports, and register infringements. The Minister of Commerce and Industry shall recommend the name of the recording officers. The requirements for the appointment of such officers and the processes they observe in discharging their duties shall be contained in the Implementing Regulations. The requirements for the appointment of such officers and the processes they observe in discharging their duties shall be contained in the Implementing Regulations.

    • The Bureau of Investigation & Public Prosecution

    The regulations have provided the Bureau of Investigation & Public Prosecution approved investigation duties involving breaches of these regulations.

    • Board of Grievance

    It involves the consideration and resolution of infringement of these rules.

    Penalties:

    • A violator of Article 1 of these Regulations shall be sentenced to imprisonment for a term not exceeding 2 years and a fine not exceeding 2 million Saudi Riyal, or either of both, without breach of any other intensive punishment provided for in any other legislation. The fine stated shall be multiplied according to that, in terms of multiple violators.
    • At the expense of the violator, the sentence will be released in one or more local newspapers
    • The business who undertakes such practices would be liquidated, the misused license would be revoked and finally, the commercial registration would be cancelled.
    • The Saudi nationals who are convicted from conducting business for five yeards and in the case of a foreign party, he/she would be deported from the country with a lifetime ban from entering the KSA.
    • The parties will be jointly liable for paying any Zakat, Tax, government fees and other obligations.
    • The properties and money of the misused business will be seized

    The authorities responsible for preventing the violations stated in the law are the Ministry of Human Resources and Social Development, the Ministry of Municipal and Rural Affairs, the Ministry of Environment, water and agriculture, the Ministry of Commerce, the General Authority for Zakat and income and other competent authorities.

    According to Article 3 (1) of the Anti-Concealment Law, the Judicial officers shall investigate, which includes searches of the site where the economic activity is taking place, examine the records, access the surveillance cameras, go through the documents and data of the suspected companies, and shall ask for the parties to disclose the information related to the activity. The sites and properties can be confiscated if it's necessary to conduct a proper examination.

    The Government of Saudi Arabia have taken extra measures to prevent the activities that lead to commercial concealment; 

    • According to Article 7, the Ministry of Commerce and Industry can take steps that motivate and encourage citizens and foreigners to reduce concealment acts. 
    • Article 8 states that the Ministry of Commerce and Industry, with the help of other relevant authorities to raise public awareness of the negative impact of the concealment and make the people understand the laws that they would be violating and the penalties they impose upon these violations.
    • Article 9 stipulates that If any person presents admissible proof and a final judgment of guilt is reached, the Minister of Commerce and Industry may award a financial compensation of not more than thirty percent (30%) of the fine levied and received under this Statute, providing that said person is neither a concealing nor a concealed entity.

    Conclusion

    The Government of the Kingdom of Saudi Arabia adopted a new Anti-Concealment Act in August 2020, effective from the last week of January 2021. "The latest revisions seek to reduce the use of business licenses granted locally but which are used as "veils" for silently participating unidentified international parties (usually in SMEs) and are proof of the government's commitment to eradicate the so-called "cover-up market. The new laws introduce heavy punishments, including up to five years in jail and fines of up to five million riyals.

    ]]>
    Wed, 07 Apr 2021 11:43:00 GMT
    <![CDATA[IT: Future of digital forensics]]> IT: Future of digital forensics

    Introduction

    The IT industry is constantly evolving, and as a result, many people are becoming victims of malware, corporate spearfishing and whaling exploits, mobile devices, and the theft of confidential private data. The collection, storage, study, and presentation of evidence from digital media are all part of the digital forensics process. With the emergence of issues in the world of forensic investigations, more interesting problems for both victims and investigators are on the horizon. Computers are increasingly becoming embedded within larger systems as they become smaller, faster, and cheaper, allowing information to be produced, stored, interpreted, analysed, and communicated in unexpected ways. We used to collect digital evidence from monolithic, stand-alone mainframes, but now we have PCs, supercomputers, distributed client-server networks, laptops and mobile phones, as well as LANs and WANs to send data around the world, which can be used to gather digital evidence.

    Evidence stored on a computer is not special in terms of relevance and materiality, but it should be limited by changing legal requirements and restrictions to protect privacy concerns because it can be easily duplicated and updated, often without leaving any traces, and is readily accessible to a wrongdoer using another computer half a world away. In general, privacy refers to whether or not information can be accessed.

    The forensics practitioners must follow the code of ethics in order to protect the client's privacy. Depending on the seriousness of the issue and the need for a result, the client's privacy could need to be violated in the course of a thorough investigation. However, it is likely that the victim agency would lose faith in the forensics team. Furthermore, there are organizations where even a minor leak of information will result in massive media coverage, jeopardizing the organization's image and, ultimately, its business.

    In such cases, privacy rights and the need for law enforcement to scan and seize digital evidence during digital forensics are inextricably linked. It's also likely that the forensics specialist does not share the details with any third parties and only uses the client's confidential information, which is also a breach of the client's right to privacy.

    As a result, it is the policymaker's duty to understand the effect of forensics in the light of wider business priorities and make the tough choices that trade off forensics capabilities with privacy considerations and, as a result, morale. Selective revelation, strong audit, and rule processing tools are key techniques for digital forensics in order to protect privacy. The dilemmas in the current situation are: How to track digital forensics while keeping search details private? How do we prevent private information from being leaked in the name of forensics?

    Digital Forensic Investigation

    Forensic Investigation (F.I.) is a procedure in a computer system for determining the evidence and facts to be presented in court. It may involve a variety of different device layers. The different network architectures will necessitate different F.I approaches and levels of complexity. When it comes to the problem of decentralized authority, the F.I. of cloud computing systems is more complicated. Cloud computing providers vary by region and location, and some of them can encrypt data before delivering it to the public network. The use of peer-to-peer apps can make F.I recovery more difficult.

    Since it can scan and copy files from or to any node/computer, it becomes a factor in exposing company confidential information to any attack. The analyst must specify the configuration parameters for peer-to-peer (P2P) F.I., such as the password, username, log time, installation time, and so on. They also recommend using the LANGuard program to keep an eye on P2P traffic on the network. The more sophisticated cell phones become, the more vulnerable they become to attack. Smartphone users are increasingly engaging in personal private practices such as online banking and e-commerce. Obtaining and spreading confidential information, fraud, theft, money laundering, copyright infringement, and indecent image are all examples of mobile device misuse. By using bit-to-bit copy, the author emphasizes the digital acquisition approach on the Subscriber Identity Module (SIM), memory card, and flash memory. The source, on the other hand, discusses copying acquisition while using the hash verification technique. When the device is being investigated during the F.I. phase, it is important to protect the privacy of honest users.

    In a cloud computing system, there is a chance of substantial data exposure to security threats and privacy violations. Furthermore, the audit trail process can be used to track down user behaviour. The forensic analyst must treat the information with caution, otherwise it could end up in the wrong hands. To keep data private and confidential, it can be encrypted using software or hardware. The implementation of encrypted disks was prompted by the need to secure users' personal data and information. Nowadays, the mechanism and methodology for preventing attacks are given more thought. A critical mechanism within an organization's network is the control and simulation of network operations.

    Nonetheless, even with the bare minimum of knowledge, computer systems are vulnerable to attack. When using encrypted traffic, it affects the privacy of users who feel they are safely secured. The area of modern forensics must evolve in parallel with cloud computing and the Internet of Things. Modern forensics techniques are divided into three categories: stored data and filesystem analysis, network forensics, and reverse engineering, which entails looking at malware samples, traces, network traffic, and log files.

    Digital forensics Challenges

    • High speed and volumes

    For at least a decade, problems with collecting, storing, and processing vast volumes of data for forensic purposes have existed, and are now being compounded by the widespread availability and marketing of digital information.

    The availability of gigabit class connections and multimedia-rich content has resulted in a huge increase in the amount of data that should be collected and processed in order to gather clues or detect crimes. This is especially important in live network analysis, since the investigator might not be able to collect and store all of the required traffic.

    • Complexity

    Evidence is no longer limited to a single host, but is instead dispersed across a variety of physical and virtual locations, including online social networks, cloud services, and personal network–attached storage devices. As a result, more skills, tools, and time are needed to recreate evidence completely and correctly. The digital investigation group has slammed partially automating certain activities, claiming that it could easily degrade the investigation's efficiency.

    • Establishment of quality

    Despite technical advancements, files remain the most commonly stored, classified, and analysed digital objects. As a result, the scientific community has attempted, but failed, to settle on common formats, schemas, and ontologies.

    They go on to say that investigating cutting-edge cybercrime can necessitate collaborative data processing or the use of outsourced storage and computation. As a result, the creation of proper standard formats and abstractions would be a critical move for the digital forensics community.

    • Investigations that protect people's privacy

    People nowadays put many facets of their lives into cyberspace, mainly through online social networks or social media pages. Unfortunately, gathering information to recreate and locate an attack will jeopardize users' privacy and is related to other issues while using cloud storage.

    • Legitimacy

    Modern infrastructures are becoming more complex and virtualized, with certain functions assigned to third parties or complexity changing at the boundary (as in fog computing) (such as in platform-as-a-service frameworks).

    As a result, conducting investigations lawfully, for example, without breaking laws in borderless scenarios, would be a major challenge for modern digital forensics.

    • Rising forensic techniques

    Encryption, obfuscation, and cloaking tactics, as well as information hiding, are examples of defensive steps. Digital forensics is fundamental to investigations performed in a reality that's often tightly coupled with its cyberextension. Modern digital societies are subject to cybercriminal activities and fraud leading to economic losses or hazards for individuals. Therefore, the new wave of forensics tools should be engineered to support heterogeneous investigations, preserve privacy, and offer scalability

    Cloud Technologies

    Since the launch of the Amazon Mechanical Turk in 2002, cloud technology has come a long way. Since then, the cloud has developed into a more cost-effective (both in terms of equipment and operational costs) and flexible way for companies to store data and handle different applications that they may need as part of their operations. This technology is a fantastic tool for companies, but it comes with some drawbacks. One such difficulty is that data can be processed in a number of places, even in a completely different country. Another problem with the cloud is that it is accessible from any place. The Netherlands Forensics Institute established Digital Forensics as a Service in 2010 to address the extreme backlog that investigators face while performing cloud forensics investigations (DFaaS).

    The encryption of data in the cloud has its own set of difficulties. In order to decrypt the data and perform a forensic investigation, a digital forensics investigator will need the assistance of the data owner or, if the Service Level Agreement permitted it, the Cloud Service Provider. An investigator will need to either brute force the encryption on the files or find out if there is a decryption method for the files if a malicious party encrypted files in the cloud as part of the crime they committed. If the perpetrator was apprehended and willing to cooperate, this would be a little simpler. The use of "...Policy based or Role based access controls that can be specified in a language like Extensible Access Control Markup Language (XACML) that regulates context-based access rules in the policy compliance point of the data" is one suggested solution (2011).

     

    Mobile Apps

    We know from previous testing that directly extracting data from an iOS computer often yields more data than an iCloud backup. Even if the password had not been changed and Apple had allowed auto backup and uploaded it to the cloud, there could be information on the phone that would be inaccessible without Apple's help, as required by the All-Writs Act Order, since the iCloud backup does not contain everything on an iPhone. The Remote data wiping is another problem with mobile devices. This is a security feature built into most smart phones that allows a user to send a text or log into a website, then remotely delete all personal data from the phone, essentially restoring it to its factory state. Another potential problem with smart phones is that there are just too many of them on the market.

    Mobile device forensics is an ever-changing world, and innovative forensics techniques must be built to meet new demands as technology advances. There could be no mobile phones in the future, and these devices will instead be a part of what is affectionately known as "wearable technology," which involves contact lenses that serve as the phone screen and a chip inserted into one's wrist that houses all of the phone's hardware and storage. The only way to get in will be through a wireless link. All of these significant developments are well beyond the capabilities of existing digital forensics resources. However, innovation breeds more innovation.

    Artificial Intelligence

    As much as our morning cup of coffee, robots are a part of our daily lives. A forensic examination is needed when a robot goes awry and causes damage or even harms a person. An investigator must detach the robot, photograph its code, and carry the code to the lab for analysis.

    Artificial intelligence (AI) has recently gotten a lot of press. Artificial intelligence, unlike robots, is designed to make decisions based on the world in which it works. These decisions can range from a smart refrigerator replenishing the ice in a freezer to a driverless car swerving to avoid a car but then killing an entire family by driving another car off the road. In that extreme situation, which is becoming increasingly likely with the introduction of self-driving and other autonomous vehicles such as the Tesla. A semi-truck with a white trailer turned left across the lane where a man was driving his Tesla using the Autopilot feature in May of 2016. The Tesla collided with the truck because neither the driver nor the Autopilot system applied the brakes, killing the driver instantly. The National Highway Traffic Safety Administration (NHTSA) conducted an investigation and concluded that "...despite the fact that Autopilot did not avoid the crash, the device worked as it was planned and intended, and therefore did not have a defect."

    It's probable that this investigation included some form of digital forensics component, in which the NHTSA checked the code that would have been relevant in that particular case, working with Tesla software coders as experts. It's quite possible that this investigation proceeded in the same way that any other piece of software would. The distinction here will be that of law. Is the car responsible for the driver's death because the car's Autopilot software did not make the decision to apply the brakes, or is there no case because the car was not configured to make the type of decision needed for this particular circumstance? As previously reported, the NHTSA ruled that the Autopilot system was functioning properly at the time of the accident, and that the driver was to blame for the accident due to his inattention to his surroundings, for which he unfortunately paid the ultimate price.

    Conclusion

    Technology has advanced by leaps and bounds in the last ten years, and it will continue to develop exponentially beyond our wildest expectations as time goes on. Digital forensics will still have a place in this world, whether it's an email containing a virus that infects an unsuspecting user's device, or artificial intelligence that can almost imitate human thoughts and actions to the point of harming anyone. To address the forensics problems that technology will cause us to face in the future, we will need imaginative minds brimming with creative solutions. It is up to the new generation to assist them in paving the way.

    ]]>
    Wed, 07 Apr 2021 10:42:00 GMT
    <![CDATA[FAQs - Trademark Registration and Use in Israel]]> FAQs - Trademark Registration and Use in Israel

    Q1. Who is eligible to apply for registration?

    A trademark registration application may be filed by any person or legal entity. There is no requirement for citizenship or residency.

    Q2. What can be protected and registered as a trademark, and what can't?

    Any logo that can differentiate the trademark owner's products and services from those of others can be registered. A 'mark' is described as 'letters, numerals, words, pictures, or other signs, in two or three dimensions, or variations thereof.' The following items are included in this expansive and versatile definition:

    • Logos and phrase marks;
    • Color marks (i.e., marks with just one or more colors and no wording or design);
    • Shapes of products and packaging, as well as 3D trademarks;
    • Points that make a sequence of movements are known as motion marks.
    • holographic inscriptions; and
    • Sound marks.

    As of now, no smell or taste marks have been detected. Registration is also possible for service, certification, and collective markings.

    Q3. Is it possible to secure trademark rights without registering them?

    Under the tort of passing off, trademark rights may be created without registering, relying on local goodwill. In most cases, long and significant use in Israel is needed to build some local goodwill, but in exceptional cases, use abroad can suffice.

    Q4. Is a well-known international trademark protected even though it isn't used domestically? If that's the case, does the international trademark have to be well-known domestically? What kind of evidence is needed? What kind of security is provided?

    And if not used domestically, an international trademark that is well-known there is covered. If a mark is not licensed in Israel, it is protected from the use and registration of a confusingly identical mark for the same or similar products or services. If a mark is licensed in Israel, it is protected from the usage and registration of a similar mark for products that are not of the same description, given that such use could lead the public to suspect that there is a link between the goods or services in question and the owner of the registered trademark, and that the owner could suffer harm as a result of such use.

    Q5. What are the advantages of registration?

    In Israel, trademark registration has a range of advantages, including:

    • a license to use the trademark solely in Israeli territory;
    • a legitimate assumption of possession and right;
    • a right to sue for trademark violation under the Trademark Ordinance (New Version) of 1972;
    • availability of a border control system that allows Customs to detain alleged infringing goods;
    • a prospect of filing a counterfeiting lawsuit with the police; and
    • Well-known trademarks have been given additional rights.

    Q6. What types of documents are needed to file a trademark application? What are the laws that control how the mark is represented in the application? Is it possible to file documents electronically? Is it possible to conduct a trademark check before filing a trademark application, or is it required? If so, what are the processes and costs?

    To file a trademark claim, the claimant must apply a power of attorney on behalf of the applicant and in favor of the attorney submitting the application to the Israel Patent Office. A qualified officer of the claimant organization must sign the form, and a scanned copy of the executed document must be forwarded. The original must be made available to the registrar upon request. The paperwork does not need to be notarized.

    When claiming traditional preference under the Paris Convention on the basis of a corresponding foreign application, the claimant must have an authorized copy of the corresponding foreign application as well as an English translation. Within three months of the application's filing date, all applications must be sent to the Israel Patent Office (a deadline which may be extended).

    A specimen in JPG format is required for device or stylized label registrations, whereas a specimen in MP3 format is required for sound mark registrations. There is an option to file electronically. It is required of companies and trademark attorneys who file on behalf of others (ie, lawyers or patent attorneys).

    Until filing, you should conduct an official trademark availability check.

    Just one foreign class is covered by an official trademark similarity quest. The official search fee is NIS647 (roughly $180 depending on the exchange rate).

    The Israel Patent Office automatically applies searches to additional related classes; but, based on the identified products or services offered with the search request, they are not all entirely protected. A system label quest is limited to one class. The price is the same as before.

    Q7. How long does it usually take to secure a trademark license, and how much does it cost? When does registration become formally effective? What factors will cause the time and expense of filing a trademark application and obtaining a registration to increase?

    Applications are normally reviewed 10 to 12 months after filing, according to current review rates at the Israel Patent Office.

    The official price for registering a trademark or service mark is NIS1,623 (approximately $450, depending on the exchange rate).

    The filing date is called the real date for the rights to a mark that has been registered for registration or used. Marks come into effect on the date of their registration (i.e., at the close of the opposition era, including resolving all opposition); therefore, the filing date is considered the relevant date for the rights to a mark that has been filed for registration or used.

    On receipt of a supporting affidavit detailing the reasons for the appeal, an accelerated investigation is possible under specific cases (e.g., an existing or imminent infringement). Within one month after receiving such a letter, an accelerated review is expected to take place. For rapid examinations, the official fee is about $265. (Depending on the exchange rate).

    Q8. Whose classification scheme is used, and how does it vary from the International Classification System in terms of claimable goods and services? Is it possible to use multi-class applications, and what are the estimated cost savings?

    The International Classification system's 11th edition (2019) is included.

    There are multi-class applications available. The below are the official fees for filing multi-class patent or service mark applications:

    • First class costs NIS1, 623 (approximately $450); and second class costs NIS1, 623 (approximately $450).
    • Every additional class filed concurrently for the same mark costs NIS1, 219 (approximately $340, depending on the exchange rate).

    Q9. When deciding whether or not to issue a trademark license, what protocol does the trademark office use? Are patent applications reviewed for future trademark conflicts? Is it possible to overcome an objection based on a third-party label with a letter of consent? Is it possible for applicants to respond to trademark office rejections?

    Trademark proposals are scrutinized from both a scientific and substantive standpoint. Both absolute and relative grounds are examined in a thorough investigation.

    When reviewing technical aspects, the examiner ensures that all technical conditions, such as filing a power of attorney and paying extra fees, have been met.

    The examiner then looks at the grammar of the product or service description (for clarification, non-ambiguity, and generalizations, for example) and the designation. The inspector may warrant a change in classification or the addition of classes to the application if the description of goods or services seems to include classes other than those originally requested.

    The Israel Patent Office then reviews the label on both relative and absolute grounds (for example, possible contradictions with previous registrations and applications).

    Although letters of consent may assist in overturning an initial rejection based on a cited mark, the examiner is not obligated to cancel a citation simply because a letter of consent is sent.

    Applicants or their affiliates (for example, trademark and patent attorneys) have three months to respond to trademark office rejections (extendable).

    Q10. Is it necessary to assert use of a trademark or service mark before registration is authorized or issued? Is it necessary to apply evidence of use? Are priority privileges given to international registrations? Is there a point at which registration must continue to be used in order to keep the registration or to overcome a third-party challenge based on non-use?

    There is no need for a licensed trademark owner to include evidence of use in Israel prior to or after registration. Furthermore, the registrar is not required to provide evidence of a trademark's use on its own initiative under Israeli trademark law.

    However, if a label is not used for three years after it is registered, it becomes vulnerable to cancellation on the basis of non-use at the behest of an involved party. In this case, evidence of use must be submitted to defend the registration.

    Q11. What words or phrases should be used to show that a trademark is in use or has been registered? Is it necessary to mark? What are the advantages of using certain terms or symbols, as well as the disadvantages of not doing so?

    To denote trademark use or registration, the symbols TM and ® may be used. It is not enough to label something. It is illegal to falsely claim that a product is protected by trademark registration (for example, by using the ® symbol or implying "Registered Trademark"). Section 3 of the Product Marking Ordinance provides that someone who assigns a misleading commercial definition to a product or sells or offers certain products faces sanctions (including fines and even imprisonment) unless they can demonstrate that they did so without intending to mislead. While no court trials have used this clause, in general, circumstances like this (i.e., wrongly indicating trademark registration) can be used in civil litigation to prove bad faith (eg, denying a party equitable relief).

    Q12. Is there a way to appeal if my submission is rejected?

    When your claim is rejected, you have the right to appeal:

    • An applicant has three months to appeal an examiner's original rejection (extendable up to 11 months, or longer under special circumstances).
    • A hearing before the registrar can be requested by the claimant.
    • Within 30 days, the registrar's ruling can be appealed to a district court.
    • Within 30 days, the claimant will file a motion to challenge a district court ruling to the Supreme Court.

    Q13. Is it possible to object to an application? Is it possible for a third party to object to a trademark or service mark application before it is registered, or to request cancellation of a trademark or service mark after it has been registered? What are the main causes of those problems, and what are the methods for dealing with them? Is it possible for a brand owner to fight a bad-faith application for its label in a jurisdiction where it is not protected? What is the standard cost spectrum for a third-party resistance or cancellation action?

    Trademark applications are released for a three-month opposition period within which a third party can file an absolute or relative opposition. Descriptiveness, marks that are detrimental to public policy, misleading marks, and marks that encourage unfair competition are all absolute grounds. Relative grounds include trademarks that infringe on third-party property rights and applications that are identical or equivalent to the company name of another party.

    Within five years of the date of trademark registration, third parties can revoke registered trademarks on the same absolute and relative grounds as oppositions. A cancellation suit against a trademark license on the basis that it was brought in poor faith has no time limit.

    A third reason for a trademark's exclusion from the register is that the logo has not been used in the three years prior to the petition for removal.

    The following items are used in both opposition and cancellation proceedings:

    • Detailed statements must be submitted;
    • Affidavits are used to provide evidence.
    • A hearing before the registrar for cross-examination; and
    • Summaries in writing

    The filing of challenge or cancellation proceedings is not contingent on the approval of a trademark. Brand owners will challenge trademark applications and registrations based on common law protection gained by trademark use as well as foreign goodwill.

    The costs of a third-party opposition or cancellation proceeding can vary depending on the facts of the situation.

    Q14. What are the requirements for maintaining a registration and how long does it last? Is it necessary to use the trademark in order to keep it up to date? If that's the case, what kind of evidence of use is required?

    A trademark registration will last an indefinite amount of time if it is renewed every ten years since it is first filed. Renewal is only possible if you order it and pay the following fees:

    • For single-class registrations, the renewal fee is $805; and
    • For multi-class registrations, the first class costs $805, and each additional class costs $680.

    There is a six-month grace period after the expiration date within which a registration can be extended, subject to payment of late renewal fees. If a mark is not replaced by the due date or during the six-month grace period (with the payment of late renewal fees), it is withdrawn from the register and cannot be renewed again. It is possible to order its reinstatement at any point by filing an appropriate affidavit, but this must be done within six months. In other words, if more than a year has expired after the renewal date, a lapsed registration cannot be renewed or reinstated.

    Furthermore, the canceled registration is considered valid for a further six months and, as a result, may be used to support a new application.

    Q15. What is the process for giving up a trademark registration?

    Through filing an appeal with the Israel Patent Office, the holders of a trademark register may voluntarily surrender it.

    It is not advisable to unilaterally forfeit a registered trademark during cancellation or other contentious litigation, since the trademark owner fears being forced to compensate the applicant's cancellation expenses. In such cases, the parties should file a joint note with the Israel Patent Office demanding the cancellation of the registration and the cessation of the litigation without a costs order.

    Q16. Will trademarks be covered by other intellectual property rights (e.g., copyright and designs)?

    Some IP privileges, such as copyrights and architectural designs, are not affected by trademark registration.

    Q17. What legal framework regulates the online enforcement of trademarks and domain names?

    Infringement occurs when a domain name or trademark is used digitally that is identical or confusingly similar to a registered trademark or an unregistered well-known trademark. Furthermore, the owners of unregistered trademarks (i.e., brand owners who acquired common law trademark rights and goodwill through the use of a trademark) have the right to enforce their rights against the unauthorized use of trademarks online or domain names that are identical or confusingly similar under unfair competition laws (e.g., passing off), as well as unfair interference with access to a trader's business under Sections 1 and 3 of the Commercial Civil Wrongs Law 1999, respectively.

    For conflicts involving the issuance of domain names under the '.IL' country code top-level domain filed or used in bad faith, including disputes including domain names that are identical or confusingly close to licensed or unregistered trademarks, the Israel Internet Association has an expedited mechanism for resolution.

     

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    Sun, 21 Mar 2021 09:19:00 GMT
    <![CDATA[FAQs - Project Finance in Israel]]> FAQs - Project Finance in Israel

    Introduction

    In Israel, project finance is a well-established financing method that has been commonly used in the last 15-20 years. It is used for debt financing in a variety of industries, particularly in public-private partnership projects. Project financing is used in a number of industries, including water desalination, power, and transpiration, residential projects as well as large-scale protection programs.

    Debt transactions in project financing are arranged according to international requirements, which include standard security packages and agreements (senior debt agreements, common terms agreement, equity subscription deeds, inter-creditor agreements, direct agreements with all major project parties etc.

    Q1. What are the key legislations and key regulatory bodies that govern the project financing in Israel?

    The project financing is not governed by any specific legal framework; it is regulated by the general legislation which is applicable to all of the financial sector in Israel.

    The banking sector is governed by the-

    •  Banking Ordinance of 1941,
    • The Banking Licensing Law of 1981 and
    • The Banking (Service to customer) Law of 1981.

    The Banking supervision law department of the Bank of Israel issues its proper code of Banking Business Directives which further regulates other aspects of banking in Israel.

    The key legislation which applies to other financial institutions is the-

    •  Control of Financial Services Law of 1981 and control of financial services law of 2005 and the other regulations promulgated thereunder.

    The key applicable regulatory bodies in the financial sector are-

    • The Commissioner of Capital Markets, Insurance and savings at the ministry of finance and the Banking Supervision Department of the Israel bank regulates the banking sector in Israel.

    Q2. What are the legal frameworks and authorities that govern the PPPs, and where have PPP frameworks been used most successfully?

    There are no clear frameworks or legislation that apply to PPP ventures, apart from general statutes such as the Mandatory Tender Law of 1993, the Contract Law (General Part) of 1973, and the Contract Law (Remedies for Breach) of 1970.The relevant authorities have amassed a wealth of experience in the implementation of projects, especially in the fields of infrastructure and transportation in a PPP scheme, over the years. In practice, a contractual structure has emerged, and the majority of PPP ventures are focused on the same general terms and risk sharing between the government and the private investor.

     Q3. In what sector is project finance commonly used?

    The project financing has been a very well established scheme in Israel and is now being widely implemented from the past 15-20 years now. It is a form of debt financing in many sectors but mainly when there is public private partnership (PPP). Electricity, transportation, water desalination are the sectors in which such financing is commonly used, moreover it is also commonly used in large scale security projects and residential projects.

    Q4. How are the debt transactions structured in project finance?

    The project finance debt transactions are structured as based on international norms, including standard protection packages and agreements (senior debt agreements, common term agreements, inter-creditor agreements)

    Q5. What is the composition of the market when it comes to the types of active lending institutions? And has the composition of the lending institutions changed in the past years?

    At present almost all the Israeli banks are involved in project financing, the main arrangers of the credit consortiums are the two largest banks Bank Hapoliam and Bank Leuim. The other banks such as HSBC, The European Investment Bank, and Deutsche Bank also play a vital role in the Israeli project market.

    In recent years it has become more and more common for the non-bank financing institutions to provide finance through the project finance scheme without any involvement of any banks as arrangers for example insurance companies and pension funds. This is being done in order to avoid additional cost and gain a better control of the project.

    Q6. Are there any major current projects or initiatives which may affect or influence the activity?

    In September of 2017 the government of Israel had for the first time published a multi-year plan with 147 infrastructural projects each of them costing at least ILS100million. The majority of such projects fall under the PPP sector. Moreover in the energy sector as well in December of 2017 principles for a major sector reform agreed between the government and the Israel Electric Corporation, this agreement included sale of six power plants to the private investors this once again comes under the scope of PPP and majority of the projects financed will be through project financing.

    Q7. What are the most notable transactions taking place in the Israel market?

    Many Project Finance Projects have been introduced by the government in the past two years. The first hospital in Israel implemented under the PPP scheme has started operating commercially, Along with this in the energy field the second pumped storage power plant has gotten finance through project finance scheme.

    Q8. How will these above mentioned projects impact the market and are there any other noteworthy developments in project finance transactions when it comes to energy projects and infrastructural developments?

    The above mentioned projects have been structured according to the common practices which are applicable to the project finance scheme. Differences can be seen in the interface with the relevant government agency. A custom collection of provisions was used in some projects to protect senior lenders' rights (in terms of security package and step-in rights) as well as the project's financial stability. Moreover the growing interest of the banks and other financial institutions in the PPP projects in various fields of infrastructure and energy from the past few years will moreover increase the need of project financing.

    Q9. Have there been any changes in the laws and regulations affecting financing structuring, such as guarantee and social regimes, local currency rules, and foreign investment restrictions?

    There are no limits on foreign investments, foreign currency trade, or inward or outward investment under Israeli law, with the exception of anti-terrorism and anti-money laundering legislation. A few years ago, no significant improvements in applicable law regarding finance structuring in terms of guarantee and protection regimes were made.

    Q10. How has the volume of credit impacted during such changes?

    The volume of credit provided by the financial institutions over the last decade have increased constantly because major governmental led reforms in the financial sector and one more reason is that these institutions have increased their involvement in credit arrangement and credit management.

    Q11. Are there any laws, regulations, or policy mechanisms under consideration that could have an effect on project finance in Israel?

    If adopted, the government plan outlined in section 1.3 may have a substantial effect on the size and magnitude of projects under construction in the PPP system, and there is no general legislative structure for the implementation of PPP projects and no clear regulation relevant to project finance. In terms of broader amendments, a revised insolvency proceedings statute has been released for public comment, with suggested changes to applicable insolvency law in different areas.

    Q12. What are the common misconceptions about project finance that exist in Israel?

    While Israel is a small country in terms of size and population, the scope of projects that are or could be funded through the project finance scheme is vast and disproportional to the country's size. Complete PPP investment was around ILS19 billion in the second quarter of 2016, with projects under construction accounting for another ILS10 billion. The cost of currently tendered projects is expected to be ILS4.5 billion. While some investors consider Israel to be a high-risk country for investments due to the current situation, the risk is mitigated to some extent by the state in many large-scale PPP projects by having restricted safety nets in the event of conflict, terror, or hostile action. Such safety nets ensure the repayment of senior debt if any of these events occur.

    Q13. Have any measures been taken to prepare for any form of market idiosyncrasies?

    Those interested in project financing should familiarize themselves with the contractual and legal structure that applies to the sector and project in which they wish to invest. Furthermore, many of the related sectors, such as energy and water, are highly regulated, and investors can expect to interact with government authorities frequently. In highly complex infrastructure projects in specific locations, assessing the risks associated with such projects necessitates a thorough understanding of the relevant authorities' activities. Such programs, in collaboration with local infrastructure organisations, are strongly recommended in this regard.

    Q14. What are the predictions for the development and financing sector in the coming months?

    The development of large-scale PPP projects is expected to continue in the coming years. It is estimated that the Road 16 project (ILS1.5 billion) and the IDF communication base project (ILS2 billion) will be awarded. The tenders for the Jerusalem LRT Green Line Project (ILS1.5 billion) and the Gush-Dan Fast Lanes project will be issued (ILS1.5billion). Tenders for large-scale PV power plants are also scheduled to be issued in the PV market. PV projects on a medium and small scale will continue to be developed in compliance with relevant regulations. In addition, at least one conventional power plant financial close is expected, while wind farm projects are expected to mature and secure construction financing.

     

     

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    Sun, 21 Mar 2021 08:56:00 GMT
    <![CDATA[FAQs- Patent Registration in Israel]]> FAQs- Patent Registration in Israel

    An invention is protected by a patent, which is an exclusive privilege given to the inventor. In other words, a patent is an exclusive license to a device or a method that proposes a new technological approach to a problem or a new way of doing things. Technical information about the invention must be submitted to the public through a patent application in order to obtain a patent.

    Patent applications are submitted at the ILPO's Patents Department from all over the world. Each submission is addressed to a special examiner (an engineer or expert) in the area in which their invention is made. A patent will be awarded if the invention meets the conditions of the Patents Law and Regulations.

    Q1. What are the sources of Israeli patent law?

    The main source of patent law is the Patents Law, 5727-1967. The list of the most significant secondary legislations is mentioned below:

    • the Patent Regulations (Extension of Protection ‒ Procedures for Order Application, for opposition to the order and for Application for Revocation), 5758-1998
    • the Patent Regulations (Application of the Patent Cooperation Treaty), 5756-1996
    • the Patent Regulations (Office Practice, Rules of Procedure, Documents and Fees), 5728-1968

    Q2. Who has the authority to file a patent?

    The owner of the invention must file an application to register a patent under Section 2 of the Patents Law. According to Section 1, the inventor or individuals who derive title under the inventor and are entitled to the invention by operation of statute, sale, or arrangement are the owners of the invention. A claimant who is not the inventor is required by Section 11(b) of the Patents Law to explain how it came to own the invention.

    Q3. When a patent is licensed, what rights do you get?

    A successfully registered patent entitles the patent holder to enjoin third parties from using the invention on which the patent is issued without permission or unlawfully, according to Section 49 of the Patents Law. 'Exploitation' means using the invention in the manner specified in the claims or in some other manner that includes the invention's nature in light of the claims. The issuing a patent does not grant authorization to use an invention illegally or in a way that infringes on any legitimate privileges under any statute."

    Q4. How does a patent holder go about enforcing his or her rights?

    Patent holders and exclusive licensees may sue in court to protect their rights. A patent infringement suit may only be filed after the patent has been granted, according to Section 179 of the Patents Law.

    Q5. What is the period of a patent's validity?

    A patent is valid for 20 years from the date of registration of the patent application if extension fees are charged, according to Section 52 of the Patents Law. If the violation occurs within the duration of the patent, it can also be pursued by a petition for damages after the term has expired due to Israel's seven-year statute of limitations. Courts have discussed the prospect of a post-term injunction, but it is uncertain to what degree this remedy exists.

    Q6. Which regulatory authority is in charge of the registration process?

    The Israel Patent Office.

    Q7. What are the reasons for a patent claim being rejected?

    The reasons for a patent claim being rejected are as follows;

    • Failure to include a complete reference list and list of publications (Section 18). Courts also ruled that failure to do so constitutes a breach of contract (see, for example, CC 14/92 (Nazareth Distr) Plasson Maagan Michael Industries Ltd v Freddi Priant et al. [1993]).
    • Failure to meet the enablement, sufficiency, definition (Article 12), and argument support (Article 13) requirements;
    • Failure to follow the procedural provisions of Chapter 3(a) of the Patents Law (payment of relevant fees, the inclusion of proper specification and claims etc.)
    • Failure to meet Section 3 of the Patents Law's patentability criteria (novelty, usefulness, industrial use, and imaginative step); and
    • Lack of clarity of ownership

    Q8. Are there any forms of statements or claiming formats that are prohibited under your jurisdiction (for example, claims based on medical processes)?

    Method claims for human therapeutic treatments are not permitted under Section 7(1) of the Patents Law. Patent applications for new species of plants or animals are also prohibited under Section 7(2) of the Patents Law, with the exception of microbiological species not derived from nature. Furthermore, since they are not considered as process or substance claims, so-called "use claims" are not permitted. Furthermore, so-called "Swiss-type" format statements are not permitted. Additional exclusions, such as business methods, have been established by case law. 

    Q9. Are there any administrative or regulatory procedures for extending the length of a patent (for example, adjustments for patent office delays, chemical patent term extensions, or supplemental security certificates)?

    Yes, but only in the form of patent extension orders for patents on medicinal preparations and medical equipment. As punishment for legal delays that prohibit the patent holder from using the patent, extension orders of up to five years can be issued. The following are the requirements for their award, as specified in Section 64D of the Patents Law:

    • The SAID registry is the first to include the drug, allowing it to be used for medicinal purposes in Israel.
    • A drug registered in Israel's Pharmaceutical Registry is present in the pharmaceutical preparation.
    • If marketing permits have been issued in the United States or a recognized European country, a patent alleging said planning abroad has been granted an extension period that is valid in both the United States (if applicable) and the recognized EU country (if applicable).
    • There has never been another extension order for the patent or the substance; and
    • The drug, method for producing or using it, medical preparations containing the material or process for producing it, or medical devices claimed in the basic patent, as well as the basic patent, are still valid.

    The drug, method for producing or using it, medical preparations containing the material or process for producing it, or medical devices claimed in the basic patent, as well as the basic patent, are still valid.

    The extension period cannot be longer than the shortest of

    • 5 years
    • the underlying patents' expiration or termination, or their patent term extensions in a recognized country
    • 14 years after the first marketing authorization in Israel or another recognized country; or
    • in recognized patents, the shortest term of expansion of associated patents

    Q10. What types of subject matters are patentable?

    A "patentable innovation" is described as "an invention, be it a product or a method in any field of technology, that is new and useful, has industrial application, and requires an innovative phase," according to Section 3 of the Patents Law. 

    Q11. Is there a way to challenge the patent office's refusal to issue a patent, and if so, to whom?

    If there is a rejection of a patent application by the Israel Patent Office, the applicant can seek a hearing before the registrar. According to Section 174 of the Patents Law and Regulation 191 of the Patents Regulations, if a patent is not issued after the trial, the claimant has the right to appeal to the district. Additionally, the registrar can reconsider the rejection at the applicant's request if the request is made within 12 months of the refusal date.

    Q12. What are the reasons for invalidating a patent that has already been issued?

    The reasons for invalidating a patent that has been granted (as mentioned in Section 31 of the Patents Law) are the same as those for opposing the issuance of a patent, as follows:

    • Owing to the previous application (which destroys novelty) or demonstration, the invention is not patentable.
    • The owner of the invention is the opponent, not the plaintiff; or
    • There are some reasons why the registrar may have denied registration.
    • A patent could also be invalidated if it was not prosecuted in good conscience (e.g., failure to inform the Israel Patent Office of an important citation abroad).

    Q13. Who will challenge a patent that has been granted?

    Any third party can bring a termination suit against a patent that has been granted. A patent revocation claim may be filed at any time after the patent has been granted.

    Q14. What are the deadlines for filing a post-grant review petition or an opposition?

    Within three months of the approval of the bid, a note of pre-grant opposition must be filed. This time frame cannot be extended.

    Q15. When an opposition is filed, what are the potential outcomes?

    The potential outcomes of opposition are as follows;

    • the opposition's dismissal
    • acceptance, in whole or in part, of the opposition; or
    • Ownership of the copyright is transferred to the opponent.

    Q16. What legal principles will the tribunal use to settle the appeal or opposition, and who holds the presumption of proof?

    The legal principles used by the Israel Patent Office are identical to those used in courts. In a patent opposition proceeding, the claimant bears the presumption of evidence. In a revocation case brought by a third party, though, the presumption of evidence is on the revocation claimant.

    Q17. What factors contribute to a patent's inability to be enforced?

    Patents cannot be executed until they are granted in most cases. A legal case for infringement can be brought after the patent has been granted, according to Section 179 of the Patents Law; however, if an action for infringement is brought, the court may award relief for infringement committed after the date of publication of the claim.

    Furthermore, if a renewal charge is not charged and the patent is declared lost; as a result, the patent will become unenforceable. If a patent holder wants to impose an invalid patent, they must file a petition with the registrar to get his or her consent.

    According to Section 53 of the Patents Law, whether the applicant used or planned to use the technology before the date of award, it would be immune from infringement. Even after the patent has been restored, if the defendant started to exploit the invention in Israel on the day the patent lapsed, or if the defendant made real provisions for its use after that date, the defendant shall be entitled to continue to exploit the invention only for the purposes of its industry.

     Q18. What matters infringe a Patent?

    In light of the concept of such claims, Section 49(a) of the Patents Law distinguishes direct infringement as the unauthorised or unauthorized use of an invention for which a patent has been issued, either in the manner prescribed in the claims or in some manner that includes the substance of the invention.

    Q19. Is it possible for a party to be held responsible if the copyright violation occurs outside of the jurisdiction?

    The Patents Law, in general, refers to infringements that occur within Israeli territories. There are no equivalent clauses in Israeli law to those found in 35 US Code 271 (f). In at least one instance, an Israeli court ordered an injunction against an Israeli firm, requiring it to guarantee that its international subsidiary did not misuse the technology outside of Israel (MCA 814/05 (Jer Distr) CC 7076/05 Orbotech Ltd v Camtech Ltd [2005]). In contrast, a party would not be held responsible for patent violations committed solely outside of Israeli territories (LCA 8831/05 Harar v Dialit Ltd, [Sup Ct]).

    Additionally, an operation carried out outside of Israel that causes violation in Israel can be prosecuted in Israel as per the case of Beecham Group Ltd v Bristol-Myers Co, 33 (3) PD 757 [1979]

    Q20. In which courts will a patent infringement suit be filed? What are the legal specifications for each location?

    According to Section 188(b) of the Patents Law, each of Israel's six district courts is potentially authorized to hear patent infringement cases, according to local jurisdiction laws.

    According to Regulation 3 of the Civil Procedure Regulations of 1984, a plaintiff can bring an action in one of several separate venues, including;

    • the location of the wrongful act or omission that gave rise to the argument; and
    • the defendant's residence or place of business

    Q21. Are there any damages available? What are the types of damages available?

    Yes, the types of damages available are as follows;

    • Actual damages, such as a plaintiff's reduced earnings or the defendant's profits;
    • Compensation, which is given at the discretion of the judge. The court would weigh the earnings from the violation, the extent and length of the infringement, and other factors when determining the amount of compensation; and
    • Punitive damages can be awarded in the event of a wilful violation.
    ]]>
    Sun, 21 Mar 2021 08:10:00 GMT
    <![CDATA[FAQs - Mining Laws in Israel]]> FAQs - Mining Laws in Israel

    Introduction

    In Israel, there are 85 active quarries and approximately 2000 non-active or abandoned quarries. All are open pit mines, extracting raw materials for the construction and road-building industries, as well as phosphates for the chemical and agricultural industries. Aspects of resource management and sustainability have been adopted in the mining sector over the last few decades, especially since the establishment of the Ministry of Environmental Protection and the formulation of the National Master Plan for Mining and Quarrying, approved in stages between 1998 and 2001The National Master Plan for Mining and Quarrying is currently undergoing a thorough revision to implement new techniques for mining sector sustainability. Furthermore, many of the non-operational quarries are in various stages of recovery preparation or are being rehabilitated by the Quarry Rehabilitation Fund (QRF).

    Q1. What are the laws that regulate the mining in Israel?

    The main rules and regulations that deal with mining codes are

  • The Mining Ordinance of 1925 and ensuring 1973 and 1978 regulations
  • The Spatial planning
  • The Mining Ordinance of 1925 and ensuring 1973 and 1978 regulations-this statute lays down the conditions and parameters for getting a mining permit. In 1978 the establishment of the Quarry Rehabilitation Fund that oversees the restoration of non-active quarries.

    The Spatial Planning- Approved mining and quarrying sites are included in the National Master Plan for Mining and Quarrying (Plan 14). Plan 14 governs the extraction of natural resources with the aim of maintaining reserves until 2020.Plan 14 also includes instructions for site reconstruction, noise nuisances, and air quality. Pollution, water degradation, and environmental impact criteria evaluation.

    Q2. Who is responsible for monitoring the mining industry?

    The monitoring of the mines are regulated by five tiers

  • Local Authority- For mining sites within its jurisdiction, the local government issues an annual business license. The mining conduct and environmental standards are specified in the business license. Mines and quarries that do not follow the terms of their license are forced to close.
  • Regional Planning Commission- The regional planning commission oversees the implementation of the approved mining plan's conditions. Mining operations are halted when mines fail to comply with their land use planning requirements
  • The Israel Land Administration- this enforces the payment of royalties to the government
  • The Ministry of Environmental Protection- The Ministry of Environmental Protection ensures that legal environmental requirements are followed, including air pollution, noise nuisances, vibrations, and so on. The Green Police and the Israel Police Environmental Unit are the Ministry's two primary inspection bodies.
  • The Ministry for national infrastructure- Mining operation is controlled by the Commission, which is part of the Ministry of National Infrastructure. The Israel Land Administration and the Ministry of Environmental Protection collaborate with the Mining Commission. The Mining Commission compares aerial photographs of mining sites with the approved mining plan twice a year. Misconduct on the part of the mining company may result in the mine being shut down.
  • Q3. What are the updates in the National Master Plan for Mining and Quarrying?

    In July of 2005 the planning board and building board decided to update the National Master Plan for Mining and Quarrying (Plan 14b) based on anticipated needs in 2040. This update incorporates a detailed new approach to environmental issues and long-term sustainability. The draft Plan 14 revision aims to "ensure the mining supplies of raw materials for the building and road construction industries up to the year 2040, thus adhering to sustainable development principles."

    Q4. What are the recommendations made in Plan 14b?

    Plan 14b has made six recommendations in total which are,

  • Ensuring the needs of the future generations for raw materials
  • Minimizing the environmental as well as the health effects of mining activities
  • Balancing between development and the need to save and preserve our resources
  • Land reserves are wisely used to ensure the supply of raw materials for the construction and road-building industries.
  • Raw material consumption that is wise and effective, as well as demand and supply management
  • Balancing national economic gains with local negative consequences, such as environmental consequences for local communities
  • Q5. Are the Israel guidelines different for small, medium and artisanal mining?

    No, the guidelines are uniform no matter the mining size.

    Q6. What is the role of EIA in mining in Israel?

    Environmental impact assessment (EIA) regulations have been incorporated into Israel's planning system, requiring reviews for any projects that are likely to have environmental consequences. The regulations provide guidelines for the preparation of EIAs and enable the Ministry of Environmental Protection to review them. The original regulations were broadened in 2003 to include sustainable development standards such as soil, water, and energy conservation and to require EIAs in environmentally sensitive areas such as coasts and riverbanks.

    Q7. Is there any public participation in the decision making when it comes to mining?

    The approval of local and regional planning committees is needed for new mining operations within existing mines. All proposed proposals must be announced and open to public scrutiny and opposition, according to Israel's Planning and Building Law. Each planning committee also involves an elected official who is not affiliated with the local or national government. In addition, stakeholder consultation and public engagement were used in the creation of the updated National Master Plan for Mining and Quarrying (Plan 14b).The plan is being developed in collaboration with all related ministries, organisations, and civic associations, and it is planned that specifics of the proposed plan will be presented to the public before it is advanced to the stage of legislative approval. At the point of evaluating alternatives to the legislative plan, a public hearing is required.

    Q8. What is the level of transparency in the mining sector?

    The Freedom of Information Act of 1998 mandates that all levels of mining governance offer requested information to any citizen. The Ministry of the Environment, as well as the Ministry of National Infrastructure, are in charge of environmental protection. The Israel Land Administration and the National Planning and Building Board also have extensive websites with a wealth of knowledge on mining operations, spatial planning, mine location, legislation, and annual site restoration reports.

    Q9. How are the risk assessments of the mining activities conducted?

    Mine risk assessments are carried out within the context of environmental impact assessments. Permanent vibration sensors are mounted and tracked in areas where the impact of explosions on nearby populations are unknown.

    Q10. What regulatory body takes care of the safety and health of the people working in mines?

     The Ministry of Industry, Trade, and Labor is in charge of all aspects of mining worker protection and health. The Work Safety Ordinance (Stone Mining) 1965, the Safety at Work Ordinance 1970, and the Use of Explosives Regulations 1994 govern mining activities. These regulatory bodies lay down the conditions for-

  • Site mapping
  • Use of explosives
  • Use of safety equipment
  • Periodic health inspection of the workers
  • Q11. What steps are taken to minimize the health effects of these mining activities? 

    Some of the steps that have been initiated to protect the health of the people are--

  • Prohibiting new mines in highly populated areas and in proximity to localities
  • Incorporating transportation issues into modern mining operations. It is proposed that raw material transportation by rail be increased in order to minimize air pollution, traffic congestion, and greenhouse gas emissions. Mining operations are thought to account for about 30% of all road cargo transport in Israel.
  • Setting up a more strict enforcement and inspection regime to ensure quarries adhere to environmental and mining regulations.
  • Q12. What steps have been taken to minimize the environmental effects of mining?

  • To address the problem of long-term licensing during which environmental standards can change, mines should be required to comply with updated standards by using best available technology (BAT).
  • Setting up a more strict enforcement and inspection regime to ensure quarries conform to environmental and mining regulations.
  • Relocating raw material processing equipment from mine outskirts to the center of the quarry, in a topographically low area, to minimize air pollution and other hazards associated with mineral processing activities.
  • Incorporating transportation issues into modern mining operations. It is proposed that raw material transportation by rail be increased in order to minimize air pollution, traffic congestion, and greenhouse gas emissions. Mining operations are thought to account for about 30% of all road cargo transport in Israel.
  • Q13. Is there an Emergency Response Plan set in place?

    There are no underground mines in Israel, and all mining operations are carried out in open areas with a low risk factor. Every mine's business license specifies the conditions for site safety and emergency response.

    Q14. What is the role of QRF in the mining sector?

    The Quarry Rehabilitation Fund was established in 1978 as a result of the Mining Ordinance (1925) regulations. It is in charge of managing the rehabilitation of quarries that are no longer in use. In Israel, there are approximately 2000 abandoned quarries. The QRF is governed by an eight-member board that includes representatives from the Ministry of the Environment, Israel Land Administration, Nature and Parks Authority, and Ministry of National Infrastructure.

    The QRF is responsible for the following-

  • To claim back a fee from the mining firm. The fee is calculated as a percentage of the overall selling price of the resource which can be as low as 0.1 percent for cement or lime and as high as 6% for natural soil.
  • To promote the site rehabilitation plan.
  • To fund and supervise all the phases of site rehabilitation.
  • The QRF maintains a NIS 300 million ($75 million) endowment, with an estimated annual investment of over NIS 16-17 million (roughly $4 million). The QRF has already completed or partially completed 230 projects and manages 50 ongoing restoration plans each year. Quarry restoration plans include a range of programs, including turning old quarries into regional parks and playgrounds reservoirs, open-air theaters, industrial areas, multi-level cemeteries, and other facilities.

    ]]>
    Sun, 21 Mar 2021 07:33:00 GMT
    <![CDATA[FAQs - Income Tax Law in Israel]]> FAQs - Income Tax Law in Israel

    Residents in Israel are taxed on their worldwide earnings. Non-residents are entitled to income tax on income earned in Israel and capital gains tax on capital gains on properties located in Israel (subject to special non-resident exemptions). Income tax, capital gains tax, value-added tax, and property appreciation tax are all levied in Israel. The Income Tax Ordinance is Israel's prime source of income tax legislation. To promote aliyah, there are also special tax benefits for new immigrants.

    Q1. What is the applicable domestic legislative framework for the enforcement of Income-tax regulations in Israel?

    The Israel Tax Authority (ITA) was created on September 15, 2003, as a result of a government decision to combine the Department of Income Tax and Land Taxation, the Department of Customs and VAT, and the Automated Processing Service in order to "consolidate the administration of tax collection under one key administrator, to be invested with legal authority to enforce the applicable tax laws."

    The Income Tax Ordinance is Israel's prime source of income tax legislation. For each tax year, income tax is imposed in accordance with the terms of the Income Tax Ordinance, at the rates prescribed in the ordinance, on income obtained or accrued (income from capital or property) by an Israeli resident in Israel or abroad, and non-residents' income obtained or accrued in Israel from the sources specified in the ordinance, which include industry, occupation, earnings, interest, dividends, securities, patents, and copyright.

    Q2. In general, which categories are subject to income tax?

    Subject to certain exceptions, all forms of remuneration and compensation, whether in cash or in-kind, resulting from/attributable to work services performed in Israel are taxable. Below are some examples of components of an expatriate remuneration plan that will be taxed as income:

    • contributions to profit-sharing schemes and some retirement plans.
    • the value of low- or no-interest loans issued by the employer, either directly or indirectly.
    • domestic assistance provided by the employer.
    • stipends for time spent at home.
    • the use of a business vehicle.
    • In a non-arm's length basis, the employer provides accommodation.
    • Allowances for living expenses.
    • Capital buying plans for employees and stock option plans for employees.
    • contributions of retirement accounts.
    • contributions to health-care, dental-care, sickness-care, and disability insurance schemes.
    • educational fee for the children.
    • reimbursement with unsupported moving costs.
    • compensation for taxation.
    • allowances for housing.

    Q3. Are there any places of revenue in Israel that are tax-exempt? If that's the case, please provide a broad description of these terms.

    In Israel, there are only a few options for receiving tax-free wages. According to the Israel Tax Ordinance and Regulations, prospective entrants and returning nationals are eligible for a number of tax deductions.

    Q4. Are there any special considerations for ex-pats in Israel?

    Non-resident expatriates may be eligible for major benefits not applicable to Israeli nationals, according to certain requirements.

    Visiting lecturer: According to the Council of Higher Education Law – 1958, a visiting lecturer is a foreign permanent professor or teacher who is paying to instruct or do study at a higher education institution in Israel.

    Foreign expert: A foreign expert is a foreign citizen who meets any of the following criteria as of March 2005:

    • They were paid more than $13,400 (in 2020) for their work, compounded by the number of months they spent in Israel, and tax was withheld as required by statute.
    • They were welcomed from abroad by an Israeli resident who is not employed by a manpower firm or a temporary organization to perform duties for the inviting Israeli resident in the international resident's area of expertise.
    • They were working or offer service in their field of expertise during their stay in Israel or the area.
    • They have been officially residing in Israel.

    If they spent less than a month in Israel, the figure would be determined linearly by dividing it by 30 and multiplying it by the number of days they spent there.

    Q5. What are the general income tax deductions permitted in Israel? 

    Personal tax deductions, also known as credit points, are generally issued to Israeli residents and withheld from their income tax liabilities. The amount of credit points a taxpayer is entitled to depend on his or her personal and family conditions, as well as whether the spouse's earnings are measured separately. There are also some credits and exemptions for contributions to recognized pension funds. Certain credit points are available to international residents (only if the foreign resident is a foreign expert). 

    Q6. What are the different types of tax credits available in Israel? 

    The below are only a few examples of general credits:

    • credit for insurance costs and donations to gain funds
    • credit for a soldier who has been discharged
    • women's credit
    • a resident of Israel receives credit
    • contribution to a government agency
    • a foreign worker's credit (subject to conditions).
    • credit point for the juvenile
    • a spouse's allowance (in certain cases)
    • credit for new immigrants (oleh)
    • Children's credit, which varies depending on the child's age

    Q7. When do you have to file your tax returns? Or when is the deadline for filing your tax return?

    In most cases, the deadline is 31.04. YY, but if double-entry bookkeeping is needed, the deadline is 31.05.YY.

    Q8. When does the fiscal year-end?

    31st December

    Q9. What are the conditions that have to be adhered to for filing the tax returns in Israel?

    Residents-

    Individual taxpayers who are expected to file a report must do so by the 30th of April after the conclusion of the fiscal year, or by the 31st of May if an online filing is required or submitted based on double-entry bookkeeping, or if an individual is allowed to file the tax return electronically.

    For each spouse's work and other income did not meet such thresholds and tax was withheld at source, a resident taxpayer whose primary source of income is employment income is not obliged to file an annual personal income tax return. Employers defer tax on work wages in compliance with tables provided by the Commissioner of Taxes and revised on a regular basis. Foreign employers are not excluded from the need to open and maintain an Israeli payroll withholding tax register for employees working in Israel on a monthly basis. Appointing a state official (or an employee) to help with payroll management and monitoring will fulfil this responsibility.

    Non-resident-

    Unless tax was withheld at the root, a non-resident with income earned or derived in Israel is required to file an annual personal Israeli tax return. Even if an expatriate is not required to file a return, they will need to do so in the years of their arrival and/or departure from Israel to take advantage of the annual (rather than monthly) tax brackets that apply to income received in Israel during those years.

    Q10. What definition is given to the 'resident' of Israel for tax purposes?

    The centre of life measure, which takes into account total relations with Israel, is used to determine if a person is an Israeli citizen for tax purposes (including social connection, economic, and family). Furthermore, if a person was present in Israel for at least 183 days in a tax year, or for at least 30 days in a calendar year, and their cumulative presence in Israel during the tax year and the two corresponding years was 425 days or more, it was assumed that their centre of life was located in Israel.

    Foreign nationals who come to live in Israel on a B-1 visa for a set amount of time are not considered as residents for tax purposes by the Israeli tax authorities, but they are also subject to taxation as non-residents.

    Q11. When it comes to the start and end dates of the residency, is there a de minimus number of days rule? For e.g., once their task is completed and they repatriate, a taxpayer cannot return to the host country/jurisdiction for longer than 10 days.

    No, there is no de minimus number of days rule.

    Q12. What if the assignee arrives in the country/jurisdiction before the start of their assignment?

    If these days in Israel were working days for a foreign resident, their salary for those days would be added to their gross taxable income.

    Q13. Are there any compliance conditions that have to be complied with before leaving Israel?

    A person is deemed to have violated residency in Israel if they are no longer registered as an Israeli citizen (as described earlier) and has lived outside of Israel for at least 183 days a year for two consecutive tax years, and their centre of life was outside of Israel for the following two years, according to domestic law. If this is the case, the individual is known to have broken residency from the time they first left Israel.

    The exit tax for Israeli citizens is a critical problem that needs to be discussed. The exit tax is imposed on the last day of a resident's stay in Israel. The exit tax is imposed on the last day of a resident's stay in Israel. However, the tax bill will be deferred to the day of the asset's final selling, and the tax will be measured based on the asset's valuation on the sale day, as well as the linear growth of assets and stock options while living in Israel.

    Q14. Is there a reporting provision in the host country/jurisdiction after an assignee leaves the country/jurisdiction and repatriates?

    No. The reporting conditions in Israel, on the other hand, are on a yearly basis. As a result, if the assignee returns to their home country/jurisdiction within the tax year, the assignee will be required to file a record with the Israeli tax authorities about income earned while residing in Israel.

    Q15. Is a wage paid while living in another country taxable in Israel? If so, how can you go about doing it?

    Non-resident workers who accept compensation for jobs performed outside of Israel are normally not taxed on their wages. Residents in Israel are taxed on an individual basis. Salary paid by an Israeli citizen working overseas with an Israeli company for more than four months is subject to special tax rates. In this situation, the employee could be eligible for such deductions and exemptions. Profits earned or derived abroad is excluded for new entrants and returned veterans for ten years.

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    Sun, 21 Mar 2021 07:04:00 GMT
    <![CDATA[FAQs - Succession Law in Israel Introduction]]>  FAQs - Succession Law in Israel

    Introduction

    Inheritance & evidence issues are not preferred to dwell on by most people, but life is fleeting. Life is temporary. After a person has passed away, the future of his property must, or by will, be determined in compliance with the laws of succession in Israel. Inheritance is the common policy of exchanging land and of transferring rights, responsibilities and even titles.

    The Succession Law of 1965 ('Succession Law') regulates the law of inheritance in Israel. The Israel courts are responsible for the estate of any person who was an Israel resident or who left Israel's land at the time of his death. In section 1 of the Succession Statute, which is that the estate of an individual goes on to his heirs following his death, there is a default assumption of Israel's inheritance law. This covers the individual's assets, land, copyrights and so on.

    Q1. ​What is succession?

    If the deceased leaves a will then per the succession law in Israel, the property is transferred to the successor.  The heirs are the individuals, bodies and legal persons that are included in the Will.

    Q2. What inheritance laws apply?

    The authority of courts in Israel is overland succession. The most important law for inheritance in Israel is the Israeli Inheritance Law of 1965 which stipulates, in any one of the conditions: Israel was the residence of the dead at the time of his death or the inheritance included property or other assets in Israel.

    Q3. What happens to an estate if there are no heirs?

    If an individual has no legally entitled family who were to be allocated to their properties, his estate passes to the State. The proposal may be forwarded to the Registrar of the Succession Cases at the Ministry of Justice for a Succession Order or to the Rabbinical Courts, subject to local authority.

    Q4. What are the types of wills?

    Several forms of will are recognised by Israeli law.

    Handwritten Will: Written exclusively with the hand-written signature of the Testator. In compliance with Section 19 of the Succession Law, the date of its establishment shall also be indicated in the handwriting of the Testator.

    A will in the presence of witnesses: written and dated, signed in the presence of two witnesses by the testator. In the case of the witnesses under Section 20 of the law of succession, the Testator must make it his will and then the witnesses shall swear to the signatures that the Testator has made the declaration and signed the will. It shall be stated in the presence of the witnesses. The Will may be handwritten or typed, but the signatures must appear in the Testator's handwriting and must be signed on the day that the Will was made, not later.

    A Will made before an Authority: Under Article 22 of the Law of Succession the Will is a Will before the Authority, the terms of which are proclaimed verbally by the individual in authority, before they are read to the Testator and at its close a document is signed and confirmed by the person in authority on the day the Will is made and in respect to which the Testator has made the declaration.

    An Oral Will: also known as "Deathbed Will." This is only possible in situations where the testator is on his or her death bed or considers himself to be in a condition in accordance with Section 23 of the Succession Law. Two witnesses must be made to an oral testament that understands the language of the testator and must document in a memorandum the contents and instructions of the testator and the date and conditions in which the testament was made. The Will shall subsequently be deposited with the Registrar of Succession Cases.

    Q5. What happens in the absence of a will?

    An individual has the right to leave property in a will to any person he/she wants. The Inheritance Law determines that in the absence of a will, the property is to be divided among close relatives of the deceased, according to how closely their ties with the deceased are related.

    In the event of an inheritance, the distribution of this property to the heirs under the statute begins with a proposal for an order of succession, in the absence of a will in Israel. This appeal is either sent to a division of the Succession Registrar's Bureau or to one of the Israeli rabbinical courts. A legal judicial order in compliance with Israel law is the order of succession. It is not obsolescent like a court order, which will be enforceable years after it has been issued. The order does not define the particulars of the allocation of assets to heirs, but only the name and inheritance rights and tax in Israel.

    Several documents must accompany the proposal for a succession order. This is why the exact procedural conditions of the procedure of filing for a Succession Order should be addressed with a legal advisor. The exact procedural conditions of the procedure of filing for a Succession Order should be addressed with a legal advisor or attorney. The exact procedural conditions of the procedure of filing for a Succession Order should be addressed with a legal advisor. If the order request is submitted by a lawyer on behalf of an affected party, an original Power of Attorney or a copy of the original shall accompany the request.

    Q6. Are wills prepared by a foreigner enforceable in Israel?

    Yes. As per the Israeli Succession Law, the will is to be translated by a certified translator

    Q7. Who can inherit in Israel?

    In Israel, the line of succession is based on blood relationships. Between parents and children and which the deceased's heirs are the closest relatives to them.  The likely heirs of a deceased could also include unborn relatives if their birth date falls within 300 days from the day of the deceased's death.

    Q8. Are handwritten wills legally binding in Israel?

    The Israeli Inheritance Law promotes the assurance with which wills are implied and respects the legitimacy in certain circumstances of handwritten wills, before witnesses, before a notary or judge or even oral will.

    Q9. Are technical objections approved?

    As long as the desire and health of a citizen are confirmed, no technical objection to a will can be acknowledged, as articulated by the Israel Court.

     Furthermore, a testament is legal in Israel if the law of Israel, the local legislation in the place where it was prepared, a law on the deceased domicile, or a law on the citizenship of the deceased, by the time the testament is prepared or at the time of his death, is valid.

    Q10. How to inherit property according to Israeli Succession law?

    The interested party has to file a probate petition for the inheritance of property in Israel and then get an order for the Succession, Inheritance, Probate, court order.  Then proceed with registration of the property in the Israel government database for properties in Israel (TABU)

    Q11. What should I do to receive my relative's land, property in Israel?

    To inherit property, a probate petition must be submitted to the Inheritance Registrar or religious court to obtain a probate court order. In the case where this is no will you must submit a petition to the succession court order.   The Inheritance Registrar in Israel automatically passes the petition to Family Court and you can only claim the property and file it in the Tabu – Israel Land Registry Office after you have obtained the Succession or Probate Order at the Israeli Family court.

    Q12. Does the law distinguish between Israeli and foreign citizens?

    No. It does not differentiate between Israeli citizens and foreigners.

    If the person who has died was a resident in Israeli territory, Israeli courts are competent, even if property in Israel is not included in the inheritance. Furthermore, Israeli courts have jurisdiction if the inheritance petition contains Israeli land even if no party has any relationship with Israel.

    Q13. Do you need to travel to Israel to present the probate petition and seek the succession order?

    No. Your legal representative will, to obtain a probate court order in your name, submit a probate petition and all relevant information including your declarations of affidavit, your legal authorisation and such to the Israeli Probate Court.

    Q14. Do Foreign Inheritance Laws apply in Israel?

    Foreign laws apply only if they grant inheritance rights to individuals related by blood, marriage, or adoption, it does not grant inheritance entitlements to those not related. If foreign law of the deceased's resident country or national country refers to Israeli law, the Inheritance Law shall be applied in all matters governed by foreign law. But, in cases in which such law discriminates on grounds of ethnicity, sex, gender or nationality, the Inheritance Law prohibits the application of foreign law. Further, such international legislation does not apply to inheritors who are not related to the deceased by blood, marriage or adoption, provided it gives any legitimate rights of heritage (i.e.. except by a last will).

    Q15. Is an international probate court order or an international succession order valid in Israel?

    No. It must be granted in the same jurisdiction of a probate court in Israel

    Q16. Which government body in Israel is liable for petitions for secession, orders and probates?

    In Israel, succession and probate orders are carried out by the Registrar of Inheritance and the family courts. The Family Court shall deal with complex cases and cases where a contest has been filed.

    Q17. What is the law for property outside of Israel?

    The Inheritance law determines that if land is beyond the borders of the State of Israel, then at the time of its passing, the law relevant is the law of its residence. In matters related to inheritance, the legislation applicable is the local law of the country where the property is situated without distinction of the property kind.

    Q18. What are the types of inheritance tax?

    In Israel, there is no property tax/inheritance tax. Successors living overseas could be subject to their country's tax laws and capital gains on the Israeli land they have inherited.

    There is also no Estate Tax in Israel

    Q19. Which government body is responsible for issuing Inheritance orders and Probate verdicts?

    The Israeli Inheritance Registrar and the decision from there is the family court's responsibility to sign the court order. They have the power, according to Israeli law, to issue inheritance orders, probate wills or intestate succession to heirs.

    Q20. How long would it take to solve an inheritance, probate case?

    Depending on their complexity of the case and disputes between the inheritors. It could last from 4-5 months to one and a half years.

    Q21. What is the remaining spouse going to get in the absence of a will?

    The remaining 1/4 stays for deceased children, grandchildren and parents, while the living partner is entitled to receive the deceased vehicle and movable properties and 3/4 of all property of the deceased. The surviving spouse has the right to 2/3 of the property if the deceased has brothers and sisters but no offspring. The remainder is divided among the siblings of the deceased.

    Q22. What are the living spouse's property rights?

    The deceased's estates are governed by property rights. In the particular case of a married couple, the property left by the deceased is entitled to the privileges the spouse has gained previous to the death of the deceased. Usually, there is an assumption of shared property between partners in the absence of clear exclusions or any arrangement and so the spouse's privilege should first be confirmed before the determination of properties contained in the estate, particularly if the name of the spouse is not recorded as the proprietor of any kind.

    Only if the deceased does not have children, relatives or parents will the partner inherit the whole estate. Otherwise, if the deceased is survived by children or parents then the partner shall be entitled to half the property and if the deceased is survived by grandparents, sibling, or another relative, then the spouse is entitled to two-thirds of the property.

    The partner has had the right to inherit all of the moveable property of the deceased, including motor vehicles that belong in the family. The living spouse's properties are not part of the estate to be inherited, under the Israeli Inheritance Act. This can entail up to half the value of the couple's properties, because of the application of Law 5733 – 1973 on Spouses (Property Relations), rules of mutual property ownership or a property relations arrangement (for example, a pre-emptive or 'prenuptial' agreement).

    The (Property Relations) Law 5743 - 1973 applies to partners who were married on or after 1 January 1974.  This statute determines that each partner has a right to a half the value of his or her property except any property possessed by one spouse prior to marriage.

    The rules of shared possession of land resulting from rulings of the Israeli Supreme Court was extended in relation to couples marrying before 1 January 1974. These rules state that where the partner (including spouses publicly identified as spouses) exhibits a "working lifestyle" and "joint endeavor" thus leads to the inference that all spousal property is a collective property.

    Q23. What are the inheritance laws for minors?

    If the heir of a property has no legitimate inheritance capacity, a guardian may be assigned to benefit the heir. The guardian may be appointed in the will, but such an appointment must be approved by the court and the court may choose a more competent person to act as a guardian. Natural guardians are the parents of the child, but a court is responsible for the whole assignment process which seeks the best of the heir.

     

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    Sun, 21 Mar 2021 06:46:00 GMT
    <![CDATA[FAQs - Medical Negligence]]> FAQs - Medical Negligence

    Introduction

    The medical profession has seen an increasing prevalence and frequency of legal proceedings on medical liability since the mid-20th century. Some people believe that increased litigation is beneficial because learning from mistakes saves the community's wellbeing, which helps keep doctors responsible. The opponents believe, however, that proceedings are harmful for maintenance of health standards, claiming there is nothing more harmful than the suggestion of patients suing their doctors.

    In contrast to any other occupation, medicine depends on human beings to make complex decisions that may have serious and long-lasting implications. Unfavourable results are usually an inherent threat to medical care and do not generally represent inadequate treatment.

    Q1. What is medical negligence?

    Medical negligence is characterized as negligent medical care, involving physicians, clinics, nurses, chiropractors, therapists, or other physicians. A medical practitioner that is not acting in a way that is deemed to be the agreed norm of diagnosis or treatment for an illness will be found liable for all resulting damages, including distress and injury, medical costs, income loss or unlawful death. The phrase "medical negligence" is also referred to as "medical malpractice."

    Q2. What are the main statutes and regulations relating to medical negligence?

    In Israel, there is no clear law on medical misconduct. Present legislation refers to neglect offences, surgical assaults, infringement of the statute and violations of the Patient's Rights Law.

    The tort of negligence, in Articles 35 and 36 of the Tort Ordinance [1] also applies. With Article 35 being Negligence and Article 36 being Duty Towards All.

    The case on negligence, as set out in the Torts Ordinance, is a structure that enables the legislature to assess criteria that are to be considered for damage and damaging factors when there is a duty of responsibility in the relationship between them. There are aspects of the responsibility for care, carelessness (violating the obligation to provide care) and injury in analyzing the reasons for neglect.

    Q3. What can you sue for?

    At any stage of medical treatment, medical negligence can occur;

    in the first step, for example in laboratory diagnosis.

    at the latter stages, for example, diagnostic presentation or establishment or implementation of a recovery facility and/or the operation.

    at the patient care post-operative stages. Conflicts with medical negligence laws are popular in the fields of dentistry, oncology, maternity, prescriptions and it's side effects, surgical errors and other medicinal fields. Any health professional may be prone to making mistakes.

    A variety of situations in which a medical professional makes an error or incorrect judgment can cause medical malpractice. Common examples of incidents of medical negligence include:

    • Birth injuries
    • Gynaecological and obstetrical malpractice
    • Surgical errors
    • Emergency Room negligence
    • Anaesthesia errors
    • Misdiagnosis or delayed diagnosis
    • Failure to diagnose cancer
    • Medication errors
    • Brain injuries
    • Patient neglect
    • Failure to obtain necessary patient information

    Q4. How do you know if you have a medical negligence case?

    To decide whether negligence occurred in a specific situation, the Court determines if the features of negligence wrong have been complied with in the case under consideration:

    • The existence of a caring obligation - is the defendant's care obligation to the complainant.
    • Infringement of this obligation.
    • Harm attributable to the infringement - Has a claimable damage to a complainant been sustained in the light of the court.
    • A causal relationship exists between the actions of the defendant, neglect and injury.

    The plaintiff must assert that all four factors apply in all the claims based on medical malpractice.

    If all the aforementioned factors are complied with, the Court will decide that the affected plaintiff has been neglected and compensated. There is no exact test for the responsibility of patient abuse. The Court shall review the facts of the situation, the organization, the conditions, the disease and the cure, case by case.

    Before proceeding with the medical negligence claim, it is important to collect vital information.  To do this lawyers receive from the client power of attorney and ask the client to sign a waiver of confidentiality. If people resort to a lawyer for medical negligence payments, it must be concluded that they should not hide the details concerning their state of health and that they must give permission to the information being disclosed and paperwork concerning their state of health to the medical establishment concerned.

    Q5. What kinds of damages (money awards) are available to the plaintiff in a medical malpractice lawsuit?

    Two categories of monetary loss were distinguished by The Courts of Israel: general and special damage. The Israeli law does not specify how the victim's pain and suffering should be compensated and the judge must give his impression on medical opinions and measure the scope. The ruling established requirements that affect the compensation sum. The age of the injured after the injury shall impact the amount of damage and disability pay. The Court mainly investigates the impact and scale of the kind of injury on the quality of life of the survivor.

    In the case of medical malpractice and neglect, financial benefits will be provided sometimes, including the payout for medical costs in the past and the future, recovery, compensation for missed or job losses, trauma, or other mental injuries. In this context, we are talking about significant amounts of money.

    Compensation for loss of earning capacity - this compensation takes into account the loss of the injured person's income due to the wrongs perpetrated against him.  Therefore, if a person is hurt physically by a misdemeanour and is unable to persevere with his job, the court will offer him compensation for the lack of earnings ability.

    Expenses for treatment - the court will consider the claimant's bills for physical, nursing, psychological, therapy and hospitalisation, and travelling supplementary costs.

    Q6. In what cases of negligence and malpractice is there a good chance of receiving compensation for damage?

    Unfortunately, there are very frequent incidents of medical neglect. They are prevalent in pregnancy and delivery, dentistry, cardiology and other medical fields. In the following examples, compensation for medical care will normally be obtained:

  • Incorrect diagnosis of the malady;
  • Incorrect surgical procedure or failure to remove foreign bodies after the completion of a surgical procedure;
  • Removal of healthy organs together with the diseased ones;
  • Scalding of tissue and organs during a surgical procedure;
  • Mixing of blood groups in the course of a blood transfusion or an intravenous administration;
  • Administration of an incorrect treatment process.
  • Q7. What is the procedure in the initiation of a lawsuit according to Medical Malpractice law?

    The commencement of a suit involves the submission of an independent medical opinion in cases of suspected medical neglect. Without an expert's report, one cannot continue with a case. However, two or three medical records may be produced in such proceedings. The defendant may provide his own specialist's examination, in which case the court shall nominate an independent professional. It is therefore important to get a professional report from a qualified expert who knows how to produce an affidavit of those reports.

    Q8. What are the medical negligence rules for foreigners?

    Many foreigners come to Israel to get medical treatment. If neglect occur at an Israeli medical institute, a foreign resident is entitled, in compliance with the Israeli Patient's Rights Law of 1996, for equal compensation as any Israeli citizen.

    Q9. How to file a medical negligence claim?

    It is insufficient to simply claim that medical negligence has taken place to sue for damages in a case of medical negligence. It should therefore be shown that it has caused real harm and a link of cause and effect between the medical mistake performed and the harm caused. An accusation of medical incompetence does not necessarily offer enough basis for the prosecution of an irresponsible doctor.

    Q10. What are your rights as a patient?

    In compliance with Israel's Law on the Patient's Rights Law, all patients are entitled to full data on their health status and the procedures and expected outcome of their care received from their doctor. Besides, all patients need to give their approval to be fully aware of the care procedure they will be undergoing to the medication they get. When a medical officer does not supply the patient with vital details, no alternatives are offered for the latter.

    Such a case itself offers ample justification for an action because, under such situations, there is no need to provide proof of the degree of health damages alleged. Violation of human rights is a cause for compensatory damages

    Q11. What are the limitations to the claim?

    If the plaintiff's medical record failures or defects, this impairs the right of the injured patient to support the argument for abuse. The judge, however, may in situations such as those, opt to pass the duty of persuasion to the defendant-doctor.

    Q12. When Can a Claim Arise Over Lack of Express Consent?

    • The right of the patient not to be given unintentional medical treatment. He has the right, so that he can determine for himself what treatment procedure to use, to get clarification.
    • The fact that the patient is not given all the data he wants to decide about the different care alternatives in this case can be evident in medical malpractice. The responsibility of the physician to warn the patient about his condition and the potential outcomes stem from the general care duty that the physician and the hospital owe to the patient. If the risks of therapy, the options, are not disclosed, so the obligation of care is violated.

    Q13. What kind of disputes can be settled through mediation?

    Lawsuits involving medical negligence are often resolved outside trials. Both medical facilities have liability protection covering incidents of suspected medical negligence or malpractice; thus, all medical professionals are insured for occupational risk. Where the mistake affects a person, doctors and hospitals tend not to go to court and risk damaging their reputation; so they also prefer to resolve the matter using mediation. The settlement will take place on the scope of the losses reported and the insurance provider will then pay the damage. Of these cases, compensation will be granted to the victim in a very short time.

     

     

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    Sat, 20 Mar 2021 21:36:00 GMT
    <![CDATA[FAQ - Labour Law in Israel]]> FAQ - Labour Law in Israel

    Introduction

    Israeli labour law extends to all Israeli or foreign workers consisting of a series of cogent legislative legislation, regulations and jurisprudence. Foreign staff are non-Israeli employees in Israel who work under a legal visa for work. Furthermore, there are common and particular collective arrangements and extension directives for any or some segments of the labour market. The fact that an employee is not entitled to suspend any minimum rights under Israel's legislation should be recognized.

    There are a variety of sources governing employment relations in Israel: fundamental rights, as established in the aforementioned basic laws; statutory rights, as provided for within legislation and regulations; contractual arrangements and extension agreements; and individual labour contracts. labour relations are governed by many different sources. The National Labor Court (NLC), which is the primary judicial body creating labour and social security legislation, interprets these legal sources. The government and the courts are used as rules, even if not binding, international norms, especially ILO conventions accepted by Israel, but also EU standards.

    Q1. What are the main statutes and regulations relating to employment?

    Israeli labour legislation provides for minimum mandatory requirements, which cannot be waived by employees.

    These laws include:

    • Minimum Wage Law, setting down the minimum wage and is revised daily;
    • Wage Protection Law governs the timing and procedures of paying and allowing deduction of the wage/salary and the provision of fines for the infringement;
    • Hours of Work and Rest Law, regulating working hours, additional hours of night work and rest days of workers as well as wages per each working group.
    • Annual Leave Law  lays down the annual minimum leave quotas and usually governs vacations;
    • Sick Pay Law, which lays out minimum sick leave-pay provisions.
    • Severance Pay Law, which lays down the allowance and calculation of the severance pay;
    • Advance Notice for Dismissal and Resignation Law, which lays down the minimum notification requirements for employer or employee before termination.

    Generally applicable extension orders include four additional compulsory benefits which workers cannot waive:

    • Refund of charges for travel to and from the workplace;
    • National holidays;
    • Pay for recovery;
    • Pension plan.

    Q2. Does employee/contractor classification have clear rules?

    The main relevant rules cover the following considerations: whether the employee's function is an integral and regular part of the employer's business; the extent of control over the employee; whether the employee has his or her own business, takes economic risks, hires employees or maintains a list of clients; the extent of the employee's financial dependence on the employer; who supplies the means to work (ie, whether the employer or the employee supplies the equipment, vehicles, materials and tools); the place of work (ie, whether work takes place at the premises of the employee or the employer); the length of employment; the method of payment; the method of payment of taxes by the employee; and whether the parties believe that they are entering into an employer-employee relationship and how this is presented to third parties. 

    The most important laws address the following considerations: if the work of the employee is an integral part of the business of the employer;

    • The scope of employee management.
    • If the employee's have their own business.
    • Takes financial risks, recruits or keeps the customer list.
    • The level of the employee's reliance on the company for financial reasons.
    • Who provides the means for working such as the machinery, vehicles, material and resources supplied by the employer or the employee.
    • The example workplace, whether the job is done at the employee's or the employer's premises.
    • The duration of the work.
    • The payment process.
    • The process of paying the employee's taxes, and whether or not the partners feel they enter into an employer/employee agreement and how it is sent to third parties.

    Q3. Must there be a written employment contract?

    Israel's legislation generally does not contain a written labour contract and an oral arrangement is legally binding. However, the Notice to the Employee (Terms of Employment) Act forces the employer to notify each employee of the employee's principal terms and conditions of employment in a stipulated manner.

    The Foreign Employee Law also mandates that a contract of work of a foreign employee be in writing, in a language familiar to the employee, with precise terms and conditions.

    Q4. Are any conditions implicit in employment contracts?

    In all arrangements and contractual provisions, all legislative and obligatory incentives are implied. An employment contract may also include the terms of any other collective bargaining arrangement or extension order.

    Q5. Is it compulsory to implement settlements on arbitration/dispute resolution?

    In collective bargaining arrangements, arbitration and conflict resolution procedures are common.  However, in personal work arrangements, it is not normal and compulsory job rights and compensation cannot be covered by arbitration. Exclusively only contractual benefits can be covered by arbitration.

    Q6. How can workers amend current contracts of employment?

    Any changes to the working terms must be communicated to the employee by written notice. Any modification is subject to the consent of the employee.

    Q7. What are the rules for employing foreign workers?

    All rights and privileges granted to workers under Israeli labour law are entitled to foreign workers in the territory of Israel; moreover, they are entitled to specific benefits according to laws governing foreign workers, e.g. written jobs, medical care and lodging.

    In the context of background checks and investigations, what should employers do;

    About criminal records?

    Criminal background checks are prohibited, as expected by law-specified government enforcement agencies. Employers delivering care for children and persons with disabilities or psychological disabilities would ask all male applicants to affirm that they have not been accused of sexual crimes.

    About Credit checks?

    Credit checks in Israel are unusual and have only recently been adopted. There is no case law available.

    What is the minimum wage?

    Under the Minimum Wage Law, the statutory minimum wage in Israel is NIS 5,300. In 2015 it rose from NIS 4 300 to the current amount in several negotiations between the Histadrut (General Federation of Labor in Israel) and employers' organisations. This is accurate as of April 1 2018.

    What are the restrictions on working hours?

    An average Israel work week takes 43 hours from Sunday to Thursday. The employee who works on a 5-day work week (Sundays to Thursdays) thus works 8.6 hours on a normal working day. Six-day employees work eight hours a day between Sunday and Thursday, with an extra three hours of work on Friday. Any operating hours exceeding normal hours per day and/or exceeding regular week (i.e. more than eight or 8.6 hours per day) are called extra hours. Overtime is usually prohibited by the Hours of Work and Rest Law.

    However, with the following restrictions, a general permission granted by the Labor Ministry allows overtime: Six-day-working employees cannot work for four hours of overtime a day or 12 hours of overtime a week. Five-day employees can't work for over four hours a day or 15 hours a week of surplus work per day. According to the legislation, one workday from one hour shall be divided into a break of at least 8 hours. Otherwise, one working day shall be taken into account and an employee shall have a right for the following day of overtime pay.

    Each employee is entitled to a minimum of 36 hours of weekly rest. Saturday shall be included in the weekly rest for Jewish employees and employees from any other religion can choose between Friday, Saturday or Sunday to rest at weeklies intervals. The Labor Ministry is permitted to issue rules that deviate from general weekly rest requirements and reduce them to a minimum of 25 hours a week. Until allowed with a general or special authorisation from the Labor Ministry, jobs shall be prohibited at weekly rest.

    An employee shall have a right to a special weekly rest compensation, for working hours of weekly hours of rest, of not less than 150% of his daily salary.

    What are the meal and rest break requirements?

    Section 20 of the Hours of Work and Rest Law specifies that an employee shall have the right to rest and reset for a minimum of 45 minutes in every working day of six hours or longer, with an ongoing rest period not under 30 minutes.

    The Labor ministry's permission nevertheless permits workers to do non-manual labour for eight to nine hours without interruption. Another license makes a continuous break of 30 minutes while the job takes place in a 3-shift mode. The statute further specifies the right of an employee to pray according to his values during the working day. In line with the conditions of the workplace, pray time is defined and the employee's religion is considered.

    How is overtime calculated?

    Any operating hours exceeding normal hours per day and/or exceeding regular week (i.e. more than eight or 8.6 hours per day) are called extra hours. The measurement is performed regularly as well as monthly. For the first two hours of overtime plus a further one hour of overtime the employee has the right to an extra-time bonus of 125% of his or her daily pay.

    What are the overtime exemptions?

    The House of Work and Rest Law does not include those types of staff, including those in managing roles, employees with special fiduciary partnership obligations and employees with unattended working hours by the boss. Labour courts can identify an employee who is identified in his employment contract as being excluded as nonexempt; the case law allows for the exception of a very limited category of employees.

    Is there any legislation establishing the right to annual vacation and holidays?

    The Annual Leave Law specifies that an employee has the right to a compensated annual leave for 10 or 12 days on start-up, rising annually to a limit of 28 days depending on the seniority of the employee. Besides, all workers are entitled to nine paid public and national holidays under the broadly applicable extension order.

    What are the employee rights to medical leave?

    The Sick Pay Law allows workers to work at a rate of 18 sick days a year, or up to 90. Workers shall not be allowed to pay on a sick day on the first day; employees shall be entitled to 50% of their pay on the second and third days; employees shall be entitled to 100% of their salaries from the fourth day onwards. Sick leave pay is certified for medical purposes and sick days accrued, unused and unused are not redeemable, unlike holidays.

    Employees are allowed, all subject to such legal provisions, to use a proportion of their accumulated sickness days for a minor, parent or spouse's disease. Male workers can use maternity checks or the birth of a child up to seven sick days. Maternity and paternity leave shall be paid for by statute and are payable by national security (not the employer).

    Is there any law prohibiting harassment in employment?

    Prevention of Sexual Harassment Law requests employers to: print in the workplace a set of guidelines to deter sexual harassment; hire a prevention officer; enforce a program to prevent sexual harassment; and investigate complaints.

    Is there any legislation protecting employee privacy or personnel data?

    Employees have a fair right to privacy, and the right not to be tracked, at work. Employers can, however, track workers overtime, providing they have approval of employees and develop a policy outlining equipment, procedures, intent and data usage. The right of employees to privacy has evolved in recent years as a matter of law.

    Must notice of termination be given before dismissal?

    The Advance Notice for Dismissal and Resignation Law includes notification from all employers and workers. The notification period shall be fixed with a limit of 30 calendar days per the time of work. An employer can overlook the employee's presence during the time of notice, as long as it pays the employee in place of notice.

    What are the laws governing redundancies? And in what circumstances are employees protected from dismissal?

    In general, an employment contract and/or any collective bargaining arrangement applicable shall allow a company to terminate one of its workers subject to restrictions of law. The dismissal of pregnant women; maternity leave women or 60 days thereafter; women residing in the shelter of abused women; men required for military, sick leave staff; infertility treatment staff; households deprived of care and persons with disabilities is subject to legal restrictions.

    In certain cases, termination is prohibited and the contractor should request permission from the appropriate governmental agency in some other cases. It would be unlawful to terminate a pregnant worker without the employer being able to satisfy the Labor Ministry that there are other grounds for termination and unrelated to the pregnancy. Besides, staff are entitled to a hearing before termination. In brief, for an employer to state his or her argument against firing, before reaching a last determination the employer must schedule a hearing with the employee concerned. The laws of the hearing are determined by jurisdiction.

    Before making the definitive decision on termination and redundancies, a hearing must be held. Essentially, redundancy is subject to the same rules. However, since the contractor may be facing allegations that a form of improper prejudice or discrimination affects the layoff selection process, it is prudent for each decision to be completely reflected and expressed. In the event involving terminations of more than 10 jobs in the same month, the Employment Service Law requires the employer notifying the Employment Service Bureau. This rule, however, is never enforced or complied with. Certain collective bargaining arrangements may be subject to a mediation requirement.

    Which courts or tribunals are competent to hear complaints?

    There are two cases of the labour courts: the Regional Labor Court and the National Labor Court. The Labor Ministry has certain procedures – such as granting termination permits to pregnant mothers.

    What's the usual protocol and the timing for complaints?

    For civil non-collective workers, the basic protocol is as follows and may take 3 or 4 years.

    ]]>
    Sat, 20 Mar 2021 19:37:00 GMT
    <![CDATA[FAQs- Enforcement of contracts in Israel]]> FAQs- Enforcement of contracts in Israel

    A healthy economy needs a legal system that can effectively resolve commercial disputes. Without one, businesses risk living in an atmosphere where contractual commitments are not strictly adhered to. Although there are advantages of using alternative conflict resolution mechanisms, doing Business depends on how government agencies work in the event of a contractual dispute. This article explores in detail the enforcement of contract in Israel.

    Q1. Which domestic laws and regulations govern the recognition and enforcement of contracts in Israel?

    The Standard Contracts Law,5743-1982, governs standard contracts in Israel (hereinafter: Standard Contracts Law).

    Contract Law is governed by a number of laws in Israel, including the Contracts (General Provisions) Law (5734-1973), the Contracts (Remedies for Breach of Contract) Law (5732-1971), and the Standard Contracts Law (5734-1973).

    Other regulations, such as the Insurance Contract Law (5742-1981), the Contract for Supplies and Services Law (5735-1974), the Sale Contract Law (5729-1968), the Guarantee Law (5728-1967), and the Lease Law (5732-1971), govern specific contracts.

    Q2. What is the purpose of the law of contract in Israel?

    The aim of this legislation is to shield consumers from unfairly disadvantageous regular contract terms.

    Q3. Can the Court or Tribunal annul or amend any standard contract?

    Yes, Under the rules of this statute, a court or the Tribunal can annul or amend any standard contract requirement that, in light of the entirety of the contract's terms and other circumstances, results in an unreasonable disadvantage to customers or an unfair benefit for the provider, and is likely to result in the customers' deprivation (any other circumstance hereinafter referred to as "unduly disadvantageous condition").

    Q4. What are the conditions will be presumed to be unduly disadvantage?

    The following circumstances would be considered unduly disadvantageous.

  • a condition that relieves or limits the liability that the supplier would have to bear by virtue of the contract if not for that condition, or that relieves or limits the responsibility that the supplier would have to bear by virtue of the contract if not for that condition;
  • a condition that gives the supplier an arbitrary right to cancel, postpone, or delay the contract's results, or to change any material requirement put on him by the contract;
  • a condition that gives the retailer the ability to delegate liability to a third party;
  • a condition that gives the supplier the exclusive right to change a price or any other commodity requirement levied on the consumer after the deal has been made, unless the change is due to conditions about which the supplier has no influence.
  • a condition that forces the customer to rely unreasonably on the supplier or another party, or otherwise restricts the customer's ability to enter or not enter into a contract with another person.
  • a condition that denies or reduces a legal right or remedy open to the consumer, or that unreasonably restricts a contractual right or remedy, or that requires any other right or remedy conditional on providing notice in an unreasonable manner, within an unreasonable period, or on any other unreasonable provision.
  • a condition that places the burden of evidence on those who would not have to bear it if the condition didn't exist.
  • a condition that, with the exception of being part of a standard settlement arrangement, refuses or restricts the customer's ability to bring such pleas before judicial authority or to pursue certain legal action;
  • a condition that specifies the law governing place of jurisdiction which gives the provider the unilateral right to select the place of jurisdiction or arbitration for the resolution of a dispute.
  • a condition that requires a case to be referred to arbitration where the supplier has more control than the client on the selection of arbitrators or the location of the arbitration.
  • The Tribunal decision in the Ituran case12 is a clear example in this regard, according to which the fact that the corporation has been proclaimed a monopoly in the area of car position systems imposes a heavier burden of equity and reasonability on it. The Tribunal also took into account the fact that some of the company's clients do not do business with it voluntarily, but rather that their insurance providers need it as a condition of offering car-theft insurance plans. The Tribunal determined that as long as Ituran has a monopoly, it cannot fail to provide its services for unfair reasons; as a result, the clause of its regular contract that allows the corporation to terminate the contract at its own discretion is an unduly disadvantageous situation.

    Q5. Can a limitation of right to apply to judicial authorities be placed?

    No, A clause in a regular contract that denies or restricts the customer's ability to seek judicial relief is invalid.

    Q6. What does the Standard Contract law cover?

    The Standard Contracts Law applies to a wide and diverse range of situations. It is not the typical consumer law, and its scope of application is far wider. The word "customer" is described as "the person to whom a provider offers a standard contract for an engagement between them, regardless of whether he is the receiver or the giver of something." As a result, the Standard Contracts Law also extends to a deal between two suppliers where one of them suggests that their engagement should be based on a standard contract. The Basic Contracts Law covers anyone who enters into a standard contract, regardless of the type of business transaction or intent.

    The law extends similarly to the Administration, according to Article 22 of the Standard Contracts Law. As a result, the statute requires the State to file applications for approval of standard contracts that it has drafted7, as well as applications for annulment of standard contracts that have unduly disadvantageous provisions.

    Q7. Can an Unduly Disadvantageous Condition be annulled?  

    Yes

    Q8. How can the proceedings go about if the unduly disadvantageous conditions need to be annulled?

    The Tribunal has the authority under Art. 17 of the Standard Contracts Law to cancel or change an unduly disadvantageous clause to the degree possible to remove the undue disadvantage. In practice, this is not a discretionary power, and if the Tribunal determines that the requirement is unduly burdensome, it must revoke or change it. Those named in the statute – the Attorney General and the Head of the Authority for Consumer Protection – are entitled to petition the tribunal in annulment proceedings.

    Customers' associations or governmental authorities, as specified by the law's legislation, are also eligible to petition the Tribunal. Israel's Consumers' Committee, the Consumers' Protection Authority, and the Bank of Israel are therefore empowered under Regulation 4 of the Standard Contracts Regulations, 5743-1983.

    Furthermore, the legislation gives the Minister of Justice the authority to authorize a consumer entity that has not been designated by the regulations to apply for annulment in a particular matter.

    The supplier whose contract is being annulled is the respondent to the annulment petition; moreover, the Tribunal may order a representative body of suppliers, or any party interested in the matter, to enter the case as a respondent. The cancellation and obliteration of a clause from the contract occurs as it is annulled.

    An annulment, unlike a normal contract acceptance, has no time limit and remains in effect as long as the Tribunal has not rescinded or reversed its ruling. The Tribunal has the authority to extend its ruling to contracts that were concluded prior to the decision but have not yet been fully implemented. Under the legislation or the rules, any individual or body who appeared before the Tribunal as a complainant or respondent will appeal the Tribunal's judgments to the Supreme Court within 45 days.

    Q9. What are the courts' authority in regards to Standard Contracts?

    The Basic Contracts Law also gives the courts the power to look at standard contract terms that are unduly disadvantageous. The Court is required by Art. 3 to annul or change a clause in a regular contract that the Court deems to be unduly disadvantageous. When exercising its jurisdiction, the Court must consider the whole contract's terms as well as all other relevant factors. When exercising its jurisdiction, the Court must consider both the entirety of the contract's terms, as well as all other applicable conditions, as well as the case's particular facts. Another way to assert an undue advantage claim is to file a lawsuit for a verdict declaring the situation to be unduly disadvantageous.

    Q10. How are the enforcement of the Tribunal's decisions handled in regards to the amendment of an unduly disadvantageous condition?

    A supplier who disregards a Tribunal order on the cancellation or amendment to an unduly disadvantageous provision is not subject to a fine under the Standard Contracts Law. This is being handled as a general contempt of court lawsuit. The Prosecutor General's Office has the authority to sue a supplier for failing to comply with the Tribunal's orders, but this type of action is rarely used. It's necessary to differentiate between a supplier who petitioned the Tribunal to approve a standard contract against a supplier who was a respondent in an annulment proceeding in this sense.

    It does not seem to be often reasonable to impose such a harsh penalty on suppliers who have petitioned the Tribunal for approval of their standard contracts and then opted not to comply with the proceedings, or to use the standard contract as authorized by the Tribunal, for any reasons, most of which are economic in nature.

    Q11. Is there any restriction on the applicability?

    Yes

    Q12. What are the restrictions or the limitations on applicability of the provisions?

    The provisions of this law will not be applicable to the following;

  • a condition that specifies the amount of money the consumer must pay;
  • a condition that complies with the requirements of a statute or is authorized by an enactment;
  • a provision that Israel must meet in accordance with the terms of an international agreement of which it is a member state;
  • a contractual arrangement made in writing and prescribing pay limits under the Collective Agreements Law 1957, whether or not it has been applied for registration under that Law.
  • Q13. How does the Minister of Justice carry out the law's implementation?

    The Minister of Justice is in charge of enforcing this law, and he has the authority to issue regulations to do so, including regulations on:

  • The Tribunal's process, the extension of time for filing appeals, and the hearings' continuity;
  • persons or entities that can appear before the Tribunal to plead in favour of a group or as respondents;
  • When the State wants approval of a standard contract, there are many options for appointing an attorney.
  • the reimbursement of witnesses' fees and lost working hours allowances in Tribunal proceedings
  • on the face of a contract, the type of the indication listed in section 15;
  • requiring a seller to include a copy of a standard contract that he has concluded or plans to conclude to the Attorney General or the Commissioner of Consumer Protection and Fair Trade, upon request.
  • ]]>
    Sat, 20 Mar 2021 17:00:02 GMT
    <![CDATA[ FAQs - Israel Aviation Laws ]]> FAQs - Israel Aviation Laws and Regulations 2021

    Introduction

    In Israel, the detailed law controls the security of all civil aviation. It regulates licensing of operators and service providers, including pilots, flight schools, airport inspectors, flight controllers, and manufacturers of aircraft and aviation equipment. Furthermore, the legislation specifies strict security clearance and medical eligibility criteria for employees in the aviation industry. The law has specific regulations for the operation and management of aviation colleges, commercial aircraft operation, aircraft maintenance and inspections, as well as airport facilities and airport and landing space operations.

    What are the principle Legislations that regulate the aviation sector in Israel?

    The bodies which regulate the principle legislation in Israel are as follows-

  •   The Aviation Law 2011- This aviation law is relatively new and is modern and up to date, it provides the legal framework for aviation operation in Israel.
  • The Air Transport Law 1980- This law adopts the Montreal Convention into the Israeli law. This law states that the liability of the air carrier, it employees or its agents for any sort or damage including the death of a person shall be determined only based on this law. There will also be no claim for compensation according to any other cause of action.
  • The Aviation Service Law (Compensation and Assistance due to cancellation of flight) 2012- This law states the rights of the passengers to get compensation and assistance if the flight gets cancelled or delayed.
  • What are the regulatory bodies that regulate the field of aviation in Israel?

    The principle regulatory bodies which regulate the aviation sector are-

  • The ministry of transportation- This regulates the aviation sector as well as it has the authority to initiate new laws and enact new regulations
  • The Israel Civil Aviation Authority ( CAAI)- This performs the following functions
  • It establishes and maintains the procedures and regulations for international as well as domestic aviation
  • Implements international agreements and international treaties
  • It supervises the aviation operations regarding transport safety and efficiency
  • It grants licenses and permits (for aircraft, air personnel and aircraft manufacturers) according to the aviation law.
  • What permit does an Israel carrier need to operate its aircraft for commercial purposes?

     An Israeli carrier or a foreign carrier cannot operate any aircraft for the commercial purpose unless and until the permit has been granted to it by the general manager of the CAAI. This operational permit will be limited to a certain time for a permitted destination. 

    Moreover, the CAAI manager may also establish conditions for,

  • The aircraft which the carrier can operate
  • the maximum number of passengers or freight that a carrier can transport, seat space, and frequency of operations
  • The types of services which the aircraft might offer
  • Any other conditions that the CAAI manager thinks right.
  • Are there any regulatory provisions that a lessor or financier should be aware of when it comes to aircraft operation?

    As for now there are no specific regulatory requirements which a lessor or a financier should be aware when it comes to the aircraft operation in Israel.

    Are the air safety regulated separately for the cargo, private and commercial planes?

    No, the CAAI regulates every aspect of the aviation industry. Even though CAAI regulates the commercial, cargo and private aircrafts it still has to regulate them according to the individual rules and standards which is different for all of them.

    Are the airports in Israel state or privately owned? And Do Israel's airports place any conditions on airlines flying to and from the country's airports?

    The airports are state owned. The IAA is a governmental company which is in-charge of the operations taking place in the airport.

    Moreover, yes there are certain requirements which are put in place when it comes to hours of operation of the airport.

    What are the legislations which apply to air accidents?

    The legislations which apply to air accidents are as follows-

  • Aviation regulations ( aircraft accidents and incident investigation)- 1984
  • The Aviation Law- 2011
  • Chicago Convention- 1944
  • The Air Transport law- 1980 ( Montreal Convention- 1999)
  • Aviation Regulations ( types of severe accidents)- 2014
  • Civil Aviation Authority Law- 2005
  • Who will be investigating the accident?

    According to the aviation law the minister of transportation will be appointing the chief investigation in the ministry of transportation to investigate the said accident.  The said investigator is responsible for the following-

  • Collection analysis and documentation of all the relevant information regarding the safety standards and the accident
  • The reason and cause of the accident
  • The preparation of the final document added with his recommendations
  • Follow up on the fulfillment of recommendations and then drawing the conclusions
  • The Aviation Laws, The Aviation Regulations and the Aviation Regulations (Types of severe accidents) set out the following main subjects

  • The procedure in case of an accident
  • Types of accidents which will be considered as severe incidents for the purpose of law
  • The authority of the chief investigator includes the right to visit the relevant place and act in a manner which preserves the site of the accident for the completion of the investigation
  • What are the legislations which cover the safety aspect in the aviation sector and who administers this air safety?

    The principle legislation which takes care of air safety is the Aviation Law- 2011

    Israel has adopted the Chicago Convention to ensure that the air navigation equipment comply with the standards mentioned in the International Civil Aviation Organization (ICAO). The air carrier is required to prove its maintenance and its technical ability as well as provide an operational and technical manual to the CAAI for its approval. The carrier is also required to get its safety management system approved by the CAAI. The CAAI is the one who issues and renews the airworthiness certificates and air operator certificates, approves the maintenance programs and carries out inspection of the aircraft operated within Israel.

    Are there any limitations that the international carriers face in comparison to the local carriers?

    At present the international carriers have no such limitations, because Israel has adopted many international aviation agreements such as the EU- Israel open skies agreement, US- Israel Open Skies Agreement. However there is one requirement which the international carrier needs to fulfill, Aviation Services Licensing law- 1963 states that for the purpose of obtaining the operating permit, the foreign operator has to first appoint a representative in Israel who is authorized to act on his behalf during the proceedings under the aviation law. The CAAI has published the details of the representative of the foreign operators on its website.

    Does registration of the ownership in the register of aircraft constitute as proof of ownership?

    The registrations of the aircrafts maintained by the CAAI is not a registration of legal ownership hence the registration of the aircraft does not constitute as a proof of ownership.

    What are the rules for registering aircraft mortgages and charges?

    The procedure for registering of aircraft charge or mortgage is given under the Aviation Regulation (Aircraft Registration and Marking) 1973 and the same shall be administered by the CAAI. However, if the registry is declarative then these mortgages or pledges will be registered with the relevant general registry that is either the companies registrar or pledge registrar.

    Is Israel a part of the main international conventions such as Montreal, Geneva and Cape Town? And how are these conventions applied in the country?

    Israel has signed the main international conventions being the Montreal convention as well as the Geneva Convention, the Montreal Convention however was ratified in March 2011. As for now Israel is not a part of the Cape Town Convention. In general, the local laws ratify these conventions and apply them to the local legislations. For Example the Air Transport law has adopted the Montreal Convention into the local legislation.

    In Future what are the predicted changes to the legislation?

    In the future all the changes will be related to the lessons learned by the aviation industry following the Covid Pandemic.

    The Insolvency and Financial Rehabilitation law- 2019, which has come into force in 2019 in September provides new conditions for the insolvency of companies and includes liabilities of others in case of insolvency. The recent impact of Covid-19 has caused financial distress to many airlines all around the world and has effected Israel Aviation sector as well. This law will provide attention to the industry in case of rehabilitation of the airlines or in case of insolvency.

    In addition to this there will also be developments in data protection for matters relating to passengers personal data. The growing number of cyber-crimes has forced additional regulatory attention to make sure the passengers' personal data is not being leaked.

     

    ]]>
    Sat, 20 Mar 2021 13:24:00 GMT
    <![CDATA[FAQs – Pharmaceutical Industry Laws in Israel]]> FAQs – Pharmaceutical Industry Laws in Israel

    Introduction

    What are the major pharmaceutical laws and regulatory bodies in ISRAEL?

    Legislation

    The main legislation relating to pharmaceuticals in Israel is: 

    • The Pharmacists Ordinance (New Version) 1981, which governs the manufacture, selling, prescribing, importation, and registration of medicinal products, as well as data exclusivity provisions.
    • The Pharmacist Regulations (Medical Preparations) 1986, which govern the selling, prescribing, importation, and registration of medicinal items, as well as pharmacovigilance and recall provisions.
    • The Pharmacist Regulations (Good Manufacturing Practice) 2008, which governs the manufacturing, importation, and recall of pharmaceuticals.
    • The Goods and Services Price Surveillance Act of 5756-1996.
    • 5761-2001, Order for the Supervision of Goods and Services Prices (Maximum Prices for Prescription Preparations).
    • 5761-2001 Order for the Supervision of Goods and Services Prices (Application of the Act to Preparations).

    Regulatory agencies

    • The Ministry of Health (MOH) Pharmaceutical Administration is the governing body in charge of pharmaceuticals in Israel. It is made up of the following bodies:
    •  The Institute for Standardization and Control of Pharmaceuticals (ISCP), which is in charge of ensuring the quality of pharmaceuticals.
    • The Department of Preparations Registration, which is in charge of registering pharmaceutical products.
    • The Import of Pharmaceuticals and Drugs Department, which is in charge of medicinal product importation.
    • The Pharmaceutical Monitoring Section, which is in charge of approving medicinal product labelling and packaging.

    The Department of Pharmacovigilance and Drug Information, which is in charge of ensuring the safety of drug treatment

    • Pharmaceutical facilities in Israel, among other items, are under the purview of the Pharmaceutical Administration.
    • Obtaining and inspecting pharmaceutical and medical device licenses.
    • Observing human clinical trials
    •  Defending against prescription fraud.
    • The key aim of the Pharmaceutical Administration is to ensure that all medical preparations sold in Israel meet the required safety, consistency, and efficacy requirements. The Pharmaceutical Administration is also in charge of implementing the rules that govern its operations.
    • Section 1 of the Pharmacists Ordinance defines the terms preparation and therapeutic medication as any type of a substance or combination of substances that is one of the following (except blood or blood portion obtained from a human being that is intended to be used in its natural physiological form and has not undergone significant processing):
    • It has properties for curing, preventing, or treating a disease in a person or animal, or it is advertised as having such properties.
    • By exerting a pharmacological, immunological, or metabolic operation, it induces (or is administered to a human being or animal for the purpose of causing) regeneration, substitution, reparation, or a change of a physiological action throughout the body.
    • It is given to or may be given to a person or an animal for the purpose of medical diagnosis.

    What is the national health-care system's framework, and how is it funded? Explain how drugs are inserted into the system or how they are supplied in the market ?

    The following are the major features of Israel's national healthcare system:

    • Membership in one of the four Israeli Sick Funds is required.
    • Israeli citizens must pay National Health Insurance to the National Health Institute, which then distributes the funds to the Sick Funds (however, non-payment by an individual would not affect the Sick Fund's obligation to provide that person with all medical care to which he or she is entitled).
    • A national "Health Basket" that is revised every year to reflect emerging medical products and technology and outlines the programs that Sick Funds must offer to their members.

    The funding for the National "Health Basket" derives from three sources:

    The National "Health Basket" is funded by three sources: national health insurance payments, Sick Funds' "participation" payments (derived, for example, from direct payments to the Sick Funds from members for complementary health insurance programs), and MOH budget payments.

    A proposal to add a new medication or medical technology to the National Health Basket may be made by any public or private agency (for example, patients, patient organizations, doctors, or pharmaceutical companies).

    Drugs that have been licensed or that have been submitted for approval and are expected to be accepted within the year will be included in applications.

    Drugs that have been licensed or that have been submitted for approval and are expected to be accepted within the year will be included in applications. If a medication is included in the new health basket, it will receive priority review. As a result, the regulatory mechanism could be improved.

    On the recommendation of the Public Committee for the Expansion of the Health Services Basket, new medicines and medical innovations are applied to the National Health Basket. This committee advises the Ministry of Health on which medicines and innovations should be included in the basket (considering budgetary constraints).

    Following the approval of the Health Council and the Minister of Finance's agreement, those recommendations must be approved by the government.

    Pharmaceutical companies typically discuss costs with the Ministry of Health as part of the decision to add a new drug or medical technology to the Basket.

    The Sick Funds are also used by the majority of Israelis to pay for additional health facilities, such as medications, that are not covered by the National Health Basket. A growing number of Israelis have private health insurance schemes, which cover a variety of medications and medical facilities (some of which are not covered by the National Health Basket or the SHS's complementary services).

    Patients that need medications or medicines that are not covered by the National Health Basket may petition their sick fund's exceptions committee, and the decision can be appealed to a state labour court.

    Is there a set of mandatory standards for the protection of pharmaceutical products?

    • Under the Good Manufacturing Practice Regulations 2008, the following mandatory conditions for medicinal product protection apply:
    • • Any allegation about a defect in the nature of a medicinal product must be investigated and registered by the quality assurance (QA) department of the MIA holder. Any defect that could result in the medicinal product's production and availability being limited or its recall from the market must be reported to the MOH by the MIA holder.

    • When a registration holder, MIA holder, or the Director General of the MOH is informed that a medicinal product could endanger public health, the registration holder, MIA holder, or the Director General of the MOH must take some action that allows it to monitor batches of medicinal products and marketed products for the purpose of recalling a defective medicinal product at the direction of the MOH Director General, or in the event that a medicinal product could endanger public health.

    • The owner of a company that manufactures or imports APIs, as well as a pharmaceutical establishment that stores or transports APIs, must take steps to allow it to track batches of marketed APIs for the purpose of recalling defective batches from the market if the substances threaten public health, or at the direction of the MOH's Director General. When the Director General or the owner of a company that manufactures or imports APIs orders the marketing of an API to be halted, it must be done right away.

    If a marketer of a pharmaceutical product or API, the owner of a pharmaceutical establishment, or the owner of a business manufacturing or importing pharmaceutical products or APIs receives notice that marketing must cease, the product/API must be returned to the entity from which it was received, unless the Director General of the MOH orders otherwise.

    A defect in a medicinal product must be reported to the MOH GMP department immediately, and an investigation and risk assessment report must be sent to the GMP department within 48 hours, according to MOH Procedure No. PUB-003/08 (June, 2019). (if the investigation and risk assessment cannot be completed promptly, intermediate reports must be filed within this timeframe). Furthermore, before the MOH makes a decision, the suspicious product's inventory must be quarantined.

    What rules govern the advertising and promotion of medicinal products, as well as the distribution of samples, and how are advertisements and promotional activities regulated?

    Legislation and regulatory authority 

    • Pharmacist Regulations (Preparations) 1986 is a piece of legislation that governs the advertisement of pharmaceutical products.

    • Pharmacists Regulations (Sale of a product not in a pharmacy or by a pharmacist) (Sale of a product not in a pharmacy or by a pharmacist) (Sale of a product not in a pharmacy or by a pharmacist)

    • Procedures of the Ministry of Health.

    • Television and Radio (Ethics in TV Commercials) Rules of the Second Authority, 1994.

    • Ethics in Radio Commercials, Rules of the Second Authority for Television and Radio, 1999.

    The MOH is the primary regulatory body in charge of implementing the restrictions and laws governing medicinal product ads. In addition, advertisements on television and radio are controlled by the Second Authority for Television and Radio.

    The Pharmacists Regulations (Medical Preparations) 1986 describe advertising as the dissemination of information in writing, through the media, or through some other means. Given this broad definition, the regulations and procedures governing medical preparation ads cover a wide range of advertising practices in all media and platforms.

    Restrictions

    The MOH must authorize any advertisement of medicinal products in advance. It is illegal to advertise prescription-only drugs (POMs) to the general public. Advertising of prescription and non-prescription drugs to health care practitioners is allowed if it emphasizes the approved indications. Advertising non-prescription drugs to the general public is permitted under strict conditions, including that the details in the advertising be right, reliable, concise, and consistent with the product's accepted indication. Comparative ads are only permitted between goods with similar APIs and where a sufficient and consistent basis for comparison exists.

    Internet advertising 

    The MOH treats advertising to the general public on the internet, including social media platforms, in the same way it treats advertising on any other platform. A registration holder may view a list of pharmaceutical products registered in its name on its website under MOH Procedure No. 137 (2015).

    Does Israel state's privacy and data security laws have an effect on pharmaceutical regulation?

    In Israeli law, there is a strong emphasis on maintaining a person's privacy. In terms of a patient's privacy, the Patient Rights Act of 1996 imposes a general obligation on medical professionals (and other therapists) and employees of health facilities to keep confidential any information about a patient that they obtain in the course of their duties or jobs. The Act also states that a medical practitioner/therapist or the director of a health system must take reasonable steps to ensure that staff working under their supervision keep patient details confidential.

    Furthermore, the Privacy Protection Act of 1981 imposes a general obligation (that extends to commercial companies) not to publish health-related information.

    Databases containing personal medical information or genetic information must follow strict security protocols under the Privacy Protection Regulations (Information Security) 2017.

    The Privacy Protection Regulations (Transfer of Data to Databases Outside the State Borders) 2001 provide for the transfer of personal data from an Israeli database to a database outside Israel under strict conditions.

    The duty to protect a patient's privacy is also outlined in various MOH Procedures, such as:

    • MOH Procedure (No. 14 (2016)), which states that the Helsinki Committee will not approve a clinical trial in human subjects unless the trial program includes provisions to protect the privacy of trial participants and the confidentiality of data collected in the trial.
    • MOH Procedure (No. 6 (2013)), which states that adverse reaction reports need not contain identifiable information about the patient, and that information in follow-up reports does not compromise the patient's privacy.
    ]]>
    Mon, 15 Mar 2021 10:19:00 GMT
    <![CDATA[Doing Business in Israel]]> Doing Business in Israel

    Introduction

    What are the recent developments affecting doing business in Israel?

    After Israeli high-tech companies on public markets, there was increased activity on the IPO scene in 2019, with 4 Israeli tech companies choosing to go public on NASDAQ. In 2019, eventual funding for Israeli start-ups also increased, Israel's largest private-to-private merger to date, and a record for total deal exits. 

    This data may attract or indicate a greater interest from entrepreneurs in scaling and growing businesses rather than the previously known tendency to seek a quick or early exit. 

    To combat money laundering, the Cash Reduction Law was passed in 2018, which came into effect in 2019. The law, as its name suggests, limits the number of cash transactions that companies can accept as payment. This new legislation, along with the general interest in fintech and the Bank of Israel's active steps to promote open banking, has resulted in increased opportunities for alternative electronic payment solutions and market competition.

    What about the legal system in Israel?

    The Israeli legal system is based on common law, but it also incorporates civil law elements.

    There is no formal constitution in Israel. Those fundamental laws, on the other hand, are considered to be the bedrock of the country's legal system and jurisprudence. Since Israel is a small country, it lacks a federal system and a jury system.

    Are there any limitations on foreign investment (such as central or local government authorizations)? Is doing business with those countries or jurisdictions subject to any restrictions?

    Israel welcomes and actively seeks international investment. As a result, international ownership of Israeli companies and properties is typically unrestricted. The only exceptions to this general rule apply to:

    • Foreign companies with links to certain adversarial countries
    • Corporations that have such state-issued control licenses should be targeted.
    • The Organization for Economic Cooperation and Development (OECD) has Israel as a member (OECD). As a result, Israel is subject to extensive anti-money laundering and anti-terror funding regulations, as well as laws prohibiting trade with "terrorist organizations."

    According to Israel's 1939 Trade with the Enemy Ordinance, it is illegal for an Israeli natural or legal individual to engage in any economic, financial, or other dealings with any of the following:

    • A country or ruler that is at war with Israel (currently Syria, Lebanon, Iran, and Iraq) (an enemy state).
    • An individual who lives in an enemy country.
    • A legal entity that operates under the supervision of a hostile power.
    • A company that was formed under the laws of a hostile country.
    • A natural or lawful person doing business in an enemy country.

    What are the most popular types of business vehicles in Israel?

    Private limited liability companies are the most popular business vehicles.

    Accountants, accounting firms, and pension funds, mutual funds, and hedge funds are the most common types of partnerships. 

    When a foreign company decides to do business in Israel, it has the option of forming a private limited liability company (typically a subsidiary) or establishing a foreign branch. Tax considerations are normally the driving force behind this decision. If a foreign company chooses to register a branch in Israel, the foreign company will be subject to Israeli control and will be directly liable for the branch's debts and liabilities.

    In Israel, public companies are popular, and Israeli companies can choose to list on the Tel Aviv Stock Exchange (TASE) or on other international stock exchanges.

    What are the key registration and reporting provisions for the most common type of corporate business vehicle used by foreign companies in Israel?

    Registration and formation

    The parent company must send the following details to the Companies Registrar in order to form a limited liability subsidiary company:

  • Three options for the subsidiary's proposed name (in English and Hebrew). The name must contain the word "Ltd." and must not be deceptive or misleading in nature.
    • Information about the parent company, such as its incorporation documents and approved signatory.
    • Information about the subsidiary, such as its registered address, authorized share capital, initial directors, and articles of incorporation (articles).
    • An application form, an Incorporating Shareholder Compatibility Statement form, and a director statement form. Each of these forms must be in the format provided by the Israeli Companies Registrar and must be in the Hebrew language.

    Within a week of submitting these documents and paying the registration fee (roughly NIS2,600), the subsidiary should be incorporated and given a company registration number.

    Reporting requirements

    Private corporations must file annual reports with the Companies Registrar, detailing the company's organizational structure, auditor, and confirmation that the company's financial reports were presented to its shareholders. A private corporation must also pay a tax of approximately NIS1,500 per year A business must also notify the Companies Registrar of such changes, such as changes to its name, articles of incorporation, issued or registered share capital, or board composition

    • There is no such thing as a minimum or maximum share capital.
    • Consideration other than money Non-cash value may be used to issue shares.

    Rights attaching to shares

    Restrictions on Restrictions on the privileges that come with shares. Both shareholders must behave in good faith and in accordance with established procedures, and they must not abuse their power or take advantage of other shareholders. Furthermore, the following shareholders are obligated to treat the company fairly:

    A shareholder with the power to name a director or general manager, or who owns at least 50% of the company's voting rights (a controlling shareholder).

    • A shareholder who understands that his or her vote will be decisive in a general meeting decision.
    • A shareholder with the authority to appoint or prohibit the appointment of a company officer, as well as some other authority over the company Additional restrictions may be included in the company's articles of association, or shareholders may agree between themselves. Rights of first refusal, co-sale, right of first bid, tag along, and various voting structures are all examples of this.

    Automatically attached rights to shares. Every shareholder has the following rights under the Companies Law of 1999:

    • Take part in shareholder meetings and vote.
    •  Get paid dividends.
    • Access to some records.
    •  The ability to act before others do (if the company has one class of shares).
    • Some drag-along rights
    • In the case of prejudice, rights.
    • Liquidation rights.
    • In certain cases, these privileges can be limited by the articles of incorporation.

    What are the most important laws that govern employee-employer relationships?

    Employees in Israel have some contractual privileges that cannot be waived under Israeli labour law, including those under the:

    • Minimum Wage Act of 1987
    • The Wage Protection Act of 1958.
    • Work Hours and Rest Periods Act of 1951.
    • The Annual Leave Law was enacted in 1977.
    • Sick Pay Act of 1976.
    • The Severance Pay Act of 1963.

    Dismissal and Resignation Advance Notice Law of 2001.

    Staff are often entitled to travel expenses to and from work, national holidays, convalescence pay, and a pension plan under widely used extension orders. International employees are subject to all mandatory labour rules, benefits, and rights. Under the Foreign Workers Law of 1991, foreign workers are now entitled to special benefits (such as a written contract of employment, medical insurance and accommodation). 

    In Israel, the international "choice of law" laws applies, and a foreign law may apply to an employment contract if the parties have expressly agreed to it. Where the choice of law is unclear, the labour courts can rule based on the facts, with the location of the agreement's performance being a significant factor. Furthermore, an explicit choice of law provision would not be upheld by Israeli labour courts if the employee's rights under that law are materially less than those provided under Israeli labour laws. Employees from Israel who work abroad may be subject to international laws.

    Is it essential for foreign workers to have work and/or residency permits?

    Employing foreign workers necessitates job and residency permits from the Ministry of Interior's Population and Immigration Authority.

    Work permits are requested in accordance with a specific job and employer.

    The process with the appropriate authorities will take anywhere from 60 to 90 days. It is important to submit the application as soon as possible, preferably before the employee arrives in Israel. These permits cost anywhere between a few hundred and a few thousand shekels.

    What are the conditions under which an employee is taxed in Israel, and what requirements are used?

    If the If the employee is an Israeli tax resident, he or she will be taxed on all of his or her wages, regardless of where it was earned, derived, or received.

    Non-resident workers are only taxed on wages earned in Israel.

    Individuals' tax residence is determined by the "centre of life" measure, which takes into account the individual's permanent residence, family, economic and social relations, place of permanent or usual work, and position of active and substantive economic interests.

     If a person is present in Israel for one of the following reasons, he or she is assumed to be an Israeli tax resident.

    • You worked for at least 183 days during the tax year.
    • At least 30 days in the relevant tax year, for a total of 425 days in the relevant tax year and the two preceding tax years.

    This assumption, however, can be debunked. Any taxes will be subject to any applicable tax treaty's limits.

     

    ]]>
    Mon, 15 Mar 2021 09:40:00 GMT
    <![CDATA[FAQs – Arbitration in Israel]]> FAQs – Arbitration in Israel

    What is the state of law and Arbitration in Israel?

    Israel has a reputation for being a litigious nation. According to study, Israel has the highest number of lawsuits lodged per capita in the country. In 2004, Israel was ranked third among seventeen developing countries in terms of judicial burden. The mixture of a large number of lawsuits filed and an insufficient number of judges resulted in an overburdened court system plagued with delays in verdict service. A Committee on the Structure and Jurisdiction of the Judiciary (hereinafter the "Landau Committee") reported in 1980 that the caseload of the courts is so heavy that there is fear that the justice system may be unable to carry out its duties and represent the public unless a swift remedy is found. Academic scholars and judges have expressed similar fears, which have persisted to this day. Along with other approaches, such as expanding the number of judges, simplifying civil processes, and implementing modern fast-track procedures for some categories of litigation, ADR is one effort to address this obstacle. In 1992, an amendment to the Courts Law allowed judges to use three ADR methods: adjudicate a case with the parties' consent by way of compromise, that is, issue a summary judgment without conducting a full trial and explaining the reasons for the decision; refer a case to; and refer a case to arbitration (at the time using the terms "conciliation" or "pishur" in the legal system).

    In particular, under the Arbitration Act 1968, arbitration was still a constitutionally accepted way of settling conflicts at the time, causing one arbitration specialist to question the necessity for the change in that regard. Judges favor the judicial compromise procedure, but disputants and attorneys are wary of it because it is challenging to foresee if the judge would rule in a situation, there are no grounds for the ruling, and it is almost impossible to challenge the decision. Due to the difficulties of judicially reviewing arbitrators' rulings under Israeli arbitration rule, arbitration has not attracted many people. The state avoided utilizing arbitration in cases of which it was a defendant due to the restricted reviewability of arbitration awards, and a 2003 Attorney-General Directive stated that "as a practice, the state should not settle its conflicts in arbitration but through the courts." The statute was changed in 2008 to allow parties to settle on an appellate mechanism for arbitrators' rulings, and the Attorney-General updated its prior stance on arbitration in 2009, issuing a new directive that stated that "the state sees in arbitration, alongside other conflict settlement procedures, a valid and worthy option, in appropriate situations, for the resolution of state disputes." While new private Arbitration Institutions have sprung up, providing arbitration facilities by former judges and seasoned attorneys, the amount of disputes that have gone to arbitration has remained somewhat unchanged. A draft parliamentary bill in 2011 that would have made binding arbitration part of the judicial framework failed to pass. Mediation has gained greater assistance from the government and the courts than consensus and arbitration. "The Settlement of Labor Disputes Law of 1957 called for a form of obligatory resolution in all labor disputes by special labor relations officers at the Ministry of Labor," according to a report from the late 1950s. However, in terms of settling labour conflicts, this procedure was ineffective. In 1992, an update to the Courts Law allowed judges to refer disputants to mediation. The Courts Mediation Regulations, provided by the Minister of Justice in 1993, laid out the protocol to be practiced by the court in staying pending cases assigned to mediation, spelled out the responsibilities of mediators in conducting mediation in civil and labour courts, and suggested a model mediation arrangement. Since Israel has yet to pass a general legislation on mediation, mediation that is not appealed to a judge is essentially uncontrolled. In Israel, there is no need for mediators to possess a degree in order to conduct mediation. However, in 1998, the Minister of Justice named a Consulting Committee on Mediation in the Courts (hereinafter the "Gadot Committee") to make suggestions on the skills and experience required by court-connected mediators. The Gadot Committee released recommendations on the basic credentials of court-connected mediators, which have since become the accepted practice in Israel for mediator preparation.

     The Gadot Committee noted that mediation was seldom used in Israel, and that the procedure was largely unfamiliar to the general population and legal profession. The Ministry of Justice established a National Center for Mediation and Dispute Resolution in that year in order to focus resources on spreading mediation. A year later, the Attorney General released a directive urging the resolution of government-related conflicts by mediation. After the late 1990s, courts have been directing civil litigation through mediation, either by in-judicial mediators, who are court employees, or by private-sector mediators who have completed court-approved training courses. Furthermore, court proceedings have been submitted to judicial mediation meetings, which are held by judges who are not assigned to consider the prosecution at trial. The courts developed Case Routing Units in 2001, which were responsible for directing cases to mediation, and the Director of the Courts Administration released a national program for the implementation of the Case Routing Units in 2003, which acted as the country's primary source of mediation cases. However, in fact, the amount of disputants who chose to engage in mediation was limited. The implementation of a soft version of obligatory mediation as a pilot scheme in a variety of civil courts was proposed by the Commission to Explore Ways to Increase the Use of Mediation in the Courts (hereinafter the "Rubinstein Committee") in 2006. Disputants in civil cases were expected to undergo a free, obligatory pre-mediation session with a mediator, through which they collected mediation material and assessed the suitability of their argument for mediation, according to the scheme. The parties could opt for mediation or arbitration at the conclusion of this session. The protocol was dubbed "Information Exchange, Acquaintance, and Coordination," or MAHUT (the Hebrew acronym), and it was included in the Civil Procedure Regulations. After 2016, an expanded edition of MAHUT has included four sessions with a social worker from the Family Court Assistance Units to introduce divorcing parties to consensual approaches to resolving their family conflicts. ADR campaigns outside of the courtroom started in the early 2000s.

    The National Center for Mediation and Dispute Resolution aided and guided the creation of community mediation services. In 2001, two group mediation centres were operational, and ten more were in the planning stages. There are now over forty of them. Furthermore, under the auspices of the Ministry of Social Affairs and Social Welfare, Citizens' Advisory Services Units ("Shil" in Hebrew) are now providing free mediation services in thousands of communities around the world. Thousands of citizens have been drawn to the modern area and emerging career of ADR in the private sector. About the fact that negotiation has existed in the dark, more than a thousand persons have received basic mediation training in compliance with the Gadot Committee's mediator training guidelines, which were established in 2001. In addition, in 2001, approximately forty private mediation centers were also providing public mediator preparation and mediation facilities. However, the increase in the number of mediators, which now stands at over 30,000, has not resulted in a sustainable mediation practice. Since the amount of mediators who currently accept cases from the courts is limited, because the general population does not want to mediate before trial, the bulk of the current trainees have not matured into licensed mediators who perform mediations for a charge or even pro bono.

    What was the primary motive of introducing ADR in the Israeli Legal System? Explain?

    Justice as Efficiency:

    The urgent need to deal with the problems of an overburdened justice system was clearly a driving force behind the implementation of ADR into the Israeli legal system. "It is suggested to include settlement, consultation, and arbitration formal status of law, both to allow disputants to select additional forms to resolve their conflict and thereby accelerate resolution of the dispute and relieve the overload of litigation in the courts," according to the 1992 Proposal to Change the Courts Statute." "The key benefit of consensus on the conclusion of disagreement in this process is simplicity and speed," according to the settlement protocol, "with decision being delivered in most situations on the basis of the disputants' arguments alone, without bringing additional evidence." Justice Meir Shamgar, the former President of the Israeli Supreme Court, wrote about the object of arbitration: "is to help disputants to resolve conflicts more quickly, for example by simplifying processes, and to reduce the pressure of litigation in the courts. The legislature has introduced a realistic, solution-oriented concept of mediation that aligns with an efficiency view of justice. In reality, though, the revised law did not achieve the productivity objective by making a dramatic improvement in the usage of mediation in the courts until the late 1990s. The Committee on the Structure of Ordinary Courts in Israel (the Or Committee) reaffirmed the reliability logic of ADR in 1997, emphasizing the role of out-of-court ADR procedures, such as consultation, in reducing the courts' caseload and delays. The 1999 Attorney- General's Directive on the Resolution of Disputes of which the State is a Party by Way of Mediation (hereinafter the "Attorney-General's Directive on Mediation") stated that mediation is normally easier and more effective than court proceedings. Furthermore, the intent of the 2001 national initiative for the Case Routing Units in the court system was to provide "swift, reliable, and meaningful justice to the individual" by enhancing "support to all who come to court" and "quickly end dealing with filed cases." Furthermore, the Rubinstein Committee, which proposed the obligatory premeditation session (MAHUT) in civil procedures, acknowledged the effectiveness and expense benefits of using mediation more often, particularly for the legal system and for disputants. With these assumptions in mind, it's no surprise that legal dialogue dominates mediation processes in court-referred disputes in Israel, focusing on the disputants' legal rights and obligations, and normalizing the mediator's evaluative function. While ADR scholars have warned about the impact of such trends on parties' ability to exercise free choice, mediator impartiality, and the future of mediation as a true alternative to the adversary legal system, the expectation of fast settlements and the equating of success with mediated agreement maintain the dominance of the justice-as-efficiency perspective of ADR. D. Justice in Context of Efficiency Well before the Courts Law Amendment of 1992, which formally incorporated ADR into the legal system for efficiency purposes, some observers argued that ADR, especially mediation, could provide disputants with a better (rather than more efficient) way of resolving legal disputes. Mediation's versatility, mediation's commitment to effective coordination and productive bargaining, and mediation's capacity for reaching innovative compromises built by the parties are among the benefits of mediation on the adversarial legal environment, according to one of the earliest Israeli law review publications on mediation. The capacity of mediation to contribute to social progress, foster mutual respect and understanding among individuals, enhance consent-based, individual decision-making without resorting to the state's coercive forces, and boost individuals' well-being can be found in the writings of numerous Israeli academics who related, among other things, to the potential of mediation to contribute to social change, promote mutual respect and understanding among individuals, enhance consent-based, individual decision-making without resorting to the state's coercive powers, and improve individuals Inside the judicial framework, the justice-beyond-efficiency stance earned official endorsement. The Attorney- General's Directive on Mediation, for example, recognized that, in addition to cost and time savings, other potential benefits of using mediation in disputes in which the state is a party include high quality solutions tailored to the parties' needs, the maintenance of relationships and future cooperation between parties, and increased public confidence in the state and its institutions. More specifically, in 2001, Justice Aharon Barak, the Chief Justice of the Supreme Court, argued that the object of mediation is to reform the litigious atmosphere of Israeli society, make it a safer place to live in, and to have a way of resolving disputes by negotiation rather than through the use of the courts' force. He mentioned a "mediation revolution" in Israel, which he said might lead to a shift in public discourse. Several months later, the Minister of Justice referred to mediation as a positive social phenomenon that inspires hope, claiming that it signals a shift away from a culture of argument, harshness, and resistance to the possibility of compromise and change of opinions that pervades everywhere - on the roads, in shopping malls, and in government institutions - to one based on dialogue. Out-of-court ADR groups and advocates vigorously supported this thicker view of ADR justice, which was championed by top legal authorities (such as the Attorney General, the Chief Justice, and the Minister of Justice). The Israeli Mediators' Association was established with the aims of assimilating mediation's language into Israeli culture and schooling, as well as introducing mediation to the general public. The value of debate, requires conversation, and consensus-building regarding competitive negotiating practices, roles discourse, and intimidation has been emphasized in the curriculum of basic mediator training courses. Academic programmes have since been developed to investigate the complex field of alternative dispute resolution beyond its ability to relieve the pressure on the courts. More broadly, we see ADR philosophy, language, and goals being introduced to community issues (e.g., living together with neighbors, minorities, and immigrants), education (e.g., bringing ADR into nurseries and schools), and environmental issues outside of the legal system (e.g., dealing with environmental conflicts and giving individuals voice in public decision-making processes).

    Some examples of justice that goes beyond productivity the following is an ADR discussion.

  • Mediation in the Community
  • On the basis of expertise gained in group mediation services in the United States and England, the Israeli National Center for Mediation and Conflict Resolution created a community mediation and conflict resolution program for Israel in 2000. 80 The program imagined mediation as a cooperative forum led by group neutrals who aided representatives of the community in resolving conflicts and maintaining relationships. It was felt that such a mechanism would improve group communication, encourage community representatives by allowing them to settle their conflicts on their own, increase knowledge of the possibilities of settling disputes by dialogue, and avoid disputes. Hundreds of informal mediation and dialogue centres sprung up across Israel with the help of the National Center for Mediation and Conflict Resolution, mostly by collaboration between local officials and voluntary mediators from the neighborhood. Acting in collaboration with neighborhood police, municipal councils, schools, and youth groups, the centers will then seek to offer mediation resources to their neighborhoods in a variety of conflicts. Mediation is defined as an ability to accomplish justice beyond-efficiency objectives for Israeli society in ADR dialogue in the form of community problems, which can be found in legal work/discourse, social work, management, and mediation literature. It implies that group mediation has the potential to effect genuine societal progress and facilitate intercultural discourse. Scholars argue that mediation can help immigrants integrate into Israeli society and overcome integration barriers; that it can help handicapped employees in a special-needs factory have a voice and negotiate with non-handicapped management; and that mediation can help improve the relationship between the police and the public through including mediation in citizen complaints against cops.

  •  Formal education
  • Another example of a justice-beyond-efficiency debate of ADR priorities is ADR dialogue in the field of schooling. In light of the deep rafts and fundamental disagreements within Israeli society on political issues (e.g., between the left and right on settlement issues or between Israeli Jews and Israeli Arabs on issues of fidelity to the state and equality), on the place of religion in public and private life, and on the plight of Palestinians, mediation and collaborative dialogue in the educational system are seen as critical. Mediation and related services focused on the ideals of negotiation, collaboration, and consent are portrayed by Israeli academics as instruments for teaching a new generation of young people to be more accepting of different viewpoints and beliefs, more respectful of others, less litigious and violent, and more collaborative in resolving conflicts. In order to spread the vocabulary and values of partnership and mediation, as well as to adopt consensual communication and conflict resolution to replace verbal and physical abuse and bullying, a significant range of mediation services have been implemented in nurseries, primary schools, and higher education institutions. Many schools adopted mediation programs in order to facilitate conversations in the aftermath of the political murder of Prime Minister Itzhak Rabin by a right-wing extremist. Hundreds of schools used mediation in any way to accomplish justice-beyond-efficiency aims like reducing crime, strengthening leadership skills, and teaching young learners how to resolve disputes peacefully. Furthermore, researchers emphasize the importance of integrating collaborative communication and collaboration concepts into interactions between educators and parents.

  • The natural world ADR in general, and mediation in particular, is used in Israeli environmental discourse as a tool that can lead to a less cumbersome and informal settlement of environmental problems, as well as the pursuit of environmental justice. In this context, justice entails collective participation in policies that impact their lives, resource sharing across various sectors of the community, and environmental conservation for the greater good and future generations, all while addressing the current needs of the populace for accommodation, jobs, shopping, and leisure. For example, a quarry near a neighborhood was the focus of a multi-party environmental mediation that discussed both the business's and employees' economic concerns as well as the community's desires in clean air and quiet. Furthermore, environmental conflicts, especially in Israel, often have a political component, making them highly inflammatory and complicated. Several efforts are attempting to bring mediation and collaborative discourse into these highly sensitive regional, environmental, cultural, and political disputes for reasons other than effectiveness.
  • Complaints against Government Entities
  • The State Comptroller of Israel, who frequently serves as the Ombudsman, oversees lawsuits against government ministries, city governments, government corporations, and other public entities. Anyone may file a lawsuit with the Office of the Ombudsman whether she has been personally harmed by a government agency and the action was unconstitutional, contradictory to administrative laws, or grossly unfair or inflexible. The Office has the authority to prosecute the case in whatever manner it deems appropriate, and it may request documentation and records from any individual or entity that may be relevant to the investigation. The versatility of the review protocol allows the Ombudsman's office to incorporate consultation techniques and sessions into the process. Since 2008, the Ombudsman's office has carried out mediations in some complaints against public authorities. Mediation takes place at the Ombudsman's offices, where the mediators are Ombudsman's office staff who have been certified as mediators. In a diverse variety of grievances, the mediators use constructive (problem-solving), transformative, and storytelling mediation styles. Improvement of partnerships between the stakeholders (thereby minimizing the amount of potential complaints), representation of people, and improved coordination are several of the intended advantages of introducing mediation to the Ombudsman's toolbox, which go beyond productivity targets.

    What are the concerns about ADR and the development of mediation in Israel?

    Concerns about Justice and ADR the development of mediation in Israel has been accompanied by lively discourse over the dangers and risks associated with the use of ADR mechanisms and the implications of ADR use on justice issues. This section explores some of these concerns and their relation to justice.

  • The Qualifications of Mediators
  • Mediation was hardly known of in Israel before 1992 when the Israeli legislature officially introduced mediation into the law.  In 1993, the Minister of Justice authorized the courts through Regulations to refer pending cases to mediation, but left open the question of the qualifications required of persons serving as mediators. In 1996, new Regulations on Mediator Appointment authorized the Director of the Courts Administration to compile a list of mediators to which the courts may refer cases for mediation, and provided that the Director should appoint an Advisory Committee to the Minister of Justice to advise the Minister on the qualifications and skills to be required of court-connected mediators. The Committee, headed by Justice Gadot, published its report in 1998.The Gadot Committee treated the qualifications of mediators as a matter of justice beyond efficiency, though it did not use that term explicitly. The Committee felt that setting minimum qualifications for mediators was necessary in order to protect both consumers (i.e., mediation parties) and the process of mediation, which had been making its first steps in Israel. The Committee rejected the view, strongly advocated by the Israeli Bar, that lawyer-mediators need not undergo special mediation training. Instead, they determined that all mediators in court-connected mediation programs had to undertake training courses, approved by the Committee, whose content included both theoretical and practical aspects of mediation. Following the Gadot Committee report, the Mediator Appointment Regulations were amended to provide that a mediator on the courts' list must have an academic degree, working experience of at least five years in his professional field, and must take a forty-hour basic mediation training course or sixty-hour family mediation training course. In another report, the Gadot Committee delved into the content of these courses, and the Reports' recommendations became the field's standard for mediators' training in Israel, both for court-connected and out-of-court mediators. The list of mediators attracted much justice-beyond-efficiency-related criticism. On the one hand, a competence issue became apparent: the list included thousands of names of persons who were eligible to be included on the list simply because they completed forty to sixty-hour training courses but in fact had no actual mediation experience and did not see mediation as a vocation. On the other hand, the criticism raised a just distribution issue: many persons on the list who wished to pursue a career in mediation found that the courts largely disregarded the list because judges had no meaningful way of choosing between the names on the list and therefore referred cases to a small group of mediators known to them. The Rubinstein Committee (2006), which reviewed the ways to increase the use of mediation in the courts, noted that one of the reasons for the slow development of mediation in Israel was the dissatisfaction of disputants and lawyers over the professional competence of the mediators and negative experience of participants in mediation. The Rubinstein Committee sought to change that by the creation of a relatively small roster of professional and experienced mediators eligible to mediate court-referred cases. These mediators were to be selected through a public bid, were to participate in continuing education activities, and were to be subject to an evaluation program. The plan succeeded to some extent but raised new justice-related issues. The new legal regime irritated many mediators who felt that the state unduly restricted their freedom of occupation and their prospects to practice mediation for a living. Legal actions before the Israeli High Court of Justice put pressure on the government, and in 2008, the Regulations on the courts' list of mediators were cancelled. Since then, there have been no official criteria for minimum qualifications required of mediators; though in practice, the Gadot Committee standards for mediators' qualifications and training remained the standard of the field. This year, the new Courts Regulations (Mediators' List) 2017 entered into force, creating stringent criteria for court-connected mediators, including participation in a supervised practicum, demonstration of evidence of actual experience in mediation, and successful completion of a professional evaluation process. The debate in Israel over the qualifications of mediators and access to the emerging new profession is likely to continue.

  • Abuse of Process, Power Issues, and Ethics
  • The reception of mediation in the Israeli legal system was met with concerns that the process might harm some of its users. For example, Israeli commentators, writing on divorce mediation, recognized the current disparities of power between men and women and noted the dangers (referred to in ADR literature) that mediation could enhance men's power and produce inferior settlement terms for women. These concerns are particularly relevant and disturbing in Israel because divorce law in Israel is based on religious norms that treat women and men unequally and enhance men's power. Looking at discrimination cases at the workplace, other commentators pointed to the hegemony of evaluative mediation in Israel and argued that Israeli policy makers should be aware that evaluative mediation is not suitable to some cases, such as discrimination disputes, and that allowing these cases to be mediated exposes disempowered parties to an increased risk of abuse. Making a more general claim, another commentator pointed to the gap between the mediation myths; that mediation is a voluntary, consent based process, and the reality of documented mediator practices that undermine party self-determination, manipulate information, and fail to prevent process abuse. Yet another commentator, writing on the importance of informed consent in mediation (which is closely connected to fairness considerations) felt that Israeli mediation law was not clear enough with regard to mediators' obligations to obtain the parties' informed consent regarding the risks of mediation, the use of separate meetings, the identity of the mediator, the style of mediation, and the mediation outcome. Commentators have noted that Israeli mediators have little guidance on the ethics of mediation practice. Some guidance can be found in the Court (Mediation) Regulations that refer to fundamental duties of court connected mediators, but the language of the regulations is abstract and laconic, leaving much to the interpretation and discretion of the mediator. Moreover, the Regulations formally apply to court-connected mediations, leaving private mediations largely unregulated. Raising justice-beyond-efficiency concerns relating to the fairness of mediation procedures, commentators warned that the Regulations do not provide for a robust obligation of mediators to respect the parties' right to self-determination; leave too much discretion to the mediator in deciding whether she is in a conflict of interests; fail to explain the meaning of impartiality in the context of conducting a mediation, thereby weakening the duty of impartiality; and fail to adequately protect the confidentiality of mediation communications. The absence of clear ethical guidelines and the high level of mediator discretion led commentators to question the appreciation of mediators of their professional role and its limits, to criticize the lack of appropriate guidance to mediators on the ways to address inequalities of power between disputing parties, and to wonder about the accountability of mediators to mediation outcomes.

  • Mandatory Mediation and Access to the Court
  • The small number of mediations of legal cases in Israel led the court system to consider introducing mandatory mediation as a precondition to adjudicating civil cases. This initiative was criticized on various grounds. One justice-beyond-efficiency based objection was that mandating pre-trial mediation sessions undermines disputants' right to access the court.  It was argued that disputants have a right to have their case adjudicated by a judge rather than mediated by a mediator, and that mandatory mediation could increase the expenses of the disputants in cases in which the mediation failed to resolve the dispute and the disputants had to pay for the costs of litigation on top of the costs of mediation. The response of the Rubinstein Committee to these concerns was to recommend the adoption of a soft form of mandatory pre-mediation session (MAHUT) that provides parties with information about mediation rather than imposing on them a duty to mediate. Another justice-beyond-efficiency-based objection was that mandatory pre-mediation sessions in civil cases could adversely affect disempowered disputants in particular. First, it was argued that the requirement to go through an additional process before having the right to be heard by a court would intensify inequalities of power and drive weaker parties to make unjustified concessions and settle. Second, it was suggested that since mediation in Israel follows a rights-oriented evaluative model, disempowered disputants that are unrepresented and less familiar with their legal rights will not be able to fully participate in the process, voice their non-legal concerns and needs, nor take an active role in the design of a creative outcome. Moreover, as disempowered disputants may rely more on the mediator and are often not in a position to second guess the mediator's evaluations, which are not necessarily accurate, they will therefore be more inclined to accept inferior offers to settle.

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    Sun, 14 Mar 2021 21:59:00 GMT
    <![CDATA[FAQs- Banking and Finance in Israel]]> FAQs- Banking and Finance in Israel

    What is the Israel Banking System?

    Israel's financial system is sophisticated. It consists of 16 banks, four international banks with Israeli licenses, and three big and three small card firms.

    Bank Leumi, Bank Hapoalim, Israel Discount Bank, Bank Mizrahi-Tefahot, and First International Bank are the main Israeli banks (FIBI). The Tel Aviv Stock Exchange is where these banks' shares are traded. The combined market share of Bank Leumi and Bank Hapoalim is roughly 60%, indicating that the Israeli financial sector is relatively centralized.

    International banks that have acquired banking licenses to work in Israel include Barclays Bank, Citibank, HSBC Bank, and State Bank of India. Under different regulatory agreements, Bank of America, Deutsche Bank, UBS, BNP Paribas, and other international banks maintain a presence in Israel.

    Central bank of Israel

    The Bank of Israel is the government's central bank, in charge of issuing money, establishing and enforcing Israel's monetary policy, and monitoring and supervising bank operations through the Bank of Israel's Banking Supervision Department.

    The Supervision Department is working to accomplish a range of public and economic goals, including preserving and sustaining bank stability, protecting banking consumers, and fostering competitiveness, among others. In order to achieve these goals, the Supervision Department has been working on two secondary goals in recent years: technical advancement in banks and improving the performance of the banking system.

    How is the Banking Market of Israel?

    In recent years, Israel's financial system has undergone significant changes. Following various supervisory criteria, it has increased its flexibility, reduced its vulnerability to high financial risks, and made substantial improvements to its business-operational models (which have been adjusted to be more competitive and technology-oriented). The banks have learnt and incorporated lessons from previous incidents by significantly lowering exposure to major creditors while diversifying the banking credit base and reducing regulatory exposure related to non-resident customers.

    These interventions were reflected in the banks' financial performance as well as an increase in capital market sentiment, as shown by the continued upward rise in bank share prices above the general stock index. Controlling owners have increasingly sold stock of banks to the general public in recent years, and the public now owns the bulk of shares in Israeli banks, with no single controlling shareholder in the three main banks, Leumi, Hapoalim, and Discount. As a result, the general public benefits from increased bank dividends as well as higher stock prices. Keeping ownership of an Israeli bank necessitates a control permit from the Bank of Israel, which must be issued after a thinking process that includes an extensive review of the applicant's financial health, as well as proper inspections. A holding permit is also necessary if you own more than 5% of a bank's stock.

    What are the recent developments in the Israeli Banking System?

    The Non-bank Credit Market

    Non-bank lenders' lending volume has risen significantly in recent years, and numerous private and public firms, as well as hedge banks, mutual funds, and insurance companies, have begun to provide credit to both retail and corporate customers.

    A new legislation, the Supervision of Financial Services Law (Regulated Financial Services), 5776-2016, was adopted in 2016 to govern this growing phenomenon (the "Financial Services Law"). The Financial Services Law is part of a major regulatory overhaul aimed at improving non-institutional entity oversight of financial services, developing and growing innovation in the financial services market, securing investor interests, and maintaining compliance with the anti-money laundering regime. Extending credit (including check discounting, offering credit lines, and asset-backed lending) includes a credit license under the Financial Services Law (the "Licence to Provide Credit"). When services are given in Israel, as well as when clients are aggressively solicited in Israel in conjunction with services provided from abroad, the licensing obligation is activated.

    Certain exemptions to the licensing provision were established by regulations passed under the Financial Services Law.  The main exemptions apply to foreign corporations who meet the following criteria: (i) they are incorporated in an OECD member country; (ii) they hold a banking license from a regulatory authority in such a country; (iii) they are subject to an anti-money laundering regime in such a country; and (iv) they are not required to obtain a license under the Banking Law (Licensing), 5741-1981. Another significant exception is for lenders who lend exclusively to business creditors for sums greater than ILS3 million. The Exemption Regulations remain in effect until June 16, 2020, and are likely to be extended after that.

    Brokerage Activities in Israel

    Section 49A of the Israeli Securities Law went into force in 2019, making it illegal to provide financial facilities in Israel for securities listed on exchanges and trading systems (other than the Tel Aviv Stock Exchange) unless the Israeli Securities Authority grants a permit ("ISA").

    In view of Section 49A, international companies seeking to offer brokerage services to Israeli customers have basically two options:

  • To only offer services to "Qualified Investors" as customers. According to the Israeli Securities Law, qualified investors include institutional investors, major corporations, and high-net-worth individuals. This option does not necessitate submitting an application to the ISA.
  • Entities covered by some jurisdictions are eligible to apply to the ISA for a permit to represent Israeli customers, including non-Qualified Investors. This route is currently available to non-Israeli entities that are subject to regulation (a) in the USA as a 'broker-dealer;' (b) in an EU country under MiFID II as a 'investment firm' or 'credit institution' or (c) Swiss-licensed banks approved as 'security dealers' under applicable Swiss law, provided that, pursuant to the applicable regulation to which that entity is subject, the fact that they are authorized as 'security dealers'. Entities accredited in other jurisdictions (i.e. not in the USA or the EU) may also apply for a special permit from the ISA. In the application, they must define the regulatory regime applicable to them, the regulation of their brokerage activities and their obligations under foreign law vis-à-vis clients located in Israel.
  • The ISDA Agreement

    Over-the-counter derivative transactions have also become popular in recent years, and many Israeli banks and institutional investors, as well as companies that need to hedge currency and commodity exposure, are entering into derivative transactions under the ISDA Master Agreement with foreign counterparties.

    The Digital Bank

    On 2019, the Bank of Israel decided to issue a license to a new bank, which had not been given a new banking license for several years. The new bank plans to act as a digital bank, i.e. without branches or physical establishments.

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    Sun, 14 Mar 2021 14:06:00 GMT
    <![CDATA[FAQs- Competition Law in Israel]]> FAQs- Competition Law in Israel

    Q1. What is the outline of Israel's Competition Law?

    The Economic Competition Statute, 5748-1988 (the Law) is Israel's primary antitrust law, with the aim of preventing damage to competition and the general public. The law lays down the substantive principles that apply to a variety of trade restrictions (restrictive arrangements, mergers, monopolies, concerted groups and official importers).

    The Law also contains regulations governing the structure and powers of the Israeli Competition Authority (ICA), its inspector general (the Director General), and the Competition Tribunal (the Tribunal), as well as procedural rules that relate to cases brought before each of them.

    Trends in recent years have included:

    • strengthening the ICA's position;
    • increasing regulatory and criminal compliance, as well as the ICA's emphasis on its advisory capacity within the government; and
    • increasing civil "follow-on" class actions against foreign cartels.

    The Israeli parliament adopted a major change to the Law on January 1, 2019. The amendment made significant and substantive changes to the Law's terminology, including key provisions relating to the Israeli monopoly control regime, the Israeli merger control regime, the Law's compliance mechanisms, and more, as outlined below. The amended Law also includes a terminological change: the word "restrictive trade practices" has been replaced with "competition." As a result, instead of being known as the Restrictive Trade Practices Law, the Law became known as the Economic Competition Law.

    Q2. What changes have been made to Israel's competition law recently?

    On 1 January 2019, Parliament passed a bipartisan amendment to the Economic Competition Law as a government-sponsored bill advocated by the Israel Antitrust Authority (now called the Israel Competition Authority (ICA)).

    The amendment affects almost all of the major chapters of the Economic Competition Law, including:

    • the regulation of restrictive agreements;
    • the merger control regime;
    • monopoly regulation; and
    • Criminal and regulatory compliance steps.

    Q3. What are the most significant improvements in Israel's monopoly regulation?

    Prior to the amendment, the only way to determine whether a company had a dominant position (monopoly) was to look at its market share. Any company that owned more than half of a specific product market was considered a monopoly, and was therefore subject to anticompetitive unilateral behaviour prohibitions (similar to Article 102 of the Treaty on the Functioning of the European Union). Any company with a market share of less than 50% was excluded from the monopoly chapter's application and from the special duties placed on monopolies.

    The amendment keeps the market share-based concept of a monopoly, which means that any company with a market share of more than 50% is considered a monopoly. It has, however, broadened the concept by including a market power test. According to the amendment, a company will be classified as a monopoly even though its market share is less than 50% if it has "major market control" in a specific product market.

    The ICA published draft guidelines on the definition of' significant market power' on 3 February 2019, outlining a number of factors to consider, including:

    • an undertaking's actual market share the number of competitors active in the same market;
    • the importance of a specific product or brand for retailers' inventory; and
    • the presence of entry and expansion barriers in the market.

    The ICA also stated that before the final version of the guidelines is released, it would not take compliance actions based on unilateral behaviour by undertakings that may be subject to the provisions of the monopoly chapter following the amendment.

    Many businesses, particularly those with a significant market position, will have to rethink their business strategies and conduct (especially pricing behaviour) as a result of the market power test.

    Furthermore, the ICA's guidelines address "collective domination" conditions, making it easier to apply monopoly limits to market players in oligopolistic markets.

    Q4. What are the most significant amendments to Israel's merger control laws?

    • The Israeli merger control system prohibits the acquisition of more than a quarter of:
    •  a company's outstanding shares;
    •  a company's voting rights;
    •  rights to name company directors; or o rights to a company's earnings.
    • The obligation to inform and obtain consent for a merger agreement is subject to certain notification thresholds, and the amendment has made significant adjustments to both this and the merger control review procedure.
    • since 1999, the turnover threshold has been increased to account for the increase in the gross domestic product (the last time the turnover threshold was revised). If the combined turnover of the merging parties (on a group basis) is NIS360 million (approximately $100 million), the merger filing condition is now triggered. This is a major improvement from the previous threshold of NIS150 million (roughly $41 million). The additional requirement that at least two of the merging parties have separate turnover of at least NIS10 million (approximately $2.7 million) has been retained; however, the ICA has stated that this amount could be increased in the future.
    •  The merger control regime has been extended to registered non-profit organizations.
    • The ICA commissioner now has the power to extend the existing 30-day legislative timeline for merger control analysis to 150 calendar days at his or her discretion. A rational administrative decision by the commissioner is required for such an extension, obviating the need for the ICA to obtain the consent of the merging parties or approval from the Competition Tribunal (previously, the Antitrust Tribunal).  Although this move is unlikely to have a significant impact on complex merger transactions, which were previously subject to lengthy approval periods and extensions, it is unclear how it would affect less complicated transactions, which were typically reviewed in a comparatively expedited manner.

    Q5. What are the most significant amendments to Israel's competition law enforcement of restrictive agreements?

    Restrictive agreements are made between businesses that can harm competition (as well as certain types of horizontal agreements). Entering into a restrictive agreement is forbidden unless it:

    • falls under a statutory exemption;
    • falls under a block exemption; or
    • is approved by the Competition Tribunal or exempted from the approval provision by the ICA commissioner.

    Exemptions for restrictive arrangements have traditionally been written broadly, resulting in a large number of unique exemption requests from the ICA commissioner.

    The amendment, when combined with the recent amendments to two basic block exemptions laws (the Block Exemption for Restraints Ancillary to Mergers and the Block Exemption for Joint Ventures), has incorporated far-reaching reforms in this regard, with a transition to a substantive self-assessment system for most types of restrictive arrangements.

    The implementation of new block exemption rules in November 2018 marked the start of the transition to a self-assessment system. For otherwise legal agreements that did not meet the formal standards and technicalities previously needed for the use of most block exemptions, merging parties and joint venture partners were given a more versatile self-assessment process. The amendment aims to strengthen the ICA's ability to deter and sanction parties to anticompetitive agreements, in addition to removing an undue administrative burden on legitimate business practices.

    To that end, the amendment gives the ICA more authority to levy administrative penalties (see below). Furthermore, regardless of the circumstances, the maximum prison term for entering into an illegal restrictive agreement has been extended from three to five years. Previously, the five-year punishment only extended to offenses committed in the presence of aggravating circumstances.

    Q6. What major reforms have been made to Israel's competition law in terms of compliance measures?

    Any violation of the Economic Competition Law is punishable by law. The ICA, on the other hand, usually performs criminal investigations and seeks indictments only when there are substantial or obvious breaches of the law (especially serious violations such as cartel arrangements and bid-rigging schemes). Other infractions of the legislation are generally dealt with administratively (primarily administrative fines since 2012).

    The maximum financial administrative penalty limit for companies has been increased from NIS24.5 million (approximately $6.7 million) to NIS100 million (approximately $27.5 million), although the turnover-based cap of 8% of a group's turnover has remained unchanged. In the past, the ICA commissioner has gone beyond the formal financial penalty limit by combining several offenses stemming from the same factual basis. As a result, potential regulatory compliance proceedings could result in financial penalties of hundreds of millions of New Israeli shekels.

     Q7. What is the Israel Competition Law's Mandatory Enforcement Program?

    Corporate officers (including active managers, general partners, and corporate officials in charge of the sector in which an infringement occurred) now face a new form of criminal responsibility under the amendment, which requires them to supervise and avoid breaches of the Economic Competition Law by the corporation.

    Failure to comply with this obligation carries a maximum sentence of one year in prison. Furthermore, even though no breach of the law has occurred, corporate officers may now be held criminally liable, which is why this one-of-a-kind provision has been dubbed "a mandatory enforcement programme clause" by local practitioners.

     

     

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    Sun, 14 Mar 2021 13:32:00 GMT
    <![CDATA[Q & A: Third-Party Funding in UAE]]> Q & A: Third-Party Funding in UAE

    Introduction

    Third-party funding, also known as litigation funding, provides a business with a viable means of pursuing litigation, Arbitration and adjudicating claims. Third-party financing ensures that the legal needs are met with minimum risk and subsequently preserve the business's liquidity in case of loss. 

    The use of third-party funding has become increasingly popular in jurisdictions across the world. For instance, courts in England and Australia encourage litigation funding to improve access to justice to a broader range of people. Especially during challenging times like the current pandemic, businesses are bearing the brunt of economic decline. Therefore, when legal claims arise in such a situation, it imposes tremendous pressure on finances. 

  • How does it work?
  • Generally, when a third party agrees to fund litigation, they bear all costs involved in carrying out the claim, right from conducting an enforcement claim. If the claim is successful, they recover the costs in addition to an appraisal on the money invested. Contrarily, upon failure of the claim, the claimant does not bear any of the costs involved. 

    Third-party funding has the following essential elements;

  • Payment of legal expenses associated with the claim are borne by the funder. 
  • In case of a successful claim, the funder can recover the costs and an appraisal on the money invested. 
  • Legal expenses in this context include anything ranging from costs for appointing experts, hiring lawyers and arbitrators. In some cases, some insured value protects the claimant from becoming liable to the successful party's costs; the funder also bears this insured value. 
  • Most litigation funding agreements are based on a non-recourse model, which means that the claimant is not entitled to pay anything to the funder if the claim is unsuccessful. Third-party funding models can primarily be of two types; 

  • Single case funding; wherein the funder takes up the legal expenses related to only a single case
  • Portfolio case funding; wherein the funder takes up legal expenses of cases of a single client 
  • Case Laws 

    Courts across different jurisdictions have taken different views regarding the validity of third party funding. In the courts of England and Wales, this practice is generally restricted; however, the opinions regarding the same have evolved over the years. 

    In Arkin vs Borchard Lines Ltd & Ors, the issue arose with regards to competition law claims. In this case, the appeal court held that, in some instances, third-party funding would only encourage access to justice; therefore, it is beneficial and valid. The court expressly reserved its discretion to declare third party funding as against public policy, making the stance unclear on the third-party funding cases. 

    As per Section 58 of the Courts and Legal Services Act, 1990, conditional fee arrangements have been permitted in some instances in case of lawyers funding litigation. They recover double the claim amount if the claim is successful and do not recover anything if the claim is unsuccessful. 

    In Australia, funding in an arbitration proceeding is gaining more relevancy than litigation funding. In Minister for Transport for Western Australia v Civcon Pty Ltd, the question was regarding Western Australian Commercial Arbitration Act. The court, in this case, did not draw any difference between Arbitration and litigation funding. Critics to the judgment believed that there is a legal need to draw a difference between the two types of funding; however, it is reasonable to assume that Australian courts will not draw any distinction in further litigation or arbitration funding. However, it may be noted that the judge referred to the kind of financing as arbitration funding since Arbitration is gaining more traction in Australia. 

  • Is third-party funding permitted in UAE? What are the legislative and regulatory provisions that apply?
  • In the UAE, different laws apply to the mainland and free zone areas. While the mainland is subject to civil law based on Sharia law, as apportioned by the Federal Constitution between the federal government and the seven emirates, the financial free zones have their own set of legal systems and body of courts primarily based and modelled around English Common Law. With reference to English Law, it has been established above that; third-party funding is an acceptable practice as a matter of public policy. It is viewed as having a positive impact on the access of justice to a larger population. 

    Similar to the position under English Laws, the DIFC court has issued PD 2/2017, i.e. Practice Direction Number 2 of 2017, concerning Third-Party Funding. Under these directions, the provisions enumerated deal with the relationship, interaction, and contracts between the funded parties and the funders concerning the legal proceedings in DIFC courts. The Directions mandate the parties concerned to enter into a Litigation Funding Agreement that can be made in general or specific terms. It further stipulates disclosure of the funder's identity but does not require disclosure of the Litigation Funding Agreement (LFA). As regards ADGM, the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 contains provisions permitting litigation funding in Part 9 thereof. It is imperative to note that there is no specific mention of arbitration funding in ADGM and DIFC laws. 

    The mention of third-party funding in the Dubai International Arbitration Centre Rules (DIAC Rules) concerning Arbitration shows that third-party funding is legitimate and recognized. Further, the introduction of the ADGM Litigation Funding Rules 2019 demonstrates the enforceability of funding arrangements in litigation and arbitration proceedings by laying down a comprehensive framework for litigation funding. 

    Onshore courts do not contain any regulations or legislation for third-party funding; similarly, the UAE Federal Arbitration Law, DIFC Arbitration Law and ADGM Arbitration Law are silent on third party funding. 

  • Are there any regulatory authorities that oversee third-party funding?
  • No particular regulatory authorities have been set up to oversee third-party funding activities. 

  • Do third-party funders have any privileges concerning the litigation process?
  • As a general rule, litigation funders do not control litigation proceedings; therefore, they cannot insist on the appointment of a particular counsel for litigation. Their participation in the process of settlements and discussions is also limited to the extent of their LFA. However, the funders are permitted to lay down specific terms related to conditional acceptance of settlement proposals, provided that this does not breach rules and serve as an unfair advantage to the funders. 

    Third-party funding agreements are governed under the UAE Civil Code; therefore, all the terms agreed upon in the agreement are required to be performed in good faith by both parties. A funding agreement can be terminated based on the funding agreement itself; however, subject to the applicability of UAE Laws; a funding agreement can be terminated by mutual consent, an order of the court or under the provision of the law, provided that the funding agreement comprises of the words' mutual consent' in its termination clause. 

  • Is there a time limit for obtaining third-party funding?
  • The DIFC Practice Directions and the ADGM Rules do not lay down any time constraints regarding litigation funding; however, the DIFC PD does lay down that the funder and the funded party are required to enter into a litigation funding agreement. Similarly, in the case of ADGM courts, the litigant may enter into a litigation funding agreement and comply with the provisions and timelines as provided thereunder. 

  • What kind of costs can be considered under third-party funding?
  • Courts have inherent jurisdiction to make costs against third-party; this includes funders as well, wherever the court deems it appropriate. Third-party funding covers costs awarded by the court in terms of security costs, contingency fees and all such costs as may be connected to the litigation or awarded by the court, provided that the funder has expressly agreed to bear such costs in the funding agreement. 

  • Is third-party funding permitted in case of class action claims?
  • Onshore laws do not permit the filing of cases collectively; however, in DIFC and ADGM courts, representative action for multiple parties having a common interest is allowed subject to certain exclusions. The DIFC Practice Regulations do not expressly lay down any such provisions prohibiting third party funding in case of class action suits. 

  • What kind of cases are typically funded by third-party funders?
  • Typically, third-party litigation funders prefer high-value disputes that allow them to recover all or most of their investment in the matter, cases such as joint venture disputes, company board disputes, intellectual property, construction, energy, tax matters etc. 

    Further, funders carry out due diligence before funding any such matter in terms of the merits of the case, assessment of the financial assets of the defendant, the prospects with regards to success in the subject and the estimated time duration of its conclusion, to assess the sums that can potentially be recovered. 

  • Are there any other funding options that are available to litigants?
  • There are essentially two routes available to persons desirous of obtaining litigation funding. They may either approach Debt Collection Companies that usually fund matters like libel, monetary claims, personal injury or other forms of loss or damage. It is to be noted that these companies are not the same as debt collection agencies who help pursue debtors; these companies generally prefer to fund claimants rather than defendants of a given claim, provided that such a claim is a small-scale claim. All such companies select cases on the probability of success. 

  • What is the liability of a third-party funder for adverse costs?
  • DIFC Practice Directions permit courts to make decisions, as they deem necessary, regarding costs against third parties; this includes funders as well. On the contrary, ADGM Court Regulations do not expressly lay down any such provisions regarding awarding adverse costs against third parties. However, since ADGM laws are based on common law principles, the funder may become liable to adverse costs in appropriate circumstances.

    As regards onshore courts, orders of adverse costs are not made against third parties. 

  • Can court order for security costs? If so, on whom does the responsibility of payment of security costs devolve? 
  • As per the DIFC Court Rules, the defendant can recover security costs against someone other than the claimant. The court can make an order for the same, provided that one or more conditions have been satisfied under the said Rules subject to an order made by the court. The DIFC PD gives courts the inherent jurisdiction to make orders regarding costs as it deems fit. 

    As for ADGM Rules, the LFA shall clearly state the funder's intention to submit to ADGM courts' jurisdiction for disputes related to costs as between the funded party and any other party to the proceedings. This express statement is necessary because it is taken into consideration by courts while making orders regarding costs. 

     

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    Sun, 07 Mar 2021 18:23:00 GMT
    <![CDATA[Rights in India Trademark vs Designs ]]> Overlapping of Rights in India: Trademark vs Designs 

    "When you brand yourself properly, the competition becomes irrelevant"

                                                                                                            – Jeff Bezos

    Introduction 

    Every brand owner creates a unique identity for themselves that sets them apart from their competition. Brands such as McDonald's, Google, Starbucks, and Pepsi etc., have created such a remarkable reputation in the market by fashioning these iconic logos that can be identified by anyone, anywhere. The creation of this unique identity can therefore be achieved by creative designs, both functional and non-functional. 

    The line between trademark and designs tends to get a little blurry; therefore, it is imperative for us to clearly demarcate the distinguishing features between these two intellectual properties and also identify how rights enumerated under them may overlap with one another. Despite designs being a distinguishing factor with regards to the shape and appearance of a product, legally, it is recognized as a trademark or a trade dress, which leaves the design or non-functional aspect of the product to mainly focus on the aesthetic creations thereof. 

    The most important feature that sets apart a design from a trademark is the objective that they aim to serve. While a trademark identifies and recognizes the manufacturer of the product, a design deals with the commercial appeal of the product. When these two objectives intersect, the problem of overlap arises. For example, the McDonalds logo creates commercial value while also enabling a consumer to distinguish it from other brands just by its logo; in this instance, overlapping between design and trademark can be identified. 

    Another example of design and trademark overlapping is Coca Cola, the unique shape of the Coca Cola bottle was initially registered as an industrial design but later on registered as a trademark due to the mark becoming highly distinctive and acquiring recognition in the market. 

    Precedents 

    An interesting case of overlap was seen, with reference to Indian law on designs and trademarks, in the matter of Crocs Inc. USA vs Aqualite India Ltd & others (CS COMM. 903/2018). The Petitioner in the matter had registered their design and filed an infringement action against the Respondent and an action for passing off to restrain the use of their footwear design; the Petitioner prayed to the court for imposing an injunction for such use by the Respondents. 

    The question that arose, in this case, was whether the rights to restrain a user under the passing off provision was available to a registered design holder. In Indian law, protection is granted to a registered trademark holder under common law, but the same protection is not envisaged under the Design Act to a design holder. Therefore, keeping this in mind, the court was of the view that protection cannot be granted to the Petitioner on the grounds of novelty and prior publication. 

    Further, if protection was afforded to the Petitioners herein, it would lead to monopolizing of the Petitioner's product and would therefore prevent innovation in the market. The Design Act specifically intended to curb "backdoor evergreening"; therefore, granting relief of passing off to the Petitioner would basically defeat the purpose of the Act altogether.

    A similar case was brought before the Delhi High Court, Mohanlal vs Sona Paint & Hardware (2013) 55 PTC 61 (Del), wherein it was held that registering a design after its registration expires as a trademark would not be protected since it amounts to the overlap of provisions of both Acts leading monopoly of the Petitioner in the market. 

    Therefore, taking into consideration the above precedents, it can be said that the overlap of designs and trademarks can be misused by parties to extend their protection under the law, which would lead to monopolizing and curbing competition and innovation in the market. 

    It must be further noted that design rights are subject to the lapse of protection since they last only for a specific number of years and after the lapse of which they cannot be renewed. On the other hand, the registration of trademarks can be perpetually renewed. 

    What constitutes infringement? 

    Trademark

    A trademark is only protected under infringement provisions if it is registered. An unregistered trademark cannot claim protection under the law. A registered trademark owner can claim protection under infringement provisions if a person who is not a registered trademark owner is using an identical mark that is so deceptively similar to his mark that it can cause confusion in the mind of the consumer. This similarity can be in the nature of goods sold, the identity of the products, i.e., the name or a combination of the two. 

    Insofar as the registered trademark is under threat or detriment with regards to his reputation, he can claim the protection of his rights. 

    This infringement may be in the form of:

  • Offering for sale in the market, goods under the registered mark;
  • Importing or exporting goods under the name of the rightful owner;
  • Affixing the name on the packaging; or
  • Advertising under a false name.
  • Infringement can pose a threat to the registered proprietor by:

  • Causing detriment to his reputation;
  • Taking unfair advantage of his trade name and reputation for personal gain; or
  • Interfering with his product's distinctive character.
  • Precedent

    There is a myriad of precedents with regards to infringement of trademarks, the most popular one being; Coca Cola Company vs Bisleri International Pvt Ltd.

    In this particular case, Defendant had sold and assigned rights to the trademark 'Maaza' to the Claimant, despite that, applied to register the trademark under the name 'Maaza' in Turkey in order to export the fruit drink thereto. 

    The Claimant was therefore granted a permanent injunction of the trademark on the grounds of infringement and passing off.  

    Designs 

    During the existence of design copyright, any person who is not a registered design owner is not entitled to use the design by:

  • Offering for sale, unlawfully, any article that has the registered design;
  • Importing without consent of the registered proprietor, any such articles which are an imitation of the registered design; and
  • Publishing or exposing for sale, without the permission of the registered proprietor, fraudulently, any such article that is an imitation of the registered design.
  • Precedent 

    In the case of M/S Whirlpool of India Ltd vs M/S Videocon Industries Ltd., the Claimant prayed for a temporary injunction against Defendant on the grounds of infringement and passing off. The Claimant argued that the design of the washing machine sold by Defendant was of the same shape as sold by the Claimant. Defendant further argued that the design was not novel and hence could not be granted protection under the Designs Act. The court, rejecting the argument of Defendant and granting an injunction, said that the design could not be invalidated even if it is not novel and previously published since there existed similarities in the designs of the washing machines. 

    Reasons for Restricting Overlap 

    The overlap between trademarks and designs basically defeats the purpose of the individual legislations that have been enacted for that purpose. It poses a threat to the product and brand owner's inherent distinctiveness, basically making it forgettable, arbitrary and ordinary, which is never the aim. 

    Therefore, there arises a need for restricting such an overlap between the two distinct intellectual properties for the reasons enumerated hereunder:

    Monopoly

    Legislations for the protection of a brand are enacted in order to prevent trade practices that may be harmful to a business. From an economic point of view, a single brand having a monopoly over the whole market slows down the economy and consequently curbs competition in the market. This lack of competition slows down innovation further. To further enunciate this fact, when a brand attains such great power over the market, they are able to charge higher prices which in turn slows down the demand of the product quantitatively and hence, the quantity being produced also slows down. This market structure is, therefore, harmful to the economy than in the case of a competitive market. 

    Unfair Competition 

    Unfair competition often arises as a result of the infringement of trademarks. However, it can also arise out of dual registration of a mark under both the design and trademark legislation; this stunts the growth of other brands as it continues to stay protected under both legislations, leaving no room for healthy competition and innovation. The smaller business then resorts to unfair trade practices which deceive the consumers by selling goods either under a trademark that already exists or infringing some other legal right of the trademark owner. 

    Unfair competition may arise out of:

  • False advertising;
  • Misrepresentation;
  • Unlawfully using and offering for sale products under the name of another; or
  • Unlawfully exploiting any technology that belongs to another.
  • In order to prosper, such unethical practices need to be kept in check so that businesses can prosper; businesses need to engage in honest trade to boost the economy and, in turn, boost innovation in the market. 

    Legal Complications 

    Improper registration of a mark or a design under either Legislation may result in legal complications, which means that the law may not allow registration of a mark on the grounds of prior registration, or in case of improper use post-registration, such registration can be cancelled by authorities. 

    To maintain the brand name and continue the use of the mark or design, it must be ensured that such registration is done appropriately to convey the exact characteristic under the appropriate Legislation that affords protection thereof. 

    Trademark vs Design 

  • Scope
  • A trademark refers to the overall brand image or appearance of the product; it includes all elements that can be used to promote a product or service. On the other hand, a design deals with the non-functional characteristics of the product that includes the configuration, ornamentation or a combination of the two.

  • Protection 
  • A trademark affords protection to the goodwill of the company and protects the image of the brand that the consumer associates with the brand. Conversely, design protection only deals with the appearance of the product and not the functionality and structure. 

  • Duration of protection 
  • A trademark can be protected for a period of 10 years, subject to renewal of registration upon expiry of 10 years perpetually thereafter. A design, on the other hand, can be registered for a period of 10 years and an additional five years upon expiry thereafter.   

    Conclusion 

    Many companies engage in registering a unique design under the design act so that eventually, its distinctiveness can allow it to be registered as a mark. This process is acquired through extensive and continuous use of the mark. For example, the Coca Cola bottle shape and the triangular shape of the Toblerone chocolate bar, which started out as a three-dimensional industrial design and later became registered as a trademark through extensive use. 

    Dual registration of marks under the trademark as well the design legislations can serve fruitful commercially, to protect different aspects of the brand or product. However, this protection can only be valid if it meets the legal requirements as enumerated.

    ]]>
    Sun, 07 Mar 2021 17:50:00 GMT
    <![CDATA[India: Minerals and Mining Laws and Regulations ]]> India: Minerals and Mining Laws and Regulations

    Introduction 

    Oil and coal have been the most desirable commodities for economies around the world. A country that owns these has the potential to become a global superpower. Due to rising environmental concerns, however, governments are taking steps and measures to utilize more sustainable measures of creating energy; therefore, there has been major disinvestment in the coal mining industry all over the world pursuant to the climate change conference in Paris. Almost 200 nations agreed to lower their carbon emissions and all other such practices that contribute to global warming. India and China are the largest consumers of coal globally; therefore, as per the Paris Agreement, these countries are required to focus on measures that will facilitate the reduction of emissions in such a way that it aligns with their national economic growth objectives. 

    In lieu of this Agreement, India is focused on expanding its mining sector by introducing new regulations that aim to facilitate the growth of this industry by attracting foreign investment and utilize their national reserves for domestic purposes to its full potential. 

    Minerals are divided into two categories in India; Major Minerals and Minor Minerals. Major minerals are governed by the Central government; hence, there is uniformity in its application across the country. Minor minerals are governed by State regulations as per the powers delegated to them. The Legislations that govern the mining sector in India are:

  • Mines Act, 1952 and Mines Rules 1955 
  • Mines and Minerals (Development and Regulations) Act, 1957 
  • Mineral Concession Rules, 1960 
  • Mineral Conservation and Development Rules, 1988 
  • Minerals (other than Atomic and Hydro Carbon Energy Minerals) Rules, 2016
  • Offshore Areas Minerals (Development and Regulations) Act, 2002 
  • Offshore Areas Mineral Concession Rules, 2006
  • As per the above enumeration of legislations, we can understand the extent of control that the government has over the mining sector of the country. Apart from the aforementioned, there are also state regulations that are specific to individual states in the country, for example, the Maharashtra Minor Minerals Extraction (Development and Regulation) Rules, 2013

    Out of the aforementioned, the MMDR, 1957 is the principal legislation for the development of mines and minerals in India.

    Legal framework 

    The legal framework surrounding the coal and mining sector in India has gone through an evolution over the years. Initially, the regime that was adopted was more socialist in nature for the promotion of foreign and private investment through exploration, mining and minerals. Gradually, this industry started to see an upsurge in private sector investment; however, this upsurge was not as effective as expected, considering many areas remained unexplored. Therefore, this called for the introduction of the Mines and Minerals (Development and Regulations) Act, 1957 that brought about a change in the licensing regime and introduced new types of licenses that could be procured for the furtherance of the aim of the Act, such as, the reconnaissance permit, large area prospecting license, etc. 

    The Central government has consolidated its control over the mining industry thereafter; however, this consolidation was relaxed in 2006 when it allowed for 100 percent foreign direct investment for mining and exploration of precious metals and stones. 

    Taking into consideration the ineffectiveness of the policies and changes in laws that were being brought about, the government then introduced a new national mining policy in 2008 that called for the integration of technology in the mining sector to ensure optimal utilization of resources and to make the commercial aspect more fruitful. It aimed to promote transparency in order to invoke a sense of trust within the investors and create a more conducive and secure environment for business. With the aim of promoting foreign as we well as private interests, the conditions to get admitted as an investor was relaxed along with allowing concessions on certain minerals. 

    Mines and Minerals (Development and Regulation) Act, 1957

    The mining industry in India is regulated extensively through a wide range of authorities such as:

  • Ministry of Mines
  • Geological Survey of India, i.e. attached to the Ministry of Mines
  • Indian Bureau of Mines, i.e. Subordinate to the Ministry of Mines 
  • Ministry of Environment, Forest and Climate Change
  • The enactment of the MMDR, 1957, was to ensure smooth mining operations by adhering to the objective of sustainable mining and allowing growth and development in the mining sector. Though this Act has gone through some changes in recent years, it becomes necessary to first examine these provisions to understand the basic application of mining laws in the country. 

    Features of the MMDR Act, 1957

    Some important provisions of the MMDR Act, 1957 are enumerated as under;

  • The responsibility to grant and approve licenses lies with the state governments, as per the state list appended to the Constitution of India. Activities such as carrying out mining processes and conducting surveys are regulated by the GSI, Controller of Mining Leases and the Indian Bureau of Mines. 
  • The Act clearly lays down the terms, conditions and rights granted under the Act, and it further imposes certain restrictions on the grant of licenses and leases. 
  • The Act stipulated a maximum area of 10 sq. km to any person who has acquired a mining license; however, this area can be extended or increased as per the discretion of the Central Government upon application for the same. 
  • Depending on the minerals being explored, a mining lease may be issued for a minimum period of 20 years that may extend up to a maximum period of 30 years. This lease is subject to renewal for a period of 20 years, subject to approval by the Central Government. 
  • Any entity that acts in contravention to the provisions provided for prospecting lease and mining license shall be punishable with imprisonment for a term of 5 years or with a fine which may extend to Rs. 5, 00,000, or both. 
  • Any contravention of the Rules or Act shall be punishable with imprisonment for a term that may extend to 2 years or with a fine that may extend up to Rs. 5, 00,000, or both. 
  • In case of continued contravention, an additional fine may be imposed on the entity, which may extend up to Rs. 50,000 for every day the contravention continues. 
  • In the case of illegal mining, fines may extend up to 10 times the value of minerals mined or three years imprisonment or both; the contravener may be debarred from obtaining any future concessions, and it may also attract cancellation of the mineral concessions held by the convicted person. 
  • Challenges 

    Crime and illegal activities are part and parcel of growth and development. So is the case in the mining sector as well. Over the course of the last decade, the mining sector has seen an increase in illegal mining. There has been a rampant increase in unscientific and environmentally harmful mining over the years; even today, in states like Goa and Orissa, environmental activists are still fighting for the removal of such illegal miners. 

    In Manohar Lal Sharma v. The Principal Secretary& Ors., Writ Petition (Cri.) No. 120 of 2012, the Supreme Court held that there should be a cancellation of coal blocks allocated by the government in 1993 on the grounds that the procedure followed by the Central Government was in contravention of the MMDR Act, in terms of arbitrariness and non-transparency of procedures. 

    Further, in another case Re: Natural Resource Allocation, SR number 1 of 2012, the Supreme Court held that auctioning of natural resources was not a constitutional mandate and is merely a means to benefit businesses by serving as an alternative form of revenue. 

    Amendments to the Act and Rules 

    Mineral Laws (Amendment) Act, 2020

    There arose a need to liberalize the coal and mining industry regulations in order for it to reach its full potential and attract foreign direct investment. For this purpose, it became absolutely imperative for the government to ease the restrictions imposed by the MMDR 2015 and MMDR 1957. The introduction of the bill will allow 100% foreign direct investment in coal mining operations; further, it aims at reducing importation of coal and increasing domestic and national production thereof. 

    Features 

  • As per the old Act, companies purchasing coal under Schedule II and III through auctions could only utilize coal extracted for end-use purposes like power generation and steel production. 
  • The Amendment provides relief to these companies permitting them to carry out operations for sale, use, in their subsidiaries, or any other such purpose, as permitted by the central government. 

  • The old Act recognized two types of licenses, namely, the Prospecting license and mining license. The Amendment recognizes a third type that integrates the two allowing the licensee to prospect and license coal, called the license-cum-mining lease. Further, holders of a non-exclusive reconnaissance license can acquire a prospecting and mining license, as opposed to the previous Act that did not permit them to do so. 
  • The old Act required new licensees to obtain new statutory clearances before the commencement of their mining operations. However, now the various permits, licenses and clearances granted to the old licensee shall be transferred in the name of the effective bidder for the initial two years. 
  • The Central government can now decide the allocation and reallocation of terminated mining allotment orders as per their discretion and designate a custodian for the same until the mines are reallocated. 
  • As per the old Act, the state government was required to obtain approval from the central government in order to issue licenses, permits and leases. This requirement has now been relaxed, and the state government is not required to obtain approval in certain cases, such as in the event the central government has already made allocation or when the federal government has reserved a mining block for resource protection.
  • Prior experience in the coal and mining industry in India is not a contributor to the eligibility of the company to participate in an auction. 
  • Private participation

    New regulations allowing private participation in the mining sector is a double-edged sword; that is, it has its fair share of advantages and disadvantages. 

    The coal mining industry has been dominated by the public sector for decades on end; the new regulations open up this sector to private participants with the aim to draw in more investors. This new regulation has relegated the minority status of the private sector by opening up biddings through coal mine auctions. On the one hand, this seems like a great step towards attracting investment but, on the other hand, it is highly unlikely that there would be a large flow of investors, as expected in the wake of the pandemic. 

    Energy security has always been an economic driver for the country, contributing to the GDP; however, over the years, there have been several shortfalls in meeting the requisite targets of imports. 

    Further, the goal of driving up demand is highly unlikely to be met considering the costs that would be incurred in an attempt to procure cheaper coal; costs such as miner's prices, government taxes, transportation costs, etc., need to be taken into consideration before investing in the industry. The new regulations only affect the miner's costs only by a small amount; therefore, no drastic change in the pricing is bring brought about through these regulations. 

    The new regulations are said to open up new mines in order to explore the full potential of national reserves. However, new mines may take years to develop, therefore, putting any developer or potential investor in a frenzy as to whether investing in such mines is a risk they are willing to take. 

    Concerns and criticisms

    The new Amendment raises a vast array of environmental concerns, considering that the whole world is moving towards more sustainable alternatives to fossil fuels and India, on the other hand, is trying to capitalize on the same by increasing demand and supply. 

    In keeping with the aim of attracting foreign investment in the coal and mining sector, India is jeopardizing its commitments made under the Paris Agreement, consequently jeopardizing the health and safety of employees that is a natural result of inhaling toxic fumes. 

    The new Amendment also opens its doors for potential overexploitation of resources through increased competition and rivalry in the sector.                                     

    In a recent case, South West Port Limited through its Unit Head & Authorized signatory Anthony Fernandes v. State of Goa, through the Chief Secretary, Government of Goa, Secretariat & Others Writ Petition No. 173 Of 2018the issue arose when the Petitioner's application for terminal entrenchment was denied by the Ministry of Environment, Forest and Climate Change in Goa. The MOEFCC had denied the application on the grounds that the Petitioner's application cannot be considered under the order passed by the National Green Tribunal since the specifics of the regulations do not comply with said order. 

    To this, the Petitioner argued that the MEOFCC does not have the authority to determine the merits of the application. He further cited all the other authorities that granted approval for the same application. 

    Preliminary objections were raised by the Respondents, saying that several material facts have not been disclosed by the Petitioner and that if allowed to continue, the Petitioner's continuous existence in this area shall be hazardous to the health and safety of residents. 

    The High Court, therefore, held that there did not exist any extraordinary circumstances in favor of the Petitioner and upon examination of the evidence and the documents present by him, it is deduced that, despite the petition being for a limited purpose, the ultimate aim of the Petitioner is to expand their activities at the Port. Further, the court also held that the Petitioner did not exhaust its alternative remedies before approaching the High Court; however, the High Court has the discretion to entertain a writ petition depending on the conduct of the Petitioner. Therefore, in view of the aforesaid, the Petitioner's claims were rejected, and the writ petition was dismissed. 

    Conclusion 

    No doubt, the steps were taken towards improving the mining sector are appreciated. However, such an appreciation cannot be done without speculation. The positive approach of this new Amendment is met with a long list of problems that need to be revisited and considered in immense detail so as to achieve the goal of operational proficiency and successful usage of national assets.

     

    ]]>
    Sun, 07 Mar 2021 16:58:00 GMT
    <![CDATA[Insurance and Reinsurance in Lebanon]]> Insurance and Reinsurance in Lebanon

    Under Decree Number 9812 of 1968, the rules and regulations concerning the insurance sector in Lebanon were established (Insurance Law). There have been limited subsequent revisions to those rules and regulations, and no material improvements were made since 1999.

    Within the Lebanese Ministry of Economy and Trade, the Insurance Control Commission (ICC) is the governing body and supervisory authority and enables the reinforcement of the insurance industry by: 

  • Offering advice that increases the standard of technical provisions. 
  • The collaboration with other neutral supervisory agencies.
  • The following updates are worth considering, given the lack of substantive reforms in the insurance industry: 

  • Consolidation among insurance providers:
  • The proposed legislation has been introduced by the Lebanese Ministry of Economy and Trade to support insurance firms merge by furnishing them with financial benefits. These mergers are supposed to boost the resources of insurance firms, which will usually further enhance the productivity and economic development of the insurance industry. In the same way, the Association of Insurance Firms in Lebanon (ACAL) reports that three separate pools will be created by integrating the capabilities of all the registered insurance companies:

  • a pool for earthquake exposure coverage.
  • an aircraft risk pool.
  • a vulnerability pool in Lebanon's developing oil and gas sector.
  • Collaboration in the stock market:
  • In June 2017, the ICC and the Capital Market Authority (CMA), two separate supervisory bodies, signed the first Memorandum of Understanding (MoU) to institutionalize the supervisory function on financial instruments used in insurance policies. This collaboration has a transformative impact on the insurance industry through three primary objectives:

  • minimizing replication of insurance industry laws and reducing the burden and expenses of compliance. 
  • minimize the risk of regulatory arbitration, which could result from a lack of coordination between the various supervisory authorities. 
  • to encourage the abolition of undesirable financial instruments, which can cause economic losses to policyholders.
  • Interference by the Central Bank (BDL):
  • In January 2018, BDL ordered banks and financial institutions to refrain from investing in insurance or market operations and to advertise insurance contracts, provided that insurance provider is exclusively limited by statute to properly approved insurance providers, corporations and brokers. In addition, the Money and Credit Code, which refers to banks, forbids banks from participating in practices other than banking.

    Difference between Contract of Insurance and Reinsurance of Contract 

    An insurance contract is a contract in which the insurer, in exchange for the payment of a premium, is responsible for such duties on the occasion of an emergency on the insured or his property (Article 950, Lebanese Code of Obligations and Contracts). 

    The insurer can re-insure against the threats that they have undertaken to insure (Article 954, the Lebanese Code of Obligations and Contracts). Reinsurance can refer only to a single contract, to a series of contracts or to all contracts entered into by the insurer. The insurer must, moreover, be the primary party liable to the insured.

    Regulatory framework

    Insurance is governed by the laws regulating the organization of insurance companies operating in Lebanon (Insurance Law) issued pursuant to Decree Number 9812 of 4 May 1968. All Lebanese and international businesses, organizations or organizations are covered by the provisions of the Insurance Act whether they are engaged in, or are able to participate in, any or all of the operations carried out under the following sections or sub-branches (Article 1, Insurance Act):

  • 1st branch: 
  • insurance and reinsurance cover for life, physical injuries and old age
  • insurance and reinsurance coverage for minors and spouses
  • capitalization activities, concluded by arrangements in which the insurance provider pays one or more predetermined sums, on one or more fixed dates, or as a result of periodic lot draws, as in the case of raffle drawings, as a counterpart to one periodic premium or premium
  • Group investment activities (mutual funds) by the collection of amounts of cash paid by non-shareholders to different portfolios on a shared basis.
  • 2nd branch: insurance and reinsurance coverage against fire damage, thunderstorms, floods, hurricanes, cyclones, hailstorms, fires, disasters, riots, plane crashes and other associated damages. 
  • 3rd branch: insurance and reinsurance protection against transport injury, ship and aircraft hull insurance and other associated risks. 
  • 4th branch: protection and reinsurance protect against injuries resulting from any collisions, civil responsibility, travel, accidents at work, personal accidents, medical care, hospitalization, fraud, breach of confidence and professional hazards, and all other danger not expressly accounted for in the Insurance Act.
  • 6th branch: insurance and reinsurance protection against damages arising from farm and emergency threats and other associated damages. 
  • It is possible to enforce a compulsory insurance requirement against such risks, in particular, those linked to the fourth branch (see above), such as the compulsory insurance required by the Road Safety Code (Article 44, Insurance Law). 

    In addition, insurance activities in Lebanon are subject to the following provisions: 

  • Articles 950 to 1023 of the Code of Duties and Contracts of Lebanon
  • By-laws of the Insurance Regulation Commission (ICC).
  • Regulatory Authorities 

    The ICC within the Ministry of Economy and Trade of Lebanon is a legislative agency that controls and governs the insurance industry. Its goal is to protect the interests of policyholders and to facilitate the preservation of an effective, healthy and stable insurance market.

    Requirements for the Authorized or Licensed Entity 

    Lebanon's insurance providers are required to have a guarantee in terms of their branch commitments as follows: 

  • LBP1,200 million for each of the first, fourth and fifth branches. 
  • LBP350 million for each second and third branch. 
  • LBP750 million for the sixth branch.
  • International companies regulated by the laws of the Insurance Act must, therefore, comply with the fees alluded to above in order to carry out the activities set out in the branches.

    Insurance firms operating in branches are expected to comply with the accounting rules defined by the Minister of Economy and Trade on the recommendation of the National Insurance Board and to hold separate individual accounts for each of the branches in which they function. Insurance providers are also encouraged to manage such demands for information, as provided for in the accounting regulations. They are required to send such requests to the Ministry of Economy and Trade and to circulate and publish them, specifically their balance sheet for Lebanese firms and the balance sheet for activities conducted in Lebanon for international insurance companies.

    Insurance firms must make clear on all manuals, policies, reports, advertising, books, leaflets or written materials that they produce and that they sell to the public or publish in newspapers as follows: 

  • Their trade name, number and date of entry in the registry of insurance companies in Lebanon. 
  • Note saying that they are regulated by the rules of the Insurance Act.
  • Penalties for Non-Compliance with Legal and Regulatory Requirements

    The license issued for one or more subsidiaries could be revoked if: 

    a.It is clear that the license has been issued in contravention of the statute. 

    b.The company no longer satisfies the terms under which the license has been issued. 

    c.The company does not comply with the relevant laws and regulations, in particular, the Insurance Act and its governing regulations. 

    d.The organization is in violation of the terms of the AOA (Articles of Association)

    The license may be revoked unless, within 15 days of the date of the notice, the organization involved is encouraged to send written comments. Within 30 days of its publication in the Official Gazette, the corporation may object to the withdrawal decision before the State Council. 

    The Insurance Act allows for various punishments, including probation and/or fines for infringements. For repeated infringements, the size of the fine would be doubled.

    Insurance contracts signed or executed in violation of the rules of the statute shall be deemed null and void. This does not, however, exclude the offending business from its duties against the insured.

    Insurance and Reinsurance Policies 

    Insurance plans used in Lebanon must be written up in Arabic. 

    Insurance plans can be written up in a foreign language, provided that the Arabic translation is presented at the same time, or the insurance policy may be deemed null and invalid. The Arabic text would prevail in the case of some difference between the Arabic and the foreign texts. 

    In addition, the Minister of Economy and Trade can exclude those forms of insurance policy from being drawn up in Arabic, if appropriate, after consulting the National Insurance Board.

    The Minister of Economy and Trade may, after reviewing the National Insurance Board, decide the minimum amounts of premiums to be paid for some forms of insurance policies and/or the overall ratios and percentages for expenditures and insurance premium annexes. 

    The insurance scheme must be dated on the day of its implementation and must specify the following (among other things) (Article 964 of the Lebanese Code of Duties and Contracts): 

  • Insured subject. 
  • Name and address of the creditor and of the insured. 
  • The type of danger is assured. 
  • Date of commencement and expiry of the risk. 
  • Insured value. 
  • Insurance premiums.
  • Third-Party Insurance Claims 

    Third parties cannot claim an insurance policy unless their claims are explicitly written for in the insurance policy. The Lebanese Court of Cassation has taken a variety of decisions providing that a third-party victim cannot make a direct claim to the insured unless specifically provided for in the insurance contract. Third parties may, however, make an indirect claim against the insurer in the name of the insured if the insured has not filed such a claim.

    Time Limits

    The right to pursue any and all claims arising out of or in association with an insurance policy must be pursued within two years of the event of the occurrence (Article 985, Lebanese Code of Obligations and Contracts). 

    The two-year limitation period shall not commence at the time of the incidence of the event under the following circumstances: 

  • In the event of concealment of an insured risk, omission, incorrect or invalid disclosure, the limitation period shall begin from the date on which the insurer becomes aware of the occurrence. 
  • In the event of an emergency, as on the day on which the parties were aware of it, given that they were able to show that they had not been aware of it before that point.
  • Remedies

    The insurer would have a privileged bond to receive due to premiums on the insured issue (Article 976, Lebanese Code Obligations and Contracts). 

    The undertakings made by the insurance companies to the insurer and beneficiary are promised a general, privileged bond on all the movable and real property of the Lebanese insurance companies and all the tangible property of international companies in Lebanon (Article 28, Insurance Law).

    Insolvency of Insurance and Reinsurance Providers 

    The license given to an insurance company for one or more subsidiaries can be withdrawn: 

  • If it is established that the company no longer satisfies the requirements under which the license has been issued. 
  • If it becomes clear, in the light of the declarations and records and as a result of cross-examination by the Ministry of Economy and Trade by the Supervisory Board, that the interests of policyholders are likely to be lost or that the organization is no longer in a position to satisfy its obligations.
  • The license cannot be revoked until the company involved has been informed by recorded letter with acknowledgement or by a notary public and has been invited to make its comments within 15 days of notification. 

    Any application to revoke a license within 30 days of the date of publication of the revocation decision in the Official Gazette can be questioned by the company before the State Council.

    Any insurance firm that has incurred losses must replenish its capital within a limited span of three months from the end of the financial year in which the losses happened. Exceptionally, this time period can be expanded by a ministerial resolution issued by the Minister for Economic Affairs and Trade for no longer than three months, given that the organization may offer adequate assurances to show its capacity to restore its resources within a fixed timeline.

    In addition, a license issued to a corporation to run one or more insurance subsidiaries can be revoked by a decision of the Minister of Economy and Trade, after consultation with the National Insurance Board, on the grounds of reports by the Supervisory Board. This is the case if the company incurs losses equal to half of its capital (for Lebanese companies) or half of the guarantee (for international companies) without being able to minimize its losses in the first six months of the next fiscal year.

    Obligations provided by insurance providers to the insured under the Insurance Act are guaranteed by a general, privileged bond containing all movable and tangible properties of Lebanese insurance companies and all movable and tangible assets of international companies in Lebanon. This general responsibility applies to treasury claims and judicial taxes and also to commitments towards recipients of life insurance activities or liability for death or bodily harm, which have precedence over all other responsibilities.

    Conclusion

    Successive amendments to the present Insurance Law are finite, and there has been no significant change since 2008. The Lebanese MOET (Ministry of Economy and Trade) has given out a statement that the Ministry has drawn up a bill to promote mergers between insurance firms by offering benefits, such as subsidized loans. Such restructuring would allow insurance firms to raise capital so that they can sell their customers higher priced products. 

    In addition, it should be remembered that a new bill for the structure of the insurance industry was presented in 2004 and was eventually ratified by the Council of Ministers. 

     

     

     

    ]]>
    Sun, 07 Mar 2021 11:21:00 GMT
    <![CDATA[Redundancy under Labor Laws in UAE]]> Redundancy under Labor Laws in the UAE

    The primary legislation regulating workplace relations in the United Arab Emirates is Law Number 8 of 1980 on labor relations, as revised by Federal Laws Number 24 of 1981, Number 15 of 1985, Number 12 of 1986, Number 8 of 2007 and Number 6 of 2019 (Labor Law), and the relevant ministerial directives incorporating those provisions. The Labor Laws and various ministerial decisions contain specific provisions that seek to protect the interests of UAE nationals. The Labor Law is applicable throughout the UAE, except for those working within the DIFC (Dubai International Financial Centre) who are subjected to the DIFC Employment Law Number 2 of 2019 (DIFC Employment Law) and the ADGM (Abu Dubai International Financial Centre) who are subjected to ADGM Employment Regulations 2019, the officials, employees and workers in federal and local government departments, or appointed for federal and local government projects, members of the armed forces, police and security officers, domestic servants working in private households, workers employed in agriculture (apart from employees of agricultural companies engaged in processing products or operating or repairing machinery required for agriculture). 

    The term "redundancy ", in the context of labor law, refers to a scenario in which an employer reduces its workforce if a certain job or jobs are no longer needed or it becomes 'superfluous'. A situation may arise due to factors that are beyond the employer's control, such as, but not limited to, the closure of the business, the employer's need to cut costs, the job no longer exists, or the ownership of the company changed hands, and therefore, in most circumstances, the dismissal is not a reflection of the employee's ability to do their job, but rather it is caused by unforeseen circumstances which sometimes can be plausible. 

    It is pertinent to note that earlier, with regard to the redundancies and economically motivated workforce reductions were not recognized by local law in UAE. Hence, there were no specific economic reasons that the employer was obligated to prove to justify the dismissal. Instead, the dismissal procedure has been governed by the applicable labor laws (Federal Law Number 8 of 1980 on the Regulation of Labor Relations), and if it was found that there is no valid reason for an employee's dismissal, he/she was entitled to compensation of up to 3 months of their salary.

    Redundancy is a sensitive and difficult aspect at any point in time and under any jurisdiction in the world. For firms operative within the UAE (including inside the DMCC Free Zone), the difficulty is especially advanced in lieu of the UAE Labor Law Number 8 of the Year 1980 and not taking off any specific statutory definition of redundancy or a redundancy procedure.

    The year 2020 and the unforeseen events that followed may have been a blessing in disguise in terms of Environment Protection and to bring to light the importance of Healthcare around the world. However, no one can deny that the economic streak of the globally leading countries has been cursed, and it has not been easy on either the Employers or the Employees to sustain financially in the times where the money is prime to have good healthcare support if the situation may arise. For the conventional workplace, COVID-19 has raised a daunting challenge. 

    As nations across the globe have struggled to minimize transmission speeds, many firms have enforced to operate remotely or face the risk of shutting down. Various employers have been forced to adjust and adapt their established environments, such as an office setting, to operate remotely with policymakers around the world enforcing stringent lockdown restrictions. It is thus, extremely difficult for employers and companies to make informed business decisions with minimal impact on their employees. In UAE, the predicament is compounded by the fact that local labor laws, in particular Labor Law Number 8 of 1980, do not contain a legal definition of termination of employment. To help private sector employers fight isolation measures, the UAE authorities announced the dismissal by Ministry Decree (Decree Number279 of 2020). This means that when an employer dismisses certain employees to cut costs in a difficult economy, it is legal to dismiss an employee as there is a valid reason for the dismissal, thereby empowering the employers to terminate unlimited term contracts for employment if there's a reason deemed fit by the authorities. The employees, however, are to be given a notice of termination of at 30 days. If the employment agreement requires a much longer notice of contract termination, then the agreement will supersede. It is pertinent to note the fact that different rules can apply to the termination of fixed-term employment contracts. 

    An essential part of the regular backup process is to ensure that it is done correctly. Under the UAE labor law, the dismissal process should be conducted transparently, including a face-to-face meeting with all affected workers. 

  • It is the responsibility of the employer to ensure that the process is formally and regularly updated, as well as providing appropriate documentary evidence of the same;
  • Moreover, all accrued benefits, such as unused vacation, must be paid to the departing employee;
  • The outgoing employee must receive a termination notice or compensation in lieu of termination, which must be served at least 30 days before the employee ends, and this restriction cannot even be lifted with the employee's consent;
  • If the employee does not find suitable employment in the UAE within the specified time, the employer is required to return the employee to the country of origin;
  • The outgoing employee has not benefited from any pension scheme managed by the company; the employer must pay the severance pay (or tip).
  • Most importantly, Resolution 279 introduces the term 'dismissal' into UAE labor law for the first time. If the employer has identified a surplus of non-UAE workers whose jobs will be made redundant, Resolution 279 requires the employer to do the following:

  • Continue to give the former employee all rights other than basic wages, including accommodation, transportation and other allowances, and private health insurance, until the employee finds another job or leaves the UAE;
  • Enroll a person on the MOHRE virtual labor market so that they can work for another organization, which is particularly useful in industries where the company's activity is increasing with the current suspension of employment abroad.
  • The new employer may then legally employ an employee by selecting one of the following permit options for work: transfer of a work permit, temporary work permit or part-time work permit. 
  • Resolution 279 does not go so far as to clearly define the terms of layoffs - whether in connection with COVID -19 or otherwise - as a "valid" reason for categories of workers under UAE labor law. However, the Hon'ble Courts are likely to rule in favor of the employers who can show that ending layoffs was the only viable option for the company.

    Resolution 279 also aims to help employers change their corporate structure by gradually adopting the following principles: 

  • Creating a remote working system; 
  • The offer of paid holidays to employees; 
  • Providing unpaid leave to employees; 
  • A temporary reduction in wages as well as a steady decline in wages.
  • In addition to the above payments, the labor courts in the UAE may ward compensation to workers if they are dismissed of their own accord. The amount of compensation will be determined by the Hon'ble Court and will take effect if the dismissal was illegal or unfair in relation to an employee who has a permanent employment contract. In this case, the court can award workers compensation for up to 3 months. A company that cannot find a valid reason or retain sufficient evidence to justify the lawful termination of an employee may put the employee at risk of being denied a visa and/or applying for a job due to arbitrary dismissal. If the employer follows a flawless procedure to maintain evidence of the termination situation, the employer will be able to protect himself from a statement of arbitrary termination and reduce the amount of compensation awarded to the terminated employee.

    The balance of convenience here lies in favor of both the employees and employers; one gets compensated for their hard work and dedication with a good chance of working in another organization within the UAE if their termination was not due to their performance and on the other hand it gives the employers in UAE a legible space to make more economically benefiting decisions that may keep the organization alive as a going concern and a fair chance for more efficient administration. 

    ]]>
    Sun, 07 Mar 2021 09:49:00 GMT
    <![CDATA[Singapore Convention on Mediation]]> The Singapore Convention on Mediation

    "An ounce of mediation is worth a pound of arbitration and a ton of litigation!"

                                                                                              - Joseph Grynbaum

    Introduction 

    Mediation is a fairly underrated process of dispute resolution as compared to arbitration. Corporations and individuals choose arbitration instead, overlooking the many benefits that can be derived out of mediation. The mechanism used to settle your dispute is the key difference between mediation and arbitration. 

    On the one hand, mediation allows settlement of dispute amicably between the parties and is a non-binding process, while on the other hand, arbitration is binding. 

    Sometimes parties go through a shaky patch which does not necessarily call for a lawsuit but merely require a mediator to advise them on how to go around the dispute at hand. As compared to litigation, mediation allows parties to come together in an environment where they can freely present their position, along with the advantage of keeping their dispute confidential. 

    In modern times, mediation is gaining immense popularity because of its cheap, easy and quick nature of dispute resolution. Though not binding, it allows parties to reach a settlement amicably, which can be advantageous in cases of minor disputes. Therefore, efforts are being made by countries to promote this means of dispute resolution. 

    One such effort in unifying the mediation process into one cohesive framework is the Singapore Convention on Mediation. This Convention aims to facilitate international trade and business by affording parties an opportunity to invoke dispute resolution process across borders. 

    The Singapore Convention on Mediation is a multilateral treaty; it aims to provide an efficient framework to its signatories to resolve international commercial disputes. This treaty can be seen to draw a similarity to the New York Convention that was signed with respect to arbitration. 

    Further, just like arbitration has become so widely used for solving commercial disputes, this treaty aims to promote the use of mediation in the same way. The absence of a cross-border process to provide legal force to negotiated settlement agreements is considered to constitute a major obstacle to the ability of some organizations to use mediation.

    The need for this Convention was seen when the UNCITRAL noticed that mediation settlements are harder to enforce in the domestic as well as the international sphere. In some jurisdictions, many businesses find it difficult to persuade their business partners to participate in mediation based on the perception that it lacks a stamp of international legitimacy, such as the New York Convention. The introduction of this Convention will allow companies to successfully conduct mediation proceedings. Further, it will also serve as an added alternative to litigation and arbitration. 

    Key Features 

    Having said that, we can say the Convention has the following features:

  • The parties should conduct business in two different states.
  • The Convention offers a consistent and effective procedure to implement the terms of that agreement in other jurisdictions for parties who have agreed to a negotiated settlement, in the manner that the New York Convention does for international arbitral awards.
  • Further, the Convention can be invoked as a defense to claims that have already been settled. 
  • There are certain matters that are excluded from the ambit of the Convention, such as arbitration awards and court judgments that involve employment, family and inheritance matters.  
  • How can the Convention be enforced?

    The party that is seeking enforcement of the Convention has to provide the following to the relevant authority:

  • A copy of the mediation settlement agreement; the agreement must be signed by both parties.
  • Any such document that serves as evidence of the mediation settlement.
  • The authority whose ratification is sought for enforcement shall then expeditiously consider the enforcement application. Further, there may be cases in which the authority can reject the enforcement of the settlement. Those circumstances are as follows:

  • In any case where the parties were under some incapacity, or the settlement agreement was rendered null and void due to some unavoidable circumstance.
  • The settlement agreement has been modified, or have the terms of such a settlement be rendered not binding. 
  • In any case, where granting relief would be against public policy or the relief would be contrary to the terms of the settlement agreement.
  • Further, the enforcement can be rejected in case there was a conflict of interest that became apparent on the part of the mediator-basically, showing that the mediator was impartial. 
  • Important Provisions 

    The Convention constitutes 16 Articles that lay down the provisions required to be adhered to, to avail mediation. Some important provisions are:

  • The scope of application (Article 1); this Article lays down the requirements that must be fulfilled for parties that wish to avail enforcement of a settlement under this Convention. The requirements are:
  • The parties to the settlement agreement must have businesses in different states.
  • The state in which the parties have their places of business should either be in a place where they perform a substantial part of their business or the place where the subject matter of dispute has arisen.
  • It also lays down the settlements that do not come under the ambit of the agreement.

  • Personal, family, employment, inheritance issues.
  • Any settlement agreement that has arisen out of a court's judgment and is enforceable as a judgment in that state where it was pronounced.
  • Settlements that have been recorded as an arbitral award. 
  • Requirements for reliance on settlement agreement (Article 4), which basically implies its enforcement, as has been previously discussed. 
  • Further, it is also important to keep in mind the grounds for refusing to grant relief as under Article 5 of the Convention.
  • The fact of a parallel application implies that the existence of a settlement made through an arbitral award or a judgment (Article 6).
  • The treaty also allows signatories to have their reservations with respect to the application of the treaty. They may choose whether or not they want a particular section to apply to their country in specific. 
  • Implications of the Convention 

    The Convention has come into force at the right time, considering the need for speedy and cost-effective methods of dispute resolution. The pandemic has impacted civil litigation in such a way that parties are forced to look for and resort to alternative methods of dispute resolution. 

    The Singapore International Mediation Center (SIMC), in May 2020, gave rise to a SIMC Protocol. This protocol aimed to provide a swift and inexpensive route for the resolution of commercial disputes during the pendency of the Covid-19 virus. This system would be introduced to expedite the mediation process through virtual means. Further, it also aimed to organize the mediation settlement process within ten days of filing an application for settlement through mediation. 

    The UK Government Cabinet Office also strongly encouraged the use of alternative means of dispute resolution such as this. Further, even the Scottish government is seeking to integrate the mediation system within their domestic system of dispute resolution as a responsible means to attain civil justice in these times of need. 

    Further, for the first time in years, the LCIA has noticed the need for an amendment of their rules with respect to mediation. The Convention has, therefore, created a whirlwind of change in the atmosphere surrounding mediation, further facilitating the growth of mediation globally by making it more accessible and cost-efficient for its users. 

    This Convention, therefore, has served as an effective means to promote mediation globally. Further, it not only provides the machinery to facilitate settlement but also lays down provisions for its enforcement. 

    The pandemic has urged more and more states to ratify this treaty and therefore assures that it will become a means that will be available to jurisdiction across the world. 

    Challenges 

    Despite its advantages, there are certain challenges that the implementation of the Convention may face. 

    Considering that the settlement by mediation has to be enforced under domestic law poses a threat to the confidentiality of the mediation agreement between the parties. The crux of any mediation agreement between parties is the fact that it is confidential in nature. This enforcement procedure may cause some hurdles in carrying out the process in the first place, considering that the mediator may show reluctance to carry out such a settlement. 

    Further, the Convention is not yet globally ratified and accepted. This means that mediation may be rendered useless if there is no domestic mechanism to enforce it. 

    Moreover, there is an absence of rules and regulations that regulate the conduct of mediators. This lack of international standards of regulation may serve as a hurdle. The mere fact of self-regulation on the mediator's part cannot be depended on without a written set of regulations. 

    Some concerns may also be raised regarding the enforcement of domestic law in terms of the solution that is suggested by the mediator. For instance, if the solution suggested by the mediator goes beyond the ambit of the court's rules, the enforcement will be rendered null and void, and the parties will ultimately have to resort to arbitration or litigation for resolution. 

    The success of the Convention can only be determined when it becomes completely harmonious with the local laws of any specific jurisdiction. In any case, where the local laws do not agree with the mediation convention, its implementation will become impossible. 

    As of March 2020, the UK, Australia and the EU remained absent from the signing of the treaty. These major countries remaining absent from the treaty may serve as an impediment to the countries conducting business with these countries since it will bar them from utilizing the mediation process for settlement. 

    KSA's Ratification 

    Saudi Arabia signed the treaty on 7 August 2019. However, it only ratified it on 5 May 2020. Saudi had certain reservations with respect to the enforcement of the Convention wherein it was declared that the treaty would not apply to settlement agreements that were signed by government agencies or any other person acting on behalf of the government agency. 

    There are around 53 signatories to the treaty, which implies that the treaty is an operation to any agreement signed between parties that reside within the territory of these states. 

    In the wake of the Covid-19 pandemic, it has become especially difficult for parties to conduct litigation proceedings because of a lack of funds. This lack of funds pushed Saudi to adopt the Convention so as to provide businesses with a cheaper, cost-effective medium of dispute resolution. 

    Further, by further promoting cross-border conflict settlement, the Convention is expected to further improve the efficiency and efficacy of global trade. It recognizes that the use of mediation results in considerable advantages, such as minimizing cases where a conflict contributes to the termination of a contractual partnership and, in effect, creates major savings in the administration of justice by States.

    In line with the Convention, Saudi has also launched a national Covid-19 Emergency Mediation Program by the Saudi Center of Commercial Arbitration (SCCA). This program basically allows parties to enforce their international mediation settlement agreements. 

    This program also acts as a way to facilitate both international as well as domestic mediation. The SCCA has further, even reduced mediation fee in line with the economic crisis due to the pandemic; it also allows parties to conduct mediation proceedings on a virtual basis. 

     

    ]]>
    Sun, 07 Mar 2021 09:07:00 GMT
    <![CDATA[Leasing Law DIFC]]> Leasing Law DIFC

    "But land is land, and it's safer than the stocks and bonds of Wall Street swindlers."

                                                                                                                           -Eugene O'neill

    Introduction

    Property holding has been one of the most attractive markets in the world for the longest time. It is considered every man's dream to own a piece of land, and every person's end goal to have a nice home they can inhibit. While over the last decade, the number of property owners has skyrocketed, those that cannot afford to have always looked to the cheaper and less tedious option of leasing. Countries worldwide have long-standing drafted legislation in relation to owning, leasing, and other aspects of Property related transactions due to the constant long-standing high demand of market interest in the same.

    Up keeping with the times, the UAE has also provided for ownership of the property through freehold for personal and business purposes as per specified terms and conditions. DIFC has provided for such regulations since 2007, which has been extensively amended as per new practices over time.

    Real Property Law

    DIFC, the free zone market in Dubai, has an established Property Law, which was implemented as Law Number 4 of 2007 that governs the ownership of freehold property within DIFC. In 2018, The Real Property Law Number 10 of 2018 was established, which repealed the aforementioned Law and was brought into force; which provides for guarantee title to Real Property, facilitating dealings with real property, and defined the powers and functions of the Registrar in relation to the Real Property.

    While this major amendment provided for better-specified regulations and rules, the Law only had a subset of regulations in terms of leasing of Property in the Free Zone area under the new amendment. The regulations provided for as per the Real Property Law briefly states Leasing, Registration, Requirements, Variations, Expiry and termination, and a few other clauses in roughly over a page. The current law in place provides regulations for retail leases, but more explicitly for residential leases located in the area since provisions are detailed in the Real Property Law for retail.

    Leasing Law 

    Due to the attraction of leasing with Freehold area properties, DIFC introduced a new Leasing Law enacted by the Ruler of Dubai, Number 1 of 2020, which came into effect in January 2020. This law establishes various legislative changes in par with international practice standards. This law sets out in detail the statutory obligations on the lessee and lessor, condition report requirements, dispute resolution, and various other aspects as elucidated in detail below.

    A lease shall not be considered legally valid as per the Act if it is not in writing, and it is required to state the following:

  • Lease Term; 
  • The rent payable by the Lessee; 
  • The dates of payment of rent; 
  • The permitted use of the Leased Premises; 
  • A description of the Leased Premises accompanied by a Lease Plan where available; and 
  • The identity of the Lessor and Lessee.
  • It is mandatory that the Lessor and Lessee make sure the above-mentioned terms are stated in the rent agreement as agreed between the parties, as this is the first step to a legally valid lease. There are various rights and obligations provided to the parties, dependent on the nature of the lease. Below mentioned are some in regards to the residential lease of property.

    Security Deposit

    As is the case with most provisions, various protections have been provided to the Lessee against abuse of power by the Lessor. While security deposits are not mandatory, the new Act provides for a maximum percentage in relation to the imposition of security deposits. The Lessor may not collect from the Lessee more than 10 percent of the annual rent as a deposit. If there is an increase in rent, the Lessor is entitled to demand a higher rate of a security deposit under the 10 percent bracket to reflect the hike. Whereas, in the event of a rent decrease, Lessee can demand part of his security as applicable, back from the Lessor.

    It is required that the Lessor must pay the Registrar the security deposit within 30 days of receiving such amount from the Lessee, along with the form and written confirmation from the Lessee. Unless explicitly provided, Lessor may not convert the security deposit to payment of rent.

    Rent 

    The new Act also provides protection from sudden increases in rent, which eases the issue of a hiked price for the tenant. If the rent specified as per the lease does not provide for a time period, it is generally required that the Lessee pays in advance in four quarterly installments for every 12 months. In the event of a rent increase for the apartment, it is now obligatory that the Lessor informs the Lessee of the increase at least 90 days prior to the expiry of the existing lease so that the Lessee can adjust his finances accordingly or evacuate, as required. A lessor is also not entitled to increase rent before the lease ends. It is to be noted that the Law does not prevent the Lessor from collecting rent in advance if agreed upon.

    Obligations of the Lessor 

    A lessor is not permitted to disconnect utility services or preventing the Lessee of privileges provided with the leased premises. It is to be noted that a lessor could be liable for such actions as the Lessee could refer such a case to the police or before a competent court.

    A lessor shall sign a release form as prescribed by the Registrar in the event of expiry or early termination of the residential lease.

    It is obligated upon a lessor to make payments of: 

  • ¾ All charges in regards to supply or use of utilities such as gas, water, district cooling, and sewage disposal, unless agreed otherwise.
  • ¾ All installation in relation to a utility service of the premises.
  • ¾ All utility charges not based on the quantity of a substance or service that is supplied to.
  • ¾ All services charges under the Strata Title law and Master Community Service Charges.
  • In the event of a repair, the Lessor is liable to carry out specified repairs if there has been a written notice provided by the Lessee that such repairs are required, and a notice for such have been provided. If the Lessor does not do the needful within 60 days of the notice being provided, then the Lessee may obtain a court order mandating the Lessor to do so. In case of urgent repairs, a lessee may obtain a court order if the Lessor cannot meet the cost or refuses to pay or fix such repairs.

    It is at the liberty of the Lessee to terminate the contract by court order if any material obligations to be made by the Lessor is not made within thirty days of notice for such obligations provided by the Lessee.

    Obligations of the Lessee 

    The Lessee shall sign a release form as prescribed by the Registrar in the event of early termination or expiry of the residential lease.

    Two signed copies of a condition report specifying the state of repair and general condition may be provided by the Lessor, and it is mandated that the Lessee provides a response within 20 days as to whether he is okay with the condition of the residential space or if not, what needs to be changed as per him.

    The Lessor has a right of entry in the event of him selling the property to showcase it to prospective buyers. If the lease is nearing its end and the Lessee is not in agreement on the renewal of the contract, then the Lessee has the right of entry to show the property during the last thirty days of the term.

    No damages that constitute fair wear and tear shall be liable for by the Lessee. If damages were caused due to failure on the part of the Lessor, this shall not be the responsibility of the Lessee. If reasonable care has been taken by the Lessee to avoid damages, then the exclusion of liability is extended to the Lessee.

    Fair wear and tear has been defined under definitions as "damage to carpets, decorations, fixtures, fittings and furniture that would reasonably be expected through ordinary day-to-day use during a tenancy for the term of a Lease in respect of the type of tenants, who do or did occupy the Leased Premises, in comparison to their state at the outset of the Lease."

    Termination

    Termination of the lease has various conditions that have to be fulfilled to do so. While the Real Property Law has provisions wherein the Lessor may immediately terminate an agreement if there is a failure of rent payment within a span of 30 days post the mandated date of payment, the provisions are slightly different with the residential lease.

    As per the residential lease, if the Lessee has not paid rent for the period of 30 days exceeding the agreed-upon date of payment, the Lessor is required to file for a court order to evacuate the Lessee.

    The Lessor is required to do the same in case of the Lessee being insolvent, using residential permits for an illegal purpose, or having abandoned the residential premises for a period exceeding three months.

    It is to be noted that these aforementioned conditions are exclusive to a residential lease, hence do not apply to retail leases.

    Conclusion

    These laws have been introduced to cover the ground in terms of leasing space in the Dubai Free Zone, and such explicit regulations leave no room for doubt for the tenants staying in the area. The provisions of this law help clear the air on any grey area that could be applicable to residential leasing activity. While these regulations have been introduced to attract foreign residents into this already lucrative area, this has also provided for guidelines and responsibilities to be taken care of by either party concerned. These laws provide a safeguard to tenants who might be in the dark in regards to the various aspects of leasing.

     

    ]]>
    Sun, 07 Mar 2021 08:26:00 GMT
    <![CDATA[Smart Contracts and Blockchains]]> Smart Contracts and Blockchains

    Smart Contracts, the anchored scripts on blockchains, permit the transparent execution of predefined processes. Using smart contracts, assets like money become programmable, which opens up previously inaccessible application potential. Smart contracts are exceptionally effective and control billions in value.

    Popular now, however, invented in 1994, when modern cryptography was in fashion, Smart Contracts aimed to improve the contractual relationships by enforcing clauses and further enabling multiple parties to operate at a distance. Most of the sectors, particularly the financial services sectors, life sciences and healthcare, energy resources and voting have used smart contract in some way or the other. Moreover, with the advent of blockchain, smart contracts have created a potential impact on daily lives.

    With the surfacing of blockchain, smart contracts are indeed one of the most sought-after technologies due to its high customizability added to the transactions. Smart contracts do bring along challenges encumbering the stakeholders who interact with them, the users, developers and the organizations built on top of smart contracts.

    Blockchain is comparatively a pop culture in the series of digital technologies that, due to their decentralized, horizontal, distributed and open-source nature, are expected to cause fundamental and large-scale changes in how the current social, economic, political relations and institutions are organized.

    Blockchain technology is best described as a distributed, append-only database, which enables transactions between human or software agents, without a central trusted intermediary. Blockchain is seen as a distributed ledger, where every user has a continuously updated authoritative copy. Anyone having access to the ledger has access to the same full transaction history and can verify the validity of all records. Sophisticated consensus mechanisms ensure that new entries can only be added to this distributed database if they are consistent with earlier records. Any type of data can be recorded in the distributed database. One may save an arbitrary piece of information on the blockchain, and that shall become part of the permanent record.

    Blockchain-based smart contracts, being self-executing code automatically implementing the terms of an agreement between parties are with certainty a critical step forward. They streamline processes which are currently spread across several databases and multiple ERP systems. So what are blockchain-based smart contracts?

    Smart contracts, next-gen in the progression of blockchains from a financial transaction protocol to an all-purpose utility. They are considered as pieces of software and not contracts in the legal sense. They extend blockchains' utility as they keep a record of financial transaction entries and automatically implement the terms of multi-party agreements. Smart contracts are executed using consensus protocols on the computer network to agree upon the sequence of actions resulting from the contract's code. There is the benefit of reduced risk of error or manipulation as the agreed terms are executed automatically.

    Prior to the blockchain era, smart contracts of this kind were impossible as the parties to the agreement would maintain separate databases. Having the shared database running a blockchain protocol, the smart contracts are automatically executed, and all parties are validating the outcome instantaneously without any need for a third-party intermediary.

    But why would companies employ blockchain-enabled smart contracts instead of their existing technology? Blockchain-enabled smart contracts are a viable option, especially when frequent transactions occur among a network of parties, and duplicative tasks are performed by counterparties for every transaction. The blockchain is a shared database for providing a secure, single source of truth, and smart contracts automated approvals, calculations, and other transacting activities that are otherwise prone to lag and error.

    Benefits of blockchain-based smart contracts

  • Speed and Accuracy:
  • The usage of software code to automate tasks increases the speed of the otherwise manually done tasks. Automated transactions pose a lesser risk and are lesser prone to any manual error or manipulation.

  • Lower execution risk:
  • The execution is automatically managed by the network rather than manually by an individual party. This eliminates the risk of manipulation, non-performance, and errors.

  • Elimination of intermediaries:
  • Smart contracts reduce and eliminate third-party intermediaries that provide "trust" services.

  • Economical:
  • As human intervention is lesser and there are fewer intermediaries involved, there will be reduced costs in the processes. 

    Smart contracts are no more than business rules translated into software. 

    What is the difference between smart contracts and business rules automation software or stored procedures? Smart contracts have the ability to support automated processes which stretch across corporate boundaries, involving multiple organizations; which the existing ways of automating business rules are unable to do. However, even if designed and programmed correctly, a smart contract isn't considered to be smart as it just blindly functions as designed to function.

    Quality programming is one important factor as the smart contract is only as good as the rules used for automating processes with the accuracy of the data fed into a smart contract being the second important factor. The smart contract rules are unalterable once put in place, and neither the user nor programmer can change it.

    So, what happens if the data is false? The smart contract shall not work properly. Data is fed into blockchains which are used for smart contract execution from external sources. Oracles are the real-time data feeds for blockchains and are essentially the intermediate layer between the data and the contract.

    While blockchains may be decentralized across several nodes, smart contracts run on a single node. The blockchain nodes cannot interpret or verify the workings of a particular smart contract; any consortium of companies which are part of a blockchain network must place their reliance on one oracle for information fed into the smart contract.

    One has to place reliance on the word of the company running the server on which the oracle and smart contract reside to believe the accuracy of the information being fed to the blockchain.

    Challenges of Smart Contract Data and Blockchains

  • Trust:
  • Oracles traditionally transmitted data from a single source, there is no perfectly trustworthy data. The data may be benignly or maliciously corrupted because of faulty web sites, cheating service providers, or errors.

  • Contingency:
  • The enforceability of a smart contract is deterministic, and it can absolutely be enforced only when the events related to its contractual clauses occur. Smart contracts are contingent on events, contingent on market events, for instance, in trade finance, the contingency is on shipping data.

  • Uniformity:
  • Constructing the smart contracts is becoming relatively easier with the advent of new programming tools which enable the businesses to pull together the basics of a smart contract. However, the difficulty arises in ensuring that every network participant is running the same version of a smart contract.

  • Flexibility:
  • Considering the immutability of blockchain-based smart contracts, the developers must anticipate any conceivable scenario that might necessitate alterations to the contract.

  • Privacy:
  • The code within smart contracts is accessible and visible to all parties within the network, which might not be acceptable for all applications.

  • Latency:
  • Blockchains suffer from high latency, considering that time passes for each verified block of transactions to be added to the ledger. Consider Ethereum, the most popular blockchain for smart contracts; this occurs approximately every 17 seconds, a far cry from the milliseconds while using non-blockchain databases.

  • Permission:
  • Even though the smart contracts are popular in both permission-less and permissioned blockchains, the latter is likely to see faster adoption in industries, considering the complexities around trust, privacy and scalability are comparatively easily resolved within a consortium of known parties.

    Conclusion

    There are technologies which are successfully addressing issues of privacy and enabling greater trust of oracles. Smart contracts are here to stay and positioned for wider adoption. There are already start-ups pairing smart contracts with IoT devices for providing access via smart locks or automatically enabling electric vehicle charging stations. Pushing of the IoT sensor data to the blockchain is also opening up countless possibilities. However, it is yet to be seen if any revised legislation shall accommodate smart contracts or recognize smart contracts which are critical for some applications of smart contracts. 

    In fact, in the coming years, the massive growth in IoT connected devices shall spur greater use of smart contracts. It is predicted that a major portion of the 46 billion industrial and enterprise devices connected in 2023 will rely on edge computing. This can further make addressing standardization and deployment issues crucial. Smart contracts could offer a standardized method for accelerating data exchange and enabling processes between IoT devices by removing the middleman: the server or cloud service that is the central communication spoke for requests and other traffic among IoT devices on a network.

    ]]>
    Wed, 03 Mar 2021 17:42:00 GMT
    <![CDATA[Legal Entitlement to Interest-UAE Law]]> Legal Entitlement to Interest under UAE Law, and applicability

    "Interest on debts grow without rain."

                                                             -Yiddish Proverb

    Paying off the debt is the secret to financial success, but what happens when the debt is not paid off in time? Is it better to pay off the highest interest accounts first to settle the debt?

    The Late Payment of Commercial Debts (Interest) Act 1998 in England and Wales, compensates the creditor for the late payment of debts as well as deters late payment. It is applicable to the commercial supply of goods and services where there is no provision for interest in the Terms of Business. Unless the contract states a provision for the substantial remedy for late payment, debts shall carry statutory interest at a rate of 8 percent above the Bank of England base rate together with compensation at the rate of £40 – £100 per invoice.

    When pursuing a debt, a claim for interest on the monies due is added. But what about in the United Arab Emirates? The right to claim an interest in the United Arab Emirates (UAE) could be perplexing for contracting parties in the UAE, since Shari'a Law prohibits the payment of interest (termed "Riba"), whether compound or simple.

    The Sharia Law pursues the objective of instituting justice and annihilating exploitation in business transactions, by proscribing all sources of unjustified enrichment and all dealings in transactions that contain excessive risk or speculation.

    These principles of Sharia Law reflected in the UAE Federal Law Number 5 of 1985 ("UAE Civil Code") and Article 409 of the UAE Federal Law Number 3 of 1987, ("UAE Penal Code") make usury amongst natural persons a criminal offence, with the penalty being possible imprisonment and/or a fine.

    As per Article 204 of the UAE Civil Code, where the subject matter of the disposition or the consideration is money, its amount and type must be specified without altering the value of that money at the time payment has any effect.

    Article 714 of the UAE Civil Code provides for anti-usury concerning lending and states that where the loan contract provides for a benefit which is in excess of the essence or subject matter of the contract, otherwise than a guarantee of the lender's rights, such provision shall be void, but the contract shall remain valid.

    However, following the global era of banking and finance, the Constitutional Department of the Federal Supreme Court of Abu Dhabi, in its metamorphic Decision Number 14/9, (28 June 1981), entitled the charging of simple interest in connection with banking operations and stating that economic necessity requires the charging of simple interest by banks. Further, Judgment Number 245/20 (7 May 2000) of the Federal Supreme Court of Abu Dhabi equally endorsed simple interest and considered the contractual interest received by the banks as lawful.

    The UAE Federal Law Number 18 of 1993 Issuing the Commercial Transactions Law ("UAE Commercial Code") expressly permits the interest on any delayed payment. The interdiction in Article 714 of the UAE Civil Code is generally acceptable to be not applicable to matters governed by the UAE Commercial Code.

    Article 76 of the UAE Commercial Code, in respect of commercial transactions, entitles a creditor to receive the interest on a commercial loan as per the interest rate stipulated in the contract. However, when such rate is not stated in the contract, it shall be calculated according to the interest rate prevailing in the market at the time of dealing, provided that it shall not exceed 12 percent until full settlement.

    Additionally, Article 77 of the UAE Commercial Code states that where the rate of interest is stipulated in the contract and the debtor delays the payment, the interest on the arrears shall be calculated on the basis of the agreed rate until full settlement. Similarly, Article 88 of the UAE Commercial Code states that unless otherwise agreed, where the commercial obligation is a sum of money which was known when the obligation arose and the debtor delays payment thereof, he shall be bound to pay to the creditors as compensation for the delay, the interest fixed in Articles 76 and 77 of the UAE Commercial Code.

    Article 90 of the UAE Commercial Code states that the interests on arrears for delay of payment of commercial debts are due upon maturity unless otherwise provided in the law or in an agreement.

    Further, as per Article 409(3) of the UAE Commercial Code, the borrower shall be bound to repay the loan along with its interests to the bank within such time limits and according to such conditions as are agreed.

    The interest is categorized more under damages, rather than being regarded to be an 'unjust gain' under the contract; however, accrual of interest on arrears is not conditioned upon the creditor proving that he sustained the damages as a result of such delay as per Article 89 of the UAE Commercial Code.

    Furthermore, as per Article 91(1) of the UAE Commercial Code, a creditor may claim complementary damages in addition to the interest on arrears without it being mandatory or necessary for the creditor to prove that such damages resulted by the debtor's fraudulent conduct or gross fault. It is worth noting here that should the creditor while claiming his right cause, in bad faith, the persistence of the dispute, the court holds the right to reduce the interest or not award any interest at all for the period of the unjustified prolongation.

    The UAE laws do not recognize and do not permit compound interest, although it may be charged by commercial banks and financial institutions in the UAE. However, the Islamic banks and financial institutions (governed by Federal Law Number 6 of 1985) apply the Islamic Shari'a Law and thus prohibit the application of compound interest.

     

    ABUDHABI  

    Articles 61 and 62 of the Civil Courts Procedures Law number 3 of 1970 of Abu Dhabi as amended by Law Number 3 and Law Number 4 of 1987, stipulated that the interest may be calculated in respect of an awarded sum as of the due date of the amount or any other subsequent date until final payment or any preceding date provided that the interest rate shall not exceed the agreed or else the applied rate at any stage before initiating a lawsuit. And in the absence of the agreement, the rate may be determined at the court's discretion on condition that the rate shall not exceed 12 percent per annum in respect of commercial transactions and 9 percent in respect of non-commercial ones. Federal Law Number 11 of 1992 in respect to Civil Procedures invalidated all previous laws, decrees and instructions in the same respect; however, excluding the provision in respect of interest where it stated that such provisions should apply and continue to be effective.

    In Judgment Number 245/20 (7 May 2000) by the Federal Supreme Court of Abu Dhabi, the court held that the simple interest should be calculated and awarded on the basis of the agreed rate until full repayment even if it exceeds 12 percent per annum and only limiting it up to a maximum of 12 percent per annum in the absence of such agreement.

    The interest is calculated on the "Principal Indebtedness", and the delay interest is calculated on the "Outstanding Principal Indebtedness". The total awarded amount of interest shall not exceed the "Principal Indebtedness" and shall be simple interest.

    Dubai International Financial Centre (DIFC)

    Interest is claimed under DIFC law and under Article 39 of the DIFC Law Number 10 of 2004 which specifically permits the interest to be recovered on a judgment for damages with interest beginning from the date of the judgment. The rate of interest is fixed as per the rules of the DIFC Court or at the discretion of the DIFC Court.

    Correspondingly, there are no restrictions on claiming an interest under the DIFC Arbitration Law and no mandatory or customary rates. The arbitral tribunals generally tend to award interest at between 9 and 12 percent per annum, but this is matter specific.

     

    ]]>
    Wed, 03 Mar 2021 16:09:00 GMT
    <![CDATA[Doing business in KSA-II]]> Doing business in the Kingdom of Saudi Arabia- Part ii

    Tax

    XII. What contributions are made towards social security by the employee and the employer during the employment relationship? Is there an Income Tax regulation in the KSA?

    There are no income taxes impositions for the employees; however, the Saudi employees must pay 10 percent of their wages as a contribution towards social security to the General Organization of Social Insurance while the Non-Saudi employees are not required to make such a contribution from their income. The employers must make contributions for the benefit of their employees, being 12 percent for the Saudi employees and 2 percent for the Non-Saudi employees.

    ZAKAT

    Ministerial Resolution Number 2216, dated 7/7/1440H, the Implementing Regulation for Zakat is applicable to the fiscal year commencing 1 January 2019 onwards for Zakat payers who are filing their Zakat returns based on accounting records. It specifically focusses on the Zakat collection regulations in the commercial activities apart from other Zakatable funds together with the requirements for filling Zakat declaration, the procedures of assessment, examination and payment, and their time periods. The Zakat collected by the GAZT shall be deposited in the Social Security Account, which shall be further distributed to the poor and needy in accordance with Royal Decree Number 161/5 dated 51383/1/H (28 May 1963).  

    The Zakat is a form of tithe and is paid by the Saudi individuals and companies annually, within the provisions of Islamic law as laid down by Royal Decree Number 17/2/28/8634 dated 29/6/1370 H (1950)

    The overview of the Zakat By-Law:   

    The Listed companies are subject to Zakat if the founders or those considered as founders are Saudis or GCC nationals. The permanent establishment of the non-resident Saudis or those who are subject to the same treatment as Saudis is subject to Zakat, provided that specific criteria are met, noting that, the By-Law is not stating a definition of the Permanent establishment. Zakat shall be levied at 2.5 percent of Zakat-base for the respective Hijri year. Where Zakat-payer's fiscal period does not match Hijri year, Zakat shall be calculated on a daily basis (i.e., the daily rate is 0.00007 percent); therefore, Zakat rate for the Gregorian year (i.e., 365 days) will be 2.578 percent, unless the Zakat base is the net adjusted profit, Zakat rate is 2.5 percent regardless the fiscal period's duration. In case of the first fiscal period or transfer of ownership, Zakat rate is prorated to the number of days, noting that Zakat is not applicable to the last fiscal period if it's less than 354 days.   

    Taxes on Corporate Income  

    Royal Decree Number M/70 dated 11/7/1439H (28 March 2018) had been issued to amend the KSA tax legislation to repeal the Natural Gas Investment Tax provisions. Effective from 1 January 2018, natural gas investments are now taxed under the general provisions of the income tax legislation including, among other provisions, is subject to the general income tax rate of 20 percent instead of the previous rate of 30 percent. Only non-Saudi investors will be liable for income tax in Saudi Arabia. Where a company is owned by both Saudi and non-Saudi interests, the portion of taxable income attributable to the non-Saudi interest is subject to income tax, and the Saudi share goes into the basis on which Zakat is assessed.   

    As per the income tax law, the following persons are subjected to income tax:   

  • Resident non-Saudi natural person carrying on activities in Saudi Arabia.   

  • Non-resident person carrying out activities in Saudi Arabia through a Permanent Establishment.   

  • Resident capital companies concerning the shares of non-Saudi partners, resident or non-resident, natural or legal persons. Shares of non-Saudi partners do not include shares held for speculation ‎purposes through trading shares of a joint-stock company in the Saudi Stock ‎Exchange. The shares of non-Saudis in mixed companies, being partners in resident ‎capital companies, are not considered as Saudi shares for the purposes of this Law.    

  • Non-resident person having other income subject to tax from sources within Saudi Arabia without having a Permanent Establishment. 

  • Person engaged in oil or other hydrocarbon production.   

  • Person engaged in natural gas investment fields. 

  • Income tax is at 20 percent of the net adjusted profits. However, income from oil and hydrocarbon production is subject to tax at a rate ranging from 50 percent to 85 percent, and the tax base of a person engaged in the natural gas investment shall be independent of the tax base relating to the same person's other activities.   

    For VAT check the answer to Question III.

    Dividends paid and received: If the foreign corporate shareholders transfer the dividends received to their overseas accounts, then such amounts are taxed at 5 percent as withholding tax. Dividends received into the KSA from foreign investments are not taxable.

    Interest and IP royalties paid: Interest paid to foreign corporate shareholders is taxed at 5 percent as withholding tax, and the IP royalties paid to foreign corporate shareholders are taxed at 15 percent as withholding tax.

    Custom Duties: Exports are not taxed. However, the Saudi Arabia Council of Ministers announced an increase to the rates of customs duties, effective 20 June 2020 reaching 10 percent, 15 percent and 20 percent for businesses importing goods in the KSA.

    Competition    

    XIII.        What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?

  • The Board of the General Authority for Competition (the "Board"). 
  • The General Authority for Competition (the "GAC"). 
  • The Committee for Adjudication of Competition Law Violations (the "Committee"). 
  • XIV.        How would a dominant market position be derived?

    Dominance in the relevant market is achieved by meeting one or both of the following criteria:  

  • A market share of 40 percent or more of the relevant market; whether it is the share of a single firm or a group of firms, whenever that group acts with a common will in committing the violation or causing the effect.  
  • Ability to influence a relevant market such as controlling prices, production, or demand; whether it is the ability of a single firm or a group of firms, whenever that group acts with a common will in committing the violation or causing the effect. 
  •  

     

    ]]>
    Sun, 28 Feb 2021 15:37:00 GMT
    <![CDATA[Pharma 2020 KSA]]> Pharma 2020 KSA

    1. What are the main laws governing the manufacture and sale of pharmaceuticals in the jurisdiction?

    Pharmaceutical Establishments in Saudi Arabia are governed by the Law of Pharmaceutical Establishments and Preparations issued by Saudi Arabia Royal Decree No. M31/1425 dated 01/06/1425H (corresponding to 18/07/2004) (the PE Law).

    2. Are there any significant differences in this area of law in this jurisdiction compared to jurisdictions like the US and EU?

    For dispensing pharmacies, ownership is restricted to Saudi nationals by the PE Law. However, there are no restrictions on foreign citizens, generally to own and start a business. The process of starting a business does not vary based on citizenship status.

    The regulation most European countries share is that foreigners intending to open a business do not need a work permit or any other type of visa. They need a residency permit in the country where they intend to establish their business. These residency permits, temporary at first, convert to a long-term residency permit depending on the success of the business venture.

    3. Who are the main regulators governing the licensing, the sale, or the manufacture of pharmaceuticals in this jurisdiction?

    The Ministry of Health regulates the healthcare sector in Saudi Arabia. The other critical public body is the Saudi Food and Drug Authority (SFDA) which grants licenses for pharmaceuticals and pharmaceutical manufacturing.

    4. When new drugs are created, which agency is responsible for giving the permission for the sale/manufacture in this jurisdiction?

    The Ministry of Health and the Saudi Food and Drug Authority.

    5. What steps must a pharmacist take before being allowed to practice in this jurisdiction?

    A Pharmacist is defined under Article 1 of Saudi Arabia Royal Decree No. M31/1425 as a person holding a Doctor of Pharmacy (PharmD) degree or a bachelor's degree in Pharmaceutical Sciences from a Saudi Pharmacy College or equivalent. A Licensed Pharmacist is a pharmacist licensed to practice the profession in the Kingdom.

    Under Article 11 of Saudi Arabia Royal Decree No. M31/1425, only a full-time licensed Saudi pharmacist holding a practice license may work in the field of introducing and advertising pharmaceutical and herbal preparations. The Minister of Health may grant exemption from the nationality condition in the absence of an adequate number of Saudi pharmacists.

    6. What are the requirements involving ownership and licensing of a pharmacy in this jurisdiction?

    A pharmaceutical establishment must obtain the required license from the Ministry in the name of the owner.

    The ownership of a pharmacy will be restricted to Saudis and granting a license to them will be subject to the following conditions:

  • The owner, or one of the partners, must be a pharmacist holding the practice license. The Minister of Health may consider the nationality condition sufficient in remote areas specified by the Implementing Regulations.
  • The manager of the pharmacy must be a full-time Saudi pharmacist holding a practice license. The Minister of Health may grant exemption from the nationality condition in the absence of a sufficient number of Saudi pharmacists.
  • The pharmacy will satisfy the conditions and specifications set out in the Regulations.
  • An applicant for a pharmaceutical establishment license or renewal of it will pay the prescribed fees for the pharmacy of 1,000 Riyals.
  • 7. What rules govern the dispensing of prescription of drugs in this jurisdiction?

    The pharmaceutical establishments may not possess any amount of pharmaceutical and herbal preparations without having the documents which establish their purchase origin and quantities.

    The pharmaceutical and herbal preparations may not be circulated before registration with the Ministry.

    8. Are there rules on the pricing on prescription drugs in this jurisdiction?

    Medicines will be priced based on factory price or price of export to Saudi Arabia in the country of origin's currency or any other currency as designated by the Ministry. The Ministry will review the prices of medicines periodically.

    A profit margin will be added to the prices of medicines for a wholesale pharmaceutical preparations sale store and pharmacy; Sale Store Profit Margin (SSPM) (based on factory or export price) and Pharmacy Profit Margin (PPM) (based on pharmaceutical sale store price) Factory or Export Price.

  • 50 Riyals or les-SSPM of 15% and PPM of 20%.
  • More than 50 Riyals and not exceeding 200 Riyals-SSPM of 10% and PPM of 15%.
  • More than 200 Riyals-SSPM of 10% and PPM of 10%.
  • 9. What rules apply when importing controlled substances and prescription drugs into the country?

    It is illegal to import drugs or medical materials which are banned in Saudi Arabia or internationally. The Ministry of Health may, if necessary, approve the import of unrestricted pharmaceutical and herbal preparations before registration.

    Pharmaceutical and herbal preparations sale stores may import registered pharmaceutical and herbal preparations if not made available by the factory, based on the approval by the Ministry of Health.

    For import requests by Government and private hospitals, the following points have to be considered.

  • The imported product must be important and not having a registered alternative in Saudi Arabia.
  • The manufacturer should be registered with SFDA unless the product could not be obtained from the registered manufacturer.
  • The country of origin must market the product.
  • The required quantity must be sufficient for a maximum of six months.
  • The imported product will not be sold or loaned to any other party, without drug sector permission.
  • 10. What are the penalties for contravention of these import rules?

    The committees formed under the Law of Private Health Institutions issued by Saudi Arabia Royal Decree No. M40/1423 dated 03/11/1423H will consider violations of the provisions of the PE Law. The Committee may, without prejudice to any severer penalty prescribed by another law, impose one or more of the following penalties:

  • Warning;
  • Fine not exceeding 100,000 Riyals;
  • Close the establishment for up to sixty days; and/or
  • Revoke the establishment's license.
  • The Committee decisions will be approved by the Minister of Health and may be appealed within sixty days to the Board of Grievances. The final decision imposing the penalty may be published at the expense of the violator in three local newspapers.

    11. Do rules on import of controlled substances and prescription drugs come into play when drugs are brought into the country having been purchased overseas on the internet or having been brought into the country in transit?

    Clearance of Pharmaceutical Products for Personal Use

    The request to import prescription drugs must be filed with the branch of the SFDA at the port of entry where the drugs will arrive.

    Drugs which are for personal use will be cleared for import into Saudi Arabia provided:

  • The prescription medications must be accompanied with:
  • A medical report (less than six months old) issued by the patient's medical care provider or a doctor's prescription (less than six months old) in the name of the patient. The prescription and the report must fulfil and mention the details required.
  • The importer of the prescription medications will be personally responsible for its lawful use responsible to limit its usage to only the intended patient.
  • Copy of patient identification document.
  • The allowable prescription medicine to be cleared for import will for the duration of the visit or one month's supply, whichever is shorter.
  • 12. What are the main laws protecting intellectual property in the pharmaceutical industry? Are there any significant allowances in the way things work compared to jurisdictions such as the US and EU?

    Law Number 159 on the Protection of Patents, Layout Designs of Integrated Circuits, Plant Varieties, and Industrial Models. Saudi Arabia has established the Saudi Authority for Intellectual Property (SAIP), which consolidates all the different Intellectual Property (IP) departments under one umbrella and provides an overall strategic direction and coordinates IP policy.

    Saudi Arabia has also adopted the unified GCC Trademark Law and is also a member of the GCC Patent Law and GCC Customs Law which helps harmonise IP practices in Saudi Arabia, the UAE and other GCC members. In Saudi Arabia, patent registration and registering trademarks is granted on a first-to-file basis.

    The availability of IP rights and their scope of protection may strongly differ to the US and EU. Most rights must be registered in Saudi Arabia, under local laws, in order to be enforced. A US trademark registration or the US patent will not be protected in Saudi Arabia.

    Saudi Arabia has granted domestic companies the marketing approvals to produce generic versions of pharmaceutical products in the GCC which are under patent protection in other countries. This approval has raised various concerns. These approvals conflict with Saudi Arabia's domestic law and raise significant questions about the transparency of marketing approvals and the predictability of patent protection in Saudi Arabia.

    13. Are health supplements, vitamins or other non-prescription drugs regulated in any

    particular way?

    For Shipments Clearance of any Over the Counter Medication, Vitamins, Herbal Products, Food Supplements or Cosmetics, the following documents are required by the SFDA:

    I. The application form which must be filled out clearly.

    II. An attached copy of medical reports or prescriptions, if requested.

    III. An attached copy of Identification (Iqama or Passport).

    IV. An attached copy of invoice.

    V. An attached copy of the bill of lading.

    14. Are there any significant rules on the packaging of drugs in this jurisdiction?

    There is a Guidance for Graphic Design of Medication Packaging issued by the SFDA. The guidance is applicable to SFDA registered or under-registration medicinal products intended for human use in Saudi Arabia. The guidance is complementary to the GCC Guidance for Presenting the SPC (Summary of Product Characteristics), PIL (Patient Information leaflet) and Labelling Information with more illustrations and details to minimise medication errors. It is intended for solid oral dosage forms, which are the most common type of primary packaging and secondary packaging used on the container label. It also should be used for all injectable medicines as well. The design considerations and principles outlined in the guidance can also be applied to other products dosage forms.

    15. Are those involved in virtual medicine allowed to prescribe or sell drugs to patients?

    The Telemedicine Regulations govern this area in Saudi Arabia. The Regulations mention telemedicine will be used for consultation, diagnostics, screening, triage, obtaining a medical opinion from a healthcare practitioner (HCP) and the monitoring of any medical conditions.

    The Regulations also define the term telemedicine as 'medical practice using information and communication technology (ICT) from a remote place involving a live or virtual interaction between the healthcare personnel and the patient. The location of two parties in the consultation will be different and involve Artificial Intelligence or robotics to come under the ambit of telemedicine. Teleconsultations between a patient and healthcare personnel or between two healthcare personnel must involve video calls and not exclusively audio to qualify as telemedicine.

    An HCP practising telemedicine may deliver an online prescription or medical investigation, which will comply with the medical prescription and investigation regulations applied in Saudi Arabia. The HCP will be responsible for the prescription and/or medical investigation delivered in line with professional responsibility.

    16. Are there any rules governing the advertising of drugs?

    Advertising pharmaceutical and herbal preparations in the media will be subject to controls set out in the Implementing Regulations. Under Article 11 of the PE Law, only a full-time licensed Saudi pharmacist holding a practice license may work in the field of introducing and advertising pharmaceutical and herbal preparations. The Minister of Health may grant exemption from the nationality condition in the absence of an adequate number of Saudi pharmacists.

    17. What is the main legislation governing legal possession of controlled substances?

    The Saudi law of Narcotics control is enacted through Saudi Arabia Royal Order No. 4/B/966/1407 dated 10/07/1407H.

    18. Are laboratories carrying out research with drugs required to be registered? If so, who is the regulator and what are the main steps?

    The Executive Directorate of Laboratories is responsible for supervising and managing the pharmaceutical laboratories which belong to SFDA's drug sector to assure their conformity with the requirements of the international quality and competence standards along with analysing imported or locally manufactured drugs in order to ensure their compliance with the authority's national standards as well as the standards of international pharmacopoeia and world health organisation.

    The Clinical Trials administration aims to provide evaluation, registration and monitoring of the Clinical Trials conducted in Saudi Arabia, contribute to the protection of clinical trial subjects and strengthen the capacity of the regulatory body, legislative and oversight functions.

    All the clinical trials involving drugs must be registered with the SFDA Drug Sector's Clinical Trials Department through the Saudi Clinical Trials Registry (SCTR). However, the registration of a clinical trial will not indicate approval.

    The researcher, sponsor, and CRO must adhere to the regulations of Research Ethics Code on Living Creatures issued by Saudi Arabia Royal Decree No. M59/1431 on 14/9/1431 H.

    It is mandatory to adhere to SFDA memos E/15481 and E/15482 (13/5/1434 H) in regard to the registration of local institutional review boards (IRBs). The researcher, sponsor and CRO must adhere to good clinical practice (GCP) in line with the ICH-E6 guideline. According to the memo E/9699 (23/4/1432 H), the sponsor or CRO must pay 15,000 Riyals for each submitted trial as an evaluation fee for the clinical trial, excluding phase IV from these fees.

    19. Are there any specific health and safety rules governing the operation of laboratories

    handling dangerous materials and disposal of waste substances?

    The medical waste management programme at the Ministry of Health is responsible for the application of the medical waste programme in the health facilities in line with the unified law for managing the healthcare waste in the Cooperation Council for the Arab States of the Gulf (CCASG) and implementing regulations issued by Saudi Arabia Ministerial Decision No. 60567/2/22 on 12 August 2006.

    20. Are there any specific rules governing testing of pharmaceuticals on humans or animals?

    The study needs to be approved by both the Ministry of Health and the Saudi Food and Drugs Authority (SFDA).

    21. Do rules on dispensing drugs to animals differ from those in dispensing to humans?

    Veterinary medicines are prescribed by a veterinary in the same way as a doctor would issue a prescription.

    22. Do the rules on practicing as a pharmacist or selling drugs differ in the free zones?

    No.

    23. Do the rules on manufacturing pharmaceutical products or pharmaceutical research differ in the free zones?

    No.

    24. How do product safety and personal injury legislation operate in situations where a patient has been injured as a result of drug which was dispensed or manufactured in this jurisdiction?

    The complaint could be filed in the Ministry of Health using the online portal. Article 27 of the Law of Practising Healthcare Professions (2005) deals with Civil Liability and states any healthcare professional who is committing malpractice, causing harm to a patient will be held liable for indemnification.

    25. Are there any drugs or therapies which are barred or have restrictions on their dispensing because of religious reasons?

    The basis for Saudi Arabia's constitution is Islam and the Holy Quran. The Government tends to decide the legality of actions based on Islamic law or on the basis of whether or not it will lead people away from Islam. The laws in Saudi Arabia prohibit alcohol in the Kingdom as they are against Islam. Drug trafficking is always punished by death.

     

    ]]>
    Sun, 21 Feb 2021 14:25:00 GMT
    <![CDATA[Pharma 2020]]> Pharma 2020

    1. What are the main laws governing the manufacture and sale of pharmaceuticals in the jurisdiction?

    Bahrain Decree-Law No. 18/1997 with Respect to the Practice of Pharmacists and Pharmaceutical Centres (as amended by Bahrain Decree-Law No. 20/2015) (the Law).

    2. Are there any significant differences in this area of law in this jurisdiction compared to jurisdictions like the US and EU?

    Bahrain Decree-Law No. 18/1997 specifies a license for opening a pharmaceutical centre will only be given for licensed Bahraini pharmacist who is at least 21 years or a company where more than one pharmacist owns at least 50% of the company shares.

    Bahrain Decree-Law No. 18/1997 also lays limits the number of pharmacies. No natural or legal person or a partner in a company may be licensed to open more than five pharmacies. This number may be exceeded by one pharmacy in any area of more than five square kilometres without an existing pharmacy, so long as a decision has been issued by the Board of Directors.

    3. Who are the main regulators governing the licensing, the sale, or the manufacture of

    pharmaceuticals in this jurisdiction?

    The National Health Regulatory Authority (the NHRA) is responsible for regulating healthcare in Bahrain.

    4. When new drugs are created, which agency is responsible for giving the permission for the sale/manufacture in this jurisdiction?

    The National Health Regulatory Authority (the NHRA).

    5. What steps must a pharmacist take before being allowed to practice in this jurisdiction?

    A Licensed Pharmacist is defined in Bahrain Decree-Law No. 18/1997 as a pharmacist licensed to practice the pharmacy profession in line with the Law. Anyone who wants to obtain a license to practice the pharmacy profession must submit an application on the application form intended for this purpose to the NHRA. Under Bahrain Decree-Law No. 18/1997, the requirements needed to obtain a license to practice are as follows:

  • To be a Bahraini national, and the Board of Directors may exempt them from this requirement if there are justifiable reasons.
  • Must hold a bachelor's degree in pharmacy or equivalent from an accredited programme.
  • Any document certifying the applicant's success in local concessions or interviews organised by a special committeeestablished for this purpose.
  • A Certificate proving that no criminal judgments have been issued against an applicant which prejudices their integrity or honour unless they have been forgiven by the relevant authorities.
  • The licensing standards are set by the NHRA. They also specify the educational qualifications and professional experience required for Bahraini nationals and non-Bahraini residents living in Bahrain.

    6. What are the requirements involving ownership and licensing of a pharmacy in this

    jurisdiction?

    Pharmaceutical Centres are defined in Bahrain Decree-Law No. 18/1997 as all type of public pharmacies, their branches and private pharmacies. A pharmaceutical centre may not be opened without obtaining a license from the NHRA first. A license for opening a pharmaceutical centre will only be given for licensed Bahraini pharmacist who are at least 21 or a company where more than one pharmacist owns at least 50% of the company's shares. If the owner dies, the pharmacy will be managed by a pharmacist for the benefit of the heirs.

    7. What rules govern the dispensing of prescription of drugs in this jurisdiction?

    Under Bahrain Decree-Law No. 18/1997, the controlled drugs may only be dispensed by a licensed pharmacist and a register must be kept of all amounts received, dispensed, the date the drug was dispensed as well as the name of the doctor who issued the prescription. The prescription must be retained for one year. The prescription must be written in clear handwriting for the pharmacist to prepare the medicine or pharmaceutical product listed without any confusion or ambiguity. The pharmacist may not replace the medicine or pharmaceutical product prescribed in the prescription with another drug. In addition, the pharmacist may, with the consent of the patient, dispense a drug similar to that prescribed in the prescription if the drug contains the same active ingredient and the same concentration in the prescribed medicine, provided the physician did not document otherwise.

    The pharmacist must refrain from dispensing a product or pharmaceutical product if they suspect an error in the prescription and must consult the relevant physician. The pharmacist does not have permission to make any changes to the medications or pharmaceutical products recorded in the prescription with respect to the quantity, type or method of use, without prior written consent from the relevant physician.

    8. Are there rules on the pricing on prescription drugs in this jurisdiction?

    All pharmacies must have an updated registry recording all medications prepared on a daily basis indicating, among other things, the price along with the relevant pharmacist signature.

    The official price of all pharmaceutical products must be declared and must be shown on the package. The pharmacies should keep a list of all the prices set by the NHRA.

    Any one who sells drugs or pharmaceutical products or health products at a price exceeding the official price set by the NHRA will be guilty of an offence. They will be jailed for one month and/or fined up to 300 Dinars.

    9. What rules apply when importing controlled substances and prescription drugs into the country?

    With the exception of pharmaceutical facilities, drugs and pharmaceutical products, including any free medical samples, may not be imported except through the pharmacy centres and subject to obtaining a license from the NHRA, in line with the conditions and procedures determined by a decision of the Board of Directors.

    Drugs and pharmaceutical products cannot be imported for personal use, whether in parcels or other packages, unless the conditions specified by a decision of the Board of Directors are met.

    The import of controlled drugs is subject to the following conditions:

  • The importer must submit a request specifying the types and quantities of drugs to be imported after reviewing the products records at the relevant section of the NHRA.
  • The approval for the import of the product complies with the accredited procedure set by international organizations.
  • 10. What are the penalties for contravention of these import rules?

    Anyone who imports medicines and/or pharmaceutical products in violation of Bahrain Decree-Law No. 18/1997 has the right to re-export the quantity within one month of the date the product is delivered at their own expense.

    The offence of violating the importing provision of Bahrain Decree-Law No. 18/1997 will lead to a fine of 200 Dinars.

    Bahrain Decree-Law No. 18/1997 prohibits the importing of drugs and pharmaceutical products for personal use. Those who violate this provision will be fined up to 100 Dinars. These fines will be accompanied confiscating all of the drugs and pharmaceutical products or health products for which offences were committed. The importer of the product will have no right to demand compensation.

    11. Do rules on import of controlled substances and prescription drugs come into play when drugs are brought into the country having been purchased overseas on the internet or having been brought into the country in transit?

    Yes.

    12. What are the main laws protecting intellectual property in the pharmaceutical industry? Are there any significant allowances in the way things work compared to jurisdictions such as the US and EU?

    Bahrain is a contracting state to the Patent Cooperation Treaty (PCT) which came into force in the Kingdom on 18 March 2007. The nationals and residents of Bahrain are themselves able to file PCT applications.

    The Gulf Cooperation Council Patent Office (GCCPO) offers a convenient alternative to filing separate applications in the GCC without the need for further validation in each country or payment of separate annuities.

    Patents are also protected in Bahrain under Bahrain Law No. 1/2004 on Patents and Utility Models (as amended by Bahrain Law No. 14/2006).

    13. Are health supplements, vitamins or other non-prescription drugs regulated in any

    particular way?

    According to Bahrain Decree No. 9/2016 in relation to Classifying Pharmaceutical Products and Health Products, a pharmaceutical product is classified as a health product or medicine, based on the Pharmaceutical Product Classification Guideline annexure to the Decree (PPC Guidelines). The health products include herbal products, products containing vitamins or minerals and other products containing specific substances like amino acids, charcoal lipids like Omega 3 and certain antiseptics.

    Before a pharmaceutical product can be sold in Bahrain, an application must be made to the NHRA and this must contain all of the necessary data supporting its quality, safety and efficacy, based on the current guidelines and procedures. PPR members review the scientific aspects of each application and reach a conclusion on the likely balance of any benefits versus risk before arriving at a decision.

    14. Are there any significant rules on the packaging of drugs in this jurisdiction?

    The official price of all pharmaceutical products must be declared and must be shown on the package in line with Bahrain Decree-Law No. 18/1997 and NHRA rules and regulations. The leaflet of each pharmaceutical drug must have the following information in both Arabic and English:

  • List of the active components and the scientific name of each component.
  • The quantities of active components in line with the required doses or regimen.
  • List components which may interfere or affect the use of the medicine or pharmaceutical product.
  • The internationally accredited therapeutic uses of the product.
  • The forms of drug doses.
  • The side effects and major adverse reactions of the product or pharmaceutical product.
  • Required precautionary measures, prohibitions and taboos.
  • Main interactions.
  • The product name and address.
  • A list of the scientific references used.
  • 15. Are those involved in virtual medicine allowed to prescribe or sell drugs to patients?

    Yes, telemedicine is legally permitted in Bahrain in line with NHRA standards.

    16. Are there any rules governing the advertising of drugs?

    The text and illustrations in the advertisements directed at doctors and health professionals must be in line with approved scientific data and must be clear and unequivocal or unambiguous. It is completely prohibited to advertise prescription drugs. To advertise non-prescription drugs, written consent from the NHRA is required. The pharmaceutical product advertisements must be consistent with the declared contents of the product and should not contain expressions contrary to public morals or which would mislead the public. No person may be engaged in the promotion of pharmaceutical product unless licensed by the State after paying the licensing fees. Those to be licensed to practice this profession must have a university degree or diploma from a credited college or institute. Drug specimens intended for advertising cannot be traded or offered for sale. These specimens must be labelled Free medical samples clearly in Arabic and English. The doctors may be provided with free samples of drugs when requested. However, it is prohibited to promote free samples to the public.

    17. What is the main legislation governing legal possession of controlled substances?

    Bahrain Law No. 15/2007 with respect to Narcotic Drugs and Psychotropic Substances.

    18. Are laboratories carrying out research with drugs required to be registered? If so, who is the regulator and what are the main steps?

    A pharmaceutical manufacturing factory will contain the necessary requirements to function and in particular, the following sections:

  • Production: containing the necessary machinery and equipment specified by the Ministry.
  • Drug Control section: includes three parts:
  • The chemical laboratory equipped with raw substances and technical equipment for analysis during the
  • production process.
  • Sterilisation laboratory equipped with modern technical equipment for the sterilisation of produced drugs.
  • Microbiology laboratory equipped with appropriate devices to measure the rate or the presence of bacteria and fungi etc.
  • 19. Are there any specific health and safety rules governing the operation of laboratories handling dangerous materials and disposal of waste substances?

    The Waste Management Department at the Supreme Council for the Environment will study the waste disposal request scientifically and accordingly accurately determine the best way to dispose of the waste.

    20. Are there any specific rules governing testing of pharmaceuticals on humans or anima ls?

    The NHRA has established clinical trials or regulatory research requirements which define the conditions under which clinical trials or research will be conducted in Bahrain. The regulatory requirements also apply to all healthcare facilities and providers, clinicians-investigators, academic centers, sponsors and third parties participating in the clinical trials or research. All research involving human beings will be reviewed by an Institutional Independent Research Ethics Committee (IREC) to ensure the appropriate ethical standards. IREC's standards and requirements are based on international regulations and standards on Good Clinical Practice, provided by leading regulatory bodies like the World Health Organization, US Food & Drug Administration, European Medicines Agency and International Conference of Technical Requirements for the Registration of Pharmaceuticals for Human Use.

    The trial subject can be any of the following:

    I. A healthy volunteer;

    II. A patient whose disease is not related to the administration of the trial product; or

    III. A patient whose disease is related to the use of the trial product.

    21. Do rules on dispensing drugs to animals differ from those in dispensing to humans?

    A licensee authorized to practice the profession will not combine the practice of pharmacy and medicine or dentistry or veterinary medicine, even if they hold the required qualifications. However, the licensee is not in violation of the practice of medicine while practising First Aid in cases of emergency or accidents in the pharmacy premises. However, the licensee must refrain from prescribing medication or other conditions in violation of the law for practising medicine.

    22. Do the rules on practicing as a pharmacist or selling drugs differ in the free zones?

    No.

    23. Do the rules on manufacturing pharmaceutical products or pharmaceutical research differ in the free zones?

    No.

    24. How do product safety and personal injury legislation operate in situations where a patient has been injured as a result of drug which was dispensed or manufactured in this jurisdiction?

    The medical complaint unit of the NHRA is responsible for studying medical complaints and judicial assignments concerning the medical errors and the disciplinary accountability for the medical error or violation of the profession code of ethics or of the law of professional practice in Bahrain. The unit is also responsible for the study of adverse events reported to the NHRA by the healthcare providers and facilities. The unit deals with all complaints with the utmost confidentiality and gives equal consideration in line with the NHRA rules and regulations. Any complaints alleging error or negligence involving death or serious harm, and those which pose an immediate threat to public safety or health will be given priority.

    25. Are there any drugs or therapies which are barred or have restrictions on their dispensing because of religious reasons?

    As an Islamic country, Bahrain has a number of laws based around Quran teachings. It is forbidden for Muslims to consume alcohol, but non-Muslims in Bahrain may purchase alcohol from licensed stores. However, getting drunk in public will lead to detentions and fines. The use, possession, and trafficking of illegal drugs are strictly prohibited. These could lead to hefty fines, jail terms and even the death penalty.

     

    ]]>
    Sun, 21 Feb 2021 13:24:00 GMT
    <![CDATA[Health & Safety 2020]]> Health & Safety 2020

    1. What is the main legislation governing health and safety in this jurisdiction?

    The primary legislation governing health and safety in Bahrain is the Occupational Health and Safety Regulations (OHS) which were introduced in 1976. These were broadly based on the UK Health and Safety at Work Act of 1974. This legislation constitutes 30 Ministerial Orders, the latest of which were passed in 2006 and 2005, but the majority of which are dated from 1976 or 1977. Since 2000, new Orders have been passed to cover first aid in the workplace, the medical examination of workers, the protection of workers from fire hazards and reporting procedures for occupational injuries and diseases.

    The 1976 Labour Law for the Private Sector promulgated by Bahrain Decree-Law No. 23/1976 is the overarching labour law, with Articles 91 to 97 relating to the general health and safety duties of employers. The Labour Inspection Department was established under this Law.

    2. What are the main differences between health & safety legislation in this jurisdiction and other major jurisdictions?

    Although Bahrain's health and safety regulations are increasingly tough, Bahraini law does not carry the weight of the UK Health & Safety at Work Act 1974 on which it is based, in terms of extent or enforcement. It is one thing to bring in legislation,but another to get organisations to comply with it.

    Unless faced with serious accidents, those who run organisations in Bahrain do not pay much pre-emptive attention to the implications of accidents, or their prevention. There is a rather conspicuous trend of production-driven businesses, such as those in construction, manufacturing, the car industry and even the education sector, of not placing safety as the top priority.

    Another deficiency is that health and safety inspectors often have little specialist knowledge. The Government invests little in their development and there are only six to eight health and safety inspectors in the country with a population of one million.

    Increasing legislation has created a need for more safety professionals in Bahrain. There is now a legal requirement that any organisation employing more than 50 people must have someone who is responsible for safety regardless of the industry.

    3. What are the main bodies responsible for health and safety monitoring, regulation and prosecution? What are their key powers?

    The primary body is the Supreme Safety Committee which is part of the Labour Ministry and is responsible for health and safety strategy in all industrial sectors, large companies and the Health, Environment, and Civil Defence Ministries. The Committee makes recommendations to the Government, such as on revising current legislation, and the need for a single Government agency, similar to the Health and Safety Executive (HSE) in the UK, to develop safety strategy and propose and enforce legislation.

    4. Following an accident or a fatality - what reporting is required? What investigations may follow?

    Bahrain Ministerial Order No. 12/2013 governs the procedures required to report occupational injuries and diseases. Under Article 3 of Bahrain Ministerial Order No. 12/2013, an employer in any establishment, branch or workplace has to notify the Labour Ministry of any injury which results in the death of a worker, a serious injury, any injury which results in the worker's absence from work for seven successive days, or vehicle accidents which occur in the establishment or workplace.

    Under Article 5 of Bahrain Ministerial Order No. 12/2013, an employer will notify the Ministry of any injury or occupational diseases they are aware of in ten days from the date of notification. Under Article 7 of Bahrain Ministerial Order No. 12/2013 a worker must also notify the Labour Ministry in writing of any employment injury suffered by them which has resulted in a serious injury or an occupational disease.

    Under Article 8 of Bahrain Ministerial Order No. 12/2013, the Ministry will conduct a technical investigation of occupational accidents, injuries and diseases.

    5. What are the main industries with specific health and safety regimes? What are the key laws and regulations covering those regimes? And who are the monitoring and enforcement bodies?

    All industrial sectors and large companies in the region have to have a health and safety regime in place. The Occupational Health and Safety (OHS) Regulations in Bahrain, which were introduced in 1976, is the primary piece of legislation regulating health and safety regimes in the country.

    The primary monitoring and enforcing body is the Supreme Safety Committee of Bahrain's Labour Ministry, which is responsible for health and safety strategy in all industrial sectors, large companies and the Health, Environment, and Civil Defence Ministries.

    6. What are the core health and safety records companies must keep?

    Under Article 13 of Bahrain Ministerial Order No. 12/2013, an employer will keep a special register in which copies of the occupational injuries and diseases forms which have been reported in line with the provisions of this Order will be deposited, provided these forms are retained for at least five years.

    7. What are the main rules governing work in extreme temperatures? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Bahrain Ministerial Order No. 24/2017 with respect to Banning the Employment of Workers in the Construction Sector during the Sun and in Open Areas between 12pm and 4pm is the key piece of legislation in the country. Article 1 of Bahrain Ministerial Order No. 24/2017 states workers whose work requires them to work under the sun and in open areas will be prohibited from working during the 12pm to 4pm during July and August every year.

    The sole exception to Bahrain Ministerial Order No. 24/2017 applies to employees working in the oil and gas sector, in addition to emergency maintenance workers, provided an employer takes the necessary precautions to protect them from heat damage.

    Any one who violates the provisions of this order will be penalised in line with Article 192 of Bahrain Law No. 36/2012 (the Labour Law for the Private Sector). Articles 52 and 53 o Bahrain Law No. 36/2012 further safeguard their well-being by stating they are not to work nights and for more than six hours a day.

    8. What are the main rules protecting the health and safety of women or young people? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    To protect the health and safety of juveniles, Bahraini labour law has devoted Chapter 8 to the employment of juveniles. Article 51 states the employment of juveniles will be allowed in industries, other than those considered to be hazardous or unhealthy, in line with an Order made by the Health Minister in agreement with the Labour and Social Affairs Minister.

    Chapter 9 of the labour law safeguards the health and safety of women employed in the country. Article 59 states no woman can be employed between 8pm and 7am and Article 60 states it is prohibited to employ any woman in industries or occupations which are dangerous or unhealthy for their unborn child.

    9. What are the main rules governing work at heights or confined spaces? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    The 2005 Work at Heights Regulation provide guidance with regard to considering precautions for working at height. The kind of recommendations this document offers includes the following;

  • employers and those in control of any work at height activity must make sure work is properly planned, supervised and carried out by competent people.
  • Low-risk, relatively straightforward tasks would require less effort if planned. Therefore, employers and those in control must assess the risks first.
  • A sensible, pragmatic approach must be taken when considering precautions for working at height. Factors to weigh up include the height of the task, the duration and frequency and the condition of the surface being worked on.
  • The Approved Code of Practice (ACOP) offers guidance for those who work or control work in confined spaces. This Approved Code of Practice (ACOP) and associated guidance provide practical advice on how you can comply with the requirements of the Confined Spaces Regulations 1997 (SI 1997/1713).

    10. What are the main rules governing work with dangerous substances, radiation and chemicals? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Bahrain Ministerial Order No. 9/2014 with regard to the Protection of Workers from Physical Hazards states an employer will protect their workers from radiation-exposing hazards by adopting proper means such as;

  • the isolation of radiation sources from other working places and production processes whenever practically possible, and
  • the establishment of protective barriers designated to absorb or reduce heat, radiations,
  • the provision of adequate ventilation and suitable environmental improvement means.
  • 11. Are there any rules governing 'manual handling' of heavy goods? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Under Bahrain Ministerial Order No. 38/2014, with respect to determining the required conditions and the precautionary measures for the protection of workers from mechanical hazards and work environment, a worker will not operate work equipment which is not supplied with proper precautionary means and will not disable and stop whatever protection available to them. They will report any defect or technical fault in the equipment or machines which may subject them to danger and will follow the warning directions and given instructions to preserve their safety and protection against work hazards. (Article 2)

    Article 15 of Bahrain Ministerial Order No. 38/2014 states explicitly a worker may not be asked to lift, transfer or move a heavy load suspected to cause any injury to them.

    12. Are there any rules governing working time - from a health and safety perspective? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Under Article 53 of the Bahrain Labour Law, the worker may not be effectively employed for more than eight hours a day unless otherwise agreed, provided the effective working hours do not exceed ten hours a day.

    The working hours and rest periods are to be regulated in a way which ensures no workers are present at the workplace for more than eleven hours a day. This is calculated from the time of entering the place until they leave. The rest period will be calculated as part of the hours during which the worker is present at the workplace in case the work requires them to be present in the workplace.

    13. What rights and duties do employees have to report health and safety breaches?

    Under Article 121 of the Labour Law, if a worker sustains an injury by accident arising out of or in the course of their employment, the relevant employer will have to notify the occurrence of the accident within 24 hours to

    (a) the police station in the area where the accident occurred;

    (b) the Labour and Social Affairs Ministry; and

    (c) the Health Ministry.

    14. What rights and duties do employers have to report health and safety breaches?

    With regard to employment and occupational injuries, Article 121 states the relevant worker may notify the occurrence of the accident if their condition allows them to do so. The notification will have to include the worker's name, their occupation, address, nationality and wages on the date of the accident together with a brief description of the circumstances involved and the measures taken for first-aid or medical treatment.

    15. Are premises required to meet fire standards? Is there a registration and inspection regime in place in this area?

    Bahrain Ministerial Order No. 6/2013 deals with the protection of workers from fire hazards in establishments and work sites in Bahrain. Under Article 5 of Bahrain Ministerial Order No. 6/2013, an employer will conduct an evaluation of the fire hazards at the work sites in the establishment and will take all the necessary measures and precautions to reduce the hazards of fire to the minimum level.

    Article 7 of Bahrain Ministerial Order No. 6/2013 requires adequate and suitable fire-fighting facilities will be provided and maintained at all work sites by the employer. It will be prohibited for any employer to use any work site except on obtaining a 'fire safety certificate' from the relevant authority.

    Under Article 8 of Bahrain Ministerial Order No. 6/2013, every year, an employer will entrust a qualified person to undertake the inspection of fire-fighting facilities at least once, provided the date of inspection, date of subsequent maintenance and name of the person who has carried out the inspection will be marked for the records. The fitness of the alarm systems meant for this sole purpose will be examined by a qualified person at least once every three months and the inspection results will be entered in a special register which will be maintained in the establishment.

    16. Are there specific rules around noise, vibration and lighting? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Under Bahrain Ministerial Order No. 9/2014, with respect to the protection of workers from natural hazards at establishments, an employer will protect their workers from the hazards of being exposed to intense lighting by adopting the proper means which secure their protection and reduce exposure to it (Article 8).

    With regard to noise protection, Article 4 of Bahrain Ministerial Order No. 9/2014 states an employer is responsible for taking the necessary measures by providing suitable ear protecting gear and others for the workers to reduce the noise resulting from using these devices, machines and equipment in the worksite.

    Under Article 5 of Bahrain Ministerial Order No. 9/2014, the employer will protect their workers from being subject to the hazards of vibrations by adopting proper methods to secure their protection and reduce being exposed to it, by adopting methods which include;

  • the supply of good vibration and movement dampers to stop the vibration of the entire worker's body,
  • continuous maintenance of machines and tools to prevent the increase of their emitting vibrations, and
  • the provision of personal protective and vibration reduction clothing and equipment.
  • 17. Where is the best place to discover if protective clothing may be required in specific work environments?

    Wherever there are risks to health and safety in an industry which cannot be adequately controlled in other ways, the Personal Protective Equipment at Work Regulations 1992 require an industry to supply personal protective equipment. These Regulations also require this equipment is properly assessed before use to make sure it is fit for purpose, maintained and stored properly, provided with instructions on how to use it safely and used correctly by employees.

    18. Are there any specific rules around working near or with water? What steps do companies have to take to prevent prosecution? What penalties are there for failure to comply?

    Bahrain Ministerial Order No. 15/2014 with respect to protecting workers from highly flammable liquids at establishments and worksites refers to water while delineating the meaning of highly flammable liquid is referred to as a chemical substance which, once it gets into contact with water, turns into a highly combustible gas.

    19. What are the key laws governing the safety of equipment and machinery? What are the most common breaches in this area? What are the penalties for these?

    The Labour Law in Bahrain mandates employers take the necessary precautions to protect their workers from work  environment hazards during working hours, which include providing and maintaining safe working equipment which do not constitute a hazard to the workers' safety and health. The employer is tethered by duty to maintain personal protective equipment which is appropriate for the nature of the work. The employer cannot charge workers or deduct any money from their wages in order to provide them with protective facilities and personal protective equipment.

    Manufacturers also have to consider the occupational health and safety of the operators of machineries. The machinery will have to be designed in a safe manner, after clear instructions for the use of machines have been set and after the necessary precautions to prevent any danger have been taken and trials and tests to ensure the safety of the machine have been conducted.

    20. Are there any specific rules around the transportation of dangerous goods and substances?

    The Labour Law includes a clause on the surveillance of the working environment and working practices, which mandate employers ensure safety in the use, lifting and transporting of goods or materials so they do not constitute a hazard to workers' safety and health.

    ]]>
    Sat, 20 Feb 2021 14:37:00 GMT
    <![CDATA[Franchising 2020]]> Franchising 2020

    1. Is there a specific law governing franchise relationships in this jurisdiction?

    The primary pieces of legislation with regard to franchise arrangements in Bahrain are the Commercial Agency Law, Bahrain Law No. 10/1992, as amended (the Agency Law) and its Implementing Regulation, Bahrain Regulation No. 2/1993 (the Implementing Regulations).

    2. Are there other laws which can be relevant to a franchising relationship in this jurisdiction?

    Certain provisions under the Bahrain Law of Commerce, Bahrain Decree-Law No. 7/1987 as amended (the Law of Commerce) and the Civil Code, Bahrain Decree-Law No. 19/2001 (the Civil Code) also govern a Bahraini franchising relationship significantly.

    3. Is there a specific legal definition of what constitutes a franchise in this jurisdiction?

    While Bahraini law has never issued a categorical definition of a franchise, Chapter 2 of Bahrain Law No. 10/1992 regarding the Regulation of the Commercial Agency Agreement delineates the legalities underlying a Bahraini franchise, its registration and functioning.

    4. Are franchise agreements required to be registered - and if so which agency is responsible for their registration and regulation?

    Article 13 of Bahrain Law No. 10/1992 states in no uncertain terms it does not recognise an unregistered agency and no suit may be instituted in respect thereof. The Commercial Agency Law and the Implementing Regulations therefore apply solely to locally registered distributorship or agency agreements. Under Article 13, the franchise agreement should be registered with the Industry, Commerce and Tourism Ministry (MOICT).

    However, while failure to register would bar any action under the Commercial Agency Law, this does not mean the action itself is barred. A claim can be made in general terms for contracts which fall under the Civil Code and to a certain extent, the Law of Commerce.

    5. Are franchise agreements required to be exclusive within the jurisdiction - and if so are there any particular considerations around product or area of exclusivity?

    Unlike other similar jurisdictions, Bahrain does not require exclusivity for commercial agency agreements.

    6. Are there any particular aspects around the regulation of franchise agreements in this jurisdiction which would surprise those new to the jurisdiction?

    N/A.

    7. Are there any restrictions on who can be a franchisee in this jurisdiction?

    To be eligible for registration in the Commercial Agency Directorate of the MOICT and so have a dealer agreement registered as a commercial agency, the Bahrain territory dealer must be a registered entity in Bahrain possessing the necessary features required by law, including a minimum of 51% ownership by a Bahraini.

    8. What steps are needed to register a franchise agreement?

    Under Article 17 of Bahrain Law No. 10/1992, the registration and renewal application must be submitted in the prescribed form prepared by the relevant department at the Commerce Ministry. The application should be submitted with the identification documents.

    On submission, under Article 18 of Bahrain Law No. 10/1992 the relevant department at the Commerce Ministry will come to a decision with regards to the application for registration or renewal within thirty days of the application date. They will then provide the agent, at their request, with a signed certificate evidencing registration or renewal in the Register.

    It is critical to note the directorate is well within its rights to reject the application for registration or renewal, stating the

    grounds for rejection. It will notify the relevant party with a copy of the rejection decision by registered mail. The relevant party may appeal the decision to the Commerce Minister within 30 days from the date of publication of the decision in the Official Gazette, or the date of notification of it to the relevant party. Finally, the decision with regard to the appeal will be made within 30 days of the date of submission of the appeal.

    Article 16 says the franchise registration is to be renewed within two months from the end of the first two years of its registration, or the last renewal date of the agency.

    9. What conditions are required for a franchisor to terminate a franchise agreement?

    The franchise relationship will terminate on the expiry of the prescribed period, unless renewed by the agreement of the two parties. The relevant department at the Commerce Ministry may, in the event of disagreement on renewal, cancel the registration of the agency. It can also re register it in the name of another merchant who the franchisor makes an agreement with. Where the franchisor wants to terminate the franchise relationship before the expiry of the fixed period, the consent of the franchisee must be obtained before the registration of the agency is cancelled, or re registered in another name. The franchisee will be entitled to claim compensation from the franchisor in the event of agreement termination before the expiry of the contractually-established period.

    Article 8 of Bahrain Law No. 10/1992 states the franchisee will, despite any agreement to the contrary, be entitled to claim compensation from the franchisor in the event of termination of the franchise relationship before the expiry of the fixed period, if the efforts exerted by the franchisee led to evident success in the promotion of the franchisor's products, or to the expansion of its customer base. They will be eligible for compensation if, on account of the franchisor's refusal to renew the agency agreement, the franchisee was unable to receive the commission they had earned.

    10. What conditions are required for a franchisee to terminate a franchise agreement?

    A franchisee in a franchise agreement made for an indefinite period may not withdraw untimely or without reasonable cause from the agency. If they do, they will have potentially have to compensate the franchisor for the damage resulting from the withdrawal.

    Under Article 24 of Bahrain Law No. 10/1992, the franchisee or their legal representative will, on the repudiation of the franchise agreement or the expiry of it, apply to the relevant department at the Commerce Ministry for the termination of the agreement. The application must be submitted within one month of the date of repudiation or expiry and must be accompanied by supporting documents.

    11. Under what conditions (if any) can a sub-franchise be set up?

    N/A.

    12. Are there specific duties for the franchisor?

    N/A.

    13. Are there specific duties for the franchisee?

    N/A.

    14. Which form of business entity do franchisee's generally adopt in this jurisdiction?

    The most commonly used business vehicles franchisees employ in Bahrain are the closed joint stock company (CJSC) and limited liability company, which is known as a WLL in Bahrain but is synonymous with an LLC. This is because of their flexible corporate structures.

    Foreign companies have absolute leeway to set up a branch, agency or offices, without being subject to the same provisions which are required for the formation of companies. Shelf companies may also be established and while it may be sold, its activities need approval from the Ministry.

    15. Are there specific steps the franchisor would need to take to protect their trademark and other IP rights?

    Under Article 3(e) of Bahrain Law No. 10/1992, the trade names and trademarks of the products subject to the agency must be specified.

    Bahrain is one of only a handful of countries in the MENA region in which it is possible to file a trademark either directly at a national level or internationally through WIPO via the Madrid Protocol. Trade mark registrations are obtained through the Trade Mark Office at the Industrial Property Office, which forms part of the Trade and Industry Ministry.

    Applications which are accepted by the Registrar are published in the Official Gazette for opposition purposes for 60 days. During this time, any interested party may file an opposition. If no opposition is filed, then the application will proceed to registration and a registration certificate will be issued.

    16. Can franchises be sold on? And if so under what conditions?

    In the event of the sale of the company or establishment through which the franchise operations are conducted, the franchise agreement will continue to be valid towards the franchisor provided the purchaser, or the merging company or establishment agree to the continuation of the franchise agreement. The purchasing individual or establishment will be liable for all the obligations of the previous franchisee. The liability will include, towards the purchaser, seller, merging and merged companies or establishments, all obligations provided for by Article 22 of Bahrain Law No. 10/1992.

    Article 22 states the agent to who the franchise is transferred, in the event of a sale, will purchase all the stocks of goods covered by the agency from the previous franchisee for the market price, in addition to 5% of the price unless the parties agree otherwise. The new franchisee and the franchisor will be jointly responsible for all the obligations of the previous franchisee towards a third party. This liability will be limited to the market value of the goods or services, if the liability was originally outlined for goods or services.

    In the event the principal company or corporation are sold or they merge with another company or corporation and they refuse to continue to be bound by the agency agreement, the agent will be entitled to claim compensation from the purchasing or merging company or from the new agent, if any, for any damage resulting from the discontinuation of the agency, subject to the provision of Article 22 of Bahrain Law No. 10/1992.

     

    ]]>
    Sat, 20 Feb 2021 13:53:00 GMT
    <![CDATA[Environment 2020]]> Environment 2020

    1. What is the main legislation governing contamination of land in this jurisdiction? What are the main penalties and how is liability determined?

    Bahrain Ministerial Order No. 21/1996 with respect to the Environment governs the issue of land contamination. Land is effectively protected by the prevention of indiscriminate waste dumping throughout Bahrain. The agricultural development sector had to adopt a policy on the use of agricultural chemicals (fertilizers and pesticides). This was meant to be governed by the international regulations on their safe use to curb environmental pollution and control its impact. Bahrain has consistently worked towards enlarging the arable area, upgrading productivity, optimising the utilisation of available water resources and increasing yield per hectare through soil conservation.

    2. What are the key agencies responsible for environmental protection and what are their core responsibilities?

    The Government of Bahrain set out the most important legislation with regard to environmental protection in Bahrain Emiri Decree No. 7/1980 in August 1980. It effectively established the Environmental Protection Committee (EPC) and the Environmental Protection Technical Secretariat (EPTS). The EPC was attached to the office of the Prime Minister through the office of the Health Minister and Chairman of the EPC. In 1996, Bahrain Decree-Law No. 21/1996 was enacted, which established the Environmental Affairs Agency (EA) which falls under the purview of the Housing, Municipalities and Environment Ministry. The EA consists of two Directorates which are the Directorate of Assessment and Planning and the Directorate of Environmental Control.

    3. What searches and investigations are generally carried out to guard against a liability for contamination of land prior to purchasing land?

    N/A.

    4. What is the main legislation governing contamination or usage of water?

    Great attention has always been paid to the prevention of marine pollution. The biggest way this has been tackled is by the control of land-based sources of pollution. There have been marine monitoring programmes in place since 1983 to check on the status of the marine life. Sea water, sediments and fish samples are analysed to determine nutrients, heavy metals, chlorinated pesticides, organic matter and hydrocarbons in order to preserve the health of the sea.

    Guidelines were set out and enforced by the 1996 Ministerial Order in order to control and prevent pollutants from industrial effluents which may harm the marine environment.

    Other tools to control the discharge of pollutants into the marine environment are the regional protocols which Bahrain had signed and ratified. These include the Protocol for the Protection of the Marine Environment against Pollution from Landbased Sources, and the Protocol concerning Marine Pollution resulting from Exploration and Exploitation of the continental shelf (Bahrain Emiri Decree No. 9/1990).

    5. What is the main legislation governing air pollution? What are its key obligations and requirements?

    The 1996 Ministerial Order is the primary piece of legislation guarding against air pollution and it has two parts which are air monitoring and pollution by motor vehicles. Continuous monitoring of atmospheric pollutants at four geographical locations started in August 1993.

    Pollutants like sulphur dioxide (SO2), nitrogen dioxide (NO2), nitrous oxide (NO), ozone (O3), carbon monoxide (CO), hydrogen sulphide (H2S), hydrocarbons (HC), inhalable particulates (PM10) and fluoride (F) are monitored, as provided under the legislation. Recorded data at each station is transmitted via modems to a central computer system. Various mean values are automatically calculated and compared to acceptable ambient air quality standards. All measured values are available for statistical evaluation. Daily, weekly, monthly and annual reports are utilised in the decision making process.

    A 'fume watch' programme was introduced in 1994, with the single goal of reporting vehicles emitting smoke, followed by an expedited approach of rectifying the situations at hand. This programme led to noticeable improvements.

    6. When land, air or water pollution occurs who is responsible for rectification and how is the proven?

    N/A.

    7. Are there any specific laws or regulations governing the protection of animals and their habitats?

    The effective management of flora and fauna depends on the maintenance of their habitats and control of their rational utilisation. To achieve this, a National Committee for the Protection of Wildlife attached to the Crown Prince Court was established. It was responsible for protecting wildlife together with all of the relevant authorities.

    8. Are there any laws or regulations preventing the introduction of invasive species?

    There is no specific legislation to the end of the prevention of the introduction of an invasive species or element. However, several studies conducted locally confirmed that reclamation and coastal activities had adversely affected the intertidal habitats and mangroves were found to be on the verge of destruction. Soon after, an integrated coastal zone management approach was identified and adopted as the most effective mechanism to manage the marine environment and achieve sustainability. A procedure for identifying, minimising and mitigating the negative consequences of the development of the coastal environment has been set with the help of UNDP.

    9. What are the main laws governing energy efficient buildings?

    In March 2019, in line with Bahrain's Vision 2030, the Works, Municipality Affairs and Urban Planning Ministry set out a plan to develop the green building and sustainability programme.

    The implementation of integrated green building principles and sustainability is expected to transform conventional practice in the building industry in a way which reduces the environment impact of construction related activities and introduces meaningful savings to the Government.

    10. What are the main laws governing energy efficient products and equipment?

    The National Energy Efficiency Action Plan represents one of the key components of the Kingdom's efforts to implement its national, regional and international commitments in the field of sustainable energy development and climate change. It takes a multi-pronged approach and builds on existing achievements. It also presents a comprehensive set of initiatives to further unlock Bahrain's energy efficiency potential across its economy.

    The Plan sets a national target for energy savings, identities implementing mechanisms and provides estimates of energy and monetary savings. It encourages the Government to set an example and in doing so, provides the necessary guidance and leadership for all related parties. The initiatives encompass primary energy savings and end-use measures. A variety of policy mechanisms will be utilised as appropriate to deliver the national energy efficiency target, such as minimum energy performance standards and labelling as well as an energy efficiency building code, energy management in buildings, electricity and fuel price reforms and sectoral targets. It also aims to raise awareness and provide training.

    11. What are the main laws governing the disposal of waste? Are there any particular industries with specific waste disposal regulations?

    The disposal of industrial and domestic waste is regarded as the most pronounced environmental problems in Bahrain. Thegeneration of both types of wastes is relatively high.

    Domestic waste is land filled without any treatment at the site which is away from urban areas. Waste management practices had been improved especially the handling, collection and transportation. Landfill site is regularly monitored to control risk associated with it and to protect the health of the citizens.

    Bahrain was one of many countries who participated in the UN Conference on Environment and Development (UNCED), which was held in Rio de Janeiro in Brazil in June 1992. It stated the necessity of linking sustainable development with environmental conservation. In order to implement the mandates of the Conference, the Environmental Affairs (EA) insisted on the effective participation of all related parties in Bahrain to execute Agenda 21.

    A national committee was established to prepare a national strategy to execute the Agenda 21 programme. One of the environmental issues which was prioritised by this committee was the Environmentally Sound Management of waste and chemicals. This committee consisted of a chairman representing the Oil and Industry Ministry and members representing Bahrain Aluminium Extrusion Company (BATELCO), Al-Zamil Coating Factory, Bahrain Aluminium (Alba), the Environmental Health Directorate, Bahrain Chemical Society, the Commerce Ministry and Bahrain Centre for Studies and Research.

    The primary tasks of this force included but were not limited to preparing a mechanism to control the industrial chemicals and their daily usage as well as implementing procedures to encourage the reduction of waste through recycling and designating a proper location for the disposal of industrial waste etc.

    12. What are the rules governing the transportation of waste - both domestically and either from or to other jurisdictions?

    The EA has been participating in several international and regional meetings to discuss protocols and formulate a unified system for waste management in compliance with the Basel Convention on the Control of Transboundary Movement of Hazardous Wastes and their Disposal.

    Bahrain ratified the Basel Convention in 1992 and it came into force in 1993. The Regional Organisation for the Protection of the Marine Environment (ROPME) later finalised a regional protocol which complemented the Basel Convention on the transboundary movement of hazardous wastes across borders. The Gulf Cooperation Council countries also produced unified rules to deal with industrial waste.

    13. What are the main laws governing nuclear waste and radiation?

    The National Report of the Kingdom of the Bahrain after attending the Convention on Nuclear Safety states that, while Bahrain has no nuclear Installations, land based or otherwise, it takes into account the developments in nuclear power programmes in various countries in the region and the constitutional responsibility of the Bahraini Government is to protect the environment and the citizens and residents of the Kingdom from any unwanted consequences resulting from the normal the environment and the citizens and residents of the Kingdom from any unwanted consequences resulting from the normal operation of the nuclear installations in the region, or from any possible accidents which may occur in any of them.

    Bahrain Law No. 21 related to the 1996 Environment Law recognises the necessity to regulate and control the import, export, possession, handling and usage of radioactive material and radiation sources and the disposal of radioactive waste.

    14. What are the main environmental reporting duties businesses have?

    All Bahraini businesses have to report any environmental incident to the Supreme Council for Environment, which will then develop contingency plans for environmental protection. Any environmental incident can be reported to SCE by calling 80001112 or submitting a case online through the National Suggestion and Complaint System (Tawasul).

    15. What international environmental treaties and agreements has this country signed up to - and what are the key implications of this?

    Bahrain is a observer to the Energy Charter Treaty. The Energy Charter Treaty is a unique multilateral treaty which covers investment protection, the liberalisation of trade, freedom of transit, dispute settlement and environmental aspects in the energy sector. It is designed to promote energy security through the operation of more open and competitive energy markets, while respecting the principles of sustainable development and sovereignty over energy resources. The Treaty was notable as it is really the only agreement dealing with intergovernmental cooperation in the energy sector, in a way which considers the whole energy value chain (from exploration to end use) and all energy products and energy-related equipment.

    In December 2015, the 21st Conference of the Parties of the UN Framework Convention on Climate Change took place in Paris. More than a hundred nations adopted the Paris Agreement to take action toward holding the increase of global average temperature to well below 2°C above pre-industrial levels. The Paris Agreement is a historic agreement to combat climate change and accelerate actions and investments needed for a sustainable low carbon future. On 22 April 2016 Bahrain signed the Paris Agreement and expressed its support through the publication of its Intended Nationally Determined Contribution (INDC) in November 2015.

    In September 2015, at the UN Sustainable Development Summit, world leaders adopted a new Transforming Our World: The 2030 Agenda for Sustainable Development agenda. Bahrain was a signatory to this agenda. The new global agenda includes 17 Sustainable Development Goals (SDGs) and 169 targets.

    16. Are there any environmental taxes or duties in place in this jurisdiction?

    Bahrain introduced an excise tax system on 30 December 2017. This was a tax imposed on specific goods harmful to human health and the environment, with the aim of discouraging citizens from consuming products which are harmful to health.

    ]]>
    Sat, 20 Feb 2021 12:38:00 GMT
    <![CDATA[Competition 2020 KSA]]> Competition 2020 Kingdom of Saudi Arabia

    1. What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?

  • The Board of the General Authority for Competition (the Board).
  • The General Authority for Competition (the GAC).
  • The Committee for Adjudication of Competition Law Violations (the Committee).
  • 2. In the context of a merger acquisition in what circumstances, are the seller and/or the purchaser required to notify the competition regulator?

    Firms intending to participate in an economic concentration transaction, or their legal representative, will report this to the GAC and submit the required information at least 90 days before completion of the economic concentration if the total annual sales value of all firms intending to participate in the economic concentration exceeds 100,000,000 Riyals.

    3. What steps will a competition regulator take if there are potential concerns around a company obtaining a dominant market position following a merger/purchase of a competitor?

  • Any natural or corporate person may file a complaint or report anti-competitive practices to the GAC even if they are not an aggrieved party, according to the forms specified for these purposes. The complainant does not have to reveal their identity.
  • The GAC may, on its own initiative, take procedures of inquiry, gathering of evidence and investigation in line with the provisions of the Implementing Regulations issued by Saudi Arabia Ministerial Decision No. 337/1441 dated 25/01/1441H of the Competition Law promulgated under Saudi Arabia Royal Decree No. M75/1440 dated 29/06/1440H.
  • The GAC may conduct periodic inspections of the markets and request necessary data and information from firms. All firms will submit the data, information, or documents requested for conducting market studies or inquiry and investigation work.
  • The GAC will review referrals received from supervisory authorities and regarding anti-competitive behaviours and practices.
  • Complaints and reports will be submitted, after preliminary examination, to the Board, including recommendation supported by evidence and indicators, wherever possible, for issuing a decision or providing guidance on it indicating approval to take procedures of inquiry, gathering of evidence and investigation or any of them, or closing the matter, provided the closing of any matter will be reasoned. The GAC may prioritise complaints and reports entailing serious harm or greater impact on competition, in line with criteria approved by the Board.
  • 4. How would a dominant market position be derived?

    Dominance in the relevant market is achieved by meeting one or both of the following criteria:

    • A market share of 40% or more of the relevant market, whether it is the share of a single firm or a group of firms, whenever that group acts with a common will in committing the violation or causing the effect.
    • Ability to influence a relevant market such as controlling prices, production, or demand, whether it is the ability of a single firm or a group of firms, whenever that group acts with a common will in committing the violation or causing the effect.

    5. Is it possible to appeal a decision by the competition regulator- how does this work?

    • The Committee's resolutions may be appealed before the competent court within 30 days of the date the violator is notified of the resolution. The Committee decisions become final after 30 days have lapsed and there has been no appeal by the defendant before the competent court as of the date of notification of it or from the date specified for delivering the decision to the parties to the case.
    • However, if a party to the proceedings appeals the Committee's decision before the competent court, they will inform the GAC within three working days from the date of appeal, by letter which will contain the Committee's decision number and the date and the number and date of the appeal filed with the competent court and a copy of it. The Committee's decisions concerning imposing fines and the Board's resolutions regarding taking measures will take effect immediately on their issuing and will be enforceable from the date of notification or from the set date of delivery to the parties unless a decision is issued by the competent court to stay their execution. A judgment to annul those decisions will not preclude their effectiveness and immediate enforcement unless the judgment becomes final.

    6. How quickly is any decision on a competition risk as a result of a merger/company purchase normally taken?

    The Board will issue its decisions concerning an economic concentration, indicating:

  • approval;
  • conditional approval; and/or
  • rejection;
  • within ninety days from the date of notifying the applicant of the completion of the reporting, in line with the provisions of within ninety days from the date of notifying the applicant of the completion of the reporting, in line with the provisions of the Competition Law (Saudi Arabia Cabinet Decision No. 372/1440) and the Implementing Regulations.

    7. What remedies are generally taken when a dominant market position is established which would a merger or acquisition?

    The Board, on a recommendation by a technical committee, may approve the request of the entity to be exempt if it would lead to improved market performance, or improve the performance of entities in terms of the quality of the product or technological development or creative efficiency or both. The benefit of the exemption to the consumer should outweigh the effects of restricting the freedom of competition.

    8. What penalties apply for failure to follow competition law in a merger or acquisition?

    • Whoever violates by entering into the prohibited agreements or contracts with the purpose or effect of it to prejudice competition or where an entity having a dominant position in the market exploits this position to undermine or limit competition or entities seeking to participate in an economic concentration transaction have not informed the GAC in line with Saudi Arabia Cabinet Decision No. 372/1440 will be fined up to 10% of the total annual sales value which is the subject of the violation. Where it is impossible to estimate the annual sales, the fine will not exceed 10 million Riyals. The Committee may, on its discretion, impose a fine of up to three times the gains made by the violator resulting from the violation.
    • An entity which prevents the law enforcement officer or investigator from performing a task assigned to them under Saudi Arabia Cabinet Decision No. 372/1440 will be punished with a fine not exceeding 5% of the annual sales value. Where it is impossible to estimate the annual sales, the fine will not exceed five million Riyals.
    • If the violator repeats the violation, the Committee may double the fine awarded in the first instance. The violator will be considered a repeat offender, if the same violation is committed within three years of the date of the resolution of the first violation.
    • Anyone who violates any other provision of Saudi Arabia Cabinet Decision No. 372/1440 will be fined up to two million Riyals.

    9. Are there any rules governing the way a company seen as having a dominant market position must sell or market their products - which are the most important ones?

    The company seen as having a dominant market position must get approval from the Board to be exempt by proving the company's act would lead to improved market performance, or improve the performance of the entities in terms of the quality of the product or technological development or creative efficiency or both. The benefit of this exemption to the consumer should outweigh the effects of restricting the freedom of competition.

    Under Article 6 of Saudi Arabia Cabinet Decision No. 372/1440, establishments with a dominant position in the market must not abuse that position to prejudice or control competition and in particular, cannot:

  • Sell goods or services at a price lesser than the total cost, solely to exclude entities from or obstruct the entry of potential entities into the market or to expose the entities to gross losses.
  • Determine or impose the sale price or terms of resale of goods or services.
  • Decrease or increase the availability of the good in order to control the price or to create a relative shortage or excess in the market.
  • Discriminate between establishments of a similar nature with respect to the price of goods or services or the terms of sale or purchase.
  • Refrain from dealing with another establishment without an objective reason, in order to prevent it from entering the market.
  • Prohibit an establishment from dealing with another establishment.
  • Require that the sale of goods or services be conditional on assuming an obligation or accepting a good or service which is, by the nature or commercial application, unrelated to the first-mentioned good or service.
  • 10. What are the penalties for failure to apply competition rules when selling or marketing products?

    Anyone who violates any other provision of the Implementing Regulations will be fined up to two million Riyals.

    11. Are there any rules which prevent companies from colluding with competitors in the market when setting prices?

    Under Article 5 of Saudi Arabia Cabinet Decision No. 372/1440, practices including agreements or contracts between entities, whether written or oral, explicit or implicit, are prohibited if the purpose or effect of it is to prejudice competition. It explicitly prohibits colluding or coordinating in bids or offers in Government tenders, auctions, etc in a way which interferes with the competition or determining or proposing prices of goods, service fees and terms of sale or purchase etc and any conduct which excludes or obstructs the entry of an entity into the market.

    12. What are the penalties for colluding with competitors?

    Anyone who violates by entering into the prohibited agreements or contracts with the purpose or effect of prejudicing competition will be fined up to 10% of the total annual sales value which is the subject of the violation. Where it is impossible to estimate the annual sales, the fine will not exceed ten million Riyals. The Committee may, at its discretion, impose a fine of up to three times the gains made by the violator resulting from the violation.

    13. Are there any rules governing the way a company seen as having a dominant market position as related to one product is able to sell or market other products?

    There are no specific rules but the company seen as having a dominant market position must get an approval from the Board to be exempt by proving the company's act would lead to improved market performance, or improve the performance of the entities in terms of the quality of the product or technological development or creative efficiency or both. The benefit of the exemption to the consumer should outweigh the effects of restricting the freedom of competition.

    14. Are there any specific industries, which have particular competition rules? Give examples of some of the main ones- and the legislation governing this regime.

    Saudi Arabia Cabinet Decision No. 372/1440 pplies to all entities (natural or legal persons in the Kingdom and practices occurring outside the Kingdom which have an adverse effect on fair competition in the Kingdom. However, public establishments and State-owned companies will be excluded from its remit if they are solely authorised by the Government to provide goods or services in a particular field.

    15. Do the free zones have a different competition regime from mainland?

    No.

    16. Are there any industries in which only state or public owned enterprises are allowed to operate? Give the main examples.

    Restricting certain business activities to Saudi Arabian nationals and/or GCC nationals, or companies wholly owned by them generally fall within two sectors, industrial and services. The industrial sector list includes oil exploration, drilling and manufacturing equipment, while the service sector's list includes security and detective services and real estate investment in Mecca and Medina (the Negative List).

    17. Are there any industries where fixed/state regulated pricing must apply? Give the main examples.

    As there are industries which are restricted and can be owned only by the Kingdom, as mentioned in the Negative List, prices will be regulated by the Kingdom as well. For example, oil prices are regulated by the Kingdom.

    18. What restrictions govern the inclusion of non-compete clauses in employee's contracts?

    Under Article 83 of Saudi Arabia Royal Decree No. M51/14265 (the Saudi Labour Law) where an employee's work enables and allows them to become familiar with the trade secrets or clients of the employer, the employer may demand they not join a competing company following the termination of their current employment contract. For this to be valid, it must be presented in writing and should state the time and place limit and the type of work which is restricted. This must also be done to ensure the protection of the employer's legitimate interests. The time limit is two years from the termination of the contract.

     

    ]]>
    Sat, 20 Feb 2021 11:34:00 GMT
    <![CDATA[Competition 2020 Bahrain]]> Competition 2020 Bahrain

    1. What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?

    The Authority for Promotion and Protection of Competition.

    2. In the context of a merger acquisition in what circumstances, are the seller and/or the purchaser required to notify the competition regulator?

    The relevant party, or their representative, must submit a request to the Authority to obtain approval of market concentration. Market concentration is established when there is a shift in market control by:

    I. A merger of two or more undertakings, fully or partially;

    II. Acquiring direct or indirect control, fully or partially, over another undertaking, by one natural person or more; or

    another undertaking or more; or establishing a joint venture which undertakes all duties of a single independent

    undertaking.

    3. What steps will a competition regulator take if there are potential concerns around a

    company obtaining a dominant market position following a merger/purchase of a competitor?

    When there are potential concerns of abuse of dominant position, the Authority may initiate an investigation on its own or at the request of the relevant Minister or any serious reports and complaints.

    Before starting the investigation procedures, the Authority will notify the relevant undertaking of the reasons for the

    Authority's view that the violation has occurred or is about to occur.

    The relevant undertaking will reply to the notice within 20 days of receiving the notice. The Investigation Committee will within six months of the date of commencement of the investigation, submit a reasoned report of its findings, accompanied with the complete investigation file.

    The Authority will publish a statement with respect to the committed violation and will determine the medium and

    mechanism of publishing after the final ruling or after the period of appeal has expired.

    4. How would a dominant market position be derived?

    An undertaking is in a dominant position where it has a market share in excess of 40% in the relevant product market. An association of undertakings is presumed to be in a dominant position where they have a combined market share in excess of 60% in the relevant product market. However, an undertaking having a smaller market share than the prescribed percentages may still be considered to be in a dominant position in the relevant product market. Additional parameters will be set by the Authority to determine if an undertaking, individually or together with another undertaking enjoys a dominant position.

    5. Is it possible to appeal a decision by the competition regulator- how does this work?

    An appeal against Authority decisions can be filed by any one with interest and on payment of the prescribed fee within 30 days of becoming aware of the decision. An Appeal Tribunal, established in the Authority, will adjudicate the appeals filed.

    The Tribunal will hold the same legal powers vested in the Court under the law. The Tribunal's decision will be considered as a judgment delivered by the Civil High Court of Appeal. The Tribunal's final ruling is subject to appeal before the Court of Cassation. The provisions of the Civil and Commercial Procedure Law will apply with respect to submitting, examining and deciding the appeal.

    6. How quickly is any decision on a competition risk as a result of a merger/company purchase normally taken?

    The Authority will approve or reject the request for approval of market concentration within 90 days of the date of request.

    7. What remedies are generally taken when a dominant market position is established which would a merger or acquisition?

    The Inspectors, being Authority employees or others, delegated by the Chief Executive will carry out inspection duties for ensuring compliance with the Law.

    8. What penalties apply for failure to follow competition law in a merger or acquisition?

    To stop the violation of the Law, the Board may impose a penalty of up to 5% of the offender's daily sales. For a first time violation, the penalty will not exceed 1,000 Dinars a day and for repeat violations, within three years of the date of the decision concerning the offender's first violation, the penalty will not exceed 2,000 Dinars a day.

    An administrative penalty of at least 1% and up to 10% of the total amount of sales of products for the period of the violation and for up to three years will be imposed.

    9. Are there any rules governing the way a company seen as having a dominant market position must sell or market their products - which are the most important ones?

    An undertaking having a dominant position in the market, will not abuse that position. The abuse of a dominant position constitutes the following:

  • Directly or indirectly imposing purchase or sale prices, or other trade conditions;
  • Limiting to the detriment of consumers the production or technical development;
  • Applying dissimilar conditions concerning the prices and other terms of business, in contracts and agreements entered with suppliers or consumers;
  • Concluding a contract concerning a certain product, subject to acceptance of obligations not having any link to the subject of the original contract or agreement;
  • Refraining, with no legitimate reasoning, from concluding purchase or sale contracts with any undertaking, or selling products at a lower price than their actual cost, or completely suspending transactions with the intention of eliminating competing undertakings from the market, or cause damage which will avert the undertakings continuing their businesses.
  • 10. What are the penalties for failure to apply competition rules when selling or marketing products?

    The Board will impose a penalty of up to 5% of an offender's daily sales of products. For a first time violation, the penalty will not exceed 1,000 Dinars a day and for repeat violations, within three years from the decision date concerning the offender's first violation, the penalty will not exceed 2,000 Dinars a day.

    An administrative penalty of at least 1% and up to 10% of the total amount of sales of products for the period of the violation and for up to three years will be imposed.

    11. Are there any rules which prevent companies from colluding with competitors in the market when setting prices?

    Under Article 3 of Bahrain Law No. 31/2018, arrangements with the object or effect of hindering competition in Bahrain are prohibited. The Law, in particular, prohibits colluding in bids or proposals concerning the tenders, auctions, or practices and influencing proposed purchase or selling price of products.

    12. What are the penalties for colluding with competitors?

    Where the undertaking conducts the anti-competitive practice, the Board will impose a penalty of up to 5% of an offender's daily sales of products. For a first time violation, the penalty will not exceed 1,000 Dinars a day, and for repeat violations,within three years of the decision date concerning the offender's first violation, the penalty will not exceed 2,000 Dinars a day.

    An administrative penalty of at least 1% and up to 10% of the total amount of sales of products for the period of the violation and for up to three years will be imposed.

    13. Are there any rules governing the way a company seen as having a dominant market

    position as related to one product is able to sell or market other products?

    There are no specific rules as the rules laid down are for a company having a dominant market position in general.

    14. Are there any specific industries, which have particular competition rules? Give examples of some of the main ones- and the legislation governing this regime.

    Article 2 of Bahrain Law No. 31/2018 specifies its application. It will apply to:

  • All undertakings that carry out their economic activities in Bahrain;
  • Any arrangement or conduct which is intended to or results in anti-competition in Bahrain, even when the party or parties are not established in Bahrain; and
  • Economic activities conducted extra territorially, yet affecting competition in Bahrain.
  • The Law will not apply to:

  • Arrangements approved by international conventions which apply in Bahrain;
  • Facilities and projects owned or controlled by the State; and
  • Arrangements necessary for the use, exploitation, transfer, assignment, or license of Intellectual Property rights; provided these arrangements do not unreasonably hamper the competition or transfer and dissemination of technology.
  • 15. Do the free zones have a different competition regime from mainland?

    No. The businesses operating in Bahrain Free Zone must also comply with Bahrain Law No. 31/2018 with respect to the Competition Promotion and Protection.

    16. Are there any industries in which only state or public owned enterprises are allowed to operate? Give the main examples.

    Any private investment (foreign or Bahraini) in the petroleum extraction is allowed only under a production-sharing agreement with the Bahrain Petroleum Company (BAPCO), the state-owned petroleum company.

    The Industry, Commerce and Tourism Ministry maintains a small list of business activities which are restricted to Bahraini ownership, including press and publications, Islamic pilgrimages, clearance offices and workforce agencies.

    17. Are there any industries where fixed/state regulated pricing must apply? Give the main examples.

    The prices are fixed under Bahrain Decree-Law No. 18/1975 with respect to Fixing Prices and Control. It was amended by Bahrain Decree-Law No. 11/1977.

    18. What restrictions govern the inclusion of non-compete clauses in employee's contracts?

    The non-competition restriction is valid only if the employee is 18 at the time the contract was concluded.

     

    ]]>
    Sat, 20 Feb 2021 11:17:00 GMT
    <![CDATA[Competition 2020 Oman]]> 1. What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?

  • The Competition Protection and Monopoly Prevention Centre (The Centre)
  • The Board of the Centre (The Board)
  • 2. In the context of a merger acquisition in what circumstances, are the seller and/or the purchaser required to notify the competition regulator?

    Under Article 11 of Oman Sultani Decree No. 67/2014, the entity intending to take action resulting in economic concentration will submit a written request to the Centre. The Centre will consider the request and issue the relevant decision related to it within 90 days of receiving the request. However, on the expiry of the 90-day period without a decision being reached, it will be considered to have approved it. The Centre may cancel the request after approving it when it is proven the information submitted by the applicant is untrue or incorrect or marred with fraud or forgery. The approval may not be given to any action resulting in economic concentration leading to the acquisition of a rate exceeding 50% of the relevant market.

    3. What steps will a competition regulator take if there are potential concerns around a company obtaining a dominant market position following a merger/purchase of a competitor?

    Centre personnel who are judicial officers under the Law will peruse the cases of monopoly and economic concentration and investigate the forbidden practices. They will also have the powers and authority to scrutinise and audit the required information, particulars and records.

    4. How would a dominant market position be derived?

    The ability demonstrated by any individual or a group of people directly or indirectly engaging in control over the relevant market and therefore acquiring a rate exceeding 35% of the volume of this particular market is domination.

    5. Is it possible to appeal a decision by the competition regulator- how does this work?

    The entity which submitted an application regarding economic concentration may submit a complaint to the Chairman of the Centre within 60 days of the date of the rejection being issued. The complaint will be determined within 30 days of its submission date. The lapsing of the period without any reply will serve as an approval of the complaint.

    6. How quickly is any decision on a competition risk as a result of a merger/company purchase normally taken?

    The Centre will consider the requests for economic concentration and issue the relevant Decision within 90 days.

    7. What remedies are generally taken when a dominant market position is established which would a merger or acquisition?

    Centre personnel who are judicial officers under the Law will peruse the cases of monopoly and economic concentration and investigate the forbidden practices. They will also have the powers and authority to scrutinise and audit the required information, particulars and records.

    8. What penalties apply for failure to follow competition law in a merger or acquisition?

  • Anyone who enters into any agreement or contract for the purpose of monopolisation or to take any form of monopoly which may negatively affect the market or enters into an agreement or contract for the purpose of preventing, eliminating or undermining competition or who has a dominant position, practices any activities which may infringe, negatively affect the competition, eliminate or prevent competition will be jailed for between three months and three years and fined an amount which is equal to the gain in terms of profits from selling the products which are the cause of the violation They will also be fined between 5% and 10% of the total annual sales of the products which are the cause of the violation gained by the violator during the last financial year.
  • The entity intending to take action resulting in economic concentration will submit a written request to the Centre and an entity which fails to submit the request will be jailed for between one month and three years and/or fined between 10,000 and 100,000 Rials. Anyone who has breached the Centre resolution rendered under Article 11 of Oman Sultani Decree No. 67/2014 will be penalised in the same way.
  • Anyone who prevents any judicial execution officer from entering the establishment, annexes and head offices or conceals any information required, or gives information considered irrelevant or misleading, hiding or damaging any documents or deeds required in the investigation process will be jailed for between one month and three years and/or fined between 10.000 and 100.000 Rials Officers acquainted with any information, particulars and records because of their position, not keeping them confidential or allows any third parties to get acquainted with them will face the same penalties.
  • If the violations are repeated, the penalties will be doubled and the business or enterprise will also be shut down or their commercial activity suspended providing the period does not exceed 30 days.
  • The president may impose administrative fines provided the fine does not exceed 5,000 Rials and the fine will be doubled for a repeat offence. Anyone who commits a similar offence in the next five years will be considered a recurrence in the application of the provisions of the Law. If the violation continues, an administrative fine of between 500 a day up to 10,000 application of the provisions of the Law. If the violation continues, an administrative fine of between 500 a day up to 10,000 Rials may be imposed.for the duration of the violation.
  • 9. Are there any rules governing the way a company seen as having a dominant market position must sell or market their products - which are the most important ones?

    Anyone having a dominant position will not practice any activities which will infringe, negatively affect, eliminate or prevent competition, including but not limited to:

  • Selling the product at a lower price than its actual price to prevent certain competitors from entering the market, excluding them or exposing them to losses with which they will not be able to perform their activities.
  •  Imposing restrictions on supplying the product to create an artificial shortage in an endeavour to increase the prices.
  • Imposing specific requirements regulating the sale or purchase or dealing with another person to weaken the competitive position concerning the other competitive persons.
  • Refrain from dealing with any other person without reasonable cause to prevent that person from entering into the market or in an attempt to force them out of the market.
  • Stipulating the supply or sale of a certain commodity or rendering specific services against the purchase of certain commodity or performance of the service from that person or another person.
  • Pricing or direct or indirect determination of the conditions for the resale of the products.
  • Enforce certain obligation to cease the manufacturing, production or distribution concerning a certain product for a limited period.
  • Purchasing, storing or spoiling certain commodities to increase the prices or prevent the reduction of the same.
  • Reducing or increasing the quantities available of a certain product in a way which creates a shortage or artificial abundance.
  • Discriminating without a reasonable cause amongst the clients concluding similar contracts in terms of prices, sale or purchase terms and conditions.
  • Inducing dealers not to permit a certain competitor to use it may be in need of it concerning facilities or services.
  • Keeping a manufacturer or supplier under an obligation not to deal with any other competitor.
  • Pending conclusion or execution of a contract or agreement on condition of accepting obligations, irrelevant to the subject matter of the agreement.
  • 10. What are the penalties for failure to apply competition rules when selling or marketing products?

    Those who violate the Law will have to:

  • Legalise their status or rectify the violation within a fixed amount of time, which will be determined by the court, provided the period does not exceed three months.
  • Dispose of some assets, shares or right equity or take other actions to procure the removal and rectification of the violation effects.
  • Keeping the violator under an obligation for settling a fine on a daily basis until the violation is rectified, which will be between 100 and 10,000 Rials.
  • 11. Are there any rules which prevent companies from colluding with competitors in the market when setting prices?

    Article 9 of Oman Sultani Decree No. 67/2014 prohibits any agreement or contract entered into either inside or outside Oman or any procedures or practices, whether written or oral implied or expressed, for the purpose of preventing, eliminating or undermining competition, particularly with regard to the prices, discounts, sale or purchase terms and conditions or provisions of the services. The forbidden practices include agreements between suppliers or competitors. The prohibition on restrictive agreements in the Law is not limited to agreements concluded between enterprises where  one, a few or all have a dominant position. The prohibition also applies to any enterprise and to all types of agreements, whether horizontal orvertical. The only test is if the arrangements would result in the prevention, reduction or elimination of competition.

    12. What are the penalties for colluding with competitors?

    The violating individual will be jailed for between three months and three years. They will also fined an amount equal to the gain in terms of profits from selling the products which are the cause of the violation. A rate of between 5% and 10% of the total annual sales of the products which are the subject of the violation gained by the violator during the last financial year.

    13. Are there any rules governing the way a company seen as having a dominant market position as related to one product is able to sell or market other products?

    There are no specific rules as the rules laid down are for a company having a dominant market position in general.

    14. Are there any specific industries, which have particular competition rules? Give examples of some of the main ones- and the legislation governing this regime.

    The Law applies to all production and trade activities and services or any other economic or commercial activities practised in Oman or any other economic or commercial activities to be practised outside Oman, and will have consequences in Oman. The Law will apply to any violation relating to intellectual property rights, trademarks, patents and copyrights, provided it has a negative or adverse impact on competition.

    However, the Law does not apply to activities of public utilities owned and operated by the State in full as well as research and development activities carried out by public or private entities.

    15. Do the free zones have a different competition regime from mainland?

    No.

    16. Are there any industries in which only state or public owned enterprises are allowed to operate? Give the main examples.

    Oman Sultani Decree No. 50/2019 enacted the new Foreign Capital Investment Law which came into force on 1 January 2020. The Commerce and Industry Minister issued a negative list of 37 business activities in which foreign investment is prohibited.

    These include:

  • Services of photocopying and typing of documents;
  • Translation and interpretation activities;
  • Transactions clearance;
  • Tailoring of Arabic menswear, of non-Arab menswear, of Arabic and non-Arab women's clothes, of sportswear and of military uniforms;
  • Manufacture of Omani kimmah and of women's Abaia;
  • Electrical repairs of a motor vehicle and recharging of batteries;
  • Repair and clean of vehicle radiators, repair of motor vehicle air conditioners and exhaust sounds for cars;
  • Wheel balance, service stations of washing and lubrication of cars, change car oil, washing and polishing cars and tyre and tube repairs;
  • Transporting and selling drinking water;
  • Labour recruitment offices and employment placement offices;
  • Driving training;
  • Laundering of all kinds of clothing and textiles, clothes ironing and laundry steam;
  • Hair trimming and cutting, hairdressing, shaving and beard trimming for men, hairdressing and other beauty treatment for women and hair trimming and cutting, hairdressing for children;
  • Taxi operations;
  • Marine fishing and freshwater fish fishing;
  • Education for handicapped;
  • Homes for the elderly, orphanages, rehabilitation centres and specialised rehabilitation centres.
  • 17. Are there any industries where fixed/state regulated pricing must apply? Give the main examples.

    The promotions and price discounting are strictly regulated by the Public Authority for Consumer Protection in Oman.

    18. What restrictions govern the inclusion of non-compete clauses in employee's contracts?

    Non-compete clauses are regulated under Article 661 of Oman Sultani Decree 29/2013 (the Civil Code). Under Article 661 of Oman Sultani Decree No. 29/2013, the former employee can only be restricted for a limited time. The time limit must be fair, reasonable and not arbitrary to the employee. The duration will depend on the industry and the employee's level of expertise.(Recent Supreme Court Judgment). The former employee, under Article 661 of Oman Sultani Decree No. 29/2013 may only be restricted from competing within a certain geographical scope.

    The Royal Oman Police issued Oman Decision No. 157/2020 on 6 June 2020 amending Article 24 of the Executive Regulations of the Foreigners Residency Law (Oman Sultani Decree No. 63/1996), which comes into force in January 2021.

    It means expatriates working in Oman can move jobs without having to obtain a No Objection Certificate (NOC) from their previous employer. Under the previous law, if a NOC was not given by the employer, the individual was required to spend two years outside of Oman. The requirement for the NOC has operated indirectly as an effective non-compete tool for employers in relation to their expatriate workforce, dispensing the need to include non-compete restrictions in the majority of employment contracts.

     

    ]]>
    Thu, 18 Feb 2021 17:22:00 GMT
    <![CDATA[Competition 2020 Kuwait]]> Competition 2020 Kuwait

    1. What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?

    The Competition Protection Authority (CPA).

    2. In the context of a merger acquisition in what circumstances, are the seller and/or the purchaser required to notify the competition regulator?

    Each merging company must comply with Kuwait Law No. 10/2007 on the Protection of Competition (as amended by Kuwait Law No. 2/2012) and its Implementing Regulations if the merger would lead to control or increase the existing control of the relevant market value. A merger filing will be required when a market share of more than 35% is acquired or strengthened. The scope of application of the merger provisions applies to companies licensed by the CPA or listed on the stock exchange. The companies involved in a merger must submit the Draft Merger Contract (DMC) to the CPA for it to approve. The Central Bank's approval is required for the units subject to its supervision. The DMC cannot be published or circulated to shareholders or partners before obtaining these approvals.

    3. What steps will a competition regulator take if there are potential concerns around a company obtaining a dominant market position following a merger/purchase of a competitor?

    A Notification along with other required documents will be submitted to the CPA at least 60 days before the date fixed for the start of control or for increasing such control (more than 35% of the particular market).

    The CPA will then publish a summary of the notification in the Kuwait Official Gazette and at the expense of the notifying person in four daily local newspapers in Arabic. The interested person may object to the notice within a period of 15 days from the date of the publication. In the event of an objection, the decision will be suspended pending the settlement of the matter of the objection.

    4. How would a dominant market position be derived?

    Dominance is defined as a situation when a person or a group of persons working together gain direct or indirect control of the market by acquiring more than 35% of a particular market.

    5. Is it possible to appeal a decision by the competition regulator- how does this work?

    Yes, the applicants have 60 days to appeal the CPA's decision.

    6. How quickly is any decision on a competition risk as a result of a merger/company purchase normally taken?

    The relevant person will be notified of the approval or rejection decision of the CPA within 15 days from the date of taking the decision by means of a registered letter.

    7. What remedies are generally taken when a dominant market position is established which would a merger or acquisition?

    The CPA will permit and except the application of the Competition Law on the cooperation between companies which aim to facilitate the market activity and the commercial entities which operate in research and development.

    8. What penalties apply for failure to follow competition law in a merger or acquisition?

    Under Articles 19 to 22 of Kuwait Law No. 10/2007, the violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and this can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.

    9. Are there any rules governing the way a company seen as having a dominant market position must sell or market their products - which are the most important ones?

    Under Article 4 of Kuwait Law No. 10/2007, the company cannot manipulate or fix prices through fictitious transactions contrary to market principles and in a way which harms competitors or sell the goods at a lower price than their actual cost.

    The company cannot restrict the flow of goods into and out of the market without justification by concealing or refraining them from dealing in the same. The company will not flood the market with goods, causing an unreasonable price which harms competitors.

    10. What are the penalties for failure to apply competition rules when selling or marketing products?

    Under Articles 19 to 22 of Kuwait Law No. 10/2007, the violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and the sum can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.

    11. Are there any rules which prevent companies from colluding with competitors in the market when setting prices?

    Under Article 4 of Kuwait Law No. 10/2007, 'Preventing or hindering a competitor from conducting business in the market' is a violation of the Competition Law. Any company which colludes with competitors and prevents another competitor from conducting business in the market is committing a violation.

    12. What are the penalties for colluding with competitors?

    The violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and the sum can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.

    13. Are there any rules governing the way a company seen as having a dominant market position as related to one product is able to sell or market other products?

    There are no specific rules as the rules laid down are for a company having a dominant market position in general.

    14. Are there any specific industries, which have particular competition rules? Give examples of some of the main ones- and the legislation governing this regime.

    The Competition Law expands its applicability to the violations committed in Kuwait, as well as to those taking place abroad but with harmful effect in the internal market. The exceptions to the scope of the Competition Law are limited to state-owned entities, all the activities required by a particular law, the cooperation between companies which aim to facilitate the market activity and the commercial entities which operate in research and development.

    15. Do the free zones have a different competition regime from mainland?

    No.

    16. Are there any industries in which only state or public owned enterprises are allowed to operate? Give the main examples.

    The Negative List codified in Kuwait Ministerial Decision No. 75/2015 consists of the following activities:

  • Extraction of crude oil or natural gas;
  • Manufacturing of coke ovens and products related to it;
  • Manufacturing of fertilisers and nitrogenous formulas;
  • Manufacturing of coal gas and distribution of gaseous fuels through main pipelines;
  • Restate activities, except for construction development projects for private operations;
  • Activities related to security and investigations;
  • Membership organisations; or
  • Activities for the sourcing of labour, including household workers.
  • 17. Are there any industries where fixed/state regulated pricing must apply? Give the main examples.

    Pricing in Kuwait is regulated by the Commerce and Industry Ministry.

    18. What restrictions govern the inclusion of non-compete clauses in employee's contracts?

    Article 196 of Kuwait Decree-Law No. 67/1980 states the general principle a contract is the law of the contracting parties and neither party to it may separately rescind or amend its stipulation except to the limits allowed by agreement or where the law provides otherwise. The employer's interests protected by the court will depend on the conditions expressly agreed to by the employer and employee in the employment contract. The interests of the employer such as trade secrets and customer goodwill can be enforced provided the employer and the employee have agreed to the conditions in the employment contract.

    The employer cannot enforce any restrictive covenants which are not expressly agreed to in the employment contract. The court will limit enforcement to a 'reasonable' geographic area and/or time frame. In practice, the court will limit enforcement of the restrictive covenants up to two or three years. An indefinite restriction will therefore not be enforceable. However, the restriction can cover the entire geographic area as Kuwait is a very small country.

     

    ]]>
    Thu, 18 Feb 2021 16:11:00 GMT
    <![CDATA[Q&A Bahrain Banks 2020]]> Q&A Bahrain Banks 2020

    1. What are the main laws regulating the banking sector in this jurisdiction and what do they cover?

    Laws relevant to the Banking sector in the Kingdom of Saudi Arabia include –

    - The Central Bank of Bahrain and Financial Institutions Law 2006

    • Bahrain Stock Exchange Law 1987;
    • Commercial Companies Law 2001;
    • Bahrain Anti-Money Laundering Law in 2001;
    • CBB Regulations and Resolutions.

    2. What is the name of the main regulators responsible for regulating the banking sector and which areas do they cover?

    The Central Bank of Bahrain (CBB) is a public body established by the Government under the Financial Institutions Law 2006 (the 2006 Law). It is responsible for maintaining monetary and financial stability in Bahrain and is also the single, integrated regulator of Bahrain's financial services sector. It succeeded the Bahrain Monetary Agency, which was established in 1973 soon after independence and which had previously carried out the Kingdom's central banking and regulatory functions.

    Article 40 of the 2006 Law provides no one may undertake a 'Regulated Service' in Bahrain unless licensed by the CBB. Regulated Services are defined as financial services provided by financial institutions, including those governed by Islamic Sharia principles. The 2006 Law also provides the CBB will issue regulations specifying the Regulated Services and organizing the provision of these services and it will supervise and control any licensees providing them.

    3. What is the definition of a bank in this jurisdiction?

    N/A.

    4. Are the same institutions able to provide regular and Islamic banking services?

    Bahrain's banking system consists of both conventional and Islamic Banks and is the largest component of the financial system, accounting for over 85% of the total financial assets. The conventional segment includes 19 retail banks, 69 wholesale banks, two specialist banks as well as 36 representative offices of overseas banks. The Islamic segment, offering a host of Sharia-compliant products and services include six retail banks and 18 wholesale banks and the numbers are increasing continuously.

    5. Are there any special regulatory requirements for those providing Islamic banking services?

    Regulated Islamic banking services consist of three activities. These are accepting Sharia money placements or deposits, managing Sharia profit-sharing investment accounts and offering Sharia financing contracts. If an institution has the requisite licence, it may be able to offer all three regulated activities alongside various supplementary activities. Islamic bank licensees must operate in compliance with Sharia economic principles and only Islamic bank licensees may hold themselves out to be fully Sharia-compliant institutions.

    Every individual Islamic bank in Bahrain has its own internal Sharia board, which determines the Sharia compliance of its products. In December 2018, there were 382 institutions and 98 retail banks registered in the banking sector, of which 21 were Islamic banks licensed by the CBB. The CBB does not interfere with this internal process but is usually very helpful and facilitates discussions about new ideas and concepts. Islamic bank licensees are divided into Islamic retail banks and Islamic wholesale banks. Specific regulatory requirements may differ between these two subcategories where appropriate to address their risk profiles.

    6. Does banking regulation operate in a different way in any freezone jurisdiction?

    N/A.

    7. What are the main steps a bank needs to take if it wishes to provide banking services in this jurisdiction?

    Chapter 2 of the Financial Institutions Law sets out the intricacies of the procedure for licensing and Article 44 lays out the application process to obtain a license.

  • Any person who wishes to provide a Regulated Service must apply for a license from the Central Bank.
  • An application must contain such particulars and information and accompanied by such documents as specified by the Central Bank.
  • Subject to the Commercial Companies Law, the Central Bank shall issue regulations specifying the requirements for offering a license to provide Regulated Services. Such requirements may include the legal form of the applicant, the location of its head office, the minimum capital and reserve requirements and the limits of capital adequacy requirements.
  • The Central Bank shall verify the application for a license to ensure that it satisfies all the conditions required, and it may ask for amendments or any additional information that it requires to assist with reaching its decision regarding the application. Such request shall be made within thirty days from the date of submission.
  • The Central Bank shall decide on the application within sixty days from the date of receiving the application complete with all the required information and documents.
  • The applicant may, at any time before a decision has been made about the application, withdraw his application or
  • make amendments to any errors therein or in the supporting documents in accordance with the Regulations issued by the Central Bank in this respect.
  • If all these conditions are met, the Central Bank will grant a license to the applicant. The Central Bank will keep a Register of Licensed Financial Intuitions on which all applications and supporting documents for licenses and any actions taken on them will be recorded.

    8. Are there any special passporting rules or exemptions for banks which already operate in other jurisdictions?

    If the bank licensee is a branch of an overseas bank, in deciding whether to grant a license, the CBB will pay very close regard to its activities elsewhere and examine how these activities are regulated. If the bank licensee is not regulated elsewhere, or in a jurisdiction which is not compliant with Basel Core Principles or FATF standards, then, a licensing application can only be considered after thorough, exhaustive enquiries into the bank's shareholders, management structure and financial position.

    9. Are there any particular laws or rules governing lending to consumers or businesses?

    N/A.

    10. Are there any particular laws or rules on guarantees?

    N/A.

    11. Are there any specific laws governing customer protection of banking clients?

    One of the primary objectives of the Central Bank, as stated in Article 3 of the Financial Institutions Law, is to protect the interests of depositors and the customers of the financial institutions and enhance the Kingdom's credibility as an

    international financial center.

    12. Who do rules on capital adequacy operate and how are they enforced?

    When a licensee is applying for a license, the requirements postulated by the Central Bank for authorization include the minimum capital and reserve requirements and the limits of capital adequacy requirements. Islamic bank licensees are required to maintain a minimum daily cash reserve balance with the CBB, which is set as a ratio of their total non-bank Dinar funds. This could be placed either by way of call, by unrestricted investment, as well as through the issuing of Dinar denominated Islamic investment certificates. The current mandated ratio is 5% and certainly may be varied by the CBB at its discretion.

    13. In the event a bank goes bankrupt does the state provide any guarantees to consumers?

    If the licensee is considered to be insolvent, the Central Bank may, under a justified resolution, assume the administration of a licensee, or appoint another person (the Administrator). Article 140 of the Law delineates the powers of the administrator. The Administrator is empowered to carry out the following without prejudice; discharge obligations of the licensee to certain creditors in preference to other creditors, if this is in the advantage of the licensee and undertake any necessary actions in the interest of the licensee and protect the interests of its customers and creditors.

    14. Are there any rules or regulations on application of interest?

    N/A.

    15. Are there laws or rules governing transactions between related parties in the banking sector?

    In Bahrain, wholesale banks have the liberty to undertake transactions without restriction, while dealing with the Government of Bahrain and its agencies, fellow Central Bank of Bahrain licensees and non-residents. For the sake of clarity, wholesale transactions may be defined in terms of transaction size (broadly, seven million Dinars or more for the activities of accepting Sharia money placements or deposits and offering Sharia financing contracts and $100,000 or more for any of the other activities which fall under the remit of regulated Islamic banking services). Islamic wholesale banks are allowed to transact in Dinars, or any other currency for any amount with the Government of Bahrain, public sector entities in the country and the Central Bank of Bahrain licensees.

    The Financial Institutions law sets out the transactions the CBB is permitted to engage in, in Article 29 of Chapter 6 on Central Bank's Transactions and Investments. The article states the Central Bank is permitted to act as agent or correspondent bank for foreign central banks, similar monetary institutions, foreign governments or their bodies or international financial institutions.

    16. Are there any activities banks are prohibited from undertaking?

    Article 42 of the Financial Institutions Law states the Central Bank is authorised to issue regulations to prohibit or restrict the marketing of, or investing in the regulated services by any unlicensed person. With regard to the prohibitions levied by this Law on the Central Bank of Bahrain, Article 31 states the Central Bank will not engage in trade or participate in any financial, commercial, agricultural, industrial or other undertakings; purchase, or retain title to real estate, except for that required for the conducting of the Central Bank's business and for the housing of its employees; advance unsecured loans accept shares or convertible public debt instruments as collateral, among others.

    17. What supervisory powers do the banking regulators have over banking activities?

    As previously established, the Central Bank of Bahrain is the single, integrated regulator of Bahrain's financial services sector. Article 39 of the Financial Institutions Law delineates the extent of the regulated services to be provided by the Central Bank, and formally authorizes the Central Bank as the supervisor of all licensees which provide the same services.

    If the powers conferred to the Central Bank prove to be insufficient for it to practice its supervision tasks over the business of the licensee, the Central Bank may seek a court order on a petition to enable the authorized investigators to enter and inspect specific premises and obtain the pertinent information, by using compelling force if it is considered necessary.

    18. What are the main penalties the banking regulators have at their disposal?

    Under the Financial Institutions Law, penalties which banking regulators can impose have five incarnations. These are the imposition of restrictions, the imposition of administrative fines, administrative proceedings, the suspension of the licensee from providing the service and public censure.

    Under Article 128 detailing the imposition of restrictions, the Central Bank may impose restrictions on the licensees and the listed companies to secure the compliance to the law, along with the terms and conditions of the issued license.

    Under Article 129 detailing the imposition of administrative fines, the Central Bank may levy on the Licensee an administrative fine not exceeding 20,000 Dinars, if the licensee breeches the law.

    Under Article 130 detailing administrative proceedings, the Central Bank may appoint an observer member on the board of directors of the licensee for a period specified by the Central Bank. This member will have the authority to participate in the deliberations of the board of directors and to give opinions on any resolutions passed by the board.

    Under Article 131 detailing the suspension of the licensee from providing the service, the Central Bank may suspend a licensee who contravenes the law from carrying out any regulated services for a period not exceeding twelve months.

    Under Article 132 detailing public censure, the Central Bank may issue a public statement setting out the breach which occurred to the law, whether this breach has been committed by the licensee, the listed company or any official of both. It is mentioned the publication should be carried out in a way proportionate to the nature and the magnitude of the violation.

    19. What happens when a bank becomes under capitalised?

    Undercapitalisation is guarded against. This is shown for the existence of the contingency reserve and the revaluation reserve. A percentage of the net profits of the Central Bank will be credited at the end of each financial year to a special Contingency Reserve account. The sums standing in the credit of the Contingency Reserve can be used for the purposes which serve the objectives of the Central Bank.

    The Revaluation Reserve has also been constructed to hold all profits resulting from the revaluation of the Central Bank's assets or liabilities in gold or foreign currencies as a result of any change in the parity-rate of the Dinar.

    20. Are there any rules on bank ownership?

    In Bahrain, finance transactions typically involve no actual movement of legal ownership and only the economic or beneficial value or ownership is transferred, which is not subject to any taxes.

    21. What are the most frequent type of enforcement actions taken in this jurisdiction?

    If a licensee fails to satisfy the Central Bank's regulatory requirements, the measures outlined in question 18 may be applied. Enforcement measures in the region have frequently included formal warnings, directions (e.g. to cease or desist from an activity), formal requests for information, adverse fit and proper findings, financial penalties or investigations. Explicit violations of the Central Bank's regulatory requirements may invite the revocation of a license and administrative or criminal sanctions.

    22. What are the rights and duties of an individual who controls a bank either as a director or for a business which owns a bank in this jurisdiction?

    N/A.

    23. Who can be legally liable if a bank fails?

    If a bank fails to fails to satisfy any of the license conditions, violates the terms of the law, fails to start business within six months from the date of the license, or ceases to carry out the licensed activity in the Kingdom, the Central Bank may amend or revoke their license. The licensee is legally liable in all of these cases.

    24. Are there any taxes levied over common banking services?

    Bahrain does not currently levy income tax, corporation tax (with the exception of oil, gas and petroleum companies who are engaged in exploration, production or refining, regardless of their place of incorporation) or capital gains tax. It also imposes no estate duty, inheritance tax or gift tax. However, it must be noted Islamic Finance transactions involving real estate may be subject to taxes. For instance, if the legal ownership of the land were to be transferred or registered, registration fees could be owed. Also notable is the fact that, on all property purchases, a registration fee of 2% is levied, which is reduced to 1.7% if registration and payment are completed within 60 days of the relevant transaction. If an Islamic financial transaction involves payments under an Ijarah, this will generally not be subject to taxation.

    Under existing Bahraini laws, payments under the bonds, Sukuk or notes will not be subject to taxation in Bahrain. No

    withholding will be required on these payments to any holder of notes and gains derived from the sale of notes will not be subject to Bahraini income, corporation or capital gains tax, While Islamic financial transactions are generally exempt from VAT if the income earned by the supplier is by way of interest, fees, commissions or commercial discounts received by Islamic Finance providers are not exempt (subject to VAT at 5%).

    25. What steps need to be taken by an individual or company which wishes to purchase a bank in this jurisdiction?

    N/A.

    26. What constitutes having control over a bank and what are the implications of having this?

    Control, with the Central Bank's approval, refers to the control established over a licensee, or taking any action which may lead to control. The notice of control shall contain the particulars and information and be accompanied by all documents which the Central Bank might specify.

    If any one acquires shares in breach of the provisions of Chapter 3 of the Financial Institutions Law on Control they will carry out the instructions issued to them by the Central Bank to transfer the shares, or refrain from exercising voting rights in respect of the shares under the procedures prescribed in these instructions.

    27. What are the main differences between banking regulation in this jurisdiction and other

    major jurisdictions such as the US and Europe?

    In Bahrain, the Central Bank of Bahrain regulates both the conduct of the financial services business in Bahrain as well as the financial institutions which provide those services. It has adopted the unitary approach. The CBB believes this approach creates a consistent and coherent regulatory model which can be applied across the board in Bahrain.

    Elsewhere, the US has adopted a dual banking system which means US banks can be chartered by one of the fifty states, or at the federal level. Most banks in the States are owned by bank holding companies, which are prohibited from controlling entities other than banks. Some bank holding companies may elect to be treated as financial holding companies, embracing a standard of activities which are financial in nature, or complementary to a financial activity. The US has a labyrinthine regulatory framework, with a myriad of regulatory agencies. The Federal Reserve is one the most critical and is supported by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, among others.

    28. Are there any special rules of client confidentiality and banking secrecy? If so what is their impact?

    Article 116 of the Financial Institutions Law elucidates on confidentiality and sets out the definition of confidential information. It refers to any information on the private affairs of any of the licensee's customers.

    Article 117 states confidential information must not be disclosed by a licensee unless the disclosure is done with an unequivocal approval issued by the person to who the information relates to together with the law, are in the process of executing an order issued by a competent court or, for the purpose of implementing an instruction given by the Central Bank.

    29. What is the typical time scale for becoming registered to provide banking services in this jurisdiction?

    After the license application has been given to the Central Bank, it will decide on the application within sixty days from the date of receiving the application complete with all the required information and documents. If they satisfy all of the conditions set out in the law, the licensee will become officially registered to provide banking services.

    30. What is the typical time scale for registration of a change of ownership in this jurisdiction?

    As the registration fees which accompany the transfer of ownership will be reduced to 1.7% (from 2%) if registration and payment are completed within sixty days of the transaction, it seems a fair approximation to state two months is the typical time frame for this.

    31. Are there any special rules on banking set off?

    While there is not a concrete set-off clause, the Central Bank may accept movable assets, real estate or other property as security for payment, if the ability of a debtor to repay any debt due to the Central Bank is doubtful. The Central Bank will sell the property, possessed as a result of the debtor's failure to pay the debt, as soon as market conditions permit (Article 31).

    32. Are there any special rules on closure of a bank account?

    N/A.

    33. What are the main rules on cheque issuing and bounced cheques?

    One of the critical functions of the Central Bank is to issue regulations regarding the settlement and clearing systems of cheques and other securities.

    34. What are the main rules on provision of safe deposits by banks?

    Article 4 of the Financial Institutions Law includes as one of the duties and powers of the Central Bank, the safeguarding of the the legitimate interests of licensees' customers against the risks associated with the financial services industry.

    Article 177 is devoted to the protection of deposits and other related rights. The Council may issue regulations to protect deposits of the customers of the licensee. The regulations will provide for compensating customers in cases where the licensee is unable, or appears likely to be unable to meet claims made against them.

    The regulation may provide for the formation of one or more funds and the funds are to constitute a separate corporate body, having an independent balance sheet and special regulations to be approved by a resolution issued by the Central Bank.

    35. What are the main rules on the provision of letters of credit, promissory notes or bills of exchange by banks?

    The Central Bank Buy is allowed to sell, discount and re-discount bills of exchange and promissory notes to other financial institutions.

    The Central Bank also maintains a foreign reserve which bears bills of exchange and promissory notes payable outside the Kingdom in convertible currencies.

     

     

    ]]>
    Thu, 18 Feb 2021 14:20:00 GMT
    <![CDATA[Establishing Policies for Blockchain Technology]]> Establishing Policies for Blockchain Technology

    Introduction

    Blockchain can be considered as a breakaway technology and is currently a hot topic that has been the subject of numerous studies across various industries. Blockchain is briefly defined as a shared ledger database that records and shares every transaction that occurs in the network of users. Initially devised for the digital currency Bitcoin, the applications of Blockchain are multifold. 

    In a conventional sales transaction, a user makes a purchase and any payment made towards such purchase is marked as a debit in the user's financial records whereas the seller records the sale as well as the payment in his records as a credit. Both parties have to maintain individual records of the transaction and have to ensure accuracy and confidentiality of such records. This is essentially how the system of double-entry bookkeeping functions. With blockchain technology in the picture, these transactions are radically transformed. 

    In a blockchain transaction, a user sets in motion a purchase, known as the block. This contains transaction data like the date, time and the purchase amount. This information can be seen by both the purchaser as well as the seller, thereby providing confirmation on the fact that the payment was initiated, sent and received. Such a data block is stored and shared in an online accounting ledger involving multiple buyers and sellers within a particular network. Any new transaction automatically gets attached to the previous one forming a chain that documents the transaction history and hence the name, blockchain technology.

    The nature of blockchain technology can be illustrated as follows:

  • All data is distributed and not transferred or copied.
  • The data is decentralized and not stored in one place. Centralized databases are highly prone to attacks by potential hackers.
  • Any data once recorded and stored is permanent and cannot be altered. This will effectively enable companies to tackle the pressing issue of misappropriation of funds.
  • The data is cryptographically stored yet it is transparent. Personal information of the user is kept confidential and hidden. However, any and all transactions are made available publicly.
  • There is no extra transaction cost. Only an initial infrastructural cost to set up the blockchain technology.
  • Faster processing of transactions as third-party verification and processing is eliminated.
  • Blockchain technology seeks to eliminate or rather replace all processes/business models that charge a small fee for transactions. For example, the business model of Apple Music or Spotify. Users have to pay a small fee to purchase/listen to an artist's song. This is essentially a profit cut for the artist and can be avoided with the use of blockchain technology. The music can be encoded and stored in a public database, and any user wishing to buy such music can do so, and the proceeds from such purchase will go directly to the music artist thereby avoiding all intermediaries.

    This very article is being written on Google Docs, which has properties similar to that of blockchain technology. A document shared with multiple users can be modified by all of them, and any such changes will be visible in real-time to the other users thereby obliterating the ordeal of saving the document, sending it across to multiple users, receiving modified documents from the other user, sending across corrections to such modifications, etc.

    In the world of finance, blockchains will completely change the way stock exchanges work or even how insurances are contracted. Financial institutions are modelled on the premise of taking a cut for facilitating a transaction. This will turn Banks into bare advisers as opposed to their long-standing role as the gate-keeper of public money. 

    Blockchain technology finds its primary use in the financial sector. However, there are several alternative business applications for it. 

  • Supply chain auditing
  • The primary concern for any consumer is whether a company's products match up to the claims made by the company. The Distributed Ledger Technology (DLT) or blockchain technology is an effortless way for any consumer to certify that any/all claims made by a company with respect to their product are true. The use of such technology provides users with the time, date and location of every step in the production process of a consumer good. 

  • File Storage
  • Distribution of data throughout the network ensures protection from potential hackers or from getting lost. InterPlanetary File System (IPFS) eliminates the need for centralized client-server relationships. This will enable faster file transfer and quicken streaming times. In a time where the content delivery system of the web is being overloaded, blockchain technology provides an easy solution.

  • Smart Contracts
  • Coding of simple contracts that will execute when the required conditions are met is a technology that is the need of the hour. Smart Contract can be defined as a computer program that is stored and executed in a Blockchain Network, containing business logic which is composed of self-executing functions and has, either partially or fully, the terms and conditions of an agreement between parties written into its lines of code, thereby enabling the digital performance and execution thereof. Ethereum is an open-source blockchain project that was released to satisfy this need. It features a smart contract functionality. 

  • Protection of intellectual property
  • The internet has, in recent times, become a gold mine for free content. Any information can be reproduced and made available to users on the internet. Copyright holders are in agony at the loss of control over an item of their creation and the consequential financial losses. Smart contracts can protect copyright, and automate the sale of such works online, extinguishing the risk of file copying and redistribution.

  • AML and KYC
  • Anti-money Laundering and Know Your Customer applications are highly potential blockchain technology projects. Presently, financial institutions carry out a strenuous multi-step process for every new customer. Use of Blockchain can cut costs exponentially and make monitoring and analysis of data a highly effective process.

  • Governance 
  • A company can make its governance completely transparent and verifiable, especially with respect to the management of assets, equity or any pertinent information. Information made publicly accessible increases the trust that users have in a company which is highly beneficial in the long run. An application called Boardroom enables organizational decision-making to take place on the Blockchain. 

    In the United States, federal agencies are gauging the efficiency of distributed ledger technologies like Blockchain to improve transparency, efficiency and trust in government information sharing. The Department of Agriculture oversees the use of Blockchain in particular food supply chains; the Food and Drug Administration supervises its use in drug supply chains and so on. However, there are numerous legal bodies that will have serious policy implications for a business that is developing and utilizing blockchain technology.

    In India, there is seen to be a clash in the ideologies of two major laws. While blockchain technology is primarily based on transparency (which requires data to be exposed) and immutability of data (which requires the data to be permanent and non-erasable), these requirements are in a major conflict with the data privacy laws prevalent in the nation. The Personal Data Protection Bill, 2019 provides extensive rights to the person from whom data is being collected (Data Principal) with respect to the privacy of their personal data and sensitive personal data. It also states that the person collecting the data cannot retain any personal data beyond the period necessary for processing the data and must then erase the data so collected once the purpose is satisfied.  

    Blockchain technology and regulation in the UAE

    The UAE government has viewed Blockchain as the stepping stone for enhancing productivity and increasing payment efficiency. It strongly backs the use of this technology and in lieu of that has launched the Emirates Blockchain Strategy 2021 and Dubai Blockchain Strategy. The former seeks to maximize the benefits of blockchain technology to transform 50% of government transactions into the blockchain platform by 2021. This initiative has been taken by the Government to make an annual savings of more than AED 10 billion, around 400 million printed documents and almost 77 working hours per week. 

    His Highness Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum launched Dubai's blockchain strategy in October 2016. This initiative was to function as a partnership between the Smart Dubai Office and the Dubai Future Foundation. The Dubai Blockchain Strategy will enable Dubai to become the first city to be fully powered by Blockchain. Three strategic pillars are sought to be used - government efficiency, industry creation, and international leadership. 

    To aid adoption of latest technologies and innovative practices at the global level, Dubai Future Foundation established the Global Blockchain Council with the aim to assess and analyze, current and future applications of the technology as well as organize transactions through the blockchain platform. The Council will assist transactions within the various financial and non-financial sectors as well as increase the degree of productivity and authenticity. The Council consists of 46 members, which include government entities, international companies, leading UAE banks, free zones, and international blockchain technology firms.

    With regard to digital transactions, the UAE would use blockchain technology, giving each customer a unique identification number that points to their details on a safety chain. Information 

    and data on a blockchain cannot be compromised or altered, ensuring the digital security of national documents and transactions and consequently reducing operating costs and speeding up decision-making. 

    Taking note from the Dubai Blockchain Strategy, the Dubai Land Department (DLD) is establishing its own blockchain system to record all real estate contracts and seeks to liaison with utility companies like Dubai Electricity and Water Authority (DEWA). This system will allow tenants to make payments electronically, thereby making transactions paperless and cost-efficient. The DLD wants to completely eliminate the requirement of parties to be physically present before any government entity for the completion of certain transactions. 

    The Roads and Transport Authority (RTA) is working on a project using blockchain technology to build a vehicle lifecycle management system. The program intends to provide a comprehensive and transparent record of the vehicle's past from the manufacturer to the scrap yard for car makers, dealers, regulators, insurance firms, buyers, sellers and garages. This blockchain-based system will enhance transparency and accountability in vehicle transactions, avoid conflicts and reduce service costs.

    The sale of cryptocurrencies in the UAE is mainly regulated by the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM). Dubai Financial Regulatory Authority (DFSA), the official regulator of the DIFC states that licenses are not granted to any company to issue cryptocurrencies in the DIFC. In ADGM, a regulatory framework for cryptocurrencies was recently introduced called Operating a Crypto Asset Business (OCAB). With respect to other emirates, there are no express regulations that prohibit or control the sale of cryptocurrencies except the e-payment regulations. 

    Value Added Tax (VAT) was introduced in the UAE only in 2018, and hence virtual currencies have not yet come under the purview of the VAT system. The Federal Tax Authority (FTA) of UAE determines the applicability of tax on cryptocurrencies. This is governed by UAE's Federal Law Number 8 of 2017. If virtual currencies are to be deemed as "goods" or "services" for the purpose of VAT law, it will result in the value of the purchase is taxable under VAT. At present, an individual's personal income tax or any other taxes are not in force in the UAE.

    Dubai Blockchain Policy

    This Policy lays down the rules that are applicable to Dubai Government Entities, Blockchain Networks and Private Sector Participants with respect to the utilization of Blockchain in government transactions. 

    Scope 

    The Policy applies to Dubai Government Entities that intend to use Blockchain or form a new Blockchain Network or join an already existing one, Private Sector Participants that are looking to join a Dubai Government Blockchain Network or a Government-hosted Blockchain Platform, and Blockchain Networks and Platforms that are formed or hosted or joined by a Dubai Government Entity.

    All relevant stakeholders are required to comply with the provision of this Policy. The Smart Dubai city Office (SDO) has to mandatorily coordinate with the Emirate's Blockchain Strategy in order to extend support to implement the Blockchain policy successfully throughout the Emirates. 

    Network Formation 

    Government Blockchain Networks that are formed in Dubai must be approved by the SDO, who will, in turn, ensure that the Blockchain Networks so created are effective and efficient across the Government. 

    The SDO has the authority to perform various functions: 

  • Approve the formation of a new Blockchain Network after assessing the supporting documents required to be submitted and provided by such entities.
  • Supervise the compliance of prevailing Blockchain Networks that fall under the ambit of this Policy.
  • Assign and re-assign, network operators to lead Government Blockchain Networks.
  • Appoint a committee or more of particular sector regulators and important stakeholders to head Government Blockchain Network formation and governance decisions.
  • Intellectual Property Rights 

    Dubai Government Entities and Blockchain Network Operators are urged to address and clearly define ownership, and other IP Rights shared or associated or developed in relation to Blockchain. Data ownership and other data-related IP rights will further be identified and handled in line with the Dubai Data Law and Dubai Data Policies.

    Data Privacy and Confidentiality

    All blockchain networks that are subject to this Policy and their members must uphold the data privacy and confidentiality regulations as prescribed by the Dubai Data Law and other relevant policies. They are required to classify all data that is shared through Blockchain networks in accordance with Dubai Data Establishment's (DDE) Data Classification Framework. Data privacy rules should be strictly observed at all times, and no personally identifiable information should be recorded directly on the Blockchain network. Mechanisms to ensure secure storage of data on these networks should be applied efficiently. Consent must be sought from individuals and private entities in order to share their data through the Blockchain network, which must be done in compliance with DDE's Dubai Data Policies. 

    Communication & Adoption 

    All blockchain networks subject to this Policy must publish and maintain a communication plan detailing the Blockchain network services provided, roadmap and future plans. Dubai Government Entities are recommended to build internal capacity and skill-set for Blockchain and other related technology in order to steer adoption. 

    Smart Contracts 

    Blockchain networks subject to this Policy making use of Smart Contracts for legal application or for automating legal obligations are mandatorily required to ensure that all such Smart Contracts are technically sound and legally reviewed so that they are in compliance with the requirements under the existing laws and regulations. A Smart Contract must be accessible by all the parties to the contract. It must be convertible to Arabic or English and should be readable in exactly the same way by all the parties to the contract. Digital signatures of all the parties must be affixed after identification using Digital Identity, and the parties have explicitly agreed to all the terms and conditions in the Smart Contract. 

    Public Interest 

    The SDO, Dubai Government Entities, Private entities, stakeholders and other members that are governed by this Policy must take into consideration public interest and public security while employing Blockchain in general and particularly seek to:

  • Uphold accountability and transparency;
  • Safeguard public health and safety;
  • Safeguard consumers and other beneficiaries;
  • Nurture the provision of better and efficient government services;
  • Protect public security;
  • Enable inter-government collaboration; 
  • Support and protect crucial economic, academic, and technology sectors from achieving stability, safety and welfare;
  • Prevent crime and protect the safety of individuals; and
  • Maintain the UAE infrastructure as well as tactical and vital services.
  • Conclusion

    In light of technological developments, UAE has strived to be at the forefront globally to achieve the same. Having recognized the potential of such newly discovered technological formats, it can be noted that the country has been quick to pass mandatory regulations in requisite of the same. While an innovative and transparent mode of ledger keeping, blockchain technology is still in its early stages and yet to be implemented as a mainstream source, but having regulations at this stage requires the users to be mindful of the laws and conduct its proceedings with heed.

    ]]>
    Mon, 15 Feb 2021 16:05:00 GMT
    <![CDATA[Business Exit Strategy Family Business]]> Business Exit Strategy for a Family-Owned Business

    Introduction 

    Companies like Walmart in the US and Reliance in India are some really successful examples of family-owned businesses. However, family and business are two parallel worlds that should ideally never meet. Operating a family business comes with its own challenges and results in friction in family relations. This friction then translates to failure of the business. 

    In order to run a business successfully, it is important to keep all emotions aside, a family business, however, goes against that basic principle. In situations where a family relation turns sour due to business conflict or any other such reason that compels a party to make a decision to part ways with the business, there arises a need for an exit strategy. 

    In the Middle East, a family-owned business is a popular business model that is being passed on from generations. However, recognizing the challenges that come along with conducting a family business, a Family Business Council- Gulf (FBCG) was incorporated to promote family businesses in the Gulf. This FBCG aims to facilitate the growth of family businesses across generations and create an environment of trust, openness and confidentiality in the region. 

    Issues that may have an effect on the exit of a member from a family-owned business can be enumerated broadly under as follows;

    The most common consideration that compels a family member to exit the company is succession. There is always an underlying expectation of every family member to be the next face of the business, especially if they have contributed to the growth of the business greatly. 

    Further, a career change may also play a role in influencing this decision. There may arise a need for professional and personal fulfilment outside the realm of the family business. 

    Another reason may be that of disagreement in terms of strategies and ownership structure. Further, poor decisions accompanied by issues in transparency in the business model may compel a shareholder to leave the company. 

    In order to deal with this issue, during incorporation of the company itself, the shareholders/ family members must lay down certain terms and protocols according to which, a shareholder could easily exit the business. 

    In any business model, be it a company or a partnership, on an occasion that a member or a partner decides to leave, there is an asset valuation that is done so that the departing member can get a fair share of what he deserves. Further, this asset valuation also facilitates in projecting the future ratio in which the profits are to be divided among the continuing shareholders. 

    Famous cases of conflicts in the family business 

    Reliance Industries and Anil Dhirubhai Ambani Group 

    Anil Ambani and Mukesh Ambani, India's richest siblings got into a conflict post the death of their father Dhuribhai Ambani over the business, following which they pursued a non-compete agreement that would basically bar each one of them from entering into a competing business for a stipulated period of time. The agreement barred Reliance Industries from entering into gas-based power projects until 2022. The non-compete agreement further incorporates the right of first refusal in case any of the groups decide to sell off the business. 

    This case went on to be heard in the Supreme Court of India wherein the dispute was decided in favor of Reliance Industries which allowed them to sell gas to RNRL owned by Anil Ambani at prices that were set by the government. 

    This scrapping of the non-compete agreement proved beneficial to the siblings in terms of their business interest. 

    The Gucci Family business 

    The conflict herein arose when Paolo Gucci instituted a suit against his father and other members of the family who were also engaged in business. The business got into several financial scandals that resulted in a lot of negative publicity over the years. 

    Palo wanted to use the Gucci name and sell leather goods, which would adversely influence competition in the market. Therefore, the defendants herein filed countersuits in that respect in order to prevent Paolo from using the Gucci name. The suits were dismissed in favor of the defendants in 1980. 

    This feud did not end here; conflicts continued between the family that led to financial issues in the business, which finally pushed family members to come to the decision to sell nearly 50 percent stake of Guccio Gucci to an investment banking firm based in Bahrain. 

    It is imperative to note that every family business faces the issue of succession. Exit strategies, therefore, plays a major role, not just in getting out of the business but also in deciding the future of the business. 

    In case such a situation arises where the next natural heir would not take over the business, the business can go into:

  • Winding-up
  • A decision can be taken to sell the business to a third-party investor 
  • Further, a business can also be sold to a promising employee or management 
  • An exit strategy must be adapted based on the business considerations like competition in the industry, new opportunities and the projections of the company with respect to its financial future. 

    An owner of a business may want to go into winding up because of a wide range of factors, both internal and external. The external factors may be, the fact that the competition in the market is getting too stiff, or that innovation in the products and marketing strategies are leading it into redundancy or even profit margins that are not able to sustain the existing business model. 

    Internal factors may also be considered in making this decision; they may be, passion for continuing the business, realization of the mission of the business etc. 

    Further, the decision to sell the business to a competitor or the management may be a way to protect the existing employees in the company and basically give them a new home. The decision to sell a business to a competitor is a great strategy since it ensures higher valuation and ease in negotiation. 

    Moreover, it is important to conduct a prior or annual valuation of the business. This practice is especially important to keep a check on the cash flow and the future of the company. It allows business owners to know exactly how to strategize in terms of growing the business and knowing when it's time to throw in the towel and sell the business. 

    The exit plan of any company must be based on the goals of the business owner. It becomes important to know exactly how much they expect to realize out of the business so as to have a steady income once it concludes. 

    Further, this valuation of a business allows owners to fill all the gaps in terms of financials which further maximizes the value of the company and makes it more desirable to prospective buyers. 

    Family Business Exit in UAE 

    Keeping in mind the predominance of family businesses in the Middle East. The Family Business Council – Gulf has, in association with PwC, launched a comprehensive guide to navigate exit strategies of shareholders. 

    This step seeks to promote harmony in the family business and seeks to avoid any major feud that may result from an exit decision. Further, this step is even more important since the majority of businesses in the Middle East are family-run, and exits in such businesses may threaten the sustainability thereof. 

    Valuation of a business 

    There is a difference between public and private companies in terms of valuation. The value of a company is easier to determine since it allows transparency in operations; however, in the case of the private company, a discount can be applied in order to evaluate the value of the business. 

    A valuation discount basically estimates the value of a company in contrast with the competitors in the market. Such a discount helps in determining the marketability and liquidity of the firm.

    The requisites as laid down by the FBCG for determining valuation discount are as follows:

  • The extent of marketability and liquidity of the company due to low profits, growth and high volatility of the shares of the company in the concerned sector. 
  • In case of a minority shareholder's exit, for instance, there may be a lack of control over an incoming shareholder. 
  • Ineffectiveness of the management team in the company or lack of governance 
  • Unreliability of financial information 
  • Insufficiency of goal alignment of majority shareholders 
  • On the contrary, the buyer or incoming shareholder may carry out a value estimation which refers to the excess value as compared to its competitors in the concerned industry. This type of valuation is known as valuation premium. 

    The key consideration in determining the valuation premium of the company are:

  • The performance of the company in terms of growth and profitability 
  • The incoming shareholder's goal with respect to the goals of the company 
  • Benefits of acquiring another business to merge with the prospects of the company
  • Control over decision making and strategy
  • Competitive advantage as compared to competitors in the market
  • Barriers that prevent external investors 
  • In terms of a privately owned company, the main considerations under this heading are that of marketability and control over minority shareholders. 

    Exit Routes 

    The FBCG has laid down potential exit routes that can influence the exit decision of a shareholder. These are as follows:

    The business may choose to sell its entirety of a business to an existing shareholder through a private sale. This may benefit the company since it ensures that the business will remain in safe hands, i.e. a family member itself. Moreover, it is a less complicated process than offering shares for sale to external buyers. It further ensures that the operation of the business continues smoothly without any disruptions.

    Another exit route can be offering for sale, the business through an IPO process. This serves as advantageous in terms of gaining capital for growth. It also allows shareholders to exit the company with a comparatively larger stake. However, the IPO process may not be the most cost-effective way of exiting the business in terms of documentation and corporate governance. 

    A trade sale is another means to exit the business. This type of transaction is based on value creation and identifying opportunities such as market expansion, diversification, operational collaboration etc. this method ensures that there is a value premium. 

    The business owner may also take the decision to sell off the company to the existing management. This is also a less disruptive method of exiting the business and allows stability in the company and operation of the business. However, in this case, the family status of the business is subject to dilution.

    Selling the business to a financial investor that could be a financial institution or a private equity firm. This sale, however, may be difficult due to the standards of the financial institution that need to be adhered to, in terms of returns. This sale may cause the company to go into restructuring in order to match the profit-maximization goal of the incoming shareholder. 

    Legal framework

    There are certain family protocols that are followed by family businesses. These protocols, however, are not binding in nature. Legally, the process of exit requires that the shareholder offers the shares of the company for sale to the existing shareholders, failing which, these shares can then be offered to third party investors. However, if the family chooses, during the time of incorporation of the company itself, they may contractually agree to keep the shares within the family to a certain extent. 

    The FBCG lays down certain documents that can be designed in order to regulate exit strategies. These are as follows:

  • Family Protocols
  • This document is non-binding in nature and only contains guidelines for the shareholders in the family business in case of an exit. 

  • Memorandum of Association (MOA)
  • This document is binding in nature that governs a myriad of matters related to a business, like business objectives, capital, liability etc. it further also contains matters related to the SHA and protocols. 

  • Shareholder's Agreement (SHA)
  • This document is also binding in nature and governs matters related to the shareholder, including the protocols related to exit.

    In case of an exit, the law provides for the sale of shares to the existing shareholders, failing which shares can be offered to a third party unless except a third-party offer is restricted as per contractual obligations. The shareholder can declare dividends in case there is a shortage of funds to buy the shares offered. 

    They can further contractually agree to minimize the offer of shares to external shareholders and maintain that majority of shares are to be offered to family members only. As an alternative, they can assign shares in the name of children or heirs that may be able to take over the family business upon reaching the age of majority. 

    Another option can be buying back shares of the company from existing shareholders. This practice is prohibited under UAE law, in which case, dividends may be declared, which may then facilitate the purchase of shares. 

    Conclusion 

    The company should, therefore, at the time of incorporation itself, lay down exit strategies as a contingent. This will disable any conflict in the future and ensure that the business runs smoothly without disruption.

    It is imperative to have a code of governance within the company framework to ensure smooth operations of the company after exit is initiated. This code should contain all the necessary and comprehensive requisites that facilitate exit like, method of valuation, investment options etc. 

    Further, the exit strategy must be synergized with the mission and vision of the business owners once the process is concluded. 

    ]]>
    Mon, 15 Feb 2021 15:32:00 GMT
    <![CDATA[Doing Business in KSA-I]]> Doing Business in the Kingdom of Saudi Arabia- Part I

  • What is the legal system in the Kingdom of Saudi Arabia (KSA)?
  • The legal system in the Kingdom is primarily based on:

  • Civil law, heavily relying on Sharia law and Islamic teachings on matters that are not codified under the statute. The Constitution of the KSA is the Quran (Holy Book) and the traditions of Prophet Mohammed (PBWH) (Article 1 of the Basic Law of Governance, issued by Royal Order Number A/90 dated 27/8/1412H) (the "Basic Law").
  • The traditions of Prophet Muhammad (PBUH) Sunnah. 
  • Ijma, the scholarly consensus developed after the Prophet's death. 
  •  Qiyas (analogy). 
  • Where the sources of law fail to provide an answer, the judges shall apply their personal interpretation and render their judgments and legal reasoning without regard to previous cases (Ijtihad). The judicial precedents system is not acknowledged in the Kingdom. The Nizam, (Royal decrees) supplement the Sharia in modern areas such as intellectual property, labor, commercial and corporate law. Other forms of regulations include Royal Orders, Council of Ministers Resolutions, Ministerial Resolutions and Ministerial Circulars, and are similarly subordinate to Sharia. Western commercial laws or institutions are adapted and interpreted from the standpoint of shariah law. As per Article 45 of the Basic Law, the Board of Senior Ulema and the Department of Religious Research provide a legal opinion on matters that need interpretation, termed as Fatwa, and is deemed as the highest in ranking for providing legal opinions.

    Furthermore, under Article 81 of the Basic Lawtreaties and agreements with states and international organizations and agencies to which the KSA is committed, form part of local law and regulations.

    In case of dispute in commercial law, particularly sale-purchase transactions, the court applies Islamic Sharia principals, as specified by the Quran and the Sunnah, and the laws that are not in conflict with the Quran and Sunnah which the authorities may promulgate (Article 48 of the Basic Law).

    There are general limitations under the Sharia law; however, there is considerable freedom to agree on contract terms for the parties. The prohibited contracts which are not enforceable are the contracts which involve speculation and the payment of interest. On breach of a contract, the KSA courts will only award compensation for proven direct damage. Any claim for loss of profit or opportunity will not be allowed as these constitute speculation, which is not permitted.

  • How are the transactions by organizations incorporated in the KSA with foreign companies governed?
  • For a trade contract assumed to be concluded with any private entity, and as per the privacy of contract doctrine, the terms and conditions agreed by the contracting parties mutually shall be applicable to the extent that they are not in conflict with the principals of Sharia. If no relevant provision is stipulated in the contract to decide the matter in hand, the judge will resort to state regulations, then to the writings of Hanbali scholars.
  • For an administrative contract entered into with a governmental agency, a ministry or a public corporation, the contract will be governed by its terms and conditions which must not deviate from the provisions and spirit of the Government Tenders and Procurement Law enacted by Royal Decree Number M/58 dated 4.9.1427H. When there is no relevant provision provided in the contract or in the law to decide the issue in hand, the judge will invoke the contractual provisions contained in the books of Hanbali scholars.
  • What are the recent Legislative updates adopted in the KSA?
  • The Ministry of Investment of Saudi Arabia (MISA)
  • The Saudi Arabian Investment Authority (SAGIA) became the MISA, an independent ministry in February 2020. This was done to provide the authority with powers enjoyed by Ministries and further improve and increase its effectiveness to attract qualitative investments that would ultimately add value to the KSA economy.

  • Revisions to the Companies' Law
  • In 2018, significant amendments were made in the companies' law regime, particularly concerning the Joint-Stock Companies (JSC) and Limited Liability Companies (LLC). The changes included new requirements on how to record the articles of association and matters concerning the authorization of director decision-making.

  • KSA Bankruptcy Law
  • In 2018, the KSA Bankruptcy Law was issued to help a bankrupt debtor reorganize his financial position and resume activities. The law establishes a framework of protection against bankruptcy for individuals, tradesmen, and foreign and local companies.

  • New Professional Companies Law
  • In 2020, a revised version of the Professional Companies Law introduces some key changes. The non-KSA companies will now be able to form a professional company within the Kingdom.

    The New Professional Companies Law addresses many of the issues that were challenging in the past and provides several novel features, including major changes in terms of shareholdings, activities and succession. Different professional activities can be merged into one company to foster innovation and enhance competition. This innovation aims to have a great impact on the market in terms of the variety and sophistication of services and, on the competition.

  • Revisions to the Negative List
  • The "Negative List" lists the group of sectors where foreign entities are barred from investing. The sectors which have been removed from the Negative List are Road transport; Real estate brokerage; Audio-visual services; and Recruitment and related services.

  • New Saudi Tender and Procurement Law
  • This law ensures that the procurement decisions by government agencies are not influenced by personal interest, and the government can now choose between the RFP model and the invitation to bid.

  • New Cloud Regulations
  • The Cloud Computing Regulatory Framework (CCRF) is wide-reaching in scope as it applies to the cloud computing services being provided to residents of KSA, and to any security breaches of data that are stored or processed within KSA.

  •  Value Added Tax (VAT)
  • The Government of the KSA announced that the VAT rate would increase to 15 percent from the current 5 percent, effective 1 July 2020.

  • The adoption of the International Standard Industrial Classification (ISIC4)
  • MISA has adopted the ISIC4 for the issuance of new Foreign Investment Licenses as the ISIC4 provides a list of detailed activities to be chosen depending on the proposed investment sector.

  • FinTech Experimental Permit Instructions
  • The Capital Market Authority (CMA) can issue a limited number of FinTech permits (or "ExPermits"), which would enable the holder to use the CMA FinTech Lab for testing a proposed product or service.

     

    ]]>
    Mon, 15 Feb 2021 12:38:00 GMT
    <![CDATA[Legality of Backdating Contracts]]> The Legality of Backdating Contracts

    Introduction 

    The "contract date", seemingly a very basic concept, can contribute to some problems and confusion among parties contracting therein. The main issue that parties may face is regarding the interpretation of the dates mentioned in the contract. There are essentially three types of dates that may be mentioned in a contract; the contract date, signature date and other defined dates. Out of the three types of dates, defined dates are a source of major confusion. These can take many forms, such as, "commencement date", effective date" or a "start date". These defined dates give legal effect to the contract or parts of it. 

    The purpose of having a defined date is to clearly set out the commencement of, all the rights, liabilities and obligations of each of the parties. This is essential since parties who enter into a contract generally spend months negotiating the terms thereof. In this case, parties are able to enforce backdated rights whose commencement may become operational on the defined effective date. Backdating of contracts can create an indemnity at an earlier date than the date of the contract. Further, in certain cases, it also enables non-parties to enforce third party rights during the pre-contractual period.  

    Backdating of contracts is a very common practice in law. To a layperson, it may be perceived as wrong, and agreeably so, since it may be misused for fraudulent practices. However, backdating is not necessarily wrong, per se. The only thing that needs to be kept in mind while analyzing a backdated contract is the purpose for which it was made and its effect. In order to tackle the problems of backdating, a lawyer must be aware of its implications and be equipped with the tools to comprehend the propriety effects thereof. 

    Backdating may be defined as the practice of marking a document, it may be a contract, cheque etc. with a date that is prior to what it should be. In many jurisdictions, this practice is considered to be illegal and fraudulent depending upon the nature of the document and its ultimate effect. 

    In the UAE, the concept of backdating is not recognized; the only exception to backdating in UAE is in the case of insuring a newborn child. In this case, the insurer is permitted to backdate up to 7 days in order to achieve the goal of providing insurance to the child from the time of birth. 

    In order to understand the concept of backdating, we may rely on some illustrations:

  • A is B's tenant, who forgets to pay his rent on the due date, being 12 October, in order to remedy this mistake, A decides to submit a cheque dated 10 October to his landlord in an attempt to excuse himself from any penalties for non-payment. This is not an acceptable form of backdating.
  • A crashes his car because of his inattentiveness. He wishes to claim the costs to repair the car out of his insurance, and he later realizes that due to non-payment of premium, his insurance has expired. A backdates a cheque to pay his premium to claim benefits thereof. This is also an unacceptable form of backdating. 
  • A & B enter into a contract, and the parties have already begun engaging in activities in furtherance of their contractual obligations. They orally agree that the effective date of the contract shall be different from the current one. Therefore, the effective date is integrated into the written contract. This form of backdating is acceptable. 
  • The minutes of a board meeting are recorded to reflect the decisions taken verbally by the directors of the company for certain corporate actions. The document that is drafted shall therefore comprise the date of the meeting and not the document. This is an acceptable form of backdating since it is for the memorialization of an event. 
  • From the above illustrations, we can understand the types of documents that are considered to be legitimately or improperly backdated. For the sake of clarity on this concept, as a general rule, if a document is dated before the occurrence of an event, it is improper, and if it dated after the occurrence of the event and accurately reflected date of the event, then it may be considered proper. 

    Latin maxim 

    Nunc Pro Tunc 

    This maxim literally translates to "now for then". It basically applies to court judgments that have been backdated, and it is a form of official backdating. It is evident from the aforementioned examples that backdating is illegitimate depending on its propriety, and it could potentially mislead a third party. In order to understand the application of this maxim in official court proceedings, we may take an example. 

    A is a plaintiff who has missed the period of limitation to file his matter in court. A makes an application in court to consider his matter, stating that the deadline has been missed, the court accepts his application and allows A to proceed with the issue nunc pro tunc

    Legitimate and improper backdating 

    It is often impossible to draw the line between proper and improper backdating. Generally, backdating is associated with fabrication. However, not all backdating is a fabrication. In certain circumstances backdating can be considered to memorialize an event that had occurred prior to the execution of the document. Such dating is considered to be legitimate and genuine. This practice of memorializing a document is a daily practice; therefore, it is necessary to distinguish between backdating that fabricates time and backdating that merely records an event. 

    In order to combat confusion and legitimize backdating, experts suggest the use of the terms "as of" or "effective as of". The use of this term suggests that the document may have been executed after the event had already occurred or is in the process. 

    In the case of United States vs Wilson (4th circuit 1997), the issue was regarding an attorney's attempt to conceal the assets of his client from the IRS, and he attempted to do this by backdating promissory notes to give the impression that his client was obligated to pay certain unconditionally received amounts. The federal jury upon examination of the facts and circumstances and considering all the evidence presented convicted the defendant on the grounds that, he had attempted to defraud the administration of the internal revenue and willfully attempted to evade and violate tax penalties. 

    In the case of United States vs. Micke, the defendant claimed tax deductions in consideration of a tax shelter investment on his return for the year 1982, he argued that the document was executed in the year 1983, but this execution was only a memorialization of the tax investment for December 1982. Therefore, in this case, though the defendant was convicted on the charge of criminal fraud, it was explained that the backdating would have been legitimate if the memorialization was done in the same year. 

    Significance of using "as of" or "effective as of" 

    In an attempt to clear the confusion and legitimize backdating, experts often suggest the use of the "as of" or "effective as of". This is an optimal way of disclosing backdating. For instance, if the date of a document is unclear, rather than writing that the event occurred "on 12 October", the language can be modified to have a different effect; therefore, one may write "as of 12 October". 

    However, this can obviously be used for illegitimate means as well. If there has been a fabrication that is being masked under the guise of the term "as of", it can serve as an impropriety means of mitigating wrong. In such a case, there a presumption that such dating is done in good faith, hence reducing the chances of misleading the client or the third party. 

    In the instant matter of United States vs. Delaney, a tax lawyer had fashioned documents by creating documents in 1998 dated back to 1996, with the intention of enabling his partners to deduct about 15 million dollars from the preceding three years inclusive of losses, in their personal tax returns. The facts and circumstances and the shreds of evidence presented demonstrated violation of tax laws. It was argued that backdating is neither a proper nor an improper practice per se; what needs to be considered is the propriety it serves. Further, when backdating is used for deceiving another, it mitigates wrongs. The accused was convicted and sentenced to imprisonment. 

    One can identify and disclose the date of execution, and this practice would help to evidence the event that has been executed. Many times, the actual date of the event is unclear to the parties or parties may have different views on dates. Therefore, regardless of whether or not the parties are aware of the actual dates, all the terms of an arrangement can coincide with the date of execution.

     Illustrations 

  • P is an employer who hires Q. They enter into a verbal agreement on 3 October. While drafting the written agreement, the document was dated "as of 3 October", and the date of execution was 15 October. In this case, the written agreement serves as a memorialization of the original event.
  • As per the company policy of company X, any person who works a full calendar year is eligible for a bonus. A's employment contract commences on 20 January, now in order to be eligible for the bonus plan, B, his employer backdates the employment contract to 1 January. In this case, there has been a fabrication of the date of the event, regardless of whether it harms a third party, this form of backdating is illegitimate. 
  • Conclusion

    As part of their professional ethics, a lawyer must keep in mind that, there is a corporate responsibility imposed on them while drafting contracts that have been backdated. Therefore, lawyers must act as compliance monitors to ensure that there is no such foul play involved in any transaction that would potentially threaten their professional career. Hence, it is important to note that backdating a contract can be considered a breach of professional conduct and can potentially attract criminal liabilities. 

     

     

    ]]>
    Mon, 15 Feb 2021 11:38:00 GMT
    <![CDATA[Duress in Contract Law]]> Duress in Contract Law

    In UAE, all legal aspects in regards to contractual related issues are encapsulated under the UAE Civil Code and the UAE Commercial Code. It is difficult to establish between illegitimate and legitimate duress as in regards to commercial contracts, a certain level of duress is expected with an agreement. While the risk of loss is ascertainable and to be accounted for to a certain degree, the scope of the same is to be decided on a case-to-case basis. In general, a threat to break the contract, a threat to committing or refraining from committing from a certain act unless a contract is signed shall generally constitute for causing duress to the signing party. The Civil Code governs all civil rights and obligations available to the parties to a contract. While in regards to certain specific laws applicable, Undue Influence in itself is an abstract concept to prove the same in a lot of cases is difficult. While that is the case, to file for dismissal of a contract on the basis of undue Influence requires the need to have an established contract. It is required that the essential elements of a contract, as stated under the Civil Code, is fulfilled. Article 125 of the Civil Code states the definition of a contract as: 

    "A contract is the coming together of an offer made by one of the contracting parties with the acceptance of the other, together with the agreement of then both in such a manner as to determine the effect thereof on the subject matter of the contract and from which results an obligation upon each of them with regard to that which each is bound to do for the other. There may be a coincidence of more than two wills over the creation of the legal effect."

    While an offer made by one and acceptance by the other party of that offer is what constitutes a crucial part of the formation of a contract, the dispute in regards to duress generally rises under specific clauses of a contract. This could lead to an undue advantage to the accepting party as while the acceptance of other aspects of the contract may be acceptable, the offeree may insist on having such problematic clauses with the agreement. Undue Influence as a concept would not be implicated within the contract, but due to external factors. In situations such as a father using his undue Influence on wife and kids to sign certain contracts, a boss instructing employees to sign certain agreements duly on the basis of Influence, and other such instances wherein there is leverage to the offering party against the accepting party to accept the same shall be termed as the use of Undue Influence. While an established concept in law, UAE law does not explicitly dictate provisions for the concept.

    Under , Part 4 of the Civil Code, provisions have been provided that would denote what Duress would constitute as. Article 176 of the Civil Code defines Duress as: 

    "Duress is coercion of a person without the right of so doing to perform an act without his consent. Duress may be forcible or non-forcible, and may be material or moral".

    In case of contractual liability, of which the opposite party can be held liable due to duress, it is mandatory as per Article 182 that the victim or his heirs do not enforce the contract after the threat has ceased to exist. Thus, it is pertinent to make sure that the contract is not implemented by the victim unless the threat still exists and can be exercised if the contract is not fulfilled. While the existence of a threat is susceptible to forcing a person to implement a contract, the same is required to be proven to the court. Duress may be in different forms, forcible, non-forcible, material, or moral.

    While forcible duress would be one which would entail an imminent threat of grave danger to the victim, a victim's associate, family or friends, or property. A lack of such a threat would classify the duress as non-forcible. Non-forcible duress can usually be classified as undue Influence. 

    So, what can be construed in regards to duress implicated by a third party? To provide for an example, if the agent of a company has inculcated the victim into a contract through duress, can the victim hold the company liable for the same?

    As per Article 184 of the Civil Code, it is pertinent that the party being constituted as the defendant is knowledgeable of the act committed. It is not possible to implicate a party that is not privy to the nature of the contract made to be held liable for the act. This can be confusing as agency law dictates that the acts of an agent while done on behalf of the principal entity, is to be seen as the work done by the principal entity and not the agent. 

    Hence, it is difficult to prove that the principal entity was aware of the circumstances under which the victim has signed the contract, and it is important to have proof relating to the same. It can be noted that in light of contracts being signed, this helps in proving that the principal entity is ultimately responsible for the actions of its agent and hence should as a duty, be aware of the professional scenarios undertaken by its agent.

    ]]>
    Mon, 15 Feb 2021 11:17:00 GMT
    <![CDATA[UAE Healthcare Q-A]]> Q&A guide to the commercialisation of healthcare in the United Arab Emirates

    Question Set:

    Medicines

    Question Body:

  • What is the definition of medicine (or equivalent) in your jurisdiction?
  • Answer Body:

    "Medical products" are defined in UAE law as "all drugs, medical devices or healthcare products".

    "Drug" is defined as "any product that contains an active ingredient or a group of active ingredients that have an intended biological effect on or in humans or animals. Drugs are products which are manufactured, sold or made available to be applied for the:

    • Diagnosis, treatment, cure, relief, or prevention of illness.
    • Restoration, renovation, modification or correction of organ functions.

    (Article 1, Federal Law No. 8 of 2019 on Medical Products, Pharmacy Profession and Pharmaceutical Establishments (Pharmaceutical Law)).

    Question Body:

  • What authorities are responsible for regulating the manufacture, marketing and advertising of medicines?
  • Answer Body:

    The UAE Ministry of Health and Prevention (MOHAP) is the primary regulatory authority that regulates all healthcare services for the Northern Emirates. The MOHAP supervises the healthcare policies, all medicinal products, manufactured and imported, as well as the licensing and registration for all medical products and institutions. Additionally, the Emirates Health Authority (EHA) also regulates public healthcare services.

    In addition to the MOH, the following regulatory authorities oversee the UAE:

    • Health Authority Abu Dhabi (HAAD), which supervises all healthcare in the capital of the UAE (Abu Dhabi) and was established under Abu Dhabi Law No. 1/2007.
    • Dubai Health Authority (DHA), which runs the medical necessities in the Emirate of Dubai and was established under Dubai Law No. 13/2007.
    • Sharjah Health Authority (SHA), which oversees all healthcare needs in Sharjah and was established under Federal Law No. 13/2009.
    • Abu Dhabi Health Services Company (SEHA), which manages and owns, either indirectly or directly, public health facilities and other services approved by HAAD in the Emirate of Abu Dhabi.

    Question Body:

  • What notifications, registrations, approvals and licences are required to manufacture and market medicines and their active pharmaceutical ingredients?
  • Answer Body:

    Manufacturing

    A medical product cannot be manufactured in the UAE without obtaining the approval of the MOHAP, provided that it is manufactured by a licensed or approved factory in the UAE according to the standards and criteria issued by a resolution of the Minister (Article 22, Pharmaceutical Law). The process is as follows:

    • The companies must seek prior approval from the relevant authorities (that is, the MOHAP or the relevant health ministry) (see Question 2), before establishing a manufacturing unit or setting up factories to produce medical products.
    • Individuals must apply to the Board of the MOHAP to obtain a licence.
    • Applications must be submitted with all necessary documents to support the application.
    • Companies must also:
    • provide all proposals and full details of any machinery to be installed in the unit;
    • give details of all medicinal products to be manufactured in such a factory and any other vital information required by the MOHAP.
    • The Minister or their deputy must cancel the medical product manufacturing authorisation licence in the UAE if:
    • it is proved that the manufacturing authorisation or factory's accreditation is based on false documents;
    • a resolution has been issued to prohibit product manufacturing in the country or the country of origin or any of the reference entities approved by MOHAP;
    • it is proved that the factory does not apply the principles of good manufacturing practice, which affects the quality of the medical product;
    • the product is found unsafe or has repeatedly failed to comply with the approved quality standards at the time of laboratory tests performed in the accredited laboratories in the country. The Minister must specify by resolution the number of failures that require cancellation of manufacture authorisation; or
    • a resolution is issued to ban the factory's activities in the country, country of origin or any of the reference entities approved by the MOHAP.

    (Article 24, Pharmaceutical Law)

    There are no exceptions concerning the requirements as the Pharmaceutical Law explicitly lays down that no clinical studies of a medical product may be conducted on humans, unless approval from the MOHAP or the concerned authority has been obtained. Any company which complies with the following requirements is entitled to hold the required approvals and licences and undertake approved activities:

    • The company must meet required sanitary manufacturing standards.
    • Full quality control of the whole pharmaceutical product must be assured.
    • An MOHAP-approved qualified pharmacist or other suitable professional must supervise the manufacturing process of the medicinal products.

    Marketing

    Individuals and companies are not permitted to circulate or advertise medical products without obtaining a marketing authorisation or exclusive marketing authorisation licence and approval from the MOHAP (Pharmaceutical Law). Also, under Federal Law No. 15/1980 regarding the regulation of Publications, companies and individuals cannot distribute publications without prior approval from the MOHAP or relevant health ministry. Additionally, UAE Cabinet Resolution No. 7/2007 states that anyone that does not have MOHAP approval and an issued licence is forbidden from advertising and promoting medical products.

    Under Article 7 of the Pharmaceutical Law, the medical product marketing authorisation applicant must:

    • Appoint one or more qualified persons residing in the country according to a resolution from the Minister.
    • Provide a medical warehouse to carry out the import, storage, distribution and wholesale of marketing approved products.
    • Monitor medical products through distribution channels.
    • Provide the necessary capabilities and systems to comply with the requirements of the medical product marketing authorisation.
    • Monitor the performance of the licensed medical product and receive reports from pharmaceutical facilities about its effectiveness, safety, usage and quality.
    • Inform the MOHAP and the concerned authority within 15 days of the date of noticing any unexpected side effects or adverse effects or critical side effects or adverse effects reported or monitored during circulation or local or global clinical researches conducted on the product(s).
    • Monitor procedures of medical product withdrawal.
    • Monitor product patent and manufacture right protection.

    There are no exceptions to the requirements as the Pharmaceutical Law explicitly lays down that no clinical studies of a medical product may be conducted on humans, without obtaining approval from MOHAP or the relevant authority.

    The MOHAP governs and regulates all manufacturing, advertising and sale of medical products in the UAE and is the only authority that issues licences for these activities. However, specific Emirates have authorities that regulate the policies and overall healthcare quality, for example, the:

    • DHA governs all policies, rules and regulations applicable in the Emirate of Dubai.
    • HAAD governs all policies, rules and regulations applicable in the Emirate of Abu Dhabi.
    • SEHA manages and owns, either indirectly or directly, public health facilities and other strategies approved by HAAD in the Emirate of Abu Dhabi.

    Question Body:

  • What are the differences between the regulation of new innovative medicines and generic or biosimilar versions of those medicines?
  • Answer Body:

    There are no differences in the regulation of new innovative medicines and generic or biosimilar versions of those medicines regarding the registration, advertising and manufacturing of medical products. The medical products must be licensed in accordance with the guidelines set out in the Pharmaceutical Law (see Question 3). The MOHAP regulates licences and approvals for obtaining, advertising and selling medical products and healthcare products. Additionally, the Higher Committee of Drug Policies is a committee under the supervision of the MOHAP which is in charge of the development of medical product circulation, pricing and control policy in the UAE.

    Question Body:

  • What are the differences between the regulation of prescription and over-the-counter medicines?
  • Answer Body:

    "Prescribed products" are regulated under Article 31 of the Pharmaceutical Law. These are medical products that require a medical prescription and which cannot be sold, displayed, stored or circulated by non-pharmaceutical facilities.

    Non-pharmaceutical facilities are defined as a facilities licensed to operate in any pharmacy, pharmacy chain, medical warehouse, marketing office, marketing consultation office, pharmaceutical laboratory, pharmaceutical research offices, factory and other facilities stipulated by the executive decree of the Pharmaceutical Law.

    The prescription must be a written or electronic document issued by a healthcare professional duly licensed to dispense medicines. An oral order issued by a healthcare professional is deemed a prescription, as long as it is documented later under the terms of a ministerial resolution.

    However, non-pharmaceutical facilities are allowed to sell, display, store or circulate medical products that can be dispensed without a prescription and which are the over-the-counter medicines under Article 32 of the Pharmaceutical Law.

    Question Body:

  • Are there fewer or different requirements for the approval of medicines that have already been licensed or approved in another jurisdiction?
  • Answer Body:

    Under the Pharmaceutical Law, companies must obtain a licence for selling or manufacturing medical products. However, there are a few exceptions, which usually involve emergency medical products that must be flown into the UAE or sporadic forms of medication that are required at short notice.

    An applicant wishing to obtain medical products from another country in an unregistered way must submit an application to the MOHAP. Only specific bodies such as hospitals and health authorities can import in this manner. All other medical products must pass through the standard licensing process whether or not they have been approved in another country.

    Question Body:

  • Is it possible to sell medicines to or buy medicines from other jurisdictions?
  • Answer Body:

    Import of medicines. Medical products and the raw materials contained in them cannot be imported, exported or re-exported without the MOHAP's approval (Article 26, Pharmaceutical Law). Individuals and companies must adhere to the specific requirements of the MOHAP. The following rules must be considered before selling medical products from other jurisdictions:

    • Only medical products listed as permitted under the Pharmaceutical Law can be imported into the UAE.
    • Individuals who do not have a MOHAP approved permit cannot import permitted medical products.

    A marketing authorisation holder must appoint one pharmaceutical establishment as an importer and appoint one or more distributors to distribute the medical products within the UAE. The importers and distributors must be duly licensed by the MOHAP to ensure oversight and security of supply chains and their appointment by the marketing authorisation holder must also be approved by the ministry.

    Export of medicines. Companies must adhere to different rules to sell pharmaceuticals to other jurisdictions. Pharmaceutical products cannot be sold to other jurisdictions if such products have not been registered under the appropriate authorities. A manufacturer which holds authorisation in its home jurisdiction and a local representative from the UAE must apply jointly for registration. The local representative can only act as an authorised representative with the manufacturer's authorisation. The local representative oversees each element needed to market the product, which includes:

    • A document of proof stating that the products are manufactured using manufacturing processes that adhere to the relevant laws.
    • A "free-of-sale" certification, that is, clearance for sale certification required to certify that the pharmaceuticals are freely sold in the exporting country.
    • A document of proof stating that the appropriate goods can be manufactured and exported from the specific country.
    • Authorisation for the location where the product was produced.
    • Approval indicating that the laws of the manufacturing country have approved the product.
    • Proof that the product meets and is approved by all safety laws of the manufacturing country.
    • All instructions and labelling for the products.
    • A detailed plan of financial activity and marketing prospects.

    However, parallel imports of medical products are not allowed in the UAE.

    Question Body:

  • How is medicine promotion and advertising activity regulated, and what are the general requirements to advertise medicines?
  • Answer Body:

    A medical product dispended by a medical prescription cannot be publicised or advertised to the public by any means (Article 39(1), Pharmaceutical Law).

    The following are permitted with the MOHAP's approval:

    • Announcing, advertising or promoting a medical product in magazines or scientific resources intended for healthcare practitioners.
    • Announcing, advertising or promoting to the public any non-prescription medicine or healthcare product that has marketing authorisation.

    (Article 39(2), Pharmaceutical Law)

    The marketing authorisation holder must ensure that medical product advertisements and promotions comply with the terms and conditions set out by the MOHAP.

    The principal legislation that governs the medical industry's advertisements is Regulation No. 430/2007 of the Health Advertisement Regulations. Additionally, Federal Law No. 15/1980 concerned with Publications and Public Matters (Article 83) states that advertisements are prohibited without the prior approval of the MOHAP. Advertisements for medicines must:

    • Be in line with the law and must not breach any rules in the UAE.
    • Not undermine UAE traditions, Islamic beliefs and customs.
    • Be clear and concise and must not misdirect individuals.
    • Not disrupt public morale.
    • Not promote the unwanted and excessive use of medicinal products.
    • must not be accompanied by the giving of samples.

    (Federal Law No. 15/1980.)

    Some medical advertising is explicitly prohibited because of its content. It is an offence to advertise the following products and services:

    • Abortions.
    • Embryo freezing.
    • Products that are proven to be harmful to individuals.
    • Treatment or preventing the following diseases: cancer, sexually transmitted diseases (STDs), Acquired Immune Deficiency Syndrome (AIDS), hepatitis, mental and psychological disorders.

    (Federal Law No. 15/1980.)

    Pharmaceutical products can be advertised on the internet. However, they must not be advertised online if they do not have professional approval from the appropriate authority. Breach of the approval requirement results in penalties, including imprisonment (Federal Law No. 15/1980).

    Question Body:

  • Are there additional or alternative regulations for special types of medicines or medicines intended for particular types of patients or diseases?
  • Answer Body:

    The Department of Health (DoH) Standard on Stem Cell Therapies and Products & Regenerative Medicine, approved in July 2019, applies to all DoH-licensed healthcare professionals, providers and suppliers of:

    • Stem cell products and laboratories engaged in the provision of stem cells.
    • Stem-cell based-products, and related cellular therapies.
    • Somatic-cell therapy and tissue-engineered products and regenerative medicine products for the purpose of human use.

    This standard also applies to insurers, third party administrators (TPAs) and Medical Billing Offices.

    The main aim is to set DOH's criteria for the provision of safe, effective and quality stem cells, stem-cell based-products and related cellular therapies, somatic-cell-therapy and tissue-engineered products and regenerative medicine products for the purpose of human use in Abu Dhabi.

    Question Body:

  • What controls apply to medicines or components of medicines that derive from humans or animals or incorporate modified genetic material?
  • Answer Body:

    The MOHAP, along with other health regulatory authorities, issues all policies for medical products. If a product contains an ingredient (active or excipient, for instance, magnesium or calcium stearate, stearic acid, gelatin, lactose) that is, or potentially is, of animal origin, or comes into contact with the material of animal origin during manufacture, the source of the material (or contact) must be declared, and evidence must be provided that the product is free from viruses, other micro-organisms and Transmissible Spongiform Encephalopathy (TSE) agents.

    The European Pharmacopoeia Commission Certificate of Suitability (CEP) is acceptable as evidence of freedom from TSE agents.

    In the UAE the following information must be submitted for the General Sales List (GSL), that is medicines that can be sold at non-pharmaceutical facilities such as supermarkets:

    • Statement issued by the principal company showing that the product is devoid from hormones, heavy metals, antibiotics, steroids, derivatives of pork and any natural and chemical ingredients having harmful effects on human biological and behavioral functions.
    • If the product contains an ingredient from an animal source, the kind of animal and part extracted from it must be specified.
    • The percentage of alcohol if any must be mentioned together with reasons for its inclusion.
    • Halal certificate issued by recognisable organisations and authorities.

    Question Set:

    Biological medicines

    Question Body:

  • What is the definition of biological medicines in your jurisdiction and what are the main laws that specifically apply to them (if any)?
  • Answer Body:

    See Question 1 for the definition of medical products and drugs.

    Under Ministerial Decision No. 1412 of 2017, the definition of "medical products" includes pharmaceutical products, including original drugs, generic drugs, herbal drugs, biological products and vaccines. There is no specific definition of biological medicines. .

    Question Body:

  • Are there any additional or alternative regulations that apply specifically to biological medicines?
  • Answer Body:

    Biological medicines are considered as medical products and all regulations that apply to medical products (see Questions 2 to 10) also apply to the biological medicines under the Pharmaceutical Law and the other relevant regulations.

    Question Set:

    Medical devices

    Question Body:

  • What is the definition of medical device (or equivalent) in your jurisdiction? What is the significance of any legal classifications?
  • Answer Body:

    A medical device is defined as a medical product that contains any element, instrument, tool, machine, appliance, implant, in vitro reagent, calibrator or a system, including its accessories and operating software, which achieves the intended purpose to be applied in or on humans or animals, without pharmacological, immunological or metabolic effect.

    A medical device is intended by the manufacturer to be used, alone or with something else, for humans, for one or more of the following purposes:

    • Diagnosis, treatment, cure, relief, monitoring or prevention of illness, injury or disability.
    • Investigation, replacement or modification of an anatomical condition.
    • Contraceptive control.

    Medical devices come within the definition of Medical Products (Article 1 of Pharmaceutical Law). The medical device definition incorporates the idea that a drug can be used for more than its intended purpose, for example, for an anatomical position as well as pregnancy control.

    Question Body:

  • What authorities are responsible for regulating the manufacture, marketing and advertising of medical devices?
  • Answer Body:

    The MOHAP's Higher Committee of Drug Policies is in charge of medical product circulation, pricing and control, including of medical devices. The DHA regulates the policies and overall healthcare quality in the Dubai. The HAAD governs all policies, rules and regulations to be administered in Abu Dhabi.

    Question Body:

  • What notifications, registrations, approvals and licences are required to manufacture and market medicinal devices?
  • Answer Body:

    Manufacturing

    The classification system for medical devices must be undertaken by the manufacturers according to the system set out by the Global Harmonisation Task Force on Medical Devices (GHTF) and the International Medical Devices Regulations Forum (IMDRF).

    The regulatory authorities set out the responsibilities to be followed by manufacturers, such as the design, process of manufacturing, advertising and marketing of medical devices. Manufacturers must conform with the relevant guidelines to assure safe use of the particular medical devices. Further, classification of the medical devices must be undertaken carefully following the GHTF and IMDRF system, where Class A, represents the lowest level of risk to patients, and Class D represents the highest level.

    The primary classification requirements followed by the UAE for medical devices follow those of other countries, such the US Food and Drug Administration's Regulations and the following EU Directives:

    • Directive 93/42/EEC concerning medical devices (Medical Devices Directive).
    • Directive 98/79/EC on in vitro diagnostic medical devices (IVD Directive).
    • Directive 90/385/EEC on active implantable medical devices (Active Implantable Medical Devices Directive).

    Under the GHTF, medical devices must meet specific requirements such as essential safety standards and design and manufacturing requirements. Manufacturers must also adhere to all UAE health and safety and other laws.

    They must also meet all expectations of the MOH at the registration process to obtain approval for the production process.

    Marketing

    Manufacturers of medical devices must be registered with the Higher Committee of Drug Policies before marketing the products in the UAE.

    Documentation required for registering is as follows:

    • Application form (in Arabic and English to the MOH).
    • Proof of conformity.
    • Authorisation of company registration.
    • Prices to be charged.
    • Evidence of essential principles (safety regulations, quality management).
    • Manufacturing process.
    • Labelling and samples.
    • Risk assessment.

    Question Body:

  • Are there fewer or different requirements for medical devices that have already been licensed or approved in another jurisdiction?
  • Answer Body:

    The MOHAP is the authority in charge of all medical products and devices within the UAE. They cover all matters set out in the Pharmaceutical Law.

    All medical devices must be registered and licensed whether including those registered in other jurisdictions. This is so that the MOHAP is aware of and has ensured that all medical devices that are available to be sold in the UAE are safe and documented.

    The only exception to the above requirement is if a medical device is required in an emergency or on short notice in which case only a health authority or hospital is permitted to order the device(s), and they must complete the necessary application.

    Question Body:

  • Is it possible to sell devices to or buy devices from other jurisdictions?
  • Answer Body:

    To sell products in the UAE, the company must be legally established in the UAE. Additionally, companies wishing to sell these devices must either contact a local representative already registered with the MOHAP to sell devices or use a company in which they have a shareholding. If using a company, the seller wishing to sell the products in the UAE the local or the foreign company must begin the registration process. Companies must also ensure that they have a trade licence in the UAE (see Question 7).

    Question Body:

  • What are the general requirements to advertise medical devices?
  • Answer Body:

    Advertising of medical devices is regulated and supervised by the Higher Committee of Drug Policies of the MOHAP. Advertisers must adhere to the rules provided by the MOHAP, including that advertisers cannot advertise without MOHAP approval, which is only granted if all necessary requirements are met (see Question 8).

    All related medical products must first receive an approval from the MOHAP before they can be advertised. Once the product receives the approval and licence(s), it can move to the next stage. The UAE has not passed any federal law governing the advertisements for medical products or devices. However, the UAE has passed numerous resolutions and decisions on pharmaceutical products. This includes laws such as the printing and publication law, and national media council regulations. Federal Law No. 15/1980 relates to printing and publication and under this law specific strict guidelines must be adhered to before anything can be published, including advertisements. Companies must:

    • Send two copies of all upcoming publications to the competent department in the MOHAP.
    • Seek adequate approvals from the appropriate ministry department before publishing any journal. If approved, notification of approval will be given within 14 days of applying.

    (Articles 11 and 12, Federal Law No. 15/1980)

    On receiving approval, a company can publish in the relevant journal. Additionally, companies in the UAE must ensure that advertisements do not cause any negative impact on society. Advertisements must not be offensive to any religious groups and must be mindful of countries' cultures and ways.

    Question Body:

  • What product marking is required for authorised medical devices?
  • Answer Body:

    Medical device approvals or clearances from a recognised regulatory authority (US, Canada, Japan, or Europe) can be used to abridge the evaluation process for medical devices to be marketed within the UAE. Evidence of regular approval or clearance of a medical device in the form of certification and relevant, authenticated documents must be submitted. For devices not certified in the US, Canada, Japan, or Europe, these will be examined, and if approved, will be exempted from recognised country certification for Class A devices (those devices which require the lowest level of regulation and pose the lowest level of risk to patients).

    Question Set:

    Combination products

    Question Body:

  • Does your jurisdiction recognise combination products? What are the main laws that specifically apply to them (if any)?
  • Answer Body:

    The MOHAP is responsible for the regulation of combination products in the UAE. Under the Pharmaceutical Law, all medical products must be registered by the MOHAP before they are imported into the UAE for sale and distribution. A medical product manufacturer must successfully register with the MOHAP before its medical products can be registered in the UAE.

    Question Body:

  • Are there any additional or alternative regulations that apply specifically to combination products?
  • Answer Body:

    See Questions 13 to 19 . The same regulations apply to the commercialisation of combination products.

    Question Set:

    Natural health products

    Question Body:

  • Is there a category for natural health products (or equivalent) (including, for example, traditional medicines, homeopathic medicines, supplements, vitamins and minerals)?
  • Answer Body:

    "Healthcare products" are defined in the Pharmaceutical Law as any medical product used for general human health and not specific for diagnosis, treatment or cure, which do not require a prescription on dispensing or direct medical supervision when applied.

    Natural health products are covered by the MOHAP and their guidelines, in the same way as any other healthcare product. However, depending on the purpose or effect of the product. the regulations may vary slightly.

    The Dubai public health and safety department manages vitamins and minerals and other health supplements.

    Question Body:

  • What authorities are responsible for regulating the manufacture, marketing and advertising of natural health products?
  • Answer Body:

    The bodies responsible for the regulation of manufacturing, advertising and sales of natural health products are mostly the same as those responsible for general health products and medical products (see Question 2, Regulatory authorities).

    Question Body:

  • What notifications, registrations, approvals and licences are required to manufacture and market natural health products?
  • Answer Body:

    Manufacturing

    Generally, the processes and legislation applicable to manufacturing natural health goods are the same as for conventional health products. A licence must be obtained to produce the goods. The process to apply for the licence and its requirements include the following requirements:

    • The applicant must be a citizen of the UAE.
    • A licensed pharmacist must be managing the production factory.
    • The nearest road between the subject of the licence, and the closest pharmacy must be no more than 200 metres away.
    • The pharmacy must follow the technological and health conditions as determined by the Minister.

    (Chapter 6, Federal Law No. 4/1983)

    A factory to manufacture healthcare products can be set up when these conditions are fulfilled.

    Marketing

    Similar to medical products, no healthcare product can be circulated within the UAE without obtaining marketing authorisation or exclusive marketing authorisation from the MOHAP according to the terms and procedures set out by a ministerial resolution (Article 3, Pharmaceutical Law) (see Question 3).

    Question Body:

  • Are there fewer or different requirements for natural health products that have already been licensed or approved in another jurisdiction?
  • Answer Body:

    The requirements for marketing/selling natural health products licensed or approved outside the UAE are no different from those that are licensed in the country.

    Such products must be accompanied by the necessary import licence/authorisation documents (see Question 26) on their arrival into the UAE.

    There are two methods of entry for imported products:

    • Mainland entry points. Entry into the mainland incurs the standard tariffs of importing into the country as stated in the Gulf Co-operation Council Common Customs Law.
    • Free zone entry points. Importing a product into one of the country's free zones will not incur the above tariffs.

    Question Body:

  • Is it possible to sell natural health products to or buy natural health products from other jurisdictions and/or electronically?
  • Answer Body:

    Natural healthcare products must be registered to be allowed to enter the country or to be sold online. This includes approval and licensing by the MOHAP. Once a product is approved, the requirements for natural healthcare products under the Pharmaceutical Law must be met. This means that at least the following must be present on the bottle in both Arabic and English:

    • Name of the medicine or preparation and its registration number in the MOHAP, mentioning the pharmacopeia or scientific or cultural references according to which the medication was prepared, if any.
    • Names and amounts of the active natural substances that are used in the composition of the medicine.
    • Date of production of the medicine or preparation, and expiry date if validity is time-barred.
    • Name of the manufacturer of the drug or preparation.
    • The instructions and warnings associated with the use of the medication or preparation.

    .When a product is approved, licensed and is fully legally compliant, it can be sold within the UAE.

    Imported products can only be sold in the UAE if they meet the necessary requirements and must enter the country with all required paperwork present on entry.

    Companies may face several difficulties in selling medicines online. Certain products such as vitamin and mineral tablets can be purchased online as long as they are approved by the MOHAP. However, other controlled substances are not permitted to be sold online. They must be prescribed to an individual and collected from a pharmacy. Controlled medical substances and products include:

    • Toxic substances and plants.
    • Prohibited veterinary substances.
    • Narcotic and psychotropic substances, whether in form of raw materials or incorporated in a medical product.
    • Hazardous medical products.

    Question Body:

  • What are the general requirements to advertise natural health products?
  • Answer Body:

    Advertising of natural health products in the UAE is permissible provided the products being advertised are licensed in the UAE from the relevant ministry. When the licence is issued, the advertisement must be sent to the MOHAP to receive approval. The import, manufacture, market or export medicines and preparations derived from a natural source or sources is not permitted unless the product has obtained a licence from the MOHAP. The company must apply to the MOHAP for their approval. The MOHAP will review the application according to the requirements of the Pharmaceutical Law and the printing and publishing laws (see Question 8).

    Advertisements must not be offensive and overly explicit, especially to religious groups and individuals. Additionally, advertisements must take local culture into account and must be sensitive towards the ways and customs of the UAE. When approval is received, the company can publish the advertisement in the public domain.

    Question Set:

    Data

    Question Body:

  • What data and information laws must be complied with by life sciences businesses that collect, use or otherwise deal in patient data (including through health apps)?
  • Answer Body:

    The Federal Law No. 2 of 2019 regulates the use of information and communications technology in healthcare (ICT Law) throughout the UAE, including the free zones. The objectives of the ICT Law are to ensure:

    • Optimal use of ICT in the health sector the security and safety of health data and information.
    • That the bases, standards and practices adopted adhere to international standards.
    • That the MOHAP can collect, analyse and maintain health information at the national level.

    (Article 3, ICT Law)

    Article 4 of the ICT Law prohibits the processing of data and information without authorisation, aiming to:

    • Ensure the authenticity and credibility of health data and information by preventing its unauthorised destruction, variation, misrepresentation, deletion or addition.
    • Allow health data and information to be available to authorised parties and make it accessible whenever needed by those parties.

    Health data and information cannot be stored, processed, generated or transferred outside the UAE, other than through a resolution issued in favour of the healthcare data and information processors in co-ordination with the MOHAP (Article 13, ICT Law).

    Under Article 16, data only be used and processed in relation to the patient's specific health matter unless the patient consents to the data being used processed for a different reason) or if exceptions apply. Exceptions include the data processing:

    • Of health financing or health insurance services and benefits.
    • Of clinical trial and research, provided that the identity of the patient is not disclosed.
    • For taking preventive and treatment measures for public health or to maintain the safety and health of the patient or for supervision, inspection and maintaining public health at the request of the healthcare data and information processors.
    • At the request of the judicial authorities.

    Research

    Question Body:

  • What restrictions and regulatory requirements apply to the testing of life sciences products on human and animal subjects?
  • Answer Body:

    No clinical or bio-equivalence or bio-availability studies of a medical product can be conducted on humans, without obtaining approval from the MOHAP or the relevant authority. In addition, the necessary medical investigations must be carried out on the human subjects of a clinical study to ensure their safety after obtaining written approval by the trial subjects for their part in the clinical study and acknowledging its potential risks (Article 13, Pharmaceutical Law).

    Clinical trials and tests cannot be conducted on bio-samples of trials by any entities other than those approved under Article 13. The following types of bodies can be approved by the MOHAP or the relevant authority to conduct clinical trials:

    • Public and private hospitals.
    • Universities and specialised scientific research centres. Where clinical trials are not able to be conducted on such institutions' premises, trials can be conducted in authorised hospitals.
    • Laboratories.

    The entity that conducts the clinical trial is obliged to:

    • Develop the trial plan to be performed, including scientific justifications.
    • Provide licensed physicians to supervise the safety of subjects of the trial.
    • Conclude an insurance contract at an insurer operating within the UAE to cover any damages that may result from the trial.
    • Comply with the:
    • code of good clinical trials practices adopted by the MOHAP;
    • Higher Committee of Clinical Trials ethics.

    Question Set:

    Reform

    Question Body:

  • Are there any plans to reform the rules on the development, manufacture, marketing and advertising of life sciences products and services?
  • Answer Body:

    On 19 December 2019, the UAE adopted Federal Law No. 8 of 2019 on Medical Products, Pharmacy Profession and Pharmaceutical Establishments and abrogated Federal Law No. 4 of 1983 and Federal Law No. 20 of 1995. The New Pharmaceutical Law modernises the legal framework for the regulation of medical products in the UAE. The legal and regulatory reforms contemplated in the UAE strongly convey the desire of the UAE to be at the forefront of medical care. The UAE is propelled to focus on its national agenda, which is to achieve a world-class healthcare system in the UAE. In the pharmaceutical sector, reform is directed at drastically increasing the manufacturing capacity, and for investing in pharmaceutical manufacturing and research and development. The UAE aims to manufacture and provide healthcare like the top countries in the world. This includes a renewed focus on research and development as well as attracting qualified medical professionals and researchers.

     

    Question Set:

    Contributor profiles

    Simarata Randhawa, Trainee Associate

    STA Law Firm

    T +9712 694 8534 F +971 2 644 919 E legal@sta.law W www.stalawfirm.com/en.html  

    Professional qualifications. B.Com; LLB; LLM with emphasis on Corporate Law and Arbitration, Boston University.

    Areas of practice. Corporate law; Healthcare.

    Recent transactions.

    • Advising on the healthcare sector of the UAE and other jurisdictions.
    • Assisting various healthcare institutions, healthcare professionals and individuals in different jurisdictions on matters relating to healthcare.

    Languages. English, Hindi and Punjabi.

     

     

    ]]>
    Thu, 11 Feb 2021 17:07:00 GMT
    <![CDATA[UBO Disclosure Requirements- UAE]]> UBO Disclosure Requirements- UAE

    In recent years, counter-fraud, money laundering and terrorism funding have been the regulator's highest priority. Fraudulent parties conceal their service using offshore accounts, and authorities report fraudulent transacts routinely at fake emails, PO boxes or private residences. This term has taken on an increasingly significant role in the fight against terrorism and money laundering. "Ultimate Beneficial Ownership", UBO refers to the individual or organisation who eventually profits from the company. 

    UAE's Administrative Cabinet Resolution Number 58 of 2020 entered into force and regulation on August 28, 2020, and replaced Cabinet Resolution Number 34 of 2020 released earlier this year. As per the resolution passed, the organisation must report its beneficial owners with new conditions regarding the regulation of UBO in the UAE. The primary aim is to increase the accountability of registered bodies in the UAE and establish effective and sustainable processes and regulatory procedures regarding beneficial ownership details. 

    The United Arab Emirates also adopted new rules for companies incorporated in the world in their attempts to grow into a fully open and reliable economy. Recently the Economic Content Laws have significantly changed the company set up in Dubai and are now expected for businesses to comply with the new ultimate profit ownership law. The UAE revised the criteria for corporate enforcement for true continental, free zone and offshore receivers by Cabinet Decision No. 58 of 2020. The Actual Beneficiary's need to reveal the details results from the UAE's attempts to restrict money laundering financial crimes.

    In accordance with this decision, the last beneficial owner's of the company's registry shall be maintained and enforced by businesses registered in the UAE or free areas (UBO). The organisational structure for which the best AML/CFT consultants in Dubai provide services can be decided in the mainland and the free areas companies.

    A UBO may be defined as all those who have or control your company directly or indirectly for the Real Beneficiary Register. It has voting control of 25 percent or more of an entity's equity capital of at least 25 percent. Anyone with other means such as management authority to recruit or fire retains ownership rights.

    If no clarification is made concerning the individual with ultimate power and no such requirement is met by the UBO, the entity that otherwise manages the business is deemed an actual benefit. Unless the company will determine the individual as UBO, the real beneficiary is the senior management's individual. Visit best AML/CFT consultants in Dubai to find out more about UBO requirements.

    What do companies do?

    Any business in the United Arab Emirates, both free zone and mainland must maintain its office:

  • Partners or Shareholders Register(PSR)
  • Real Beneficiary Register (RBR)
  • Register of Nominee Directors
  • What needs to maintain a UBO register?

    According to the Cabinet Resolution, UAE companies must create a UBO registry containing details concerning the actual beneficiary:

  • Full name
  • Nationality 
  • Date and Place of Birth
  • Place of Residence and Address
  • Passport 
  • ID number
  • Date and basis on which the person became a UBO
  • The date on which the person ceased to be a UBO
  • Companies must continually update the register. In addition, businesses must notify the registrar within 15 days of this change or change any given information. Moreover, the companies must appoint an individual to be told of any disclosure by the registrar.

    Rules (For Listed Companies)

    The companies listed in stock exchanges or companies that are owned by listed companies should rely on the disclosures they have already made to the stock exchanges. They are not needed to make separate notifications concerning the UBO. The decision of the cabinet on the Real Beneficiary shall extend to all persons in the mainland and companies in the free areas, except as follows:

  • Companies Registered in Financial Free Zones (DIFC, ADGM); and
  • Companies owned by the Federal government & its Subsidiaries.
  • The Decision of the Cabinet also points out how UBO legislation relates to liquidating firms. When a company is dissolved or liquidated, within 30 days of the Liquidator appointment, the official liquidator must send a true copy of the UBO registrar's updates to the registrar. Companies must comply or face a list of sanctions levied by the UAE Ministry of Economics (MOE). However, the list of administrative sanctions must also be released by the MOE. In order to escape penalties triggered by non-compliance, contact the best AML/CFT consultants.

    AML/CFT Consultants in Dubai, UAE

    UBO disclosure was first implemented in the banking industry, where banks where companies had to disclose details about their UBO during the opening process of the bank account. Accordingly, during corporate creation in the UAE, some free zones (JAFZA, DMCC) had also introduced the UBO divulgation provision. Yet, before the publication of the Cabinet Resolution Number 58 of 2020 most licencing agencies in the UAE have pressed for such standards.

    Now, the provision for disclosure of companies in mainland, onshore and commercial-free areas has been extended after the decision (except the financial free zones). Under the new legislation, businesses need to maintain a UBO registry and provide the registrar with details on the Real Beneficiary. Their ownership structure will be evaluated by the companies and experts provided by the best AML/CFT consultants in Dubai, including Jitendra Business Consultants (JBC). JBC has a highly trained team of corporate organisation experts and chartered accounts to ensure compliance. JBC trains and guides company personnel to manage the RBR and Partners or Shareholders Register (PSR). JBC also helps company owners retain the records on their behalf and offers secretarial services to ensure that they properly manage and update the registers and comply with the legislation while incorporating, renewing and amending them.

    As described further below, companies in the UAE are expected to define and maintain the registries of final beneficial owners and notify local authorities of the benefits of the gain to owners following the cabinet resolution's publication on real benefit proceedings or UBO regulations last August 28 2020. "Negotiated owners" apply to entities with influence or possession of a business following the regulations:

  • possession of 25 percent or more of equity or more of the corporation's voting rights, or more than 20 percent;
  • having other company interests or influence through other means such as the power to nominate, exclude or dominate the majority of the board members.
  • The regulation requires UA/EA Entities to plan and to report to the required authority, within sixty (60) days of the date the resolution or by the date on which the resolution is adopted (unless the exemptions are applied), the Last Beneficial Owner ("UBO") register, the Nominating Director Register (if applicable) and the Partners or Shareholders register. More guidance is required in the field of submissions issued by several other free zone authorities and the Department of Economic Development (for onshore entities). This resolution applies to all UAE approved entities except:

  • Financial free areas organisations (Abu Dhabi International Financial Hub and Global Markets); and
  • Companies owned by the Federal or Emirates Government directly or indirectly.
  • It is to be noted that no reference should be made to publicly released information in the registers, and all the information is supposed to be retained and kept only for use by authorities.

    Registration of UBOs

  • UBOs are naturally individuals who ultimately own or control the company or have the ability, by direct or indirect ownership or by the right to nominate or remove a majority of its Directors and Managers, to vote with a minimum of 25 percent of its shareholder.
  • Any individual who regulates the business by other means shall be deemed a UBO when no person fulfils the above condition.
  • If the natural person does not meet the requirements mentioned above, a natural person responsible for its senior management shall be called the UBO.
  • Companies planning to enter into operations or restructuring in the UAE shall apply legislative forms to be signed or signed by at least two proposed directors with effect from October 25 2020, along with the Articles and the Memorandum of Association the case of a single director. Companies should recognise each beneficial owner and state explicitly the existence and scope of benefits held by each ultimate beneficial owner. Unless they are happy with the declaration required by specific rules met, DED and other licencing bodies can not proceed with company registration.

    Established corporations must also supply the registrar of companies with their UBO records. The details required are company elderly names, business names, legal form, articles and association memorandum, headquarters addresses and more.

    Offences and Penalties

    If a duty laid down in the Beneficial Owners Procedures Legislation is not complied with, a corporation and a company manager may be responsible for several liabilities. In some instances, the beneficiary owners and shareholders are also penalised for defaults and regular sanctions which continue to be enforced if there is a default. These several breaches should be avoided: 

  • Failure to keep business profit owner's records;
  • Late introduction of information on changes to beneficial ownership of companies to Registrar of Companies;
  • Registration of business registrars containing information regarding beneficial owners of the company; and
  • Failure to collect, update and provide correct details for beneficiaries for six months after the publication of the regulations.
  • Note: any shareholder, official, or beneficial owner, who makes a declaration, declaration or receives false, disappointing or misleading information recklessly or intentionally by the registry office shall be liable for a criminal offence punishable by legislation.

    Officials in the UAE who do not keep records of ultimate profiteering owners shall not be kept liable if appropriate evidence is provided for adherence, due diligence and proof that the failure is not due to incompetence, omission or conduct on their part. Officers are excluded from all liabilities.

    Any alteration to the information found in the registers of authorities is to be recorded within fifteen days of the introduced modifications. Within thirty days of the liquidators' appointment, named liquidators shall be needed to send actual copies of the revised UBO registers to the companies registrar.

    Overall, the need for corporate accountability, particularly about ownership and tax needs, has been stressed more and more. Several municipalities have turned the desire for transparency into structured reporting of productive land, strengthening businesses' need to examine their structure and ensure they meet various local publication standards. A significant example is implementing the European Union 4th AML Directive on anti-money laundering (4th AML Directive) (EU). The 4th AML Directive allows the EU Member States to create databases of legal entities' ultimate beneficiaries (UBOs) among other steps designed to battle cash-laundering and terrorist finance. Individual Member States were able to decide how the directive should be applied, and the member states took various approaches in doing so.

    EU Member States had a deadline of June 26, 2017, to enact legislation implementing the 4th AML Directive, but discussions continue to be held about how the directive should be enforced, who should access the registry, and how much legislation in practice would increase transparency.

    One of the main issues concerning the directive's application concerns data protection: who can and for what purposes be accessed in the registry. Under the directive, the appropriate authorities, financial intelligence units and any individual or entity that can show a 'legitimate interest' should be provided with information. The benefits register is at present voluntary for the Member States. However, the European Commission, the European Parliament and the Council of the European Union recently decided to amend the directive in the form of a 5th Directive, making the register obligatory for public access.

    Conclusion

    This paper offers an initial overview of how the Fourth AML Directive application stands at present, particularly the various conditions for UBOs to be defined and registered in different countries of the EU. In the various EU Member States, significant fines may result if the registration conditions are not complied with. Therefore, it is recommended that all companies with a UBO within the scope of the Fourth AML Directive be aware of the new regulations to ensure that in each EU State in which you have a legal entity, you comply with the UBO registration requirements of the company.

  • UBO registrations, shareholders and directors candidates shall be made available by all UAE bodies, except as excluded by the resolution, by 27 October 2020.
  • Registers shall be filed by 27 October 2020, with the competent authority of UBOs and partners/owners and nominees' directors. Although onshore companies and some free zones are still not subject to confirmation of the filing mechanisms.
  • Any changes or modifications to the information given to the appropriate registrar must be informed by the organisation within 15 days of such changes or modifications.
  • ]]>
    Wed, 03 Feb 2021 17:18:00 GMT
    <![CDATA[Tri-Party Agreement & their Implications in UAE]]> Tri-Party Agreement and their Implications in the UAE

    What is a Tri-party Agreement?

    It is an agreement between three parties. In other words, when three-parties has an intention to do the things on which they have agreed. The Tri-parti agreement usually happens in financial transactions. As per the Article 125 of the UAE Civil Transaction Act (the "Code"), there can be a meeting of more than two -minds that may agree to produce the legal effects. However, as per Article 126 of the Code, Contract should only be on the legal things.

    For instance- A agrees with B to supply goods to him, but A cannot pay the full amount at the time of receiving the goods. A brings C who agreed that if A fails to pay the full amount, then C will pay the amount to B. This a Tri-party agreement between A, B and C where three parties agreed to do the things.

    Interpretation of Tri-Party Agreement

    In common law practices, the interpretation of a contract is always an analytical activity, the aim of which is not to ascertain the purposes of the parties but to evaluate the contemporaneous sense of the contractual language using an objective standard. However, discussed below, the UAE Civil Transactions Act does not make it a common practice.

    Article 248-256 of the Civil Transaction Law there are three instances where the interpretation of the contract law is necessary. 

  • Plain Expression
  • Two situations may be differentiated in the Plain Expression. The agreement involves an outstanding usage of the word which coincides with the real intention of the parties. Secondly, the word does not actually mean what you think.

    If in the first instance, the contract's expression is simple and complies with the will of the parties, it cannot be interpreted in any further way. Therefore, the judge should not be in disagreement with the law in order to recognize the apparent meaning of the term. In the absence of express rules, the Civil Transactions Act makes judicial remedies undesirable. This law was enforced many times by courts in the UAE. For example, if the contract language is plain and apparent, the clarity of that wording does not differ.

    In the second case, the word is clean and not real, since it was against language. The parties did not imply the true will of the parties. The vocabulary of the contract is not clear or complete as to what it intends to convey. Despite the clarity of the expression, the court is able to make an interpretation, as clarity is clearly what the expression means in this case, not the intent of the parties. In such a case, priority should be given to the actual meaning of the expression over the meaning in which the parties interpreted the expression. The Civil Transactions Act states in Article 285(1) that the real object of the parties and not the language and syntax of the agreement is what matters. This rule can be found in judgement number 294 of the Dubai Cassation Court of 2008, which claimed that 'In the interpretation of the contract, the true meaning of the word is decided and not its obvious wording or syntax.

  • Equivocal/Ambiguous Expression
  • When The sentence has two or more implied definitions, and both of these can be interpreted without a language distortion. If a contractual term is so ambiguous that the context can be interpreted in more than one way, then clarification is necessary. Article 265(2) of the Law on Civil Transactions provides information on how to interpret it: 'Without stopping the literal meaning of language, if there is room for construction of the contract and with the search for clarity in this respect, the common intent of the parties shall be examined in accordance with current relationship and good faith between the Parties. The Dubai Cassation Court ruled that the purpose of the contract was defined by true intentions and meanings, rather than by the wording or syntax, in compliance with the procedure of that court and with the provisions of Articles 258 and 265 (2) of the Civil Sales Transactions Act. The contract must be construed in light of the parties' mutual purpose, not in terms of its literal nature.

    However, a strong distinction needs to be made between contextual and extrinsic evidence. It is not appropriate to use the expression as a guide to the development of a contract, although using the expression to interpret a contract is reasonable. Thus, when reading the contract, the intentions of the parties are readily apparent. This is the antepedemean proof rule. Article 36 of the UAE Penal Code mandates the use of the symbol.

  • Construction in case of doubt
  • As per Article 226 of the Civil Transactions Act, A debtor has the right to run a court under the Civil Transactions Act. This is a lengthy article that needs to be read attentively. The main problem with this paper is that it raises questions as to whether or not there are any suspicions and who has to be viewed as the debtor in favor.

    The only uncertainty which cannot be understood by applying the rule of construction laid down by Article 265 of the Civil Transactions Act is the doubt contemplated in Article 266; for if Article 266 is deemed separately true and other provisions in isolation, those other arts would no longer be relevant. Article 266 must also be seen as an exception to other building rules, for instance, the law of insecurity.

    The most problematic side of Article 266 is that the term "debtor" is vague. Each party in most contracts has the capacity to demand of the other party in return for its obligation to do something else. In exchange for this obligation, Article 266 should have replaced the word "debtor" with the word "aggrieved party" However, the interpretation of the 'contra proferentem,' in other words against that party which proposed the ambiguous clause would have been wiser. However, no case in the UAE has addressed the questions concerning interrelationship to the best of my knowledge.

    The general judicial inquiry indicates that the courts of the UAE usually comply with legal requirements while reading a contract. However, it should be noted that all of the above statutory rules are not obligatory – they are just guidance for the court in order to help decide the alleged intent of the parties.

    The parties can, by agreement, change or exclude any of these statutory requirements and set out their own architectural rules.

    Contract of Guarantee as a Tri-party agreement

    The contract of Guarantee is the perfect example of a tri-party agreement. Guarantees usually come under the purview of the Civil Code of UAE Article 1057 of the Civil Code describes guarantees as a suretyship consisting of combining the responsibility of the guarantor with the liability of the obligor in the fulfilment of her obligations. However, if the Guarantee is of such a type that the guarantor earns some remuneration by giving the Guarantee, then the Contract of Guarantee would be governed by the Commercial Act.

    For lenders, the Civil Code dictates the rules about guarantees. A guarantor's responsibility is incidental to the principal debtor's obligation. Therefore, if a principal debtor does not comply with his or her commitments, the Guarantee will no longer apply.

    If the principal debtor becomes bankrupt, the creditor must prove its debt in the bankruptcy, without which it would forfeit its right to claim against the guarantor to the extent of any sums which the creditor would have earned had it proved such debt in the bankruptcy; and when a debt has been paid back, the borrower must send the guarantor all required papers to ensure the guarantor has the power to take legal action against the principal debtor.

    It is necessary to remember that a guarantor's financial commitments are only backed by his/her own personal properties. This provision may preclude subordination of other liens that have been secured by a mortgage or pledge over the properties of the guarantor.

  • Enforcement of the contract of Guarantee 
  • Lenders should consider the overall procedure for implementation of a guaranty, and how long the process will take. A lienholder must first inform the guarantor of the default of the primary obligor by serving legal notice in compliance with the terms and conditions of the guaranty. A lender may either apply for attachment directly or launch a complaint prior to filing an attachment.

    The next move is for the borrower to file a complaint against the guarantor and go to court to enforce the Guarantee (within eight days from the date on which the assets of the guarantor are attached, if applicable). Prolonged court action normally lasts from 8 and 10 months, during which defense has been raised. The court may appoint a financial expert (usually a chartered accountant) to assess any changes the guarantor may be needed to make to their loan. Luckily, in many cases, prosecutions take just two years.

    Once the judgement is obtained, the case will be referred to the execution court for the liquidation of the guarantor's properties, and any funds realized from the liquidation will be charged to the lender to the extent of the guarantor's liability under the Guarantee. Any excess will be returned to the original guarantor.

    Termination of the Tri-Party Agreement

    There are many ways to terminate the contract. The termination of the contract is discussed in the Articles from 273-367 of the Code

  • When both the parties agree to terminate it. The Civil Code provides for the situations in which the parties may end a contract due to incompliance. The provision must be drawn in a manner consistent with UAE Legislation.
  • Should termination occur due to violation of the specifications or failure to perform, it can permit termination without notification; otherwise, the notice is compulsory under Article 271 of the Civil Law. In the absence of advance warning. Regardless of the clear clause in the contract, the parties are free to mutually leave the contract. 

  • Order of the court.
  • As the name suggests, the parties may request termination upon reaching out to the proper authority such as Court or Arbitration Institute. This option can also be exercised in the scenario where the termination clause is also there in the contract.

  • By operation of the law
  • We shall take into account the law governing the contract within the structure of the termination of the contract. Various types of contracts, depending on your country of residence, are offered in the UAE.

    Alterations may make the contract unfeasible to conduct an occurrence outside the control of the parties or the unforeseen event. That is in the customer's best interest. Moreover, any conditions of public interest can also allow the parties to dissolve the contract. Each party must be transparent about the unpleasant and unprofitable existence of the contract.

    Article 247 provides that if the other party does not comply with the negotiated terms, all parties cancel the contract. 

    A party has the authority to refuse to fulfil its obligations under a contract where each party must exercise its share if the other party fails to exercise its obligations. The other party is not obliged to do so if one of the parties does not conduct the contract. The continuation of the contract relies on the other party's ability to continue. Because of the failure to perform or violation of consent, the contractor may attempt even to terminate the contract. In this clause, all parties are seeking harm or redress and must give the other party prior notice. You should encourage the failure to fix it instead of issuing an alert.

    The termination of the contract is a challenging task. However, the procedure of terminating a contract can be stopped by drafting a mutual termination provision. The related clause strengthens the legality of the court proceedings by reducing future problems of the law. Henceforth, prior to terminating any commercial contract, the party must assure that there exists a legal right to dissolve the contract or must obtain legal assistance from Corporate Lawyers in UAE to review the terms of the contract in accordance with the UAE Civil Law and other contractual laws of the country to avoid the unnecessary hassle of termination before the court.

    ]]>
    Wed, 03 Feb 2021 12:27:00 GMT
    <![CDATA[Transfer Pricing Regulations in Middle East]]> Transfer Pricing Regulations in the Middle East

    The Transfer Pricing is a common mechanism which the countries use to transfer the tax base. The transfer is often from countries with high taxation to countries with low taxation. Transfer Pricing deprives states of their fair share of taxes from global corporations. In the case of Transfer Pricing, countries are competing for the presence of multinationals by adopting ways to make their jurisdiction more attractive. One such adopted way is by decreasing its corporation tax. No doubt that the Transfer Pricing legislation has been in Europe and North America for around 50 years, but the Middle Eastern countries are newcomers in this field. 

     In the European Union, many public authorities introduced Transfer Pricing Regulations; however, the effectiveness of these regulations has been in question. Some consider the regulations as a contributory factor to the increasing complexity of tax laws and an additional cost for companies. The common consolidated corporate tax base was primarily introduced to solve the Transfer Pricing problem in the European Union.

    Middle Eastern countries have witnessed significant developments in the taxation sector. The Middle East was popular for relying heavily on the Oil and Gas sector to contribute to its national revenues. However, seeing a decrease in the energy prices which lowered the total revenue by about 60 percent between 2012 and 2016, many countries introduced Value Added Tax in 2018. The Middle East also signed up to international Transfer Pricing recommendations from the Organization for Economic Cooperation and Development, as an attempt to counter the erosion of national revenue and further minimize capital flight.

    Kingdom of Saudi Arabia

    The Kingdom of Saudi Arabia (KSA) introduced its Transfer Pricing legislation in December 2018, with its final roll-out in February 2019. The KSA's General Authority for Zakat and Income Tax introduced reforms, where companies operating in the KSA must comply with the 3-tiered documentation required by Article 13 (covering transfer pricing documentation and country by country reporting (CbCR)). Firms must supply the following:

  • Master file; 
  • Local file- containing additional information required by the OECD, such as industry analysis; and  
  • CbC report. 
  • The companies are also required to submit a Transfer Pricing disclosure, providing details on enclosed transactions and Transfer Pricing policy. These requirements are as per the recommendations of OECD. 

    The KSA framework introduces four minimum standards for business to follow.

  • Article 5 covers harmful tax practices;
  • Article 6 covers treaty abuses;
  • Article 13 covers transfer pricing documentation and country by country reporting (CbCR); and
  • Article 14 - covers dispute resolution.
  • In 2019, Bahrain, Egypt, Qatar and the United Arab Emirates also introduced new Transfer Pricing regulations. Bahrain and Oman are expected to introduce new transfer pricing regulations as well.

    The increased focus on Transfer Pricing by the Middle Eastern countries is a result of compliance with commitments on tax

    cooperation. Many jurisdictions in the Middle East continue to commit to the OECD's Inclusive Framework for the implementation of minimum standards. 

    Recent changes to the Transfer Pricing requirements: 

    United Arab Emirates

    The UAE Cabinet issued the Cabinet of Ministers Resolution Number 31 of 2019 concerning economic substance regulations in the UAE on 30 April 2019. The Regulations require the UAE entities ("Relevant Entities") that carry out any of the activities listed as "Relevant Activities" in the Regulations to have demonstrable economic substance in the UAE from 30 April 2019. In addition, CbC reporting is required for MNEs with consolidated group revenue of a minimum of USD 860 million. MNEs must notify the UAE government of the CbC filer's tax residency. The entities subject to the economic substance regulations must file an annual notification declaring the business and activities being performed and if the economic substance test is being met.

    The Regulations were introduced to honor the UAE's commitment as a member of the Organization for Economic Cooperation and Development Inclusive Framework on Base Erosion and Profit Shifting and in response to European Union's review of the UAE tax framework. The Regulations ensure that the Relevant Entities undertaking Relevant Activities are not being used to artificially inflate profits that are not in commensuration with the economic activity undertaken in the UAE. The objective of the Regulations is to determine the requirements and set out the standard to confirm that the Licensee carries out the activity in the State that achieves economic substance interest. 

    The Regulations came into force on 30 April 2019, guidance on the Regulations was issued on 11 September 2019, the Regulatory Authorities were identified in a Ministerial Resolution issued on 4 September 2019 and amendments were made to the Regulations in Cabinet Decree Number 7 of 2020 issued on 19 January 2020 (the "2020 Regulations"). As per the 2020 Regulations the provisions of the Regulations do not apply to any commercial company, as defined in Article 8 of Federal Law Number 2 of 2015 concerning Commercial Companies, as amended, in which the Federal Government, the Government of any Emirate of the State, any Government Authority or entity affiliated to either of them owns directly or indirectly at least fifty-one percent (51%) of the share capital. The Regulations apply to a licensee carrying out Relevant Activities. Under the Regulations, "Relevant Activities" are:  

  • Banking  
  • Insurance  
  • Fund management  
  • Lease-finance  
  • Headquarters  
  • Shipping  
  • Holding company  
  • Intellectual property (IP)  
  • Distribution and Service Centre 
  • The Relevant Entity must comply with the economic substance requirements by: 

  • Conducting the core income-generating activities in the UAE;  
  • Being "directed and managed" in the UAE; and  
  • Considering the level of activities performed in the UAE:  
  • Having an adequate number of qualified full-time employees in the UAE  

  • Incurring an adequate amount of operating expenditure in the UAE  

  • Having adequate physical assets in the UAE.  

  •   A Relevant Entity which only undertakes a Holding Company Business will be subject to less stringent economic substance requirements. However, if a Relevant Entity carries out high-risk IP related activities, additional requirements shall apply. It is mandatory that the economic substance requirements be met for each of the Relevant Activities in case a Relevant Entity is carrying out more than one Relevant Activity. 

    The penalty for failure to demonstrate sufficient economic substance in the UAE or to notify or to provide accurate or complete information or for the relevant Financial Year ranges from AED10,000 - AED50,000. 

    Bahrain 

    Bahrain's rules, effective from January 2019, require profits generated by the companies of Bahrain to comply with the actual economic activity in Bahrain. The new rules protect situations where the Bahrain entities accrue profits concerning the attribution of specific functions; albeit, in reality, it does not have the required level of substance for managing and controlling such functions. The entities that fall under the definition of "Relevant Entities" are subject to the rules and are required to file an annual Economic Substance Report within a period of three months from the end of the financial year. 

    Egypt 

    Egypt, similar to the KSA, introduced master file and local file documentation requirements, effective from January 2019. The rules apply to tax years beginning on or after 1 January 2018. However, there is no minimum threshold for the preparation of a master file and local file. A CbC report is also required for MNEs with consolidated group revenue of a minimum of USD 190 million. 

    Oman 

    There are currently no specific Transfer Pricing documentation requirements; however, Oman has also joined the OECD's Inclusive Framework for the implementation of minimum standards. As a result, Oman may introduce its CbC reporting requirements accordingly.

    Turkey 

    On 25 February 2020, Turkey adopted the three-tiered transfer pricing documentation, including the preparation of a master file, local file and CbC report. A master file is required for MNEs with assets and revenues of a minimum of USD 75 million. A local file is a requirement for all entities with related-party cross-border transactions. Companies with revenues and assets of a minimum of USD 15 million USD must submit a detailed form on related parties and intercompany transactions. CbC reporting is required for MNEs with consolidated group revenue of a minimum of USD 820 million.

    Qatar 

    At the end of 2019, Qatar also published its Executive Regulations to the Income Tax Law introducing Transfer Pricing documentation requirements for tax years ending on or after 31 December 2019. Along with the master file and local file requirements, which supplement the CbC reporting requirements that have been in effect since 2018, the new rules also require a Transfer Pricing questionnaire to be submitted with the annual tax return. The threshold for preparation of a CbC report is USD 825 million. 

    Conclusion

    With the adoption of Transfer Pricing regulations, the GCC authorities signing the Base Erosion and Profit Shifting Inclusive Framework and further having committed to applying four minimum standards, Transfer Pricing in the Middle East shall permit and regulate the Pricing Transactions internally within businesses as well as between companies which operate under common control or ownership, including cross border transactions. The MNEs having their operations in the Middle East must carefully take the changes to the Transfer Pricing documentation requirements and their deadlines into consideration. The Middle Eastern countries require the preparation of Transfer Pricing documentation in compliance with the Organization for Economic Co-operation and Development's base erosion and profit shifting initiative. The Middle Eastern countries in the region did not previously have Transfer Pricing documentation requirements. The documentation obligations have increased by adding the preparation of documentation that is consistent with the OECD's three-tiered approach.

    ]]>
    Wed, 03 Feb 2021 10:54:00 GMT
    <![CDATA[Avoidance of Double Taxation – UAE India]]> Avoidance of Double Taxation (DTAA) – UAE & India

    Introduction 

    Benjamin Franklin once said, there are two things you cannot avoid; death and taxes. In a country like the UAE, where tax is almost invisible, corporate tax is levied on oil companies and foreign banks as part of the corporate tax regime, and with the introduction of VAT, this saying could not have been truer. Despite the aforementioned taxes, UAE is still a very attractive investment hub for foreign investors. 

    The UAE has entered into an agreement to avoid double taxation with over 100 countries with the aim to promote their economic relations and prevent tax evasion. The taxation regime protects the interest of enterprises by making sure either country is not burdened with double the tax that they are liable to pay. Enterprises in business with either country need to, however, constantly keep updating themselves with the changing tax regimes thereto.  

    This article, therefore, deals with one such country that has entered into an agreement with the UAE under this taxation regime. 

    Double Tax Avoidance Agreement (DTAA) between UAE- India 

    India, unlike the UAE, has a tax regime that has a wider scope and covers a myriad of income. Tax is levied on income, wealth accompanied by a levy of VAT and surtax. In order to keep track of all these taxes, their implications and to keep a check on all the updates in any tax legislation, rules and regulations, a legal entity requires the assistance of legal practitioners. 

    This Treaty was entered into by the two parties in the year 1993, with the aim of promoting trade relations and as a benefit, to enterprises of both countries, to avoid being taxed for the same thing twice. Protection of income is with respect to the following:

  • Revenue derived from shipping and Air transport;
  • Royalties, interest and dividends;
  • Revenue generated from immovable property or alienation thereof; and
  • Revenue derived from providing personal services.
  • In order to avail this benefit, the entities of either country must have a permanent establishment in either state.

    With respect to the subject of taxation, tax is to be levied on the following:

  • Profit derived out of business along with any profits derived from Air and shipping transport;
  • Revenue of each individual entity that exists in either country;
  • Directors' fees; and
  • Employee salaries.
  • The Treaty lays down that a tax levied hereunder shall be on the entity wherein commercial activity was conducted. To determine the place of commercial activity, the entity must have either of the places of business in the country to the Treaty; it may be, an office, place of management, a factory or workshop or any other such place that would facilitate business activities and generate revenue or profit to the entity concerned. 

    Case Laws 

    Tax, as a subject is a very complex one. Legislations of taxation though, theoretically sound, are practically complicated to implement. Therefore, many businesses either resort to experts or they stumble into lengthy litigation due to discrepancies. 

    As a cautionary measure, businesses must always refer to precedents to avoid making errors in the application of the tax. 

    Abu Dhabi Commercial Bank, Mumbai V Department Of Income Tax

    For the sake of convenience let us refer to ADCB as A. A, is a party engaged in the banking business and made remittances to UAE nationals. However, by certificates issued by their CA, tax deducted on such remittance showed "nil". 

    As per Article 13 of the DTAA, A argued that the tax value remained nil on such remittance because tax deductions on capital gains are payable in the country of residence. 

    It was observed by the court that, since there are no provisions regarding tax on capital gains in the UAE, the capital gains arising in India are taxable. Therefore, the judge held that any person responsible for making payment to a non-resident, including the resident bank (i.e. A) is responsible for deducting tax at the source. 

    In another case, Dr. Rajnikant Bhatt, Thane V Assessee, A, was a resident of the UAE, therefore as per the DTAA any income not falling under the ambit of Article 22 of the Treaty, which talks about the effect of the Treaty on income other than the ones mentioned in the preceding Articles, was subject to taxation. 

    The learned judge herein failed to appreciate the fact that A was a resident of the UAE and held that the income was properly taxed in India, whereas it was subject to be taxed in UAE. 

    Therefore, this holding was erroneous and had to be amended. It was ultimately held that A was a recipient of income arising out of business carried out through a permanent establishment in the UAE; therefore the income assessed fell under the heading "other income sources" as per the Treaty and cannot be taxed in India, since A was a resident of UAE. To read and access this guide, Click here 

     

     

    ]]>
    Wed, 20 Jan 2021 00:00:00 GMT
    <![CDATA[Offering Crypto-Assets in UAE]]> Regulations for Issuing and Offering Crypto-Assets in UAE (ICARs)

    Introduction 

    Over the past decade, the financial technology market has evolved substantially. With the introduction of cryptocurrencies, policymaker and framers of legislations find the need to implement legislation that will help regulate this growing market. Since cryptocurrencies operate beyond the banking system, it tends to present some challenges. Several jurisdictions around the world have embraced the challenges that come along with cryptocurrencies while others have outright rejected recognition thereof. 

    In the UAE, cryptocurrencies and terms associated therewith were somewhat foreign; however, over the years, UAE has become an active participant in this global trend. In keeping with the aim of its UAE Blockchain Strategy 2021, the Government has made several attempts to transform UAE into a crypto hub. The FSRA, being the regulator of securities in ADGM, has issued several supplementary and comprehensive guidance for carrying out activities related to cryptocurrencies, other authorities like the SCA and DFSA have followed suit. 

    The Securities and Commodities Authority (SCA) has recently issued Regulations for Issuing and Offering Crypto-Assets (ICARs). The ICARs aim to regulate crypto-assets right from issuing, licensing, promotion, exchanging and all such other aspects that govern it. 

    Objectives

    The Regulation aims to regulate matters connected with the promotion, offering and trading of crypto assets in the state and related financial activities. The Regulation authorizes the SCA to exercise discretion in the following matters:

  • Protecting investors and other individuals against the risks connected with dealing in crypto assets.
  • Preventing financial crime and ensuring proper application of laws with regards to the prevention of financial crime in the state.
  • Ensuring proper application of laws for the use of financial instruments.
  • Protecting the reputation of the state and maintaining all such protocol that ensures the maintenance of the state's international commitments.
  • Promoting innovation, competition and evolving new means of financing enterprises operating within the state. 
  • In admitting a new licensee under the regulations, examining the suitability and reputation of the applicant and all other parties connected to the applicant.
  • Scope of application 

    The introduction of these Regulations is a turning point for crypto-asset Regulation in the country. The ICARs applies to any person who:

  • Is engaged in promotion, issuance, or offering crypto assets for sale to persons in the UAE or persons who are engaged in such activities. It aims to capture a wider audience through cross border dealing in crypto assets. 
  • It aims to provide services with respect to, custody, operation of exchanges that deal with cryptocurrencies and providing a platform for raising funds for cryptocurrencies that are issued in the UAE. 
  • Any other person who conducts Financial Activities within the territory connected with crypto assets. 
  • Exceptions 

    There are certain exemptions that have been made regarding persons/ entities that fall under these Regulations. Therefore, the scope of application is limited to the aforementioned and does not include:

  • Crypto assets issued by the local or federal governments, institutions, authorities or companies that are wholly owned by the Government. 
  • Currency (virtual or otherwise), units of stored value or any other such items that have been issued in a facility that have acquired or are required to acquire prior approval from the Central Bank.
  • Dematerialized securities in a clearing or settlement system not issued as a crypto asset but administered using an electronic record-keeping method controlled by the issuer or approved registrar, unless it qualifies as a crypto asset due to other connected features.
  • Activities conducted within the financial free zones within the territory of the state. 
  • Listing on a crypto-asset exchange 

    Article 8 of the ICAR stipulates that no crypto-asset shall be listed and made available for trading on a crypto-asset exchange within the state, unless:

  • Where the crypto-asset exchange is limited to accepting on qualified investors following the filing of the offer documentation with the Authority.
  • Where the crypto-asset exchange becomes available to persons other than qualified investors, with prior assent of the Authority.
  • The Regulations further provide that, approval shall be granted to the applicant subject to the satisfaction of the following:

  • All crypto-assets except the ones falling under-recognized cryptocurrencies under Article 19 must comply with the provisions that are applicable to commodity tokens under these Regulations.
  • Further, the Regulations also require the appointment of a crypto asset custodian unless the need for this requirement to be satisfied can be waived due to the satisfaction of custody arrangements in accordance with the requirements of the Authority.
  • Disclosure of all fees and commission paid or to be paid, to the issuer or an offering person must be made to the investors.
  • Any and all such requirements as may be mentioned in Article 17 of the Regulations.
  • Duties and obligations of the crypto asset custodian 

    A crypto-asset custodian is essentially a third-party entity that provides storage and security solutions for crypto assets. The main aim of such crypto asset custodians is to facilitate institutional investors who hold large amounts of cryptocurrencies and hedge funds to manage their funds. 

    Holding such large amounts of funds and crypto-assets presents its own challenges. Therefore, the Regulations impose certain duties and obligations in custodians of such cryptocurrencies, and these requirements may be subject to modifications by the SCA accompanied by certain licensing conditions that may be imposed as it may deem fit.

    The custodian of crypto assets is required to:

  • Create a separate wallet or account for each of their clients that contains information such as details of the holder and the transactions that are conducted on its account.
  • The custodian must maintain all accounts separately from its own assets and property.
  • The custodian must not transfer, pledge, hypothecate, grant security interest, lien or loans to a third party with respect to the customer's crypto assets, and neither should the custodian engage in adverse claims. 
  • The custodian shall be permitted to transfer crypto-assets out of the customer's account only when specifically instructed to do so. No such initiative is permitted to be taken by the custodian on their own accord. 
  • Store cryptographic keys and other such sensitive data that may be subject to an online attack outside the ambit thereof. Further, where rights regarding such cryptographic keys exist, no individual in a company is permitted to authorize or take any action regarding crypto assets held for clients.
  • Certain procedures and policies shall be put in place regarding actions to be taken in case a crypto asset becomes compromised, or any such loss has been caused to a client. 
  • A written agreement shall be entered into by the crypto asset custodian with their client, which lays down all the duties and obligations as per the provisions of the Regulation.
  • In case there is a conflict between the functions of the crypto asset custodian and any other related activities associated thereto, it shall be referred to the Authority is no action can be taken to avoid such conflict, along with information regarding the system that is used and controls that mitigate the issue and must ensure that all such disclosures have been made to the clients.
  • Crypto-asset exchanges 

    The Regulations also lay down certain rules for the operation of crypto-asset exchanges, a broad enumeration of the same is provided below:

  • Ensure that all information regarding trading and transactions are provided to the Authority.
  • Effectively carry out surveillance to identify, monitor and detect any such practices that lead to market abuse or financial crimes.
  • Ensure that the crypto-asset exchange is subject to adequate Financial Crimes Controls and the rights granted to users are protected.
  • Permission to access the crypto-asset exchange is to be granted to specific persons who are able to demonstrate a good track record of regular investment in crypto assets; those persons who access the exchange merely for the purpose of acquiring and selling crypto assets.
  • Ensure fair and transparent rules are put in place which ensures suspension or termination of access to markets in case a person does not meet the obligations imposed with respect to crypto transactions, and all such other rules enumerated under Article 16 of the Regulations.
  • Crypto fundraising platforms 

    Funding is a necessary prerequisite for any type of investment, similarly for any new or existing crypto project funds are required. Any person desirous of starting a crypto project needs to fist raise funds, these funds, however, cannot be raised from just any source. The Regulations lay down certain standards for raising funds in Article 14 thereof. 

  • Fundraising is permitted to be conducted only by such persons who have received the assent of the Authority to conduct such an activity.
  • A cap of AED 50,000 has been imposed on the amount permitted to be invested by customers.
  • The regulations also lay down that, fundraising can be accepted only in those currencies and crypto assets that can be subject to the Financial Crime Controls in accordance with Article 22.
  • All the disclosure requirements mentioned in the regulations are required to be complied with, and the person raising such funds shall be answerable to the Authority for such compliance.
  • The fundraising platform must not permit any trading or exchange activities of issued crypto-assets unless that same has been approved by the Authority.
  • The Regulations also impose certain requirements for operating a fundraising platform. Any person desirous of operating a crypto-asset fundraising platform must obtain a license from the Authority, this application shall be subject to certain modifications by the Authority as per their requirements. 

    The requirements are as follows:

  • The applicant must be a corporate person in any of the forms as prescribed by the Custody Regulations or; a person authorized to operate a crypto-asset exchange.
  • An offering person of crypto-assets where the scope of the proposed crypto fundraising platform is limited to being in respect of the relevant crypto-asset.
  • The applicant complies with all such requirements as mentioned under Article 21 and 22 of the Regulations.
  • Any such additional requirements may be imposed by the Authority in case the customers are exposed to any risk that cannot be adequately covered. 
  • Financial Crimes 

    The SCA takes into consideration the possibility of financial crime and introduces requirements that would help mitigate risks related to these crimes. It lays down various requirements such as business risk assessment, the effectiveness of financial crime controls, monitoring financial crime, carrying out due diligence, assigning a high-risk rating to clients that deal in crypto assets, designating bank accounts through which such transactions can be effected, tracing transactions involving crypto-assets and so on. 

    It is to be noted that, crypto assets which are not permitted to be traced are not permitted for use in order to fund accounts or make transactions through persons authorized through the Authority. 

    ]]>
    Sat, 09 Jan 2021 13:08:00 GMT
    <![CDATA[Securing Interest over Movable Assets ]]> UAE: Federal Law Number 4 of 2020 on Securing Interest over Movable Assets 

    Introduction 

    Federal Law Number 20 of 2016 concerning mortgage of movable properties has been repealed and replaced by the introduction of Federal Law Number 4 of 2020 on securing interest over movable assets. It is imperative to note that, the essential elements of the old law have been retained in most cases with a few additions that will facilitate the creation of legislation which is better suited to meet the domestic needs of the persons concerned in transactions hereunder. 

    Further, the law does not capture all the necessary provisions and procedures attached to the law, a detailed view of the application of the law can only be taken once the Implementing Regulations are issued by the Ministry of Finance. 

    Amendments 

    The amendment mainly brings about the following notable differences:

  • Scope of application 
  • The prior law applied to contracts that created a security interest over tangible or intangible assets that were movable in nature, and this applied to assets both in the present and the future in case of civil and commercial transactions. The amendment retains the basic principle that was followed in the old law, changes have been made regarding the transferee's rights with respect to the sale of account receivables, and the new law suggests that these rights shall be treated as a security right. 

  • Protocol 
  • In order to create valid security, the prior law mandated strict adherence to protocol regarding the contract, description of secured assets and declarations as to rights of third parties. The new law provides clarifications as to the automatic extension of security rights concerning returns and proceeds of the secured assets unless except the parties involved agree otherwise. Barring the aforesaid, the formalities as per the old law have been retained. 

  • Types of assets 
  • The old law lays down property that can be subject to a mortgage, which includes any current or future material or moral movable property like:

  • Accounts payable.
  • Payables and deposits at licensed banks and financial institutions including current account deposit accounts.
  • Bonds and other documents that make ownership transferable through delivery endorsement, commercial papers, certificates of deposit, bills of lading and warehouse bonds.
  • Work equipment and tools.
  • Material and moral elements of a business falling under the Commercial Transaction Law and the Trademark Law.
  • Raw materials, goods intended for sale or lease and goods used in the manufacturing process.
  • Fixtures that may be separated from real estate. 
  • Any other such movable property that may be considered to be valid under federal laws of the state.
  • The amendment to the old law has retained the abovementioned movable assets that are valid and subject to a security interest. However, it does include one additional definition with respect to accounts receivables; these are defined as the right to receive any such amount that the third party owes to a pledger. The amendment clarifies that these amounts shall not include rights to deposits, endorsable bonds, or the right to entitlement to collect securities. 

  • Exclusions 
  • Movables that were subject to registration as per existing laws or ones that had a relevant registry were not included in the prior law. Under Article 4 of the old law, property that was excluded from being mortgaged included:

  • Items intended for personal or home use necessary for him and his dependents.
  • Beneficiaries of an insurance contract or entitlements thereof.
  • Wages, salaries, expenditures and compensation to workers and employees.
  • Public funds, endowment funds, foreign diplomatic funds and funds of international government organizations.
  • Future rights arising out of inheritance or wills.
  • The amendment has narrowed down the range of assets under three heads:

  • Movables required by law to be registered as security rights in relevant registries.
  • Wages, salaries, expenditure and compensation to workers and employees.
  • Public funds, endowment funds, foreign diplomatic funds and funds of international government organizations.
  • Right to access the Register 
  • As per the old law, parties to a contract were permitted to agree upon allowing public access to the public with regards to the information declared in the Register. Generally, the public is permitted to access basic information within limits set by the Implementing Regulations attached to the law. The information could be obtained in a hard copy or soft copy format, once ratified by the Registrar, the report has a binding force. 

    The new law provides for public access to information in a similar manner that may be governed by the new Implementing Regulations. The same can be requested in a hard copy or soft copy format as previously practiced. The new law does not expressly mention whether or not parties to a contract can withhold confidential information, but the same may be elaborated upon by the implementing regulations. 

  • Priority Rights 
  • Under Article 17, the old law laid down that declaration of the mortgage by the mortgagee entitled him to rights over other creditors in fulfilling his rights over the mortgaged property. This priority was subject to the date and time of said declaration. 

    The amendment makes some additions to the old law, retaining the basic essence of the provision:

  • Priority rights shall be granted to all secured liabilities including the ones that arise after they become enforceable.
  • Security rights established under the law shall not be affected any other competing rights that may come to the notice of the mortgagee.
  • The implementing regulations shall lay down any, and all other such priority rules all may affect particular types of mortgage.
  • Registration 
  • Article 6 of the old law called for the establishment of a Register that could manage declaration of rights made by the rights holder, i.e., the Emirates Movable Collateral Registry. The new law aims to establish a new authority for registration of security rights, and the procedures of the same shall be determined by the Implementing Regulations attached to the new law. 

    In order to enforce security rights, the old law recommended registration on the online registry, and this was done with the view to create a valid security interest and ensure security against third parties. The new law, however, enumerates methods in which the right holder can ensure the security of interest enforceable against a third party, as follows:

  • Registering the security on the Register.
  • Delivering possessory rights over mortgage.
  • Control over mortgage by the mortgagee.
  • Moreover, registration of future security rights was permitted to be declared as per the old law upon the approval by the parties to a contract. This declaration then created security rights between parties and all such other third parties involved in said transaction. However, a cap of 5 days was imposed for the conclusion of the contract from the date of possession of the mortgaged property, subject to extension by not more than 30 days. 

    The new law allows registration of security interest prior to establishing the interest or concluding the contract. The new law has done away with the cap of days that was imposed on the conclusion of the contract; however, the Implementing Regulations may contain provisions to that effect. Further, the new law also provides that security interest of the following nature must be registered within a period of not more than seven working days of the possession of assets, as follows:

  • Intellectual property rights;
  • Financing acquired for equipment; and
  • Inventory.
  • Rights of the security holder 
  • The old law sets out conventional execution against the mortgaged property; it drew a difference between movable assets related to bank accounts and bonds and other movable assets.

    Bonds and bank accounts

    In case of bonds and bank accounts, violation of any obligations by the principle debtor or pledger under the security contract was permitted to be remedied under the law. If the security consists of accounts payable at banks, the collection thereof was to be conducted via set-off of the balance of any account against the relevant obligation. The new law provides that the mortgagee shall have recourse to accounts receivables at any time and can fulfill any payment from debts prior to the breach of obligation. The new law also provides for the waiver of rights regarding enforcement in their written contract. 

    Movable assets 

    In the prior law, failure to perform obligations by the principle debtor or mortgagor under the written contract, the property was subject to seizure and sale at market value within a period of 10 days after notification by the mortgagor of such breach of contract. This right could be enforced under certain circumstances as follows;

    In case of an agreement between the parties allowing the use of conventional measures:

  • When secured assets were unencumbered by another security.
  • Where notification of possession of the property has been given to the owner of said property.
  • Where the secured asset is a fixture and the owner of real estate to which the fixture is attached, and the mortgagee and all such other parties are notified.
  • The new law restricts the use of conventional measures of execution to breach by the principle debtor or mortgagee and discards all such other provisions provided as under Article 27 of the old law. 

  • Execution through judiciary 
  • The old law provided that the mortgagee could request for seizure of property before the Summary Court, once such seizure was effected, the court was permitted to authorize the sale of secured assets attached to the transaction. The new law retains these essential elements with an addition; that each interested party has the right to raise objections to the application for seizure within a period of 5 days from the date of being informed of such an application. 

    Conclusion 

    The issues regarding the legal status of security interests already registered with the Emirates Movable Collateral Registry have not been dealt with, in the new law. The varying effects on the legal status on all such other matters shall be provided under the Implementing Regulations. However, currently, the old regulations shall apply as long as there is no conflict with provisions mentioned in the new law. 

     

     

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    Sat, 09 Jan 2021 12:19:00 GMT
    <![CDATA[Unilateral Appointment of Arbitrator India]]> Legality of the Unilateral Appointment of an Arbitrator India

    A unilateral appointment clause is an agreement that gives one of the parties the opportunity to choose between two available options to settle a dispute, while only one of the options is available to the other party. Whether Unilateral Appointment Clauses are accepted as legitimate and enforceable is inconclusive and paradoxical.

    Arbitration relies on the important elements of a neutral third party to be mutually selected to resolve the dispute and whose decision is considered as final and binding.

    The Arbitration and Conciliation (Amendment) Act, 2015

    The Arbitration and Conciliation (Amendment) Act, 2015 altered the arbitration in India. Section 12(5) of the 1996 Arbitration and Conciliation Act was amended to incorporate two separate schedules into the Act. The new Fifth Schedule provides as to whether there are circumstances giving rise to justifiable suspicions to an arbitrator's independence or impartiality, and the new Seventh Schedule lays down the categories of individuals who are ineligible to be nominated as arbitrators. The Supreme Court of India in TRF Limited v. Energo Engineering Projects Limited, AIR 2017 SC 3889 (the "TRF Case") introduced another category of ineligibility because it was held that the person designated as an arbitrator who is ineligible under the 2015 Act could not nominate an arbitrator himself. The Supreme Court in Broadband Network Limited v. United Telecoms Limited held that the arbitrator was "de-jure" unfit to exercise his functions as an arbitrator and due to such ineligibility, his mandate has been revoked. 

    The TRF principle was fortified by the Supreme Court in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. (ARBITRATION APPLICATION NO.32 OF 2019). The Court classified two categories of cases:

  • TRF category, where the employee of the interested party is appointed as the arbitrator or has the right to nominate the arbitrator; and
  • Perkins category, where only the employee of the interested party has the exclusive right to nominate the sole arbitrator.
  • The Court stated that if under the TRF principle, an interested person cannot act as or nominate the arbitrator, the consequence must necessarily be that such person would be disentitled to nominate an arbitrator, even if the person were not acting as an arbitrator. The possibility of bias exists in both categories.

    The Delhi High Court on 20 January 2020 in Proddatur Cable TV Digi Services v. SITI Cable Network Limited held that while party autonomy is an underlying principle in the arbitration agreement, the procedure laid down in the arbitration clause cannot override considerations of impartiality and fairness in arbitration proceedings. 

    Similarly, the Delhi High Court in Arvind Kumar Jain v. Union of India on 4 February 2020 held that the respondent could not pressurize the petitioner to agree to waive under Section 12(5) of the 2015 Arbitration Act to appoint a sole arbitrator of the respondent's choice.

    It is a welcome trend to invalidate unequal arbitration agreements where only one party is able to appoint a sole arbitrator. The question is not whether the sole arbitrator appointed by one party is biased or partial. The fact that one party enjoys the exclusive right to appoint an arbitrator of its choice is by itself unfair. Even if the unilaterally appointed sole arbitrator has the best of the intentions, the court would still invalidate the appointment and appoint another arbitrator. 

    In Voestalpine Schienen GmbH vs. DMRC, [(2017) 4 SCC 665], the parties would nominate their respective arbitrators from a panel of arbitrators where the respondent shortlisted five names from the panel, and each party nominated an arbitrator from the given list. The process was challenged as contrary to Section 12(5) of the 2015 Arbitration Act. The Apex Court held that the choice of the opposite party is limited, and there is no free choice to nominate a person out of the entire panel prepared by the respondent. Further, the respondent selecting five names out of the list and then opposite party choosing their respective arbitrator from those five names instills the idea of biasness. The opposite party must be given the full freedom to nominate an arbitrator from the entire panel.

    In Bharat Broadband Network Limited v. United Telecoms Limited, 2019 the Apex Court held that the ineligibility under Section 12(5) of the 2015 Arbitration Act along with schedule VII of the 2015 Arbitration Act will have a retrospective application and is not confined to only a prospective application.

    Parties keep a unilateral appointment clause in their contract because if two parties are to agree on a sole arbitrator when the disputes arise, the parties more often than not do not agree to follow that settlement in the absence of a written contract. The parties then move to the court to appoint an arbitrator which can take about 6 months or even 2 years to make the appointment. Most organizations appoint their own arbitrators for ensuring speedy resolution of the dispute. 

    Courts tend to have a limited pool of arbitrators which makes it difficult for matters that require subject matter specialists. The most popular reason for adopting the unilateral clause is cost reduction. 

    The case of SMS Ltd. v. Rail Vikas Nigam Ltd. (14 January 2020) highlighted the need for having clarity on the legality of the exclusive right of one party over panel selection. The respondent, in this case, provided the petitioner with a panel of thirty-seven candidates to choose its arbitrator from. It was found that only eight of the thirty-seven candidates were not employed earlier by the respondent in some capacity. The Delhi High Court relied on Voestalpine and Perkins judgment and held that the panel did not satisfy the neutrality test of arbitrators. The Court permitted the petitioner's appointment of its nominee outside of the panel and appointed an arbitrator for the respondent.

    Indian Law in sync with the International Law

    The Supreme Court in the TRF Case grounded its reasoning on the 2015 Arbitration Act. Under Section 12(5) of the 2015 Arbitration Act, a person covered by the Schedule VII of the 2015 Arbitration Act shall be ineligible to be appointed as an arbitrator.

    Similarly, in the Perkins Case, it was held that naturally, the person having an interest in the outcome or decision of the dispute should not have the power to appoint the sole arbitrator. 

    This stance was long desired and indeed beings India in compliance with the international understanding of this issue- the principle of equality. 

    What does the principle of equality or equal treatment hold?

    The parties must have the opportunity to participate in the constitution of the arbitral tribunal on equal terms. The equality of the parties is part of transnational procedural public policy. The parties may jointly choose a sole arbitrator, but none of the parties should be able to make that choice solely. For party-appointed arbitrators, the principle requires that each party has the possibility of making a unilateral appointment. 

    In a landmark case in France, two defendants had to jointly nominate an arbitrator. They challenged this composition in the Paris Court of Appeal, which saw no issue with the appointment procedure. However, the Cour de Cassation reversed the ruling and held that the equality of the parties in the appointment of arbitrators is a matter of public policy that can be waived only after the dispute has arisen.

    The principle of equality to appoint an arbitrator is enshrined in the laws of some countries for instance in Germany by virtue of 1034 of the Code of Civil Procedure, in the Netherlands by virtue of 1028 of Dutch Code of Civil Procedure and in Spain by virtue of Article 15 of Act on Arbitration. The disadvantaged party in such countries can request the domestic court to nullify the exclusive privilege of the opposite party.

    India's interpretation of Section 12(5) and the Schedule VII of the 2015 Arbitration Act in TRF Case and Perkins Case syncs India with the global consensus.

    The national courts in common law countries, for instance, the United States of America, the United Kingdom and Singapore have upheld the validity of unilateral dispute resolution clauses. Whereas, the decisions of the courts in civil law countries like France and Russia have gone in the other direction of invalidating unilateral option clauses. India is a hybrid legal system and is opting both.

    The recent court rulings in India are more in favor of civil law jurisdiction. The party autonomy is respected if the parties are given a wider choice of arbitrators with neutral credibility.

    The Courts have largely perceived the agreement for the procedure of arbitration between the parties as a manifestation of party autonomy in an arbitration proceeding.

    The amendments made to the Act in 2015 struck a balance between impartiality and neutrality of an arbitrator with party autonomy by making amendments in Section 11 and 12 of the Act and introducing Schedule V, VI and VIII to the Act for increasing the credibility of arbitration proceedings. The primary role is to ensure that the person appointed as an arbitrator is neutral, independent and impartial.

    However, the Supreme Court in the TRF Case and Perkins Case took away the right to appoint the sole arbitrator by one party to the arbitration agreement. The Supreme Court clearly established that the only option remaining is to approach the Court for the appointment of an arbitrator in cases where the agreements provide for the appointment of sole arbitrator agreement by one party, and there is no consensus between the parties on the choice of arbitrator.

    Such practice is against the rule of minimum Court intervention provided under the 2015 Arbitration Act. The ongoing arbitration proceedings where only one party has appointed the independent and impartial arbitrator and agreements where one party had the exclusive right to appoint the sole arbitrator are in jeopardy.

    ]]>
    Sat, 09 Jan 2021 12:00:00 GMT
    <![CDATA[Legislative Amendments to freehold Ownership AUH]]> Abu Dhabi: Legislative Amendments to freehold Ownership Laws

    Introduction 

    Abu Dhabi, being the capital of the UAE, is a sea of opportunity for growth of the business, investment, technical and urban development. However, it has yet to reach its full potential. 

    A research conducted by the Abu Dhabi Urban Planning Council through their Real Estate Forecast in 2010 showed that the real estate market is experiencing irregularities with regards to demand and supply. Therefore, as part of Abu Dhabi's 2030 Vision, the Abu Dhabi Urban Planning Council proposed measures to curb this irregularity in the market to meet shortage and meet the increasing demand by implementing a comprehensive framework of plans that would improve economic growth. Legislations have been passed ever since, in order to meet these economic objectives. However, it became necessary to amend these laws to meet the social and economic development criteria even further. 

    The enacted legislation has opened up the market for foreigners and non-nationals in order to facilitate international and cultural expansion into the Emirate. The Real Estate Law Number 3 of 2005 laid down a comprehensive guide for all those who wished to invest. It answered a vast array of questions related to development, regulation, registration, enforcement, licensing, protection of buyers and sellers and many other such relevant topics. 

    Prior to the latest amendment, ownership of real estate was mainly restricted to UAE and GCC nationals. This amendment is of great significance since it now allows non-nationals to purchase and conduct the sale of land and not only the property that stood on the land. The Law Number 13 of 2019 undertakes amendment of Law Number 15 of 2005 regulating the ownership of real estate property. 

    Let us first understand what freehold exactly means. 

    What is a freehold property?

    Freehold, literally means, "free from hold". Ownership of such kind of property ensures exclusive rights of the owner legally free from any other entity. Purchase of property under freehold status entails the following;

  • Exemption from annual rent on land, on which the property lies
  • No restrictions as to transfer of property 
  • Non- answerability to a third party, i.e. complete charge over maintenance of the property  
  • Unlimited tenure of ownership 
  • Freehold properties are usually undeveloped land which allows owners to build a property of their choice therein. These properties can be used for a number of purposes; hotels, commercial offices, residential buildings or houses etc. Some real-life examples of such freehold properties are, Palm Jumeirah, JBR, Dubai Hills Estates, Dubai Marina and La Mer by Meraas.  

    At the outset, an investor might think that freehold property is expensive and that leasehold is a better option. But if you think about it logically, would you rather buy land or property at a full and final price which also gives you the benefit of clear ownership title, or would you choose a property that whose ownership lies with someone else and have to constantly pay the price for it as per the changing market prices? This amendment, therefore, gives you the option of choosing the former and making a smarter investment decision. 

    Background

    Pre- Amendment Provisions

    The real estate market in Abu Dhabi began to undergo development with the introduction of the Real Estate Law Number 3 of 2005 that laid down the fundamentals of real estate in the Emirate. This law established a regulatory authority responsible for the registration of real estate, called the Land Registration Department at Abu Dhabi along with establishing Al Ain Municipal Authorities. This law further laid down the rights and liabilities of buyers and sellers, the importance of registration of property and the consequences of non-registration. It further permitted all UAE nationals to own, purchase and sell residential, commercial and agricultural land. 

    The abovementioned law was subsequently amended to include provisions relating to rights of UAE, GCC and Non-GCC nationals with regards to ownership, leasing mortgaging etc. (Law Number 19 of 2005). Further, it also introduced the creation of investment zones which excluded foreigners from ownership of land. These investment zones are enumerated hereinbelow; Al Raha beach Area, Al Reef, Al Reem Island, Yas Island, Saadiyat Island, Lulu Island, Al Maryah Island, Masdar City and Seih al Sedeirah. 

    However, with the introduction of the supplementary Executive Council Regulation Number 64, directions were set out to benefit non-nationals through ownership of property in the investment areas. This benefit could only be availed through a long-term contract of 99 years or a leasing contract of 50 years on a renewable basis. 

    Regulatory Oversight

    The authority responsible for regulating all real estate activities in Abu Dhabi are as follows:

  • The Real Estate Law Number 3 of 2005 led to the establishment of the Abu Dhabi Real Estate Regulation Authority (RERA). 
  • The Department of Urban Planning and Municipalities is also responsible for maintaining real estate records. 
  • The Department of Municipal Affairs (DMA).
  • Legislative Framework 

    The legislation that governs real estate in Abu Dhabi are as follows:

  • Law Number 3 of 2005 which deals with regulation of real estate registration.
  • Law Number 19 of 2005 concerning real estate property and its amendments.
  • Establishment of the DMA by Law Number 9 of 2007.
  • Law Number 13 of 2019 latest amendment of the real estate property law.
  • Post- Amendment Provisions 

    A series of meetings between the Abu Dhabi Executive Committee, investors and developers have resulted in this monumental legislative amendment. Law Number 13 of 2019 has been enacted to enhance the international status of the Emirate. It aims to attract foreign investment leading to economic stability and geographic harmony. 

    Amendments have been made to Article 3 and 4 of the 2005 law. The amendment lays down provisions as enumerated hereunder:

  • Article 3
  • Emirati citizens are entitled to ownership of property.
  • Non- nationals can own up to 49 PERCENT of public holding companies.
  • Ownership of property is permitted with respect to any person who can acquire permission from the Abu Dhabi Executive Council.
  • Further, non-nationals are also entitled to ownership rights over real estate (land) within the investment zones.   
  • Article 4
  • Right of disposal of property without permission of the landlord, granted to holders of usufruct and mustaha property, holding property for more than ten years.
  • The right of the landlord to mortgage property, without the consent of the holder of usufruct or mustaha property, has been revoked.
  •  The biggest benefit of this amendment is with respect to ownership of land by foreigners. Previously, non-nationals were entitled to merely hold surface property by a deed of 99 years, i.e. apartments, floors, villas etc. this deed entitled them to re-sell the property but did not give them the option of sale. 

    With respect to mustaha, holders of the property could own residential units for a period of 50 years through a renewable contract with rights to make alterations and constructions excluding rights to own the land. 

    Further, the fact that usufruct properties could be owned for a period of 99 years barring the owner rights to make alterations served as a major impediment. 

    The amendment comes as a major relief to owners of the property and further encourages foreign investment in these investment zones that have been so allocated. It serves advantageous in the long run; however, this may lead to diminishing demand for a leasehold property. 

    Merits 

    The decision has been widely accepted by real estate developers for the following reasons:

    Clear Title of Ownership

    A clear title of ownership entails freedom from any impairment or lien by a third party. It helps alleviate financial risks and burdens and facilitates quicker transactions. It even allows the government to monitor activities of the titleholder with minimal effort. Developers can, therefore, expeditiously undertake construction activities. 

    Economic Driver 

    The pandemic has caused instability in the economy, and many nations are struggling to recover, therefore, in a way, this step taken by the government will serve as a fruitful foresight in the current scenario. It can also be seen to have a twofold advantage for the economy by creating jobs along with encouraging investment. 

    Larger Investment Pool 

    A large investment pool indicates the availability of a large number of funds. Prior to the amendment, the investment was limited to funds from UAE and GCC nationals, which meant that there was a limitation imposed scope of reach of investment, however, now this scope has widened allowing for greater foreign investment in the specified investment zones. 

    High Return on Investment 

    The main aim of making an investment is to get returns on it. If investment prospects do not show high returns on investment, no investor would even approach that market. Considering the growth in the real estate and healthy economic conditions, Abu Dhabi has great potential to attract homeowners and investors owing to its favorable prices and appealing location. Therefore, investment in property is bound to give a high return on investment. 

    GDP Growth 

    The new freehold law aims to increase investment by attracting a wider audience. Investment from wealthy expats will contribute to economic growth, especially in the current recessionary market where most countries are suffering a major dive in their market and are struggling to come back up. 

    Ease of Due Diligence 

    Prior to the enactment of the new freehold law, expats were allowed to hold property through 99-year leases, which increased the burden on banks when they had to conduct due diligence of those properties. However, with just one owner of the property and land as per the new law, the burden on banks is reduced; therefore, making real estate more bankable.  

    Conclusion 

    Buying freehold property has a wide scope of benefits for the investor. The land is practically yours until you want to sell it, this is exactly the aim of the new amendment; to facilitate an intelligent investment decision for foreign investors. Moreover, the value of the land only gets better with time, unlike in the case of leasehold was the value just depreciates. 

     The new law, therefore, opens up a whole new door of opportunities for expats and foreigners alike. It creates an atmosphere of equilibrium between nationals and non-nationals, which is a breath of fresh air the real estate market.  

     

     

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    Thu, 07 Jan 2021 17:08:00 GMT
    <![CDATA[Inchoate crimes-criminal responsibility]]> Inchoate crimes and criminal responsibility

    Introduction 

    As a general rule, criminal codes punish all those criminal acts preceding the commission of a crime. The liability hereunder is determined by the intention to commit the crime. It is to be kept in mind that, merely thinking about committing a crime does not amount to criminal liability; when an individual engages in acts that further his intentions, such as preparation of the crime, intentional omission, neglect or any such overt act that furthers the intent of the individual to commit the crime, he becomes criminally liable. Domestic and national laws globally, hold individuals liable for agreeing to engage in a criminal act, soliciting conduct and taking measures that would realize the crime. The seriousness of a crime is determined by a cumulative assessment of all acts committed for the purpose of committing further crimes; this, therefore, elevates the liability that is to be imposed on an individual. For instance, for the purpose of committing burglary, a person may have to first enter a property in an unauthorized manner, amounting to trespass or breaking and entering. Therefore, burglary shall be coupled with trespass or breaking and entering, increasing the severity of the crime. 

    Inchoate crimes may also be referred to as incomplete crimes since they do not directly amount to commission of the said crime but constitutes all such overt acts that amount to participation in a crime. There are mainly three acts that constitute inchoate crimes; abetment, conspiracy and attempt to commit a criminal act. 

    Criminal attempt 

    Attempt to commit a crime is usually separated from actual commission thereof; however, the attempt does constitute some underlying offences. Essentially, inchoate crimes can be scrutinized on the basis of, firstly, intention and secondly, steps that have been taken in order to prepare for it. 

    Under US law, offenses of general applicability did not recognize attempt as a crime prior to the 19th century; attempts were later made to include attempt alongside conspiracy and solicitation as inchoate crimes. Upon revision of the United States Code, offenses of general applicability now include; attempt, facilitation, solicitation, conspiracy and regulatory offenses. 

    It is important to note that, intent by itself cannot be considered a crime; it needs to be accompanied by a substantial step or significant conduct. 

    Such significant conduct need not be penultimate, and it can be a substantial underlying step that leads to an action that would effectively materialize the offence. In order to recognize the criminal attempt, the following requirements must be satisfied:

  • Intention;
  • Substantial act; and
  • Failure to realize the crime.
  • Failure to realize the crime is an essential prerequisite of a crime because, if a crime is realized, there is no question of attempt; the accused shall be then charged for the offense itself and not the attempt thereof. 

    Conspiracy

    A conspiracy involves an agreement between two or more people to commit a crime, the actions taken may not by itself constitute a crime but the acts must indicate that the persons involved in the commission thereof had conspired with the intention of breaking the law. Unlike attempt, in case of an attempt to commit a crime, a conspiracy is punishable regardless of whether the crime was committed or not. 

    For instance, A and B plan to rob a jewelry store. In order to commit the robbery, they first scout the premises of the store to assess the security system, once that is done, they then buy guns for committing the robbery. Now, in this case, if A and B are caught before they even commit robbery, they can be charged with conspiracy regardless of whether they actually completed or attempted to do so. 

    In cases of conspiracy, there is a need for all the persons involved to come to an agreement to commit the crime. This agreement does not necessarily have to be in express terms, and it can be implied from the circumstances that follow. For instance, if A asks B to accompany him to rob the jewelry store, B is not required to expressly say 'I agree to rob the jewelry store', he can merely act towards the furtherance of the crime and actively participate in planning the crime. 

    In some cases, persons who conspire to commit a crime may also be required to commit the actual crime in order to be charged with the commission of the offence. However, charges of conspiracy and commission of the crime are, in most cases, viewed as separate offenses. 

    Aiding and abetting 

    Any individual who assists in a crime regardless of whether he has committed the crime shall be held to be an accessory to the crime. The charges of abetment may vary as per the degree of involvement thereof. There are two factors that need to be considered when assessing aiding and abetment; that is, the existence of a principle and an accessory. 

    The principle is the person who actually commits the crime and is ultimately responsible for the commission thereof. An accessory, on the other hand, is a person who, though does not have any direct involvement in the commission, has assisted the principle to realize actual commission. 

    Therefore, the elements of aiding and abetting are:

  • Existence of a principle that commits the actual crime;
  • Assistance by the accessory; and
  • The accessory's knowledge of the principle's intent to commit the crime.
  • It is to be noted, however, that a person who has accidentally abetted a crime shall not be considered guilty for abetment thereof. For instance, A and B take a hostage in the jewelry store and order him to assist them in filling their bags and escaping, the hostage is, in such a case bound to comply with the direction given by A and B, fearing for his life. 

    With regards to punishment, accessories to a crime generally do not face the same degree of punishment as the principle. As per some national and domestic laws, however, the same charges are levied on an accessory as the principle since the mens rea attached to committing the crime existed therein as well. Further, in the case where the principle is not found or manages to escape, the accessory is still charged with aiding and abetting the crime. 

    A popular defense to this offense is, abandonment or withdrawal. A person accused of abetting a crime may plead that he withdrew his participation from the crime and tried to do everything in his power to prevent it from happening, now to prove his attempts to prevent the crime from happening he could cite instances where he attempted to notify authorities of the crime or any acts of similar nature. 

    Defenses to inchoate crimes 

    A defense attorney in such cases can argue on three main grounds:

  • Entrapment 
  • A defense attorney can plead that the accused was convinced by law enforcement authorities to engage in the crime with a promise that they would not be charged with the crime once the principle is arrested. The accused shall then be required to prove that the idea originated from the authority rather than the accused themselves and that he had no intention to commit the said offense.

  • Abandonment 
  • The second defense that can be pleaded in this case is that of abandonment or withdrawal from the crime. They may argue that the crime was never completed and that they had withdrawn their affiliation with the principle. For most inchoate crimes the argument of abandonment can be used, except in cases of conspiracy. The defendant herein has to establish the fact that prior to the ultimate commission of the act, the defendant had withdrawn from the commission thereof. In order to prove that, the defendant may have to show that they made active efforts to inform the authorities or tried to stop the commission of the crime. A participant in a crime cannot merely argue that they withdrew from the situation by not participating; they need to clearly establish that the withdrawal was effectuated well before the commission thereof. 

  • Impossibility 
  • This defense is basically that of mistake. It can be either mistake of law or fact. Now, it is a well-established rule of law that, a mistake of fact cannot be excused because of the presumption that every person is required to know the law. Therefore, one may rely on a mistake of fact. To argue this, it can be said that, if the ultimate offense is not considered to be a crime, then the prosecution of a participant thereof cannot be prosecuted either. 

    It is imperative to note that the aforementioned arguments are valid; however, they rarely succeed. 

     

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    Thu, 07 Jan 2021 15:22:00 GMT
    <![CDATA[India – Non- Performing Assets in Banking]]> India – Rise of Non- Performing Assets in the Banking Sector 

    Introduction 

    The foundation of any healthy economy is its banking sector. The basic function of a commercial bank involves lending and borrowing, while deposits into the bank are an asset; the advancement of loans involve a high degree of risk. The fact that repayment of the loan is not always guaranteed is a risk that banks are bound to take to carry on their business. Many times, large amounts of loans taken from banks remain unpaid, which subsequently results in loss to the financial institution. 

    In order to ensure stability and efficiency thereof, private and public sector banks are required to keep a check on the deposits received, and the loans advanced. In recent years, the quantum of non-performing assets is on the rise and is posing a serious threat to the Indian economy. As a general rule, banks declare an asset as non-performing when the borrower fails to pay back such a loan upon the lapse of 90 days from the due date in case of commercial loans and upon the lapse of 180 days from the due date in case of consumer loans. Non-performing assets reduce the deposit status of banks and also serve as an impediment to their profitability. This subsequently has an adverse negative impact on the economy as a whole. 

    What are NPAs? 

    Simply put, a non-performing asset is a loan or advance that has not been honored or interest to the loan is unpaid past the due date. It basically entails a loan or advance that fails to generate any revenue for the bank. 

    The Narasimha Committee that was established for the purpose of financial system reforms defined NPAs as:

    "A non-performing asset is a loan or advances for which the principal or interest payment remains overdue for a period of 90 days."

    The Reserve Bank of India has classified assets under four different heads for this purpose; a standard asset, sub-standard asset, doubtful asset and a loss asset. 

    A standard asset does not pose any real problem and carries a normal degree of risk as would be anticipated with any type of loan. On the other hand, a sub-standard, doubtful and loss asset is deemed to be non-performing if they remain unpaid for a period of 90 days to 12 months, more than 12 to 18 months and more than 36 months respectively. 

    Typically, banks consider a number of factors before declaring an asset as non-performing, if in case these reasons are not justifiable as per their standards, the loan is declared to be non-performing, and then banks can foreclose and recover the amount due through the collateral that has been provided for this purpose. For example, A takes out a mortgage from ABC Bank, the mortgage becomes non-performing after a lapse of 90 days, in order to recover the mortgage amount, the bank will send a foreclosure notice to A on his house that he had used as collateral for the purpose of the mortgage.  

    Contributing factors in the rise of NPAs 

    It is a well-established fact that banks lend to people that have money, which means that large corporations have the upper hand in receiving large amounts of loan from banks. 

    A popular example can be cited here, the Vijay Mallya scam wherein the owner of the Airline Kingfisher borrowed a sum of approximately Rs. 9,000 Crores and subsequently failed to pay the amount back. The total gross- non-performing assets incurred by the bank through giving loans to corporates stood at approximately Rs. 2.9 Lakh Crores out of which 3.5 percent was Mallya's contribution. There are many more such cases that have occurred in India where banks have lent money to large corporations and reputed businessmen which have resulted in default and caused banks to go into a loss that subsequently effects common people of the country. 

    Over the past decade, the Indian economy has gone through a lot of changes. Initially, it was going through a booming phase wherein the private and public sector banks were both on a positive high this was when banks started lending big corporations, however, when the financial crisis hit the country corporate profits decreased causing a lot of companies to close down and incur steep losses. Following this financial crisis, the government was forced to shut down mining projects in the country, which subsequently caused a decrease in the profitability and growth in the infrastructure sector resulting in fluctuation in prices. This further slowed down bank returns and increased the amount of non-performing assets held with banks. 

    Another contributor to the increase in non-performing assets was the relaxation of lending norms by banks. Many times, banks would fail to analyze the financial rating and credit scores of a big corporation and would end up lending to banks based on goodwill. 

    The government has taken several steps to turn around this scenario in the banking sector. Several legislations and regulations have been passed and amended in order to facilitate solving this issue. 

    The developments that have taken place with respect to Non-performing assets are as follows;

    The increase in the quantum of non-performing assets is a major concern for banks since it decreases its earnings, subsequently limiting their ability to offer loans by way of provisioning. This can be attributed to reckless lending activities and willful default by borrowers or the lack of ability to repay. Measures have been taken in the past to deal with the problems of NPA which include the introduction of several reform schemes such as, Asset Reconstruction Companies (ARCs), corporate debt restructuring schemes, strategic debt restructuring, sustainable structuring of stressed assets etc. 

    The government has also set up debt recovery tribunals in order to expedite the process of dealing with the NPA issue. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) was also enacted for this purpose but failed to realize its objective. 

    Insolvency and Bankruptcy Code

    The introduction of the IBC's resolution process expected to quicken the process of exercising control over the quality of assets. Previously, problems related to NPA and restructured assets were solved with the assistance of the RBI and the concerned bank. 

    The introduction of the IBC brought about a change in the resolution of distressed corporate debtors. It lays down a comprehensive procedure for liquidation of the corporate debtor in a timely fashion under the supervision of the NCLT. 

    Though the recovery procedure under the IBC is much quicker, it poses some challenges. As per the Insolvency and Bankruptcy Board of India (IBBI) data, the number of cases closed under the insolvency resolution regime has been considerably lower than what was proposed in the resolution. Therefore, some changes are required to be made in order to ensure the accuracy of the application of the Code. 

    Credit Risk Management

    Credit risk is basically the risk a bank takes by agreeing to lend, this risk materializes when the borrower fails to hold up his end of the bargain by failing to pay installments, which is basically a default. Credit risk management is basically the act of mitigating losses by estimating the bank's available capital in relation to the probability of loss that may be incurred upon the issue of loans. 

    The banks are required to carry out credit appraisals of the borrowers and look into the degree of accountability presented therefrom; the banks must also take into consideration the effect of any external factors. Once all this is estimated, the profits and losses are to be weighed down to ensure eligibility of the borrower to be granted the loan. An MIS may be implemented in order to keep a check on the credit eligibility and look out for warning signs. 

    Increased authority of the RBI

    The RBI is permitted to conduct an inspection of the lender to ensure their ability to grant loans and ensure that all such protocol is being followed. Amendments in the banking regulations authorize the RBI to monitor large accounts and create committees for the purpose of overseeing these transactions. 

    The RBI has issued several guidelines for the purpose of tackling the issue of NPA such as the strategic debt restructuring schemes that permit banks to make changes in the management of a company who is under default; it has also developed a joint lenders' forum for the purpose of creating resolution plans. Theses resolutions have now been integrated under a common Code, i.e. the IBC. 

    There have been several recommendations with respect to recovery of NPAs, wherein banks and government sectors must appoint certain authorized persons to manage senior level positions with proper guidance, laws should be amended in order to assign more authority to banks to recover the default amount, imposition of accountability on the senior-most executives to ensure that issues related to NPAs are tackled with ease. 

    Recommendations 

  • In order to address the steep increase of the problems with NPA, the government can consider the transfer of unclaimed deposits into its accounts so that unclaimed funds can be returned to the bank in the form of capital. 
  • In terms of Cash Reserve Ratio (CRR), the limit imposed on banks in order to receive interest should be relaxed so that such interests can serve as a profitable option and consequently reducing the burden on banks by decreasing their capital requirements. 
  • The Indian government can take inspiration from the US Federal Reserve that has created a troubled asset relief program that allows the treasury to stabilize the financial system of the country by the purchase of stressed assets. This program can be implemented through the creation of special purpose vehicles that will decrease the burden on banks. 
  • Setting up asset reconstruction companies (ARC) and setting up provisions for fraud management in order to fast track stressed assets in public sector banks.  
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    Thu, 07 Jan 2021 14:53:00 GMT
    <![CDATA[Goods and Services Tax in India ]]> Goods and Services Tax in India 

    The goods and services tax is an indirect tax that is applied on the consumption, sale or manufacture of goods and services. The GST is charged on the supply of goods and services in the territory of India. The Central Goods and Services Tax Act in India came into effect in 2017, which lays down the tax being levied on every value addition to the goods and services. Such value additions shall include multiple stages including but not limited to purchase of raw materials, manufacture, warehousing, sale to the retailer and ultimately sale to the end consumer. The Act intends to compile and regulate various taxes such as central excise duty, additional duties, service tax, special duties, state value-added tax, surcharge, cesses, purchase tax etc. into one single tax known as GST and the same has been implemented via this Act. A few of the judgments that have had a major impact on the GST in India have been discussed below. 

    Union of India vs Mohit Mineral Pvt Ltd (Civil Appeal number 10177/2018

    This case was a very important turning point in the history of taxation in India, as the judgment that was rendered upheld the constitutional validity of Goods and Services Tax (Compensation to States) Act stating that it was not beyond the legislative competence of the Parliament. All three acts are under the light in this judgment including the Central Goods and Services Act (CGST Act) 2017Integrated Goods and Services Act (IGST Act) 2017 and Compensation to States Act (GST Act) 2017. 'Cess' is a tax that is levied for a special purpose, as an increment to an existing tax. Such special-purpose includes any special administrative purpose or expense such as health cess, education cess, road cess, etcetera. The levy of compensation to states cess under the GST Act is an increment to goods and services tax that is permissible under the law as laid down by the GST Act. However, the imposition of tax on the same subject or same taxable event via two different acts of CGST Act and IGST Act was under question in this judgment. At the same time, the validity of the GST Act was also questioned, calling it a 'colorable legislation'. While dealing with the constitutional validity of the GST Act, the Court rejected the contention of the GST Act being called colorable legislation. Civil appeal arising out of SLP number 25415/2017 was filed by the Union of India (UOI) challenging the ad-interim order passed by the Division Bench of Delhi High Court in writ petition number 7459/2017 in the case of Mohit Mineral Pvt Ltd vs. Union of India. One of the important questions raised was whether the levy of compensation to states cess and GST on the same taxing event is permissible in law. The Court held that the GST imposed as cess on intra-state supply of goods and services under the CGST Act and GST imposed on the supply of goods and services under the IGST Act are two separate imposts in law and are, therefore, not prohibited by any law to be declared as invalid. Thus, it was held that the levy of compensation to state cess on the same taxable event is permissible. Both these contentions have been discussed further. 

    Mohit Mineral private limited is a company that is engaged in the trading business of imported and Indian coal. Mohit Mineral filed a petition in the Delhi High Court with two main contentions amongst others. One of the contentions presented by the petitioner is that on the very same transaction, there cannot be an imposition of levy of two taxes, being under the CGST Act and the other under the IGST Act as it amounts to double taxation. The petitioner contended that the levy of taxes was under the same subject causing overlapping of law and stated it to be impermissible by law. The levy of taxes in the present case was under the same subject, the same taxable event being under CGST Act via Section 9 & IGST Act via Section 5. Section 9 of CGST Act provides for levying of cess on intra-state supplies of goods and services. It mandates the levy and collection of cess on the supply of goods and services. Section 5 of the IGST Act states that there shall be a tax levied called the integrated goods and services tax on all inter-state supplies of goods and services or both. The imposition of the tax was taking place twice through the levying of cess on intra-state supplies of goods and services via Section 9 of CGST Act and inter-state supplies of goods and services as laid down in Section 5 of IGST Act. A prima facie case had been made out to hold that there was an imposition of double taxation in the order passed by the Delhi High Court in the case of Mohit Mineral Pvt Ltd vs. UOI. However, it was held in the present case that such order had been passed in error and such decision of the Delhi High Court was overturned. In the present matter, the Court held that "there might be overlapping, but the overlapping must be in law. The fact that there is an overlapping does not detract from the distinctiveness of the aspects." It was held that since the taxes are separate and distinct imposts levied on different aspects, and then there shall be no overlapping in law. The same transaction may involve two or more taxable events in its different aspects. The two separate imposts are the levy of tax on goods and services imposed on intra-state supplies via CGST act & inter-state supplies via IGST Act and two separate imposts in law are not prohibited by any law so as to declare it invalid. It was held that the levy of compensation to state cess is an increment to goods and services tax which is permissible under the law. The second contention presented was that the Compensation to States Act (GST Act) is colorable legislation and lacks legislative competence by violating the Constitution of India, so far as the collection of levy on cess is concerned. However, this contention was rejected, and the GST Act was declared not to be colorable legislation. It was held, that the Parliament of India has full legislative competence to enact the GST Act and the GST Act has in no manner transgressed the Constitution of India. 

    Union of India vs. Sapna Jain [SLP(Crl.) number 4322-4324/2019]

    This case revolves around the application of Section 132 of the CGST Act, 2017. Section 132 addresses where the arrest of accused persons for tax evasion can be carried out by the officers authorized with power under the Act. Section 132 of the CGST Act mandates that if the Commissioner has reasons to believe that any person has committed an offence under offences laid down in Section 132 of the CGST Act, then as the powers conferred to him by Section 69 of the CGST Act, he may authorize any officer of the central tax to arrest such a person. The term of imprisonment and penalty has also been laid down which mandates imprisonment of maximum five years and the offence has been listed as a non-bailable and cognizable offence. In this matter, the Bombay High Court had granted pre-arrest bail to persons who had been accused of tax evasion in respect with the powers granted to officials to issue arrest under the CGST Act. A special leave petition was filed against the order of Bombay High Court granting the pre-arrest bail to persons in case of tax evasion under Section 132 of the CGST Act. Supreme Court then clarified the position as there were many conflicting views that had been taken by various high courts in different cases regarding the arrest of persons addressed under the arrest provisions laid out in the CGST act, 2017. In P.V. Ramana Reddy Vs Union of India & Ors. [Special Leave to Appeal (Crl.) No. 4430/2019]the Telangana High Court rejected the contention of the petitioners to challenge the power to issue summons under GST and held that a person could be arrested by the competent authority in GST evasion. The petitioner approached the Court and challenged the power of summons that had been issued by the officer under the CGST Act under the provisions of Section 69 of the CGST Act. The petitioners were accused if circular trading by claiming input tax credit (ITC) on materials never purchased and the passing on of such ITC to companies to whom such goods were never sold. The petition was filed by petitioners stating that such arrest should not be made by the powers conferred to officers under Section 69 of the CGST Act and sought anticipatory bail. The Court held that issuing invoices or bills without supplying goods and utilizing ITC by using such invoices were offences that fell under the ambit of Section 132 of the CGST Act and despite the petition being maintainable and receiving protection under Criminal Code of Procedure,1973 there was no relief granted to the petitioners. In the present matter, the Supreme Court upheld the order of the Telangana High Court, whereby, bail was denied to persons arrested on charges of tax evasion. It was held that as there were divergent views taken by different High Courts on the same matter, the anticipatory bail that had been provided in the present case and other orders in the present case were not interfered with; however, the Supreme Court declared that from future all the High Courts should keep in mind the order of the Telangana High Court while entertaining requests on the matter of arrest under Section 132 and Section 69 of the CGST Act of 2017. By such an order, the special leave petition was dismissed.

    Jay Bee Industries Vs. Union of India (Appeal number 2169 of 2018)

    The petitioner was dealing with the manufacture and supply of electrical transformers and its parts. He was subject to goods and services tax on the supplies made in relation to such electrical transformers. He was also entitled to a credit of input tax on the inputs as well as the capital goods and input services. The petitioner was also entitled to input credit tax on inputs contained in finished & semi-finished goods lying in stocks and being utilized under the GST Act. The petitioner was registered with the sales tax department as well as the central excise tax and was accordingly paying appropriate duties & taxes with a GST number provided. From 1st July 2017, when the GST Act came into effect, the petitioner accordingly migrated to the GST and got allotted a new GST number. In accordance with Section 140(3) of the CGST Act, a person registered is entitled to the credit of eligible duties in respect of inputs that are held in stock and semi-finished/finished goods. Accordingly, with Rule 117 of the CGST Rules, 2017, in order to avail such input tax credit, every registered person shall submit an electronic declaration in the name of the form 'Tran-1'. However, even when the Act had become effective from 1st July 2017, the electronic system was not accessible for operation, and even the forms were not made available on the portal. The petitioner was, therefore, not able to fill up the Tran-1 form despite his best efforts. Due to defects of the system and technical glitches, the failure of filing tax returns resulted in failure to comply with procedural requirements. The petitioner sought that the respondents should re-open the common portal so that the petitioner is allowed to file the Tran-1 form and be able to avail the tax input credit in respect of taxes and duties paid on inputs that are held in stock and contained in finished & semi-finished goods. The petitioner also contended that no interest be demanded from the petitioner to the extent of that amount in order to prevent a miscarriage of justice. The respondents, however, contended that the limitation under the Act provides that the filing of the form to obtain credit has to be done within a period of 90 days from the appointed date and therefore cannot obtain the legitimate input service tax. The Court after hearing both the sides held that the input tax credit could not be denied on procedural grounds and relief was granted to the petitioner as he had done his best to file the form but was not able to do so on account of technical glitches. It was settled that input tax credit could not be denied on account of procedural grounds and the filing of forms was allowed despite the expiry of the limitation period. The petition was accordingly allowed, and the respondents were directed to provide the petitioner with the appropriate form. It is therefore concluded that input tax credit cannot be denied on account of procedural grounds. 

    State of West Bengal v Calcutta Club Ltd (civil appeal number 4184/2009)

    This case came about as a turning point for the reason that it was ruled that services yielded by incorporated clubs to its members would be exempt from service tax. In the present matter, the members of the Calcutta Club were exempted from service tax on the supply of goods and services such as food, drinks and refreshments delivered to them by the club. The question was whether such a supply of food and drinks would be subject to sales tax or not. 

    In the present matter, the order of the State of West Bengal to allow the Calcutta club to not pay sales tax on supply of goods and drinks to its members has been challenged. The application has been filed by the State of West Bengal against the judgment rendered in Calcutta Club Ltd. vs. deputy commissioner of commercial taxes (2007 10 VST 385 NULL). The facts of this case are that the Calcutta Club (petitioner) had filed an application praying that the said club is not a "dealer" within the meaning of the West Bengal Sales Tax Act 1994 as there is no sale of goods in the form of food, drinks or refreshments by the club to its permanent members which in turn protects the club from payment of any sales tax under the Sales Tax Act of 1994. The club demanded that it is not subject to pay any kind of sales tax and the request of the respondents for payment of such sales tax on supply of goods to permanent members to be quashed. The club had not been registered as a dealer with the sales tax act of 1994. However, the Deputy commissioner of commercial taxes (respondent) presented that irrespective of the club is incorporated or unincorporated, the club will have to pay tax for the supply of drinks, foods and beverages to its permanent/temporary members as the same fell within the ambit of the definition of "sale" under the sales tax act. It was held that the payment made by the members to the club was actually a payment in the real sense to themselves and the members shall be termed as the 'principal', whereas the club despite being a separate entity shall be the 'agent' who is entitled to the collection of such payment. It was also held that there was no sale that took place in the club and the concept of mutuality between the club and the members shall not be eliminated. Therefore, the application was allowed. 

    In the present matter, the State of West Bengal (petitioner) has challenged the above order stating that such supply shall be deemed to fall under the ambit of "sale" and shall be eligible for sales tax irrespective of mutuality or reciprocity between the members and the club. Various judgments were also presented by the State of West Bengal (petitioner) that had rendered orders in favor of such supplies to be deemed a sale. The Calcutta Club (respondents in this matter) presented that the club was merely acting as an agent with its members and are not liable to payment of any tax. The contention presented was that there could be no supply by an agent (the club in this case) to a principal (members of the club in this case). Upon reading of the sales tax act, 1994, it became clear that supply of beverages, drinks and food has to be made upon consideration either in cash or otherwise to make the same eligible for tax. It was held that the collection by the club from members is not payment of the price of food or drinks, but rather reimbursement of expenses met from the fund of the club which has been contributed by the members of the club themselves. The decision taken by the taxation tribunal in Calcutta Club vs. Deputy commissioner of sales tax was a correct decision, and accordingly the present application was dismissed. It was ruled that the Calcutta club would not be entitled to charge service tax on the goods and services rendered to its members. It was held that the club whether incorporated or unincorporated if it is exclusively run by the members only and the members participate in contribution of the fund of the club then the sales tax shall not be levied. 

    M/s Sanjose Parish Hospital vs The Commercial Tax Officer(LAWS(KER)-2012-9-420)

    In this particular case, the question was whether the supply of medicines, implants and consumables provided by hospitals to in-patients (subject to medical treatment at a hospital) should be subject to any value-added tax during the course of medical treatment. The private hospitals in the State of Kerala and Kerala Private hospitals association state committee had filed a petition disputing their liability to get themselves registered as dealers under the Kerala value-added tax act, 2003 to pay tax for medicines and consumables sold to the medical patients. The hospitals presented the contention that hospitals are not liable to pay tax for the supply of medicines and other items for the medical treatment of patients at the hospital. It was contended that the definition of "sale" contemplates only food and articles of human consumption and the same is exclusive of 'medicine'. The hospitals were rendering what is called "hospital service", and that supply of medicines and other items is incidental to the service rendered to the patients treated. It was held in the judgment that the supply of such medicines and consumables should constitute composite supply and the same treatment shall not be subject to value-added tax (VAT) as it is done with the intention of curing the patient. The levying of taxes on such supply of medicines and other items shall not obligate the hospital to get themselves registered or to pay tax and accordingly the petition was passed allowing the hospitals do not pay value-added tax on supply of medicines and other items to patients during medical treatment. 

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    Thu, 07 Jan 2021 13:46:00 GMT
    <![CDATA[Deficient Services Consumer Protection Act]]> Deficient Services under Consumer Protection Act, 2019 (India)

    The Consumer Protection Act, 2019 (the "New CPA") heralds the commencement of a new era in India concerning the consumer rights to be in sync with the new-generation consumer expectations. The modes of business like telemarketing, direct selling, multilevel marketing and e-commerce were not envisaged three decades back in the 1986 legal framework and have made consumers more vulnerable to unfair trade practices. Well, new problems do require new solutions! The direct selling and multilevel marketing earlier regulated through guidelines issued by state governments and the consumer affairs ministry are now within the ambit of the New CPA.

    The New CPA modifies the rich legacy of the Consumer Protection Act, 1986 (the "1986 Act") to curb the challenges of a rapidly growing, sophisticated and inter-dependent market for goods and services. The New CPA expands the scope of grievances that consumers can complain against, as well as gives the regulator suo motu powers. The 1986 Act had a three-tier structure providing for adjudicating any complaint, but failed to provide for a regulator which could initiate or intervene on a preventive basis like direct product recalls which are dangerous or unsafe. The New CPA provides for this by establishing a Central Consumer Protection Authority. The New CPA creates a regulatory structure on a par with advanced global jurisdictions like the U.S. and U.K.

    When a consumer finds the service deficient, he can lodge a complaint under the New CPA. This marks the prime requirement to be that the matter must fall within the definition of "service", and it must entail a deficiency as per the requirements provided under the New CPA.

    What is Deficiency of Service?

    According to the definition under Section 2(11) of the New CPA, "deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes-

  • any act of negligence or omission or commission by such person which causes loss or injury to the consumer; and
  • deliberate withholding of relevant information by such person to the consumer.
  • From the railway sector to aviation, from the banking sector to the entertainment sector, deficiency of service could be witnessed in any service sector which holds a buyer-seller relationship. The consequences of deficiency of service can vary from being minor to grave, ranging from harassment to mental or physical injury to death, thus leading to legal consequences.

    The CPA's main purpose has always been to protect and safeguard the interests of the consumers. The New CPA came into effect on 20 July 2020 and has within its ambit the physical platforms for buyer-seller relationship along with recognizing services provided by E-commerce platforms.

    In Gurshinder Singh vs Sriram General Insurance Co. Ltd. & Ors. 2020 (MANU/SC/0083/2020), the Supreme Court of India held that mere delay in intimating the insurance company regarding the theft of the vehicle could not be a ground to deny the claim of the insured.

    It was held that denying the claimant merely on the ground that there was some delay in intimating the insurance company would be unfair and unjust. The insurance claims should not be declined on technical grounds if it had already been verified and found to be genuine by the investigator.

    Section 2(47) of the New CPA expands the definition of "unfair trade practice".

    While the 1986 Act had listed six types of unfair trade practices, the New CPA states three additional types of unfair trade practices:

  • non-issuance of bill or cash memo or receipt for the goods sold or services rendered in such manner as may be prescribed;
  • refusing to withdraw or take back defective goods or to discontinue or withdraw deficient services and to refund the consideration paid, within the period stipulated in the bill, cash memo or receipt and in the absence of such stipulation, within a period of thirty days. It is relevant to determine whether the goods or deficient services have been provided; and
  • disclosing to another person any personal information given in confidence by the consumer unless such disclosure is made in accordance with the provisions of any law for the time being in force.
  • Sections 82-87 of the New CPA deal with "Product Liability". Section 2(35) of the New CPA entitles a person to make a claim of product liability against the manufacturer, seller or service provider for such defective products to compensate for the harm caused to a consumer by the defective product manufactured or sold or by deficiency in services relating to the product.

    As per Section 85 of the New CPA, the product service provider may be liable if the service provided by him was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or pursuant to any contract or otherwise.

    No specific provision of product liability existed under the 1986 Act. However, the consumer can now seek compensation for harm caused by a defective product or a deficient service under the New CPA.

    Due to the Healthcare Amendment, there has been a deletion of "Healthcare" from the definition of services under the New CPA. The Supreme Court in Indian Medical Association vs VP Shantha & Ors. (1996 AIR 550) had included Healthcare into the definition of services under the 1986 Act. However, it is yet to be seen whether the inclusion of Healthcare will continue to apply under the New CPA.

    Jurisdiction under the New CPA is decided based on the 'value of goods or services paid as consideration' by the consumer. The Consumer Courts is a 3-tier system of courts, National level, State level and District level. The threshold for pecuniary jurisdiction of the commissions are; District Commission: Rs 1 crore or less, State Commission: Rs 1 crore to Rs 10 crore, and National Commission: Exceeding Rs 10 crore.

    Remedies

  • The aggrieved consumer may approach the Grievance Redressal Mechanism of the Service Provider before initiating any legal action against the service provider.
  • The aggrieved consumer can also send the legal notice to the service provider detailing the complaint, relief sought and time period to comply.
  • The sending of the Legal Notice is not mandatory, and hence the aggrieved consumer can file the complaint directly before the appropriate Consumer Forum.
  • As per Section 37 of the New CPA, if as per the District Commission there exists a possibility of a settlement which may be acceptable to the parties, it may direct the parties to give consent in writing, within five days, to have their dispute settled by mediation. Where the parties agree for settlement by mediation and give their consent in writing, the District Commission shall, within five days of receipt of such consent, refer the matter for mediation.
  • The complainant, if not satisfied with the verdict passed by the District Consumer Forum, can file a review application, within 30 days from the date of order, in the same Forum (Section 40 of the New CPA). Furthermore, if still not satisfied by order of the review application, the aggrieved can appeal to the State Commission within 45 days from the date of order (Section 41 of the New CPA).
  • The aggrieved if not satisfied with the State Commission order, can file a review application, within 30 days from the date of order, in the same Forum (Section 50 of the New CPA) and accordingly can appeal to the National Forum within 30 days from the date of order given by prior Forum (Section 51 of the New CPA).
  • Conclusion

    'Buyers beware' is no more the norm with the New CPA in force. The consumer is now the king, not just in business but also in law as the New CPA leverages responsibilities on the sellers, manufacturers, service providers and also the endorsers of such products. The New CPA fastens the process of resolving the disputes and also offers mediation cells for easy settlement.

     

     

     

     

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    Thu, 07 Jan 2021 12:11:00 GMT
    <![CDATA[Concealment of Assets in Bankruptcy]]> Concealment of Assets in Bankruptcy

    Introduction 

    A businessman's business is basically his baby; the decision of going through the process of bankruptcy is probably the most difficult decision that a company has to make throughout its lifetime. Everyone involved in the procedure, be it, the debtors or creditors are losers herein, in the sense that, the debtors sell all their assets to pay off creditors, but this sale of assets would not be profitable to any of them since they would be sold at the market price or lower. 

    Self-interest and greed for more is a part of human nature. Especially in cases of bankruptcy, many debtors resort to deception in terms of assets, so as to prevent paying the creditors in full and retaining as much as possible with themselves. This deception can cause more harm than benefit to the debtor. False statements and concealment of assets violate the sanctity of law and amount to fraud and misrepresentation, against which a creditor can initiate judicial action. 

    Over the years, companies that go out of business have come up with some really creative ways of hiding their assets ranging from; transferring assets to another account only to be slyly retrieved after the conclusion of bankruptcy proceedings to selling off assets or property with the possibility of being reclaimed thereafter. 

    It is a basic presumption in bankruptcy law that the debtor makes full disclosure of all assets and liabilities. Failure to do so can land him into a complex web of civil and criminal litigation.

    Case Laws 

    To understand the concept of concealment, we can rely on certain precedents:

    In Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.), cert. denied, 382 U.S. 843 (1965), the court held that concealment does not merely require secrecy in terms of physically hiding property; it includes all acts that done that may amount to defrauding the creditors, trustee or the custodian of the property. 

    Further, in United States v. Moss, 562 F.2d 155, 160 (2d Cir.), cert. denied, 435 U.S. 914 (1978) it was held that, an important element of concealment of property is the intention of the debtor. If acts were done in contemplation of bankruptcy or with the intention to defeat the provisions of the bankruptcy code. 

    With respect to the offense of concealment, we may cite, Sultan v. United States, 249 F.2d 385, 386 (5th Cir. 1957) wherein it was held that the offence of bankruptcy is a continuing offense and deal with the conduct of the debtor before and after the concealment of property. 

    Assets Exempted from Disclosure 

    An application for bankruptcy can be made by the debtor himself, one or more creditors, the public prosecutor, or suo motu by the courts own motion. 

    In a bankruptcy proceeding, creditors are mostly paid out of company assets; however, if the company assets fail to satisfy the requirements of debt, assets may also be taken out of the debtors' personal estate.

    However, the debtor does not necessarily have to turn everything over to the creditors, as there are some assets that are exempted from the whole procedure. Such as:

  • Reasonably necessary, clothing, furniture, household appliances;
  • Vehicles and jewelry, up to a certain value;
  • Portions of unpaid wages; and
  • Public benefits such as welfare, unemployment compensation and pension.
  • However, on the other hand, property like, family heirlooms, expensive motor vehicles, cash, bank accounts, shares and bonds etc. are liable to be ceased. 

    Methods of Concealment 

    A debtor is said to have concealed their assets if they satisfy any of the following criteria:

  • Willful concealment of any property, owned and operated under the name of the corporate debtor;
  • Removing, fraudulently, from the list of assets, any such details of the property that should have been a part thereof;
  • Making any false entries in the books of accounts relating to the property of the debtor or his corporate affairs;
  • Willful creation of any security interest over property that would serve fruitful to the debtor, other than in the ordinary course of business;
  • Securely transferred or disposed of any property before commencement of bankruptcy proceedings;
  • Creating fake documents that diminish the value of assets; or
  • Lying about ownership of any valuable property.
  •  How can an administrator discover a discrepancy?

    Well, one might think that they have successfully concealed your assets. However, such concealment cannot escape the due diligence of an expert administrator or trustee. The trustee looks into each and every minute detail of a company that has applied for bankruptcy; they require the concerned debtor to submit all documents such as, statement of assets, statements of lawsuits, all assets and liabilities and copies of income tax returns etc. This exercise of the trustee is to test the truthfulness of the debtor. The trustee also evaluates all the liabilities against the creditors, which means that the trustee takes a look at all the statements of the creditors to estimate the value that is owed to each creditor. To further confirm that nothing is being concealed the administrator or trustee may:

  • Review documents that reflect personal and company debts;
  • They may further conduct a search of public records, along with a search of assets; and
  • They may also conduct a detailed search of all bank records and tax returns to look for any discrepancies, like transfer of a large amount of funds before the commencement of bankruptcy proceedings.
  • Consequences of Non-Disclosure 

  • Despite all attempts of a debtor to conceal his assets, if the administrator or trustee discovers assets that remained undisclosed, the administrator has the authority to reverse the order of discharge of debts, which means that, upon discovery of pending assets the debtor will still owe the creditor the debt that was attempted to be eliminated by the initiation of bankruptcy proceedings. 
  • The administrator further, even has the authority to revoke any discharge that has been obtained by the debtor, upon later discovery.  
  • Domestic bankruptcy laws provide for the imposition of damages, penalties or furtherance of civil and criminal action against any person who engages in the concealment of assets.
  • Unintentional Concealment of Assets 

    There are dire consequences of hiding assets, like criminal and civil action. However, the law does not punish someone who has unintentionally forgotten or somehow had a reason to believe that such assets are not to be included in the list of assets being declared. The law affords an opportunity to them to, therefore, amend such an application.

    In many jurisdictions, such as the US, unintentional concealment of assets can be amended by an application to the court regarding the changes and the reasons for such amendment. Such an application, however, is subject to the scrutiny of the court, and the court may then choose to accept or reject such an amendment. 

    Applications can be amended for the following three reasons:

  • In case of a mistake;
  • Omissions; or
  • Change in circumstances.
  • In order to avoid any such problems in filing for bankruptcy, it is important for a company to engage a professional body that can facilitate the procedure and make sure that all the documents that are being submitted and passed on correctly to the concerned authority. 

    Bankruptcy Laws in UAE

    The laws related to bankruptcy are fairly new in the UAE, being enacted only in 2016 by Federal Decree Number 9 of 2016. Unlike other jurisdictions, these laws apply only to companies and not individuals. Moreover, these laws apply to companies that are partly or fully owned by the government, and companies established in the mainland. This law does not apply to companies established in the DIFC and ADGM free zones. 

    The regulatory body responsible for the governance and enforcement of rules and regulations is the Committee of Financial Restructuring (CFR). This authority is also responsible for the administration of a register of insolvencies. 

    Penalties under UAE Law

    Article 197 of the Bankruptcy Law, lays down a penalty for the imprisonment of 5 years for any person who is found committing any such act that:

  • Conceals, destroys and alters any part of the books with the intention to defraud the creditors;
  • Engages in embezzlement of funds with the intention of causing harm to the creditors; or
  • Engages in acts that, show an increase in the persons' liabilities and reduces their assets with the intention to deceive.
  • Subsequently, Article 198 also imposes liability on a member of the board of directors and managers of the company for the abovementioned acts, with imprisonment of a term not exceeding five years and a fine of AED 1,000,000. 

    Bankruptcy Laws in India 

    Bankruptcy laws in India are governed by the Insolvency and Bankruptcy Code, 2016. This Code aims to consolidate laws relating to insolvency resolution of corporates, partnerships and individuals. The Code provides for maximization of assets and promotion of entrepreneurship. Further, the Code also provides for promotion of the interest of shareholders. The Code mainly deals with cases of civil nature, but there are certain provisions that can attract criminal action.  

    The Code establishes the Insolvency and Bankruptcy Board of India that is responsible for regulating the entities registered under it; it also is responsible for overseeing insolvency proceedings. 

    Penalties under the Code, are enumerated under Chapter VII. With respect to concealment of assets and intention to defraud creditors, the penalties are enumerated under Section 68- 73 of the Code. 

  • Section 68, punishment for concealment of property.
  • Section 69, punishment for transactions defrauding creditors.
  • Section 70, misconduct in the course of the corporate insolvency resolution process.
  • Section 71, falsifying books of the corporate debtor.
  • Section 72, wilful material omissions relating to corporate affairs.
  • Section 73, false representation to creditors.
  • The Code lays down that, any person who, with the intention to defraud the creditors, willfully conceals and property or any part thereof or destroys or mutilates any books to get rid of any evidence with regards to the existence of property shall be liable to a penalty under the Code. The penalties enumerated herein may take a civil or criminal route, depending on the gravity of the crime, ranging from imprisonment or fine or both. 

    Conclusion 

    In view of the aforementioned, the debtor should beware of the consequences and penalties attached to concealment of assets. The debtor must be mindful of the law in this respect because inadvertence thereof is not an excuse to be left scot-free. In law, there is a basic presumption that each and every person is aware of the law. Therefore, ignorance of the law is not an excuse. The insolvency and bankruptcy laws are the most stringent and adherence to them is in the best interest of those concerned. 

    Failure to disclose assets is a landmine for the debtor, which poses a major risk to him every step of the way. On the other hand, it is a goldmine for the attorney for the opposite party, since non-disclosure makes for a very straight forward argument in any civil or criminal litigation. 

    ]]>
    Thu, 07 Jan 2021 11:35:00 GMT
    <![CDATA[Amendment to the Companies Law on LLC]]> UAE: Effect of the Amendment to the Companies Law on LLCs

    Introduction

    The UAE government has recently amended Federal Law Number 2 of 2015 (hereinafter referred to as "old law") by issuing Federal Decree-Law Number 26 of 2020 (hereinafter referred to as "new law"). The introduction of this amendment has effectuated an overhaul of the corporate landscape of the country. The new law has made several changes in its provisions, but the most notable difference is the removal of restrictions regarding the existence of a UAE national as a majority shareholder.

    The new law affords foreign shareholders an opportunity to acquire full ownership in onshore companies thereby rescinding the general requirement imposed under Article 10 of the old law wherein fifty- one per cent (51%) of shares of a company established onshore were mandatorily required to be held by a UAE national.

    Article 10 of the new law presupposes the creation of a committee that shall be responsible for enumerating all such activities having a strategic impact along with laying down prerequisites for licensing companies desirous of carrying out such activities. The Competent Authority under the Department of Economic Development, established through Article 10(2) shall be authorized to determine shareholding percentages of UAE nationals, their percentage of participation in the Board of Directors in such companies and approve the companies' incorporation applications thereby implying that the some of the prerequisites of the old law shall still apply to certain classes of companies, as per the discretion of the Competent Authority. However, upon request from the Ministry, relevant authority or the Competent Authority, any company can be excluded from this list, wholly or partly, from complying with any provision or condition that are concerned with the UAE national's shareholding or their participation in the board of directors, provided that their activities are regulated by special legislation.

    Moreover, the new law has also abolished Federal Law Number 19 of 2018 concerning Foreign Direct Investment, which entails that the general requirement for a UAE national as a majority shareholder has been removed with regards to Limited Liability Companies (LLCs).

    The critical changes effectuated through the amendment concerning LLCs are enumerated as follows;

  • One Person Company
  • As per Article 71(2) of the old law, an LLC could be constituted with a minimum of two shareholders and a maximum of fifty shareholders and permitted a single natural UAE national to incorporate an LLC without the requirement of a second shareholder.

    As an impactful change to this, the new law has now removed the aforementioned restriction and now allows foreign investors, natural or juridical, to establish an LLC.

  • Capital increase or decrease
  • The amendment creates a new possibility for the purpose of increasing capital on an emergency basis. Article 101 stipulates that a shareholder may seek a court order for the purpose of preventing the liquidation of the company or in order to settle liabilities payable to third parties.

    In case a shareholder defaults in paying his share of the increase in the capital, any other shareholder is permitted to pay on his behalf. Therefore, the number of shares shall be allocated to such a shareholder in equivalence to the amounts he paid on his own behalf as well as the amounts paid on behalf of the defaulting shareholder.

  • Changes in the provisions associated with the Memorandum of Association (MOA)
  • General meetings:
  • The new law has introduced several changes regarding the formalities that need to be followed for the purpose of convening a general assembly of an LLC. As per Article 92(2) any Director or authorized Director, who owns at least 10% of share capital in the company shall be entitled to call for a General Meeting. The threshold as per the old law for such a minority right was set at 25%.

    Further, Article 93 (1) of the new law extends the timeframe for the invitation to a general assembly from a period of 15 days to 21 days. The provision also allows the use of modern technology for the purpose of sending out the invitation, in addition to registered letters, as may be provided for in the MOA. A copy of the same is also to be sent to the Competent Authority prior to sending the same to the shareholders.

    As regards quorum of the general meeting and voting decisions, Article 96 (2) of the new law rescinds the majority Emirati participation. The quorum for constituting a general meeting has been reduced from 75% to 50% unless the MOA specifies otherwise. In case a meeting is adjourned, a fresh invitation shall be sent to for a second meeting, and the same shall be held after five days and not later than 15 days of sending out such invitations (Article 96(3) of the new law).

  • Dispute Resolution
  • Generally, an MOA constitutes all matters relating to incorporation, rights and liabilities of directors etc. However, Article 73(2) of the new law mandates that the MOA shall contain means for settlement of disputes that arise between the company and any of its Directors or among their shareholders as a result of their company's business.

  • Specific provisions relevant to Public Joint Stock Companies (PJSCs) have been made applicable to LLCs as well, as per the amendment.
  • Disqualification of Directors
  • Under chapter 2 of the Companies Law, the directors, if they do not comply with the provisions of this law, may be disqualified from the company. The following includes the provisions which, if not met, may disqualify the Director and can impose penalties on them. Under Article 158 of the Companies Law, the Director will be deemed as resigned if he or she is absent from the meeting(s) of the Board three (3) consecutive times, or five (5) intermittent meetings within the period of the Board, without any excuse acceptable to the Board.

    Article 162 of the new law imposes a liability, not only on the directors but also on the executive management in case of fraud, misuse of power and any violation of the provisions of the law or the Articles of Association of the company. In case of a fault arising out of a decision passed owing to majority shareholder votes, accountability lies with the shareholders that assented to the decision. Dissenting members shall not be held liable, contrarily, in case of unanimous decision, the all member shall be held liable.

  • Appointment and re-appointment of Auditor 
  • The duration for the appointment of auditors has been increased from a period of three years to a period of six years with a requirement to re-appoint the chief auditor after the lapse of the first three years. The provision further allows for re-appointment of the existing auditing company after the lapse of a period of two years.

    Conclusion

    Introduction of the new law is a significant step towards relaxation of the corporate climate in the country and is expected to improve the economy and consequently attract a sea of foreign investors, making UAE an attractive investment hub.

    The provisions concerned with foreign ownership come into force six months from the date of issue, of the new law. Companies falling under the ambit of this law are required to comply with the provisions of the law and get their affairs in compliance thereof within one year from the effective date, i.e. 2nd January 2021. For the purpose of complying with the provisions of the new law, it is highly recommended that companies review their Memorandum of Association and carry out such requisite changes as mention in the new law.

    ]]>
    Thu, 17 Dec 2020 12:33:00 GMT
    <![CDATA[Doing Business in Ras Al Khaimah 2021]]> Doing Business in Ras Al Khaimah 2021

    Enforcing Contracts Questionnaire

    1.Case Study Assumptions

    Two domestic companies - Seller and Buyer - conclude a contract for the sale of some custom-made goods. Further to such contract, Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller, custom-made furniture. Upon delivery of the goods, Buyer alleges that the goods are of inadequate quality, and refuses to pay. Seller insists that the goods are of adequate quality and demands payment of the contract price. Since the goods were custom-made for Buyer, Seller cannot sell them to a third party. Following Buyer's refusal to pay, Seller sues Buyer. The court decides 100% in favor of Seller, and orders Buyer to pay the contract price.

  • Both Seller and Buyer are domestic companies, located in Ras Al Khaimah.
  • Seller sues Buyer to recover the amount due under the contract. The value of the claim is: AED 317,386.
  • The court deciding the case is located in Ras Al Khaimah and is the first instance court with jurisdiction over commercial claims of AED317,386.
  • Seller fears that Buyer may dissipate assets, move assets out of the jurisdiction or become insolvent. Therefore, if such a procedure is allowed before the competent court, Seller requests and obtains attachment of Buyer's movable assets (for example, office equipment or vehicles) prior to obtaining a judgment.
  • Buyer opposes the claim, which is then disputed on the merits. An opinion on the quality of the goods delivered by Seller is required and is given by an expert during the court proceedings:
  • If it is standard practice in your country for Seller and Buyer to call their own expert witnesses, then each party calls one expert witness to provide an opinion on the quality of the goods delivered by Seller.
  • If it is standard practice in your country for the judge to appoint an independent expert to provide an opinion on the quality of the goods delivered by Seller, then the judge does so. It is assumed that no opposing expert testimony is provided.
  • Judgment is 100% in favor of Seller. Buyer is required to pay the agreed contract price to Seller.
  • Buyer does not appeal the judgment.
  • Seller starts enforcing the judgment when the period allocated by law for appeal expires. It is assumed that Buyer has no money in his bank accounts but has sufficient movable assets to fulfill the full debt. As a result, Buyer's movable assets (for example, office equipment or vehicles) are attached and stored in preparation for a public sale.
  • A public sale is organized, advertised and held to sell Buyer's movable assets. The assets are sold and the value of the claim is entirely recovered by Seller.
  • Definitions: for the purpose of this questionnaire, the terms below carry the following meaning:

  • Competent court means the court in Ras Al Khaimah with jurisdiction over commercial disputes similar to the one described in the assumptions of the case. If more than one court is competent, competent court means the court that is most likely to determine the outcome of the standardized case.
  • Expert witness means a witness with the required qualifications or experience to give an opinion on whether the goods delivered are of adequate quality. Expert opinion is required and provided prior to judgment.
  • 2.                                                                                                                                              Reform Update

     

     

    Answer

    Have there been any reforms since November 1, 2018 in domestic commercial litigation (e.g. amendments to the civil procedural rules or to the case management system, implementation of e-filing, implementation of mediation, substantial changes in arbitration law, creation of a new commercial court, or appointment of new judges or

    reorganization of the judicial system)?

    Yes, there has been a reform since June 1, 2011

    If relevant, please describe the reform(s). Please include information on the date of adoption, publication and enforcement of the new law(s) or regulation(s).

    a.  Ministerial Resolution Number 57 of 2018 concerning Executive Regulations of Federal Law Number 11 of 1992 on Civil Procedure Law has been amended by UAE Cabinet Resolution Number 33 of 2020 (Executive Regulation Amendments)

    b.  The conduct of proceedings before courts have been amended, mainly, the process for service/ notification;

    c.  The amendment aims to reduce the burden of courts with respect to gathering essential evidence and

    documents, reduce costs and expedite the process in civil and commercial law suits by expanding the scope of powers of the case management office. The Case Management Office is the branch of the court that insures that the parties are duly summoned and have had the opportunity to raise their main arguments before referring the case to the court for consideration;

    d.  Accessibility of judgments has been enhanced by making them

    available through publication thereof, in commercial, civil and employment matters; and

    e.  The efficiency of proceedings are improved by imposing stricter rules for cases reserved for judgment, increasing the claim value for cases heard by summary chambers, mapping out the grievance procedure of summary orders, precautionary attachment orders and setting a statute of limitation for

    appealing decisions of the execution judge.

    Are any such reforms expected to be implemented in the next six months? If so, please describe.

    No.

    3.Competent Court

     

    Answer

    Comments

    3.1 Does the Civil Section of the First Instance Court of RasAl Khaimah have jurisdiction over the case described in Section 1, given the value of the claim set at AED 317,386?

    Yes

    If you answered "No",please specify what the new competent court would be:

    3.2. How many cases similar to the one described in Section 2 before the Civil Section of the First Instance Court of Ras Al Khaimah have you or your firm handled since 2019?

    More than 100

     

    Please provide your responses to the following sections taking into account the case study assumptions provided above. For your convenience, answers from Doing Business in Ras Al Khaimah 2019 are included in this questionnaire where available.

    If the competent court has changed, please answer all applicable questions in Sections 4, 5 and 6 assuming that the new court would hear the case.

     

     

    ]]>
    Wed, 09 Dec 2020 17:18:00 GMT
    <![CDATA[Enforcement of New York Convention Awards in the UAE]]> Enforcement of New York Convention Awards in the UAE

    Introduction 

    Arbitration clauses are becoming more and more prominent in corporate agreements, the reason behind this is the ease with which disputes can be dealt with as compared to the traditional court system. In any case, a corporation may find that arbitration is the easiest and the most rational method of settlement. 

    Arbitration is, therefore, becoming an increasingly popular means of dispute resolution internationally. This popularity in the international sphere has given rise to a large number of multinational and bilateral treaties. In the UAE, the primary source of domestic arbitration law fell under the Federal Law Number 1 of 1992 on the UAE Civil Procedure Code that regulated the execution of foreign judgments, orders and instruments. This was consequently replaced by the Federal Law Number 6 of 2018 on Arbitration, and this Law applies to all arbitral proceedings carried out in the UAE. The introduction of this Law was a step in the right direction since it facilitates the amalgamation of national arbitration laws with the UNCITRAL Model Laws on International Commercial Arbitration. The Arbitration Law is, therefore, applicable to all entities whose seat of arbitration is onshore within the territory of the UAE. The exception to this Law is the financial free zones that are considered to be offshore and have their own autonomous laws, courts and jurisdictions. 

    Key provisions of an arbitration agreement 

    In order to have a valid arbitration agreement, the Law provides for some formal requirements that need to be adhered to, as follows:

  • Any agreement to refer disputes to arbitration shall be in writing;
  • The parties to the contract must be capable of entering into the contract;
  • The arbitration agreement must have the original contract that shows the intention of the parties to resort to arbitration or the presence of an addendum to the original contract that shows such intention; 
  • Arbitration may also be agreed upon orally by the parties; however, such oral agreement can only be considered binding if it occurs in a court or is recorded by a court judgment; and
  • It is imperative to note that, the doctrine of severability is recognized by the Law, in that the arbitration clause shall not be affected by nullity, termination or rescission of the contract. 
  •  The parties may, as per their discretion, agree upon a common arbitrator. In case parties are unable to come to a decision regarding the appointment within a period of 15 days, a written request shall be submitted to the opposite party that the arbitrator is appointed by the concerned institution to which the matter has been referred. 

    Further, any connection of the parties with the arbitrator must be disclosed in writing before any doubts about the arbitrator's impartiality or independence arise. The arbitrator must therefore recuse himself from such a dispute. 

    As per Federal Decree Number 24 of 2018, the UAE Penal Code imposed criminal liability on an arbitrator who was found guilty of bias. However, as per a later amendment, this rule was said to apply only to experts, translators and other fact-finders appointed in an official capacity. This amendment was a positive step in arbitration, to instill a sense of trust in the minds of arbitrators conducting arbitration within the UAE and would help ensure that arbitrators would not leave a case because of fear of prosecution. 

    Prominent arbitral institutions in the UAE

     The most prominent arbitral institutions in the country are as follows:

  • Dubai International Arbitration Center that is governed by the DIAC Arbitration Rules, 2007 and it administers arbitration thereunder. 
  • The Dubai International Financial Center in association with the London Court of Arbitration (DIFC-LCIA), the arbitration administered herein fall under the DIFC-LCIA Arbitration Rules, 2008
  • Abu Dhabi Conciliation and Arbitration Center (ADCCAC), the rules followed by this institution are the Procedural Regulations of the ADCCAC.
  • The Emirates Maritime Arbitration Center (EMAC)
  • Sharjah International Commercial Arbitration Center 
  • Ras Al Khaimah Center for Reconciliation and Commercial Arbitration 
  • Enforcement of Arbitration Award

    After the accession of the New York Convention in 2006, the UAE including the ADGM and DIFC entered into treaties for the recognition and enforcement of arbitral awards:

  • The GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications, 1996;
  • The Riyadh Convention, 1996; and
  • The Convention on the Settlement of Investment Disputes, 1965.
  • In order to give force to the New York Convention in the UAE, the government enacted Federal Decree Number 43 of 2006 regarding The United Arab Emirates Joining the Convention of New York on Recognition and Enforcement of Foreign Arbitral Awards, the details of which are given below. 

    Federal Decree Number 43 of 2006 Regarding The United Arab Emirates Joining the Convention of New York on Recognition and Enforcement of Foreign Arbitral Awards

    The United Arab Emirates joined the New York Convention for recognition and enforcement of foreign arbitral awards. The Decree recognizes and enforces arbitral awards made in the territory of the state other than the state where such recognition is sought. Further, this would also apply to arbitral awards that were not considered domestic awards in the state where recognition and enforcement are sought. Important provisions of the Decree are enumerated herein below:

  • In order to obtain recognition and enforcement, the parties applying for recognition must attach a duly certified copy of the original award along with a certified copy of the original agreement between the parties. In case the document does not exist in the official language of the country, then translations for the same are required to be provided. 
  • The contracting states shall recognize an agreement in writing under which the parties undertake to submit themselves to arbitration, in respect of a defined legal relationship, regardless of it being contractual or not. 
  • The party against whom such enforcement is sought may apply for non-recognition, and such recognition can be refused if the party is able to prove:
  • That they were under some incapacity and for this reason, the said agreement is not valid under the Law to which the parties are subjected. 
  • The party against whom the award is invoked was not given proper notice of appointment of the arbitrator or of the arbitration proceedings or was unable to present his case.
  • The award deals with submissions that were beyond the scope of arbitration.
  • The composition of the arbitral authority was not in accordance with the agreement between the parties. 
  • The competent authority can also refuse to grant recognition if it finds that the subject matter is not capable of settlement by the arbitration law of the country, further if the recognition is contrary to public policy, it can be subject to refusal. 
  • The Decree provides that, the convention shall not have any effect on the recognition and enforcement arbitral awards that are subject to other multilateral or bilateral agreements entered into by the parties. 
  • Enforcement through UAE Courts 

    It is important to note here, that the Arbitration Law, i.e. Federal Law Number 6 of 2018 on Arbitration, does not apply to foreign arbitral awards. Enforcement of foreign awards can be done in two ways, through the UAE Courts or through the ADGM and DIFC. 

    For the recognition and enforcement of foreign arbitral awards, we may peruse the provisions of the Cabinet Regulations, i.e. Cabinet Resolution Number 57 of 2018 Concerning the UAE Civil Procedure Law

  • Article 86 of the Cabinet Regulations are concerned with the recognition and enforcement of foreign arbitration awards, and it lays down that, arbitral awards can only be enforced if they adhere to and are permissible under the laws of the state.
  • The requirements for the recognition of an arbitral award are laid down in Article 85 of the Regulations as follows:
  • The same conditions that apply to the enforcement of national awards shall apply to the foreign arbitral awards, in case the terms of the foreign award are not permissible under national laws, the competent authority may reject recognition and enforcement.
  • The judgment passed by the state, has been duly certified by the state where it was passed. 
  • The parties to the dispute in the concerned matter were appropriately represented and appeared for the matter.
  • The judgment passed does not conflict with any other previous judgment issued by a UAE Court.
  • The judge enforcing such an order has the authority to compel the presentation of any documents that support the application before the decision is passed. 
  • A claim for recognition and enforcement of a foreign award in the UAE requires an application for recognition or an ex-parte petition; this should be filed directly with the execution court following which, the execution judge will render his judgment within a period of 3 days from submission thereof. 

    Once the application is accepted, the respondent will be notified and served with a copy of the application that will afford the respondent the opportunity to appeal its order. In the meantime, the claimant may proceed to apply for either executory attachment or securing a judgement debt etc. 

  • In case a conflict arises about recognition and enforcement under the Cabinet Regulations or the New York Convention, the parties are permitted to invoke the provisions that are most favorable to their circumstances. 
  • It is to be noted that, Article 236 of the Arbitration Law has not been repealed with respect to the current utility and purpose of UAE law; therefore, the courts have the authority to nullify awards that are found outside the ambit of the Arbitration Law and the New York Convention. 
  • Enforcement through ADGM and DIFC

    Another means to recognize and enforce foreign judgements, is through ADGM and DIFC Courts. The laws that are followed hereunder concerning arbitration are the ADGM Arbitration Regulations and the DIFC Arbitration Law, respectively. 

    The DIFC Arbitration Law (DIFC Law Number 1 of 2008), lays down a procedure for the recognition and enforcement of a foreign arbitration award in Part 4 thereof. Alongside the requirements of recognition and enforcement, the Law also lays down the circumstances under which these foreign awards may be refused.  

    Prior to the enactment of the Cabinet Regulations, parties to arbitration preferred enforcement and recognition through this mode rather than approaching the UAE Courts. The reason for this is the introduction of the Cabinet Regulations; the procedures for enforcement have become quicker and more cost-effective. However, no injunctive relief is available to parties from precautionary attachment; further, receiving non-monetary relief from UAE courts is a tedious task.

    Timelines for enforcement of foreign court judgments 

    As a general rule laid down under Article 473 of the Civil Code, onshore courts may recognize foreign judgements that are not more than 15 years old. In case of offshore judgements, the judgement creditor is permitted to apply for recognition and enforcement within a period of six years from the date of judgement, upon satisfaction of all the criteria mentioned under the Law. Further, in case of an appeal against the judgement, within six years of the date of the last appeal. 

    Conclusion 

    The changing attitude towards arbitration is taking a positive turn, leading to the development of the legal system in the UAE. It is further, a contributory to transforming UAE into a financial hub in the Middle East. Therefore, foreign award creditors can now optimistically approach the courts within the country for the enforcement of awards against stakeholders in the UAE.  

     

     

    ]]>
    Wed, 09 Dec 2020 16:16:00 GMT
    <![CDATA[New Mining Investment Law Saudi]]> Saudi Arabia: New Mining Investment Law

    Introduction 

    The Middle East has primarily always focused its attention on revenue generated from the oil and gas industry. However, recently these countries are venturing out and exploring other sectors in keeping with their aim of economic diversification. Due to their concentration on oil and gas reserves, the land has not been utilized to its full potential; this realization has pushed Middle Eastern countries to tap into their mineral resources to boost the economy and create jobs. In order to realize their goal, GCC countries are either working on or have recently introduced new mining laws to encourage investment and to create a unified regulatory framework towards achieving the aim of development and diversification.  

    As part of their Vision 2030 program, Saudi is tapping into their primary, midstream and downstream mineral reserves in order to enter into the international mining market and serve the local as well as export market aiming towards its growth alongside the oil & gas and petrochemical industry. In furtherance of this intent, Saudi introduced a new mining investment law in early June 2020, which brings about some significant changes in the old Law. 

    Key Changes

    The Saudi Cabinet has approved the following amendments to be made in the 2004 Mining Investment Law:

  • Formation of a permanent mining committee under the Chairmanship of the Minister of MOIMR accompanied by representatives of other Ministries. The powers given to the Committee include making decisions about the allocation of the mining area, objections filed by and against government agencies etc. 
  • It provides for an exploitation license and a general license, both of which abolishes and supersede the material collection license in the old act. 
  • The MOIMR is to appoint competent representatives as judicial officers who have the power to inspect, monitor and control violations and ensure that the licensees are performing activities in compliance with the Mining Investment Law and its Implementing Regulations
  • The amendments also include setting up of a committee to determine violations and imposing penalties, and the Law has laid down a comprehensive regime related to violations and penalties as compared to the old Law. 
  • Priority rights over the purchase of minerals extracted, no longer lies with the government. 
  • As per the previous Law, the licensees were allotted a maximum period of 60 days to remedy issues related to the environment, wildlife etc. however, under the new Law, this period has been extended to 180 days after which, the license is subject to termination.
  • Control restrictions have been removed, any changes regarding control have to merely be notified to the Ministry within 30 days of such change. 
  • In a force majeure event, the licensee shall be entitled to a substitute site wherever possible, under the discretion of the Ministry.
  •  In Detail 

    Royal Decree M/140: Mining Investment Law 

    Historically, the mining sector has faced a long list of challenges with respect to licensing procedures which restricted private sector investors from entering the market, lack of access to financing and capital that resulted in barriers to entry for Saudi companies; and tough global competition accompanied by lack of support from the government in this particular sector. 

    The new legislation aims for sustainable growth in the mining sector by:

  • providing financial assistance to businesses in the form of short term and long-term loans;
  • increasing the spectrum of land that can be explored for the conduct of mining activities;
  • establishment of a national database for geological surveys;
  • extension of the duration of exploration licenses; and
  • The option to mortgage mining licenses and creation of a register of mineral zones. 
  • These amendments bring about changes that can facilitate the economy to compete in international markets, therefore, bringing in foreign investment. 

    Mining Funds 

    A significant amendment that was brought about in the new legislation was regarding financial support to businesses in the mining sector. The Law, therefore, prescribes financial support by way of medium- and long-term loans. These loans, however, will not be in the form of investment vehicles but a bank account which will be financed by fees, fines and other levies imposed by the Ministry. 

    Licenses

    The types of minerals defined under the old Law are retained in the amendment with a slight change in the terminology used in its reference. The minerals are now referred to as part of either Class A, B or C, previously referred to as Class 1, 2 and 3. In order to avoid confusion; Class A (Class 3) covers metallic minerals, precious and semi-precious stones and ores requiring advanced processing; Class B (Class 2) covers non-metallic, industrial and raw materials; Class C (Class 1) covers construction material. 

    The different types of licenses enumerated in the amendment are as follows:

  • Mining License
  • The old Law had a separate class for a mining license for raw materials and quarry licenses, which has now been deleted from the amendment and now mining licenses can be issued for both Class A as well as Class B.

  • Small Mine License 
  • As per the old Law, only class B and C were entitled to procure a small mine license. With the amendment, small mine licenses can be issued to Class A and B.

  • Building materials and Quarry License
  • Previously covering Class B and C, the new Law will now only cover Class C. 

  • Material Collection License 
  • This concept has been done away within the amendment.

  • General Purpose License 
  • In order to achieve the purpose of an exploitation or utilization license, a new category of licenses has been added by the new amendment. By procuring this license, one can use land and establish facilities thereof outside the relevant licensed zone. 

  • Exploration License
  • The old Law limited the term of validity to 10 years, and the amendment has extended this period up to a period of 15 years. 

    It is provided that, upon receipt of an application for exploration, exploitation or utilization license, the ultimate responsibility to obtain necessary permits and approvals lies with the Ministry. In the absence of any objections, the application shall be deemed approved, contrarily, the applicant shall be granted an opportunity to amend their application to correct such errors as may be directed by the Ministry. 

    In case of more than one application being received by prospective licensees for the same site, priority shall be given to the applicant depending on the date on which the application was submitted. 

    Registers 

    As per the old Law, the Ministry was required to maintain a register of applications along with a register within which details of all the grounds under which the licenses were to be granted. Further, the registers were open to the public for inspection. 

    In case of rejection of an application, the details of such an application would be made unavailable after a period of 180 days from the date of rejection of the said application. 

    Under the new Law, the Ministry is required to:

  • Maintain a register of all the applications, wherein all details such as renewal, amendment, transfer, extension, mortgage, termination, expiry and any and all such details are to be recorded.
  • Along with a license register, the Ministry is also required to maintain a mineral zone register wherein all information regarding mineral formations and reserves are to be recorded.  
  • In keeping with the old Law, confidential information is not to be disclosed before the lapse of 180 days of refusal of the application. However, the new Law allows disclosure without approval in cases where the licensee has abandoned his application and upon receiving reports of valid licenses. 

    The provisions concerned with abandonment of the application, however, required clarification which has not been provided for in Law. Such confusion can only be clarified upon publication of the Implementing Regulations. 

    The new Law further calls upon the Ministry to develop a National Geological Database as a central repository as an incentive to investors, by allowing access to all information regarding potential deposits and reserves. The database is expected to bring about a large rollout of investors and encourage more people to obtain licenses for conducting exploration activities. 

    Excluded lands 

    The old Law prohibited the issuance of license with respect to the following:

  • Religious places;
  • Historical and archeological sites;
  • Land specified under the council of ministers' resolution;
  • Lands on which airports, railways, cities, infrastructure are located; and
  • Public facilities, water and agricultural projects, military installations.
  • The new Law prohibits mining licenses from being issued for religious and military sites, land specified by the resolution of the council of ministers and reserves of hydrocarbon operations. Exploration and exploitation licenses can now be issued for land falling under subdivision b, d and e, as mentioned above. 

    Mortgages 

    Financing in the mining sector has always been somewhat of a challenge for Saudi companies due to its capital-intensive nature. The Ministry, in association with the Capital markets, has identified the need of companies and has taken steps to develop attractive financing options in this sector. 

    The new Law permits licensees to pledge or mortgage their rights under the exploitation and exploration licenses. No prior consent of the Ministry is required in order to transfer such rights to eligible persons. However, the Ministry is supposed to be notified of such a pledge or mortgage so that a record of the same can be entered in the license register. This comes as a relief to potential lenders since it allows them to enforce security over an exploitation license in order to salvage distressed project value by transferring the license to a new developer. 

    Once the Ministry is notified, it is required to publish a full text of any such notices regarding mortgaged licenses. Such a disclosure, therefore, invokes the confidence of financiers who were previously dependent on the honesty of borrowers. This amendment allows them to obtain copies of such notices. 

    Environmental Considerations 

    Mining activities have long-lasting environmental impacts; therefore, the Law imposes a responsibility on the licensees to provide a financial guarantee for rehabilitation and closure of the site concerned. In order to keep a check on the environmental and social impact of mining activities, the licensee is required to submit reports of environmental and social assessments to ensure that the project being undertaken is compliant with the regulations imposed by the Ministry, is economically feasible and contributes socially to local communities. 

    The licensee is required to submit this report to the competent authority, the approval of which shall be communicated within a period of 60 days of such submission. 

    Conclusion 

    Therefore, the new amendment includes several provisions that aim to attract foreign investors in the mining sector, allowing them to benefit from the natural resources that the country has to offer. This new Law allows licensees to undertake exploitation, exploration and also engage in industries that produce metals and mineral products. The new Law is expected to bring about a change in the mining sector by contributing to revenue and job creation, growth in economic and social revenue and better control over governance. In keeping with the objective of attracting foreign investors, the new Law also eases financial limitations and government levies on certain sectors. 

    The aims and objectives of this amendment are to foster the development of national industries, bring about a change in mining operation and governance, instill a sense of confidence in the minds of investors by promoting transparency. 

    ]]>
    Wed, 09 Dec 2020 15:55:00 GMT
    <![CDATA[Confidentiality in International Arbitration]]> Confidentiality in International Arbitration

    Introduction 

    Confidentiality is the essence of trust, which is why individuals, corporations and even government bodies resort to Arbitration. Confidentiality is attractive to litigants internationally for a myriad of reasons, like freedom of making arguments which would not normally be made at a public forum, or choice of adherence to a set precedent. 

    Although an attractive feature, confidentiality is not necessarily a mandatory feature of international arbitration, however, most countries maintain privacy as a cursory obligation to the parties to a dispute. Many international arbitration judgements have been reported all over the world, which only affirms that confidentiality is non-essential. In order to protect their interests, parties, therefore, add a confidentiality clause in their contracts, which enables the parties to initiate action in case of non-compliance. 

    The vast diversity of cases referred to arbitration imposes a bounded duty on parties thereto and on everyone involved, to maintain confidentiality. However, there is no presumption of confidentiality in international arbitration; neither is there a general principle to that respect. 

    Those interested in pursuing international commercial arbitration should verify the laws regarding confidentiality to avoid unfavorable circumstances and dissemination of sensitive data publicly. Parties seeking protection of information can opt for protection under the national laws, the arbitration agreement or even the law of contract. ­

    International Precedents 

    Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10

    The Australian High Court held that, while the privacy of arbitration should be maintained mandatorily, confidentiality is not an essential attribute. The court further held that prohibiting the disclosure of information with respect to the proceedings are not a consequence of the private nature of the proceedings. Furthermore, it was said that despite the maintenance of a certain degree of confidentiality in certain situations, it is not absolute. 

    To further enunciate this point, in United States v Panhandle Eastern Corporation 118 FRD 346(d.dEL.1988), the issue that arose was regarding preventing disclosure of documents relating to arbitration proceedings, conducted between Panhandle and Sonatrach, which was an Algerian gas and oil company. The plaintiff argued that such disclosure would cause great detriment to their relationship with the Algerian government. 

    The Court, however, did not see much merit in this contention and held that the argument failed to satisfy the grounds of good cause as provided under the Federal Rules of Civil Procedure. Further, addressing the question of confidentiality, rejected the existence of a duty of confidentiality on the grounds of absence of an express agreement between the parties. 

     Ali Shipping Corp v. Shipyard Trogir, [1998] 2 All ER 136

    As per English Law, confidentiality is not a presumed notion. The obligation is only imposed when the Arbitration Agreement or the contract between the parties expressly lays down such a provision. 

    In this case, the court laid down certain exceptions to the rule of confidentiality. Those exceptions were as follows:

  • The obligation with respect to arbitration is not mandatory if the disclosure of arbitration was made with the express or implied consent of the parties who produced the material; 
  • Further, when the court permits by an order or judgement in favor of disclosure;
  • When is it necessary to protect the interest of the arbitrating party; and
  • Public interest.
  • Scope of Confidentiality 

    We may discuss confidentiality with respect to two aspects; the first aspect is related to persons who are either party to the arbitration hearing or officials that are involved, and the second aspect, with respect to the documents produced and all the testimonies involved. 

    The first aspect implies that there is an inherent duty upon the parties, judges, court officials and everyone who is concerned or attending the arbitration to maintain confidentiality as to the subject matter, judgments, statements etc. 

    The second aspect is with regard to the material or the physical form. This entails that the documents involved, statements filed, reports produced may contain sensitive data about the company such as trade secrets and other policies. Therefore, the disclosure of such information may cause detriment to the sanctity of the business. 

    Keeping this in mind, many arbitration institutions have laid down certain codes of ethics that every arbitrator and the officials involved have to adhere to:

  • The International Commercial Arbitration Rules lay down, in its articles the duty of arbitrators and staff to maintain confidentiality. 
  • The American Arbitration Association imposes a duty on both, the arbitrators and administrators to maintain confidentiality, in the same manner as provided in the International Commercial Arbitration Rules of the ICC.
  • Further, even the London Court of International Arbitration regulate confidentiality in a similar manner.
  • The United Nations Commission on Trade Law (UNCITRAL) Arbitration Rules, do not regulate confidentiality but only recognize it with regard to the award, by consent of both parties. 
  • It is to be kept in mind, that all these institutions only regulate the duty to maintain confidentiality by the officials and arbitrators involved and not on the parties, which may defeat the end originally intended to be achieved by such regulation. 

    There is no international regulation that is imposed on all countries alike. Therefore, national laws need to take a step forward and address the issues associated with confidentiality and develop frameworks that can protect sensitive information. Countries like Australia, New Zealand etc. Have already developed a strong framework or rules and regulations to ensure its maintenance. However, a majority of countries are still far behind in implementing rules to maintain the confidentiality of international arbitral awards. 

    Exceptions to the Rule 

    Maintenance of confidentiality is not required in the following cases:

  • In view of public interest, when the matter at hand is so necessary for the welfare of the public that is acceding the parties' private interest;
  • Disclosure to authorities, when one or both of the parties are bound to disclose information related to arbitration to tax authorities, financial institutions or any judicial institution for recognition of the award;
  • In any case where the disclosure of information related to arbitration becomes important for upholding the rights of a third party; and 
  • For any other such reason that may be deemed necessary by either the parties, the public or authorities.
  • Therefore, unless expressly prohibited by any rules, regulations or legislation, or by agreement between the parties to arbitration, details of arbitration may be published or reported to the public in furtherance of a legitimate reason and justification of good faith.

    Privacy and Confidentiality 

    The concept of privacy is often associated with confidentiality. However, there is a slight difference between the two. It is an established principle in arbitration that an arbitration proceeding is to be conducted in private; however, privacy is concerned with the rights of the parties, whereas confidentiality is concerned with the duty of the arbitrators and everyone involved to maintain confidentiality with respect to the documents, transcripts, awards, etc. that are part of the arbitration proceedings. 

    Moreover, privacy is a core facet of arbitration, and as a rule, third parties cannot be admitted thereto unless except expressly agreed to between the parties. Therefore, parties to the arbitration are bound by the code of secrecy or privacy, but, there does not exist an expressly binding provision for maintenance of confidentiality. 

    However, privacy and confidentiality go hand in hand. The mandatory purpose of maintaining privacy would be defeated if the confidentiality was not maintained. 

    Legal Privilege and Confidentiality 

    Legal privilege as a concept is a widely accepted and strictly implemented concept in the legal profession. One might even plead legal privilege as a defense to non-compliance to the duty of maintaining confidentiality. The concepts of legal privilege and confidentiality tend to converge. Legal privilege is a right that is bestowed on a party that allows them to withhold certain information from being disclosed. Further, as per the duty of professional privilege, any conversation between a lawyer and his client is meant to be kept confidential. However, this can be overridden in certain circumstances. To put it simply, legal privilege is a right of the client, whereas, confidentiality is an ethical duty of the counsel or lawyer towards the client. 

    Rules in arbitration and litigation are quite different in terms of flexibility. In arbitration, confidentiality arises naturally or as a result of an agreement to maintain the same. The confidentiality in arbitration has no correlation with the relationship between the lawyer and client. 

    Transparency and Confidentiality 

     Confidentiality and transparency, as a general rule, cannot exist together. The whole purpose of resorting to arbitration is to maintain a sense of confidentiality, unlike a normal court of law. However, over the years, the need for transparency has increased manifold. The reason being, prevention of biased opinions of the arbitrator based on their individual professional practice and expert opinion. There arises a need for adopting a set of rules that make international arbitration more transparent in their practice. 

    Moreover, transparency can ensure trust, in terms of accountability of all those involved in the arbitration, right from the parties to the arbitrator himself. Further, it can also facilitate the accuracy of decision making and thorough investigation before the announcement of the award. Many times, the arbitrator happens to take a very casual approach, in terms of announcement of the award, knowing that details of the arbitration are not open to scrutiny by the public. 

    In furtherance of achieving the aim of transparency, the UNCITRAL Rules on Transparency we enacted in 2014. The main objective of the rules is to promote cooperation and transparency in investor-state arbitrations, and it is currently specific only to that particular sector of disputes. However, these rules are most definitely paving the way for transparency in all sectors of international arbitration. Moreover, the growth in transparency and acceptance thereof is bound to remodel the scope of confidentiality and privacy. 

    Therefore, transparency ensures that due process is strictly followed and that the objectives of fairness and equity are upheld. 

    Conclusion 

    Matters of confidentiality are widely accepted in national and domestic legislation and in international arbitration as a duty of the arbitrators to maintain secrecy. The same, however, cannot be said for the parties. 

    Moreover, the need for transparency in international arbitration proceedings calls for an amendment of the rules related to confidentiality. But as for now, it is recommended that any party engaging in commercial activities should contractually agree to terms of confidentiality related to arbitration. 

    The prevalence of these contractual terms will bind the parties to recognize this duty and therefore, protect the parties from unnecessary publicity that may cause detriment to the reputation of either party. 

    ]]>
    Wed, 09 Dec 2020 14:38:00 GMT
    <![CDATA[Amendments in Insolvency Law in UAE]]> Amendments in Insolvency Law in UAE

    The laws concerning insolvencies of the United Arab Emirates-domiciled companies are fairly recent (the "Bankruptcy Law").

    The Bankruptcy Law has been an important step forward and is influenced by features of a number of insolvency laws in other jurisdictions and international insolvency law trends. The Bankruptcy Law streamlines and modernizes the UAE insolvency law and, places a new emphasis on the early restructuring of indebtedness for distressed companies.

    However, even more recently, the UAE has pioneered a new insolvency regime for individuals or natural persons with the issuance of the Insolvency Law Number 19 of 2019 (the "New Insolvency Law"), which is effective as of 30 November 2019.

    The New Insolvency Law intends to provide sufficient protections to natural or civil persons facing financial distress and who are unable to settle their debts, unlike the Bankruptcy Law which regulates commercial companies and individuals considered as traders under the Commercial Transactions Code. The New Insolvency Law differs from the Bankruptcy Law, which was promulgated by Decree-Law Number 9 of 2016. The New Insolvency Law for Natural Persons is applicable to natural persons, who are not engaged in an economic activity and are not traders. The primary purpose of both the laws is to protect the common interests of the creditor and the debtor in a fair manner. The risk is divided between them to alleviate the debtor from the cycle of financial difficulties and enable him to pay off his accumulated debt.

    Voluntary Settlement

    The New Insolvency Law paves the way for the voluntary settlement process, which is equivalent to "Preventive Composition" under the Bankruptcy Law. A request for voluntary settlement shall only be submitted by the debtor, and is only possible as long as the debtor is not yet "insolvent". A debtor is considered as not insolvent when the debtor has not stopped paying his debts as they fall due for a period that exceeds 50 consecutive business days.

    The voluntary settlement process protects the debtor from insolvency by formulating a settlement plan and enabling the debtor to continue to have control over managing his estate while carrying out his activities during the settlement process. Upon requesting voluntary settlement, the debtor's debts neither become due and payable nor are payments for debts accelerated.

    On the other hand, the voluntary settlement process permits the creditors to be actively involved in approving the settlement plan. The creditors are prohibited from individually filing for enforcement against the assets of the debtor and cannot request for the insolvency and liquidation of the debtor. However, the secured creditors can request from the court to enforce their security for payment of any due and payable debts without having to take part in the voluntary settlement process.

    Insolvency and Liquidation

    The New Insolvency Law provides streamlined insolvency procedures, which can be initiated by the court, the insolvent debtor or the creditors with claims of AED 200,000 or more. All debts, whether secured or not, are due and payable, on order issued by the court to commence the insolvency proceedings. The debtor is then prohibited from:

  • Administrating or carrying a transaction over any of his assets; 
  • Securing any new debts; 
  • Providing any guarantees or securities; and
  • Obtaining any new financing for three years from the issuance of the insolvency judgment.
  • The court may order, based on its discretion or on the request of the debtor, the suspension of all criminal proceedings concerning any bounced cheques issued by the debtor and shall order the suspension of all enforcement and legal claims filed against the debtor.

    The proceeds of the liquidation of assets are distributed to creditors as per their ranking, which means: in the order of secured creditors, preferred creditors and ordinary unsecured creditors.

    Both the secured as well as preferred creditors with due and payable debts can obtain the court's approval for independently enforcing their security against the assets of the debtor. The secured creditors will otherwise be paid out of the proceeds of the liquidation of the assets subject to their security. Any debts of secured creditors exceeding the liquidation proceeds of the secured assets shall be treated as unsecured debt.

    The debtor is required to attach the following documents to apply for settlement of financial obligations:

  • Memorandum briefly describing their financial position and any data concerning their sources of income, both inside and outside the country. Their professional, vocational or professional status, the liquidity projections of the debtor and the sources of such liquidity within 12 months from the submission of the application.
  • The creditors' names and addresses, whose debts have been defaulted or are expected to have defaulted, the debt amount, the dates of maturity and the guarantees provided to the creditors, if any.
  • Statement providing the debtor's movable and immovable assets inside and outside the country and the approximate value of each as per the date of the application.
  • Statement of any legal and judicial proceedings or actions taken against the debtor.
  • Statement by the debtor of the current or anticipated financial difficulties, which made him unable to pay the debts, at the time of application, or in the future.
  • Necessary funds to support the debtor, their family and any dependents.
  • Debtor's proposals for the settlement of his financial obligations.
  • Debtor shall nominate an expert to undertake the proceedings as per the provisions of the New Insolvency Law.
  • Statement disclosing financial transfers outside the country that took place during the preceding 12 months.
  • All other documents supporting the application, or as requested by the court.
  • If the debtor is unable to provide the required information, the reasons for not furnishing the required documents or information shall be stated in the application. 

    The court may decide not to complete the procedures for the settlement of financial obligations and may refuse a request for settlement of financial obligations if:

  • Court determines that the debtor has committed, or refrained from, taking action to conceal or damage any part of their property.
  • The debtor provides false statements regarding their debts, rights or funds.
  • The debtor has not paid any of his debts on maturity for more than 40 consecutive working days as a result of his inability to fulfil the debts.
  • Penalties

    The creditor who has committed any of the following acts is liable to imprisonment and a fine of minimum AED 10,000 and maximum AED 100,000:

  • If they have made a claim concerning a fake or sham debt against the debtor.
  • If they increased the debts to the debtor illegally.
  • If they voted in any meetings on decisions concerning the debtor's settlement of financial obligations knowing that it is legally prohibited to do so.
  • If the debtor knowingly concluded an agreement, following the court's decision to commence insolvency proceedings and the liquidation of funds, which gives him an advantage to the detriment of other creditors.
  • Each insolvency debtor shall be punished with imprisonment for a maximum period of two years and/or a fine of minimum AED 20,000 and maximum AED 60,000 when the insolvency debtor causes a loss to creditors by:

  • Spending huge sums of money in a speculative business that was not required for their usual business, or in purchasing services, goods or materials for personal or domestic use which are not in commensuration with their financial situation, or they engaged in gambling, knowing that their creditors may be adversely affected.
  • Paying the debts of one creditor, causing damage to the remaining creditors within a period of six months before submitting their request to settle their obligations or declare insolvency.
  • Disposing of their funds in bad faith, at a lesser price than the market price to damage the creditors.
  • Resorting to harmful means to damage the creditors to delay the declaration of insolvency and liquidating their funds.
  • Disbursing money, knowing that it violates the terms of the plan.
  • Conclusion

    The issuance of the New Insolvency Law is a positive development, ultimately aiming to boost confidence in retail lending and promoting a more secure lending environment with sufficient protections to debtors.

    The New Insolvency Law addresses a debtor's inability to pay their debts due to bankruptcy and debt default, known as the 'insolvency of the natural person.

    The promulgation of the insolvency law will govern the insolvency of a natural person and increase the transparency on civil debt repayment transactions and the general security of financial transactions. This shall further enhance the financial stability in the UAE by accelerating the growth and making it easier for individuals to obtain loans, due to the clear rules that are easily applicable to collect any bad debts and rehabilitate the debtor financially. The Law shall also enhance creditor banks' confidence in retail lending and encourage individuals to engage in calculated borrowing.

     

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    Wed, 09 Dec 2020 14:07:00 GMT
    <![CDATA[Income Tax Act– Singapore]]> Amendment of Income Tax Act– Singapore

    What is the Tax System in Singapore?

    The tax revenue collection in Singapore includes corporate tax, personal tax, Goods & Services tax, and property tax. The tax system in Singapore is one which many countries thrive on echoing as it is known for being simple, efficient, and attractive due to its clearly laid down tax provisions. Despite charging low tax rates to businesses and individuals alike, Singapore consistently generates budget surpluses and develops an excellent infrastructure.

    Singapore is an important finance, commerce and trading hub of Asia. Singapore attracts foreign investments to its shores. It implements socially progressive policies as Singapore believes in rewarding its residents.

    Inland Revenue Authority of Singapore is the main government agency that levies and collects the taxes and also represents Singapore in international tax treaty negotiations and aids the Government in drafting tax legislations.

    What makes Singapore more beneficial compared to other countries in field of taxation?

  • The single-tier taxation system;
  • No tax on overseas income;
  • No capital gains tax;
  • No dividend income tax;
  • No tax on assets acquired in inheritance or as gifts; and
  • The extensive network of bilateral treaties on Avoidance of Double Taxation.
  • The Singapore Ministry of Finance (the "MoF") proposed 38 amendments to the Income Tax Act (the "IT Act"). The main objectives of the amendments are: 

  • effecting tax measures announced in Budgets 2020; 
  • enhancing the Income Tax Comptroller's powers for safeguarding public money; 
  • clarifying the tax treatment of measures announced for COVID-19 support to businesses and households; and 
  • improving tax administration and the clarity of existing legislation. 
  • On 20 July 2020, the MoF launched a public consultation, which ran until 7 August 2020, on the draft Income Tax (Amendment) Bill 2020 (the "Draft Bill"). 

    The Draft Bill incorporates 38 proposed legislative amendments to the IT Act which can be categorized under:

    I. Unity Budget 

    This includes twenty proposed amendments to cater for measures announced by the Deputy Prime Minister and Minister of Finance, in the Unity Budget Statement on 18 February 2020. 

  • Granting Corporate Income Tax Rebate. 
  • The main aim here is to help companies with cash flow, with a Corporate Income Tax Rebate of 25 percent of the tax payable, capped at USD 15,000 per company, to be granted for Year of Assessment 2020.

  • Increasing the number of Year of Assessments
  • The qualifying deductions, including both the current year unabsorbed capital allowance and the trade losses for the Year of Assessment, may be carried back. The qualifying deductions for Year of Assessment 2020 may be carried back up to 3, instead of 1, immediate preceding Year of Assessment, capped at USD 100,000 of qualifying deductions. The businesses are eligible to get a refund of maximum USD17,000 corporate tax paid during Year of Assessment 2017 to Year of Assessment 2019.  

  • Extending and enhancing the Double Tax Deduction for Internationalization
  • Singapore aims to continue encouraging internationalization by covering more qualifying expenses and extending the Double Tax Deduction Scheme until 31 December 2025.  

  • Extending the Mergers & Acquisitions 
  • Singapore aims to continue encouraging companies to consider Mergers & Acquisitions for growth and internationalization, by extending to cover qualifying acquisitions made on or prior to 31 December 2025.

    II. Economy-wide and sector-specific measures in response to the COVID-19 in the Resilience, Solidarity, and Fortitude Budgets

    The five proposed amendments provide for the following: 

  • Exempting from income tax the prescribed payouts received by individuals in 2020 for Year Assessment 2021, including the Self-Employed Person Income Relief, Workfare Special Payment, and COVID-19 Support Grant.
  • Exempting from income tax the prescribed payouts received by businesses in 2020 for Year Assessment 2021 and/or Year Assessment 2022, depending on the financial year-end of the businesses, including the Jobs Support Scheme payouts, COVID-19 Quarantine Order Allowance, Leave-of-Absence and Stay-Home Notice payouts to affected Self-Employed Persons and employers.
  • Exempting from income tax for Year Assessment 2021 on benefits-in-kind and cash allowances received by qualifying employees in the year 2020 including for accommodation, food, transport and other necessities, subject to conditions and caps.
  • Lifting the tax deduction caps for doubtful debts and debt securities for banks and qualifying finance companies for Year Assessments 2021 and 2022.
  • Amending the secrecy provision to permit access to information vital for the Inland Revenue Authority to administer public schemes, without requiring the express consent of the person to whom the information relates. The Comptroller is allowed to provide the information necessary for administering any public scheme to the Chief Executive Officer or the authorized officers.
  • III. Other proposed amendments

  • There are six proposed amendments concerning the existing tax policies and administration.
  • Introducing a surcharge for tax avoidance arrangements
  • The tax adjustments currently made under the anti-avoidance rules only restore the taxpayers to their initial position, as if no arrangement was entered into. As a step to further deter tax avoidance arrangements, the amendment introduces a surcharge equal to 50 percent of the additional income tax imposed by the Comptroller. Singapore has also proposed to introduce a surcharge equal to 50 percent of the amount of additional stamp duties imposed by the Commissioner in the Stamp Duties Act along with an amendment in the draft Goods and Services Tax (Amendment) Bill 2020. The above is a result of the adjustments made to counteract the tax avoidance arrangement.

  • Mandating the electronic tax refunds
  • The refunds of Corporate Income Tax to the companies will be done electronically. This is complementary to the Government's efforts to harness digital technologies in transforming public service. Mandatory electronic refunds of Goods and Services Tax to taxpayers will be proposed in the Goods and Services Tax (Amendment) Bill 2020 as well.

  • The remaining seven proposed amendments are technical amendments.
  • Tax Deductions

    Any expenses incurred directly or as reimbursement on using private hire cars or private cars are not eligible to be deductible from tax, irrespective of the private cars being used for personal or business purposes. For private cars, capital allowances are also not permitted.

    What are the exceptions to this?

    The private hire car expenses and hiring charges are tax-deductible to a person provided the person has a business of hiring out cars, and the private hire car is used by the person principally for hiring. The capital allowances can also be claimed on a private hire car provided it is acquired by a person who has a business of hiring out cars and is used by the person principally for hiring.

    The Draft Bill permitted the deduction of car-related expenses and capital allowances, on cars used in the business of providing chauffeur services, to any person from any business of providing chauffeur services using motor cars, provided the specified conditions are complied with. However, the chauffeur services may no longer be provided as incidental to the main business of renting out cars, so the proposed change shall be effective from Year Assessment 2021.

    Conclusion

    Singapore's tax regime balances the incentives and promotes free trade and commerce activity while ensuring that sufficient revenue flows to meet its social and economic objectives. The country has always been known for the mutually beneficial relationship it shares with its residents.

    It is this why Singapore has one of the highest rates in the world for tax compliance from domiciled companies as well as its residents.

     

    ]]>
    Wed, 09 Dec 2020 13:42:00 GMT
    <![CDATA[Dubai Financial Support Fund]]> Amendment of Dubai Financial Support Fund

    Law Number 10 of 2019 (the "New Law"), partially amended Law Number 24 of 2009 on the establishment of the Dubai Financial Support Fund, was issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates.

    The New Law replaces the provisions of Articles 2, 9, 11, 12, 15 and 17 of Law Number 24 of 2009 with other new provisions concerning the functions and powers of the Director-General of the Dubai Department of Finance (DoF), determining the financial resources of the Dubai Financial Support Fund (DFSF), and the responsibility the Dubai Government holds towards others.

    As per the amended Article 9, the Director-General of the DoF shall supervise the administrative, technical and financial affairs of the Fund, issuing decisions and procedures to achieve its objectives. It shall have several functions and powers, for instance:

  • To approve the general policy of the Dubai Fund;
  • To submit the general policy of the Fund to the Supreme Committee for Financial Policy for approval in Dubai;
  • To obtain loans and financing necessary to achieve the objectives of the Fund.
  • The Director-General of the DoF has authority under the New Law to establish institutions, companies and commercial projects, offices and branches, to purchase and sell assets and shares, as per the legislation in force. It also has the authority to propose:

  • criteria and controls for the provision of financial support from the Fund; and
  • strategic projects and entitlements to support the obtaining of approval of financial, administrative and technical regulations concerning contracting procedures. These include lending contracts entered into by the Fund with eligible financial support entities, forming permanent and ad hoc committees and task forces, and approving the organizational structure of the Fund by submitting it to the Executive Board for approval, along with approving the annual budget of the Fund project.
  • The Director-General of the DoF shall approve the annual report on the performance, activities and investments of the Fund, its institutions and affiliates. This report shall be submitted to the Higher Committee for approval. The Director-General is entitled, by law, to appoint external auditors and determine their fees, to review the reports and observations to be submitted. At the end of each fiscal year, any other functions or powers assigned to it by the Higher Committee shall be relevant and correspond to the achievement of the Fund's objectives, enabling it to carry out the functions and powers entrusted to it.

    Article 11 of the New Law stipulates that the DFSF shall appoint an Executive Director by a resolution issued by the Chairman of the Executive Council upon the recommendation of the DoF's Director-General. The Executive Director of the Fund shall have several functions and powers, like:

  • To Organize of work concerning the administrative, financial and technical aspects of the Fund;
  • To prepare the annual budget of the Fund, and to submit it to the Director-General for approval;
  • To represent the Fund before others;
  • To conclude contracts and agreements necessary to achieve its objectives; and
  • To supervise the work of the Fund.
  • Articles 7, 8 and 16 of Law Number 24 of 2009 on the establishment of the DFSF shall be repealed and shall be enacted by Law Number 10 of 2019 from the date of its issuance. The New Law further annuls any other legislation that contradict or challenge its articles.

     

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    Mon, 07 Dec 2020 12:18:00 GMT
    <![CDATA[Termination of Sale Purchase Agreement]]> Termination of Sale Purchase Agreement in the UAE

    Introduction 

    A Sale and Purchase Agreement (SPA) is a widely used contract/agreement in business transactions. It is predominantly used in the land department. It is beneficial, and a vital necessity that people looking to settle or finalize a deal of either property or any other movable or immovable asset have a well-drafted SPA. Despite its important nature, parties are unsuccessful in studying the document and understand their legal status with respect to the laws of the UAE. This article aims to throw light on one of the aspects of the SPA - the termination of the SPA in accordance with the property laws in the UAE.

    Termination - Definition

    A valid and enforceable contract must be executed. Once it is executed the contractual relationship automatically terminates. However, the dissolution of a contract may occur prior to its execution or before it can be fulfilled by the parties. Termination of a contract/agreement has the effect of discharging the parties from their unperformed obligation under the said contract/agreement.

    Types of Termination

    The UAE Civil Transactions Law lays down provisions relating to contracts, the effect of such contracts of parties, the dissolution of contracts and the effects of such amongst others. 

    Article 267 of the Law states that any agreement may be terminated only in the ways mentioned in the provision. There are primarily four types of termination under the UAE Law, and they are:

  • Termination by mutual agreement after the conclusion of a contract
  • Termination by judicial decision 
  • Termination by prior agreement
  • Termination by law
  • Termination by mutual agreement after the conclusion of the contract
  • The UAE Civil Transactions Law acknowledges the right of parties to cancel the contract/agreement if they have each other's consent once they have entered into the contract in Article 268. Parties can revoke any agreement made, by mutual consent after the contract has been concluded and they will be put back in their original position that they were in before such contract was made. This mode of termination of contracts/agreements is valid in the UAE and is called iqala. Iqala is seen as the termination of an agreement as well as termination between the parties and a new agreement with respect to the third party. These two views have been accepted by the UAE Laws. Referring to Articles 268, 269 and 270 of the UAE Civil Transactions Law, the Dubai Court of Cassation inferred that these articles cumulatively substantiate that cancellation of a contract by mutual consent of the parties is also an agreement per se as the various obligations arising from the existing contract between the parties will expire and this will lead to the dissolution of the contract in addition to the cessation of the obligations. 

  • Termination by judicial decision
  • In a contract/agreement that is binding on both parties, if one party refuses to carry out his obligations as stated in the contract then, the other party can institute a proceeding against such party to either perform the contract or cancel it as stated in Article 272 of the UAE Civil Transactions Law. Such proceedings must be instituted after giving notice to the defaulting party. The judge may pass an order requiring the defaulting party to perform the contract or may choose to defer the performance for a specified period of time, or an order to cancel the contract and pay the necessary damages may be ordered.

    For the court to pass an order to terminate an agreement, a few conditions have to be met.

  • Binding contracts - the contract entered into by the parties must be a binding contract. A non-binding contract is defined in Article 218 and is one that has a condition in place, stating that the parties may cancel such contract or agreement without mutual consent or without an order of the court. Termination of an agreement can only occur in binding agreements. 
  • One party's failure to fulfill any of its contractual obligations - if one of the parties fails to fulfil his obligation then the other party can seek execution of that obligation from the court or request the court to terminate the agreement. 
  • Party requesting termination must perform or be prepared to carry out his obligations - If such party is not ready to perform or fulfill his obligations, then he does not have the right to claim termination of the agreement. If a part is seeking termination, he must fulfill his own obligations. For instance, if a buyer wishes to terminate an agreement, then it is imperative that he establish that he has paid the price of the item that he wishes to purchase or is willing and ready to pay the price. If a seller wishes to terminate an agreement, then he must prove that he has fulfilled his obligations or is willing to fulfill them. 
  • Party requesting termination is able to return to the situation that they were originally in before the contract post-termination - the party who insists on termination of the contract must be able to restore the situation to what it was prior to contract. If he is unable to do so, then the court may order the obligor to perform the agreement or order the payment of compensation to the other party. Inability to restore the situation to what it previously eliminated the right to termination of the contract.
  • Sending notice to the other party - it is an essential requirement for the party requesting termination to send a notice to the other party mentioning the party's refusal to fulfill his obligations. 
  • Defaulting party/Obligor must not take any action to fulfil his obligations - for the court to pass an order to terminate the contract, it must first determine if the defaulting party/obligor has not taken any actions to fulfill his obligations. However, if he has taken steps to fulfill his obligations, then the court can exercise discretion and order payment of compensation for delay in performance. 
  • Termination by prior agreement
  • According to Article 271 of the UAE Civil Transactions Law, parties can agree and include a clause in their agreement stating that in case of non-performance by either one of the parties the agreement shall be considered or deemed to be cancelled, and judicial intervention is not required. The Court of Cassation has defined this mode of termination as 'explicit cancellation condition'. When such a condition has been made a part of the agreement, then termination of the contract is mandatory. Enough emphasis has also been placed on the point that the explicit cancellation condition does not need to follow a specific format or require certain specific words.

    A prior agreement to terminate in the contract if the relevant circumstances arise deprives the obligor and the judge of the option to choose between the performance of the contract and termination of the contract. However, this deprivation does not in any way authorize the obligor to proceed with termination without sending a notice to the other party. The UAE Courts in several decisions have proclaimed that the judge takes away his discretion in the matter of cancellation, regarding an agreement of termination of a contract without warning or notice.

  • Termination by law
  • If the performance of the very subject matter of the contract becomes impossible and such impossibility is not caused by any action of the party, then the contractual obligations shall cease to exist, and the contract shall be automatically cancelled in accordance to Article 273 of the UAE Civil Transactions Law. If for example a sale purchase agreement was entered into by two parties with respect to a particular property. Unfortunately, due to a natural calamity, the property gets destroyed. The performance of the contract then becomes impossible owing to the destruction of the subject matter and hence will be deemed to be terminated by law. The seller must then return the consideration if received from the buyer. Therefore, it can be said that the following conditions must be satisfied for a contract to be terminated by law:

  • Impossibility of performance of the subject matter of the agreement.
  • Impossibility must happen after the conclusion of the contract.
  • Impossibility caused by a third party and for reasons not attributable to the party under obligation
  • Impossibility should be regarding the entirety of the contract and not just a part of it. 
  • With respect to the last condition, if there is a partial impossibility, then only that part of the contract will be extinguished.

    Termination of SPA in the UAE

    The most common scenario that plays out in the real estate market is when Developers fail to fulfill their contractual obligations, and hence the purchasers seek to terminate the SPA. A purchaser of a real estate property in the UAE can, according to the provisions of the UAE Civil Transactions Law, set out to terminate the SPA and seek a complete refund of the consideration paid towards the purchase of properties. 

    There is seen to be general incompetence on the part of Developers when it comes to fulfilling their obligations. Numerous cases are put forth before the court wherein the Developers fail to deliver the properties on the contractually agreed date leading to a dispute. It is, however, necessary that the buyer has fully complied with his contractual obligations and must have adequate evidence to support such compliance. 

    It is a general practice for SPA's to include an Anticipated Completion Date (ACD) by which one party commits to handing over the possession of the property to the other party. There is also an allowance granted to the sellers to extend the ACD by a period of six to twelve months. An application for termination of SPA cannot be filed unless such period has expired else the application will be rejected on the grounds that the claim was premature. 

    Most SPAs allow the buyer to terminate the SPA when the seller fails to deliver the property on the contractually agreed date. However, a few SPAs do not extend any remedy whatsoever or provide only interest as a contract remedy. SPAs that had been abandoned with an unspecified completion date were allowed to be terminated by the Purchasers in judicial decisions. 

    Unforeseen occurrences or Force Majeure is the only remedy available to the seller in a situation where he has failed to comply with his contractual obligations. The French Civil Code, 1804 propounded a civil law doctrine that has been religiously followed by the UAE legal mandate. The circumstances leading to the unforeseen occurrence should have been one that was not expected by the breaching party at the time of executing the SPA. Financial difficulties, even at the time of recessions, are not force majeure. The breach of a parallel contract by a third party also does not fall within the ambit of force majeure and hence is not available as a remedy for the seller. 

    A unique case was decided upon the Dubai Court of Cassation based on a claim made by an investor for the return of monies paid towards the purchase of land after the termination of the SPA. Two parties entered into an agreement for the sale of a particular property. The terms of the agreement stated that the seller could terminate the agreement immediately at any time and without any notice if the cheques given by the buyer were dishonored. In such a case, the title of the property would automatically revert to the seller. The seller was under obligation to return the funds transferred by the investor along with the advance payment. However, the seller had the right to retain 10 percent of the amount already paid by the investor.

    In this case, the buyer breached the payment terms of the agreement as he was unable to pay the installments. The seller consequently withdrew the title and terminated the agreement. The buyer then requested the return of the balance amount transferred by him after deducting the 10 percent that the seller had a right to retain, but the seller refused to do so. The buyer initiated a claim before the Dubai Courts against the seller demanding repayment of the money. The Dubai Court of appeal favored the investor, and an appeal was made to the Dubai Court of Cassation by the seller. The Court of Cassation returned the seller's land to him and awarded him damages as well owing to the loss of opportunity to exploit the property and the loss of profit that ensued. 

    This judgement throws light on the type of contracts where one or both parties have the choice to pull out from the agreement during a given period. An agreement that gives the parties the right to exercise the option of conditionality is essentially a non-binding contract for the party who has the right to halt the contract, but it has a binding effect on the party who does not have the option of conditionality. 

    Law Number 19 of 2017 issued in the Emirate of Dubai grants the right to terminate an off-plan sale without the requirement of a court order or an arbitral award to the Dubai Land Department (DLD) as well as the developer. The developer should follow the procedure laid out by the DLD before terminating the off-plan sale for the default of the buyer. 

    The procedure is enumerated as follows:

  • The default must be notified to the Dubai Economic Department (DED).
  • Based on such notice, the DED will serve an official notice to the defaulting party.
  • The DLD will then issue a report of registration in case there is non-compliance from the buyer.
  • The DED, after issuing a notice to the defaulting buyer grants them a 30-day grace period to try and rectify the default. The DLD can issue its report only if the defaulting buyer fails to rectify the default within this 30-day period. After the publication of the report, the DLD will deregister the Sale and Purchase Agreement (SPA) that exists between the buyer and the seller. The developer can then, without any court order or award, terminate the SPA after issuance of the DLD report.
  • The completion status of the project greatly influences the DLD report. Depending on the percentage of completion, the share that the developer gets to retain from the purchase money varies. 
  • If the construction has not been started for reasons not attributable to the developer then he can retain a maximum of 30 percent of the amount received towards purchase money and must return the balance to the buyer within 60 days from the termination of the SPA.
  • If the completion status of the construction is below 60 percent, then 25 percent of the purchase price can be retained by the developer, and he must return the balance amount within one year from the termination of the SPA or within sixty days after the property has been successfully sold, whichever occurs earlier.
  • If the completion status is between 60-80 percent, the developer has the right to retain 40 percent of the purchase price and return the remaining amount within one year from the termination of the SPA.
  • If the completion status is beyond 80 percent, then the developer has one of three choices. He can request the buyer to execute the SPA or have the DLD sell the property in a public auction where the proceeds would be set off against the unpaid purchase price to the developer or in the worst-case scenario the developer may terminate the SPA and retain 40 percent of the purchase. The developer is by law not permitted to retain more than 40 percent of the purchase price, and he must return the balance amount to the buyer. 
  • Conclusion

    The Sale and Purchase Agreement can be said to be the essential document in a business transaction involving properties and hence must be perfectly and accurately drafted so as to safeguard the rights of both parties. A purchaser must do a thorough check on the developer and whether all the necessary items are in place signing the agreement. It is important that the purchaser requests a copy of the title deed to ensure that there is no dispute to the title and the owner is clearly the rightful owner of such property. He must also look into the DLD records to check if the property has been duly registered. Any Purchaser who has to the best of his abilities complied with the SPA but has not been put in possession of the property within the date of completion as agreed in the SPA can seek termination of the SPA before any competent authority and request for a refund of the amounts that were paid towards the purchase price.

     

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    Sun, 06 Dec 2020 15:43:00 GMT
    <![CDATA[Artificial Intelligence Criminal Justice System]]> Artificial Intelligence & The Criminal Justice System

    Introduction 

    As Stephen Hawking once said, "Artificial Intelligence is either the best or the worst thing to happen to humanity." The fact that the system is constantly evolving and learning from our routine behavior allows it to adapt and become a sophisticated technology that has the potential to replace several mundane tasks that are being done by humans today. For instance, many tech-savvy organizations are using Artificial Intelligence (AI) to carry out repetitive administrative tasks such as HR, IT, Marketing etc. while this move is fruitful for the company in terms of reduced human labor and increased efficiency, it is detrimental to humans with the relevant skills being replaced by such systems. The point here being, there are various pros and cons of using artificial intelligence in every field. 

    From Terminator to Robocop, the idea of crime-fighting robots has been embedded in our minds, and its practical application would just be so profound. With the advent of AI in our daily lives, what seemed like a futuristic thought is now coming to life. The criminal justice system is increasingly turning to Artificial intelligence to elevate their law enforcement agencies and officers. The most popular use of artificial intelligence is in identifying traffic and safety violations and enforcing rules and regulations thereof; it also helps in identifying repeat offenders in that respect. Apart from using AI for identifying traffic violations, this system is also used for investigative purposes, which entails, surveillance, facial recognition etc. 

    One such case of success of AI in law enforcement was seen in China, wherein, a suspect was caught by police officials at a pop concert containing around 60,000 people. His attempts to blend in with the crowd failed and was taken by surprise as he was identified at the ticket counter by a facial recognition system. 

    The primary goal of law enforcement may be realized by intelligent systems that assure safety and security, further working towards solving and deterring crime. With the rise of artificial intelligence, police officers all over the world are relying on this technology to facilitate police work; however, artificial intelligence though beneficial, must be kept in check considering the risks that come along with it. 

    This article focuses on both the positive and the negative impact that AI may have on the criminal justice system. 

    Advantages of Use 

    The ability of a machine to respond to its external environment without human intervention is a feat in itself. This facet of human intelligence that is inculcated by the artificial intelligence system will serve highly advantageous and allow AI to be integrated permanently in our criminal justice system.

    Minimizes threat to life

    Despite AI being in its primitive stages of use in many countries in the world, it does have the potential of becoming an integral part of maintaining public safety. In case of high profile and dangerous cases, wherein the suspect is armed with a weapon, there is an impending threat to human life, however, using AI in such cases can ensure that this threat is minimized, if not completely eradicated. 

    Video and imaging analysis

    It is mammalian nature to feel tired and fatigued. This nature, therefore, sets us apart from artificial intelligence, in the sense that, while examining large amounts of video or image data there is a high possibility of error that can be prevented by the use of machines. Further, the adaptive feature of AI allows it to distinguish between facial features and behavior once an algorithm with that respect is fed into the system. For example, this AI system would be specifically useful in identifying a repeat offender in case of theft and robbery. 

    Not only does AI reduce and eliminate errors, but it also improves data collection in terms of speed, quality and specificity.  

    Further, along with analyzing videos and images, AI can also analyze sounds. For instance, if a gunshot is fired, depending on the quality of the sound, AI may be able to specifically point out the exact weapon used and estimate the caliber of the bullet fired. 

    This basically then allows the police officials to respond to the scene of the crime faster. 

    Forensic Analysis 

    Another aspect of law enforcement is the one associated with the collection and analysis of evidence. In many cases of violent crimes, especially before the development of advanced DNA collection and analysis techniques, it was very difficult to get a perfect match on the evidence collected by reason of it being too minuscule, tarnished or unviable. The challenges that such collection of evidence poses can be addressed by AI, in the sense that, sensitivity to data collection and processing of large amounts of complex data can be expedited. Along with collection and analysis of evidence, AI can also allow the creation of advanced systems for conducting an autopsy and determine the cause of death with ease. 

    Predictive Analysis

    In the law enforcement profession, police officers, investigators etc. spend years and years gaining expertise, only then are they able to anticipate the commission of a crime. However, AI in this department would facilitate in forecasting a crime based on the behavior of an individual within the environment under surveillance. Its adaptive nature can also help in predicting whether or not a criminal would revert to his criminal past or be reformed after serving a sentence. This predictive analysis system can help curb terrorist activities, transportation of illegal goods and human trafficking activities, among many others. 

    Accuracy of Judicial Decisions 

    In the case of pronouncement of judicial decisions, the predictive nature of AI may come in handy. The fact that AI can assess the risks involved with the alleged offender with respect to criminal recidivism and appearance in court may allow judges to impose stricter conditions or even relax release conditions. This system would work by analyzing, the number of offenses, the number of times the offender has committed the same offense and the number of times that he has failed to appear in court. 

    Associated Risks of Use 

    Artificial intelligence comes with its fair share of risks; it is more or less a double-edged sword. On the one hand, it facilitates ease of access to the law enforcement department; on the other hand, it allows criminals to fashion new ways of committing crimes. 

    Criminals are no strangers to technology, from the exploitation of cryptocurrencies to hacking into GPS and mobile systems. With growth and development in artificial intelligence, threats to internal and external security also increases. Therefore, law enforcement must be well- equipped in order to curb the challenges that such technology poses.

    The United Nations Interregional Crime and Justice Research Institute identified three basic dangers associated with artificial intelligence; physical attacks, digital attacks and political attacks. 

    Physical attacks are those that are associated with data poisoning, smuggling contraband through the use of drones and using armed drones that use face recognition to physically attack the target. 

    Digital attacks can range from data phishing and exploiting security systems and vulnerable online data. 

    Political Attacks are associated with infiltrating media and news portals to spread fake news which would potentially cause conflict. Moreover, political attacks on political figures by way of manipulating audio and video material that can cause detriment to the reputation of the political figure before the public.  

    A major threat is also associated with the use of arms and weapons. The fact that AI can be used to create smart weapons of mass destruction for criminal and terrorist activities is a big threat to the safety and security at a global level. An instance of the use of AI for terrorist activities was seen in the case of a planned attack on the Japanese Prime Minister, wherein, a drone was sent by the Islamic State of Iraq and Levant (ISIL), set to land on the roof of his office with an aerial unmanned explosive device.

    Further, it is also important to note that AI is merely a machine that has been fed an algorithm; therefore, it is objective in nature. To clearly analyze the possibility of an offender reverting to crime, a subjective view needs to be taken; hence, with respect to predictive analysis in case of a court hearing or otherwise, it can lead to discrimination in the criminal justice system. 

    Artificial Intelligence in the UAE

    The UAE has, since time immemorial, been constantly adapting and using the latest technologies in all aspects of life, to the point where it is now considered to be a technological hub. To further this reputation, the UAE has come up with a roadmap to integrate artificial intelligence into the economic and government system to promote growth and opportunities. 

    A national program for artificial intelligence has been set up by the UAE to achieve this end. Its vision to become a world leader through the national use of AI is projected to be realized by the year 2031. The National AI Strategy 2031, aims to achieve an AI friendly ecosystem in its governance at all levels, education, financial services and economic sector. 

    In 2018, the Dubai Police launched a surveillance system called Oyoon that translates to eyes in Arabic. This surveillance system aims to monitor individuals or vehicles through a wide network of cameras, and this surveillance system basically aims to predict crime by raising any red flags identified in the environment with reference to the database that has already been fed to the system. This system allowed the arrest of around 300 suspects in the year 2018. 

    As per recent reports, the Dubai Police is working with IBM and Google to develop AI technology under its Smart Dubai 2021 initiative that would create a robot police force that would take the edge off the human police force in terms of patrolling residential areas and other public spaces. This real-life Robo Cop is said to be equipped with live imaging, facial recognition and a system for reporting crime. 

    The development of AI is still at the primitive stage; therefore, no legislations have been enacted to regulate that sector. However, the Ministry of Artificial Intelligence is said to develop legislations and frameworks that will regulate technologies in government and federal institutions. 

    Artificial Intelligence in the MENA Region 

    Apart from its growth in the UAE, many other countries in the Middle East and North Africa region are adopting artificial intelligence in their governance and justice system. The use of AI is quite recent; therefore, not many developments have been made in that respect. But, these countries have started to take steps to integrate AI and look towards the creation of smart cities. 

    Bahrain 

    As a step towards achieving their 2030 Vision, the Information and Government Authority of Bahrain organized a two-day event in 2018 for establishing and recognizing the importance of AI in developing smart cities as per the country's planning document. 

    Egypt

    The Egyptian Authority of Finance Control has laid down provisions to control financial transactions using AI. Further, the Egyptian National Telecom Authority aims to explore interconnectivity through the use of AI. 

    Saudi Arabia 

    KSA has also taken steps to include AI in its strategic planning document as part of their Vision of 2030. It has already started using AI for the purpose of Investment. It also attended the Conference on Artificial Intelligence and Robotics in 2017, though it has not seen much light in the law enforcement sector, Saudi is slowly inching towards its usage by beginning work on smart cities industrial zones.  

    Many more countries in the region as well as all over the world are adopting AI as a part of creating a smarter and futuristic nation in different sectors, therefore, enhancing and paving the way for a cohesive criminal justice ecosystem. 

    Conclusion

    Although the use of artificial intelligence is in its primitive stages, its future seems bright, provided it is used in an ethical manner. Further, the law enforcement community might not be well versed with technology; therefore, the implementation of the AI system needs to be gradual. Once law enforcement officials are able to gradually familiarize themselves with the technology, its use will become efficient and effective. 

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    Sun, 06 Dec 2020 15:18:00 GMT
    <![CDATA[Crypto Asset Exchange – Bahrain]]> Crypto Asset Exchange – Bahrain

    Introduction

    Cryptocurrencies gained traction all across the world since its inception, considering this growth in popularity and use, industry experts, praise its potential. This digital currency went from being a mere concept to virtual reality. In the Gulf Region, Bahrain and Abu Dhabi are a leading hub for digital currencies, Blockchain and cryptocurrencies. On the other hand, many gulf countries and countries all across the world are skeptical about the integration of cryptocurrencies within their economy. 

    Considering this skepticism, governments are taking steps to regulate crypto assets in order to diversify their economies and attracting cryptocurrency firms. In keeping with this aim of development, it should be kept in mind that, these digital assets are accompanied with a lot of risks; therefore, it becomes important to strike the right regulatory balance so that the risks harmonize with the aim of economic growth. 

    After extensive deliberation, planning and identifying the potential threats that can arise in dealing with crypto assets the Central Bank of Bahrain has emerged with Regulations in order to regulate digital capital markets, more specifically crypto assets.  

    CBB Regulations

    The Central Bank of Bahrain is responsible for regulating the capital markets in the country, now inclusive of cryptocurrency and Blockchain companies. In early 2019, the CBB approved the final rules and regulations in the CBB Rulebook under Volume 6 that would permit cryptocurrency usage in the Kingdom. The Rules cover areas like licensing, capital requirements, risk management, control environments, anti-money laundering/ anti-counterfeiting, countering funding terrorism, business conduct standards, reporting rules and cybersecurity regulations. 

    Despite the growth of this digital currency, banks and financial institutions are still iffy about the advantages of digital currencies and are therefore reluctant to use the same. Studies conducted all across the world have shown the potential that this digital currency holds and the fact that it is capable of impacting sectors beyond the financial sector such as the education sector, supply chain etc. Under the Rulebook, the crypto assets are defined as virtual, digital assets or tokens operating on a Blockchain platform that is protected by cryptography. These crypto-assets are offered by Crypto Asset Platform Operators or CPOs; these CPOs act as a principal or agent that facilitates custody of crypto assets on behalf of their clients.

    Crypto Regulatory Sandbox

    The term crypto regulatory sandbox is very common in the world of Fintech. This term basically refers to space wherein companies that engage in Fintech transactions can test out their code before deploying it globally. This is a sandbox, and the companies are exempt from some regulations so that they can test out their innovations without the fear of breaking the law. 

    In Bahrain, there are about 30 companies that have been approved for the Regulatory Sandbox by the CBB; these companies comprise of CPOs and exchanges. The Bahraini Regulatory Sandbox allows companies to test their technology and innovation solutions in the financial and/ or the Fintech sector. 

    Capital Requirements 

    The CBB Regulations divide types of crypto assets services into four categories according to the capital requirements for each category. Further, it also enumerates the different set of services that the CPO can provide. The categories are enumerated hereunder;

    Category 1 

  • The first category is concerned with entities that act as an investment advisory to potential investors and provide services like receipt and transmission of orders. 
  • The Rulebook also imposes certain obligations on the Licensee:
  • the Licensee is not entitled to hold any money or assets that belong to the client concerned;
  • the Licensee shall refrain from receiving fees and commission from any party other than the client;
  • the Licensee must not operate a crypto asset exchange; and
  • the minimum capital requirement, in this case, is BHD 25,000.
  •  Category 2 

  • Entities that provide; portfolio management services, crypto-asset custody, investment advisory, or are accepted as an agent in that sphere fall under this category. 
  • The Licensee may deal as a principle, which means that the agent may act on behalf of the client and hold and control the assets of the client. However, this does not allow the Licensee to deal from their own account. 
  • The minimum capital requirement, in this case, is BHD 100,000.
  • Category 3 

  • This category involves entities that act as a principal and an agent and trade-in accepted crypto assets, including activities like portfolio management, investment advisory and crypto-asset custody. 
  • In this category, the Licensee may deal in their own account and conduct dealings as a principle, however, these cannot operate a crypto-asset exchange. 
  • The minimum capital requirement, in this case, is BHD 200,000.
  • Category 4 

  • This category is concerned with entities that operate a licensed crypto-asset exchange, including services concerned with custody services for crypto assets. 
  • The Licensee, in this case, may not engage in matched principal trading and must not execute client orders against proprietary capital. 
  • The minimum capital requirement, in this case, is BHD 300,000.
  • These CBB must ensure, at its discretion, the financial integrity of the Licensees considering their ongoing business operations. The capital requirements encompass paid-up share capital, not inclusive of losses, this paid-up share capital must be deposited to local Bahraini banks and evidence thereof are to be presented to the CBB as and when requested. 

    In addition to capital requirements, the Licensee is supposed to maintain professional indemnity insurance at a minimum of BHD 100,000 by an insurance firm approved by the CBB.  

    Licensing Requirements 

    The CBB lays down eligibility criteria for investors who wish to register themselves with the licensees; the applicant must be a legal person either incorporated in the Kingdom of Bahrain or overseas in accordance with the law at the time being in force; a natural person may also register themselves as long as they are above the age of 21. 

    The CBB recognizes and regulates the following types of services with respect to crypto-assets:

  • Regulated crypto-asset services;
  • Execution of orders on behalf of clients;
  • Dealing on own account;
  • Portfolio management; 
  • Crypto asset custodian; 
  • Investment advice; and
  • Crypto asset exchange.
  • The CBB further also lays down the activities that are excluded from regulation:

  • Creation or administration of crypto assets;
  • Development, dissemination or use of software for creation or mining of crypto assets; and
  • Loyalty program.
  • No person is entitled to conduct activities mentioned above, in the market within the territory of Bahrain without obtaining a license from the CBB. 

    Further, the CBB also lays down requirements concerning the legal status of the applicants, as follows:

  • In case of category 1, 2 and 3 – the applicant must be a Bahraini Limited Liability Company; or a branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation; or a Bahrain Joint Stock Company. 
  • In the case of category 4 – the applicant must be; a Bahraini Joint Stock Company or a branch resident in Bahrain of a company incorporated under the laws of its territory of incorporation. 
  • Any person desirous of obtaining a license must duly submit an Application for a License accompanied by a cover letter duly signed by an authorized signatory. This letter is to be submitted to the CBB and addressed to the Licensing Directorate. The documents to be accompanied with the Application for License are as follows:

  • Application for authorization of Shareholders;
  • Application for approved persons;
  • A comprehensive business plan;
  • In case of an overseas company, a copy of the commercial registration, license from a competent authority or any such equivalent document;  
  • In case of an existing Bahraini company, the commercial registration certificate; 
  • Certified copy of the Board resolution, confirming its decision to seek CBB license; 
  • A copy of the MOA and AOA; and
  • Any other such documents that are mentioned in the CRA 1.2 of the CBB Regulations Volume 6.
  • Once all the documents mentioned above are in order and submitted to the concerned authority, the CBB will review the same and duly inform and advise the applicant in writing about either of the following:

  • Granting application without conditions;
  • Granting application with conditions; and
  • Refusal of application, in this case, the CBB is required to clearly state the grounds under with the application was refused. 
  • By law, the CBB is required to announce the decision and inform the applicant about the acceptance or refusal within 60 days of submission of all such documentation required by the CBB. Once approved, the decision to grant license shall be published in the Official Gazette and in two local newspapers, one in English and one in Arabic. 

    The applicant seeking grant of license has to pay a non-refundable application license fee of BHD 100 at the time of submission of the application to the CBB. It is to be noted that an approved person is not required to pay any such applicable fees. 

    Accepted Crypto Assets

    The authority to determine the suitability of crypto assets lies with the CBB. Therefore, only after the approval of the CBB with respect to the acceptability of the crypto assets will the Licensee be able to deal in the same. Further, certain factors are considered by the CBB for approving crypto assets as under-regulated crypto-asset services, as follows:

  • The track record, reputation and technological experience of the issuer and the software developers;
  • The issuer's cybersecurity systems and controls; 
  • Availability of a reliable multi-signature hardware wallet solution; 
  • Protocols and underlying infrastructure;
  • Whether the crypto assets have been traded on any sidechains;
  • Other crypto-asset exchanges on which the crypto asset has been traded; and 
  • All such factors that are enumerated under CRA 4.3.3 .
  •  Ongoing obligations and Disclosures

    In CRA 4.1 to 4.12, the CBB imposes certain obligations upon the licensees, including but not limited to; ensuring fair, transparent and orderly dealings of activities, managing risks associated with the business and operations, providing clients with sufficient information to facilitate decision making, maintain fair treatment of clients and take into consideration the complaints submitted by clients. 

    As part of establishing a trustworthy relationship with clients, the Licensee must disclose any such risk that may arise and may come to the knowledge of the Licensee regarding the crypto assets. This information must be disclosed in a clear and conspicuous manner along with the rights and liabilities imposed on the client, in both the Arabic and English language. 

    Further, the Licensee is required to:

  • Maintain proper records and books in connection with the crypto-assets;
  • Maintain confidentiality of all client information; and
  • Maintain records of telephonic conversations and electronic communications, and all such matters as may be required by the CBB.
  • Conclusion 

    Many countries have banned cryptocurrencies considering its dubious presence. The rationale behind this is that crypto-assets can easily turn into a treacherous scheme to defraud investors. The problem with cryptographic assets is that, since it is in the digital form, once stolen it cannot be traced, one example of such a theft is Coin Check which was the world's biggest crypto theft, thereafter, there have been numerous scams and hacks within the crypto world. Therefore, it is totally understandable where the skepticism against the use of cryptocurrencies arises. 

    On the flipside, billions of people all over the world have benefitted from dealing in crypto-assets and entering the financial market. This market is in a somewhat grey area all over the world; however, countries are striving to regulate the use of these assets through guidelines and regulations that would allow them to make use of crypto-assets to benefit the economy. 

     

    ]]>
    Sun, 06 Dec 2020 14:45:00 GMT
    <![CDATA[Autonomous Machine Testimony]]> Autonomous Machine Testimony

    Smart objects have taken over our homes, workplaces and communities, and over the coming decades, the volume of legally admissible data from these devices is likely to be more. The new culture is to have voice-activated technology as digital assistants, smart appliances, and personal wearable devices. 

    Lawyers may have to represent clients in cases dealing with evidence, witnesses, or contracts, all relying on immutable digital proof such as time-stamped video and audio recordings. The lawyers may need to specialize in addressing the data issues concerning the domains such as digital twins and personas, surveillance capitalism and digital privacy rights. A pivotal step is getting this information admitted as evidence. Firms need to start building expertise around the admissibility and verifiability of data collected by smart technology-enabled devices.

    The Smart Home is the Nest of the Internet of Things

    Network and internet-connected devices, also referred to as the Internet of Things (IoT) are creating a nervous system within what has been traditionally recognized to be the most private of spaces: the home. Fundamentally, the IoT is a system to gather and assimilate immense quantities of information that amount to private surveillance of the user's activities, preferences, and habits in his own home. This information is to optimize the function of the given object.

    The first Internet of Things privacy study, a joint academic collaboration between Northeastern University and Imperial College London, examined the data-sharing activities of 81 different "smart" devices that are omnipresent today in people's homes. These included immensely popular consumer products produced by tech giants, including smart TVs, smart audio speakers and video doorbells. The teams of researchers (one in the US and one in the UK) conducted 34,586 experiments to quantify exactly much data these devices were collecting, storing and sharing.

    The researchers' findings were staggering, 72 of the 81 IoT devices shared data with third-parties completely independent of the original manufacturer. Furthermore, the data that these devices transmitted went far beyond rudimentary information about the physical device being used. It included the IP addresses, specifications of the device and configurations, usage habits, and location. 

    Today's economy is a surveillance economy – one that is dead set on acquiring "behavioral surplus", or the digital data generated as a by-product of human interaction with a wide variety of devices. These include, but are not limited to cell-phones, self-tracking devices, social media interfaces, and smart home devices anticipated to be a $27 billion market by 2021. As the number of devices generating digital records of usage grows exponentially, and as their records of usage tracks, not just communications but also movement, domestic habits, and even sleep patterns, this behavioral surplus can yield an elaborate account of human behavior.           

    The most familiar example may be that of the location-tracking component of cell phones. Cell phones transmit a rich, comprehensive account of individuals' movements in time and space which can be monetized. So tenacious is this feature that even when location-tracking apps are switched off, and SIM cards are removed from the device, some phones continue to collect location material by enabling triangulation via local cell towers, and generating distinctive "mobility signatures."

    Inside the home, digital assistants such as Siri and Alexa are capable of recording and transmitting ambient conversations; more insidiously, the development of lidar sensors, which would map both movement and behavior, is reported to be underway. 'My Friend Cayla' is an interactive toy that captures conversations between the doll and its children users, and then proceeds to transmit those conversations to the manufacturer for further uses.

    The Privacy Issues inherent to these Smart Devices 

    Other studies support the notion that any device connected to the Internet can be used as ad tracking devices. What really raises IoT privacy issues is how that device-divulged information and data is being employed. If it were used for personalization and customization, then that would have been understandable to a degree. For instance, information about which devices are being used to watch Netflix's streaming content might help them to optimize the quality of their streams.

    However, IoT privacy experts have suggested that actual personal data "leaking" from home is being harnessed to construct sophisticated profiles of users, based on their usage habits. It is even more troubling, from a privacy perspective, that some of this data involves personally identifiable information such as exact geolocation data, social media data, and unique device information. All of this data can easily coalesce in order to deduce the identity of the user; this very data falls into a goldmine for advertisers, who strive to learn as much as they can about users so that they can optimize the relevance of the ads they issue. 

    The 'Testimony' these devices issue

    In March 2018, Facebook disclosed that the political consultancy, Cambridge Analytica had accessed the personal data through improper means of up to 87 million Facebook users. What was worse, Facebook failed to notify its users of the colossal breach until long after it learned about it. It received a whopping USD 5 billion sanctions from the Federal Trade Commission for its privacy failures, along with a USD 100 million fine from the US Securities Exchange Commission. 

    Despite this, their privacy practices remain amorphous. To illustrate the same, some terms in the Supplemental Portal Data Policy of the 2019-released Portal smart display can be studied.

    The Data Policy states that when portal's camera and microphone are on, Facebook collects camera and audio information, although it states that it does not listen to, view the contents or keep any video or audio calls on the portal.

    The Data Policy further elucidates upon how this information is shared, stating that they may also share voice interactions with third-parties where we have a good faith belief that the law requires us to do so. It also states that, when independent apps, services, or integrations are used on Portal, Facebook shares information with them about the Portal device, the device name, IP address, zip code, and other information to help them provide the requested services. 

    The terms of service agreements like the aforementioned one are blatantly ambiguous and bear great privacy flaws. However, a lot of consumers have rationalized that the trade-offs are worth it; while privacy may be a concern, at the end of the day, convenience reigns supreme. The promise of enhanced conveniences, as well as the reduction in household costs, is a big overriding factor that explains why consumers continue to purchase and use these devices despite privacy risks.

    Having said that, when a security breach happens, the impacts are borne by device owners and wider society, and more often than not, the makers of these devices are indemnified. The regulatory oversight that privacy breaches invite and the privacy infrastructure of different jurisdictions will be explored below.

    Digital Privacy in the US

    In 2017, 143 million American consumers' personal information was exposed in a data breach at Equifax; in 2013, 3 billion Yahoo accounts were affected by an attack; in 2016, Deep Root Analytics accidentally leaked personal details of nearly 200 million American voters; in 2016, hackers stole the personal data of about 57 million customers and drivers from Uber Technologies Inc. Despite these record-shattering data breaches and inadequate data-protection practices, only piecemeal legislative responses have been produced at the federal level. While most Western countries have already adopted comprehensive legal protections for personal data, the United States, home to some of the most advanced tech and data companies in the world is possessive of only a patchwork of sector-specific laws and regulations that utterly fail to adequately protect data. 

    The American Fourth Amendment

    The Fourth Amendment of the US Constitution declares inviolate "the right of the people to be secure in their persons, houses, papers and effects." It protects against unreasonable government intrusions by establishing a certain right to privacy enforceable by the individual as against the world.

    The essence of the Fourth Amendment is clearly to restrain unwarranted government action against the individual: it is the expression of the framers' intent to secure the American people from intrusion by the state, in the form of unreasonable search and seizure. However, the Court does not properly recognize how the Fourth Amendment protects digital privacy; virtual access by law enforcement threatens the security of citizens in their houses.

     

    ]]>
    Thu, 03 Dec 2020 00:00:00 GMT
    <![CDATA[Doing Business in Abu Dhabi 2021]]> Doing Business in Abu Dhabi 2021

    Enforcing Contracts Questionnaire

    1.Case Study Assumptions

    Two domestic companies - Seller and Buyer - conclude a contract for the sale of some custom-made goods. Further to such contract, Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller, custom-made furniture. Upon delivery of the goods, Buyer alleges that the goods are of inadequate quality, and refuses to pay. Seller insists that the goods are of adequate quality and demands payment of the contract price. Since the goods were custom-made for Buyer, Seller cannot sell them to a third party. Following Buyer's refusal to pay, Seller sues Buyer. The court decides 100% in favor of Seller, and orders Buyer to pay the contract price.

  • Both Seller and Buyer are domestic companies, located in Abu Dhabi.
  • Seller sues Buyer to recover the amount due under the contract. The value of the claim is: AED 317,386.
  • The court deciding the case is located in Abu Dhabi and is the first instance court with jurisdiction over commercial claims of AED 317,386.
  • Seller fears that Buyer may dissipate assets, move assets out of the jurisdiction or become insolvent. Therefore, if such a procedure is allowed before the competent court, Seller requests and obtains attachment of Buyer's movable assets (for example, office equipment or vehicles) prior to obtaining a judgment.
  • Buyer opposes the claim, which is then disputed on the merits. An opinion on the quality of the goods delivered by Seller is required and is given by an expert during the court proceedings:
  • If it is standard practice in your country for Seller and Buyer to call their own expert witnesses, then each party calls one expert witness to provide an opinion on the quality of the goods delivered by Seller.
  • If it is standard practice in your country for the judge to appoint an independent expert to provide an opinion on the quality of the goods delivered by Seller, then the judge does so. It is assumed that no opposing expert testimony is provided.
  • Judgment is 100% in favor of Seller. Buyer is required to pay the agreed contract price to Seller.
  • Buyer does not appeal the judgment.
  • Seller starts enforcing the judgment when the period allocated by law for appeal expires. It is assumed that Buyer has no money in his bank accounts but has sufficient movable assets to fulfill the full debt. As a result, Buyer's movable assets (for example, office equipment or vehicles) are attached and stored in preparation for a public sale.
  • A public sale is organized, advertised and held to sell Buyer's movable assets. The assets are sold and the value of the claim is entirely recovered by Seller.
  • Definitions: for the purpose of this questionnaire, the terms below carry the following meaning:

  • Competent court means the court in Abu Dhabi with jurisdiction over commercial disputes similar to the one described in the assumptions of the case. If more than one court is competent, competent court means the court that is most likely to determine the outcome of the standardized case.
  • Expert witness means a witness with the required qualifications or experience to give an opinion on whether the goods delivered are of adequate quality. Expert opinion is required and provided prior to judgment.
  •  

    ]]>
    Mon, 30 Nov 2020 15:03:00 GMT
    <![CDATA[UAE Contracts]]> UAE Contracts

    Question Set:

    Formation of contracts

    Authority and capacity

    Question Body:

  • What are the authority/capacity rules for entering contracts?
  • Answer Body

    Individuals

    UAE Federal Law Number 5 of 1985 on Civil Transactions Law (Civil Code) allows all individuals to enter into agreements unless they are minors, who do not have the right to deal with property and are prohibited from entering into a contract. However, Article 159 of the Civil Code allows minors to handle financial dealings that are for their own benefit and not to their detriment. The Civil Code also allows guardians or tutors to make dispositions on behalf of minors and mentally disabled and insane adults.

    Companies

    Commercial Companies Law Number 2 of 2015 and Commercial Transaction Law Number 18 of 1993 apply to all contracts between two companies. A corporate entity, whether it is a private or public joint stock company, can enter into a contract in its own name, subject to the provisions of its articles of association and the requirements of the Civil Code, the Commercial Companies Law and the Commercial Transactions Law.

    Foreign companies

    Foreign companies established in the UAE can enter into a contract with other companies or individuals in the same way as other public or private companies. A contract entered into by a foreign company is governed by the Civil Code, the Commercial Companies Law and the Commercial Transactions Law. The contract must be in accordance with the provisions of Civil Code unless the context of the agreement suggests otherwise.

    Partnerships

    A partnership company can enter into a contract as a legal person immediately after its formation. Part III of the Civil Code sets out provisions governing contracts entered into by a partnership company, including the rights and obligations of the partners under the contract.

    Limited liability partnerships (LLPs)

    LLPs are capable of entering into contracts as they have legal personality. The LLP partners are liable under the contract up to the value of their shares in the partnership.

    Trustees

    UAE civil law does not recognise the concept of trust and does not explicitly recognise the right for a trustee to enter into a contract in relation to trust property or the trust beneficiary. Foreign trust arrangements will be analysed according to UAE law principles.

    Charities

    UAE law places stringent requirements on the establishment of charities, which requires prior approval by the government. The government must be made aware of all the activities of the charity, including the money it raises. When a charity enters into a new contract, this requires approval of the contract by the government.

    Public bodies and local authorities

    Public institutions and local authorities are subject to the same rules as any other entity in the UAE when entering into a contract with individuals or companies. UAE government entities follow a transparent and fair system for awarding and tendering contracts. Invitations to bid are made public and are accompanied by a set of rules and guidelines that the bidders must follow.

    Agency rules

    An agent under a principal-agent contract can enter into a contract with a third party. The provisions of the contract and the rights and obligations arising out of that contract then devolve to the principal. However, the agent must accurately disclose to the third party their relationship with the principal, unless the third party was already aware of it or it is irrelevant to the third party. If this is not done, the principal is not bound by the contract entered into by the agent.

    Formal legal requirements

    Question Body:

  • What are the essential requirements to create a legally enforceable contract?
  • Answer Body

    The Civil Code governs contracts entered into by two contracting parties in the UAE. Article 125 of the Civil Code defines "contract" as an offer made by one of the contracting party that is accepted by the other, along with an agreement from both parties on the subject matter of the contract, from which results obligations for both parties.

    Under the Civil Code, the first step in forming a contract is the first meeting between the parties, known as an "open session" (Khiyar Al-Majlis), where the parties negotiate and can decide whether to enter into an agreement. Until the end of the first meeting, either party has an option to accept or reject the offer (Article 136, Civil Code). A contract is formed when there is an offer and an acceptance, which are two essential elements for creating a contract under the Civil Code. An expression of intent can be made orally or in writing, or by an act demonstrating the mutual consent of the parties (Article 132, Civil Code). If there is a repetition of the offer before acceptance, the last offer made is the final and valid offer.

    The following are the necessary elements required for making a contract:

    • The parties must agree to the essential elements of the contract.
    • The subject matter of the contract must be:
    • defined or capable of being defined;
    • possible; and
    • permissible under the law, and not against sharia law or public order.
    • There must a lawful purpose for the rights and obligations arising out of the contract.
    • There must be offer and acceptance.
    • There must be consideration.

    A further essential requirement for a valid contract is a place of agreement. Article 142 of the Civil Code suggests that if a contract is made by the parties not in each other's presence, it is deemed to have been made at the place where the offeror learns of the acceptance. However, if the contract was made over the telephone, the contract will be considered to have been made at the time of the Majlis when both the parties were present.

    A contract need only contain the essential elements and the legal conditions and obligations of the parties (Article 141, Civil Code). After completion of the Majlis, the parties can later insert additional details into the contract. Where the parties agree on the essential elements of the contract leaving further conditions to be determined at a later date, and a dispute arises as to those matters, the court will adjudicate in accordance with the nature of the transaction and conduct of the parties throughout the term of the contract (Article 141(2), Civil Code).

    The final and the most important requirement of the contract is the payment of earnest money, which is considered to be the evidence that the contract has become final and irrevocable (unless the agreement is contrary to any provision of the law or any custom) (Article 148, Civil Code).

    Question Body:

  • When are written contracts legally required? Can oral contracts be valid and enforceable?
  • Answer Body

    There are several types of contracts that must be in writing to be valid under the Civil Code, including contracts relating to:

    • Marriage.
    • The sale and purchase of immovable property.
    • The sale and purchase of ships.
    • Partnership.
    • Payments for individuals' support, including medical treatment and education.
    • Gifts.

    The Tenancy Law Number 26 of 2007 provided that the rights of a tenant or landlord would not be enforceable unless the contract was in writing and registered with the Real Estate and Regulatory Agency (RERA). However, following amendment by Law Number 33 of 2008, the parties now only need to register the contract with RERA.

    A written contract may also be required as evidence to prove a right in court. Specifically, in a sale of property or when a sale is rescinded for a defect, the party must prove that they did not consent to the defect either verbally or by way of written contract (Article 120, Civil Code). For that reason, commercial parties typically require some form of contractual documentation.

    Article 656 of the Civil Code requires contracts entered into by companies to be in writing. However, if such a contract is not written, that does not affect the rights of third parties (see Question 11).

    Oral contracts are permitted under the Civil Code, as long as there is an agreement and acceptance of an offer. However, there are specific rules that a contracting party must consider before entering into an oral contract. For example, a contract can be entered into through certain actions that signify acceptance. Silence of one party can be considered in some situations as acceptance of an offer (Article 135, Civil Code). Similarly, repeated offers before acceptance annul the earlier offers.

    Question Body:

  • Are there language requirements for the validity of contracts? Is translation into the language of your jurisdiction required?
  • Answer Body:

    There is no language requirement for the validity of a contract in UAE. While Arabic is the sole official language of the UAE, English language is the most common and accepted language in international business relations. However, translation into Arabic is recommended. A certified translation of the contract is required by the UAE courts and will prevail in the event of discrepancies between the two versions.

    Question Body:

  • Can contract terms be inferred by the conduct of the parties or incorporated by reference?
  • Answer Body

    The terms of the contract can be explicitly expressed or can be implied or inferred by the conduct of the parties. For example, a contract for the sale of goods may state that every time the buyer sends a purchase order the seller must acknowledge receipt and then send the goods. However, in practice, if the seller has always sent the goods without acknowledging receipt and the buyer has never opposed this, even though the parties agreed to a different procedure, the usual conduct of parties will be inferred to be the contract terms.

    Therefore, if the parties agree on the essential elements of the contract and leave practicalities to be determined at a later stage, the court will adjudicate any related dispute in accordance with the nature of transaction and conduct of parties throughout the term of the contract (Article 141(2), Civil Code).

    Question Body:

  • What mandatory terms can be implied into a contract by law?
  • Answer Body

    A duty to act in good faith is implied into all contracts subject to UAE law, as sharia law emphasises the principles of justice and fairness. A contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith (Article 246, Civil Code). This mandatory provision prevents the parties from abusing their contractual rights and requires them to act reasonably.

    Under UAE laws, the law completes the contract. That is, in the absence of a certain disputed clause, the prevalent UAE laws will apply. Therefore, when entering into a contract, it is essential to stipulate key provisions, such as the purpose of the contract, well defined obligations, and any monetary amounts involved.

    Question Body:

  • Are contracts in electronic form (email, web-based or otherwise) legally enforceable?
  • Answer Body

    Electronic contracts are enforceable in the UAE, provided the essential elements of a contract (such as offer, acceptance and consent) can be expressed through electronic communications. Federal Law Number 1 of 2006 concerning Electronic Transactions and Commerce Law (ETCL) regulates all electronic transactions and contracts in the UAE, and allows the use of electronic documents in court. Federal Law Number 36 of 2006 amending the Law of Evidence in Civil and Commercial transactions provides that electronic signatures, records, and documents have similar effects as physical documents (see also Question 12).

    Question Body:

  • How are preliminary agreements used in your jurisdiction?
  • Answer Body

    Memorandums of understanding (MOUs) are used in the UAE. An MOU is generally subject to time constraints. If the purpose of the MOU is not fulfilled within the specified time, the MOU will terminate automatically. Any agreement is valid under the Civil Code if it meets all the relevant requirements (see Question 2).

    An MOU will be legally binding unless it provides otherwise. The parties generally wish that certain provisions of an MOU, but not all, be legally binding. Therefore, the parties must clearly specify which terms of the MOU are binding, and which are not.

    Question Body:

  • Can negotiations become legally binding in any circumstances? What are the principles and rules (if any) on pre-contractual liability?
  • Answer Body

    Parties can walk away from any negotiations without incurring liability. Liability only arises once there is offer and acceptance at the end of the Majlis (see Question 2). Negotiations become legally binding on the signing of a contract by all parties.

    Question Body:

  • Is the concept of "good faith" in negotiations recognised and applied? If so, how?
  • Answer Body

    Good faith is implied into all contracts under the Civil Code. A contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith (Article 246, Civil Code). Even if the contract does not expressly provide for reasonable standards of good faith, the parties must perform their obligations in accordance with the law and in good faith.

    In principle, the duty of good faith applies at the negotiation stage. When a party makes a fraudulent statement during negotiations, this will likely render the contract void for lack of mutual consent under Article 246 of the Civil Code. The wronged party can apply to the court for the contract to be cancelled and seek damages. However, in practice, the UAE courts have limited the application of the duty of good faith to the performance of the contract, except when the duty to act in good faith at the negotiation stage is expressly set out in the law applicable to the specific type of contract. For example, in insurance contracts, the insured must disclose all information material to the insurer's evaluation of the risk (Article 1032, Civil Code).

    Formalities for execution

    Question Body:

  • What are the formalities for a validly executed contract?
  • Answer Body

    Companies

    Partnership contracts must be in writing (Article 656, Civil Code), although failure to draft the contract in writing will not affect the rights of third parties. A written contract must be signed by all parties and be marked with a company's seal or stamp.

    Notarisation provides proof of authenticity of the document. Certain contracts must be made in writing and be notarised to be effective. For example, commercial agency agreements must be registered with the Ministry of Economy.

    Agents or representatives of a company can enter into a contract on behalf of the company provided that they have a legalised and certified power of attorney (POA). The POA must be notarised by a public notary in UAE (Article 149 to 156, Civil Code).

    Foreign companies

    A POA given by a foreign entity to their agents must:

    • Be initially notarised by a public notary in the foreign country.
    • Bear the stamp of the Ministry of Foreign Affairs and UAE Embassy in the country concerned.
    • Be translated into Arabic.
    • Bear the stamp of the Ministry of Foreign Affairs in the UAE.

    Individuals

    See Question 1, Individuals and Question 3.

    Electronic signatures

    Question Body:

  • Can contracts and deeds (or equivalent) be validly executed with an electronic signature in your jurisdiction?
  • Answer Body:

    The ETCL governs the use and admissibility of electronic signatures in the UAE courts. The ETCL provides that nothing prevents the use of electronic signatures as evidence in court under the Evidence Law (Federal Law Number 10 of 1992).

    Under the ETCL, the use of and reliance on an electronic signature must be reasonable, which is based on numerous factors including:

    • The nature of the transaction.
    • The existence of previous transactions between the parties using e-signatures.
    • Any evidence of prior breaches involving e-signatures.

    The Federal E-Commerce Authority has set up a secure e-signature platform used to compare the reliability of e-signatures.

    Deeds

    Question Body:

  • When are deeds (or equivalent) required?
  • Answer Body

    A notarised written contract is required for specific types of contracts, including marriage contracts, wills, and contracts for the transfer of immovable property.

    Additionally, a deed is also required when a pledgee assigns their rights, by way of security, to another person. The deed of assignment must be registered with the Land Registry (Article 1418, Civil Code).

    A power of attorney can only be granted by a deed of agency issued by the principal, which specifies the powers of the agent (Article 150, Civil Code) (see Question 16).

    Question Body:

  • What are the legal formalities for a valid deed (or equivalent)?
  • Answer Body

    The formalities for a valid notarised contract/document in the UAE are as follows:

    • The parties must present the original document.
    • The document must be translated into Arabic before being notarised.
    • The signatories or their legal representatives must have legal capacity.
    • The documents presented must not be contrary to UAE laws and must not fall under the notary prohibitions.
    • All the parties to the agreement must be present.
    • The documents must be certified by the relevant foreign authorities of the country of notarisation (if applicable).

    Question Body:

  • What are the legal requirements and formalities for the execution of deeds (or equivalent)?
  • Answer Body

    See Question 14.

    The agents or the representatives of the company can enter into a contract on behalf of a company if they have a legalised and certified POA. The formalities for a POA vary depending on the type of POA (see Question 19).

    Powers of attorney

    Question Body:

  • What are the main types of powers of attorney in your jurisdiction?
  • Answer Body

    There are two main types of POA in the UAE:

    • General POA. This gives very wide powers to the authorised person acting on behalf of the principal.
    • Specific POA. This is often used when an individual provides only limited powers (for a specific matter) to the agent rather than a broad range of powers.

    There are many more specific types of POAs recognised in the UAE that fall under these general types. These include restricted, absolute and conditional powers of attorney.

    Question Body:

  • What are the main transactions when powers of attorney are used?
  • Answer Body

    There are numerous transactions for which a POA can be used in the UAE, including business dealings and transactions, legal representation, real estate transactions, financial matters and so on. The type of POA used depends on the type of transaction. For example, POAs are used to authorise lawyers for legal representation in the courts or for specific organisations to act on behalf of an individual.

    To enter into contracts on behalf of a corporate body, an individual must have a legalised and certified POA.

    Question Body:

  • What are the key provisions in a power of attorney?
  • Answer Body

    One of the key provisions in a POA is the inclusion of the complete details of the principal and the agent, including their passport number and other information.

    The provisions in a POA vary depending on whether it is either general or specific. A general POA includes a broad list of powers granted to the agent, such as managing financial matters, legal representation in courts, managing real estate, entering into contracts and so on.

    The provisions in a specific POA are limited to a particular matter. A specific POA should explicitly specify the acts that the agent is allowed to perform under the POA.

    Question Body:

  • What are the legal requirements and formalities for the execution of a power of attorney?
  • Answer Body

    The following requirements apply to the execution of a POA:

    • The POA must be in Arabic, or legally translated into Arabic if necessary.
    • The principal must sign the POA before a public notary and have it stamped.
    • If the POA is drafted in a foreign country, it must be notarised in that country and attested by the UAE Embassy and Ministry of Foreign Affairs in the country. It must then be attested by the UAE Ministry of Foreign Affairs.
    • If the POA is for legal representation in court, it must be attested by the Ministry of Justice in the relevant Emirate.

    Question Body:

  • Are foreign powers of attorney recognised in your jurisdiction? If so, must a foreign power of attorney comply with legal requirements and formalities to be effective?
  • Answer Body:

    To be recognised in the UAE, a foreign POA must:

    • Be signed before a public notary in the foreign country.
    • Certified (legalised) by the UAE embassy in the foreign country.
    • Stamped by the UAE Ministry of Foreign Affairs.
    • Translated into Arabic and stamped by the UAE Ministry of Justice to certify the translation.

    Notarisation

    Question Body:

  • When is notarisation required for contracts in your jurisdiction?
  • Answer Body

    Notarisation is required for several types of contracts, including marriage contracts, wills, local agency agreements, and contracts for the transfer of immovable property. Notarisation can be obtained from any public notary, including abroad. A document notarised abroad must be certified by the Ministry of Foreign Affairs and the UAE embassy in the relevant country.

    Electronic/online notarisation is allowed in the UAE. Electronic notary services are available in Dubai and Abu Dhabi.

    Question Body:

  • When is apostilling or legalisation required for contracts in your jurisdiction and how is it carried out?
  • Answer Body

    Documents and contracts notarised outside the UAE must be approved by the Ministry of Foreign Affairs or the UAE embassy in the country concerned. The documents must then be certified by the Ministry of Foreign Affairs and by the Ministry of Justice in the UAE.

    The UAE is not party to the HCCH Convention Abolishing the Requirement of Legalisation for Foreign Public Documents 1961 (Apostille Convention).

    Virtual closing and completion

    Question Body:

  • Is virtual closing used and valid in your jurisdiction?
  • Answer Body

    Virtual closing is not used and is not valid under the Civil Code.

    Question Body:

  • What are the key issues in the conduct of completion meetings?
  • Answer Body

    There are no legal requirements relating to the conduct of completion meeting. The parties will sign the preliminary agreement or final agreement. The signatories must submit the necessary identity documents (copy of passport or identification document) and any document proving that they are authorised to sign the agreement.

    Question Set:

    Content of contracts

    Question Body:

  • What are the different types of contractual terms in your jurisdiction? What liability arises for breach of those terms?
  • Answer Body

    All contractual terms and clauses have legal effect, provided that all the parties are aware of the terms and have agreed to them (Article 257, Civil Code).

    Representation

    As a general practice in the UAE, contracts have a representations and warranties clause that allows either party to file a claim if there is any element of misrepresentation during the initial negotiations. In addition, either party can file a civil case for breach of contract and a criminal case for criminal breach of trust under Federal Law Number 3 of 1987 regarding the UAE Penal Code.

    Warranty

    A warranty is a promise from an individual providing a good or service that it will perform the service or supply goods as described in the contract. Under UAE law, every transaction involving the sale of goods carries a warranty that the products are free from defects. A seller must also warrant that goods are free from any encumbrances and charges, and not subject to third-party claims (Article 534, Civil Code). Therefore, the seller must disclose any claim made by a third party.

    The seller's warranty against defects does not apply if the:

    • Seller informed the buyer about the defect before the sale.
    • Buyer bought the goods after becoming aware the defect and agreeing to it.
    • Parties agreed the seller would not be responsible for the defect.
    • Sale was at a public auction.

    (Article 545, Civil Code.)

    Question Set:

    Variation, assignment and waiver

    Question Body:

  • How can the parties vary the contract terms agreed between them?
  • Answer Body

    Consent of the parties is a vital element to any contract under the Civil Code. A contract clause is only valid if both parties have provided mutual consent to the clause (Article 257, Civil Code).

    The parties are not allowed to withdraw from a valid and binding contract or to vary its terms unless they mutually agree to do so or if the court orders this (Article 267, Civil Code). Therefore, the parties can only modify the terms of a contract by mutual consent.

    Question Body:

  • What are the main ways to transfer contractual rights to a third party?
  • Answer Body

    Either or both of the contracting parties can opt for a transfer of rights to a successor in the event of death.

    For an assignment of debt to be valid, there must be consent of the transferor, transferee and creditor (Article 1109(1), Civil Code). For an assignment of contractual rights to be valid and enforceable, the type and quantity of the assigned rights must be certain and identifiable (for example, payment obligations or receivables). Where the assigned right is a sum of money, the amount must be fixed at the time of execution of the assignment agreement.

    The rights under construction contracts can be assigned to a third party, but not the obligations unless the parties expressly agree. The contractor can appoint a subcontractor for the execution of the works (in whole or in part), unless the main contract prohibits subcontracting or the nature of the works requires that they perform the contract in person (Article 890, Civil Code). The subcontractor does not have a direct claim against the employer for anything due to them by the main contractor, unless the contractor refers them to the employer (Article 891, Civil Code).

    Question Body:

  • What are the rules relating to waiver of contractual rights?
  • Answer Body

    Typically, parties have the right to waive their rights under a contract. Contractual rights can be waived under certain circumstances, for example, if the parties mutually terminate the contract. However, there are rights that cannot be waived, such as the legal limitation period to bring a claim (Article 487, Civil Code).

    Question Set:

    Enforcement and remedies

    Question Body:

  • What makes a contract invalid? What are the consequences of misrepresentation and mistake on the enforceability of a contract?
  • Answer Body

    Invalidity

    The direct purpose of a contract must exist, be valid and permitted, and not be contrary to public morals (Article 207, Civil Code). A contract is considered invalid if it:

    • Does not contain a lawful benefit for both parties.
    • Lacks any of the essential elements of a contract (Article 210, Civil Code) (see Question 2).

    If only some of the terms of a contract are void, the entire contract will be void unless the remainder of the contract is severable.

    Misrepresentation

    There is misrepresentation when either of the contracting parties deceives the other by any means, causing that party to provide consent that they would have otherwise not given. Deliberately suppressing a fact is considered misrepresentation under Article 186 of the Civil Code. A deceived party has the right to cancel the contract if the contract was concluded by fraud. The right to cancel a contract due to misrepresentation lapses on the death of the person with the authority to apply for cancellation (Article 192, Civil Code).

    Mistake

    A mistake does not render a contract void unless it relates to the nature of the contract, one of the conditions of its formation, or its object (Articles 193 to 195, Civil Code). A contracting party has the right to rescind the contract if they have made a mistake on a matter of substance (for example, in relation to the object of the contract, the person of the other contracting party or one of their characteristics). However, a mere mistake in an account or in writing the contract will not have any effect on the contract, as such a mistake can be easily rectified when identified.

    Question Body:

  • How can the parties be discharged from performing the contract? On what basis does a party have the right to terminate the contract?
  • Answer Body

    Contracts in the UAE often include clauses on termination, dispute resolution, force majeure, and similar matters. These clauses define the rights and obligations of the parties if they fail to perform the contract or cannot do so due to unwanted and unforeseen events. For example, in the case of force majeure (that is, the occurrence of an unforeseeable event), the general position is that the contracting parties are allowed some leniency in the performance of their contractual obligations, such as delays for delivery, particularly in the construction industry. In the case of impossibility to perform contractual obligations, non-performance can be excused and consideration will not be due for the performance of those obligations (Article 273, Civil Code). Damages for non-performance must be paid by the debtor unless they can show that the impossibility arose from circumstances that are beyond their control (Article 386 of Civil Code).

    The parties can agree that the contract will be terminated in the event of non-performance of a party's contractual obligations.

    In the absence of a termination clause, a contract can be terminated by mutual consent of the parties, by the order of a court, or by the operation of law (Article 267, Civil Code). If one party is not willing to terminate the contract and the other party wishes to terminate, they must compensate the other party for the loss incurred and the loss of opportunity. The Civil Code specifically provides for the procedure for termination of various types of contract as follows:

    • Articles 892 to 896: termination of contracts for work.
    • Articles 919 to 923: termination of employment contracts.
    • Articles 954 to 961: termination of agency contracts.

    Question Body:        

  • What are the key rules on privity of contract and third party rights?
  • Answer Body

    Under the principle of privity of contract, only parties to a contract can be obliged to perform the contract under it and sue under the contract.

    However, there are a few exceptions to privity of contract. Under the Civil Code, contracting parties can add clauses to give specific rights to third parties. If the clauses grant third parties specific powers, these third parties will have contractual rights. However, third parties cannot be held liable for any legal consequences or non-performance of the contract.

    Question Body:

  • What are the main rules relating to excluding and limiting contractual liability?
  • Answer Body

    The parties are free to agree on and exclude/limit contractual remedies. However, contracting parties cannot exclude liability for a harmful act (Article 296, Civil Code).

    Question Body:

  • What are the main remedies available for breach of contract?
  • Answer Body

    The court will decide whether to:

    • Order specific performance.
    • Order that the costs for the object of the contract to be performed by a third party be paid by the breaching party.
    • Cancel the contract and order the breaching party to pay compensation.

    The judge must be satisfied that specific performance is impossible before assessing compensation (Article 386, Civil Code).

    The UAE recognises different forms of damages, including direct damages, loss of profits and loss of opportunities. The contract can specify the amount of compensation/damages payable for breach of contract, although the court has discretion over the amount of damages awarded (see Question 34).

    If the contract is cancelled, the court must ensure that the parties are restored to the position they would have been in had the contract been properly performed (Article 274, Civil Code).

    There are also a few self-help contractual remedies available under the Civil Code, including the following:

    • If the work of a contractor produces a beneficial effect on a property, the contractor has the right to retain the property until full consideration is paid. However, if the work does not produce any benefit, they do not have the right to retain the property pending payment, and if they do so, their right in the property is lost, and they are liable for compensation (Article 879, Civil Code).
    • Amounts due to contractors or engineers who are undertaking the work of constructing, reconstructing or repairing a building have priority rights over the building during a sale. The priority right must be registered at the time of registration of the sale (Article 1527, Civil Code).

    A contracting party must compensate the other for any direct or consequential harm they cause (Article 282, Civil Code). A party that proves that the loss was caused by an external cause such as natural disaster or an unavoidable accident, must compensate the other party in the absence of any contractual provision to the contrary (Articles 292 and 878, Civil Code).

    Further rules on contractual liability include:

    • If several persons have caused a harm, each of them is liable in proportion to the harm caused (Article 291).
    • Compensation is assessed based on the harm suffered by the victim (Article 292).
    • Compensation is given in money, unless the court expressly orders otherwise (Article 295).
    • Any contractual condition excluding liability for a harmful act is void (Article 296).
    • No claim for reimbursement can be heard after the expiration of three years from the date on which the victim became aware of the claim (Article 298).
    • Compensation is payable as diya (blood money) or arsh (damages for personal injury) for harm caused to an individual (Article 299).

    Question Body:

  • Are clauses setting out a fixed or ascertainable amount of compensation/damages valid in your jurisdiction? Are these clauses subject to any limitation?
  • Answer Body

    Parties can agree on the amount of compensation payable under certain circumstances or for breach of contractual terms (Article 390, Civil Code). The court has the power to alter such clauses if it considers that they are not proportional to the loss suffered.

    Question Set:

    Enforcement and cross-border issues

    Choice of law

    Question Body:

  • Is a choice of foreign law in a contract upheld by the local courts?
  • Answer Body

    The Civil Code recognises choice of foreign law clauses. A foreign law will not be applied if its principles are contrary to sharia law or public morals (Article 23, Civil Code). If it is established that a foreign law is applicable, its provisions will apply except for private international law rules. UAE law will apply if the foreign governing law refers to UAE law as the governing law of the contract.

    However, the UAE courts ordinarily apply UAE law despite any reference to a foreign law in the contract. In a recent judgment, the Abu Dhabi Court of Appeal applied UAE law, on the basis of public order, to an agreement that was to be governed by English law.

    Jurisdiction

    Question Body:

  • Is a choice of foreign jurisdiction in a contract upheld by the local courts?
  • Answer Body

    Article 257 of the Civil Code suggests that if all parties agree to a foreign jurisdiction, the court of that jurisdiction will have the authority to resolve disputes between the parties.

    The UAE courts have jurisdiction to hear actions filed against both:

    • UAE nationals.
    • Foreign persons having a domicile or a place of residence in the UAE.

    Enforcement of foreign judgments

    Question Body:

  • How are foreign judgments recognised and enforced in your jurisdiction?
  • Answer Body

    The following requirements must be met for a foreign judgment be recognised in the UAE:

    • The UAE courts must not have jurisdiction over the substantive dispute in relation to which the foreign judgment was obtained.
    • The judgment must have been issued by a competent court under the law of the foreign country.
    • The parties must have been properly represented and attended the hearings, or have assigned their representative to attend the hearing.
    • The order or the decision must be final.
    • The order or decision must not conflict with a decision or an order issued by an UAE court, and not contrary to UAE rules of morality or public.

    The UAE is a signatory to bilateral legal and judicial co-operation treaties with several countries (for example, India, France, Afghanistan, Pakistan, Egypt, Jordan, Nigeria, Morocco, Iran, and the UK). The conditions and procedure to enforce foreign judgments are specified in these treaties. For example:

    • Under the Riyadh Arab Agreement for Judicial Cooperation 1983, the judgment creditor must make a formal request to the competent court where enforcement is sought. The enforcement process starts after approval of the request.
    • Under the GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications 1996, the enforcement procedure is governed by the law of the country where the judgment is executed. The judgment creditor must produce the judgment, a certificate declaring the judgment to be final, and other documents confirming that the defendant was properly notified (for ex parte judgments).
    • Under the Convention on Judicial Assistance, Recognition and Enforcement of Judgments in Civil and Commercial Matters between the UAE and France 1992, an application for the recognition and enforcement of a foreign judgment must be submitted to the competent court of first instance in accordance with Article 235 of the UAE Civil Procedures Code.

    In the absence of a treaty, the UAE Civil Procedures Code will apply. The UAE courts take into consideration the principle of reciprocity to enforce a foreign judgment. The applicant must request an execution order from the court of first instance, which will assess whether the conditions listed above are met.

    Question Set:

    Other key issues

    Question Body:

  • Are there any additional and important issues about the law and practice relating to contracts, negotiation and enforcement in your jurisdiction which is not addressed in another question of this Q&A?
  • Answer Body:

    Not applicable.

     

    ]]>
    Sun, 15 Nov 2020 13:18:00 GMT
    <![CDATA[Mortgage Agreements in KSA]]> Mortgage Agreements in the Kingdom of Saudi Arabia

    As per the New Commercial Mortgages Law promulgated in the Kingdom of Saudi Arabia on 24 April 2018, the mortgage arrangement is anchored in a fixed debt that is promised to be amortized, or an item guaranteed under the debt or outstanding debt.

    The mortgage laws in the Kingdom of Saudi Arabia are based on the fundamental principle of "Rahn", as specified in the Quran, and in Shariah Islamic law. National effectuation of the mortgage law is overseen by local jurisdictional authorities, a part of the Saudi Arabian Monetary Agency (SAMA), in addition to the Negotiable Instruments Disputes Office (NIO). While the SAMA and NIO certainly do have the authority to oversee most financial transactions, the responsibility to enforce mortgage contracts falls upon the Sharia courts. 

    The "Al-Rahn" Principle of Shariah that governs Mortgage Contracts 

    The term "Al-Rahn" translates directly into "collateral". Al- Rahn is implicative of an arrangement where an asset is put up as collateral for the payment of a debt or obligation. This collateral that is to be physically presented before the loaning bank is a guarantee of the borrower's full intention of paying back the loan over the course of its maturity. 

    The concept of al-Rahn has been deemed critical in order to safeguard the primary objective of the "Muamalat" (transactions) component of Islamic jurisprudence, which is to protect the belongings of every person involved. It signifies that a breach of contract is tantamount to noncompliance with a critical tenet of the Shariah law (in Muamalat). 

    The legitimate contractual obligations mandated by the investigative system of mortgage approval have observed the ten following Al-Rahn standards:

  • The obligation of the mortgagor is tethered to the sold or mortgaged property; 
  • The mortgagee is empowered to withhold, or keep the sold or mortgaged property if the need arises; 
  • The mortgagee is obligated, and compelled, to a degree, by honor to protect the sold or mortgaged property; 
  • The mortgagee shall pay the duties that are part and parcel of the sold or mortgaged property; 
  • While the duration of the mortgage is still effective, the mortgagor and the mortgagee shall not tamper with, or interfere with the mortgaged property; 
  • The mortgagee is disallowed from the utilization of the sold or mortgaged property; 
  • The value of the mortgaged property should directly correspond with the debt of the mortgagor; 
  • The mortgagee is not allowed to sell the mortgaged property in order to satisfy the debt; 
  • The mortgagee (who is in control of the property) should appreciate his designation of priority creditor, who shall be paid before alternate lenders and other creditors; 
  • The mortgagee is committed to releasing the mortgaged property when the obligation has been fulfilled in totality by the mortgagor.
  • Contract rights, as ascertained by the Mortgage Law 

    Certain key provisions in Mortgage Law mandate the presence of certain elements in the mortgage agreement. 

    Characteristics of the Mortgaged Property, and the Mortgage Agreement 

    For a real estate property to be successfully mortgaged, it must be identifiable and detailed in the mortgage agreement, or subsequent agreement. It must be noted, as per the Mortgage Law, such a property may be sold independently through a public auction, in the event of a default. 

    Management and Use of the Mortgaged Property

    Returns from a mortgaged property are contractually coded as reserved for its owner, as are the related costs; the owner may continue to make returns from the mortgaged property until the law denies him of such ownership. However, this entitlement aside, the debtor is expected to use the mortgaged property in a fashion that does not prejudice the rights of the creditor. 

    Invalid Terms and Conditions

    If a mortgage agreement bears terms or conditions that stipulate that (a) the benefits of the mortgaged property shall be solely for the interest of the creditor, or that (b) the creditor shall own the mortgaged property in the event that the debtor fails to settle the debt in time, then these terms or conditions shall be instantaneously deemed invalid. Thereupon, these provisions shall be severed, although the mortgage shall continue to be valid.

    Mortgagor's (Debtor) Obligations to the Mortgaged Property

    In addition to the obligation placed upon the debtor to ensure the integrity of the mortgaged property until the settlement of the debt, the debtor shall provide warranties in the contract pertaining to the devaluation and general defects. 

    This codification ensures that, if the debtor were to act with negligence or misconduct, the creditor could contractually obligate the debtor to increase the mortgage by an amount that matches the decrease in value. 

    However, if the devaluation or defect is a by-product of matters that extend beyond the debtor's control, then what remains of the property shall become the subject of the mortgage.

    The Rights of Recourse available to the mortgagee

    Should work be started that bears the potentiality of resulting in the devaluation of the mortgaged property such that it becomes insufficient for the guarantee, the creditor may ask a court to suspend such work.

    Mortgage Settlement/ Termination

    Upon issuing a warning to the debtor as per the contractually mandated rules, a creditor who is a party to a registered mortgage can effectuate the eviction of the mortgaged property, and the sale thereof, should the debtor fail to settle the amounts due in a timely fashion.

    The events that call for the discontinuation, or termination of the registered mortgage include: (a) a settlement of all of the debt associated with the mortgage; (b) the sale of the mortgaged property in a fashion pursuant to the law, with the proceeds brought to the creditor; (c) the residence of the mortgage rights (creditor's rights) and the ownership rights (of the mortgaged property) with one party, whether it be through the transfer of the ownership of the mortgaged property to the mortgagee, or the transfer of the creditor's right to the mortgagor; or (d) the creditor's waiving of his rights as mortgagee under the mortgage agreement, pursuant to a written waiver.

    However, in circumstances where the debtor is deceased or becomes impaired, his heirs or successors shall succeed the debtor's obligations.

    Measures adopted in light of COVID-19

    As the impact of COVID-19 continues to unfold, the Saudi government has been implementing policies across the country in an effort to lessen the financial burden on nationals. 

    The Saudi Arabian Monetary Authority engaged in dialogue with banks with the result of the introduction of flexibility in repayments of consumer finance to individuals who have lost their jobs on account of the coronavirus. Notably, the measures instituted include the relief of mortgage payment for a maximum period of six months, at no additional cost. 

    ]]>
    Sun, 08 Nov 2020 10:46:00 GMT
    <![CDATA[Legislation Commentary on Federal Law]]>  

    Legislation Number

    Federal Law Number 5 of 2012 Concerning Combating Information Technology Crimes (Cyber Crimes Law)

    Date of publication in the Official Gazette

    13 August 2012

    Jurisdiction

    The United Arab Emirates

    Related Legislation

     

  • Federal Law Number 12 of 2016 amending Federal Law Number 5 of 2012 on Combating Cybercrimes
  • Law Number 3 of 2012 on Establishing the National Electronic Security Authority (E-Security Authority Law)
  • Federal Law Number 1 of 2006 on Electronic Commerce and Transactions
  • Institution writing the commentary

    STA Law Firm

    Legislation Commentary

     

     

     

  • Abstract
  • The legislation being commented is dedicated to cybercrimes and explores means and methods of punishing an individual who commits such crime. It was issued on 13 August 2012 by the President of the United Arab Emirates H.H. Sheikh Khalifa bin Zayed upon the proposal of the Minister of Justice and the approval of the Council of Ministers. The Federal Law Number 5 of 2012 Concerning Combating Information Technology Crimes (The Cyber Crimes Law) repealed and replaced its predecessor Federal Law Number 2 of 2006.  The primary purpose of the new law is to criminalize persons who get unlawful access to the computer network, electronic information system or website, and also those who indulge in destructing, omitting, deleting, copying, modifying, deteriorating, altering or publishing any data or information.

     

    The main purpose of examining this law is to see how which standards are set to protect technology and the information from attacks in the digital world. Ensuring data privacy and safety is a crucial task for all organizations and individuals. Nowadays, data is an essential asset every company has; the data of the private individual, if stolen, may be used against the individual and can lead to severe consequences.

  • Analysis
  • Before analysing the legislation, it is essential to explore what kind of threats are there. At present, there are several categories of issues the users may face in the digital sphere:

  • Hackers are people who "trespass" into computers from remote locations:  they can cause the breached computer or system to malfunction, or use it to host a website, spread viruses or send spam.
  • Viruses, which infect computers through file sharing and email attachments, can delete files, attack other computers and make systems run slowly.
  • Spyware, which is software that piggybacks on programs that are downloaded, collects information about a user's online habits and transfers personal information without their knowledge.
  • Identity thieves, which obtain unauthorized access to personal information, such as financial account and social security numbers. They can then use obtained information to commit crimes such as theft or fraud.
  • Ransomware, wherein, perpetrators deprive users access to software programs and files, often by encrypting them, and later demand the same users to pay a ransom in order to remove the restriction.
  • The Cyber Crimes Law of 2012 divides cybercrimes into several categories, being:

  • Unauthorized access to an electronic site
  • Whoever gains access to an electronic information system, a website, computer network or information technology means without authorization or unlawfully remains therein, will be criminally charged for breaching the law and the punishment for the same shall be an imprisonment and a fine not less than one 100,000 AED and not in excess of 300,000 AED or either of these two penalties. However, if such activity resulted in deletion, destruction, omission, disclosure, deterioration, alteration, copying or publication of any data, the punishment shall be imprisonment for at least 6 months and a fine not less than 150,000 AED and not in excess of 750,000 AED or either of these two penalties. If the mentioned data were personal, the one who committed a crime would face imprisonment for at least 1 year and a fine between 250,000 AED and 1,000,000 AED or either of these two penalties.

    If it was found that such unlawful activity was conducted in the course of work, the individual who committed a crime is subject to imprisonment for a period of at least 1 year and by a fine ranging from 250,000 AED to 1,000,000 AED or either of these two penalties. Any unlawful activity related to the government data, or confidential information pertaining to a financial, commercial or economic facility can result in temporary or permanent imprisonment and a fine ranging from 250,000 AED to 2,000,000, AED, which will depend on what has been done with the obtained data.

    What is evident from the punishment meted out is the fact that the government is taking cybercrimes quite seriously and aims to deter anyone from indulging in the same.

  • Forgery
  • Forgery of any electronic document of the federal or local government or authorities or federal or local public establishments is a criminal offence with the punishment being temporary imprisonment and a fine not less than 150,000 AED and not in excess of 750, 000 AED. However, if the forged documents belonged to any other authority not mentioned in this Article, the punishment will be both imprisonment and a fine not less than 100,000 AED and not in excess of 300,000 AED or either of these two penalties.

  • Medical data
  • Crimes against data or information related to medical examinations, medical diagnosis, medical treatment or care or medical records are met with punishment in the form of temporary imprisonment.

  • Bank accounts data
  • If anyone gains access, without authorization, to credit or electronic card numbers or to bank accounts numbers or data, they shall be punished by imprisonment and a fine. However, what they intend to do with that information is relevant to the punishment as well. If there is an intent to use these numbers and data to gain control over someone else's funds or to benefit from the services which they provide, a punishment of imprisonment for at least 6 months and a fine not less than 100,000 AED and not in excess of 300,000 AED or either of these two penalties shall be given. If the individual who committed the crime has reached to take over the funds of others whether, for himself or others, he shall be punished by imprisonment for at least 1 year, and a fine not less than 200,000 AED and not in excess of 1,000,000 AED or either of these two penalties.

    Whoever forges, reproduces or counterfeits a credit or debit card or any other electronic payment method by using any computer program, shall be punished by imprisonment and a fine not less than 500,000 AED and not in excess of 2,000,000 AED or either of these two penalties.

    If anyone, without an authorization, obtains a secret number, code, password or any other means to access either an electronic information system, information technology means, a website or a computer network, they will be punished by imprisonment and a fine ranging from 200,000 AED to 500,000 AED or either of these two penalties.

  • Activities that prejudice public morals
  • If an individual is found guilty of establishing and managing a website or sends, publishes or re-publishes through the computer network gambling activities or pornographic materials and whatever that may afflict the public morals of the nation, they will be punished by imprisonment and a fine not less than 250,000 AED and not in excess of 500,000 AED or either of these two penalties. This penalty also applies to whoever produces, prepares, sends or saves for distribution, exploitation or display to others through the computer network, gambling activities or pornographic materials and whatever that may be in contradictory to the public morals of the nation.

    The deliberate acquisition of pornographic materials involving juveniles by using a computer network or electronic information system or electronic website, by an individual shall be punished by imprisonment for at least 6 months and a fine ranging from 150,000 AED to 1,000,000 AED. Also, anyone enticing or aiding another person, by using any information technology means, to engage in prostitution will be punished by imprisonment and a fine not less than 250,000 AED and not in excess of 1,000,000 AED or either of these two penalties.

  • Defamation
  • If an individual accuses or insults another person of a matter of which he shall be subject to punishment, by using a computer network, he hall be punished by imprisonment and a fine between 250,000 AED and 500,000 AED or either of these two penalties. If insult or slander is committed against a public servant in the course of or because of his work, it shall be considered an aggravating factor of the crime.

  • Invasion of privacy
  • According to the Cyber Crimes Law of 2012, invasion of privacy includes but is not limited to:

    • Interception, eavesdropping, recording, transferring or disclosure of communications, or audio or visual materials.
    • Publishing news, electronic photos, scenes, comments, statements or information even if true and correct.
    • Photographing others or creating, disclosing, transferring, copying or saving electronic photos.

    Such acts of invasion of privacy are punishable by imprisonment for at least 6 months and a fine not less than 150,000 AED and not in excess of 500,000 AED or either of these two penalties.

  • Human trafficking
  • If anyone is found guilty is establishing or running a website or publishing information on a computer network in relation to human trafficking or human organs or dealing in them illegally will be met with a punishment of temporary imprisonment and/or a fine not less than 500,000 AED and not in excess of 1,000,000 AED.

  • Terrorist activity
  • Whoever is found guilty of establishing or managing a website or publishing information for the interest of a terrorist group or any other unauthorized group or association, or body with the intent to aid communication with their leaders or members or attract new members, or to praise or promote their ideas, finance their activities or provide actual assistance for the purpose of publishing methods for manufacturing explosives or incendiary devices or any other devices used in terrorist acts, will be punishable by imprisonment for at least 5 years and a fine not less than 1,000,000 AED and not in excess of 2,000,000 AED.

  • Collection of donation without authority
  • Should anyone be found guilty of establishing or managing a website or publishing information on the computer network or any information technology means so as to promote the collection of donations without having license accredited by the relevant authority shall be punished by imprisonment and a fine not less than 200,000 AED and not in excess of 500,000 AED or either of these two penalties.

  • State security and reputation
  • The Cyber Crimes Law states that if anyone establishes, manages or runs a website or uses information on the computer network with the intention to incite acts or transmit or publish information or news or any pictures which may expose the national security and the higher interests of the State or disturbs its public order shall be punished by temporary imprisonment and a fine, not in excess of 1,000,000 AED.

    It is further established that whoever publishes any information, statements, news or rumors on a website or any computer network with the intention to make sarcasm or damage the reputation or prestige the State or any of its institutions or its President or any of the Rulers of the Emirates, the Deputy Rulers of the Emirates, the Crown Princes, the national peace, national anthem or any of its symbols, shall be punished by temporary imprisonment and a fine not less 1,000,000 AED. Moreover, if anyone establishes or manages a website, or publishes information on a computer network aiming to overthrow, change the ruling system of the State or to disrupt the provisions of the applicable laws and the constitution in the country or contrary to the basic principles which establishes the foundations of the ruling system of the State will be punished by life imprisonment.

  • Narcotics and money laundering
  • If anyone deliberately commits any act in relation to narcotics and money laundering, such as:

    • Illegal transfer or deposit of funds with intent to conceal or disguise the source of funds.
    • Illegal possession, attainment or use of funds with the knowledge of its illicit origin,
    • Disguising or concealing the nature of the illicit funds, or its origin, movement, related rights or ownership.

    by the use a computer network or electronic information system will be punished by imprisonment up to 7 years and by a fine of not less than 500,000 AED.

  • Deportation
  • In accordance with the Cyber Crimes Law, a person who has committed a crime will be deported once the individual has seen out the punishment that has been handed out to them.

  • State security & Exemption
  • The Cyber Crimes Law of 2012 has laid down the following offences as crimes against the State:

    • Unauthorized access to any website, computer network or information technology, to obtain confidential information of financial, commercial or economical stature. (Article 4)
    • Establish or publish any idea or work on a website or computer network that promotes hatred, racism, riot and damages the national unity, social peace or public morals. (Article 24)
    • Establish or publish any idea or work on a website or computer network that promotes the interests or activities of a terrorist group or any unauthorized organization or aids in manufacturing incendiary devices that can be used in terrorist acts. (Article 26)
    • Establish or publish any idea or work on a website or computer network that endangers national security, the higher interests of the Nation or troubles the public order of the Nation. (Article 28)
    • Establish or publish any idea or work on a website or computer network that aims to damage the reputation of the Nation, any of its institutions, Rulers, flags or any symbols. (Article 29)
    • Establish or publish any idea or work on a website or computer network with the aim to overthrow, change or disrupt the ruling system or oppose the basic principles that constitute the foundations of the system. (Article 30)
    • Provide incorrect and inaccurate information to organizations and authorities through a computer network or other information technology means which can result in damaging the reputation or interests of the Nation. (Article 38)

    An exemption has been provided by the law from punishing those individuals who have provided the authorities with information pertaining to crimes that affect the security of the Nation, wherein such information has resulted in either the discovery of such a crime or led to the arrests of such perpetrators.

    • Conclusion:

    The Cyber Crimes Law of 2012 was established in order to keep up with technological advancements and how they can be used to facilitate crimes. The stringent punishment structure, that covers a wide array of offences from unauthorized access to data to money laundering, shows the intention behind the legislature when it came to creating this law, and further enhances the scope of the Ministry towards protecting the Nation and its cyber assets from any possible threats.

    By the issue of such proactive legislation, it is evident that UAE government is determined to protect its residents and assets and strive to ensure a positive outreach towards battling crimes of such stature.

     

    ]]>
    Sun, 08 Nov 2020 09:48:00 GMT
    <![CDATA[Sohar Free Zone]]> Sohar Free Zone

  • What law established this free zone?
  • A Ministerial Committee to was set up by His Majesty Sultan Qaboos bin Said establish a new Port in SOHAR in 1995 and to develop the Port of Salalah, formerly called Raysut. The Government of Oman and Port of Rotterdam signed a Memorandum of Understanding in July 2002 to draft a concession agreement for SOHAR Port. Concession Agreement was ratified by the Royal Decree 80/2002, and the same was issued in the August 2002. Further, 2007, a concession agreement for the development of 4,500-hectare acres Free Zone was signed, and SOHAR Free Zone was established in 2010. Thereafter, Royal Decree No. 123/2010 established the SOHAR Free Zone.

  • What are the main internal regulations governing this free zone?
  • This Free Zone is managed by SIPC, short for SOHAR Industrial Port Company, which is a 50:50 joint venture between the Sultanate of Oman and Port of Rotterdam.

    The governing regulations for the operation of SOHAR Free Zone are Ministerial Decision 35/2016 issued by the Ministry of Commerce and Industry. The above Rules and Regulations of SOHAR Free Zone is in accordance with Free Zones law circulated by the Royal Decree No. 56/2002; Royal Decree No 76/2003 related to enforcement of Common Customs Law in GCC; Royal Decree 123/2010; Ministry of Finance's Approval of its letter Finance(64396/11673).

  • Does this free zone has reciprocal arrangements with other free zones?
  • No, SOHAR Free Zone does not have reciprocal arrangements with other free zones.

  • What key areas of local legislation must a business operating in this free zone still comply with? What are the most important examples of how this affects operations?
  • The key areas of Oman Legislation that businesses operating in this Free Zone must comply with are:

  • The Commercial Companies Law no.4/74
  • The Free Zones Law issued in the Royal Decree no. 56/2002
  • The Commercial Register Law no.3/74
  • The Law of Money Laundering and Terrorist Financing issued in the Royal Decree no. 79/2010
  • The Labor law issued in the Royal Decree no. 35/2003
  • The above list is not exhaustive, but any laws that are not covered by the internal regulations of the Free Zone must be complied with.

  • What key agencies do businesses operating in this free zone need to register with or be aware of?
  • The agencies that a business operating in this Free Zone needs to register with mainly depends on the type of activity carried out by the company. For example, for industrial projects, a clearance is needed from the Ministry of Environment and Climate Affairs.

  • Some agencies include:
  • Ministry of Commerce and Industry
  • Oman Ministry of Foreign Affairs
  • Oman Chamber of Commerce and Industry
  • Ministry of Environment and Climate Affairs
  • How does a company set up in this Free Zone?
  • Upon receiving the complete application form, the registration of a new company in SOHAR Free Zone only takes one business day.

    Following are the steps involved generally:

  • Submission of a complete Plot Application Form
  • Agreement on the Commercial terms
  • Pre-contract Clearances (Example, No Objection Letter from the Ministry of Environment and Climate Affairs for Industrial projects. Another example, for large power and water consumers, a principal acceptance is required from the Utility Companies.
  • Due diligence performed on main promoters/shareholders of the proposed company in the Free Zone
  • Plot selection followed by approval of the Plot Application
  • First Quarter lease payment, followed by Incorporation fees and License fees payment
  • Incorporation of the Free Zone Working Company (Including all documents and clearances)
  • Signing the Land Lease Agreement
  • What features go companies set up in this Free Zone have?
  • Like most other Free Zones, SOHAR Free Zone offers various incentives that attract foreign and local investors like the following:

    • 100% of foreign company ownership
    • Low Capital requirements
    • 25 years of Corporate Tax Holiday
    • One Stop Shop for relevant clearances
      • Company licensing and registration
      • Environmental Approvals
      • Visas
      • Tax exemption certification
      • Labour permits
      • Application for Utilities
      • Plot Work Permits
      • Customs system registration
    • Zero per cent (0%) re-export and import duties
    • Zero per cent personal income tax
    • Low labour requirements: an overseas workforce of 85% is allowed
  • What can companies set up in this Free Zone do?
  • Following are the activities that a company in SOHAR Free Zone can carry out:

  • Commercial activity: export, import, storage and handling, general trading.
  • Industrial activity: works based on reassembling, manufacturing and remanufacturing.
  • Service activity: logistics and consultancy services.
  • Banking and financial activities: foreign exchange, banks and money transfers.
  • Educational activity: institutes and schools.
  • Health activities: health centres, hospitals, pharmaceuticals, laboratories and specialized health centres.
  • What can companies set up in this Free Zone not do?
  • Generally, any activity that does not conflict with the applicable laws in the Sultanate of Oman is not permitted in the Free Zone.

  • What types of business are allowed to operate in this Free Zone?
  • Same as Question 8 (above) 

  • What inheritance laws apply in this free zone? 
  • The inheritance law as is mentioned in the 1996 Basic Statute of the State is governed by the Islamic Shari'a Law 

  • What taxation applies?
  • SOHAR Free Zone offers zero per cent personal income tax. 

    Tax and Customs Exemption Department inform the Working Company of their decision in respect to the submitted application for tax exemption.

    Companies can enjoy a Corporate Tax Holiday for up to twenty-five (25) years, but is subject to the maintenance of a certain level of Omani Staff. Same is explained in the table below:

     

    Tax Exemption Period

    Omanization Level (Minimum)

    First 10 years

    15%

    Following 5 years

    25%

    Following 5 years

    35%

    Following 5 years

    50%

     

  • What accounting and auditing rules do businesses operating in this free zone need to adhere to?
  • The company undertakes to maintain regular accounts of all the activities carried out by it, approved by an accounts auditor who is licensed to conduct the profession of auditing and accounting. The Auditor must provide the Secretariat with such accounts.

  • Where do businesses operating in the free zone generally locate their bank accounts?
  • The working companies are required to open a local bank account prior to obtaining the Free Zone license. For the same, copy of the authorized signatory forms, commercial registration, Oman Chamber of Commerce and Industry affiliation certificate, a deposit of capital amount as stated in the Commercial Register and application signed and sealed by the authorized signatory.

  • Are there any specific rules governing when the moveable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?
  • Activities are generally confined to the Free Zone. Operation in other zones may require the assistance of local agent/distributor.

  • Are any specific licenses required to operate as a specific type of company in this free zone?
  • The users of Free Zones cannot be allowed to conduct business except post obtaining either a Working Company License or Service Provider's License.

    The types of licenses issued are (5 main):

  • Logistic License
  • Light Manufacturing and Assembly License
  • Service Provider License
  • General Trading License
  • Industrial License
  • Is there any specific ongoing regulation or monitoring firms operating as particular types of companies by this free zone authority?
  • The Operating Authority, being SOHAR Free Zone LLC itself, assumes responsibility according to Article 2 of the Rules and Regulations for the development and management of the Free Zone couple with supervising the business at the Free Zone. The Article goes on to define specific authorities and powers for the governing of the Free Zone.

  • How are disputes settled in this free zone?
  • Generally, the contract mentions the dispute resolution mechanism to be followed in a situation where a dispute arises. In the absence of the same, the courts in Oman assist in resolving disputes. The main courts in Oman are:

  • The Court of First Instance
  • The Court of Appeal
  • The Supreme Court
  • Without prejudice to other laws, the Operating Authority has the power to impose penalties in certain situations, and in extreme cases, may revoke/withdraw the license on the basis of fraud and cheating. A limitation period of sixty (60) days is available to the concerned party to appeal the decision. (Article 46 of the Rules and Regulations)

  • How are disputes between onshore companies and companies in this free zone settled?
  • Same as Question 18 (Above).

  • What are the main rights and duties of an employer and employee working in this free zone?
  • Royal Decree 35/2003 issuing the Oman Labour Law provides a comprehensive framework for employment in Oman.

    For example, Article 27 of Oman Labour Law mentions certain duties of the employee related to the working diligently under the supervision of the employer, to obey the employer's instructions as long as it is not inconsistent with contract and the laws, not to disclose work secrets, not to use tools of work outside of the workplace except upon obtaining the approval of the employer, etc. Additionally, according to Article 33, the employer must provide the employees with adequate access to medical facilities. Article 34 states that the employer must provide all the employees with suitable means of transport, accommodation, meals, drinking water etc. for practices specified by the Minister.

  • How are employment disputes between employers and employees working in this free zone settled?
  • In addition to the Oman Labour Law as mentioned above in Question 20, unless a separate mechanism has been agreed upon in the employment contract, the labour dispute resolution is addressed before a designated body which is the Department for the Settlement of Labour Disputes at the Ministry of Manpower.

  • What entry qualifications and permits are required for staff working in this free zone, and how are employees registered with the authorities?
  • All Omani employee contract must be registered with the authorities. The same is done via One Stop Shop within 15 of such Omani employee joining the company.

    While employing expatriates, three mandatory processes must be completed:

  • Clearance by Ministry of Manpower
  • Issuance of employment visa by Royal Oman Police, the Immigration Department
  • Issuance of resident's card by the Immigration Department of Royal Oman Police.
  • There are basically 4 types of work visas provided:

  • Temporary Work Permit
  • Express Visa
  • Business Visit Visa
  • Group Visa
  • How are staff working within this Free Zone registered with the authorities?
  • Explained in detail in question 22 above. Additionally, once the visa is issued, it is collected by the SOHAR Free Zone representative and deposited at an entry point in Oman, post which a deposit slip is issued. The copy of both is sent to the company.

  • What rules govern the remuneration and minimum benefits of staff working in this Free Zone?
  • Royal Decree 35/2003 issuing the Oman Labour Law provides a comprehensive framework for employment in Oman, and the same governs the remuneration and minimum benefits of staff working in this Free Zone.

  • What rules govern the working time and leave of staff working in this Free Zone?
  • Royal Decree 35/2003 issuing the Oman Labour Law provides a comprehensive framework for employment in Oman, and the same governs the leave and working time of staff working in this Free Zone.

  • What are the main features of a property lease in this free zone and what are the key restrictions when leasing a property?
  • First and foremost, a Plot Application Form has to be completed and submitted for relevant clearances, and the same is essential as a reference of the same is made in the Land Lease Agreement which is a comprehensive document. All the commercial terms must be agreed upon and adhered to. It is essential to get a pre-contract clearance depending on the activity that will be carried out on the said premises. Some examples of the same have been mentioned in Question 6 above. Definitive plot size and approval is done at this stage, and the approval of the Plot Application is done. A final plot plan with technical details is given by the technical department of SOHAR Free Zone. Finally, after the incorporation of the company, the Land Lease Agreement is signed.

  • Is it possible to apply for a building permit in this free zone? How is this done, and what steps are required?
  • For the execution of a specific work in the common areas of the Free Zone, a construction permit is necessary. An application has to be submitted to SIPC, short for SOHAR Industrial Port Company. The application is checked within 2 weeks from the date of submission. At this stage, the tenant submits a preliminary construction execution plan. SIPC provides is input and comments on the existing pipeline system. The tenant must coordinate the additional requirements and conditions of adjacent plots who must agree to the construction. Written consent from them must be obtained. The tenant then finalizes the construction execution plan which is checked by the SPIC for design and construction, post which a 'kick-off' meeting between the concerned parties is organized. Once all parties agree to the terms of the construction, the SIPC issues the Construction Permit.

  • What environmental requirements must construction companies building in this free zone consider, e.g. form of building, landscaping or building height?
  • The Construction Permits are subject to certain terms and conditions. Construction Permit for Work in or affecting the Common Areas requires several things to be kept in while planning the design for construction. The Permit Holder must mark the corners of the construction site with post dug firmly that extends to 1 meter above ground level. Machine may be used to dig around a distance of 0.50 meters from the existing Pipelines. When the construction is near such Pipelines, temporary barriers must be put within 25 meters. There are a number of delicate details that must be in kept in mind while constructing in this Free Zone, depending on the nature of construction, the activity to be carried out and relevant permissions needed for the same.

  • What are the key restrictions when leasing a property in this Free Zone?
  • Essentially, a company must be registered within this Free Zone to lease the property here. Upon meeting the prerequisites of incorporating a company in this zone and obtaining the permit/license, the company may apply for Land Lease Agreement, though several clearances for the same are handled before, as mentioned above.

  • What are the rules governing the use of utilities in this free zone?
  • Generally, One Stop Shop assists investors in obtaining and applying for all utilities. The Authority for Electricity Regulation provides tariffs throughout Oman. The water services in SOHAR Free Zone is provided by Majis Industrial Services.

  • How do retail premises establish themselves in this Free Zone?
  • There are no particular restrictions prohibiting retail establishments from operating in SOHAR Free Zone. The same process would apply as for any other type of company incorporation.

  • Is it possible for hotels and retail establishments to operate in this free zone- how do they establish themselves?
  • Yes, hotels and retail establishments can operate in this free zone. The establishment procedure is similar to that of any other company incorporation in SOHAR Free Zone.

    ]]>
    Thu, 05 Nov 2020 15:44:00 GMT
    <![CDATA[Ummal Quwain Freezone]]> Ummal Quwain Freezone

    1. What law established this freezone?

    The law establishing this freezone are as follows:

  • Ummal Quwain Emiri Decree No. 2/1987 concerning the Incorporation of a Freezone in Ahmed Bin Rashid Port;
  • Ummal Quwain Free Trade Zone Ordinance 1987;
  • Ummal Quwain Law No. 1/2013 concerning ports, Customs, and Freezone corporation in Ummal Quwain.
  • 2. What are the main internal regulations governing this freezone?

    The internal rules and regulations regulating the activities in UAQFTZ are as follows:

  • Ummal Quwain Free Trade Zone Rules and Regulations of March 2015;
  • UAQ Free Trade Zone Company Regulations 1/14.
  • The rules and regulations are issued by Ummal Quwain Free Trade Zone Authority and regulate those wishing to carry out relevant business from both in or from the freezone

    3. Does this freezone have any reciprocal arrangements with other freezones?

    UAQFTZ is a relatively new freezone and does not have any parallel arrangements with other freezones. However, UAQFTZ has recently signed a Memorandum of Understanding with Dubai Ministry of Finance(MOF) to ensure international standards of transparency in exchange of information for tax purposes, in accordance with Organization of Economic Cooperation and Development (OECD) regulations and principles.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    Every freezone has their own set of rules and regulations. However, the criminal laws of UAE are still applicable in UAQFTZ. The following are the laws which companies operating in UAQFTZ must adhere to:

  • Federal Law No. 4/2002 on Criminalization of Money Laundering;
  • Federal Law No. 7/2014 concerning Combatting Terrorism offences
  • Federal Law No. 3/1987 (the Penal Code) and its amendments;
  • Federal Law No. 1/2004 on Combatting Criminal Offences;
  • Federal Decree Law No. 5/2012 on Combatting Cybercrimes.
  • 5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    Every company established in UAQFTZ must be registered with the UAE General Directorate of Resident and Foreign Affairs in order to seek residential permits for their employees. Whereas, companies may also encounter Public notaries and the Department of Municipal Affairs and alike for attestation of certain documents depending upon the type of activity.

    6. How does a company set up in this freezone?

    In order to set up a company in UAQFTZ, an investor must undergo six (6) stages as follows.

    Stage I

    Select a License: The investor's first step is to decide what type of license is most appropriate for their business structure. UAQFTZ offers several types of license such as; commercial license, general trading license, consultancy license, freelance permit, industrial license, service license.

    Stage II

    Select a Type of an Entity: The second stage is to opt for the type of business structure the investor wishes to incorporate. UAQFTZ offers three types of entities which can be established in the freezone which are as follows:

  • Freezone Establishment (FZE) for single shareholder.
  • Freezone Company (FZC) for minimum of two shareholders or a maximum of 50 shareholders.
  • Branch of an existing company.
  • Stage III

    Choose the type of facility: At this stage, the investor must opt for the type of office facility such as office space, warehouse or land whichever suits his business structure.

    Stage IV

    Submit Documents: The investor post undergoing stage I, II, III should submit all the relevant documents with the freezone authority to receive the trade/commercial license.

    Stage V

    Fees: The company after submitting all documents must submit the fees for incorporating a company and seeking a trade license, depending upon the type of activity.

    Stage VI

    Receive the License: upon completing the stages above, the entity will issue a license to the entity and the business will be ready to undertake the activity mentioned in the trade license.

    7. What features do companies set up in this freezone have?

    Companies established in this freezone have several features, e.g. they will have easy access to major sea ports and receive special concession from Ummal Quwain's sea port and hi-tech facilities.

    UAQFTZ is an ideal location for Small and medium sized enterprises (SME) and micro business,

    In addition, companies set up in this free zone benefit from 100% foreign ownership, 100% repatriation of capital and profit, no restrictions on sector investment, and 0% personal and corporate taxation.

    8. What can companies set up in this freezone do?

    The companies incorporated in UAQFTZ can perform activities mentioned in the trade license. Generally, companies can import, export, distribute, store, trade and manufacture goods. The companies can provide consultancy services, and obtain a post seeking consultancy license to offer expert and professional advice. Companies are also permitted to provide services specifically mentioned in the license such as courier, logistics, insurance, travel agency, and tour services. UAQFTZ also permits a freelancer to operate within the freezone and to conduct business in his own name, specifically for those operating in technology, media or film industry.

    9. What can companies set up in this freezone not do?

    Companies established in UAQFTZ are prohibited from performing financial activities. In addition, companies are also prohibited from operating outside the boundaries of the freezone without prior approval of the relevant government authorities.

    10. What types of business are allowed to operate in this freezone?

    Companies can operate in various sectors inclduing industrial activities, trading activities, services, and professional activities.

    11. What inheritance laws apply in this freezone?

    At present, UAQFTZ does not have specific inheritance laws, so UAE laws apply. UAE follows shariah laws for inheritance for Muslims, whereas non-Muslims can follow the law of their home country . Dubai has implemented Law No. 15/2017 for inheritance and will, where non-Muslims can register their will and can apply law of their choice. Similarly, it is expected that non-Muslim citizens in Ummal Quwain will be able register their will.

    12. What taxation applies?

    UAQFTZ offers zero percent corporate and personal tax as well as 100% import and export tax exemption.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    UAQ Free Trade Zone Company Regulation No. 1/14 mandates companies established there to prepare adequate accounting records which must be audited at least once a year. The regulation obliges the company to prepare financial statements and to mention the accounting principles followed by the company within that financial statements

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    Companies in UAQFTZ can maintain bank accounts either in Umm Al Quwain or anywhere in UAE.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    At present, there are no specific rules governing the transfer, of moveable property from one freezone to another freezone in other jurisdictions. In such circumstances, companies must obtain prior approval of the custom department or any other relevant authority.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    UAQFTZ provides licenses to freelancers which are freelance permits specially designed for individuals who have special talent or creative roles in the technology, media or film industries. The free zone, also offers commercial, consultancy, industrial, and service licenses.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    All the entities established under this freezone will be regularly monitored by the freezone regulatory authority which maintains and regulates the companies in order to ensure their proper functioning.

    18. How are disputes settled with companies in this freezone?

    The disputes are initially resolved by the regulatory authority or if not possible then the matters proceed to the UAE courts or the arbitration centre as agreed by the parties.

    19. How are disputes between onshore companies and companies in this freezone settled?

    The disputes between onshore companies and companies in the freezone will be resolved through the relevant courts of Umm Al Quwain or other courts in the UAE.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The relationship between an employer and employee is outlined under Umm Al Quwain Free Trade Zone Rules and

    Regulations 2015 and UAQFTZ Employee Regulations. Further, the regulations state that the duties of both the parties are in accordance with Federal Law No. 8/1980 (the UAE Labour Law).

    21. How are employment disputes between employers and employees working in this freezone settled?

    Employment disputes are initially handled by the regulatory authority and if needed might be resolved from labour court after seeking a No Objection Certificate from Freezone Authority.

    22. What entry qualifications and permits are required for staff working in this freezone?

    Incorporations in UAQFTZ are required to register with UAE General Directorate of Resident and Financial Affairs and must obtain an online work permit and residency permits for their employees. The registration authority in the freezone offers a one stop-shop clearance for processing such permits. Generally, companies must submit the mandatory application form along with the attested degree of the employee. Once the permit is generated, they must undergo a medical test and should complete the procedure to obtain an Emirates ID. Then, the visa status is updated and stamped on the passport.

    23. How are staff working within this freezone registered with the authorities?

    Employees working in the freezone are registered in UAE General Directorate of Resident and Financial Affairs and receive a work permit from the authority, which is valid for three years.

    24. What rules govern the remuneration and minimum benefits of staff working in this

    freezone?

    The UAQFTZ employee regulations govern the remuneration and end of service benefits paid to the employees. These regulations are in line with the Federal Law No. 8/1980.

    25. What rules govern the working time and leave of staff working in this freezone?

    The Employee Regulations of UAQFTZ govern the working time and leave of the employees which include overtime, Ramadan time and summer timing. Generally, under Federal Law No. 8/1980, employees are allowed to work for 48 hours per week.

    They are also entitled to all the national holidays, sick leave and 30 days per month leave after the probation period of six months.

    26. What are the main features of a property lease in this freezone?

    UAQFTZ provides several types of the facility such as Flexi desk for micro businesses or SMEs, the Flexi Desk for Trading or consultancy companies, Flexi Desk for Premium or General trading. The freezone also provides other options of warehouses or land as per the requirement of the leaseholder.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    The UAQFTZ Rules and Regulations 2015 allow the Licensee to construct their own facilities. However, they must satisfy requirements of the relevant authority in order obtain required inspections and approvals in writing from the Authority prior to the commencement of construction of works, which include obtaining a No Objection Certificate from relevant authorities. The licensee must also obtain Building Completion Certificate (BCC) from the relevant authority as well as an Operation Fitness Certificate (OFC) prior to commencing the operations. The OFC must be renewed annually and cannot be renewed without a valid operation fitness certificate.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    In accordance with UAQFTZ Rules and Regulations 2015, all the construction work must be in line with the Authority's Planning Regulations and Department Guidelines, issued by the authority, Authority Construction Health, Safety and Environment (HSE) Guidelines.

    29. What are the key restrictions when leasing a property in this freezone?

    The prime requirement for leasing property in the freezone is to be registered with UAQFTZ and this must be renewed according to the term of the lease.

    30. What are the rules governing the use of utilities in this freezone?

    The UAQFTZ Rules and Regulations 2015 only regulate or govern the utilities, which further impose a requirement of seeking a NOC prior using any utility. The authority also has the right to set out further regulations for usage of utilities.

    31. How do retail premises establish themselves in this freezone?

    The retail premises have to obtain the license from the registration authority and the process is similar to obtaining leases for other activities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    There is no specific information about establishing a hotel in the freezone. However, the Registration Authority has the right provide a license in this regard.

    ]]>
    Thu, 05 Nov 2020 15:15:00 GMT
    <![CDATA[TECOM Freezone]]> TECOM Freezone

    1. What law established this freezone?

    This freezone was established by Dubai Law No. 1/2000 issued on 29 January 2000.

    2. What are the main internal regulations governing this freezone?

    The regulations governing the Dubai Creative Clusters (DCC) were the Dubai Technology and Media Free Zone Companies Regulations 2003.

    In 2016, the Dubai Creative Clusters Private Companies Regulations were issued to replace the 2003 Regulations.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    There are presently no arrangements between this freezone and other freezone areas. However, it is now much easier to transfer a visa to and from the Dubai Multi Commodities Centre.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    DCC regulations and laws govern DCC companies, but when these laws and regulations are silent, Federal Law No. 2/2015, The UAE Commercial Company Law, will apply. Other laws the DCC needs to comply with includes Federal Law No. 11/1992, the UAE Commercial Transactions Law, and Federal Law No.18/1993, The UAE Civil Procedure Code.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    For legal and administrative transactions and procedures, including issues relating to visas and immigration, DCC companies will usually directly deal with the DCC Authorities.

    6. How does a company set up in this freezone?

    Initially, there is a pre-approval required where the business proposal will be reviewed, including the business's documentation and details of the shareholders and other departments. When granted pre-approval, a lease agreement for business premises will be entered into.

    The DCC legal and financial department will then review the documentation for final approval. An invoice will then be issued by the DCC for the registration and licensing of the entity which will include the office rent. The license will be granted only once the invoice has cleared and receipt of the entire share capital is received (in the case of limited liability companies).

    The documentation required to register a company within the free zone includes: details and passport copies of the shareholder, manager, and director, the company incorporation certificate, the business plan, a NOC, MAA, share capital proof, resolution for incorporation, and bank reference letter.

    7. What features do companies set up in this freezone have?

    Foreign investors usually adopt a business establishment by opening a branch office or incorporating a limited liability

    company as the business can be 100% foreign owned, therefore the company can take full control of the business as there is not the UAE sponsor requirement. The DDC is known for its excellent location and strong legal framework. Additionally, the free zone is appealing as it offers 100% repatriation of capital and profits and is exempt from corporate tax and customs duty.

    8. What can companies set up in this freezone do?

    The types of businesses permitted to operate within the freezone are divided into four categories: Information and communication technology (ICT), education, science and media. These are further sub-divided into:

  • ITC Cluster: Dubai Outsource Zone and Dubai Internet City
  • Media Cluster: Dubai Media City, International Production Zone and Dubai Studio City
  • Education Cluster: Dubai International Academy City and Dubai Knowledge Village.
  • Science: Dubiotech and Embark, Healthcare City.
  • 9. What can companies set up in this freezone not do?

    All entities carrying out business in the DCC should hold a license of authorisation and function as per the license.

    10. What types of business are allowed to operate in this freezone?

    A limited liability company, a branch office of a foreign company, or a branch office of a UAE company and freelancing.

    11. What inheritance laws apply in this freezone?

    The laws of the UAE govern the DCC. The Shari'a principle of inheritance will apply to Muslim individuals and the heir to the estate of a non-Muslim can request the court to enforce the laws of succession of the deceased's home country. The Court can also apply Shari'a to non-Muslims.

    12. What taxation applies?

    Under Article 17 of Dubai Law No. 15/2014, all legal entities registered in the DCC are exempt from all taxes including income tax. There is no record kept of the transfer of capital, profits earnt and wages. The DCC also offers a fifty year tax holiday even if a new tax is introduced onshore.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    All legal entities operating in the DCC should have updated account and finance records. For a limited liable company, accounts should be audited by an accounting firm which is duly licensed and authorised under Dubai laws.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    A business functioning in the DCC locates their bank account in the Emirate of Dubai.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The transfer and movement of any goods is governed by Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The license type will depend on the business activity applied for. For an onshore limited liability company, there might be a requirement to open a branch office.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There may be specific permissions required from the federal or local authorities. For instance, a restaurant will need approval from the Dubai Municipality Dubai Control.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The DCC has its own set of rules governing the relationship between an employer and employees, supplementary to UAE labour laws. Federal Law No. 8/1980, The UAE Labour Law, is the main piece of legislation with regulations for the functioning of employment rights and relationships in the DCC. Federal Law No. 8/1980, The UAE Labour Law, compels an employer to enter into a contract with an employee. The employment contract will contain the details of work, such as working hours, wages, the type of work, allowances, leave, salary, etc. The employer is obliged to meet the minimum requirements for pay, working hours, wages, allowances, etc. In return, the employee is required to work and carry out his duties under the contract and as requested by the employer.

    21. How are employment disputes between employers and employees working in this freezone settled?

    Disputes arising between employers and employees are usually handled by an expert team of DCC mediators. However, the DCC does not hold itself responsible for any resolution that takes place between the parties. If DCC mediators are not successful in resolving a dispute, they will issue the claimant with a letter to refer the matter to the labour court.

    22. What entry qualifications and permits are required for staff working in this freezone?

    In most cases, employers will assist their employees in obtaining the required permits to work in the DCC. If the employee is an expatriate, the employee will need to be sponsored to work in the freezone legally. The employer will need to enter into a personal secondary agreement with the DCC, after which, the DCC will sponsor the employer's staff on his behalf. Employees who are not sponsored by the DCC require an employment visa sponsored by the DCC and a DCC ID card to legally work in the freezone.

    23. How are staff working within this freezone registered with the authorities?

    The standard application form and fees for each application have to be complied with by the employer. After receiving a permit to enter, the applicant undertakes a medical test and a medical certificate will be issued. An application then has to be made for a residence visa which is attached to the employee's passport allowing the employee to reside and work in the DCC legally.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    There is no mandatory remuneration or benefits the employer has to provide his employees with. However, it is common practice for employers to provide their staff with at least the minimum wage and allowances for housing and transportation. If the employee is terminated, then the employer should make provisions for the employee to return to his home country, except if the employee is moving to a new employer in the UAE. DCC rules and Federal Law No. 8/1980, The UAE Labour Law, state that the employer must arrange for a medical card and all other necessary costs.

    25. What rules govern the working time and leave of staff working in this freezone?

    Under Federal Law No. 8/1980, The UAE Labour Law, working hours should not exceed 48 in a week (40 hours if a 5-day working week) and 8 in a day (except in the case of industries with the required permission from the authorities). An employer must allow his staff to take an hour break for food, rest, and prayers after every five working hours. Working hours should be flexible and adhere to Ramadan and summer working hours for certain industries. Pregnant women are entitled to 45 days paid leave, and half paid leave if service is less than one year. There is a further allowance of 100 days unpaid in the case of sickness due to pregnancy.

    After one year of service, employees are entitled to 30 days leave annually. After six months in the first year, an employee is entitled to two days annual leave per month. All employees are entitled to 90 days sick leave per year of which 15 days are fully paid leave and 30 days half paid.

    26. What are the main features of a property lease in this freezone?

    There are a variety of rental spaces made available by the DCC such as office space, retail space, etc. A lease can be for a single unit or multiple stories. The activity of the company will play a role in the type of property available.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    To obtain a building permit in this freezone, the application should have specific documentation such as; building permit request form, valid site plan; project HSC plan( should be signed and stamped by the company manager); copy of the project manager and team HSC passports; copy of the final design letter; project detail sheet( stamped and signed by a consultant);

    security cheque; NOC from the master developer and fees of AED 1.00 per square feet ( Minimum AED 9,000).

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Any contracting company in Dubai must comply with the regulations set by the Environmental, Safety and Health Department in the Dubai Municipality.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in the DCC will have an office based in the DCC. For a lease agreement, approval from the DCC is mandatory to maintain a license. An office can be rented from the DCC or a private landlord. However, market rates are not applicable and are set by the DCC authorities.

    30. What are the rules governing the use of utilities in this freezone?

    The Dubai Electricity and Water Authority and the DU are the service providers in the DCC. Applicable charges are levied for use.

    31. How do retail premises establish themselves in this freezone?

    Retailers can establish themselves in this freezone subject to an allowance from the DCC authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    Hotels can operate and establish themselves in this freezone, provided they obtain the necessary permissions from the DCC

    (special approvals will be required).

    ]]>
    Thu, 05 Nov 2020 14:44:00 GMT
    <![CDATA[Hamriyah Free Zone]]> Hamriyah Free Zone

    1. What law established this freezone?

    The Hamriyah Free Zone was established under Sharjah Emiri Decree No. 6/1995 issued in 12 November 1995 as amended by Sharjah Executive Council Decision No. 1/2000 (the Decree).

    2. What are the main internal regulations governing this freezone?

    The principle regulation governing all operations within HFZA is the Implementing Rules and Regulations issued by the Hamriyah Free Zone Authority (HFZA) under the Decree.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    HFZA has not signed any reciprocal arrangements with other freezones which have been confirmed. Reciprocal arrangements between free zones often get underway to facilitate cooperation on various matters. For instance, reciprocal arrangements may have been entered for the exemption of customs duties on goods transferred reciprocally, or any other benefits.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    Businesses operating in this freezone must comply with the federal laws of the United Arab Emirates, in addition to requirements under the laws of the Emirate of Sharjah. Some of the key legislation in this regard includes:

    • Federal Law No. 8/1984 and the repealing law Federal Law No. 2/2015 (Commercial Companies Law)
    • Federal Law No. 4/2002 Regarding the Criminalisation of Money Laundering. This law requires disclosure of currencies, tradable financial instruments, high-value stones, and precious metals entering and exiting the country.
    • UAE Labour Law still applies within the Freezone, though the procedure may be different for resolving disputes.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    Each company within the freezone needs to comply with the general policies of the UAE General Directorate for Resident and Foreign Affairs. Depending on the company's activities, it may have to satisfy the health and safety guidelines for respective business.

    6. How does a company set up in this freezone?

    HFZA has simplified the incorporation process into a four-step requirement; license application and approval, project approval, providing of legal documentation, signing of the agreement and making required payments. The lease, license, and Certificate of Incorporation (where applicable) will then be issued.

    The application stage includes a request for a license to get provisional approval. The second step includes submission of all required documents concerning a company's formation, ownership and management. The third step includes the signing of a lease agreement and payments, issuance of a lease and issuance of a certificate of incorporation.

    7. What features do companies set up in this freezone have?

    FZEs and FZCs established within the HFZA have a minimum capital requirement of AED 150,000 deposited in a UAE bank. There are no corporate or personal taxes on profits and there is no public registry for the companies.

    The freezone itself provides a seaport on both the west and east coast, which is unique for any freezone in the UAE. It has access to the Indian Ocean making it an attractive freezone for setting up operations for companies that have huge import and export requirements from Asia or the Middle East.

    8. What can companies set up in this freezone do?

    Within the free zone companies are permitted to execute a variety of commercial, service, and industrial activities. Within the commercial sector, permitted activities include: import, export, trading, and e-commerce. Companies are also authorized to perform: manufacturing, processing, packaging, assembling, fabrication, business consultancy, marketing consultancy, IT consultancy, HR consultancy, tourism consultancy, amongst other activities. Freezone companies can only undertake the activities listed in their licences. A company can sell their products locally between freezones, outside the UAE or if in the UAE, only through a local distributor by payment of relevant customs duties.

    9. What can companies set up in this freezone not do?

    Some activities, for instance insurance, travel and tourism (except for tourism consultancy) are governed by Federal approvals. These activities are not carried out by freezone companies. Similarly, hospitals or school licenses are not granted by the HFZA as it is a 'commercial activities' freezone.

    10. What types of business are allowed to operate in this freezone?

    HFZ includes the Hamriyah SME Zone, Hamriyah SME E-office Zone, Hamriyah Logistic Village, Hamriyah MB Zone and seven further zones including the Oil & Gas Zone, Construction World, Petrochemical Zone, Maritime City, Timber Land, Perfume World and Steel City. However, HFZ allows a broad spectrum of business sectors to operate in its free zone. These business sectors include services such as business, management, IT consultants, oil and gas, import and export in various types of sectors include services such as business, management, IT consultants, oil and gas, import and export in various types of manufacturing, technical equipment, precious stones, logistics, warehouse distribution and storage. Business set-ups under HFZA are varied in their nature, type and scope of work.

    11. What inheritance laws apply in this freezone?

    The inheritance laws of the UAE apply to the HFZA as well. In a nutshell, matters of inheritance in the UAE are governed by Federal Law No. 5/1985 and by Federal Law No. 28/2005 regarding the UAE Personal Affairs Law. As a general rule, inheritance issues for Muslims are dealt with in accordance with Sharia law, whereas for non-Muslims, the law of the deceased's home country can apply in case a will is made. Succession under Sharia law principally operates by a system of reserved shares under which shares of inheritance are predetermined depending on whom the deceased is survived by. However, as per the Personal Affairs Law No. 28/2005, a non-Muslim expatriate who is resident in the UAE can opt for the law of their home country to be applied to the distributions of its UAE assets through a will.

    12. What taxation applies?

    HFZ provides a tax-free business regime providing exemptions from all commercial levies and repatriation of capital and profits. Customs duty applies when the free zone business wants to sell their product in the UAE mainland.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    The account and auditing rules are stated under Article 19 of the Implementing Rules and Regulations issued by the HFZA pursuant to Sharjah Emiri Decree No. 6/1995 concerning the incorporation of Free Zone Companies. Under this Article, each of the freezone companies are required to maintain annual accounts with necessary disclosures. The companies audited account statements are required to be submitted three months prior to the end of the financial year. HFZA reserves the right to demand the balance sheet and accounts to be met by a procedure set out by HFZA.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    There is no specific provision governing the location of bank accounts in the Hamriyah Freezone Companies Registration Regulation. An account can be set up with a UAE local bank of the investor's choice.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    Yes, an approval is required from the HFZA every time a physical movement of goods takes place outside or inside the freezone.

    Generally, a Freezone company may only operate within the free zone boundaries, and is not allowed to trade directly with the UAE market. However, HFZ companies and establishments can sell their products in the UAE through a local distributor, and on the payment of relevant customs duties - hence the same rules may apply for moveable property being sold outside.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    Three different types of licences are issued in the HFZ - Industrial licences, Service licences and Commercial licences.

    The types of legal entities are Free Zone Establishment (FZE), Free Zone Company (FZC) and branches of local or foreign companies. An FZE will be a single shareholder limited liability company, and an FZC will be a multi shareholder limited liability company with 2 to 5 shareholders.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    Article 22 and 24 of the Implementing Rules and Regulations provide for "Investigation and Deregistration".

    The HFZA may appoint one or more competent persons as inspectors to investigate the affairs of any Free Zone company or establishment, and report to the HFZA. Such appointment may be made on the application of the shareholder, by the FZE and FZC, by any creditor of the shareholder, by the HFZA acting unilaterally, or by any other person. This is based on the provision that the HFZA is satisfied that good reason has been shown, or that circumstances have arisen that require the investigation.

    Construction activities, environmental, health and safety matters are also examined by the HFZA as per the Investor Guide Kit, and penalties are imposed by the HFZA for violations.

    18. How are disputes settled with companies in this freezone?

    Disputes are settled through the general course of judicial redressal forums, and courts as they are available for civil disputes. The exception would be if any other forum, such as arbitration or another form of dispute resolution, is agreed upon by the parties in the contract.

    19. How are disputes between onshore companies and companies in this freezone settled?

    A case would be filed with the courts of the Emirate of Sharjah provided no other forum has been agreed upon between the parties to the dispute. If the parties sign an agreement with an express clause on arbitration in Dubai or the DIFC, the matter shall be referred to that particular forum.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    Within HFZA, the guidelines for an employer - employee relationship are guided by the UAE Labour Law - Federal Law No. 8/1980. An employee is entitled to work only for their employer inside the free zone. Accordingly, wages can be paid on a monthly, weekly, daily, or by piece basis in any currency with no minimum wage prescribed.

    The maximum working hours for an adult employee is eight hours per day, or forty hours per week, and can be increased or decreased depending on the profession and working conditions. If employees work on a Friday, they are entitled to an additional 50% of their wage. Employees cannot be asked to work two consecutive Fridays.

    21. How are employment disputes between employers and employees working in this freezone settled?

    At HFZA, the visa department handles employee disputes. Disputes are first submitted to this department where consultation or arrangement may be reached. Thereafter, as UAE Labour Law applies to the settlement of all disputes between employers and employees, it is understood that the usual method applies. An application must be made by the aggrieved party to the Ministry of Labour office in Sharjah where the parties must then state their arguments before a representative. After assessing the matter, the representative makes a recommendation. If the parties fail to resolve the dispute as recommended by the Ministry, the matter is then referred to the court for litigation and a decision is made accordingly.

    22. What entry qualifications and permits are required for staff working in this freezone?

    The general requirements are:

    • The minimum age limit for applying for an employment visa is 18 years and the maximum is less than 60. Howeverspecial approval can be obtained for shareholders/managers. The manager of the company's HFZ operations whose name is mentioned on the Trade license should be on the HFZ visa.
    • Other visas can only be applied for after a Manager's Residence Visa is obtained. Once a stamped manager visa is obtained, application must be made for a HFZ authorization card. Only HFZ Visa holders are permitted to sign for visa related documents and other services.
    • The owner, shareholder and manager whose names are mentioned in the Trade license, are exempted from the Bank Guarantee. Other employees must have to deposit with the HFZ Visa & Residence Department Bank Guarantee/Cash Deposit the equivalent of one month's salary and a return ticket fare to the country of origin is mandatory.
    • The Investing Company should acquire a Health Card issued by the UAE Ministry of Health for its employees. This requires a medical check-up, the obtaining of an Emirates ID card, and enrolling in suitable medical insurance. The process is facilitated by HFZ.
    • After entering the country, a medical should be done and the medical report along with a residence application should be submitted within 14 days from the date of arrival to avoid penalty.
    • An additional visa can only be applied for after exceeding the allotted visa limit.
    • All HFZA sponsored employees can work only inside its boundaries. For temporary assignment outside the Freezone, companies need to apply to the Visa Dept for permission to work outside.

    23. How are staff working within this freezone registered with the authorities?

    Staff are registered with the authorities through the guidance of the departments of HFZA in various matters differently.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    The UAE Labour Law governs the remuneration and minimum benefits of staff working under the HFZA.

    25. What rules govern the working time and leave of staff working in this freezone?

    The UAE Labour Law governs the working time and leave of staff.

    26. What are the main features of a property lease in this freezone?

    As stated previously, there are various zones, hence the HFZ provides various options regards the license of a company and its business activities. The property and its lease features are:

    • Land plots ranging in sizes from 2,500 m2 upwards in a multiple of 5000 m2 are available with minimum 5 years and maximum 25 years' renewable lease.
    • The business centre provides space for over 100 executive offices suits ranging in size from 15 m2 to 42 m2 with conferencing and internet facilities. The lease term is one year renewable with 3 months' notice period.
    • It further provides pre-built warehouses in sizes of 614 m2, 416 m2 and 276 m2 for storage, manufacturing and light manufacturing purposes which contain various utilities. Lease term is a minimum 1 year and maximum 25 years and renewable for a further 25 years. Rates can be fixed for the first 5 years with a rent review at the end of this period.
    • It occupies a 14m deep water harbour which comfortably accommodates LPG and bulk handling vessels. It gives the crew and their free zone compatriots accessibility to each other as well as access to the "Freight Bridge" between Europe and the Far East, and the super highway known as "the link" that connects the freezone site with the United Arab Emirates west and east coastlines.
    • Notice Period for Lease Termination: Office - 1 Month, Warehouse - 3 Months, Land - 6 Months ending with the contractual year.
    • Non-renewal for a month will be treated as abandonment leading to termination, removal and the discarding of items in the facility.
    • In the case of leases for facilities which are not ready, a Rent Holiday will be applied until the date when these are ready and not until the investor takes the key.
    • The leased property may not be used for anything other than the permitted use stated in the lease agreement.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    A company wishing a building permit can acquire it through application to the Sharjah municipality, and by following its rules and regulations. The permit is issued for six months for construction and modification to any existing facility. This permit is issued against the approval of drawings, including an approved and valid site plan, the appointing of a HFZA registered Consultant and Contractor, a Building Completion Certificate, and application for Levelling and Fencing. Further information about this process can be obtained on the website of the Sharjah Municipality.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Construction companies building in this freezone must comply with all health and environmental standards as set out by the Sharjah Department of Town Planning and Survey (DTPS) as per the Environment regulations. Companies must also comply with the Sharjah Building Code when constructing their facilities. The DTPS advise builders on the use of land, height of buildings, parking areas, loading and unloading points in industrial areas, and locations of petrol stations, commercial centres and other projects. Sharjah Municipality looks into the requirements regarding the number of storeys in a building, minimum spaces inside rooms, ventilation, lighting, exit and entrance points, passages, elevators and allied aspects.

    29. What are the key restrictions when leasing a property in this freezone?

    Only companies that have completed the incorporation process and are licensed in this freezone are allocated land or other property on a lease.

    30. What are the rules governing the use of utilities in this freezone?

    The standard terms and conditions of the use of utilities are set out in the various forms for different types of constructions. A guide is provided - the "Investor guide kit" for the use of utilities.

    31. How do retail premises establish themselves in this freezone?

    This freezone does not relate to retail operations.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    In essence, hotels are not usually licensed by the HFZA. In some cases, cafes or restaurants are licensed. There are no specific rules regulating restaurants operating in this freezone. Therefore, the same procedure for establishing or incorporating would apply as any other type of business activity. Hospitality is subject to approval and generally these licenses are granted only by special approval. Only limited cafes operate inside the freezone.

    ]]>
    Thu, 05 Nov 2020 12:29:00 GMT
    <![CDATA[Fujairah Creative Freezone]]> Fujairah Creative Freezone

    1. What law established this freezone?

    Fujairah Emiri Decree No. 4/2007 established Fujairah Creative City (FCC).

    2. What are the main internal regulations governing this freezone?

    The Fujairah Free Zone Authority sets the regulations governing FCC Free Zone.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    Dubai Law No. 13/2015 established the Dubai Free Zones Council which provides for the enhancement of cooperation between freezones.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    In situations where FCC rules and regulations do not apply, UAE legislation will apply. Numerous UAE legislations and mandatory industry standards, depending on the business activity, also need to be complied with by any business operating in FCC freezone.

    For example, when FCC rules and regulations do not apply, Federal Law No. 11/1992, the Civil Procedure Code, Federal Law No. 18/1993, the Commercial Transactions Law, and Federal Law No. 2/2015, the Commercial Companies Law, will apply.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    Freezone companies are generally limited to the activities stated on their license. If a freezone company wants to carry out operations beyond the limitations stipulated in its license, it will need to comply with the requirements of Federal Law No. 2 /2015, the Commercial Companies Law, which determines the licensing procedure in the required Emirate.

    The FCC Authorities provide assistance dealing with the federal ministries to obtain driving licenses, car registrations, securing the notarisation of documents, acquiring entry permits, applications for residence visas, and transit and visitation visas for employees and investors. They also assist with the recruitment of employees at all levels.

    6. How does a company set up in this freezone?

    There are various types of businesses that operate in FCC freezone area that come under the categories of New Entity, Branch and Foreign Branch.

    There are specific requirements and procedures that need to be complied with to set up a company in FCC, such as filing an application, providing a passport copy for each individual (including shareholders and staff at managerial levels), profiles of the parent company in case of branch formation, the details of each individual involved, payment of the necessary fees, and signatures on the articles of incorporation. Once the trade license has been issued, an establishment card/immigration card will be issued. An immigration file may also be referred to for the application of a visa.

    7. What features do companies set up in this freezone have?

    A company that operates in a freezone is free to carry out its business without the terms and conditions that usually apply to foreign companies. They are free from conditions such as having a local UAE partner and corporate and income tax laws.

    8. What can companies set up in this freezone do?

    Companies set up in this freezone can conduct broadcasting, audio and visual, communication and design, photography and videography, consultancy, advertising, architecture and technology, education and training, e-commerce and publishing, marketing and media service activities.

    9. What can companies set up in this freezone not do?

    Companies set up in FCC are not permitted to undertake activities beyond the scope of their license.

    10. What types of business are allowed to operate in this freezone?

    Companies set up in this freezone can conduct broadcasting, audio and visual, communication and design, photography and videography, consultancy, advertising, architecture and technology, education and training, and e-commerce activities. The creative zone agreement cannot be re-assigned and shares a personal status with customers. This agreement is read and governed by the laws of the UAE. No third party has the right to dictate its terms in the agreement.

    11. What inheritance laws apply in this freezone?

    Shareholder rights are heritable and can be transferred. However, the procedure is governed by UAE laws and FCC rules and regulations.

    12. What taxation applies?

    Businesses carrying out their operations from FCC are not subject to corporate and income tax.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    Annually there are no auditing requirements

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    There isn't any specific location businesses operating in FCC should have their bank accounts. A company operating in FCC can have an account with any bank without restriction.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The Dubai Custom regulations are applicable when movable property is removed from, or transferred to, FCC freezone, and must be declared to Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    Certain types of company are only allowed to establish themselves in FCC. The FCC offers a variety of licenses which include: commercial licenses, single owner commercial licenses and freelancer.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    The regulations and monitoring applicable to a company will depend on the nature of the company's business in FCC.

    18. How are disputes settled with companies in this freezone?

    The FCC Authorities accept all complaints from employees, will investigate them, and provide the suitable means to resolve the dispute.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising between a FCC freezone company and an onshore company will be settled through the normal judicial avenue (the Courts of Fujirah), unless an alternative forum is expressly provided for in the contractual agreement between the parties, and in these cases, the FCC will act as mediator.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The employer-employee relationship is governed by the rules and regulations of the FCC Free Zone. However, they are supplementary to Federal Law No. 8/1980, the UAE Labour Law, which deals with the rights and obligations of an employer and employee. FCC regulations and Federal Law No. 8/1980, the UAE Labour Law, obligate the employer to provide the employee with an employment contract which includes particulars such as the rights and duties of the parties, the term of work, leave, working hours, salary, etc. Therefore, the employer must ensure all the minimum requirements of the employee are met, and the employee should comply with the contractual obligations as agreed.

    21. How are employment disputes between employers and employees working in this freezone settled?

    The employment contract should detail the governing jurisdiction/authority for handling any disputes between employers and employees.

    22. What entry qualifications and permits are required for staff working in this freezone?

    Company shareholders, employees or officers who wish to be employed in a managerial post and take up UAE residency are required to submit their original decree translated into Arabic, attested from their home country and certified by the UAE

    Foreign Ministry. To obtain a 'visa on arrival' in GCC countries, the visa will need to state the managerial position the employee will be filling. Other employees who want a company visa, but do not have certified attestations, can only apply for a visa for administrative positions such as marketing and sales.

    23. How are staff working within this freezone registered with the authorities?

    To obtain a permit from the FCC Authority, employers have to submit an application for each applicant along with the

    payment of the required fees. An entry permit has to be obtained by the employer on behalf of the employee. Once the employee has an entry permit, a medical fitness certificate will be issued after passing a medical examination. The last stage is the issuance of a residency permit, allowing the employee to work and live in the FCC region legally. The application also requires that the parties enter into a contract with FCC under Federal Law No. 8/1980, the UAE Labour Law.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    The remuneration, benefits, working hours and other similar criteria are all governed by the FCC Free Zone rules and regulations. Remuneration and benefits for employees will be decided by the employer.

    25. What rules govern the working time and leave of staff working in this freezone?

    Federal Law No. 8/1980, the UAE Labour Law, regulates the working hours, leave terms, maternity leave, etc. of FCC Free Zone workers. Under the provisions of Federal Law No. 8/1980, the UAE Labour Law, companies are required to set rules for working hours, disciplinary procedures, grievances and the health and safety of workers.

    26. What are the main features of a property lease in this freezone?

    The main features of a property lease in FCC will include office space facilities, such as a P.O Box No, telephone line, fax, wifi, car parking, and other obligations applicable in case of any damage to the property.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    A building permit cannot be obtained in FCC Free Zone.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Construction companies are required to comply with the Fujirah Municipality requirements.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in FCC should have an office based in FCC. The approval of the FCC Authority for a lease agreement is mandatory to maintain a license. An office can be rented from the FCC Authority or a private landlord. However, market rates are not applicable and are instead set by the FCC Authorities.

    30. What are the rules governing the use of utilities in this freezone?

    Utilities in FCC are charged based on the actual usage of the service. However, this is subject to the relevant utility provider such as the Fujirah Municipality.

    31. How do retail premises establish themselves in this freezone?

    No specific restrictions affect retail premises. However, their operation is subject to the approval of the relevant authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    No specific restrictions affect hotel operations. However, their activities are subject to the approval of the relevant authorities and FCC rules and regulations.

     

    ]]>
    Thu, 05 Nov 2020 11:46:00 GMT
    <![CDATA[Fujairah Free Zone]]> Fujairah Free Zone

    1. What law established this free zone?

    Fujairah Free Zone was established by Emiri Decree on 28 November 19987 and is located next to the Port of Fujairah which offers total unique access to all Arabian Gulf Ports, the Red Sea, India and Pakistan.

    2. What are the main internal regulations governing this free zone?

    All internal regulations of this Free Zone are managed by the Emiri Decree of 28 November 1987

    Some federal laws which govern the FFZ are:

    • Federal Law No. 1/1979 for regulating industry affairs;
    • Federal Law No. 8/1984 amended in 1988 for commercial companies;
    • Federal Law No. 5/1985 for Civil Transactions;
    • Federal Law No. 18/1993 for Commercial Transactions.

    3. Does this free zone has reciprocal arrangements with other free zones?

    No, Fujairah Free Zone does not have reciprocal arrangements with other free zones.

    4. What key areas of local legislation must a business operating in this free zone still comply with? What are the most important examples of how this affects operations?

    The key areas of legislation which businesses operating in this Free Zone must comply with are:

    • License Law, Fujairah Law No. 1/1992;
    • Trade Attorney Law, Fujairah Law No. 18/1981 amended by Fujairah Law No. 14/1998;
    • Fujairah Local Order No. 1/1987;
    • Fujairah Local Order No. 1/1994;
    • Fujairah Local Order No. 2/1994.

    The above list is not exhaustive, but any laws which are not covered by the internal regulations of the Free Zone must be complied with.

    5. What key agencies do businesses operating in this free zone need to register with or be aware of?

    The agencies a business operating in this Free Zone need to register or be aware are:

    • The immigration department of Fujairah;
    • Chamber of Commerce for registration of FZE;
    • Federal Electricity & Water Authority (FEWA);
    • Health Ministry;
    • Fujairah Municipality for Environmental Approvals;
    • Department of Industry & Economy for special strategic projects;
    • Environment and Water Ministry;
    • Department of Civil Defence for Occupational Health and Safety.

    6. How does a company set up in this Free Zone?

    On receiving the completed application form, the registration of a new company in the Free Zone is quite straightforward. The process usually involves:

    • Submit the required documents including:
  • Passport copy of applicant;
  • FFZ application form;
  • Description of project or business/business plan;
    • Letter from bank or bank statement showing 150,000 AED funds for minimum capital requirement (not in all cases, check with FFZ).
    • The client submits the filled out application form along with the above-mentioned documents. If everything is submitted correctly and in order, a preliminary approval is granted.
    • The client registers as an FZE, FZC, or a Branch.
    • The FFZ arranges for the telephone lines and utilities such as furniture and also arranges for a bank account and registration with the Chamber of Commerce.

    7. What features go companies set up in this Free Zone have?

    Like most other Free Zones which are granted benefits, incentives and other facilities by the Free Zones, Fujairah Free Zone offers various incentives to attract foreign and local investors like:

    • 100% foreign ownership;
    • 100% free transfer of funds;
    • 100% tax exemption from import and export duties;
    • No foreign exchange controls;
    • No restriction on hiring foreign employees;
    • Cost-effective and timely immigration procedures;
    • Convenient procedures for recruitment;
    • Advanced infrastructure;
    • Total safety and protection for investors;
    • State-of-the-art communication method;
    • Full repatriation of capital and profits;
    • Low investment costs;
    • Progressive economic policies with a legal framework;
    • Various investment opportunities;
    • Affordable sponsorships and visas;
    • Corporate Bank Account Setup.

    8. What can companies set up in this Free Zone do?

    Following are the activities a company in this Free Zone can carry out:

    • Trading and General Trading License
  • For import, export and re-export of products and materials;
  • The client can do business freely within and outside the UAE;
  • Special government permits for hassle-free trade.
    • Warehouse License
  • Issued when warehouses are leased.
    • Manufacturing License
  • Issued when the business project is approved and implemented
  • The investor must arrange for full insurance of machinery and workers
  • The investor must specify the facility building and open space requirements, the environmental issues involved and the electricity, water and manpower needed
  • 9. What can companies set up in this Free Zone not do?

    Generally, any activity which does not conflict with the applicable laws of the UAE.

    10. What types of business are allowed to operate in this Free Zone?

    Following are the activities a company in this Free Zone can carry out:

    • Trading and General Trading License
  • For import, export and re-export of products and materials;
  • The client can do business freely within and outside the UAE;
  • Special government permits for hassle-free trade.
    • Warehouse License
  • Issued when warehouses are leased.
    • Manufacturing License
  • Issued when the business project is approved and implemented
  • The investor must arrange for full insurance of machinery and workers
  • The investor must specify the facility building and open space requirements, the environmental issues involved and the electricity, water and manpower needed
  • 11. What inheritance laws apply in this free zone?

    The inheritance law is mentioned in the 1996 Basic Statute of the State is governed by Islamic Sharia Law.

    12. What taxation applies?

    Working companies in the tax territory cannot exercise any unlicensed business or activity without complying with the applicable laws, systems and regulations. Payment of financial obligations is essential to the government, public institutions and authorities as well as their entities.

    The working companies are exempt from taxes as well as from submitting income returns as stipulated in the Law of Income Tax on the Companies. Such exemptions are the benefits and attractions for investors and traders to come to the FFZ.

    13. What accounting and auditing rules do businesses operating in this free zone need to adhere to?

    The Emiri Decree of 1987 issued on 28 November 1987, The company undertakes to maintain regular accounts of all the activities carried out by it, approved by an accounts auditor who is licensed to conduct the profession of auditing and accounting. The Auditor must provide the Secretariat with such accounts.

    Working companies must provide the concerned department with soft copies of the updated entries and registers at the end of each calendar month, which shall be kept until the auditing date.

    14. Where do businesses operating in the free zone generally locate their bank accounts?

    Working companies have to open a local bank account before obtaining the Free Zone license. The local banks of Fujairah like National Bank of Fujairah, United Arab Bank, First Gulf Bank, HSBC and all other banks which are established both in the UAE and in Fujairah can assist with this.

    15. Are there any specific rules governing when the moveable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?

    Activities are restricted to the premises of the Free Zone. The movement of property relating to a certain zone to other zones may require the assistance of local business management agents.

    16. Are any specific licenses required to operate as a specific type of company in this free zone?

    The companies in this Free Zone only carry out any economic activity under the following type of company they form, either as Free Zone establishments or Free Zone company or a branch and can only carry activities of the business structure they have registered under.

    17. Is there any specific ongoing regulation or monitoring firms operating as particular types of companies by this free zone authority?

    Operations in this Free Zone are regulated and monitored by the Fujairah Free Zone Authority which is a separate entity specifically for the regulation of this Free Zone.

    18. How are disputes settled in this free zone?

    Generally, the contract mentions the dispute resolution mechanism to be followed in a situation where a dispute arises. Depending on the particular case and parties involved the matter might be resolved either through Alternative Dispute Resolution if the parties can agree to settle, parties in the UAE are usually advised to settle their cases through ADR or go ahead on to litigation in the UAE courts.

    19. How are disputes between onshore companies and companies in this free zone settled?

    Generally, the contract mentions the dispute resolution mechanism to be followed in a situation where a dispute arises. Depending on the particular case and parties involved the matter might be resolved either through Alternative Dispute Resolution if the parties can agree to settle, parties in the UAE are usually advised to settle their cases through ADR or go ahead on to litigation in the UAE courts.

    20. What are the main rights and duties of an employer and employee working in this free zone?

    Those working in free zones are generally not directly governed by the UAE Labour Law. Each free zone authority has its own employment law and employees are subject to the rules and regulations of their respective free zone authority. When these employment rules or law are not specified, the UAE Labour Law can step in to regulate the situation.

    21. How are employment disputes between employers and employees working in this free zone settled?

    In addition to the information mentioned above, unless a separate mechanism has been agreed on in the employment contract, the labour dispute will be processed in the Fujairah Labour Ministry.

    22. What entry qualifications and permits are required for staff working in this free zone, and how are employees registered with the authorities?

    All employee contract must be registered with the authorities.

    While employing expatriates, three mandatory processes must be completed:

    • Clearance by the Labour Ministry;
    • Issuing an employment visa;
    • Issuing a resident's card and medical health card.

    23. How are staff working within this Free Zone registered with the authorities?

    All employee contract must be registered with the authorities.

    While employing expatriates, three mandatory processes must be completed:

    • Clearance by the Labour Ministry;
    • Issuing an employment visa;
    • Issuing a resident's card and medical health card.

    24. What rules govern the remuneration and minimum benefits of staff working in this Free Zone?

    Each free zone has its own regulatory framework. If there is no definite framework then the UAE Labour Law applies.

    25. What rules govern the working time and leave of staff working in this Free Zone?

    Each free zone has its own regulatory framework. If there is no definite framework then the UAE Labour Law applies.

    26. What are the main features of a property lease in this free zone and what are the key restrictions when leasing a property?

    In this Free Zone the benefit is that the lease of property is easily accessible.

    27. Is it possible to apply for a building permit in this free zone? How is this done, and what steps are required?

    Yes, it is possible to apply for a building permit.

    The steps to apply for a building permit are as follows:

    • After the company is registered with the Chamber of Commerce, operating licenses will be issued.
    • A copy of the registration will be provided for the Authority's records.
    • The application form for a building permit must be filled out and submitted with the registration copy.
    • With the application form, the company must submit all the details of the contractors and consultants which will be working for the building and get approval for the contractors and consultants from the Authority.
    • Before construction of the building, the detailed design plan must be submitted

    28. What environmental requirements must construction companies building in this free zone consider, e.g. form of building, landscaping or building height?

    There are no current requirements for construction depending on the scenarios the requirements must be approved by the Health Ministry, Department of Civil Defence etc.

    29. What are the key restrictions when leasing a property in this Free Zone?

    A company must be registered in this Free Zone to lease the property. On meeting the prerequisites of incorporating a company in this zone and obtaining the permit or license the company is free to lease property.

    30. What are the rules governing the use of utilities in this free zone?

    The benefits of opening a company with the FFZ is that the new establishment is provided with utilities such as furniture, electricity, internet and phone connections.

    31. How do retail premises establish themselves in this Free Zone?

    There are no particular restrictions prohibiting retail establishments from operating in the Free Zone. The same process will apply for any other type of company incorporation.

    32. Is it possible for hotels and retail establishments to operate in this free zone- how do they establish themselves?

    Hotels and retail establishments can operate in this Free Zone. The establishment procedure is similar to that of any other company incorporation in the Free Zone.

    Originally published on LexisNexis

    ]]>
    Thu, 05 Nov 2020 10:55:00 GMT
    <![CDATA[Dubai World Central Freezone]]> Dubai World Central Freezone

    1. What law established this freezone?

    Dubai World Central (DWC) freezone was established under Dubai Law No. 8/2006, amended by Dubai Law No. 10/2015.

    2. What are the main internal regulations governing this freezone?

    DWC is regulated by the DWC Free Zone and Administration Rules and Regulations 2010.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    Yes, the logistics corridor provides for unrestricted movement of freights between DWC Free Zone and the Jabel Ali Free Zone (JAFZA). Companies from both Free Zones can use the facilities provided by the Al Maktoum International Airport. Freight movement between the Dubai Airport Free Zone Authority (DAFZA) and DWC Free Zone is also permitted.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this Free Zone must still comply with? What are the most important examples of how this impacts operations?

    When the DWC Free Zone and Administration Rules and Regulations 2010 are not applicable, UAE legislation applies. For example, Federal Law No. 2/2015, the Commercial Companies Law, will be applicable to areas not covered by DWC Free Zone regulations.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    The agency to be complied with depends on the activity a company undertakes. For example, an entity conducting business in the aviation sector must comply and register with the Civil Aviation Authority.

    6. How does a company set up in this freezone?

    Applicants seeking for lease of warehouse or development land are required to submit a business plan in the prescribed format and other requisite background information to the free zone department. On approval of this, the applicant can proceed to incorporation and registration process. The Authority generally reviews an application in 15 days of the date of its receipt.

    However, in certain circumstances, a longer review period may be necessary.

    7. What features do companies set up in this freezone have?

    DWC freezone provides for 100 percent foreign ownership and does not restrict the capital return of income generated within the region. The reciprocal agreements between DWC freezone and other freezones provide for the unrestricted movement of freight between freezone areas.

    Companies established in DWC freezone are exempt from tax liability (corporate and income tax) for 50 years from the date the company is registered.

    8. What can companies set up in this freezone do?

    Companies are permitted to undertake all legitimate business activities unless the DWC Authority expressly restricts it.

    9. What can companies set up in this freezone not do?

    A company is not permitted to carry out any activity not provided for under its license.

    10. What types of business are allowed to operate in this freezone?

    A company can conduct business in a wide range of industries, such as storage, logistics, transport, aerospace, etc.

    11. What inheritance laws apply in this freezone?

    The general inheritance laws of the UAE apply under Sharia law. However, Dubai Personal Law No. 28/2005, allows a non-Muslim to opt for the application of the laws of his home country for the dispersal of assets.

    12. What taxation applies?

    DWC companies are not liable to pay corporate or personal tax, or tax on the import or export of goods for a period of 50 years from the date the company was registered.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    Companies operating in DWC freezone have to comply with International Financial Reporting Standards.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    Companies conducting business in DWC are allowed to choose any bank account in the UAE.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    Dubai Customs regulations and Dubai and Federal law are applicable when movable property is removed from, or transferred to, DWC freezone. If property imported into the region from abroad is moved out of the area, customs duty has to be paid.

    However, no duty will be due for the transfer of movable property between DWC freezone and the DAFZA or JAFZA region.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    An educational license, general trading license, industrial license, logistics license and service license are all issued by the DWC Authority.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular  types of company by this freezone authority?

    The monitoring authority depends on the company activity. For example, the Civil Aviation Authority monitors aviation industry activities.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in DWC freezone are settled through the normal judicial avenue applicable in the UAE (the Courts of Dubai).

    However, if a company expressly states the preferred forum in a contractual agreement, the alternate method will be applicable.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising between a DWC company and an onshore company are settled through the normal judicial avenue applicable in the UAE (the Courts of Dubai). However, if a company expressly states the preferred forum in a contractual agreement, the alternate method will be applicable.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The relationship between an employer and employee in DWC will be governed by Federal Law No. 8/1980, the UAE Labour Law.

    21. How are employment disputes between employers and employees working in this freezone settled?

    If a dispute arises between an employer and employee, the employee is required to file a complaint with the DWC Authority.On receiving a complaint, the DWC Authority will try to mediate between the parties. If the parties fail to settle the dispute, the matter will be referred to the Ministry of Labour.

    The complaint must be in writing and contain a summary of the facts. It should also be accompanied by copies of the employee's labour card and employment contract.

    The Ministry of Labour will attempt to settle the matter amicably, however, if the parties fail to come to a settlement, the Ministry of Labour will send an application to the Dubai Courts.

    22. What entry qualifications and permits are required for staff working in this freezone?

    The DWC freezone licensing department assists in obtaining the required permits and will stipulate staff entry qualifications depending on the proposed position.

    23. How are staff working within this freezone registered with the authorities?

    The DWC freezone licensing department assists staff with the registration process.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    Federal Law No. 8/1980, the UAE Labour Law, governs the minimum benefits and remuneration of staff employed in DWC freezone.

    25. What rules govern the working time and leave of staff working in this freezone?

    Federal Law No. 8/1980, the UAE Labour Law, also regulates the working hours and leave of DWC employees. Companies are required to set rules on working hours, disciplinary procedures, grievances and the health and safety of workers.

    26. What are the main features of a property lease in this freezone?

    The DWC rules and regulations do not specify any features of a property lease.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    A building permit can be obtained from the DWC Authority, the sole authority authorised to do so. It deals with all matters relating to building such as development, construction and land planning. However, utilities must be provided by a utility provider.

    To acquire a building permit in the DWC freezone, a company has to submit an application to the DWC Land Planning and Development Department.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Construction companies are required to comply with the DWC Building Regulations for Aviation, Logistics and Residential districts.

    Therefore the environmental requirements will depend on the industry. For example, the Aviation District has to comply with Civil Aviation Authority regulations.

    29. What are the key restrictions when leasing a property in this freezone?

    The DWC Authority does not set any restrictions when leasing a property.

    30. What are the rules governing the use of utilities in this freezone?

    Utilities in DWC are charged based on actual usage. However, this is subject to the relevant utility provider.

    31. How do retail premises establish themselves in this freezone?

    There are no specific restrictions on retail premises. However, their operation is subject to approval from the relevant authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    There are no specific restrictions on hotel activities. However, their operation is subject to approval from the relevant authorities.

     

    ]]>
    Thu, 05 Nov 2020 09:41:00 GMT
    <![CDATA[Dubai Sceience Park City Freezone]]> Dubai Sceience Park City Freezone

    1. What law established this freezone?

    This freezone was established by Dubai Law No. 1/2000 issued on 29 January 2000.

    2. What are the main internal regulations governing this freezone?

    The regulations governing the Dubai Creative Clusters (DCC) were the Dubai Technology and Media Free Zone Companies Regulations 2003.

    In 2016, the Dubai Creative Clusters Private Companies Regulations were issued to replace the 2003 Regulations.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    There are presently no arrangements between this freezone and other freezone areas. However, it is now much easier to transfer a visa to and from the Dubai Multi Commodities Centre.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    DCC regulations and laws govern DCC companies, but when these laws and regulations are silent, Federal Law No. 2/2015, The UAE Commercial Company Law, will apply. Other laws the DCC needs to comply with includes Federal Law No. 11/1992, the UAE Commercial Transactions Law, and Federal Law No.18/1993, The UAE Civil Procedure Code.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    For legal and administrative transactions and procedures, including issues relating to visas and immigration, DCC companies will usually directly deal with the DCC Authorities.

    6. How does a company set up in this freezone?

    Initially, there is a pre-approval required where the business proposal will be reviewed, including the business's documentation and details of the shareholders and other departments. When granted pre-approval, a lease agreement for business premises will be entered into.

    The DCC legal and financial department will then review the documentation for final approval. An invoice will then be issued by the DCC for the registration and licensing of the entity which will include the office rent. The license will be granted only once the invoice has cleared and receipt of the entire share capital is received (in the case of limited liability companies).

    The documentation required to register a company within the free zone includes: details and passport copies of the shareholder, manager, and director, the company incorporation certificate, the business plan, a NOC, MAA, share capital proof, resolution for incorporation, and bank reference letter.

    7. What features do companies set up in this freezone have?

    Foreign investors usually adopt a business establishment by opening a branch office or incorporating a limited liability company as the business can be 100% foreign owned, therefore the company can take full control of the business as there is not the UAE sponsor requirement. The DDC is known for its excellent location and strong legal framework. Additionally, the free zone is appealing as it offers 100% repatriation of capital and profits and is exempt from corporate t x and customs duty.

    8. What can companies set up in this freezone do?

    The types of businesses permitted to operate within the freezone are divided into four categories: Information and communication technology (ICT), education, science and media. These are further sub-divided into:

  • ITC Cluster: Dubai Outsource Zone and Dubai Internet City
  • Media Cluster: Dubai Media City, International Production Zone and Dubai Studio City
  • Education Cluster: Dubai International Academy City and Dubai Knowledge Village.
  • Science: Dubiotech and Embark, Healthcare City.
  • 9. What can companies set up in this freezone not do?

    All entities carrying out business in the DCC should hold a license of authorisation and function as per the license.

    10. What types of business are allowed to operate in this freezone?

    A limited liability company, a branch office of a foreign company, or a branch office of a UAE company and freelancing.

    11. What inheritance laws apply in this freezone?

    The laws of the UAE govern the DCC. The Shari'a principle of inheritance will apply to Muslim individuals and the heir to the estate of a non-Muslim can request the court to enforce the laws of succession of the deceased's home country. The Court can also apply Shari'a to non-Muslims.

    12. What taxation applies?

    Under Article 17 of Dubai Law No. 15/2014, all legal entities registered in the DCC are exempt from all taxes including income tax. There is no record kept of the transfer of capital, profits earnt and wages. The DCC also offers a fifty year tax holiday even if a new tax is introduced onshore.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    All legal entities operating in the DCC should have updated account and finance records. For a limited liable company, accounts should be audited by an accounting firm which is duly licensed and authorised under Dubai laws.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    A business functioning in the DCC locates their bank account in the Emirate of Dubai.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The transfer and movement of any goods is governed by Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The license type will depend on the business activity applied for. For an onshore limited liability company, there might be a requirement to open a branch office.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There may be specific permissions required from the federal or local authorities. For instance, a restaurant will need approval from the Dubai Municipality Dubai Control.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The DCC has its own set of rules governing the relationship between an employer and employees, supplementary to UAE labour laws. Federal Law No. 8/1980, The UAE Labour Law, is the main piece of legislation with regulations for the functioning of employment rights and relationships in the DCC. Federal Law No. 8/1980, The UAE Labour Law, compels an employer to enter into a contract with an employee. The employment contract will contain the details of work, such as working hours, wages, the type of work, allowances, leave, salary, etc. The employer is obliged to meet the minimum requirements for pay, working hours, wages, allowances, etc. In return, the employee is required to work and carry out his duties under the contract and as requested by the employer.

    21. How are employment disputes between employers and employees working in this freezone settled?

    Disputes arising between employers and employees are usually handled by an expert team of DCC mediators. However, the DCC does not hold itself responsible for any resolution that takes place between the parties. If DCC mediators are not successful in resolving a dispute, they will issue the claimant with a letter to refer the matter to the labour court.

    22. What entry qualifications and permits are required for staff working in this freezone?

    In most cases, employers will assist their employees in obtaining the required permits to work in the DCC. If the employee is an expatriate, the employee will need to be sponsored to work in the freezone legally. The employer will need to enter into a personal secondary agreement with the DCC, after which, the DCC will sponsor the employer's staff on his behalf. Employees who are not sponsored by the DCC require an employment visa sponsored by the DCC and a DCC ID card to legally work in the freezone.

    23. How are staff working within this freezone registered with the authorities?

    The standard application form and fees for each application have to be complied with by the employer. After receiving a permit to enter, the applicant undertakes a medical test and a medical certificate will be issued. An application then has to be made for a residence visa which is attached to the employee's passport allowing the employee to reside and work in the DCC legally.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    There is no mandatory remuneration or benefits the employer has to provide his employees with. However, it is common practice for employers to provide their staff with at least the minimum wage and allowances for housing and transportation. If the employee is terminated, then the employer should make provisions for the employee to return to his home country, except if the employee is moving to a new employer in the UAE. DCC rules and Federal Law No. 8/1980, The UAE Labour Law, state that the employer must arrange for a medical card and all other necessary costs.

    25. What rules govern the working time and leave of staff working in this freezone?

    Under Federal Law No. 8/1980, The UAE Labour Law, working hours should not exceed 48 in a week (40 hours if a 5-day working week) and 8 in a day (except in the case of industries with the required permission from the authorities). An employer must allow his staff to take an hour break for food, rest, and prayers after every five working hours. Working hours should be flexible and adhere to Ramadan and summer working hours for certain industries. Pregnant women are entitled to 45 days paid leave, and half paid leave if service is less than one year. There is a further allowance of 100 days unpaid in the case of sickness due to pregnancy. After one year of service, employees are entitled to 30 days leave annually. After six months in the first year, an employee is entitled to two days annual leave per month. All employees are entitled to 90 days sick leave per year of which 15 days are fully paid leave and 30 days half paid.

    26. What are the main features of a property lease in this freezone?

    There are a variety of rental spaces made available by the DCC such as office space, retail space, etc. A lease can be for a single unit or multiple stories. The activity of the company will play a role in the type of property available.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    To obtain a building permit in this freezone, the application should have specific documentation such as; building permit request form, valid site plan; project HSC plan( should be signed and stamped by the company manager); copy of the project manager and team HSC passports; copy of the final design letter; project detail sheet( stamped and signed by a consultant);

    security cheque; NOC from the master developer and fees of AED 1.00 per square feet ( Minimum AED 9,000).

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Any contracting company in Dubai must comply with the regulations set by the Environmental, Safety and Health Department in the Dubai Municipality.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in the DCC will have an office based in the DCC. For a lease agreement, approval from the DCC is mandatory to maintain a license. An office can be rented from the DCC or a private landlord. However, market rates are not applicable and are set by the DCC authorities.

    30. What are the rules governing the use of utilities in this freezone?

    The Dubai Electricity and Water Authority and the DU are the service providers in the DCC. Applicable charges are levied for use.

    31. How do retail premises establish themselves in this freezone?

    Retailers can establish themselves in this freezone subject to an allowance from the DCC authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    Hotels can operate and establish themselves in this freezone, provided they obtain the necessary permissions from the DCC (special approvals will be required).

    ]]>
    Wed, 04 Nov 2020 16:04:00 GMT
    <![CDATA[Dubai Production City Freezone]]> Dubai Production City Freezone

    1. What law established this freezone?

    This freezone was established by Dubai Law No. 1/2000 issued on 29 January 2000.

    2. What are the main internal regulations governing this freezone?

    The regulations governing the Dubai Creative Clusters (DCC) were the Dubai Technology and Media Free Zone Companies Regulations 2003.

    In 2016, the Dubai Creative Clusters Private Companies Regulations were issued to replace the 2003 Regulations.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    There are presently no arrangements between this freezone and other freezone areas. However, it is now much easier to transfer a visa to and from the Dubai Multi Commodities Centre.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    DCC regulations and laws govern DCC companies, but when these laws and regulations are silent, Federal Law No. 2/2015, The UAE Commercial Company Law, will apply. Other laws the DCC needs to comply with includes Federal Law No. 11/1992, the UAE Commercial Transactions Law, and Federal Law No.18/1993, The UAE Civil Procedure Code.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    For legal and administrative transactions and procedures, including issues relating to visas and immigration, DCC companies will usually directly deal with the DCC Authorities.

    6. How does a company set up in this freezone?

    Initially, there is a pre-approval required where the business proposal will be reviewed, including the business's documentation and details of the shareholders and other departments. When granted pre-approval, a lease agreement for business premises will be entered into.

    The DCC legal and financial department will then review the documentation for final approval. An invoice will then be issued by the DCC for the registration and licensing of the entity which will include the office rent. The license will be granted only once the invoice has cleared and receipt of the entire share capital is received (in the case of limited liability companies).

    The documentation required to register a company within the free zone includes: details and passport copies of the shareholder, manager, and director, the company incorporation certificate, the business plan, a NOC, MAA, share capital proof, resolution for incorporation, and bank reference letter.

    7. What features do companies set up in this freezone have?

    Foreign investors usually adopt a business establishment by opening a branch office or incorporating a limited liability company as the business can be 100% foreign owned, therefore the company can take full control of the business as there is not the UAE sponsor requirement. The DDC is known for its excellent location and strong legal framework. Additionally, the free zone is appealing as it offers 100% repatriation of capital and profits and is exempt from corporate tax and customs duty.

    8. What can companies set up in this freezone do?

    The types of businesses permitted to operate within the freezone are divided into four categories: Information and communication technology (ICT), education, science and media. These are further sub-divided into:

    • ITC Cluster: Dubai Outsource Zone and Dubai Internet City
    • Media Cluster: Dubai Media City, International Production Zone and Dubai Studio City
    • Education Cluster: Dubai International Academy City and Dubai Knowledge Village.
    • Science: Dubiotech and Embark, Healthcare City.

    9. What can companies set up in this freezone not do?

    All entities carrying out business in the DCC should hold a license of authorisation and function as per the license.

    10. What types of business are allowed to operate in this freezone?

    A limited liability company, a branch office of a foreign company, or a branch office of a UAE company and freelancing.

    11. What inheritance laws apply in this freezone?

    The laws of the UAE govern the DCC. The Shari'a principle of inheritance will apply to Muslim individuals and the heir to the estate of a non-Muslim can request the court to enforce the laws of succession of the deceased's home country. The Court can also apply Shari'a to non-Muslims.

    12. What taxation applies?

    Under Article 17 of Dubai Law No. 15/2014, all legal entities registered in the DCC are exempt from all taxes including income tax. There is no record kept of the transfer of capital, profits earnt and wages. The DCC also offers a fifty year tax holiday even if a new tax is introduced onshore.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    All legal entities operating in the DCC should have updated account and finance records. For a limited liable company, accounts should be audited by an accounting firm which is duly licensed and authorised under Dubai laws.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    A business functioning in the DCC locates their bank account in the Emirate of Dubai.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The transfer and movement of any goods is governed by Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The license type will depend on the business activity applied for. For an onshore limited liability company, there might be a requirement to open a branch office.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There may be specific permissions required from the federal or local authorities. For instance, a restaurant will need approval from the Dubai Municipality Dubai Control.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The DCC has its own set of rules governing the relationship between an employer and employees, supplementary to UAE labour laws. Federal Law No. 8/1980, The UAE Labour Law, is the main piece of legislation with regulations for the functioning of employment rights and relationships in the DCC. Federal Law No. 8/1980, The UAE Labour Law, compels an employer to enter into a contract with an employee. The employment contract will contain the details of work, such as working hours, wages, the type of work, allowances, leave, salary, etc. The employer is obliged to meet the minimum requirements for pay, working hours, wages, allowances, etc. In return, the employee is required to work and carry out his duties under the contract and as requested by the employer.

    21. How are employment disputes between employers and employees working in this freezone settled?

    Disputes arising between employers and employees are usually handled by an expert team of DCC mediators. However, the DCC does not hold itself responsible for any resolution that takes place between the parties. If DCC mediators are not successful in resolving a dispute, they will issue the claimant with a letter to refer the matter to the labour court.

    22. What entry qualifications and permits are required for staff working in this freezone?

    In most cases, employers will assist their employees in obtaining the required permits to work in the DCC. If the employee is an expatriate, the employee will need to be sponsored to work in the freezone legally. The employer will need to enter into a personal secondary agreement with the DCC, after which, the DCC will sponsor the employer's staff on his behalf. Employees who are not sponsored by the DCC require an employment visa sponsored by the DCC and a DCC ID card to legally work in the freezone.

    23. How are staff working within this freezone registered with the authorities?

    The standard application form and fees for each application have to be complied with by the employer. After receiving a permit to enter, the applicant undertakes a medical test and a medical certificate will be issued. An application then has to be made for a residence visa which is attached to the employee's passport allowing the employee to reside and work in the DCC legally.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    There is no mandatory remuneration or benefits the employer has to provide his employees with. However, it is common practice for employers to provide their staff with at least the minimum wage and allowances for housing and transportation. If the employee is terminated, then the employer should make provisions for the employee to return to his home country, except if the employee is moving to a new employer in the UAE. DCC rules and Federal Law No. 8/1980, The UAE Labour Law, state that the employer must arrange for a medical card and all other necessary costs.

    25. What rules govern the working time and leave of staff working in this freezone?

    Under Federal Law No. 8/1980, The UAE Labour Law, working hours should not exceed 48 in a week (40 hours if a 5-day working week) a nd 8 in a day (except in the case of industries with the required permission from the authorities). An employer must allow his staff to take an hour break for food, rest, and prayers after every five working hours. Working hours should be flexible and adhere to Ramadan and summer working hours for certain industries. Pregnant women are entitled to 45 days paid leave, and half paid leave if service is less than one year. There is a further allowance of 100 days unpaid in the case of sickness due to pregnancy.

    After one year of service, employees are entitled to 30 days leave annually. After six months in the first year, an employee is entitled to two days annual leave per month. All employees are entitled to 90 days sick leave per year of which 15 days are fully paid leave and 30 days half paid.

    26. What are the main features of a property lease in this freezone?

    There are a variety of rental spaces made available by the DCC such as office space, retail space, etc. A lease can be for a single unit or multiple stories. The activity of the company will play a role in the type of property available.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    To obtain a building permit in this freezone, the application should have specific documentation such as; building permit request form, valid site plan; project HSC plan( should be signed and stamped by the company manager); copy of the project manager and team HSC passports; copy of the final design letter; project detail sheet( stamped and signed by a consultant);

    security cheque; NOC from the master developer and fees of AED 1.00 per square feet ( Minimum AED 9,000).

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Any contracting company in Dubai must comply with the regulations set by the Environmental, Safety and Health Department in the Dubai Municipality.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in the DCC will have an office based in the DCC. For a lease agreement, approval from the DCC is mandatory to maintain a license. An office can be rented from the DCC or a private landlord. However, market rates are not applicable and are set by the DCC authorities.

    30. What are the rules governing the use of utilities in this freezone?

    The Dubai Electricity and Water Authority and the DU are the service providers in the DCC. Applicable charges are levied for use.

    31. How do retail premises establish themselves in this freezone?

    Retailers can establish themselves in this freezone subject to an allowance from the DCC authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    Hotels can operate and establish themselves in this freezone, provided they obtain the necessary permissions from the DCC

    (special approvals will be required).

    Originally published on LexisNexis

     

    ]]>
    Wed, 04 Nov 2020 15:16:00 GMT
    <![CDATA[Dubai Media City Freezone]]> Dubai Media City Freezone

    1. What law established this freezone?

    This freezone was established by Dubai Law No. 1/2000 issued on 29 January 2000.

    2. What are the main internal regulations governing this freezone?

    The regulations governing the Dubai Creative Clusters (DCC) were the Dubai Technology and Media Free Zone Companies Regulations 2003.

    In 2016, the Dubai Creative Clusters Private Companies Regulations were issued to replace the 2003 Regulations.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    There are presently no arrangements between this freezone and other freezone areas. However, it is now much easier to transfer a visa to and from the Dubai Multi Commodities Centre.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    DCC regulations and laws govern DCC companies, but when these laws and regulations are silent, Federal Law No. 2/2015, The UAE Commercial Company Law, will apply. Other laws the DCC needs to comply with includes Federal Law No. 11/1992, the UAE Commercial Transactions Law, and Federal Law No.18/1993, The UAE Civil Procedure Code.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    For legal and administrative transactions and procedures, including issues relating to visas and immigration, DCC companies will usually directly deal with the DCC Authorities.

    6. How does a company set up in this freezone?

    Initially, there is a pre-approval required where the business proposal will be reviewed, including the business's

    documentation and details of the shareholders and other departments. When granted pre-approval, a lease agreement for business premises will be entered into.

    The DCC legal and financial department will then review the documentation for final approval. An invoice will then be issued by the DCC for the registration and licensing of the entity which will include the office rent. The license will be granted only once the invoice has cleared and receipt of the entire share capital is received (in the case of limited liability companies).

    The documentation required to register a company within the free zone includes: details and passport copies of the

    shareholder, manager, and director, the company incorporation certificate, the business plan, a NOC, MAA, share capital proof, resolution for incorporation, and bank reference letter.

    7. What features do companies set up in this freezone have?

    Foreign investors usually adopt a business establishment by opening a branch office or incorporating a limited liability

    company as the business can be 100% foreign owned, therefore the company can take full control of the business as there is not the UAE sponsor requirement. The DDC is known for its excellent location and strong legal framework. Additionally, the free zone is appealing as it offers 100% repatriation of capital and profits and is exempt from corporate tax and customs duty.

    8. What can companies set up in this freezone do?

    The types of businesses permitted to operate within the freezone are divided into four categories: Information and communication technology (ICT), education, science and media. These are further sub-divided into:

    • ITC Cluster: Dubai Outsource Zone and Dubai Internet City
    • Media Cluster: Dubai Media City, International Production Zone and Dubai Studio City
    • Education Cluster: Dubai International Academy City and Dubai Knowledge Village.
    • Science: Dubiotech and Embark, Healthcare City.

    9. What can companies set up in this freezone not do?

    All entities carrying out business in the DCC should hold a license of authorisation and function as per the license.

    10. What types of business are allowed to operate in this freezone?

    A limited liability company, a branch office of a foreign company, or a branch office of a UAE company and freelancing.

    11. What inheritance laws apply in this freezone?

    The laws of the UAE govern the DCC. The Shari'a principle of inheritance will apply to Muslim individuals and the heir to the estate of a non-Muslim can request the court to enforce the laws of succession of the deceased's home country. The Court can also apply Shari'a to non-Muslims.

    12. What taxation applies?

    Under Article 17 of Dubai Law No. 15/2014, all legal entities registered in the DCC are exempt from all taxes including income tax. There is no record kept of the transfer of capital, profits earnt and wages. The DCC also offers a fifty year tax holiday even if a new tax is introduced onshore.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    All legal entities operating in the DCC should have updated account and finance records. For a limited liable company, accounts should be audited by an accounting firm which is duly licensed and authorised under Dubai laws.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    A business functioning in the DCC locates their bank account in the Emirate of Dubai.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The transfer and movement of any goods is governed by Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The license type will depend on the business activity applied for. For an onshore limited liability company, there might be a requirement to open a branch office.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There may be specific permissions required from the federal or local authorities. For instance, a restaurant will need approval from the Dubai Municipality Dubai Control.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The DCC has its own set of rules governing the relationship between an employer and employees, supplementary to UAE labour laws. Federal Law No. 8/1980, The UAE Labour Law, is the main piece of legislation with regulations for the functioning of employment rights and relationships in the DCC. Federal Law No. 8/1980, The UAE Labour Law, compels an employer to enter into a contract with an employee. The employment contract will contain the details of work, such as working hours, wages, the type of work, allowances, leave, salary, etc. The employer is obliged to meet the minimum requirements for pay, working hours, wages, allowances, etc. In return, the employee is required to work and carry out his duties under the contract and as requested by the employer.

    21. How are employment disputes between employers and employees working in this freezone settled?

    Disputes arising between employers and employees are usually handled by an expert team of DCC mediators. However, the DCC does not hold itself responsible for any resolution that takes place between the parties. If DCC mediators are not successful in resolving a dispute, they will issue the claimant with a letter to refer the matter to the labour court.

    22. What entry qualifications and permits are required for staff working in this freezone?

    In most cases, employers will assist their employees in obtaining the required permits to work in the DCC. If the employee is an expatriate, the employee will need to be sponsored to work in the freezone legally. The employer will need to enter into a personal secondary agreement with the DCC, after which, the DCC will sponsor the employer's staff on his behalf. Employees who are not sponsored by the DCC require an employment visa sponsored by the DCC and a DCC ID card to legally work in the freezone.

    23. How are staff working within this freezone registered with the authorities?

    The standard application form and fees for each application have to be complied with by the employer. After receiving a permit to enter, the applicant undertakes a medical test and a medical certificate will be issued. An application then has to be made for a residence visa which is attached to the employee's passport allowing the employee to reside and work in the DCC legally.

    24. What rules govern the remuneration and minimum benefits of staff working in this

    freezone?

    There is no mandatory remuneration or benefits the employer has to provide his employees with. However, it is common practice for employers to provide their staff with at least the minimum wage and allowances for housing and transportation. If the employee is terminated, then the employer should make provisions for the employee to return to his home country, except if the employee is moving to a new employer in the UAE. DCC rules and Federal Law No. 8/1980, The UAE Labour Law, state that the employer must arrange for a medical card and all other necessary costs.

    25. What rules govern the working time and leave of staff working in this freezone?

    Under Federal Law No. 8/1980, The UAE Labour Law, working hours should not exceed 48 in a week (40 hours if a 5-day working week) and 8 in a day (except in the case of industries with the required permission from the authorities). An employer must allow his staff to take an hour break for food, rest, and prayers after every five working hours. Working hours should be flexible and adhere to Ramadan and summer working hours for certain industries. Pregnant women are entitled to 45 days paid leave, and half paid leave if service is less than one year. There is a further allowance of 100 days unpaid in the case of sickness due to pregnancy.

    After one year of service, employees are entitled to 30 days leave annually. After six months in the first year, an employee is entitled to two days annual leave per month. All employees are entitled to 90 days sick leave per year of which 15 days are fully paid leave and 30 days half paid.

    26. What are the main features of a property lease in this freezone?

    There are a variety of rental spaces made available by the DCC such as office space, retail space, etc. A lease can be for a single unit or multiple stories. The activity of the company will play a role in the type of property available.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    To obtain a building permit in this freezone, the application should have specific documentation such as; building permit request form, valid site plan; project HSC plan( should be signed and stamped by the company manager); copy of the project manager and team HSC passports; copy of the final design letter; project detail sheet( stamped and signed by a consultant);

    security cheque; NOC from the master developer and fees of AED 1.00 per square feet ( Minimum AED 9,000).

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Any contracting company in Dubai must comply with the regulations set by the Environmental, Safety and Health Department in the Dubai Municipality.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in the DCC will have an office based in the DCC. For a lease agreement, approval from the DCC is mandatory to maintain a license. An office can be rented from the DCC or a private landlord. However, market rates are not applicable and are set by the DCC authorities.

    30. What are the rules governing the use of utilities in this freezone?

    The Dubai Electricity and Water Authority and the DU are the service providers in the DCC. Applicable charges are levied for use.

    31. How do retail premises establish themselves in this freezone?

    Retailers can establish themselves in this freezone subject to an allowance from the DCC authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    Hotels can operate and establish themselves in this freezone, provided they obtain the necessary permissions from the DCC

    (special approvals will be required).

    ]]>
    Wed, 04 Nov 2020 13:14:00 GMT
    <![CDATA[Dubai Internet City Freezone]]> Dubai Internet City Freezone

    1. What law established this freezone?

    This freezone was established by Dubai Law No. 1/2000 issued on 29 January 2000.

    2. What are the main internal regulations governing this freezone?

    The regulations governing the Dubai Creative Clusters (DCC) were the Dubai Technology and Media Free Zone Companies Regulations 2003.

    In 2016, the Dubai Creative Clusters Private Companies Regulations were issued to replace the 2003 Regulations.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    There are presently no arrangements between this freezone and other freezone areas. However, it is now much easier to transfer a visa to and from the Dubai Multi Commodities Centre.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    DCC regulations and laws govern DCC companies, but when these laws and regulations are silent, Federal Law No. 2/2015, The UAE Commercial Company Law, will apply. Other laws the DCC needs to comply with includes Federal Law No. 11/1992, the UAE Commercial Transactions Law, and Federal Law No.18/1993, The UAE Civil Procedure Code.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    For legal and administrative transactions and procedures, including issues relating to visas and immigration, DCC companies will usually directly deal with the DCC Authorities.

    6. How does a company set up in this freezone?

    Initially, there is a pre-approval required where the business proposal will be reviewed, including the business's documentation and details of the shareholders and other departments. When granted pre-approval, a lease agreement for business premises will be entered into.

    The DCC legal and financial department will then review the documentation for final approval. An invoice will then be issued by the DCC for the registration and licensing of the entity which will include the office rent. The license will be granted only once the invoice has cleared and receipt of the entire share capital is received (in the case of limited liability companies).

    The documentation required to register a company within the free zone includes: details and passport copies of the shareholder, manager, and director, the company incorporation certificate, the business plan, a NOC, MAA, share capital proof, resolution for incorporation, and bank reference letter.

    7. What features do companies set up in this freezone have?

    Foreign investors usually adopt a business establishment by opening a branch office or incorporating a limited liability company as the business can be 100% foreign owned, therefore the company can take full control of the business as there is not the UAE sponsor requirement. The DDC is known for its excellent location and strong legal framework. Additionally, the free zone is appealing as it offers 100% repatriation of capital and profits and is exempt from corporate tax and customs duty.

    8. What can companies set up in this freezone do?

    The types of businesses permitted to operate within the freezone are divided into four categories: Information and communication technology (ICT), education, science and media. These are further sub-divided into:

    • ITC Cluster: Dubai Outsource Zone and Dubai Internet City
    • Media Cluster: Dubai Media City, International Production Zone and Dubai Studio City
    • Education Cluster: Dubai International Academy City and Dubai Knowledge Village.
    • Science: Dubiotech and Embark, Healthcare City.

    9. What can companies set up in this freezone not do?

    All entities carrying out business in the DCC should hold a license of authorisation and function as per the license.

    10. What types of business are allowed to operate in this freezone?

    A limited liability company, a branch office of a foreign company, or a branch office of a UAE company and freelancing.

    11. What inheritance laws apply in this freezone?

    The laws of the UAE govern the DCC. The Shari'a principle of inheritance will apply to Muslim individuals and the heir to the estate of a non-Muslim can request the court to enforce the laws of succession of the deceased's home country. The Court can also apply Shari'a to non-Muslims.

    12. What taxation applies?

    Under Article 17 of Dubai Law No. 15/2014, all legal entities registered in the DCC are exempt from all taxes including income tax. There is no record kept of the transfer of capital, profits earnt and wages. The DCC also offers a fifty year tax holiday even if a new tax is introduced onshore.

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    All legal entities operating in the DCC should have updated account and finance records. For a limited liable company, accounts should be audited by an accounting firm which is duly licensed and authorised under Dubai laws.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    A business functioning in the DCC locates their bank account in the Emirate of Dubai.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    The transfer and movement of any goods is governed by Dubai Customs.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The license type will depend on the business activity applied for. For an onshore limited liability company, there might be a requirement to open a branch office.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There may be specific permissions required from the federal or local authorities. For instance, a restaurant will need approval from the Dubai Municipality Dubai Control.

    18. How are disputes settled with companies in this freezone?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Disputes arising in this freezone are dealt with by the Courts of Dubai. Unless there is an agreement between both parties to resolve the dispute via an alternative method such as arbitration.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The DCC has its own set of rules governing the relationship between an employer and employees, supplementary to UAE labour laws. Federal Law No. 8/1980, The UAE Labour Law, is the main piece of legislation with regulations for the functioning of employment rights and relationships in the DCC. Federal Law No. 8/1980, The UAE Labour Law, compels an employer to enter into a contract with an employee. The employment contract will contain the details of work, such as working hours, wages, the type of work, allowances, leave, salary, etc. The employer is obliged to meet the minimum requirements for pay, working hours, wages, allowances, etc. In return, the employee is required to work and carry out his duties under the contract and as requested by the employer.

    21. How are employment disputes between employers and employees working in this freezone settled?

    Disputes arising between employers and employees are usually handled by an expert team of DCC mediators. However, the DCC does not hold itself responsible for any resolution that takes place between the parties. If DCC mediators are not successful in resolving a dispute, they will issue the claimant with a letter to refer the matter to the labour court.

    22. What entry qualifications and permits are required for staff working in this freezone?

    In most cases, employers will assist their employees in obtaining the required permits to work in the DCC. If the employee is an expatriate, the employee will need to be sponsored to work in the freezone legally. The employer will need to enter into a personal secondary agreement with the DCC, after which, the DCC will sponsor the employer's staff on his behalf. Employees who are not sponsored by the DCC require an employment visa sponsored by the DCC and a DCC ID card to legally work in the freezone.

    23. How are staff working within this freezone registered with the authorities?

    The standard application form and fees for each application have to be complied with by the employer. After receiving a permit to enter, the applicant undertakes a medical test and a medical certificate will be issued. An application then has to be made for a residence visa which is attached to the employee's passport allowing the employee to reside and work in the DCC legally.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    There is no mandatory remuneration or benefits the employer has to provide his employees with. However, it is common practice for employers to provide their staff with at least the minimum wage and allowances for housing and transportation. If the employee is terminated, then the employer should make provisions for the employee to return to his home country, except if the employee is moving to a new employer in the UAE. DCC rules and Federal Law No. 8/1980, The UAE Labour Law, state that the employer must arrange for a medical card and all other necessary costs.

    25. What rules govern the working time and leave of staff working in this freezone?

    Under Federal Law No. 8/1980, The UAE Labour Law, working hours should not exceed 48 in a week (40 hours if a 5-day working week) and 8 in a day (except in the case of industries with the required permission from the authorities). An employer must allow his staff to take an hour break for food, rest, and prayers after every five working hours. Working hours should be flexible and adhere to Ramadan and summer working hours for certain industries. Pregnant women are entitled to 45 days paid leave, and half paid leave if service is less than one year. There is a further allowance of 100 days unpaid in the case of sickness due to pregnancy.

    After one year of service, employees are entitled to 30 days leave annually. After six months in the first year, an employee is entitled to two days annual leave per month. All employees are entitled to 90 days sick leave per year of which 15 days are fully paid leave and 30 days half paid.

    26. What are the main features of a property lease in this freezone?

    There are a variety of rental spaces made available by the DCC such as office space, retail space, etc. A lease can be for a single unit or multiple stories. The activity of the company will play a role in the type of property available.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    To obtain a building permit in this freezone, the application should have specific documentation such as; building permit request form, valid site plan; project HSC plan( should be signed and stamped by the company manager); copy of the project manager and team HSC passports; copy of the final design letter; project detail sheet( stamped and signed by a consultant); security cheque; NOC from the master developer and fees of AED 1.00 per square feet ( Minimum AED 9,000).

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    Any contracting company in Dubai must comply with the regulations set by the Environmental, Safety and Health Department in the Dubai Municipality.

    29. What are the key restrictions when leasing a property in this freezone?

    Any legal entity operating in the DCC will have an office based in the DCC. For a lease agreement, approval from the DCC is mandatory to maintain a license. An office can be rented from the DCC or a private landlord. However, market rates are not applicable and are set by the DCC authorities.

    30. What are the rules governing the use of utilities in this freezone?

    The Dubai Electricity and Water Authority and the DU are the service providers in the DCC. Applicable charges are levied for use.

    31. How do retail premises establish themselves in this freezone?

    Retailers can establish themselves in this freezone subject to an allowance from the DCC authorities.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    Hotels can operate and establish themselves in this freezone, provided they obtain the necessary permissions from the DCC

    (special approvals will be required).

     

    ]]>
    Wed, 04 Nov 2020 12:16:00 GMT
    <![CDATA[Ajman Freezone Authority]]> Ajman Freezone Authority

    1. What law established this freezone?

    The Ajman Free Zone was established in 1988 and was granted autonomous status in 1996, by the Ajman Emiri Decree No. 3/1996.

    2. What are the main internal regulations governing this freezone?

    The Ajman Free Zone Authority has issued an "Integrated Management System" document that sets out the free zone's commitments.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    This free zone does not have any reciprocal arrangements with other free zones.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    The key areas of UAE Legislation businesses operating in this freezone must comply with are:

    • UAE Federal Law No. 2/2015 concerning Commercial Companies.
    • UAE Federal Law No. 8/1980 regarding the regulation of labor relations and its amendments.

    In general, UAE legislation will cover any matters not covered by the free zone's internal regulations.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    The key UAE and Emirate onshore agencies a business would need to register with will depend the on the activity of that company.

    6. How does a company set up in this freezone?

    Companies wishing to establish themselves in this free zone must follow a three-step procedure.

    Step 1: Submission of Documents (all sufficiently attested and notarised)

    • Passport Copy of the Manager
    • Passport-sized photo of the Manager
    • No Objection Letter from the Current Sponsor (in cases where the applicant is a resident in the UAE)
    • Business Plan

    There are additional documents to submit if the entity setting up the company is a corporate entity, as opposed to being a natural person:

    • Articles of Association
    • Power of Attorney authorizing the individual concerned to undertake the company registration
    • Certificate of Incorporation of the parent company
    • Board Resolution from the Parent Company authorizing the establishment of the branch or subsidiary (in cases involving the establishment of a company branch or subsidiary).

    Step 2:

    • Payments must be completed: Registration Fees, Licensing Fees

    Step 3:

    • Lease agreement must be signed

    7. What features do companies set up in this freezone have?

    Like all free zones, Ajman Free Zone allows 100% foreign ownership. The free zone also provides a 100% exemption for corporate tax and income tax. In addition, the free zone offers low set up costs as compared with other free zones.

    8. What can companies set up in this freezone do?

    Companies set up in this free zone can conduct activities that fall within the scope of the following licenses: e-commerce, trading, industrial, professional/services and national industrial.

    9. What can companies set up in this freezone not do?

    Companies set up in this free zone cannot conduct activities that fall outside the scope of the following licenses: e-commerce, trading, industrial, professional/services and national industrial.

    10. What types of business are allowed to operate in this freezone?

    Small and medium industries, business service sectors are among the businesses allowed to operate in the free zone.

    The following business structures are allowed to operate in the free zone:

    • Free Zone Entity
    • Free Zone Company
    • Branch of a Local Company
    • Branch of a Foreign Company

    11. What inheritance laws apply in this freezone?

    As for all areas of law that are not covered by the Ajman Free Zone's regulations, the general laws of the UAE are applicable (Islamic Sharia Law). A non-Muslim expatriate can request that the laws of their home country apply, as per the Personal Affairs Law, UAE Federal Law No. 28/2005.

    12. What taxation applies?

    The Ajman Free Zone allows for 100% foreign ownership, free of all types of taxes (including corporate and personal).

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    Businesses operating in Ajman Free Zone are in no obligation to submit auditing reports.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    Businesses operating must select a bank in the Emirate in which they are operating to open their bank accounts, as per the provisions set out in the Commercial Companies Law.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    In accordance with the Ajman Free Zone Regulations, businesses set up in the Ajman Free Zone must limit their activities to within the free zone, in order to operate within the mainland, a local agent/distributor must be appointed.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    Four types of licenses exist in the Ajman Free Zone:

  • Trading License, which concerns companies that operate in the trade of goods, such as sale, purchase, import and export of goods.
  • Industrial License, which concerns companies that produce and manufacture goods.
  • Professional/services License, which concerns companies that offer services
  • National Industrial License, which concerns companies that produce and manufacture goods for government entities.
  • 17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There is no such specific ongoing regulation or monitoring of firms.

    18. How are disputes settled with companies in this freezone?

    Within this free zone, disputes are settled through the UAE courts. If a case were to be brought against an Ajman Free Zone company, it should be filed with the courts of Ajman.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Dependant on the contract concerned, companies hold the option of settling disputes in the courts of Ajman.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The provisions of UAE Federal Law No. 8/1980 and its amendments apply to employers and employees in this free zone such as:

  • Article 91: Employer must provide the employee with protective equipment, clothing, instructions on all other means of protection to protect him from hazards of injuries, hazards of fire and vocational diseases.
  • Article 92: Employer must display at a conspicuous point detailed instructions, in Arabic and in a language understood by employees, concerning methods to prevent fire and protect employees from dangers.
  • Article 93: Employer must provide each 100 employees with one medical aid box.
  • Article 94, 96: Employer must provide proper cleanliness, ventilation, adequate illumination, potable water and toilets, clean atmosphere and precautionary measures against fire and electric current.
  • Article 95: Employer must appoint one physician to do full medical checkups at least once every 6 months for employees exposed to an infection risk. Employer must record the results.
  • Article 96: Employer must provide employees with means of medical care.
  • Article 97-98: Employer (or his representative) must regularly inform employees of dangers related to their profession and provide written preventative measures.
  • Article 99: Employer must forbid alcoholic drinks and intoxicated.
  • 21. How are employment disputes between employers and employees working in this freezone settled?

    In order to manage these kinds of disputes, one of the parties must submit a complaint to the Ajman Free Zone Authority. If the Ajman Free Zone Authority is unable to manage the matter, it will refer it to the Ministry of Labour. Failure to settle the matter amicably will result in the matter being transferred to the Courts of Ajman.

    22. What entry qualifications and permits are required for staff working in this freezone?

    Qualifications will depend on the employee's position and their company's license. An employee requires a visa/entry permit for which a personnel sponsorship agreement must be submitted. A residence permit must then be obtained; this requires an Emirates ID card and a medical check-up.

    23. How are staff working within this freezone registered with the authorities?

    Staff working within this free zone are registered under their company's name, which is registered in this free zone. The company's trade license and the employee's passport must be submitted to the Ajman Free Zone Authority's Licensing Department to obtain the required visa.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments grant employees the right to obtain insurance and end of service benefits.

    25. What rules govern the working time and leave of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments give employees the right to at least one rest day per week, if an employee works on a Friday they can obtain an additional 50% of their wage. The maximum working hours for an employee is 40 hours per week. As for the leave of staff working in this free zone, if they have been employment for more than 6 months and less than a year, they are entitled to annual leave of two days per month and 30 days annually.

    26. What are the main features of a property lease in this freezone?

    The features of a property lease in this free zone are the same as those in the UAE in general.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    There is no possibility to apply for a building permit in this free zone.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    The standards set out by the Health, Safety and Environmental Management System Regulations.

    29. What are the key restrictions when leasing a property in this freezone?

    The key restrictions of a property lease in this free zone are the same as those in the UAE in general.

    30. What are the rules governing the use of utilities in this freezone?

    The use of utilities is determined based on actual usage in this free zone.

    31. How do retail premises establish themselves in this freezone?

    Retail premises establish themselves in this free zone the same way they do in the UAE in general.

    ]]>
    Wed, 04 Nov 2020 10:15:00 GMT
    <![CDATA[Abu Dhabi Airport Freezone]]> Abu Dhabi Airport Freezone

    1. What law established this freezone?

    The following laws which established the Abu Dhabi Airport Business City are:

    • Abu Dhabi Executive Council Decision No. 61/2010 which gives the Sky City the authority to grant free zone status to the properties owned by the Abu Dhabi Airports Company.
    • Abu Dhabi Executive Council Decision No. 62/2010
    • Abu Dhabi Executive Council Decision No. 63/2010

    2. What are the main internal regulations governing this freezone?

    The main internal regulation governing this free zone is the Abu Dhabi Airport Free Zone Companies Registration Regulation.

    The provisions of this regulation address issues not covered by UAE Federal Law No. 2/2015 concerning commercial companies. All matters not addressed by the regulation are covered by UAE Federal Law No. 2/2015.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    This free zone does not have any reciprocal arrangements with other free zones.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    The key areas of UAE Federal Legislation that businesses operating in this freezone must comply with are:

    • UAE Federal Law No. 2/2015 concerning Commercial Companies (e.g. banks must be located within the country)
    • UAE Federal Law No. 8/1980 regarding the regulation of labor relations and its amendments
    • UAE Federal Law No. 4/2002 regarding the criminalization of money laundering (e.g. disclosure of currencies, penalties for money laundering).

    In general, UAE Federal legislation will cover any matters not covered by the free zone's internal regulations.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    The key UAE and Emirate onshore agencies a business would need to register depends on the activity of that company. Some general onshore agencies which need to register include:

    • Abu Dhabi Airports Company
    • Abu Dhabi Municipality
    • UAE General Directorate of Resident and Foreign Affairs
    • Department of Municipal Affairs
    • Notaries

    6. How does a company set up in this freezone?

    Companies wishing to establish themselves in this free zone must follow a three-step procedure.

    Step 1: Submission of Documents

    • Application form
    • Business plan
    • A copy of the manager's passport
    • A passport-sized photo of the manager
    • No objection letter from the current sponsor (in cases where the applicant is a resident in the UAE)
    • Two years audited financial reports for a corporate entity or a certificate of reference from a personal bank of the individual shareholder.

    Step 2:

    • Payments must be completed: registration fees, licensing fees
    • Documents concerning company's formation, ownership and management must be provided

    Step 3:

    • Lease agreement must be signed;
    • Issuance of the business license upon completion of step one and step two
    • Visa Processing

    7. What features do companies set up in this freezone have?

    Like all free zones, the Abu Dhabi Airport Free Zone allows 100% foreign company ownership, and 100% repatriation of capital and profits. The free zone also provides a 100% exemption for corporate tax, import and export tax, and personal income tax.

    In addition, the free zone offers the following advantages:

    • Unified administrative services
    • Cargo clearance service
    • Online customer service
    • Proximity to the Airport
    • On-site customs inspection
    • International freight forwarders and logistics services

    8. What can companies set up in this freezone do?

    Activities relating to the following industries are authorized:

    • Aerospace and Aviation
    • Maintenance, Repair and Overhaul (MRO)
    • Airport Services
    • Airline Services
    • Aircraft Interiors
    • Cargo Freight and Logistics
    • Consultancy
    • Technology and ICT
    • Transportation
    • Warehousing and Distribution
    • Marketing and Events
    • Regional Headquarters
    • Knowledge and Development

    Businesses setting themselves up in this freezone are expected to operate in an activity relating to the aviation industry.

    9. What can companies set up in this freezone not do?

    Activities outside of their permitted license.

    10. What types of business are allowed to operate in this freezone?

    • Companies set up in this free zone can conduct activities relating to the following industries:
    • Aerospace and Aviation
    • Maintenance, Repair and Overhaul (MRO)
    • Airport Services
    • Airline Services
    • Aircraft Interiors
    • Cargo Freight and Logistics
    • Consultancy
    • Technology and ICT
    • Transportation
    • Warehousing and Distribution
    • Marketing and Events
    • Regional Headquarters
    • Knowledge and Development

    11. What inheritance laws apply in this freezone?

    The general laws of the UAE are applicable (Islamic Sharia Law) if an area of law is not covered by the Ajman Freezone's regulations. A non-Muslim expatriate can request that the laws of their home country apply, as per the Personal Affairs Law, UAE Federal Law No. 28/2005.

    12. What taxation applies?

    The Abu Dhabi Airport Freezone allows for 100% foreign ownership, tax free (including corporate, import and export, and personal tax).

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    Businesses operating in this free zone must keep accounting records, and submit auditing reports at least once a year as per the provisions of Part 11 of the Abu Dhabi Airport Freezone Companies Registration Regulation.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    Businesses operating in this freezone must select a bank in the UAE to open their bank accounts, as per the provisions set out in the Commercial Companies Law.

    15. Are there any specific rules governing when moveable property is removed from the

    freezone area or transferred into the freezone area from another jurisdiction?

    Businesses set up in the Abu Dhabi Airport Free Zone must keep their activities to within the free zone. In order to operate within the mainland, a local agent/distributor must be appointed.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    The following licences are required to operate in this free zone:

    • Trading Licences
    • Light Industrial Licences
    • Service Licences
    • National Industrial Licences

    The following types of companies are authorized:

    • Freezone Limited Liability Company (Corporate)
    • Freezone Limited Liability Company (Natural)
    • Branch of local or foreign companies.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    As per Part 15 of the Abu Dhabi Airport Free Zone Companies Registration Regulation, the freezone authority may appoint an inspector to investigate a company's business dynamics. The company's directors must produce records at an investigator's request.

    18. How are disputes settled with companies in this freezone?

    Disputes are settled through the traditional UAE courts, unless another platform for the settlement of disputes has been agreed on in the contact. A case against an Abu Dhabi Airport Freezone company should be filed with the courts of the Emirate of Abu Dhabi.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Unless another platform for the settlement of disputes has been agreed on in the contact, such cases should be filed with the courts of the Emirate of Abu Dhabi.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The provisions of UAE Federal Law No. 8/1980 and its amendments apply to employers and employees in this free zone such as:

  • Article 91: Employer must provide the employee with protective equipment, clothing, instructions on all other means of protection to protect him from hazards of injuries, hazards of fire and vocational diseases.
  • Article 92: Employer must display at a conspicuous point detailed instructions, in Arabic and in a language understood by employees, concerning methods to prevent fire and protect employees from dangers.
  • Article 93: Employer must provide each 100 employees with one medical aid box.
  • Article 94, 96: Employer must provide proper cleanliness, ventilation, adequate illumination, potable water and toilets, clean atmosphere and precautionary measures against fire and electric current.
  • Article 95: Employer must appoint one physician to do full medical checkups at least once every 6 months for employees exposed to an infection risk. Employer must record the results.
  • Article 96: Employer must provide employees with means of medical care.
  • Article 97-98: Employer (or his representative) must regularly inform employees of dangers related to their profession and provide written preventative measures.
  • Article 99: Employer must forbid alcoholic drinks and intoxicated persons in the workplace.
  • 21. How are employment disputes between employers and employees working in this freezone settled?

    The UAE Labour Law, UAE Federal Law No. 8/1980 states that in the case of these disputes, an application must be filed with the Ministry of Labour in Abu Dhabi. If the parties are unable to solve the case by this manner, the case will be referred to the courts.

    22. What entry qualifications and permits are required for staff working in this freezone?

    Qualifications will depend on the employee's position and their company's license. An employee requires a visa/entry permit for which a personnel sponsorship agreement must be submitted. A residence permit must then be obtained; this requires getting an Emirates ID card and a medical check-up.

    23. How are staff working within this freezone registered with the authorities?

    Staff working within this free zone are registered under their company's name, which is registered in this free zone. The company's trade license and the employee's passport must be submitted to the Abu Dhabi Airport Free Zone Authority's Licensing Department to obtain the required visa.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments grant employees the right to obtain insurance and end of service benefits.

    25. What rules govern the working time and leave of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments give employees the right to at least one rest day per week, if an employee works on a Friday they can obtain an additional 50% of their wage. The maximum working hours for an employee is 40 hours per week. As for the leave of staff working in this free zone, if they have been employment for more than 6 months and less than a year, they are entitled to annual leave of two days per month and 30 days annually.

    26. What are the main features of a property lease in this freezone?

    The main features of a property lease in this free zone are the following:

  • Availability of land plots for long-term leases
  • Availability of warehouse facilities (360 m2 to 2880 m2)
  • Availability of ready offices and workstations
  • A company must be incorporated in the freezone in order to lease a property.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    It is possible to apply for a building permit in this free zone, namely by making an application to the Abu Dhabi Municipality.

    The following documents must be submitted:

  • Approved site plan
  • Urban planning council approval
  • Commissioned letter signed by the owner
  • Liability free certificate
  • 28. What environmental requirements must construction companies building in this freezone

    consider, e.g. form of building, landscaping or building height?

    The standards set out by the Abu Dhabi Environment, Health, and Safety Management System Policy, and the Abu Dhabi International Building Code must be complied with.

    29. What are the key restrictions when leasing a property in this freezone?

    There are several key restrictions when leasing a property at Abu Dhabi Airport Business City. A company must be incorporated within the freezone in order to lease property. Additionally, a company must (i) have share capital of AED 150,000 to 1,000,000, (ii) operate in an industry segment or be licensed for an activity which is permitted in Abu Dhabi Airport Business City, and (iii) be incorporated as one of the legal entities allowed in the Abu Dhabi Airport Business City.

    30. What are the rules governing the use of utilities in this freezone?

    The use of utilities is determined based on actual usage in this free zone.

    31. How do retail premises establish themselves in this freezone?

    There are no specific restrictions prohibiting retail establishments from operating in this freezone. The same process would apply as for any other type of business.

    32. Is it possible for hotels to operate in this freezone - how do they establish themselves?

    It is possible for hotels to operate in this free zone. They establish themselves the same way other businesses would in this freezone.

     

    ]]>
    Tue, 03 Nov 2020 17:52:00 GMT
    <![CDATA[The Securities Regulation in Oman]]> The Securities Regulation in the State of Oman

    The Muscat Securities Market (the MSM) was established on 21 June 1988 to regulate and control the Omani Securities Market. While it was a loosely regulated market in its initial stages, enactments such as Royal Decrees 80/98 and 82/98 have helped with restructuring the marketplace.

    The Capital Market Law (the CML) establishes two bodies in relation to the Securities Market:

  • Muscat Securities Market, established by Royal Decree (53/88); and
  • Capital Market Authority, established by Royal Decree (80/98) 
  • MSM was established for the purpose of trading, and the CMA was established for the purpose of regulating said market trade. While trading Securities in Muscat is legal and in practice, there are no standalone provisions governing this type of trade, except for Joint-Stock Companies that are issuing Securities. The option of trading in derivatives such as regulations stated as per CMA's Capital Law and Commercial Companies Law will have to be abided as per applicability. Decision Number 1/2009, Issuing Executive Regulation of the Capital Market Law is the legislation that states the various regulations, conditions to be followed by any company that is dealing in Securities and establishing itself with the Oman Market.

    Powers of the Authority

    Chapter One of Part 4 of the Legislation Regulating Securities and Listed Companies provide for the Authority's powers such as:

  • organize, license and monitor the issue and trading of Securities;
  • Supervise the operation of the Muscat Securities Market;
  • Supervise all companies operating in the Field of Securities;
  • Supervise public joint-stock companies;
  • Supervise Insurance companies;
  • Licensing and regulation of credit rating companies; and
  • Licensing and regulation of special purpose vehicle.
  • Definition of Securities and Securities Activities 

    Part one of the Royal Decree Number 80/98, Legislations Regulating Companies Operating in the Field of Securities and Listed Companies states the various definitions pertaining to the Act. As per the Act, Securities is defined as,

    "Shares and bonds issued by the Government and its Public Authorities, treasury bonds and bills, and other Securities negotiable in the market."

    Although Derivatives or other Financial Instruments are not specified under the aforementioned definition for the sake of traders in other instruments could consider their securities covered under the ambit of 'Other Securities' as per the aforementioned definition. The fact that although the definition is narrow, the fact that CMA regulates any kind of investments that are offered in the market is a supporting factor to trading in other Securities such as CFDs.

    While the current regulations in place do not provide for a multitude of Securities to be traded in, it is to be noted that there is legislation underway for the purpose of regulating exempted Securities and that it is at its final stages of implementation, estimated to be passed as law during the publishing of this Article.

    Activities conducted by companies dealing with Securities is mentioned under Article 25, Part 3 of First Volume as any company that:

  • Promotes and underwrites Securities;
  • Finances Investment in Securities;
  • Participates in establishing the capital of companies using Securities;
  • Deposits, clears and settles Securities transactions;
  • Establishes and manages Securities portfolio and investment funds;
  • Conducts brokering in Securities; or
  • Manages trust accounts and custodianship of Securities. 
  • Criteria

    The legislation provides for various criteria to be fulfilled for issuing any of the companies that want a license to conduct the aforementioned activities. These are:

  • Applicant must be a commercial company registered in Oman or a branch of a foreign company.
  • The objective of the company must be confined to the practice of one or more activities mentioned above.
  • Issued capital and paid-up capital upon incorporation must not be less than the minimum amount specified, depending on the type and objectives of the company.
  • Managers of the company must have the experience and efficiency required for the business of the company in the manner to be specified by a decision made by the Authority.
  • Insurance needs to be obtained, the value of which shall be specified by the Authority.
  • None of the founders, directors, or board members must have been convicted during the five years preceding the date of application.
  • Establishment and Licensing

    Licenses for branches of licensed companies are stated as

  • Market Maker in MSM
  • Custodian
  • Margin Financing
  • Issuer of Structured Instruments
  • Brokerage
  • Portfolio Management 
  • Managing Investment Funds 
  • Issue Management 
  • Investment Advice and Research 
  • Marketing non- Omani Securities 
  • Agent for Bondholders 
  • There are minimum capital requirements for these activities that are mentioned in the Article.

    Foreign company's activities are granted as per Article 126, for the purpose of:

  • Investment Advice and Research;
  • Marketing non-Omani Securities;
  • Issue Management; and
  • Portfolio Management.
  • Anybody issuing Securities for trading shall be listed on the market, and the application for listing shall be submitted within one month from the date of registration in the Commercial Register. 

    Article 15 states that dealing in Securities in Oman is confined to dealing on the floor. Any dealing that takes place outside the floor is considered null and void.

    As regulations are narrowly defined, any other form of dealing can be appealed to the Authority's Board of Directors, who passes a case by case decision in pursuance to its Internal Regulations and Guidelines.

    Application for foreign companies has various requirements to be fulfilled as per mentioned in Part IV of regulating legislations. In order to obtain approval for establishment, a company needs to submit the following:

  • Payment receipt of application vetting fees.
  • Names and nationalities of founders.
  • Evidence of the founder's good reputation and that they were not declared bankrupt during the last five years preceding the application or convicted in a felony or breach of trust as per Commercial Companies Law.
  • Statement of the activities the company desires to carry out.
  • Authorization by the founders or directors or their deputies to carry out establishment procedures and obtaining the license.
  • Approval of Central Bank of Oman if the applicant is a bank with a separate investment banking division. 
  • Prospectus

    If the securities offered are for public subscription, it is mandatory for a Prospectus to be established by the company. This prospectus is to be filed in Arabic, disclosing the financial statements and all relevant information regarding the issuing company. The issue manager may translate the prospectus provided that in the event of a dispute, the Arabic one shall prevail. The issue manager and company shall be responsible for the accuracy of information. The prospectus must contain:

  • Statements to be disclosed to the investors;
  • Information relating to investment decision to be taken; and
  • If there is concealed information, it shall be stated as to why it is concealed.
  • Renewal

    While these aforementioned documents are to be submitted for the establishment of a company for securities, Article 118 lists for documents relating to carrying out business for the first time and for the purpose of renewal:

  • Payment receipt of licensing fees and the fees for carrying out the business.
  • Certificate of registration in the commercial register and date, number, and place of registration. 
  • Copy of MOA, AOA, of the incorporated branch as well as the parent company, and any other documents in regards to the incorporation of a company.
  • Bank Guarantee Evidence.
  • Statement on the directors and officers and their qualifications and experience. 
  • Statement of fulfillment for the minimum number of employees.
  • Appointment of Auditor as per CMA accreditation.
  • Insurance Policy taken against liability for loss or damage to clients due to fault of company, officers, employees, loss, damage, or theft.
  • Internal Regulations copy.
  • Statement that the parent company is carrying out the activities the branch desires to carry out.
  • Five plus years' validity on the license granted to the parent company in its country of origin.
  • Unconditional Bank Guarantee from the operating bank and authorized to the extent of 1 percent of paid-up capital of the company, not exceeding 15,000 Omani Riyal. 
  • Any other documents; if required.
  • While these aforementioned criteria for conducting business is for all companies, branches of foreign companies require further additional documents to be submitted. These are:

  • True copy of constitutive memorandum and articles of association of the parent company in the country of origin and any other documents relating to the incorporation of the company.
  • Statement that the parent company is carrying out the activities the branch is desired to carry out.
  • The license granted to the parent company in the country of origin has been valid for not less than the last five years.
  • Copy of the annual reports of parent company containing the audited financial statement for the past five years.
  • Statement on the business of the parent company, subsidiaries and associates and their locations.
  • Statement that the paid-up capital and shareholders' equity of the parent company is not less than 2 Million Omani Riyals as per the last audited financial statements.
  • Statement that the parent company will supervise the branch in the Sultanate and its compliance with the applicable laws, regulations and directives.
  • Certificate from the regulatory authority in the county where the principal place of business of the applicant is located indicating the license granted to the company, date of commencement of business and continuation.
  • Statement from the regulatory authority in the country where the principal place of business is located indicating approval for the company to carry out the business of the companies operating in securities in the Sultanate. 
  • Bank guarantee from the branch of a foreign company shall be 50,000 Omani Riyals
  • Latest Legislation

    After 20 years of established Securities Market, the Authorities have finally legislated regulation that has been long overdue for various types of securities and derivatives such as swaps, forwards, futures, mortgage-backed securities, and options. This legislation also has potential for trading in commodity derivatives, currency swaps, interest rate futures, credit default swaps, CFDs, international indices and more. This would mean legislation separate for capital markets and securities markets. Royal Decree 50/2019 was passed earlier this year which provides for various permissions and regulations for foreign investors in the capital market.

    ]]>
    Tue, 03 Nov 2020 17:12:00 GMT
    <![CDATA[Telecommunication and Media Law]]> Telecommunication and Media Law

    Introduction

    The media and telecommunication industry is one that is fast evolving worldwide. From an earlier time period where Print and Radio were considered the primary outlet of entertainment and news, which was slowly replaced by television with a variety of channels for the viewer to consume. From the time since cable television was established, the evolution of television has been drastic and vibrant. Even then, this transformation, while drastic, was gradual. From Black and White to color, to animations and reality TV, this process of evolution was well over a period of 100 years.

    At the beginning of the 20th Century, a new form of media and telecommunication was emerging, known as the Internet. While initially conceived with the idea of establishing communication between entities in different countries, this piece of technology evolved, drastically and as quick as one can imagine, in a span of a decade and some to provide for services unfathomable to mankind.  

    Telecommunications

    At a time like this, regulating these industries and space is difficult. With ever-evolving practices and propositions, countries find itself at an impasse to update regulations in such a quick span of time. 

    The Government of UAE established the Telecommunications Regulatory Authority as per Federal Law by Decree Number 3 of 2003 as an independent authority that is empowered to regulate this industry. This Decree provides for the various duties and powers the Authority has in regards to the communication sector of the country.

    Article 8 of the Decree provides for a head office to be established in Abu Dhabi with an office in Dubai, and more offices in different as it may deem necessary. As of now, there are three offices, two in Abu Dhabi and one in Dubai.

    Establishment of this Authority allowed for a second telecom operator in the country by the name of Du to be introduced. This reduced the call rates and internet packages that were earlier only provided by the sole telecom provider in the country known as Etisalat. It is to be noted that although the establishment of two service providers encourages a good alternative for customers, the TRA is excluded from Anti-trust regulations. The Authority is also exempt from being audited by the Audit Bureau. The TRA is authorized to exercise various authoritative activities such as:

  • Issuing Executive Order after approval from the cabinet.
  • Establishing general policies for telecommunication Sector and presenting it to the cabinet for approval.
  • Issuing general directives or instructions regarding implementation of the Law and its Executive orders.
  • Issue, extend, revoke and suspend licenses in regards to the Law and its executive orders.
  • Decide fees of licenses, authorizations, approvals, and services issued or provided.
  • Issue internal rules.
  • Article 10 and 13 further enumerates the powers and duties of the Authority. The Telecommunication Regulation Authority is also responsible for various regulations including dictating terms on portability of numbers and numbering plans, and usage of radio spectrum pursuant to the Law.

    Any activity in relation to telecommunications in the country requires a license to be issued by the Authority or an agreement with an already licensed operator.

    Types of Licenses

    There are two types of licenses granted by the TRA:

  • Class License
  • Individual License
  • Class License 

    A company incorporated under the Commercial Companies Law and a judicial entity or a subsidiary company of the judicial entity, after obtaining approval from the board, is eligible to apply for a Class License.

    Individual License 

    Applicants under this criteria are required to provide various information such as the company management and shareholding structures, their business operations, the type of network and services they intend to provide, funding source, and any other type of information that may be required by the Authority. These licenses are issued for a period of 10 years and for services which require the usage of scarce resources of spectrum and numbers.

    These classes are dependent on the resources requested and did not refer to open class of available licenses. 

    Radio Spectrum

    TRA is also the Authority that has jurisdiction over the radio spectrum. The Authority is responsible for allotting and revoking any frequency as per the National Frequency Plan. There is a fee to be paid to be authorized to run a radio station, decided as per the Federal Law or Executive Order.

    Other Areas of Authority

    While majorly authorized to preside over telecommunication sector, the TRA has also published various regulations such as UAE Information Assurance (IA) Regulation for information assurance at the national, sector, and entity levels, and other acts in relation to the cyber world. It is to be noted that there is a Cyber Law Act and a Decree-Law which regulates combating Cybercrime, and in cases of crimes committed on the cyberspace that is not specified for under the provisions of these acts, shall also be tried as per the UAE Penal Code. The TRA also regulates Internet Access Management Policy which provides a criterion for a website to be allowed on the UAE domain. Any website or app that violates such regulations shall be blocked on the cyberspace in the country. One such recently regulated areas are Internet of Things (IOT). The TRA published a policy in 2019 mandating IoT service sector to be compliant as per the laws set out in the regulation. The TRA provides for stricter data protection standards, as such. While the TRA does not explicitly prohibit the usage of VoIP technology, such apps or entities are required to be in compliance with Etisalat or Du to be legally operational in the country.

    The TRA cleared in a recent meeting held by the cabinet that regulating video and internet calling apps such as Zoom and Google Meet does not fall under the purview of the Authority.

    Media

    Media is an ever-emerging and evolving field that is regulated by various legislations in UAE. Due to the unique position of the population in the country wherein expats comprise well more than half of the population, it can be seen that different outlets of media are occupied by a representative of each expat community living in the country. This leads to a cocktail of channels in terms of various media outlets that have a presence in the UAE. As is the case, there are also various regulations that monitor these media spaces. These are:

  • Press Law of 1980 provides for regulations in relation to Publication and Publishing;
  • Cybercrimes, Federal Law Number 5 of 2012 regulate the crimes committed on cyberspace in regards to media and content as well;
  • Federal Law Number 2 of 2015 against discrimination and hatred, known as the Discrimination Law;
  • TRA's social media white papers;
  • UAE Penal Code, which is Federal Law Number 3 of 1987, also works in compliance with the cyberspace and crimes committed online could be under the purview of this Law; and
  • National Media Council (NMC) Regulations.
  • National Media Council

    National Media Council (NMC) was established as per Federal Law Number 11 of 2016 and is entrusted with the task of regulating media in the State. As NMC is a federal body, the regulations provided for by the body is to be followed throughout the country. With that being stated, a few Emirates have state authorities that regulate their media, but those authorities shall also be in coordination with the NMC as required. The Chairman's Board Resolution Number 30 of 2017 provide for the scope of Media Activities and its licensing requirements. Media Activities as per Article 1 of the Resolution shall be:

    "Any activity that is related to production, transmission, transfer, distribution and sending print, digital, Radio and Television information via media, including journalism, publications (printed matters), Radio and Television Broadcasting, cinema movies or shows and any other relevant activities as determined by the Council."

    The NMC is responsible for various activities in relation to media, such as drafting required legislation for the media, development of the policies as required in the country, and coordinating with state bodies and their legislation while observing the foreign and domestic policy of UAE.

    Requirements

    As stated earlier, in terms of TRA regulated activities, it is required that any activity that falls under the ambit of Media activities needs a license to be carried on in the country. There are various requirements needed to be adhered to dependent on the nationality of the applicant. 

    If the applicant is a UAE National, then he should be:

  • At least 25 years of age; unless exception granted by the Council;
  • Of good reputation and decent conduct;
  • Should not be convicted of ant crime involving breach of honor or public trust;
  • Should hold a high academic qualification as suggested by the Council;
  • Should not already have a license that has been suspended or cancelled, or company shut down or closed, or already been denied a certain media activity unless that denial has been remedied or removed; and
  • There may be other terms required as per the Council.
  • GCC National Applicants are to also adhere to the aforementioned principles, along with:

  • Signing an undertaking stating that he is not prohibited or banned to carry out media activities that are similar to the license applied, in his own country; and
  • Application should be in the areas of activities allowed to carry out except for establishing printing presses, publishing houses, newspapers, and magazines.
  • Corporate person applying for a license shall meet the below-mentioned requirements such as

  • No outstanding payments to be made to the Council;
  • Corporate person or company representative shall be 25 years of age or older;
  • Company shall be in compliance with local regulatory legal entities, legislations, and authorities; and
  • The activity to be conducted shall be part of the allowed activities.
  • Application 

    While the regulations are different criterion dependent upon nationality, it can be seen that they overlap with each other. Regulations on a base level, hence, are the same for all nationalities, with slight variation and addition dependent upon the type of person. While this is just a comprehensive requirement that the applicant needs to fulfil, the licensing requirements set in Article 7 is similar for everyone. A person or entity is required to:

  • Fill an online application with Emirates ID information of the license applicant;
  • Fill a new License Application Form;
  • Photocopy of Passport, Family Book, Emirates ID (for UAE National) and two personal photos;
  • Passport, Emirates ID and two personal photos (for GCC national and corporate or company);
  • Brand Name of the company, which shall not be in violation of Trademark Laws;
  • Place where the activity will be carried out;
  • Financial Guarantee if required for the activity; and
  • Pay due fees.
  • Media Content

    In 2017, NMC issued Resolution Number 23 of 2017, which was issued as Digital Regulations in 2018, concerning media content. This regulation expanded the scope of media regulation to Digital content production and distribution. As is the case with Press Law, these laws are applicable to media free zones as well. Various content standards are also established which were already provided for in the Press Law such as respecting the Islamic Faith, religious beliefs, State, cultural heritage, symbols, institutions, not harm national unity, security, or economy of State, and respecting intellectual property rights.

    It was now required by the Committee to establish a Website Censorship Committee, a Permit requirement for circulation and printing, amongst others. Traditional Mass Media such as newspapers, magazines, television and radio are now required to license their websites as per the Regulations. Individuals who are influencers or conduct business through personal sites, blogs, or social media. The fees for such licenses would vary from a 1,000 AED to 15,000 AED per year.

    Conclusion

    While UAE is regulating various outlets of media and communication, a lot of the regulations provided are under broad terms and opaque. It is still at its developing stages and requires a specific set of guidelines in terms of these regulations on various fronts. As is, the current regulations cover a broad spectrum of outlets and mandates such outlets to be registered or licensed as per requirements. The laws are stricter in comparison and entities or individuals using this space should be very careful of the statements they make and the people they connect with. The cyberspace here, albeit regulated through different legislations, is still one of the most strictly regulated space and that has to be kept in mind while carrying out online activities.

     

     

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    Tue, 03 Nov 2020 16:40:00 GMT
    <![CDATA[Collective Investment Law - DIFC]]> The Collective Investment Law (DIFC Law No. 2 of 2010) – An Overview

    Collective Investment Law of 2010

    The Collective Investment Law (DIFC Law Number 2 of 2010) came into force on 1 July 2010, and applies in the jurisdiction of the Dubai International Financial Centre. The Collective Investment Law defines the arrangements which, according to the Dubai Financial Services Authority (DFSA), amount to Collective Investment Funds; this proffered definition is expansive in scope and covers a plethora of pertinent arrangements. 

    What is a Collective Investment Fund? 

    Subject to Article 12 in the Collective Investment Law of 2010, a collective investment fund refers to any arrangements concerning the property of any description, where:

  • the purpose or effect of the arrangement is to enable persons taking part in the same to receive profits, or income arising from the acquisition, holding, management, or disposal of the property, or sums paid out of such profits or income; 
  • the arrangements must be such that the persons who are to participate in the arrangements do not have day-to-day control over the management of the property, whether or not they have the right to be consulted; 
  • the contributions of the unit-holders and the profits out of which payments are to be made to them are pooled, and/ or, the property is managed as a whole by a fund manager. 
  • As per the Collective Investment Law, a person shall not make an offer of any units (be it share, or interest) in a Collective Investment Fund in the DIFC, unless the offer of such a unit is made in thorough accordance with the Collective Investment Law, and any other applicable rules of the DFSA.  

    The Basic Categories of the Collective Investment Funds 

    Based on geographical location, collective investment funds can be classified as either domestic funds or foreign funds. 

    Domestic Funds is the term employed to refer to collective investment funds that have been established or domiciled in the DIFC. Domestic funds may be sub-categorized into three groups – public funds, exempt funds, and qualified investor funds. These can, in turn, be sub-divided into an assortment of specialist sub-categories that include Islamic funds, feeder funds, master funds, private equity funds, property funds, real estate investment funds, hedge funds, umbrella funds, among others.

    Conversely, Foreign Funds is the term employed to refer to collective investment funds that are domiciled outside the DIFC. It is critical to note that only foreign funds that meet certain criteria can be sold in, or through the DIFC. Foreign funds that meet the stringent eligibility criterion to be sold through the DIFC can be subcategorized into Designated Foreign Funds, and Non-Designated Foreign Funds.

    Key Features of the Collective Funds Regime

    The Collective Investment Funds regime was designed to provide adequate investor protection while meeting international standards for regulation. Some of the cardinal features of the same are as follows; 

  • A Public Fund regime, which extends a wider umbrella of protection to retail investors vis-a-vis requirements, such as the independent oversight of a fund, and detailed disclosure in a prospectus;
  • An Exempt Fund regime in which funds enjoy the feature of a fast-track notification process; here, the DFSA aims to complete the notification process within a period of 5 days, and with the added advantage of lighter regulation than a Public Fund;
  • A Qualified Investor Fund (QIF) regime, which provides proportionate regulation; this allows for flexibility for the QIF Managers and QIFs, by means of reliance on key requirements in the Collective Investment Law. This regime is unique in that it requires self-certification regarding the adequacy of systems and controls. Like Exempt funds, QIFs also enjoy a fast-track notification process, with the DFSA aiming to complete the authorization process within a period of 2 days;
  • Domestic Fund Managers are also a critical feature of the regime; they are DIFC-based and are empowered to establish and manage funds in the DIFC, as well as in jurisdictions outside the DIFC;
  • It must be noted that fund managers that hail from authorized jurisdictions are also empowered to establish and manage funds in the DIFC under certain circumstances;
  • DFSA-licensed Firms are permitted by Law to market and sell units in an expansive range of Foreign Funds in, or from, the DIFC;
  • A competitive fee structure is applied and attached to fund managers and funds;
  • The fund managers of umbrella funds are afforded the flexibility to use the Protected Cell Company (PCC) structure for open-ended umbrella funds. This legally protects investors in each sub-fund from liabilities arising in other sub-funds borne by the umbrella;
  • Bespoke shari'a governance requirements apply to Islamic funds;
  • Bespoke regulatory requirements 

  • accommodate specialist funds, such as private equity, property, REIT, money market and hedge funds; 
  • Key players in the fund management service sector are also closely regulated and monitored by the DFSA; this is to ensure optimal investor protection, by the upholding of high industry standards that meet international best practice; and
  • It must be noted that, in order to establish and manage a fund in the DIFC, one needs to be either a DFSA-licensed fund manager or an external fund manager. 
  • Types of Domestic Fund Vehicles 

    As per Article 26 of the Collective Investment Law, there exist three types of fund vehicles that can be employed to establish a domestic fund in the DIFC. These are Investment Companies, Investment Trusts and Investment Partnerships.

    While each is possessive of unique features, the most preferred to date is undoubtedly the Investment Company model; trust structures are predominantly employed for property funds, and partnerships for the hedge, and private equity funds. 

    An Investment Company requires to be incorporated in the DIFC, with the fund director named as a corporate director in the company. It must be noted that an investment company established as an umbrella fund is empowered to employ the PCC (protected cell company) structure. 

    An Investment Trust gains authorization upon the creation of a trust deed between a fund manager and a trustee. The trustee may either be a DFSA- licensed trustee, or an authorized individual from an approved jurisdiction.

    Finally, an Investment Partnership is a limited partnership registered in the DIFC, which consists of a general partner and limited partners. The general partner shall be the individual authorized by the DFSA to be the fund manager of the fund. 

    The Management of a Domestic Fund (by a DFSA-licensed fund manager)

    The Collective Investment Law sets forth the general duties of a fund manager of a domestic fund. They are tasked with the management of the fund, including the fund property, in a manner that is in accordance with the fund's Constitution. They are required to perform the functions conferred by the Collective Investment Law. They must necessarily comply with any conditions or restrictions imposed by the DFSA, and with any requirements or limitations imposed under the Collective Investment Law. This includes any limits relating to financial interests that it or any of its associates may hold in a fund. 

    The fund manager is also expected to take reasonable steps to ensure that in any dealings, a conflict of interest does not arise. They are also required to ensure that the fund property is valued at regular intervals, except for situations that suspend such valuation in accordance with its Constitution. Ultimately, the fund manager is answerable to the unit-holders with regard to the safe-keeping of the fund property, regardless of whether this specific task has been delegated to a third party. 

    The Management of a Domestic Fund (by an External Fund Manager)

    As per Article 20 of the Collective Investment Law, a fund manager from an acceptable jurisdiction may establish and manage a domestic fund domiciled in the DIFC, without having to obtain a DFSA license, on a handful of conditions:

  • it must necessarily be a corporate body;
  • the domestic fund is being managed from a jurisdiction that is either included in DFSA's Recognized Jurisdictions List or is assessed by the DFSA to have been capable of providing an adequate threshold of regulation;
  • It must willingly subject itself to the DIFC Laws and Courts; and 
  • It must appoint a DFSA-licensed fund administrator (trustee). They shall act as the local agent of the External Fund Manager in order to receive, process, and deal with the DFSA for regulatory processes. The local agent shall also be required to take on some investor-related functions. 
  • The Management of an External Fund from the DIFC

    Domestic fund managers are authorized to manage a fund in a jurisdiction outside the DIFC (i.e. an external fund). Upon the submitting of a proposal seeking the establishment of an external fund, the DFSA assesses the desirability of the relevant jurisdiction. This is conducted in terms of its Financial Action Task Force compliance and on the basis of whether the applicant has adequate controls in place to address risks that may arise from having the fund established in that particular jurisdiction.

    Marketing of Domestic and Foreign Funds

    Domestic Funds 

    The marketing of domestic fund is based on generally accepted principles of disclosure vis-a-vis prospectus requirements. However, it must be noted that the level of prospectus disclosure required for public funds, which are open to upwards of 100 investors, and/or retail clients, is significantly higher than the disclosure requirements for exempt funds, which are open only to professional investors.

    Article 51 of the Collective Investment Law on Prospectus Requirements states that if the fund is public, a copy of the prospectus is required to be filed with the DFSA.   

    Foreign Funds

    Article 54 of the Collective Investment Law on the marketing of foreign funds states that they can only be marketed in the DIFC by DFSA-licensed firms that are possessive of holding advisory or arranging authorizations. Furthermore, the following criterion is required to be met in order for them to advertise units of foreign funds:

  • The foreign fund must be a designated, regulated fund in a jurisdiction included in the DFSA's Recognized Jurisdictions; or
  • The firm has a reasonable basis for recommending the investment (in the units of the foreign fund) to the particular client, taking into consideration their investment objectives and circumstances; or
  • The foreign fund is open to 100 or fewer investors, each of whom meets the Professional Client test and makes a minimum subscription of USD 50,000 (not offered to investors by way of a public offering).
  • Another key detail contained in the Law is that foreign funds which cannot be marketed to retail investors in the home jurisdiction of that fund are prohibited from being marketed to retail investors in the DIFC.

    Conclusion

    Through the medium of the Collective Investment Law, the DIFC has constructed a new regime that has been tailored artfully to meet the needs of authorized firms who endeavor to manage Collective Investment Funds in the DIFC. From a structuring perspective, the framework affords maximum flexibility and ensures no stone is left unturned in terms of regulation and oversight. 

     

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    Tue, 03 Nov 2020 16:05:00 GMT
    <![CDATA[Securities Lending and Borrowing Regulations]]> Securities Lending and Borrowing Regulations as per Dubai Financial Market

    The Securities Lending and Borrowing (SLB) refer to a temporary arrangement of a loan of securities by a lender or a borrower. In this arrangement, the borrower is entitled to return securities at any time, and the lender may recall the securities at any time. The ownership of the lent securities is passed on from the lender to the borrower, and the borrower then receives certain rights over such security. On the passage of such securities, the borrowers get entitled for benefits whereas the lender forfeits certain rights of no longer owning the security that has been passed on to the borrower. However, the borrower has to make payments to the lender for such a transaction. The SLB promotes market efficiency, liquidity and at the same time, reduces the market volatility. 

    The SLB transactions are carried out in the Dubai Financial Market (DFM) and the main parties included in a DFM SLB Model include the lender, the lending agent, the borrowing agent, the borrower, the agent lender and Central Securities Depository (CSD) of DFM. CSD is not a counterparty to the SLB transactions in the DFM SLB Model. CSD has to match and settle SLB transactions by moving loaned securities between the lender and borrower on a free-of-payment basis. It is also accountable for recording all SLB transactions and transferring collateral which is DFM listed securities on a free-of-payment basis. It shall also be responsible for adjusting the quantity of outstanding loans for mandatory securities type of corporate actions. 

    Securities lending and borrowing is a contract under which the ownership of securities is temporarily transferred from the lender to the borrower and where the borrower is committed to returning them at the request of the lender at any time during the agreed period or at the end of that period unless agreed otherwise. The lending agent shall be authorized to conduct the securities lending transactions on behalf of others, and similarly, the borrowing agent shall be authorized to conduct securities borrowing transactions on behalf of others. Whereas, a lending and borrowing agent shall be a corporate person authorized by the authority to conduct securities lending and borrowing transactions for himself or on behalf of others. 

    It is imperative that the lender and borrower have to be DFM investors having a DFM Investor Number (NIN). Any investor that is in possession of a DFM Investor Number (NIN) either directly with DFM or indirectly with a local custodian shall be eligible for the title of a lender and shall include investors as individuals. In case the lender has the number via a local custodian, then the name of the investor associated with the local custodian NIN shall be considered as the lender. Agent leaders are offshore intermediaries lending securities for clients who are lenders, and such leaders manage the lending of securities for lenders. In the case of onshore intermediaries such as local custodians or local brokers intending to manage or arrange securities lending activities in the UAE, the regulations on approval of lending agents must be complied with. Any investor who has a DFM NIN either directly with DFM or indirectly via a local custodian shall be eligible to become a borrower. 

    The role of a lending agent and a borrowing agent is limited to local sub-custodians, local brokers or any companies as may be approved by the local regulator of the Securities and Commodities Authority (SCA) of the UAE. The borrowing agent and the lending agent are responsible for instructing the CSD to move loaned securities and any applicable collateral which are DFM listed securities based on instructions from the lender and the borrower. 

    Securities Lending and Borrowing Rules as per DFM 

    The Securities lending and borrowing rules have been laid out which have to be complied with in order for a successful SLB transaction. These rules lay out the conditions that a borrower/lender and agents have to follow to carry out an SLB transaction and the same have been summarized below: 

  • Registration: A lending and borrowing agent shall have to register with the DFM (Dubai Financial Market as licensed by the SCA) provided that the applicant has been approved by the SCA as per the SLB regulations/directives. Any registration process shall also have to be complied with in the manner as determined by the market rules from time to time which include all regulations, circulars, guidelines or procedure as may be prescribed by the DFM from time to time. 
  • Notify the SLB transaction: The lender in order to lend securities shall have to instruct the lending agent to transfer loaned securities from the lender to the borrower in consonance with the market rules that are issued from time to time for the transfer of loaned securities from the lender to the borrower. Similarly, for a borrower to borrow securities, he must instruct the borrowing agent to initiate a borrow request from time to time for the transfer of loaned securities from the lender to the borrower. 
  • Offshore SLB Activities: The lending and borrowing agents shall be instructed by the lender and borrower as and when the need shall arise to move loaned securities to settle any offshore SLB activities and the agents shall accordingly report such offshore SLB transactions. 
  • Onshore SLB Activities: For any onshore SLB activities, only lending and borrowing agents shall be authorized to conduct there, and all market operational/regulatory requirements prescribed under the SCA Regulations shall have to be complied with. 
  • Market purpose and procedures: The DFM may prescribe the purpose for the borrowing of securities in unification with the SLB regulations, and the SLB shall not be permitted for purposed other than that as prescribed in the market procedures. The market procedures will also grant access to lending/borrowing agents or clearing members as prescribed by the market procedures from time to time. Designated SLB accounts can also be issued for a borrower under the market procedure. The transfer of borrowed securities is strictly prohibited unless permitted otherwise in the market procedures issued at recurring times.  
  • Fees and charges: The prescribed fees by the DFM or any relevant charges shall be paid by the lender and/or borrower from time to time and shall be collected by the lending and borrowing agents. The DFM shall have the discretion to vary or change the fees/charges from time to time. 
  • Penalties: In case the SCA directs the market to unwind an SLB transaction, then the DFM has the authority to do so, and such a right shall be reserved by the market. Such an SLB transaction can also be withdrawn by the DFM in accordance with the law or any government policy directive. The market will also be entitled to prescribe measures to implement such an unwind of the SLB transaction in case such an unwind seems impossible due to the insufficient securities with the borrower. The lender or borrower shall be subject to suspension by the market from creating new securities loan instructions for non-compliance with the DFM Rules. 
  •  

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    Tue, 03 Nov 2020 14:39:00 GMT
    <![CDATA[setting up Company through SAGIA]]> It was challenging to set up business in Saudi Arabia until 2018 brought a new era by bringing about many changes to the rules and regulations of the country making it easier for people to set up their businesses. The time taken to process a business license in Saudi Arabia has been reduced by about 92 percent to encourage further investments. 

    The Saudi Arabian General Investment Authority (SAGIA), launched in 2000, is the country's foreign investment license provider. SAGIA is established to provide a quick and smooth company registration, investment application and business setup in Saudi Arabia. SAGIA has reduced the processing time significantly. Only financial statements and certified commercial registration need to be submitted by the businesses to the investment authority for licenses to be issued. Foreign investors can open marketing, sales, and administration offices to complement industrial or non-industrial projects.

    There are three types of business forms available to foreign companies in Saudi Arabia. Each of these business forms has its own distinct advantages and disadvantages, as well as different requirements for registration and minimum capital. In most situations, these requirements are dependent on the degree of commitment a company has to Saudi Arabia, and the proposed business activity.

    I. Limited liability company (LLC):

    To establish an LLC, the minimum capital investment required is Saudi Riyal (SR) 500,000. The LLC must have a minimum of 2 and maximum of 50 shareholders. If there are more than twenty partners, "Board of Controllers" must be established by the company. The shareholders are liable for the debts of the limited liability company only to the extent of their capital shares. A Saudi partner is not mandatory as there is no legal limitation on the percentage of foreign ownership. The LLC must have an auditor.

    Steps for Registration:

    1. Reserve a Company Name

    An approved name must be reserved at the Ministry of Commerce and Industry before registering a company. The name reservation is valid for a period of two months and can be done online on the website of the Ministry of Commerce and Industry.

    2. Apply for Investment License at SAGIA

    The first requirement for establishing a Saudi company with foreign shareholders is obtaining an investment license by submitting an application to the SAGIA. The time taken for this step is around three to four weeks, costing about SR 2000.

    The following documents are required to be submitted:

  • Completed standard license application form signed by the applicant, inclusive of an authenticated declaration that the applicant has reviewed the Foreign Investment Regulation and its Implementing Rules.
  • Authenticated resolution of the applicant's board of directors to incorporate an LLC in Saudi Arabia.
  • Authenticated copy of the applicant's articles of association and certificate of incorporation.
  • Authenticated copy of the applicant's balance sheet for a period of two years preceding the year of application.
  • A complete copy of the passport as well as four passport-size photographs of each person listed in the applicant's articles of association and the company's proposed manager.  
  • 3. Draft and approval of the Articles of Association (AOA) and the local incorporation documents.

    4. Legalize and Notarize the Documents

    Once the AOA has been approved, it needs to be executed and legalized before a notary public by the company or the authorized representative.

    5. Publication in Official Gazette

    After having the company documents approved and notarized, the company name and a summary of the AOA must be published by the company in the official gazette.

    6. Opening of a Bank Account

    A bank account can be opened after completing the aforementioned steps. Shareholders can obtain certification stating that the capital has been deposited by transfer of the share capital.

    7. Establishing an Office and Register in Commercial Registry

    The office space is for carrying out the activities of the company and also for registering the address that will help to obtain municipality license issued by the Ministry of Labor and GOSI (General Organization for Social Insurance). Once all the paperwork is sorted, and the office and bank account are established, the final registration is submitted to the Commercial Registry at the Ministry of Commerce and Industry. Certain activities still need licenses and certificates from the Chamber of Commerce, which is another mandatory document required along with the Commercial Registration.

    8. Register for Taxes and Social Insurance

    Registration for Tax is completed at the Department of Zakat and Income Tax (DZIT). The Zakat aspect is a religious wealth tax and is assessed based on taxable income and certain assets. For the registration of social security insurance, the employer must open a file with the GOSI. The employer and the employee will be registered with the organization's two branches- the Pension Fund and the Industrial and Illness Fund (Occupational Hazards Fund).

    II. Branch

    By obtaining the required license, a foreign company may register a wholly foreign-owned branch office in Saudi Arabia.

    A Branch is not legally distinct from the foreign business itself, so the business activities of the Branch will be limited to those of the foreign business, and the foreign business will be liable for the debts and other liabilities of the Branch. The minimum capital requirement is usually SR 500,000.

    Branch office registration follows the same procedure as the registration of an LLC, except that there are no Articles of Association to be approved. Although a Branch does not have to draft the local incorporation documents, it needs to have the documents of the parent company legalized to prove the legal existence of the company.

    III. Representative Office

    Technical and Scientific Offices (TSOs) are liaison offices for a manufacturer to provide technical support via a distributor to the local market. Temporary Company Registrations (TCRs) are short-term general businesses established for specific government contracts. These forms are generally limited in their activities. A TSO serves only as a liaison between a foreign company and the local market (and a Saudi distributor). TSO's activities are limited to providing technical assistance and information to the users and distributor regarding market, products and technical research in connection with the products. A TCR only performs the contracted work operations but does not engage in any other general promotion or solicitation of its business.

    The process for registering as a TSO requires the foreign company and a Saudi distributor to enter into a distributorship agreement. Before licensing and registration can be completed, the distributor must write a letter supporting the establishment of the TSO. For registering as a TCR, after a government contract is established, the company must obtain a Temporary License from SAGIA before formally filing for a TCR with the Ministry of Commerce and Industry. In general, the registration process is similar to that of a branch for both TSO and TCR. There is no minimum capital for TSO as well as TCR.

     

     

     

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    Tue, 03 Nov 2020 10:37:00 GMT
    <![CDATA[Winding up of a company in DMCC]]> Winding up of a company in DMCC

    DMCC Company Regulations 2020 

    On 02 January 2020, the Dubai Multi Commodities Centre (DMCC) issued and promulgated the New Company Regulations 2020 ('Regulations'), which were to replace the former DMCC Company Regulations of 2003. They were so reconfigured in order to attain alignment with international legislation; furthermore, they have simplified the interpretation of the Regulations, as well as the growing needs and requirements of businesses. 

    Winding Up 

    The Regulations include detailed provisions on the winding up of a DMCC company. This event could manifest in four discrete ways, as elaborated upon in the Regulations

  • Solvent Winding-Up: in this case, the shareholders unanimously resolve, at a general meeting, to wind up. Accordingly, the company is able to discharge its liabilities within 12 months of the commencement of procedures of the winding-up;
  • Summary Winding-Up: this is in reference to the event wherefore the shareholders unanimously resolve, at a general meeting, to wind-up and the company is able to wind up its affairs, and discharge its liabilities within six months of commencement of the procedures of the summary winding up;
  • Insolvent Winding-Up: when the shareholders unanimously resolve, at a general meeting, to wind up, followed by a settlement of dues meeting with the creditors; and
  • Involuntary Winding-Up by The Courts: when the Court orders the winding-up of the company.
  • It is worth mentioning that the provisions of the UAE Federal Bankruptcy Law (Federal Law 9 of 2016) relating to the bankruptcy of companies generally are also stated to apply to DMCC companies; it is unclear as to how the two regimes shall interact in practice. 

    Voluntary Winding Up Procedures

    The aforementioned solvent, summary, and insolvent winding up eventualities belong to the "voluntary" category of winding-up procedures. 

    A company is at liberty to wind up voluntarily should it resolve by unanimous resolution at a general meeting that it shall be wound up, or if the losses of a company reach 75 percent. 

    If the losses of a company reach seventy-five (75) percent, or more, of its share capital, the company shall (within 21 days of gaining awareness of the extent of its losses) call for a general meeting, at which a resolution for a voluntary winding-up, or alternatively for the recapitalization of the company to the extent of its losses shall be proposed. 

    In the case of a solvent or summary winding up, it is said to commence at the time of passing the resolution for voluntary winding-up by the company. On the other hand, in the case of an insolvent winding up, it is said to formally commence at the time of the certification of the notice of appointment of the liquidators.  

    Within a window of ten days from the date of appointment, the liquidator shall sign a notice of such an appointment and provide it to the shareholders, and the creditors via a delivery method approved by the Registrar. 

    Effect on the status of the company 

    In, and only in the case of a voluntary winding up, the company shall, from the outset of the winding-up procedures, halt all aspects of its functioning, except so far as may be required to effectuate its winding-up. However, it should be noted that the status and powers that the company wields shall be eligible to be continued until the company's dissolution. 

    To further comprehensive understanding of this topical procedure, we shall now proceed to delve into the regulatory nuances of these arrays. 

    Solvent Winding Up

    In order to commence a solvent winding-up, a declaration of solvency is required to be issued via a form signed by the directors. 

    Upon having made an exhaustive inquiry into the affairs of the company, the declaration shall state whether the company has no assets and no liabilities; the company has assets, and no liabilities; or, whether the company has liabilities and will be able to discharge those liabilities within twelve months of the commencement of the winding-up. 

    As previously established, the company shall appoint one or more liquidators at the general meeting, solely for the purpose of winding-up the company's affairs and distributing its property. 

    If the winding-up of the company continues for more than twelve months, the liquidator must, every three months until the cessation of the procedure, prepare a progress report providing a summary of his acts and dealings. He is required to send a copy of the progress report to the shareholders, and to the Registrar. 

    Summary Winding Up

    Like a solvent winding up, a declaration of solvency is required to be issued via a form signed by the directors, in order to start the effectuation of a summary winding up. 

    Here, the declaration of solvency should state whether, having made a full inquiry into the affairs of the company; it has no assets and no liabilities; the company has assets, and no liabilities; or, whether the company has liabilities and will be able to discharge those liabilities within six months of the commencement of the winding-up. 

    In a pre-established summary winding-up, if the liquidator has not submitted an application for the company to be dissolved within six months from the date of the directors' declaration, the summary winding-up shall be dimensionally converted into a solvent winding-up. 

    Insolvent Winding Up 

    Section 19 of the DMCC Company Regulations governs the effectuation of an insolvent voluntary winding-up. 

    Initially, the company shall call a general meeting of creditors, at which the resolution for an insolvent winding-up is to be proposed. The directors of the company are required to produce a signed statement of affairs of the company, and present it before the creditors. 

    Upon viewing the same, the creditors and the company may each nominate one or more persons to act as liquidator; these individuals shall be appointed by means of a simple majority by value of claims. 

    It is critical to note that, during the period following the commencement of the winding-up, but prior to the appointment of a liquidator, the powers of the directors shall not be exercised; the only exceptions to these is if the consent of the Registrar has been procured and if the motive is to protect the company's assets. As soon as the liquidator is appointed, all the powers of the Directors cease. 

    The eventuality of an insolvent winding-up also allows for the creation if a liquidation committee. As per Regulation 122, the creditors may vote to appoint a liquidation committee at a meeting; this shall consist of a minimum of three and a maximum of five members. The liquidation committee shall assist the liquidator in discharging the liquidator's functions. 

    Much like the previous studies instances of winding up, the liquidator must, every three months until the cessation of the procedure, prepare a progress report providing a summary of his acts and dealings.

    As soon as the company's affairs are thoroughly wound up, prior to the company's dissolution, the liquidator shall prepare a summary bearing the crux of the process, showing how it was conducted. Following the production of the same, the liquidator shall call for a general meeting of the company before the creditors, for the purpose of tying up all the loose ends in as transparent a fashion as possible. 

    Involuntary Winding Up 

    Article 137 of the Regulations empower the Court to wind up a company if it makes such an order following a petition to wind up issued by the Registrar. 

    The Registrar may present a petition to the Court demanding that a company be wound up if it determines that the company has been struck-off without a shadow of a doubt; or, is the company has committed a serious or repeated contravention of any of these Regulations or any other decision applicable in the DMCC Free Zone. 

    Where the Court accepts, and orders that a company be wound up, the Court shall identify the individual who shall don the role of the liquidator; this person shall take office immediately, upon the order being made. 

    As soon as the company's affairs are fully wound up, and right before dissolution, the liquidator shall prepare a summary of the winding-up, showing how the company's property has been dealt with/ disposed of. 

    The Powers of the Liquidator

    The powers that the liquidator(s) wields is significant and certainly warrants delineation. They are empowered to settle a list of contributors, with power to amend the register of shareholders; to make an order on any contributory to pay any sum due from him to the company; to make calls for the adjustment of the rights of the contributories among themselves; and, to rightfully distribute any surplus among the contributories. 

    Proofs of Debt in Liquidation

    If a company is being wound-up, a person claiming to be a creditor of the company who wishes to recover his debt in whole, or in part, must submit his claim in writing to the liquidator. In order to establish his claim, he is required to produce proof of debt. 

    The creditor's proof of debt is required to bear the creditor's name and address; the total amount of his claim; 

    whether or not that amount is inclusive of outstanding non-capitalized interest; particulars of how and when the debt was incurred by the company; particulars of any security interest held; details of any reservation of title with respect to the goods referred to by the debt; the name, address and authority of the person signing the proof of debt. 

    If the liquidator rejects a proof of debt (either in whole, or in part), he shall prepare a written statement of his reasons for doing so, and provide the same to the creditor. 

    Conversely, where a liquidator intends to declare a dividend, he must deliver a notice of that fact to all known creditors and, formally invite them to prove their debts. 

     General Priority of Expenses

    The Regulations also provide an elaborate, prioritized list of the expenses of the winding-up, which are payable out of the available assets of the company. They assume the following order of priority; 

  • expenses or costs of the liquidator which are properly chargeable, or incurred by the liquidator in conducting his duties; 
  • the remuneration of the liquidator; 
  • any amounts payable to secured creditors; 
  • any amount which is owed by the company to an unpaid person who is, or was an employee of the company, provided that the total does not exceed a sum equivalent to the salary of that person for a period of three months as a maximum; 
  • any amounts payable to DMCCA, DMCC or any other government authority
  • any amounts payable to general unsecured creditors. 
  •  Distribution of a Company's Property

    Upon winding-up, a company property's distribution shall be realized in pari passu satisfaction of the company's liabilities. It shall be distributed among the shareholders, according to their rights and interests in the company. 

    Conclusion

    Currently, the preferred modes of winding up are centered around an auditor's report confirming that there are no debts, liabilities or receivables due or payable, in order to proceed with the winding-up process. The new Regulations has detailed new events for insolvency that have been elucidated upon in this article; however, implementation of the same is still freshly underway and is yet to be analyzed. 

    Starting from January this year, companies were granted 24 months to comply with the new Regulations, or amend their articles to be in line with the new Regulations. To be sure, failure to comply with the same may attract penalties and/or sanctions.

     

     

     

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    Tue, 03 Nov 2020 10:03:00 GMT
    <![CDATA[Professional Companies Law of KSA]]> The New Professional Companies Law of Saudi Arabia

    The New Professional Companies Law (PCL) that has been enforced on 26 March 2020 has successfully replaced the former 1991 Professional Companies Law in the Kingdom of Saudi Arabia, and all regulations/provisions that are in contradiction to the new Professional Companies Law shall be deemed to be invalid and inconsistent. The PCL forms the regulatory framework for the professional sector by regulating professions which are executed by an individual or a professional body on account of achieving educational qualifications for such a profession, skills or any experiences in consonance with the applied codes of conduct along with the licensing requirements and provided that the registration is done by the competent authorities. The new professional companies law defines professional companies being established by individuals who are licensed to undertake one or more professions or with the aim of providing specific professions in professional companies. 

    Scope of Professional Companies Law

    All registered general partnership companies (GPCs) that fall under the ambit of 1991 PCL shall be subject to the applicability of the new PCL. Any Saudi natural person that is licensed to an undertaking profession shall be governed under this PCL. This law also extends to Saudi natural persons/juristic entities participating as investors/shareholders in the professional companies excluding the GPC's and limited partnership companies (LPC's) partaking in professional companies as the general partner shareholders with a joint liability which extends to the non-licensed investors of Saudi Arabia. The scope of the new PCL also extends to juristic foreign investors that includes the non-Saudi juristic entities providing specialized services being classified under the professional sector engaging in professional companies as shareholders/investors. 

    In the 1991 PCL, professional companies were limited to one corporate form being the GPC's in which shareholders are fully and jointly liable for the liabilities and debts are borne by the company without entailing any other protection. However, under the new PCL, the PCL can take any corporate form which includes General Partnership Companies and Limited Partnerships Companies. It can also take the corporate form of a joint-stock company (inclusive of single shareholder joint-stock companies), limited liabilities companies (with two or more shareholders) and single shareholding LLC's provided that the shareholder is licensed to undertake the relevant profession in the professional sector. 

    Features of the New PCL

    The companies under the PCL can provide more than one professional service as classified under different sectors of business activities provided that such required licenses are obtained from the competent government authorities in the domain of Saudi Arabia and after each sector has been satisfied. There is also the formation of a compliance committee that introduces the formation of a specialized committee which shall be convened on the decision of the Minister of Commerce and Investment. It shall contain three members or more with one minimum member being specialized in the pertinent laws of Saudi Arabia. The guidelines in the committee, along with remuneration, shall be determined by a resolution issued by the Minister of the Ministry of Commerce and Investment. 

    The professional companies are now allowed to undertake more than one profession under its applicability that implies providing more than one kind of professional service at a time in one company. It was earlier prohibited from engaging in more than one profession. Even a natural person that is not a licensed professional or a juristic person has the permissibility to be a shareholder/partner in the professional company which has taken the form of a limited liability company or a joint-stock company. The new PCL has referred to the Ministry of Commerce in Saudi Arabia as the regulator of the professional companies. A minimum threshold of 25 percent for Saudi Arabian ownership in the professional company has to be present and has to be adhered to. The professional companies could select any of the corporate forms, and specified guidelines in the PCL shall have to be followed. 

     

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    Tue, 03 Nov 2020 09:40:00 GMT
    <![CDATA[Rail Infrasructure Projectse GCC]]> Rail Infrasructure Projects in the GCC

    Rail Projects are always an ambitious and expensive affair every country hopes for, not to mention the long time periods required to complete and establish such projects as operational. While providing extensive environmental benefits, reducing the pollution created by cars and other heavy operational 18 wheelers, the rail project would also provide for economic and infrastructural benefits. In this piece, we shall discuss the GCC Rail Project, also known as the Gulf Railway, which has been envisioned and in the works for over a decade, its benefits, risks, and disadvantages. 

    Since the beginning of time, a developed railway network is considered synonymous with prosperity and progress of a nation. A well-connected country is a well-developed country. As is the case, various GCC member countries have undertaken or are in the process of undertaking various rail-related projects. While these projects are expensive, governments in the Middle East have allotted their income from Oil, whenever there is a price hike, to this ambitious Project. The planning is supposed to connect the UAE with Saudi Arabia, Kuwait, Bahrain and Oman.

    Panning an area of a staggering 2177 km, this Project is estimated to cost up to 250 billion US Dollars. As is, the majority of this Project is planned for UAE and Saudi Arabia. The plan was first proposed in 2009, with the completion estimated by 2018. Issues such as economic recession, dropped oil prices, differences in opinion amongst member states, and various other factors have led to the first phase of the Project, which would link UAE, Saudi Arabia, and Oman, now postponed to completion by 2023. The second phase of the Project connecting Saudi Arabia, Kuwait, and Bahrain, is estimated to be completed by 2025. Also, the income of different countries being varied provides a slight hiccup in regards to funding as some states such as Bahrain are not as well equipped for these projects as its major partner giants like Saudi and UAE. Even then, the Gulf countries have taken on massive foreign currency reserves and loaded up on sovereign debt. As is, the majority of this Project is planned for UAE and Saudi Arabia. Despite the various issues financially faced by these countries, they have doubled down on rail infrastructure spending and has made considerable progress over the last two years. 

    Certain countries have found other ways to boost their incomes, like the introduction of VAT in both UAE and Saudi, and Public-Private Funding as a preferred mode of the funding model. PPPs have helped countries in mitigating various types of risks that are involved with such projects. Apart from the Gulf Rail, countries that are part of this expansive rail project also have their individual trains operating or in the process to begin operation within the Country. These could then be linked to the Gulf Rail, providing a complete network of train system within and outside the Country.

    UAE

    The UAE has various rail projects in different cities. Etihad Railways is one such ambitious rail project which has already completed 1200 km distance of its desired Project. The Ministry of Finance has signed a deal with Abu Dhabi Department of Finance to fund the second stage of the Etihad Rail Project. The second stage will pan a distance of 605kms which will be from Ghuweifat on the border with Saudi Arabia to Fujairah on the UAE's east coast and hence will also integrate into the GCC Railway network.

    The Dubai Municipality had caught on earlier about the need and importance for a rail system based on studies starting from 1997. It had been reported that Dubai's motorists spent an average of 29 hours annually in traffic, which is a higher time period than those who are stuck in traffic in New York, Bangkok, London, etc. In 2009, merely just over a decade later, Dubai had started operations of the metro to the general public. Operated and controlled by the Roads and Transport Authority of Dubai, this was the first urban metro project to be operational in the Arab States. With Red and Green lines connecting various parts of Dubai, and a tram project within Jumeirah Lake Towers, one can get pretty much anywhere around the city through public transport. Further expansion has been planned, comprising a 15 kms expansion covering various parts of the city that is heavily populated, termed as the Route 2020. The stations will connect certain prime spots and locations such as the Discovery Gardens, Al Furjan, Jumeirah Golf Estates, and the Dubai Investment Park. This is exclusive of other lines that are in works connecting parts of Old Dubai. Not only are these projects going to improve connectivity, but it shall also provide for higher property prices in these areas, as they would be more easily accessible to the general public.

    Saudi Arabia

    Saudi has launched its own initiative in connecting the country with various massive railway projects known as the Saudi Landbridge Project. A project investment worth an estimate of 7 billion US Dollars with the tracks panning a distance of 950 kilometers, this would be one of the longest train lines equipped throughout the Arab states. Saudi has various lines under construction for its projects. Another project that is simultaneously underworks is between Riyadh and Jeddah, spanning a distance of 115 kilometers. This will primarily be a freight line which shall be interlinked with North-South railways. The Harmain High-Speed railway line connects Makkah with Madinah, passing through stations in King Abdullah Economic City, and King Abdulaziz International Airport in Jeddah. There will be three freight and two passenger stations (at the airport and in the city centre) in Jeddah. The Dammam-Jubail line will cut short the time for passenger travel by two hours. The freight service from Jeddah to Dammam will cut short the time period for transportation by days on end, as now the link by sea takes roughly around over a week with shipments.

    Bahrain

    Bahrain has already started and is continuing development of the King Hamad Causeway Project, which is its transport connection project to the Gulf rail. It is estimated to cost 3.5 Billion US Dollars and three years to complete this Project. In connection with the Saudi Arabia Ministry of Transport, King Fahd Causeway Authority, and Bahrain Ministry of Transport, Bahrain is going to jointly realize this rail project. The Project consists of a 25 km road and rail offshore section adjacent to the existing causeway and a further 25 km rail section only which is predominantly in KSA connecting to the existing Dammam to Al Hofuf line and with a short section inside Bahrain connecting to the proposed King Hamad International Terminal at Ramli area. 

    Inspired by the Dubai metro, Bahrain is also in the works of launching its own metro line, the light rail network, and the tender for its Project is rumored to be put out next year. However, the operation for this Project is only expected to happen by 2027.

    Kuwait

    Kuwait has delayed the road railway project linking to GCC rail this year due to failure on the part of Public Authority of Roads and Transportation to provide for designs for the rail routes. A 24-month delay has been requested by the Authority as an intensive project as such would require a competent consultant to complete the design on the Project. It is estimated to cost Kuwait 7 billion US Dollars to complete its side of the Project.

    Kuwait also has been in talks of launching a local metro rail within its city since 2009. The plans have unfortunately not come to fruition, although tender for the Project has been handed out. This is also expected to connect to the Gulf rail.

    Oman

    Oman has anticipated its need for a local rail line to and from its mineral mines as this would make transportation of the country's main resource easier. But current lack of demand in the product has stalled the Project; Phase 1 of which is from Manji to Duqm. Oman was in the initial phases of planning stages two of its railway network, the 240km line from Haifait to Fahoud, which is divided into two phases: the 114km section from a junction with phase one at Haifait to Ibri, and a 126km link from Ibri to Fahoud. It is yet to be known whether the status of the Project has changed.

    Concerns and Risks

    There are various concerns and risks evolving around the Project. Since GCC is not economically integrated with each other, there is the aspect of concern as to the percentage of completion from each of the States. It would be in vain if one Country was to complete its part in construction while another hasn't, and the railway not being operational due to this. Hindering oil prices and dwindling interest in minerals are pushing few of the member countries to postpone the Project for a later date. Another concern is regarding illegal immigration and visa issues of non-GCC nationals as it would be difficult to monitor the passengers entering the train, with lines going cross border for thousands of miles. Disagreements between states as to where the lines should begin and end, what part of the city to integrate the lines to, would be another issue altogether. Political turmoil and differences, if occurs, would further make a dent in this plan. There is also the concern of those who own or stay on the land that might come in between the stipulated rail line. They would have to be handsomely compensated, provided they agree to give up their land for this purpose. Technical aspects like the procurement of material, its quality for infrastructure, build quality of the rail, boring through underground lands and tunneling through mountains are herculean tasks that would require utmost care to execute, and has to be made sure that it is done properly.

    Advantages

    Apart from being a beacon in energy efficiency and sustainability, rail projects provide various other advantages. They help with easier transportation of goods for businesses operating interstate and would cheapen the cost of shuttling said goods from various states. Businesses have more scopes of operations as now they can efficiently conduct their businesses in the multiple countries available for trade. We are not strangers to the exponentially long lines of trucks parked at the border, awaiting customs approval to cross over, sometimes taking days in the process. Drivers can now be relieved of this painstaking task once the rails are operational. This would also reduce the time it takes for travel to those that stay far away from their workplaces. All these aforementioned advantages help with the GDP growth of a country. It also saves largely on Petrol consumption in these countries, helping provide a sustainable and brighter future.

    Conclusion

    While this Project has been a dream amongst GCC member countries for years on end, like any other projects on this scale, it has faced its hindrances. Overcoming the various economic, political, and financial issues might seem almost impossible at various points, but once that has been overcome and the project is completed, it would be an unprecedented, never-before achieved dream that would contribute majorly to the development in tourism and commerce of all the countries involved. We can already see a glimpse of that enthralling success as most of the member states are already underway in nearing the realization of this dream.

     

     

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    Mon, 02 Nov 2020 18:36:00 GMT
    <![CDATA[Respiratory Laws and Regulations in UAE]]> Respiratory Laws and Regulations in UAE

    The United Nations Environment Programme (UNEP) celebrates June 5, 2019 as World Environment Day. Interestingly, the theme of this year's World Environment Day was "Air Pollution". The day is significant as the UN body attempts to draw the world's attention towards the imminent danger posed the air pollution and resultant effect on human health especially the detrimental effect on the respiratory system as it is direct need of air which affects our health crucially. The news published in leading newspapers all over the United Arab Emirates at different time have pointed to the spiralling level of air pollution due to increase in number of cars, energy production as the anthropogenic cause and sea salt and dust particle as natural cause. In fact, Greenpeace the world-renowned environment non-governmental organization (NGO) has claimed Dubai as one among the 50 global hot spots for the high nitrogen oxides. Elevated levels of air pollutants such carbon monoxide, silica, nitrogen dioxide, tropospheric ozone, methane, in the air are the causative agents for damage to the respiratory tract, exposing the people to vulnerability of asthma, cancer and in long-term could cause chronic lung disease.

    Federal Law Number 24 of 1999 on the Protection and Development of the Environment defines "Air Pollution" as any detrimental and undesirable change in the quality of the open air at work locations, closed as well as semi-closed civic areas thereby harming the health of humans and the environment, by natural factors or anthropogenic activities.

    Though this article focuses on the legal perspective of protecting the respiratory system of people, it is important to know a bit of science behind the why what and how of air pollution and the precipitating agents of it and the causes. The causes of air pollution which cause respiratory problems are:

    • Transportation/vehicular emissions
    • Shipping
    • Power generation and distribution
    • Seawater desalination
    • Construction activities
    • Maritime activities-shipping, patrolling vessels
    • Oil and gas activities
    • Manufacturing industries-mineral mining, etc.
    • Sandstorms, mineral dust and salt water evaporation

    The pollutants that are released from the abovementioned activities are:

    • Sulphur dioxide (SO2):

    Sulphur dioxide (SO2) exists as a gaseous pollutant that is mainly emitted from fuel combustion from the transportation sector, electricity production, facility for water desalination and oil and gas extraction.

    • Carbon monoxide (CO):

    Carbon monoxide (CO) is a pollutant which is generated by partial internal combustion engines and smoking cigarettes.

    • Nitrogen dioxide (NO2):

    Nitrogen dioxide (NO2) is a gas that has its reservoir in the atmosphere. It is a pollutant mainly emitted during fuel combustion.

    • Ozone (O3)

    Tropospheric ozone (O3), known as 'ground-level ozone', is a secondary pollutant, which is not emitted due to natural or human interference. It is formed in the upper troposphere due to photochemical reactions in the sunlight and primary pollutants viz. the nitrogen oxide (NOX) and volatile organic compounds (VOCs).

    • Particulate Matter (PM10)

    A particulate matter which is less than 10 μm in diameter (PM10) is composed of small solid or liquid particles which float in air. They can arise from nature such as sand from the desert or from human sources e.g. combustion engines or formed in the atmosphere when gaseous pollutants such as SO2 and NOX react.

    • Hydrogen Sulphide (H2S)

    Hydrogen sulphide (H2S) gas has an odour of rotten eggs and causes odour nuisance at very low concentrations. Hydrogen sulphide is not categorically a 'criteria pollutant' in the UAE. The main

    emission sources for this are dumping of solid waste, emissions from sewage systems, wastewater plants as well as oil and gas activities.

    These pollutants are just deleterious to the environment as they cause:

    • Acid deposition by NOX and SOX, impacts buildings, water bodies, forests and wildlife.
    • Eutrophication of water bodies stimulate algal blooms and kill fish and plants.
    • Tropospheric ozone, which damages vegetation.
    • Negative impacts on wildlife caused by air pollutants.
    • Short-lived climate pollutants which contribute to climate change.
    • Affects the agricultural production
    • Reduces photosynthesis
    • Reduces plant ability to sequester carbon
    • Reducing the health and productivity of crops

    but they have a compoundable effect on human health and especially the respiratory system:

    • Headache and anxiety (SO2)
    • Impacts on the central nervous system (PM)
    • Irritation of eyes, nose and throat
    • Breathing problems (O3, PM, NO2, SO2)
    • Effect on the respiratory system is manifested as infections, irritation, besides inflammation.
    • reduced lung function as well as asthma
    • Lung cancer
    • Chronic obstructive pulmonary disease
    • Effect over the reproductive system.
    • Effect over liver, spleen and blood.
    • Poor air quality impacts the socio-economic wellbeing of the public in the Emirates.

    In fact, as documented by Ministry of Climate Change and Environment on its official website about the impact of air pollution especially by PM 2.5 on the respiration system as follows:

    • Congestive heart failure
    • Lung cancer
    • Chronic Bronchitis
    • Asthma
    • Scarred lung tissue
    • Emphysema
    • Low birth weight

    In order to redress the above problems, the UAE Government has adopted many measures such as:

    1. Ambient Air Quality Standards and Index adopted by Ministry of Environment and Water,

    UAE environment is mainly desert land with a long coastal line, also the wind current that changes frequently and seasonally causes harsh and arid climate. These factors affect air quality. Therefore, it is vital to keep a check on air quality caused due to anthropogenic activities.

    The quality of the air in the UAE is scrutinized by high-quality monitoring stations which conforms to the specifications approved by the European Union and the US Environmental Protection Agency. Currently, there are 41 stations across UAE.

    2. Federal Law Number 24 of 1999 on the Protection and Development of Environment: Protection of air from pollution

    • Article 48 The establishments, in the exercise of their activities, shall ensure that pollutants leaking into the air do not exceed the maximum permissible limits specified by the implementing regulations13
    • Article 49 The use of machines, engines or vehicles producing exhaust residues exceeding the limits provided for in the implementing regulations shall not be allowed.
    • Article 50 It lays down prohibition pertaining to throw or burn solid garbage and wastes except in places designated for such purpose, located far from residential, industrial and agricultural areas as well as the aquatic environment. The implementing regulations shall determine the specifications, restrictions and minimum distance between the places designated for such purpose and said areas.
    • Article 51 It is prohibited to apply pesticides or other chemicals for agricultural purposes, public health requirements or any other purpose except by abiding by the conditions, restrictions and guarantees set by the implementing regulations which guarantee that human beings, animals, plants, watercourses or any other environmental components are not exposed to the adverse
    • effects of such pesticides or chemical compounds whether directly or indirectly, presently or in the future.
    • Article 79 lays punishment for the breach of Article 49 shall be sentenced to a fine amounting to one thousand Dirhams (Dh. 1,000) at least.
    • Article 80 for breach of article 51 hereof shall be sentenced to a fine amounting to ten thousand Dirhams (Dh. 10,000) at least and fifty thousand Dirhams (Dh. 50.000) at most.
    • Article 82 lays down that whoever shall breach a provision of Article 48 and 50 would be sentenced to fine of Dh.2000 to maximum Dh.20,000

    3. Department of Planning and Development Ports, Customs, Free Zone Authority, Government of Dubai: Regulation Cs - 5.0: Construction Safety Regulations for Environmental Nuisance

    Construction works have to be undertaken in a manner that air quality isn't impacted and doesn't cause environmental nuisance.

    Dust control is vital near residential areas. Dubai is vulnerable to dust storms frequently. Dust generation is mainly due to construction activities such as uncovered loose materials, agitating ground sediments, earthmoving, demolition of buildings, concrete cutting or grinding, blasting, and concrete batching plants.

    The management techniques laid down in the Manual says that the contractor must adopt the following measures (as appropriate) to prevent the generation of dust:

    Draft and implementation of a dust management plan.

    Application of water sprays over stockpiles.

    Covering the loaded trucks with such loose sediments.

    Protect on-site the materials and their exposure to wind and the weather elements.

    Perimeter fencing to minimize the impact of dust on the public areas.

    Machines with internal combustion engines must be properly serviced to prevent the emission of excessive pollutants or noise.

    Exhausts and ductwork from the chimneys and plants must be located away from windows and public areas.

    Materials can only be processed in certain designated zones away from boundaries and public areas, with dust as well as noise control/ suppression. In case of in situ cutting, dust suppression measures must be used.

    Attempt to minimize ground area disturbance.

    Avoid non-critical earthworks on windy days.

    All loads of sand, aggregate or dry waste transported from the site must be covered.

    Stockpile the loose material in sheltered areas.

    Wetting of the roads and surfaces must be done in a manner that there is no run-off.

    Application of the "stabilizers" to be mixed with the water for a spray so to reduce the dust.

    Routine clean of the entry/exit roads and major traffic thoroughfares on site.

    fencing with gauze to reduce wind erosion.

    4. Cabinet Decree (12) of 2006 Regarding Regulation concerning Protection of Air from Pollution

    • Article (12) All Authorities and Facilities must ensure enough ventilation inside the sites of work, necessary precautions as well as steps to retard the emission of air pollutants.
    • Article (4) All Authorities and Facilities shall take into account, during the combustion of any sort of hydrocarbon fuels Certain tools and equipment shall be used for the control of air pollution to reduce emissions, provided that such tools and equipment are in compliance with the techniques of control and Cleaner Production.
    • Article (3) Car and Vehicle emissions may not exceed the maximum allowable limits specified
    • Article (2) All facilities shall not exceed the maximum allowable limits specified in annex (1) attached hereto regarding the emission or the leakage of the Gaseous and Solid Pollutants and vapours to the ambient air.
    • Article (13) All Closed and Semi-closed Public Places must satisfy enough means of ventilation, that suit the size of the place, its capacity, and the type of activity practised in it, to ensure the renewal of air, its freshness, and appropriate temperature.

    5. Abu Dhabi Framework Code of Practice 2.0 for occupational safety and health system: Personal Protective Equipment

    • Wherever an employee is subject to the airborne contaminants in excess of the threshold values mentioned, it is the prime duty of the employer to provide respiratory protection equipment to the employees.
    • Employers shall establish a written Respiratory Protection Programme which requires site-specific procedures.
    • The employer shall designate a person who is a competent person and train him to supervise and administer Respiratory Protection Programme.

    6. Government of Dubai: Personal Protective Equipment for Respiratory Protection

    • This guideline was issued by the government in pursuance of Local Order No. 61 of 1991.
    • All the employers of designated industries have to provide free of cost equipment for respiratory protection of employees.
    • It shall be the responsibility of the employer and supervisor to provide proper selection, maintenance, training and use of the respiratory protective equipment
    • The guidelines also mention three types of respiratory protective devices viz. air purifying devices, air-supplied respirators, self-contained breathing apparatus.

    In conclusion, as seen from the foregoing session that UAE at Federal level as well as at Emirates level have adopted rules, regulations, code of conduct for different industries to protect air and save the people from resultant air pollution. As in the UAE, air quality is one of the priority issues mentioned in the UAE National Vision 2021 agenda. The agenda aims to raise/improve the air quality from its present/current level to approximately 90% by 2021.

    To attain this objective, the Ministry of Climate Change and Environment (MoCCE) is working in tandem with its partners in a public-private partnership through means such as the use of state-of-the-art systems and techniques and the adoption of best practices. These include steps to develop and enhance the national standards for air pollution and strict compliance control, the transition to a clean and green

    economy, promote public transport rather than private one and development of artificial intelligence to detect the changes in air quality. UAE, as a nascent step, has started investing in solar-power projects viz. the Mohammed Bin Rashid Al Maktoum Solar Park, which is hyped to be the largest solar power park in the world. Further, Dubai aims to produce 75% of its energy demand from clean sources by 2050.

    ]]>
    Mon, 02 Nov 2020 12:44:00 GMT
    <![CDATA[bankruptcy legislation on business]]> Effect of recent bankruptcy legislation on those businesses facing difficulties because of cash flow issues

    The recent overhaul in the laws governing insolvencies of domiciled companies in the United Arab Emirates (UAE) vide the new UAE Bankruptcy Law (December 2016) ensures that most corporate insolvencies are resolved through the consensual restructuring of debtor entity's liabilities since market participants were reluctant to rely on legislation that was essentially untried. Indubitably, the Bankruptcy Law (the Law) is influenced by several features of insolvency law regimes in different jurisdictions, coupled with international trends. It focuses on the early restructuring of indebtedness for troubled companies.

    A key limitation under the Law is that secured creditors are not constrained by proceedings initiated under it, such that the security persists to be capable of being enforced [upon obtaining permission from the court in the case of Protective Compositions (explained below)] outside of such proceedings. As a result, it is likely to perturb the effectiveness of the Law in practice, and may also limit the instances of debtors in huge financing transactions seeking under this Law.

    The Law applies to all the companies that have been established under the Commercial Companies Law, as mentioned in Article 2 (1) of the Law. This Law does not apply to the companies that are partly or wholly state-owned unless they have chosen to come within the ambit of the Law by providing an application for the same in their company constitutions. This provisions of this Law also apply those establishments and companies in the Free Zones that are subject to provisions of Federal Law No. (8) of 2004 on Financial Free Zones, that are not governed by other provisions regulating financial restructuring, protective composition procedures and/or bankruptcy. Lastly, Licensed Civil Companies that are carrying out professional activities fall within the ambit of the Law.

    The key court-driven procedures in focus expand to Protective Composition and Bankruptcy. The tests that determine when a company is insolvent have been clarified and made comprehensive. The cash flow test which applies when a debtor is unable to repay his debts by this Law also introduced an alternative balance sheet test which applies when the current liabilities by are debtor are not covered by his assets. Generally, a 30 days limitation period from the date of it becoming insolvent is prescribed to the debtor to file for bankruptcy, and to apply for protection within the same period. Though many criminal implications under the prior regime have been repealed, some penalties do continue to apply to a debtor who fails to take action within the limitation period above. A Financial Restructuring Committee is required to be formed under the Law, and its role is to monitor the management of restructuring procedures aiming at facilitating consensual restructuring arrangements between a creditor and debtor.

    Prevention Composition: is a debtor-led, supervised by court procedure that is available to the debtor who:

  • Upon undertaking one of the two abovementioned tests, has been insolvent for a period less than 30 business days; or
  • Is in financial turmoil but has not yet become insolvent.
  • The objective of this procedure is to facilitate the rescue of a business by providing support to the debtor to settle with its creditors. A person in financial trouble because of existing cash flow issues may undertake this procedure in case they have not entered into this procedure in the past one year, or in case the debtor has already initiated bankruptcy proceedings. A court-appointed expert prepares a report on the position of the debtor in terms of his finance, to check whether necessary conditions have been fulfilled. If this application is approved by the court, the debtor is placed under the supervision of an expert appointed by the court (or more than one expert if the court deems so). There are terms that need to be followed under this procedure, and the failure to abide by the same would lead to such composition being null, and an order by the court to convert the proceeding to that of bankruptcy, consequently liquidating the debtor's assets.

    Bankruptcy: Under the Law, bankruptcy is two-fold: insolvent liquidation and formal restructuring. An application for bankruptcy declaration can be made by the debtor, the public prosecutor, a court or a creditor who has an unpaid debt to be received of a minimum of AED 100,000 for a period of 30 business days. Once the application has been filed, a court-appointed expert makes a report on the financial status of the debtor, similar to that of the above procedure.

    Liquidation: The court can order the winding-up of the business if:

  • A restructuring scheme or preventive composition within bankruptcy is not appropriate, unapproved or terminated;  or
  • A debtor trying to evade financial obligations or is acting in bad faith.
  • Unlike restructuring and composition which tries to rescue the debtor, liquidation aims to terminate the corporate existence of the company.

    While many contemplated the success of this new regime, recently, the UAE started to the positive effects of this new Law. The application of clear and transparent rules that balances the interest of both the creditor and debtor was successful in the case where a UAE company (cannot be named) successfully restructured its debt and is to resume business under Law No (9) of 2016 Chapter 4, the first for the UAE! With the company's debt equalling almost 18 times its capital, the company sought restructuring under this regime and has been successful.

    ]]>
    Mon, 02 Nov 2020 10:34:00 GMT
    <![CDATA[Real Estate Developments in auhdxb]]> Real Estate Developments in Abu Dhabi and Dubai

    The United Arab Emirates is continuously witnessing positive developments in the real estate market. The market is adapting to the changing terms of the scenario around the choices of the investors willing to invest in the real estate market. Abu Dhabi and Dubai are the ever-growing Emirates in the country with a boost of real estate development announcements over one year. Abu Dhabi recently experienced the launch of the Jubail Island project spanning at the cost of AED 5 Billion and the development of Abu Dhabi's massive waterfront residential scheme at the Yas Island.

    It is pertinent to note that the supply of the residential units has been continued for the first quarter of the year. With the issue of the amendments to the provisions of the Abu Dhabi Law Number 19 of 2005 ("Abu Dhabi Law") which dealt with real estate property and its amendments in the Emirate of Abu Dhabi. The Abu Dhabi Law was amended concerning Articles 3 and Article 4 under the new unnumbered law on 17 April 2019.

    Under article 3.1, the rights of the owner towards the property were limited to the following three (3) categories only:

  • Emirati citizens, natural or legal persons
  • public holding companies with ownership not exceeding 49 per cent non-nationals
  • any person who has been issued a decision by the Abu Dhabi Crown Prince or the President of the Executive Council
  • Article 3.2 stipulated that the foreign nationals, as well as the legal or natural persons, still have the right to acquire and own all in-kind and original rights in the properties within the areas of investment.

    Article 4 was amended concerning the holder of the 'Musataha'. Musataha is a type of agreement which entitles the holder of the real right in rem towards the construction of the building to make investments, mortgages, sell or purchase a plot of land. This term ranges from a period up to that of fifty (50) years. The Resolution Number 64 of 2010 issued by the Abu Dhabi Executive Council made provisions for the regulations, rules and the term of the Musataha Agreement. The parties to the Musataha Agreement shall exercise the right to dispose of the property, including the right to mortgage. This right can be taken into effect without obtaining the consent of the landlord.

    These developments play a major role in upbringing the real estate industry in Abu Dhabi. When a customer approaches a developer, it is of high importance that the preferences and choices of the investors are taken into account when the product is offered. In this case, the flat, unit or property. The industry data is critical when scrutinising the key indicators while at the planning stage.

    It is widely believed in the market, that the residential real estate sector for both Dubai as well as Abu Dhabi in a comparison state. To take an example, a foreign investor would prefer to make an investment in Dubai for some apparent reasons, like more knowledge on the real estate regulations and increased gains in the form of profits and interest on the investments. The developers are competing for attracting the investors with competitive value offering and campaigns for maintaining the turnover. Also, the payment structure has been on the lines to the construction progress. The developers are offering a plan in which a specific percentage out of the purchase price is to be paid on completion and sometimes after the end of the project.

    October 2018 saw the newly issued rules which were set to make things easier for the landlords to commence eviction of the tenants. These rules will allow the landlords to approach the respective enforcement departments for claiming any of the outstanding rents and the property back in possession. Initiatives like these make an effort to support and create awareness about the suitable environment for investing in the real estate in Abu Dhabi, together with the mechanism for ensuring simplified procedures and amicable resolution of disputes.

    Foreign Ownership:

    With the introduction of the Abu Dhabi Law, which allowed 100% foreign ownership, is intending to boost the confidence amongst the investors and encouraging transparency for longer investment terms. It will enable the foreign nationals to obtain an ownership of freehold titles within the investment zones along with the title deeds. It is to be noted that, previously, the investors were awarded a ninety-nine (99) year lease. This is a fundamental gear change in the market, which is set to enhance and encourage the economic activities in Abu Dhabi. These regulations will also substantially reduce the costs associated with registering the property. Abu Dhabi intends to focus on the foreign investor market in India and that of China, where there is potentially the highest number of investors showing a lot of interest to invest in the real estate in the United Arab Emirates.

    The main attraction towards the new Abu Dhabi Law is the initiative of the Abu Dhabi Government, introducing the long-term investor visas along with 100% ownership for the companies belonging to specific industries. This is aimed towards the economic growth and developmental support in Abu Dhabi.

    Off-Plan purchases:

    Rightly called as the Abu Dhabi Real Estate Law Number 3 of 2015 concerning the regulation of the Real Estate Sector in the Emirate of Abu Dhabi, provides for the strengthened protective incentives for the off-plan buyers. The off-plan sale is understood as an agreement where the investor is granted the rights in the property under the floor and compound plan. The law appointed the Abu Dhabi Department of Municipal Affairs ("DMA") as the regulator for real estate who shall be performing similar functions to that of the Real Estate Regulatory Authority ("RERA") of Dubai. The points to remember are as follows:

    • A central and unique or database record for all the projects in the Emirate of Abu Dhabi
    • Developers to charge only the administrative fees as approved by the DMA
    • Rules to be laid down by the owners' association
    • Sale of off-plan units only on the real right, i.e. right in rem over the property
    • Developers to open an escrow account for off-plan sale
    • Fine imposed on the developers in the event the project is delayed

    Rent cap in Abu Dhabi:

    The Department of Municipal Affairs and Transport (DMAT) in Abu Dhabi recently recalled the annual rent cap of 5%, which was abolished in the year 2013.

    Dubai:

    The real estate market in the Emirate of Dubai has always boomed with the majority of the investors willing to invest in the projects. As it was previously experienced for the rental and sale prices in 2018, the same is expected to decline in 2019. This is largely due to the excess amount of supply volume. However, the industry in the long-term perspective is optimistically positive. Since the prices are on the declining pace; it is making it favourable for the investors to think and invest their money in developing or developed projects. Often, the developers are offering attractive incentives and pries, which has widened the investor pool.

    2019 is set to experience a prosperous market avenue in Dubai's real estate market where the developers are promoting their projects with a payment plan that is suitable for the investors along with their off-plan projects. The disparity in the ratio of demand to supply is also making the developers to create an environment more favourable to the buyers. With the Expo 2020 approaching, the Dubai real property market is set to boost investments by foreign investors by a large parity. Also, with the 10-year investor visa, which was introduced is offering the eligible residents to have a strong sense of permanent residence in the country for investors willing to invest around AED 10 Million.

    Digital platforms in the real estate industry:

    • Real Estate Self-Transaction (REST) Platform:

    Dubai has launched the REST, a digital platform, which is expected to target the ease of managing all the transactions related to real estate or property.

    • Taqyimee:

    Taqyimee is a smartphone application for valuation services for real estate. It is expected to connect all the evaluators to all the potential and existing investors and owners.

    These platforms will increase the transparency in the real estate industry, making it more investor-friendly and providing easy accessibility to the services.

    Laws on Rent Cap

    Dubai

    The rent cap law in the Emirate of Dubai has issued the Government of Dubai Decree Number 43 of 2013 (the Decree) dealing with the determination of increasing the rents in the real estate industry in Dubai. The Decree imposed an increase in the rent cap to 20%. The rent cap law makes it clear that it applies to all the development areas and the free zones as the Dubai International Financial Center (DIFC). The RERA gives a detailed index on market price where the rental increase prices can be calculated.

    ]]>
    Mon, 02 Nov 2020 10:14:00 GMT
    <![CDATA[Hand Safety in Oil Gas Industry]]> Hand Safety in Oil and Gas Industry

    The Petroleum Industry has undergone a historic boom, with new technology coming in place. The employment in the oil and gas industry is growing time and again and the jobs in this sector are one of the most dangerous and hazardous. Together with occupational risks, there arise safety risks which include bodily injury to fingers and hands. These are the most vulnerable physical parts which are easily prone to risks and dangers.

    The finger and hand injuries are regularly featured in the petroleum company's incident records. It made up to 50 % of the accidents in the sector. As per the 2014 statistics issued by the International Association of Drilling Contractors, 43% of the recorded incidents on the exploration and production rigs were comprised of just the injuries related to hand and fingers. Due to which, the companies involved in the oil and gas exploration and production industry are employing more injury prevention strategies.

    These kinds of risks are included in the occupational hazards in the petroleum industry. The hazards are omnipresent, ranging from upstream to midstream and downstream as well. The workers are prone to come in contact with the heavy equipment, chains, pipes, and flash fires, which may result in accidents. Despite the regulations with regards to personal protective materials, the risks are high.

    The workmen in such a dangerous environment deserve better safety and protection. The industry has to adopt specific standards and regulations that should mandate the following:

    • Educating the workforce about the risks and how to employ safe practices
    • Usage of appropriate personal protective equipment (PPE) which shall start with requisite hand protection

    Hazards such as struck by objects or being caught between dangerous equipment as well as exposure to heat, flares, fires and chemicals, cause inherent bodily harm, which is long-lasting.

    The companies are obliged to conduct a proper risk assessment and thereby affording the employees a chance to understand how the risks can be avoided and mitigated. This can minimizing finger and hand injuries. The company should prioritize the minimization of exposing the workmen to unnecessary risks.

    It is pertinent to note that technology has advanced in this industry where injuries can be said to have been reduced. The technology used is such as pipe handling via remote control in the case of oil and gas pipe drillings.

    Introduction of advanced expertise and technology

    There are kinds of injuries which have witnessed reduction when the technology is put to use. These technologies consist of remote-control pipe handling systems in the exploration and production rigs. One of the significant changes is separating the human touch from the machinery but still controlling the operation and thereby improving the safety standards in the industry.

    One of many examples of these technologies is the "Iron Derrickman". It is installed on the drilling oil rigs where it is carried out with the elimination of the necessity of personnel above the derrick and floor below on the floor of the platform. This further results in a rapid reduction of the risks which are exposed during the handling of the pipes and rigs. One of the other methods is remote top drive technology which is undertaken via the handsfree case.

    The petroleum companies operating in international waters are under an obligation for complying with the regulatory requirements which stipulate the usage of remotely operated and unmanned vehicular equipment. However, it is essential to take into consideration that this advanced technological equipment will create dangers to human and in a specific event, these significant accidents have taken place - collisions between these uncrewed vehicles and personnel as well between structures and with the equipment itself.

    In spite of increased and enhanced awareness amongst the workers and improvement in the training of the employers within the industry, the number of injuries about hands is keeping on increasing. This trend is evident at all the places since these risks are inherent in every workplace or job.

    According to one of the occupational health and safety magazine in the oil and gas industry, majority of the incidents are related to hands, arms and fingers. It can be easily construed that hands and fingers are not much prone to hazards, but the reality is that hands take most of the risks and dangers and suffer a lot of exploitation.

    Generating awareness amongst the oil and gas companies is effective on its own where these organizations have come up with campaigns for health and safety where informative posters and animation will help the creation of a safe environment at the workplace. The companies need to approach the protection and security from within the organization to combat the ever-changing and ever-increasing risks of injuries.

    Risks about non-equipments:

    Equipment and machines do indeed create hazards and dangers on-site, but the second contributor towards the injuries can be afforded to the corrosives or more say, the chemicals. These chemicals are hazardous and irritant to the sensitive areas of the skin, which is highly capable of damages which can prolong for an extended period.

    These corrosive chemicals cause hazardous risks and damages including hand blistering, skin loss and sometimes even the rehab therapists and the doctors would not be an able cure. The second hazard is the absolute temperature where the hands become so sensitive that protection is highly necessary during operations. There is also another risk of electrical burns and shocks which are common in day to day life and cause approximately a thousand deaths per year.

    How to prevent injuries at the workplace:

    It is of utmost importance that such damages must be avoided and taken care of. It mainly occurs due to incorrect positioning of the fingers or hands, which indicates that the safety training has not been taken place for the workers or the personnel. Another issue is the improper use of the tools. It is the job of the company to provide proper training and understanding of the practical applications of the devices.

    Further, even improper outerwear contributes a lot to finger injuries. Such as continually wearing rings and cuffs, which can substantially hamper the proper operation of the machinery within the electrical zones. The worker should be wearing gloves and protective gears all the time. For example:

    • Rubber gloves and protective guards
    • Electrical gloves for electrical work
    • For cutting, use of steel mesh gloves
    • Limit the use of soft cotton or canvas gloves

    The UAE Federal Law Number 8 of 1980 concerning the Labour law mentions explicitly that the employer must create such an employee-friendly environment and provide with an adequate measure for their protection. Pursuant to that, the oil and gas companies have to make sure that they comply with the different permits and regulations that are brought about by the municipalities in the UAE. Also, it is the duty and responsibility of the municipalities to conduct regular compliance checks at such platforms and rigs.

    Despite continuous efforts from the petroleum companies regarding safety and protection and hazards mitigation, the number of injuries is increasing year by year, and no substantive solution is provided for its improvement. With repeated and unstoppable synergies from the companies as well as the employers, we can surely achieve the second step in human safety and protection and devise a strategy which is work and employee friendly.

    It can be undoubtedly said that improvement in technology for oil and gas drilling rigs can play a significant part in mitigating risks, but it is also important to note that there is equal involvement of the employees and the employers together achieving a similar goal of safety and risk and hazard mitigation.

     

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    Mon, 02 Nov 2020 09:55:00 GMT
    <![CDATA[Initial Public Offering - Saudi Arabia]]> Initial Public Offering - Saudi Arabia

    Introduction

    In the early 1930s, capital markets were given a platform in Saudi Arabia but regulations were put in place only post 1980s through the Ministerial Committee, Tadawul and the Capital Market Authority (CMA). These were established to ensure fairness and efficiency in the market.

    A public offer is one that fails to meet the requirements for a private placement.. The requirements for private placements include:

    • An offer must be made by an authorized person and the offeror must inform the appropriate authority 10 days prior to making the offer with a declaration from the offeror and the authorized person as well as copies of any offering documents
    • The offeror must inform the Authority at the earliest if there is any material change after the submission documents and before the start of the offer. The Authority may require the offeror to re-file the offering documents
    • If after receiving the private placement notification, the Authority deems that the offer of securities is not in the best interests of the market it may carry out enquiries to assess and receive explanation on any relevant matters and require the provision of  additional information to assess the accuracy of the information.
    • If after receiving a private placement notification, the Authority believes that the private placement is not in the best interests of the investors and the market and may result in a breach of the Capital Market Law, it may give the offeror an opportunity to be heard, issue a notification to the offeror that the offer is not to be made or publish a notice prohibiting the offer, sale or transfer of securities.
    • The offeror must collect and submit to the Authority a list of all individuals who have acquired securities and details about the proceeds once the offer is completed. If the offer is not completed the authorized person must submit a notification in writing to the Authority within 10 days mentioning failure to complete the offer.

    Regulatory Oversight

    The key regulatory authority for operations is the Capital Market Authority (CMA) who ensure the compliance of the Capital Market Law by issuing new rules and regulations. CMA plays an essential role in maintaining transparency, fairness, accountability and greater efficient operation of the market.

    Legislative and Regulatory framework

    Apart from the CMA's framework, several other regulatory frameworks are in place, as mentioned below:

    • Capital Market Law (Royal Decree No M/ 30 dated 2/ 6/ 1424H corresponding to 31/ 7/ 2003G)
    • Listing Rules (CMA board resolution number 3-11-2004 dated 20/ 08/ 1425H corresponding to 4/ 10/ 2004G, as amended)
    • Market Conduct Regulations (CMA board resolution number 1-11-2004 dated 20/ 08/ 1425H corresponding to 4/ 10/ 2004G)
    • Offers of Securities Regulations (CMA board resolution number 2-11-2004 dated 20/ 08/ 1425H corresponding to 4/ 10/ 2004G, as amended by CMA board resolution number 1-28-2008 dated 17/ 8/ 1429H corresponding to 18/ 8/ 2008G)
    • Merger and Acquisition Regulations (CMA board resolution number 1-50-2007 dated 21/ 9/ 1428H corresponding to 31/ 10/ 2007G)
    • Companies Law (Royal Decree dated 22/ 3/ 1385H)
    • Corporate Governance Regulations (CMA board resolution number 1-212-2006 dated 21/ 10/ 1427H corresponding to 12/ 11/ 2006G, as amended)
    • Internal Regulations by the Capital Markets Authority (CMA)

    Types of Offers

    There are two types of offers - a retail offer and an institutional offer. A retail offer is a public offer which does not meet the requirements for a private placement. This is governed by the Offers of Securities Regulations and it can only be offered to sophisticated investors and a maximum of 60 non- sophisticated investors. A minimum subscription amount of 1,000,000 KSA Riyals must also be met. The issuer would also be required to file a prospectus with CMA for approval.

    The key difference between the two offers is that retail offers can be offered to retail investors while institutional offers are focused primarily on sophisticated investors.

    Supporting Documents

    The issuer must ensure to submit a certified copy of the following documents as part of their application:

    • Letter of appointment of financial advisor
    • Letter of appointment of legal advisor
    • All underwriting commitment letters
    • Details of the team working on the application for registration and offer
    • An electronic copy of all the above-mentioned documents
    • Any other documentation that may be required by the Authority.
    • and more.. (For the full list of supporting documents please refer publication)

    After the offer has been received from the Authority and prior to the listing, the issuer must submit an original copy of the following documents to the Authority:

    • A prospectus in Arabic signed on every page by the representatives of the issuer who are appointed as authorized signatories
    • Updated commercial registration
    • Five copies of the published prospectus in Arabic
    • Five copies of the English translation of the prospectus
    • The securities allocation model;
    • The most recently reviewed interim financial statements
    • All signed underwriting, sub-underwriting and distribution agreements entered into in connection with the offer
    • An updated and signed letter that contains the applicable information as required by Annex 6 of these Rules
    • An electronic copy of all of the above-mentioned documents

    The copies of all documents must be preserved by the issuer for at least 10 years from the date of completion of the offer. In case of a litigation the issuer must preserve the copies until the end of that litigation.  

    The Prospectus

    The prospectus is a vital document while filing for an IPO. All information that will aid the inventor to make the best judgement of the issuer like the company's activities, financial position,etc must be mentioned in the prospectus.

     

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    Mon, 19 Oct 2020 13:20:00 GMT
    <![CDATA[Initial Public Offering - Qatar]]> Initial Public Offering - Qatar

    Introduction

    Qatar Exchange Company was established in 2009 replacing the Doha Securities Market. The exchange is monitored by Qatar Financial Market Authority (QFMA) and is a platform for trading various securities in the form of IPOs and other financial instruments. The Qatar Financial Centre (QFC) is also a business and financial center which provides legal and business structure. The QFMA regulates various aspects such as

    • Regulate, control, and supervise financial markets
    • Regulate the dealing of the securities activities with fairness, competitiveness, and transparency
    • Raise public awareness of securities activities and promote in securities investment and development
    • Monitor the investors dealing rules governing activities related to trading of securities and other types
    • Implement disclosure policy
    • Prevent conflict of interests and insider trading
    • Combat causes and crimes in relation to the markets
    • Communication and information exchange with foreign financial markets and regional and international regulators

    Regulations

    The QFMA was established as per Law Number 33 of 2005, amended by Decree Law Number 14 of 2007. This law is more commonly known as Qatar Financial Market Law (QFMAL). Governmental bonds can only be issued by the Qatar Central Bank (QCB), as per the law. The regulations in all are:

    • QFMA Law
    • QFMA Regulations
    • Offering and Listing Rulebook
    • Commercial Companies Law (CCL)

    Securities

    Securities is defined in Law number 8 of 2012 of QFMA as

    • Shares and bonds of Qatari shareholding companies
    • Bonds, sukuk, and bills issued by the government or any Qatari Authority or public institution
    • Any other securities such as non-Qatari securities licensed by authorities
    • Derivatives, commodities, and other investment instruments licensed by authority

    Equity Offerings refer publication

    An equity offering refers to the process of allowing plausible investors to purchase a portion of the company through the acquisition of shares. By offering equity to the public, a company is able to increase its capital and create a higher value profile for itself. But, in order to be able to list a security on the Qatar Stock Exchange, the following conditions need to be met:

    • Company must be a joint stock company registered with the Ministry of Business and Trade.
    • Whole class of ordinary shares must be listed.
    • An audited record of the issuer's financial statement for the last three years must be presented.
    • All the financial statements presented must follow the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS).
    • Profitability is not necessary to prove.

    Retail and Institutional Offer

    While Qatar does not provide specifically for retail and institutional offers, the only term mentioned in the laws are specific investors. Even with specific investors, it is to be noted that no definition as such of what qualifies for a specific investor is provided for within the laws. The only definition in terms of issuer is provided for as Foreign and Local issuer.

    Listing Requirements

    There are a brief set of requirements in terms of a company to be listed for IPO. As per the regulations, a company can only list on the QSE if the entity has at least

    • A subscribed set of share capitals of 40 Million Qatari Riyals
    • 30 Shareholders
    • 50 Percent of paid up share capital

    The company is also required to prepare a comprehensive and adequate prospectus containing disclosure of all information in relation to the interest of investors as determined by the QFMA. It is also required that the company fully settle its previously issued capital provided that the equities shall not be less than the paid up capital according to the latest audited financial statements. Lastly, and approval from the QFMA is required before initiating the listing process.

    Application

    The issuer is required to submit various documents in line for application processing. Some of the mentioned documents are:

    • Copy of issuer's memorandum and articles of association;
    • Name of the issuer's directors, with specimen signatures for authorized persons who are allowed to sign on behalf of the issuer;
    • A financial statement that has been audited by an independent auditor;
    • Particulars of existing shareholders;
    • Undertaking by the issuer stating that it will observe and comply with all regulations and laws applicable to the financial markets;
    • Undertaking stating that the issuer will provide Qatar's Exchange with instructions in relation to any matter on price affects in relation to securities.
    • Commercial Registration Document
    • Listing Agreement and Application

    Prospectus refer publication

    The Qatar laws in relation to issuing of IPOs do not specify what necessarily is to be mentioned in the Prospectus. A vague mention of "all particulars and information capable of assisting investors to make their investment decision" is stated as per the laws. In practice, the Prospectus would generally include:

     

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    Mon, 19 Oct 2020 12:34:00 GMT
    <![CDATA[Initial Public Offering - Oman]]> Initial Public Offering - Oman

    The Market

    The Muscat Securities Market (MSM) was established in 1988 with the aim to develop methods and measures to deal with securities, and raise awareness about the market. MSM allows trading in joint stock companies, government bonds, corporate bonds, investment funds and financial instruments approved by MSM.

    To cope with the growing international market, the Capital Market Law (CML) restructured the MSM to enhance control and regulation of market activities, protect investors and create an environment that attracts investment.

    Legal Framework

    Legislative and Regulatory

    Two separate entities have been created by the CML in order to overlook and regulate all market activities, namely:

    • CMA- it is a regulatory authority incorporated to overlook and organize issuance of trade securities in Oman.
    • MSM- it functions independently of the CMA, but is subject to its supervision.

    The laws and regulations established in order to govern admissions to listing and ongoing disclosure obligations in the Market include:

    • The CML- is responsible for the creation of CMA, and includes a myriad of provisions and regulations.

    The CML was further amended in November 2014 to include provisions for violations of CML with increased penalties for the following:

  • False statements or announcement that could potentially misguide investors
  • Carrying out activities in the market without a license
  • Insider trading/ disclosing confidential market information
  • Making unrealistic demands for securities/ creating circumstances that make potential investors believe that prices of securities may fluctuate
  • Furnishing false or inaccurate information in the prospectus of a joint stock company
    • The Executive Regulation of CML (ER 1/ 2009)- aims at implementing the CML and consolidating directives that regulate the capital market sector
    • The Listing Rules contained in ER 1/ 2009
    • Royal Decree No. 82/ 1998 – established the Muscat Depository and Securities Registration Company (MDSRC)
    • The Commercial Company Law (CCL) – this law applies to all commercial companies that operate within the limits of the Sultanate of Oman.

    Regulatory Oversight

    After the repeal of the Ministerial Decision No. 4/ 2001, the sole power for regulation of MSM was vested in the CMA. For public joint stock companies the provisions of CCL, CML and ER 1/2009 apply, whereas the CCL alone applies to private joint stock companies and limited liability companies. 

    Retail Offer and Institutional Offer

    A retail offer caters to  individual investors who are non-professional and invest in shares for their own personal accounts, however, an institutional offer caters to insurance companies, investment banks, etc.

    There is a  distinction between retail and institutional offers on the basis of target investors. The retail is open to the public at large, whereas an institutional offer, invites only certain categories of people to subscribe to the shares of a joint stock company.

    Though an institutional offer can be availed by a certain category of people, that category is not expressly defined unlike other jurisdictions. Regardless of the type of offer, a prospectus must be issued, in accordance with the requirements of the CMA.

    Eligibility for IPO

    Regulatory Requirements

    There are three markets within MSM wherein the issuer can list securities being offered, based on their characteristics, these securities must meet the requirements laid down in Royal Decree No. 80/98 & ER 1/ 2009 in order to be eligible which are as follows:

    • The Regular Market:
  • The paid up capital should not be less than RO 5 million
  • Shareholders' equity should not be less than 120% of the paid up capital
  • Ratio of free float shares or units is 40% of the paid up share capital as minimum
  • The company has achieved net profit during the last two years at 5% of the paid up capital
  • For more info

    • Parallel Market:
  • Public joint stock companies and investment funds listed for the first time
  • Public joint stock companies and investment funds who failed to satisfy the requirements of the Regular Market
  • the ER 1/ 2009 lists companies only if they are eligible as follows:

  • It  is a newly established joint stock company
  • The shareholders' equity in the joint stock company is not less than 50% of the paid up share capital
  • The public joint stock company has not satisfied the requirements of the Regular Market
    • Third Market:
  • Closed joint stock companies
  • Investment funds offered in private placement
  • Further, the ER 1/ 2009 lists companies if they are eligible as follows:

  • If the entity is a private joint stock company
  • The shareholders' equity of the private joint stock company is less than 50% of the paid up share capital
  • If the entity is not eligible to be listed under the Regular Market
  • Additional Requirements by the CMA:

    Please refer publication

    Foreign Ownership and Sector Specific Restrictions

    The CMA's approval is not mandatory for a foreign investor to own securities of a listed company in Oman. However, there are certain regulations and restrictions imposed as follows:

    • Foreign shareholding- These shareholdings must not exceed 70% of the issue share capital of the issuer. This restriction is not applicable to those companies that are enumerated under the Oman Free Trade Agreement.
    • Restrictions that apply to the AoA of a Joint stock company listed in the MSM -  the AoA may specify limitations or prohibitions with regards to the shareholdings
    • Government - owned joint stock companies are barred from offering their shares to foreign investors
    • As per the Banking Royal Decree 114/2000 the approval of the CBO is mandatory for transfer of any securities, in cases when the issuer is a bank or an establishment engaged in banking business

    Dual/ Secondary Listings

    The MSM is permitted to enter into cross- listing agreements with other stock exchanges keeping adhering to the conditions that are applicable in that regard.

    Licensed brokers outside Oman and the GCC can also purchase and sell Omani listed companies.

    IPO Process

    The Initial Public Offering (IPO) process allows privately owned businesses to open up to the public by offering its securities in the Stock Market viz. the Muscat Securities Exchange.

    First, the issuer is required to take the approval of the Promotes and the Board of Directors. Once the approval is taken appropriate advisors (lawyers, accountants, underwriters,etc) must be appointed.

     

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    Mon, 19 Oct 2020 11:48:00 GMT
    <![CDATA[Initial Public Offering - Lebanon]]> Initial Public Offering - Lebanon

    Introduction

    The Banking Control Commission (BCC) was established in 1967 in Lebanon by the Central Bank of Lebanon (BDL) to administrate banking and control of the Central Bank. The BDL regulated banking as well as the financial market. In 2015, the Central Bank established the Capital Market Authority (CMA) to provide for a proper regulatory framework in terms of trading in Securities and supervising the work of licensed stock exchanges.

    The Beirut Stock Exchange (BSE) was established in 1920 and is one of the oldest markets in the Middle East. The BSE is the sole formal exchange market in Lebanon and hence all securities related transactions are to be done through this market. There are various markets in lieu of modernization of the market and adopting a new trading system and they can be broadly categorised as follows:

    • The Official Market
    • The Secondary Market
    • Over The Counter Market 

    Official Market

    The official market is where primary listing of securities and related transactions take place.

    Listing Requirements

    To be listed in the official market, BSE rules provide for criterion under Article 106. These are

    • Minimum capital has to be more than US$ 3 Million equivalent to Lebanese Pounds;
    • The incorporation period of the company should have been for at least 3 years prior;
    • At least 25 percent of the company's capital is required to be floated to the public on its first day of quoting; and
    • The aforementioned percentage of capital has to be held by 50 people or more.

    Secondary Market

    If a newly established company that do not meet the requirements to trade in the Official market, the trading then takes place with the Secondary market.

    Listing Requirements

    To be listed in the Secondary Market as per Article 111 of the BSE rules, a company has to:

    • Have a minimum capital of US$1 Million equivalent to Lebanese Pounds;
    • 25 percent or more capital to be floated on first day of quoting; and
    • At least 50 shareholders required to acquire the issuer's floated capital.

    Over the Counter

    Over the counter market is for those securities that are being traded without being listed on the exchange.

    Listing Requirements

    Since over the counter market is not the primary or secondary market, the requirements are not as much. A minimum capital of 100,000 US$ equivalent in Lebanese pounds is the only requirement to be listed in this market.

    Legislations

    The laws and regulations which govern the listing requirements are stated across various regulations. These are:

    • The BSE Legislative Decree Number 120
    • The BSE Bylaws Decree Number 7667
    • The Code Decree Number 304 of 1942

    Application Procedure

    In terms of listing in the Official or Secondary market, a company is required to file various documents in relation to its application. The application form must be filed in accordance with BSE Committee Rules. Certified copies of the registration application and the incorporation certification must be filed at the Commercial Register. A certified copy of the Company's by-laws as well as a certified copy of the minutes of general and board meetings for the last 3 years must be filed along with the application.

    Copies of balance sheets, inventories and other consolidated final accounts along with a copy of the reports of the Board of Directors and Auditors for the last three years are to be filed. A general statement showing the issuer's activities and markets and about the issuer's subsidiaries and main activities is to be submitted along with a detailed statement setting forth the nature, kind and value of securities being applied for.

    In practice, the Committee takes two weeks from submission of application to process listing.

    Application form

    The Committee rules provide for what is required to be mentioned in the application form for admission in detail. It is pertinent that the company mention all these details to avoid rejection by the BSE for the purpose of Public Securities Trading. A detailed enumeration of the required information is provided in the publication

    Securities and Activities

    Although offering of IPO falls under the ambit of Securities, the scope of Securities is much wider than just that of an IPO offering. Security Activities are defined in Article 2103 of Part B of Licensing and Registration Regulation. As such, any activities mentioned below shall fall under the ambit of Securities Activities

     

    ]]>
    Mon, 19 Oct 2020 10:30:00 GMT
    <![CDATA[Initial Public Offering- Kuwait]]> Initial Public Offering- Kuwait

    Introduction

    As per Law Number 7 of 2010, Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities, Security is defined as, "Any instrument - in any legal form - that evidences ownership of a share in a financial transaction and that is negotiable pursuant to a license from the Authority, such as:

  • Shares issued or proposed to be issued in the capital of a company
  • Any instrument that creates or acknowledges a debt issued or to be issued by a company
  • Loans; bonds; Sukuk; and other instruments that can be converted to shares in the capital of a company
  • All public debt instruments that are tradable and issued by the various government entities or public institutions and authorities
  • Any right, option, or derivative relating to Securities
  • Units in a collective investment Scheme
  • Any paper or instrument considered by the Authority as a Security for the purposes of implementing this Law and the Bylaws"
  • Kuwait established Capital Market Authority in February 2010 as a regulatory body of the various transactions that takes place in the market. The CMA is in charge of various activities such as

    • Regulating Securities activities
    • Growing capital markets and diversifying by introduction of investment instruments in accordance with international practice
    • Ensuring compliance in regards to the established rules and regulations

    In 2015, the body enacted a set of laws in relation to the market place conduct. This is the law that governs the regulations, procedures, sale, and offer in relation to the aforementioned securities, in Kuwait.

    The law was enacted in 2015 as Decree Number 72 by the Kuwaiti Parliament. Kuwait CMA Laws is considered to be one of the most complex and diverse set of regulations to be adopted by Kuwait in its recent years.

    Listing Requirements

    For a company to be listed with the Kuwaiti stock Exchange, there are various regulations to be followed. Proceeding the listing application submission, a company has to provide all documents and information required along with the payment of fees for the Exchange and Authority. Module 12 of the Bylaws deal exclusively with the requirements and rules of listing. A detailed enumeration of the requirements are provided here

    Licensing

    Further, it is necessary for the issuer to obtain a license to conduct activities in the market. Article 63, Chapter 5 of the CMA handbook states that a person cannot operate without a license in the market for activities such as:

    • Securities Broker,
    • Investment Advisor,
    • Investment Controller,
    • Investment Portfolio Manager,
    • Collective Investment Scheme Manager,
    • Any person who conducts or participates in any other activity that is deemed by the Authority to be an activity in Securities to be regulated in accordance with the purposes of the Law,

     

    ]]>
    Mon, 19 Oct 2020 09:51:00 GMT
    <![CDATA[Initial Public Offering- Egypt]]> Initial Public Offering- Egypt

    Introduction

    The Egyptian Stock Exchange (EGX) is the registered securities exchange that handles all of the stocks to be traded in Egypt. EGX comprises of two exchanges:

    • Cairo Stock Exchange
    • Alexandria Stock Exchange

    A merger in 2007 of the two exchanges resulted in the birth of EGX. The Egypt Government established The Egyptian Financial Supervisory Authority (EFSA), replacing The Capital Market Authority (CMA), The Insurance Supervisory Authority and The Mortgage Finance Authority.

    In 2017, the EFSA was reestablished as the Financial Regulatory Authority (FRA). The FRA is responsible for all financial transactions excluding banking related transactions, and markets. All financial transactions in relation to banking related transactions and markets are regulated by the Central Bank of Egypt.            

    Laws Applicable

    • The CM Law (Capital Markets Law No. 95 of 1992 and its Executive Regulations) which regulates the EGX and includes certain eligibility criteria and disclosure obligations in relation to the contents of the offer document
    • The Listing Rules (Decree of the CMA's Board of Directors No. 30, which concerns itself with the listing and de-listing of securities on the EGX and all ongoing obligations once listed.
    • The Companies Law, specifically Company Law No. 159 of 1981 and its Executive Regulations which regulates incorporation and management of all entities incorporated in Egypt.

    IPO Registration Requirements

    Due to the extensive nature of IPO process worldwide, it is important to approach the regulators as early on as possible to ensure a smooth process with as little obstacles as possible. This also provides the company with further time to provide for any clarifications required by the Authority, if needed.

    • Licenses from the regulatory body are compulsory. Underwriters need to be licensed by the EFSA under its rules and regulations.
    • A minimum issued capital of LE 1,000,000 is required for a company to enter the IPO process, along with the authorized capital to be less than five times the issued capital.
    • According to the CMA Laws, the founders must obtain a minimum of fifty percent of the shares available.
    • Furthermore, Egyptian law recognizes a difference between retail and institutional offers and this makes it a market that allows for more specific action to be taken by the parties to market their commodities as such.
    • A company is required to inform the Authorities in regards to initiation of issuing of securities, and can start within 3 weeks of informing, provided no objections have been raised by the Authority.
    • Semi-annual activity Report and Progress Report to be provided.
    • Offering of shares shall be unconditional and immediate with no deference to a term.
    • The main difference between a retail offer and an institutional offer is that a retail offer will require a prospectus to be prepared and approved by the EFSA, whereas an institutional offer will not.
    • It is required that the corporate entity appoint investment bankers/licensed underwriters, solicitors, auditors and financial advisors

    Since registering for IPO is a complicated process, it is advisable to appoint aforementioned professionals as they will help you smooth out the process of registering. Underwriters set the price for IPO offering and hence is a crucial aspect of the process.

    Retail Offer

    A retail offer, as with most jurisdictions, is a public offer of securities. The main practical difference between a retail offer and an institutional offer is that a retail offer will require a prospectus to be prepared and approved by the EFSA whereas an institutional offer will not.

    The documents required in the case of a Public Offering:

  • A public subscription approved by EFSA
  • A Prospectus
  • The shareholders' resolution with special majority
  • Fair value report issued by the financial adviser
  • Prospectus

    The Prospectus at incorporation have to disclose various details as specified for in the CML. These are:

    • Name, Legal form of the Company.
    • Purpose and Duration of the Company.
    • Date of the initial contract.
    • Date of beginning and end of fiscal year.
    • Issued and paid up capital

    The information to be enclosed in the Prospectus is not limited to the abovementioned. The extensive list of details required by the CML can be found here

    This Prospectus is required to be filed with and certified by the Authority and published in two popular daily morning papers, of which at least one should be an Arabic newspaper. As an extremely crucial document, a company cannot introduce IPO or start the process without the establishment of a Prospectus.

    Institutional Offer    

    An institutional offer may also be referred to as a Private Offer, only qualified investors are eligible to invest in such securities, the criteria for qualifying as investor herein in may depend on certain aspects like financial capability and experience in the securities market.

    Further, certain requirements with respect to eligibility hereunder for natural persons and qualified investors can be found here.

    Listing Rules

    After the completion of the IPO procedures, the Company is required to adhere to the Listing rules of EGX. To be listed on the Official list, the Company is required to have:

    • At least 2 million Shares
    • At least 100 shareholders
    • An issued Capital of at least 20 Million EGP
    • Primary and Secondary Share Offering amounting to not less than 10% of total issued shares
    • 5% or more of the company shares to be free floating percentage 
    • Net Profit, excluding taxes for the previous fiscal year shall not be less than 5% of the paid in capital
    • Shares deposited with the Central Depository System
    • An accredited Auditor as per EFSA
    • If it is issued by the Government and offered to the public.

    Further, in case the shareholders drop below 200 in a span of 3 months during the fiscal year, the shares can be subject to being de-listed and non- official list of the stock exchange. This non- official list may also contain foreign securities.

     

    ]]>
    Sun, 18 Oct 2020 17:12:00 GMT
    <![CDATA[Trade Secret Protection ]]> Trade Secret Protection 

    Introduction

    The prowess of a company depends on its ability to work smarter than their competitors. This can be achieved through specifically designed operational workflows, specialized technologies or structural control practices that enable a firm to stand out within a particular market or industry. Such intellectual knowledge is typically only available to those within their respective organizations. However, in many cases, the protection of these trade and operational secrets can be difficult to oversee and enforce. The lack of proper protection could invariably affect a company in the most adverse manner if competitive rivals gained access to this intellectual property.

    The necessity to protect a company's trade secret is essential, and thus, efforts are made to build a protective wall around the key secrets of the firm. This article will provide an overview of trade secrets and its protection and delve further into the provisions available for companies in the UAE while confronting potential threats that need to be addressed. 

    Overview of Trade Secret Protection

    The subtle truth behind every successful company is the existence of an exceptional trade secret that differentiates it from its competitors. This information is sensitive and is not readily available to any individual outside a particular firm. The economic advantage created for the company is why this information needs to be protected. Some forefront nameworthy runners who protect their trade secrets include Google who protects the algorithm of its search engine or Coca Cola who preserves the secret formula to their product. All these companies are just a mere layer of mist over an ocean of companies trying to protect their operational and trade secrets. 

    Many jurisdictions treat trade secrets protection in different ways but, the integral purpose of protecting this information is to ensure that a company does not get manipulated or cheated by another competitor in the market. Irrespective of the height of protection provided, a trade secret can be recognized if they fulfill the following three criteria:

  • The information that is being protected is not public information.
  • The information generates an economic advantage for the firm.
  • The information is actively protected by the members of the company. 
  • Trade secrets can be in different forms - such as a pattern, formula, recipe, method, instrument or process - that is not directly apparent to the surrounding population. Considering that these trade secrets were developed or generated through intensive, lengthy and expensive methods, the existence of these documents are considered as classified or top-secret documents of the company. Since these are developed through extremely intensive processes, competitors have all the more motivation to learn these trade secrets through any method possible. One of the many defenses a company takes to protect its trade secrets is by ensuring that the employees who join the firm agree and sign a confidentiality, non-compete or non-disclosure agreement that restricts the sharing of the firm's intellectual property.

    The US jurisdiction allows each state to enforce state developed regulations to protect the trade secrets of the company operating within that state. They protect trade secrets that are of all forms and type related to engineering, financial, scientific, business, technical and economic in nature. This would govern the tangible or intangible trade secrets, and the methods and practices used to protect them. Regardless, important information that a company must bear in mind is that if the information is discovered either through independent discovery or through the failure of a trade secret holders to preserve the secret, the protection embalming the trade secret will be retracted.

    Irrespective of the features and the rising need to protect a company's trade secrets, it is important for entities to take appropriate measures to tackle the issue at hand and preserve their secrets. With the rapid advances with digital technology, it is becoming more challenging for companies to protect their trade secrets as information can be accessed without proper authorization and transmitted quickly across systems. This would need to be considered by companies when they develop and establish a framework to protect their trade secrets. Companies can also train their employees in risk and quality practices, to maintain due diligence and care when handling trade secrets in order to avoid misappropriation of information. 

    The level of protection and framework available through regulations and enforceable legislation will vary from one country to another. While one country may offer extensive and stringent protection for trade secrets, other countries may lack the required framework to support and protect companies to this effect. This should be considered by companies, and appropriate precautionary measures must be taken to ensure the care and safety of their trade secrets. This points us to the reason why large corporate giants like Facebook and Uber fight to protect their patents or trademarks, which are essential factors that contribute to the success of these companies. 

    Unlike patent protection, the laws used to protect trade secrets cover a range of products such as patents, trademarks and other intellectual or tangible property that the company can protect using the trade secrecy laws. Depending on the jurisdiction that the company operates within, the punishment imposed on parties that violate the protection of trade secrets may include penalties or even imprisonment which could go up to USD 5 million and 15 years respectively. However, the company must be able to prove to the respective legal system that they had taken adequate precautionary measures to safeguard their trade secrets while considering the nature of the market and the plausible threats arising against its safety.

    There are three kinds of protection that can be provided to safeguard trade secrets. First, store trade secrets in a physical location and restrict the access to that location like Coca Cola does to protect its secret formula by keeping it in a vault. Second, use digital security measures such as strong passwords, firewalls or encrypted flash drives to protect the information on the company's system. Finally, use legal measures and tactics such as marking confidential documents with a stamp stating "Confidential" to alert its users to be careful not to divulge this information with anyone else. 

    Trade Secret Protection in the UAE

    The significance of trade secret protection even in the UAE is deemed highly necessary for the survival and growth of the business and the economy. In order to help the businesses, protect their trade secrets, the legal system within the UAE has created provisions that would always allow a company to stay one step ahead of the threats. The initial step taken by the UAE to introduce and protect trade secrets in the country was in 2006 through the establishment of the Federal Law 31 of 2006

    This framework details the provisions set-up to regulate the activities and possible threats surrounding trade secrets. It states that if a company acquires any specific knowledge which could classify as trade secrets through legal avenues, then the company is allowed to use that information without fearing any repercussions. They also extend protection to instruments of the company which need not be new but is not patented. This is an added benefit as companies in the UAE cannot patent their product if it is not new or unique. This new provision will extend the spread of protection and not only ensure protection for the company's trade secrets but also provide the same for patents and other intellectual property of the firm. In addition, the protection that the trade secrets receive possesses an indefinite useful life. 

    As misappropriation by employees is one of the largest causes of violation of the protection of trade secrets, Article 905 of the UAE Civil Code provides provisions to challenge that threat which states that it is the responsibility of the employee to ensure that any trade secrets of the company are not divulged through them accidentally or intentionally. This provides a safety net for employers who fear the safety of their secrets and consider it to be in an unpredictable environment. Furthermore, the UAE Labor Law (Article 120) allows for companies to terminate their employees without any prior notice if they were found disclosing confidential information. 

    Since, the threat to trade secret protection arises not only from external factors but also, from internal factors, companies in the UAE can protect themselves by drafting a confidentiality or non-disclosure agreement with any of its employee or third parties. Also, the company should issue guidance that allows and informs against the disclosure of any sensitive company data. If the information is shared with other parties, they should also be educated that the information is sensitive and must not be communicated with anyone else. 

    Apart from the initial legal protection established by the UAE, a new Companies Law was introduced in 2015, which included a provision for the "Disclosure of Company Secrets" in the UAE. This allowed for greater protection of trade secrets under the scope of three different laws:

  • Civil Transactions Law – imposes an ongoing obligation on employees to preserve a company's trade secrets even after the end of their employment.
  • UAE Penal Code – punishes any party who discloses a trade secret without the legal permission to do so.
  • UAE Patent Law – protects knowledge gained during the period of employment that could be regarded as a company's trade secrets.
  • Along with the guidance provided, the UAE's Companies Law details punishments that would result in the event of failure to safeguard the trade secrets of a company. It states that the punishment will be enforced if any employee of the company (including a chairman or board member) intentionally discloses the trade secrets of the company that can cause harm to the firm's operations. Albeit the language of the provision can be interpreted in several ways, the quintessential need to motivate parties associated with the company to protect the company's trade secrets can be said to be achieved through this provision. 

    If a legal or financial consultant, subscription director, covering sponsor or any other representatives intentionally takes advantage of the company's confidential information for their benefit, they will be held liable and, in effect, be punished for the non-protection of trade secrets. However, there are defenses stating that a legal consultant may not be deemed as a violator if they did not use the company's trade secret for their own benefit. This opens an avenue of subjective assumptions as to whether anyone who claims and proves they did not intentionally divulge the information will be held liable under the law.

    Despite the gaps that exist within the legal frameworks governing trade secrets in the UAE, it can still be assumed that adequate efforts are being conducted by the legal system to ensure that proper frameworks are available to deter parties from breaching the safety measures in place. If found guilty, parties who have disclosed the information will be penalized and charged with criminal penalties such as fines of at least AED 20,000 and a minimum of one-year imprisonment. 

    Challenges surrounding Trade Secret Protection

    It is difficult to establish the extent of loss suffered as a result of 'theft' of trade secrets - it is difficult to measure, and the value cannot be accurately ascertained. Uncertainty also exists regarding when such secrets were compromised. Many companies realize that their trade secrets were stolen years after the crime had been committed. In this timeframe, it would be difficult to trace the theft back or ascertain the losses incurred as a result of the misuse of secrets. 

    As discussed above, employees may transfer the secrets to competitors as they change employment, especially if they stand to profit from the exchange. This would weaken the company's ability to continue protecting the secrets from its competitors in the event of such a breach. With advancing digital capabilities, companies stand the risk of being hacked, with trade secrets being stolen if an outside party gains access to the entity's network and data. So, if the appropriate risk response controls have not been set-up to prevent information hacking, then the ability to duly protect the company's property will be left to question. 

    Many of the violations usually take place from within the firm either due to negligence or due to intentional embezzlement by its employees. In order to mitigate the risks involved, companies can explicitly make provisions within the drafted employment contracts that bar employees from disclosing the company's trade secrets without facing legal repercussions. They can also conduct ongoing surveillance of employees to ensure that no unusual behavior occurs that would invariably affect the company's well-being. Finally, companies can mandate risk and quality training to their employees to educate and remind them of the company's policies regarding the protection of trade secrets and the penalties associated with its disclosure. 

    Another challenge that arises in the implementation of the regulations within the UAE is the misinterpretation of the law. Under these provisions, there is no parameter to assess the 'intentions' of a person to actually cause harm to a company. Such phrases can be easily misinterpreted or miscommunicated by the parties in the discussion. 

    Conclusion

    Some say that curiosity kills the cat but imagine allowing the cat to find what it is looking for - which is, in our case, our trade secrets. Sometimes it is not the threat we must fear but, the lack of preparation we take to push the threat away lest we fall into a spiral of doom. Many companies that are performing and growing at an exponential rate in the market are either not wary of the existence of curious cats out in the market, or they disregard the ability of these cats to impact their firm and market presence negatively. Is there a substantial buffer of protection that the company has allotted for or threats that they have foreseen? Are they prepared to fight it? 

    Conclusively, it can be understood that in today's age and time, one of the most valuable assets possessed by a company is its trade secrets. The adequate amount of protection for a company's trade secrets can give it a reason to fight. The protection that the UAE legal system provides is a growing set of enforceable protective methods. Unlike many jurisdictions, the UAE imposes criminal penalties and punishment in the event of a violation of the protection of a company's trade secrets. Taking into perspective all the threats involved, companies need to promptly prepare a more rigid and unbreakable wall of security; the lack of such a defense system would not only void the expected benefits but might raise concerns on the company's ability to continue as a going concern in the long run.

    ]]>
    Sun, 18 Oct 2020 15:49:00 GMT
    <![CDATA[Company Formation in Nigeria]]> Company Formation in Nigeria

    "Business opportunities are like buses, there's always another one coming." – Richard Branson

    Richard Branson's Virgin proved that be it record labels or airlines, where there is a will there is definitely a way. The door might not always be open, but sometimes it's ajar or the key is under the carpet. All you need to do is pick the key and turn the lock. Basically, the right environment for success ebbs and flows, but a keen business person is never passive.

    Companies are certainly a veritable vehicle for carrying out business and the advancement of societal goals. In the same vein, companies are the greatest contributors to the Gross Domestic Product of the countries and by implication, the per capital income. Companies are seen as a means of creating wealth. Hence, it is pertinent that the law and procedure on the formation of companies must be certain, simple and expedient. Furthermore, companies can attract the foreign investment required for development where there is the ease of doing business. 

    The primary law governing the businesses and companies in Nigeria is the Company and Allied Matters Act (CAMA), which deals with various types of company structures, their eligibility, registration process, and rules for operation.

    Corporate Affairs Commission (CAC) is the regulatory body in charge of implementing the provisions of the CAMA.

    The business structures allowed in Nigeria are registered business name, a company limited by shares, a company limited by guarantee, unlimited company (all companies may be private or public), and incorporated trustees.

    Among the criteria for ranking countries in the 'World Bank's Ease of Doing Business Report' is the simplicity and speed for starting a business. Consequently, the Corporate Affairs Commission (CAC) acting on the executive orders of the Presidency in the first quarter of 2017 initiated some reforms on the formation of companies in Nigeria.

    I.          Name of the Company

    In Nigeria, the first step to incorporate a company is to conduct a "name availability search" at the CAC to confirm the availability of the desired name for the company. This step involves ensuring that the said name is not identical or similar to the name of any existing company or any existing trademark or trade name. The name must not be such which is unacceptable to the CAC.

    When the CAC confirms the availability of the desired name, same will be exclusively reserved for an initial period of sixty days further renewable for sixty days, subject to availability of the name. Throughout the reservation period, no other company can be registered with the reserved name or any name which, as per CAC's opinion, is identical or similar to the said reserved name.

    II.         Objects of the Company

    As per the provisions of CAMA, the Memorandum Of Association (the MOA) of every company, which is filed at the CAC along with an application to incorporate the company, must include the objects for which the company is being incorporated. The entities may engage in several types of business; however, there are certain prohibited businesses, for instance, the manufacturing of arms and ammunitions; manufacturing and dealing in narcotic drugs and psychotropic substances; as well as the production of military and para-military wears and accouterment.

    III.       Documents Required

    The next step is that the following documents must be completed and filed online:

  • Memorandum of Association and Articles of Association (MOA & AOA)
  • MOA & AOA are the constitutional documents of the company. The MOA sets out, along with other information, the objects of the company, a description of the type of company, and the authorized share capital of the company.

    The AOA regulates the internal governance and administrative procedures of the company.

    The MOA and AOA must be subscribed to by minimum two entities, both of whom/ which, generally, can be non-Nigerians and whom/ which must jointly subscribe for a minimum of 25 percent of the company's authorized share capital.

    Each subscriber must submit a recognized form of identification (any nationally recognized means of identification). If the subscriber is a corporate entity, it must submit a copy of its certificate of incorporation and a resolution of its board of directors authorizing it to subscribe for shares in the proposed company. The resolution shall be printed on the subscriber's letter-headed stationery, signed by its directors and the subscriber's common seal must be affixed.

    If any subscriber is a corporate entity, the CAC requires that such subscriber be represented by an individual, who will sign the MOA & AOA and other documents on behalf of the entity, in addition to affixing that subscriber's common seal.

  • Application Form for Registration of the Company
  • In this form, the following information is required:

  • Statement of Authorized Share Capital and Return of Allotment of Shares 

  • Particulars of Directors- There must be at least two individuals appointed as the directors. Generally, the directors need not be Nigerians, but they must be at least eighteen years old.

  • Notice of registered office address

  • Particulars of the Company Secretary

  • Declaration of Compliance with the CAMA Requirements 

  • IV.         Share Capital

  • Authorized Share Capital
  • As per CAMA, the minimum authorized share capital for a private company is generally Naira 10,000; whilst for a public company is Naira 500,000. If any of the subscribers to the company's MOA & AOA is a foreign entity, the NIPC (Nigerian Investments Promotion Commission) requires that such a company must have a minimum authorized share capital of Naira 10,000,000.

  • Issued Share Capital
  • At incorporation, and during its existence, the company's issued share capital must be minimum of 25 percent of its authorized share capital.

  • Paid-Up Share Capital
  • There is generally a statutory requirement that the minimum amount of a company's issued share capital must be paid up.

    V.         Management

    The company acts through its member or shareholders in general meeting or its board of directors or through officers, managers or agents appointed by the members in general meeting or the board of directors. The AOA often permits the board of directors to delegate functions to a managing director and other executive directors or to the board of directors' committees.

    To employ any expatriate personnel, the company is required to obtain expatriate quota approval from the Nigerian Immigration Service.

    VI.       Other Permits

  • Importation and Repatriation of Investment Capital
  • The Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F34 LFN 2004 ("FEMMA") specifies that a person investing in any Nigerian enterprise with foreign currency imported into Nigeria may do so through an authorized dealer by telegraphic transfer, cheques or other negotiable instruments converted into Naira. The foreign investor is required to specify the Nigerian beneficiary of the investment funds and the purpose thereof. Certificate of Capital Importation must be issued by the authorized dealer, evincing receipt of investment capital, within 24 to 72 hours of funds inflow.

    The FEMMA provides that the foreign currency imported into Nigeria for investment purposes is guaranteed unconditional transferability through an authorized dealer in freely convertible currency. Unconditional convertibility and repatriation will also apply to yields on investment funds and in the event of a divestment. The FEMMA also permits the operation and maintenance of domiciliary accounts.

  • Certificate of Business Registration
  • As per the Nigerian Investment Promotion Commission Act, Cap N117 LFN 2004 ("NIPCA"), any company with non-Nigerians participants must register with the NIPC and obtain a Certificate of Business Registration from the NIPC prior to carrying on business in Nigeria.

    NIPC shall register the enterprise, within seven working days from the date of receipt of completed registration forms, provided it is satisfied that all relevant documents for registration have been duly completed and submitted.

  • Business Permit
  • A non-citizen of Nigeria shall not establish a business without obtaining the consent of the Minister responsible for immigration matters (Section 8 of the Immigration Act, Cap I1 LFN 2004). The consent is usually obtained after the company's incorporation has been concluded when the "Business Permit" is issued by the Department of Citizenship of the Federal Ministry of Interior.

  • Expatriate Quota Approvals
  • To employ non-Nigerian personnel, it is the duty of the company to obtain an expatriate quota approval. Expatriate quota approvals are valid for a specified period and are renewable for consecutive terms.

    The company is also required to file monthly returns regarding the approved expatriate quota positions specifying the employees who hold the approved positions and details of the Nigerians understudying the expatriates holding the said positions.

    The expatriate employee, upon securing the expatriate quota approvals, must obtain a CERPAC, which permits him/her to reside and work in Nigeria. The CERPAC is issued by the Nigerian Immigration Service to the non-Nigerian employees upon their arrival in Nigeria.

  • Transfer of Foreign Technology
  • Any contract entered between any company in Nigeria with a foreign company that involves transferring of foreign technology to the Nigerian company must be registered with the National Office for Transfer Technology Acquisition and Promotion (NOTAP) within sixty days from the date of execution of such contract. The registrable contracts also include agreements between a Nigerian company and its overseas parent involving such transfer. The registration process usually is completed within five weeks from the date of submission of all the required documents to NOTAP.

    Tax for Company Registered in Nigeria

    Both the resident and non-resident corporations are subject to corporate tax of 30 percent on net profits. The LLC in Nigeria is liable to pay a VAT rate of 5 percent on goods unless it is incorporated within a Free zone, in which the VAT is zero percent.

    Under the Nigeria tax law, companies are liable to pay withholding tax on the payment made to non-resident like interest, royalties and other service fees. The rate of withholding is 10 percent of gross payment.

    Free Zones

    In Nigeria, the Free zones are rewarding areas which help to attract foreign investors and further provide employment opportunities to the native people. Free zone companies permit foreign entrepreneurs to import and export without any taxation in Nigeria.

    There is a total of 33 Free zones in Nigeria.

    For setting up a company in the free trade zones, specific steps need to be taken. These steps are standard for all the free zones in Nigeria:

  • Fill up the application form and submit the completed application form in the Zone Administration office or Nigeria Export Processing Zone Authority (NEPZA) in Abuja. The application shall be reviewed within five working days, and either accepted or rejected by the administration.
  • On approval, an Operating License (OPL) will be issued by the Administration of the Free Zone, and then the Free Zone Administration will discuss the site location and assign a space.
  • Certificate of Importation must be received through one of the banks located in the zone.
  • The investors must submit four copies of full architectural drawings for approval by Zone Management to start the construction. The built-up spaces must not exceed 70 percent of the leased land, and construction must start within three months after the execution of the agreement.
  • The permissions for the foreign nationals and employees shall be done at the immigration desk offices in the free zones.
  •  

    ]]>
    Sun, 18 Oct 2020 15:05:00 GMT
    <![CDATA[Parallel Imports]]> Intellectual Property Rights: Exhaustion of Ownership and Parallel Imports

    Introduction

    Parallel Imports 

    The term parallel import denotes importation of goods legitimately acquired from the owner of the goods subsequently sold in an unauthorized manner through unauthorized trade channels. 

    These goods may also be referred to as grey market goods, since, despite being legitimate, they lose their value when they are sold through unauthorized trade channels. An owner of a registered trademark earns goodwill through the sale of his goods through a particular channel as authorized by them; however, once the goods leave that channel, it compromises the integrity and reputation of the goods that have been registered as a trademark.

    There are two types of parallel imports, namely, active parallel imports and passive parallel imports.  

  • Active Parallel imports
  • When a licensee of the trademark owner sells goods in the jurisdiction of the right holder itself or in the jurisdiction of another licensee who is in direct competition thereof, in this type of parallel import the breach arises when the licensee acts in contravention of the contract between him and the right holder.

  • Passive Parallel imports
  • This kind of parallel import is much more common; it arises when a third-party purchases goods owned by the right holder from one country and resell the same in another country. 

    A breach of an agreement between the parties regarding parallel imports is done with the intention of gaining higher profits due to price differences of identical goods. When such a breach arises, it contravenes any such provisions regarding international licensing and distribution as agreed upon between the licensee and the right holder. Therefore, it is imperative to keep watch on where the goods are being distributed and to ban the distribution of goods in such countries as prohibited by the right holder. 

    Doctrine of Exhaustion 

    An owner of an intellectual property right possesses the sole exploitation rights over his goods. He is further empowered to be protected by such laws in the country where such protection is granted to him. The Doctrine of Exhaustion or first sale doctrine is basically an exception to this rule, and it entails the exhaustion of rights of the right holder once he has consented to the lawful sale of the products covered under the intellectual property rights held by him. 

    To understand this concept better, let's take the example of reselling preowned cars. A manufacturer or a right holder has the authority to prohibit other manufacturers from selling his product; however, this right is exhausted once the car is sold lawfully to a customer and that customer decides to resell the same to a third party. The right holder shall then, not have any rights over prohibiting such resale. This basically means that the right to sale over the same goods cannot be practiced twice by the right holder.  

    The doctrine of exhaustion can be divided into the following types: 

  • Regional Exhaustion 
  • The doctrine of regional exhaustion has been adopted by the European Union. This doctrine basically imposes a disability on the right holder to prevent the subsequent sale of a product in the same region (here, the EU) or any other country that is part of the same region. 

  • National Exhaustion 
  • This doctrine relates to the domestic market. Once the first sale has been made within the domestic market, the right holder is prohibited from receiving any further profits or claiming any rights over a subsequent transaction that takes place in that regard. This doctrine basically prevents the right holder from receiving profits multiple times out of the same transaction or from goods that have been sold by him once. It, therefore, protects the rights over profits of the party, making the subsequent sale of goods. 

  • International Exhaustion 
  • This doctrine is based on the presumption that once the goods are placed on the market, they leave the control of the right holder. Therefore, this doctrine basically views the international market as a singular market; hence, goods sold by the right holder, for the first time, anywhere across the borders, cause the right holder to relinquish his rights thereof. 

    It is imperative to note that, the abovementioned doctrines can only be adopted as per the regime that is chosen by the country concerned in order to curb such practice. 

    For instance, A, a right holder, sells his product to a third party within his territory who further sells those products to B, in another country. The question that would arise in such a situation would be whether A's rights have been exhausted once the first sale of the product is completed. This question can only be answered by taking into consideration the international exhaustion regimes adopted by A's country. 

    TRIPs on Parallel Imports

    The Agreement on Trade-Related Aspects of Intellectual Property Rights (popularly known as TRIPs Agreement) is an international agreement between member nations of the WTO, and this agreement lays down provisions regarding effective implementation of trade-related intellectual property protection. 

    That being said, the TRIPs agreement does not contain any such concrete provision regarding parallel imports. Dispute settlement mechanisms under the agreement allow right holders to bring action against another state; however, Article 6 of the Agreement states that no complaint can be entertained with regards to exhaustion. 

    Further, the TRIPs agreement, with regards to English and Japanese law, does not contain any such provision barring importation of goods subject to a notice being given about restrictions regarding such importation.

    Despite not containing any such provisions regarding parallel imports within its Articles, it is important to note that, it gives States the right to choose any such regime that they may think fit regarding international exhaustion within their domestic laws. 

    Parallel imports in the Middle East 

    Many Middle Eastern countries do not have any laws prohibiting parallel imports in the country. Countries like Kuwait, Bahrain, and Turkey etc. are a few that do not prohibit parallel imports under their trademark law. However, the following countries have other provisions that may be implemented to bar parallel imports;

  • Kingdom of Saudi Arabia 
  • Though KSA does not recognize the term parallel imports in its trademark laws, there are provisions in the customs law prohibiting imports/ exports of goods by unauthorized agents. The rights holder may register themselves with the Customs along with a list of those agents, as authorized by them. An agent or distributor selling goods in an unauthorized fashion may be issued a cease and desist notice and further can be dragged to court for non-compliance of the same before the Ministry of Commerce. 

  • Jordan 
  • Genuine import and export of goods are allowed regardless of whether the agent importing/exporting it is authorized or not. However, as per customs law, action can be brought about in case of counterfeit goods. 

  • Qatar 
  • The right holder having a trademark registered within the territory of Qatar is not entitled to bring any action regarding parallel imports. However, under their Agency Laws, the right holder may bring action against an unauthorized agent. 

  • UAE 
  • The concept of parallel import is not recognized by UAE trademark laws; however, Agency Laws to prohibit the same may be implemented. 

    Parallel Imports in the UAE 

    The UAE, like several other Middle Eastern countries, does not contain provisions relating to parallel imports in their trademark laws. However, in order to cease the flow of parallel import goods in an unauthorized manner, Agency Laws may be applied. 

    Commercial Agency Law by Federal Number 18 of 1981 amended by Federal Law Number 2 of 2010 lays down certain requirements of a commercial agent:

  • A commercial agent shall be a UAE national or a company in the UAE owned in 100 percent capacity thereof by a national. 
  • Only agents registered under the Ministry of Economy and Commerce are authorized to engage in business.
  • The agent and the principle are to be bound by a written agreement, which must be registered with the Ministry of Economy and Commerce.
  • Therefore, as per the above, any goods imported in contravention of the above are liable to be ceased by Customs, and the Police is entitled to take custody thereof. Further, action can only be invoked if the above conditions are satisfied. If an agreement is entered into unaccompanied by registration, the agreement is void ab initio. 

    It is important to note that counterfeit and unauthorized goods being sold with regard to the pharmaceutical sector poses a major threat to public health and safety. Especially in GCC countries wherein, the IPR laws are not as stringent regarding parallel imports. With regards to pharmaceutical products, it is important for the right holder to have full control over the distributional channels that their products pass through. Therefore, GCC countries must put in place policies that prevent illicit trade. GCC countries should also focus on scrutinizing free zones to rule out the possibility of counterfeiting.

    Further, the UAE enables manufacturers and trademark holders to approach the courts regarding parallel importation under anti-piracy laws as well. A landmark case saw the imprisonment of six foreign nationals who engaged in importing goods from another country without the permission of the right holder. In this case, the six persons including the shop manager engaging in the sale of such goods were arrested following a raid of their shop, with imprisonment of the manager for a period of two months along with a fine of AED 20,000 and deportation. This ruling set a precedent and further strengthened UAE's as a safe business hub. 

    Indian Perspective 

    Trademark rights are exclusive in nature, and this exclusivity is recognized by the Trademarks Act of 1999. Unlike several other jurisdictions, India has adopted specific regulations regarding exhaustion of rights on a national level; however, the same is not identified for international exhaustion. Section 30 of the Trademark Act affirms the aforementioned. The provisions enumerated under Section 30 lay down that an owner of a registered trademark may oppose further dealings of goods provided a legitimate reason exists in that regard.  

    The concept of international and national exhaustion was disputed in the case of Kapil Wadhwa vs. Samsung Electronics before the Delhi High Court. In the aforementioned case, the main issue was whether international exhaustion recognized by the Act. The defendant herein was an authorized dealer of Samsung products; however, it was argued by the plaintiff that the defendant failed to follow the norms that were set by them regarding pricing and the defendant was selling legitimate Samsung products at a price lower than the standard price set. To which the defendant argued that the sale of genuine products does not amount to infringement under Section 30

    The judges in the matter held that the defendant should be restrained from importing products from other countries and displaying the same in their shop. It was further held that, if any product is being imported from another country and being sold in the domestic market, the shop owner must clearly display the same therein. In favor of the plaintiff, it was held that they are not entitled to give any warranty with regards to such products that have been imported and the duty to provide the consumer with a warranty lay solely on the defendant. 

    Conclusion 

    Parallel imports have significance in both the legal and economic sphere. The legal connotation establishes that the goodwill of a trademark holder shall not be compromised by causing deception and confusion in the minds of the consumers. However, the economic aspect of parallel imports promotes the availability of goods across borders and in turn, prevents the possibility of monopoly over a certain market. 

    Therefore, parallel imports have both positive and negative ramifications depending on the perspective adopted. The consumers face the positive impacts wherein they are able to buy goods at lower prices, whereas, the trade owners face the negatives, with regards to losing integrity and credibility of their brand. 

    ]]>
    Sat, 17 Oct 2020 11:54:00 GMT
    <![CDATA[E- Commerce Law KSA]]> E- Commerce Law Saudi Arabia

    Introduction

    Due to the advance of internet across the globe and in the age of technology, e-commerce has found unprecedented support and flourished greatly during the past decade bringing about a major change in the retail industry, especially during these trying times. Most businesses have adopted an online model to inculcate themselves into the electronic sphere. With such an increase in the usage of e-commerce platforms to conduct business, there arises a need to regulate these activities, including the maintenance of confidentiality of the data exchanged therein.

    For the purpose of protecting and regulating e-commerce activities countries all over the world have laws and regulations that impose obligations upon businesses, policies that need to be strictly complied with and restrictions on publication and use of customer information.

    E- Commerce in the Middle East

    As per various studies that have been conducted and statistical data collected by consumer surveys, it is safe to say the countries falling in the MENA region are digitally savvy and have some of the highest levels of internet usage as compared to other regions. However, the e-commerce industry remains comparatively slower than other regions.

    Middle Eastern countries are however, rapidly moving into the digital sphere to conduct their business with the rise in notable e-commerce players. Local governments of these regions have taken up the responsibility to regulate this rapid digitization.

    In the UAE, Federal Law number 1 of 2006 for Electronic Commerce and Transactions has been implemented in order to regulate business activities in the cyber sphere. It aims at protect the rights of people doing business electronically along with promoting growth E- Commerce and other transactions on the national and international level. It further sets out a regulatory framework related to licensing, approval, monitoring and overseeing the activities of service providers who are seeking to enter or are already operating in the UAE e-commerce market.

    Saudi Arabia

    The Saudi market is opening up, inviting investors and businesses to partake in commercial activities resulting in exponential growth of e-commerce in the country. The Saudi E- Commerce Law of 2019 plays a major role in providing a comprehensive framework of rules that need to be adhered to by any e-commerce entity planning to or conducting e-commerce in Saudi Arabia.

    The Ministry of Commerce and Investment (MCI), is responsible for setting up and carrying out commercial policies with a view to diversify the sector and boost competition among participant institutions. The MCI is also tasked with issuing, reviewing and supervising commercial systems and regulations.

    Legislations

    The cardinal legislation that precedes over all laws in KSA is the Shari'ah law.

    In an attempt to progress as per global standards, Saudi Arabia has undertaken a National Transformation Program pursuant to Vision 2030 that aims at bringing about changes by widening the scope of legal and regulatory framework of their commercial systems. In 2019, KSA took steps to formulate laws that are able to blend their domestic laws with global standards. This was done with the introduction of a new Electronic Commerce Law (the Law) adopted on 10th July, 2019 by Royal Decree Number M/126 along with Implementing Regulations of the Electronic Commerce Law (the Regulation).

    Electronic Commerce Law (Royal Decree Number M/126)

    The provisions of the Law apply to three categories of people:

    • the Service Provider, that is the person practicing within the territory of KSA;
    • the Practitioner, a person outside KSA that offers goods and services within the Kingdom allowing Consumers to access such products and services, and;
    • the Consumer (Article 2).

    It aims to build faith in the e-commerce industry in addition to boosting development in the field whilst providing consumers with necessary protection from misinformation and fraudulent practice.

    Disclosure

    As per Article 6 of the Law, the service provider is required to disclose the following information in relation to their online store/ e-shop:

  • Contact details that include, the name and address of the service provider unless registered with an e- shop authentication entity.
  • If registered with the commercial registry or any publicly available record, the name and registration number thereof.
  • Information as under Article 6 of the Regulation, that includes; the e-shop's privacy policy which should contain methods to the scope of dealing with user profiles and measures to protect the personal data of the consumer, measures to receive and resolve consumer complaints and the service provider's tax details, if any.
  • The service provider is also required to disclose his license information with regards to his e-shop accompanied by information regarding the authority that granted such license.
  • The service provider basically enters in to a contract with the consumer during the course of conducting business, therefore it is important for them expressly clarify, the terms and conditions that will apply thereof.

    The service provider must disclose information relating to the characteristics of the products that are being offered, the total price inclusive of all taxes and fees, warranty information, after sales services, termination of contract, and any other such information that may be stipulated in the Regulations. Providing the consumer with all such information assures the consumer of the authenticity of the service provider and affirms their faith in the reliability of products offered.

    Registration

    For an e- shop to be operational and legitimate, it is necessary that it be registered in the Commercial Register. Therefore, a Trader (as per Article 1 of the Law, Service Provider registered in the Commercial Register) is required to register the main electronic shop in the Commercial Register within 30 days from the date of its establishment. Article 12 of the Regulations lay down that an application for registration should made through the Ministry website which must include all the necessary contact information of the trader accompanied with the description of the main e-shop and its activities.

    However, if a Practitioner (according to Article 1 of the Law, means any person who is not registered in the commercial register practicing e-commerce) wishes to become a Trader and get registered into the Commercial Register, then his application must include the following information:

  • The contact details of the Practitioner accompanied by his ID number
  • The description of the e-shop and the activities that will be practiced through the E-shop
  • In case of any changes in the registration application, the competent department must be informed within 30 days of such change through the Ministry website
  • Once the Application is filed, the E- shops are to be authenticated. This Authentication is carried out by licensed authentication bodies that have been established by the Ministry. In order for the E- shop to be authenticated, the service provider is required to provide the following information:

  • The name, address and means of communication of the service provider, which must also include, whether it is a trader or practitioner, a Saudi or non- Saudi
  • Commercial registration information or identity information, whichever applicable
  • Names of authorized signatories in case of a legal person
  • The platforms that will be used by the service provider to conduct e-commerce
  • The licenses issued by competent authorities, if any
  • After all such information is authenticated by the licensed authentication entity, a statement of authentication shall be issued to the applicant and the same shall be published in the Entity's website. A statement regarding authentication shall then be published on the service provider's e- shop.

    Advertisement

    In order to target the desired audience for their products, the service provider may engage in advertising products to promote sale, directly or indirectly.

    As per Article 10 of the Law, electronic advertisements shall be considered a contractual document and shall be binding on both parties. In order to make the advertisement effective, the service provider must contain some distinctive mark that would help the consumer identify and distinguish the products of one service provider from another along with the service provider's contact information.

    The consumer must be able to make an informed decision, therefore, the service provider must ensure that all information related to the product should be available, further, the advertisement should not contain any such information that might mislead the consumer or contain any such logo or trademark that the service provider has no right to use. Notwithstanding the previous statement, if the consumer does not wish to receive any such advertisements, then the service provider must provide means to cease transmission of such advertisements.

    Termination

    As per the provisions of the Law, the Consumer has the option to terminate an e-commerce contract. The Consumer is permitted to terminate the contract within 7 days from the receipt of the product, unless except, he has used and/or benefitted from use of the product in which case the consumer shall bear the costs of termination.

    The consumer shall not however, be eligible for termination and refund in cases enumerated as follows:

  • In case of custom made products
  • Products in the digital format, such as CDs and DVDs
  • Products subject to damage during the termination period
  • In case of services, such as catering, transportation etc.
  •  In case of a contract entered into for public auction
  • Any other such products or services as enumerated under Article 13 of the Law.
  • Protection of Personal Data

    A major concern while engaging in E- commerce activities, is that of data privacy and protection. It is the duty of the law and lawmakers to establish laws that protect an individual's identity and prohibits invasion of privacy thereof. Under the Shari'ah principles, disclosure of any secrets of private information of an individual is prohibited except unless the individual has expressly consented to it or if such disclosure is in furtherance of public interest.

    The Law (Royal Decree Number M/126) imposes certain obligations upon the service provider regarding privacy of consumer information that have to be strictly adhered to. Article 5 of the Law lays down that, the service provider is barred from retaining any personal consumer data except for the period required by nature of the transaction, unless expressly consented by the consumer for another period or transaction.

    The service provider owes a responsibility to the consumers to take all such measures to maintain confidentiality of personal data that is under his control during the course of the transaction. The service provider is therefore, barred from using such data for unlicensed and unauthorized transactions or disclosing the same to third parties, except with the consent of the consumer. In case it comes to the notice of the service provider that his system has been hacked and the personal information of consumers have been leaked, the service provider must, immediately report such a breach to the Ministry within 3 days.

    The Law also provides for penalties in case of contravention of any provision of the Law and/or Regulation in Article 18 of the Law; enumerated as follows:

  • A warning
  • A fine not exceeding 1 Million Riyals
  • Suspension of the E-shop, partially or fully
  • Blocking the E- shop, temporarily or permanently
  • Further, since e-commerce is conduction in the cyber sphere, the Anti- Cyber Crime Law (Royal Decree Number M/17) may also apply. The law aims at, protecting rights pertaining to legitimate use of computers and information networks, public interest and national economy along with enhancing information security. The law also stipulates that, the consent of an individual be taken before processing any of their personal details.

    The Anti- Cyber Crime Law, provides for penalties for with regards to unauthorized access, use, distribution or redistribution of personal data, including bank and credit information and unlawful access to website or hacking a website with the intention to destroy or modify it, or occupy its URL.

    Moreover, the Telecommunications Law lays down provisions to safeguard public interest as well as maintain confidentiality and security of telecommunication information (as per Article 1 of Royal Decree Number M/12, telecommunications also includes transmission over the internet). It further restricts disclosure of information of subscribers by internet providers to third parties.

    Therefore, moving forward, the E- commerce sphere in the Kingdom of Saudi Arabia is booming and aims to achieve greater heights with this comprehensive Law in place, accompanied by a myriad of safeguards to ensure safety of all participants.

     

    ]]>
    Sat, 17 Oct 2020 11:16:00 GMT
    <![CDATA[Initial Public Offering- Bahrain]]> Initial Public Offering- Bahrain

    Securities and Assets

    Securities is a financial instrument that is negotiable and holds some type of monetary value. It is equivalent to an ownership position in a corporation through stock. Securities can be categorized into three types:

    • Equities
    • Debts
    • Derivatives

    Securities are defined in Volume 6, Glossary of Terms of CBB handbook as shares or bonds issued by shareholding companies, government debt instruments and other such financial instruments as are mentioned therein.

    Establishment and Regulations

    The Bahrain Bourse (also known as the Bahrain Stock Exchange; BSE) facilitates as a major stock market index that tracks the workings of share holding companies listed with it. The Bahrain Stock exchange also provides a ground for traders to conduct their business on the ground.

    Financial Institutions Law 2006, known commonly as the 2006 Law, established the Central Bank of Bahrain as the regulatory authority of BSE.

    Bahrain Bourse is the market formed and governed by

    • Decree Number 4 of 1987, later repealed and replaced by
    • The Law Number 57 of 2009, and
    • Decree Number 60 of 2010.
    • CBB Law 2006
    • CBB Disclosures Standards Book
    • CBB Resolution Number 17 of 2012
    • CBB Rulebook Volume 6
    • CBB Rulebook Volume 7

    These laws govern a set of Rules and Regulations such as:

    • Internal Regulation
    • Money Laundering Regulations
    • Trading Rules and Procedures
    • Clearing, Settlement, Central Depository and Registry Rules
    • Clearing, Settlement, Central Depository and Procedures
    • Market Rules
    • Bahrain Investment Market Rules
    • Listing Rules

    In 2010, Bahrain Bourse was established as a shareholding company to replace BSE, as per Law Number 57.

    Authority

    Central Bank of Bahrain was established by the Financial Institutions law 2006 as a regulatory authority responsible for overseeing the main market and the secondary market. Volume 6 of the CBB Rulebook entails all required regulations in relation to the capital markets.

    Listing Requirements

    In terms of an IPO, there are various listing requirements a company needs to adhere by before authorization for listing is provided. These are

    • Appointment of Advisors
    • Appointment of Auditors
    • Appointment of PR Agent
    • Appointment of Legal Counsel
    • Appointment of Investment Bank
    • Conduct Financial Due Diligence
    • Review financial assets of the company
    • IPO coverage supervision
    • Legal Due diligence
    • Disclosures of the Board of Directors and Management's shareholding in the company and exposure of crucial personal dealings
    • Board of meetings and any major resolutions to be disclosed

    Prospectus

    The Prospectus is defined in the Glossary in Volume 6 as 'An offering document that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. 

    ]]>
    Thu, 15 Oct 2020 17:00:00 GMT
    <![CDATA[Initial Public Offering – UAE]]> Initial Public Offering – UAE

    An initial public offering is a process that allows companies to offer their shares to the public for the first time. This can be done by publishing a prospectus, offering shares for subscription, submitting relevant documents for approval and so on. Further, Public Joint Stock Companies (PJSC), are the only types of companies that are allowed to offer their shares for subscription in the UAE.

    Regulatory Framework

    Securities and Commodities Authority (SCA) and the Department of Economic Development (DED) are the two key regulators for the IPO process. Any further approvals that need to be obtained, may be obtained from the Central Bank or the Insurance Authority in the UAE, depending on the nature of business carried out by the company. Once approvals and licenses are obtained, the companies may offer their shares under the DFM or ADX.

    Laws

    • The Companies Law (Federal Law No. 8 of 1984 concerning Commercial Companies) – this governs UAE companies in general, including PJSCs
    • The SCA Law (Federal Law No. 4 of 2000)
    • The Listing Resolution (Council of Ministers' Decision No. 12 of 2000 concerning the
    • Regulations as to the Listing of Securities and Commodities)
    • The Disclosure Resolution (Council of Ministers' Decision No. 3/R of 2000 concerning the Regulations as to Disclosure and Transparency)
    • The ADX Rules (There are no separate listing rules for the DFM: any issuer seeking to list on the DFM need only comply with the listing requirements set out in the Listing Resolution)
    • The Central Bank Resolution (the UAE Central Bank Board of Directors' Resolution No. 164/8/94 regarding the Regulation for Investment Companies and Banking, Financial and Investment Consultation Establishment or Companies).

    Eligibility for IPO

    There are certain regulatory requirements that need to be fulfilled before a company is permitted to offer their shares to the public. These requirements may be summarised hereunder;

  • Article 4 of the Listing Resolution lays down that, only securities that are incorporated in the PJSC whose head office is in the UAE, securities that are foreign but are approved to be listed by the Board of Directors of the SCA, bonds and debt instruments resolved to be listed by the SCA or any other securities approved for listing by the SCA, are eligible to be listed in the market.
  • Further, Article 6, divides the securities into two categories based on which securities can be listed. In order to be listed in any of the two categories they are required to satisfy some requirements. (Refer to requirements here)
  • Contrarily, a discretionary authority to exempt a company from the eligibility requirements lies with the Board of Directors of the Market. The Board also has the authority to reject an application without reason.
  • In case of a foreign company eligibility requirements including Council of Ministers' Decision No. 7/R, 2002, must be adhered to. The requirements are enumerated as follows:
  • The issuer must comply with all provisions in the law of the country of its incorporation
  • The issuer must be in the form of a public joint stock company or equivalent
  • The issuer must be listed in the market of its home country (and the market should be subject to the supervision of a body or authority exercising competencies similar to the competencies of the SCA)
  • The issuer must have been incorporated for (and have audited accounts for) a period of not less than two years
  • The issued share capital of the issuer must not be less than the equivalent of AED40 million (around US$10.9 million) and must be issued to not less than 100 shareholders
  • During the two years preceding the date of submission of the application for listing, the issuer's net assets must have been in excess of 20 per cent of its paid-up capital, or it had
  • realized net profits distributable to the shareholders averaging not less than 5 per cent of the paid-up capital
  • The issuer must publish its balance sheets and financial results in two daily Arabic language newspapers before its securities can be admitted to trading on a Market
  • The issuer must appoint a representative in the UAE to register the securities, distribute
  • profits and receive and issue reports and documents connected with the business of the company
  • The issuer must comply with any additional conditions that the Board may from time to time prescribe.
  • However, regardless of the abovementioned conditions, the SCA's Board and the Board of Directors of the Market have the discretionary authority to exempt a foreign company from any of the conditions mentioned above or contrarily, decline the application without reason.

    Steps involved in the IPO Process

    Conversion of the Company into a PJSC

    The first step is to convert the company into a PJSC if it isn't one already. The following steps may be undertaken for the same:

    • The nominal value of the issued securities must be fully paid-up
    • A period of not less than two financial years must have expired since the incorporation of the Private JSC
    • For both of the two years preceding the application for conversion, the company must have achieved net profits for distribution which exceed 10 per cent of the value of the issuer's capital
    • At least three quarters of shareholders must vote in favor of the conversion at an extraordinary general meeting
    • the SCA must approve the conversion (its approval will be published in the Official Gazette)

    Thereafter the IPO process may be divided into six steps:

  • initial approvals
  • pre-subscription period
  • public subscription/public offering
  • incorporation announcement
  • registration before the competent authorities and the SCA
  • listing of the company on UAE financial markets
  • Initial Approvals
  • A company (the founder's committee thereof) seeking establishment of PJSC is required to get a special approval from the Board of Directors of SCA for incorporation, if not completed. Upon examination the SCA then, determines whether or not the company possesses such working capital that would be sufficient for the next twelve months and that the offered shares are limited to qualified institutional investors and high-net-worth individuals for amounts that are no less than AED 5 million.

    Thereafter, initial approval is obtained from the Department of Economic Development (DED), following which a preliminary approval is to be obtained from the SCA for the establishment go the joint stock company accompanied by all the relevant documents as may be necessary. (Refer to the list of documents required)

    Further, the founders committee is given an opportunity to then make any changes as per the requirements of the SCA within 15 days of receiving the notification for such change.

    Upon amendment of the application according to the requirements of the SCA, a copy of the finished document is sent to the DED within 10days, following which, according to a joint meeting between the SCA and DED, the DED issues a decision to the license the incorporation of the company.

     

    ]]>
    Thu, 15 Oct 2020 16:20:00 GMT
    <![CDATA[Design Rights in the UAE]]> Design Rights in the United Arab Emirates

    Imagine waking up one morning to a flood of notifications from loyal followers who tip you off that an X Brand T-shirt design they believed was a copy of one of your designed tees. What's worse is that the X Brand T-shirt is being sold for half the price of your original graphic tee. Fashion copycats happen all the time, especially since many laws do not protect fashion. The X Brand company simply points out that since you did not trademark your design or graphic or you do not have a trademark for the font or graphic design of the T-shirts, you have zero legal rights to them. Nothing would be more infuriating for you than knowing that a huge company is accruing profits from the work of your design.

    Do you feel that big businesses think that small businesses are just there to pull ideas from, and they think that small businesses are weak enough to pull a fight? As disappointing the reality may be, truth also lies in the fact that this is a two-way stream. Designer rip-offs happen constantly, and it is also the small businesses who rip off designs of the big brands and sell them at a much, much cheaper price than the original. Well, it is not only the price that is cheap, but it is also the quality which is so inferior that the big brands almost feel attacked by having their design linked to such quality.

    Remember in 2018 when Burberry slapped Target with multi-million-dollar counterfeiting lawsuit? Burberry sued Target for knocking off Burberry's iconic plaid pattern by selling scarves in the pattern just as the British fashion brand was bringing it back.

    Be it cases of affordable fashion brands doing the copying, like when Zara copied USD 795 Balenciaga sneakers and Kanye West's coveted Yeezys, or a practice adopted by the luxury fashion, for instance when Gucci's 2018 cruise collection included a jacket that was a replica of one by 1980s Harlem couturier Dapper Dan, copying of designs exists at every level.

    What was interesting in this case was that Gucci ripping off Dapper Dan turned the issue to 360 degrees because Dapper Dan was famous for using counterfeit Fendi, Louis Vuitton and Gucci logo prints to make clothes, till he was sued by the brands for copyright infringement in 1992, and his Harlem store went out of business due to litigation fees. Gucci just ended up settling the dispute by collaborating with Dapper Dan. Oh well, Dapper Dan had anyways been self-collaborating by running his operation for a decade prior to being sued!

    In the United Kingdom, the design law protects the appearance and shape of whole products or parts of products, its shape or decoration. There exists the concept of unregistered design right, an automatic Intellectual Property (IP) protection which applies to original, non-commonplace designs, thus protecting the design from being copied. The unregistered design right protects the shape and configuration of products, both internally and externally.

    There also lies a right for the designers to secure a greater level of protection by having their design registered with the UK Designs Registry.

    While the unregistered design right is accorded to only 3 Dimensional (3-D) designs, 2 Dimensional (2-D) designs are protected by registering the design. However, the EU IP laws cover both 2-D and 3-D items.

    Designs are protected primarily to ensure that the owner of the design reaps sufficient reward for their efforts. The design rights add effective and affordable protection and value to a business. One sees a product prior to feeling the product. The customers crowd where there is a display of well-designed products, thus meaning that the success of a market is directly proportional to how good the products look.

    United Arab Emirates (UAE)

    In the UAE, industrial designs are covered under Law Number 44 of 1992 (as amended by Law Number 17 of 2002) for the Protection of Patents and Designs (the "Law"). The term "Industrial Design" is defined as any form constituted by lines or colors, or any three-dimensional form that is primarily related to lines or colors, provided that it has a specific appearance and can be used as a model in industry or handicraft.

    Article 44 of the Law states that the industrial design is eligible for protection under the Law only if it is recorded in the Special Register kept by the Directorate. The registration application shall be filed and examined as per the procedure, and on payment of the fees, prescribed by the By-Laws of the Law.

    The objective to protect the design owner is to prohibit third-parties from misappropriating the design or using any similar confusing designs for their own benefits. The legal protection is sought by the design owner to pursue the copycats and deter the third-parties from manufacturing and selling knock offs of the same or similar design that could very well be confused to be the original design. The registration gives the owner exclusive rights, and when faced with a scenario where the competitor has imitated the design of a product in the market, the registered design owner can avail his exclusive rights over his registered design.

    The Industrial Property Office administers Patents and Designs under the supervision of the Industrial Property Directorate, Ministry of Finance and Industry.

    Industrial Design under the Law:

    Applicants can obtain the 'industrial drawing' and design certificate provided it does not violate the public order or morals of the state. The term of protection is ten years from the filing date.

    The owner of an industrial drawing and design certificate can prevent any other party from undertaking the following activities:

  • Use of the industrial drawing, design, or model for manufacturing any product;
  • Importation or acquisition of any merchandise relating to the drawing, design, or model with the intention of using or selling that product.
  • The Ministry of Economy reserves the right to call for such additional information as it may deem fit in processing an application relating to registration of industrial design and/or grant of industrial design certificate from the applicant.
  • The application for protection can include more than one industrial drawing or design, provided that there is interrelation in terms of manufacture and uses, and does not in total exceed twenty drawings or designs.

    A trade mark is designed to primarily identify the origin and source of goods and protect the distinctive non-functional features that relate to and indicate the source of origin of a product.

    The trade mark laws protect anything having a distinctive form such as names, words, signatures, letters, figures, drawings, logos, titles, hallmarks, seals, pictures, engravings, advertisements, packs or any other mark or group of marks if used or intended to be used either to distinguish goods, products or services whatever their source or to indicate that the goods or products belong to the trade mark's owner due to its manufacturing, selection or trading or to indicate the rendering of a service. This is established under Federal Law Number 37 of 1992 as amended (the "Trade Marks Law").

    The trade mark protection is afforded when the product's design is non-functional and is used as a source indicator. For instance, the shape of the product is such that it distinguishes it from someone else's product. The best route taken here for legal protection would be that the 3-D shape of the product is registered as a trade mark in addition to any industrial design registration.

    Trade mark protection does not consider novelty. Even if the design is not novel, trade mark protection can be afforded as long as the trademark retains its distinguishing feature as a source indicator. This is in contrast to the industrial design protection, which can be afforded only if the design is novel but continues to protect even when the shape product loses its distinguishing feature as a source indicator.

    Even if an entity imitates the store layout in such a manner that it replicates another's store, it would amount to trade mark infringement. The store layout can also be registered. Apple Store received trade mark for 'Distinctive Design and Layout' and trade marked its store design with the U.S. Patent and Trademark Office in 2013.

    The trade mark, when lawfully registered, provides the owner with the exclusive right to use the mark under Article 17 of the Trade Marks Law. A registered mark cannot be found to infringe another mark (registered or otherwise), provided the registered mark was registered as per the provisions of the Trade Marks Law. It follows that a prior third-party, holding a valid registration, would need to invalidate the other trade mark registration in order to claim successfully that the defendant committed the offences set out in the Trade Marks Law.

    Offences under Article 37 of the Trade Marks Law are:

  • Any person who forges a trade mark registered according to Law or imitates the same in a way misleading the public and any person who uses with bad faith a forged or imitated trade mark.
  • Any person who places with bad faith on his products a registered trade mark owned by a third-party or uses such mark without right.
  • Any person who deliberately sells offers for sale or negotiation or acquires for sale products having a forged, imitated or illegally placed trade mark, the same applies to any person who deliberately provides or offers the provision of services under a forged, imitated or illegally placed trade mark.
  • Trade mark infringement in the UAE is the unauthorized use of a trade mark on or in connection with goods sold or services provided in the UAE in a manner that is likely to cause confusion, deception, or mistake about the original source of the goods or services.

    When an individual entity uses a logo that is deceptively similar to a registered logo, for instance, by altering the alignment of the design or changing the color, the trade mark right holder may sue for infringement.

    While registering a trade mark in the UAE, the examination process commences, which includes a formal examination, examination on the grounds of refusal and a search for prior trade marks. The trade mark is published for opposition before the registration which constitutes thirty days from the date of a publication of the trade mark application in the Trade Mark Journal or in two local daily newspapers.

    Consider a scenario where a product with a registered trade mark in the UAE is such that it is instantly distinguishable from conventional products in the same product category as a result of its unique technology, shape and designs. There is another entity introducing a similar product with identical shape and design but under a different brand name and manufactured in a different country. Since the brand name here is different, the infringement case would be slapped only if the original product had trade marked its shape as a 3-D trade mark in the UAE. If so, the infringement claim shall be successful and accordingly, the counterfeiting goods will be seized.

    Conclusion

    Altering design features to an already registered product design is an increasingly popular way of having an edge by making it attractive to customers as it can turn a product into an instantly recognizable brand. It is always wise to have the pillars of legal protection by registering the design and legally protecting your brand. Know the IP Protection Laws of the country before conducting business.

    BEWARE of infringing and being infringed!

    ]]>
    Thu, 08 Oct 2020 09:38:00 GMT
    <![CDATA[Company Formation in Iraq]]> Company Formation in Iraq

    The Companies Law Number 21 of 1997 (amended by CPA Number 64 in 2004) (the "Companies Law") permits various types of corporate entities to be registered in Iraq (including the Kurdistan Region of Iraq).

    The foreign investors who intend to enter the Iraqi market can use three main vehicles:

  • Private limited liability company (LLC);
  • Branch office of a foreign entity;
  • Representative office of a foreign entity; and
  • Mixed and Joint-stock companies
  • Limited Liability Company

    The Companies Law permits the foreign investors to establish or participate in Iraqi companies without any restriction, provided they obtain the necessary approvals from Iraqi ministries or departments. 

    The following steps are required to establish an LLC under the Companies Law:

     I. Submission of a completed application to the Companies' Registrar in Baghdad including the following main information regarding the business entity proposed to be registered at the Iraqi Ministry of Trade:

  • Name of the business entity to be registered as an LLC;
  • The type of business activity;
  • The address, phone number, fax number and email address of the business and the address of the offices in Iraq;
  • The structure of ownership (wholly Iraqi owned, wholly or partially foreign-owned);
  • Memorandum of Association (MOA) as the governing document of the LLC.
  • The MOA must contain the following details:

  • Name of the company;
  • Form of the company;
  • Objectives of the company;
  • Address of the Head Office in Iraq
  • Details of the founder(s) including the name, address, occupation and nationality; and
  • Share capital.
  • Minimum Capital

    In certain sectors, the minimum capital required could be higher than the standard minimum capital as in the oil sector where the minimum capital is IQD 2 Billion. However, the standard minimum capital for an LLC is IQD 1,000,000 with the nominal value mandated to be one Iraqi Dinar per share. Issuing of shares with a higher or lower value is prohibited under the Companies Law, and the share capital must be fully paid up when the LLC is registered. Cash must be paid into an authorized bank's account in Iraq, and such contribution is frozen in the account until documents are submitted to the bank ensuring the completion of the establishment formalities. Contributions in kind must be specified in the MOA, and the value must be approved by all the founders. 

    Shareholders

    The shareholders in an LLC must not exceed 25, which may be a combination of legal entities and individuals. There is no minimum requirement of shareholders, thus meaning that an LLC may be established by a single person (including a legal person).

    The share capital is divided into indivisible shares with a uniform nominal value. The transferring of shares is subject to a pre-emption right in favor of the other shareholders.

    Management

    The LLC is managed by a General Manager who can also be a non-Iraqi national approved by the Iraqi Ministry of Interior (MOI).

    The General Assembly lays down the powers and salary of the General Manager. A General Manager is authorized to conduct all transactions and business concerning the performance of the company's normal corporate activity. 

    The manager may be decided to be removed by the authority that appointed him/her by giving a reason for such a decision. 

    Liability of Partners

    The liability of the partners towards third-parties is limited by law to the extent of their investment in the LLC's capital.

    The Companies' Registrar should obtain the approval of the MOI prior to issuance of a registration certificate for an LLC that is owned by foreign parties. Such approval often takes between three to six months. After obtaining the approval from the MOI, and receiving the registration certificate, the LLC can operate throughout Federal Iraq.

    In summary the steps involved are:

  • Reserving a company name with the Chamber of Commerce and Federation of Chambers of Commerce in Baghdad.
  • Drafting of the company's Articles of Association
  • Depositing the initial capital with a commercial bank and obtaining the relevant document evidencing completion
  • Obtaining the shareholders' tax clearance certifications from the General Commission of Taxation
  • Submitting the required documents to the Companies' Registrar
  • Obtaining the Registration Certificate
  • Creating a company seal
  • Registering for taxes with the General Commission of Taxation
  • Legalizing the accounting books
  • Registering the employees for social security
  • Branch Office and Representative Office of a Foreign Entity

    A foreign parent entity may establish a branch office in Iraq, provided the parent company has secured a contract from the Government of Iraq, or a contract with a prime contractor who is contracted with the Government of Iraq. A branch office can conduct the commercial activities permitted by its parent company and is also bound by the operations specified in the contract upon which it relies to establish its presence in Iraq.

    A representative office can only engage in business development and marketing activities, and thus, cannot engage in any commercial activity in Iraq. However, a representative office can be converted to a branch office on securing a government contract, or a contract with a prime contractor of the Government of Iraq.

    Procedure:

    The procedure for establishing a branch office and a representative office is similar.

    A completed application to register branch office, or a representative office must be submitted, including the following:

  • The legal name of the foreign parent company;
  • Trade name of the foreign parent company;
  • Foreign parent company's type of business activity;
  • The business address of the foreign parent company's office in Federal Iraq;
  • Telephone, facsimile and electronic mail in Iraq, where available;
  • The foreign parent company's amount of charter or authorized capital;
  • Foreign parent company's net worth at the end of the recent financial period;
  • The names and addresses of any owners holding 10 percent or more of the foreign parent company's equity.
  • The time taken for registering a branch office or a representative office often takes between one to two months from the date of submission of the necessary documents.

    For setting up a Joint-Stock Company, the minimum number of partners required are 5 who participate by owning shares through a public subscription, and the maximum number of partners is 100. The liability of the shareholders is limited to the nominal value of the shares to which they have subscribed. The minimum capital required is IQD 2 million. 

    Registration in the Kurdistan Region of Iraq

    The Companies Law applies to the Kurdistan Region of Iraq, permitting for 100 percent foreign ownership. It is vital to note that the Erbil's Companies Registrar does not require a government contract for registering a branch office. The incorporation of an LLC or a branch office in the Kurdistan Region of Iraq considerably takes lesser time as it can be completed between two to four weeks.

    For an LLC which is partially or wholly owned by a foreign entity, the foreign entity must have been incorporated for more than one year. The following documents must be translated to Arabic and certified at the Iraqi embassy in the foreign entity's home country:

  • The foreign entity's Articles of Association;
  • The foreign entity's Certificate of Incorporation;
  • The foreign entity's most recently filed financial statements; and
  • Resolution to own an LLC in the Kurdistan Region.
  • The branches of foreign companies which are registered in the Kurdistan Region cannot operate in Federal Iraq. The parent company must have been incorporated for more than a year in order to register a branch in the Kurdistan Region. A branch of a foreign oil services company does not have to secure a contract with an operating oil company for a pre-approval on its registration by the Ministry of Natural Resources.

    The entities are required to register with the Income Tax Directorate (ITD) in the Kurdistan Region for corporate income taxes, and the current corporate income tax rate for all industries is 15 percent. The Kurdistan Income Tax Law Number 26 of 2007 amended by Law Number 20 of 2011 are silent about loss carries forwards. However, as per the Iraqi Income Tax Law Number 113 of 1982 as amended in 2003, the losses incurred during the year may be carried forward for a maximum of five consecutive years, to be off-set against profits generated from the same source as the original loss.

    The entities registered in Kurdistan Region must register with the ITD for employment taxes for their employees working in Kurdistan, and these employees are subject to personal income tax at a rate of 5 percent on their income in excess of IQD 1,000,000 per month.

    There is currently no VAT or sales tax levied on goods or services in the Kurdistan Region.

    Free zones

    Iraq currently operates:

  • Khor al-Zubair Free Zone;
  • Falafel Free Zone; and
  • Al-Qayim Free Zone
  • The activities which are permitted in the free zones are:

  • Industrial Process;
  • Storage;
  • Transportation;
  • Trading;
  • Banking; and
  • Insurance.
  • The first step is to submit a completed application for approval to the Iraqi Free Zone Authority. After obtaining the approval, physical space must be rented in the specific zone within a period of 30 days from the date of approval.

    It takes an average of 4 months to set up a company in the Free zone. The Free zones can be 100 percent foreign owned with the minimum number of directors as one and the minimum number of shareholders is also one.

    The imported goods into the Free zones for usage inside Iraq are subject to 5 percent reconstruction levy. The income of the Free Zones' foreign employees is exempt from all taxes and only the Iraqi employees are subject to 50 percent tax exempt.

    The income from investment in these Free zones are exempt from the following:

  • Corporate Tax
  • Custom Duties
  • Value Added Tax
  • Capital Gains Tax
  • While there are no foreign exchange restrictions applicable to Free zones, offshore banking is allowed in the Free zones.

     

    ]]>
    Thu, 08 Oct 2020 08:27:00 GMT
    <![CDATA[Bahrain Employment Law and Rights]]> Bahrain Employment Law and Employee Rights

    Law Number 36 of 2012, the promulgation of the labor law in the private sector (the "Law") repealed and replaced the more archaic Labor Law for the Private Sector, Law Number 23 of 1976. The New Law is a milestone for the private sector as it revitalizes the private sector labor market, whilst further enhancing the rights of employees and simultaneously protecting employers' rights.

    The Law imposes onerous provisions on employers and has brought significant changes to the provisions relating to employees' leave entitlements, their end-of-service leaving indemnity, the rights of female employees and penalties. The Law is thus arguably more aligned with international standards and better equipped for modern-day society.

    The Law offers protection to all types of employees regardless of whether they are part-time, full-time, local or expatriate employees. An employee, under the Law, is defined as every natural person employed in consideration of a wage by an employer and under his management or supervision.

    The contracts of employment shall be in writing, in Arabic and where a contract is drawn up in a foreign language, it shall be accompanied by an Arabic translated version as per Article 19 of the Law. In case of absence of a written labor contract, the worker may solely prove all of his rights through all means of proof.

    The Law sets down minimum threshold in some cases such as 30 days of annual leave and 55 days of sick leave allowance (15 days with full pay, 20 days with half-pay and 20 days without pay). However, the Law sets down a maximum threshold in some other cases such as eight working hours. The employers are free to amend within the commanding principals of the Law.

    The employment claims are filed in the Labor Case Administration Office. However, the employer and employee may mutually agree to refer the dispute to the individual Labor Dispute Settlement Authority at the Ministry before taking the dispute to the Courts.

    Protection against Discrimination

    As per Article 39 of the Law, discrimination in wages based on sex, origin, language, religion or ideology shall be prohibited. As per Article 29 of the Law, female workers shall be subject to all of the provisions governing the employment of male workers without any discrimination in similar situations. The defenses to a discrimination claim are subject to the Law of Evidence where the employer may offer testimonies and other documents to substantiate the contrary.

    Article 192 of the Law states that any employee who, during his work, sexually harasses any of his colleagues, by reference, by word, by deed or by any other means, shall be punished by imprisonment for a maximum period of a year or by a maximum fine of 100 Dinars. If this is committed by the employer or his representative, the punishment would be imprisonment for a minimum period of six months or a fine ranging from 500 Dinars to 1,000 Dinars.

    Dismissal

    The Law distinguishes between dismissal without a justifiable cause and unfair dismissal. Where the employee is dismissed on discriminatory grounds, it is considered as unfair dismissal. The compensation differs for each type of dismissal based on the employee's term of the contract. If the contract is for an indefinite term, the employee shall be entitled to compensation of two days' wages for each month of service, provided not less than one month's wages up to a maximum of 12 months' wages when the employee is dismissed without a justifiable cause. If the contract is for a fixed term, the employee on being unfairly dismissed shall be entitled to compensation of wages for the remaining period of the contract unless the parties have mutually agreed at a lesser compensation, provided that the agreed compensation is not below the three months' wages or the remaining period of the contract, whichever is lesser. The employee in all cases is also entitled to additional compensation equivalent to half of the laid down compensations due unless the contract provides for higher compensation.

    In case of mass dismissal, the employer and the employees shall aim to initially settle the dispute amicably. If no agreement is reached within a period of 60 days, either employer or employees may request the Ministry for referring the dispute to the Collective Dispute Settlement Board (CDSB) and where the CDSB does not resolve within 60 days, the employer or employees may request the Ministry to refer the dispute to the arbitral tribunal. The arbitral tribunal shall issue an enforceable binding award.

    Article 68 of the Law regulates the work by stating that the employer shall maintain a special file for each employee including in particular, the employee's name, age, residential address, marital status, residential address, nationality, job or occupation and qualification and experiences, date of employment, current wage, and all modifications to this wage, the leaves, the date of termination of service and the reasons thereof. The employer shall keep the minutes of investigations conducted with the employee, and his supervisors' reports on the level of his performance of the work as per the work regulations. The employer shall keep the worker's file for at least for two years from the date of termination of the work contract. The data is considered as personal data and is not transferred freely to other countries except upon obtaining employee's consent.

    Employee Rights

    Article 41 of the Law stipulates that the employer shall not transfer an employee employed on a monthly basis to an employee employed on a daily, weekly, piece-work or hourly basis, without the employee's written consent in accordance with the provisions of the Law. Article 42 of the Law states that the employer shall not force the employee to purchase foodstuffs, goods or services produced or offered by the employer or from specific establishments owned by him or by a third party.

    Article 50 of the Law specifies that the night shift workers and those under the occupational confinement system shall receive compensation for the nature of their job. The worker may not be employed for more than eight hours per day unless otherwise agreed upon, provided the working hours do not exceed ten hours per day. However, no worker shall be present at the workplace exceeding eleven hours a day calculated from the time of entering until the departure therefrom. The employer can employ the worker for additional hours provided the worker receives a wage for each additional working hour equivalent to his due wage plus at least 25 percent for hours worked during the day, and a minimum of 50 percent for hours worked during the night.

    Leaves

    The employee having spent in the service of the employer at least one year is entitled to a paid annual leave of a minimum of thirty days, with an average of two and a half-day for each month. Where the period spent in the service of the employer is less than one year, the worker shall be entitled to a leave corresponding to the period of his work. Article 61 of the Law gives the employee the right to determine the date of his annual leave in case he is applying for an exam in any of the educational stages provided the employer is notified not less than thirty days prior to the date of the intended annual leave. Article 62 of the Law, however, grants the employer the right to deprive the employee of his wage during his annual leave if it is evidenced that the employee was employed by another employer during the said leave, without prejudice to the disciplinary liability in this respect.

    Article 63 of the Law entitles the worker to a three day leave on full pay in the event of:

  • his marriage for one time;
  • the death of his/her spouse or any of his/her relatives to the fourth degree of kin;
  • death of his/her spouse's relatives to the second degree of kin.
  • The female employees are entitled to maternity leave on full pay for 60 days, including the period before and after the confinement, provided they produce a medical certificate attested by a government health center or a clinic approved by the employer stating the expected date of her confinement. A female employee is entitled to obtain leave without pay for providing care to her child who has not attained more than six years of age for a maximum of six months, three times throughout the period of her service. The female employee, after her maternity leave and until her child is six months of age, is entitled to two periods to suckle her newly born child, each of which shall not be less than one hour. She is also entitled to two periods of care for 30 minutes each until her child completes one year of age. The female employee may combine these two periods, and such two additional periods shall be considered as part of the working hours without any reduction in her wage.

    Article 67 of the Law entitles the Muslim worker, who spent five consecutive years in the service of his employer, to a fourteen-day leave with full pay to perform his Hajj (Pilgrimage) obligation. This leave should be granted once to the worker during the period of service unless he availed it during his service with another employer. The employer determines the number of employees to be granted such leave in each year depending on the working requirements, priority given to the employee who has achieved the longest period of continuous employment.

    Termination of Employment

    As per Article 110 of the Law, when the employer is forced to dismiss a few employees due to downscaling of business or reorganization or even if due to partial disclosure, the local Bahraini employees must be retained if it would be possible to terminate the foreign employee possessing the same competence and experience as the local employee.

    Under Article 99 of the Law, either party to the contract may terminate the contract following the notification to the other party at least thirty days before the date of the termination. Hence, under the Law, the employer is obliged to serve a termination notice should it wish to dismiss an employee. However, the employers shall be bound to follow a longer notice period if it is mentioned so in the contract. When the employer fails to serve the notice in a timely manner, the employee would be entitled to the wages for the notice period.

    Employee's Entitlements upon Termination

    Apart from the Notice Period Wages, there are other entitlements the employee can avail upon termination.

  • Balance of Leave (Article 59 of the Law)
  • The employee shall be entitled to 30 days of annual leave, and the employee shall receive wage corresponding to the accrued leave days.

  • Travel Tickets (Article 27 of the Labor Market Regulatory Law)
  • The expatriates shall be entitled to a return travel ticket to their home country if they do not commence working with another employer within Bahrain.

  • End of Service (Article 116 of the Law)
  • The employee, not benefitting from the provisions of the Social Insurance Law shall be entitled to a reward equivalent to the wage of half a month for each year of service for the first three years and the wage of one month for each subsequent year upon the termination of his contract. The employee is entitled to receive his leaving indemnity for a fraction of a year proportionate to the period of service he spent with the employer. The calculation is based on the employee's most recent wage, excluding all allowances except social allowance. A Bahraini employee receiving a salary exceeding 4,000 Dinars is entitled to the leave indemnity concerning the amount in excess of the 4,000 Dinars only (Article 17 of the Social Insurance Law).

  • End of Service Certificate (Article 13 of the Law)
  • The employer is obligated to give his employee an end of service certificate, free of charge, confirming the date of employment, the type of work performed, the wage and other benefits he obtained, his experience, occupational competency, and the date and reason for termination of the labor contract.

  • Non-Competition Restriction
  • The non-competition restriction is valid only if the employee shall have attained 18 years of age at the time of concluding the contract. The restriction shall be limited as to a time period which must not exceed one year after the termination of the employment contract and shall be limited in terms of place and type of work as necessary to protect the legitimate interests of the employer. The employer may not rely on such restriction if the employee has had a justifiable reason to terminate the employment contract.

    Conclusion

    The Law strongly favors the interests of the employee over that of the employer. Nonetheless, the Law also provides a clear mechanism for calculating compensation upon termination, encouraging out of court settlements and thus reducing litigation costs for employers. Overall, the Law ultimately introduces more efficient and effective employment regulations that are in line with current international standards and best practices. There are considerably fewer disputes processed through the courts, thus reducing the number of frivolous cases filed by disgruntled employees.

     

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    Tue, 06 Oct 2020 10:13:00 GMT
    <![CDATA[The ADGM Litigation Funding Rules]]> The ADGM Litigation Funding Rules

    The Litigation Funding Rules 2019 (the "Rules") of the Abu Dhabi Global Markets Courts ("ADGM Courts") were enacted on 16 April 2019. The Rules are issued by the Chief Justice of the ADGM Courts under Article 225 of the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 (the "Regulations"). The Rules provide a comprehensive framework for third-party litigation funding and are in response to the growing interest in third-party funding of proceedings in the Middle East and Africa region regulating both funders and litigation funding agreements concerning proceedings before the ADGM Courts. The Rules are designed to provide the parties and funders with greater certainty in relation to the enforceability of funding arrangements in proceedings for resolving disputes.

    ADGM Courts are the most progressive judicial framework in the Middle East, are one of three world-class and independent authorities under the ADGM. ADGM directly applies the well-established and internationally accepted principles of English Common Law.

    What does the Litigation Funding entail?

    The litigation funding enables the litigants in obtaining finance to cover whole or part of their legal costs from any private commercial litigation funder who has no direct interest in the proceedings. When the litigant is successful, the Funder shall receive a pre-agreed share of the outcome of the claim, which may be a percentage of the amount recovered. When the litigant is unsuccessful, the litigant pays nothing to the Funder, and the Funder shall lose its money.

    Part II of the Rules deals with the Funders.

    What are the requirements for the Funders?

    The following conditions must be satisfied at the time the Litigation Funding Agreement (LFA) is made and continued to be satisfied by the Funder:

  • A principal business of the funding of proceedings to which the Funder is not a party must be carried on by the Funder; and
  • the Funder must have qualifying assets of minimum USD 5 million or the equivalent amount in foreign currency. The qualifying assets could be cash and cash equivalents including, without limitation monies and assets contracted to the Funder under a contract for fund management; and in the case of an incorporated company, the paid-up share capital.
  • What are the prohibitions against financial and other interests in Funders?

    The Funder must not be owned wholly or partly, directly or indirectly, by way of shares or otherwise by the lawyer or the law firm who has introduced the Funder to a client concerning the proceedings; or whose client has an LFA in force with the Funder concerning the ongoing proceedings.

    Part III deals with the Litigation Funding Agreements (LFA)

    Reasonable steps must be taken by the Funder to ensure that the Funded Party receives independent legal advice concerning the LFA and its terms prior to its execution. This provision is satisfied when the Funded Party has confirmed in writing to the Funder that the Funded Party has received such advice.

    The LFA must include provisions setting out at a minimum; the scope of funding; the amount of funding; the timing of each tranche of funding; and the Funder's recovery under Section 225(3)(e) of the Regulations.

    Rule 8 also specifies Financial liabilities. The LFA must state whether and to what extent the Funder is liable to the Funded Party to meet the liability for adverse costs and to pay any premium (including insurance premium tax) for obtaining adverse costs insurance. The LFA must state when and the manner in which the Funder will seek recovery from the Funded Party.

    Rule 9 deals with Conflicts of interest. The LFA must not contain any terms that could induce the Funded Party's lawyer or law firm to breach its professional duties which are owed to the Funded Party or to ADGM Courts including under the ADGM Courts Rules of Conduct or permit the Funder to influence the lawyer or law firm so that it takes control of the dispute or assumes conduct of it. The LFAs which include more than one Funded Party must include provisions for managing conflicts of interest between the Funder, the Funded Parties and the lawyers.

    The LFA must:

  • Include provisions as to the Funder's role in decisions about whether to settle the proceedings and on what terms;
  • State the circumstances in which the Funder may terminate the agreement and the Funder shall not be entitled to terminate it except in the specified circumstances;
  • Require the Funder to observe the confidentiality and privileged nature of all information and documentation concerning the proceedings to the extent required by law;
  • Not result from or involve any commission, fee or share of proceeds being paid to a lawyer or law firm concerning the introduction of a client to the Funder by that lawyer or law firm;
  • Require the Funder to take reasonable steps to ensure that it has satisfied itself that there are no circumstances arising from the funding that might give rise to any reasonably foreseeable conflicts of interest, whether in connection with the Funded Party, its lawyer or law firm, the other parties to the proceedings or their lawyer or law firm, or ADGM Courts or arbitral tribunal hearing the proceedings;
  • Require the Funder to notify the Funded Party expeditiously if the Funder foresees or reasonably believes that it will no longer meet any of the prescribed requirements for Funders;
  • State, expressly for the benefit of the Funded Party and any other party to proceedings before ADGM Courts funded under the LFA that the Funder submits to the jurisdiction of ADGM Courts for the purposes of disputes concerning the costs as between the Funded Party and any other party to the proceedings.
  • Conclusion

    The ADGM Courts are anchored by a judiciary of highly experienced and eminent judges from the world's leading common law jurisdictions. ADGM Courts handle civil and commercial disputes. The ADGM Courts are "digital" by default and continue to engage and deliver the judicial and dispute resolution services via their e-platform. The Rules were drafted after an extensive review of the litigation funding framework adopted in other jurisdictions like Australia, Singapore, Hong Kong, England and Wales and the United States of America.

     

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    Tue, 06 Oct 2020 07:33:00 GMT
    <![CDATA[A Guide to Medical Malpractice]]> A Guide to Medical Malpractice: A Medico-Legal Team Is Central to Your Case

    A patient goes to the doctor or hospital, trusting the ability of the healthcare professional in curing any ailment. Complete trust is placed upon the doctor's skills and knowledge, his specialty, and the various professional degrees suffixed to the doctor's name. Most of the time, a patient goes to a specific hospital or doctor based on their reputation. The number of healed patients, the number of successful surgeries all play a big role, the bigger the name, the higher the expectations by the patient and family members. 

    But what if the doctor or the hospital fails to carry out the expected duties in saving a life or properly treating an ailment?

    Everybody has read the horrific tabloid stories about surgeons removing the wrong organ or, perhaps just as horrific, patients not being anesthetized properly and feeling every ounce of pain during an operation but unable to alert anyone. 

    According to WHO, medical negligence causes nearly 2.6 million deaths a year (WHO news release on 13 September 2019).

    This number is scary high when compared to deaths related to seasonal flu (6,50,000) (WHO news release on 13 December 2017) and road accidents (1.35 million) (WHO news release on 7 February 2020). Medical Malpractice is a dainty issue most of us would rather never think about.

    It is indeed a perplexing issue as medicine is far from a perfect science. In most cases, the professional will have to take a trial and error approach, eradicating one possible diagnosis at a time. The trying of alternatives until the goal is attained, be it diagnosis or treatment, is very different from improper or negligent care, despite the fine line between the two. Therefore, the official charged with investigating Medical Malpractice has to be extremely skilled.

    Medical negligence is when a healthcare professional causes a harm to a patient due to ignorance or a harm occurs unknowingly or not taking a diligent action that could have reduced the discomfort or life threating complication.

    Medical malpractice occurs when the healthcare professional is aware of the complications or potential consequences and still proceed.

    The most common examples of Medical Malpractice or Negligence 

  • Surgical Error
  • When the doctor tells the patient that they need to undergo a surgery, it brings a slight fear or discomfort for the patient. There is a common misconception that nothing can go wrong if it is a minor surgery. The truth is that regardless of the type of surgery, whether minor or major, a surgical error can occur. "Surgical Error" is an avoidable mistake during any surgery. There are different reasons why a surgical error can occur:

  • Incompetency of the surgeon;
  • Not following the surgical protocol;
  • Too many cases to handle at one time which may drain out the surgeon;
  • Overconfidence due to experience;
  • Insufficient planning;
  • Missing the patient's medical history or comorbidities (other diseases the patient has) that may cause a complication during the surgery.
  • Every patient is different. No matter how many years of experience a surgeon has and how many successful surgeries they have seen, it is always a trial and error approach for each patient. In any case, if negligence should take place, this can lead to physiological and psychological trauma for the patient. Every year we hear stories on how a small mistake by the surgeon costs loss of a body part or someone's life.

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    Wed, 23 Sep 2020 09:08:01 GMT
    <![CDATA[CFD's in Kuwait]]> Contracts for Differences in Kuwait

    Introduction

    Contracts for Differences (CFDs) is a type of security investment wherein investors make a profit from the difference of a company's fluctuating stock value in the market. CFD is a form of derivative trading, formed as an agreement between an investor and a CFD broker for exchanging the difference in the value of a financial product within the opening and closing time of the contract. CFDs can be classified as a form of security that is issued by the Company. The wider range of markets to invest with, the flexibility to go long or short, and the ease of contract execution are some of the advantages for an investor to choose this form of security over others. Kuwait established the Capital Market Authority in February 2010 as a regulatory body of the various transactions that take place in the market. In 2015, the body enacted a set of laws in relation to the market place conduct.

    Capital Market Authority Law (CMA Law)

  • This is the Law that governs the regulations, procedures, sale, and offers in relation to the aforementioned securities, in Kuwait.
  • The Law was enacted in 2015 as Decree Number 72 by the Kuwaiti Parliament.
  • CMA Law is considered to be one of the most complex and diverse sets of regulations to be adopted by Kuwait in its recent years.
  • This article shall further discuss the regulations in relation to the licensing and other requirements for CFD Trading in Kuwait.

    Securities

    As per Law Number 7 of 2010, Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities, Security is defined as, "Any instrument, in any legal form, that is an evidence of ownership of a share in a financial transaction, and that is negotiable pursuant to a license from the Authority, such as:

  • Shares issued or proposed to be issued in the capital of a company;
  • Any instrument that creates or acknowledges a debt issued or to be issued by a company;
  • Loans; bonds; Sukuk; and other instruments that can be converted to shares in the capital of a company;
  • All public debt instruments that are tradable and issued by the various government entities or public institutions and authorities;
  • Any right, option, or derivative relating to Securities;
  • Units in a collective investment Scheme;
  • Any paper or instrument considered by the Authority as a Security for the purposes of implementing this Law and the Bylaws."
  • Any activity that falls under the aforementioned categories shall be termed as Securities. For companies to establish trading through securities, there are various obligations that are required to be fulfilled. Securities licensing has to be obtained in order for a Company to be authorized to issue securities. Kuwaiti entities like shareholding companies must secure the Authority's approval for issuing securities. The issuance approval process is necessary whether the issuance of the securities is direct or indirect. Bonds may be issued by shareholding companies directly, or indirectly through a special purpose vehicle that is established either onshore or offshore.

    Licensing

    Article 63, Chapter 5 of the CMA Handbook states that a person cannot operate without a license in the market for activities such as:

  • Securities Broker;
  • Investment Advisor;
  • Investment Controller;
  • Investment Portfolio Manager;
  • Collective Investment Scheme Manager;
  • Any person who conducts or participates in any other activity that is deemed by the Authority to be an activity in Securities to be regulated in accordance with the purposes of the Law; and
  • A few other activities.
  • Whereas, a company may be granted a license to perform multiple activities aforementioned, provided they fulfill the required criteria and submit the Private Placement Memorandum (PPM).

    A Private Placement Memorandum or a Prospectus is a document which helps a company attract professional clients to subscribe onto its platform. This is a crucial document as depending on the Prospectus, this specific category of clients would subscribe to the Company's capital. As such, CMA requires the person or entity to submit its PPM in accordance with Article 5-11 of the Securities bylaws. The article provides for the Prospectus to include:

  • Issuer's details, such as name, address, and date of incorporation.
  • Sales Agent's name and address, if the Issuer is not the Sale Agent.
  • Subscription Agent's name and address, if any.
  • Subscription period.
  • Subscription minimum, if any.
  • Kinds of investors eligible for the Subscription.
  • Details of the intended use of the proceeds of the issue.
  • A statement that the Prospectus has been prepared in accordance with the Law and these Bylaws and approved by the Authority.
  • Statement of the Central Bank's approval for the issue by Units Subject to the Supervision of the Central Bank.
  • A statement that the Authority shall not be a party to any claim of damages arising from an approved Prospectus.
  • The Prospectus shall not exclude any important information issued and the information provided is factual in nature. This is to be confirmed by the Issuer, Obligor, or the Subscription Agent and any information in relation to these entities that might be relevant, are made aware of, to the investors.
  • A statement, either of Board of Directors or on behalf of individual board members stating that all information stated in the Prospectus is accurate and complete.
  • Certification from legal advisors of Issuers and Obligors on the legitimacy and compliance of the Prospectus and other relevant documents with the legal requirements of the Authority.
  • A note explicitly stating "We recommend that you seek the advice of an appropriately qualified Licensed Person regarding the contents of this Prospectus before deciding to take part in the subscription."
  • Transaction carried out or to be carried out by related parties to be stated in brief.
  • Details of the offered securities as stated:
  • Number and class of the Securities offered
  • Statement of the rights arising from Securities, depending on the type of Security (Shares, Preferred shares, Bonds, Sukuk, etc. as mentioned in Article 5-9)
  • Brief description of any restrictions on Trading of the Securities being offered and any future measures concerning thereof
  • Purpose of such Securities being issued.
  • XVII.A few information concerning the Issuer shall be mentioned in the Prospectus such as:

  • Number and Detail of ant Securities previously issued by the Issuer
  • Audited and approved financial statements of the three years immediately preceding the application of Prospectus. If the last audition was conducted nine months prior to the application, then an updated financial statement by an Auditor is to be provided.
  • XVIII.Any information on claims, judicial actions, or arbitration procedures to be taken against the Issuer or any of its Subsidiary Companies in relation to the financial position, regardless of the status as to whether it is considered, suspended, or alleged.

    The aforementioned set of details and documents needs to be submitted to the Authority before the Company is able to issue Prospectus to the Public.

    These documents are not just applicable for the purpose of CFDs, but also other types of Securities, such as shares. Unlike with CFDs, certain securities such as shares have various rights affiliated with them to be enjoyed depending on the type, which is stated in Article 5-9 of the Module:

    In the case of Ordinary Shares, the rights arising shall be:

  • Voting rights.
  • Profitability (short-term) of shares.
  • In case of liquidation, Rights.
  • In the event that the Subscription is not covered, pertaining Rights granted.
  • Whereas in the issuance of Preferred Shares:

  • Profit distribution, with provisions determining the distribution of Dividends.
  • Restriction on payment of Dividends for Shares.
  • Voting rights.
  • Profits and liquidation proceed rights.
  • Terms and Conditions for the conversion of Preferred Shares into ordinary shares, and redeeming the convertible shares.
  • Ability to exercise rights before and after the conversion of shares.
  • Whereas in the issuance of Sukuk, offering bonds, and any other debt instruments:

  • Payable Returns.
  • Date of Payment.
  • Redemption Payment.
  • Provisions of formation and operation of Bondholders and Sukuk holders Association.
  • Events that would lead to an acceleration of this particular set of securities.
  • Terms and Conditions for conversion to ordinary shares.
  • Rights in case the Issuer or Obligor's financial status results in bankruptcy, liquidation, or being wound up.
  • The process for a license application of any Securities Activity is lengthy and would take three months or upwards to be granted. The documents required to be submitted for the application is specified in Articles 1-5 of CMAs executive bylaws. These documents are stated as mentioned below:

  • Name and address and the commercial register number of the license;
  • Regulatory business plan containing certain details;
  • Statement of the Securities Activity for which the application is in regards to;
  • Information about the issued and paid-up capital of the Company to which the application is in regards to;
  • A statement of the shareholders whose ownership has reached above a specified percentage of the Company to which the license application relates;
  • A copy of the Company Contract to which the license application relates and any amendments to the same;
  • Nomination for applicants for Registered Positions and Employment Positions in accordance with the Fit and Proper Rules in Appendix 5 of this Module;
  • Sufficient information of any Effective Control over the Company to which the license application relates;
  • Any agreements or undertakings with external entities;
  • The audited financial statements for the last three years prior to the date of application, along with forecasts of its expected financial position for three years after business commencement;
  • Approval of the Central Bank should the applicant be one of the Units Subject to the Supervision of the Central Bank;
  • A legal opinion from an external legal advisor of the Company on any lawsuits of material influence on the legal position of the Company;
  • Declarations signed by the founders of the Company to the effect that no verdict of bankruptcy, penalty on a crime of breach of honor or trust, or being convicted of a crime/ felony involving a breach of honor or trust or freedom restricting penalty in any of the crimes stipulated in the Law of the Authority or any other law over the five year period preceding the license application unless he or they have been discharged;
  • A declaration by the license applicant stating that the information contained in the application and enclosed documents are accurate and complete in addition to any other declarations required by the Authority;
  • Proof of payment of fees for the processing of the application;
  • Any request by the applicant for the dis-application of legal or regulatory requirements and the justification for such a request;
  • Any other information or documents that may be specified by the Authority.
  • The license applicant could be asked to submit further documents covered under Article 1-7 including but not limited to, the sufficiency of resources for practice, admin experience, technical resources, etc. If the applicant does not meet the allotted deadline to submit the extra documents and cannot provide a legitimate reason in not doing so, then the application would deem to be withdrawn.

    Reverse Solicitation

    Reverse solicitation is also commonly known as Passive Marketing. This is the act where an investor who has not had any previous contact with an investment manager, contacts an agent to make a potential investment in the fund. Article 63 of the CMA law prohibits the act of offering and selling of foreign securities in Kuwait unless it is done through a 'licensed person', invalidating the practice of Reverse Solicitation. The categories of such licensed entities permitted activities are mentioned above under Licensing.

    The practice of reverse solicitation used to be very common in the Kuwaiti market earlier. A foreign company now may conduct its marketing provided it is through an agent or registered as per the aforementioned criteria. But a foreign entity is prohibited from conducting any activities with the Kuwait Markets unless it is through licensed persons. Article 93 under Chapter 9 explicitly states that foreign securities may not be issued for Public or Private Placement unless licensed by the Authority.

    It is required of the licensed person to be the one initiating contact with the investor. Provided that this is the circumstance, the Company does not need to obtain a license or submit PPMs. These regulations are not applicable to any entity that has their operations, branches, employees, or other forms of logistics located in Kuwait, as they are eligible for marketing their securities without having an investor establish contact first, provided they have obtained their license as per stated regulations.

     

     

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    Tue, 22 Sep 2020 10:04:00 GMT
    <![CDATA[Corporate Governance Law for JSC]]> Corporate Governance Law for JSC

    Corporate governance can be stated as a set of regulations, mechanisms, its process, and relations by which corporations are controlled and operated. It is a system of governance where the interests of various stakeholders involved with the Company is taken care of. It covers every spectrum of management and helps provide the setting up of a framework of a company's objectives.

    The Securities and Commodities Authority (SCA) is a body established by UAE as per Federal Decree Number 4 in 2000. The purpose of the Authority is to monitor and supervise Joint Stock Companies and financial services. Hence, any company with its securities listed in the UAE Financial Market would come under the ambit of SCA's regulations. The SCA supervises and regulates the following financial service activities:

  • Exchange Markets;
  • Joint-stock companies;
  • Brokerage companies (as Trading Member or as Trading and Clearing Members);
  • Financial Analysis and Consultancy Firms;
  • Investment Management Firms;
  • Investment Funds;
  • Investment Fund Administration;
  • Promotion and Introduction Activity (for financial products, financial services and funds either foreign or domestic).
  • This piece shall be articulated as to how Public Joint Stock Companies (PJSC) can conduct their corporate governance matters in regulation with the SCA.

    The corporate governance of companies that are established in Dubai has to be compliant with DIFC Law Number 5 of 2018, also known as Companies Law. Since the establishment of Abu Dhabi Global Market (ADGM), Abu Dhabi based companies are required to be in accordance with Companies Regulation and Commercial Licensing Regulation of the ADGM.

    The SCA and Securities Market has prepared and made available the form required to be submitted as a Corporate Governance Report for JSCs on their website. It is mandatory that the form is filled and submitted as per Report submission. Article 52(2) of the Resolution Number 7-RM states the contents of the report required as:

  • A statement of the details and reasons for any compensations and allowances paid to any member of the Board of Directors and its sub-committees for the financial year;
  • A statement of the Company's directors and the first and second lines according to the Company's organizational structure, their positions, appointment dates, details of the salaries and bonuses each member was paid, and any compensations they received from the Company and the grounds for such compensations;
  • Compensations granted to the Board members and all the members of the Company's staff including bonuses and any motivational programs relative to the securities issued or guaranteed by the Company.
  • A new amendment passed this year has further detailed on the requirements in regards to the annual report on corporate governance. The new Resolution Number 3-RM 2020 dictates the details under Article 77 as:

  • The names of Board members, chairman, vice-chairman and other persons occupying main jobs in the Company, a brief biography of each member including its qualifications and experience, and the identification of the independent member(s) as well as other positions in the Board or senior management they hold in other companies or institutions.
  • Committees and Board members, the authorities and assignments entrusted thereto and activities carried out during the year.
  • The number of meetings held by Board and Board Committees as well as names of the attendees.
  • The names of the major shareholders who directly or indirectly own more than five percent of the company shares in addition to a brief summary of the changes in the company capital structure.
  • Report on the risk management framework and internal controls, including the following:
  • The applicable corporate governance rules.
  • The self-evaluation approach of the Board performance.
  • Internal audit procedures and the scope of their full application by the Board.
  • Details and reasons for any compensation and allowances received by each Board member and Board committees for the financial year.
  • A statement of the company directors and the first and second grades as stated in the organizational structure of the Company and their functions, dates of appointment, details of salaries, bonuses received by each of them separately and any other compensation received from the Company, clarifying the consideration for these compensations.
  • Compensation of the Board members and all members of the Company administrative body, including remuneration and any incentive programs related to securities issued or guaranteed by the Company.
  • Authorities Board Decision Number (33/R) of 2009 states that a license provided by the SCA shall be valid for a period of one year. Although, in the spirit of uniformity, the first license granted shall only be valid until December of the same year. The renewal of the application is an annual process, subject to the virtue of the application.

    The 2016 Corporate Governance Rules apply to all listed local public shareholding companies. The Board of Directors shall be held responsible if the Company is found violating the rules. In compliance with Corporate Governance rules of nomination for board membership, Article 40 of Decree Number 7 R.M. states that the Articles of Association shall be the basis of determination for the formation of the Board of directors. What is interesting to note is that the Law mandates for at least 20 percent of the nominated directors to be female. This can be seen as a more diverse outlook being adopted through the amended act.

    In late February of this year, a new Resolution Number 3/RM of 2020 was passed by SCA that adopted the C.G. Resolution. It contains a set of new rules and regulations for JSC's corporate governance and repealed various previous rules that were applicable with the aforementioned Decree Number 7 R/M of 2016. The intention behind these overhauls of various regulations is to ensure further transparency to the stakeholders in regards to the functioning of a company. Companies in the UAE have been given till the end of 2020 to implement the new regulations, and in case of further delay, shall be provided with an extension on a case by case basis.

    Article 14 that deals with Board Obligations has been amended to widen the duties of the body of the Board of Directors, as per the C.G. Resolution. Now it covers code of conduct for employees, auditor of the Company, and board members. In a move to ensure transparency, the article further enumerates on regulations to prevent insider trading and the likes. The amendment has illustrated further on the individual duties of the Directors as well, holding them to a higher standard by urging to act in good faith and due care in their duties as a board member. While asking Directors to be mindful of Conflict of Interests, the act also specifies for the rest of the board members to resort to a competent court to invalidate the order of the member in case a member is found breaching any guidelines; and return any benefits gained due to the transaction.

    The chairperson has been given extra duties in terms of obtaining approval to trade shares for board members. They are now required to make sure the Directors do not violate trading rules by indulging in sales or purchase of shares in an unethical manner. It is also mandatory to appoint a vice-chairperson as per the amendment, and the chairperson is responsible for ensuring the Board of Directors do so.

    Further updates in regards to the amended resolution regarding corporate governance include:

  • The obligation to appoint a secretary on the Board of directors. Requirements for filling this position and the functions of the secretary (Article 8).
  • The obligation that the majority of board members should be independent, non-executive (Article 9(5)).
  • Bringing more clarity to the mechanism through which the interests of new board members are disclosed through the submission of a Declaration of Interest form upon assuming position (Article 11).
  • The introduction of proper and fit criteria for board members (Article 18).
  • Bringing more clarity to the process through which conflict of interest is handled (Articles 32-38).
  • The development of a new approach to management through the (optional) adoption of the dual governance structure. Under this approach, two board committees are formed: an executive committee charged with the direct oversight of the executive management of the Company and a supervisory committee that supervises the work of the Board, the executive committee, and the Company's management (Articles 53-56).
  • Bringing more clarity and detail to the risk management procedures through the (optional) formation of a permanent committee that is in charge of handling risks pursuant to Article 62 and Articles 65-72.
  • Bringing more clarity to governance-related disclosures (Articles 74-77).
  • While in the past it has been noticed that various PJSCs have been taking advantage of a lack of a detailed set of regulations on its conduct with regards to governance and obligations to the stakeholders, this amendment is to ensure that such practices are eradicated in the market. These amended regulations hold current JSCs to a higher level of accountability to the authorities and stakeholders, while simultaneously encouraging more transparency in the workings conducted by the companies, hence reducing the risk of an investor.

     

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    Sat, 05 Sep 2020 10:37:00 GMT
    <![CDATA[Mismanagement by a Manager in a LLC]]> Mismanagement by a Manager in a Limited Liability Company

    A limited liability company (LLC) is a form of a company that is subject to the regulations of laws and the governing law for the management of a company in the United Arab Emirates (UAE) is Federal Law Number 2/2015 on Commercial Companies Law (CCL). The UAE CCL is the foremost legislation that regulates the liabilities of a manager. A Limited Liability Company (LLC) is formed with a minimum number of two people and a maximum number of 50 people with any partner liable to the extent of his share in the capital. Any single natural or corporate person may incorporate and hold an LLC. All holders shall be liable to the extent of their share capital in the company as set out by the Memorandum of Association (MOA) of the company. Having said that, it is imperative to note that on account of a gross error, mischief, misconduct or any deceitful act conducted by the manager, the manager shall be held personally liable to the company/shareholders/third parties. The provisions of the LLC laid out in the CCL are bound to be applied to the manager to the extent that it is not in conflict with the nature of the company. A person authorized to manage the company shall practice due diligence and preserve its rights to act with prudence (Article 22 of CCL). The manager is to at all times perform acts consistent with the objectives of the company and the powers granted by virtue of such authorization are to be exercised in the same respect.

    There are certain general and specific duties of the manager which he has to abide by in order to avoid implications of mismanagement in a company. These general duties include adhering to the terms laid out in the constitutional documents of the company. Article 83 of the CCL lays down that the management of a limited liability company shall be assumed by one or more managers as laid out by the partners of the company in the Memorandum of Association (MOA). The MOA or the Articles of Association (AOA) are the constitutional documents of a company laying out the corporate governance of the company alongside the administrative structure and management of the corporation. The managers are to be appointed via partners or third parties, and in case the MOA of the company does not prescribe for the election of the managers, then the same shall be carried out by a general assembly meeting of the partners where such managers would be selected. The MOA or AOA shall be responsible for not only the appointment of the manager but also for prescribing the powers to such managers. In case the MOA or AOA does not prescribe such powers of managers, then the managers shall be fully entitled and authorized to exercise full powers to manage the company as he deems fit and such acts shall be binding to the company provided that the capacity of the manager has been clarified upon the commencement of such acts.

    Personal Liability of the Manager

    Consistent with the provisions of Article 84, the CCL lays down the liability of the managers of the company which holds the manager accountable for his actions taken in the course of the company's activities. A manager in an LLC shall be personally liable against the company, the partners and the third parties for all such fraudulent or deceitful acts committed by the manager. Any losses or expenses that are incurred due to the inadequate use of the power or any contravention of provisions of the said Law by the manager shall be borne by the manager. Absolutely no provision in the MOA can exempt any manager of his personal liability towards the company in the event of a breach or any fraudulent act committed by him in the course of the company's activities. The manager has to also fill in the role of abiding by the MOA or AOA of the company and any failure on his part to do so shall result in liability on account of the manager. Any gross error resulting in losses or expenses shall also be borne by the manager. The provisions set out for the manager in the MOA have to be followed through, and any dishonesty arising in fulfilling such obligations shall be seen as a liability of the manager. Article 84 continues to state explicitly that the provisions in application to the directors in a joint-stock company (JSC) shall apply to the managers in a limited liability company. Hence, any liability of a director in a JSC shall be equally applicable to a manager in an LLC.

    The manager shall not without the proper consent of the company's general assembly undertake the management of a competing company or a company with similar objectives to own company on his own account or on account of third parties. The manager shall not be authorized to operate in any deals of trade in competition or trade of similar activity being carried out as that of the company whereupon such actions shall result in the manager being dismissed and shall require the manager to compensate for the same (Article 86 of the CCL).

    Subject to Penalties

    The manager/managers shall be solely responsible for committing any acts in contravention of the provisions of the CCL and on account of committing any unfavorable acts that lead to fraud, deceit or fraudulence. Such a manger shall be subject to penalties on account of committing acts against the company and any other liabilities that arise against the objectives of the company. Since the provisions that apply to the directors in a joint-stock company shall apply to the managers in a limited liability company (Article 84 of CCL), therefore, the liability of a director in a JSC is equally applicable to a manager in an LLC. Having said that, the following penalties can be imposed on a manager in an LLC:

  • A fine of AED 10,000 to AED 100,000 may be imposed on the manager if he fails to provide any documents or information to the auditors of the company/inspectors of the authority which disables them to perform their duties or if he provides any misleading information and conceals any information in the same regard (Article 347 of CCL).
  • A penalty of AED 50,000 to AED 500,000 shall be imposed on any manager who distributes to the shareholders or others any profits or interests in contravention of the provisions in CCL or the MOA/AOA of the company (Article 363 of CCL).
  • A manager shall be subject to a penalty of fine amounting to AED 100,000 to AED 500,000 and/or imprisonment from 6 months up to 3 years if he deliberately renders false documents in the balance sheet, the profits and losses account, in a financial report or omits material incidents in such documents with the intention of concealing the true financial position of the company (Article 364 of CCL).
  • A fine of AED 50,000 to AED 500,000 and/or imprisonment of up to six months shall be imposed on the manager of the company if he utilizes or discloses a secret of the company or purposefully causes or attempts to cause damage to the activity of the company (Article 369 of the CCL).
  • A penalty of minimum AED 1,000,000 (one million) to a maximum of AED 10,000,000 (ten million) and/or imprisonment of up to six months will be imposed on a manager in an LLC if he directly/indirectly participates with any entity that indulges in transactions for the purpose of influencing the prices of securities issued by the company (Article 370 of CCL).
  • A fine of AED 50,000 to AED 1,000,000 shall be imposed in the manager of an LLC if the losses if the company reach half of its capital and the manager or board fails to invite the general assembly of the company to convene (Article 344 of the CCL).
  • A penalty of a minimum amount of AED 10,000 to a maximum of AED 100,000 is imposed on any person who violates the provisions of the UAE Commercial Companies' Law for which a penalty has not been specifically stated or whoever violates the regulations, rules or decision that are issued in the execution thereof (Article 360 of the CCL). Therefore, for any act committed by the manager for which a penalty has not been prescribed, then a penalty can be imposed for such fraudulent act under this provision.

     

    ]]>
    Thu, 03 Sep 2020 09:03:00 GMT
    <![CDATA[ADGM Registered Businesses Real Estate]]> How ADGM Registered Businesses can Own Real Estate in Dubai

    Abu Dhabi Global Market (ADGM), an established free-zone and international financial centre in Abu Dhabi was legally established pursuant to Federal Decree Number 15 of 2013 and Abu Dhabi Law Number 4 of 2013 (the ADGM Founding Law). ADGM attracts several international business and investors to the free-zone, primarily due to the adoption of the English Common Law as the cornerstone of its legal and regulatory framework.

    The ownership of the real estate in Dubai is governed by Law Number 7 of 2006 concerning Real Estate Registration in Dubai and is restricted to the UAE and GCC nationals and the companies wholly owned by them as well as public joint-stock companies. The foreign nationals and companies wholly or partly owned by them have the right to own real estate in Dubai but only in certain designated areas, the residential and commercial areas, including Downtown Dubai and Burj Khalifa, The Palm, Emirates Hills, The Meadows, The Lakes, The Springs, Dubai Marina and Jumeirah Lakes Towers.

    How can an ADGM Entity Own Properties in Dubai?

    The Dubai Land Department (DLD) initially permitted all types of onshore and offshore companies to own real estate in Dubai. In 2012, it introduced a change in its policy, permitting only Jebel Ali Free Zone Authority (JAFZA) Offshore Companies as corporate holders of Dubai property. The JAFZA offshore company could, in turn, be owned either by an individual or a foreign offshore company, such as a British Virgin Islands (BVI) company. In 2018, the DLD entered into a Memorandum of Understanding (MoU) with the ADGM, thus allowing investors to tailor structures for real estate ownership, under a more familiar Common Law framework. ADGM incorporated entities are now permitted to own land and property in the areas of Dubai designated for foreign ownership pursuant to the MoU between the ADGM and the DLD and structure their businesses in ADGM accordingly.

    For registering property in Dubai under an ADGM entity, the following rules and procedures shall apply:

  • The DLD will register properties in the name of an ADGM entity as per its own rules, regulations and conditions and subject to the Law Number 7 of 2006 of Dubai;
  • The DLD shall rely on a Certificate of Incumbency issued by the Registration Authority of ADGM for ensuring the registration and licensing by the Registration Authority of ADGM as of the date of the Certificate of Incumbency;
  • The shareholders in the ADGM entity are either natural persons or companies whose shareholders can be verified by the DLD. However, the ultimate shareholders can be identified by relying on additional information requested by the DLD to the Registration Authority of ADGM;
  • For ADGM entities which are owned by a combination of natural and corporate persons, the DLD approval may be subject to compliance with specific conditions and submission of certain documents including a No Objection Certificate issued by the DLD approving the ownership of properties in Dubai;
  • An 'Acknowledgement and Undertaking Letter' in the form issued by DLD concerning the disclosure of future shareholding transactions must be signed and submitted by all the shareholders or directors of the ADGM entity to the DLD;
  • Fees concerning the registration, transfer and cancellation must be paid in full directly to the DLD. Change in ownership for an individual owner involves a 4 percent transfer fee payable to the DLD. A change in shareholding of a company where the property is held by an ADGM company will require a No-Objection Certificate (NOC) from the DLD subsequent to the payment of the 4 percent transfer fee, but prior to the proposed shareholding change. However, for a transfer from an individual name to an entity set up by the same individual, the DLD may consider the transaction as a 'gift transfer', subject to a 0.125 percent transfer fee.
  • The ADGM branches of foreign companies and listed public companies are outside the scope of the MoU, and the ADGM trusts and foundations are not permitted currently to own properties in Dubai, whether directly or indirectly.

    The easiest method of property ownership is through ADGM SPVs. The Special Purpose vehicles (SPVs) may serve as a special purpose for professional investors, or investment institutions for securitizing assets or investing in real property.

    Registering property in Dubai in the name of an ADGM SPV tends to offer several benefits, for instance:

  • Having a single ADGM SPV as the corporate owner of multiple properties can help in consolidating real estate holdings for easier management and transfer.
  • An ADGM SPV separates the real estate assets from personal liabilities.
  • Having a corporate structure allows for the securitization of real estate assets.
  • An ADGM SPV being a locally-registered entity is at reduced costs, as opposed to a foreign offshore structure such as BVI for the documents of foreign offshore structures undergo expensive attestations to be used for transactions within the UAE.
  • The ADGM, being a Common Law jurisdiction, has the inheritance procedures greatly simplified as the shares held by the ADGM SPV are transmitted as per the Common Law, and hence Personal Status Law does not apply on the event of the death of a shareholder. However, in the case of Muslim shareholders, Sharia may still be applied.
  • Conclusion

    The UAE continues to develop an unparalleled real estate sector to bring forth new initiatives to bolster the ease for investors. The cooperation between ADGM and the DLD aims to streamline regulations to further enhance accessibility into the real estate market. The MoU serves to augment the sustainable growth of the real estate sector. The DLD, previously limited to free zones in Dubai, has gained access to the financial free zone in Abu Dhabi through the MoU, thus providing facilitated and transparent services for all investors and consolidating the vision to position Dubai as the world's premier real estate destination.

     

     

    ]]>
    Wed, 02 Sep 2020 09:56:00 GMT
    <![CDATA[E-Commerce in the UAE]]> E-Commerce in the UAE

    "We buy things we don't need, with money we don't have, to impress people we don't like."

    -Dave Ramsey

    One of the most repeated lines from one of the most popular movies of the 20th century, one can see how the statement rings true in relation to a possession obsessed society. But while there might have been some truth to the statement, there is more to it than that, and that truth has evolved over the years. Our society thrives on possessions but also easiness in getting those possessions, and in this day and age, the convenience of the consumer is prime. The concept of caveat venditor being of primal importance in modern-day world trade combined with convenience and speed, the world has truly become a consumer's oyster. The drive for convenience has pushed the world to intertwine commerce with technology, and the concept of E-commerce is one we find harder to live without with every passing day, only to be fueled by the current state of the pandemic and heat. So, with the population moving towards digital platforms for their every need, what are the regulations of this market?

    UAE, and in particular, Dubai, has one of the highest percentages of internet users in the world, clocking in at around 90 percent of the population actively engaged with the internet. The internet population of the UAE is the 4th highest in the Middle East region. Online retail sales have seen unprecedented growth in the last decade, with an estimated net value jump from 490 Million US Dollars to 1.6 Billion US Dollars in just a span of 5 years. The UAE also passed the Electronic Transaction and E-Commerce Law in January 2006. Although it is an act that covers matters of Electronic Records, documents, and signatures related to Electronic Transaction, it does not entirely cover the rest of related regulations and offences committed in the cyber world.

    The offences committed on the internet are covered within various laws that are practiced in the UAE, as there is no specific act in place for the purpose. The cyberspace is monitored through a mixture of:

  • UAE Regulatory Regime
  • Publication and Publishing Law
  • Cyber Crime Laws
  • National Media Council Resolution Number 20
  • TECOM Code of Guidance (For Dubai based tech companies)
  • Media Zone Authority Content Code (For Abu Dhabi based tech companies)
  • As per Article 2 of the Act, any matter not mentioned under the E-Commerce Law of 2006 shall be covered as per International commercial laws affecting Electronic Transactions and Commerce.

    Registration

    To conduct activities of commerce in the country, a company is required to register through the Department of Economic Development of the concerned emirate or through the free zone, depending on the business module to be set up. Certain business types, like that of Uber and Careem, are operational only with permission certificates provided to them from the Tourism Department, even though their business module is heavily reliant on the internet.  

    Contracting

    Businesses that are conducted on a B2C model will have to have specific contracts with their suppliers and partners, which shall be compliant with Civil and Commercial Codes. As is the requirement with every contract, there should be two consenting parties, a legal obligation, offer, acceptance, and consideration as can be seen with Article 130 of the Civil Code. The provisions of the contract acceptance and basis have been stated in Article 14, Chapter 4 of Electronic Transactions and Commerce Law. The regulations stated are as per:

    2- Where the Originator has not agreed with the Addressee that the acknowledgment is given in a particular form or by a particular method, an acknowledgment may be given by:

    a) any communication by the Addressee, electronic, automated or otherwise; or

    b) any conduct of the Addressee, sufficient to indicate to the Originator that the Data Message has been received

    3- Where the Originator has stated that the Data Message is conditional on receipt of the acknowledgment, the Data Message is treated as though it had never been sent until the acknowledgment is received

    4- Where the Originator has asked for an acknowledgment but has not stated that the Data Message is conditional on receipt of the acknowledgment within the time specified or agreed, or if no time has been specified or agreed within a reasonable time, the Originator:

    a) may give notice to the Addressee stating that no acknowledgment has been received and specifying a reasonable time by which the acknowledgment must be received; and

    b) if the acknowledgement is not received within the time specified in para (a) of this subsection, may treat the Data Message as though it has never been sent, or exercise any other rights it may have

    5- Where the Originator receives the Addressee's acknowledgment of receipt, it is presumed, unless evidence to the contrary is adduced, that the related Data Message was received by the Addressee, but that presumption does not imply that the content of the Data Message sent by the Originator corresponds to the content of the message received from the Addressee

    6- Where the acknowledgment received by the Originator states that the related Data Message met technical requirements, either agreed upon or set forth in applicable standards, it is presumed, unless evidence to the contrary is adduced, that those requirements have been met

    If the digital contract falls under above mentioned categories, then it is deemed to have been validated through acceptance and hence the parties shall be held compliant as per.

    Electronic Signatures

    In an attempt to regulate and malign contractual breaches occurring in the digital space, Federal Law Number 36 of 2006 was introduced legitimizing the value of electronic signatures as much as that of any other signatures recognized as per the Law of Evidence. The conditions prescribed for the validity of E-signatures can be seen in Article 17 of the Act, which states:

    1- A signature shall be treated as a Secure Electronic Signature if, through the application of a prescribed Secure Authentication Procedure or a commercially reasonable Secure Authentication Procedure agreed to by the parties involved, it can be verified that an Electronic Signature was, at the time it was made:

    a) unique to the person using it;

    b) capable of identifying such person;

    c) was, at the time of signing, under the sole control of the Signatory in terms of the creation data and the means used; and 

    d) linked to the Electronic Record to which it relates in a manner which provides reliable assurance as to the integrity of the signature such that if the record was changed the Electronic Signature would be invalidated.

    Confidentiality

    It is required of the parties to maintain the secrets told to them by the other party, in terms of trade, agreement, or any such type of information in relation to the trade. Although the Act does not provide for a penalty of any kind to those who violate the confidentiality clause, a party can be found guilty of the offence and punishable under Article 379 of the UAE Penal Code.

    Confidentiality does not just extend to two contracting parties, but also to the end-users. If you own or run an app that collects sensitive user data, it is mandatory as per UAE Internet Guidelines that you protect the data from breach of any kind and in case such a breach is found, you shall be held liable and shall be asked to compensate and provide for the remuneration of the offence.

    In the spirit of transparency, it is important of e-commerce businesses to state their privacy policy in a clear and legible manner to the layman, so that customer's scope to dispute is reduced. It has been noted that this scope to dispute is wide due to apps either tucking their T&C away or making it so complicated and lengthy that the customer would not be interested in reading it.

    While there is still legislation to be brought on these terms, providing for Terms and Conditions upfront with a clickwrap method ensures that the user is aware of the terms he agrees to, as it is legible for a layman.

    Conclusion

    While the types of penalties that have been dictated in this Act is limited to digital documents (Articles 26-33), it is also important to note that Article 29 provides for punishment for any act committed through electronic means that may violate or constitutes an offence as per the laws in force in the country. Foreign nationals who are found violating the mentioned laws are also liable to be deported, if the courts may deem fit to do so, as per Article 32. So, while it is convenient to have deals and other transactions conducted online, and while it is not a space that is as rigidly regulated as the offline commercial world, it is worth noting that there is enough recognition by the country towards this side of the business and it is hence important to be cautious while conducting oneself on the World Wide Web. Overall, there is still an urgent requirement of stricter regulation of cyberspace as a consolidated law, as it is an impending need every passing day.

    ]]>
    Wed, 02 Sep 2020 08:53:00 GMT
    <![CDATA[Cybercrimes and Punishment in the UAE]]> Cybercrimes and their Punishment in the UAE

    Any illicit use of the internet, computer network, electronic website or any other information technology means is prohibited and shall constitute as a cybercrime. The use of the internet for the invasion of privacy, for provoking another to commit a crime or for destroying any information of any of the regulatory authorities is strictly forbidden. Cybercrimes in the United Arab Emirates (UAE) are regulated under Federal Decree Law Number 5/2012 on combating cybercrimes. Cybercrimes can include anything ranging from identity theft, invasion of privacy, internet fraud, wire fraud, forgery or any other illegal use of any computer network. Any use of any information technology means without the proper authorization and legal rights shall result in the imposition of imprisonment and/or a penalty of a fine. Slandering of public officials, forging electronic documents, reproducing credit card date, insulting religions and Islamic Sharia Law, obtaining other's passwords for bank accounts or forging any medical data shall be constituted as cybercrimes and these different acts carry different penalties with it. The following list highlights the different type of cybercrimes and the punishments for it:

  • Narcotics and money laundering: Any person who deliberately and intentionally commits through a computer network/an electronic information system/any information technology means the following acts shall be liable for committing cybercrime and these acts include:
  • Any illegal transfer, transport or deposit of funds with the intent to conceal or disguise the source of funds;
  • The concealment of the nature of the illicit funds or its origin, movement, related rights or ownership; and
  • Illegal possession, attainment or use of funds with the awareness of its illegal origin.
  • Any person responsible for intentionally committing the above acts shall be punished by imprisonment up to seven years and by a fine ranging from minimum AED 500,000 and maximum of AED 2 Million.

  • Access to an Electronic information system: Any person who gains access to any electronic information system, any website, a computer network or information technology means without the authorization, in excess of authorization or continues to remain in access without authorization shall be punished by imprisonment and a penalty of a fine ranging from a minimum AED 100,000 and a maximum of AED 300,000. Through such illegal access if a person participates in any deletion, omission, destruction, disclosure, deterioration, alteration, copying, publication and re-publishing of any data/information, then he shall be punished with imprisonment for a period of at least six months and/or a fine not less than AED 150,000 and not more than AED 750,000. Other illegal access would include:
  • If the data or information objects of the acts are personal and are indulged in deletion, omission, copying etcetera, then the person shall be punished with imprisonment of at least one year and/or a fine of minimum AED 250,000 and maximum AED 1 million.
  • If such an act is committed during the course of the work of the person, then such person shall be punished with minimum AED 250,000 and maximum AED 1 million.
  • Any person who has access to any website, electronic information system or others as mentioned above without authorization where such access is intended to retrieve government data or any confidential information in regards to any financial, commercial or economical facility shall be subjected to temporary imprisonment and a fine of minimum AED 250,000 and maximum AED 1,500,000.
  • If such access leads to the deletion, omission, copying, deteriorating, destruction, alteration, publishing or re-publishing of such government data shall be punished for a period of at least five years and a fine of minimum AED 500,000 and maximum AED 2 million.
  • If such work is related to the medical field whereby the data and information are related to medical examination, medical diagnostics, medical treatment care or medical records, then any possession, modification, destruction or unauthorized access of such data shall result to a punishment of temporary imprisonment.
  • Electronic communication: Any person that runs software on the computer network or an electronic information system or the information technology means and causes them to willfully or without authorization stop functioning or causing them to be impaired or results in crashing, deleting, omitting, destroying or altering the program, system, website or data shall be punished by imprisonment for a period of minimum five years and/or a fine not less than AED 500,000 and AED not more than 3 million.
  • Defamation: Any person that insults (without prejudice to the crime of slander) another or accuses another of a matter that may make him subject to punishment/contempt by others through a computer network or via any information technology means, then such a person causing the contempt and accusation shall be punished with imprisonment and/or a fine not less than AED 250,000 and maximum AED 500,000. Slander against public officials would be considered as an aggravating factor of the crime.
  • Forgery: Any person that commits forgery of any electronic document of the federal/local government or authorities or federal or local public establishments shall be punished by temporary imprisonment and a fine of minimum AED 150,000 and maximum AED 750,000. If the forged documents belong to any other authority other than the authorities mentioned above, then such person shall be punished with imprisonment and/or a fine not less than AED 100,000 and AED 300,000.
  • Banks: If any person gains access without authorization or a legal right to credit or electronic card numbers or data to bank accounts, bank account numbers or any other data in relation to any electronic payment method via computer network or an electronic information system or any other information technology means shall be punished with imprisonment and/or a fine. The punishment shall include imprisonment for minimum six months and/or a fine of AED 100,000 to AED 300,000 if the data is intended to be used to take over the finds that belong to others or for personal benefit. If the person has succeeded to take over the funds for himself or others, he shall be punished by imprisonment for one year and/or a fine of AED 200,000 to AED 1 million.
  • Extortion: If any person extorts another, threatens another or forces another person to engage or disengage from a certain act through information technology means/computer network shall be punished by imprisonment for two years and/or a fine shall be imposed from AED 250,000 to AED500,000. If the subject of such threat lies with committing a felony or with the purpose of engaging in matters against honor or morals, then such an act shall be subject to imprisonment up to ten years.
  • State Security: Any person who publishes any information, news, statements or rumors on any computer network, website or any other information technology means aiming or calling to overthrow, with the intention to change the ruling system of the State, or seize it or does so with the intention to disrupt the provisions of the constitution or the laws applicable in the country or does so to oppose the basic principles which constitute the foundation of the ruling system of the State, shall be punished with temporary imprisonment and a fine of maximum AED 1 million. Any person disobeying the laws and regulations in force in the State by publishing any information regarding the computer network or any information technology means shall be punished with imprisonment and/or a fine of AED 200,000 to AED 1 million.
  • Trafficking in antiquities: Any person that intends to indulge in the trafficking of antiquities or archaeological artifacts on instances other than permitted by law by means of establishing, managing or running a website information technology means to do so shall be punished with imprisonment and/or fine from AED 500,000 to AED 1 million.
  • Religion and Islamic Sharia law: Imprisonment and/or a fine shall be imposed ranging from AED 250,000 to AED 1 million on any person who commits through a computer network any of the following acts:
  • Insults the Islamic rituals/sanctities
  • Insult to the recognized celestial religions
  • Insults any of the sanctities or rituals of other religions where such rituals are inviolable under Islamic sharia law
  • Condoning, provoking or promoting sin
  • Imprisonment of up to seven years shall be imposed on any person that commits a crime of insulting the Divinity or any of the messengers or prophets. Any insult against the religion of Islam or anything that leads to the insult of the basic principles of the religion shall also be punishable. Whosoever opposes or injures the teachings and rituals of Islamic religion or prejudices the religion of Islam shall be punished with seven years' imprisonment.

     

    ]]>
    Tue, 01 Sep 2020 13:08:00 GMT
    <![CDATA[DIFC Data Protection Law, 2020]]> DIFC Data Protection Law, 2020

    Dubai International Financial Center (DIFC), issued DIFC Law Number 5 of 2020, a new Data Protection Law ("DPL"), replacing the existing Data Protection regime, first enacted in 2007. DPL aims to strengthen its standards by providing enhanced controls for the Processing and free movement of personal data by controllers or processors as well as protecting the fundamental rights of data subjects. With the new legislation, DIFC's data protection is in sync and aligned with globally adopted measures, similar to the one adopted in European Union (General Data Protection Regulation), and in the United States of America (California Consumer Privacy Act). DIFC has always been up to date with International market and laws, and now with the issuance of the DPL, will further earn itself an international recognition by establishing enhanced governance and transparency requirements.

    The DPL is in effect from 1 July 2020, with affected businesses granted until 1 October 2020 to undertake the necessary compliance measures.

    Scope of Application

    DPL applies in the jurisdiction of the DIFC. The DPL applies to the Processing of personal data by a Controller or Processor incorporated in the DIFC, irrespective of whether the Processing takes place in the DIFC or not. DPL applies to the Controller or Processor that processes personal data in the DIFC as part of stable arrangements, other than on occasional basis, regardless of the place of incorporation. DPL applies to the Controller or Processor in the context of their processing activity in the DIFC (not in a third country), inclusive of transfers of personal data out of the DIFC.

    However, DPL does not apply to a natural person processing the personal data in the course of a purely personal or household activity and having no connection to any commercial purpose.

    Personal Data in the DPL

    Any information that refers to an identified or identifiable natural person is Personal Data.

    Identified or Identifiable could be a direct or indirect reference to an identifier such as name, identification number, location data (depending on the context), an online identifier (like IP addresses or cookie identifiers) or to one or more factors specific to the individual's physical, biometric, biological, physiological, mental, genetic, cultural, economic or social identity.

    Rights of the Data Subjects

    The DPL mirrors the rights granted to data subjects in the European Union. Data Subjects have various rights, for instance:

  • right to request copies of their personal data at any time;
  • right to rectify data;
  • right to withdraw consent and request erasure of their personal data.
  • The European Union Law has a drawback as it does not adequately pave the way for new emerging blockchain technologies where personal data can be indefinitely stored and cannot be managed in accordance with the modern data protection laws.

    The DPL, however, remedies this as it introduces an exemption from the right of rectification and erasure of personal data when the data subject is disclosed specific information by the data controller, including that the personal data will be processed in a way preventing the data subject from exercising such rights.

    The DPL introduces a right for the data subjects (similar to the United States), which protects them from any discrimination resulting from the exercise of their rights. For instance, a customer has refused to allow a business to retain his personal data; the DPL will require that business to provide the customer with the same quality of goods or services as other customers and ensure that the refusing customer is not discriminated against.

    Legally Binding Written Agreement

    Part 3A of the DPL deals with Joint Controllers (where two or more persons jointly determine the purposes and means of Processing Personal Data) and states that they must enter into a legally binding written agreement, defining their respective responsibilities for ensuring compliance with the obligations under the DPL. Such agreement shall clarify the process for ensuring that a Data Subject can exercise his rights and for providing a Data Subject with the information.

    Furthermore, where Processing is to be carried out by a Processor on behalf of a Controller, the Processing shall be governed by a legally binding written agreement between the Controller and the Processor. A Controller shall only enter into agreements with Processors which provide sufficient assurances of implementing appropriate technical and organizational measures to meet the Processing requirements of the DPL and protecting a Data Subject's rights. (Part 3B of the DPL). A Processor may not engage another Processor to act as a Sub-processor without the prior written authorization of a Controller, and when authorized, the Processor shall inform a Controller of any intended changes regarding the replacement or addition of a Sub-processor.

    Additionally, a Processor may not engage a Sub-processor for carrying out specific Processing activities on behalf of the Controller, unless a legally binding written agreement containing the requirements is in place with the sub-processor that ensures a full delegation of the obligations that the Processor owes to the Controller under the agreement with the Controller in respect of such specific Processing activities.

    The Commissioner appointed under the DPL shall publish standard contractual provisions for the businesses. Failure to ensure that the contracts are in compliance with all relevant processors of personal data shall result in a maximum fine of USD 25,000.

    Commissioner

    Part 8 of the DPL deals with the appointment, removal, powers, functions, objectives and liabilities of the Commissioner.

    The President of the DIFC shall appoint a person to be the Commissioner who is appropriately experienced and qualified. The DIFCA Board of Directors shall be consulted by the President prior to appointing, re-appointing or removal of the Commissioner. The Commissioner shall be appointed for a specified period of time not exceeding five years, and may be re-appointed but not extending beyond the day when the Commissioner turns 75 years of age.

    The Commissioner has such powers, duties and functions as conferred on him under the DPL and the Regulations. The Commissioner shall not be held personally liable for any act or omission committed by him under or in relation to the DPL or in relation to his duties and functions as Commissioner, save for where the Commissioner has acted in bad faith. The DIFCA will indemnify and hold harmless the Commissioner with respect to all liabilities that may be incurred by or suffered by the Commissioner in relation to the discharge of the Commissioner's duties and functions under or in relation to the DPL and his duties and functions as Commissioner.

    Data Protection Officer

    A Controller or Processor may elect to appoint a Data Protection Officer ("DPO") that meets the requirements specified in the DPL and are responsible for high-risk compliance with the DPL and other applicable privacy laws. Any business conducting "high-risk processing activities" has an obligation to appoint a DPO. The DPO's contact details must be given to data subjects when collecting their personal data.

    The DPL specifies the DPO to be a resident in the United Arab Emirates. However, the residency requirement does not apply where the person is an individual employed by a group of members and performs similarly for the group on an international basis elsewhere. In such cases, the DPO must be easily accessible to each member of the group.

    Where the Controller or Processor is not required to appoint a DPO, it shall clearly allocate the responsibility for oversight and compliance under the DPL within its organization and provide details of the persons with such responsibility to the Commissioner upon request.

    Personal Data Breaches (Part 7 of the DPL)

    A "Personal Data Breach" is defined as a breach of security leading to the unlawful or accidental destruction, loss, alteration, unauthorized disclosure of, or access to, personal data transmitted, stored or otherwise processed.

    Notification to the Commissioner:

    A Personal Data Breach compromising a Data Subject's confidentiality, security or privacy, the Controller involved shall notify the same to the Commissioner as soon as practicable. A Processor shall notify the relevant Controller after becoming aware of a Personal Data Breach without undue delay. Failure to notify shall result in a fine of maximum USD 50,000 on either or both of the Controller and Processor.

    Notification to a Data Subject:

    Where a Personal Data Breach is likely to result in a high risk to the Data Subject's security or rights, the Controller shall communicate the same to an affected Data Subject as soon as practicable. However, the Controller shall promptly communicate with the affected Data Subject if there is an immediate risk of damage to the Data Subject.

    The DPL states that where a notification to an affected Data Subject involves a disproportionate effort, public communication will be sufficient to satisfy the provisions. Failure to notify as per the requirements can result in a fine of maximum USD 50,000. Where a Data Subject has suffered loss as a result of the failure to notify, he can apply for compensation or damages to the court.

    Penalties

    The Commissioner is entitled with the power to issue fines for contraventions of the DPL which are enforced through the courts when the businesses fail to pay.

    Fines of maximum:

  • USD 50,000 is imposed for failure to implement and maintain technical and organizational measures to protect personal data;
  • USD 25,000 is imposed for failure to maintain records of the Processing;
  • USD 100,000 can be imposed for failure to comply with:
  • Data Subject's rights of access, rectification and erasure of personal data;
  • new requirements relating to data portability; and
  • Data Subject's right to object to any decision based solely on automated Processing, including profiling, which produces legal or other seriously impactful consequences.
  • The Commissioner has the power to inspect and audit businesses subject to the DPL to verify compliance.

    Conclusion

    The newness of the DPL issues such rights, requirements and responsibilities which do not consider it sufficient only to have a reliance on legal or compliance teams but rather have everyone in the organization comprehend their role to keep the data safe and secure. The businesses need to understand how they can use and process personal data and update existing contracts with third parties, privacy notices and interactions with customers, and think about employee awareness around the handling of personal data.

     

    ]]>
    Tue, 01 Sep 2020 11:16:00 GMT
    <![CDATA[Copyright Registration in the Middle East ]]> Copyright Registration in the Middle East 

    Admittedly, the Middle East has something of a "Wild West" reputation, when it comes to some business behaviors. One of the most protuberant of these is the Middle Eastern perception of copying someone as a form of flattery, rather than as theft. In this era, where platforms like Instagram and Pinterest reign supreme, the idea of free design has been distorted. While people are happy to pay for construction, because that is tangible, the design is thought to be 'just a piece of paper'. However, the impression that the Law here does not protect designers is, to an acute degree, unfounded. In the UAE, the Ministry of Economy is the highly competent authority that registers and protects intellectual property. 

    However, it is important to note that the number of copyrights registered annually in the GCC countries is a relatively small figure, and furthermore, that copyright litigation here is rare. When it does occur, it ends up being a time-consuming, and cost-ineffective ordeal for copyright holders. While a unified system pertaining to copyrights in the GCC countries does not exist, copyright registration is recommended in order to maximize protection; this ensures that infringers shall be subject to limited damages, fines and possible imprisonment. 

    This article shall explore copyright registration in the GCC countries- a domain that should be taken into consideration in order to evade the possibility of continued infringement. 

    Copyright Registration in the United Arab Emirates 

    Upon the creation of the object to be copyrighted, copyrights can be registered in the United Arab Emirates in accordance with the UAE Federal Law Number 7 of the Year 2002 Concerning Copyrights and Neighboring Rights.

    For it to be eligible to be copyrighted, the object should have been the direct result of intellectual work, as opposed to plagiarism, and should be expressed in any objective form. The copyright can be registered in the UAE upon the filling out of a simple form, and the deposition of one sample of the work to the office of one of the following organizations:

  • The Copyright Department of the UAE Ministry of Economy (Copyright Department) – response may be expected within 1 - 3 months;
  • The Dubai Copyright Office (the local hand of International Online Copyright Office INTEROCO, European Union) - response may be expected within ten days;
  • The U.S. Copyright Office (they may be reached via post).
  •    

    Is the registration of a company or product logo/ insignia/ brand mandatory in the United Arab Emirates? 

    It must be noted that the registration of a copyrighted object is a voluntary right of author/ registrant in the UAE. However, in case these very trademarks or copyrighted objects are being employed in the market in order to promulgate goods/services to customers, the registration of their copyrights is mandatory, in order to avoid penalties that may be levied on account of deception of UAE consumers (as per the UAE Executive Regulation of the Consumer Protection Law). 

    How does UAE Law define copyright?

    As per the United Arab Emirates Federal Law Concerning Copyrights and Neighboring Rights, copyrighted work refers to any created compilation, that may lie in the scope of letters, arts, sciences, in whatsoever mode of expression, and intended for whatsoever purpose. 

    To faintly capture the jurisdiction of this term, the term 'copyrighted work' could be used to refer to registered logos, books, pamphlets, essays and other written works, computer programs and applications, databases, lectures, addresses, sermons, dramatic, dramatic-musical works and shows, verbal or non- verbal music compositions, sound and audiovisual works, architectural works, engineering plans and layouts, works of drawing, painting, sculpture and lithography, and engravings or similar works in the scope of fine arts, photographic works and works analogous to photography, works of applied and plastic art, illustrations, geographical maps, sketches, three-dimensional works relative to geography, topography and architectural designs. 

    Characteristics of the awarded Copyright Certificate 

    As previously established, the copyright registration process is about six months long if the approached authority is the U.S. Copyright Office, and about ten days if the request is issued to the INTEROCO European Copyright Office. The issued copyright certificate shall stay valid over the rest of the course of the author's life, and fifty years after his death. The jurisdictions that the certificate covers shall be the 167 countries that are party to the Bern Convention, of which the UAE has been a signatory since 2004. The authorship of the copyright may be privately held. Either a private individual or a legal entity may be the right-holder; interestingly, partial ownership by physical persons and companies is allowed. The price of copyright registration in the country is USD 4000, with the registering organizations of the INTEROCO or the U.S. Copyright Office. We shall delve further into the intricacies of these vis-à-vis the questions posed below.  

    How long does the copyright protection last? 

    The registered copyright object is protected in the UAE, all through the lifetime of the author, and an additional fifty years beginning from the first day of the calendar year following the death. Correspondingly, the economic rights of the authors of collective works (except those of the authors of applied arts) shall be protected for a period of fifty years beginning from the first day of the next calendar year, in case the author is a legal person.  

    Who is eligible to be an author to copyright in the UAE? 

    The author of copyright could be any physical person, or a group of private individuals, whose information is elucidated upon in the application form. These UAE authors' rights are recognized and protected in all countries that are signatories to the Berne Convention for the Protection of Literary and Artistic Works. As per UAE Copyright Law, the author is the individual responsible for the creation of the work, or the individual who has his name mentioned on the work; if the work has been attributed to him at the time of publication, this author is eligible. 

    Which are the documents that need to be prepared for lawful copyright registration in the UAE? 

    The documents that require to be presented include: 

  • the application
  • a sample of the work to be copyrighted
  • the photo I.D. or passport of the person who is to assume authorship
  • essential information about the right-holder (owner) 
  • a confirmation receipt of the official registration fee payment
  • the contact details of the applicant
  • Is the UAE a signatory to the Berne Convention governing international copyrighting? 

    The United Arab Emirates is indeed party to the Berne Convention for the Protection of Literary and Artistic Works, as of 14 July 2004. The Berne Convention is an international agreement governing copyrights; it was first ratified in Berne, Switzerland, in 1886. It was precisely this Convention that formally set in stone several aspects of modern copyright law; it introduced the novel concept that a copyright exists the very moment that a work is "fixed". It also puts forth, and actively enforced a requirement that countries recognize copyrights held by the citizens of all other countries that are signatories to the Convention. The World Intellectual Property Organization administrates the Berne Convention. 

    Copyright Registration in the Kingdom of Saudi Arabia 

    While there certainly are a large number of myths afloat in the ether about copyright protection in Saudi Arabia, some of which ring to the tune of- "it is not possible for non-Saudi nationals, and foreign companies to benefit from copyright protection", this is simply not the case.

    Like the UAE, the Kingdom is also party to the Berne Convention, which sets out the quintessential intellectual property principles including "national treatment" and the "automatic" protection of copyright works.

    Is Copyright protection available in Saudi Arabia?

    Saudi Arabia certainly has copyright legislation in place in order to secure the protection of copyrighted objects. The Law, Royal Decree Number M/41, dated 30 August 2003, and its corresponding implementing regulations are possessive of detailed provisions on the subject matters of protection, infringement, exceptions, ownerships clauses, and procedure to enforce rights. 

    Which objects are eligible for copyright protection in Saudi Arabia? 

    Literary, artistic and scientific works are protected in Saudi Arabia. Literary work is a term that could be employed to refer to books, articles, magazines, software, and artistic work (which may include paintings, photography, sculpture, lithography and maps etc.) 

    What is the process for registration of Copyright in Saudi Arabia?

    As of now, there is no concrete procedure in place for copyright registration. Nonetheless, as previously established, since Saudi Arabia is privy to the Berne Convention, any work which falls in the purview of protectable subject matter, and fulfils the condition of originality and authenticity, shall be protected without registration. Provisions pertaining to copyrights in TRIPS agreements are also applicable in Saudi Arabia, given that it is a member of WTO.

    Which ministerial authority in the country is responsible for Copyright protection?

    In Saudi Arabia, the Ministry of Culture and Information is responsible for the protection and enforcement of copyrights in Saudi Arabia. The Copyright Protection Division is a highly germane department that has significant oversight within the ministry. 

    How long does copyright protection stay in effect? 

    In the Kingdom of Saudi Arabia, it greatly depends upon the type of work involved. 

  • The protection of work for a singular author extends to span his/her lifetime, and for 50 years after the death of the author.
  • With regard to joint work, the protection shall extend over the span of the lifetime of the authors, and for 50 years after the death of the last surviving author.
  • With regard to corporate entities, the protection of fifty years shall start from the date of the first publication of work onwards. 
  • Photographs are all protected for a definitive period of 25 years.
  • The SAIP Launch of the Optional Copyright Registration System – A Paradigm Shift

    Notably, in December 2019, the Saudi Authority for Intellectual Property announced the launch of the optional registration service with regard to the copyright system; this allows the authority to register credited work and documentation, and serves as an electronic database for them. The works that currently are able to enjoy the optional registration service include computer software and apps, in addition to architectural designs.

    With the single-minded goal of the establishment of a safe atmosphere to harbor innovators, the approval for the optional registration list of copyrighted works was adopted upon the issuance of the approval of the Board of Directors of the Saudi Authority for Intellectual Property, pursuant to the missions and prerogatives assigned to it, as per the Council of Ministers Resolution Number 496, dated 9/14/1439 A.H. In its third article, it stipulates that the authority shall bear the onus for the organization of the domains of intellectual property in the Kingdom, and their development, nurturance, protection, and elevation. 

    Copyright Registration in Bahrain

    Like the UAE and the KSA, Bahrain is also a member of the Berne Convention, according to Law Number 30 of 1996, in addition to the WIPO Copyright Treaty as per Law Number 14 of 2004. Bahrain's membership in both of these treaties was effectively translated into the local legislative system, with the goal of throwing a net of copyright protection, with respect to both moral and financial rights.

     

    The Copyright Law of 2006 sets the Bahrain intellectual property scene apart by establishing the protection period to be the authors' life plus 70 years, as opposed to the common 50 years, and by adding specific provisions with regard to customs and preliminary procedures. 

    What are the Bahraini copyright registration formalities, if any? 

    Like the majority of the countries in the GCC, and as delineated by the Berne Convention, copyright protection can be availed of automatically, without the need for registration or other formalities. However, should the copyrighted work be deposited before the Ministry of Information, evidence of ownership shall become governmentally touted; this would greatly assist the resolution of ownership disputes, document assignments, and any other financial transactions.

    The legislative component of the Copyright Protection machine in Bahrain is admirably robust, with the laws and regulations in the Kingdom being fine-tuned to perfection. However, the wedge in the cogs is posed by the minuscule number of judicial and administrative precedents, especially with regard to I.P. enforcement– most of the provisions have been left untested. 

    Copyright Registration in Kuwait 

    By virtue of the Berne Convention, of which Kuwait also happens to be a signatory, copyrighted work stands to be protected, without mandating the formality of registration or deposition with the National Library. However, in order to wield the power of a prima facie ownership claim, it is recommended to adopt a formal registration procedure that guarantees protection.

    What are the legal requirements to obtain a copyright in Kuwait? 

    In order to obtain copyright protection, the work at hand is required to be; distinct, novel, and genuinely produced. It goes without saying that the work must have been manifested in a creative fashion, that is completely bereft of imitation, or plagiarism, so to speak.  

    The procedures to obtain a copyright are elucidated upon in the following steps:

  • The relevant application from the National Library is to be filled out. 
  • Two copies of the work-to-be-copyrighted are to be provided.
  • All pertinent information is to be compiled in the CD format.
  • A Power of Attorney is required to be issued the workup to the Kuwaiti consulate. 
  • If the agent is foreign, a local agent is required to be present. 
  • Can copyrights be registered? 

    In Kuwait, copyrights can certainly be registered with the National Library, in order to protect the copyrighted work from misuse. 

    What are the formalities for copyright registration in Kuwait? 

    Under the new Kuwaiti Copyright Law of 2017, the administration of registration has been assigned to The National Library. The applicant is expected to file an application addressed to the National Library, bundled with a copy of his work. In the Law, the Library has prescribed asset of varied procedures for different types of objects and an official fee. Within two to three months, the Library shall issue a depository number to the applicants, once the formal filing has been made.

    What is the tenure of active, registered copyright? 

    Like many other GCC countries, the period of protection of the copyright is the life of the author, in addition to another fifty years starting from the year of death of the author. 

    The period of protection for compilations published by individuals sheltering under a pseudonym, or cinematic compilations, photography works, applied arts, software or posthumously published compilations is 50 years. 

    With regard to works owned by broadcasting entities, the period of protection extends to twenty years from the end of the year in which it was the first broadcast.

    Copyright Registration in Oman

    By now, a pattern is discernible- on account of it being a signatory to the Berne Convention like the other GCC countries, copyrighted works do not need to be registered in order to acquire protection in Oman. 

    However, the government provides nationals with a voluntary right– they are provided with a mechanism for copyright registration if they wish to engage in the same. While this certainly does not grant those, who register with any special rights, it can certainly be said to be a potential tool to serve as additional evidence, in the event of ownership being contested. Once or twice a year, the Ministry of Commerce and Industry issued the details of the works that have been deposited for copyright registration in the Official Gazette. 

    Conclusion

    It can be universally conceded that strong profits and lax enforcement are possessive of sway, that might encourage traders to illegally market, and distribute infringed products. Regrettably, famous copyrights are routinely used, and capitalized upon for profit, without permission throughout the Middle East; this leads one to believe that a set of unified I.P. laws in the GCC is of the essence. This has the potential to eliminate a variety of infringements in the member states and clear the path for heavy-handed I.P. enforcement. Companies and industries that are registrants under this proposed system would also indubitably benefit from the unified front it proffers– it would make their I.P. impregnability more absolute. 

    ]]>
    Tue, 01 Sep 2020 09:39:00 GMT
    <![CDATA[A Guide on REITs]]> A Guide on REITs

    Since time immemorial, real estate has been acknowledged as a historically significant investment class- one that offers increased portfolio diversification, low volatility, and optimally risk-adjusted returns. A Real Estate Investment Trust (REIT) is a financial instrument that not only allows investment in real estate but an instant investment in a multitude of real estate assets by means of the purchase of a single REIT's shares. While not all REITs are affordable, many are. On account of their accessibility and general universality, a REIT can often present an immensely appealing route for an individual looking to become a real estate investor.

    A REIT is a company that places investments in income-generating real estate, of the commercial variety in addition to others. Investors that yearn for access to real estate can accordingly purchase shares of a REIT; through that share ownership, they would be effectively adding the real estate owned by the REIT to their portfolios. This provides investors with exposure to all the properties owned by the fund, simultaneously.

    REITs – Background

    Why were REITs created?

    REITs first came to be in the United States under President Eisenhower when he signed the REIT Act in the Cigar Excise Tax Extension of 1960. These were intended to give commonplace investors a means of investing in a diversified portfolio of income-churning real estate through a share-based model.

    What makes REITs unique?

    They are mandated by law to follow a highly specific set of operating requirements to receive and retain the qualification of a REIT. What sets REITs apart from other investment vehicles is the fact that REITs are mandated to derive a minimum of 75 percent of their gross income from real estate-related sources, and correspondingly invest 75 percent or more of their total assets in real estate. Another significant distinction lies in the fact that the law requires REITs to distribute 90 percent or more of their income from their real estate investments directly to investors. Owing to these operating requirements, REITs offer investors a plethora of reasons to invest in real estate via this conduit, some of which shall be delved into below.

    Coveted Characteristics of REIT Investment

    Dividend Income

    The high dividend payout requirement for REITs translates into a larger share of REIT investment returns coming from dividends as opposed to other stocks. For this very reason, many financiers and advisors unequivocally recommend REITs to be well-suited for income-seeking investors, as well as for long-term investors seeking both income plus capital appreciation.

    In the United States, REIT dividend yields have historically been higher than the average yield of the S&P 500 Index. As a matter of fact, long-term calculations display that more than half of equity REIT total returns have come from dividends.

    Portfolio Diversification

    As discussed before, REITs have provided significant diversification benefits for investors on account of their relatively insignificant correlation with other assets, including other stocks and bonds.

    Diversification is an ideal sought to reduce portfolio volatility - the risk that investors will be subject to tumultuous oscillations in the value of their portfolio holdings. The remedy that some investors implement to evade volatility preemptively is the diversification of the portfolio, e.g., between small-cap stocks and large-cap stocks.

    However, it must be noted that this strategy only divides a portfolio between different parts of the same asset class and fails to achieve the full benefit of diversification. Another means to approach portfolio diversification would be to diversify amidst asset classes.

    REITs, for instance, have had less of a tendency to move synchronously with other equities when stocks fluctuate. Between 1992 and 2016, large-cap and small-cap equity total returns bore an 83 percent correlation, while large-cap equity and Equity REIT total returns bore a mere 56 percent correlation. This goes to show that the combination of a large-cap portfolio with listed equity REITs would certainly bear more fruit, with regards to achieving diversification.

    Inflation Hedging

    A key concern for several investors today is how to secure enough income to tide them by for a decade-long retirement period. Even in an environment with minimal inflation, the cumulative effects of inflation over long periods can erode the purchasing power of portfolio assets. The dilemma that retirees often encounter is that it can be tough to stay ahead of inflation with fixed income securities. In contrast, equities (the traditional inflation hedge) are usually trimmed back to reduce investment risk.

    REITs are structurally possessive of a natural hedge against inflation in a fashion that matches up exceedingly well with the needs of investors. The commercial real estate rents and values have tended to increase when prices do; this has, in turn, supported REIT dividend growth, and provided retirement investors with reliable income even during inflationary periods.

    Tax Benefits

    Adding to the standard benefits available to investors who have access to REITs by means of traditionally tax-advantaged accounts (i.e. retirement accounts), REIT investors encounter several additional, critical upsides.

    The most well-known tax advantage is actually related to an investment fund's basic ability to be classified as a REIT.

  • To receive the official REIT stamp and designation, one of the most fundamental requisites is that a fund distributes a minimum of 90 percent of its (taxable) income every year to its shareholders. 
  • If a fund successfully meets the REIT qualifications, then these earnings will not be subject to taxation at the company level.
  • Earnings are distributed to investors and are only taxed at the individual investor level. This eliminates the brunt of the burden of double taxation that many face with traditional company stocks. The absence thereof of a company level tax enables investors to keep the lion's share of their overall returns. 
  • Total Return Performance

    REITs' reliable track record of growing dividends, combined with long-term capital appreciation through stock price increases, has gifted investors with an attractive total return performance for many periods over the past 45 years, especially when compared to the broader stock market.

    REITs are publicly traded, professionally managed companies that manage their businesses intending to maximize shareholder value. These companies engage in positioning their properties optimally to attract tenants and earn rental income. They manage their property portfolios and ensure the buying and selling of assets to cultivate value throughout long-term real estate cycles. Their efforts drive the total return performance for REIT investors, who benefit from a reliable annual dividend payout as well as the potential for long-term capital appreciation.

    Liquidity and Transparency

    For a great many years, investors considered real estate to be an illiquid asset, and rightfully so. However, the liquidity of REITs listed on major stock exchanges converts real estate investing into a simple and straightforward operation.

    By the provision of real-time pricing and valuations, REITs also provide market transparency for investors.

    How do REITs work?

    Once a fund successfully achieves the qualification of a REIT, investors can buy shares in a variety of ways. The REIT pools this assimilated capital in order to make a great variety of real estate investments. Investments can include the REITs direct ownership of the real estate, real estate loans, or both.

    REITs can be classified into three broad manners:

  • By means of the types of investments they pursue (i.e. equity or debt).
  • Howe their shares are traded (i.e. exchange-traded REITs or non-listed REITs).
  • The sectors of real estate that they place a focus on (i.e. healthcare REITs or industrial REITs).
  • Each of REIT's represents partial ownership of every one of the individual assets held by the fund. Therefore, any fluctuation in the valuation of a REIT's shares reflects a change in the value of the overall collection of real estate properties the REIT holds. REITs are professionally managed by fund managers, who determine and execute the REIT's investment strategy.

    REITs Classification

    Earlier, we established that one way to classify REITs is based on the financial structures of their underlying holdings: debt, equity, or a hybrid of both.

    An equity REIT is one that participates in the direct ownership (and subsequently, the development and operation) of the real estate assets that it owns; these can include commercial real estate or for-sale housing. Equity REIT managers construct their investment strategies based on how much physical work and capitalization they deduce to be required to raise investment properties to their highest value and potential for producing income.

     

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    Wed, 19 Aug 2020 10:25:00 GMT
    <![CDATA[Distribution of Pharmaceuticals in India]]> Detailed FAQ on the Distribution and Import of Pharmaceuticals in India

    Distribution of Pharmaceuticals in India

    The Indian pharmaceutical distribution system has a limited number of orbits – the pharmaceutical manufacturers; the clearing and forwarding agents (CFAs/ depots); stockists; wholesalers; and retailers.

    Clearing and Forwarding Agents

  • What constitutes the role of the carrying and forwarding agent (CFA)?
  • The Indian pharma industry's distribution set-up is perceptibly fragmented and has evolved on the basis of a tiered sales tax structure, which consists of the central sales tax (CST), and the local sales tax. While the inter-state sale of goods attracts the central sales tax, the interstate transfer of goods does not attract any tax. In order to avoid the CST, all medium and large pharmaceutical companies have established a carrying and forwarding agent (CFA); alternatively, company depots are established in each state, and goods are transferred as an interstate stock transfer. On the other hand, the smaller companies adopted the super-stockist model (since the cost of infrastructure for depots or CFAs outweighs the accrued tax benefits).

  • Why have CFAs gained more prominence than company-owned depots?
  • In order to cut overheads following liberalization, pharmaceutical companies increasingly replaced company-owned depots and warehouses with CFAs.

  • Are CFAs part of a production company, under contract to a single company? Or can they work for several companies?
  • The Ernst and Young account suggest that CFAs are part of the production company; however, the typical CFA would represent about six companies. However, it should be noted that when stockists receive goods from a CFA, they are invoiced in the name of the producer, and not in the name of the CFA.

  • Is the fee of the CFA fixed?
  • The fee of the CFA may be a fixed percentage margin or may depend on the turnover. However, there still lies a great deal of uncertainty about how much they receive; it may range from 2 and 4 percent on a high turnover product to 10 percent on a low turnover one.

    Stockists/ Wholesalers

  • What is the role of wholesalers in the pharmaceutical market?
  • In the 70s and 80s, when attempts were made to introduce to expand the orbit of drug distribution to include emerging markets, many small players became stockists and wholesalers in order to be able to compete with retailers, especially because of the increased profitability of drug marketing, as opposed to drug production.

  • From how many companies do stockists market and distribute pharmaceutical products?
  • They typically market products of 6-8 pharmaceutical products, and only a handful distribute products of more than 50 companies. Mergers and acquisitions of pharmaceutical companies have resulted in the doubling of the number of stockists per company – this has fostered a great deal of competition at the distribution level.

  • What are the margins paid to the wholesalers?
  • There is also a lack of scholarly consensus on this matter; while some say that stockists get 8-10 percent of their sale price to the retailer, others report a margin of 8 percent on the maximum retail price of price-controlled drugs and 16 percent on de-controlled drugs.

  • What is the estimate of the number of stockists in India?
  • The current estimate is 60,000, this a figure supplied by the All-India Organization of Chemists and Druggists, who are able to control entry into this position. However, given the increasingly tough competition, and what with stockists shifting gears to settle into the lucrative domain of retailing, a decrease in the number of agents at this level is to be expected!

    Retailers/ Pharmacies/ Dispensing Practitioners

  • What is the role of retailers in the pharmaceutical market?
  • Retailers account for about 70-80 percent of the pharmaceutical sales in the country, with the remainder being sold directly through hospital pharmacies. In rural India (that accounts for 25-35 percent of the market, private medical practitioners usually keep stocks of most of the medicines that they expect to prescribe. Most small hospitals and nursing homes also have in-house pharmacies and require patients to buy drugs on the premises.

  • What are the margins paid to the retailers?
  • Retailers are entitled to margins of 6 percent for controlled formulations, and 20 percent for de-controlled formulations on the maximum retail price; this is set by Law, and may even be printed on the medication. However, it must be noted that this formal position often masks considerable variations, whether by company, retailer, drug, when there is a supply-demand imbalance, or when a stock of drugs is approaching its "sell-by" date. Often, manufacturers, stockists, distributors, and others offer price reductions to the retailers to move drugs quicker or to increase the margin that can be earned by the retailer.

  • What are the kinds of operations that the retailers engage in?
  • Retailers comprise a wide variety of different kinds of operation, that range from small shops to retail chains. The small shops in India's retail sector are typically family firms, with a single owner or a set of brothers, continuing an extended family tradition. These shops typically have a small number of employees, whose turnover is quick.

    At the other end of the retail continuum exists chains of retail outlets. These include Apollo, Lifeken, Medicine Shoppe, CRS Health, and Health Glow. These one-stop chains are offering prescriptions and OTC drugs, health supplements, health foods, alternative medicines like Ayurveda and homoeopathy, home and personal care products, tele-medicines and pathology collection centres under one roof. In order to wield the immense added advantage of round-the-clock operations, it added extended value-added services such as free home delivery, prescription reminder service, loyalty programs, and OPD departments.

  • How do these chains operate?
  • A chain with a system of 400+ pharmacies and 50+ franchises works in cooperation with the manufacturer, on account of the immense negotiation powers it has in that relationship. The group does not do the purchasing through the distributor necessarily but positions themselves as the distributor, and buy from the manufacturer, getting the wholesale margins in the process. Purchasing it at that price, they sell it at the consumer rate. Given that the margins soar, they accordingly are able to provide better services, with added benefits for patients and customers.

    Procurement

  • What are the procurement systems in India?
  • The two primary procurement systems in India comprise state/ government procurement, and procurement by large private health institutions. As per a report prepared for the National Commission on Macroeconomics and Health, government procurement accounts for about 6 percent of total pharmaceutical sales in India.

  • How is central/ state government procurement structured?
  • There is no single central government procurement office, despite 25 percent of the total public sector drug volume being procured by the Central Government for the Central Government Health Services, Armed Forces Medical Services, and Public Sector Units, and State Sector Units.

    The Medical Stores Organization (MSO) is the body responsible for the procurement and supply of quality medicines, and medical instruments to Central Government hospitals and dispensaries in rural and suburban areas.

  • What are other duties of the MSO?
  • The MSO is also responsible for the distribution of drugs supplied by international organizations such as UNICEF, CIDEA, WHO, and USAID. It bears specific responsibilities for vaccines received from the aforementioned organizations, under various agreements entered with the Government of India. It is also responsible for stores maintained for national eradication programs such as anti-malaria, anti-leprosy, anti-TB, AIDS, as well as Family Welfare under the National Health and Family Welfare Programs.

  • How is private purchasing conducted by large users?
  • Large private hospitals negotiate prices with CFAs and distributors, and accordingly avoid retailer margins, in addition to availing of bulk purchase discounts. The Community Development Medicinal Unit supplies approximately 450 organizations, at prices significantly lower than those quoted by manufacturers for general purchase. In addition, NGOs can also buy directly from producers who provide them with special terms.

    Collective Organizations

  • Are there collective organizations in the retail sector?
  • The main association is the All-India Organization of Chemists and Druggists (AIOCD), with its state branches. This institution dates back to 1921 when the Bengal Chemists and Druggists Association (BCDA) was established, followed by corresponding associations in Chennai, Mumbai, and Delhi. In 1944, these collectively established the All-India Retail Chemists Association, and from 1972 onwards, the Indian Organization of Chemists and Druggists. It was only in 1975 that these three all-India bodies merged to create the All-India Organization of Chemists and Druggists (AIOCD).

  • What is the role of collective organizations in the retail sector?
  • The AIOCD negotiates agreements with the drug producer associations. These agreements often specify the percentage of trade margins for various categories of drugs and allow the local branches of the AIOCD to block the entry of new companies.

    Licensing for Drugs Manufacturing

  • What are some registration and licensing requirements regarding drug manufacturing facilities?
  • These mandate the License for Capital Goods import (for items other than the freely importable goods under the Import Policy); License for Raw Materials Import (for items other than the freely importable goods under the Import Policy); Factories Act registration; Labor Laws registration; Pollution Control Board clearance; electricity supply; building permission; water supply; land lease or purchase; sales tax registration; excise duty registration; explosives license; licenses for storing petroleum products; registration under the Boilers Act; registration under Standards of Weights and Measures; registration with the State Director of Industries; among others.

    Licensing of Drug Retailers

  • Do sales offices need to be licensed?
  • Under the Drugs and Cosmetics Act, sales offices, pharmacies, or any other sales outlet/ stocking point for drugs need to be licensed to do so by the State Government that has jurisdiction over that particular office/ pharmacy. Where the drugs are sold or stocked for sale at more than one location, a separate, discrete license is required for each such venue.

  • What are the requirements and conditions for such a license?
  • The site should meet the specification of minimum area and equipment; the compounding of drugs on the premises should be executed by a registered pharmacist; the sale of any prescription drugs should be under the monitored supervision of a registered pharmacist; a prescription register, or a cash/credit memo book should be maintained; the prescription register should contain the specified particulars of the sale; no prescription drug shall be sold without a prescription.

  • What other legislations do wholesale and retail outlets require local registration under?
  • These include the Shops and Establishment Act; the Standard of Weights and Measures Act; labor legislation, and sales tax legislation.

    Import of Pharmaceuticals in India

    In India, the import of drugs is regulated under the auspices of the Drugs and Cosmetics Act of 1940, and the Drugs and Cosmetics Rules of 1945. At present, bulk drugs (with active pharmaceutical ingredients), and finished formulations are regulated under the aforementioned Act. It is critical to note that any substance that falls within the definition of drug required to be registered prior import into the country.

  • What do the requirements to obtain permission for the import of drugs entail?
  • No new drugs are permitted to be imported into the country without the sanctioning of the licensing authority, in writing. For the sake of clarity, all drugs whose composition is not recognized as safe for use by experts, and which have not been used for an appreciable period of time are to be regarded as a new drug.

  • Who can furnish permission for the import of new drugs?
  • Permission for the import of new drugs can be obtained from the licensing authority after they are provided with documentary evidence of the standards of quality, purity, and strength of the drug.

  • What should the application for the import of new drugs include?
  • Form 44 is the application form required for permission, and must be in accordance with appendices, namely; chemical and pharmaceutical information; animal pharmacology and toxicology data; human clinical pharmacology data; regulatory status in other countries; prescribing information; and complete testing protocol for quality testing.

  • What are the stages involved in drug importation?
  • Phase 1 is Registration, Phase 2 is the obtaining of the Import License, and Phase 3 is that of Marketing.

  • What does Phase 1 – Registration entail?
  • The application for the issue of the registration certificate shall be made in Form 40, either by the manufacturer or an authorized agent in India. The authorization by the manufacturer to his agent in India shall be by a power attorney that has been authenticated in India before a First Class Magistrate, or in the country of origin, before an equivalent authority, the certificate of which has been attested by the Indian Embassy of the said country. The original shall be furnished along with the application of the registration certificate.

    A fee of USD 1,500 shall be paid along with the application, as a registration dee for his premises meant for manufacturing of drugs intended for import. Another fee of USD 1,000 shall be paid along with the application for the registration of a single drug to be imported into, and used in India – an additional fee of USD 1,000 shall be applied for every additional drug.

    The applicant shall be liable for a payment fee of five thousand dollars for expenditure, as may be required for inspection/ visit of the manufacturing premises by the licensing authority. He shall also be liable for payment of a testing fee directly to a testing laboratory approved by the Central Government of India, or abroad, as may be required for examination, tests, and analysis of drugs.

    Should the original be defaced or damaged, a fee of USD 3,000 shall be paid for the issuance of a duplicate copy of the registration certificate.

  • What does Phase 2 – Import License entail?
  • An application for an import license shall be made in Form 8 to the licensing authority for drugs excluding Schedule X, and for Schedule X drugs in Form 8-A; either by the manufacturer or the manufacturer's agent in India (who possesses a wholesale license for the distribution of drugs). It shall be accompanied by a license fee of INR 1,000 for a single drug, and INR 100 for each additional drug.

    Any application for an import license in Form 8 or 8-A shall be accompanied by a copy of the registration certificate issued under Form 41. A fee of INR 250 shall be paid for a duplicate copy of the license, should the original get defaced, damaged, or lost.

  • In overview, what does the general checklist for import consist of?
  • It bears;

  • The covering letter
  • The original power of attorney
  • Copy of import permission for a new drug (in Form-45 for a formulation, and Form 45-A for new bulk drug substances)
  • Copy of the wholesale license, or manufacturing license of the Indian agent
  • Authorization letter
  • Schedule D(I) and Undertaking, duly signed, stamped, dated with a designation of the authorized signatory of the manufacturer
  • Schedule D(II) and Undertaking, duly signed, stamped, dated with a designation of the authorized signatory of the manufacturer
  • Copy of the original notarized
  • Attested/ apostilled copy
  • An original label bearing the name of the drug, with the pharmacopoeial specification, the importer name and address as per the wholesale license, and import license number.
  • Upload Form 40
  • TR-6 Challan of Fees paid
  • Are pharmaceuticals free importable?
  • Most pharmaceuticals are freely importable, as per foreign trade law. However, it must be noted that certain drugs may not be imported except under a license granted by the Drug Controller of India. These products cannot be imported after the date shown on the label as being a date when the potency would reduce or toxicity would increase beyond the standard permitted.

  • What is the import duty structure?
  • The import duty structure relies on the classification for import tariff and excise duty. The import duties are prescribed by the Customs Tariff Act. The specific life-saving products can certainly be imported at zero duty. For most other pharmaceuticals, the duty structure would be roughly as below:

  • Cost, Insurance, and Freight (CIF) value of the imported item: A hypothetical INR 10.00
  • Basic duty: 30 percent of CIF value (INR 3.00)
  • Countervailing duty: 16 percent of the CIF value, in addition to basic duty plus surcharge (INR 2.08)
  •  Special additional duty: 4 percent of the total of all the above (INR 0. 60)
  • Total landed cost: INR 15.68
  •  Effective duty rate: 56.8 percent
  •  

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    Mon, 10 Aug 2020 19:50:00 GMT
    <![CDATA[Securities Finance in Bahrain]]> Securities Finance in Bahrain

    What are Securities and Assets?

    Securities is a financial instrument that is negotiable and holds some type of monetary value. It is equivalent to an ownership position in a corporation through the stock. Securities can be categorized into three types:

  • Equities
  • Debts
  • Derivatives
  • Equities
  • Equity security is one where you hold shares of capital stock, enabling you to be a shareholder in the company. These shares pay out dividends, and such shareholders are usually not entitled to regular payments. The dividends are dependent on how the company is performing, and in the case of bankruptcy, you are entitled to residual interest after all the obligations have been fulfilled to its creditors. On the bright side, some control in the company via voting rights is available.

    Various types of Equities Shares can be defined as Debentures, Bonds, Deposits, Notes, or Commercial Paper.

  • Debts
  • A debt security is one where the money is borrowed by the company and must be repaid-with interest as per various factors. These include government and corporate bonds, certificates of deposit, and collateral securities. They are issued for a fixed period, which can be redeemed in the end by the Issuer. These securities can be secured or unsecured, dependent on the type.

    There are various types of Debt shares, such as Corporate Bonds, Money Market Instruments, Euro Debt Securities, Government Bonds, etc.

  • Derivatives
  • As per financial terminology, Derivatives refer to those contracts that are dependent upon the performance of an underlying entity. This entity could be of any kind, such as assets, index, interest rate, or futures, referred to commonly as underlying. While there are various types of derivatives, insuring against price differences of various entities is what it is primarily used for. Two parties specify certain preset conditions upon the dates, estimated prices, underlying variables, etc. and form an agreement, paying the other party a certain amount in case of the events not being in favor of the party in a loss.

    The various types of derivatives can be classified as forwards, futures, options, swaps, collateral debt obligations and contract for differences (CFDs).

    What Law defines Securities as per Bahrain's Regulations?

    In the context of this article, Volume 6 of CBB Regulations define Securities as shares or bonds issued by shareholding companies, government debt instruments, and the following financial instruments:

  • Shares in companies and other securities equivalent to shares in companies or other entities, and depositary receipts in respect of shares;
  • Bonds or other forms of debt, including depositary receipts in respect of such securities;
  • Warrants;
  • Units, rights or interests (however described) of the participants in a collective investment scheme;
  • Options, futures and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event);
  • Options, futures and any other derivative contract relating to commodities that can be physically settled;
  • Units to Real Estate Investment Trusts (REITs);
  • Index tracking products including Islamic indices;
  • Any other financial instrument approved as a financial instrument by the CBB for the purpose of trading such an instrument on an exchange; and
  • Islamic securities, being those financial instruments that are Shari'a compliant.
  • What are the Statutes and Regulations relevant to governing securities offerings in Bahrain?

    The Bahrain Stock Exchange (BSE) (also known as the Bahrain Brouse), facilitates as a major stock market index that tracks the workings of shareholding companies listed with it. The Bahrain Stock Exchange also provides a ground for traders to conduct their business on the ground.

    Financial Institutions Law 2006, known commonly as the 2006 Law, established the Central Bank of Bahrain as the regulatory authority of BSE.

    Bahrain Bourse is the market formed and governed by various enactments such as:

  • Decree Number 4 of 1987, later repealed and replaced by the Law Number 57 of 2009, and Decree Number 60 of 2010
  • CBB Law 2006
  • CBB Disclosures Standards Book
  • CBB Resolution Number 17 of 2012
  • CBB Rulebook Volume 6
  • CBB Rulebook Volume 7
  • These laws govern a set of Rules and Regulations, such as:

  • Internal Regulation
  • Money Laundering Regulations
  • Trading Rules and Procedures
  • Clearing, Settlement, Central Depository and Registry Rules
  • Clearing, Settlement, Central Depository and Procedures
  • Market Rules
  • Bahrain Investment Market Rules
  • Listing Rules
  • In 2010, Bahrain Bourse was established as a shareholding company to replace BSE, as per Law Number 57.

    Who is the regulatory authority/authorities tasked with the responsibility for the administration of these rules?

    Central Bank of Bahrain is the sole regulatory authority in terms of supervising the market. The CBB was established by the Financial Institutions Law 2006 as a regulatory authority responsible for overseeing the main market and the secondary market. Volume 6 of the CBB Rulebook entails all the required regulations in relation to the capital markets.

    Are the markets compliant as per International Standards? If so, what are they?

    The Central Bank of Bahrain is compliant with various relevant international standards such as International Organization of Securities Commissions (IOSCO), IOSCO's Multilateral Memorandum of Understanding (MMOU), and was reviewed for compliance by International Monetary Fund (IMF).

    What dictates possession with regards to Contract for Difference?

    CFDs do not institute possession of the stock that is bought but rather imitates the profit and loss for real purchase or sale of an asset. This contract gives a chance to trade in the underlying market and make profits without owning the said asset. As per CBB Regulations not explicitly mentioning so, CFDs come under the category of Derivatives as per aforementioned glossary of terms of Volume 6. Hence, possession of CFDs could be possible as a derivative.

    What are the classifications set as per Bahrain Laws that define Trading in Securities?

    Article 80 of Securities under the 2006 Laws lays down what would define an entity as a Company/Financial Firm that's trading in Securities. These activities, without limited to a single one, are:

  • Promoting and underwriting securities or financing investments therein.
  • Participating in incorporating of securities companies or increasing the capitals thereof.
  • Forming and managing securities portfolios and investment funds.
  • Depositing, clearance and settlement of securities.
  • Brokering in securities transactions.
  • Providing advisory services related to securities.
  • Any other activities as approved by the Central Bank.
  •  

    As aforementioned, CFDs are not explicitly provided for as per the terms, but any CFD that is effectively linked to security in the form of bonds, shares, indices, futures, etc. will fall within the scope and ambit of securities as defined above. All CFDs would be considered as contracts within the meaning of various definitions under Securities such as, 'other securities equivalent to shares in companies or other entities', 'any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties', or 'other derivative contract relating to commodities that can be physically settled'.

    Hence, fulfilling either or all of the said criteria would put CFDs under the ambit of a contract and hence a financial firm trading in these categories would be recognized as a Company as per Commercial Companies Law in Bahrain.

    What are the Licensing and Corporate Governance Compliance to be adhered by financial firms in terms of Initial Public Offering of Securities?

    Article 40 of the CBB Law provides that no person may carry out regulated services without being authorized by the CBB while Article 81 states that no person may issue any securities in Bahrain unless the Central Bank of Bahrain's written approval is granted. In respect to the Articles, it is mandatory for a financial firm to adhere to the conditions specified in OFS 1.5.2 of Volume 6 which states the General Requirements and Rules and Regulations to be complied for issuing of Securities to all Issuers, including an overseas issuer. OFS 2.2 defines Initial Public Offering as an offer for a subscription to the public on behalf of or by a newly-established company, or an unlisted issuer of its own securities. For a Public Offer to be approved as per CBB, the Issuer must meet certain criteria.

    The Criteria is mentioned under OFS 2.3.3 of Volume 6:

  • The Issuer is a duly incorporated entity as per the laws of Bahrain, or in case of an overseas Issuer, as per the laws of its place of incorporation;
  • The Issuer operates in conformity with its Articles and Memorandum of Association or the equivalent constitutional documents;
  • The securities are transferable freely and free from any encumbrances;
  • The offered securities are to be listed on a licensed Exchange in Bahrain, along with having adequate assurances between the Issuer and the licensed Exchange that they will be admitted to such a platform;
  • The mandatory custodial and/or central depository arrangements have been made including the deposit of securities with an entity eligible to provide depository services under Article 94 of the CBB Law;
  • The mandatory clearing and settlement arrangements have been made giving effect to Article 108 of the CBB Law;
  • The eligible advisors have been appointed by the Issuer, including appointing a listing agent who shall liaise with the licensed Exchange and the CBB where the CBB deems vital;
  • A lead manager must be appointed by the Issuer for any public offer;
  • The Issuer has to make sure that the issue is underwritten unless provided an exemption by the CBB;
  • While the issue is being underwritten, full details of the underwriter and the underwriting agreement must be disclosed in the prospectus.
  • These aforementioned submissions are to be made for the license of Initial Public Offering of Securities in the Bahrain Market.

    What publicity requirements are to be made by the applicant?

    The applicant is required to publish a draft of the summary prospectus in two daily local newspapers, where one is in Arabic and the other is in English, at least 5 days prior to the start of the offering period.

    What information needs to be included in the filing of various documents required for PO?

    Prospectus

    The prospectus is defined in the Glossary in Volume 6 as 'An offering document that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. A prospectus needs to be offered for every offer of securities. OFS-5.2 to OFS-5.10 states in detail of what is further required in a Prospectus, as mentioned below:

  • Full name and registration number of the Issuer;
  • Type and amount of securities;
  • Date of the offering document;
  • The expiry date of the validity of the prospectus;
  • Logo and the full name of each advisor;
  • Logo and the full name of the lead manager and co-managers;
  • Logo and the name of the underwriter, if any;
  • Face or par value of the securities;
  • Offer price;
  • Premium (if applicable);
  • Placement fee or charge (if applicable);
  • Minimum subscription limit (if applicable);
  • Maximum subscription limit (if applicable);
  • Eligible subscribers (general classification by nationality or region); and
  • Standard disclaimer statement, written in capital letters and box framed, stating
  • "THE CENTRAL BANK OF BAHRAIN AND [NAME OF THE LICENSED EXCHANGE] ASSUME NO RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS DOCUMENT AND EXPRESSLY DISCLAIM ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS DOCUMENT."

    OFS 5.3 states Additional and Specific content for debt securities and 5.4 to 5.10 mentions other additional requirements to be complied with in regards to filing of the prospectus depending on the type of security that is being offered. It is mandated as per CBB that a Prospectus must be drawn up for every offer of Securities in the market.

    A company is also required to submit their MOA or AOA as per regulations of Commercial Companies Law of Bahrain established as per Decree Law Number 21 of 2001.

    What is Underwriting?

    Underwriting service is when a licensee bears the risk of commitment to market or places all or part of the issue of a financial instrument issued by an unconnected party to the investors in return for a fee and within a pre-agreed time frame. It includes a binding commitment by the licensee to purchase the portion of the issue which remains unsubscribed for. Underwriter, as per regulations, must not be a related party; and must be done directly or through an authorized market maker. There should be an established price stabilization mechanism for the securities for a period of minimum six months beginning from the first day of trading on a licensed exchange. A longer period of price stabilization may be required by the CBB, if and where it considers as necessary.

    Are there any regulations to be followed by an Underwriter?

    The underwriter is required to comply with:

  • CBB Law, rules and regulations,
  • Volume 6 of the CBB Rulebook, and
  • Issuer's Memorandum and Articles of Association, particularly concerning the eligibility of the expected subscribers to acquire the Issuer's securities and related disclosure requirements.
  • What are the Application Requirements?

    OFS 4.1.2 provides for the accordance of the application to be submitted to the CBB for approval. It must be submitted under cover of a letter signed by two authorized signatories by the Board of Directors of the Issuer, along with:

  • A copy of the Issuer's Board of Directors' proposal in respect of the issue to its General Assembly;
  • A copy of the General Assembly resolution through which the issuing and offering of securities is approved;
  • A copy of the duly signed Board of Directors' responsibility statement, signed by all directors in the standard statement stipulated by this Module;
  • A copy of the duly signed declaration by the lead manager, based on a due diligence exercise of all relevant conditions, facts and arrangements, as appropriate;
  • A copy of the duly signed declaration by the legal advisor for the offer, based on a due diligence exercise of all relevant legal conditions, facts and arrangements, as appropriate;
  • A final ratified Memorandum and Articles of Association, or relevant constitutional documents for existing issuers, or a draft copy thereof for issuers under formation;
  • A draft of the offering document prepared in line with the CBB requirements as stipulated under this Module;
  • A copy of all arrangements, contracts and/or letters signed with the Issuer and or lead manager with all appointed advisors;
  • Duly completed term sheet on the offering, as stipulated by the CBB from time to time in this Module;
  • The expected offering timetable;
  • A bona fide copy of either the Issuer's external auditor unqualified report on the annual audited financial statements or interim period reviewed financial statements prepared by the Issuer's external auditor;
  • A copy of the audited financial statements, including the balance sheet, income statement, cash flow statement and change in shareholders' fund, for the period required under this Module for each type of offer, and the interim period reviewed financial statements for the period required under this Module;
  • A copy of the duly signed report prepared by an independent accountant on any estimates, projections of the financial statements, or future operating results of the Issuer, if applicable;
  • A copy of at least two independent valuer's reports if the proposed offering of securities is guaranteed, is made up of physical assets or property or backed by any assets, property, or any form of collateral;
  • A copy of all documents available for inspection by the potential subscribers and/or allottees;
  • Information on the legal structure of the company and company registration;
  • A draft of the summary prospectus to be published in two daily local newspapers, one in Arabic and the other in English, at least 5 days before the start of the offering period;
  • If the offer is subject to the listing requirements, the Issuer or lead manager must provide information on the listing arrangements and information on the designated listing agent if different from the lead manager;
  • If, in addition to listing on a licensed exchange, the offer will be listed on an exchange outside Bahrain, a copy of the approval of the relevant regulator within that jurisdiction;
  • If the offer will be made in countries other than Bahrain, a copy of such other country's regulatory approval for such offer;
  • If the securities under the proposed offer are already listed on an exchange, details of the current listing requirements and performance of the securities;
  • If the securities under the proposed offer have been placed through private placement prior to the date of submission of application, full details about such placement;
  • Draft or proof print of any application form to subscribe or purchase the securities;
  • A copy of the draft or any temporary document of title proposed to be issued; and
  • For initial public offerings, initial offer for sale of securities and foreign listings, the Issuer is required to provide the CBB with a draft of agreements or contracts related to the depositing of securities and registration arrangements.
  • The time periods within which these documents need to be submitted are specified below.

    Are there any Language Requirements for filing?

    The prospectus is required to be drafted in layman's language and is not to be made too complicated. Apart from this, as stated above, while having to publish the Offering Document in the newspapers, it has to be done in one Arabic and one English language national daily newspaper. These regulations are specified as per Volume 6 of the CBB Module.

    What are the time periods specified?

    The application has to be submitted with the required information, documentation, and fees at least 30 days prior to the commencement of the offering period. The applicant then has to make representation to the CBB within 30 calendar days of the receipt to clarify any grounds set out in the notification. It is crucial to note that CBB will only start the process of the application once all the required documents are submitted. After receiving the representation, the CBB will provide its final decision in another 30 days.

    Is there any differentiation between Primary and Secondary Offerings?

    No, there are no separate categories mentioned as per Volume 6 of CBB Rulebook on Primary and Secondary Offerings.

    Are there regulations governing Private Placements?

    OFS 2.4 states the regulations and criteria required to be fulfilled for Offers made by Private Placement. A private offer must be made only to accredited investors for a minimum investment of USD 100,000. The private offers are limited to be taken up by not more than 100 accredited investors, excluding offers of private equity.

    What are the restrictions and criteria to qualify for Private Placements as per CBB?

  • It is required for the first offering to be made to existing shareholders and then to the public.
  • Listed issuers are required to obtain CBB Approval to make a Private Placement.
  • Approval from the shareholders during the General Assembly is also necessary.
  • Issuers must combine all offers of securities that are in substance part of a single offering. The CBB will consider if the offer occurs in the six-month period before or the six-month period after the completion of an offer.
  • The Issuer must make sure that the purchasers of securities are not doing so for reselling or redistribution purpose as this would be regarded as a Public Offer.
  • Any private placements marketed or promoted by licensees of the CBB must set fees within the actual cost and must be within reasonable and justifiable levels that do not compromise the interests of the Issuer or the investor.
  • The Issuer, lead manager and any appointed advisor to the private placement offer must not disseminate or make available any information related to the private placement offer to the public prior to the subscription being closed and must not at any time disclose or make available any information that could be regarded as an inducement to deal in these securities.
  • Are there restrictions on transferring of securities in private placing?

    It is to be made sure by the Issuer that the purchases of securities are not made by the holders for the purpose of redistribution to other investors within a period of one year.

    What are the Documents required to be submitted?

  • A confirmation from the Issuer or the lead manager that the offer will not be offered to the public and shall only be offered in line with requirements of Section OFS-2.4;
  • A copy of the subscription form which must include the accredited investor status confirmation;
  • A list of the expected accredited investors, if available at the time of submission; and
  • An offering document for a private placement of securities must meet the requirements of the particular security.
  • Disclosures

    The private placement or any other fee such as offering expenses, upfront discounts, placement commissions, or other placements or selling agents, and any other related cost must be disclosed clearly in the PPM.

    What about Foreign Offers?

    Foreign offers that are marketed within Bahrain is subject to filing requirement as per the Module. Any offering document for Foreign Private Placement also requires to have the following statement to be included to be able to be in circulation in Bahrain.

    "In relation to investors in the Kingdom of Bahrain, securities issued in connection with this prospectus and related offering documents must be in registered form and must only be marketed to existing account holders and accredited investors as defined by the CBB in the Kingdom of Bahrain where such investors make a minimum investment of at least US$ 100,000, or any equivalent amount in other currency or such other amount as the CBB may determine.

    This offer does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006). This prospectus and related offering documents have not been and will not be registered as a prospectus with the Central Bank of Bahrain (CBB). Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than as marketing to accredited investors for an offer outside Bahrain.

    The CBB has not reviewed, approved or registered the prospectus or related offering documents and it has not in any way considered the merits of the securities to be marketed for investment, whether in or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this document and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this document.

    No offer of securities will be made to the public in the Kingdom of Bahrain and this prospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally."

    Is Cross Border Practice permitted?

    Cross Border practice may be conducted if it is not Collective Investment Undertakings (the CIUs) or Reverse solicitation or activity under the definition of tolerated practices, as per CBB.

    Are there any additional regulations or exemptions for Convertible Securities?

    The Issuer of convertible securities must disclose in the offering document the extent to which the shareholder may subscribe for the convertible securities.

    Securities may be converted into other types of securities, or these can be converted into another class of the same securities. The conversion of securities may also take place within the same securities issuer's company and/or group, or in relation to another company or group.

    In the case of convertible securities which are exchangeable for securities of another company, an Issuer must submit to the CBB the annual report and accounts of that other company unless that company is listed or adequate information is already available. 

    Are there any specific ongoing reporting obligations for the Issuer?

    The Issuer is required to keep the Exchange and holders of its listed Debt Securities informed of any information concerning its business as soon as reasonably practicable, including information on the major new developments in the group's sphere of activity which is not in public knowledge. It is necessary to enable them and the public to appraise the position of the business and is necessary to avoid the establishment of a false market in its listed Debt Securities if it can be reasonably expected to significantly affect its ability to meet its commitments.

    The Issuer also needs to ensure if his Debt Securities are also listed on other exchanges, information released to any of such other exchanges is released to the Bahrain Stock Exchange at the same time as it is released to the other markets.

    This regulation is subject to Article 160 of the Commercial Law, and further ongoing obligations are mentioned in Volume 8 of the Rulebook.

     

    What are the regulations against malpractices?

    Bahrain Regulations provide for a general overview of the prevention of malpractices, like insider trading and more. Appointed advisors are subject to confidentiality requirements which must be explicitly stated in the respective agreements, contracts and/or letters.

    All advisors must abide by the rules relating to the Prohibition of Market Abuse and Manipulation contained in Module MAM of Volume 6, as well as the relevant rules of the licensed Exchange regarding the prevention of insider trading, in their capacity as a temporary insider.

     

    What are the relevant Market practices one needs to keep in mind while abiding by CBB Regulations?

    There are various market practices that CBB will take into account which are given under Prohibition of Market Abuse and Manipulation, MAM 1.2.1 as:

  • The level of transparency of the relevant market practice to the whole market;
  • The disclosure requirement of the relevant market practice by the market participants;
  • The need to safeguard the operation of market forces and the interplay of supply and demand, or safeguard the interest of the securities holders;
  • The degree to which relevant market practices has an impact on market liquidity and efficiency;
  • The degree to which the relevant practice takes into account the trading mechanism of the relevant market and enables market participants to react properly and in a timely manner.
  • Behaviour or conduct does not amount to market abuse if it conforms with a rule which includes a provision to the effect that behavior conduct conforming with the rule, does not amount to market abuse.

    Is Price Stabilization to be declared, and are there exemptions provided?

    Lead Manager's Declaration must contain the price stabilization method, limits and determination of issue price where the issue is not underwritten. There are various practices that are exempted from Prime Stabilization method, which has been provided under the Prohibition of Market Abuse and Manipulation in Volume 6.

     

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    Mon, 10 Aug 2020 16:40:00 GMT
    <![CDATA[Foreign Direct Investment in Egypt]]> Foreign Direct Investment in Egypt

    Egypt Is a party to numerous bilateral investment agreements and multilateral conventions in the world including Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965), Multilateral Investment Guarantee Agency (1965) and Unified Agreement for the Investment of Arab Capital in the Arab States (1980). Egypt is a signatory to the United Nations Conference on Trade and Development (UNCTAD of 1964), and the government of Egypt has accordingly adopted various policies and enacted laws to improve the country's position with foreign investors. Investment in Egypt was earlier governed by the Investment Guarantees and Incentives (Law number 8 of 1997 as amended) which was repealed by Investment Law number 72 of 2017 (Investment Law 2017 or new Law as amended.) The Law was officially published on 31 May 2017 and came into effect on 1 June 2017, the provisions of which shall apply to local and foreign investment in Egypt under the regime of inland investment, investment zones, technological zones, or free zones. Amendments to the Law were issued by Royal Decree Number 2731/2019 and 2732/2019 with the purpose to promote investment climate in Egypt and add new incentives for investment projects. When a natural or legal person (Egyptian or foreigner) invests within the Arab Republic of Egypt by either setting up, expanding or developing an investment project and using the money for the development of such a project while contributing to the sustainable development of the State will be termed as an investor making an investment in Egypt. Such an investment project can include activity in many sectors including industry, agriculture, tourism, communications or technology sectors. The new Law aims to promote foreign investment in Egypt by simplifying the process while improving the national economic growth rate. Employment opportunities, promotion of exports and sustainable development are some of the benefits that are aimed to be promoted through this Law, and great emphasis has been laid out on the social responsibilities of foreign investors in the territory. The competent authorities aim to enhance foreign investment in Egypt, and it shall be governed by the following principles:

  • Promotion of equality of investment opportunities without any discrimination;
  • Supporting emerging companies, whether big or small and empowering small and young investors;
  • Protecting the environment and public health
  • Protection of consumers and prevention of monopoly
  • Encouraging transparency and prudent management
  • Stabilize investment policies
  • Maintain national security and the public good
  • All such principles will apply to both the Investor and the Republic in their respective areas of responsibility.

    Features of the Law

    Some of the principal features of the new Law are listed below:

  • Investment Map – The General Authority of Foreign Investment (GAFI) is a regulatory body in Egypt that is the Authority that will prepare an investment map to identify the different types of investment zones for investment projects. Such an investment map shall lay down the type, regime, sectors, geographic areas, real-estate properties and other activities pursuant to the type of investment regime. Such an investment map shall be reviewed every three years and whenever required by the Authority.
  • Types of Investment Zones – The Prime Minister of Egypt shall designate areas for different activities of investment in different investment zones depending upon the investment activity carried out. Such zones can be divided into inland investment zones, investment zones, technological zones and free zones (public and private).
  • Projects of National Interest- Companies that are undertaking activities pertaining to national or strategic interests of the country shall be able to receive approval for such a project in one single time for the establishment of such a project. Such strategic or national projects include roads, transportation, ports that may be granted one single approval for the establishment and management of the project, and such approval shall be effective immediately without necessitating any other procedure.
  • Investor Service Centre - The Investor Service Centre shall be established in the Authority that shall provide all companies permits and licenses for conducting activities in the investment projects and with all incorporation and post-incorporation services. Investors can obtain all such licenses from this centre and need not contact any other authority. This shall also establish electronic means by which such incorporation activities can be conducted.
  • Safeguards Afforded to Foreign Investors

    The following protection and safeguards are afforded to investors under the Law:

  • The foreign investors within the Republic shall be given fair and just treatment and will receive the same treatment as afforded to Egyptian Nationals under the Law. An exception to grant preferential treatment to investors can be made with the approval of the Council of Ministers.
  • Arbitrary or discriminatory procedure to establish investments is prohibited, and an investment project established on the grounds of fraud, deceit or corruption shall not enjoy any protection under the provisions of this Law. Nationalization of projects is not allowed.
  • The property in investment projects cannot be attached, confiscated or frozen except by a court's order or judgment. The only exception to this will be tax debts and social insurance subscriptions due to the State, which may be collected at any time and through all types of attachment.
  • Proper procedure and a warning must be issued before conducting any revocation or suspension of licenses issued with respect to any investment project in the jurisdiction. The right to be heard and defend with an adequate grace period shall be afforded to the person being accused of any violation.
  • Foreign nationals who are not residents of Egypt shall be provided with residence in the territory throughout the term of the investment project.
  • Such investors are entitled to receive all profits from the project, and if they wish to, then they can even transfer such profits abroad. The investors will also have a right to liquidate the project and transfer the proceeds of such liquidation abroad. They can also transfer any compensation received from the project abroad.
  • An investment project can appoint up to 10 percent foreign employees in a project which can be increased to a maximum of 20 percent foreign employees in case it is not possible to appoint national workers with the required complications. This percentage can further be raised in matters of special significance and after a decision is issued by the Supreme Council for the same.
  • Investors will enjoy general incentives such as an exemption of 2 percent overall customs tax on the value of imported machinery and equipment in Egypt. Stamp tax and registration fees on loan agreements, mortgages, articles of association and land contract notarizations related to the investment shall also be exempted.
  • Special Incentives shall be provided by the Supreme Council's decision by dividing investment areas into two Sectors; Sector A affording a 50 percent discount off the investment costs and Sector B affording a 30 percent discount off the investment costs.
  • Additional incentives for foreign investors can be issued by the head of the General Authority for Investment and Free Zones (GAFI) which may include stabilized utilities, State incurring expenses paid by the Investor, allocation of lands free of charge, allowing special customs offices for exports and imports pertaining to the investment project and other incentives.
  • Social Responsibility of Investors

    The investors have certain responsibilities to adhere to while investing in Egypt. This shall include achieving goals of sustainable development, and the Investor may dedicate a certain percentage (not exceeding 10 percent) of his annual profits, to participate in certain fields in whole or in part and contribute to sustainable activities. Such field of activity includes the following:

  • Protection of the environment is of prime importance, and the investors shall take all necessary action to enhance and safeguard the environment.
  • Investors can provide services or programs in healthcare, social care, cultural care or any other development areas.
  • Support technical education or provide funding for research and studies. Investors may also participate in spreading awareness through campaigns that develop and improve the production in universities or scientific research institutions.
  • Providing training and scientific research.
  • The Competent Minister may create a list of social development activities according to the sectors, geography or other criteria and make an announcement of the list to the public. Investors may not pursue any projects that are religious, political, party-related or involve discrimination among citizens. Social responsibility is imposed on the investors in Egypt and shall be pursued subject to Article 15 of the Law.

    The Investment Regime

    This Article aims to divide and focus on the investment regime in all four areas, including investment in inland regions, investment zones, technological zones and free zones (public and private).

  • Inland Investment
  • Investment set up, established or operated in the mainland of Egypt (zones other than the free zones) in accordance with the national public policy and the provisions of the Law shall be termed as an inland investment. The investment can be made in all areas other than those of investment and free zones. An investment plan shall be drawn up by the Ministry of Investment for approval by the Supreme Investment Council, which shall include the type of investment, geographical area, the system and other sectors. After receiving the plan, the investment authority will issue guidelines for such a project within 90 days of receiving the proposal. Such guidelines shall include the permits, licenses, allocation of land and issuance of other approvals. Companies that are set up for national operations shall be granted approval by the Prime Minister for the management of the project.

  • Investment Zones
  • An investment zone is a geographic area with defined size and borders specified to conduct a specific investment activity and other activities that complement this. An investment zone is set up by virtue of a decree issued by the Prime Minister in fields including agricultural, logistic and industrial zones. Such a decision shall clearly lay out the location, coordinates, nature of the activity, term for completion and shall grant a license for the investment project. The developer in charge of the zone will be responsible for the establishment of the zone pertaining to the license, the failure of which shall render the license void. The investment zone shall be managed by a Board of Directors (BOD) who shall have the sole jurisdiction to manage such a zone. The BOD shall lay down the plan of action and rules for conducting activities in the project. The BOD will also file quarterly reports on any progress or issues relating to the investment project.

  • Technological Zones
  • Technological zones will be established by virtue of a decree issued by the Prime Minister covering areas of communication and technology and by issuing of a license. This field can include industrial activities, technological education, software development and other complimenting activities. All machinery and tools required to conduct activities relating to communication and technology in this zone shall be exempt from all taxes and custom duties. The Board of Directors will have the sole jurisdiction to set out rules and criteria for the management of the project. The BOD will be required to disclose all the funds of the project, which will be subject to audit on an annual basis by an independent entity to avoid conflict. Such a report shall be submitted to the Supreme Council to ensure that there is no violation by such BOD.  

  • Free Zones
  • A free zone is that part of Egypt's territory that will be located within its borders while being governed by administrative Authority and the dealings of which shall be conducted with special customs and tax provisions. There are two types of free zones, public and private. A public free zone shall be set up by the Council of Ministers upon a proposal by the competent Minister. Such public free zones shall be granted a license, and the decision issued will layout the location and boundaries of the free zone. Public free zones in Egypt will mainly aim at the exportation of goods and services abroad and shall be managed by a BOD. Similarly, a private free zone can also be set up a proposal of the competent Minister pending the approval of the council of ministers and shall be restricted to one or more similar activities in nature. The free zones can be set up in all investment sectors but shall not be issued licenses to conduct projects in areas of oil processing, fertilizer industries, iron and steel, natural gas, transport, liquidation, energy heavy industries, alcoholic beverages, guns, ammunition, explosives industries and other industries associated with the national security of Egypt. This shall be done without prejudice to the provisions of the licensing of oil refining projects (Law Number 133 of 2010) and companies that are granted licenses to operate in the free zones under this Law. All investment projects in this zone shall be subject to customs and tax controls in accordance with the Egyptian customs administration tax authority. Areas covering banking, non-banking financial instruments and monetary systems shall be carried out in the free zone areas after receiving approval and licenses issued by the chairman of the BOD of the zone. A 1 percent fee of aggregate income is required for any project not involved in importation or exportation of goods in the public free zone, whereas, a fee of 2 percent of total revenues in relation to other projects except importation and exportation shall be required in the private free zones. With respect to both the private and public free zones, the investment projects shall be required to pay a 1 percent fee of the total revenues upon exporting goods abroad and a fee of 2 percent of total revenues upon imported products into the country (transit goods exempted from this fee). An annual fee not exceeding 0.001 percent of the capital, at a maximum of 100,000 Egyptian pounds shall be paid in the equivalent currency specified by the competent Minister in both the zones.

    Amendments to the Law

    Pursuant to the executive regulations of the Law, amendments to the Law by virtue of Decree Number 2731 of 2019, local and private entities are required to submit information and data to record the foreign direct investment in Egypt as well as any indirect investment to the General Authority of Foreign Investment (GAFI). Public bodies have been identified as public authorities, ministries, governorates and other legal persons competent to grant the necessary license to companies to establish activities in accordance with social laws and international agreements. Some of the public bodies included but not limited to are the ministry of petroleum, ministry of electricity and renewable energy, the Central Bank of Egypt, Egyptian exchange and special economic zones. Earlier all companies set up under the Law were required to submit only annual reports of the financial statements of the company to the GAFI. Whereas, under the amendment, quarterly reports according to the new data reporting requirements shall also be submitted to the GAFI by all companies having foreign investment in Egypt. Such quarterly reports shall be submitted within a maximum of 45 days from the end of each relevant quarter and annual reports within four months from the end of every financial year shall also be submitted. The failure to comply with this shall result in a penalty not exceeding 50,000 Egyptian pounds to be imposed on the person in charge of the management of the company, provided that he was aware of such non-compliance.

    Dispute Resolution

    The disputes arising in relation to investment projects can be amicably settled under the Law by virtue of dispute resolution, and other amicable ways including arbitration, mediation and negotiations and are listed below:

     

  • Ministerial Committee for Investment Dispute Resolution – A committee for investment dispute called the 'Ministerial Committee on Investment Dispute Resolution' issued by a decree of the Prime Minister, shall tackle disputes arising between investors and the State in relation to any investment projects that are submitted thereto.
  • Grievance Committee – A grievance committee/committees shall be established to examine any complaints against the resolutions passed by the authorities in accordance with issuance of approvals, permits or licenses in the investment projects. A judge from the judicial body shall form and chair such a committee. An aggrieved party can submit complaints to the committee within 15 days from the date of notice or knowledge of decision rendered against such an aggrieved party. The committee shall be entitled to contact the parties in question and request for documentation or clarifications as the case may be. It shall settle such a matter within a maximum period of 30 days from the date of closing of hearings and submissions in the matter. 
  • Ministerial Committee on Investment Contracts Disputes – A committee called the 'Ministerial Committee on Investment Contracts Dispute Resolution' shall be formed by virtue of a decree issued by the Prime Minister to settle disputes arising from investment contracts with the state or such authorities being a party. The settlement decision by such a committee after being approved by the council of ministers shall be binding and enforceable.
  • Mediation and Arbitration Centre – The parties of a dispute can agree to settle such a dispute at any time through settlement by arbitration or mediation or any other means of dispute resolution. The Egyptian Arbitration and Mediation Centre with a seat in Cairo shall be set up to tackle the settlement of investment disputes arising among investors or investors and the State if such parties agree to settlement through arbitration or mediation before this Centre. Members comprising a board of directors who have the experience, reputation and specialization shall be appointed by virtue of a decree issued by the Prime Minister.
  •  

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    Sun, 09 Aug 2020 09:23:00 GMT
    <![CDATA[SEBI Portfolio Managers Regulation 2020]]> SEBI Portfolio Managers Regulation 2020

    The Portfolio Management Services (PMS) industry had a robust growth of 18 percent Compound Annual Growth rate in the preceding five years, with assets under management (AUM) rising from INR 6.04 trillion to INR 13.7 trillion. Furthermore, disruptions in the market, including technological advances, have affected the core portfolio selection, management and distribution side of the industry. The Securities and Exchange Board of India (SEBI) on 16 January 2020, undertook the first overhaul of the regulations governing PMS in over two decades by issuing the SEBI (Portfolio Managers) Regulations, 2020 (Regulations). The Regulations were introduced considering the recommendations of the working group constituted to review the erstwhile SEBI (Portfolio Managers) Regulations, 1993. The main objective for the new development is to enhance the regulations in the previously unregulated industry and bring in more transparency with the dual aim of protecting investors while maintaining the attractiveness of the industry. The Regulations came into effect from 21 January 2020. 

    The portfolio manager is a body corporate, who directs or advises or undertakes on behalf of the client, the administration or management of a portfolio of securities or goods or funds of the client and may deal in goods received in delivery against the physical settlement of commodity derivatives. All portfolio managers must obtain a certificate of registration from the Board. 

    Main changes introduced in the new Regulations as compared to the 1993 Regulations:

  • Minimum Investment 
  • Regulation 23(2) of the Regulations has increased the minimum investment amount per client to INR 50 lakh from the previous limit of INR 25 lakh. This particular change was to ensure that PMS is adopted only by high net-worth individuals (HNI) and that retail investors come through the mutual fund route. As compared to mutual funds, PMS is a more sophisticated investment choice with complicated and riskier products. Increasing the limit is judicious to the extent that retail investors having a limited understanding of the risk shall not deal with the product and be protected under the mutual fund's regime as they are subject to tighter regulation. However, the change may slow down the growth of the PMS industry since the market consisting of investors will reduce with the doubling of the investment amount. Thus, despite making the services more investor-friendly, it is not clear if the stellar growth thus far will continue. 

  • Minimum Net Worth 
  • Regulation 9 of the Regulations have increased the minimum net worth required for portfolio managers to INR 5 crore from the previous requirement of INR 2 crore. A grace period of 36 months can be availed by the existing registered portfolio managers to increase their net worth. The increased threshold will limit the number of existing or new businesses that wish to retain or obtain their registration. The requirement is far away from the net worth required for investment advisors, which is INR 25 lakh (Regulation 8 of the SEBI (Investment Advisors) Regulations, 2013) though the services provided by both service providers are similar. The change has been introduced to deter the non-serious players, but it may be a restricting factor for other players who fulfill other criteria but do not reach the threshold for net worth. For the Regulations, "net worth" means the aggregate value of paid-up equity capital plus free reserves minus the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off. 

  • Investment in unlisted securities 
  • Portfolio managers offering advisory or non-discretionary services to clients may invest or provide advice for investment up to 25 percent of the AUM of such clients in unlisted securities, in addition to the securities permitted for discretionary portfolio management. (Regulation 24(4) of the Regulations)

  •  Standardization of fee and distributor's commission 
  • Regulation 22(11) states that a portfolio manager shall charge an agreed fee from the client without guaranteeing any return and the fee so charged may be a fixed fee or a return-based fee or a combination of both, provided that no up-front fees shall be charged by the portfolio manager directly or indirectly to the clients.  

  • Standardized reporting 
  • As per the previous regulations, a periodical report had to be submitted to the client every six months, but now a performance report to the client needs to be submitted every three months (Regulation 31 of the Regulations) along with disclosing the default in payment of coupons or debt security or downgrading of rating by the credit rating agency. The reporting to the clients shall contain the following details, namely, the value and the composition of the portfolio, description of goods and securities, number of securities, value of each security held in the portfolio, units and the value of goods, cash balance and aggregate value of the portfolio as on the date of the report; the default in payment of coupons or other default in payments concerning the underlying debt security and downgrading to default rating by the rating agencies, if any; details of commission paid to the distributor(s) for the particular client. 

  • Principal Officer 
  • Regulation 2 of the Regulations elaborates that "principal officer" is an employee of the portfolio manager who is responsible for; the decisions made by the portfolio manager for the administration or management of a portfolio of funds or securities of the client, as the case may be; all other operations of the portfolio manager.

    The principal officer is required to have;

  •  a professional qualification in law, finance, accountancy or business management;
  •  minimum five years' experience in related activities in the securities market (minimum two years of relevant experience to be in portfolio management or investment advisory services, or in areas related to fund management); and
  • a relevant National Institute of Securities Markets certification. 
  • A portfolio manager who was granted the registration certificate before the commencement of the Regulations is required to comply with requirements (1) and (2) above within a period of three years. Additionally, specific qualifying criteria must be met by at least one employee of the portfolio manager other than the principal officer and compliance officer. 

  • Payment of fees, and the consequences on failure to pay the fees 
  • Every applicant who is eligible for grant of a certificate shall pay the fees within 15 days (Regulation 15 of the Regulations) of receiving intimation from the Board in the manner specified in Schedule II. The Board may on sufficient grounds being shown permit the portfolio manager to pay such fees at any time prior to the expiry of one month from the date on which such fees become due. The consequences of failure to pay the fees remain the same. Failure to pay the fee as specified in Schedule II may result in the suspension of the certificate by the Board, and the portfolio manager shall forthwith cease to carry on the activity as a portfolio manager for the suspension period. 

  •  Disclosure Document (Regulation 22(4) of the Regulations)
  • The Disclosure Document shall include the following:

  • the manner and quantum of fees payable by the client for each activity for which the portfolio manager renders the service directly or indirectly (where such service is outsourced);
  • the portfolio risks including risks specific to each investment approach offered by the portfolio manager;
  • complete disclosure of the transactions with related parties according to the accounting standards specified by the Institute of Chartered Accountants of India;
  • the details of conflicts of interest concerning the services offered by group companies or associates of the portfolio manager;
  • the portfolio manager's performance, provided that the performance of a discretionary portfolio manager shall be calculated using 'Time-Weighted Rate of Return' for the immediately preceding three years and in such cases performance indicators shall also be disclosed. The portfolio manager may be permitted to disclose performance segregated on the basis of investment approach;
  • the portfolio manager's audited financial statements for the immediately preceding three years.
  • Further Regulation 22(5), 22(6) and 22(7) of the Regulations specify that the contents of the Disclosure Document are to be certified by an independent chartered accountant, and the portfolio manager shall further ensure that a copy of the Disclosure Document is available on the portfolio manager's website at all times and as soon as the registration is granted. The portfolio manager shall file a copy of the Disclosure Document after the grant of certificate of registration with the Board before circulating it to any client or whenever any material change including change in the investment approach is affected. The portfolio manager shall file the disclosure document with the material change within seven working days from the date of the change.

  • Investment approach
  • The PMS sector did not provide a formal concept of an "investment approach". An investment approach is a wide outlay of the types of securities and instruments permissible to be invested in for the client by the portfolio manager, taking into account factors specific to clients and securities. 

    Portfolio managers use several investment approaches to manage portfolios and market their portfolio offerings in their individual ways. If portfolio managers are not required to report the performance based on the different investment approaches, accurate information will not flow to potential clients and the SEBI. The portfolio manager is mandated to disclose the investment approach in the Disclosure Document shared with a prospective client, and the same is also required to be included in the client agreement. 

    An investment approach shall include:

  • the objective of the investment;
  • describing the types of securities, e.g., listed or unlisted, equity or debt;
  • the portfolio's allocation across types of securities;
  • the basis of selecting such types of securities as part of the investment approach;
  • the appropriate benchmark for comparing the performance and the basis for the choice of the indicative benchmark tenure or investment horizon;
  • the risks associated with the investment approach; and
  • other salient features, if any. 
  • It was further specified that the information concerning the investment approaches offered by portfolio managers should be uniform across all types of disclosure materials, reporting, and marketing. 

    Conclusion 

    The magnitude of changes introduced by SEBI is aimed at building the investor confidence and promises a positive outlook for the industry. The changes such as increased investment by clients and increased net worth for portfolio managers are preferred goals, but did SEBI consider the implementation aspects of these goals if the ultimate objective is to increase the participation in PMS? The downfall could be, for example, minimum investment by the client will hurt the wider objective of amplifying the investor base and in turn will diminish the market and also have a bearing on the freedom to contract and the right to choose from the available investment options. The enhanced eligibility criteria for the principal officer will result in increased compliance costs for the portfolio manager. It is yet to be concluded whether the new Regulations will be a boost to the industry as it intends.  

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    Wed, 05 Aug 2020 16:08:00 GMT
    <![CDATA[Challenging Expert Appointment in the UAE]]> Challenging Expert Appointment in the UAE

    The appointment of an expert in UAE (United Arab Emirates) can be challenged on the basis that the expert failed to carry out his duties in an impartial manner or without prejudice to either one of the parties. The expert appointed has to at all times exercise impartiality towards the parties in a dispute and has to act independently. An expert is defined as any legal person who practices the profession of expertise and is registered on the list recorded in the experts' register in the Ministry of Justice of UAE under the Federal Law Number 7/2012 on the Regulation of Expertise before the Judicial Authorities (the "Law"). The expert appointed has to at all times exercise impartiality towards the parties in a dispute and has to act independently. There are certain conditions that the expert has to abide by at all times, and any failure of the expert in performing these duties shall render the expert's decision to be challenged. These conditions that the expert has to conform to have been mandated under Article 11 of the Law and have been outlined below:  

  • The expert is to practice his profession with utmost honesty, sincerity and accuracy. It is to be practiced in a manner that is prudent whilst preserving its dignity and consideration. It is also imperative for an expert to take into account the principles and traditions of the profession in accordance with the Charter which lays down the set of rules and regulations governing the work of the expert;
  • The expert shall be banked upon to handle the task entrusted to him personally and independently;
  • The expert shall not indulge in any disclosure of information pertaining to his professional expertise work or anything that he may have accessed by virtue of his work of expertise;
  • Neither the expert nor any one of his relatives (up to the fourth degree of kinship) are to have any personal interest either directly or indirectly in any business related to the subject of the case or the subject of his expertise;
  • The employer of the expert shall not be a party to the dispute being considered by the expert;
  • The expert should not accept any work of expertise in a dispute for which he has already been asked for consultancy or where he has been briefed on the documents related to the dispute by any party to the conflict;
  • He has to update and develop his skills in the field of specialization in which he is licensed to practice the expertise;
  • He has to associate his name, registration number and the name of the office through which he works in all publications, correspondences, certificates and reports signed by him;
  • Maintain a special register where data of expertise work performed by him shall be recorded;
  • Maintain a true copy of the reports prepared by him till the adjudication of a conclusive judgment regarding the case subjected to his work of expertise and
  • The expert has to notify the Ministry of Justice of his address and any modification that might occur within a month of the respective modification. Any amendment or modification to the license data will also have to be notified to the Ministry within a month of the said notification.
  • In order to challenge the appointment of an expert, a committee shall be set up by a decision of the Minister of the Ministry of Justice, known as the "Experts Affairs Committee" and this committee shall be competent in reviewing complaints and reports related to the experts. The committee shall be equipped to take any necessary action in accordance with the procedure as specified by the Law and also in accordance with implementing regulations and decisions of the committee. The name of the expert can be struck off from the list upon a decision of the committee in case he loses a requirement of his registration, if he is convicted of a felony or misdemeanor inclusive of a breach of trust/honor and if he is incompetent or unable to perform his work any longer due of his health condition based on the report of the competent medical committee (Article 23 of the Law). The Public Prosecution shall notify the committee of the penal cases filed against the experts and of the judgments convicting them and the committee shall in furtherance of this notify the expert and the party for which he works of the complaint filed against him. The expert shall have a time period of 15 days to respond from the date of receiving such notification. Accordingly, the complaint, along with the expert's response, shall be submitted to the committee upon which a decision can be rendered to dismiss it or refer it further to the investigation.

    Federal Law number 10/1992 on Evidence in Civil and Commercial Transactions (Evidence Law) authorizes the court for the appointment of one or more experts where it deems fit in matters related to a dispute. Whenever deemed to be necessary, the court is authorized to deputize one or more experts from amongst the State employees or from the experts registered on the list to give their advice in matters related to the dispute concerned (Article 69 of the Evidence Law). If either of the parties to the legal dispute is not content with the appointment of the expert or the legal action, then they may lodge a complaint against the estimate within a prescribed time period of 8 days of it being announced. Such a complaint shall be carried forward with a deposition of a written report with the court's record clerk which shall result in the order of estimation not being carried out. However, the said complaint shall be ruled on by another judge or another circuit upon hearing the statements of complainants and the ruling rendered in such matter shall be final and irrevocable (Article 91 of the Evidence Law).

    In case the parties are not content with the appointment of an expert then the parties to a dispute shall have the right to apply for dismissal if such an expert based on the conditions mandated in Article 77 of the Evidence Law. Such conditions include the scenario where the parties may apply for removal of the expert if it appears that he is incapable of performing his assignment without bias. If it is shown that the expert is a relative or in-law to either of the parties in the legal action up to the fourth degree, then the expert's appointment may be challenged. He should also not be a trustee or guardian, be working for any of the litigants or be appointed as an attorney for either party in his personal work. If the expert or his wife is involved in an existing dispute with any of the parties in the lawsuit, unless such dispute has arisen after the appointment of the expert for the purpose of having him dismissed, then the expert's appointment holds ground for being contested. The appeal for dismissal of the expert shall be made by appearing before the court within a time period of one week of the date of his appointment if the order has been issued in the presence of the party who applies for such dismissal. If such an order has been issued in his absence, then the appeal for dismissal shall be submitted within the next week following the service of the order upon him. The right to appeal for dismissal shall not elapse on the basis of reasons arising after such time has been given or if the litigant has produced a proof that he has no knowledge of such reasons except after the lapse of the time given. The reports of the expert can be challenged by the court where the court decides not to follow such report provided that the judge specifically provides reasons for such decision.

     

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    Wed, 05 Aug 2020 15:42:00 GMT
    <![CDATA[Non-payment of Service charges]]> Non-payment of Service charges in Dubai and Abu Dhabi

    The Real Estate Regulatory Agency ("RERA") issued a notice in April 2020, stating that the homeowners in Dubai who defaulted on 2019 service charge payments will have their fines waived. But did this mean that the waiver would extend to 2020 payments? Well, that is at least what many homeowners believed which has been the prime reason why there has been a delay in the payments.

    "What is a service charge?" holds no link to the rent or the occupation of part of an area of land, but instead is used for the maintenance and upkeep of the property and the services offered to cover up the expenses for security staff, cleaning services, landscaping etc. Service charges can also fund luxury facilities for residents, such as communal leisure facilities.

    A tenant might come across in their lease or tenancy agreement the way in which a service charge is organized and details of what the landlord can and can't charge and the proportion of the charge which is to be paid by the individual leaseholder. The landlord (or sometimes a management company that is a party to the lease) provides the services, while the leaseholders pay for them.

    Typically, the old leases still provide services at a fixed rate, regardless of the actual costs incurred by the landlord. However, most service charges are calculated on the actual or estimated cost of the services and thus vary from year to year. These are known as variable service charges.

    Dubai

    Law Number 6 of 2019 on Ownership of Jointly Owned Property in the Emirate of Dubai (the "Dubai Law") clearly lays down that the Owner shall pay the Service Charge and Master Community Service Charge unless the Unit lease stipulates otherwise. In all cases, the Owner shall remain liable to pay the Service Charge and Master Community Service Charge if the tenant fails to pay them as prescribed by the Dubai Law.

    Article 25 of the Dubai Law lays down that the Owner shall pay the share of the Service Charge to the Management to cover the expenses of the Management, operation, maintenance and repair of the Common Areas. Services Charge for unsold Units, as well as for Units sold in which the Developer is obliged to pay the Service Charge for the buyer in the contract of sale or attachment in accordance with the provisions agreed in the contract. The area of the Unit registered in the Land Registry shall be relied upon when calculating the Owner's share of the Service Charge.

    It is forbidden for the Management to impose or collect any amount whatsoever from the Owner for the operation, management, maintenance and repair of common areas or common facilities except after obtaining the prior approval of the RERA, and in accordance with the directions issued by the Directors General. Moreover, the Developer or the Management cannot take action against the Owner which prevents him from benefiting from the Unit or the Common Areas or Common Facilities, solely to oblige him to pay the Service Charge or Master Community Service Charge in contravention of the procedures stipulated in the Dubai Law.

    Article 32 of the Dubai Law states that the Management has a lien on each Unit in respect of unpaid Service Charge. The Unit shall not be disposed of until after the paying of allowance to the Management. However, if the Owner fails to pay their share of the Service Charge or any part thereof, the Management shall demand them to pay this charge within thirty days from the date of notifying them thereof by a written notice approved by the RERA. If this time limit elapses, the financial claim issued by the Management to the Owner shall be enforceable before the execution judge in the Centre, in accordance with the rules and procedures in force in this regard. The competent execution judge may when necessary, sell the Unit whose Owner has not paid his share of the Service Charge, through public auction to recover the due Service Charge. The Owner who fails to pay his share of the Service Charge shall pay the legal fees, expenses and attorneys' fees determined by the competent execution judge.

    RERA has recently issued a "Need to pay up" notice insisting the homeowners need to come up with their share. To upkeep the properties, it is important that the payments towards the community's service fees are paid on time and in full. As the Owner Association Management Companies are required to get prior RERA approval as per the Dubai Law to send legal notices to homeowners who have repeatedly defaulted on service charge payments, the latest notice to pay up has cleared the possible legal option to pursue the defaulters.

    Abu Dhabi

    Law Number 3 of 2015 concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the "Abu Dhabi Law") applies to real property within the Emirate of Abu Dhabi with the exception of the Abu Dhabi Global Market. The Abu Dhabi Law covers a wide range of subjects including the development and regulation of strata title, the registration and enforcement of mortgages and the licensing of real estate agents, brokers and other entities.

    As per Article 68 of the Abu Dhabi Law, the Owners' Union may collect the service fees from the owners to finance its activities, as per the contribution percentage of each real estate unit. The service fees shall be paid by the Owner of each real estate unit to the Owners' Union on the due date, provided that the Developer pays his share in the fees with respect to unsold units. The Union's Articles of Association shall mention the type of service fees, how to collect them, and the records that should be kept.

    Upon the failure of the Owner to settle its service fees, a preferential right for the Owners' Union shall arise on the respective real estate unit. The Owners' Union shall, according to the resolution of its Board of Directors, notify the Owner of the real estate unit by the registered mail with acknowledgment receipt to settle the overdue service fees within three months from the date of notification. Should the Owner of the real estate unit fail to pay within the specified period of the notification, without expressing an acceptable excuse, the Owners' Union may submit an application before the judge of urgent matters to issue an order to sell the real estate unit for the settlement of the due service fees according to the provisions of the Civil Procedure Law.

    ]]>
    Sun, 02 Aug 2020 09:37:00 GMT
    <![CDATA[External Commercial Borrowings in India]]> External Commercial Borrowings (ECBs) in India

    Within a narrow span of two years, foreign debt more than doubled, as domestic lenders adopted a cautious stance upon considering the fallout of a liquidity crisis, and as India's Central Bank eased rules for using overseas borrowings. As depicted by the data of Reserve Bank of India (RBI), the total external commercial borrowings – i.e. loans granted by non-resident entities to eligible Indian borrowers in foreign currency, increased by a whopping 61.45 percent year-on-year to USD 50.15 billion, as of December 2019. This happens to be a 117 percent jump from the numbers of 2017.

    External Commercial Borrowings (ECB) refers to the debt shouldered by an eligible entity in India for solely commercial purposes, that has been extended by external sources, i.e. from any recognized entity outside India. These borrowings are expected to conform to norms and conditions put forth by the RBI. The ECBs fall under the umbrella of RBI regulations as postulated under the Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations (Master Direction), and the Foreign Exchange Management Act, 1999 (FEMA).

    ECBs have proven to be instruments that greatly aid Indian firms and organizations in their efforts to raise funds from beyond India's borders, especially with regard to bringing in fresh investments. One might recognize that structures similar to ECBs include those of Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Exchangeable Bonds (FCEBs). It is vital to note that while the main purpose underlying the issuance of FCCBs is the raising of capital, ECBs are more expansively applicable; within the latter's ambit lies commercial loans that can include securitized instruments, bank loans, suppliers' credit, buyers' credit, and bonds. The minimum maturity period of the aforementioned instruments is, on average, three years.

    Availing of External Commercial Borrowing

    As of today, there exist two paths to raise funds by employing ECBs- the approval route, and the automatic route. There are a variety of eligibility regulations created by the government for availing of finance under the automatic route. These regulations are in relation to amounts, industry, the end-use of the funds, etc. Companies that desire to raise finance via ECB must necessarily meet these eligibility criteria; thereafter, funds can be raised without the need for approval.

    The approval route, on the other hand, mandates that companies which fall under certain pre-specified sectors must obtain the RBI's or the government's explicit permission, prior to raising funds through External Commercial Borrowing. The RBI has issued circulars and formal guidelines, specifying the borrowing structure.

    In order to ensure that the inflow stays clean, the RBI has created the categorization of "eligible entities" amongst the borrowers, and that of "recognized non-residents" amongst potential lenders. Furthermore, it has maintained checks via forms of ECB, end-use restriction, minimum maturity period etc.

    Eligible Borrowers and Recognized Lenders

    The ECBs come in two configurations: Foreign Currency ECB (FCY ECB) and Indian Currency ECB (INR ECB). Eligible borrowers could be a label that fits any entity that is eligible to seek Foreign Direct Investment (FDI). It can also include specific entities the likes of Port Trusts, Units in Special Economic Zones, Small Industries Development Bank of India and the EXIM Bank of India. The ECBs are to be obtained from 'recognized lenders'. These terms could refer to any entity that is a member of the International Organization of Securities Commissions (IOSCO) and Financial Action Task Force (FATF). In addition to IOSCO and FATF, multilateral and regional financial institutions where India is a member country, foreign subsidiaries of Indian banks (subject to applicable prudential norms), and individuals (if they are foreign equity holders), also fit the bill of recognized lenders, as per the ECB Master Direction.

    End-use Restrictions

    Over the passage of time, RBI has relaxed the stringent restrictions on end-use of ECBs raised, and as per the circular dated July 30, 2019, the utilization of ECB proceeds is now permitted to satisfy general corporate purposes, working capital requirements, repayment of INR loans and for such on-lending purposes, subject to limit and leverage requirements detailed in the Master Direction. The most notable development with regard to the relaxation in policy is that of the new permissibility of ECB usage for working capital, and general corporate purposes with a minimum average maturity period (MAMP) of 10 years. Furthermore, the ECB proceeds can also be harnessed for the repayment of rupee loans availed domestically with a MAMP of 7 years.

    Notably, the Master Direction imposes restrictions of the manner in which these funds are used. The funds borrowed through External Commercial Borrowing may be used for the expansion of companies, but they cannot be employed for the purposes of onward lending, repaying existing loans, or investing in real estate.

    Benefits of External Commercial Borrowing

    Aside from the obvious, the ECB structure is possessive of a variety of intrinsic benefits, some of which shall be detailed upon. First and foremost, the value of funds is generally lower when borrowed from external sources. For instance, there are a multitude of economies that have a lower interest rate; if Indian firms and organizations were to borrow at lower interest rates from the Eurozone and the United States, they would indubitably stand to benefit. Since the markets are larger while raising funds through ECB, companies' capacity to meet larger requirements from international players is magnified, in comparison with domestic player interaction.

    Another boon is the fact that ECBs are, by virtue of their most fundamental nature, simple loans. Given that they do not necessarily have to be of equity nature, the company's stakes shall not be diluted. The borrowers can necessarily raise funds without relinquishing control since debtors will not have any voting rights in the company.

    While ECBs enable the borrower to diversify the investor base, they also open up a vista to global markets, affording borrowers greater exposure to worldwide opportunities, which is not to say that ECB does not feed the local economy. The inflows can be directed into the sector by the government of India, thereby increasing the potential for growth. For example, a greater percentage of funding through ECB can be permitted by the government for the SME and infrastructure industry, thus contributing to the growth of the country.

    Disadvantages of External Commercial Borrowing

    While a multitude of ECBs' strong points has been discussed, some disadvantages are worth considering too. One could hypothesize that the company could develop a lax attitude, as they increasingly come across funds available at lower rates. This could lead to companies borrowing with abandon and could lead to higher debt on the balance sheet of the company, thereby adversely affecting financial ratios.

    The fact is that rating agencies view companies with higher debt on their balance sheets with a negative perspective, which could lead to a market demotion of such companies. Additionally, the shares of the company could also be subject to a fall in market value over a period of time.

    Since raising funds through External Commercial Borrowing is done in foreign currencies, the principal and the interest shall have to be paid in foreign currencies. As such, the company opens itself up to the risks associated with exchange rates. This could even lead the company to engage in cost-hedging.

    It is established that the ECBs can be availed at lower rates; however, there are several guidelines and restrictions that cannot be evaded. These restrictions primarily apply to the amount that can be borrowed, and the maturity of the External Commercial Borrowing. While amounts in excess of USD 20 million will have maturity periods of at least five years, amounts under USD 20 million will have maturity periods of at least three years on average.

    The External Commercial Borrowings are among the most commonly available sources of funding. Nonetheless, it goes without saying that companies must exercise caution with regard to the impact that the borrowing can have on their balance sheets, and exchange risks.

    Conclusion

    What with the RBI delineating industry-specific distinctions for the automatic route and the approval route to ECB procurement, putting forth end-use restrictions and minimum average maturity periods, it is clear that ECBs are going to harnessed as one of the primary vehicles to bring investment in India.

    Given that the RBI now permits ECB proceeds to see through the repayment of loans, the Indian GDP is expected to maintain stability; at the same time, Indian corporations have been afforded grand leeway to seek much-required funds from the overseas market with refreshingly modest interest rates.

     

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    Sun, 02 Aug 2020 08:38:00 GMT
    <![CDATA[Competition Law in Bahrain]]> Competition Law in Bahrain

    "The heart of our national economy long has been faith in the value of competition"

    -Standard Oil Co. v. FTC, 340 U.S. 231, 248, 71 S. Ct. 240 (1951)

    Firms conducting anti-competitive behavior may find their agreements to be unenforceable and risk being fined for particularly impaired conduct as well as exposing themselves to possible damages actions. In addition, individuals could also find themselves facing disqualification orders or even criminal sanctions for serious breaches of competition law. Any business, irrespective of its legal status, sector and size, needs to be aware of competition law, in order to meet its obligations to avoid the penalties and also to assert its rights to protect the position in the marketplace.

    Two sets of competition rules apply in parallel in the United Kingdom (UK). Anti-competitive agreements which may affect trade within the UK is specifically prohibited by Competition Act 1998 (Chapters I and II) and the Enterprise Act 2002. Where the effect of anti-competitive behavior extends to the other EU Member States, it is prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).

    The Kingdom of Bahrain (Bahrain) issued Law Number 31 of 2018 with respect to the Competition Promotion and Protection (the Law) in order to boost its economic diversification and liberalization further. The Law came into force in 2019 and is expected to have positive repercussions on businesses carrying out their operations in the country. 

    It is vital to note that while Bahrain has never had a standalone competition law, specific key concepts related to competition law are embedded in various laws already in force in the country, such as the Civil Code, Commercial Code and Consumer Protection Law. However, the Law was created based on a wide range of international sources to foster Bahrain's regulatory framework in accordance with developments of international legislation.

    The Law focuses on regulating the following core issues:

  • anti-competitive arrangements;
  • abuse of dominant position; and
  • economic concentration.
  • Pending the issuance of a decree forming the Board of Directors and the financial allocation of the Authority for governing and enforcing the Law (the Authority) in the general budget of Bahrain, the Consumer Protection Directorate at the Ministry of Industry, Commerce and Tourism (MOICT) has been temporarily appointed as the Authority.

    The powers, functions and duties of the Authority are:

  • To monitor compliance with the Law;
  • To receive and investigate complaints concerning the possible violations of the Law; and
  • To investigate any possible violation discovered by the Authority or where requested to do so by the Minister.
  • Scope of Application

    Article 2 lays down the scope of application of the Law. The Law shall apply:

  • To all undertakings that carry out their economic activities in Bahrain;
  • To any arrangement or conduct which is intended to or results in anti-competition in Bahrain, even when the party or parties are not established in Bahrain; and
  • To economic activities conducted extraterritorially, yet affecting competition in Bahrain.
  • Provisions of the Law are not applicable:

  • To arrangements approved by international conventions that are applicable in Bahrain;
  • To facilities and projects owned or controlled by the state of Bahrain; and
  • To arrangements necessary for the use, exploitation, transfer, assignment, or license of Intellectual Property rights; provided that these arrangements do not unreasonably hamper the competition or transfer and dissemination of technology.
  • Anti-competitive arrangements and exemptions (Section Two of the Law)

    The Law imposes a prohibition on arrangements which have the object or effect of hindering competition in Bahrain such as:

  • Influencing the prices of the products through increasing, reducing or fixing the price or by fictitious arrangements or in any other form;
  • By limiting or controlling the production, marketing, technical development or investment;
  • By sharing the markets or sources of supply;
  • By knowingly disseminating false information about products and their prices;
  • By doing collusive practice in bids or proposals with respect to the auctions, tenders or practices, and influencing the proposed selling or purchase price of products;
  • By affecting other competitors through fabricating sudden abundance of products leading to exchanging these products at a false price;
  • By doing a collusive practice of refusal to buy, sell or supply from a particular business (or businesses) with the purpose of preventing or hindering its practice.
  • Any arrangement which is found to be contrary to provisions above shall be null and void in Bahrain. However, an arrangement where all its parties are under the direct, or indirect control of one undertaking, shall not be subject to provisions above, even if the controlling undertaking is a party to the arrangement.

    There are exceptions to the general prohibition against anti-competitive arrangements mentioned in Articles 4, 5 and 7 of the Law. In general terms, arrangements which would normally be prohibited on the grounds of being anti-competitive may be permitted if:

  • the Authority, by virtue of a resolution, decides that the harm caused by the anti-competitive nature of such arrangements are outweighed by certain positive outcomes of the arrangement (Requirements are set out in Article 4 of the Law);
  • the Authority, as per Article 5 of the Law, decides so for the categories of arrangements between small businesses having one of the positive outcomes set out in Article 4 of the Law. The exemption shall be for a specific term that may be renewable for additional terms;
  • by a reasoned decision issued by the Minister, after obtaining the advice of the Authority, and approval of the Council of Ministers, on the grounds of compelling reasons of public policy. The decision may be conditional and for a specific period, subject to renewal (Article 7 of the Law).
  • Abuse of dominant position and exemptions (Section Three of the Law)

    A dominant position exists when any business, solely or jointly with other businesses, can control or influence the market. A business enjoys a dominant position if it has an economic strength to prevent effective competition in the market and to act in a manner significantly independent from its clients and competitors.

    Unless proven otherwise, a business is in a dominant position if its share is in excess of 40 percent in the relevant product market in Bahrain. An association of undertakings, consisting of two or more undertakings, are in a dominant position if their market share is in excess of 60 percent in a relevant product market. However, an undertaking may be deemed to be in a dominant position in the relevant product market, even if its share is lesser than the aforementioned percentage. A Resolution by the Authority shall set additional parameters to determine if an undertaking, individually or together with another undertaking enjoys a dominant position.

    Article 9 specifically prohibits an undertaking from abusing its dominant position. The following, in particular, shall constitute abuse of a dominant position:

  • Directly or indirectly imposing the selling or purchase prices or any other trading conditions;
  • Limiting, to the detriment of consumers, production, markets, or technical development;
  • Applying discriminating conditions concerning prices, product quality, and other terms of business, in any contracts or agreements concluded with consumers or suppliers of equivalent legal positions;
  • Subjecting conclusion of a contract with respect to a certain product, to conditions such as accepting products or obligations which by their nature or commercial use have no link to the subject of the original agreement, contract or transaction; 
  • Refraining, without any legitimate reasoning, from concluding with any business transactions for the purchase or sale of a product, the sale of products at a price lower than the actual cost, or completely suspending transaction to eliminate competing undertakings from the market, or causing damages that will prevent such undertakings from continuing their businesses.
  • Similar to the exemption in case of anti-competitive arrangements, the Minister, as per Article 10 of the Law, has the power to approve an exception to the prohibition of abuse of a dominant position, if it is deemed to be in the public interest.

    Market concentration and exemptions (Section Four of the Law)

    The Law also regulates certain types of market concentration in Bahrain. Market concentration is established, when a shift in market control is attributed to any of the following:

  • Merger, partially or fully, of two or more undertakings which were previously independent;
  • Acquiring indirect or direct control, over another undertaking partially or fully, by:
  • One or more natural person, controlling one or more undertaking;
  • Another undertaking or undertakings;
  • Establishing a joint venture that undertakes all duties of a single independent undertaking.
  • Furthermore, under Article 12 of the Law, certain types of market concentration transactions are prohibited without approval from the Authority, as mentioned by the Minister's decision after obtaining the advice of the Authority. 

    Article 13 of the Law states that the concerned party, or its representative, shall submit to the Authority, a request to obtain approval of market concentration.

    The Law prohibits economic concentrations which would have the effect of significantly limiting competition in the market. Similar to the exemption in case of anti-competitive arrangements, the Minister, as per Article 15 of the Law, has the power to approve a proposed market concentration, on the grounds of compelling reasons of public policy.

    Penalties

    The Law grants powers to the Authority to ensure compliance with the Law and investigate circumstances where its provisions may have been breached. In case of violation of the Law, the Board of Directors may:

  • Impose a fine not exceeding 5 percent of offender's daily sales of products. Such fine shall not exceed Bahraini Dinar (BD) 1,000 per day in the event of a first-time violation, and BD 2,000 per day in the event of recurrence of the same violation within three years from the date of the issuance of the first decision; and
  • Impose, by virtue of reasoned resolution, an administrative penalty ranging between 1 percent and 10 percent of the total amount of sales of products for the period during which violation took place, and for a maximum period of three years.
  • Other penalties for violations of the Law include both criminal and pecuniary. A person who commits any of the following acts may face imprisonment of up to one year and/or a fine ranging between BD 5,000 and BD 50,000:

  • Provides the Authority with false or misleading data, or data that is contrary to what is recorded in documents and registers in his possession;
  • Withholds any data, information, records or documents which are required to be provided or available to the Authority for the performance of its duties under the Law;
  • Prevents or delays the work of the Authority's inspectors or Authority's ongoing investigation;
  • Destroys any documents that are related to an investigation that is being conducted by the Authority.
  •  

    ]]>
    Sat, 01 Aug 2020 21:01:00 GMT
    <![CDATA[Arbitration in Ras Al Khaimah]]> Procedural Overview onto the rules of arbitration at the Ras Al Kamiah Reconciliation and Commercial Arbitration Center

    Although a dispute may be resolved through court litigation, the parties in the new era are increasingly submitting their disputes for mediation, arbitration or any other Alternative Dispute Resolution ("ADR"). Since a long time, in Europe and in the rest of the world, it is widely admitted to resolve disputes through arbitration or mediation, rather than resorting to judicial proceedings.

    The parties often opt for ADR avoiding national courts for the following perceived advantages:

  • ADR is comparatively faster than court litigation, primarily because the administrative procedure is more straightforward, and also because the arbitration award generally constitutes a binding and final decision, with minimal scope for appeal.
  • ADR is comparatively cheaper, especially when the dispute has an international scope. Indeed, the parties may save costs by settling their international dispute through a single procedure.
  • The parties have the freedom to choose:
  • the ADR Centre among several options freely;
  • the arbitrator(s)/mediator(s) with expert knowledge and from specific legal/technical backgrounds;
  • the law to be applied;
  • the language of the proceedings.
  • With the provisions of the New York Convention, arbitration awards are easier to enforce in other countries than court judgments;
  • Arbitration or mediation awards and proceedings are generally confidential.
  • THE RAS AL KHAIMAH CENTRE OF RECONCILIATION & COMMERCIAL ARBITRATION

    The "ARTICLES OF ASSOCIATION OF THE RAS AL KHAIMAH CENTRE OF RECONCILIATION & COMMERCIAL ARBITRATION" ("Regulations") are applicable on the commercial disputes presented to the R.A.K Chamber for reconciliation or arbitration by either a prior agreement between the parties of the dispute or on the request of a party and the approval of the other.

    It is recommended for those who want to solve their dispute pursuant to the Regulations to include in their contracts:

  • Article of Reconciliation; or
  • Article of Arbitration; or
  • Article of Reconciliation & Arbitration
  • The agreement of reconciliation or arbitration before R.A.K Chamber of Commerce & Industry is the acknowledgment by both the parties to accept the procedures as well as the rules and regulations and commit to it. Parties can agree in writing on the method of arbitration by utilizing different rules to manage the arbitration, including the non-compliance to the rules and regulations. In such a scenario, the role of the R.A.K Chamber shall be only to host the arbitration under its guardianship without applying any rules of the Regulations especially concerning the selection of the arbitrators and the possibility of filing or non-filing appeal against the award of arbitration. 

    The procedural rules that are agreed upon by both the parties shall be implemented on the dispute submitted to the R.A.K Chamber for reconciliation or arbitration. However, when there is no provision in the Regulations to address the specific matter in the dispute, then without prejudice, the laws of the country will be required to be followed. When one or more of the Regulations are not implemented, and the party is aware or expected to be aware of the same, and the party has not raised an objection within a suitable time, the party shall lose their right of objection thereafter. The parties shall be notified by registered mail or by any other known communication means such as fax, or e-mail. The correspondences shall be sent to the parties on their addresses registered to the secretary of the Centre.

    Procedure for Reconciliation and Arbitration

    The Board shall be formed by the members or others of specializations provided that their number should be a minimum of five as per the internal regulations of the R.A.K Chamber, and the Chairman shall be elected by the members.

    Reconciliation

  • The desired party shall apply, in writing, to the secretary of the Centre.
  • The application shall contain details of the case and the applicant's contentions supported by documents.
  • The other party shall be notified by the secretary within a period of not more than seven days from the date of receiving the application. The other party shall present his opinion concerning the case within fifteen days from the date of notification of the reconciliation application.
  • The reconciliation tribunal shall be formed by the Committee of Reconciliation & Commercial Arbitration of the R.A.K Chamber & Commerce ("Committee") as per the Regulations. The parties shall have the right to object on the appointment of the tribunal within two weeks from the date of notification, and the reconciliation procedure shall start after the expiry of such period.
  • The authority shall hear the pleadings by each party who shall attend either personally or through an attorney.
  • If the authority succeeds in reconciling the parties, it will be recorded in a minutes.
  • The authority shall finalize its duty within two months from the date of commencement, with the possibility to extend the term for similar period/s by a resolution from the Committee. However, on failure to reconcile, the case/dispute shall be considered as non-existing before the R.A.K Chamber, and the rights of the parties shall not be prejudiced in any way due to what had been presented or written during the reconciliation sessions.
  • Arbitration

    The party seeking for arbitration shall present an application to the Centre Chairman enclosed with the arbitration agreement along with the supportive documents which shall be sent to the defendant within seven days from date of receiving the application. If there is no agreement on the arbitration and the defendant fails to respond to the arbitration request within thirty days from date of dispatch, the arbitration request shall be considered as rejected from the defendant's side. However, if there is an agreement on the arbitration, the defendant is obligated to send his response to the Centre in regard the arbitration request along with his supporting documents within thirty days from the date of receiving the arbitration application.

    Appointment of Arbitrators:

    The arbitrators selected by the parties have to be approved by the Committee as per the Regulations.

    The arbitration authority shall be formally notified of their appointment with a brief of the dispute, including the name of the litigants. Each arbitrator, whether appointed by the Committee or the parties, shall reply in writing within two weeks from the date of receiving the notification of his approval, a default of the same shall be considered as rejecting the delegation and another arbitrator shall be nominated. The arbitrator shall explain in his response about his relation, business, or any other connection with the parties that might raise a doubt concerning his neutrality towards the dispute.

    The arbitrator's duty shall terminate prior to the closing pleading by the agreement of the parties to terminate it or by a Committee resolution if the Committee found a legal or actual reason that hindered its task or that fails to achieve its efforts as per the Regulations or in the specific time according to a complaint filed by either party or the arbitrators. The Committee shall review the complaint after notifying the concerned arbitrator and other arbitrators and litigants. The arbitrator and other parties of the litigation shall have the right to answer the complaint in writing within fifteen days from the date of notification, and the Committee shall issue its resolution within twenty-one days from the date of receiving all responses from the concerned arbitrator and other parties. A substitute of the arbitrator shall be appointed within twenty-one days from the date of dismissal in the same way as an arbitrator is appointed as per the Regulations.

    If the arbitrator refuses the appointment or if the arbitrator expired during his duty or he could not attend the arbitration meetings, or if he is dismissed from the arbitration procedures, then the Committee Chairman has the right to cease the arbitration till the appointment of the substitute arbitrator or till the reason that hindered his duty is resolved.

    If the parties fail to agree, explicitly or implicitly, on the law required to be implemented, the arbitration committee shall implement the currently valid laws and customs of the country if the subject of the litigation is internal and between parties who have their business addresses within the country. In other cases, the Committee shall implement the law/s closest to the subject of the litigation.

    If the parties have agreed on arbitration inside the Centre and as per the Regulations, then it will be an arbitration authorized by reconciliation and accordingly appealable. The arbitrators who are delegated to effect the reconciliation shall follow the laws required to be implemented, except what is related to the general rules. If the parties agreed for the Centre to host the arbitration without implementing the Centre regulations, then the arbitration shall be either a judicial resolution or reconciliation by the approval of the parties.

    The essential principles of judicial litigation shall be taken into consideration by the arbitration committee while exercising its duty:

  • The right of defense and thus enabling both the parties to present their statements and evidence before issuing the arbitration award.
  • Enabling both the parties to review all papers and documents presented by other party.
  • Treating both the parties equally.
  • The parties have the right to attend either personally or via an authorized attorney before the Committee, and the Committee shall identify the valid representation. If any of the parties fail to attend the sessions requested by the Committee and fail to present within a reasonable period of time a good justification for their absence, the arbitration shall continue to resume.

    Right for Temporary Injunction: The commencement of the arbitration shall not deprive the parties of their right to refer the litigation to the courts for taking temporary injunction. However, the party who takes such procedures shall notify the Centre secretary and the arbitration authority of the same.

     

    Final Award

    The final award issued by the arbitration authority during the arbitration procedures shall be adopted by the majority and signed by the members approving it. The members objecting the award shall state their objection in writing depicting the reasons and sign it for it to be enclosed with the award. If there is no majority for concluding the award, then the final award or any other resolution adopted by the authority during the arbitration procedures shall be issued solely by the Chairman of the arbitration authority.

    Fees

    The charges of reconciliation or arbitration shall include the R.A.K Chamber fees, arbitrators charges, normal expenses spent by parties to prepare their defenses and any other administrative expenses related to renting halls, copies, registration, photocopying and other charges required for reconciliation or arbitration.

    The Committee shall prepare the lists of registration, administrative fees for reconciliation and arbitration and arbitrators fees to be decided by the R.A.K Chamber Board of Directors and the arbitrators' charges shall be a percentage of total litigated amount with a minimum and maximum amount depending on the condition of the case.

    The non-refundable registration fee is to be paid at the time of applying for reconciliation or arbitration.

    The case shall not be handed over to the authority of reconciliation or arbitration until the complete payment of the administrative fees and any advance payment as decided by the authority. The authority shall have the right to request the parties to pay additional payments for reconciliation or arbitration. If the parties refuse to pay any of the required payments, the reconciliation or arbitration shall be terminated, and the secretary shall notify the authority as well as the Committee.

     

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    Sat, 01 Aug 2020 11:49:00 GMT
    <![CDATA[Laws on Medical Negligence in ME]]>  

    Since the middle of the twentieth century, the medical profession has demonstrated an increase in the incidence and severity of medical liability lawsuits. Some are of the opinion that the rise in litigation is useful as learning from errors makes healthcare safer for the community and aids in holding physicians accountable for their actions. The opponents, however, believe that litigation is unnecessary to maintain health standards, asserting that nothing could be more damaging to the future of medical care than the suggestion that patients sue their doctors. Medicine, unlike other professions, relies on humans (physicians), rather than machines, to make complicated decisions that may have potentially severe and lifelong consequences. Adverse outcomes are often an inherent risk of medical care and do not necessarily reflect poor treatment. How is medical malpractice dealt with in the following Gulf countries?

    Saudi Arabia

    Health Care Services in Saudi Arabia has shown a great evolution over the past two decades in both governmental and private sectors. This development in health care was the result of the upgraded technology at the facilities as well as the training and improved experience of the medical practitioners. However, the increasing number of the population, together with the increased awareness about health matters resulted in a growing trend of medical practice litigations. In Saudi Arabia, the number of medical malpractice complaints filed against medical practitioners increased by 37%, from 2,002 complaints in 2011 to 3,178 complaints in 2016.

    The legal system of Saudi Arabia is based on the principles of Sharia law. The Higher court decisions in Saudi Arabia are not binding but are persuasive. The Sharia Medical Panel (SMP) considers medical malpractice claims in Saudi Arabia. The Law of Practicing Healthcare Professions (2005) ("The 2005 Law") lays down for professional liabilities. Article 34 of the 2005 Law sets out that the SMP shall have the following jurisdictions:

  • In considering the claims of medical malpractice cases brought before it regarding private rights ("diyah", indemnity or compensation.)
  • In considering cases of medical malpractice leading to death, damage or loss of total or partial use of an organ, even in the absence of a claim for a private right.   
  • Article 27 of the 2005 Law deals with Civil Liability and states that any healthcare professional who is committing malpractice, causing harm to a patient shall be held liable for indemnification. The SMP shall determine the amount of such indemnification. The following shall be deemed as malpractice:

  • Error in treatment or inadequate follow­-up. 
  • Lack of skills and knowledge that can be expected from others in a similar profession. 
  • Performing unprecedented and experimental surgery, in violation of the relevant rules. 
  • Conducting scientifically unestablished research or experiments on patients. 
  • Administering medications to patients on an experimental basis. 
  • Using medical equipment or instruments without adequate knowledge of its use, or failing to take any appropriate precautions to prevent the damage arising from such use.  
  • Failure in providing adequate monitoring or supervision. 
  • Failure to consult of whom the consultation is necessitated by the condition of a patient.
  • The provision limiting the liability of a healthcare professional or holding him accountable shall be deemed invalid.

    Article 28 of the 2005 Law deals with Criminal Liability and states that any person committing any of the following: 

  • Practicing healthcare without a license;
  • Providing false information or using unlawful means to obtain a license to practice healthcare;  
  • Using means of advertising leading the public to believe in his eligibility to practice healthcare, contrary to fact;  
  • Unlawfully claiming a title associated with healthcare professionals; 
  • Possessing equipment or instruments usually used in the practice of healthcare professions without having a license to practice such professions or a legitimate reason for such possession; 
  • Unjustifiably declining to treat a patient;
  • Trading in human organs or performing human organ transplant knowing that the organ in question has been obtained by means of trade;
  • shall be subject to imprisonment for a period not exceeding six months and a fine not exceeding SAR 100,000, or either punishment.

    The SMPs were given the authority to apply disciplinary liability on practitioners who violate ethical standards as indicated in Articles 31 and 32 of the 2005 Law. Disciplinary actions can start with a warning letter, to a fine, not exceeding SAR 10,000, reaching to the revocation of the license to practice as a health care professional. In case the license is revoked, reapplication for a new license cannot be filed before the lapse of two years from the date of revocation.

    The SMP headed by a judge includes three physicians (one medical teaching staff from a medical school and two physicians from the Ministry of Health (MOH)), as well as a legal expert. In the case of a malpractice suit against a pharmacist, the committee also has two pharmacists, one of whom is a teaching staff of a pharmacy college and the other a pharmacist nominated by the MOH. The SMP is allowed to consult any expert in the field of specialties related to the case under scrutiny. Blood money paid only in the event of death is the highest compensation, whereas other categories of compensations for the loss of an organ or its functions. The SMP makes its decision on majority votes provided that the judge is a part of this majority. The decision of the SMP is independent, final and can be appealed through the Council of Governance within 60 days of its issue.

     

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    Sat, 25 Jul 2020 09:56:00 GMT
    <![CDATA[Cross Border Arbitration in India]]> Five Landmark Jugement on Cross Border Arbitration in India

    The world has become a global village with the advent of globalization. Business organizations have expanded themselves across and beyond borders leading to an increase in cross-border transactions. Agreements and contracts executed between commercial organizations many times go ugly, thus, giving rise to disputes which are not within the confines of the municipal law of a particular country, because the transactions are 'cross-border' in nature. Adjudication of cross-border business disputes demand the expertise of a different sort, especially when the organizations in dispute are from nations which follow different legal systems. Redressal of disputes qua 'arbitration' is their best bet in such situations for arbitration is the most plausible solution.

    All agreements executed between corporations inter-se primarily have the three covenants;

  • 'governing law', as to the law of which country shall be taken recourse to, if and when deals between the international corporations go bitter;
  • 'jurisdiction clause', as to courts of which country shall have a say in the matter in dispute, at hand; and
  • 'arbitration clause', how the conflicts are to be resolved between the corporations before they are formally brought before the court of law for adjudication, such as mediation, conciliation and arbitration.
  • The arbitral mechanism is time-effective and cost-effective, making it convenient for parties to arrive at unbiased outcomes so that commercial relations between parties can be taken forward, healthily. To ensure the absence of actual and anticipatory biasness, it is a widespread practice for the parties involved in international commercial transactions to choose the "seat" of arbitration in a country which has nothing to do with the commercial transactions of the entities involved.

    Arbitration law in India is governed by the Arbitration and Conciliation Act of 1996 ("1996 Act") based on the UNCITRAL (United Nations Commission on International Trade Law) Model Law. The 1996 Act is divided into two parts-

  • 'Part I' relating to domestic arbitrations; and
  • 'Part II' relating to International Commercial Arbitrations.
  • 'International commercial arbitration' is defined under Section 2(1)(f) of the 1996 Act as an arbitration relating to disputes arising out of a legal relationship, whether contractual or not, which are considered as commercial as per the law in force in India; where one or more of the parties are entities (personal or impersonal) which reside outside India.

  • Bhatia International v. Bulk Trading SA (2012) 9 SCC 552 ("Bhatia")
  • The arbitration proceedings were held in Paris as per the Rules of International Chamber of Commerce ("ICC"). An application was moved under Section 9 of the 1996 Act for an order of injunction restraining transfer, alienation or creation of third-party rights on the property. The application was held to be maintainable. The court held the Part I of the 1996 Act to be applicable to arbitrations even though the place of arbitration is not in India. The court opined that remedies under Section 9 of the 1996 Act do not get excluded by the application of the ICC Rules of Arbitration. The Supreme Court held that "To conclude, we hold that the provisions of Part I of the 1996 Act would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogatory provisions of Part I. In cases of International Commercial Arbitrations, held out of India, provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Provisions in Part I of the Act which are contrary to or excluded by that law or rules shall not apply."

    II. The Supreme Court of India put all legal speculations to rest in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 ("BALCO"). 

    The Supreme Court of India affirmatively held as follows:

  • The 1996 Act has accepted the territoriality principle, which has been adopted in the UNCITRAL Model Law.
  • Section 2(2) of the 1996 Act makes a declaration that Part I of the 1996 Act shall apply to all arbitrations which take place within India. Part I of the 1996 Act, therefore, has no application to International Commercial Arbitrations held outside India. Provisions contained in Section 2(2) of the 1996 Act are not in conflict with any of the provisions, neither of Part I, nor of Part II of the 1996 Act.
  • No application for interim relief in a foreign seated international commercial arbitration is maintainable; neither under Section 9 of the 1996 Act nor under any other provision of Part I of the 1996 Act
  •  Part I of the 1996 Act is applicable only to such arbitrations which take place within the territory of India.
  • Thus, the BALCO case in substantiality over-ruled the Bhatia case. The law laid down by the Bhatia case, in regards to the applicability of Part I of the 1996 Act to International Commercial Arbitrations, was repealed by the BALCO case, prospectively. Thus, the Bhatia case still holds the ground and applies prospectively with respect to agreements entered into between the parties prior to 6 September 2012 (the date when the judgment in the BALCO case was rendered).

    III. The judgment of Harmony Innovation Shipping Limited v Gupta Coal India Limited and another, (2016) 11 SCC 508 ("Harmony") serves as a well-written all-in-one essence of the landmark rulings of pre-BALCO on "what would constitute 'implied' and 'express' exclusion".

    The Supreme Court of India in the Harmony case dealt with the anomaly of implied exclusion of Indian laws under an arbitration agreement. The agreement provided that, in case a dispute arose with the amount involving less than USD 50,000, then arbitration is to be conducted in accordance with the small claims procedure of the London Maritime Arbitration Association. The agreement in subject clearly stated that the contract executed shall be governed by (and will be construed as per) the English law qua the arbitration clause. Though there wasn't express exclusion of Indian laws (the 1996 Act), there seemed ample indication as to this through the express inclusion of various phrases such as: 'arbitration in London to apply', 'arbitrators are to be the members of the London Arbitration Association' and 'contract is to be governed and is to be construed in accordance with English law'. The agreement was executed in the pre-BALCO phase, and therefore the principles laid down in BALCO would not be applicable. However, the implied exclusion of the 1996 Act was clear from the phrases used in the agreement which evidenced the parties intended to exclude the applicability of Part I of the 1996 Act.

    IV.Enercon (India) Ltd. & Ors v. Enercon GmbH & Anr, (2014) 5 SCC 1 ("Enercon") held that the "venue" of an arbitration is the geographical location chosen based on the convenience of the parties and is different from the "seat" of arbitration, which decides the appropriate jurisdiction. Enercon (India) Ltd (Enercon India) was set up pursuant to an agreement with Enercon Gmbh (Enercon Germany).

    The Indian law was chosen as the law applicable to all aspects of the agreement and the arbitration. As per the Intellectual Property Licence Agreement (the IPLA) the venue of the arbitration was London, and the provisions of the 1996 Act were to apply.

    Based on various English cases, it may be questioned that because the parties chose Indian law particularly for the conduct of the arbitration, are the parties likely to have intended to have fixed the seat of arbitration as London, the same as the venue? However, the Supreme Court found no other connecting factor in favor of London and so India was held as the 'seat' and London was merely chosen by the parties as a venue for the conduct of the hearings.

    Relying on the 2012 BALCO decision, the court held that the parties must have intended for the seat to be in India as the parties specifically applied portions from Part I of the 1996 Act, which, in the post-BALCO phase was only effective where the seat of arbitration was India.

    It is essential not to confuse the legal seat of arbitration with the geographically convenient place or places for holding hearings. If the "seat" of arbitration is in India; the 1996 Act being the curial law, recourse to Indian Courts as per Part I of the 1996 Act, including Section 9 of the 1996 Act thereof is available to the parties. The "seat" of arbitration; thus, would be the country whose law is chosen as the curial law by the parties. It was concluded that the courts of the "seat" of arbitration have the exclusive jurisdiction to exercise supervisory powers over the arbitration process. The courts of the "venue" of arbitration cannot have concurrent jurisdiction.

  • Shri Lal Mahal Ltd. vs. Progetto Grano Spa (Civil Appeal No. 5085 of 2013 arising from SLP(c) No. 13721 of 2012) ("Lal Mahal")
  • As per Part I and Part II of the 1996 Act (Section 34 and Section 48 of the 1996 Act respectively), an arbitral award may be set aside by the court, if the arbitral award is in conflict with the public policy of India. In Phulchand Exports Limited v. O.O.O. Patriot ((2011) 10 SCC 300) ("Phulchand"), Supreme Court held that the scope and purport of the expression under Section 34 and 48 of the 1996 Act are the same and thus broadened the meaning of 'public policy' under Section 48 of the 1996 Act. Section 48 of the 1996 Act provides the grounds on which enforcement of a foreign award in India may be refused. Section 48(2)(b) of the 1996 Act states that enforcement of an arbitral award may be refused if "the enforcement of the award would be contrary to the public policy of India". Thus, where the award is final upon an action for enforcement of the foreign award, the parties by virtue of the Phulchand decision could apply the comprehensive standard of 'public policy' and almost re-open the entire matter. The decision given in Phulchand has been overruled by Lal Mahal. The Lal Mahal case concerned a dispute between an Indian supplier and an Italian buyer in a contract for the supply of wheat.

    In the Lal Mahal case, the award passed under the rules of the Grain and Feed Trade Association, London was upheld by courts in the UK, and sought to be enforced in India. Under Section 48 of the 1996 Act, objection to the enforcement of the award was raised on the ground that the award was patently illegal and in violation of 'public policy' as the award was contrary to the terms of the contract. 

    The Supreme Court in Lal Mahal passed a seminal judgment that established a distinction between the scope of objections of the enforceability of a foreign award under Section 48 of the 1996 Act, and challenges to set aside an award under Section 34 of the 1996 Act. The scope of the expression' public policy' was substantially curtailed by the Supreme Court. 

    It held that the ground of 'patent illegality' is limited to Section 34 of the 1996 Act primarily where the issue is whether the award should be set aside or not. The expression' public policy' under Section 48 of the 1996 Act would not bring within its folds the ground of 'patent illegality'.  

    The doctrine of 'public policy' concerning its applicability is comparatively limited in cases that involve a conflict of laws and matters which involve a foreign seated arbitration or any other foreign element. The court stated that the expression' public policy of India' as per Section 34 of the 1996 Act was required to be interpreted in the context of the jurisdiction of the court where the validity of the award was challenged and before it became final and executable. This is to be contrasted with the enforcement of an award after it becomes final.  

    The Supreme Court further clarified that Section 48 of the 1996 Act does not offer any opportunity for a second glance at the foreign award which is at its enforcement stage or permit review of such an award on the merits. The court declined to allow a challenge on the grounds of 'patent illegality'. Since the challenge raised required reconsideration of the merits and re-looking at the facts, the court declined to entertain the challenge and allowed enforcement.

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    Mon, 20 Jul 2020 18:41:00 GMT
    <![CDATA[Regulations for Insurance Brokers in UAE ]]> Regulations Governing Insurance Brokers in the UAE 

    An Insurance Broker is defined under Federal Law Number 6 of 2007 (in respect of the establishment of the Insurance Authority and Regulating the Insurance Practice) as:

    "The person mediating independently in insurance or reinsurance operations between the insurance/reinsurance applicant on one hand and the insurance/reinsurance company on the other, and charging, for his services, a commission from the insurance/reinsurance company with which the insurance/reinsurance policy is concluded."

    The Insurance Broker profession in the United Arab Emirates (UAE) is regulated by the Insurance Authority Board of Directors Resolution Number 15 of 2013 (the "Regulations"), including amendments from time to time. Under Federal Law Number 6 of 2007, the Insurance Authority (IA) was set up as a separate legal personality for the regulation and supervision of the insurance sector in the UAE.

    To carry out the profession of an insurance brokerage, it is mandatory to obtain a License to practice the insurance activities in the UAE as a Company or a Branch or an Insurance Agent of Foreign Company. The Insurance Authority (IA) issues the License which is valid for one year from the date of issuance and renewable on a yearly basis. The License expires at the end of December each year.

    The companies wishing to obtain a license from the IA must meet specific requirements set by the Regulations.

    What are the criteria for the Licensing of Insurance Brokerage?

    The companies must satisfy the following criteria:

  • The company must be incorporated in the UAE and registered under the Commercial Companies Law having paid-up capital of AED three million or more, and the objective must be to practice the activity of insurance Brokerage.
  • Branch of a Foreign Company or of a financial Free Zone must be registered under the UAE commercial law having paid-up capital of AED ten million or more.
  • The company must submit an unconditional Letter of Guarantee produced by a bank payable on demand to the IA chairman of the board of directors. This may be liquidated partially or fully in order to guarantee the settlement of the broker's transactions and obligations arising from his practice towards his customers and the insurance companies.
  • It is mandatory for the insurance broker to obtain an insurance policy covering the broker's professional liability in favor of the IA chairman of the board of directors. The value of this policy must be minimum AED two million for companies incorporated in UAE and minimum AED three million for a branch of a Foreign Company or in a financial Free Zone in the UAE.
  • The insurance broker is continuously required to appoint the technical and administrative staff required for practicing the activity.
  • Provision of a suitable headquarters, technical systems and software required to practice the activity.
  • An internal control system for ensuring proper application of the regulations, laws, circulars and resolutions issued by the IA from time to time.
  • The agreement between the license applicant and a bank operating in the UAE concerning the account designated to the practice of Insurance Brokerage must be submitted.
  • The prescribed fees must be fully paid, and the company must comply with any additional requirements or conditions determined by the IA.
  • Once the application for approval to practice the Insurance Brokerage business is submitted to the IA in the prescribed Form along with the required documents, the IA issues the decision of approving or rejecting the application for a license within a maximum period of twenty working days. The Insurance Broker will be registered in the IA's Insurance Brokers Register on approval of the application. A decision rejecting an application for license, registration, cancelation or write-off may be appealed within twenty working days from being notified of the relevant decision. The appeal shall be submitted to the IA Board of Directors to decide thereon within twenty working days from the date of submission of the complete appeal. The Board's decision on the grievance shall be final.

    Technical and Administrative Staff

    Certain requirements, as set by the Regulations, must be met by the technical staff of the insurance broker. The Insurance Broker must appoint at least one Internal Auditor, General Manager, Operation Manager and at least one specialized employee for each type of insurance having the required qualification and experience. Resolution Number 58 of 2015 in respect of the execution of the Regulations ("Execution Regulations") further lays down specific requirements for the employees and the person responsible for the branch.

    Who can be appointed as technical and administrative staff for the insurance brokerage company?

    Any individual who meets the following criteria:

  • A natural person enjoying full capacity.
  • The individual needs to be of good conduct, one who has never been sentenced for freedom restricting punishment in a moral turpitude crime without being rehabilitated.
  • Has not stopped the payment of his commercial debts even if not associated with bankruptcy declaration, or has been judged bankrupt without being rehabilitated.
  • The Insurance Broker is required to notify the IA of any appointment, transfer or modification or termination, within a period of sixty days.

    Obligations of the Insurance Broker

  • The insurance broker must make written internal bylaws and provide a copy thereof to IA within three months from the date of obtaining the license.
  • The insurance broker must continuously review and update the internal control system for ensuring proper application of the regulations, laws, circulars and resolutions issued by the IA from time to time.
  • The insurance broker must create an Operational Guide for risk management and periodically update and review the same as per the applicable rules.
  • Develop a professional code of conduct for employees; and supervise and organize their undertakings to ensure compliance with the Regulations and Execution Regulations.
  • Co-operate and coordinate with the internal controller, to enable them to perform the assigned tasks and notify the IA in case of any violation.
  • The insurance broker may not dismiss the internal controller except by the board of directors' decision or management board of the Insurance Broker's decision, provided that the IA and the internal controller are notified of the dismissal decision at least thirty working days prior to such dismissal, explaining the causes and justifications of the dismissal.
  • The insurance broker must comply with the obligations towards the IA, customers and insurance companies as provided in the Regulations.
  • Penalties

    Penalties sanctioned by the IA in case the Insurance Broker violates the law, regulations, instructions, resolutions or circulars issued thereunder:

  • A warning to the Insurance Broker and compel them to remove the breach causes and take the necessary actions to prevent recurrence it in the future; or
  • Suspension of the Insurance Broker from practicing the activity for a maximum period of one year.
  • The IA may cancel the Insurance Broker's license in any of the following cases:

  • Losing any of the license conditions as stipulated in the Regulations.
  • Gross breach of any of the obligations and duties.
  • Failure in renewing the license, or in paying the annual renewal fees or prescribed delay fines.
  • Issuance of a final court judgment declaring the Insurance Broker bankrupt.
  • The liquidation and dissolution of the Insurance Broker.
  • When the Insurance Broker fails to practice the licensed activity within six months from the date of obtaining the license.
  • When the Insurance Broker fails to practice the activity after a suspension period.
  • When it is found that the license was granted on the basis of invalid information or data, or based on an undertaking that has not been implemented as determined by the IA.
  • Penalties sanctioned by the IA in case the employees of the insurance broker violate the law, regulations, instructions, resolutions or circulars issued thereunder:

  • Warning; or
  • Suspension from practicing the activity for a maximum period of two months; or
  • Cancellation of the accreditation in case of excessive breach of the law, regulations, instructions, resolutions or circulars issued by the IA.
  •  

     

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    Mon, 20 Jul 2020 17:46:00 GMT
    <![CDATA[Microfinancing: A Global Purview]]> Microfinancing: A Global Purview

    Microfinancing can be categorized as financial services that target small businesses and individuals by providing them loans, savings or checking accounts amongst other things in order to provide them access to unconventional methods of banking and associated services. This aids in rendering self-sufficiency for particularly marginalized groups and geographically isolated segments of society that otherwise are not able to access the conventional methods of banking. Microfinancing has proven to be a boon globally to everyone who is not able to access the high range of financial services or products, including fund transfers or payment services. It provides a two-fold objective of promoting employment amongst entrepreneurs with start-up businesses that have fewer funds or other small businesses and at the same time aids the poor to administer their finances while taking full benefit of economic opportunities. Microfinancing helps in the economic development and growth of a country through its support by providing affordable financial services and access to capital. This includes delivering loans, saving accounts, credit or any other policies related to insurance or money policies and presenting small entrepreneurs and small businesses with the financial independence that one would require. 

    Microfinancing has its origin dates back to the 1800s in Europe and the 1900s in the United States. One of the first institutions of microfinancing to receive attention was pioneered by 'Muhammad Yunus' who founded the first micro-credit establishment known as the 'Grameen Bank' in Bangladesh in the year of 1976. The objective is to promote sustainability, and the features of microfinancing are outlined below:

  • The objective of microfinancing is to aid and assist individuals with loans or any other financial services to people who are living below the poverty line and cannot afford the banking services or financial services conveniently. Such loans will also be provided to self-help groups, start-up businesses or other small companies that cannot afford the conventional methods of banking institutions and other financial services. 
  • Microfinancing includes within its ambit apart from small loans, also any financial services including insurance or savings accounts and other insurance funds.
  • The category of borrowers that will be qualified for obtaining loans under microfinancing can be small business groups/individuals that belong to low-income backgrounds or are faced with difficulties in gaining capital access due to low-income funds.
  • The tenure of a loan in microfinancing is short, and the loans do not entail the need for collateral. This aids the individuals who already face a crunch financially and are at ease of obtaining loans easily without having to provide collateral security for the loans.
  • Loans are provided without additional security and offer a better rate of repayment on loan than traditional banking and other financial institutions available in society; however, the interest rates can be high due to high risk of default.
  • It provides sustainability in developing and emerging countries by improving the situation of the economy and providing equal opportunities for financing to the ones who cannot afford it. It aims at increasing incomes and employment in developing countries, thereby empowering the economy against poverty and aiding in economic development.
  • Different types of institutions offer different types of options such as credit unions, cooperatives, non-banking financial companies and other non-governmental organizations.
  • Creation of opportunities to the underprivileged for employment and moving them out of poverty. 
  • Developing a sustainable community by providing access to support services and resources for the input of income following which self-sufficiency and financial independence is created.
  • Microfinancing promotes ethical lending practices and promotes specific repayment plans.
  • The microfinancing institutions help in linking the gap between the modern financial institutions and the poor and enables the poor to gain access to these resources comfortably. Impoverished individuals, underprivileged individuals, farmers, villagers, micro-entrepreneurs and poor families with no access to banking services benefit by microfinancing. There are certain challenges that also need to be combated with the emergence of microfinancing activities that include access to reliable market information, risk management, social impact transparency to stakeholders/investors and valuation of investments. The lack of security and high levels of costs required for operation impose limitations in the field of microfinancing

    Microfinancing organizations run in the United States, where marginalized sections are provided with small loans and other financing activities. These organizations focus on promoting healthy lending opportunities and the creation of jobs via employment. Self-employment is largely promoted, and micro-lending activities are carried out. In Canada, the microfinancing activities are carried out via credit unions that provide financial services to the financially marginalized sections of the society. Many microfinancing institutions have been developed for providing financial alternatives and affordable small loans. In the Indian territory, microfinancing activities have also been carried out in full swing by providing individuals with finances in the form of self-help groups and non-governmental organizations. Such self-help groups are formed whereby a group of individuals come together to self-govern and self-manage links with banks and operate independently with the help of financial services. Such groups obtain security by non-governmental organizations and receive funds and credit. Many micro-credit associations are also effective in Egypt, Lebanon and Morocco that carry out microfinancing operations. Microfinancing activities have been initiated globally in Asia, Middle East, America and Europe. Hence, microfinancing has emerged beneficial for the poor and the sidelined sections of the society by creating equal opportunities for such underprivileged sections financially. Through this, the financial needs of the underprivileged are integrated with the overall financial needs of the country. 

     

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    Sun, 12 Jul 2020 16:04:00 GMT
    <![CDATA[Enforcing UAE Judgments in Egypt]]> Enforcing UAE Judgments in Egypt

    The United Arab Emirates (UAE) has entered into a cooperative arrangement with Egypt known as the 'Legal and Judicial Cooperation Agreement between the UAE and the Arab Republic of Egypt' in the year 2000. This arrangement governs the reciprocal enforcement of judgments between UAE and Egypt, and the enforcement of UAE judgments are thereby recognized in the territory of Egypt through this agreement. Legal and Judicial Cooperation Agreement between the Government of the United Arab Emirates and the Government of Egypt was published in the UAE pursuant to Federal Decree Number 83 of 2000 and published in Egypt pursuant to Presidential Decree Number 464 of 2000 and came about in order to obtain constructive cooperation between the two governments by establishing reciprocity of foreign judgments. 

    Chapter V of this Agreement dictates the recognition and implementation of judgments in civil, commercial and personal status articles. Article 26 of this convention states that each of the parties shall recognize the rulings issued by the courts of the other, thereby affirming that the enforcement of judgments passed in UAE holds the same binding nature in the territory of Egypt. Such judgments shall cover civil matters, criminal matters issued in civil courts, commercial and personal status matters provided that the court issuing the ruling is competent in accordance with the rules of international judicial jurisdiction in the respective country and such decision that shall be based on judicial or state procedures from the courts of the state. It is imperative that the provisions in recognition and implementation are compatible with the international treaties and agreements in force with the contracting party. 

    In certain cases, there can be a refusal to recognize the foreign judgment that has been mandated in Article 31, and the grounds for refusal of enforcement of a foreign judgment would include:

  • If the ruling passed in the judgment is contrary to the provisions of the Constitution; if such principles are contrary to the public order or morals of the country from which such recognition would be derived, in that case as well the foreign judgment could not be enforced. Therefore, a judgment executed in UAE shall not be recognized in Egypt if it holds to be conflicting with the public policy and morality of the principles in Egypt and if it is contradictory to the provisions of the Constitution of Egypt.
  • If any judgment is passed in violation of the law of the states and was passed in favor of persons without any legal representation or persons that are incapable of obtaining such legal representation.
  • If the judgment was passed by a court that was not fit or competent to pass such judgment.
  • An ex-parte judgment delivered shall not be enforceable, where the opponent convicted in absentia was not capable of representation to defend himself.
  • Any judgment passed against the laws of the country or passed in contravention to the laws shall not be enforceable in the territory of Egypt.
  • In all such cases, the judgment passed shall not be recognized in a foreign country, and the judgment passed in UAE on the above grounds shall not be recognized to be enforceable in the jurisdiction of Egypt. Article 32 explicitly states that the execution of the judgment shall be dependent on being in sync with the rules and law of the country where it is being enforced. For the judgment rendered in UAE to be recognized in Egypt, it has to be consistent with the laws of the territory of Egypt and cannot be in contradiction to the regulations of Egypt. The judgment shall be deemed to be competent in the cases where the jurisdiction of the court of the contracting party in which such judgment was pronounced follows the principles of competency which have been mandated in Article 29 and outlined below. Following are the grounds where a said judgment shall be deemed to be passed by a competent court:

  • Where the defendants' domicile or place of residence at the time of the lawsuit was located in that country.
  • If the contractual obligation which is the subject of the dispute has been executed in whole or in part in the state where it was pronounced or if it is obligatory to implement in it according to an explicit or implicit agreement between the plaintiff and defendant.
  • In cases of non-contractual liability, the act required for liability has occurred in that country.
  • If the defendant accepts explicitly or implicitly to submit to the jurisdiction of the court whether by selecting a chosen home or by agreeing on its jurisdiction where the law of the country does not prohibit such an agreement.
  • If the defendant has expressed his defense of the merits of the case without submitting that the dispute was not within the jurisdiction of the court.
  • In the case of personal status and expenses, if the opponent has a domicile or a residence in the territory of that state.
  • In the case of inheritance, if the deceased person had a domicile or property in the territory of that state at the time of his death.
  • If the defendant in that particular country has an agent at the time of taking the actions arising from the agency's work.
  • All such judgments pertaining to the grounds mentioned above shall be deemed to be competent and shall be fit for execution. The competent judicial authority in Egypt shall recognize or implement the ruling passed in UAE by firstly verifying whether the conditions stipulated in the legal and judicial cooperation agreement are met without being subject to an examination of the matter, and this shall be done by the authority itself and by declaring such decision. Upon such examination, if the decision declared deems the judgment to be fit and executable, then an order to execute such ruling shall be issued, and the effect of such ruling in UAE shall be equivalent to the effect in Egypt. The effect of such foreign ruling in Egypt shall hold the same effect as it would in UAE. However, there are certain documents that shall be required for the execution of the foreign ruling, and it is vital that all such documents be submitted. Such documents are addressed in Article 35 of the Agreement and include the following:

  • A full and complete official copy of the ruling along with the attested signatures from the competent authorities.
  • A testimony obtaining that the judgment holds power to order/request recognition/execution of the ruling. The party requesting recognition is required to obtain such testimony in most cases unless otherwise stipulated. 
  • Testimony has to be obtained in certain cases where the person who does not have the capacity to litigate to show that he has represented legal litigation. 
  • In cases of absentia, a copy of declaration authenticated by its conformity to the original has to be submitted, or any other document has to be submitted that shall prove the defendants' true declaration of the case in which the judgment was issued.
  • For the implementation of the ruling, the official copy must be affixed to the executive form. 
  • All documents must be officially signed and sealed by the competent court in order for the foreign judgment to be enforceable. It is only after the establishment of conciliation before the judicial authorities in accordance with the provisions of the agreement that the judgment rendered in UAE would be recognized and enforced in the jurisdiction of Egypt. This conciliation would include verification that it has the power of executive support in the country where it was established, in this case, UAE and that it is void of including provisions that contradict the provisions of the Constitution or the principles of the system. The party that is aiming and requesting for such recognition shall have the duty to present an official copy and certificate from the judicial authority affirming that it possesses such power stated in the executive bond. All such documents shall be signed and sealed by the court of the competent authority. The executive bonds produced in UAE would be ordered to be executed in Egypt in harmony with the procedures in relation to judicial rulings and that such rulings do not contradict the provisions of the Constitution or the principles of public order and morality in Egypt where it is required to be implemented. The party requesting such recognition of document shall submit an official copy stamped with the seal of the notary or notarial office. It shall also present a certificate that justifies the statement that the document is in possession of the powers of the executive bond. Article 34 dictates that the implications of an order to execute the rulings that have been issued in one country by a competent court shall be enforced and have the same effect of rulings as if issued by the courts of the other country. Therefore, the enforcement of judgments passed by the courts of UAE shall have the same effect of the ruling and be executed in Egypt, provided that it does not contravene any of the grounds that have been mentioned in the agreement for refusal of execution and provided that the judgment does not hinder any of the principles of public order and morality. 

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    Wed, 08 Jul 2020 11:39:00 GMT
    <![CDATA[Asset Management Regulations in UAE]]> Asset Management Regulations in UAE

    The asset management sector within the United Arab Emirates (UAE) is responsible for sustainable growth of financial sectors that aids in overseeing financial services and investment regime spread out across the seven Emirates. Investment management or asset management can be broadly apportioned into three sectors in UAE, onshore jurisdiction (exclusive from free zones), Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). With UAE being an attraction for many foreign investors and for the setting up of private equity and asset management industries, there arises a need for overlooking the management of investments being made here. UAE being a financial centre and trading hub and has ended up creating several sovereign wealth funds and enormous wealth for certain individuals and groups. The DIFC has adopted a Special Purpose Company (SPC) structure which manages such funds and assets. The ADGM has introduced a Special Purpose Vehicle (SPV)which garners more flexibility and rapidity. An SPC structure can get established in a short period of time. An SPV has also acquired substantial interest due to its flexibility. Through the sustenance of growth in financial sectors and fund regulations, managers and investors are able to achieve more confidence and transparency in the management of assets. The fund regulations issued by Dubai and Abu Dhabi have been outlined further below:

    Abu Dhabi Global Market 

    Foreign investment and financial services have been encouraged in the Emirate of Abu Dhabi by the creation of an economic free zone in the name of ADGM. The ADGM has its own rules and regulations that offers numerous investment incentives and the title to a 100 percent foreign ownership by foreign investors willing to invest here. The Financial Services Regulations (FSRA) of 2015 (as amended) have been issued by ADGM under which investment management or asset management is conducted pertaining to the rules laid out by the FSRA. Licensing by both the ADGM and FSRA with respect to holding a commercial license and a license to carry out financial services is a prerequisite. A private Real Estate Investment Trust (REIT) has proved to be rather well accepted in terms of a hub for asset management in the real estate sector. ADGM has also been forward with introducing a Special Purpose Vehicle (SPV) which has garnered significant interest due to its flexibility and speed. An SPV has proved itself to be a robust and efficient benchmark against running alternatives. An analysis of the provisions in relation to asset management have been discussed below:

  • Pursuant to the FSRA, an asset is defined as the collateral that is held to cover positions including the right to transfer of assets equivalent to that collateral or the proceeds of the realization of any collateral but not including default fund contributions. Management of assets has been addressed under Schedule 1, Paragraph 56 of the FSRA as a specified kind of activity concerning on a discretionary basis the managing of assets belonging to another person as long as the assets include a financial instrument, virtual asset or rights under a contract of long-term insurance but not being a contract of reinsurance. 
  • Pursuant to the amendment of 13 January 2020 to the FSRA, asset requirements have been introduced under Regulation Number 38, which lays down the conditions for the management of assets. This provides that the regulator can impose an asset requirement on an authorized person who receives financial services permission. A regulator shall perform all such functions and powers as are conferred on it under the Regulations. He shall have the responsibility to foster and maintain financial stability, including the reduction of systematic risk by the appropriate management of assets and funds. The asset requirements under Regulation 38 imply an imposition of prohibition or disposal of any of the assets that belong to the authorized person whether they lie in ADGM or outside. The authorized person can be referred to as 'X' here, and the requirements under FSRA prohibit or restrict dealings of assets belonging to X except by the regulator. All or any of X's assets belonging to any customers but held by X shall be transferred to be held by a trustee approved by the regulator post the issuance of a notice to such trustee. Even after the transfer of such assets to a trustee, such assets shall not be dealt or released without the consent and approval of the regulator. The regulator is also entitled to disapprove of any transfer of assets as directed by X if the regulator has reason to believe that such instruction would be incompatible and will not be in X's interest. The regulator shall not be held to be in breach of contract despite X's instructions here.
  • Virtual assets are assets via a digital representation of value that can be digitally traded and function as a medium of exchange, a unit of account and/or a store of value, however, does not have legal tender status in any jurisdiction. It is distinguished from fiat currency (not holding any intrinsic value like paper money) and electronic money. It is not issued nor guaranteed by any jurisdiction and fulfils functions by agreement within the community of users of the virtual asset. Regulation 5A provides that the regulator may prescribe an authorized person conducting a regulated activity in relation to virtual assets. Buying or selling of financial instruments or virtual assets is a specified kind of activity which also includes underwriting financial instruments by a principal or agent as has been laid down in Schedule 1, Paragraphs 4 and 12 respectively. An authorized person by the regulator will be entitled to arrange deals in investments by managing virtual assets belonging to another person. 
  •  Earlier the overlooking of regulations was conducted by the UAE Central Bank, and it was transferred to Emirates Securities and Commodities Authority (SCA) in where new investment fund regulations have been issued (the 2016 Fund Regulations

    Dubai International Financial Centre

    The Dubai Financial Services Authority (DFSA) is an independent financial regulator of all financial services that are conducted in DIFC. There have been regulations that have been issued for the asset management industry in Dubai under DIFC, which is an economic free zone with its own set of rules and regulations for such management. The DIFC has also been successful in adopting a Special Purpose Company (SPC) structure in the management of funds and assets. The authority's board of directors' decision number 1/2014 concerning the regulations for investment management has issued regulations for safeguarding the assets and funds where the investment management activity shall be carried out in the State after the grant of a license by the SCA in accordance with the provisions of this Regulation. Such investment management activity may not be promoted in the State except by persons authorized by the SCA to engage in such activity. Under the said Regulations for investment funds, it is the duty of the investment manager to comply in certain terms of investment under its management to protect the funds and assets of clients and abstain from exploiting them for purposes other than the interests of the clients. It is imperative that the investment manager does not contradict the investment objectives of the clients. The assets or funds are not to be received directly or indirectly from any client provided that the managed assets are deposited in an account with a custodian. Such a custodian shall be licensed by the SCA or by a custodian licensed outside the State if the client's investments lie outside the State. The manager is also to make all possible efforts to analyze and learn the financial position of the companies and assets in which the manager invests the funds of the client under its management. It is to be ensured by the manager that the investments are expanded in order to minimize risks of an investment in line with the investment policy and that the manager is refrained from using such funds for personal use. The manager shall not be allowed to use such funds of clients to affect securities prices in the market. The manager also has to omit to the SCA that he shall submit periodic rights on the distribution of transactions with service providers that are dealt with in the course of such transactions including banks, brokerage firms and the parties offering the service of custody for the assets managed with its knowledge. Therefore, the manager has the sole responsibility of managing funds and assets to the best of his ability, of safeguarding such funds and assets against use in any personal capacity and to protect from exploitation for any other purposes than the client's interest.

    Onshore Jurisdiction 

    Earlier the overseeing of management, regulation and licensing of funds and assets was governed by the UAE Central Bank. This was transferred from the Central Bank to the Emirates Securities and Commodities Authority (SCA) and was governed under the new Investment Fund Regulations (2016 Fund Regulations pursuant to decision number 9 RM of 2016). These Fund Regulations ensured the creation of a management company license (the Management Company License) which permits the licensed entity to manage and establish mutual funds. Through the fund regulations, the management company license permits the management company to manage funds that have been established by such company. However, this shall not include the management of funds not established by the company. It is the responsibility of the management company that the assets of the fund are maintained in a proper manner, separate from the management company. The company is responsible for studying the financial position of the company and along with it the financial position of the assets. This has had a positive impact on the funds market and the management of funds in UAE. The management company has an obligation to assess the assets and calculate the net asset value of the unit. It will also be responsible for maintaining the assets and the profits derived from such assets. Asset managers in UAE were previously licensed by the Central Bank, the paradigm of which has shifted to obtaining a license under the investment management regulations from the SCA. These investment management regulations can be defined as the management of securities portfolios for the account of third parties. This shall also include within its ambit the management of mutual funds in accordance with the investment purposes and policy as described in the agreement of investment management signed between the investment manager and its clients including individuals, mutual funds or establishments. The management company license allows the management company to establish funds and supervise such funds. The management of funds is undertaken by the management company license that permits the management company to manage such funds. In order to obtain a management company license under the Fund Regulations, the company must be operating in the area of securities licensed by the SCA, and the company shall incorporate to establish and manage mutual funds. The management company will, therefore, be responsible for ensuring the net value of the assets of the fund established and managed by the company and shall do so with diligence and care. Prior to the 2016 Fund Regulations, the SCA passed regulations in 2013 and 2014.

    Other Sources 

    Other sources of asset management include privately managed accounts and offshore accounts. Offshore accounts can be created in various countries like Cayman Islands, Bermuda, Panama, which offer a no-tax regime and investment schemes that are successful in management and regulation of assets. There are certain public mutual funds as well that have been established in order to regulate assets. An onshore fund will be managed by the SCA, whereas DIFC and DFSA also promote and manage funds. The DIFC has published a Qualified Investor Fund (QIF) regime which can be established to oversee funds. A QIF, however, would entail only a minimum investment of US$500,000 per investor and a maximum number of 50 investors per fund. Equity licensed by the DFSA would allow managing a QIF. Apart from this, DIFC has adopted a special purpose company (SPC, as explained above) through which managers' effect investment schemes and standardize assets. The ADGM with its Special Purpose Vehicle (SPV) which is also more flexible and quicker than the SPC. The UAE is also home to several sovereign wealth funds that are funded through revenues of the government. The ADGM has also launched a framework to regulate crypto asset activities undertaken by custodians and other intermediaries at ADGM. Therefore, the asset management industry all over UAE is bound to grow and will grow to great diversifications economically and attract foreign investments at the same time. 

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    Wed, 08 Jul 2020 10:13:00 GMT
    <![CDATA[Extradition Treaty of UAE]]> Extradition Treaty of UAE

    In International Law, extradition is when one state (Requesting state) requests another state (Requested state), to effect the return of a person for trial for a crime punishable under the Requesting state's laws and committed outside the Requested state (state of refuge).

    The extraditable person could be:

  • charged with a crime but not yet tried;
  • tried and convicted who have escaped custody; and
  • those convicted in absentia.
  • Except for the protection of special national interests, states do not apply their penal laws to acts which are committed outside their boundaries as per the principle of territoriality of criminal law.

    Extradition between countries is regulated by diplomatic treaties and within countries by extradition acts. Belgium, in 1833, adopted the first act providing for extradition.

    Extradition acts primarily specify the extraditable crimes, clarify extradition procedures, and set out the relationship between the international treaties and extradition act. National laws vary regarding the relationship between extradition acts and treaties. In the US, extradition may be granted only pursuant to a treaty and only if Congress has not legislated to the contrary. A similar situation exists in Belgium, the Netherlands and Britain whereas Switzerland and Germany extradite without a formal convention in cases where the Requesting state and their governments have exchanged declarations of reciprocity. Fugitives are also sometimes surrendered by states solely as an act of goodwill. However, countries without extradition agreements with certain other countries have been considered as a haven for the fugitives. Certain principles of extradition are common to many countries. For instance, many states decline any obligation to surrender their own nationals. In Britain, the United States and Argentina, nationals may be extradited only if it is authorized by the governing extradition treaty. Another instance of a common principle is double criminality. This principle stipulates that the alleged crime for which extradition is being sought must be criminal in both the Requesting and the Requested countries.

    The United Arab Emirates sends and receives numerous extradition requests every year. Extradition requests sent by the UAE are prepared and sent by the International Co-operation Department of the Public Prosecution. This department ensures that requests fulfil the conditions set forth in the governing law of Federal Law Number 39 of 2006 on Mutual Judicial Co-operation in Criminal Matters ("2006 law") which was passed to facilitate the UAE's co-operation with foreign and international judicial authorities. The 2006 law empowers federal courts and the Ministry of Justice, under enumerated circumstances, to provide information to foreign authorities regarding the identity and whereabouts of an individual, search persons and premises, seize property, and obtain information and evidence that might assist their foreign counterparts in conducting investigations or making extradition agreements. It also ensures that the documents are duly translated into the official language of the Requested country and that the request is sent through the proper diplomatic channels.

    In respect of extradition requests received by the UAE from other countries, the relevant UAE court tries the matter to decide whether that request is in conformity with the relevant governing law, and accordingly, accepts the extradition of the subject of the request to the Requesting country. The competent court will refuse extradition if the extradition request fails to fulfil the conditions of the applicable law. Therefore, UAE courts are bound to apply the bilateral and multilateral treaties if these exist. Otherwise, they will resort to the domestic law regulating judicial co-operation to decide whether to accept or refuse a request for extradition.

    Extradition can be a complex matter and is relatively simplified by the presence of treaties between the UAE and a significant number of countries that have strong relations with the UAE. The UAE fully understands the importance of international judicial co-operation and more precisely extradition in combatting crimes.

    I. Extradition Treaty of UAE with KSA, Kuwait and Bahrain

    Riyadh Arab Convention on Judicial Co-operation ("Riyadh Convention"), a multilateral treaty signed and ratified by the UAE for judicial co-operation was ratified in the UAE by Federal Decree Number 53 of 1999. The Riyadh Convention was signed by most Arab countries including Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia and Tunisia.

    As per Article 38 of the Riyadh Convention, each contracting party undertakes to extradite persons found on its territory charged with having committed a crime by the competent authority or convicted of having done so by a judicial body of other contracting parties.

    Article 39 of the Riyadh Convention deals with the extradition of nationals.

    A contracting party may refuse to extradite its national provided that the state party within limits covered by its jurisdiction undertakes to charge the national who has committed a crime punishable by law in the territory of any other contracting party. The committed crime by the national must be one for which:

    1) the laws of the two states concerned impose a detention penalty of at least one year; or

    2) if a more severe penalty is foreseen in the laws of any of the two contracting parties.

    Article 40 of the Riyadh Convention states the conditions for extradition as:

  • The individual is charged with committing an act punishable by the laws of each of the two contracting parties (The Requesting state party and the Requested state party) where both laws provide for a detention penalty of one year or a more severe penalty.
  • The individual is charged with acts not punishable by the laws of the Requested state party or where the penalty for the act under the laws of the Requesting state party has no correspondent under the laws of the Requested state party. The same penalty shall apply if the individual prosecuted is a national of the Requesting state party or a national of another contracting party whose laws provide for the same penalty as those provided under the laws of the Requesting state party.
  • The individual is convicted in the presence or absentia by the courts of the Requesting state party where the crime imposes a detention penalty of one year or a more severe penalty, for acts punishable as per the laws of the Requested state party.
  • Nevertheless, there are crimes which are not subject to extradition as laid down in Article 41 of the Riyadh Convention:

  • The crime for which extradition requested is a political crime or one limited to violating military duties. Crimes such as an assault on kings and presidents of the contracting parties or their wives or their ascendants or descendants, heirs apparent or vice-presidents of the contracting parties, murder and robbery committed against authorities, individuals or means of transport and communications, despite being of a political purpose, will not be considered crimes of a political nature.
  • The crime for which extradition requested was committed in the Requested state party's territory, except if the crime caused damage to the interests of the Requesting state party and its laws provide that such crime be prosecuted and punished.
  • The crime has been the subject of a final judgement in the Requesting state party.
  • At the time the extradition request was received, the legal action was fortified, or the penalty was dropped due to passage of time.
  • The crime was committed outside the Requesting state party's territory by a person not carrying its nationality, and the law of the Requested state party does not provide for prosecution when the crime is committed outside its territory.
  • The Requesting state party has issued an amnesty.
  • If charges relating to the crime have been made in the Requested state party's territory, or if a judgement was passed in respect of such crime in a third contracting party's territory.
  • Article 9 of UAE's 2006 law states similar legal obstacles (as mentioned in Article 41 of the Riyadh Convention) that will lead to non-extradition along with additional grounds for non-extradition such as:

  • If significant grounds contribute to believe that the extradition request is aimed to prosecute or punish a person for reasons related to his ethnic or religious affiliation, or his nationality or political opinions.
  • If the requested person underwent investigation procedures or trials for the same crime subject of extradition and was acquitted; or convicted but served the punishment for which he was judged.
  • The person was subjected or could be subjected in the Requesting state's territory to torture, inhuman treatment, humiliating treatment or cruel punishment which does not conform to the crime.
  • As per Article 42 of the Riyadh Convention, the competent authority of the Requesting state party shall submit an extradition request in writing to the competent authority of the Requested state party along with other necessary documents and enclosures.

    Article 43 of the Riyadh Convention permits the detention of the individual whose extradition is requested in case of urgency and based on a request by the competent authority of the Requesting state party. The individual shall be released if the Requested state party does not receive the necessary documents or a request to extend the detention within 30 days from the date of arrest. (Article 44 of the Riyadh Convention).

    The multiplicity of Extradition Requests (Article 46 of the Riyadh Convention):

    If the Requested state party receives several requests for extradition for the same crime, priority shall be as follows:

  • The first priority shall be given to the Requesting state party whose interests were damaged by the crime.
  • Next priority to the Requesting state party in whose territory the crime was committed.
  • Next to the Requesting state party of which the individual to be extradited was a national at the time of committing the crime.
  • However, if circumstances converge priority shall be accorded to the first Requesting state party to submit the extradition request. If the extradition requests relate to multiple crimes, weighing them shall be based on the circumstances and seriousness of the crime and the place in which it occurred.

    UAE has set up a five-stage judicial mechanism to enable the person requested for extradition to challenge the extradition process as follows:

  • The Local Interpol Authorities in the UAE.
  • The Public Prosecution heading the International Judicial Matters
  • The Court of Appeal
  • The Cassation Court
  • The Ministry of Justice & The Ministry of Interior
  • II. Extradition Treaty of UAE with India

    Law relating to extradition in India is governed by the Extradition Act, 1962 (the "1962 Act") and the Extradition Treaties operating between India and other countries. Section 34 of the 1962 Act states extra-territorial jurisdiction, that is, an extradition offence committed by a person in a Foreign State shall be considered to have been committed in India and is liable to be prosecuted in India for such offence. Under Section 216 of the Indian Penal Code, 1860 read with the Constitution of India, 1950 (Schedule VII, List I, Item 18), extradition may be defined as, the action of giving up a fugitive criminal to the authorities of the State in which the crime was committed. Section 3(4) of the 1962 Act categorically states that, in the absence of an extradition treaty between India and any Foreign State, the Central Government may, by notified order, treat any Convention to which India and the Foreign State are parties, as an extradition treaty providing for extradition as specified in that Convention. As per Section 2(f) of the 1962 Act, only "fugitive criminals" may be extradited. Fugitive criminal, as per the extradition law prevailing in India means a person who is accused or convicted of an extradition offence which was committed within the jurisdiction of a Foreign State, and a person who while in India, conspired, attempted to commit, incited or participated as an accomplice in the commission of an extradition offence in the Foreign State. As per Section 2(c) of the 1962 Act, an extradition offence is an offence which is provided in the extradition treaty with the Foreign States. In case of absence of a treaty, an extradition offence is an offence punishable with imprisonment for a minimum term of one year as per the laws prevailing in India or of a Foreign State. Section 2(a) of the 1962 Act defines a composite offence as, an act or conduct of a person occurring wholly or in part in a Foreign State or in India, effect of which (or intended effect which) taken as a whole constitutes an extradition offence in India or in a Foreign State.

    For the surrender of a fugitive criminal, a requisition is to be made to the Central Government by:

  • A diplomatic representation by the Foreign State, at Delhi; or,
  • The Government of the concerned Foreign State may communicate with the Central Government through its diplomatic representation in that State; or,
  •  By other modes settled by arrangements ensuing between India and other countries.
  • The Central Government may then, if it thinks fit, order for an inquiry by a Magistrate. The Magistrate shall issue an arrest warrant for the fugitive criminal under Section 6 of the 1962 Act. After the Magistrate has enquired the case, if a prima-facie case is made out in support of the requisition, the Magistrate may commit the fugitive criminal to prison; shall report the result of the inquiry along with the written submission, if any, filed by the fugitive criminal to Central Government for consideration. However, if a prima-facie case is not made out in support of the requisition, then, Magistrate shall discharge the fugitive criminal. Upon satisfaction qua the prima-facie report of the Magistrate, the fugitive criminal may be surrendered to the Foreign State.

    As per Section 31 of the 1962 Act, a fugitive criminal shall not be surrendered or returned if, the offence is political in nature; the prosecution of offence is barred by time in the Foreign State; if the person is accused of any offence in India, other than the offence for which extradition is sought, or is undergoing sentence under any conviction in India until after he has been discharged, whether by acquittal or on the expiration of his sentence or otherwise; and until the expiration of 15 days from the date of his being committed to prison by the Magistrate.

    Under Section 34A of the 1962 Act, if the Central Government is of the opinion that a fugitive criminal cannot be returned or surrendered, pursuant to a request for extradition by the Foreign State, the Central Government, if it deems fit and proper, can take steps to prosecute such fugitive criminal in India. A provisional arrest is provided under Section 34B of the 1962 Act as upon urgent request from the Foreign State; the Central Government may request the Magistrate (having competent jurisdiction) to issue an immediate provisional warrant for the arrest of the fugitive criminal. The fugitive criminal is to be released upon the expiration of 60 days if no request qua his surrender or return is received, within the period of 60 days. The 1962 Act also makes provisions for the multiplicity of requests from more than one State for the surrender of a fugitive criminal. Section 30 of the 1962 Act stipulates that "if requisition for the surrender of a fugitive criminal is received from various foreign States the Central Government may, considering the circumstances of the case, surrender the fugitive criminal to such State as the Government thinks fit." However, treaties between India and the Kingdom of Bahrain, Kuwait, the Sultanate of Oman, the UAE and Uzbekistan all consider requests priority wise.

    Section 34C of the 1962 Act provides that, where a fugitive criminal has committed an extradition offence punishable with the death penalty in India, is surrendered or is returned by the Foreign State on request of the Central Government (India); and the laws of the Foreign State do not provide for death penalty qua the offence for which the fugitive criminal is convicted, then the fugitive criminal shall be liable for the punishment of life imprisonment qua the offence.  There is no provision of statutory appeal vis-à-vis extradition proceedings in the 1962 Act. For the redress of any grievance against any order vis-à-vis extradition proceedings, the writ jurisdiction of the High-Court concerned has to be invoked.

    In 1999, the United Arab Emirates and India had entered into an agreement on mutual legal assistance in criminal suits. In 2000, the two countries signed an extradition treaty. The individual requested to be extradited must be accused of an offence in the country requesting the extradition. Moreover, such an offence must be punishable under the laws of both India and the UAE with imprisonment for minimum one year, or the person has been sentenced by the court of the other country for minimum six months.

    India, like many other countries, adheres to the principle of not extraditing its own nationals. Indian nationals who return to India after having committed offences in the Gulf countries are not to be extradited to those countries. Such accused Indian nationals are liable to be prosecuted in India in accordance with Indian Law, as the bilateral treaties with these States (except Oman) preclude  extradition of own nationals. India follows a dual system and extradites nationals on the basis of reciprocity where, if the other Treaty State does not extradite, India too bars extradition of its own nationals.

    Conclusion

    The importance of a formal extradition arrangement can be validated by the fact that the absence of it may lead to rejection of the extradition requested by a state. This was witnessed when the lack of a formal agreement between India and Argentina was a primary reason for Argentina's denial of extradition of Ottavio Quattrocchi, who was wanted in India in relation to the infamous Bofors case.

    Extradition is a critical process to bring back those accused of financial crimes and corruption to stand trial. It is a laborious and time-consuming process which is eventually subjective to the benevolence the foreign state, but extradition is the only way to bring back the accused persons who are evading the grasp of justice.

     

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    Mon, 06 Jul 2020 11:31:00 GMT
    <![CDATA[Health Insurance Oman]]> Health Insurance Oman

    The sharp sell-off in global oil prices that began in mid-2014 triggered an economic slowdown across the Gulf Cooperation Council (GCC) states, with enormous consequences for many sectors, including the health insurance industry. Despite this unexpected turmoil, however, significant changes in government health insurance regulations and rising populations are expected to generate some growth opportunities for private health insurers over the coming years, especially in the Kingdom of Saudi Arabia (KSA), where the private health insurance market is expected to grow by more than 9 percent annually through 2021, according to projections from Oxford Economics. Economics forecasts that the private health insurance market in KSA will grow to reach USD 3.5 billion in 2021, from an estimated USD 2.4 billion in 2016, representing an overall rise of 45 percent. The sudden decline in oil prices has forced the GCC states to think more strategically about how to diversify their economies. And, in many states, developing a more robust health care environment has emerged as an essential element of their growth plans. Many, like the KSA, are moving to mandatory health insurance programs to help boost the medical infrastructure and decrease the tendencies of some Saudi residents to leave the country for medical treatment. This, in turn, is expected to boost premium revenues in the sector. The single largest economy of the GCC states, with a population of 32 million, the KSA now requires, as of 2017, health insurance for all employees in the private sector, as well as their families. Similar rules are now also in place in Dubai and Abu Dhabi in the United Arab Emirates (UAE)

    Only one percent of the total policies registered with insurance companies in Oman is for health as compared to 75.4 percent of vehicle insurance, as per the figures of National Statistics and Information. The figures look surprising because 70 percent of the mortality cases reported in Oman is because of Non-Communicable Diseases such as diabetes, cancer, cardiovascular problems and chronic respiratory diseases. High premiums for insurance policies as well as the free treatment of Omanis in government hospitals are the reasons for the low demand for policies. The Health insurance market has now mandated health insurance law in Oman. Residents in Oman are required to have a minimum level of medical insurance coverage with minimum benefits pursuant to the Resolution Number 34 of 2019 for the Issue of Unified Healthcare Insurance Policy Form, also known as Dhamani, issued by the Capital Markets Authority (CMA) in March 2019 and is now in force ("the Law"). The Law applies towards the employer market and the beneficiaries arising from those relationships including employer, employee as well as the dependents. The Law applies a "Basic Benefits" as well as an "Optional Benefits" coverage, standard form "Policy Schedule" for parties' signature. For the pre-contractual disclosure requirements, the Law applies a standard "Insurance Application".

    Chapter One of the Law states a "Unified Health Insurance Policy" ("the Policy"). The term "Insured" is defined as "natural or unnatural person responsible for paying the insurance premium" and the term "Beneficiary" is defined as "employee or employee dependent for whom the Insurer performs the duties assigned by the provisions of the Policy". The Dependents include employee's legally wedded spouse, residing in Oman, employee's children who are under 21 years age and any person residing in Oman and is dependent on the employee. This includes the employee's parents and other relatives based in Oman, maid or house help who are sponsored by the employee.

    An Insurer has been defined to be an "Insurance company licensed to practice health insurance business in the Sultanate". A completed Policy must be submitted by the Insured as a legal obligation. The Law covers application, coverage, mandatory minimum benefits and claims management.

    Chapter Two of the Law defines a wide interpretation of what shall constitute the contract of health insurance, and includes all basic information, details and common practices in healthcare insurance contracts. The Insurers will need to take care regarding their pre-contractual documents, as these may unintentionally constitute the contract of insurance. Chapter Two places obligations on the insured to disclose correct and accurate information. The CMA issued the Code of Conduct for Insurance Business which requires the Insurers to inform the Insureds of their duty to disclose any relevant information. The Law, therefore, applies the duty of utmost good faith (uberrimae fidei).

    The combined limit under the Policy is OMR 4,500 in terms of financial spend, which is much lower than the KSA and UAE mandated schemes. The in-patient treatment limits for the policy year is capped at OMR 3,000 and includes a usual basic cover of admission in hospital or daycare, room cost, cost of treatment, consultant fees, diagnosis and test, medicine, companion cost and ambulance cost. This also includes the cost for pre-existing and chronic conditions for the in-patient treatment, while the latter is excluded from an out-patient treatment. The hospital admission as per the Policy must be in a joint room limited to 30 days for each instance, whereas the ambulance cover is limited at OMR 100 each trip. Out-patient treatment is limited to OMR 500 for each policy year, and the cover is limited to consultancy fees, diagnosis and tests, lab fee and pharmacy fees. The Policy also includes the cost of repatriating a deceased Beneficiary to their country of origin, for which the limit allocated is OMR 1000.

    Any deviation or departure from the basic benefits is not permitted unless agreed as a Schedule to the Policy and is signed by both the parties. When any additional benefits are opted for by the Insured, they must be set out in the Optional Benefit Schedule format provided under Appendix 3 of the Law.

    The Law sets out specific obligations on how it will be administered:

  • The Health Insurance Claim Management systems of the providers must be compatible with the system of electronic claims applicable in Oman;
  • The Insurers will bear the cost of a medical Consultation only if there is a prior referral from a licensed physician;
  • The providers must seek prior approval for all in-patient treatment and for all out-patient treatment where costs exceed OMR 100, however for emergency cases treatment must start immediately;
  • The providers must upload all details in the online application for approvals, and the Insurer must respond within 30 minutes with their decision, failing which it will be deemed as approved;
  • The provider is also required to respond to any inquiries or observation by the Insurer within 30 minutes of the inquiry or observation being made;
  • For any claim made outside the network, the Insured must make a claim within 120 days of the claim, and the Insurer shall compensate the Beneficiary within 15 days from the date of receiving documents in support of the claim; and
  • When any claim is rejected by the Insurer, the Insurer provides to the Beneficiary, within 10 days of rejection a written statement stating the reasons for the rejection.
  • The mandatory basic minimum coverage of the Policy is set out under Appendix 4 of the Law, providing two options to the Insured based on which premium will be determined by the Insurer. Both the options apply the same coverage terms and limits; however, the first option provides for deductibles on certain categories while the second option does not require any deductibles to be paid by the Beneficiary. The deductibles under the first option are limited to out-patient treatment only and are set at 10 percent for medicine, subject to the limit of OMR 5 per visit and 15 percent for consultancy fees, lab fee and diagnosis for providers within a network, with a cap of OMR 20 per visit, and at 30 percent for providers outside the network, with no cap.

    Mandatory health insurance rules, Decision Number 78/2019, issued by Oman's CMA, establishes the regulatory infrastructure for the health system, Dhamani. The CMA developed the rules covering four aspects of the mandatory health insurance system:

  • General provisions which govern the health insurance market.
  • Licensing requirements for insurance companies.
  • Obligations for the main parties in the insurance relationship, third-party administrators (TPAs), employers, employees and health services providers.
  • Dispute resolution.
  • Licensed insurance companies, health service providers, TPAs and others will have to use the electronic "Dhamani Platform." The purpose of this electronic platform is primarily to digitalize the private healthcare system and health insurance services in Oman and enhance the monitoring of the overall system in Oman. As of October 2019, the CMA aims to launch the e-healthcare system by mid-2020. The regulations also restrict insurance companies from retaining more than 40 percent of the insurance premiums in Oman.

     

    Health Vision 2050

    Since 1976 Oman has been through three distinct phases of development concerning the health care sector. The first phase ran until 1990 and was directed at building Oman's health infrastructure. The second phase ran from 1991 to 2005 and focused on the development of various components of the health system. The third phase began in 2005 and is now targeted at providing comprehensive health care coverage by using high-level strategic planning to address the specific needs of the sector.

    In 2014 the government of Oman released a long-term plan for the country's health care sector, Health Vision 2050. The plan envisages large-scale investment in the health care sector to further create a well-organized efficient health system.

    With the population of Oman expected to double by 2050, Health Vision 2050 aims to establish up to 10,000 health centers to meet the demands of a growing and increasingly urban population. Health Vision 2050 aims to move the treatment of non-communicable diseases out of the hospitals and provide health care closer to the patients' homes. 

    Health Vision 2050 points to the growing need for geriatric care facilities, considering the number of elderly people living in Oman over the age of 60 are expected to increase from 6.1 percent of the population to 13.1 percent through to 2050. Home care should be provided for geriatric patients finding it difficult to attend health facilities as well as the terminally ill and those with chronic long-term conditions. Oman has made impressive steps in building sturdy health infrastructure, mobilizing the community, and promoting greater access in health care delivery to ensure the universal human right to health.

    Across the GCC, health care is intimately connected to the macroeconomic outlook for oil prices and continuing efforts by governments to improve the delivery of health care services for their people, both local citizens, as well as expatriate workers. As each state seeks to diversify its economic base, the health care industry is poised to expand further, as will the demands for health insurance. In some of the region's larger economies, such as the UAE and the KSA, high premium growth is expected to persist, making the region relatively attractive to health insurance providers.

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    Sun, 05 Jul 2020 11:27:00 GMT
    <![CDATA[IP Issues in Social Media]]> IP Issues in Social Media Content

    During the Congressional questioning of Mark Zuckerberg, CEO of Facebook, in April 2018, Zuckerberg said: "Every piece of content that you share on Facebook, you own, and you have complete control over who sees it and … how you share it, and you can remove it at any time." House Energy and Commerce Committee raised an important question, does a user's rights in data shared via Facebook depends on Facebook's terms of service and should such terms be regulated? And if so, how? 

    Swift advancements in social media pose great challenges for courts, as the existing laws were written without having social media in mind. Congress has also faced difficulty in passing new regulations for the complex and developing area that it does not fully comprehend. The interaction between social media and Intellectual Property (IP) law is an emerging area of concern for the lawmakers, lawyers, business owners and consumers.  

    Zuckerberg appeared before the Congress after a University of Cambridge professor was alleged to have obtained data on Zuckerberg along with potentially 87 million Facebook users, through a personality quiz and then shared the data with Cambridge Analytica, whose services were retained by customers, including the 2016 presidential election campaign for Donald Trump. As a result, Facebook tightened its policies regarding the information accessible by third parties and developers, prohibiting the sharing and selling data to others. But what about the information which is shared by the users through the Facebook site? Can Facebook be permitted to utilize such information? Are consumers knowingly permitting Facebook to use their information in connection with advertising? Zuckerberg stated that Facebook is exhaustive in its legal documents, but does not expect most of the people to read a fully legal document. 

    Should the content of written terms of service that govern the relationship between social media sites and consumers be regulated like the loan documents that govern the relationship between lenders and consumers? If the users of social media sites carefully read the terms of service, they will be aware of the information being shared among a network of friends and protected by the right of privacy can or cannot be used in connection with subsequent retargeted advertising. 

    In the lawsuit Fraley v. Facebook (no. 11-CV-01726), after a user clicked the "Like" button on a company's Facebook page, Facebook generated advertisements that would typically consist of that member's name and profile picture asserting that the person "Likes" the advertiser, along with the company logo. The plaintiffs contended that this was a violation of their right of publicity, and Facebook argued that the users consented to share their name and profile picture in the manner utilized through the terms of service.

    The stakes are higher for trade secrets. The lists of customers, suppliers, and other contacts, along with their associated information are of huge value to a business but can be highly detrimental when a competitor obtains the information. 

    Social networking is a daily part of the new era. With Facebook having about 500 million active users and Twitter having over 175 million users, the online activities are growing, and so are the concerns and challenges related to IP protection on the Internet. Recalling what happened with Daniel Morel, a photographer who was in Haiti during the devastating January 2010 earthquake, Morel posted dramatic first-hand-account photos. The photos went viral soon after Morel posted it. Unfortunate for Morel, someone else posted Morel's taken pictures on their own Twitpic page and claimed ownership. Soon after, French news and photo agency added the images to their photo database, which were transmitted to Getty Images and then published in several newspapers and online sites across the globe. Credit for the photos went to the French news and photo agency, Getty Images and the man who first copied Morel's photographs. Morel took the French news and photo agency and Getty Images to court in New York on the grounds of "distributing and selling his images without prior permission" thus violating copyright law. The agency responded by stating that Twitpic's Terms and Conditions permit others to use the posted images.

    The court ruled in Morel's favor, stating the defendants did not meet their burden to establish of being licensed to use Morel's photographs.

    The Terms and Conditions of Twitpic and Twitter do not permit the third parties to distribute or use the content without the owner's express permission. Most photo-sharing and social media sites have similar terms in this regard, and, to avoid third-party liability under the Digital Millenium Copyright Act of the United States (DMCA), are required to designate agents for infringement complaints by site users. 

    It is virtually impossible to establish binding global legislation on the regulation of social networks. As the majority of servers for these networks are located in the US, American law applies and, unfortunately, it is relatively deficient with regard to the security of Internet users' private information. 

    From "Winter is Coming" to plays on the Harlem Shake to anything involving cats, memes and GIFs (Graphics Interchange Format) are an increasingly popular way in which cultural ideas are shared. Another viral trend? It would definitely have to be the meme involving the big-eyed and bigger-eared Baby Yoda from the Disney Plus series "The Mandalorian" debuted in 2019. The images and animated GIFs of the adorable tiny green creature went viral on the social media feeds soon after the new character appeared in the show. Strangely, the GIFs started disappearing from Vulture and other websites. On 23rd November of the same year, it was reported by the website ComicBook that Disney had deleted Baby Yoda GIFs from Giphy for copyright reasons. But why? Giphy declined to elaborate this fully and stated that it (not Disney) removed Baby Yoda content due to "confusion" which had been resolved. It is still not known whether Giphy took down the Baby Yoda GIFs at Disney's behest or without any prompting. If Disney didn't prompt it, then did Giphy act preemptively out of fear that Disney might object to its IP running viral through the Internet? Nobody wants to be sued by Disney; after all the Mouse has enough money and lawyers to eradicate infringers with a sweep of its tail. So, are GIFs subject to Copyright? Yes, GIFs like any original creative work are subject to Copyright. But in practice, their lawful use is a slightly more complicated issue. The GIF content that is widely available tends to range from snippets of existing copyright material (for example a short sequence from a film) or an original animation. The GIF is either an original creation subject to Copyright, or it is derived from pre-existing work that is copyrighted. This presents a unique problem regarding the legal use of GIFs, as it may be argued that they contain unlicensed copyright-protected material. As such, in principle, freely sharing GIFs could legitimately draw the ire of copyright holders. 

    There is barely any case law surrounding the use of GIFs which means two things: 

  • Copyright owners of the material in GIFs are not currently attempting to enforce their copyright. 
  • No test case exists limiting the extent to which the owner can claim copyright over the GIF
  • Sites such as GIPHY prohibits the usage of the GIFs on their site for commercial purposes. It would take exceptional and detrimental circumstances for a copyright owner to take umbrage and issue a legal claim based on copyright. The remedies available are reasonable royalty or damages. In both cases, the cost of bringing a legal action would massively outweigh the recompense. As such, a copyright claim against the use of a GIF derived from or wholly comprised of the copyrighted material would not be a commercially viable one. 

    Epic Games faced several lawsuits over its use and sale of in-game animations based on dance moves argued to be popularized by celebrities. But who really owns a meme? There's no precedent for copyright or IP suits concerning memes. Memes, specifically the ones imitating movements made popular by celebrities or viral videos, do not appear to qualify for copyright protection. Does a single, repetitive dance move constitute IP? No. As per 17 U.S. Code § 102, the body of work which is protected needs to be an original creation which has been memorialized in a tangible form. Hence, one dance step is not considered a creative body of work because it is not enough material to cover. 

    The creators of the original works are rightly protective of their IP. "Grumpy Cat Inc. Corp. Ohio" registered Grumpy Cat with the US Patent and Trademark Office in 2012. In 2013, the owners of the cats used in the memes of "Nyan Cat" and "Keyboard Cat" won a lawsuit against Warner Bros. and 5th Cell Media for distributing and producing a video game respectively by using images of their cats. Getty Images, holding a reputation for strictly enforcing their IP, has enforced the use of one of its images in a meme. The Socially Awkward Penguin was a short-lived meme that was shared, and people would often change the text to include awkward sayings. The original image of the penguin came from a National Geographic photographer, and Getty Images enforced their rights and demanded money from people who used the image in memes.

    The Copyright Modernization Act (the "Act"), passed in 2012, is to reform Canada's copyright legislation. The Act permits the incorporation of the copyrighted works into user-generated content provided it is not for commercial gain and has no substantial adverse effect on the original material. 

    In the United Kingdom, the UK's Copyright and Rights in Performances (Quotation and Parody) Regulations 2014 covers the rights to parody. Section 30A of the Copyright, Designs and Patents Act 1988 (Caricature, parody or pastiche) states that the fair dealing with a work for the purposes of caricature parody, or pastiche does not infringe copyright in the work. The term 'fair dealing' provides an exception to copyright but does not provide such an exception for commercial use. 

    What can be acceptable for an individual sharing a funny meme with friends is not going to be seen as acceptable for companies seeking to make a profit. When the use of an image is directly or indirectly related to the business or a commercial endeavor, it is vital to first make sure that they have the appropriate licenses in place for commercial use. If the use is commercial, it is less likely to be considered as 'fair' and also could be seen as damaging to the original creator's reputation. 

    As per 17 U.S. Code § 107, for determining whether the use made of a work in any particular case is a fair use, the factors to be considered include the purpose and character of the use, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, the nature of the copyrighted work and the effect of the use on the potential market for or value of the copyrighted work. These factors are neither exclusive nor constitute a bright-line rule, but rather, are applied on a case-by-case basis (Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577-78 (1994)). When the meme is a parody or includes critical comments in a non-commercialized way, fair use will likely save the day. But, if it is used in a commercial way in advertising or trying to sell items by using someone else's images for the meme, then that will likely invite trouble. 

    As per the DCMA, the social media sites hosting GIFs and having a system to report and remove the content accused of copyright infringement will not be held responsible. This means that the DCMA will hold the person liable for sharing copyrighted GIFs, rather than the platform on which it was shared. Even if the attribution or a link back to the creator's website is included, the person may still be held liable for infringement of copyright. The legal reality of Social Media and IP is really to establish "Who Owns What?". Well, the viral content always has a creator who will not be happy if everyone else is profiting off of his work. 

     

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    Sat, 04 Jul 2020 11:26:00 GMT
    <![CDATA[Criminal Action Against NRI’S in India ]]> Criminal Action Against NRI'S in India 

    A Non-Resident Indian (NRI) is an Indian that is located abroad or overseas, living outside the territory of India and has been legally defined under the Foreign Exchange Management Act of India, 1999 and the Income Tax Act of India, 1961 for the applicability of the respective laws.

    Section 2(w) of the Foreign Exchange Management Act, 1999 (FEMA) defines a person resident outside India as a person who is not resident in India in consonance with the provisions laid out in Section 2(v) of the FEMA. Section 2(v) defines a person resident in India in the following conditions:

  • Any person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year shall be termed as a person resident in India; however, it does not include a person who has gone outside the territory of India or who stays outside India, after he has taken up employment outside India; for carrying on outside India a vocation or business; or for any other purpose indicating his intention to stay outside India for an uncertain period.
  • Besides the above, in the cases where a person who has come to India or stays in India shall not be considered as a person resident in India in either case, otherwise than for the purposes of taking up employment in India; for carrying on in India a vocation or business; or for any other purpose indicating his intention to stay in India for an uncertain period. 

  • Any person or body corporate incorporated or registered in India.
  • An office, agency or branch in India owned or controlled by a person resident outside India.
  • An office, agency or branch outside India owned or controlled by a person resident in India.
  • Any person not fitting the criteria for 'person resident in India' as laid out above, shall be termed as a person resident outside India (NRI)

    As per Section 13 of FEMA, the person in contravention of any of the provisions, rule or regulation of the Act, shall be liable to pay the penalty up to three times the amount or sum involved in such contravention, provided such sum in quantifiable, or the penalty shall amount up to two lakh rupees when the sum is not quantifiable. In addition to this, if the contravention is a recurring one, then a supplementary penalty extending to the amount of up to five thousand rupees will be charged for each day from the first day of such intervention till the date such penalty is paid.

    The Income Tax Act of 1961, defines an individual who is said to be a person resident in the jurisdiction of India. The status of a person on the residency or non-residency shall depend on the period of his/her stay in India. The period of stay is to be counted in the number of days for each financial year that shall commence from 1st April to 31st March (known as previous year under the Income Tax Act). An individual shall be considered as a resident in India in any previous year if the individual satisfies the conditions laid out in Section 6 of the Income Tax Act:  

  • The individual has been in India for a period of 182 days for the previous year. 
  • The individual has been in India for a period of total 365 days for a total of four years preceding the year in India and for a period of 60 days or more in that particular year when in India.
  • A person who fails to satisfy the conditions, as mentioned above, will be treated as an NRI in that previous year. Income tax rates are different for persons who are termed as residents in India and different for NRI's for the payment of income tax.  

    An NRI is subject to criminal action pursuant to the Criminal Procedure Code of India of 1973 which dictates punishment for non-citizens of India. Section 188 in the Code of Criminal Procedure of India, 1973 mandates that for an offence committed outside India by a person, not being a citizen of India, may be dealt with in respect of such offence as if it had been committed at any place within India at which he may be found. However, any such offence committed by a person, not in India, shall not be inquired into or tried in India except with the prior sanction of the Central Government. Therefore, even if an NRI commits an offence outside the territory of India, he may be dealt with such offence as if such an offence was committed within India. Nevertheless, the proviso to Section 188 suggests that the offences could be inquired into or tried only after having obtained the prior sanction of the Central Government. Therefore, Section 188 is a shackle on the power to inquire into an offence committed by an NRI to the extent that it can be done only with the authorization of the Central Government. No sanction shall be imposed till the commencement of the trial, and therefore, such a shackle has been imposed post the stage of a trial. Only when a criminal action shall be initiated into a trial stage, is when the sanction of the Central Government of India shall be required and not before. Hence, the trial cannot be instigated beyond the cognizance stage in a trial without the approval of the Central Government.

    The Registration of marriage of Non-Resident Indian bill of 2019 mandates action to be brought against NRI's where an action can be brought against an NRI husband who has earlier been escaping liability under the Indian Penal Code of 1860 after marrying an Indian woman and then absconding to a foreign country. Pursuant to the 2019 bill, the court is empowered to issue summons and warrants and further issue attachment of properties belonging to proclaimed offenders with NRI status. Further, the passport of such an offender can also be confiscated, or the visa can be cancelled.

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    Sat, 04 Jul 2020 10:47:00 GMT
    <![CDATA[DIFC Contract Law]]> DIFC Contract Law

    Is the Law of Contracts a complete descriptive theory, explaining what the law is? Or is it a complete normative theory, explaining what the law should be? The traditional definition of a contract is one embracing all promises that the law will enforce. However, even a theory that focuses only on the enforcement of bargains in the law of contracts must still consider the entire continuum from standard form commercial contracts between business firms to contracts between firms and consumers. A law of contract which comprehends such a broad domain has not yet been explained by any descriptive theory.

    As per the basic principles of English Contract Law, a contract is an agreement giving rise to obligations which are recognized or enforced by law. The 3 basic essentials to the creation of a contract:

  • agreement;
  • contractual intention; and
  • consideration.
  • The first essential of a contract is that the parties should have reached an agreement, which is generally when one party makes an offer, which is accepted by another party. The English courts will apply an objective test in deciding whether the parties have reached an agreement. In Stover v Manchester City Council ([1974] 1 WLR 1403), an offer was defined as an expression of willingness to contract on specified terms with the intention for it to be binding once it is accepted by the person to whom it is addressed.

    In Carlill v Carbolic Smoke Ball Company ([1893] 2 QB 256), a medical firm advertised that flu would be cured by its new drug, a carbolic smoke ball, and if it did not cure, buyers would receive £100. When sued, Carbolic argued the advertisement was not a legally binding offer; it was merely an invitation to treat, a mere puff or gimmick. However, the advertisement was held to be an offer by the Court of Appeal. An intention to be bound could be inferred from the statement that the advertisers had deposited £1,000 in their bank "shewing our sincerity".

    The Dubai International Financial Centre Law Number 6 of 2004, cited as the Contract Law 2004 (the "Law"), applies in the jurisdiction of the Dubai International Financial Centre (DIFC). Nothing in the Law requires a contract to be evidenced by or concluded in writing. The contract shall be proved by any means, including witnesses. A validly entered contract is binding upon the parties and can be modified or terminated only as per its terms or by agreement or as otherwise provided in the Law. However, the parties to a contract may exclude the application of the Law or digress from or alter the effect of any of their provisions, except as otherwise provided in the Law.

    The acceptance of an offer concludes the manner of formation of a contract in the Law. A contract is modified, terminated or concluded by the mere agreement of the parties, without any further requirements. As per the Law, a proposal for concluding a contract constitutes an offer provided it is sufficiently definite along with indicating the intention of the offeror as one to be bound in case of acceptance. However, an offer can be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. Similarly, an offer may be revoked if the revocation reaches the offeree before it has dispatched an acceptance.

    DIFC being an international centre paves the way for linguistic discrepancies. The Law states that where a contract is drawn up in two or more language versions which are equally authoritative and in case a discrepancy between the versions arises, preference shall be given to the interpretation as per the version in which the contract was originally drawn up.

    The Law states that the contractual obligations of the parties may be express or implied. Article 57 of the Law states that the implied obligations arise from:

  • the purpose and nature of the contract;
  • usages and practices established between the parties;
  • fair dealing and good faith; and
  • reasonableness.
  • Article 62 of the Law states the "Price determination". Where a contract has not fixed or made provision for determining the price, in the absence of any indication to the contrary, the parties are considered to have referred to the price charged at the time of concluding the contract for such performance in comparable circumstances and to a reasonable price when no such price is available. The price shall be a reasonable price also in case the price was to be fixed by a third person, and that person does not or cannot do so. When the price is to be fixed by reference to factors which have ceased to exist or to be accessible or do not exist, the nearest equivalent factor shall be treated as a substitute.

    While Part 7 of the Law deals with the time, order, place and payment of Performance, Part 8 of the Law states regarding the Non-Performance. Non-performance has been defined in Article 77 of the Law as a failure by a party to perform any one or more of its obligations under the contract, including defective performance or late performance.

    However, the non-performing party may, at its own expense, cure any non-performance, provided:

  • it gives notice regarding the proposed manner and timing of the cure, without undue delay;
  • the cure is appropriate in the circumstances;
  • the aggrieved party holds no legitimate interest in refusing the cure; and
  • the cure is effected promptly.
  • Article 82 of the Law also mentions about Non-Performance in case of Force majeure. Except with respect to a mere obligation to pay, non-performance by a party is excused when the party is able to prove that:

  • the non-performance was due to an impediment beyond its control; and
  • the party could not reasonably be expected to have considered the impediment at the time of concluding the contract or avoided and overcome it or its consequences.
  • For when the impediment is temporary, the excuse of Non-Performance shall have effect for such reasonable period considering the effect of the impediment on the performance of the contract. Notice of the impediment and its effect on its ability to perform must be given to the other party by the party who fails to perform. Failing to give notice within a reasonable time may hold the party that failed to perform liable for damages resulting from such non-receipt. However, a party can still exercise a right to terminate the contract or to withhold performance or request interest on money due.

    Part 9 of the Law deals with the assignment of rights and obligations. An assignment of a contractual right is a transfer by virtue of which the assignor's right to performance by the obligor is extinguished in part or in whole, and the assignee acquires a right to such performance. An assignment of a contractual obligation is a delegation of the obligation to the assignee. An assignment of a contract by a party is an assignment of the contractual rights and delegation of the contractual obligations of the party.

    Part 10 of the Law lays down the rights of the third-party to enforce the contractual term. A "third-party" is a person who is not a party to the contract. The third-party must be expressly identified in the contract by name, as a member of a class or as fitting a specific description but need not be in existence when the contract is entered into.

    The third-party may in his own right, enforce a term of the contract provided:

  • the contract expressly provides that he may do so; or
  • the term purports to confer a benefit on him unless it appears that the parties did not intend the term to be enforceable by the third-party.
  • Part 11 of the Law lays down provisions for the right to damages. Non-Performance, except if excused under the Law, gives the aggrieved party a right to damages exclusively or in conjunction with other remedies. The Non-Performing party is liable only for harm which it had or could reasonably have foreseen at the time of concluding the contract as being likely to result from its Non-Performance. The aggrieved party is granted full compensation for harm sustained, the loss which it suffered or any gain of which it was deprived, as a result of the Non-Performance. The assessment is at the discretion of the Court when the amount of damages cannot be established with a sufficient degree of certainty.

    Part 12 of the Law lays down provisions for "Agency". An agency relation exists only when there has been consent by the principal to the agent that the agent may act on his account, and consent by the agent to act so. A general agent is an agent authorized to conduct a series of transactions involving continuity of service, and a special agent is an agent authorized to conduct a single transaction or a series of transactions not involving any continuity of service. The Law also provides for the Disclosed principal; Partially disclosed principal; and Undisclosed principal along with providing for authority, liability and indemnity of the Agency relation.

    Conclusion

    The contribution of the classical contract law to the modern law of contract is a mixed one. The most enduring legacy is the conception of contract as an institution and their insistence on the contract's independence from other forms of legal obligation. By contrast, classical lawyers' monolithic view of a contract is outdated and harmful to modern law. To combat the needs of an increasingly complex society in Dubai, the DIFC Contract Law had to be more complex and more sophisticated. The relativity to English Contract Law was essential as the DIFC Contract Law was adequately to perform the plethora of roles assigned to it.

     

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    Sat, 04 Jul 2020 10:01:00 GMT
    <![CDATA[ADGM Company Regulations 2020]]> ADGM Company Regulations 2020

    Abu Dhabi's decision to set up a financial center, known as the Abu Dhabi Global Market ("ADGM") has opened doors for international business. ADGM has its own published rules and regulations as well as Registrar of Companies (Registrar) and a Financial Services Regulator. Further, a court has also been established in the ADGM. As the laws and regulations needed to be attractive to international businesses, Abu Dhabi strategically based the system on English common law, even though the existing system in the UAE is heavily influenced by civil law systems, namely, French, Roman, Egyptian and Islamic law.

    The Companies Regulations 2015 of the ADGM were substantially based on the UK Companies Act 2006 (the "UK Act"). The decision to use the UK Act as the principal precedent for the drafting of the Companies Regulations 2015 was taken in view of the fact that that the UK Act is a well-established and highly regarded statute that has undergone evolution and improvement over a long period of time. The UK Act also has the benefit of being supported by precedents and regular English court decisions, providing increased legal certainty and predictability. The UK Act is also consistent with EU law and therefore, the company laws of the EU Member States. Moreover, the UK Act is well known to a large number of practitioners in the UAE and widely used in international business.

    As a result, the drafting of the Companies Regulations presented the ADGM with an opportunity to take the best of the UK approach and avoid the peculiarities that have been removed by the best practice of other jurisdictions. The ADGM Companies Regulations 2020 ("Regulations") has repealed the Companies Regulations 2015 and all of the amendments issued thereafter.

    In ADGM, there are no restrictions on foreign ownership. The types of company which can be established are:

  • Private (with limited or unlimited liability)
  • Public
  • Restricted Scope Companies (RSC")

    The private companies may apply to the Registration Authority to become RSC as per the Regulations. A company may only be registered as an RSC if it is a subsidiary undertaking of another body corporate that that prepares and publishes group accounts or is a subsidiary undertaking of a body corporate which is incorporated by a Federal Law or by a law of any Emirate of the UAE or it is directly or indirectly wholly-owned by an applicant (the "founding member") who is one person, or a group of members of the same family and approved by the Registrar exercising his discretion.

    What constitutes being a member of the same family has been broadened under the Companies Regulations 2020 to include grandchildren, great-grandchildren and adopted children (and their spouses).

    Third parties will know that an RSC is subject to less onerous requirements due to the requirement to have "Restricted" in the company's name. The onus will then be on such third parties to conduct diligence on the company. ADGM provides for RSC to be a vehicle with far less onerous disclosure and compliance requirements than those that are generally applied in ADGM. RSC is intended for use by holding vehicles and professional investors where confidentiality may be highly important. An RSC is required to file its articles, details of its registered office, details of its directors and secretary (if it has one) and an annual return with the Registrar. Of these documents, only its articles and details of its registered office will be made publicly available. An RSC is obliged to keep accounting records, to have an accounting reference date and to prepare, but not audit, accounts on the basis of the small companies' regime. However, an RSC will not be obliged to file these accounts with the Registrar (unless requested by the Registrar) or to circulate them to its members or debenture holders. An RSC will not be required to prepare directors' reports and the requirement to seek members' approval for certain transactions with directors, including directors' service contracts, is not applicable for an RSC. ADGM is keeping up with the deregulated regime for an RSC.

    Cell Companies

    The Regulations also provide for Cell Companies. A cell company may be a public or private company, and a limited company (whether limited by shares or by guarantee) or an unlimited company. However, a cell company cannot be an RSC, and an RSC cannot be or become a cell company.

    Cell companies operate via multiple cells within the company with their own allocated assets and liabilities, which are intended to be distinct from the assets and liabilities of the company itself with their own balance sheets and separate insolvency processes per cell. Cell companies may take two forms under the Regulations:

  • an incorporated cell company, where each cell has a distinct legal personality; or
  • a protected cell company, where a creditor's recourse is limited to cellular assets by operation of law.
  • As per the Regulations, different classes of share may be issued with varying rights of class and the Regulations provide for both companies having a share capital and companies without share capital and there is no concept of nominal share value.

    Certificate of Incorporation

    Under the Company Regulations 2020, any certificate of incorporation issued by the Registrar shall be in electronic form only as opposed to signed and authenticated by the Registrar. However, a request can still be made for a paper copy certificate of incorporation, signed by the Registrar or authenticated by the Registrar's seal, and such request may be subject to a fee as prescribed by the Board of Directors of the ADGM.

    Re-registration and Continuance

    Re-registration and Continuance provisions have been included in the Regulations to provide a route for companies to redomicile in the ADGM.

    Conflict of Interest

    A director of a company must not act on behalf of a company, or exercise any of his powers as a director, in relation to any matter in which he has or can have a direct or indirect interest which does or may conflict with the interests of the company. This applies to the exploitation of any information, property or opportunity, and it is immaterial whether the company could take advantage of the information, property or opportunity. However, this duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company.

    The Regulations impose a duty not to act in relation to matters where the director has an actual or possible conflict, without the approval of the unconflicted directors or the members.

    Disqualification of Directors

    The Regulations vest this power in the Registrar. The procedure to be followed by the Registrar envisages a staged process which involved the issuance of a warning notice followed by an opportunity to make representations to the Registrar, the issuance of a decision notice followed by the opportunity to contest the Registrar's decision in court and finally, the issuance of a final notice.

    The Registrar may make an order (a "delegation order") for the purpose of enabling functions of the Registrar to be exercised by the Financial Services Regulator subject to such exceptions and reservations as may be specified in the order. A delegation order may confer on the Financial Services Regulator such other functions supplementary or incidental to those transferred as appear to the Registrar to be appropriate. The delegation order may be amended or, if it appears to the Registrar that the continuation of the delegation order is no longer in the public interest, revoked by a further order.

    The disqualification, among other grounds, can be on conviction of a criminal offence, for persistent breaches of the company's legislation or fraud. The provisions of the Regulations impose a duty on the Registrar to disqualify unfit directors of insolvent companies.

    Derivative claims

    The Regulations provide for Derivative Claims which are proceedings by a member of a company concerning a cause of action vested in the company and seeking relief on behalf of the company. The right to bring a derivative claim is restricted to eligible members holding five percent of the share capital (a member holding five percent or more of the share capital of the company, or a member with the written consent of members holding along with the first-mentioned member a minimum of five percent of the share capital of the company). The derivative claim is in respect of a cause of action arising from an actual or proposed act or omission involving default, negligence, breach of trust or breach of duty by a director of the company. The cause of action may be against either or both the director and another person.

    Merger

    The Regulations involve a merger:

  •  by absorption, where any two or more companies merge into a single company which is an existing company, or
  •  by consolidation, where any two or more companies amalgamate into a new company.
  • In the merger, at least one of the constituent companies participating must be a company formed or incorporated under the Regulations. Where one or more of the constituent companies participating in a merger is a non-ADGM company, a merger shall not be approved unless the conditions set under Section 810 of the Regulations are fulfilled.

    The Regulations provide for drafting the terms of the merger, the preparation of various reports, the calling of shareholder meetings to approve the merger and the publication of the merger terms and reports prior to the meeting.

    Conclusion

    ADGM is a business-friendly financial center as it permits a broader scope of financial services and banking activities along with other opportunities. The ADGM Companies Regulations 2020 provide structuring flexibility for applicants and also a corporate governance and compliance framework that most international businesses are already familiar with. Efforts for the ADGM application, licensing and registration processes to be quick and straightforward are always a priority for ADGM.

     

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    Tue, 30 Jun 2020 07:21:00 GMT
    <![CDATA[Offshore Companies Guide]]> Offshore Companies Guide

    Companies in the offshore jurisdiction are set up to create flexibility amongst the shareholders of the company, and such company formation is more straight-forward and comfortable. This article aims to make a comparison between the requirements of companies set up in offshore jurisdictions pertaining to the Cayman Islands, British Virgin Islands, Bermuda, Panama, Bahamas and Belize. Formation of offshore companies in these jurisdictions are governed by the several legislation that has been listed out below:

  • Cayman Islands Company Law (Companies Law of 2013);
  • British Virgin Islands (BVI Business Companies Act number 16 of 2004);
  • Bermuda (Companies Act, 1981 of Bermuda);
  • Panama (Panama Corporation law 32 of 1927);
  • Bahamas (International Business Companies Act of 2000) and
  • Belize (Belize International Business Companies Act of 1990)
  • Auditors

    In an offshore company set up in Bermuda, the shareholders must appoint an auditor who shall audit the financial statements of the company. Such a requirement can be waived, provided all shareholders and directors of the company agree in writing or at the convening of a general meeting that there shall be no auditor. For Cayman and BVI, there is no requirement for the appointment of an auditor of the company or an annual audit of the company. In Belize, no auditor needs to be appointed, and the same is the case with Bahamas and Panama. Hence, in all jurisdictions, no requirement for auditing of accounts is required, and an auditor of the company need not be appointed.

    Taxation

    There is no imposition of taxes in Bermuda, Cayman, BVI, Belize, Bahamas and Panama. All offshore companies established in these jurisdictions shall enjoy exemption of tax, and such tax-exempt status is granted automatically without the company having to apply for it. In Panama, the company has to declare its constitutional documents to a notary public, following which tax-exempt status shall be granted. For the rest of the jurisdictions, such tax-exempt status shall be granted instinctively. A no taxation policy is highly beneficial and provides ease for a company set up in an offshore jurisdiction.

    There is no imposition of corporation tax, wealth tax, capital gains tax or any other tax applicable to a business company.

    Minimum paid-up share capital

    There is no requirement of a minimum paid-up share capital in an offshore company set up in Bermuda, Cayman, BVI, Belize, Bahamas and Panama. There is no minimum authorized or issued share capital requirement in any of the offshore companies set up in these jurisdictions.

    Voting rights

    Under the Cayman Islands Company Law (Companies Law of 2013), a majority of at least two-thirds is required for approving a decision in a general assembly of an offshore company, unless the articles of association specify that the required majority shall be a number greater than two-thirds. Under the British Virgin Islands (BVI Business Companies Act No 16 of 2004) a resolution passed by the general assembly in an offshore company shall be approved by a majority in excess of 50% or in case the memorandum of association requires a higher majority. In Bermuda, as per the Companies Act, 1981 of Bermuda, resolutions of shareholders generally need to be approved by a simple majority. The articles of a company have the power to decide if holders can have voting rights in Panama

    Registered office

    Every company must have a registered office in the respective jurisdictions, the address of such company shall be registered with the registrar. Such registration shall be a matter of public record. Registration of the company must be filed at the registry and shall be available in the public domain. For instance, pursuant to Section 37 of Companies Act of Bahamas, a company shall have a registered office in the Bahamas, and the address of the registered office shall be submitted to the registrar. Article 6 of Panama Corporation law 32 of 1927, the registration of the company shall be in the public domain.

    Minimum shareholders/directors

    In Panama, a minimum of three directors and one shareholder is required for the setting up of a company.

    For Bermuda, a minimum of 1 shareholder is needed, and the names of all shareholders shall be maintained in a register of members. At the same time, nominee shareholders are permitted. For Cayman and BVI, at least one shareholder is required, and nominee shareholders shall also be permitted. The names of all shareholders shall be maintained in a register of members for both the companies. Similarly, for Belize, a minimum of one shareholder is required, and the same is the case with the Bahamas.

    Transfer of shares

    Shares may be transferred by a standard instrument of transfer signed by or on behalf of the transferor and usually the transferee. Transfer of shares is governed by Article 29 of Panama's Act, where shares shall be transferable by the bye-laws of the company. Transfer of shares is governed by Section 31 of the Bahamas Act, where registered shares of the company may be transferred by the transferor via a written instrument. Similarly, shares can be transferred to other jurisdictions.

    Stamp duty

    No stamp duty is payable in respect of an instrument executed in an offshore company in Bermuda. In the Cayman Islands, certain documents shall be subject to stamp duty, and it shall be payable if the document is executed in the Cayman Islands. For BVI, no stamp duty shall be applicable, and the BVI Stamp Act (Cap 212) exempts the company from registration or payment of any stamp duty on instruments executed in an offshore company. In the Bahamas, no stamp duty is applicable, and the business license fee and in Panama, no such stamp duty is applicable as well.

    Exchange controls

    There are no exchange controls applicable in the Cayman Islands or BVI. In Bermuda, there are exchange controls applicable, but that is in particular with local persons and businesses and shall not be applicable to offshore companies. In the Bahamas, the exchange control regulations shall not be applicable to offshore companies.

    Shareholders meetings

    An annual general meeting shall be held once a year in Bermuda. The notice shall be sent with respect to such general meeting and such notice period might further be extended as well. For Cayman, no annual general meeting is required, and such meetings may be convened, but if the same is provided in the articles of the company. Such a meeting can be called upon the written request of the shareholders in accordance with the articles of the company. The BVI act does not pose any requirement for the convening of an annual general meeting, and the same is not necessary.

    Directors

    In Bermuda, one director is required to be appointed. Such a director can be an individual or any type of legal person that can include a company. It can also include an association or body of persons. The minimum requirement of directors in Cayman is at least one director. In BVI, the minimum number of directors is one, and the same is the case with Bahamas and Panama.

    Public records

    The notice of the registered office has to be a public record. Such is the case with Cayman, BVI and Bermuda. In BVI, the memorandum and articles of association which include the name and its registered agent and registered office have to be in the public record. The certificate of incorporation also has to be in the public record in BVI.

    Constitutional documents

    In Bermuda, the constitutional documents of an offshore company are its memorandum of association and bye-laws. Such memorandum sets out the objectives of the company, and the company shall have the power to formulate such memorandum. The bye-laws will prescribe the rights and duties as between the company, the shareholders and the director. However, such bye-laws shall not be in the public domain and not available for any public inspection. In Cayman, the constitutional documents will be memorandum and articles of association which must specify the name and registered office of a company. Such articles shall bind the company and its members who are registered with the company. Such articles can be registered but are not available for public inspection. In BVI, the constitutional documents and memorandum must include the company's name and address along with the registration of the office and the agent. The articles must be included when the memorandum is submitted for registration with the registrar and such will be available by public inspection. In the Bahamas, the constitutional documents shall include articles of continuation accompanied by memorandum and articles of the company and the same shall be registered with the registrar.

    Incorporation approval

    No governmental approval is required for incorporation of a company in Cayman and BVI. However, certain business activities may require licensing or registration. In Bermuda, the approval of the Bermuda monetary authority must be obtained in regards to the transfer of shares and certain other business activities may require special approvals or license. In Panama, the incorporation of a company is not required.

     

     

    ]]>
    Tue, 23 Jun 2020 11:38:00 GMT
    <![CDATA[Foreign Investment Risk Review]]> Foreign Investment Risk Review Modernization Act, 2018- USA

    National security always matters, obviously. But the reality is that if you have an open door in your software for the good guys, the bad guys get in there, too. - Tim Cook

    The Committee for Foreign Investment in the United States ("CFIUS") lurked in the background for years. CFIUS is an interagency committee that primarily blocks mergers, acquisitions, and takeovers by foreign entities that create a potential national security risk. Most of the data for CFIUS' decisions is classified, so the public's sole window into the operations of CFIUS is its public testimony, mandated reports since 2007 and Congressional research reports. Despite having played a significant role in some important transactions, it remains little known. In the wake of the Foreign Investment Risk Review Modernization Act ("FIRRMA") of 2018, largest-ever expansion of CFIUS, the scramble to understand CFIUS is more furious than ever. 

    President Trump blocked a Chinese company's attempted purchase of an Oregon-based semiconductor company in 2017, and also blocked a Singapore company's attempted purchase of a California-based telecommunications equipment company in March, both after the CFIUS recommended he do so. 

    Previous expansions of CFIUS began with a bang, with Congress reacting to particular, high-profile transactions. Like its predecessors, FIRRMA was born out of fear of a rival, in this case, China. During the Obama Administration, Congress began to show increasing skepticism of Chinese investment in American companies. Initially, many major acquisitions, like Lenovo's 2005 purchase of IBM Thinkpad, received approval with no objections (See Mike Musgrove, U.S. Panel Clears IBM Deal With Chinese Firm, WASHINGTON POST (Mar. 10, 2005)). In 2011, members of Congress rang the alarm over the potential acquisition of 3Leaf Systems by Huawei, a Chinese telecom giant, and CFIUS' posture regarding sovereign wealth funds more generally (See James K. Jackson, Cong. Research Serv., RL33388, THE COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES 2, 22 (2012)). In 2013, Congress expressed concern over a potential acquisition of Smithfield, a pork processor and producer, by Shanghui, a Chinese food company. Senator Debbie Stabenow declared that CFIUS must take Shuanghui's "troubling track record on food safety into account," connecting national security and the health of American families more generally (Christopher Doering, Secretive U.S. Panel Eyes China's Smithfield Deal, U.S.A. TODAY, (Jun. 9, 2013)). The Obama Administration, however, held steady to its commitment to an "open investment policy" with the traditional justification that "inbound investment has long been an important component of our overall economy" (Statement by the President on United States Commitment to Open Investment Policy, White House (June 20, 2011)). That posture did not last, and CFIUS became far more aggressive in the Administration's second term. The quantity of CFIUS notices increased overall, as well as the number of failed transactions. In 2012, President Obama blocked a deal by Ralls Corporation, the first formal presidential action since 1990, over concerns that it would acquire real estate near a sensitive naval base. Ralls immediately filed suit (Ralls Corp. v. Committee on Foreign Investments, et al., No. 13-5315 (D.C. Cir. 2014)) and, on appeal, established that its due process rights had been violated, though many questions remained unanswered. Chinese transactions were disproportionately represented among CFIUS investigations from 2013–2015, almost double the next highest country, Canada, and almost all formally blocked acquisitions were Chinese. 

    FIRRMA, enacted in August 2018, provides CFIUS considerable reach into the deals where national security is a potential issue. The Law extends the jurisdiction of CFIUS over "certain non-controlling investments" into U.S. businesses involved in sensitive personal data, critical infrastructure or critical technology. Among the specific technologies, FIRRMA was designed to protect big data, artificial intelligence, nanotechnology and biotechnology. It also establishes the jurisdiction of CFIUS over real estate transactions.

    The Regulations limit the application of CFIUS to "certain categories of foreign persons," and has "initially" termed a handful of countries as "excepted foreign states. like Australia, Canada, and the U.K., countries with which the U.S. has "robust intelligence sharing and defense industrial base integration mechanisms". On 13 January 2020, the CFIUS issued final regulations to implement the FIRRMA to be effective from 13 February 2020. 

    Key Takeaways from the Regulations of FIRRMA

  • Expanded Jurisdiction: The Regulations broaden CFIUS' jurisdiction over foreign investments that could potentially result in control over a U.S. business by a foreign person ("covered control transactions") to include two additional types of transactions: (i) certain non-controlling investments in U.S. businesses involved with "sensitive personal data", "critical technologies" or "critical infrastructure"; and (ii) specific transactions involving real estate, primarily transactions in the proximity of specific maritime ports, airports and military installations. 
  • Specifically, FIRRMA gives CFIUS the authority to review the lease or purchase by, or concessions to, a foreign company of the U.S. real estate which: 

  • is located within or shall function as part of, air or maritime port;
  • is in close proximity to a U.S. military installation or other property of the U.S. government which is sensitive for reasons concerning the national security;
  • could reasonably enable the foreign person the ability to collect intelligence on activities being conducted at such installation or property; 
  • could expose national security activities at such installation or property to the risk of being under foreign surveillance; and 
  • meets other criteria as the Committee prescribes by regulation.
  • FIRRMA provides the CFIUS significant leeway to propose regulations to limit the review of real estate transactions. For instance, the purchase of any "single housing unit" and the real estate in "urbanized areas" is exempted, except as prescribed by the CFIUS in regulations in consultation with the Defense Department. Secondly, FIRRMA specifies that regulations shall be prescribed by the CFIUS to ensure that the term "close proximity" refers only to a distance within which the lease, purchase or concession of real estate could pose a national security risk concerning a U.S. government facility. Thirdly, FIRRMA authorizes the CFIUS to prescribe regulations that further define the term "foreign person" for purposes of such transactions, thus further narrowing the scope of this provision.

  • Mandatory Filings: Most filings with CFIUS remaining voluntary, certain foreign investment transactions involving foreign government ownership or critical technology requires mandatory filings, with few exceptions. 
  • Exceptions for Qualifying Investors: There are specific exceptions to the jurisdiction of CFIUS over certain real estate transactions and non-controlling investments for investors from "excepted foreign states", initially Australia, Canada, and the United Kingdom, that fulfil certain qualifications. These exceptions deem to be of limited utility as, among other things, they do not cover control transactions. 
  • Incremental Acquisitions: The Regulations continue to furnish a safe harbor from future CFIUS review of any additional investment by a foreign person in a U.S. business where CFIUS had approved a prior controlling investment, although a non-controlling investment, by the same foreign person. 
  • Investment Funds: In Investment Funds, FIRRMA specifies that the limited partners may qualify as passive investors, provided the conditions are met, including: (i) the fund is managed by a U.S. general partner or an equivalent; and (ii) restrictions on the limited partner to impact certain investment decisions whether through a committee, advisory board, or another form of authority. "Investment Fund" not defined by FIRRMA is however defined by the Pilot Program as any entity that is an "investment company" as defined in §3(a) of the Investment Company Act. "Investment Fund", under the Pilot Program, covers conventional funds engaged in the business of issuing face-amount certificates or investing in securities, along with entities such as government sovereign wealth funds, private equity funds and hedge funds. 
  • Nerve Center Test: CFIUS has proposed an interim rule defining the term "principal place of business" (PPB) using a "nerve center" test, which may exclude the jurisdiction of CFIUS over certain investment funds organized outside the U.S., but managed by U.S. general partners. A party's PPB is defined as the primary location where an entity's management controls, directs or coordinates the entity's activities, or, for an investment fund, where the fund's activities and investments are primarily controlled, directed or coordinated by or on behalf of the general partner, managing member, or equivalent. 
  • Short-Form Declarations: Investors may make a CFIUS filing, either by a traditional "notice" or an abbreviated "declaration." 
  •  Filing Fees: The filing fee of 1 percent of the value of the transaction, with a maximum of USD 300,000, authorized by FIRRMA, is yet to be implemented by the CFIUS. 
  • Reporting: FIRRMA modifies CFIUS' annual confidential report to specified Members of Congress and non-confidential reports to the public to enable more information to be available on investment transactions, specifically which involve China. 
  • Impact on Technology Sector: National security concerns regarding technology and data transfer to China propelled the policy debate that eventually led to FIRRMA. FIRRMA and CFIUS' regulations along with the related export control changes will significantly impact the large segments of the U.S. technology sector that were earlier unaffected by CFIUS or export control requirements. 
  •  

    Although CFIUS does not officially provide any reasoning for its decisions, the foreign investors or domestic companies seeking to attract foreign capital can look at the following instances as a guide on whether a proposed transaction may ultimately be blocked by the President. 

    1990: China National Aero-Technology Import and Export Corporation (Catic) acquiring Mamco Manufacturing (Mamco), a Seattle aerospace supplier. Former President Bush stated Catic's continued control of the airplane parts maker might threaten the national security of the United States and thus ordered Catic to divest itself of Mamco. 

    2012: Ralls Corporation (Ralls), owned by Chinese company Sany Group acquiring Oregon wind farm project. Former President Obama ordered Ralls to divest its interests in the wind farm project. Underlying his decision, President Obama stated that there is credible evidence that leads to believe that Ralls may take action that threatens to impair the national security of the United States. As per the Obama administration, Ralls had four wind farm projects that are within the vicinity of restricted air space at a naval weapons system training facility. 

    2016: Chinese firm Fujian Grand Chip Investment Fund acquiring Aixtron, a German-based semiconductor firm with U.S. assets. Former President Obama's action appeared to be based on concerns regarding China gaining access to the secrets of producing gallium nitride used in military equipment. The Treasury Department stated that the national security risk posed by the transaction related to the military applications of the overall technical knowledge and experience of Aixtron, a producer and innovator of semiconductor manufacturing equipment and technology.

    2017: Canyon Bridge Capital Partners, a Chinese investment fund (Canyon Bridge) acquiring Lattice Semiconductor Corp. (Lattice). President Trump's order blocking the transaction cited a similar rationale as President Obama's 2012 reasoning. Moreover, the Treasury Secretary Steven Mnuchin highlighted four national security concerns in a press release: (1) Chinese government's role in the transaction; (2) the potential transfer of Lattice's intellectual property to Canyon Bridge; (3) semiconductor supply chain's importance to the U.S. government; and (4) the U.S. government's use of Lattice products. 

    2018: Singapore-based Broadcom acquiring semiconductor chip maker Qualcomm. Broadcom, although being based in Singapore, the main concern that drove President Trump's decision over the Qualcomm deal was China, because permitting an American technology company to be acquired would surrender its dominance in the wireless and semiconductor industry. In a letter from CFIUS addressed to Broadcom, concerns cited were that if the deal went through, Qualcomm could be displaced as leaders in developing the forthcoming 5G standard for faster, higher-capacity wireless networks by Huawei and other Chinese telecommunications companies.

    Conclusion

    It is indispensable for businesses to formulate investment strategies that factor in the CFIUS risk and implement such processes so as to enable the rapid identification of the potential deals which could implicate CFIUS review.

    As governments in various countries strengthen their grip on national security reviews of foreign direct investment, the need for better calibration and assessment of the associated regulatory risk in cross-border transactions is more significant than ever before. The US is far from alone. The European Union, United Kingdom, Germany, France, China and other nations are also incrementally ratcheting up their reviews. In February 2019, the European Commission approved a block-wide mechanism for screening Foreign Direct Investment to build on national review mechanisms already in place in 12 member states. For instance, the government of the UK is proposing radical novel legislation to permit it to intervene in cases which potentially raise national security concerns. The government of UK estimates an approximate of 50 cases annually may end up with some form of remedy to address such concerns under the new law. In France, the new PACTE law aims to extend the list of sectors subject to review, strengthen the sanctions mechanism and introduce some transparency into the process through annual reporting on a no-name basis of reviewed cases. In Canada, the Investment Review Division, which is part of the Ministry of Innovation, Science and Economic Development Canada, is the government department responsible for the administration of the Investment Canada Act, the statute regulating investments by non-Canadians in Canadian businesses. In Germany, pursuant to the German Foreign Trade and Payments Act and the German Foreign Trade and Payments Ordinance, the German Federal Ministry for Economic Affairs and Energy is entitled to review inbound transactions by foreign investors based outside the European Union or the European Free Trade Association. They may prohibit or restrict a transaction if it poses a threat to the security of the Federal Republic of Germany or the public order. In July 2018, Germany blocked the Chinese takeover of a German machine tool manufacturer and expanded its authority to block acquisitions of firms involved in "critical infrastructure." In July 2018, China proposed new draft regulations to expand the foreign investments covered under its national security review process.

     

     

     

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    Tue, 23 Jun 2020 10:38:00 GMT
    <![CDATA[Federal Law towards Family Law]]> Amendments by Federal Law Number 8 of 2019 towards Family Law

    The Abu Dhabi Statistics Centre (ADSC) had revealed that about 30 percent of the divorces that took place in 2018 in the United Arab Emirates (UAE) was dissolved within the first year of marriage. A total of 5,467 marriage contracts were registered in 2018, indicating a 6 percent annual increase of marriages since 1979. The ADSC pointed out that the number of registered divorce cases rose to 2,025 in 2018 from 1,859 in 2017, an annual increase of 4.2 percent since 1975. Whereas 28.5 percent of marriages ended in divorce within the first 12 months, which equates to 1,558 of marriage contracts, 62.2 percent of divorces took place within the first four years of marriage. 

    As we progress through 2020, the government of the UAE has issued some symbolic amendments in the UAE Family law, especially towards divorce and custody cases by virtue of Federal Law Number 8 of 2019 amending Federal Law Number 28 of 2005 concerning the Personal Status Law in UAE (the "new Law").  

    1) The text of Article 118 was replaced by virtue of Article 1 of Federal Law Number 8 of 2019 dated 29/08/2019 dealing with divorce. It is known that each of the two spouses is entitled to request for divorce due to prejudice that is making the continuity of the friendly companionship between them impossible. Article 118 of the new Law states that if the prejudice is not established, the lawsuit shall be rejected, and if the discordance is still continuing between the spouses, then the aggrieved party may file a new lawsuit. If the Family Orientation Committee does not succeed to reconcile them, a judgment shall be issued by the judge to appoint two arbitrators from among their parents, after requesting each of the spouses to nominate his/her arbitrator from among his/her parents, or contrarily from those who have the ability and experience to reconcile. However, if one of the spouses procrastinate in nominating his/her arbitrator or abstain from attending this hearing, the judgment shall not be subject to any appeal. The arbitrator appointed by the court under Article 118(2) is under an obligation to issue an order within a period of 90 days from the date of appointment. The two arbitrators along with the parties to the litigation of the judgment appointing the arbitrators shall be notified by the court, and each of them shall be asked to take an oath to perform the assignment with equity and honesty. 

    2) The text of Article 120 of the new Law states that if the two arbitrators fail to reconcile the spouses, the court shall present the arbitrators' recommendations to the spouses and invite them to reconcile before issuing the judgment of separation. If the couple reconciles despite the two arbitrators' recommendation of separation, and a judgment is not issued yet therein, the court shall confirm the reconciliation.

    Nevertheless, if reconciliation between the two spouses is not possible, the following scenarios can occur: 

  • Should the offense be entirely from the husband's part and the wife is seeking the divorce, or both parties are claiming for separation, the arbitrators shall decide a non-retractable divorce without prejudice to the rights of the wife resulting from marriage and divorce.  
  • If the offense is entirely from the wife's part, the two arbitrators shall decide to divorce them for a consideration deemed adequate by them and payable by the wife unless the husband requests to maintain the marriage. The court shall take into account the interest of the family. 
  •  Where both parties participated in the offense, the arbitrators shall decide on their separation without consideration or with one in proportion to each one's share in the offense. 
  • If the case is not clear as to who is the offender among the spouses and if the husband is the claimant, the arbitrators shall recommend dismissal of his case; but if the wife or both of them are claiming separation, the arbitrators shall decide either separation without consideration or refuse their separation, as they deem appropriate for the interest of the family and the children. 
  • 3) As per the text of Article 121 of the new Law, the two arbitrators shall submit to the judge their reasoned decision that shall include the extent to which each of the spouses offended the other. The judge shall rule according to the recommendation of the two arbitrators if they reached the same opinion; otherwise, the judge shall appoint other arbitrators, or add a third whose opinion shall prevail. The judge shall amend the recommendation of the two arbitrators where it violates the provisions of the new Law. 

    4) The new Law further describes circumstances under which the wife can be considered guilty pursuant to Article 71. The text of Article 71 of the new Law relates to the instances when the alimony to the wife is forfeited. These instances are, 

  • If she refuses to give herself to her husband or refuses to reintegrate the conjugal domicile without an excuse accepted by the Sharia. 
  • Should she abandon the conjugal domicile without an excuse accepted by the Sharia. 
  • If she forbids her husband to enter into the conjugal domicile without an excuse accepted by the Sharia. 
  • If she refuses to travel with her husband without an excuse accepted by the Sharia.  
  • If a judgment or decision is rendered by the court, restricting her freedom, in a matter to which the husband is not entitled, and the said judgment or decision is in the process of execution.
  • 5) Article 72 has been amended stating that the following shall not be considered a transgression to the duty of obedience: 

  • If she goes out by virtue of Sharia or custom or as necessary, or  
  • If she works according to laws, regulations and customs,  
  • and the judge shall take into account the family's interest. 

    6) Unless otherwise stipulated in the contract, the spouses shall live in the conjugal home and in the event of a dispute between the spouses, the judge shall take into account the interest of the family as per Article 75. 

    7) Article 30 of the new Law states that the capacity to marriage is completed by reason and maturity. The age of maturity is considered as eighteen years completed unless the person concerned matures earlier in conformity with the law. A person who legally matures before reaching the age of eighteen, he/she shall not marry except in accordance with the regulations issued by a Cabinet decision upon the proposal of the Ministry of Justice. However, should the person having completed the age of eighteen request marriage but had failed to obtain the approval of his tutor, he may refer the matter to the judge. The judge shall then fix a period for the tutor and if he fails to appear, or his opposition to the marriage is not convincing, the judge shall approve the marriage. 

    8) The text of Article 56 of the new Law lays down the rights of the husband towards his wife, as follows: 

  • House supervision and preservation of its contents. 
  • Suckling his children from her unless there is an impediment. 
  • Any other rights prescribed by Sharia. 
  • ]]>
    Fri, 05 Jun 2020 11:35:00 GMT
    <![CDATA[Alternative Investment Funds]]> Alternative Investment Funds

    A CNBC article noted, "With the Stock market bland and the bond market bubbling, investors may have to search elsewhere in the months ahead for return." The investors who are tired of the stock markets wrench and their volatility and who have been continuously looking out for innovative investment options, Alternative Investments come conveniently for them. During the past decade, investors have been just walking away from the stock market, attempting to venture into alternative investments. The reasons behind such a bold step are that the results for long term investors from the stock market are not encouraging, and the rewards are not in proportion to their patience and risk tolerance. Considering the past ten years, S & P 500 has been over only by 10 percent or more, approximating 1 percent per year. The term "Alternative Investments" is a broad term and can be defined as an investment product, other than traditional products like bonds, shares or cash. Liang (2003) defined Alternative Investments as complex investment strategies that create returns in excess from the returns, which are typically available with traditional investments. Alternative investments vary from traditional investments considering the use of a wide range of techniques and instruments, low correlation with traditional asset classes, and dynamic trading strategies. Liang proceeds to state that many institutional investors like investment banks, insurance companies as well as the private endowments like university endowments are flocking to the alternative investment funds due to its lack of regulatory oversight, demands from both wealthy and institutional investors and other special features. 

    In India, Alternative Investment Funds (AIFs) are defined in Regulation 2(1)(b) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. It refers to any privately pooled investment fund, whether from an Indian or foreign or Non-Resident Indian Investor, incorporated or established in the form of a company or a trust or a Limited Liability Partnership (LLP) or a body corporate which is neither presently covered by any regulation of the Securities and Exchange Board of India (SEBI) governing fund management like, the Regulations governing Mutual Fund Regulations, 1996 or Collective Investment Scheme Regulations, 1999, and any other regulations of the SEBI to regulate fund management activities, nor coming under the direct regulation of any other specific regulators in India like the Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory & Development Authority (PFRDA), Reserve Bank of India (RBI). Therefore, in India, AIFs are defined as private funds which are otherwise not falling under the jurisdiction of any regulatory agency in India except SEBI. AIFs include Hedge Funds, Venture Capital Fund, Private Equity Funds, SME Fund, Equity-linked instruments, Social Venture Fund, Debt Funds, Infrastructure Funds, Commodity Funds, etc. AIFs primarily exclude Mutual Funds, Collective Investment Schemes, Family Trusts (set up for the benefits of relatives under the Companies Act 1956), Employee Welfare Trusts or Gratuity Trusts, Employee Stock Option Scheme or Employee Stock Purchase Schemes, 'holding companies' falling under the definition of Section 4 of the Companies Act 1956, other specific purpose vehicles that are not established by fund managers including securitization trusts regulated as per a specific regulatory framework, and funds managed by a securitization company or reconstruction company that is registered with the RBI as per Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and it also excludes any such fund which is directly regulated by any other regulator in India. SEBI issued the AIF Regulations to create a structure where a regulatory framework is available for all shades of investment vehicles or private pool of capital so as to channelize and better regulate the funds where institutions or High Net-worth Individuals invest. The necessity for the framework arises to help detect any fraud, unfair trade practices and minimize conflicts of interest through disclosures, incentive structures, reporting requirements and legal agreements.

    Considering AIFs' impact on the economy and the regulatory regime, the concerned exposure, risk as well as their impact on the economy in other aspects, they are categorized into three categories:  

  • Category I AIF is the AIF with positive spillover effects on the economy, for which certain concessions or incentives might be considered by the Government of India or SEBI. Such funds generally invest in a start-up or early-stage ventures or social ventures or SMEs or infrastructure or other sectors which as per the government or regulators is economically or socially desirable. They shall not be permitted to engage in any leverage except to meet a temporary funding requirement for not more than thirty days, not more than four occasions per year and not more than 10 percent of the corpus, for instance, Venture Capital Funds, SME Funds, Social Venture Funds and Infrastructure Funds. Fund of Category I AIFs may invest in units of Category I AIFs of the same sub-category provided that they only invest in such units and not be investing in units of other Fund.  
  • Category II AIF is the AIF for which no certain concessions or incentives are given and do not fall under Category I and Category III. Same as specified for Category I AIFs, Category II AIFs are also not permitted to engage in any leverage, except to meet a temporary funding requirement for not more than thirty days, not more than four occasions per year and not more than ten percent of the corpus, for example, Private Equity or Debt Fund for which no specific concessions or incentives are given by the Government of India or any other Regulator. Fund of Category II AIFs may invest in units of Category I or Category II AIFs, provided that they only invest in such units and not be investing in units of other Fund. 
  •  

  • Category III AIF is a fund that has some potential negative externality in specific situations and which undertakes leverage to a great extent. These funds intend to make short term returns or such funds which are open-ended or close-ended and receive no certain concessions or incentives from the Government of India or any other Regulator for instance Hedge Funds which employ a diverse or complex trading strategy and invest and trade in securities of listed or unlisted investee companies having diverse risks or complex products including listed and unlisted derivatives. Category III AIFs may engage in borrow or leverage or subject to consent from the investors in the fund and subject to a maximum limit, as may be specified by the SEBI provided that such funds disclose complete information concerning the overall level of leverage employed, the level of leverage arising from the borrowing of cash, from the position held in derivatives or in any complex product and information regarding the main source of leverage in their fund to the SEBI and to the investors periodically, as may be specified by the SEBI. These funds are allowed to invest in Category I and III AIFs, provided they only invest in such units and shall not invest in units of other Fund. Category III AIFs shall be regulated through issuance of directions regarding areas such as operational standards, the conduct of business rules, prudential requirements, restrictions on redemption and conflict of interest as may be specified by the SEBI.  
  • Investment Restrictions and Conditions for AIFs  

    All AIFs shall state the investment purpose, strategy and methodology in its placement memorandum to the investors and raise funds by way of issue of units from any investor whether an Indian, foreign or non-resident Indian. Consent of two-third of unit holders by value of their investment in AIF is required for any material alteration to the fund strategy.

    AIFs raise funds through private placement and cannot accept an investment of value less than INR 1 Crore, provided that in case the investor is an employee or director of the AIF or employee or director of the manager, the minimum value of an investment is INR 25 lakh. Any scheme of the fund is not permitted to have more than 1000 investors, and each scheme must have a corpus of minimum INR 20 Crore. The manager or sponsor of the AIF should have a continuing interest in the AIF of minimum 2.5 percent of the corpus or INR 5 Crore, whichever is lower. This continuing interest should be in the form of investment in the AIF. It cannot be through any waiver of management fees, provided that in case of Category III AIF, the continuing interest should be a minimum of 5 percent of the corpus or INR 10 Crore, whichever is lower. The manager or sponsor shall disclose their investment in the AIF to the investors of the AIFs in all Categories. Under Category I and II the AIFs are close-ended, and schemes launched by such funds should have a tenure of minimum three years and extension of the tenure of the close-ended AIF may be allowed for a maximum of two years subject to the approval of two-thirds of the unitholders by the value of their investment in the AIF. AIFs of Category I and II are not permitted to invest more than 25 percent of the investible funds in one Investee Company while it is 10 percent for Category III AIFs, and Category III AIFs can be open or close-ended. In case of absence of consent of the unitholders, the AIF shall fully liquidate within a period of one year following the expiration of the fund tenure or extended tenure. AIFs can invest in associates in which the sponsor or manager holds interest, either individually or collectively, more than fifteen percent of its paid-up equity share capital or partnership interest, with the approval of 75 percent of investors by the value of their investment in the AIF. An un-invested portion of the corpus may be invested in liquid mutual funds or bank deposits or other liquid assets of higher quality such as, but not limited to, Treasury bills, Commercial Papers, Certificates of Deposits till deployment of funds as per the investment objective. Units of close-ended AIFs can be listed on a stock exchange after the final close of the fund or scheme subject to a minimum tradable lot of INR 1 Crore. Co-investment in an investee company by a manager/sponsor cannot be on more favorable terms than those terms offered to the particular AIF by the investee company. 

    Reporting norms to SEBI are on a:

  • quarterly basis for Category I, II AIFs and Category III AIFs which do not employ leverage;
  • monthly basis for Category III AIFs which employ leverage. 
  • Benchmarking of Performance 

    In February 2020, SEBI issued the guidelines for benchmarking of the performance of AIFs in order to streamline disclosure standards and helping the investors to assess scheme performance. The agreement between the AIFs and benchmarking agencies shall cover the manner of data reporting, certain data that must be reported, and terms of confidentiality. Performance benchmarking shall be done on a half-yearly basis as on 30 September and 31 March of each year. Performance benchmarking enhances transparency among AIF investors aiding in their ability to compare performance across similar strategy schemes possessing the same vintage and thereby assess the relative performance of the management team while considering making investments. 

    A template for Private Placement Memorandum (PPM) has been introduced to ensure minimum disclosure to prospective investors. To further ensure compliance with the terms of PPM, it will be mandatory for AIFs to carry out an annual audit by an internal or external auditor or legal professional. Angel funds, as well as AIFs/schemes in which each investor commits to a minimum capital of INR 70 crore or USD 10 million, are exempted from the requirement of PPM and audit. 

    As of 30 September 2019, investments made in AIFs have risen to INR 1.25 trillion, with 65 percent of the assets coming from Category II Funds. In December quarter 2019, investments by AIFs rose to over INR 1.4 lakh crore.  

    Conclusion

    India, as a nation has witnessed several investment schemes in varying shades of grey. The AIF Regulations are a facilitator as they bring transparency regarding the issue of regulation of capital that is raised locally for deployment by various types of investment funds. It will help to monitor the unregulated funds, encourage the formation of new capital and investor protection. AIF's comprehensive Regulations surely bring greater clarity to the market and the investors. Its comprehensive nature brings different investment entities under the watchdog that were hitherto unregulated by the SEBI.

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    Fri, 05 Jun 2020 10:57:00 GMT
    <![CDATA[COVID-19 on Shipping and Maritime Industry]]> Impact of COVID-19 on the Shipping and Maritime Industry

    The outbreak of the infectious disease named as the coronavirus disease (COVID-19) caused by the newly discovered coronavirus has caused chaos and panic all over the world causing the ceasing of all normal daily activities like going to work, a walk outside or in some countries even stepping a foot outside the house. One of the activities that has also been majorly impacted due to the spread of this disease is the shipping and maritime industry. This epidemic has caused the shipping and maritime industry to face the worst circumstances as the workforce in these sectors has been shut down for the safety and prevention of the escalation of COVID-19. This setback has also been caused due to the standstill of all kinds of cargos via water or air during this quarantine period (period of isolation) as the transportation of such cargos in ships or through the air can be possibly carrying with it the virus from one port to another. This widespread pandemic has launched a major brunt for the shipping and maritime industry not only from the ports of China (where the virus is said to originate) but also the ports globally. All the trade chains, including the major import and export trade, is in the face with a downfall. During this adverse time and the urgency of the situation, a ban has also been imposed by various countries on the entry of containers and vessels that are being operated from other ports, especially those that are transported from China. Such impeded operations have hampered with the logistics and operations of these industries. During this adverse time, many workers and staff are being trapped onboard the vessels due to either being in quarantine or for other prescribed safety issues. The ports are also running at a low capacity, and the storage facilities have been highly overcrowded. The maritime transport and shipping industry is plastered with major challenges during these challenging times. Some of these issues faced by the maritime and shipping industry have been outlined below: -

    I. Port closures

    Ports have been closed due to quarantine periods in effect and in order to ensure the well-being of workers and various conditions have been imposed, for instance, the ban of marine vessels into certain countries which has demanded such vessels to be on the water and not have a destination port to go to. The entry of vessels by certain countries has been restricted or prohibited, thus, causing chaos amongst the marine transportation facilities globally.

    II. Less demand for cargos

    The competent health authorities of every country are avoiding the risk of spreading of COVID-19, which has led to the decline in import and export of products and goods between countries. All such goods that were previously carried conveniently on a ship or any other marine vehicle have to follow a set standard of rules and procedure which has limited the demand for such cargos. The delay in such transportation due to added complications of quarantine periods have led to the further decline of demand for such cargos. Perishable goods are not being able to be transported due to the waiting period of 14 days or the waiting period prescribed by the competent authorities in every country.

    III. Disputes between owners and charters

    Charters hire the vessels from the owners of the vessels and various kinds of disputes are arising between the owners and charters of such vessels due to loss of time and money. The disputes are arising pertaining to the hire period of such vessels where the charter had been granted such a vessel for a limited period of time; however, such time period being negated due to force majeure.

    IV. Disputes in lay time settlement

    The owners grant the vessels to charters for a definite time period for fixed costs. The overriding of such time period leads to additional costs that have to be paid for surpassing the set time period. COVID-19 has imposed major difficulties on the settlement of such time period as the vessels are prohibited from entering certain ports forcing them to be on territorial waters for an extended period of time forcing them to be a party to pay additional costs that are under the light of dispute. Due to force majeure, such costs are not being paid, therefore, causing losses to parties.

    V. Discussion on clauses

    Every owner of a ship or a vessel is to add an infectious disease clause within its directives and guidelines which is causing a dispute between the owners of the vessels and charters hiring such vessels. Both parties would want to add such clauses advantageous to their own situation or clauses that ensure maximum safety which is leading to disagreements on which clauses to be inserted.

    VI. Bankruptcy

    Many small companies engaged in the maritime and shipping industry have gone bankrupt due to less demand and the inability to handle the finances of the company during this period of less demand of cargos and shipping. This has majorly impacted the small running businesses and even resulted in the shutting down of various companies engaged in this industry.

    Federal Transport Authority in Play

    The Federal Transport Authority (FTA) in the United Arab Emirates (UAE) has issued circulars with instructions that mandate various precautionary measures in light of the outbreak of COVID-19 in the maritime and shipping industry. Such instructions dictate the measures and methods to be adopted for containers and vessels that enter through the various waterways and airways in the UAE. Such instructions have been issued to contain the negative effects of this contagious disease and aims to keep the safety of transportation staff and users as the top priority. Such directives include the reduction of the number of staff engaged in such transportation, apply the preventive distancing policy in the public transport means, implement regular plans for disinfecting means of transport and facilities as determined by the competent authorities from time to time, ensure a backup for human resources in case the current staff falls as a victim to the virus so that the continuity of such operations is maintained, organize and establish communication channels within every organization to facilitate the reporting of any symptoms in order to tackle it swiftly in accordance with the procedures of the respective country. Moreover, instructions that have been issued to educate the staff and workers about the crucial and necessary precautions and measures to be taken with regards to their operations in the work environment. All the vital equipment required for the disinfection is also to be delivered and installed and all such disinfection supplies to be distributed amongst the workforce and staff. The transportation facilities would also be disinfected on a timely basis and reduce the staff by launching modern technologies to do the possible work. Priorities are given to seafarers with resident visa who are stuck board the ship vessels, the crew that is longer medically fit to carry out work onboard the ship and crew or seafarers that require urgent medical attention. Some of the other instructions that have been issued by the FTA include the following:

  • All the dry docks, ship repair and maintenance workshops are to prevent and ban entry to any ship or marine vessel for any repair, maintenance or repair workshop except under the quarantine rules for the crew of the ship or marine vehicle. Such quarantine period defines that a ship repair or maintenance workshop can be held only after the passage of 14 days from the date of such ship or marine vehicle being located in the last designated port or after the passage of 14 days from the date of the last interaction of the crew of the ship with any person outside the ship or vessel.
  • The captain of the ship or the marine vehicle is to inform the competent health authorities in case of any detection of symptoms of COVID-19, and all such information is to be delivered in time in order to avoid penalties.
  • The FTA has also stopped the entry of foreign yachts and coordinated with relevant authorities to prevent the issuance of sailing permits.
  • All commercial, marine recreational activity and personal pleasure boats have also been suspended during the nation sterilization period with the exception of mountainous areas and islanders that are to use these means only in accordance with the set requirements.
  • The work of wooden ships has also been suspended by the FTA, where all such work of wooden ships is banned from entering the waters of UAE and allow only such ships that are loaded with food and fish.
  • The wooden ships are to remain in the territorial waters for a maximum period of 7 days in order to prevent mixing with seafarers. All wooden ships that are devoid of prior commercial contracts and are coming for direct shopping from the local market have also been forbidden.
  • All such guidelines have been issued by the FTA in order to ensure the implementation of such instructions and the failure of which would lead to applicability of heavy fines on the violators of such instructions. All such instructions are regulated in coordination with the competent authorities and are to be carried out in order to prevent the further spread and outbreak of this infectious disease and in order to ensure the security and safety of the workers engaged in such transportation facilities. Appropriate health scanning and clearance from ports is required before permitting any vessel inside the port of UAE. With the pandemic of COVID-19, the maritime and shipping activity has reduced significantly, and the way to recovery is showing signs of slackening. However, the hopes for recovery exist, and with added precautions and measures being taken, one can positively hope for the restoration of maritime and shipping activities inadequate swing boosting the economy.

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    Thu, 04 Jun 2020 12:29:00 GMT
    <![CDATA[Economic Substance Regulation]]> Economic Substance Regulation 2019 and 2020 UAE

    The UAE Cabinet issued the Cabinet of Ministers Resolution Number 31 of 2019 concerning economic substance regulations in the UAE (the "Regulations") on 30 April 2019. The Regulations require the UAE entities ("Relevant Entities") that carry out any of the activities listed as "Relevant Activities" in the Regulations to have demonstrable economic substance in the UAE from 30 April 2019.

    The Regulations were introduced to honor the UAE's commitment as a member of the Organization for Economic Cooperation and Development Inclusive Framework on Base Erosion and Profit Shifting and in response to European Union's review of the UAE tax framework. The Regulations ensure that the Relevant Entities undertaking Relevant Activities are not being used to artificially inflate profits that are not in commensuration with the economic activity undertaken in the UAE. The objective of the Regulations is to determine the requirements and set out the standard to confirm that the Licensee carries out the activity in the State that achieves economic substance interest.

    The Regulations came into force on 30 April 2019, guidance on the Regulations was issued on 11 September 2019, the Regulatory Authorities were identified in a Ministerial Resolution issued on 4 September 2019 and amendments were made to the Regulations in Cabinet Decree Number 7 of 2020 issued on 19 January 2020 (the "2020 Regulations"). As per the 2020 Regulations the provisions of the Regulations do not apply to any commercial company, as defined in Article 8 of Federal Law Number 2 of 2015 concerning Commercial Companies, as amended, in which the Federal Government, the Government of any Emirate of the State, any Government Authority or entity affiliated to either of them owns directly or indirectly at least fifty-one percent (51%) of the share capital. The Regulations apply to a licensee carrying out Relevant Activities. Under the Regulations, "Relevant Activities" are:

  • Banking
  • Insurance
  • Fund management
  • Lease-finance
  • Headquarters
  • Shipping
  • Holding company
  • Intellectual property (IP)
  • Distribution and Service Centre
  • The Relevant Entity must comply with the economic substance requirements by:

  • Conducting the core income-generating activities in the UAE;
  • Being "directed and managed" in the UAE; and
  • Considering the level of activities performed in the UAE:
  • Having an adequate number of qualified full-time employees in the UAE
  • Incurring an adequate amount of operating expenditure in the UAE
  • Having adequate physical assets in the UAE.
  • A Relevant Entity which only undertakes a Holding Company Business will be subject to less stringent economic substance requirements. However, if a Relevant Entity carries out high-risk IP related activities, additional requirements shall apply. It is mandatory that the economic substance requirements be met for each of the Relevant Activities in case a Relevant Entity is carrying out more than one Relevant Activity.

    The Regulations permit an entity to outsource some or all of its activities to a third-party service provider. However, the service providers must in their own right have adequate presence in the UAE, and the entity must have adequate supervision of the outsourced activities. Support from service providers cannot be 'double-counted' if the services are provided to more than one Relevant Entity.

    The Relevant Entity must report complete information regarding its Relevant Activities annually to the authority delegated pursuant to a resolution of the Cabinet of Ministers to regulate a Relevant Activity for the purposes of the Regulations ("Regulatory Authority").

    Penalties for failure to comply with the Regulations:

  • Failure to demonstrate sufficient economic substance in the UAE or to notify or to provide accurate or complete information or for the relevant Financial Year: AED10,000 - AED50,000.
  • Failure to provide information exchange with the foreign competent authority concerning Parent company; Ultimate parent company; and Ultimate beneficial owner: AED10,000 - AED50,000.
  • Failure to provide any of the above for the second Financial Year: AED100,000 - AED300,000; and the commercial license could be suspended, withdrawn, or not renewed.
  • Article 13 of the Regulations state the "Right of Appeal against Administrative Penalty". A Licensee upon whom a penalty is imposed by the Regulatory Authority may appeal against it on any of the following grounds (a) that liability to that penalty does not arise (b) Appeal against its amount.

    The Regulatory Authority shall issue a resolution setting out the procedures for an appeal including the mechanism for filing an appeal and other procedures relating to the review and decision in relation to an appeal by the Regulatory Authority on receipt of an appeal and means for notifying its decisions to a Licensee.

    The Regulations aid in bringing the UAE in line with other jurisdictions that have recently issued economic substance legislation (for instance Cayman Islands, Bermuda, Mauritius). The Regulations affirm the UAE's commitment to addressing concerns regarding the shifting of profits acquired from mobile business activities to "zero or nominal tax jurisdictions" without corresponding local economic activities.

     

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    Thu, 04 Jun 2020 09:55:00 GMT
    <![CDATA[Sweat Equity Shares]]> Sweat Equity Shares

    Sweat equity shares have proven to be a boon to the corporate world by way of promoting healthy competition and serving as a reward for the employees of the company while at the same time furthering the development of the company. Sweat equity shares are shares that are issued at a discounted rate or are offered in exchange for consideration that is other than cash, by the company to the employees or directors for stipulating their expertise and knowledge or on account of rendering available rights in nature of value additions or intellectual property rights. The sweat equity shares can only be issued to the directors or employees of the company and shall only be extended to the ambit of equity shares. Sweat equity shares are issued by the company on the basis of value additions of the employees or directors. Such shares are issued as a reward to the employees by cutting them a discount on such shares or granting such shares in exchange for consideration. For instance, if 'X' contributes towards the betterment and welfare of the company by developing a program for carrying out the ease of operations, then a share issued by the company in the name of 'X' as a reward for the time, effort and contribution towards the advantage of the company shall be termed as a sweat equity share. It Is the contribution to a task or project that is rewarded by the company for value additions of the employees, where such value additions were to be derived or were derived by the company otherwise from the outside like by an expert or professional. The company issues sweat equity shares to its personnel instead of paying professionals outside for their technical know-how if the same work is done by the employees of the company. Such shares shall be issued by a special resolution of the company. The sweat equity shares can be of great benefit for start-up companies that would lack the financial sources to carry out all activities for the company initially. A start-up would require a great number of funds for various functions and activities of the company. The employees benefit as the reward of such shares would act as a great boost of motivation and also serves as a substitute for monetary benefits to the employees. This helps promote healthy competition in companies as the initial start-up company would otherwise face issues to compete with the market competition in the long term. As for the sweat equity shares in companies that are already established, they shall possess large investments and funds in order to issue such sweat equity shares in the market and get heavy returns which can then be issued to the employees. The sweat equity shares serve as a great way of promoting a healthy work environment and as an incentive besides the essential remuneration. A special procedure would be carried out by the company to issue such shares, and the same can be done by a resolution passed by the general meeting conducted at a company. The majority of votes by the shareholders of the company will have to be in favor of such a resolution for the resolution to be deemed to pass. The employees end up holding the shares partially or fully as pertaining to the investment made by such employees in the company. Certain company targets can also be set up as an option where on completing an agreed task established by the company, the employees shall receive an aggregate of shares in the company.

    The following points are essential in the understanding of sweat equity shares in a company: -

  • Sweat equity shares are issued by the company to the working personnel or directors of the company at a discounted rate or in exchange for consideration other than cash.
  • The employees in exchange for their contribution to the welfare of the company receive partial or full ownership in the sweat equity shares.
  • These shares serve as a reward besides the basic remuneration received by employees of the company.
  • This acts as an incentive and motivation for the employees of the company while at the same time benefitting the company.
  • The company is also able to achieve the purpose of retaining its employees by such rewards.
  • The terms and details of the shares issued shall be proposed and discussed via a general meeting in the company.
  • The employees have the additional motivation, and at the same time, the company benefits, hence, proving to be a two in one situation where two benefits are achieved via sweat equity shares.
  • Initial start-up companies benefit from such an arrangement to a great extent due to the lack of financial sources as compared to well-established businesses and promote a healthy competitive market.
  • Such shares can be issued to the employees, directors or promoters of the company.
  • Sweat equity serves as a non-monetary benefit and comes in the shape of effort, labor and time contributed towards the development and welfare of the company.
  • It is imperative that a register of such sweat equity shares be maintained that would record the value of such shares being rewarded and the time period pertaining to the particular person being awarded such shares. Any limitations or rights shall also be discussed beforehand and shall be mentioned. The same shall also be discussed and laid down in a general board meeting proposed by the company. The company can provide such equity at a discount for the technical know-how or making any intellectual property rights available. Therefore, the sweat equity shares provide with great benefits for the company and simultaneously its employees.

     

     

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    Wed, 03 Jun 2020 11:40:00 GMT
    <![CDATA[Software Infringement in UAE]]> Software Infringement in UAE

    Software piracy or violation of a software license, is an illegal action that occurs due to unsanctioned use, distribution, exploitation and/or reproduction of copyrighted software. With the technology roar, it is very fundamental that an economy in its full strength and thrive be able to protect the rights of software developers and afford them with suitable protection. The protection of original work of authorship is essential with respect to protecting the rights of the original authors, and this includes the protection of software codes or software applications, programs and its databases. Federal law Number 40/1992 (as amended) on copyrights and related rights (Copyright Law) in the United Arab Emirates (UAE) governs any infringement or any disputes arising that are software-related. Software protection falls under the ambit of copyright protection in the UAE. Copyright Law in UAE targets to safeguard rights pertaining to software and technology. The copyright filing of software is carried out by the UAE Ministry of Economy. An author is any person who creates such software or any person whose name shall be mentioned upon the publication and attributing such person as the author. The authors of works and owners of any related rights of the software shall benefit from protection in case of any violation or infringement of rights arising all across the territory of UAE. Any infringement of rights in one emirate shall amount to an infringement being caused in all the other emirates. Protection of software or related rights that are afforded in one emirate shall extend to all the other emirates as well.

    Protection of Software

    The Copyright Law mandates that computer programs and applications, databases and similar works as and when determined and declared by a ministerial decision. The authors of such works and owners of any related rights of the software shall benefit from protection in case of any violation of rights in relation to copyright protection arise within the territory of UAE (Article 2 of Copyright Law). Therefore, any infringement of rights in relation to copyright protection arising in one emirate shall occur to an infringement in all the other emirates and protection afforded in one emirate shall extend to all the other emirates as well. Protection of software would include the title of work in case it extends to innovative work and would also extend to the written innovative broadcast program. However, protection shall not be extended to ideas, procedures, abstract principles, facts and to works that have fallen in the public domain. It shall protect the innovative expression of any of these works. The author of the software publisher has the sole right to exploit such work and make it available through computers, data or any other communication networks as he deems fit.

    The successors of the author and the author himself may only be in charge of authorization of the work that has been copyrighted, whether such exploitation of work includes reproduction, electronic storage, rental or publication in any manner whatsoever (Article 7 of Copyright Law).

    A single copy of the computer programs, applications or its databases can be made with the knowledge of the legitimate possessor. Such a person making the single copy shall have to obtain an appropriate license from the legitimate possessor. Computer programs do not allow the right to rent unless such computer program would be the principal object of the rent. Financial rights shall be protected all through the lifetime of the author and following the author's death, from the date of the commencement of the new calendar year till a lapse of 50 years (Article 20 of the Copyright Law).

    Transfer of Financial Rights

    The author or successors of the author are entitled to the right of transferring some or all of his financial rights to third parties (physical/juridical). Such transfer has to be done in writing and postulate the transferred right along with the duration of the transfer, object of transfer and place of exploitation. The author is the owner of all the financial rights that have not been unequivocally assigned. The transfer of financial rights that are regarding the computer applications, programs and databases shall be governed under the contract license conglomerated with the program while appearing on the support carrying such program or on the screen of the computer upon downloading or storing such program. It is imperative that the purchaser or user of such program be made aware of such terms before downloading such program and be made to agree to the terms and conditions included in such license post which such purchaser or user shall be obliged by such terms (Article 12 of Copyright Law).

    Penalties for Software Infringement

    The Copyright Law has provided for penalties on any person that causes infringement or violation of copyright on software or any related rights, and the same have been discussed below:

  • Punishment of a minimum of three months and a fine ranging from anywhere between AED 50,000 to AED 500,000 upon any person who indulges in the infringement of copyright by causing to download or store in the computer any copy of the computer program or computer applications or databases without the granting of any license from the author or the rightful owner of such work. In case of repetition of the offence, imprisonment of a minimum period of 9 months and a fine of a minimum of AED200,000 shall be imposed on such offender indulging in recurrence of the offence (Article 38 of Copyright Law).
  • Any person who uses a computer program or computer applications or its databases without obtaining a license in advance from the author or his successors shall be subject to a fine ranging between AED 10,000 to AED 30,000 for each program, application or database being used in violation of the Copyright Law. For a recurrence, the penalty shall amount to a minimum of AED 30,000. The Court is also entitled to close such program, application or database for a period not exceeding three months, in case such an offence has been committed in the name or to the benefit of a juridical person or commercial/vocational establishment (Article 39 of Copyright Law).
  • The Court is entitled to confiscation and destruction of any counterfeited copies resulting out of violation of the rights of the legitimate author or its successors. Any copies produced from the legitimate work that is safeguarded under copyright protection or any reproduction therefrom shall be subject to confiscation by the Court's discretion. Any equipment or devices that are used in the preparation of such offence shall also be subject to destruction or confiscation and will not be permitted to be utilized for any fixed period of time declared by the Court which may not exceed a period of 6 months. The summary of the court ruling shall be in the public domain by publication in one or more daily newspapers, and the expenses of the same shall be borne by the condemned party (Article 40 of the Copyright Law).
  • Hence, these are the penalties that shall be imposed on any violation of rights or infringement of work occurring under the Copyright Law with fine and/or imprisonment being enforced on the condemned party. With the boom of technology, the development of software is on the rise and the protection of the authors of such works is pertinent and crucial. The Copyright Law in UAE provides a platform for the protection of such copyrights that are enjoyed by works relating to software development, applications, databases and applications.

     

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    Wed, 03 Jun 2020 11:13:00 GMT
    <![CDATA[Competition Law in UAE]]> Competition Law in UAE

    If a certain organization succeeds in overtaking the market by outshining its competitors, then the competitors face abuse of a dominant position which leads to a competitive market being governed by erroneous marketing mechanisms. Such erroneous market mechanisms would also include within its ambit where two or three dominant distributors or sellers of a particular product, for instance, toothpaste, decide together to sell all such kinds of toothpaste available in the market at a high price which leaves the consumers with no option but to purchase an essential product like toothpaste at the hands of unfairness. The competition law in the United Arab Emirates (UAE), targets to promote and at the same time, protect competition and anti-monopoly practices by enhancing efficiency and consumer interest. Sustainable development is aimed to be achieved by stimulating a healthy and productive environment amongst organizations by regulating fair, competitive practices in the jurisdiction. Federal law Number 4 of 2012 on the Regulation of Competition (Competition law) governs competition in UAE and aims at harboring fair and correct market mechanisms in consonance with the principle of economic freedom. Exclusion and prohibition of restrictive agreements are adhered to garner the prevention of competition. Acts and behaviors leading to a dominant position and controlling of economic concentration operations are prohibited along with any other acts endangering or limiting competition. An economic concentration is an act that would result in an organization or a group of organizations to have direct or indirect control over an organization or a group of organizations by the execution of whole or partial transfer in the title of property, rights, shares or stocks from one organization to another. Any organization being enabled to control either individually or collectively with any other organization that affects the relevant market would be in the hindrance of the Competition Law. Any legal or natural person practicing an economic activity or any person in an association, regardless of its legal form, is entitled to do so and will be termed as an organization under this Law. A relevant market would entail any commodity or service or a combination of commodities or services which based on their characteristics, price and methods of use may be substituted with any other goods or services or other alternatives chosen in order to meet a specific requirement of consumers in a certain geographical area. Competition can be defined as an organization performing economic activities in a relevant market in accordance with the market mechanisms without such market mechanisms having an adverse impact or limiting development.

    Scope and Jurisdiction

    This Law shall apply to all economic activities that are carried out by organizations in the UAE. It shall also extend to the abuse of intellectual property rights inside and outside of the jurisdiction of UAE. Any such economic practices that are practiced beyond the territory of UAE, however, affect competition in the UAE, shall also be administered under this Law. The provisions shall not apply to any practice, agreement or business that is related to any service or commodity which is governed under the regulation of competition rules granted by another law or regulation to sectoral organizational bodies. However, if such sectoral organizational bodies apply to the Ministry of Economy in UAE in writing to be included and provided that the Ministry approves of such application, then the provisions of this Law shall apply to such sectoral organizational bodies. In the absence of such application, the exclusions shall continue to include the telecommunications sector; financial sector; oil & gas sector; cultural activities (including audio, visual and print); production and distribution of pharmaceutical products; mail and courier services; activities in relation to production, distribution and transmission of electricity and water; activities in relation to sewage, garbage disposal, sanitation and other similar activities along with environmental services in support of such activities and land, sea & air transport sectors (transport by rail and related services included). The Council of Ministers shall be authorized to make any addition or deletion of these sectors, activities or works laid down in such exclusions. Small and medium-sized organizations in accordance with prescribed controls by the Council of Ministers shall also be excluded. Any acts undertaken by the Federal Government or one of the UAE governments or any acts carried out by organizations based on decisions, authorizations or under supervision of the government shall be excluded from the ambit of this Law.

    Competition Regulation Committee

    A committee by the name of Competition Regulation Committee shall be formed under the Competition Law which will be chaired by the undersecretary of the Ministry of Economy. The Council of Ministers shall hold power to oversee the formation of such a committee, along with the regulation of its work system, the term of membership and remuneration of the members of the committee. This Committee shall be responsible for mandating policy for the protection of competition in UAE. It shall also consider issues related to the implementation of provisions of the Competition Law and raise any recommendations as required to the Ministry. Any legislation or procedure as deemed necessary for the protection of competition shall be presented to the Minister of Economy and recommendations for the exclusion of restrictive agreements or practices relevant to the dominant position can also be made by the committee. Any submission of applications to the committee for reconsideration of decisions made by the Minister shall be made within ten days from the date of notification of such decision. The committee shall also have the duty to prepare an annual report on the activities of the committee which shall be presented to the Minister along with the handling of any other related matters for the security of competition in the jurisdiction of UAE.

    Anti-Competition Practices

    The Law prohibits organizations holding a dominant position from the imposition of prices on retailers or distributors and prohibits from falsely or deliberating cutting prices to alter the mechanisms in the market to their own advantage either directly or indirectly. Restrictive agreements are proscribed from restricting or preventing competition in the relevant market. Any agreements that cause the freezing or limiting of production, distribution or marketing are prohibited. A restrictive agreement would also include any agreement that restricts the freedom of supply of goods and services in the relevant market. Anti-competition practices can be broadly divided into two parts, including restrictive agreements and abuse of a dominant position, and they have been outlined below:

    Restrictive Agreements

    Any agreement that has as its subject the abuse of competition shall be delimited. The Competition Law forbids restrictive agreements that cause retractions on competition in the relevant market. These regulations have been imposed and penalized as to prevent causing waves in the competition levels in the relevant market. Such restrictive agreements would include the following:

  • Agreements that aim to fix directly or indirectly, the purchase/sale prices of goods or services by causing a reduction or increase or fixation of prices which affects competition.
  • Any agreement determining terms and conditions of sale, purchase or performance of services or any similar transaction.
  • An agreement indulging in collusion of bids or proposals in tenders, practices and any other supply offers.
  • The limiting/freezing of production, distribution or marketing of any other investment aspects.
  • Any conspiracy piloted for the prevention of purchase from a particular organization that ends up limiting sale or supply to any other particular organization shall be an agreement conducted to abuse competition.
  • An agreement causing the obstruction of the ability of an organization to carry out its business would be prohibited.
  • A sudden oversupply that leads to the circulation of goods and services at fake prices, restriction of freedom of supply of goods and services to relevant market including hiding or unlawfully storing goods and services would all be included under restrictive agreements.
  • Any agreement aimed at market sharing, allocation of clients with respect to geographical areas, seasons, periods of time, customer quality, distribution centers affecting competition shall be restricted.
  • Any obstruction of entry of an organization into the market or causing a deliberate exclusion of any organization from the market shall not be permitted.
  • Abuse of Dominant Position

    Any organization that is any dominant position in the relevant market or in any other influential or substantial part will not be sanctioned to carry out any activity that leads to the abuse of such a dominant position that prevents, restricts or prejudices competition. Such organization shall not be permitted to perform objectives that directly or indirectly impose prices or conditions for resale of any goods or services; sell goods or perform services deliberately below the cost price in order to obstruct entry of competitive organizations to the relevant marker; exposing such organizations to losses making it harder for competitive businesses to continue their business; compelling any customer to not deal with a competitive organization; unjustified imposition of a false price by abstaining selling or purchasing of goods or services; causing unjustified discrimination of customers in identical contracts in terms of process of goods and services; distributing false information knowingly about the products or process of any other organization; forming conclusions of sale or purchase contract or agreement for goods and services that lies contingent on acceptance of obligations for dealing with other goods or services that are unrelated to subject of original dealing; causing an increase or decrease in the quantity of a product which creates a forced deficit or oversupply of goods or services.

    Penalties

    Any organization that causes a violation of either the provisions prohibiting restrictive agreements and abuse of a dominant position shall be subject to a penalty of a fine ranging from AED 500,000 to AED 5,000,000. Other penalties include that any organization in violation of any other provision of the Law shall be fined of no less than AED 10,000 to no more than AED 100,000. In the event of a recurrence, the penalties shall be aggravated. It is also possible for a concerned party to file for a complaint with the Ministry that concerns any violation of the provisions of the Law in consonance with the executive regulations of this Law. A written request to the Minister can also call upon for a criminal case against any violations or negligence of duties being caused by the Ministry. Any competent court is entitled and authorized to render a decision for the suspension or prevention of any act in relation to competition cases that have been considered on a summary basis until the final declaration of the decision being rendered.

     

     

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    Wed, 03 Jun 2020 10:15:00 GMT
    <![CDATA[Conspiracy for Abetment of Crimes]]> Law Governing Conspiracy for Abetment of Crimes

    Urging a person to commit an illegal act or crime is as much an offence as the carrying out of such criminal offence. Federal Law Number 3 of 1987 promulgating the Penal Code ("Code") in the United Arab Emirates (UAE) mandates that any person is considered as an accomplice to a crime by causation in the following situations and the same has been mandated in Article 45 of the Code:

  • If he abets or aids a crime which occurs in accordance with such perpetration.
  • If a conspiracy is laid out with others in order to commit a crime and when such a crime occurs in agreement with such conspiracy.
  • If a person grounds for another person by instigating him to carry out the crime or by handing him out the weapons or tools or any other such thing which leads to deliberately aiding such a doer of the crime or assisting him for the facilitation, preparation or completion of such a crime.
  • It is evident that an accomplice is to be treated as an equal to the actual perpetrator of the crime and will liable to the same punishment as the actual committer of the crime. The intention of the person found at the scene of the crime plays a vital role. If an accomplice is found at the scene of the crime with the resolve or intent to commit the crime, then such a person shall be considered as a direct accomplice in case any other person cannot be determined for the causation of such crime. It is important to define the intention of the person found at the scene of the crime, and the same has been dictated under the provisions of Article 46 of the Code. A person found at the scene of the crime shall be termed as an accomplice by causation, whereas, a person who is directly involved in the plan of the crime shall be termed as a direct accomplice. It is clearly addressed in Article 47 of the Code, that whether a person is directly involved or is an accomplice by causation, irrespective, shall be subject to the penalty of the crime caused as if he had carried out the crime himself unless the law provides otherwise. Article 48 provides that in case of lack of any criminal intent not being established due to the accomplice not being punishable or because of any other reason, then the rest of the accomplices shall not be able to benefit from it. This means that the accomplice can escape liability or punishment for the crime abetted provided it fulfils the provision of lack of establishment of criminal intent or action and where the bearing of culpability of one accomplice shall not support or waiver the liability of any other accomplices under scrutiny.

    The following points revolving around the accomplices and fellow accomplices of the abetment of a crime are noteworthy of mention in pursuance to the abetment of crimes in UAE:

  • A direct and causative accomplice, both shall be subject to a penalty of the crime that has actually been committed, even if such crime had not been intended to be committed. This implies that irrespective of the intent or knowledge behind the causation of the crime, the punishment will directly be proportional to the gravity of the crime committed.
  • If personal excuses cause the exemption from the punishment or cause the punishment to mitigate for a direct or causative accomplice to a crime, then the same shall not extend to other accomplices of the crime.
  •  If the penalty or the nature of a crime changes in accordance with the intent of a person who has been convicted of the crime, then the other accomplices to the crime shall be punished in accordance with the intent or knowledge of the felon of the crime.
  • Whoever causes the abetment of a conspiracy shall be punished with temporary imprisonment. Any person participating in a criminal conspiracy whether for committing such a crime or for participating in fulfilling the purpose intended by the criminal conspiracy shall be liable to punishment, including temporary imprisonment or detention. Even an invitation for joining in on a conspiracy to commit a crime shall be punishable by detention even if the invitation has not been accepted. Any person that abets via publicity or any means of publicity others to not comply with the law of the land or incites them to cause any other act that is legally considered a crime shall be subject to punishment by detention. A penalty of imprisonment of a time period of up to one year and/or by a fine of up to AED 5000 shall be imposed on any person who by any means of public publicity supports or assists the hatred against a particular sect of people and causes disturbance of public security. The use of means of publicity for abetment of withdrawal of money deposited with any public banks or monetary funds or the selling of state securities and public stocks shall be punishable by imprisonment of up to one year.

    There are abetments of crime that can also be caused at the place of work. If at least three public employees leave their place of work or abstain from performing duties of work on a mutual agreement to achieve an illicit purpose, then each of them shall be punished by detention for a period of up to a year. Such punishment shall be subject on the persons causing health or security of people to danger and causes disturbance or incitement among people. Any abettor causing disruption to such public interest shall be liable. The abetment or assistance of any manner to any other person in the committing suicide shall be punished by the detention of a period of maximum five years. Such assistance can also be when a person committing suicide is incapable of comprehension or discretion in the said activity, and the person assists such a person in committing suicide.

     

     

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    Tue, 02 Jun 2020 19:06:00 GMT
    <![CDATA[Guide to International Arbitration]]> Guide to International Arbitration

    "When will mankind be convinced and agree to settle their difficulties by arbitration?"- Benjamin Franklin    

    A year ago, it seemed as if Brexit was finally about to happen. One year on, they are in the same position again. At one point, albeit, it seemed likely that the UK would leave the European Union (EU) without a Withdrawal Agreement (a 'no-deal Brexit'), which would have been hugely disruptive, not least concerning the enforcement of English court judgments in Europe. As a result, parties chose to include arbitration in their agreements, and this could lead soon to an increase in London-seated arbitrations. Under the agreement, the UK enters a transition period where it will continue to follow EU rules until 31 December 2020, by which time both sides hope to have agreed on a trade deal. The shift towards London-seated arbitration in international commercial contracts may turn into a long-term trend.   

    From a global perspective, Brexit is a sideshow compared to China's Belt & Road Initiative (BRI), the most significant investment and construction programme that has been undertaken. Arbitral institutions in APAC are eager to pick up disputes work arising from the many complexes, multi-party projects that makeup BRI.  

    In April 2019, Beijing and Hong Kong announced an arrangement permitting arbitrations seated in the island to be supported by interim or protective measures issued by courts in the mainland. The critical point is that the arbitration can be administered by any institution, as long as it appears on the official list of permitted bodies. The International Chamber of Commerce (ICC) along with the Hong Kong International Arbitration Centre (HKIAC) and a handful of other institutions appears on the list. Sadly, the difficulties in Hong Kong are affecting business confidence in the island's economy and institutions. Unless the political challenges are fully resolved, it is difficult to judge what their overall effect will be. Still, from an arbitration perspective, there is the potential for disputes to migrate southwards to Hong Kong's main rival in the region, Singapore. The caseload of the HKIAC has remained constant, and that of the Singapore International Arbitration Centre (SIAC) has more than doubled throughout the current decade. Both have recently permitted third-party funding of arbitrations. Hong Kong's law permits arbitral awards to be appealed on the point of law, provided parties to opt into the arrangement. This is contrary to the position in England, where appeals of this kind are allowed unless parties opt-out as per section 69 of the Arbitration Act 1996.   

    The expansion and globalization of cross-border investment and trade have led to an increase in more complex relationships between businesses, investors, and States. Inevitably, some of the relationships do break down. Hence the parties need to consider the best means of resolving any dispute which may arise, preferably at the outset of the relationship. Arbitration has been in use since centuries, with Plato writing about arbitration amongst the ancient Greeks. In the new era, arbitration has become the standard method to resolve disputes in specific industry sectors such as construction, shipping, and insurance where the arbitrators' technical expertise is particularly valued. However, over the last 50 years, the international community has increasingly embraced arbitration, with many recognizing its significance as the primary means of resolving complex, transnational, disputes as well as the economic benefits for a State perceived as "arbitration-friendly". Unlike courts, the arbitral tribunals in commercial disputes have no inherent jurisdiction or power as their authority arises from the parties' contract. Albeit, once selected by the parties, arbitration has the backing of statutes and treaties. The essential elements include that the International Arbitration Clause must be in writing to be enforceable as most jurisdictions require the arbitration agreement to be in writing (see, e.g., New York Convention Article II (1)). Also, the International Arbitration must be mandatory. The arbitration clause must make clear that if a dispute arises, it must be arbitrated. Permissive language suggesting arbitration is optional, such as "any dispute may be referred to arbitration," in certain jurisdictions may provide an argument for a non-cooperating party to try to avoid arbitration when a dispute arises. Some parties, in particular lenders, may prefer unilateral option clauses, allowing one party the option to choose between arbitration or court proceedings in the event of a dispute. These clauses are not enforceable in all jurisdictions and should be carefully considered before being included. Therefore, parties should take particular caution in drafting arbitration provisions. In a unanimous decision on 8 January 2019 in Henry Schein, Inc. vs. Archer & White Sales, Inc. (586 U.S., 139 S. Ct. 524 (2019)), the US Supreme Court confirmed that the United States is a pro-arbitration jurisdiction that will honor parties' agreements to arbitrate. Specifically, where an arbitration clause clearly delegates the decision of arbitrability to the arbitrators, courts should have no say in the matter, even if they perceive the argument in favor of arbitration as "wholly groundless." This decision provided clarity for potential disputants and was in line with prior Court precedent that prohibited courts from reviewing the merits of a dispute when delegated adequately to an arbitrator.   

    The choice of arbitral seat determines the country whose courts will have supervisory jurisdiction over the arbitration. Courts at the seat will have the authority to address specific matters that concern the arbitration, such as ruling on (i) preliminary injunctions in aid of the arbitration; and (ii) any challenges to the arbitral award. Thus, it is highly advisable to select a seat in a country with modern, arbitration-friendly laws in place, with courts that are familiar with principles of international arbitration. The selection of a seat should not be confused with the venue for the arbitration. The arbitral seat is distinct from and does not need to correspond with, the venue where hearings physically take place. In the case of A4 vs. B4 ([2019] ADGMCFI 0007), A4, a company registered in Abu Dhabi, brought arbitration proceedings in the Abu Dhabi Global Market Courts under the rules of the London Court of International Arbitration ("LCIA") on 8 March 2018 against B4, who are also incorporated in Abu Dhabi before His Honour Justice Sir Andrew Smith.   

     

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    Tue, 02 Jun 2020 17:45:00 GMT
    <![CDATA[Free Zone Bahrain Logistic Zone]]> Free Zone Bahrain Logistic Zone

    Q1. What law established this Zone?

    The Bahrain Logistics Zone is the first boutique logistics park in the region which was launched in 2008 and is strategically located adjacent to Khalifa Bin Salman Port, which is a state-of-the-art port in Bahrain, towards the North.

    Q2. What are the principal internal regulations governing this Free Zone?

    The principal internal regulations are managed and governed by the Ports and Maritime Affairs, at the Transportation and Telecommunications Ministry.

    Q3. Does this Free Zone have reciprocal arrangements with other free zones?

    No, the Bahrain Logistics Zone does not have reciprocal arrangements with other free zones.

    Q4. What key areas of local legislation must a business operating in this Free Zone still comply with? What are the most prominent examples of how this affects operations?

    The key areas of Bahrain Legislation which businesses operating in this Free Zone must comply with are:

  • Bahrain Maritime Code.
  • Ship Registration Law.
  • Bahrain Ministerial Decision No. 6/2001 with regards to the promulgation of registration of the ships as well as the determination of safety conditions.
  • GCC Safety Regulations for Non-conventional ships.
  • Bahrain Ministerial Decision No. 14/2016 concerning approved classification societies.
  • Bahrain Ministerial Decision No. 20/2016 concerning the Implementation of Conventions related to marine navigation.
  • Bahrain Ministerial Decision No. 9/2017 concerning the licensing for Marine Services.
  • Bahrain's Labor Law, Bahrain Law No. 36/2012.
  • The above list is not exhaustive, but any laws which are not covered by the internal regulations of the Free Zone must be complied with.

    Q5. What key agencies do businesses operating in this Free Zone need to register with or be aware of?

    The agencies a business operating in this Free Zone needs to register with mainly depends on the type of activity carried out by the company.

    Some agencies include:

  • Ports and Maritime Affairs.
  • Foreign Affairs Ministry.
  • Bahrain Chamber of Commerce.
  • The Supreme Council of Environment.
  • Industry and Commerce Ministry.
  • This list is not exhaustive.
  • Q6. How does a company set up in this Free Zone?

    These are the steps generally involved:

    I. Apply for Serviced/Land Facilities

    Prerequisites Review is needed to check eligibility to ensure that the company meets them.

  • Complete the Application Form, which includes:
  • Financial information (Audited financial statement- three years).
  • All company information, including a business plan or annual report to demonstrate competence.
  • The application is submitted with all additional supporting documents.
  • The BLZ Selection Committee generally responds with the decision in two weeks.
  • II. Check the eligibility of the company.

    III. Selection of the nature of business.

    IV. Evaluation.

    V. Selection Criteria.

    VI. Application decision.

    Q7. What features go companies set up in this Free Zone have?

    Like most other Free Zones, Bahrain Logistics Zone offers various incentives which attract foreign and local investors like:

  • 100% of foreign company ownership.
  • 0% Corporate Tax.
  • Bonded and non-bonded activities permitted.
  • Access to training support and government financial grants.
  • Access to bilingual and highly educated Bahraini workforce.
  • Dedicated support team.
  • Highly competitive costs.
  • Most efficient and fastest access to Saudi Arabia.
  • 100% repatriation of profits, capital and dividends.
  • Around the clock processing of shipments.
  • Q8. What can companies set up in this Free Zone do?

    These are the activities a company in BLZ can carry out:

  • Regional Distribution and Contract Logistics.
  • Freight Forwarding Services.
  • Courier and Express Services.
  • E-commerce and Fulfillment Operations.
  • Repacking, packaging, labelling, palletizing etc.
  • Q9. What can companies set up in this Free Zone not do?

    Generally, any activity which does not conflict with the applicable laws in Bahrain is not permitted in the Free Zone.

    Q10. What types of business are allowed to operate in this Free Zone?

    These are the activities a company in BLZ can carry out:

  • Regional Distribution and Contract Logistics.
  • Freight Forwarding Services.
  • Courier and Express Services.
  • E-commerce and Fulfillment Operations.
  • Repacking, packaging, labelling, palletizing etc.
  • Q11. What inheritance laws apply in this Free Zone?

    The inheritance law, in Bahrain, is Sharia law for Muslim and Bahrain Law No. 11/1971 regarding Inheritance and Settlement of Estates of Non-Muslim Aliens.

    Q12. What taxation applies?

    BLZ offers zero percent Corporate Tax.

    Q13. What accounting and auditing rules do businesses operating in this Free Zone need to

    adhere to?

    The company undertakes to maintain regular accounts of all the activities carried out by it, approved by an accounts auditor who is licensed to conduct the profession of auditing and accounting.

    Q14. Where do businesses operating in the free Zone generally locate their bank accounts?

    Working companies are required to open a local bank account.

    Q15. Are there any specific rules governing when the moveable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?

    Activities are generally confined to the Zone. Operation in other zones may require the assistance of a local agent or distributor.

    Q16. Are any specific licenses required to operate as a specific type of company in this Free Zone?

    The users of Zones cannot conduct business except after obtaining a License. The licenses are issued by an integrated online commercial registration portal called the Sijilat. Sijilat's operations are handled by the Industry, Commerce and Tourism Ministry. This portal allows investors to obtain their commercial registrations for their proposed business in Bahrain.

    Q17. Is there any specific ongoing regulation or monitoring firms operating as particular types of companies by this free zone authority?

    The principal internal regulations are managed and governed by the Ports and Maritime Affairs, at the Transportation and Telecommunications Ministry.

    Q18. How are disputes settled in this Free Zone?

    Generally, the contract mentions the dispute resolution mechanism to be followed in a situation where a dispute arises. In the absence of this, the courts in Bahrain assist in resolving disputes. There is a dual court system in Bahrain:

  • Civil Courts: This consists of a Supreme Court and subordinate summary courts. These Summary courts are in all communities which encompass separate courts for each civil and criminal matters. The highest appellate court is the Supreme Court of Appeal, which also decides on the regulations and laws and its constitutionality.
  • Sharia Courts: Sharia courts primarily deal with personal status matters, which include inheritance. The Sharia Court of First Instance is in all communities. The Court of Appeal is in Manama. Any case which goes beyond this Court of Appeal is taken to the Supreme Court of Appeal (Civil System).
  • Q19. How are disputes between onshore companies and companies in this free Zone settled?

    Generally, the contract mentions the dispute resolution mechanism to be followed in a situation where a dispute arises. In the absence of this, the courts in Bahrain assist in resolving disputes. There is a dual court system in Bahrain:

  • Civil Courts: This consists of a Supreme Court and subordinate summary courts. These Summary courts are in all communities which encompass separate courts for each civil and criminal matters. The highest appellate court is the Supreme Court of Appeal, which also decides on the regulations and laws and its constitutionality.
  • Sharia Courts: Sharia courts primarily deal with the personal status matter, which includes inheritance. The Sharia Court of First Instance is in all the communities. The Court of Appeal is in Manama. Any case which goes beyond this Court of Appeal is taken to the Supreme Court of Appeal (Civil System).
  • Q20. What are the main rights and duties of an employer and employee working in this Free Zone?

    Bahrain Law Number 36/2012 issuing Bahrain's Labor Law provides a comprehensive framework for employment in Bahrain. This law encompasses the protection of various types of employees irrespective of the nature of employment like a local, expatriate, full time or part-time. Certain employee rights are highlighted in the Labor Law and include 30 days of annual leave, maximum thresholds etc. Additionally, there is a prohibition on discrimination between employees based on ethnicity, religion, language and belief etc. When an employment contract is signed, the employer has an expectation of sincerity, due diligence from the employee towards complying with the terms of the employment agreement, failing which the employer may initiate legal proceedings as agreed in the contract (and vice versa).

    Q21. How are employment disputes between employers and employees working in this Free Zone settled?

    In addition to Bahrain's Labor Law, unless a separate mechanism has been agreed on in the employment contract, the labor dispute resolution is addressed before a designated body which is the labor court. Additionally, the Labor and Social Development Ministry may also be approached to settle or initiate any dispute.

    Q22. What entry qualifications and permits are required for staff working in this free Zone, and how are employees registered with the authorities?

    The employment contract must be in writing (Arabic), and two copies maintained, one of which will be the employer's and the other, of the employee. Where the contract is not in Arabic, under Article 19 of Bahrain Law Number 36/2012, the Arabic version of the employment contract must be accompanied. There are situations where there is the absence of a written contract between the employer and the employee, and in these cases, the employee may establish their rights with evidence.

    Q23. How are staff working within this Free Zone registered with the authorities?

    A foreign employer may not engage the employees in Bahrain if they have not been registered with the Industry, Commerce and Tourism Ministry under its Commercial Registry. Employers also have to be registered with the Labor Market Regulatory Authority (LMRA), and after registration, work permits will be granted.

    A Ports and Maritime Authority Work Permit also needs to be applied for all sites at the Zone which is controlled by the Ports and Maritime Authority.

    Q24. What rules govern the remuneration and minimum benefits of staff working in this Free Zone?

    Bahrain Law Number 36/2012 issuing the Bahraini Labor Law provides a comprehensive framework for employment in Bahrain, and it also governs the remuneration and minimum benefits of staff working in this Free Zone.

    Q25. What rules govern the working time and leave of staff working in this Free Zone?

    Bahrain Law Number 36/2012 issuing the Bahraini Labor Law provides a comprehensive framework for employment in Bahrain and also governs the leave and working time of staff working in this Free Zone.

    Q26. What are the main features of a property lease in this Free Zone, and what are the key restrictions when leasing a property?

    An application form has to be completed and submitted for relevant clearances, and a reference to it must be made in the Lease Agreement for covered storage areas in warehouses. All the commercial terms must be agreed on and adhered to. It is essential to get a pre-contract clearance depending on the activity which will be carried out on the premises. The Lease Agreement has to be signed, attested and duly registered.

    Q27. Is it possible to apply for a building permit in this Free Zone? How is this done, and what steps are required?

    No regulations could be located.

    Q28. What environmental requirements must construction companies building in this free Zone consider, e.g. form of building, landscaping or building height?

    No regulations could be located.

    Q29. What are the key restrictions when leasing a property in this Free Zone?

    Primarily, a company must be registered in this Free Zone to lease property here. On meeting the prerequisites of incorporating a company in this Zone and obtaining the permit or license, the company may apply for a Lease Agreement, through several clearances.

    Q30. What are the rules governing the use of utilities in this Free Zone?

    No rules could be located.

    Q31. How do retail premises establish themselves in this Free Zone?

    Retail Premises do not establish themselves in this Free Zone as the purpose of the Free Zone is maritime and port activities.

    Q32. Is it possible for hotels and retail establishments to operate in this free Zone- how do they establish themselves?

    Generally, hotels and retail establishments do not operate in this Free Zone.

     

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    Fri, 08 May 2020 12:18:00 GMT
    <![CDATA[The Power to Appeal]]> Appealing Power: The Power to Appeal

    Power and responsibility go hand in hand. The power to appeal renders the responsibility to seek justice, and the public prosecutors have been entrusted with such powers to seek appeals in certain civil and criminal matters in the United Arab Emirates (UAE). The courts in the UAE, set out clearly, a hierarchy of levels establishing the different degrees of courts. The hierarchy of courts can be seen to be set out like the levels in a pyramid. The courts of first instance occupy the base level in the hierarchy of courts. As one goes higher to the next level, the courts of appeal come in on the second level. Moving on to the next level, the Federal Supreme Court is at the federal level, and the Court of Cassation is at the local level of the emirates which have independent judicial departments. In this article, I aim to bring to light the power of appeals by public prosecutors with respect to civil and criminal procedural matters in the territory of the UAE.

    The power to appeal against a judgment passed by the courts in Dubai in civil matters is entrusted with the attorney general and in criminal matters with the public prosecutor. The court of cassation in Dubai is the highest degree of court and consistent with the provisions laid out in Article 173 of Federal law number 11/1992 (as amended) (Civil Procedural Law), appeals to the court of cassation must be filed within 60 days from the date of the judgment passed by the court of appeal. If the litigants in the dispute are unsatisfied with the decision rendered by a court, then the parties may file an appeal on the subject of law alone. The following conditions need to be satisfied for an appeal by the litigants to be accepted by the court of cassation:

  • The appeal has to filed by the litigants in dispute within 60 days of the judgment by the court of appeal, and in cases of emergency within ten days from date of the judgment;
  • The value of the claim in a civil action should be a minimum of AED 200,000 or above. For an appeal with criminal action, there is no such minimum value; 
  • A violation or breach of the law;
  • Error in the application or interpretation of the law;
  • The court did not hold jurisdiction for the particular case;
  • The decision was rendered inadequately or on lack of reasons;
  • The judgments of the court of cassation are final and binding. Despite the above limitations, the attorney general has the power to file an appeal in the court of cassation against any final judgment irrespective of which court issued the decision within one year from the date of issuance of the judgment (Article 174 of Civil Procedural Code). Pursuant to Article 256 of the Federal Law Number 35/1992 (as amended) (the Criminal Procedural law) in the UAE, the public prosecutor has the right to challenge a judgment regardless of the court rendering it, and there is no time limit for making such appeal. However, the following conditions need to be satisfied with respect to filing an appeal by the attorney general in civil matters and the public prosecutor in criminal matters in the court of cassation of Dubai:

  • Judgment is rendered on a breach or violation of law
  • An error in the application or interpretation of the law
  • Where the parties to the dispute do not fit the grounds to make an appeal
  • Filing an appeal in a personal capacity and not on behalf of the litigants in the dispute
  • Law of limitation stops the parties from filing such an appeal
  • The court has rejected an appeal by the parties
  • The parties have surrendered the rights to file an appeal
  • The court of cassation has the authority to hear appeals against the decisions rendered by the courts of appeal. Judgments rendered by the court of cassation are final, conclusive and binding on both the parties of the dispute and are not subject to appeal. The public prosecutor has the authority to file an appeal in a civil action, even after the time limit has lapsed provided it is done within a period of one year from the date of the issuance of the judgment. This includes filing a claim after the lapse of the prescribed time period provided for raising such a claim, filing of the case in the wrong jurisdiction or violating the procedure of the law where the minimum requirement for a dispute in terms of money has to be met. Where a judgment has been achieved based on misrepresentation of the words of law or by the violation of a law, then such judgment can be said to be defective, and an appeal can be filed against such a judgment. In such a case, where the error renders the judgment to be defective, the attorney general shall have the power to appeal against this judgment. The following three conditions need to be satisfied:

  • Violation of the law;
  • Error in the application of the law; and
  • Error in the interpretation of the law
  • The attorney general has the authority to appeal against any judgment if it has been passed in violation of the law, if there is an error in the application or if there is an inaccuracy in the interpretation of the law (Dubai court of cassation in appeal number 2015/462).  This includes where the judiciary has established the legal basis wrongly, where it does not meet the conditions for its application, such as filing a case in the wrong jurisdiction and where an error was caused affecting the judgment.

    A court of first instance is the first degree in the hierarchy of courts in UAE. Such courts have the jurisdiction to hear all matters related to civil, commercial, administrative, labor and personal status lawsuits. If any party is unsatisfied with the final decision of the courts of first instance, then such parties can appeal in the court of appeal which is the second degree of litigation in the hierarchy of courts in UAE. There is a statute of limitation imposed where the time limit for filing such an appeal against the judgment of the court of first instance will have to be filed after the passing of 30 days unless otherwise provided and in the matters of urgency such an appeal could be heard after a lapse of 10 days from the day of the judgment being rendered.

    Case Analysis

    This article aims to discuss the different scenarios where the attorney general and public prosecutors filed an appeal and whether such an appeal was accepted or not. 

  • The attorney general has the power to make an appeal against the final judgments rendered by courts in civil matters (provided it is done within the prescribed limit) and not against the final decisions of the committee of the appeals department in the center for lease dispute resolution. Center for lease dispute resolution in the emirate of Dubai by Decree Number 26/2013 is the authority to adjudicate all rental disputes arising. Article 14 of this decree mandates that all decisions passed by the appeal's department committee at the centre are final and cannot be contested by any appeal. In this particular matter, there was a rental dispute between a lessor and a tenant. The attorney general appealed against the decision of the appeal's committee at the center. It was held that Article 14 holds the decisions of the committee to be conclusive and binding and that nowhere does it mention in the decree that the attorney general holds power to appeal against the decisions of the committee. The court held that such an appeal was not valid and it was not within the powers of the attorney general to file an appeal against the decisions of the committee (Dubai Court of cassation in appeal number 2015/129). The attorney general does not hold power to file an appeal against the final decisions of the independent committees and bodies unless the text of such independent committees states the same.
  • In cases of private courts, committees and where independent bodies have been set up, the law of such bodies and courts need to mention that the attorney general will have the authority to contest an appeal against the decisions of such bodies. Otherwise, the attorney general will have no authority to appeal against the decisions of such private courts or committees. In the present matter, there was a dispute regarding an insurance claim in the regular courts of Dubai formed under the law on the formation of courts in the emirate of Dubai (Law number 3/1992). It was concluded that the attorney general should be restricted to the final rulings by the regular courts under this law and the special courts or special judicial committees of the same law unless a special provision is added allowing the attorney general to have the authority to file such an appeal against the decisions of such regular and special courts/committees (Dubai Court of cassation in appeal number 2014/411).
  • The public prosecutor has the right to appeal in the interest of law where there is an error or violation of the law; however, such an appeal shall accept such an appeal, if the object of the appeal is not at the heart of the law. The court of cassation did not accept the appeal in the present matter, as the claim of the appeal by the attorney general that was shown to be in the interest of law was not at the heart of the law.
  • The parties to a dispute are not entitled to appeal against the judgment of the court if the prescribed time period for raising such a claim has lapsed. In the present matter, the public prosecutor was one of the parties in the matter. The litigants in a dispute are not allowed to file an appeal against the judgment of the court after the prescribed time period for raising such a claim has lapsed. However, an exception to this was made in this particular case as the public prosecutor instituted the appeal not as a litigant in the matter, but in his personal capacity to file an appeal within the time period of one year from the issuance of the judgment consistent with the provisions set out in Article 174 of the Civil Procedural Code of UAE (Dubai court of cassation in appeal number 2008/89). This holds an exception to the rule for all parties in a dispute not to have the authority to file an appeal after the limitation period has expired, but where one of the parties being the public prosecutor can file an appeal in his personal capacity pursuant to Article 174.
  • It has been established that the public prosecutor has the authority to appeal against final judgments of courts provided it is done within the allocated time frame of 1 year from the date of issuance of the judgment. If the public prosecutor makes such an appeal after the lapse of 1 year, then such an appeal shall not be accepted. However, in the present matter, the opposite of this was decided. The court of cassation accepted the appeal of the public prosecutor even after the lapse of 1 year, stating that the time period of 1 year was to be counted from the date of the appeal of the judgment and not from the date of the original verdict issued (Dubai court of cassation in appeal number 2000/211). In the present matter, an appeal by one of the parties had been submitted to the court of cassation which the court rejected. Following this, the public prosecutor made an appeal in the court of cassation. The court held that the time period of 1 year should be counted from the date of the issuance of the final ruling of the subject of the appeal. This raises a concern as the courts have the discretion to decide whether such an appeal by the public prosecutor will be accepted or not depending on the varying circumstances of the case.

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    Fri, 08 May 2020 11:29:00 GMT
    <![CDATA[applicability of VAT legislation]]> An overview of the applicability of VAT legislation

    Value Added Tax (VAT) was introduced in the United Arab Emirates upon the issuance of Federal Decree Law Number 8 of 2017 and was implemented just as the year 2018 was heralded. Value Added Tax is the tax on the consumption or use of goods and services that is levied at each point of sale. It is an indirect form of tax that has been levied thus far on upwards of 180 countries worldwide. While businesses collect and account for the tax on behalf of the government, the end-consumer ultimately bears the cost.

    Since the implementation of the VAT, the VAT landscape has changed in dimension considerably. In the summer of 2018 itself, intending to cater to this evolution, the Federal Tax Authority published several updates in the form of a Cabinet Decision, FTA Decision, New Guides and Public Clarifications. This article will explore some of the same in order to understand the breadth of the applicability of VAT legislation, especially with regard to goods purchased before the 1st of January, 2018. For the sake of clarity, the system supporting this form of taxation has been delineated below.

    The System

     The mechanism is relatively simple – a business house conveys the tax that it has collected from its customers to the government. Concurrently, the government furnishes the business with a refund on the tax that it has paid to its suppliers. At the end of the chain, consumers bear the whole brunt of the tax in the form of a 5 percent increase in the cost of taxable goods and services they purchase in the UAE.

    VAT Registration under UAE VAT Decree-Law and Executive Regulations

    Businesses are mandated to register for VAT if their taxable supplies and imports exceed AED 375, 000 per annum (mandatory registration threshold). In contrast, VAT registration stays optional for businesses whose supplies do not exceed AED 187,500 per annum (voluntary registration threshold). The rights and obligations of VAT-registered persons include i) the charging of VAT on the taxable supply of goods and services, ii) the claiming of the input tax credit on VAT paid on their purchases, iii) the payment of VAT to the government, iv) the periodic filing of VAT returns, v) the maintenance of proper books of account & records, and vi) general compliance with the VAT Law and rules & regulations.

    At the end of each tax period, tax-registered businesses, i.e. the "taxable persons" are required to submit their tax returns to the UAE Federal Tax Authority.

    What the VAT return represents is a valuation of the supplies and purchases in the taxable person's name during the tax period; it reflects their VAT liability.  

    The liability of the VAT is the exact difference between the output tax payable (the VAT charged on supplies of goods and services) and the input tax (purchase-incurred VAT) for a given tax period, recoverable for that exact period. It should be noted that, where the output tax outstrips the input tax amount, the difference is to be paid to the FTA. Conversely, where the input tax exceeds the output tax, the taxable person would be able to recover the excess input tax; this could be set off against subsequent payment due to the Federal Tax Authority.  

    VAT De-registration under UAE VAT Decree-Law and Executive Regulations

    A VAT registered entity is entitled to apply for VAT De-registration to the Federal Tax Authority, in case he can show for any of the following scenarios; i) the cessation of his production of taxable supplies, or ii) the dive in the value of taxable supplies made over the period of twelve (12) consecutive months such that it is less than the voluntary registration threshold, as per clause 2 of Article 17 of the UAE VAT Law.

    Input Tax Recovery under UAE VAT Decree-Law

     The recoverable input tax for any tax period is the total input tax for goods and services which are intended to be used to make (i) taxable supplies, (ii) supplies which made out of state, but which would have been taxable supplies had they been made in the state, or (iii) supplies, made out of the state, which would have been treated as exempt had they been produced in the state. 

    As per Article 54 of the UAE VAT Law, the taxable individual shall be entitled to treat the tax paid with respect to the import of goods as recoverable tax, if the goods were imported by him through another implementing state, and the intended final destination of those goods was the state at the time of import.

    The Claim of Input Tax Paid prior to Tax Registration

     A registrant is entitled to recoverable tax, incurred before the effective date of tax registration, on the tax return submitted for the first tax period, only if the taxed goods and services were used to produce supplies that authorize input tax recovery before registration. Therefore, the tax is coverable in the cases of i) the supply of goods and services being made to the registrant prior to the effective date of tax registration, and ii) his import of the goods prior to the effective date of tax registration.

    However, it must be noted that input tax paid prior to the effective date of Tax Registration may not be recovered in the cases of (i) the receipt of goods and services being made out for purposes other than making Taxable Supplies, (ii) the input tax related to the part of the capital assets depreciating before the effective date of tax registration, (iii) the services having been received more than five years prior to the effective date of tax registration, and (iv) the individual having moved the goods into another implementing state prior to the effective date of tax registration in the state.

    Profit Margin Scheme for goods purchased before 2018

    On June 2018, the Federal Tax Authority released a clarification on the profit margin scheme for Value Added Tax in the UAE – the VAT Public Clarification VATP002.  The VATP002 elaborately delineates the goods which are eligible for the application of the profit margin scheme. What the profit margin scheme allows for is a taxable person to calculate VAT on eligible supplies solely based on the profit margin earned, as opposed to the basis of the original selling price.   

    The goods which fall under the purview of the profit margin scheme are and stay limited to i) second-hand goods (i.e. tangible, moveable property that bears the potential for further usage as it is, or after a degree of repair), ii) antiques (i.e. goods which are upwards of 50 years of age), and iii) collector's items (i.e. stamps, coins, currency). The profit margin scheme allows VAT to be accounted for by the dealers of these second-hand goods on the profit made on the supply only, give that certain conditions are met.

    With regards to eligibility, VATP002 confirms that only those goods which have been previously subject to VAT qualify under the profit margin scheme. This is of notable importance with respect to goods which were originally supplied prior to the 1st of January 2018. Furthermore, the input tax on the purchase of such goods should not have been recovered by a table person, as per Article 53 of the VAT Executive Regulations.

    Businesses which do make extensive use of the profit margin scheme, for example, those operating under the umbrella of the automotive industry, could prudently put records in place to identify the goods eligible for the profit margin scheme, and the goods that require accounting for VAT on the full selling price. The identification of the differing treatment for the two sets of goods could set up in the ERP system in a conspicuous, non-overridable fashion. Previous transactions must also be regularly reviewed to monitor risks, such as VAT that has been under-accounted for; this might warrant a voluntary disclosure.

    It is important to note that the FTA issued a clarification stating that the profit margin scheme could not be employed in instances where VAT was not charged on goods. Such instances include goods being purchased prior to the implementation of VAT, or stocks in hand having been acquired before the 1st of January, 2018.

     

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    Mon, 04 May 2020 11:25:00 GMT
    <![CDATA[Termination in case of Terminal Illness, UAE]]> Termination in case of Terminal Illness, UAE

    It has been an unexpectedly enlightening experience to see patients' primary concern once they are diagnosed with a terminal illness is whether they will be able to continue working while they are receiving their treatment or not and the extent of treatment on their ability to function and look normal. Of interest reaching the insurance annual cap is still an issue for all patients in the UAE including expatriates. Almost all expatriates with cancer diagnosis fear they will lose their job and hence their health insurance once they are not able to meet their job requirements or miss working days. This complex issue had been illustrated by Hana Abu Lughod, an expatriate from Jordan in Dubai, who lost her job after her breast cancer diagnosis. Hana lost her job after her diagnosis and had to seek charity support to finish her cancer treatment. The radio presenter was diagnosed with breast cancer in May 2017 at just 32. The biggest challenge was not living with the uncertainty of cancer itself, but the financial impact it had on her life and the new way she was treated by friends. Hana's positive outlook has helped carry her through a double mastectomy in her home country, where she was forced to go after losing her job, visa and health insurance. 

    It is sadly inevitable that some of the members in the workforce may be diagnosed with a severe illness during their working tenure. For some, the illness may be terminal, particularly as more and more of them have to work to a much older age. One in every five people who return to work after cancer face discrimination from their employer or colleagues, according to research from Macmillan Cancer Support and YouGov (2011). A terminal illness is likely to be considered as a "disability" under equality legislation internationally, which means the employee has the right not to be treated less favorably at work, and the employer must reasonably consider adjustments to enable them to stay in work. But, the situation of the terminally ill worker can be complicated. They may not be able to adapt to an adjustment, and due to the degenerative and fluctuating nature of their condition, what was "reasonable" one day may not be reasonable the next day. 

    American Courts have consistently declined to hold to a higher standard a "benevolent" employer that goes above and beyond the call of duty. A good example is Myers vs. Hose (50 F.3d 278), where a city bus driver was terminated as due to significant restrictions he was not able to perform his work duties. In support of his Americans with Disabilities Act (ADA) claim, the employee argued that the fact that other employees were provided accommodations when he was not is evidence of discrimination. In rejecting the ADA claim, the Court did not want to punish a good deed. It was held that the duty of reasonable accommodation does not encompass a responsibility to provide a disabled employee with alternative employment when the employee is unable to meet the demands of his present position. The fact that certain accommodations were offered to some employees out of good faith did not validate that they should be extended to Myers as well. Such a mandate would discourage employers from treating disabled employees in a spirit that exceeds the mandates of law. If the same level of accommodation would be legally required of the employer in all subsequent cases, a good deed would effectively become a liability. Discouraging discretionary accommodations would undermine Congress' purpose of eradicating discrimination against disabled persons. The claims were dismissed for the additional reason that the plaintiff could not prove that any nondisabled person was treated better than him.

    A severe and long-term illness preventing an employee from the ability to work can eventually result in the "frustration" of the employment contract. Determining the point where frustration occurs is most challenging. The judgment of the Ontario Superior Court of Justice in Estate of Cristian Drimba v. Dick Engineering Inc. (2015 ONSC 2843 (CanLII)), illustrated the complexities. In 1996, Mr. Drimba began working for the engineering firm. He was diagnosed with terminal cancer in June 2013 and commenced a leave of absence. Two months later, the assets of the firm were sold but Dick Engineering continued as a corporate entity. On 29 August 2013, Mr. Drimba was informed in writing that his employment would continue and that upon his recovery, Dick Engineering would arrange his interview with the purchaser of the assets. Mr. Drimba died on 17 September 2013. His estate filed an action for wrongful dismissal against the engineering firm. The Court stated that Mr. Drimba was neither terminated by any act of the employer nor he was constructively dismissed. It should be noted that as per Employment Standards Act 2000 (ESA), either termination or dismissal by the employer is a requisite for the employee to be entitled to a notice of termination, termination or severance pay. ESA Regulation 288/01 provided that an employee is not entitled to either termination pay or severance pay where the employment contract has been frustrated by a fortuitist or unforeseen event or circumstance. In Ontario Nurses' Association vs. Mount Sinai Hospital (2005 CanLII 14437 (ON CA)), a nurse was terminated from Mount Sinai Hospital due to a disability. The hospital contended that her disability resulted in the frustration of her employment contract. As per the ESA provisions, she was disentitled to statutory termination pay as well as statutory severance pay. The Ontario Court of Appeal amended the ESA provisions as they were unconstitutional and concluded that the employee was entitled to statutory termination and severance pay where the employment contract is frustrated due to illness or injury. In Mr. Drimba's case, the Court concluded that his employment contract became frustrated before he died. He was entitled to both termination pay and severance pay under the ESA. His estate was then so entitled.

    Article 114 of the Federal Law Number 8 of 1980 also known as the UAE Labor Law states that 

    "An employment contract shall not terminate by reason of the employer's death unless the subject of the contract is connected with his person. A contract shall, however, be terminated by reason of the worker's death or total disability to work, as established by a medical certificate approved by the competent health authority in the State. If a worker is capable, notwithstanding partial disability, of performing other work consistent with his state of health, the employer shall assign him, at his request, to that other work, if available, and pay him the wage normally paid to holders of such jobs, without prejudice to any entitlements and compensation due to the worker under this Law."

    Further, as per Article 120(e) of the UAE Labor Law, the employer may dismiss the worker without prior notice if the worker fails to perform his primary duties as per the employment contract, and fails to remedy such failure despite a written investigation on the matter and a warning that he will be dismissed in case of recidivism. 

    As per Article 83(2) of UAE Labor Law, should the worker contract an illness after spending more than three months of continuous service from the end of the probation period, he is entitled to a sick leave not exceeding 90 consecutive or non-consecutive days for every year of service. In addition, Article 85 states that the employer may terminate the service of the worker subsequent to the exhaustion thereby of the sick leaves set forth by the Labor Law, should he not be able to report back to his work. In such a case, the worker shall be entitled to the end of service gratuity in accordance with the provisions. 

    Therefore, the employer may terminate the services of an employee, in accordance with the notice provisions, if the employee is unable to resume their duties following 90 calendar days' sick leave in any year of service. The employer must allow the employee to take the full sick leave entitlement before terminating. On such termination, the employee remains entitled to end of service benefit. However, unpaid periods of service are not included for the purposes of length of service for calculating end of service benefits. As such, if the employee has taken 90 days' sick leave (the first 45 of which are paid and the second 45 days of which are unpaid) only the first 45 days must be included in the end of service benefits calculation. 

    The UAE Amnesty has provided help in a situation where the employer was diagnosed with cancer. Mr. Mohammed Ayyoob was working in Bufalini Middle East Marble L.L.C, Sharjah Industrial Area since March 2015. His salary and overtime were pending for 5 months. The company was going through financial issues as the company Owner Mr. Abdul Rasheed had been diagnosed with cancer who had gone to Pakistan in December 2017 and had no plans to return. There was no work in the company and the company would be closed soon. He did not have the money to pay their pending dues. The employer, in this case, had cleared Mr. Ayyoob's immigration fines through amnesty and cancelled his visa.  

    The UAE rules and regulations are framed to protect the employee, yet employers often dismiss an employee for underperformance rather than a medical condition. This is in accordance with Article 120(e) of the Federal Law Number 8 of 1980 regulating Labor Relations in the UAE as explained above. Current regulations do not exclude medical conditions as an acceptable reason or cause for underperformance as an exception for these rules. There are several expatriate cancer patients who lost their jobs in the middle of their treatment and they were left without health insurance or valid legal status to stay in the UAE and thus bound to leave to their home countries to seek continuation of their cancer treatment which most likely delays and causes gaps in their treatment. The expatriates with terminal illness diagnosis in the UAE should be treated with special protective rules and regulations given the seriousness of such diagnosis and also the nature of treatments which could last for years and even the patient's entire life. The uncertainty of the terminal illness itself in addition to the financial impact of job loss and health insurance loss can lead to severe consequences and likely poor oncological outcome if the patient is not able to continue their treatment. 

     

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    Mon, 04 May 2020 10:59:00 GMT
    <![CDATA[Governing Cartels in India]]> Regulation Governing Cartels in India: An Analysis

    In August 2016, the Competition Commission of India (CCI) levied an immense penalty it has levied to date – a whopping 63.2 billion rupees- in the infamous Cement Cartel case. The origin of the Cement Cartel case was a complaint filed by the Builder's Association of India. The complaint alleged that: employing the Cement Manufacturer's Association (CMA) as a platform, 11 cement manufacturing companies had limited the production and supply and were engaged in fixing the price of cement. The CCI discovered that the cement manufacturing giants had indeed used the CMA as a platform to fix prices, and instantly imposed penalties on the 11 companies. The cement manufacturing companies appeared before the former Competition Appellate Tribunal (COMPAT), and appealed the CCI's decision. The COMPAT, setting aside the CCI's order, remanded the case back to the CCI on the grounds of due process, and violations of the principles of natural justice.

    Consequently, the CCI acquiesced to hearing the case anew and passed an order finding that the 11 cement manufacturing companies had fixed cement prices, limiting and controlling the production and market supply of cement, in contravention of section 3(1), 3(3)(a), and 3(3)b of The Competition Act of 2002. It must be noted that the standard of evidence that CCI relied on to reach its decision was a "preponderance of probabilities." The ever-combative cement manufacturing companies and the CMA once again appealed against the CCI's decision to the National Company Law Appellate Tribunal (NCLAT).

    It was not until July 2018 that the NCLAT issued its much-awaited decision – it had dismissed the CMA's appeal and had upheld the CCI's decision. The cement manufacturing companies contested this decision by stating that the government of India had specifically required the CMA to assimilate and forward cement price and production data to it. Therefore, no incriminating inference should be drawn from the CMA's forwarding of such data to the Department of Industrial Policy and Promotion (DIPP). To this claim, the CCI and NCLAT argued that the information that the DIPP had authorized for collection had never been meant to be shared with individual cement manufacturing companies.

    However, in its monthly executive summaries, the CMA has published and circulated various details relating to cement prices and production to all of the cement manufacturing companies. Furthermore, to uphold its ruling, the NCLAT leaned on the fact that the standard of evidence to prove a cartel case in India is one of "balance of probabilities", as opposed to the "beyond reasonable doubt" standard underlying criminal law. Therefore, the NCLAT relied on corroborative evidence, including price parallelism, similarities in dispatch patterns, production coordination, and low-capacity utilization to deduce that the 11 cement manufacturing companies were involved in a cartel.

    Cartels

    Adam Smith, in a fit of righteous indignation, defined cartels as conspiracies against the public for how they impair the rights of consumers. According to the Office of Fair Trading of the United Kingdom, a cartel is a clandestine, verbal, and often informal agreement between businesses not to compete with each other. Essentially, these limit output with the single-minded objective of increasing prices and magnifying profits. These goals are attained by means of price fixing, allocation of production, the sharing of geographic markets or product markets, and engagement in collusive bidding or bid-rigging in one or more markets. The bottom line is that cartels restrict competition, and the offshoots of their functioning include the misallocation of resources and the deterioration of consumer welfare.

    The Competition Act

    The Indian Competition Act 2002 (Competition Act) is the legislation regulating anti-competitive conduct in India, and the Competition Commission of India is the statutory authority overseeing the enforcement of the competition law. The CCI is aided in its duties by its investigative arm, the Office of the Director-General (DG); its duties involve the achievement of the objectives of the Competition Act, namely the prevention of practices causing an appreciable adverse effect on competition (AAEC), the promotion of competition in the market, and the protection of the freedom of trade and the interests of the consumer.

    The Competition Act's stance on Cartels

    Section 2, sub-section (c) of the Competition Act defines the term cartel as "an association of producers, sellers, distributors, traders or service providers who by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or, price of or trade in goods or provision of services."

    Section 3 of the Competition Act categorically proscribes the creation of certain anti-competitive agreements, such as agreements between or among competitors (horizontal agreements, like those of cartels), and agreements between actors at different levels of the production chain (vertical agreements). Agreements that are not in line with provisions of Section 3, i.e. agreements that provide for bid-rigging, price-fixing, etc. are presumptively deemed void.

    To certify the existence and functioning of a cartel, the CCI must establish that the competitors had entered into an agreement with the explicit goal of fixing prices, limiting supply, sharing markets, or rigging bids.

    Once a cartel is found to exist, by default, it is hypothesized to cause an appreciable adverse effect on competition (AAEC), unless the agreement is anchored to an efficiency-enhancing joint venture. While this presumption is rebuttable, alleged cartelists have very rarely succeeded in opposing the same. The CCI is also invested with the power to search and seize documents, and to collect evidence via raids to establish the existence of a cartel agreement.

    According to Section 19 of the Competition Act, The CCI is authorized to initiate inquiries into anti-competitive agreements or unilateral conduct of its own volition, upon receipt of any relevant information, or based on a reference from any statutory authority. To determine if an agreement violates Section 3, the CCI is required to consider an exhaustive list of factors, including foreclosure of competition, barriers to entry, and benefits to consumers.

    Sanctions

    Section 19 also sets forth an exhaustive list of factors to define the relevant product and geographic markets before evaluating and assessing competition. The Competition Act also empowers the CCI to impose penalties, in addition to granting them the power to issue cease and desist orders.

    Under Section 27 of the Competition Act 2002, the CCI may impose a penalty up to three times the offender's profit for each year that the prohibited agreement has been in effect; or 10% of its turnover for each year that the prohibited agreement has been in effect (whichever is higher).

    In May 2016, the Supreme Court of India issued a clarification stating that the "relevant turnover", as opposed to the "total turnover" of the enterprise in question should be taken into consideration when evaluating the penalties to be imposed on the transgressor. In Excel Crop Care Limited v. CCI & Anr. (Civil Appeal No. 2480 of 2014), the Supreme Court stated that "the penalty cannot be disproportionate and it should not lead to shocking results"; further it ascertained that the relevant turnover would be "more in tune with the ethos of the Competition Act and the legal matters which surround matters pertaining to the imposition of penalties." In these contexts, relevant turnover refers to an entity's turnover with regard to products and services that have been hurt by such contravention.

    Section 48(1) of the Competition Act presupposes guilt solely on the individuals who held responsibility for the conduct of the company at the time of the infringement. Notably, Section 48(1) provides leeway for this presumption to be rebutted should the relevant individuals be able to demonstrate that the infringement was committed without their knowledge; rebuttal is also permissible if the concerned individuals had exercised due diligence to prevent the same. Under Section 48 (2), however, the consent or neglect of these individuals is established de facto by their involvement and rescinds rebuttal as an option. Furthermore, Section 48 (2) of the Competition Act is not limited to the persons in charge of the company and thoroughly extends to any individual involved with the company's contravention. The cases of Sports Broadcasters (Case Number 02 of 2013) and Dry Cell Batteries (Case Number 06 of 2016) are prime examples; both saw the former employees of the opposite parties being penalized under Section 43 for contravention of the Competition Act. With respect to individuals associated with a company's cartel conduct, the maximum penalty that can be imposed as per Section 27 of the Competition Act is 10 percent of his/her income for each year of the continuance of such conduct by the company.

    As illustrated earlier in the Cement Cartel case, the decisions of the Competition Commission of India can be appealed before the National Company Law Appellate Tribunal (NCLAT), and further, before the Supreme Court of India.

    Cartel Enforcement Activity

    The Competition Commission of India has been immensely agile in its action against cartels. Right up to 2018, sixty-three percent of the cases investigated by the Commission exclusively pertained to cartelization. As of 31 July 2017, one hundred thirty-six (136) of six hundred sixty-nine (669) orders issued by the CCI bore substantive discussions on cartelization. Between 2018 and 2019, the Commission decided forty-eight (48) enforcement cases out of a total of sixty-eight (68) which included instances of abuse of dominance and anti-competitive agreements alike. Since 1 April 2019, the Commission has imposed penalties in five cartel cases.

    The following are critical decisions of the enforcement authorities pertaining to cartelization:

    In the Flashlights case (Suo Motu Case No. 01 of 2017 In Re: Alleged Cartelization in Flashlights Market in India), the Commission held that there was no violation of Section 3 of the Competition Act despite the active exchange of information between competitors. This was on account of the agreement to fix prices not having been implemented; therefore, the presumption of an appreciable adverse effect on competition (AAEC) did not holdfast.

    In the Rajasthan Cylinders case (Civil Appeal 3546 / 2014), the Supreme Court conclusively ruled that, despite identical prices issued by bidders and a trade association congregation, there had been no collusive bidding. The parallel pricing was attributed to the nature of the market and not collusion.

    Dawn Raids and the Leniency Regime

    The Commission has been successful in employing dawn raids and leniency applications as implements in their battle against cartels in India.

    Dawn Raids

    As per Section 41 (3) of the Competition Act, the Director-General is empowered to conduct dawn raids. Dawn raids are conducted by the Director General's personnel at the premises of companies that are suspected of violation of the Competition Act; these typically start in the morning of a working day and last the whole day. The director-general is possessive of a wide range of powers to wield during a dawn raid, which include using reasonable force to access the premise to be searched; sealing the premises; examining books and other records related the business; seizing any documents; examining any person on oath, and employing the notes from a deposition as evidence. To guard against abuse of power, the director general's powers are underlined by limitations which prevent him from conducting a raid without a search warrant and the presence of two independent witnesses, from accessing documents protected by attorney-client privilege, and from searching any area outside the scope of the warrant.

    The Director General's Office has been increasingly engaging in dawn raid investigations with the goal of cracking down on alleged anti-competitive practices. There have been only six (6) instances of dawn raids in India since the inception of the CCI, three of which have been conducted in the past twelve months. This sudden spike in dawn raids can be justifiably attributed to the Supreme Court's ruling in Competition Commission of India vs. JCB India Ltd. on 15 January 2019, where it was ruled that documents seized by the Director general during a raid can be employed as evidence during an inquiry. As per the data available in the public domain, the Director-General has conducted raids at Glencore over alleged collusion over the price of pulses, at Eveready Industries, and at the French firm Mersen over alleged collusion in pricing equipment sold to Indian Railways and Climax Synthetics Private Ltd, among others.

    Leniency Regime

    The Competition Commission has sought to induce cartel participants into breaking rank and whistleblowing about their fellow cartelists via their leniency program, under the Competition Commission of India (Lesser Penalty) Regulations of 2009.

    As per the Competition Act, any member of a cartel can opt to file a leniency application with the Competition Commission, prior to the Director-General Office's submission of its investigation report, seeking a reduced penalty in exchange for "full, true and vital disclosure of information and evidence of substantial value". This categorization could include without being limited to information pertaining to the existence of the cartel, its members and duration.

    If the applicant provides valuable information that was previously unknown to the CCI, it is capable of granting a reduction in the penalty of up to 100 percent to the first leniency applicant, up to 50 percent to the second leniency applicant and up to 30 percent to any subsequent applicant.

    The leniency regime has been an immensely successful endeavor, given that several investigations and orders have been issued pursuant to leniency applications. Furthermore, the recent orders passed by the CCI under the leniency regime highlight the factors the CCI employs whilst determining the quantum of reduction in penalty, i.e. the stage at which the leniency application is made, the standard of evidence, etc. The year 2018 saw a case involving bid-rigging between two broadcasting companies, Globecast and Essel Shyam Communications Ltd (ESCL); the CCI found that the parties had violated section 3(3)(d) of the Competition Act by swapping sensitive bid-related information with the vested purpose of broadcasting various sporting events such as cricket, Formula One and hockey. Notably, the CCI approved a 100 percent penalty reduction for Globecast on account of its submission of evidence that enabled the CCI to form a prima facie opinion regarding the existence of the cartel, including email correspondence articulating the submission of bids in a colluded manner, sensitive price information, and a forensic report containing mirror images of confiscated laptops and mobiles. While ESCL also furnished additional information to the CCI in its leniency application, it was granted only a thirty per cent reduction since the CCI had already referred the matter to the Director-General for investigation at the time of receiving its application.

    It is important to note that the evidentiary value of the leniency applications is of the essence. In the aforementioned case of the alleged cartelization in the flashlights market in India (Suo Motu Case No. 01 of 2017), the CCI stated unequivocally that, in the absence of implementation of a price-fixing agreement, it does not consider the exchange of commercially sensitive information between competitors to be sufficient to establish contravention of section 3 of the Competition Act.

    Conclusion

    The Competition Commission of India is a proactive regulator and has notably been undertaking advocacy initiatives in order to add to the discourse between market competition regulators and potential leniency applicants. Accordingly, there has been an exponential increase in the number of leniency cases in India which is reflective of a thorough awareness of the leniency regime in the country. Concurrently, there is a conspicuous trend in the number of bid-rigging issues, especially in the domain of public procurement. Given the havoc that anti-competitive activities can wreak on the sustainable economic development of the country, the Competition Act needs to be thrust into the limelight now more than ever.

     

     

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    Sun, 03 May 2020 10:58:00 GMT
    <![CDATA[Coronavirus as a Force Majeure Event]]> The Consideration of Coronavirus as a Force Majeure Event

    As it continues to spread globally, coronavirus (COVID-19) has effectively ensnared the world's attention and concern by bringing it to a standstill. As of 28th March 2020, the World Health Organization has confirmed 512,701 cases of the virus worldwide and a total of 23,495 deaths. The virus has been detected in a total of 202 countries. As a result of the unprecedented spread and impact of COVID-19, governments and other public bodies have imposed a plethora of containment restrictions and suspensions to movement, travel and supply of goods and services. This has been causative of a slow-down in business operations, and a subsequent increase in focus on the contractual obligations of businesses and their likely inability to perform these obligations. 

    Force Majeure

    A force majeure clause operates to excuse a party's non-performance of its contractual obligations on account of extraordinary, unforeseeable circumstances. Essentially, Force Majeure is an event that is beyond the control and scope of all parties to a contract. Natural disasters, the likes of storms or hurricanes, major political events like war, and grave public health crises like a pandemic, all fall under the purview of Force Majeure.

    Force Majeure is a civil law concept – one that translates to "greater force." Specific force majeure clauses in commercial contracts determine how the risk is allocated, and what the remedies are in the event such a calamity occurs.

    The concept of force majeure has attained universal recognition as a principle of international law, and domestically varies in its application. If the contract happens to be governed by common law, e.g. English law, the parties must come within the express wording of the clause to be able to rely on the force majeure provision. It is vital to note that, in the absence of an explicit force majeure provision, the courts would not imply one into the contract by default; in this event, the only recourse that would stay available to the parties would be the consideration of reliance on the narrow doctrine of frustration. Frustration, an English contract law doctrine, is meant to be implemented to set aside contracts where an unforeseen event "either renders contractual obligations impossible or radically changes the party's principal purpose for entering into the contract."

    On the other hand, in countries like China, force majeure happens to be an implied term in any contract; accordingly, the Chinese government has been issuing Force Majeure certificates to companies that have been rendered incapable of fulfilling their contractual obligations in a diligent effort to indemnify them from breach of contract claims.

    Similarly, in the UAE, the doctrine of Force Majeure is recognized at law, and parties would be able to depend upon the same even if the contract is silent concerning the clause. It is a mandatory rule of law that de jure applies even without explicit mention in a contract.

    Force Majeure in the UAE

    The Civil Transactions Law (Federal Law Number 5 of 1985), the "UAE Civil Code" is what deals with the doctrine of force majeure in the UAE. Article 273 of the UAE Civil Code states that in contracts binding on both parties, if force majeure supervenes which makes the performance of the contractual obligations impossible, then the corresponding obligations shall be cancelled, and the contract terminated. Furthermore, Article 273 further specifies that, if the impossibility is only partial, only that part of the contract which is impossible shall be void; the same is to apply in the case of a temporary inability in continuing contracts. In both cases, the Civil Code permits the obligor to cancel the contract provided that the obligee has been made aware of the same.

    While the UAE Civil Code is not possessive of a comprehensive definition of what constitutes a "force majeure" event, the consensus is that the umbrella is limited to "unforeseeable events". On account of its unprecedented nature, in the context of its geographical setting in the United Arab Emirates, it remains to be seen if the COVID-19 outbreak would be considered a "force majeure event"; it is likely to be dependent on the specific circumstances of each case. However, there is definite exploratory scope in the statement that the outbreak could be considered a force majeure event.

    As per the UAE Civil Code, the law permits the total and partial exoneration from contractual obligations depending on the circumstances. Furthermore, exceptional circumstances empower a judge or an arbitrator to modify the contractual obligations to a "reasonable level" as per Article 249 of the UAE Civil Code.

    As per the aforementioned article, if exceptional, unforeseeable circumstances of a public nature occur, and cause the performance of the contractual obligation to become so harshly overbearing to the obligor to threaten him with grave loss, the judge may reduce the scope of the obligations "to a reasonable level" in accordance with the circumstances, upon weighing the interests of each party.

    The distinction that deserves highlighting is between the effect of the two Articles mentioned above – Article 273 and Article 249. On the one hand, the application of Article 273 results in the cancellation of the obligation, while Article 249 allows for the contractual obligations to be subjectively modified.

    With regard to muqawala contracts (a popular contract in the construction domain, to make a thing or perform a task), Article 893 of the Civil Code specifies that if any cause arises, that curtails performance of the obligations of a contract, any of the parties may require that the contract be terminated. If a contractor is rendered incapable of satisfying a muqawala contract on account of an unforeseeable cause (in which they played no part), the contractor will be entitled to the value of the completed work and the incurred expenses; this entitlement should match the total value that its counterparty derived from the incomplete performance.

    It is important to note that the Civil Code's Articles 273(1) and 273(2) does not mandate that notice be given to effect the cancellation of a contract. That being said, a party relying on the Civil Code in force majeure circumstances would be well-advised to provide notice of cancellation to its counterparty prudently; such a far-sighted act could evade any allegation of breach of the general obligation of good faith under the Article 246 of the Civil Code.

    The UAE Civil Code, under Article 287 also provides that if a person can prove that a loss arose on account of an external cause in which they played no part, including but not limited to natural disasters, accidents, force majeure, and the act of a third party, they shall not be obliged to make good the loss.

    Force Majeure in the UAE: Implementation

    As mentioned earlier, while the Civil Code references force majeure and ascertains that there exist exceptional circumstances which form the basis for relief from the performance of contractual obligations, it fails to provide a clear-cut definition of force majeure, and what it constitutes. Therefore, an analysis of whether coronavirus may constitute a force majeure event should make the contract in question the starting point; it should be scoured for any definitions that could account for a pandemic scenario. If the contract is silent with regard to the same, the issue falls into the jurisdiction of the court or arbitral tribunal; they become responsible for the determination of whether the effects of a pandemic constitute force majeure or exceptional circumstances in the context of the Civil Code.

    To the extent that the effects of coronavirus can be likened to be normal commercial risks that are oft caused by other, more commonplace circumstances, a finding of force majeure might be unlikely. Conversely, if the ramifications of the pandemic are of a distinct, particularly severe nature, the basis of force majeure may be more readily found. For the affected party to trigger the force majeure clause, the party has to satisfy all procedural requirements to display that COVID-19 was the sole cause of their inability to perform, that they could not reasonably mitigate its consequences and their non-performance was due to circumstances beyond their control

    At this stage, the critical issue that is being faced in the assessment of the applicability of this clause is that the future impact of COVID-19 is shrouded in uncertainty. Furthermore, it is unclear how the courts in the UAE and the arbitrators would deal with force majeure and exceptional issues raised by COVID-19. Much hinges on whether the severity of the outbreak, and whether the hurdles to business suffered, as a result, go beyond those experienced in new situations. With the COVID-19 pandemic continuously developing and magnifying in dimension, businesses could proactively protect themselves by obtaining business interruption insurance, or any other insurance policies.

    Conclusion

    The Public Health Emergencies of International Concern (PHEIC) recently raised questions regarding the fulfilment of contractual obligations in domestic and international contracts. In the last 15 years, PHEIC has been implemented a total of five times; for the SWINE FLU (2009); POLIO (2014); ZIKA (2016); EBOLA (2014 and 2019) and now for COVID-19 (Coronavirus).

    Countries are announcing grave concerns about the rapid widespread of this insidious virus on the daily, and full or partial lockdowns have been implemented almost universally. Not only have these caused severe disruptions to travel and trade, but also operational chaos on a global scale.

    Especially since the WHO officially characterized COVID-19 as a pandemic on the 11th of March 2020, the question of which party should bear the burden of the risk of loss has become more germane than ever. To all, "force majeure" has been the answer on the tip of the tongue. Given that there is no standard universal definition for force majeure events, COVID-19 will inevitably transform the force majeure landscape in evaluating its applicability to this situation.

    The initial point for contracts governed by the UAE law, and any contract for that matter, would be to consider the force majeure provision in the contract meticulously. In the absence of the same, the provisions of the Civil Code mentioned above could apply to regulate the allocation of risk and the consequences of a force majeure event.

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    Sun, 03 May 2020 09:27:00 GMT
    <![CDATA[Transfer of Shares in UAE]]> Transfer of Shares in UAE

    The governing of transfer of shares in a company is done by Federal Law Number 2/2015 on Commercial Companies Law (CCL) in the United Arab Emirates (UAE). The different types of companies that can be set up under the CCL comprise of a joint liability company, simple commandite company, limited liability company, public joint-stock company and private joint-stock company. In this article, we aim to discuss the assignment or transfer of shares pertaining to all the varied forms of companies that can be incorporated under CCL. The memorandum of association (MOA) or the articles of association (AOA) are the constitutional documents of a company laying out the corporate governance of the company alongside the administrative structure and management of the corporation. The transfer of shares is categorized as an internal affair of the company and is demarcated by the MOA or AOA. Through the MOA or AOA, a contract is thereby regulated between the shareholders or members of the company and the company itself, prescribing regulations and management structure for the company. Article 10 (1) provides that except for JLC's and simple commandite companies, any other company shall have to have one or more UAE partners with owning a minimum of 51% of share capital in the company. Any transfer of title to any share of a partner deeming otherwise or hampering with the prescribed percentage shall be considered to be untenable (Article 10(3)). The transfer of shares has been discussed in the different form of companies below.

    Joint liability company

    If there is to be any provision of assignment of shares, then the same has to be specified in the MOA of the joint liability company (JLC) and the same has been laid out in Article 42, clause (i) of the CCL. Any assignment or transfer of shares shall be accepted only after receiving the consent of all partners of the company, provided that the same is of course done with respect to any limitations (if any) in the MOA (Article 56 of CCL). The same must be registered with the competent authority in the registrar else the assignee shall not be deemed to be a partner in the company until such registration of assignment of shares. It is also mandated that any agreement to the contrary of shares being assigned without limitation shall be null and void. However, a partner may be allowed to transfer the rights attached to his shares to a third person in the company, and such agreement shall be restricted to an effect only amongst themselves. 

    Simple commandite company

    Assignment of shares where consent is to be acquired from all the partners or else by a majority of partners if the same has been set out in the MOA in order to proceed with the assignment of shares in the company to a third party, such registration of s assignment has to be recorded with the registrar via the competent authority for it to be valid (Article 70 of CCL).

    Limited liability company

    A limited liability company (LLC) consists of a minimum of two shareholders to a maximum of 50 shareholders where the partners shall be accountable to liability pertaining to the extent of shares in capital owned by them. A single person LLC can also be incorporated where the holder shall not be liable for the company's obligations other than to the extent of share capital owned by him as laid out in the MOA. In an LLC, a partner may assign or transfer shares owned by him in such a company to another partner or a third party. It is imperative that the assignment or pledge of shares be made in accordance with the MOA of the company and not otherwise or else such a transaction shall be unenforceable. The same has been mandated in Article 79 of the CCL. It is highly essential that the entry of such transfer of shares be set out in the commercial register with the competent authority or else such a transaction will be rejected. A company is not entitled to reject the entry of the transfer of shares unless in violation of the MOA or CCL. Article 80 of the same law addresses the procedure for the assignment of shares of a partner in the company, which is outlined below:

  • For the assignment of shares to lead, a partner in the company will do so to a person who is not a partner and the same shall be notified to all the other partners of the company through the manager of the company. The manager shall be informed of the said assignee/purchaser and the prescribed terms of such transfer/sale who will in further notify the partners after receiving such notice.
  • Every shareholder is granted a right of pre-emption, where such shareholder decided to transfer shares. Pre-emptive rights give the shareholder of a company the right to buy additional shares in the future, first before being offered to any other person or entity. The shareholder proceeding with the assignment of shares has up to 30 days from the date of notifying the manager of the agreed price, to initiate such pre-emption rights. In case there is any clash that arises on the price, then such share will be assessed by experts with financial and technical experience, appointed by the competent authority.
  •  If more than one partner ends up using the right to pre-emption, then the sale shall be divided among them on pro-rata basis to their respective shareholdings, which is that they will receive the sale in proportion to the shares held by them. 
  • After the lapse of 30 days and no declaration to the pre-emption right being made, the partner shall be free to dispose of his share.
  • The procedure for the assignment of shares has been addressed above, and such pledge or assignment is to be carried out in accordance with this procedure and in accordance with the MOA of the company. MOA shall always prevail over any assignment or transfer of shares being carried out.

    Joint-stock company

    In a joint-stock company (JSC), the transfer of shares is practised by the transfer of title to shares that are listed in the markets, shares not listed in the markets and transfer of title to shares by inheritance, will or court judgment. In a JSC, a register known as the share register of a joint-stock company is held by the company recording the shares held by shareholders and the rights attached to such shares in the company. The transfer of title to the shares that are listed in the markets is undertaken by the entry of such transfer in a share register that is held by the company and the procedure for the same has been mandated in Article 211 of CCL. The prescribed procedure for transfer of title to shares of the company in accordance with the financial market where such shares are listed is to be carried out. Article 212 pursues transfer of title of shares not listed in the markets. It is only from the date of such entry in the share register that the transfer shall be effective against the company or any third party. Such entry marks out the share to be transferred and any rights thereby attached with it. There are certain circumstances, whereby a company may not enter the disposal of shares and such events would include where such disposal was in contravention or violation of CCL or where decisions were issued contrary to the MOA or articles of association of the company. If by order of the court, the shares in question are attached or mortgaged pursuant to the court order, then such shares shall not be deemed fit for transfer. The certificate of shares is misplaced, and the company issued no substitute of such certificate; if the company is holding any debt on the shares then the company is entitled to suspend any registration of transfer of shares until the clearance of such debt on the shares and if any contracting parties are incapacitated, are not fit for such transfer or declare bankruptcy or insolvency, then in all such events the company shall not enter into the disposal of shares of the company. Transfer of title to shares by inheritance, will or court judgment is carried out under Article 213 of CCL where a title to a share is transferred by inheritance or will and the heir shall demand to enter such transfer of title in the register of shares. If the transfer is applicable by a court judgment, then such transfer shall be entered in the share register in accordance with such judgment passed and the assignee shall be deriving such rights of share transfer from the date of registration.

     

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    Sun, 03 May 2020 07:51:00 GMT
    <![CDATA[Mutual Fund Regulations]]> Mutual Fund Regulations

    For years, it has been pointed out that the majority of funds underperform the market. But not all of them! Well-chosen funds can provide quick and easy exposure to the market's various sectors and industries, lending the portfolio the kind of diversification that can help insulate one from damages during turbulent times. No single piece of faulty corporate news is likely to sink the fund, as it might an individual stock. Not for nothing are mutual funds the investment vehicle of choice for so many. The funds are convenient, cost-effective, and a lot less risky than individual stocks. For the people who have things to do other than check their stocks every five minutes, mutual funds provide peace of mind alternative (or, oh well, supplement). Indeed, for serious long-term investors, mutual funds are just about the perfect investment vehicle. Due to mutual funds and retirement accounts, many Americans have become players on Wall Street.  

    Mutual Funds in UAE 

    The UAE has embarked on an ambitious undertaking by introducing novel business amicable mutual funds regulations to promote the UAE funds industry and provide the foundation for a more developed regional funds regime in the Gulf Cooperation Council. The mutual fund's industry facilitates the gathering of monies for investment in various sectors across the Middle Eastern through funds established in the UAE, in addition to foreign funds registered and promoted in the jurisdiction. One eminent development is the issuance of the Emirates Securities and Commodities Authority (SCA) Board of Directors' Chairman Decision No. (9/RM) of 2016 Concerning the Regulations as to Mutual Funds (Fund Regulations), replaces SCA Board Resolution No. 37 of 2012 Concerning the Rules of Investment Funds, as amended. The Fund Regulations became effective on 31 July 2016. The Fund Regulations continue to ensure-   

  • overseeing the regulation, marketing and licensing of investment funds in the UAE to remain with the SCA. The SCA carries out prudential supervision tasks relevant to the financial position of mutual funds established and licensed as per the provisions of the Fund Regulations;   
  • Approval by the SCA is a requisite to establish a local investment fund- an investment fund established in UAE, excluding the free zones, licensed by SCA;   
  • SCA approval is also a requisite for the promotion and marketing of foreign funds to investors in the UAE. The Fund Regulations define a foreign fund as 'a mutual fund established outside the UAE, in a free zone, or a financial free zone within the UAE'; and   
  • appointment of a UAE-licensed local promoter is a requisite for the marketing of foreign fund to investors in the UAE 
  • The Fund Regulations do not apply to:  

  • Accumulation of funds for (a) investment in a joint bank account, (b) concluding group insurance contracts, or (c) participation in social security, employee incentive programme or investment plans associated with insurance contracts unless such collected money or investments are directed from such plans to mutual funds;  
  • Funds established by a federal or local government agency, the companies wholly owned by any of them as well as the foreign funds promoted to one of such entities.   
  • In the case of reverse solicitation.   
  • The Fund Regulations provide that no foreign fund may be marketed, advertised, distributed or offered within the UAE prior to obtaining the approval from the SCA and appointing a local promoter. However, the Fund Regulations fail to mention, who is eligible to be a local promoter? What are the obligations of the local promoter? What is the minimum subscription per single investor?  

    The Fund Regulations provide that the term of the SCA approval shall be one year. The term may be renewed by submitting an application to the SCA at least one month prior to expiry. However, the SCA shall have the right to reject the application for renewal as required by the public interest.   

    Public Funds versus Private Funds  

    The Fund Regulations apply to both private and public placements. A contrast is made between public funds, open-ended or close-ended funds established in the UAE targeting all investors, and private funds, open-ended or close-ended funds established in the UAE targeting qualified investors.  

    Application for the license of a public open-ended mutual fund is required to be submitted either by its founders or a corporate entity licensed by the SCA to practice the activity of establishing and managing a similar fund in the UAE. The Fund Regulations provide for the submission of a prospectus, with supporting documents and a key investor information document. Prior to obtaining SCA's approval for the licensing and announcement, it is prohibited to announce the start of initial procedures to obtain a license for a fund, announce its licensing, promote it, subscribe in its units, distribute any promotional materials or announce any information concerning the fund. The term of the license for the fund is one year, and may further be renewed. Similar to open-ended public funds, the scope of investment in public close-ended funds include high-liquid non-tradable securities and tradable securities (stocks, bonds and cash instruments). The scope also includes financial derivatives on tradable securities to control the level of risks outlined in the prospectus or for hedging in an amount not higher than the total net asset value subject to disclosure thereof, declared indexes and bank deposits to ensure liquidity with a maturity of maximum 12 months with licensed banks, subject to determining the investment ratio.   

    Restrictions for Public close-ended mutual funds:  

  • The ratio of the investment in securities issued by an entity shall not exceed 10 per cent of the issued capital or 10 percent of the net value of the fund's assets (whichever is lesser).   
  • The ratio of investment in unlisted securities shall not exceed 10 percent of the fund's net asset value.   
  • The ratio of investment shall not exceed 20 percent of the fund's net asset value in securities that are listed in a foreign market, provided that the market is subject to a regulator similar in operations to SCA.  
  • Investment in the financial derivatives is subject to a maximum of 1 percent of the net asset value of the fund.   
  • Investment in a different mutual fund is not permitted unless the fund is in a manner that serves the interests of the unitholders and is consistent with the investment policy of the fund and 
  • Engaging in foreign exchange operations is permitted provided, they are incidental and to manage its investments.   
  • The Fund Regulations make provision for various types of mutual funds:  

  • Master fund- a public mutual fund or part of a group of funds affiliated to an umbrella fund, provided the master fund meets specific criteria;   
  • Feeder fund- Public mutual fund or part of a group of funds affiliated to an umbrella fund which is excluded from investing in tradable securities and from other investments as determined by the SCA, and also invests a minimum of 85 percent of its assets in the units of a public foreign fund or a public master fund; and   
  • Umbrella fund.   
  • Promoting the Funds  

    The SCA issued Chairman of the SCA Board of Directors' Decision No. 3/RM of 2017 Concerning the Regulation of Promotion and Introduction (Promotion Regulations) in January 2017. The Promotion Regulations do not set forth that they substitute the Fund Regulations either wholly or in part and in fact appear to supplement those sections of the Fund Regulations that relate to promoting foreign funds. How so? Well, the Promotion Regulations reconfirm that the marketing of interests in foreign funds to investors in the UAE mandates that such interests be registered with the SCA. Also, the Promotion Regulations reiterate that reverse solicitations set out in the Fund Regulations are applicable.   

    The Promotion Regulations specify a further exemption. When a foreign fund is offered to a qualified investor, the SCA-licensed promoter does not have to market it by way of a private offering in the UAE.

    Who is considered as a qualified investor?   

    A qualified investor is:  

    I. An investor who is capable of managing investments by itself and on its own accord, such as:   

  • The federal and local governments, government institutions and authorities, or the companies wholly owned by any of the aforementioned;   
  • International bodies and organizations;   
  • Individual licensed to engage in any commercial business in the UAE provided that investment is one of the purposes of its business; or   
  • A natural person with an annual income of minimum AED 1 million, or his net equity, with the exception of his residence, valued at AED 5 million and a declaration that he has the adequate knowledge and experience whether solely or through a financial consultant, to assess the offering documents, the risks and advantages associated with or arising from the investment; and   
  • II. represented by an investment manager licensed by the SCA.  

    Various new SCA regulations relating to funds had been enacted between 2016 and 2018. While the Administrative Decision No. 57/RT of 2017 deals with the Adjustment of Positions Mechanisms for Mutual Funds, Chairman of the Authority's Board of Directors' Decision No. 10/RM of 2016 incorporates the Fees of Mutual Funds, outlining the fees payable to the SCA in respect of application fees and license renewals for public and private mutual funds.  

     

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    Sun, 03 May 2020 07:20:00 GMT
    <![CDATA[DMCC Company Regulations, 2020]]> DMCC Company Regulations, 2020

    Regulations in the business world are essential and a mechanism to protect workers, public safety, businesses, and investments. However, regulations which are inefficient or inadequate can indeed stifle entrepreneurial activity and business growth which ultimately impacts the ease of conducting business. For instance, it takes about 200 hours to complete the export border requirements for maritime transport in Cameroon and Côte d'Ivoire. On the contrary, it takes only 10 hours in Singapore. In Gabon, the border compliance for export at seaports at an average cost about $1,600, but in Mauritius, the same costs just over $300. What can drive the businesses away from the oversight of regulators and tax collectors into the dark shadows of the informal sector or in hunt of a more supportive business environment? Burdensome rules! Where the rules prevent economic activity from flourishing, foreign investors may reject the economies. The freedom to do business economically goes hand in hand with economic development and a thriving private sector. These, in turn, reinforce poverty elimination and the pursuit of shared flourishing prosperity.  

    Doing Business 2020 Style in Dubai 

    New rules and regulations were issued by the Dubai Multi Commodities Centre (DMCC) and Government of Dubai Authority on commodities trade and enterprise, effective from 2 January 2020 to further boost the ease of setting up as well as conducting business in DMCC. According to the official figures in 2019, almost 2000 new companies were registered in the DMCC, taking the cumulative to over 16,000 companies registered in the free zone. The new Companies Regulations 2020 (Regulations) updates the existing company law framework, providing greater flexibility and ease of operations for businesses registered within DMCC and increasing the remit of their activities.  

    The Regulations replace the DMCC Company Regulations 2003 and rules and regulations issued thereunder. There have been several fundamental changes to the previous regulations. 

    What has changed? 

    Standard or modified Articles of Association (AOA) 

    The Regulations provide the companies with the flexibility to either adopt the DMCC's standard template AOA or opt for a modified AOA. This is a positive change from the previous regulations which restricted the DMCC companies from deviating from the prescribed standard form AOA. However, adopting modified AOA requires the submission of a legal opinion to the DMCC Registrar confirming compliance with the Regulations. If the Registrar notifies a Company that, in the opinion of the Registrar the Articles of the Company contain a provision which is contrary to or inconsistent with these Regulations, that particular company must amend its Articles in such manner as the Registrar may direct. The DMCC is yet to clarify the definition and scope of "legal opinion".  

    Share capital and share classes 

    As per the Regulations, there is no statutory share capital requirement of AED 50,000. However, the DMCC Authority may impose a share capital for certain activities as required. A bonus issue of shares is permitted to the shareholder of a DMCC company, provided that it is made out of the retained earnings of the company. Corporate entities licensed by the Dubai Multi Commodities Center Authority (DMCCA) can issue different types of shares which permits them to structure their shareholding as per their needs. The shareholders may provide in their AOA, the kinds of shares that can be issued and the rights which are attached to each type of share (Regulation 27). The Regulations do not mention any specific types of shares, and under Regulation 32, only bearer shares are expressly prohibited from being issued. The issuance of different kinds of shares provides the company with the opportunity to look for financial investors without the requirement of furnishing them with the same rights as the existing/voting shareholders. 

    Corporate governance 

    The Regulations introduce the "Officer Rules", which is intended to set out and govern the roles, responsibilities, duties, procedures and arrangements related to officers (i.e., managers, directors and secretaries) of a DMCC company. Also, a DMCC company may appoint a corporate services provider as company secretary. More importantly, the Regulations prohibit a DMCC company from providing any form of financial assistance to directors. The Officer Rules lay down the requirements and conditions for the appointment of a director, manager and secretary, and define the tasks and obligations of the respective position as follows:  

    Director- 

  • Implementation of the overall strategy, business activities and affairs;  
  • Compliance and governance of Risk Management; and  
  • Ensuring the manager and secretary are fulfilling their tasks.  
  • Manager- 

  • Day to day management following the directors' directives; and  
  • Implementation of any powers granted by the AOA or by the directors and shareholders.  
  • Secretary-  

  • Filing documents with the Registrar as per the Regulations;  
  • Calling for the directors' or shareholders' meetings; and 
  • Maintaining and keeping the register for the minutes of the meeting. 
  • Mandatory appointment of Company Secretary 

    Each corporate entity has to have at a minimum one manager, one director and one secretary. However, in the case of a branch, only one manager is required, whereas the appointment of a secretary is optional. While the directors and managers can only be natural persons, the secretary may also be a corporate entity. The third-party service providers, such as legal consultants may be appointed as secretaries to fulfil this legal requirement.  

    Insolvency 

    The Regulations provide extensively for the insolvency procedures as well as winding up of a DMCC company. The Winding Up Routes cover the winding-up procedures, powers of directors and appointment of liquidators. They include solvent winding up, summary winding up, insolvent winding up and involuntary winding up. The Regulations maintain the applicability of the UAE Federal Bankruptcy Law No. 9 of 2016 (and any amendments), but the interplay of both legislations is still unclear.   

    Voluntary suspension of company license 

    By requesting the DMCC Registrar, a DMCC company can have its license suspended which could be for 12 months or more subject to the approval by the DMCC Registrar. It is beneficial for those companies in particular who wish to temporarily suspend their operations in the DMCC, without the obligation to formally initiate the de-registration procedures or be at the risk of receiving fines for violating the licensing procedures in the DMCC. A dormant company status has been introduced to enable the voluntary suspension of a commercial license. 

    Dividends 

    The Regulations provide more onerous provisions concerning dividends, including specific provisions to address the consequences of the unlawful distribution.   

    Auditing and reporting 

    There are well-defined provisions concerning the auditing and reporting of the financial accounts of a DMCC company. The financial accounts should be prepared according to the International Financial Reporting Standards. The auditors and the DMCC company are obliged to disclose to the DMCC Registrar all breaches or non-compliance with the provisions of the Regulations.   

    Maintenance of Company Registers 

    Regulation 39 states that a Company must have, (a) a Shareholder Register; (b) an Officer Register; (c) a Security Register; and (d) a Minutes Register, in a legible form capable of being reproduced within a reasonable time. A Branch must have an Officer Register in a legible form capable of being reproduced within a reasonable time.   

    Greater flexibility in conducting shareholder's meetings 

    As per Regulation 59, notwithstanding anything in the Company's Articles and upon a Shareholders' Request, the Directors or Secretary must call an extraordinary General Meeting; or a meeting of Shareholders of the relevant type or class of shares, to be held as soon as possible but in any case not later than sixty Business Days after the date of the Shareholders' Request.   

     

    Regulating and Certification of a Branch  

    The Regulations provide provisions for regulating branches and issuance of an establishment certificate for new and existing branches.    

    Migration 

    As per the Regulations, DMCCA also offers the existing companies to migrate into the DMCC. A company registered in another UAE free zone, in the mainland or even in a foreign jurisdiction has the opportunity to relocate its business to the DMCC by keeping its corporate identity. However, it should be noted that migration into the DMCC will only be possible if the exiting jurisdiction acknowledges and recognizes the possibility to migrate into another jurisdiction. To successfully migrate into the DMCC, the company will require a no-objection certificate from its Registrar. Currently in the UAE, only the Jebel Ali Free Zone, the Dubai Airport Free Zone and Dubai South are offering such a possibility. The same aforementioned conditions apply if a company wants to migrate out of the DMCC into another jurisdiction. The Regulation 18 states that a Non-DMCC Entity may if authorized by the laws and regulations of the jurisdiction in which it was formed, make a Continuation Application to the Registrar for it to continue as a Company.   

    In summary, these Regulations recognize the following types of entities: (a) Companies; and (b) Branches. A Non-DMCC Entity will be recognized as a Company under these Regulations upon its transfer to the DMCC Free Zone in accordance with Regulation 18. A person is only permitted to conduct business operations in or from the DMCC Free Zone if the Registrar has issued to that person: (a) a Certificate of Registration (in the case of a Company) or Certificate of Establishment (in the case of a Branch); and (b) a License (unless the person is an Exempt Entity), in each case as provided for in these Regulations and the Licensing Rules. Each DMCC Entity must unless exempted by DMCCA, at all times maintain a valid License and comply with the terms and requirements as set out in the Licensing Rules. 

    The Regulations clarify for the avoidance of doubt, the provisions of Federal Law No. 2 of 2015 Concerning Commercial Companies do not apply to any DMCC Entity. 

    Immediate action to be taken: 

    Each company must within twenty-four months from the date the Regulations come into force (or such other period as may be agreed with the Registrar), amend its Articles to the extent that the provisions of its Articles are contrary to or inconsistent with these Regulations.    

    Conclusion 

    The Regulations provide the investors to benefit from a more robust commercial and regulatory framework governing the operations and management of the company in the free zone. The Regulations provide clarity on matters that raised questions in the past, especially about the tasks and responsibilities of officeholders. Howbeit, there are areas of ambiguity that need to be clarified through the actual implementation of the Regulations by the DMCCA. The Regulations are indicative of the commitment to provide companies with a seamless ability to set up and grow their operations. Furthermore, the possibility to adopt own Articles of Association along with the potential to issue different types of shares will provide the companies with greater flexibility to structure their shareholding, attract new investors and expand their business. 

    According to the DMCC figures, over seven new businesses are established in DMCC per day. The DMCCA is confident that, along with their location, infrastructure and service, the Regulations will also aid in increasing the number of businesses incorporated in DMCC. 

     

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    Sat, 02 May 2020 18:14:00 GMT
    <![CDATA[Commercial Companies Law in Oman]]> Commercial Companies Law in Oman

    The new Commercial Companies Law (CCL) in Oman was enacted by the Royal Decree Number 18 of 2019, (the Law) and published in the official gazette on 17 February 2019. The Law came into effect within 60 days of its publication, being, 17 April 2019 and repeals the previous Commercial Companies Law in Oman (Law Number 4 of 1974, as amended). The current Law is seen as one of the modern-day companies' enactment and has attempted to do away with complex and cumbersome governance and other related procedures. For the first time, the Law also paves way for a natural/legal person to set up a single person company and lays down extensive set of provisions dealing with manager's liability and that of the corporate shareholders. Article 3 of the new CCL defines a commercial entity as a 'for profit' business established by two or more persons. In line with Article 13 of the Law, investors can form a company provided that their principal place of business is in the mainland. With respect to free zones, it is stated that such free zone entities shall be governed by the regulations of respective free zone as approved by the Council of Ministers. In the absence of any such legislation governing the free zone companies, it is safe to say that such a company shall be governed by the CCL. Companies that are fully owned by nationals of Oman shall enjoy all the rights that are limited by the Companies law of Oman. In the previous law, commercial companies could adopt any of the 6 forms of a company including a general partnership, limited partnership, joint venture, joint stock company and limited liability company. The new Law provides for a seventh form, a one-person company under Article 4 of the Law. In this Article, we aim to discuss the changes brought about in mainly three forms of companies which are joint stock companies, limited liability companies and joint venture companies.

    Joint stock companies

    Significant changes have been introduced in joint stock companies (JSC) in the Oman's CCL and have been summarized and discussed below:

  • Uneven Number of Members - In the old law, the board of members in a JSC had to consist of a maximum of 12 members, whereas under the new CCL, the board has to consist of an odd number of members and the maximum number of members would be 11. In order to comply with the provisions under the new law, an existing company with an even number of board of directors will have to either remove or add new directors to get the total number of such director's equivalent to an odd number of members (Article 179).
  • Quorum of Board Meetings – A quorum of one half of the members (50%) was needed to pass any decision which implies a relative majority was needed under the old law. This has been increased to two-thirds of members required to be present in a meeting under the new CCL. Resolutions in such meetings shall be approved by an absolute majority unless the articles of association provide for a higher percentage (Article 192). However, what would constitute an 'absolute majority' has not been defined on which further guidance is needed by the law.
  • Minutes of Board Meetings- The minutes of the board meetings shall be prepared by the secretary of board of directors and shall be signed by the secretary and all the members who attended the meeting. An objection by any member towards any resolution passed shall be recorded in the minutes and the signatories of these minutes shall be accountable for the data laid down in the minutes of the meeting (Article 194)
  • Board Members Resignation- If any board member fails to attend three consecutive board meetings without a reasonable and valid excuse, then such a person shall be considered to have 'resigned as a matter of law' (Article 195). Hence, a board member will need a valid excuse that will be accepted by the rest of the members of the board to skip three consecutive meetings. Failure of attending three back to back meetings shall deem fatal for a member, as the company shall imply that such a person has resigned from the company.
  • Means of Communication in Meeting- A maximum of two board meetings could he held via video conferencing in each financial year under the old law. Whereas under the new CCL, no such restriction has been imposed on the number of meetings that can be held via video conferencing.  Article 191 of CCL mandates that the board of directors may collectively decide to convene meetings through the use of correct means of communications as they deem necessary. Any verbal or visual communication can be facilitated between members of the company not present in one place, as long as the secretary of board is able to identify and record such discussions.
  • General Meeting - Earlier shareholders were required to meet own a minimum of 25% shares in a company to call for a general meeting. The same has been reduced to 10% under the new law (Article 164), thus, providing shareholders with increased protection.
  • Agenda of General Meeting - In the old law, shareholders owning 10% of the company's shares could request to include an agenda item for a general meeting, whereas, under the new law this has been reduced to 5% (Article 165).
  • Minutes of General Meeting – The minutes of a general meeting were required to be signed within 15 days from the date of the commencement of meeting pursuant to the old law. Whereas, under the new CCL, board minutes need to be signed and lodged by all board members within 7 calendar days from the date of the commencement of the meeting. However, the new law does not clarify the implication of failure to obtain such signatures of board members and further guidance is required on the same (Article 167)
  • Chairman of General Meeting – The chairman of the board of directors shall manage the general meetings. The absence of such a chairman shall put the deputy of such a chairman in charge and further the absence of the deputy will put the person appointed by the board in charge. If the board fails to appoint such a person, then the auditor shall have the authority to appoint a person and put him in charge of the general meeting (Article 171).
  • Quorum of General Meetings –  A general meeting shall be attended by shareholders or by proxies (proxy has to be in writing) with a minimum ownership of at least one half of the shares in the company. The failure to establish such a quorum shall lead to the adjournment of such a meeting and the same shall be reconvened any time within 7 days of such adjournment. The second meeting shall be valid irrespective of the number of shares owned by persons attending the meeting and all resolutions passed shall be adopted by a simple majority of the shares represented in the meeting (Article 173)
  • Increased Shareholder Protection- Pursuant to Article 148, the shareholder's interests are protected by providing them increased protection in a JSC. A regulator can be appointed to take care of shareholders if the company acts against the interests of the shareholders or creditors. Following a warning, the regulator will be entitled to eliminate any work by the company causing any damage to any of the shareholders or creditors of the company. A board observer can be appointed to overlook the meetings of the company and can obligate the chairman to convene a general meeting for taking any necessary action required to remedy any risks arising against the shareholders. Such a regulator can also dissolve the board and instead appoint a temporary board to overlook matters of the company. The regulator will hold full authority to prohibit the company from effecting any activity causing danger to the shareholders of the company.
  • Voting Rights for Articles of Association of Company- Article 122 of CCL provides that the Articles of Association of a JSC may establish privileges, rights and limitations for any class of shares of the company and such information can be amended provided that a minimum majority of two-thirds of the owners of such class of shares, vote for such an amendment at a general meeting.
  • Voting Rights for Securities and Bonds - Pursuant to Article 158 of CCL, a general meeting in a JSC can be convened for the holders of securities and bonds shall require a voting majority of two-thirds of such holders present at the meeting. Such a meeting shall be convened if holders representing at least two-thirds of the securities or bonds attend such a meeting, failing which holders representing one-third of the securities and bonds shall hold a second general meeting within 30 days of the commencement of the first general meeting.
  •  

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    Sat, 02 May 2020 12:18:00 GMT
    <![CDATA[Short Selling Provisions in EU]]> Short Selling Provisions in European Union

    A curious story emerged on 11 April 2017 when a man was charged with planting a bomb under the Borussia Dortmund football club team bus in April. It was initially suspected to be the work of terrorists but the truth was actually much stranger-it was a short seller. The man, a 28-year old known only as Sergei W, set the bomb to profit from 15,000 put options he had purchased in anticipation of the club's share price slumping post-attack. Ironically, the damage from the bomb was shrugged off in the financial markets. The club's shares fell further after Dortmund had been eliminated from the Champion's League the week after the attack then on that particular day. This odd tale might confirm the nefarious reputation that many short sellers have in the public eye. 

    The financial crisis in 2008 initiated a global recession which eventually, but only partly contributed to the sovereign debt crisis in the Eurozone. It was argued in the Liikanen Report of 2012 that these events should provide an impetus for the legislative reforms concerning the financial and capital markets in the European Union. The group further emphasized that even though the reforms are, by nature, pre-emptive, the aim shall be to provide authorities with tools that would effectively control the market disorders prevalent today. The distinctive objective is to create a market infrastructure in which the efficient capital allocation would not be suppressed, and in which systemic risks could be monitored and managed properly to protect the economic stability of the Member States. In consequence, the European Commission had proposed about 30 sets of rules since 2010 regarding the common financial and capital markets in the European Union (EU). The most essential of the reforms includes the implementation of Basel 3 framework into the EU banking regulation (CRD IV). Others that furthered global collaboration int his regard include the European Market Infrastructure Regulation (EU) No 648/2012 and Alternative Investment Fund Managers Directive (2011/61/EU), which provide comprehensive rules for over-the-counter derivatives trading and the business activity conducted by the property, private equity, commodity, and hedge funds. As Dobravolskas and Seiranov in 2011 address, the "regulatory reforms are reaction to market failures" and the evolution of regulation can be comprehended as a long regulatory cycle where "periods of tightened regulation are changed with lax regulation or deregulation". Quite interestingly, the previous financial markets regulatory cycle in the EU from 1999 to 2004 also addressed issues such as supervision, supranational regulation and harmonized frameworks (Quaglia 2007), but was unable to provide sufficient systemic resiliency against the upcoming meltdown in 2008.  

    In the immediate aftermath of Lehman Brothers' collapse both the United States (US) Securities and Exchange Commission and the regulatory body of the United Kingdom (UK), the Financial Services Authority had temporarily banned short selling to protect the markets and reduce downward pressure on prices. The ban covered 29 financial stocks in the London Stock Exchange and eventually over 900 stocks in the US. Subsequently, 24 other countries enforced varying constraints on short-selling between September and October in 2008. Following the diversified measures by regulatory bodies, it was reported that market participants had been negatively affected by the numerous and varying rulebooks across market places, while inversely, other, usually larger institutional market participants benefitted from regulatory arbitrage. The report formed the basis for the legislative process that would eventually lead to the introduction of Regulation (EU) No 236/2012 on Short Selling and Certain Aspects of Credit Default Swaps, which became fully applicable on 1 November 2012. 

     

    Regulation is aimed to achieve the following:

    I. increasing the transparency of short positions,

    II. reducing settlement risk and other risks linked with uncovered or naked short selling,

    III. reducing risks to the stability of sovereign debt markets posed by uncovered (naked) Credit Default Swaps (CDS) positions, while providing for the temporary suspension of restrictions where sovereign debt markets are not functioning properly,

    IV. ensuring that the competent authorities have clear powers to intervene in exceptional situations to reduce systemic risks and risks to financial stability and market confidence arising from short selling and credit default swaps,

    V. ensuring coordination between the Member States and the European Securities and Markets Authority (ESMA) in exceptional situations.

    The short-selling regulation consists of Regulation (EU) No. 236/2012 as well as the Implementing Regulations and Delegated regulations that implement the so-called technical standards. Technical standards regarding the further implementation of short-selling regulation are represented by either the  RTS (Regulatory technical standards) or ITS (Implementing technical standards). The short-selling regulation has four technical standards, Implementing Regulation (EU) 827/2012 and delegated regulations- (EU) 826/2012, (EU) 918/2012 and (EU) 919/2012. A new framework regarding short-selling of financial instruments and transactions in credit default swaps was introduced with the short selling regulation. The regulation requires holders of net short positions in shares or sovereign debt to make notifications once certain thresholds have been breached. It also outlines further restrictions on investors entering into uncovered short positions in shares or sovereign debt.

    The practice of short selling under the new regulatory regime is the prohibition of naked short selling. According to Preamble 18 of the Regulation the "uncovered short-selling of shares and sovereign debt is sometimes viewed as increasing the potential risk of settlement failure and volatility", and to reduce such risks "it is appropriate to place proportionate restrictions on uncovered short selling of such instruments". In consequence, the Regulation mandates either the borrowing, or the arrangement of the borrowing with a third party that confirms that the securities have been located before entering into a short position. Thus, prohibition of naked positions applies equally to equity and sovereign debt instruments. Concerns regarding the stability of sovereign debt markets on one hand and the excessive sovereign debt of certain member states on the other have been highlighted since the escalation of the European debt crisis. Due to the possible adverse impact on debt market stability, regulation now prohibits purchasing credit default swaps without having a long position in underlying sovereign debt instrument. Thus, sovereign credit default swaps shall be based on the insurable interest principle; the only legitimate reason to enter into a CDS contract is to hedge against the default risk of the issuer, which naturally requires ownership in the underlying security. Conversely, should a natural or a legal person buy a credit default swap without purchasing the underlying debt instrument first, it would be in his best interest that the issuer defaults. Further practical change is the obligation to report and disclose significant net short positions to national competent authorities (NCA) and the public, respectively. Apart from exemptions granted for market makers and authorized primary dealers, the reporting requirement applies to every market participant, but for a predefined threshold, i.e. if a significant net short position in shares equals or exceeds 0.2 percent of issued share capital. Notification obligation further applies to every 0.1 per cent change above the threshold. Notification must be made public if the net short position in shares exceeds 0.5 percent of the issued share capital of a company and for each 0.1 percent above that. Notifications must be made privately or in public when a net short position falls below the aforementioned limits.

    Notification must be made to the competent authorities when net short positions in sovereign debt instruments exceed or falls below certain limits. Where the total amount of outstanding debt of a state is in the range of 0 to 500 billion euros, the notification limit is 0.1 percent. Where the total amount of outstanding debt of a state is over 500 billion euros or where there is a market with futures for the issued sovereign debt instruments of that State, and the market is considered liquid, the notification limit is 0.5 percent. Notification must be made each time the net short position is increased by 0.05 percent above the 0.1 percent level and when the net short position is increased by 0.25 percent above the 0.5 percent level. The threshold for Iceland is 0.1 percent.

    The purpose of the reporting obligation is twofold. First, it enables ESMA to monitor market moves in general and large positions in particular, and in consequence manage risks that dwell within. Secondly, NCAs are required to disclose reported net short positions in shares in a comprehensive and easily accessible manner, which shall be expected to contribute to more transparent market fluctuations. The disclosure threshold is set at 0.5 percent of issued share capital, and each 0.1 percent move above the initial threshold, also is further disclosed. Authorities should disclose more detailed and timely information on short positions as it provides more accurate picture of the market sentiment, thus increasing the pricing efficiency. Based on trading data from 913 Nasdaq-listed stocks, it was concluded that short sellers are information-oriented traders, the results showed that abnormal short-selling activity before the earnings announcement was significantly linked with the stock price reaction after the earnings went public, indicating a positive relationship between overvalued stocks and short sale volume. The Regulation also provides NCAs with an authorization to enforce temporary bans or introduce other constraints of similar effect, provided it notifies ESMA beforehand, which then coordinates and implements the proposed measures. However, according to Article 28(1), ESMA is permitted to disregard any NCA and directly order emergency measures and conduct direct operational decisions anywhere in the European Economic Area. Intervention may only take place, however, if market conditions favor taking measures. Such conditions pose an apparent threat to the functionality of financial markets or to the stability of the whole or part of the financial system in the Union ("cross-border implications"). Interestingly, the European Court of Justice (ECJ) rejected the UK's lawsuit in January 2014. In the case United Kingdom of Great Britain and Northern Ireland v. Council of the European Union, European Parliament", the UK argued that emergency powers handed to ESMA were illegal and that constraints on short-selling harm market efficiency. The ECJ ruled that the new powers were compatible with EU law, dismissing the legal case in its entirety.

    The legal mandate for the competent authority to prohibit or impose conditions to natural or legal persons entering into a short sale is provided in Article 20(2). Measures are further applicable to transactions concerning all financial instruments and transactions other than short sales, provided the pursued effect of the transaction is to confer a financial advantage in the event of a decrease in price or value of another financial instrument. Under Article 20(1)(a), the definition of exceptional circumstances is proportional to the market preconditions that include adverse events or developments which constitute a serious threat to financial stability or market confidence in one or more Member States. Article 24(1) of Commission Delegated Regulation (EU) No 918/2012 supplements the Regulation with specific characteristics of adverse events and developments. They include any act, result, fact, or event that is or could reasonably be expected to cause serious financial, monetary or budgetary problems which may lead to financial instability concerning a Member State or a bank and other financial institutions deemed important to the global financial system; a rating action or a default by any Member State or banks and other financial institutions deemed important to the global financial system that causes or could reasonably be expected to cause severe uncertainty about their solvency; substantial selling pressures or unusual volatility causing significant downward spirals in any financial instrument related to any banks and other financial institutions and sovereign issuers deemed important to the global financial system; any relevant damage to the physical structures of important financial issuers, market infrastructures, clearing and settlement systems, and supervisors which may adversely affect markets in particular where such damage results from a natural disaster or terrorist attack; and any relevant disruption in any payment system or settlement process, in particular when it is related to interbank operations, that causes or may cause significant payments or settlement failures or delays within the Union payment systems, especially when these may lead to the propagation of financial or economic stress in a bank and other financial institutions deemed important to the global financial system or in a Member State. Lastly, additional consideration should be paid to the violent intraday price changes. Thus, should a price of a financial instrument fall significantly during a single trading day, the national competent authority is handed powers to prohibit or restrict short selling in order to prevent a disorderly decline in the price of the financial instrument (Article 23(1)). A liquid share is determined to experience a significant fall in price when close-to-close return yields, 10 per cent or more. This applies to illiquid shares as well, provided the company is included in the main national equity index and is the underlying for a derivative contract traded in a trading venue. Otherwise a significant decrease in price is defined as 20 per cent or more for a share which price is €0.50 or higher, or the equivalent in the local currency. In all other cases, the daily decrease in value shall be 40 per cent or more to be considered significant. For sovereign and corporate bonds, increases of 7 and 10 per cent in the yield, respectively, are deemed to be significant drops in value (Article 23(2-3)). Quite interestingly, certain market conditions that would be later identified by the Regulation were already broadly taken into account in a public statement ESMA released on 11 August 2011. In it ESMA noted that the European financial markets had been very volatile in the preceding weeks and that the "developments have raised concerns for securities markets regulators across the European Union". The following day Spain, France, Belgium and Italy prohibited short selling with several publicly traded financial and insurance companies. The bans were originally set to last either 15 days or until further notice. Belgium and France lifted the ban on 11 February 2012. France did not validate the decision, but Belgium pointed to the reduced market volatility. Greece had already banned short selling on 9 August 2011. The Greek regulator HCMC made the decision while taking into account the conditions prevailing in the Greek markets. After several extensions, the ban was eventually lifted on 15 July 2013. However, the regulatory bodies in mainland Europe were not the first ones to implicate a relationship between high volatility and short selling. On 19 September 2008, the Securities and Exchange Commission described the market conditions as a period of unusual and extraordinary market volatility, while it appeared that "unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation." A day earlier the Financial Services Authority justified its ban by stating that the measurements would protect and stabilize the markets. The Chief Executive Hector Sants was quoted that "while we still regard short selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets". In 2012, the Australian market authority ASIC remarked that, during the financial crisis, countries around the world took steps to strengthen their financial systems due to the widespread concern that short selling was contributing to market volatility and putting enough pressure on market confidence to be systematically relevant to the global financial system and economy.

    Current Standings:

    EU toughens short-selling rules as markets are hit by the coronavirus. The European Union's market watchdog is ramping up surveillance of hedge funds and other short sellers that may be taking advantage of the market rout caused by the coronavirus outbreak. Temporary measures announced by the European Securities and Markets Authority on 16 March 2020 will force investors to reveal more information about their short-selling positions by halving the threshold for disclosures. The ESMA's new rules, which also apply to the UK under the post-Brexit transition period, mean any short-selling position that accounts for 0.1 percent or more of a company's outstanding shares must be announced to the market, compared with the previous threshold of 0.2 percent.

    The measures, which come into force immediately and will last three months, have been prompted by severe stock market losses that have caused some of the biggest ever one-day falls for indexes such as the FTSE 100. The ESMA said the measures were precautionary and appropriate given that the severe stock market volatility posed a serious threat to market confidence in the EU as short selling can increase price swings and result in larger losses across financial markets. The temporary measures stop short of bans imposed during both the 2011 eurozone credit crisis and the 2008 global financial crash. In 2008, the UK's financial watchdog banned the shorting of 34 domestic stocks including major banks, asset managers and insurers for five months following the collapse of Lehman Brothers. 

    Application of the Short Selling Regulation (SSR) to the UK

    When introduced, the SSR and the delegated regulations applied directly in the UK (and other EU member states) without the need for implementation in national law. Certain aspects of the SSR either afford discretion to national regulators or require those regulators to establish operational procedures to enable matters to be dealt with under national law. In the UK, these additional provisions were implemented by secondary legislation and changes to the UK Financial Conduct Authority (FCA) Handbook.

    The UK withdrew from and ceased to be a member state of the EU on 31 January 2020. The negotiated withdrawal agreement entered into between the UK and the EU provides for a transition period, commencing on 31 January 2020 and ending on 31 December 2020, unless extended (such period, the "transition period"). The withdrawal agreement stipulates that EU law such as the SSR, shall apply to and in the UK during the transition period. The UK also intends to "onshore" the SSR into UK national law, with the UK version of the SSR applying after the end of the transition period.

    The COVID-19 pandemic has resulted in extreme volatility in equity markets across the EU. In response, several market regulators across the EU have taken action, using powers under Article 20 of the SSR to temporarily ban short-selling in certain securities. 

    Austria

    On 18 March 2020, the Austrian Financial Market Authority (FMA) issued a temporary prohibition on short sales of all shares that are admitted to trading on the Regulated Market of the Vienna Stock Exchange. The prohibition will stay in effect for an initial period of one month and started on 18 March 2020. 

    Belgium

    Belgium's Financial Services and Markets Authority (FSMA) announced the temporary prohibition for 17 March 2020, of the short-selling of the shares of 18 issuers admitted to trading on the Belgian Euronext market. 

    France

    The Autorité des Marchés Financiers (AMF), the French financial regulator, issued a temporary prohibition on the short sales concerning the shares of 90 issuers on the Paris exchange, commencing on 17 March 2020. 

    Greece

    The Hellenic Capital Markets Commission (HCMC) issued a temporary prohibition on short-selling of all shares admitted to trading on the regulated market of the Athens Stock Exchange. The measure came into force on 18 March 2020 and will last until 24 April 2020. 

    Italy

    The temporary measure by the Commissione Nazionale per le Società e la Borsa (CONSOB), the Italian regulator, prohibits short selling applies to all the traded shares on the Italian regulated market, from 18 March 2020 until 18 June 2020. 

    Spain

    The Comisión Nacional del Mercado de Valores (CNMV) has issued a temporary prohibition on short-selling of shares of equities admitted to trading on all Spanish trading venues (the Madrid, Barcelona, Valencia and Bilbao Exchanges, and the Mercado Alternativo Bursátil), lasting for an initial period of one month, from 17 March 2020 until 17 April 2020. 

    ESMA

    Under Article 27 of the SSR, within 24 hours of receiving a notification of a short-selling prohibition from a national regulator, ESMA is required to issue an opinion on whether it considers the measure, or proposed measure, necessary to address the exceptional circumstances identified by the national regulator. The ESMA has issued a positive opinion in respect of all of the prohibitions described above.

    The UK Position

    The FCA issued a statement (FCA Statement) on these short-selling prohibitions on 17 March 2020. The FCA noted that when considering whether to use its short-selling powers following action by another EU regulator, its standard policy has been to assist that regulator in enforcing the prohibition. The FCA further noted, however, that it has never used the relevant banning powers given to it under the SSR and that while it would not rule out such action in exceptional circumstances, it sets a high bar for imposing such a measure. On 23 March 2020, the FCA issued a further statement on short-selling, providing more detail on why it has not introduced a short-selling ban to date:

    "The FCA continues closely to monitor market activity, including short-selling activity. Aggregate net short-selling activity reported to FCA is low as a percentage of total market activity and has decreased in recent days. It will continue to fluctuate, but there is no evidence that short selling has been the driver of recent market falls. A great many investment and risk management strategies rely on the ability to take 'long' and 'short' positions. These benefit a wide range of ordinary investors including the pension funds for employees of companies and local government. We also note that short selling is a critical underpinning of liquidity provision. The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate."

    The new threshold reporting obligations apply to any natural or legal person, irrespective of their country of residence. They do not apply to shares admitted to trading on a European Economic Area (EEA) or UK regulated market where the principal venue for the trading of the shares is located in a third country, or to market making or stabilization activities. The FCA Statement indicated that it will apply this temporary change to the reporting thresholds, but that this would involve changes to its systems. Until the FCA has made these changes, it has indicated that it expects firms providing reports in respect of UK listed shares to use the previous, 0.2 percent threshold.

    Conclusion

    There was widespread criticism of short sellers in the wake of the 2008 financial crisis, when certain investors were accused of deliberately undermining confidence in banking shares, fueling the global market instability. The regulator has had its hand strengthened by the continued critical voices around the world. Despite the already stringent rules, participants around the globe have been asking for further tightening. In June 2017, Tom Farley, head of the New York Stock Exchange, said that short sellers should be forced to reveal more of their activities and called the practice of short selling "icky and un-American."

     

     

     

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    Thu, 16 Apr 2020 08:08:00 GMT
    <![CDATA[Criminal Implications of Perjury ]]> Criminal Implications of Perjury 

    An Examination of the UAE Penal Code

    Perjury, the crime of lying under oath, is an offence that derails the fundamental goal of the justice system – the discovery of the truth. Even some notable and influential entities have not been exempt to the consequences of perjury, which include prosecution, prison, and impeachment.

    Understanding Perjury

    Since time immemorial, perjury has been defined as the act of lying while testifying in court. A witness under oath commits perjury when they make a statement, either in court or in other proceedings, that the witness knows not to be true. It is required that said witness' statement be "material" to the subject of the proceedings; this means that it must bear a direct relationship to the lawsuit or inquiry at hand. There are a handful of elements that are essential to the crux of perjury – these shall be briefly delineated. Firstly, it must be noted that perjury only happens under oath; the witness must have vowed to state the truth to an individual authorized to administer the oath, such as a public prosecutor  or judge. Secondly, only false statements, issued with the intent to mislead, constitute perjury – false testimony that is the result of confusion, or a lapse of memory is not. Thirdly, it must be noted that inconsistent statements that are of consequence to the proceedings, can also be perjurious; this is because a witness' testimony is viewed as a whole. Inconsistency under oath is famously what resulted in the impeachment of Bill Clinton. Causing, or instigating others to commit perjury also constitutes a criminal offence – this act is called suborning perjury.

    Let us suppose that Mr A lends Mr Z some money. Mr Z repays it in full. Mr A, however, brings an action against Mr Z for the money, and in his declaration, asseverates that he lent the money, which was never repaid. At the trial, Mr A's receipt is produced. Except for Mr Z, not a single soul suspects that Mr A resorted to falsehood in his declaration. Is it fair that he enjoy impunity?

    Let us also consider this: Mr Z brings an action against Mr A for a debt which is, in reality, overdue. Mr A's plea positively avers that he owes Z nothing. The case comes to trial, and an overwhelming wall of evidence shows that the debt is a just debt. Mr A does not move to attempt a defence. Is it fair that he enjoy impunity?

    If, in either of the cases mentioned above, Mr A were to suborn witnesses to corroborate the lie that he issued on the pleadings, each one of these witnesses, in addition  to Mr A, would be liable to severe punishment. However, as noted by the Supreme Court of India in Swaran Singh v. State of Punjab in 2000, perjury has become a way of life in courts.

    In saying so, the Supreme Court noted that "a trial judge knows that the witness is telling a lie and is going back on his previous statement, yet he does not wish to punish him or even file a complaint against him. He is required to sign the complaint himself which deters him from filing the complaint....."

    Section 209 of the Indian Penal Code and its treatment of Perjury

    The fact of the matter is that courts are often reluctant to order prosecution, and this subsequently encourages frivolous litigants to put forth false averments in pleadings before the court. In India, Section 209 of the Penal Code is supposed to act as an effective regulatory mechanism to impose checks and balances on frivolous litigators, but it has been seldom invoked.

    Section 209 states in no uncertain terms that dishonestly making a false claim  in a Court is an offence punishable by imprisonment up to two years, and by heavy sanctioning. Section 209 also delineates what constitutes an offence in this regard; (i) the accused should have made a claim; (ii) the claim should have been made in a court of justice; (iii)the claim should bear falsity, either wholly or in part; (iv) the accused must be cognizant of his claim being false; and finally, (v) the claim should have been made fraudulently, untruthfully, or with intent to injure.

    In the aforementioned examples involving fictitious Mr A and Mr Z, it was clear as day that the claims made by Mr A were entirely without factual foundation. In the first example, there was a conspicuous absence of a factual basis for Mr A to claim for the money, given that it was a sum that had already been repaid. In the second example, there was a conspicuous absence of a factual basis for Mr A's positive averment that he owed Z nothing. These examples precisely highlight that the transgressions that the drafters intended to address under Section 209 of the Indian Penal Code were those of making claims without factual foundation.

    Section 209 was enacted in India with the primary goals of preserving the sanctity of the Court of Justice and safeguarding the due administration of law by preventing the deliberate issuance of false claims. Similarly, in the United Arab Emirates, Article 253 to Article 261 of the UAE Penal Code identify perjury as a crime that affects the justice process, and set out penalties to moderate lawful testifying.

    Chapter One of Title Three of the UAE Penal Code and its treatment of Perjury

    Chapter One of Title Three of the UAE Penal Code concerning crimes that affect the justice process specifically addresses false testimony, perjury, and abstention of testifying.

    Article 253 of the UAE Penal Code states that he who issues false testimony before a judicial authority, or a competent organization that has the jurisdiction to hear oath-bound witnesses, will be sentenced to a minimum of three months in detention. The same fate awaits those who deny the truth, or keep silent about all or part of the relevant facts of the case known to them, regardless of whether they are admitted to testify or not, and whether or not their testimony was accepted in the proceedings..

    If the perjurer should perpetrate this act during the investigation of a felony or trial thereof, Article 253 states that he shall be sentenced to term imprisonment. In the dire case that he false testimony issued leads to death sentence or life imprisonment, the perjurer  shall also be sentenced to the same penalty.

    Article 254 exempts from penalty the witness who retracts his false testimony prior to the closing of the investigation, and before he could be denounced. Another brand of witness who is allowed exemption from penalties as per Article 255 is the witness who would be subject to a severe truncation of his freedoms and honor, if he told the truth. The witness who would have, upon speaking the truth,  exposed himself, his spouse, one of his ascendants, descendants, brothers, sisters, or in-laws to danger is also exempt from penalties. However, if such perjury exposes another person to any sort of legal prosecution, the perjurer shall be sentenced to detention for a minimum term of six months.

    Article 256 further states that the court-ascertained sanction shall be halved for the person responsible for instigating the false testimony, if and only if the witness unwittingly exposes him to any of the freedom-threatening scenarios elaborated upon in Article 255 by speaking the truth.

    With regard to experts appointed by a judicial authorities in civil or criminal proceedings, Article 257 states that the expert, who knowingly puts forth a statement which offends the truth, or contorts its true meaning, shall be sentenced to detention for a minimum period of a year. Furthermore, he shall be prohibited from practicing his profession in the future. In case the perjurious statement the expert is made in context of a felony, he shall be sentenced to term imprisonment. The aforesaid penalties shall also apply for the translator who deliberately produces a wrong translation in a civil or criminal case. Further developments with regard to criminal liability of UAE experts (arbitrators and the such) shall be further discussed in this article.

    Moving into medical domain, Article 258 of the UAE Penal Code states that a physician or a midwife, who accepts any grant, privilege, or promise thereof in return for the issuance of a false testimony with regard to pregnancy, birth, illness, disability or death, shall be sentenced to imprisonment for a period that shall not exceed five years.

    As per Article 259, an individual that who employs torture, force, or any variation of a threat to have someone else keep silent about a matter, or to have them issue untrue statements shall be sentenced to detention for a period not exceeding one year; they shall also be fined a sum not exceeding five thousand Dirhams.

    We spoke earlier about the oath, and how essential an ingredient it was to the occurrence of perjury. As per Article 260 of the UAE Penal Code, any civil litigant, forced to give the oath, who has sworn contrary to the truth in the proceedings shall be sentenced to detention for a maximum period of two years, and to a maximum fine of ten thousand Dirhams. However, it is of value to note that, should the offender revert to the truth prior to the rendering of the judgment of the case in which the oath was taken, the offender shall be exempted from the aforementioned penalty.

    Furthermore, should an individual asked to testify refuse to take the oath, he shall be sentenced to detention for a maximum term of one year, and to a maximum sanction of five thousand Dirhams. However, the offender shall be exempt from the penalty if he retracts his refusal to take the oath prior to the issue of the judgment.

    Oath Issuance

    Arbitral tribunals greatly prize witness evidence, and with the goal of ensuring its integrity, Article 211 of Federal Law Number 11 of 1992 Concerning the Civil Procedures Code), the previous UAE Arbitration Chapter, stated that "arbitrators should administer an oath to the witnesses and whoever makes a false statement before the arbitrators shall be deemed to have committed the crime of perjury." Previously, it was held that, if such an oath was not prescribed, the finality of the arbitral award could be compromised.

    However, the new UAE Arbitration Chapter, which came into effect on June 2018 with the enactment of the Federal Law Number 6 of 2018 concerning Arbitration (the Federal Arbitration Law), the express requirement for taking witness testimony on oath appears to have been relaxed. Specifically, Article 33(7) of the Federal Arbitration Law states that, "unless otherwise agreed by the parties, hearing the statements of the witnesses, including the experts, shall be carried out as per the effective laws of the State."

    The arbitral tribunal's failure to administer an oath to the witnesses before they testify in arbitral proceedings has the potential taint the validity of the arbitral award, especially if the fallacious witness testimony was the basis of the latter's reasoning or ruling.

    Potential Criminal Liability for UAE Arbitrators

    Article 257 of the UAE Penal Code, elucidated upon above, was amended by the Federal Law Number 7 of 2016 to introduce criminal liability for arbitrators, experts, and translators who issue decisions and opinions that are contrary to the tenets of impartiality and honesty.

    Prior to its amendment, Article 257 was confined in its scope to the criminal liability of experts appointed by the courts. Today, Article 257 applies to arbitrators and experts who are appointed by an administrative or judicial authority, or ones that have been nominated by the parties- if they go against their duties of honesty in issuing a decision, filing a report, or asserting  fact, they shall be punished by temporary imprisonment. Pursuant to Article 68 of the UAE Penal Code, the period of temporary imprisonment could be between three (3) to fifteen (15) years. However, it is a conceivably difficult task to establish that an arbitrator has failed to act in an honest and impartial manner. This boils down to the fact that perjury, as such, is difficult to prove.

    Conclusion

    The judicial system of the UAE, however, has a well-oiled system in place to discourage false testifiers and perjurers – the UAE Penal Code promotes cognizance, directs prosecution, and punishes those found guilty accordingly.

    Indeed, to enable courts to ward off unjustified encumbrances in their functioning, those who engage in perjury have to be appropriately dealt with. Else, it would be a Herculean task for any court to administer justice in the true sense, and in a fashion that meets the satisfaction of those that approach it armed with the hope that truth might ultimately prevail.

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    Thu, 16 Apr 2020 07:19:00 GMT
    <![CDATA[MAC Clauses in M&A transactions]]> MAC Clauses in M&A transactions

    In M&A transactions, buyers continuously grapple with the risk of the business ultimately delivered on closing falling short of what the buyer agreed to acquire. The parties negotiate the allocation of the risk between the buyer and the seller; the material adverse change "MAC" provisions of the contract are critical implements in the process of risk allocation.

    Material Adverse Change (MAC) Clause

    Material Adverse Change, in the context of M&A Transactions, refers to any effect, change, or event that would (a) prevent or hinder the company's consummation of its obligations under the agreement or (b) has a material adverse effect on the business, results of operations, or assets of the company.

    A  material adverse change (MAC) clause is one of the mechanisms adopted by the parties to M&A deals on account of their fear of unpredictable transaction risks. It is specifically engineered to allow them to adjust or even terminate their agreements if certain adverse events occur. In effect, a MAC clause would transfer the risk of adverse events occurring between signing and completion from the buyer to the seller.

    Historically, the MAC clause has been a potent contractual tool by means of which a buyer could (i) refuse to close a deal considered to be no longer profitable or convenient, or (ii) try to re-negotiate more favorable terms by threatening the termination of the agreement, upon the occurrence of events or changes having an adverse impact on the business of the target company.

    MAC clauses typically recur in M&A agreements to serve a dual purpose; the more conspicuous of the two is the right to walk away. MAC clauses permit the buyer to terminate a transaction if a material event that is detrimentally affecting the consummation of the transaction or the target company's business, operations, assets or profits occurs before the closing date. To this end, the common practice is to include in the M&A agreement a condition precedent by which the buyer's obligation to close the deal is conditioned upon the absence of a MAC event.

    Secondly, representations and warranties can be qualified by established a MAC standard. In this case, if a representation and warranty is breached , such a breach will trigger an indemnification provision only to the extent that the potential breach has met the MAC standard (i.e. the non-compliance of a representation will be qualified as a breach only if the non-compliance has a material adverse effect on the business of the target).

    Interpretation

    MAC Clauses in English-law governed contracts are interpreted in accordance with the standard principles of contractual interpretation. What is the key issue here, moreover, is the determination of what is meant by the term "material adverse change. Especially since "material adverse change" is seldom defined in agreements with an optimal degree of specificity, its interpretation is often shrouded in uncertainty. Precedent shows us that parties have tended to employ broad language in the MAC clause, leaving it to the court to assess what is a MAC within the context of the particular set of facts.

    Conspicuously enough, there is a great dearth of case law on the interpretation of MAC clauses under English law, particularly in the M&A context. This appears to be reflective of the fact that MAC clauses are relatively unusual in private UK acquisitions. However, one may also infer that commercial parties are deterred from relying on a MAC clause since its applicability is highly fact-dependent, and the outcome of litigation to determine the issue is far from certain.

    When can MAC Clauses be triggered in M&A transactions?

    English jurisprudence, although in a stage of relative infancy in this regard, suggests that the English court will, for policy and other reasons, construe MAC clauses in a narrow, seller-friendly manner.

    Based on recent English decisions, which are in turn based on the specific wording of the MAC clauses in question, the following inferences regarding the triggering of the clause in M&A transactions can be made:

    • The party seeking to terminate the contract shoulders the burden of proving that a MAC has definitively occurred.
    • A buyer will bear the brunt of the evidential burden in convincing the court that a MAC has occurred. This feature has its origins in public policy that favours the enforcement of signed deals where the commercial risks are discernible to the parties, and are reflected in the agreed price. The fact that MAC clauses have the potential to be used opportunistically in cases of buyer's remorse also does not evade the court's awareness.
    • The court shall apply the standard English law principles of contractual interpretation to a MAC clause, and shall carefully consider the language agreed upon by the parties, in the context of the wider contract and the facts known to all parties.
    • It is critical to note that a buyer cannot trigger a MAC clause on the basis of circumstances that it was aware of while entering into the agreement; however, it may be possible to invoke the clause if the conditions were to worsen in a fashion that converts their material nature.
    • Triggering the MAC clause mandates the satisfaction of the materiality test, which is comprised of two elements. First and foremost,  the change must be of sufficient magnitude; a great deal of emphasis has been placed on the importance of the words "significant" or "substantial" by the courts.  On October 1st, 2018,  in Akorn v Fresenius Kabi, the Delaware Court of Chancery found that Akorn had suffered an MAC where its financial performance had "dropped off a cliff" ; its revenue, operating income and earnings per share fell by 25%, 105% and 113% respectively, and its ebitda fell by 86%, with the drop showed no sign of abating.

    Secondly, the effect must be a temporally significant one, as opposed to merely a temporary change or a short-term blip. On September 29th, 2008, in the Hexion v Huntsman, the Delaware Court of Chancery found that ebitda, as opposed to earnings per share, was the appropriate benchmark to evaluate a cash acquisition. Weak quarterly results that displayed a 3% plummet in EBITDA were regarded as a mere hiccup rather than as a long-term impediment. The court found that only 25% of Huntsman's EBITDA had suffered significantly after the merger agreement had been signed; this was attributed to just being a function of the company's cyclical business. Therefore, unless the agreement states, otherwise, the court will require a long-term adverse impact on a business' financial condition in its assessment of whether a MAC has occurred. A buyer looking to safeguard himself from short-term economic fluctuations could consider including specific timeframes in the MAC clause; otherwise, the requirement for durational significance will be imposed by default.  

    • The interpretation of the term "financial condition" shall be limited to a narrow scope. An assessment of a company's financial condition should start with an evaluation of the company's financial statements at the relevant time. It must be noted that an enquiry into the financial situation is not limited to the company's financial information, especially if there is axillary evidence that is compelling enough to activate the MAC clause. On April 2013, in Grupo Hotelero Urvasco SA v Carey Value Added SL, the High Court considered the possibility of a material adverse change (MAC) in the financial condition of the borrower, Grupo Hotelero Urvasco, SA. The lender, Carey Value Added SL, failed to prove a MAC in the financial condition of the borrower, although a MAC was proven in the financial condition of the guarantor, Grupo Urvasco SA. Grupo Urvasco, however, had failed to repeat its representation about its financial condition on the drawdown date of Grupo Hotelero Urvasco.  Under these circumstances, the court ultimately found that no MAC had occurred.
    • To trigger a MAC, there needs to be a causal link between the change and a specific adversity. A buyer would be required to demonstrate causation between that the change relied on and the alleged adversity. Change in a forecast is unlikely, in itself, to be causative of deterioration in the commercial prospects of a target business. On April 2015, in Ipsos SA v Dentsu Aegis Network Ltd, the High Court evaluated a material adverse change (MAC) clause in a share purchase agreement (SPA) which essentially empowered the buyer, Ipsos SA to terminate the SPA should anything of materially adverse effect happen in the period between signing and completion.  The court held that Ipsos had an arguable case with regard to the financial performance of the target company, Synovate, for it satisfied the definition of a MAC. However, with regard to the downward revision of Synovate's financial forecasts, the court found that Ipsos did not have an arguable case. The court stated that the mere revision of a forecast could not have the requisite causal effect on Synovate. This ruling goes to show that a change in a forecast is considered unlikely, in and of itself, to be causative of deterioration in the commercial prospects of a target business.
    • A subjective standard would greatly prime the buyer to potentially trigger the MAC clause. When the existence of a MAC is determined by reference to a buyer's opinion, the odds are in the buyer's favour. This is because the buyer would simply have to convince the court that it has formed this opinion and that the opinion was honest and rational.

    Can COVID-19 qualify as a material adverse change or material adverse effect?

    The growing global health emergency that is COVID-19 is having very real impacts on the global economy, and profoundly shaking the operations of a multitude of businesses. Global efforts to curb the spread of the virus have manifested in severe restrictions on the movement of goods and people. Businesses are now actively evaluating their ability to mitigate operational risks under existing contracts; the material adverse change (MAC) clause has recently received a great deal of scrutiny as a potential path to refuge from COVID-19's effects in this respect.

    If the buyer wishes for certain events outside of the seller's control to fall within the scope of the MAC clause, such as a downturn of the economy, acts of war or terrorism, or pandemics,  these events must be specifically included in the MAC clause.

    The court's fixation on specificity concerning material changes makes the invocation of a MAC clause due to COVID-19 issues difficult in most circumstances. The long-term effects of COVID-19 on financial and operational aspects remain mostly unknown. Furthermore, there is always a variety of confounding factors that affect market performance, such that attributing a MAC to COVID-19 alone, as opposed to general market or business conditions, may be a problematic task.

    Conclusion

    From the case law, it is clear that the court lofts the bar very high in its determination of whether a MAC has occurred. The arduous intricacies that underlie the establishment of a MAC might lead one to question the worth of MAC clauses in practical terms. However, even though the court provides a great deal of resistance before finding that a MAC has occurred, this clause remains a potent contractual weapon for buyers in the M&A context.

    If an adverse event were to occur before completion, a MAC clause endows the buyer with significant leverage to restructure a deal. While the court seldom finds that a buyer has successfully triggered the MAC clause, a noteworthy number of deals are renegotiated following a buyer's announcement of its intention to invoke a MAC; the result is almost always in favor of the buyer, granting him a lower price or other concessions. Sellers are well-aware of the laborious nature of the litigation process involving the interpretation of MAC clauses, and are thus willing to renegotiate terms before completion in order to save themselves from the costs, and the associated reputational damage of a claim.

     

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    Mon, 06 Apr 2020 14:15:00 GMT
    <![CDATA[Patent Laws in the UAE 2]]> Q&A on Patent Laws in the UAE

    (Part II of II)STA's renowned Intellectual Property team has progressed with the second series of the Q&A on Patent Laws in the UAE based on popular demand by pundits in the intellectual property sphere. In this questionnaire, the Patent Division under the Intellectual Property team has clarified various queries raised by the readers including the courts' jurisdictional approach, torpedo actions, practical legalities of alternative dispute resolution in patent infringement and enforcement.

    (continued)

    Q.11. What is the procedure for commencing legal proceedings in patent infringement matters in the UAE?

    The claimant in an alleged infringement suit is generally required to serve a legal notice for cease and desist prior to instituting a suit at the competent legal forum in the UAE. This provides the alleged infringer with the opportunity to cease all operations and commercial transactions involving the particular product so as to ensure that there is a cap on all future claims. An adequate opportunity of being heard shall be provided to such an infringer by the patent owner of such work. For instance, if 'X' is the patent owner of an invention 'Y' and it comes to the knowledge of 'X' that 'Z' has been dealing in the sale of 'Y' or has been replicating the particulars of the invention without his consent then 'X' shall send a cease and desist letter to inform 'Z' to completely halt all kind of activity in relation to 'Y'. At the same time, 'X' shall warn 'Z' that failure of the same shall be reported by him to the court and that there will be further legal consequences. Before the commencement of legal proceedings on potential patent disputes in UAE, a cease and desist letter is generally always sent in good faith in order to bring to the attention of the alleged infringer that such an activity is in violation of the Federal Law Number 17 of 2002 on Regulation and Protection of Industrial Property of Patents, Industrial Drawings and Designs as later amended by Federal Law Number 31 of 2006 (the Patent Law).

    Q.12. Explain in brief the approach of the court (UAE and wider GCC) towards cross-border injunctions?

    The courts in the UAE have the authority to grant cross-border or extra-territorial injunctions(both temporary and/or permanent) and the court shall exercise such power after assessing whether infringement has taken place and identifying the degree of infringement in each particular case.

    • The owner of a patent right canapply to custom authorities (through the court) in case of cross-border relief, preventing infringed products from entering the geographical borders of the UAE. The Courts may grant temporary and/or permanent orders or injunctions in order to avoid these infringing goods (goods that violate the patent of the patent owner) from entering the UAE.
    • The GCC Customs law is a unified law relating to customs matters in the six GCC countries (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia & the United Arab Emirates). If an injunction has been granted by a court of a GCC country, the injunction will be applicable and automatically enforced in other GCC countries as well. However, if an injunction originates from an outside country other than the GCC countries, then the injunction shall be re-assessed by the local courts in UAE based on the local and Sharia law, and consequently, a decision would be issued at the court's discretion.
    • The GCC courts can issue injunctions that have extra-territorial effects; however, the applicability of these injunctions depends on the existence of an agreement between the GCC country and the other country.

    Q.13. What are torpedo actions and their applicability in cross-border patent infringement matters filed in the UAE?

    Article 2 of the Brussels Convention, sets out the rules for jurisdiction and enforcement of judgments across EU member states and holds that an entity should be sued in its country of domicile. A 'Torpedo action' is the strategy open to a potential defendant to a cross-border injunction for commencing proceedings in a for (i) a declaration of non-infringement and invalidity of the other party's claim in respect of a European patent granted in that member state; and (ii)a declaration of non-infringement in respect of the other European patents granted in other member states. UAE courts do not recognize the torpedo actions and therefore, the infringement suit is tried in the jurisdiction where the patent right is breached. If the rights of a patent owner are violated in a foreign country, then the patent owner cannot sue for such an action arising in the UAE courts. The blocking effect of 'torpedo actions' occurring outside the UAE, are not recognized in the UAE. 

    Q.14. Can parties resort to alternative dispute resolution (ADR) methods (such as arbitration and mediation) to resolve disputes on patent infringement?

    It is pertinent to note that there is no specific procedure on arbitration relating to patent litigation in the UAE. However, arbitral tribunals will have jurisdiction in cases where the parties agree to resolve disputes arising out of agreements relating to patents (such as a patent license agreement) by ADR methods such as arbitration. No compulsory mediation or arbitration is required in disputes relating to patents in the UAE. Hence, alternative dispute resolution can be used in patent disputes in case the licensing agreement between the parties mentions a mediation or arbitration clause explicitly.

    Q. 15. Can a patent holder bring proceedings claiming both patent infringement and unfair competition for the same set of facts?

    The practice of attempting to substitute one's goods or products in the market for those of another to deceive the public, leads to unfair competition in intellectual property law. The UAE Competition Law (Federal Law Number 4 of 2012) and Commercial Transactions Law (Federal Law Number 18 of 1993) deals with unfair competition and generally proceedings claiming unfair competition shall be covered under this law. Therefore, the owner of a patent right can raise the contention of unfair competition  in a patent infringement case as well.

    Q.16. Briefly explain the legislative procedure in patent infringement proceedings and the remedies provided under the Patent Law?

    I. Administrative Approach

    Pursuant to article 66 of the Patent Law, the Minister of Economy may form a committee chaired by a judge who shall be nominated by the Minister of Justice. The committee will also comprise of two experts on industrial property rights excluding any staff members of the industrial property administration. The primary responsibility of this committee is to examine petitions regarding the enforcement of the Patent Law and its implementing regulations. In case the committee rejects a proposal of the interested party and claims that there is no infringement, then the aggrieved party can approach the competent court to initiate civil and criminal proceedings. The patent infringement proceedings shall be carried out under civil or criminal procedural law depending upon the nature of the action brought forward in the dispute.

    II. Judicial Approach

    Article 60 of the Patent Law has provided that the owner or the assignee of a patent may request the competent court to issue an order to seize the invention, drawings, designs, or for parts thereof using the industrial property when an infringement or illegal activity which is in breach of the Patent Law or a particular contract takes place. In the event that any aggrieved party (applicant) identifies that another party (infringer) has infringed the rights conferred upon the former by the Patent Law, the former shall file a case in the court of competent jurisdiction in the Emirate in which the infringement has occurred or the damages has arisen. This can be explained further with the following illustration: Suppose a company 'XYZ' has registered a patent with the Ministry of Economy's Dubai office and the rights conferred upon XYZ is infringed by a company 'ABC' in the Emirate of Abu Dhabi. In this particular scenario, one should analyse the jurisdiction of the court based on the place where the infringement has taken place and the place where the damages occurred. In such instances, the applicant may impose both civil and criminal (penal) proceedings against the infringer. The civil case shall be towards a claim for compensation for unauthorized use and infringement of the patent right; whereas, criminal case could impose the accused to imprisonment and/ or fine. The court is also conferred with the authority to order the destruction or impairment of the seized invention, drawings, designs, machinery or for parts thereof. In practice, the courts generally refer such matters to an expert to analyze the contentions of the claimant, determine the extent of the breach of the claimant's rights (if any) and provide the financial implications of such infringement. Thereafter, the competent court will issue its decision and such decision should also be published in the industrial property circular or a daily newspaper by the convicted party.

    Q.17. What are the legal implications in the event an applicant obtains false or forged information to the Ministry of Economy to obtain a patent certificate?

    The convicted person in this scenario shall be sentenced to imprisonment for a minimum of three (3) months and maximum of two (2) years and/ or shall be imposed with a fine of minimum of UAE Dirhams five thousand (AED 5,000) months and maximum of UAE Dirhams one hundred thousand (AED 100,000), as mentioned in article 62 of the Patent Law.

    Q.18. Can evidence obtained in criminal proceedings be utilized in civil actions and vice versa?

    Evidence obtained in criminal proceedings of patent infringement can be used in civil proceedings, and the evidence obtained in civil proceedings can be admitted in criminal proceedings and vice versa. Such information can also be used in any future civil and/ or criminal proceedings amongst the parties.

    Q.19. To what extent is pre-trial disclosure permitted for obtaining evidence from an adverse party?

    A pre-trial disclosure is a stage of the litigation process where both the parties are required to disclose the documents relevant to the issues in dispute to the other party before the commencement of the trial in court. However, there is no mandatory pre-trial disclosure procedure in the UAE. The evidence is presented during the trial in court or disclosed to the expert as and when the expert requests for the same.

    Q.20. What extent of proof is ideally required for a claimant to establish infringement or invalidity in such cases?

    The court makes the final decision on whether to accept or reject evidence presented by the parties depending upon the gravity and circumstances of the case. The courts have the discretion to decide on their own merits, whether a suit for infringement exists or not. The court can even appoint experts to determine the validity and infringement in any proceedings. The court may seek the opinion of the experts in the field of dispute resolution or may seek the advice of the administration of Industrial Property (Article 67 of Federal Law Number 31 of 2006). The Court of Cassation (in Civil Appeal Number 81 of 2016) upheld the Court of Appeal's decision where it was held that the report of the panel of experts was right to prove that there no infringement and the system used by the defendant was different to the claimant's patent. Hence, the court may rely on an expert report and determine invalidity and infringement.

    Q.21. Are parties afforded any preliminary relief and how long does patent infringement proceedings typically last?

    The patent infringement proceedings will vary depending on the circumstances, nature and complexity of the case and therefore it is not possible to settle on a binding timetable of patent proceedings. However, as mentioned in the answer __, the claimant may file an application for the precautionary seizure of the invention, drawings, designs, or for parts thereof using the industrial property when an infringement or illegal activity which is in breach of the Patent Law or a particular contract has taken place.  

    Q.22. What happens in the event  a preliminary injunction is granted by the competent court and the main infringement proceeding is not in favor of the claimant?

    In case a preliminary injunction has been granted, however, the main infringement action is lost, then the defendant can apply for damages within 60 days from the date of the final court decision.

    An action for compensation can be filed by the attached person, within 60 days from the date of termination of the previous term or from the date of issuing the final decision of refusing the relevant action which the seizor preferred. (Article 61 of Federal Law Number 31 of 2006).

    Q.23. Can an aggrieved party to a patent infringement suits file an appeal in the UAE; if so, what is hierarchy of the courts in this regard?

    In case the claimant is not satisfied with the decisions taken by the committee (formed by the Minister of Economy under Article 66 of Federal Law Number 31 of 2006), then such decisions may be appealed before the competent court according to the civil procedures law within thirty days as from the date of notification of such a decision before the court. The defeated party can also appeal in the relevant courts according to the hierarchy in UAE jurisdiction, which is from Courts of First Instance; Court of Appeal and Court of Cassation respectively.

    Q24. What are the procedures for safeguarding inventions in the the pharmaceutical sector in the UAE?

    The inventions in the pharmaceutical industry (on drugs and other compounds) can be protected under the provisions mentioned in the Patent Law, provided the applications:

  • are registered in the records; and
  • are submitting after conferring with the rules of novelty and priority usage.
  • Q.25. What are the significant emerging trends that is visible in the UAE with regards to the enforcement of the Patent Law?

    The Ministry of Economy works on accelerating the administrative procedures and convert all systems into an automated system to shorten the length of the application and examination procedures. The aim is to fasten the procedure for proceedings in patent disputes and to deliver justice to parties without any delay. By developing an automated system, the process shall be accelerated and the length of the application shortened.

     

     

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    Mon, 06 Apr 2020 10:09:00 GMT
    <![CDATA[Side Agreements in UAE]]> Validity of Side Agreements in the United Arab Emirates

    A side letter or a side agreement is an agreement that is not part of the primary contract or agreement but is an ancillary to the primary contract. A side agreement is used by parties a contract to confirm additional details that were not known, at the time, when the primary contract was being finalized. A side agreements is used mainly to

    • Clarify certain points mentioned in the primary contract, for example, setting out the steps that a party must take to satisfy an "all reasonable endeavors", an obligation that is not defined in the main document;
    • Supplement points for main contract, or
    • Verify contracts, for instance once the primary contract is drafted and the parties wanted to make changes to the contract, which would result in redrafting the clauses and will be time-consuming. Therefore, it may be easier to set out the amendments in a side agreement.

    Although the general intention under the law of contracts is that a side agreement will give rise to legally enforceable rights and obligations and has the same force as the underlying primary contract. However, this by no means is guaranteed. In some cases, the courts have denied the validity of side agreement and have stated that a side agreement has nothing more than a moral effect. As a result, side agreements should be carefully drafted. Side agreements are often used in commercial contracts, primarily in financial or property transactions. A side agreement is usually in the form of a letter signed by parties signatory to the primary contract. For a side agreement to become binding it must satisfy the same criterion that all contracts have to fulfill, that is there should be an offer, acceptance, consideration, certainty and an intention to create legal relation. A side agreement is a contract for which consideration (payment, in any form, under the contract) must be provided. The condition of consideration is the most important in a side agreement and it does not have to be in monetary form; it can merely be a reciprocal benefit. It is important to note here that in the absence of any benefit or payment, a side agreement can only become legally binding if it is executed as a deed, which means that it must state that the side agreement is a deed and the party's signatures must be witnessed.

    In the United Arab Emirates (UAE), it is common knowledge that many limited liability companies (LLCs) are owned and managed by foreign shareholders, though the legal ownership may reflect differently. Article 10 (1) of the Federal Law No. 2 of 2015 (Company Law), states that

    "With the exception of Partnership Companies and Simple Limited Companies where all the joint partners of any of such companies shall be UAE nationals, any company established in the State shall have one or more UAE partners holding at least 51 per cent of the share capital of the company."

    Which primarily means that UAE nationals shall hold at least 51% of the shares in share capital of an L.L.C and the remaining 49 per cent shares can be held by the foreign investor/s, as sole ownership is only allowed to the local nationals for L.L.C incorporation. In reality, many companies are absolutely owned and managed by foreign shareholders. Even though as per law share of local Emirati has to be a minimum of 51%.

    Given the legal scenario, foreign investors have resorted to side structures to keep their controlling financial interests in their UAE companies. Therefore, it is common practice in the UAE for shareholders to execute "Nominee Shareholder Agreements" (NSA) or "side agreements" between the parties. Under NSA, a UAE national agrees to waive all rights nominally held by the LLC, rights like to receive dividends, to exercise votes in general meetings, and to obtain any proceeds of the sale of the shares. In short, the provisions of the NSA circumvent UAE's company law. NSA or the silent agreement prevents the UAE majority shareholder from taking part in the operations of the LLC, which makes the foreign partner the sole beneficiary and decision-maker of the company.

    As a result of NSA or the silent agreement, the UAE national turns into a silent registered owner of shares or a 'silent partner', while the foreign investor secures all economic interests in such shares. Having a 'sleeping partner' means that the investment in the business concerning the establishment and operation of the company is made entirely by the foreign shareholder and the UAE national shareholder just acts as a 'sponsor'. The UAE national only provides administrative assistance to the company like liaising with the authorities and arranging for the visas. An annual sponsorship fee is therefore agreed upon between the party, which is paid to the sleeping partner. Even though the company's Memorandum Of Association (MOA) and trade license may reflect de jure ownership by the parties, side agreements assist the foreign shareholder in protecting their interests and ensuring that they have control over the company. 

    The legal debate arises regarding the validity and enforceability of these arrangements. When a dispute arises between a foreign investor and the UAE partner, the crucial matter of concern is which agreement the court shall recognize.  Will the Court recognize the MOA, which is officially notarized and registered in the Commercial Register or will the court uphold the side agreement?

    In order to answer this a question, one must take a look at the relevant UAE laws and legislations, which are primarily the UAE Civil Code, the Commercial Company Law, and the Anti-Fronting Law, along with examining the practice of the UAE courts in applying these laws. Article 22 of the old Commercial Companies Law (CCL), has been recently abolished and replaced by Law number 2 for the year 2015. The new law states that the UAE nationals' shares are to be at least 51% of the total shares in any LLC established in the mainland. CCL (Federal Law No. 2 of 2015) Article 29 – Clause 3 which reads as –

    "If it is agreed in a company's Memorandum of Association that one of the partners is to be deprived of the profits or exempted from loss, or to receive a fixed percentage of profits, such Memorandum shall be deemed void."

    A literal interpretation of the provision renders most side agreements illegal and void ab initio. Article 395, of the UAE Civil Code, states that if the contracting parties conceal a true contract with an apparent contract, the true contract will be effective as there has been severe criticism of the contractual setup that clearly compromised the UAE's efforts to involve more domestic operators in its national economy.

    This ensuing debate also led to the enactment of the Federal law called The Anti-Fronting Law, the objective of which is to prohibit side agreements with UAE nationals. Failure to comply with provisions of Anti Fronting Law invites penalty. Under Anti Fronting Law there is also criminal consequences for repeated offences. It is important to note that the sanctions imposed under the Anti-Fronting Law apply to all persons who are parties to such side contracts.

    After reviewing the law with respect to NSA or side agreement, now let's take a look at how the courts in UAE have dealt with the issue. Abu Dhabi Court of Cassation pronounced (in Civil Appeal 30 of 2015) that a UAE national has no rights to claim profits from the company, if he has voluntarily sold his shares in the company. The Court stated that this is because the sale of shares would violate UAE Companies Law and public policy prevalent in the country.

    A recent judgment by the Federal Supreme Court demonstrated a unique position on the issue of side agreements. An action was filed by a UAE shareholder (owning 51 % of the shares as per law), requesting the court for confirmation of his entitlement to 51 % of the profits according to the shareholder's agreement. In response the Omani shareholder (owning 24 % of the shares as per MOA) argued that the partners in the company signed a side agreement and entered into an arrangement whereby the UAE partner would own 37.5 % of the shares, the Omani partner would also have 37.5 %, and the US Company owned 25% as opposed to previous 24 % of the shares. The Federal Supreme Court decided that there was sufficient documented proof to establish the existence of the side agreement as argued by the Omani partner. Upon reviewing all the documents submitted by Omani partner, the court concluded that there is sufficient evidence to establish existence of the side agreement between the parties (and that the shares have been distributed based on 37.5% to the UAE and Omani partners and 25% to the US Company).

    In another judgment the Dubai Court of Cassation confirmed the Courts' of First Instance and Appeal judgments. The court here recognized the side agreement. The court in its ruling stated that:

     […] And whereas the lower courts have observed the above rules and grounded its judgment on: (the documents, particularly the declaration made by the appellant, which was dated later than the date of the MOA of the Company, and in the said declaration the appellant admitted that he had made no contribution to the capital of the company and has no rights in its profits or any of its assets……and the respondents have paid all the capital on behalf of the claimants. Hence all the profits and assets of the company shall belong to the claimants….)

    The practice by the Dubai Court of Cassation in recognizing the side agreement is worth a mention here. The Court acknowledges the side agreement and sets aside the MOA, mainly when such side agreements have been documented in writing. The Court of Cassation has relied heavily on Article 10 of the old Commercial Companies Law (Law number 8 for the year 1984) to decline any attempt to prove anything that is contradicting with what is stated in the MOA unless it is made in writing.

    In Cassation number 77/2010, Commercial Cassation, dated 11th May 2010, the Dubai Court of Cassation stated:

    "…- though the general rule is that it is permissible to use unwritten evidences as a method of proof, as per the provision of sub-clause (1) of Article 35 of the UAE Code of Proof, however the Commercial Companies Law number 8 for the year 1984  made an exception to that general principle, ….,and stated in article 10 of the said law that (testimonies are not admissible to prove what is contradicting the provisions of the MOA)- …- therefore it is impermissible to any of the partners to prove versus any other partner the fictitiousness of any of the provisions of the MOA, unless made in writing…"  (Emphasis added.)

    Therefore, we can say that the Dubai Court of Cassation has made it clear that the only way to prove anything that is in contradiction with the MOA, is by documenting the side agreement in writing. Having said the above it should be noted that it is still safe to rely on the side agreements as the courts are recognizing them as far as they are in writing

    It would be inconsistent with UAE government's business friendly attitude to limit or prohibit side agreements. As it would only deter foreign investers to invest in UAE. Despite the fact that legality and enforceability of side agreements is still in question, these types of arrangements, even though highly intricate in nature are and will continue to be very commonly used in the UAE. However, an option available to improve a foreign minority shareholder's position could be to avoid the problem by establishing a UAE branch of a foreign business rather than a UAE LLC. The branch will require a UAE national agent to be appointed, but the agent will not have any ownership or management rights in the business of the branch.

     

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    Mon, 06 Apr 2020 07:29:00 GMT
    <![CDATA[Special Purpose Acquisition Company]]> Special Purpose Acquisition Company

    One or more private individuals/entities can create a Special Purpose Acquisition Company (SPAC) for the special purpose of acquiring interest in one or more existing companies or businesses by raising capital through an initial public offering (IPO), and therefore, receive profit from such a merger, acquisition and/or other business transactions. SPAC's were first introduced in the 1990s in the United States of America and recently its popularity was increased on a global level. Before identifying a business idea, an IPO is initiated, and consequently, the proceeds from the IPO shall be used to acquire an existing company. For example, 'A', 'B' and 'C' decide to come together to set up a SPAC called ABC. ABC will then hire a team of experts which shall initiate an IPO and raise money through such a public offering to be placed in a trust. The next step for ABC would be to target and identify a business acquisition. If ABC (parent company) decides to acquire XYZ (target company) which is a private company, then the proceeds from the IPO shall be made by ABC to acquire XYZ. Hence, through the set-up of a SPAC, a private company gets access to the public markets while raising capital from the public without incurring any of the expenses associated with the IPO and exposed to gain maximum profit from such a transaction.

    Individuals/Entity coming together => Preparation of an IPO => Collecting the proceeds of the IPO and depositing them in a trust => Identifying a business target =>Announcement of the business target =>Voting amongst the shareholders for approval of the business transaction =>Approval of the transaction =>Using the proceeds from the IPO to fulfil the business transaction =>failure of business transaction leads to liquidation and returning of the money in the IPO back to the shareholders

    The working of a SPAC involves various steps. Firstly, the managers form a blank check company and buy all the shares. Once the blank check is formed, the managers shall file proper registration forms where all guidelines regarding the entity, managerial characteristics, securities composition, etc.  shall be laid down. The date of the IPO shall also be determined in the same prospectus. Underwriters shall use units (a security that consists of a combination of shares and warrants) as a financing security. After the IPO, the proceeds raised will be immediately deposited in a trust account with credible financial institutions. After the IPO, the SPAC shall be listed and will become a public company and the trading of the shares can start henceforth. This helps the private companies to obtain finance and gain access to the financial markets. While the securities are being traded, managers seek proper acquisition targets to merge with and the SPAC shall have a limited amount of time to close such a merger deal due to the listing regulations. The acquisition target shall be announced and a vote amongst the shareholders shall take place to approve or reject such a business proposition. In case the business transaction is not approved, the SPAC shall be liquidated and the money from the trust account shall be returned to the shareholders. Each share will get back a proportionate amount of the IPO proceeds previously deposited. In case of approval of such a business transaction, the SPAC will continue to conduct business. Some of the benefits provided by setting up a SPAC are listed below: -

  • The founders of a SPAC incur less expenses as they use the proceeds received from the capital raised through the IPO
  • Setting up a SPAC is a fast process and there is usually a time limit till when the business transaction can be conducted
  • The proceeds from the IPO are returned on the failure of a business transaction.
  • It is less risky as there is a downside protection for the investors until the business transaction concludes
  • There is access to public markets as the companies can get publicly listed
  • The timing of exit can be controlled in case of liquidity of such a company and there is a possibility of full cash exit at the time of liquidation
  • SPACs are listed and welcomed in the U.S. financial markets as well as on the Stock Exchanges in various other countries like Canada, Malaysia, United Kingdom, Canada, Netherlands, New Zealand, South Korea, to name a few of the countries. The Securities Commission Malaysia has enacted a specific regulatory framework dedicated to SPACs in the Equity Guidelines ('EGs') in 2009. The guideline for SPAC's provide that in order to be listed, a SPAC should be incorporated under the Malaysian corporate law. Guidelines provide that regarding the proceeds of the SPAC, 90% of the proceeds received from the IPO should be held in a trust. Only one class of warrants can be issued during the IPO, and those warrants shall be callable only after the business combination has been completed. The proposal of an acquisition is decided by the team hired in the SPAC and is approved if it is consented by a majority of shareholders (at least 75% of the nominal value of the share capital). The Toronto Stock Exchange (TSX) has provided investors with Guidelines ('Guide to Special Purpose Acquisition Corporations' adopted in 2014) in Canada for acquiring SPAC's. Provisions for listing requirements have been laid out in the same. A company set up with the purpose of acquiring through a merger, asset acquisition or any other similar business combination, an unidentified operating business. A prospective target business is identified after the proceeds from the Initial Public Offering are raised and used to achieve such a business transaction. In United States of America, these companies are listed according to the regulations laid out by NYSE, NASDAQ and NYSEMKT LLC).

    It can be safely concluded that the sole purpose of raising the funds in an IPO is done with the intention of using these funds to finance the acquisition of a yet unknown existing company and within a limited time frame. The period shall be specified within which such a merger has to be achieved and the failure to achieve the same shall lead to liquidation of the SPAC. However, there are certain downsides to it as well as the acquisition target needs to be identified and executed in a timely manner and indicate such an agreement with the listing exchanges. Private companies wanting to go public face a risk of the market not being receptive to the offering made. There also lies a possibility that the companies going public through a business combination with a SPAC, the shareholders do not approve of the business transaction (in cases where the shareholder vote is required).

    SPAC is not currently provided under any statute law or code, with the exception of Korea and Malaysia. The Korea Exchange (KRX) which provides for a definition under the Enforcement Decree of the Financial Investment Services and Capital Markets Act (section 6 (4) 14). This defines a SPAC as a corporation, with the sole business objective of merging the corporation with another corporation and issue the stock certificates through a public offering. SPAC's are listed as public companies under the KOSPI or the KOSDAQ markets in Korea. Under the Equity Guidelines provided by Malaysia, a SPAC is defined as a corporation which has no operations or income generating business at the point of initial public offering and has yet to complete a qualifying acquisition with the proceeds of such offering. No compulsory legal definition of SPAC's has been defined except in Malaysia and Korea, and in the absence of such a law, the national law provisions shall supplement this.

     

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    Sun, 05 Apr 2020 16:55:00 GMT
    <![CDATA[Franchising in Saudi Arabia]]> Franchising in Kingdom of Saudi Arabia

    Cross border transactions continue to evolve, and businesses within the Middle East continue to witness substantial growth. Kingdom of Saudi Arabia (KSA) continues to prosper due to foreign investment in addition to its oil revenue business. The business of franchising has helped all kinds of local brands gain an access to the international market while promoting their goods and services.

    Understanding a Franchise Agreement

    A Franchise agreement is undertaken between two natural/legal persons where one person (franchisor) grants the other (franchisee), the right to conduct his business by yielding the technical know-how and expertise for the same. The franchisee is granted the right to use the trademark affiliated with the franchisor's business in exchange for monetary or non-monetary consideration.

    Saudi Arabia's New Franchise Law

    Franchising agreements were governed under the Commercial Agency Law (Royal Decree Number 11, 20/02/1382H) of Saudi Arabia up until 2019.  However, a new set of executive regulations have been drafted by the Ministry of Commerce and Investment (MOCI) to govern the franchise agreements in the territory. These regulations passed under Royal Decree Number 122, 09/02/1441H (the Law) corresponding to 8 October 2019, shall come into effect on 22 April 2020. The objectives of the legislation are as follows:

  • To govern the relationship between a franchisor and franchisee;
  • obligate the franchisor to adhere to disclosure requirements for a franchise agreement;
  • protect franchisee(s) in the event of termination of the franchise arrangement;
  • encourage commercial franchising activities on the principle of transparency and
  • maintain continuity of the franchise system in KSA.
  • Jurisdictional Scope

    Article 3 provides that the Franchise Law applies to any franchise agreement undertaken in the Kingdom of Saudi Arabia; this most likely means that the Franchise Law will apply regardless of where the sale occurs, or where the parties are located, so long as the services offered under the franchise arrangement are provided in the KSA. Article 4 excludes from the purview of the Franchise Law, among other types of arrangements: (i) Concessions issued under royal decrees; (ii) Contracts subject to KSA's commercial agency regulation, and (iii) Other agreements or arrangements to be addressed by the implementing regulations.

    The Law has been passed with the aim of making the relationship between a franchisor and franchisee a clear and transparent one. Before the Law came into existence, the arrangements between a franchisor and franchisee fell under the principal and agent relationship, governed by the Saudi Commercial Agencies Law. The Law eliminates this (Article 4) and henceforth, a franchise agreement shall only be governed by the regulations under this.

    The Franchising Law: Provision of Regulation at a Granular Level

    The overall objective of international franchising and regulations governing it is to enable international companies to enter local markets and to develop a regulatory framework for the relationship between the franchisor and the franchisee. UAE law does not bear a specific legal definition of 'franchise'; the country has no specific laws to exclusively govern franchise either. The main piece of legislation dealing with franchising in Dubai and the United Arab Emirates (the UAE) is the UAE Commercial Agency Law (Federal Law number 18/1981, as amended) (the Agency Law). Pursuant to the Agency Law, an agency has been defined as, ''Any arrangement in which a foreign company is exclusively represented by an agent to distribute, sell, offer, or provide goods or services within geographically defined limits for a commission or profit'' (Article 1 of the Agency Law) and the relationship between a franchisor and franchisee shall be addressed by the  same. The franchisor will be treated as the principal and the franchisee shall be treated as an agent for the purposes of the Agency law, therefore, the relationship between a franchisor and franchisee will be that of a principal and agent. The franchisee cannot be treated as an employee of the franchisor. The Commercial Agency law has been governing the relationship between a franchisor and franchisee in the jurisdiction of KSA up until 2019 and the same shall be invalid under the new Law passed in the nation. The Law brings forth a new set of regulations governing the relationship between the franchisor and franchisee and adding obligations of conducting activities in good faith on behalf of both parties. Through this law, the necessary protection for both parties has been laid out; the following are some of the essential points covered under this Law.

  • The franchisor's obligations
  • The franchisor has the obligation to establish the rights of the franchisee; the business model of the franchise model; enable the franchisee to access the knowledge to run such a business; provide employee training and other technical and marketing experience to the franchisee. The franchisor has an obligation to fulfill all disclosure documents (a disclosure document is a document that includes the most prominent disclosure rights, duties and risks related to opportunities pertaining to a franchise) to the franchisee and provide the franchisee with a clean and accurate copy at least 14 days before the signing of a franchise agreement (Article 7).  The agreement must be written and signed by both parties and if it is written in any language other than Arabic, then it must be translated to Arabic (Article 11).

  • Renewal of the franchise agreement
  • The franchisee must send written notice to franchisor of its intent to renew or extend the franchise agreement within a period of no less than 180 days before the franchise agreement's expiration date (Article 15). Such a franchise agreement shall be renewed or extended except where the parties have agreed to new terms that state otherwise, in case of a terminable event (agreement coming to an end after a certain time), franchisee owes monetary debts to the franchisor, the franchisor no longer wishes to conduct business with such a franchisee, or in cases where the franchisee fails to sign a renewal or extension agreement within 60 days of the agreement's expiration date. Importantly, unless the franchise agreement categorically stipulates otherwise, the new franchise Law requires that the renewed franchise agreement be under similar conditions, which can be interpreted to mean having similar terms and conditions as the earlier agreement. A franchisee shall have to take approval from the franchisor if and when the franchisee decides to change or transfer the franchise business to a third party (Article 13).

  • Termination of the franchise
  • Article 18 states that the franchisor cannot terminate such an agreement prematurely, except in scenarios bearing 'legitimate' cause to do the same; the Law proceeds to delineate 9 cases that constitute legitimate cause. These include insolvency, failure to obtain license, violation of intellectual property rights of the franchisor, among others (Article 18). In addition to the 9 cases, a catch-all provision imbues a franchisor with the power to terminate for 'any other case stated as legitimate cause for termination in the franchise agreement'. Therefore, franchisors must prudently review the drafting of the termination provisions in their franchise agreements, and ensure additional events that might give rise to a termination, are included in the agreement as a further 'legitimate cause for termination.'

  • Compensation and Penalties
  • The franchisee is entitled to ask for compensation without terminating the franchise agreement for any harm suffered by such a franchisee as a result of the franchisor's material breach of its obligations related to disclosure registration (Article 19).The franchisee can request compensation if it was harmed due to the franchisor's inadequate termination and the franchisee can claim such compensation before a competent court, provided it is done within 3 years of the termination of the franchise agreement. A violation of the franchise agreement can result in a fine not exceeding SAR 500,000 imposed by a committee formed by a ministerial resolution and such decisions shall be subject to appeal (Article 24).

    Foreign Investment Laws

    Under the current applicable regulations, non-Saudi nationals are proscribed from acting as commercial agents or franchisees. This activity is currently restricted to Saudi nationals, and 100% Saudi-owned companies. Any business owned fully or partially by a foreign investor will be subject to the Saudi Arabian General Investment Authority (SAGIA)- issued foreign investment regulations; it must be noted that the restrictions imposed on non-nationals, with respect to ownership and control, are in relation to trading and wholesale activities.

    In light of the vision of 2030, KSA is encouraging foreign direct investment and aims to promote the growth of small and medium enterprises in the country. Franchise businesses help establish more business opportunities which in turn creates more job opportunities and hence, resulting in enhancing the economy of Saudi Arabia. This vision aims to encourage the local brands in Saudi with the ability to manufacture national products, to expand their business worldwide. This will in turn promote the international status of the country and increase diversification and empowerment of the economy.  Through the franchise business, the economy of Saudi shall be diversified by placing it on the global franchise map. The vision of 2030 aims to support those wanting to invest in the franchise system as it is an important opportunity to launch entrepreneurial projects and at the same time promote small and medium projects which calls for an establishment of a legislative, cultural and economic structure for its growth. The main purpose of this vision is to increase the contribution of the franchising business sector to increase the Kingdom's GDP (gross domestic product).

    Ambiguities and Gaps

    This legislation is notable in that it features many elements of the most burdensome franchise registration, pre-sale disclosure, and relationship laws, but leaves an array of questions to be addressed by implementing regulations. For instance, Article 10 of the act imposes an obligation to act in good faith on both the parties of the franchise agreement, without lucidly defining 'good faith'. Another area that has to be addressed is set out in Article 1 of the Law; while it states that the franchisor has an obligation to impart the technical knowledge and expertise to the franchisee, the constitution of 'technical expertise' has been neglected . The term 'technical knowledge and expertise' has not been explained and is subject to interpretation. Article 23 mandates that the parties may agree to settle disputes arising under 'franchise agreements or the application of the law' by alternative dispute resolution. However, the Law under Article 3 clearly states that it shall apply to any franchise agreement that is implemented within KSA. Regardless of the fact, that if parties choose to seek remedy under Article 23 and resolve a dispute arising out of a franchise agreement through arbitration or any other dispute resolution, and in the process, choose any foreign law as being the governing law for the franchise agreement, then a question arises as to whether the aggrieved party can invoke the jurisdiction of the court regarding the governance of the law.  It can be interpreted that since Article 3 clearly states that all franchise agreements within KSA shall be governed under this Law, then the aggrieved person can invoke the jurisdiction by demanding the local law to be applied. Hence, there is an ambiguity that has been created between Article 23 and Article 3 and as seen, Article 23 stands in contradiction of Article 3 since the Law does not grant the parties the right to choose the governing law for the given franchise agreement.

    There are certain contradictions prevailing in these set of regulations that need to be addressed by the competent authorities in the jurisdiction of Saudi Arabia, for gaining more clarity and understanding about franchise agreements prevailing there.

     

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    Sun, 05 Apr 2020 15:47:00 GMT
    <![CDATA[How to Get Away with Building]]> How to Get Away with (a) Building?

    A short essay on joint development agreements, musataha structures and constructions on third-party property.

    Queen Elizabeth II is frequently regarded as the owner of one of the world's largest real estate portfolio with properties in the United Kingdom, Ireland, Falkland Islands and Canada to name a few. However, there is a major difference between being a real estate owner and a real estate developer. Although both attribute their finances in the real estate sector, they do not conduct standalone operations in most cases. Real estate developers need not always own the particular land to construct a real estate project. For instance, suppose a real estate developer has a particular ocean-view project in mind; this would mean that this particular developer would now need to identify a landowner who (i) owns a piece of land that fits the developer's idea and is suitable for the project; and (ii) agrees to lease, sell or agree on a joint-venture basis with the real estate developer.

    Certain sectors such as real estate, aviation, maritime and mining frequently demand a higher amount of influx of capital and developmental costs than others. Therefore, many-a-times these real estate developers would rather hope to enter into a joint-venture agreement with the landowner than purchase such property since the former is generally required to allocate substantial resources towards the development. In this article, our real estate lawyers in Dubai talks about the legalities surrounding these real estate joint development agreements in the United Arab Emirates (UAE).

    Before we proceed with this article, it is pertinent for the reader to understand the definition of a real estate joint development agreement. A joint development agreement is a contract entered into by two or more entities (or individuals) to establish the terms of the development of any particular project. The parties to a real estate joint development arrangement generally have two (2) options to structure the transaction. The first option is to establish a company where the landlord and real estate developer are shareholders. However, the Federal Law Number 2 of 2015 concerning Commercial Companies (the Companies Law) is silent on the concept of joint venture entities. Therefore, the parties would need to establish one of the other types of entities prescribed in the Companies Law such as (generally) a limited liability company or alternatively incorporate a company in a free zone that permits project development in the Emirate of Dubai (such as an offshore entity in the Jebel Ali Free Zone). In this scenario, the agreement between the shareholders of the company would be the primary documentation of the real estate joint development arrangement if the parties do not explicitly enter into a joint development agreement. On the other hand, the second option is for the landlord and the real estate development company to enter into a real estate joint development agreement. In either case, the following legislations would apply to a real estate joint development arrangement in Dubai: -

  • The Companies Law (in the event the landlord and the real estate developer incorporates a company for the purpose of developing the project);
  • Federal Law 5 of 1985 on the Civil Code (as amended);
  • Federal Law 11 of 1992 on the Civil Procedure Law;
  • Federal Law Number 18 of 1993 on Commercial Transactions Law; and
  • Laws, Decrees, Executive Council Resolutions and by-Laws issues by the Dubai Land Department (the DLD).
  • Key Points in Real Estate Joint Development Arrangements

    In such arrangements, the landlord has the responsibility to provide any and all documentation pertaining to the particular property including (but not limited to) the title deed, ownership documents, valuation of the land, proof of permitted use and the like. Whereas, the real estate developer ensure that the transaction and the development will be in compliance with the abovementioned statutes, requisites approvals and no-objection certificates are in place, anticipated completion date has been set, escrow account has been applied for and obtained (if the units in such project would be sold off-plan), sub-contractors and parties have been appointed. The developer should also liaise with the requisite regulatory authorities such as the DLD, Dubai Municipality and the General Directorate of Civil Defense in Dubai. Another (and one of the most important) aspect of these transactions is the authority to sell the units in these projects to the investors. The landlord should ideally provide the developer with all the necessary clearance and authority to act on behalf of the landlord to sell the units of the project. If the proposed construction is towards selling to third party investors, the terms of the joint development agreement should also clearly stipulate that the parties agree to register such units in the name of these investors after they meet the conditions set out in the sale purchase agreements. STA's real estate team had earlier discussed about these issues from an investor's viewpoint in Court Uncourt (Investors Due Diligence before Purchasing Real Estate in Dubai - Volume VII; Issue 3).

    These transactions are also structured in form of musataha agreements as well in certain circumstances. Musataha is a real estate transaction wherein the landlord leases the plot to the developer on a long-term basis (up to fifty years) with the right to construct structures and buildings. Article 1353 (Chapter II, Section 3) of the Federal Law 5 of 1985 on the Civil Code (as amended) has laid down that a musataha is a right of (in rem) provided to construct on a land which is owned by another party. In such transactions, the owner of the right of Musataha. In such transactions, the owner of the right of Musataha is deemed to be the owner of the real estate project constructed on the land and they may sell the units of such project accordingly, as mentioned in the musataha agreement. However, it is pertinent to note that the landlord is conferred with the right to demolish (remove) the buildings and fixtures. Further, the landlord may also retain the buildings and fixtures in circumstances when the demolition is not possible or detrimental to the land, provided they obtain the consent of the real estate developer.

    From a Judicial Perspective

    The article now goes on to explain three different cases between parties to a real estate transaction to understand the view of the court in matters where a party has constructed a project on the land of another.

  • Court of Cassation Case Number 307 of 2010 (Real Estate): The plaintiff (company) gave a piece of gifted land to an individual for their 'use' vide an unregistered agreement. It is pertinent for the reader to understand the meaning of the term 'use' in this case. Real estate transactions generally involve a sale, lease (or rent) or transfer of right to use (musataha). The individual in whose favour the right to use the land was issued, further passed on this right through an unregistered will to the defendant. In this particular matter, the plaintiff (governmental authority) initiated legal action against the defendant to appoint a specialized expert to indicate the actual rental value of a house on a plot located in Al Satwa area for the period of 8 April 2000 till the date of the submission of the expert's report. The plaintiff also requested for the expert to ascertain the damages incurred to the property along with a statement of the requisite maintenance charges to be incurred (including bills for electricity and water) due to the defendant's use of the property. The plaintiff also requested the court to evaluate the compensation due to aforementioned damages and the eviction of the defendant. The defendant contended that he had a will with the property issued to him. The defendant also submitted a request to the DLD to register the house under his name and to conduct an investigation (by an expert) so as to prove that the development on the land was built by his money. However, he had initiated this process while he was still contending the validity of the abovementioned will (since the agreement and the will were not registered) in the court.
  • Initially, the court rejected the claims of the defendant and ordered the defendant to pay an amount of AED 945,218 to the plaintiff for the rental value of the property from 8 April 2000 (the date the individual died) to 11 February 2009. Further, the court also ordered the defendant to pay an amount of AED 129,600 as an annual rent for the period of 12 February 2009 till the handover date plus AED 100,000 as maintenance costs. Therefore, the defendant filed an appeal (case number 418/2010) requesting the court to cancel the judgment issued by the Court of First Instance. After studying the facts and the issues in the matter, the Appeal Court decided to amend the judgment issued by the Court of First Instance by reducing the amount granted as rent to AED 700,418 for the period of 2003 (from the time of succession certificate of the deceased individual) to 11 February 2009 and agreed on the other amounts.

    Thereafter, the plaintiff and defendant filed a case at the Court of Cassation under case number 307/2010 and case number 308/2010 respectively. The Court of cassation reviewed the submissions of both parties and decided to reject the defendant's case (case number 308/2010) and ordered the defendant to pay the expenses along with AED 1,000 (UAE Dirhams one thousand) as attorneys' fees. On the other hand, the Court of Cassation ruled in case number 307/2010 to reject the judgment issued by the Court of Appeal (case number 418/2010) and ruled in favour of the judgment issued by the Court of First Instance. The court also ordered the defendant to pay for expenses of the two stages of litigation, plus attorney fees of AED 1,000 (UAE Dirhams one thousand).

  • Appeal Number 250/2017 (Real Estate Appeal): In this particular matter, the plaintiff owned a particular piece of property that was provided to the defendant (vide an unregistered agreement) to use the land. The defendant who had the possession of the land constructed certain buildings on this land (with his money) and thereafter, a dispute arose between the parties. The plaintiff filed a case claiming for the rent, and repossession of the land (including the fixtures developed by the defendant). The court reviewed the matter along with the provisions of the Federal Law 5 of 1985 on the Civil Code (as amended) and ruled that the land along with the fixtures on the same would be the property of the plaintiff and the plaintiff can give a sum of money to the defendant for constructing the land. One of the primary contentions with which the court arrives at this conclusion was that the agreement was not registered. Therefore, parties to a real estate transaction should always ensure that the agreement between them is registered is the manner prescribed under the law.
  • Appeal Number 225/2018 (Real Estate Appeal): The courts adjudicated this case wherein the plaintiff entered into an agreement with a developer group (joint venture between various entities). However, the developer group had used multiple entities in the transaction (meaning one entity signed the agreement, another entity obtained the funds, a third entity was involved in the construction of the project). The primary question before the courts in this matter, was to determine the liability of the parties. The court found that all the entities of the developer group which were involved in the transaction would be liable in the matter, irrespective of the size of their contribution to the matter.
  •  

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    Sun, 05 Apr 2020 08:56:00 GMT
    <![CDATA[Joint Ownership of IP]]> Joint Ownership of Intellectual Property

     

    Introduction

    Henry David Thoreau said, "the world is a canvas to the imagination." This is very accurate as ideas are the foundation of any success, business, or personal. Depending on the effort put and the extensive research into the innovation, it is safe to say that innovations are a major factor that distinguishes businesses from their competitors. The person who invents anything must be given protection for his/her innovation as it is somewhat like owning a property of their own. This is what is commonly referred to as intellectual property (IP). Common examples of IP are copyrights (for published or written books – movies), patents (for commercial inventions), trademarks, and so on. From a business perspective, companies have to consider early on how to protect their IP, therein conserving their innovation. A patent gives rights exclusively to any innovation or product in the relevant jurisdiction. Different jurisdictions have different rules and regulations in relation to owning IP. This article will compare the United Arab Emirates (UAE) law on joint ownership on IP to the United States law together with the United Kingdom (UK) Law and further evaluating the advantages and disadvantages in each jurisdiction.

    Joint Ownership of Intellectual Property in the UAE:

    Patent protection:

    IP in general in the UAE is governed by Patents and Industrial Design Law Number (44) of 1992, Trademarks Law Number (37) of 1992, Copyright and Neighboring Rights Law Number (40) of 1992. Patents in the UAE are protected in two ways generally – by registering with Intellectual Property Protection Department (IPPD) under the Ministry of Economy and through the GCC (Gulf Co-operation Council) patent office in Riyadh, Saudi Arabia.

    Joint ownership of IP

    It is often seen that IP is a product of startup businesses. These businesses are jointly owned generally for obvious reasons such as more capital, less responsibility, and easy flexibility. In the UAE, this is seen as a huge plus point as the concept of joint ownership enables international companies to establish themselves in the country. Furthermore, Federal Law Number (2) of 2015 issued on 1 April 2015 concerning Commercial Companies states that expatriates are not allowed to own more than 49 per cent of a limited liability company outside the permitted free zones (Article 151). Thus, joint ownership is considered a fair and accessible solution, especially from an international business perspective as UAE is one of the most attractive cities for business, internationally.

    Avoid Joint Ownership of Intellectual Property

    Although joint ownership of IP sounds enticing, there are potential risks involved in this as the parties involved would have to make collective decisions on any or all the rights of the IP. It is very feasible for one party to exploit the rights and ownership of IP. Therefore, it is paramount to ensure that the initial contract is formed impartially for the benefit of all parties. Furthermore, in essence, the stages of patenting are extremely challenging on its own as the need of each business is unique. One of the riskiest aspects of owning IP jointly, from a legal perspective, is that in the UAE, as well as the majority of jurisdictions, it is required for the joint owners to both be plaintiffs. This concept, in itself automatically deems the patent void.

    Joint Ownership of Intellectual Property in the US:

    World Trade Organization insists that countries include and pass legislation protecting IP parallelly to their local laws. Thus, this leads to some similarities in IP protection and rights across the world. In the US, patents are dealt with by the American Invents Act (IAI), which allows a one-year grace period to register the patent. Contrary to this, the UAE allows only a three-month period for the patent to be registered.

    Agree to Joint Ownership of Intellectual Property

    Another benefit for IP in the States is that the law allows joint owners of the patent to exploit and utilize it without consent of one of the parties. However, the risk involved here is that if the patent were disputed and lead to litigation it would have the same complications as the UAE. In the case of Goodman v Lee (78 F.3d 1007, 1012 (5th Cir. 1996)), it was decided that each co-owner could independently exploit the profits, but must account such profits to the co-owners and that each co-owner could enforce without the consent of the co-owners.

    Avoid Joint Ownership of Intellectual Property

    Applying for a patent is proved to be costly, exhausting, and complicated in almost all jurisdictions. As an example, companies have different forms of IPs, and each IP consists of different rules and regulations, thus adding to the complexity of the issue. It is vital to take away that though both the US and the UAE have different rules and regulations governing IP in the respective countries, they also do possess similar advantages and disadvantages.

    Joint Ownership of Intellectual Property in the United Kingdom (UK)

    With regards to the UK, IP rights are governed by both national as well as EU regulations. The Co-operation Treaty and the Patents Act 1977 (PCT), governs these rights accordingly. The UK still remains part of the European Union; it is still unclear how the law will change post-Brexit.

    Agree or avoid Joint Ownership of Intellectual Property

    As with the States, in the UK as well one party jointly owning IP with the other can exploit it without the other party's consent. Moreover, as for enforcement actions, it is similar to both the US and the UK. Most legal practitioners agree that cases should be dealt with through out of court settlements as litigation is always considered as a last resort. In the case of Murray v Yorkshire Fund Managers Ltd (1998, Court of Appeal, 1 WLR 951), it was decided that, in the absence of contractual relationship, a co-owner of certain confidential information could not prevent any other co-owner from exploiting or using the confidential information.

    As discussed above, the variation of the different pieces of legislation and rules governing IP rights in different jurisdictions is slim to none. However, the complications vary and sometimes are intertwined within these jurisdictions. For instance, there exists within the IP ownership agreements, clauses concerning jurisdiction which is a potentially problematic area. This is because if different patents are filed for the same single joint ownership in multiple jurisdictions its uncertainty and complexity increase. It could lead to litigation increasing costs and exhausting resources as well as jurisdiction wars. Therefore, if the companies perceive the risk of single joint ownership to be prevailing significantly, they should consider alternative solutions.

    Alternative Approaches

    Some suggestions of alternative solutions a company could adopt are enlisted below:

    • Issuing Licenses – whereby it would be wise of one party who owns the IP to license it to the other party.
    • Dividing Property whereby parties of single joint ownership can agree amongst themselves to divide IP between themselves, based on the vested interest of the private parties.
    • Form a group whereby parties can form a "patent pool" if there is a large amount of IP's involved with an external administrator

    Conclusion

    Businesses, qualified property attorneys and practitioners do not have the in-depth perception at times regarding joint ownership on intellectual property. However, they do accept it nonetheless as the "fair option." Joint Ownership on Intellectual property is fraught with risks, it is most unfair and proofs to be unworkable at times. If the owners proceed with joint ownership on intellectual property, it is essential to ensure that every detail regarding the rights and obligations of the Intellectual property is set out in an agreement. Besides, a plan should be set out from the start of solving potential problems concerning the enforceability of the provisions set out in the contract. Joint ownership of intellectual property should never again be viewed as the "safe option." As Paul Gibbons implies, businesses need to take into account not only the mathematics of risk moreover the psychology of risk.

     

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    Sun, 05 Apr 2020 07:36:00 GMT
    <![CDATA[Design Rights in India]]> An Analysis of Design Rights in India

    Have you ever crossed a person who doesn't love owning branded phones, shoes, cars, or jewellery? I don't think so. But for a fact, we can say that many people buy products that are copies of various original brands. Why? Because in today's world filled with technological advancements, people love showcasing their fashion interests or new trends on every platform. But money being a constraint, they will eventually fall into the massive pit of "fakes". For example, many international shoes and cloth brands have a high reputation amongst youngsters, and it is a well-known fact that every consumer's biggest weakness is "low prices". So, we can understand that these companies imitating to be companies that are in good ranks in the market will gain a lot of income by making minor changes in the name and selling their products for relatively low prices as compared to the costs of these international brands imitated. Is there any possibility to stop this, or are these markets going to continue being filled with fake low-quality products resembling the products of reputed companies? In justification, this is a simple case of infringement of design rights.

    By the end of this article, one will be able to explore different dimensions of the protection of design rights under the Intellectual Property Rights (IPR).

    The exterior design of a commodity makes the product visually alluring and enticing. This design acts as a significant value-adding element which increases the marketability of the merchandise. As marketability is considered to be a factor for the performance of a company, companies will seek for protection of these designs to avert its use by third parties. Notable examples of imitating designs include the shape of the bottle of a favourite beverage, design of mobile phones. The design is a significant factor that helps influence consumer behaviour, which finally creates an impact on the performance of the product in the market. For this protection to be applied, every company must first have an IP (Intellectual Property) strategy.

    In areas like Asia, where there is an excellent overabundance of competitors, cheap manufacturing costs conclusively make it a centre for notorious practices, so the need for proper IP strategies in these areas is essential. Ever wondered about the essentiality of this strategy or the need for IP laws? When these laws protect a company's product, it hinders illegitimate products from devaluing the brand. Also, conservation of thee designs will help trigger creativity in the minds of the industrial sectors, expanding commercial activities.

    History of Design Rights in India

    Heading back to the evolution of the Designs Act in India, first titled as The Patterns and Designs Act, 1872 gave exclusive rights to inventors of new inventions and designs. Due to the realisation of an urgent need to protect new designs hit in India, the enactment of this Act came into being. Later on, the Act succeeded into a consolidated form known as "The Inventions and Designs Act, 1888" which was a transparent replication of the British model of the Act in the United Kingdom.

    The Act of 1911 excluded trademark or property mark from the interpretation of the term 'design'. The Act further provided guidelines to satisfy to get a registered design in India. Duration of rights that were held by the proprietor, fee extensions, period of expiry was further defined. This Act was amended several times after the Indian independence and the British colonial period and finally, Indian Designs Act, 2000 was enacted to make amends to the law relating to the protection of designs and industrial designs and to implement the TRIPS agreement (Trade-Related Aspects of Intellectual Property Rights) to which India was a signatory. India also adopted the system of "first to file, first to get" which meant the inventor of a particular design must apply for the registration of his design at the earliest to prevent others from claiming rights for that specific design. A significant change that was brought about was the exclusion of 'artistic works' defined in The Indian Copyright Act of 1957, from the definition of 'design'. This exclusion explained by The High Court of India in Microfibers Inc. v. Girdhar Co. & Anr., that artistic work excluded were the works of paintings and creative works put into industrial use were not excluded from Section 2(d) of the Designs Act of 2000. The object of this decision was to mainly help reward innovators for the labour and research applied to unfold a unique and original design.

    International Agreements for protection of Industrial Designs

    Many International agreements also helped India improve its security of industrial designs. At the international level, apart from the TRIPS Agreement which helped give the member countries of the WTO to amend their legislation to provide a minimum level of protection to the Industrial designs. There are also three other international treaties that provide general standards of security which were to be provided by the contracting states. The first significant international agreement that covered general rule of protection for industrial designs is the Paris Convention for the Protection of Industrial Property and the second one was the Hague Agreement which concerned the International Registration of Industrial Designs, it governed the WIPO (World Intellectual Property Organization) which provides a global protection system for registering designs. The Locarno Agreement, 1979, also established an international classification for industrial designs. India follows this international classification even though she is not a contracting party of the Hague Agreement.

    In countries like India, the requirement of registering for the protection of designs of a product is high as several companies may have similar ideas for one popular product that they are selling. 

    Crocs Inc. The USA v. Liberty Shoes Ltd. is an infamous and recent case where design infringement discussed in various aspects. The plaintiff filed a suit against Liberty Ltd. on allegations of the defendants infringing their designs that were valid until 28.05.2019. Crocs Inc. had filed cases in various lower courts against different manufacturers as the facts in most cases were directly related to design infringement. As the claims lied at different stages in different courts, they transferred all of the arguments to the Delhi High Court. The court later decided to hear the pending applications and suits together. Major companies who Crocs Inc. alleged of design infringement were Bata India, Coqui, Relaxo Footwear Ltd.

    At the time of argument, the court did come in the conclusion that most of the designs of the alleged companies' models were unusually similar to that of the plaintiffs. It was also observed by the court that there were minor changes in the design like colour, placement of perforation. Nevertheless, the court viewed that overall, the aesthetic effects of the products were similar.

    The plaintiff also argued that the standard design element used to infringe by the alleged was their signature gaps on the tops of the shoes. Later on, the court found out that the designs of holey soles were available on a public domain from 2002 and 2003, at that time, which makes the registration of the plaintiff's design invalid. So, the court held that the plaintiff's designs could not call to be genuinely inventive because there was the usage of that design in other mediums. Due to this, the court considered the plaintiff's idea not new or original, thus quashing the conviction of the alleged design infringement. So, this case helped us explore another significant area of design and how important it is to register a design of a manufacturer and also make sure that the design invented must not have prior usage to the registration of it in that territory. This way, one can lose the originality and uniqueness of his/her design. Thus, registration of the design of an article is not registrable in India, if it:

    • Has been revealed to the public anywhere in India or any other country before the date of its registration, by disclosure of it in a tangible form or using it before the time of its booking;
    • Is not original or new;
    • Contains obscene or unlawful matter; or
    • design is not distinguishable from other known configurations.

    The above grounds can be used for the cancellation of a design or its registration and also as a defence in a proceeding of infringement. The court considers these grounds in the above case.

    The Designs Act of 2000 is said to be a complete code and protection under this code is legal. This law protects the visual designs of objects that are not purely functional. Section 2(d) of this Act defines design as only the features, pattern, ornament or composition of shapes, lines or colours that applied to any article which is either two dimensional or three dimensional or in both forms. The design must be used to article by any mechanical means, whether in automatic, manual or chemical manner. The finished article must be appealed and judged solely by the eye. The Designs Act also includes protection of industrial designs (also known as patent designs) in India. Another unique feature of this Act is that it provides only civil remedies. Apart from an injunction, the proprietor of the design can recover monetary compensation by damages. Also, infringement of a design can only exist if the design registered under the Act. 

    The next question that arises, which is also confusing, is the question of distinguishing The Design Act from other Intellectual Property Rights. IPR has one common feature; it gives protection against various usages of a particular commodity or any other characteristic that brings upon value addition and determines the marketability of that product. But when going in depth to this concept, many organisations fail to register their product designs. Why do you ask? They'll reply with "It's copyrighted or patented already, why should I consider going through the hassle of registering my design?"

    In the case of Vior (International) Ltd. & Anr. V. Maxycon Health Care Private Ltd., a patented product (Ferric Carboxymaltose: water-soluble iron carbohydrate complex) was used by an unauthorised organisation when the plaintiff had given copyrights to only one company. Pleading that the defendants are manufacturing and selling their patented product and falsely representing it online that the plaintiff had provided them with IP license to manufacture and commercialise the patented product. The court held the defendants liable for unauthorised manufacturing and selling the patented products. It amounts to infringement of the rights of the plaintiff granted under Section 48 of Patents Act, and also the defendants were held liable for the breach of the plaintiff's copyright by candidly copying the information on the plaintiff's website, which was held to be infringement under Section 51 of the Copyright Act of 1957. 

    From the above case, we can now understand the most and primary distinction between Design Rights and Patent rights and Copyrights. Patent protection is provided only to the functional part of a product which involves an industrial process in inventing it, and copyright protection is similar to design protection, but copyright attaches itself to the original creator of the work. Thus, establishing a difference between the three rights under the IPR.

    In our technological era, the concept of innovation and creativity revolves around money and profit. The consumers try to gain maximum satisfaction from the product he buys, while the producer aims only at the accumulation of profits. With a market full of options, products with new and original innovation will the public accept. Due to this, enterprises become vulnerable to the problems of design infringement and piracy. Though there are rigid IP (Intellectual Property) laws that deal with infringement issues, they are still said to be not capable enough to protect intellectual assets of the enterprise. The main intention is obviously to gain monetary value and protection to the industrial design of the enterprise. Once the design is meddled with by another party, there is direct damage in gain and security. The Indian government introduced the National IPR policy, which complies with the World Trade Organization's (WTO) agreement on TRIPS, to keep in check with the issues. This policy has also been keen on increasing awareness for the generation and effective enforcement of IPR. This policy mainly highlights the issue of infringements of Patents, design and Trademark and also emphasises the steps to be taken by the authority to stop the practice of piracy in the Indian jurisdiction.

    In the case of Piracy, the judgement in Veeplast v. Bonjour said that in piracy of design, every resemblance would not be considered to be an act of imitation. In this case, the court said that instead of placing products side by side to find the similarities in the design, it was more sensible to examine the commodity from the view of a customer with average knowledge and not-so-perfect recollection. This way, finding out if the imitated product mistook the customer for an original one, would declare it as an infringement of design. Overall, the primary consideration is whether the features of shape, configuration or patterns are similar to each other.

    In a country like India, one of the many reasons why designs are not protected frequently is because of the rapid changes in consumer trends in clothing and technological industries, and new models must be on track with these trends. The requirement of a design not existing in a public domain before it's registration is something most of these companies cannot meet, which concludes with issues of piracy and infringement growing each day. The term of protection of industrial designs has also become a significant issue. This issue is also the reason why companies tilt more to the side of registering for copyrights and trademarks as it provides them with a longer term of protection, especially if the design of that company is the mere basis of profitability for that enterprise in the market.

    But, even after these problems exists, India has made sure of establishing a proper structure for the protection of industrial designs of every individual, entrepreneur, inventors, innovators and manufacturers in the market. A different absolute criterion for security has recommended which aligns the international standards provided for the protection of industrial designs, globally. The procedures for filing design applications are made to be simple and less time consuming, and applicants are made clear of the requirements for the implementation of registration. Thus, the substantive criteria for the application must inform the applicants to make sure that the design applications are processed speedily and efficiently so that the inventors of these designs can now sell their products with the thought of absolute safety from infringement of their design.

     

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    Sat, 04 Apr 2020 18:11:00 GMT
    <![CDATA[Consumer Protection Bahrain and Oman]]> Q&A on Consumer Protection and Product Liability in Bahrain and Oman

    Sources of law

    Q1. What are the principal legislation and regulation pertaining to product liability?

    The main areas of law and regulation relating to product liability are:

    I. Oman

    Product liability is regulated by the:

  • Consumer Protection Law (Royal Decree No 66 of 2014), which sets out liabilities for providers and advertisers.
  • Commercial Agency Law (Royal Decree No 26 of 1977, as amended) under which registered agents must pass on the benefit of manufacturers' warranties to consumers
  • II. Bahrain

    In Bahrain, product liability is regulated by the Civil Code, Consumer Protection Law No 35 of 2012 for protection of the consumer and Executive Regulations via Resolution Number 66 of 2014. The seller must provide the buyer with all the necessary information about the item being sold. The seller shall be liable to the consumer for selling the defective goods.

    The National Committee for Consumer Protection (NCCP) provides for oversight over such instances.

    Q2. How to establish liability under the most causes? When is a product said to be defective? Does strict liability apply in certain circumstances?

    In almost all GCC nations, to establish liability, the consumer may file the case on the grounds of a tort, liability under the contract and breach of the relevant consumer protection legislation.

    The following must be established to prove liability in tort:

  • duty of care from the supplier / manufacturer towards the consumer.
  • Breach of that duty of care due to manufacture, defective design, or warnings or instructions.
  • Causation link between the defect in the product and the damage that customer faced.
  • As per Oman Royal Decree 66 of 2014 defect is defined as any reduction in the value of a commodity/service for the purpose it was manufactured or produced and that prevents the consumer from benefiting from it or render the same unfit for the intended purpose in a manner that is beyond the control of the consumer.

    According to Bahrain's Resolution Number 66 of 2014: Any mistake in designing, manufacturing, producing, or storing the commodity that would lead to harm to the consumer, or to depriving him completely or partially of their benefit, or a decrease in their value or benefit.

    Product liability claims are based on strict liability claims, and hence manufacturers are liable irrespective of that fact they were negligent or not.

    Q3. Who is shall be liable for a defective product? What duties do they have and towards whom?

    The liability for defective products falls on both manufacturers and suppliers.

    Under Oman Royal Decree 66/2014, Article 22 lays down that despite the legal guarantees/ agreements for the protection of the customer, the provider of goods and services shall guarantee the quality delivered to the customer as per the standards of health, safety and environmental conditions. Under Bahrain Executive Regulations, A written declaration issued by the supplier or his representative, that the product subject to the warranty is free from defects and conforms to the specifications approved by law, and his pledge to fix any defect or damage to it within a specified period

    Excluding/limiting liability

    Q4. How can supplier limit its liability for defective products and any statutory restrictions on a supplier doing this? Is there a mandatory warranty period for the products?

    A supplier may limit its liability for defective products by inserting relevant warnings on products, for example, but this will not necessarily protect it. The relevant Consumer Protection Authorities and the courts of the GCC nations are rather pro-consumer when it comes to consumer complaints.

    In Oman, the law is silent on this point, and the court shall determine such questions with regards to such question, but the courts generally resort to principles of law laid down in Oman's Civil Code and Civil Transaction Law.

    In Bahrain, Article 11 lays down that the supplier shall bear the costs of transporting the defective product, as well as the costs of sending technicians to replace or repair the defective part of it, and all costs of recovering the product. The Executive Regulations lays down that the provider shall be exempted from the liability if he is not the manufacturer of that product.

    Product Liability Litigation

    Q5. Which courts are competent to try product liability cases?

    In Oman, the Public Authority for Consumer Protection (PACP) is empowered to oversee and enforce the consumer protection law in Oman. The complaint is usually resolved either through amicable resolution between the consumer and the trader or in case the consumer does not accept PACP's decision, then PACP refers the matter to the public prosecution for framing charges against the trader/dealer/manufacturer of goods and services. In Bahrain, Consumer Protection Directorate Services under the Ministry of Industry, Commerce and Tourism, receives and responds to the consumer complaints.

     

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    Mon, 02 Mar 2020 14:54:00 GMT
    <![CDATA[Patent Laws in the UAE 1of 2]]> Patent Laws in the UAE (Part 1 of 2)

    Guidance to readers: This is the first part of a two-part series on various aspects of patent law in the United Arab Emirates (UAE) including statutory interpretation, dispute resolution mechanism, judicial authority, patent infringement, enforcement, rights of patent holders, procedural aspects and the like. The Patent Law practice at STA has contributed the below Article.

    Q1. Explain the UAE Patent Law and briefly and list out the primary sources of law, applicable international treaties as well as regulation(s) surrounding both - patents and patent litigation?

    The patent law in the United Arab Emirates (the UAE) applies to new inventions that result from or contain an inventive step and be capable of industrial use or exploitation. The term of protection for patents is twenty (20) years from the filing date (there is no grace period or extension available). For avoidance of doubt, patent applications filed within the United Arab Emirates extends protection only and only within the UAE (namely, the Emirate of Abu Dhabi, Dubai, Sharjah, Ras al Khaimah, Fujairah, Umm Al Qwain, and Ajman) and such applications do not automatically qualify for any protection within the Gulf Co-operation Council or the GCC. In order to avail patent protection across the GCC, a patent application can be filed before the GCC Patents Office. To understand more on the UAE Patent Law, exceptions as to grant of patent rights, patent registration procedure(s), and more, click here. Following are the principal sources of law and regulation regarding patents and patent litigation in the UAE:

  • Patent protection in the UAE is regulated under Federal Law No.17 of 2002 on Regulation and Protection of Industrial Property of Patents, Industrial Drawings and Designs as later amended by Federal Law No.31 of 2006.
  • The UAE is a member of various international conventions and treaties including World Intellectual Property Organization Convention (the WIPO), Patent Cooperation Treaty (the PCT), The Paris Convention for Protection of Industrial Property, The Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS) and the Gulf Cooperation Council (the GCC). Being a signatory of such treaties and conventions enables the parties to avail beneficial advantage of such treaties when considering patent protection in the UAE.
  • The UAE operates under two systems, the PCT system for domestic patents, and the GCC Patent system which provides a mechanism for regional filings of patent applications within the GCC countries. The GCC itself is not part of the PCT system, but GCC member states are PCT members.
  • Applicants can also apply for a patent application at the GCC Patent Office. Once the patent has been accepted and granted, the applicant is eligible for patent protection across all the GCC States.
  • In so far, patent litigation is concerned, the following laws and regulations (other than those listed above) apply:

  • UAE Penal Code (Federal Law Number 3 of 1987, as amended);
  • UAE Criminal Procedures Law (Federal Law Number 35 of 1992, as amended);
  • UAE Civil Procedures Code (Federal Law Number 11 of 1992, as amended);
  • UAE Civil Transactions Law (Federal Law Number 5 of 1985, as amended);
  • UAE Commercial Transactions Law (Federal Law Number 18 of 1993, amended); and
  • Federal Law No (19) for the year 2016 (as amended) in respect of Combating Commercial Fraud.
  • Q2. Is it possible for parties to approach arbitration or consider mediation in resolving patent related dispute? Are there specialized courts or tribunals dealing with patent claims in the UAE? Which authority or court can the parties approach to in order to enforce patents and/or patent rights?

    All civil claims pertaining to patents can be filed before local courts. Parties may consider (but are not obliged Based on expert's report and further based on submissions made by the parties, the courts will decide and pass a judgment on the claim. Arabic is the only official language accepted before the UAE Courts and shall be used during the proceedings. No other language is accepted and all the other relevant documents submitted to the court must be duly translated in Arabic.

    Although patent protection is available in GCC by filing an application before the GCC Patents Office, there is however currently no centralized court system to administer and hear patent litigation claims for GCC members. Accordingly, patent claims are required to be filed before local courts of the respective GCC member state(s) as provided for under Article 26 of the GCC Patent Regulations and its Executive Regulations (as amended).

    Q.3. What constitutes a claim for patent infringement under UAE Laws? How are such claims generally assessed? When can patent infringement claims be _led? Can Patent owners obtain any reliefs by way of injunction? How are disputes pertaining to priority claim and invention ownership settled?

    A potential claim for patent infringement arises in cases where third party illegally or wrongly engages in manufacture, sale, import or distribution of patented product or process.

    Assessment of patent infringement claims generally involve a careful construction of the patent claim and comparison of construed claim with the infringing product or process.

    Patent infringement claims can be filed only upon grant of patent. Such claims can be filed in the relevant Emirate where the infringement takes place.

    Interim and conservatory measures are interim remedies or reliefs available for patent owners and can be applied at any time. Based on evidence provided, the courts may direct or order the defendants to immediately stop any activity or activities that contravene or violate the patent law.

    Disputes relating to priority claim and invention ownership can be settled through a court order. With respect to priority claim on an invention, the first party that files will have the priority.

    Q.4. Is it possible for a party to represent a potential claim on their own? Who else can represent the parties before courts? Is it possible to add or remove parties during litigation?

    In accordance with provisions contained in Article 83 of the UAE Commercial Companies Law (Federal Law Number 2 of 2015), the management of a limited liability company can be undertaken by one or more managers as determined by the shareholders in the company's memorandum and articles of association or through a resolution passed at the general meeting of shareholders. In line with Article 83 (2), unless the contract appointing the manager or company's memorandum and articles provides otherwise, the manager has the full powers to manage the company including representing the company before local courts. The UAE Civil Procedure Code (as amended by Civil Procedure Regulation 47 of 2018) provides under Article 26 that a company's manager or any employee (with authorization from company) can represent a claim before the local courts.

    Additionally, local advocates with right of audience and representation before the courts can represent the matter(s). It is possible to add or remove parties during litigation in patent disputes in UAE provided that such a claim for altering a party or parties is made before the courts. The facts and underlying circumstances surrounding a claim may need to be reviewed and it may be possible to alter the claim parties if the local courts approve the same. This claim must be made before the courts have set a date for judgment and such an application must set out reasons why such change(s) are being sought. It may also be possible to add the name of a party to a claim as necessary party provided such application evidences reasons as to why a third person/entity is being made a party to the claim. In matters involving patent infringement, for instance, the claimant(s) may wish to add one of the subsidiaries of the defendant as a party upon knowing or realizing that the actual infringer was the subsidiary or the place where infringement actually took place was at the subsidiary.

    Q.5. Are patent validity and infringement claims dealt together by UAE Courts?

    The invalidity actions shall be brought in separate proceedings. While the infringement proceedings are on, a counterclaim for invalidity should be filed in federal courts and a stay in infringement proceedings may be issued and such a stay shall be decided by the court. GCC patent law is not clear on invalidity issues and invalidity aspect is not specifically addressed in the UAE Patent Law. However, invalidity proceedings can be initiated by any interested party either as a new lawsuit before Federal Courts or as a defense or counterclaim. In infringement cases where lack of novelty or inventive step are claimed, the invalidation of a patent would be based on other grounds, such as misappropriation.

    Q.6. Please discuss the law of limitation in relation to patent claims

    While the UAE Patent Law is silent on limitation aspects, other laws including the UAE Criminal Procedures Law (Federal Law Number 35 of 1992, as amended), UAE Civil Transactions Law (Federal Law Number 5 of 1985, as amended), and the UAE Commercial Transactions Law (Federal Law Number 18 of 1993, amended) will apply. The law surrounding law of limitation that applies to civil and criminal claims for patent infringement can broadly be discussed as under:

    For criminal claims pertaining to patent infringement, the limitation period is five (5) years from the date the crime is committed.

    For civil claims relating to compensation for misappropriation and patent infringement, the limitation period is three (3) years from the date a criminal judgment has been obtained or from the date when damages were proved (in cases where criminal judgment has not been obtained or such damages result from a non-criminal activity)

    For commercial claims (in matters involving patent license or assignment of license), the general rule is that affected party may bring a claim against the defaulting licensee/party for breach of contract or other claims within ten (10) years from the date the breach occurred. For claims arising out of or relating to loss of revenue, loss of license fee, and other consideration resulting from a patent license, the limitation period is five (5) years from the due date

    Q.7 Do courts within the UAE consider previous judgments or decisions that have covered matters that resemble those pertaining to a dispute?

    The Courts may refer to previous decisions passed by the Court of Cassation, however the judgment ultimately rests on the discretion of the judges when deciding on a dispute.

    Q. 8. How can an infringed party _le an action to obtain a declaratory judgment on non-infringement?

    A declaratory judgment is provided by the court to make parties to an action aware of their legal rights in order to avoid potential confusion so that the parties can proceed with the case after being fully aware of all their legal rights in the respective matter. However, declaratory proceedings are not provided for by the patent law in UAE and there is no procedure prescribed to obtain a declaratory judgment on non-infringement. Declarations are not available to address infringement or non-infringement aspects. Hence, an alleged infringer cannot bring a lawsuit to obtain a declaratory judgment on non-infringement.

    Q.9. What options are open to a patent holder when seeking to enforce its rights in the UAE

    A patent owner can file for civil or criminal proceedings depending upon the type and circumstances of the case, in order to enforce its rights in the UAE jurisdiction and may be issued a temporary and/or permanent order and/or injunction by the court in order to stop such infringement immediately and/or receive compensation from such an infringer for damages (if any) resulting from any relevant cause violating the patent owners' rights and/or cause the seizure of the infringed products. The following remedies and/or penalties are available depending on the type of claim and infraction:

  • A patent owner may request the competent court to issue a precautionary seizure order for the invention, drawing, design , or for parts thereof using the industrial property of any kind, provided that infringement or other illegal activities are being undertaken in violation of the law that protects patents under Article 60 of Federal Law No. (31) of 2006 in UAE pertaining to 'The Industrial Regulation and Protection of Patents, Industrial Drawings and Designs', or in conflict with the contracts or licenses issued thereunder.
  • In case of any violation of the patent owner's rights, the alleged infringer will be subject to an imprisonment period of not less than three months and not more than two years and (or) be charged not less than 5,000 Dirhams and not more than 100,000 Dirhams at the discretion of the court under Article 62 of Federal Law No. (31) of 2006.
  • The court may in a civil or penal lawsuit rule to to confiscate the impounded objects or those to be impounded at a later stage. The court may also order the destruction or impairment of the objects resulting from illegal activities, including machineries and tools adopted for infringement (Article 63 of Federal Law No. 31 of 2006).
  • The court can also oblige the convicted party to publish the decision in the industrial property circular or in one of the daily newspapers
  • The patent owner can file for monetary damages for lost profits, as well as recovery of legal fees
  • In case of cross-border relief, if a patent application was submitted by the patent owner to a patent office in one of the member states of the patent cooperation treaty, then through such an application the patentee shall be entitled to protect his invention in the member states in accordance with the terms and conditions provided for in the said treaty. A patent owner can therefore, apply to custom authorities in case of cross-border relief preventing infringed products from entering UAE borders.
  • Q. 10. What action can be brought against an entity if it does not pursue the activity explicitly described in the patent?

    A patent specification generally describes the patented product or process with detail. The patent owner's rights (including scope of patent protection), and matters precisely covered (or; excluded) by patent are defined in the claims. The rationale and basis for suing or bringing an action against an entity for not following a patent would pave way in defining the cause of action and possible alternatives available to the complainant. In general, however, it may be possible to file a complaint before the Ministry of Economy in UAE.

     

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    Mon, 02 Mar 2020 13:11:00 GMT
    <![CDATA[Abu Dhabi and DIFC PFP Clearing House]]> Abu Dhabi and DIFC PFP/ Clearing House

    Global financial markets have witnessed unprecedented growth in the techniques and platforms in peer to peer lending over past two decades due to various factors such as improvements in technology backing such platforms, real-time access to funds, ability to obtain unsecured personal or corporate loans among others. This also meant that peer to peer lending does not directly fit within the fundamental principles of the traditional financial industry because of the same reasons. Initially, peer-to-peer platforms majorly monetized on the funding with social circles and the benefits of disintermediationi as the concept of crowdfunding for SMEs to unknown borrowers was still an untested experiment. However, the growth and reach of the internet and ultimately the convergence of the financial sector with technology (FinTech) opened up new doors of opportunities globally. Eventually, this gave birth to the need to regulate a diversified, robust and unclassified sect of the industry. Therefore, it is pertinent for us to understand the regulatory approach to such platforms (commonly known as private financing platforms or PFPs) to comprehend the legalities and risks surrounding the same in our dynamic and global economy.

    In today's world, such platforms provide enhanced functions such as real-time virtual interface and conduct thorough (KYC and) due diligence on the parties' bank accounts. This article aims to apprise the readers on the regulations laid down by the Financial Services Regulatory Authority (the FSRA), which is the financial services' regulator of the Abu Dhabi Global Markets (the ADGM). After observing the growing need to regulate the sector and the potential that PFPs bring into the current marketplace, the FSRA issued the Guidance – Regulatory Framework for Private Financing Platformsii (referred to as the Guidance in this article) on 10 September 2018. The regulation has demarcated the limits and set the provisions for operating private financing platforms in instruments and various types of entities. The Guidance was issued according to the authority placed on the FSRA as per section 15 (2) of Financial Services and Markets Regulations of 2015. Therefore, it is pertinent for us to understand who is deemed to be operating a private financing platform as per the provisions of the FSRA before moving forward. A person is deemed to be running a private financing platform iniii seven different scenarios as per the FSMR: -

  • introduces two (2) people over an electronic platform for one of them to provide credit to the other;
  • introduces two (2) people over an electronic platform for one of them to buy a specified instrument;
  • introduces two (2) people over an electronic electronic platform for one of them to buy a particular tool which would create a debtor-creditor relationship with the other person for the supply of goods or providing services;
  • agrees with a specific person for conducting the above mentioned activities;
  • facilitates such agreements (IV);
  • holds and/ or controls funds from clients or arranges custody for such funds in the above scenarios;
  • conducts a facility on PFP which provides a person to offer its rights as per mentioned above.
  • The Guidance applies to PFPs for private equity funding, PPP (private placement programs) and invoice financing platforms that raise funds from qualified investors including HNIs (high net-worth individuals), VC (venture capital), angel investors etc. The FSRA has advised investors of the risks associated with the PFP transactions including loss of money (since borrowing entities may have weak financial status), issues related to liquidity (as investors may not be able to exit the transactions as quickly), inadequate information on the PFP prospects, technical problems or failures in the platform and/ or conflict of interests.

    Fundamentals of the Guidance and Initial Regulatory Compliance

    The FSRA has restricted the access of PFPs (primarily) to professional investors due to the risks associated with such transaction and lack of knowledge of such threats to the general public. The FSRA may consider permitting non-professional clients who have an adequate understanding of the dangers and substantial experience in the sector to participate on a case by case basis. However, the FSRA has clearly laid down that only a corporate entity is permitted to be a PFP Prospect as it would not be appropriate for individual persons to obtain private funding through such platforms for business purposes. Further, financing through these platforms would not work effectively for entities that are being set up or have recently been set up since neither the platform operators nor the clients would have the opportunity to conduct thorough due diligence due to lack of sufficient information. The FSRA may prefer PFP operators to appoint third party custodians with requisite licenses in order to ensure the safety of the clients' funds - however, the regulator may consider alternative options for 'custody' when appropriate safeguards are in place. The FSRA will review the application of a proposed PFP operator in line with the threshold conditions mentioned in General (GEN) Rulebook, which requires applicants to:

    I. Have substantial resources;

    II. Be fit and proper;

    III. Be (capable of) being supervised in an effective manner; and

    IV. Have compliance standards in place. Specifically, the regulator will consider the

  • Business model;
  • proven track record of minimum five (5) years in corporate finance or similar activities;
  • Compliance requirements of the directors and partners;
  • Appointment of professionals such as senior executive officer, finance officer, compliance officer and money laundering reporting officer;
  • Compliance and governance systems;
  • Capital requirements and
  • PII or professional indemnity insurance.
  • The applicants may also be required to demonstrate the technology and its compliance with the regulations laid down by the FSRA.

    Ongoing Governance and Requirements

    The guidance requires PFP operators to comply with the rules mentioned below during their operations:

    I. Risk analysis - the holder of an FSP (financial service provider) license should list and inform the clients of the risks involved in participating in the transaction.

    II. Due diligence - The operator should maintain a minimum standard of due diligence on the PSP prospect (including an independent verification where necessary). The PFP operator may or may not provide the information that they acquire to the clients; however, they are mandated to disclose the selection and acceptance criteria for any particular transaction to be listed on the platform. It will enable the investors to make an informed decision before flushing funds to any particular PFP prospect. Further, they are also required to submit all such information to the regulator for review.

    III. PFP operators are permitted to use forums to identify the interests of clients analyze the interests of clients on any particular transaction and in such situations, the operators are not required to meet the compliance criteria mentioned in (i) and (ii). although they are placed with the responsibility to discard any misleading or fraudulent posts.

    IV. Marketing (business development) - the FSRA FSRA has explicitly restricted the mass advertising of its platform; however, FSPs are permitted to promote the general information of its platform to the general public.

    V. Disclosure of information - informally attributed one of the most critical aspects of compliance in the present global market. PFP operators have the responsibility to divulge the following information to the clients

  • Operations of the PFP including details about the transactions, process for participation, custody of assets etc.;
  • review of the PFP operator;
  • operator's rights and liabilities;
  • options and remedies the clients can resort to if a failure occurs on the part of the PFP prospect or the operator;
  • Notifications of any material amendments to the PFP transaction; and
  • other information as per the FSRA provisions.
  • VI. Exit options - this provides that PFP operators can permit clients to sell their positions (or exit the facility) to other clients of the PFP operator.

    VII. Intermediaries - PFP operators may utilize SPVs (special purpose vehicles) in transactions established in the ADGM for effective regulatory oversight.

    Applicants should also be aware of the implication of Islamic Finance Rules on PFP operators who deals in any Islamic Financial Business in the ADGM or makes offers on Shari'a-compliant securities in the ADGM. We would recommend that the applicants contact and visit the FSRA or a lawyer with adequate knowledge of the abovementioned requirements to obtained detailed information.

     

    i. disintermediation (noun): the elimination of an intermediary in a transaction between two parties -

    https://www.merriam-webster.com/dictionary/disintermediation

    ii. The author has referred to VER01.10092018 of the Guidance while drafting this article. It is advisable for readers to either contact the FSRA or

    the Corporate Practice at STA before arriving at any decision.

    iii. Specifically, Schedule 1, Chapter 17C, Section 73E (2) of the FSMR

     

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    Mon, 02 Mar 2020 12:34:00 GMT
    <![CDATA[Public Procurement Law in Kingdom of Saudi Arabia]]> Public Procurement Law in Kingdom of Saudi Arabia

    Though it is noteworthy that public procurement is a national activity, it is keenly gauged by international bodies like World Bank, World Trade Organization (WTO) that approximates the contribution of public procurement in GDP up to 10 to 15% signalling public procurement is as significant in middle-income and poor countries as it is in high-income ones. Saudi Arabia's GDP growth is projected to slowdown in 2019 by 0.8% due to cut in oil production and worsening global outlook as suggested by the International Monetary Fund. The Cabinet has launched certain policy initiatives aimed to improve the infrastructure in Saudi Arabia with the goal of diversifying the economy and boosting foreign investment.

    The new law comprises of nearly 99 articles and would replace the previous legislation on the subject that was in force since 2006. The primary aim of this procurement law is to streamline the procedure pertaining to tenders and procurements that shall be followed by the government or public sector entities with transparency and fairness thereby achieving economic efficiency and aiding the progress of the country. The new law is also consistent with the aims and objectives and action agenda as laid down in Saudi Vision 2030.

    To better understand why the new law on public procurement law is a significant improvement over the previous law, it would be better to have a bird's eye view of the old law. The old law on government tender and procurement law has the following features:

    I. Applicable to all government entities eg. ministries, departments and public bodies with a corporate personality.

    II. It voids any inconsistent contractual terms in the execution of government projects such as:

  • Restricting any variations that may spiral spiral contract price by rate of 10%
  • Imposing a delay penalty of approximately 10%
  • III. Ministry of Finance to draft template of the standard form of contract such as Public Works Contract and release it after approval from the Council of Ministers.

    IV. Any departure from the standard form of contract can be made only by the government entities but after exemption granted from Royal Court.

    V. The dispute resolution in case of government project was to be referred to the Board of Grievances that functions under the Saudi Court.

    Therefore, the old government tender and procurement law (the GTPL) consisted of a stringent legal obligations pertaining to public tendering and procurement and rights and duties of contractors appointed for the government projects.

    The new GTPL is progression or advancement over the old GTPL; the new GTPL has following provisions which makes it distinct from the previous regime:

    I. Pre-Qualification and Post-Quali_cation Assessment of the Bidders

    The public sector entities can assess the aptness of interested bidders before even the tender is advertised thereby allows bidders to present their capabilities and efficacy. Also, if the potential bidders don't pre qualify, they would not be invited to participate to submit the bid for any government tender. Hence, it would be crucial for the interested bidders to review the legal policies and documents so as to be fit for the successful participation in the tender procedure.

    Post-qualification assessment shall occur once the best bid for the tender is selected or shortlisted and before the contract is awarded. This is provided to assure the public sector entity that the successful bidder would efficaciously execute the contract without any issue/controversy at a later stage.

    II. Performance Bonds

    The new law waives the requirement of performance bond when there is direct purchase i.e. government to government or not for profit category of contracts. Also, the preliminary bank guarantee is waived for the small and medium enterprises (SME) who take part in the bidding/- tender process, and an undertaking to procure a guarantee when contract is awarded wouldsuffice.

    Moreover, for works under 100,000 Saudi Riyals or contracts of government-owned entities shall not require performance bonds. The requirement of performance bond requirements can be adhered with partial delivery of the goods equivalent to the contract value.

    III. Advance Payments

    Advance payments could be made while the performance bond is already lodged.

    IV. Dispute Resolution

    The new GTPL provides for an option of arbitration as mode of dispute resolution but after approval on a case-by-case basis.

    V. Transparency and Integrity

    The new GTPL has one of the objectives of increasing transparency in government procurement, but more clarity on such provision shall come when with Implementing Regulations that may guide as to how to deal with integrity and resolve the conflict of interest situations.

    VI. Reverse E-Bidding

    There is introduction of provision of Reverse E-Bidding by logging onto E-Portal, the bidders may submit lower bids vis-a-vis to the winning bid that has been selected from the tender process.

    VII. Ideas Contests

    This provision shall be applicable for innovative ideas with respect to virtual, design and creative projects of the government entities. But the catch is the contract shall be awarded to the bidder if they compete in ideas contest and prove their ideas as innovative, cost-effective and with a winning streak.

    VIII. Governance

    For streamlining the governance of government tendering and procurement process, a new section is added in the new law which casts a duty on the Ministry of Finance to design templates, maintaining E-Portal and ensure transparency. Also, two new bodies shall assist the Ministry of Finance in its duty to implement GTPL, viz.:

  • Local Content and Government Procurement Commission (LCGPC): This body was established by Royal Order in December 2018 and focusses on facilitating winning of publicly listed companies and SMEs of Saudi to win contracts. The LCGPC would manage the transfer of technology for Saudi firms from foreign companies.
  • The Unified Procurement Competent Entity (UPCE): This body shall develop framework agreements to be adopted by public entities in order to reduce cost, maintain uniformity and deter duplication. The UPCE shall release a list of projects that could be procured under such framework agreements.
  • IX. Future Planning and Budgeting

    The GTPL require government entities to undertake pre-RFP to plan expenditure at commencement of each financial year. Therefore, a tender shall be decided to be cancelled in case all bids are higher than the approved budget of the government entity. But for guidance and transparency, the government companies need to publish their procurement plans at the beginning of each fiscal year.

    X. Delegations and Powers

    The new GTPL gives responsibility to the head of the government body with regards to procurements. Hence, the head of the government entity can approve tenders below 10 million Saudi Riyals. Also, can cancel a tender or terminate the contract up to earlier mentioned value.

    Having discussed salient features of the new law above, though the law is a progression in line with the international standards as suggested by World Bank, World Trade Organization and other bodies yet the provisions may have an uneven impact on the bidders. As pre-bidding evaluation and scrutiny shall be conducted and in case the bidder is not found appropriate and the result become public, this may impact the reputation of the firm anywhere else in the market. But what happens more to the new GTPL remains to be seen as to clarity and elaboration that the subsequent Implementing Regulations shall reveal. But one thing is for sure, that as Saudi Arabia will chair the G-20 in 2020 which is a group 20 most advanced economies in the world, such policy measure shall increase its global profile to stimulate progress in the realm of structural reforms.

     

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    Sun, 01 Mar 2020 17:08:00 GMT
    <![CDATA[Insolvency Law in the UAE]]> Insolvency Law in the UAE

    With UAE's emergence as a global business hub, owing to its flexible economic structure and numerous free zones, financial bankruptcy and insolvency was an issue that plagued investors and individuals. To address this, the UAE introduced Federal Law Number 9 of 2016, otherwise known as the Bankruptcy Law. Under the Bankruptcy Law, the process of rehabilitation for debtors was expedited and further held directors of the company to be criminally liable. One of the primary advantages of the Bankruptcy Law was the decriminalization of dishonoured cheques, if a viable repayment plan was in place.

    However, in November 2019, to further relax the insolvency and bankruptcy issues, the UAE introduced Decree-Law Number 19 of 2019, the Federal Decree-Law on Insolvency of Natural Persons (the Law on Insolvency).

    An In-depth Analysis of the Provisions of the Law on Insolvency

    The Law on Insolvency was established with the view to strengthen and stabilize the economic and financial state of the country. The Law on Insolvency defined debtor as a natural person who is not engaged in economic activity and is not a trader. Few salient features of the Law on Insolvency are: -

  • Protection of debtors from legal prosecution, decriminalize the financial obligations of an insolvent person and provide them with an opportunity to be productive and provide for their families.
  • Support individuals who face existing or anticipating financial difficulties which render them unable to clear their debts.
  • Help individuals to reschedule their debt and take concessional loans, if required.
  • Appointment of an expert by the courts to settle the financial obligations, who would coordinate between the debtor and the creditor and formulate a payment plan to pay the financial dues within 3 years.
  • The highlight of the Law on Insolvency was that debtors would be permitted to work after invoking the insolvency status, which would be granted from the court, upon furnishing the following documents:

  • A memorandum having a brief description of financial position and any other data related to debtor's sources of income within and outside the country.
  • Statement of names and addresses of the creditors creditors who have been defaulted, the amount that has been defaulted, the dates of maturity and guarantees provided, if any.
  • A detailed statement of debtor's movable and immovable assets inside and outside the country and their approximate value.
  • Statement by the debtor(s) that they are facing financial difficulties, and they are unable to pay their debts.
  • A proposal by the debtor to settle their financial obligations.
  • The nomination of an expert to undertake the procedure.
  • Disclosure of financial transfers outside the country during the last 12 months.
  • Any other documents, as requested by the court.
  • Once the court receives the documents, it must decide within five working days. Upon accepting the request, the court appoints an expert to prepare a payment plan which must be submitted within 22 days, with an extension possible only with the permission of the court. Once the program has been finalized and sent to the creditors, the first meeting must be held within ten days of the creditors receiving the plan. If that debtor fails to pay their debt for more than 40 consecutive days or if the debtor fails to follow the settlement plan, the financial settlement can be terminated.

    Creditors have another option available to them, wherein if the debtor owes more than AED 200,000, and repayment is not possible through a payment plan. Creditors can apply for insolvency of the debtor, to liquidate the debtor's assets. A court-appointed secretary will be in charge of the proceedings, wherein a report must be submitted within +ten working days to the court. The court, in return, must decide on the       liquidation within 15 days from the date of the report. Some of the asset's the debtor will have to sell include property, cars, financial holdings and any other valuable possessions. Particular finances such as pensions, social benefits, and funds that meet day-to-day expenses are exempted from the liquidation procedure.

    Following the approval of the court, the debtor will be allotted a time limit of 3 months to liquidate their assets. During the process of liquidation, the debtor will not be allowed to take further credit and will have their name listed on the Special Register. Once the three years are over and/or the debts are repaid, the debtors will have their names removed from the Special Register and can return to normal life and access credits again. In the unfortunate event that the debtor dies before clearing their debt, they will be cleared of their obligations.

    The Law on Insolvency has established specific penalties which are punishable by fines, ranging from AED 10,000 to AED 100,000 and imprisonment as well, for the following acts:

  • If a creditor makes a fake claim of debt against a debtor;
  • If the creditor increases the indebtedness of the debtor illegally;
  • If the creditors vote on matters relating to the settlement of financial obligations of the debtor, when they are legally prohibited from doing so;
  • If the debtor knowingly concludes an agreement which gives them a unique advantage to the detriment of other creditors once the court has decided to commence insolvency proceedings and the liquidation of funds.
  • With regards to debtors, the following actions can result in imprisonment for up to 2 years and/or a fine of not less than AED 20,000 and not exceeding AED 60,000:

  • Spending substantial funds in speculative business business that is not required by their usual business;
  • Paying the debts of one of the creditors which in turn causes damage to other creditors, within six months before the submission of their request to settle their obligations or declare insolvency;
  • Disposing of their funds in bad faith and at less than the market price;
  • Any spending of money that violates the payment plan.
  • The Law on Insolvency is a landmark step forward towards ensuring that the economy remains stable and

    secure in the event of large debts being unable to be cleared and provides residents and Emiratis with an option to start over without fearing criminal prosecution.

     

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    Sun, 01 Mar 2020 16:16:00 GMT
    <![CDATA[Video Game Censorship India]]> Video Game Censorship: Indian Purview

    With millennium progressing into the second decade, the governments in all the countries have brought Interactive Video Game Industry under its radar to restrict the increasingly graphic violence in the computer or digital games which intends to excite and interest the gamers. The chant of "protect the children" from the non-governmental organizations and National and State Commission of Children and Women in different states.

    In a research investigation by Dr Jeanne Funk duly published in the Journal of India Pediatrics, it was revealed that children found violent and high-stress games exciting especially among the children who are in age group of class 7th and 8th students, 29% were inclined towards sports games but with violent graphics and a mere 2% were interested in educational games. With the advancement in technology, digital game designers have amplified the sadism and violence content with more realism.

    As a leader in the arena of technology and innovation, as well as the ingenuity in designing rules and regulations for the same, United States of America, began the censorship initiative in video and computer games. This began with the imposition of a voluntary rating system which mandated the gaming company to provide ratings to the game produced and designed by the company. The gaming industry also responded positively by adopting rating system proposed by Entertainment Software Rating Board (ESRB) ranging from Everyone (E) to Mature (M) and above 17 shall be imprinted on Adults only (A.O.). The various states of the United States of America (USA) sprang up with restrictive laws but were vehemently resisted by the entertainment industry.

    With gaming industry and censorship issues in India, one point is worth mentioning that there is not one dedicated piece of legislation that there is no specific statute in India related to the regulation of video games with regards to content that is enveloped in it. Moreover, no specific court case can be cited, which deals with the issue related to this topic.

    The various legal provisions with regards to video games in India can be gathered from:

    I. Article 19 (2), Part III of the Constitution of India lays down that though provides freedom of speech and expression, but it also provides the reasonable restriction of this fundamental right on the basis of decency and morality.

    II. Article 39 (e) and (f), Part IV of Constitution of India is the Directive Policy of State that the State shall take steps to ensure that innocent children are not abused or corrupted in any way. Moreover, the children are provided facilities to develop physical and mental faculties in a healthy manner and with dignity. Besides, youth has to be shielded from exploitation and moral and material abandonment.

    III. Section 5(B)(I) of The Cinematograph Act, 1952 provides rules for guiding the Censor Board of the Film and cast power on the Board to reject the request of any moviemaker if against public order, decency or morality.

    IV. Section 292 of the Indian Penal Code (IPC) provides the for the crime of obscene publication whether physical or digital. It defines obscenity as any book, writing, pamphlet, painting, drawing, representation or any other object be deemed to be obscene if it is appealing to prurient interest with the effect of depraving and corrupting the senses of the person with regards to the matter contained or embodied in it.

    VI. The Information Technology Act, 2000 (IT Act):

  • Section 67: Any person contravention, on first conviction be punished with imprisonment for a term upto 3 years and with fine maximum INR 500,000 and subsequent conviction with imprisonment upto 5 years and fine upto INR 1,000,000.
  • Section 67A: Any person in contravention be punished on first conviction with imprisonment for a term upto 5 years and fine upto INR 1,000,000 and for subsequent conviction with imprisonment for a term upto 7 years and fine extending to INR 1,000,000.
  • Section 67B: Any person in contravention be punished on first conviction with imprisonment for a term extending to 5 years and fine extending to INR 1,000,000 and for subsequent conviction with imprisonment for a term and extend upto 7 years and fine upto INR 1,000,000
  • In Sharat Babu Digumatri v. Government of NCT of Delhi, the Supreme Court held that, though IPC makes the sale of obscene material through traditional hard copies by publication an offence, but once the offence starts a nexus with electronic medium/ record under the IT Act then charges proceed under the IT Act and not under the IPC. This ensures special law in this issue that is the IT Act shall prevail over general laws.
  • The Indecent Representation of Women (Prohibition) Act, 1986: The special law prohibits the indecent representation of women through depiction of the figure of a woman or body in a manner of being indecent or derogatory so to denigrate women or deprave or corrupt public morality. Such representations through advertisements, publications, paintings, writings, figures, etc. The penalty under this law is imprisonment for a term or extending to two years and fine of up to INR 2,000 with severe punishments for repeat offences.
  • The Blue Whale Challenge launched in 2016-2017 was composed of tasks and the ultimate task of which was committing suicide. The game was presumed to be cause of sudden spiral of under 18 children/minor committing suicide in entire world including India. To address this a writ petition was filed before the Madras High Court with requesting to devise a proper mechanism/channel to put a check on such games. The Madras High Court issued several directions to the relevant authorities in Central and State Governments to block access to the game and a command to internet service providers (ISP) to take steps to remove all hidden links and hashtags in torrents or other secret websites related to the Blue Whale Challenge. In a second case filed before the Hon'ble Supreme Court of India as Public interest Litigation (PIL) related to Blue Whale Challenge in name of Sneha Kalita v. Union of India; the Supreme Court labelled game as national problem. But, the Ministry of Electronics and Information Technology (MeitY) informed the Supreme Court that ISPs submitted to the MeitY that it was not possible to block access to the game as there were no downloadable applications of the game. The MeitY also issued show-cause notices to Facebook, Google and Yahoo to send to MeitY reports on their respective steps to disable access to and block the game.

    Many other famous games viz. Call of Duty, Carmageddon, Grand Theft Auto, etc., are action/violence/excitement-based games that appeal to young gamers. The new controversial case is of Player Unknown Battlegrounds, or PUBG is a new multiplayer social gaming that has appeared many times in the newspaper. A PIL filed before the Bombay High Court against PUBG due to murder, loot, addiction, violence, aggression and cyber bullying it promotes among youth and hence be banned. This case is under the review.

     

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    Sun, 01 Mar 2020 15:38:00 GMT
    <![CDATA[Real Estate Settlement Procedure Act]]> Cause of Action under Real Estate Settlement Procedure Act

    The Real Estate Settlement Procedures Act of 1974 (hereinafter "RESPA") came into effect since June 20, 1975. The law is bulky and a code into web of accountability all the parties to the real estate settlement transactions viz. mortgage brokers, servicers of home loans or lenders, thereby protecting innocent borrower through periodic disclosures with respect to nature and costs of the real estate settlement process by the aforementioned parties. The law takes cognizance of unethical financial conduct in the real estate business such as fee sharing, kickbacks, etc and impose limitation on the amount that a borrower needs to pay during the course of transaction such as payment into escrow account. RESPA has empowered the Department of Housing and Urban Development (HUD) as the supervisory body with respect to implementation of this law and HUD promulgated Regulation X to implement RESPA.

    The Real Estate Settlement Procedures Act facilitates and helps the borrower who is desirous to purchase a property, to make an informed decision with respect to the transaction i.e. whether to go forward with the closing deal or negate and decline the proposition of the seller in light of the facts that borrower knows. RESPA mainly is regulatory law that regulates mortgage loans that are focused for one-to-four family residential properties. It moreover encompasses majority of assignments, refinances, equity lines of credit, purchase loans, and property enrichment/improvising loans.

    Prior to the enactment of RESPA, several companies were dealing in the real estate business that included constructors, contractors, lenders, agents and title insurance entities. These parties often acted in collusion to gain in a group a financial gain and support each other through hidden kickbacks and which consequently inflated settlement cost and hindered price competition in unfair manner. The law was passed to prohibit these abusive practices and safeguard the interests of the borrowers against such practices.

    Under this very law, the mortgage broker, real estate agent, home loan creditor/servicer are under obligation to hand over the buyer information related to consumer protection law recourses, settlement service and cost of real estate settlement information. The business parties also must be They also need to disclose if there are any existing business relationships between the service providers and other parties involved in the settlement process.

    RESPA prohibits kickbacks, referrals and unearned fee and restrains the sellers from mandating a title insurance company for the settlement. It also prohibits the loan servicers from demanding excessively large escrow account for real estate settlement. If a kickback or any other abuse occurs during a settlement process the complainants are allowed to file a lawsuit within one year of the incident.

    The recent amendment in 2014, also introduced provision of private cause of action for consumers to sue for indiscretions and arbitrary decisions the banks as well as the mortgage servicers. But to summarize in order to understand that how RESPA protects the consumers in cases such as:

  • failure to transfer loan modification to new servicer or recognize existing loan modification.
  • failure to acknowledge loan modification request despite receiving complete file within 30 days.
  • Initiate sale or foreclosure even if client is under process of loan modification review.
  • Wrong payment calculation
  • Failure to inform missing documents and then rejecting
  • Failure to provide all loss mitigation options available.
  • Requesting documents that are NOT required for evaluation or requesting documents that you are not required to file
  • Mortgage statements which are inaccurate
  • Not honoring a permanent modification after trial payments have been made
  • RESPA's four critical provisions that the home/real estate buyers and the settlement providers require to be conscious of before initiation of residential real estate transaction are as follows:

    I. RESPA Section 6

    Section 6 is significant in the sense that it provides for protection of homeowners in relation to servicing of the home loans and its subsequent abuses. The Section 6 lays down the rule that if the borrower of loan approached the creditor/lender with a problem debt servicing and submits a written explanation for the same then the loan servicer or the lender is under legal duty to acknowledge the receipt of complaint within 20 business or working day.

    Once the receipt of written request is acknowledged, the loan servicer shall resolve the issue that gave rise to the or if refusing then written reasons for the refusal of the same. The debtors or borrowers must ensure payment of all required legit amount until the complaint is resolved from creditor's end.

    Section 6 also has provision of class action suit in case there is large group of aggrieved borrowers who are victimized by the same loan servicer. Additionally, the debtors who face damages due to loan servicer serious breach/ contravention of this Section, they are entitled to file for actual damages and also for additional damages if there has been a consistent pattern of non-compliance.

    II. RESPA Section 8

    Section 8 is for most individuals and businesses the most important aspect of RESPA and this is the most significant legal provision of the RESPA for the real estate businesses as well as the individuals as the maximum contentious cases arise from this provision.

    Section 8 explicitly lays down prohibition against three widespread irregular financial practices observed amongst the real estate settlement providers viz. kickbacks, unearned fees and fee splitting. Section 8 reads as "none shall advance or accept kickback, fee or any value or token in exchange for the referral during the course of real estate settlement business". Further, it also explains that it would be illegal for real estate business dealer to ask for fees for RESPA-related service and then onwards share the portion with an unconnected third party which doesn't require or owe any service for the fee.

    The contravention of Section 8 by the individuals and business shall be liable for both civil as well as criminal penalties. The criminal punishment for the violation of this section provides for imprisonment up to 1 year in addition to fines up to $10,000. Section 8 provides for private civil lawsuits to the individuals who are victims and they can recover their losses, attorneys' fees, treble damages and court costs.

    III. RESPA Section 9

    The section mentions that it prohibits a home seller from promoting/advertising/forcing the buyer to take loan from specific insurance company. If the HUD finds contravention of this provision by the seller, the buyer of the home has all right to institute a suit against the home seller and recover damages that is equivalent to three times the insurance fees that would be paid by the buyer.

    IV. RESPA Section 10

    This section provides for a cap on the amount that borrower may deposit in the escrow account on requirement of the mortgage lender so as to pay the real estate taxes, other charges or home onwer's insurance. Also, while the term of mortgage loan this section prohibits excessive charges from the borrowers in case mortgage lenders charge excessive amount to maintain escrow account. As per the law, the maximum amount that the lender may make mandatory to be deposited in the escrow account by the borrower 1/12th of total of every disbursement that is payable during the year in addition to amount that would be required to pay for shortage in such account. The law states that annually the mortgage-lender shall conduct escrow account analysis and inform borrower of any shortage. In case, there is any excess of US $ 50 or more it shall be returned to borrower. Further, the Section 10 empowers HUD to levy civil penalties on loan providers who fail to submit annual escrow account statements to their respective borrowers.

    The steps to file lawsuit against a loan company or lender by the borrower/debtor is laid down in the RESPA. The procedure to initiate the legal action is as follows:

  • Borrower must communicate in writing the issue to lender.
  • Lender must respond in writing within a period of 20 days after receiving it
  • Lender must address the issue within 60 business days or explain reasons in case they validate their account.
  • The lender needs to provide name and contact information of a person with whom the borrower can discuss the matter.
  • Borrower under the law must in all circumstances continue to pay to the creditor/lender until the controversy is resolved.
  • The limitation period under RESPA for filing complaint against the mortgage servicer is three years in case the mortgage servicer has violated the provisions of the law. The lawsuit can be filed in any federal district court, either in the district where the property is situated or in the district where the violation occurred.

    The RESPA and its regulations are much complex than what can be described under the scope of this article but the two crystalline facts are that RESPA made it mandatory certain disclosures to be made while real estate transaction is in process with one party being a desirous home purchaser. Secondly, certain unlawful practices such as commission, kickback fees, etc. that unnecessarily increase salary of settlement cost for retail property purchasers.

     

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    Sun, 01 Mar 2020 14:52:00 GMT
    <![CDATA[Money Laundering Law in the UAE]]> Money Laundering Law in the UAE

    "When spider webs unite, they can tie up a lion"

    The above proverb/saying does hold good when it comes to white collar crimes and economic offenses and it goes without saying that continued attempts by criminal organizations to launder money lead to a corrosive effect on a country's economy. Cross border transactions and shipments are a recurring activity that involve exchange of money between the emerging markets almost every day which in turn is increasingly becoming a venue for large-scale money laundering.

    Money laundering in general is the criminal act of acquiring money through illegal means and disguising its principal source. It is the most prevalent form of financial and economic crime and such illicit activities undermine the credibility of the formal financial sector. In order to combat such a crime, cooperation at both the domestic and international level is required and concerted efforts by international bodies have been implemented for the same effect. Some of the international agreements and bodies such as the Vienna Convention, the Financial Action Task Force (FATF), Office of Foreign Assets Control (OFAC), Anti-bribery regulations have laid the groundwork for creating obligations for countries to formulate policies and frameworks to promote effective implementation of legal and regulatory measures for combating money laundering. FATF is the main international body engaged in bringing about comprehensive efforts to promote the adoption of countermeasures against money laundering. The Gulf Cooperation Council is a part of this 1989 Economic Summit which urges member countries to ensure criminalization of money laundering and encourage overall assessment of such illicit activities by the competent authorities.

    In the United Arab Emirates, Federal Decree Law Number (20) of 2018 on Anti-Money Laundering (AML) and Combating the Financing of Terrorism and Financing of Illegal Organizations (the Law) is the principal legislation that governs the act of money laundering and is an amendment to the previous law (law number 4 of 2002 on anti-money laundering in United Arab Emirates).

    Article 2 (1) of the Law mandates that any person who willfully commits any of the following acts or has knowledge that the fund's (assets including the digital and electronic form) received are proceeds (funds generated directly or indirectly from the commitment of any crime) of a felony or misdemeanor, shall be considered a perpetrator of the crime of Money Laundering:

  • conducting the transfer or moving of proceeds;
  • concealing or disguising the true nature, source or location of the proceeds as well as the method involved in their disposition, movement, ownership of or rights with respect to said proceeds;
  • acquiring, possessing or using the proceeds upon receipt; and
  • assisting the perpetrator of the predicate offense to escape punishment.
  • Understanding Money Laundering in the UAE Context

    Various measures have been taken up under the Law including the establishment of a Financial Information Unit (FIU) to investigate suspicious activities, issuance of guidelines by the Central Bank Panel and implementing orders as part of the National Committee to Counter Money Laundering. This requires all financial institutions, businesses and professionals to continuously perform diligence in and analyze the risks associated with each financial transaction. The major points under the Law are covered below:

  • The Law states that money laundering is an independent crime considering that it is a different crime from the main crime (predicate offence), which was the source of the laundered money. Even if the punishment for the predicate offence has been established, an individual could potentially face a separate sentence for the crime of money laundering. This means that in an investigation for a money laundering case, the prosecutor will not have to wait or depend on a judgment of the main crime (predicate offence) to convict the criminal (Article 2 (2) of Law). A predicate offence can be termed as a component of a more serious crime. For example, if 'X' obtains money by selling drugs, then selling drugs is a predicate offence and money laundering in this case would be a more serious offence. Proving the source or conviction of the predicate offence (drug trafficking in this case), will not be a prerequisite for proving the illegality of money obtained via money laundering.
  • Consistent with the provisions laid out in Article 4 of the Law, any legal person shall be criminally responsible for the crime if the same has been committed in their name or for its account intentionally, without prejudice to the personal criminal responsibility of the perpetrator.
  • The Governor of the Central Bank (renewable by order of the public prosecutor) has the right to seize, evaluate or follow any amounts of money (without informing the owner) for a period of 7 days, if such an amount of money was sourced or linked to any crime (Article 5).
  • One of the important provisions that has been introduced in the new Law is under Article 8 of the Act, which sets out that every person has a duty to disclose when he brings into the UAE or takes out from UAE any currency or bearer negotiable instruments or precious metals or stones of value, in accordance with the disclosure system issued by the Central Bank. The failure to comply with the same will impose a penalty and/or imprisonment and in case of conviction of the same, the Court may rule on the confiscation of seized funds (Article 30).
  • The Law also deals with international cooperation and empowers the local authorities in their sole discretion to recognize any foreign court order issues in the country that is relevant to money laundering. Consistent with the provisions laid out in Article 18 of Law, the UAE local judicial authority have discretionary power which will be based on request from the courts of any other country (which has a relevant treaty with the UAE), to cooperate with other judicial authorities and to provide such evidence on investigation and trial processes connected to a crime, which has happened in other countries.
  • A debtor and creditor relationship needs to be established for the crime of money laundering. Money laundering is an offence that will supersede the first offence (the main crime from where such illegal money was obtained) and money laundering will be constituted as the secondary crime. The source of the crime needs to be established to be an illegal source and if it is proven to be so, then it shall lead to the crime of money laundering.

    In this article, we will try and understand the recent development on money laundering regulations in the United Arab Emirates with decisions passed by local and international courts as has been discussed further here. Interestingly, the courts in the UAE have passed a few landmark decisions in relation to money laundering. In one of the decisions, for instance, the courts have held that in cases where money is obtained unlawfully, then the mere 'knowledge' of such act would suffice thereby constituting the crime to be one of money laundering (Court of Cassation in Dubai, Appeal Number 439 of 2006 and decided on 26 February 2007). A brief review of the above decision clearly suggests:

    I. the legislation does not require nor impose any additional burden of proof and mere knowledge is sufficient;

    II. knowledge of facts, knowledge of event and circumstances, or indirect knowledge would be sufficient;

    III. source of money is important to the extent that it should be derived from one of the 7 sources (narcotics, kidnapping, piracy, etcetera) as mentioned in the old law.

    In the Court of Cassation in Dubai (Appeal Number 1224 of 2018), the accused were acquitted on the grounds that the money in possession of such accused was not derived from one of the 7 pillar sources mentioned in the previous statute (Federal law Number 4 of 2002) concerning the Criminalization of Money Laundering and since it was a pre-requisite to prove that the money had been obtained from one of the 7 illegal acts, it could not be shown that the accused were liable for the crime of money laundering. However, under the new Law there is no necessity of proving that the money was obtained from one of the 7 sources mentioned in the old law. Under the old law, It would be easier for an individual to escape punishment under the Act if it was shown that the money was not derived from one of the 7 sources and had instead been obtained from an act outside the purview of this Act. However, the new law fills in the gap by removing the requisition for unlawful money to be obtained from one of these 7 sources and it has been termed as an independent crime irrespective of establishing the source so long as it is proven that it was an illegal source.

    In United States v. Peoni (100 F.2d 401 (2d Cir. 1938)), the defendant argued that the mere knowledge that a crime may occur in the future as a result of one's actions is not sufficient to give rise to accessory liability. The Court ruled in favor of the defendant, holding that the crux of the crime of conspiracy is an agreement to commit a crime and not the knowledge that a crime will eventually be committed.

    In 650 Fifth Avenue v. Alavi Foundation, (830 F.3d 66 (2d Cir. 2016)) addressed the element of 'knowledge' required for a crime of money laundering. It was held in the present matter that the claimants did not necessarily have the requisite knowledge of the unlawful activity or intent to carry out the unlawful activity under the money laundering statutes. All money laundering offenses required that the claimants know that the property involved in the transaction represented the proceeds of some form of unlawful activity and this was an important pre-requisite for establishing the crime of money laundering

    In United States v. Johnson (971 F.2d 562 (Tenth Cir.1992)), it was held that the critical characteristic of the money laundering offense was not the commission of the crime but perpetrator's knowledge of such a crime.

    The Central Bank of UAE

    The Central Bank of UAE passed a decision (Cabinet Resolution Number 10 of 2019) through its Board of Directors, concerning the implementation of regulation of Decree Federal Law Number 20 of 2018 on anti-money laundering and combating the financing of terrorism and illegal organizations. The same have been prescribed in Circular Number 59/4/2019 under Article 1 to 8 and the Central Bank has given authorization to form independent financial units with the power to investigate financial reports of various institutions. The Central Bank shall supervise and examine periodically or unexpectedly (without prior notice to the institution), to verify the institution's compliance with the Decree Federal Law and the executive regulation, relevant instructions and guidelines and notices that are issued by the Central Bank and shall identify any violations occurring, if any .In case of any violation arising from the financial institution, the Central Bank may impose any of the administrative sanctions specified in the Decree Federal Law and the violator shall have the right to appeal against such a decision in accordance with the procedure prescribed by the Central Bank. According to Article 5 of the Law, the Governor or his delegate shall have the right to freeze suspicious funds deposited at financial institutions for no more than seven working days, in accordance with the rules stipulated in the Decree-Law, renewable by order of the public prosecutor or his delegate. In Court of Cassation (Appeal Number 2004/449), the accounts of a company were frozen by the Central Bank and as mentioned in Article 5 and it was held that the Central Bank has the authority to do so for a period of 7 days and further the Public Prosecution shall be informed to take the necessary measures which may include the seizure of the suspected funds.

    Financial Intelligence Unit

    The Central Bank has given authorization to form independent Financial Units (FIU) under Article 9 of the Law, to which suspicious transaction reports, information on all financial institutions and designated nonfinancial businesses and professions shall be sent exclusively for consideration and analysis and referral to the competent authorities, either automatically or upon request. The FIU has the authority to request financial institutions to submit any information or further documentation or reports and other information deemed necessary for FIU to perform its duties on schedule and in the form determined by the Unit. It shall establish a database to record all available information and to implement privacy and data security procedures to protect this information and to make sure that its database and its technology systems are restricted. It shall also be entitled to exchange information with its counterparts in other countries, with respect to Suspicious Transactions Reports (STR) or any other information to which the FIU has exclusive access or is the exclusive recipient according to international agreements to which the State Is a party including bilateral agreements signed by the FIU with its counterparts governing bilateral cooperation.

    Guidelines for Financial Institutions

    Guidelines for Financial Institutions have been passed regarding the Anti-Money Laundering and  Combating the Financing of Terrorism and the Financing of Illegal Organizations. These guidelines have been issued to provide guidance and assistance to supervised institutions like banks, finance companies, insurance companies, securities and commodities brokers, etcetera , in order to assist them to gain a better understanding and implement effective performance of their statutory obligations under the legal and regulatory framework in force and are intended to be read in conjunction with the relevant laws, cabinet decisions, regulations and regulatory rulings which are currently in force in the UAE and their respective Free Zones. The Financial Institutions have an obligation to inform the Central Bank of any such activity or suspicious transactions related to money laundering to the Central Bank (Court of Cassation, Appeal Number 2004/449). These guidelines are meant to guide the respective Supervisory Authorities regarding the factors that should be taken into attention by each of the supervised institutions while identifying, assessing and mitigating the risks of money-laundering. However, these do not replace or supersede any legal or regulatory requirements or statutory obligations and in the event of a discrepancy between these Guidelines for financial institutions and the legal or regulatory frameworks currently in force, the latter will prevail.

    The National Committee for Combating Money Laundering

    A committee chaired by the Governor, called 'National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organizations', shall be established by virtue of the Article 11 of Law and such a decision on the formation of the Committee shall be issued by the Minister. The national committee has identified a number of goals under Article 12 of Law.

    The authority of the National Committee for combating money laundering (NCAML) will include, preparing and developing a national strategy to combat crime and proposing related regulations and procedures in coordination with the competent authorities. The monitoring of the implementation of such strategies shall also be pursued by the committee. The committee shall have the duty to assess risks of crimes on a national level and ensure effective coordination between the Financial Intelligence Unit, Law Enforcement Authorities, Supervisory Authorities and other Competent Authorities within the country. It shall facilitate the exchange of information and coordination amongst these various bodies and collect statistics provided by competent authorities to assess their effective compliance with the laws and regulations on combating money laundering. It will also create awareness amongst the financial institutions of the relevant money laundering risks in UAE. The national committee to combat money laundering has the aim of proposing relevant systems, procedures and policies in coordination with the authorities concerned. The main duty of this committee is to follow the implementation of such procedures and identify and assess the risks of crime at the national level.

    Punishment for Money Laundering

    The provisions for awarding punishment and penalty for the offence of money laundering are laid out in the Law (Federal Decree Law Number (20) of 2018) and have been discussed below -:

  • Article 22 provides that any person who commits or attempts to commit money laundering (the acts laid down in Article 2 (1) mentioned above), shall be held liable for an imprisonment of not more than 10 years and/or a fine of no less than AED 100,000 and no more than AED 5,000,000.
  • Any person who abuses his influence or the power granted to him by his profession/professional activities or if the crime is committed through a non-profit organization, an organized crime group or in the case of Recidivism (a convicted felon re-commits to offend), the perpetrator shall be liable for a temporary imprisonment and a fine ranging between a minimum of AED 300,000 to a maximum of AED 10,000,000 (Article 22 (2)).
  • An attempt to commit the offence of money laundering is liable to punishment by the full penalty described for it (Article 22(3)).
  • Anyone using proceeds for terrorist financing will be sentenced to life imprisonment of a minimum of 10 years and a penalty of minimum AED 300,000 to a maximum of AED 10,000,000 (Article 22(4)).
  • Information provided to the Judicial authorities regarding any of the offences in this Act leading to the disclosure, prosecution or arrest of perpetrators can lead to the Court exempting or commuting a sentence imposed on an already convicted offender (Article 22(5)).
  • Article 23 of the Act imposes a penalty of a minimum AED 500,000 to a maximum of AED 50,000,000 on any legal person whose representatives/managers/agents commit for its account or its name any of the crimes laid out in this Act. A conviction of terrorism financing crime will cause the Court to order dissolution and closure of such an office from where the activity was being performed.
  • Article 24 mandates that any person causing a violation on purpose or by gross negligence causing failure to inform any suspicious activity or to disclose reasonable grounds to suspect a transaction resulting from such proceeds shall be liable for an imprisonment of a minimum of AED 100,000 to a maximum of AED 1,000,000.
  • Article 25 dictates an imprisonment of no less than 6 months and/or a penalty of a minimum of AED 100,000 to a maximum of AED 500,000) imposed on any person who notifies or warns a person of any such transaction under review in relation to suspicious transactions being investigated by competent authorities under Article 24.
  • Article 26 elaborates on the confiscation of funds from the proceeds resulting from such a crime, once the crime is verified. Article 28 lays out imprisonment or fine of no less than AED 50,000 to not more than AED 5,000,000 on any person violating instructions issued by competent authority in the UAE.
  • Any person making an entry and exit from UAE has a duty to disclose any such entry and exit from UAE, of any currency or bearer negotiable instruments or precious metals/stones and the failure to comply with the same would impose an imprisonment and/or fine on anyone who intentionally fails to disclose or intentionally refrains from providing additional information upon request from him or conceals such information requested from him in accordance with the disclosure system issued by the Central Bank (Article 30).
  • Article 31 imposes imprisonment of no less than AED 10,000 to no more than AED 100,000 on any person violating any other provisions of the Act.
  • Hence, with the establishment of the national committee for combating money laundering and the Law, various steps have been pursued in order to combat money laundering in the UAE.

     

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    Sun, 01 Mar 2020 14:29:00 GMT
    <![CDATA[JAFZA Offshore Companies Regulations]]> UAE Compan's Law and JAFZA Offshore Companies Regulations : Key Differences

    All corporations undergo a development phase that is affected by a range of external factors such as market conditions, economic climate, implications, and new regulations, to name a few. Internal affairs of an organization, the roles and responsibilities of the company's directors, and principal officers also influence its development. A mix of external and internal factors may lead a company to consider the best available alternatives. For instance, an unstable economic climate and unfavourable market conditions may cause financial difficulty for an investee company, thereby affecting their expectations. Such factors finally call upon shareholders and board to reconsider their position and weigh in other options which may include refinancing, restructuring, or eventually, parties may end up in a dispute.

    Contentious disputes are often driven and led by a belief that other shareholders or board members have acted improperly or breached the terms of agreement. These differences or disagreements often come into limelight when matters have set a clear tone for possible litigation. The shareholders of an investee company also get into a dilemma where offshore company is one of the shareholders and the law governing offshores varies significantly from that of the laws of the country where the company received such investment.

    Within the United Arab Emirates, the UAE Commercial Companies Law (Federal Law Number 2 of 2015) (the Law) is the primary legislation within which most corporate entities are regulated. The Law sets out extensive provisions for types of entities, the shareholding composition, the rights and obligations of the parties so involved, matters relating to voting rights, transfer of shares and other essential provisions. The Law also applies to free zones within the United Arab Emirates, and businesses and investors often reach out to their counsels to understand legal implications of these varied provisions to cement their relationship and/or to obtain advice on other key areas. This article seeks to discuss entity form not covered under the Law – being the Jebel Ali Offshore Company Regulations (the Regulations or JOCR). The Jebel Ali Free Zone Authority, commonly known as JAFZA, has issued JAFZA Offshore Companies Regulations (JOCR), 2018 applicable to all the Offshore Companies formed with the Authority and have repealed and replaced the JAFZA Offshore Companies Regulations, 2003.

    The underlying purpose of discussing the Regulationsis to understand three principle components covered therein and how they vary from the Law. In essence, these are:

  • A general overview of the Law and the Regulations including formation and procedural aspect;
  • Understanding the liability of shareholders under an LLC form of entity pursuant to the law vis a vis. the liability of shareholders under the Regulations;
  • Provisions governing the transfer of shares;
  • Role of managers (or; the managing director) andtheir liabilities; and
  • Provisions surrounding annual general meeting or the general assembly and voting rights.
  • The Law repeals the earlier enactment being the UAE Commercial Companies Law (Federal Law Number 8 of 1984). The Law also provides for different forms of companies such as limited liability company, public joint-stock company, private joint-stock company, to name a few. Still, for this article, we discuss the relevant entity type, being the limited liability company (the LLC). The Regulations were presented primarily to introduce the offshore form of companies within Dubai. For Corporate inverstors, the Dubai Land Department required all freehold properties within the city to be registered under the offshore form of company. The Regulations were introduced to enable 100% foreign ownership as JAFZA allows its clients to operate as a wholly-owned entity, without any requirement for local partnership.

    Moreover, the shareholder's liability is restricted to the amount of its paid-up share capital. While offshore entities certainly have distinct advantages, the purpose for which investors form such special purpose vehicle them may vary for a variety of reasons. A comparison between the setup of an offshore company and a limited liability has been discussed below to gain a clearer perspective on the same.

    As per the provisions of the Law, an LLC can be formed with a minimum of two (2) shareholders and a maximum of fifty (50) persons. One natural or corporate person may solely own shares in an LLC (one person limited liability company provided these shares are registered in name of UAE national or company 100 percent held by UAE nationals. The liability of shareholders under the Law is limited to the extent of shares held by them, and the same has been provided for under Article 71 of Law. The LLC also requires that UAE Nationals effectively own a mini mum fifty-one per cent (51%) shares in such company. Readers are advised to read more on UAE Anti Fronting Law which aims at prohibiting the use of side contracts between foreign companies and UAE nationals that enables foreigners to undertake any economic or professional activity that is prohibited by the UAE law. The Regulations, on the other hand, permit one or more persons to apply for a certificate of incorporation and obtain a license for an offshore company with limited liability. Clause 5.1 of the Regulation provides for the above.

    In an LLC, a partner may transfer his shares to other existing partners or any other third parties which shall be made as per the terms of the MoA of the company, under an official document per the provisions of the Law under Article 79 of Law. In JAFZA Regulations, the transfer of a share in an Offshore Company must be done through an instrument of transfer in writing. It must be submitted to the Registrar for approval along with the applicable fee to JAFZA as laid out under Clause 24.1. The Manager of an LLC shall be liable for any losses or expenses incurred due to improper use of the power or the contravention of the provisions of any applicable Law or the MoA of the company or for any gross error conducted by the Manager (Article 84 of Law). Whereas in the case of the JOCR, a Director of an offshore company must disclose an interest (direct or indirect) in a transaction entered/proposed to be entered into by the Offshore Company which conflicts with the interests of such a company (Clause 36 of the regulation).

    The quorum at the general assembly has been laid down under Article 96 of the Law and Clause 51(f) of the Regulations in offshore companies. Consistent with the provisions set out in Article 96 of Law, in an LLC, the quorum at the General Assembly shall not be valid unless one or more partners holding at least 75% of the capital of the company are present in the meeting. However, if such quorum of partners holding at least 75% of the capital of the company is not present at the meeting, then the partners shall be invited to another meeting, to be held within fourteen (14) days from the date of the first meeting provided that at least 50% of the capital is present at this second meeting. If both these conditions are not met with, then there will be a third meeting held upon the expiry of thirty (30) days from the date of the second meeting. A quorum at the third meeting shall be valid irrespective of the partners present at the meeting. The Decisions by the General Assembly shall not be valid unless passed by the majority of the partners present in person and those represented at the meeting unless the Memorandum and Articles of Association (the Constitutive Documents) provide for a higher majority. Accordingly, in cases where the Constitutive Documents require a higher majority, the decisions passed by the General Assembly with a lower majority will not be valid. In an offshore Company under Clause 51(f) of the Regulations, the voting at a general meeting will be held to be valid, only if the shareholders holding, shares representing 95% (ninety-five per cent) of the total capital of the Offshore Company are present.

    Interestingly the reasons for the imposition of this 95% rule imposed by the Regulations pursuant to Article 51(f) is unclear. One may ask why such an imposition of 95% majority? Further, if such imposition were at 99%, what difference would that make? Comparatively, the regulations regarding the quorum of a general assembly in other offshore jurisdictions (discussed below) requires standard majority which is generally set at 75% of the share capital owned by the shareholders in a general meeting. Imposing the high bar 95% rule could, in some cases, affect the rights and interests of decision-makers and often force them to consider litigation. Consider by way of example a case where disputing litigants are tasked with substantial negotiation(s) for several mainland companies and free zones companies in addition to a small offshore entity that is integral and important to the settlement process. Further assuming that parties have (in principle) achieved a settlement on all the entities but the offshore's majority rule creates a snag for want of 95% rule imposition. In such event, the parties may have to deal with the offshore firm separate to the entire settlement process and thereby requiring the Some of the provisions for offshore companies in other jurisdictions about voting rights call for a lower percentage. For instance, under the prevailing regulations of Cayman Islands Company Law (Companies Law of 2013), a majority of at least two-thirds is required for approving a decision in a general assembly of an offshore company, unless the articles of association specify that the required majority shall be a number higher than two-thirds. Under the British Virgin Islands (BVI Business Companies Act No 16 of 2004) a resolution passed by the general assembly in an offshore company shall be approved by a majority over 50% or in case the MoA requires a higher majority. In a foreign company in Guernsey (Companies Law of 2018), a resolution that is passed at a general meeting on a poll is given by the relevant majority of the voting rights of members who, vote in person or by proxy on the resolution. The requirements for a poll are based on the majority being assessed not against the total voting rights of the company, but against the complete voting rights of those members who do choose to vote. In Bermuda, (Companies Act, 1981 of Bermuda), resolutions of shareholders generally require to be approved by a simple majority.

     

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    Sun, 01 Mar 2020 11:34:00 GMT
    <![CDATA[Investors’ Due Diligence Real Estate ]]> Investors' Due Diligence Before Purchasing Real Estate in Dubai

    Numerous authors, legal professionals, bankers and jurists have written papers on the increased foreclosure rates preceding 2008 in the United States' real estate market. This predicament led to a domino effect of issues on mortgages, (the infamous) collateral debt obligations and other financial instruments in the sector. However, this ripple did not stop within the borders of the United States. Various developing and developed economies observed the after-effects of the burst of this bubble over the (then) years to come. This ripple, in turn, changed the stringency level of legal provisions governing both financial and

    real estate sectors with governments across the globe, increasing the regulatory control. While STA's lawyers in Dubai have discussed on these aspects in the past, we will endeavour to explain the importance and requirement of conducting due diligence from an investor's perspective in Dubai before investing in the Emirate's real estate sector. Over the past few decades, Dubai has evolved to become one of the premier jurisdictions in the world for real estate investment due to its attractive projects and investor-friendly legal framework. Numerous investors from across the globe flood to the Emirate for purchasing from the lucrative array of real estate units that the Emirate has to offer.

    Broadly, there are two types of real estate units available to investors in the UAE: off-plan units and developed units. While each of these options has their own commercial and legal implictions, it is pertinent for any investor first to understand the reason why they are investing in real estate to understand the most suitable option. The Dubai Land Department (the DLD) is a reputed and effective regulator of real estate sector in Dubai, that has implemented numerous regulations and circulars to safeguard the

    interests of parties to a real estate transaction in Dubai.

    Caveat Emptor

    Investors should carefully examine various aspects when entering into a real estate transaction: namely legal, due diligence, financial due diligence and physical due diligence (commonly known as snagging). In addition to other matters that their counsels may advise on the transaction. Investors should understand the due diligence requirements and contact real estate lawyers in Dubai once they identify the particular unit (or project) that they wish to purchase.

  • Legal Due Diligence: Legal due diligence requirements could broadly cover the following aspects of a real estate unit: -
  • Regulatory Check: The DLD is the primary authority governing real estate in the Emirate of Dubai and issues title deeds to investors for the ownership of the real estate unit. It is also advisable for investors or their attorneys to contact the DLD for confirming the title of the property before initiating the process or handing over any token monies. Investors should primarily contact the seller or developer of the unit and confirm that the registration of ownership of the unit as per the records of the DLD and they have the authority to sell the property. For example, if the property is under the name of a corporate entity, then only the authorized signatory or actual power of attorney holder of the authorized signatory would have the ability to sign the sale purchase agreement and other documents. It would be prudent to undertake due diligence checks with the Dubai Municipality and other governmental authorities based on the type and utility of the particular real estate project. This is to ensure that there are no fines or other penalties on the said property.
  • Judicial Search: The investor's should also undertake search on any attachments or inclusions of the particular real estate unit in any litigation matter, i.e. confirmation that that unit is free of any legal liabilities. Parties holding a court judgment in their favour for obtaining monies from UAE courts are opento initiating execution proceedings and attaching real estate unit(s) of the judgmentdebtor in the event the latter defaults on the payments as stipulated in such judgment.Therefore, investors should be fully aware of any such judicial lien or liabilities on the unit before proceeding with the transaction.
  • Conveyance: This is one of the primary and and most crucial aspects to be managed by the investor before intusing any funds into the investment. It is pertinent for the investors to understand the specific clauses, payment terms, mortgage options and other provisions of the sale-purchase agreement and the reservation form (if provided) before signing the same. In certain situations, investors may be unaware of the rules of right to resell the unit, obtain mortgages, provisions regarding unit handover etc.This issue may occur when the investors may sign the sale-purchase agreements in haste without consulting lawyers or professionals specializing in the field. Foreign investors are often not aware of the laws and regulations in the real estate sector and tend to contrast interpretation of transactions with similar situations in their home countries (other jurisdictions). Therefore, it is pertinent for investors to understand their rights and liabilities as per the law of the land and a simple study of the documentation will not suffice. Ideally, a vigilant investor from a foreign jurisdiction may review the paperwork and make sure that the sale-purchase agreement is vetted by a real estate lawyer. However, this will not suffice if the investor does not have an understanding of their rights (such as right to take handover of the unit on agreed date, right to mortgage the property as per law, right to resell the real estate unit etc.) and liabilities (like processing payments as per the instalment dates agreed upon, to pay Oqood Registration fees etc.).
  • Check on arrears in service charges and other utilities: Investors should also check on any outstanding payments due to the Dubai Electricity and Water Authority, respective owners' association, chiller charges etc. to understand the existing liabilities on the units. Generally, the seller is required to obtain a no objection certificate from the master developer, owners' association/management company and transfer the name of the unit owner with the utilities' provider at the time of selling the unit(s). This is to safeguard the investors' interests and ensure that there are no hidden liabilities or charges on the particular unit.
  • Financial Due Diligence: This aspect of the due diligence process is twofold. First, to check and confirm the existence of any underlying mortgages, loans or other liabilities with financial institutions; and second, to identify the exact value of the particular real estate unit after checking with authorized and independent personnel/ companies. Investors should conduct a financial due diligence as well to ensure that there are no unknown financial obligations (or liens) on the particular real estate unit and to ensure that the unit is basically, worth the money - for instance, lack of knowledge of the market prices of units by foreign investors.
  • Snagging: In simple terms, snagging is a process by which investors ascertain whether the physical property is in line with market standards and the conditions as mentioned by the seller or developer.It helps the buyers to route the liability to remedy or fix any specific issues that the property may pose with regards to the unit area, plumbing and electric, flooring, walls, doors and other movable or immovable fixtures. Investors should ideally appoint a company that specializes in this field of work at the time of obtaining the handover of the units and report the same to the seller or developer within a limitation period of one (1) year, provided they do not waive off their rights towards the same or accept the property as-is.
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    Sun, 01 Mar 2020 10:41:00 GMT
    <![CDATA[Airplane Crash Liability International Law]]> Airplane Crash Liability in International Law

    Introduction

    The two recent international aeroplane crashes (the Lion Air crash and the Ethiopian Air crash) resulted an international outcry over the safety of passengers aboard international flights. Consequently, the question of which entity can be held accountable for these disasters is on the mind of many. The answer lies in international air law, particularly the various international aviation treaties that have been signed and ratified to regulate aeroplane crash liability. 

    Overview of International Air Law instruments governing aeroplane crash liability 

    Several international air law instruments have been signed and ratified by countries. To regulate and oversee the aeroplane crash liability. One hundred fifty-two states ratified the Warsaw Convention of 1929.  Article 17 of this Convention states that the carrier or airline is legally liable for harm or damage  sustained if  death or wounding of a passenger or any other bodily injury occure. The carrier is responsible, if the accident in which the passenger suffered kharm happened on board the carrier's aircraft or during the operations of embarking or disembarking the said carrier . Article 18 of the Convention states that a carrier "is liable for damage sustained in the event of the destruction or loss of, or damage to, any registered luggage or any goods if the occurrence which caused the damage so sustained took place during the carriage by air". It is clear from these provision that the carrier or airline is liable for death or sustaining of bodily injury of passengers, as well the destruction of luggage or goods on board an ill-fated aircraft.

    Article 20 (1) of the Warsaw Convention provides a way for a carrier or airline to escape liability by proving that the airline and its agents took all necessary measures to avoid the damage. Furthermore, the carrier is not liable if they can show that it was impossible to take all the actions required to prevent the accident. The airline is not responsible, in terms of Article 22 for the destruction of luggage and goods provided that such damage was occasioned by negligent pilotage or negligent handling or navigation of such aircraft. Pilot error must be the sole reason for damage to goods and luggage, should the carrier wish to escape liability. Article 21 invites a carrier to prove contributory negligence for the carrier to be exonerated in whole or in part from liability.  The carrier may also escape liability if they can show that the damage caused was due by a negligent act, a wrongful act or an omission that is attributable to a third party.

    If the carrier fails to discharge the burden of proof placed on it in articles 20 (1), 20(2) and 21, article 22 (1) protects the carrier by putting a cap on the liability if the carrier for each passenger to a sum of 125,000 Francs or USD 12,000. The Hague Protocol of 1955 doubled this amount to USD 24,000. For destroyed goods and luggage, a cap of 250 Francs or USD 25 per kg is permitted. Article 28 states that action for damages must be brought at the option of the plaintiff before the Court having jurisdiction. A court will have jurisdiction provided that the carrier is an ordinary resident, carries on business, or has an establishment in that area. The court at the place of destination will also have jurisdiction. Article 29 states that the right to damages prescribes after two years from the date on which the aircraft ought to have arrived.

    The drafters of the Guadalajara Protocol of 1961 considered advancement in aviation which included carriers concluding subcontracts with other airlines to transport passengers and goods. The subcontractors, in the event of a plane crash, were only liable up to the limit set out in Article 22 of the Warsaw Convention.  The limit set in the Hague Protocol of 1955 was only available to passengers onboard original carriers.

    The Montreal Convention "the Unification of Certain Rules for International Carriage by Air" of 1999 ratified by 132 States and came into effect on 4 November 2003. The significant changes made by this convention increased the amount that a passenger could claim for injury or death to USD 170,000 from the US Guatemala City Protocol of 1971 increased the limit for passenger death to about USD 100,000. To avoid paying more than USD 170,000 the carrier must prove that their negligence did not cause the aeroplane crash, or show that the negligence of a third party created it. Article IV states that the carrier cannot be held responsible for death or injury solely caused by the state of health of the passenger.

    The Montreal Convention allows a passenger to not only claim in the domicile of the carrier, where the carrier mainly carries on business, where the contract was made, the place of destination, but also the passenger's domicile. This allows the family of a deceased passenger to claim in the most convenient forum and the most legally beneficial to them, provided that the limits set out in the Convention are observed in such claim.  Under the Montreal Convention, the carrier must compensate the owner of destroyed goods or baggage at a rate of USD 27 per kg. In terms of the Montreal Convention, the carrier can also escape liability if they can prove a wrongful act or an omission on the part of the passenger. Thus, a strict liability regime applies to aeroplane crashes. The passenger is not required to prove negligence on the part of the carrier. It is the airline who bears the onus of defending itself against the passenger's claims.

    The Montreal Convention also includes an obligation on the part of carriers to obtain insurance in their home country. The insurance policy must be enough to cover their liability under the Convention. This provides passengers with the assurance that, should an aircraft crash occur, the carrier will be able to meet their obligation to pay to compensate all the victims' families fully. In the same vein, a state wherein a carrier operates has the right to require a carrier to furnish evidence of such insurance cover thereby protecting its citizen from obtaining inadequate compensation in the event of an air crash.

    The Montreal Convention regime also imposes liability on a carrier who has been contracted by a carrier who is party to the Convention to transport passengers and cargo. Carriers can no longer be exonerated of liability because they outsourced another airline or carrier who is not a party to the contract contracted by the carrier and the passenger in the event of an aeroplane crash.

    The protection of passengers was a paramount consideration in the drafting of the Montreal Convention. The Convention prevents States from excepting themselves from the rules of the Convention. The regulations of the Montreal Convention only free states if the State operates an aircraft for non-commercial purposes. The State must also ensure that the plane in question is carrying out the functions and duties of the State. A state is also exempted from the provisions of the Montreal Convention if it involves the carriage of the military equipment and personnel on aircraft that was leased by the State.

    For the provisions of the Conventions to be triggered, the flight must have been an international flight, meaning the plane was travelling from one country to another. For a treaty to apply to a specific aeroplane crash, it must have been ratified in the country of departure and county of the passenger's destination. Where the departure country ratified a treaty, but the destination country did not, then neither the Warsaw Convention or The Montreal Convention applies. Where the departure country had ratified the Warsaw Convention, but the destination country ratified the Montreal Convention and the Warsaw Convention, then the Warsaw Convention applies. Consequently, this places the deceased passenger's family in the difficult position of having to institute legal proceedings against the carrier in another country or another jurisdiction. In addition, this limits the legitimate claim to the low amount set out in the Warsaw Convention.  In the case of Chubb & Son v Asiana Airlines, South Korea had ratified the Hague Protocol of 1955 while the US had ratified only the Warsaw Convention of 1929. The court held that the adhering to two different versions of the same treaty does not create a separate treaty between the countries. The land of departure and the land of destination must have ratified the identical treaty for any one of the Conventions to apply

    Another problem that may arise of where the Warsaw Convention applies is that it refers to "passengers" which means that the family of a pilot or a crew member will not be able to hold a carrier liable for an aeroplane crash.

    A significant detail to note is that a carrier is liable according to the limits set out in the two conventions if the airline issued a ticket. A valid ticket must include the place and date of issue, name and address of the carrier, the location of departure and destination, as well as an indication that the carrier is subject to the provisions of either the Montreal Convention or the Warsaw Convention. If the carrier fails to issue a ticket, then the carrier is exposed to unlimited and indeterminate liability.  

    Carrier Defences to Negate Airplane Crash Liability

    The definition of an accident is set out in the Air France v Saks 470 U.S. 392. 405 (1985) case by the United States Supreme Court. According to this judgment, liability arises under Article 17 if the passenger's death or injury is caused by an unexpected or unusual event or happening that is external to the passenger. An aeroplane crash, considering its rarity and magnitude, can be classified as one such event.  In the case of Wallace v Korean Air, it was held that an accident within the meaning of Article 17 referred to a risk characteristic of air travel or related to the operation of an aeroplane and where carriers are in a unique position to take all necessary measures to prevent such incidents. An aeroplane crash also falls under this definition.

    The Warsaw Convention and Montreal Convention neglect to impose liability on aircraft manufacturers expressly, in cases where the negligence or wrongful act of a manufacturer causes an aeroplane crash.  This consideration is necessary concerning the Lion Air and Ethiopian Air disasters as they may have been caused by a software or mechanical malfunction of the Mcas flight control system in the aircraft. In that case, Boeing as the manufacturer of the aeroplane would be liable as a "third party" under both the Warsaw and Montreal Conventions. If there are multiple manufacturers of the said aircraft, then those manufacturers will be jointly or severally liable for the crash. Maintenance companies and part providers must also be held liable for aeroplane crashes. To use the Ethiopian air crash as an example, it was stated that a sensor malfunctioned, which led to the above stated mechanical fault that allegedly led to the accident. It would appear in such a case that the carrier, Ethiopian airlines may be exonerated of liability by demonstrating a causal link between the malfunctioning software and the crash. International air law should evolve to recognise the role of manufacturers and maintenance companies in aeroplane crashes and impose liability accordingly.

    The pilot's error will rarely give rise to rise to liability on the part of the pilot unless the pilot is found to have erred in steering the plane. If the pilot's training was inadequate, then whichever party is responsible for providing such training, whether it is the manufacturer or the airline, then that party will be found to be liable if the failure to provide adequate training is causally linked to the aeroplane crash. The Ethiopian Air crash investigators allege that could have been caused by a lack of knowledge of how to disable faulty software on the Boeing 737 Max 8 jet. The manufacturer should have facilitated such training.

    Another question to be answered is whether a carrier can incur liability for mental or emotional injuries sustained by the plaintiff. In Eastern Airlines v Floyd (499 U.S. 530 (1991)), the United States Supreme Court said allowing for emotional and psychological injuries would result in indeterminate liability. It is clear from the Jack v Trans World Airlines (854 F. Supp. 654 (N.D. Cal. 1994)) case that psychiatric damages that are unrelated to physical injury cannot be recovered.  Relatives of the deceased in an aeroplane crash may only bring an action for emotional harm if they witness an aeroplane crash with the knowledge that their relative is on board. 

    Undoubtedly, a plane crash will result in death or bodily injury of passengers as well as the destruction of damage to cargo. Therefore, some of the definitional loopholes available to carriers may not be applicable as they would be in the case of delay or another minor mishap during a flight. In the case of an aeroplane crash, the most likely way a carrier would escape liability is if the departure and destination countries did not ratify identical treaties. If both the departure country and destination countries ratified the Warsaw Convention, the passengers and their families are only entitled to a portion of the compensation that is possible under international air law.

    Conclusion

    The two main pieces of international air laws are the Montreal Convention and the Warsaw Convention. The Montreal Convention created a unified regime of international air law. However, the fact that some countries ratified the Warsaw Convention and not the Montreal Convention and vice versa have significant implications on aeroplane crash liability. Several states have chosen only to ratify the Warsaw Convention which disadvantages international air travellers. Although containing some definitional loopholes, these loopholes are unavailable to carriers of an aircraft that has crashed.

     

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    Sun, 01 Mar 2020 09:58:00 GMT
    <![CDATA[FIFA Court of Arbitration for Sports]]> FIFA; before and after Electing Court of Arbitration for Sports

    Introduction

    Fédération Internationale de Football Association (FIFA) was founded in 1904 to supervise international football competitions, with its headquarters in Zurich. FIFA now has 211 national associations as members and is divided into regional confederations: Asia, Africa, Europe, Oceania, South America and North & Central America and the Caribbean. While FIFA funds its member nation associations financially and logistically, they in return are obliged to abide by the rules and regulations set out by FIFA to promote smooth administration of the sport. One of FIFa's main duty is to oversee the execution of different competitions, international and regional, and to promote the same. It actively runs the sport and works towards developing the game worldwide.

    Needless to say, the commercialisation of the sport has also opened a window for a number of disputes that arise, not only between player and their countries but also disputes in each game. There was a need for a uniform set of rules and regulations governing all the national associations and hence a judicial body to attend to all the disputes that arise therein.

    This guide articulates the dispute resolution method followed by FIFA. It also highlights the independence of the Court of Arbitration for Sports (CAS) in giving unprejudiced and unbiased decisions.

    Governing bodies of FIFA

    FIFA has three judicial bodies: the Disciplinary Committee, the Appeal Committee and the Ethics Committee. Each has certain powers with limitations to govern the sport of football and all the disputes that ascend. Whether it is sanctioning serious infringements which have escaped the match officials' attention, extending the duration of a match suspension, rectifying evident mistakes or pronouncing additional sanctions like fines, the FIFA Disciplinary Committee is authorised to sanction any breach of FIFA regulations which presumably does not come under any of the other jurisdictions. The Appeal Committee essentially looks into deciding appeals against the decisions of the Disciplinary Committee. There are certain decisions of the Disciplinary Committee that are final and are not subject to appeal; except for such decisions to which an appeal is not allowed, the Appeal Committee may decide upon the merits of the case whether an appeal to a decision must be granted or not.

    FIFA recognises the jurisdiction of CAS

    Initially, FIFA wished to establish a completely independent arbitration tribunal, Arbitration Tribunal for Football (TAF), to settle all the football-related matters. This tribunal was uniquely meant to have its own infrastructure as well as administration, funded by FIFA. To establish TAF would haveve been time-consuming keeping in mind insufficient funds and hence, the lack of professional support to inculcate the FIFA regulations in it. In a following meeting f, the Executive Committee of FIFA asked the President of FIFA to evaluate alternative means for quick dispute resolution arrangement that would facilitate similar results and purpose as TAF.

     There were deliberations between FIFA and the International Council of Arbitration for Sport (ICAS), which is the governing body of Court of Arbitration for Sports, the result of which was a formation of a list of learned arbitrators specifically for football-related matters in tune with the FIFA regulations. The agreement signed between the two established that FIFA recognised the jurisdiction of CAS in November 2002.  Hence, since CAS is the official body to deal with the appeals against decisions of FIFA's judicial bodies, except the matter where the appeal was not allowed, it follows the same procedure as it does for other disputes it takes cognizance of. ICAS decides the list of arbitrators to decide football-related matters and after the agreement, it decided to nominate a uniform way of electing the arbitrators. It is indubitable that CAS' jurisdiction being recognised by FIFA was a step further towards ensuring that the spirit of the sport is maintained to promote fair competition.

    Court of Arbitration for Sport

    It is fair to presume that a specialised system for dispute resolution of every field is more reliable than a general dispute resolution system. Arbitration being an established yet developing aspect of dispute resolution is efficient, considering it is faster and the parties get to pick their arbitrators. The birth of CAS supported the same idea and it was believed that sport-related disputes needed to be handled independently to ensure specialised and accurate results in a fast track manner. To take these matters out of the national courts and bring them in front of a specialised sports tribunal proved to be a quick and reliable method of dispute resolution. Ever since CAS' inception, it has been globally regarded as the supreme body to deal with all matters related to sports. It is funded by ICAS and hence its independence from ICAS and other authorities have always remained a topic of debate. It was a historic and crucial step by FIFA to recognise this esteemed institution to hear appeals for all football-related matters.

    CAS was established in 1984 and is headquartered in Lausanne, Switzerland, though it has offices in Sydney, Abu Dhabi, New York, to name a few. CAS' independence has always been in question and a landmark judgement by the Swiss Supreme Court [Arrdts du Tribunal Fdd6ral Suisse [ATF] 119 271 (Switz.)] established CAS' independence, largely gave a seal of approval to CAS and the attention was drawn to the disputed biased links between CAS and IOC. Consequently, the organizational structure of CAS was altered to create a governing body to maintain the internal functioning of the tribunal in a uniform manner and to amend the rules of CAS in accordance with the procedure followed. Further in 2003, CAS' independence from IOC was confirmed once again by the Swiss Federal Tribunal in [ATF] 129 445 (Switz.), where it held CAS as the "true Supreme Court of world sport" and emphasised on CAS' independence and unbiasedness from IOC, deeming it to be a court of arbitration whose decisions were regarded to be at par with that of the state court.

    CAS follows a set of rules enumerated in the Code of Sports-related Arbitration and Mediation Rules like the procedure to be followed. There are different subcategories within CAS to deal with several types of sports-related issues and in this case, subcategories of issues arising in competitions organised by FIFA:

    • Ordinary Arbitration Procedure which takes cognizance of issues of the first instance. These are basic arbitrary issues, like those arising in broadcasting rights, licensing and sponsorship contracts.
    • Appeal Arbitration Procedure which as the name suggests, governs appeals against the judgments passed by different sports bodies. Issues like player transfer, compensation or disciplinary sanctions come under this category.
    • The Ad hoc Division is basically a panel of arbitrators available throughout major sporting events to quickly resolve disputes arising therein to speed up the procedure considering the length of the tournament or the games. During FIFA World Cup, or the Olympics for example, a panel of arbitrators is available on call to resolve any sports-related issues that arise during the games that can be quickly dealt with to ensure it does not hinder the game in any way, or cause any stoppage to the same.
    • Mediation is another dispute resolution method that is offered to parties before they can decide whether they want to resolve the issue by arbitration or mediation.

    CAS has a pool or closet of in-house arbitrators who come from culturally diverse backgrounds and countries, well versed and learned about the rules and regulations of the sporting world, which couples with the goals of CAS in the first place, to offer a specialised dispute resolution forum. The knowledge of rules and regulations is parallel to the knowledge of the laws needed from the judge in a state court, for example, to ensure that disputes are dealt with amicably and with the most efficiency.

    What is essential in being able to file an appeal against any sporting authority is that they must have expressly mentioned in the contract that disputes would be resolved by arbitration and the respective national association must recognise CAS' jurisdiction for the same. Debates ran around the concept of having a select set of arbitrators in CAS and whether players were restricted from being able to take their case to national court should they doubt the unprejudiced procedure of dispute resolution by CAS. Signing a contract with a club which in its dispute resolution mechanism recognises CAS' jurisdiction limits the option of a player being able to go to a national court, leaving him no choice but to either sign the contract with the club accepting CAS' jurisdiction without a choice, or not be able to sign with them at all. The Swiss Federal Court's take on the abovementioned statement in Apr. 18, 2011, 4A 640/2010 (Switz.) was that:

    [t]he arbitration clause must meet the requirements of Art. 178 PILA. However, the Federal Tribunal reviews the agreement of the parties to call upon an arbitral tribunal in sports matters with some 'benevolence'; this is with a view to encouraging quick disposition of disputes by specialized tribunals which, like the CAS, offer adequate guarantees of independence and impartiality. The generosity which characterizes case law of the Federal Tribunal in this context appears in the assessment of the validity of arbitration clauses by reference. The Federal Tribunal has accordingly found valid at times a general reference to the arbitration clause contained in the statutes of a federation. Thus in the case of a football player who was a member of a national federation this Court considered as a legally valid reference to the arbitration clause contained in the FIFA Statutes the provision contained in the Statutes according to which the sportsmen belonging to the federation had to comply with FIFA rules.

    The Disciplinary and the Appeal Committee

    As mentioned above, unless any other committee is authorised to sanction any breach of FIFA regulations, the Disciplinary Committee is authorised to do so. The chairman of the Disciplinary Committee may dispose of cases brought to it and may suspend, fine, pronounce, alter and annul provisional measures. According to Article 2 of the FIFA Disciplinary Code, any decision taken by the referee during a match is final and no appeal is available to the player against it.

    Except otherwise mentioned that the decision of a certain authority is final, the decisions of the Disciplinary Committee may be appealed to the Appeal Committee. The chairmen and members of this committee are legally trained and act in accordance with the FIFA Disciplinary Code. The decisions by the Appeal Committee are legally binding on all the parties involved and CAS reserves the rights to hear appeals against the decisions of the Appeal Committee.

     

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    Tue, 04 Feb 2020 11:56:00 GMT
    <![CDATA[Due Diligence Foreign Law Firms ]]> Due Diligence by Foreign Law Firms of UAE Entities

    Business transactions around the world often involve mergers, acquisitions or take-overs. Such transactions of the business organizations require thoughtful decisions which ultimately decides the future of the Company. Hence, due diligence holds the key to vital decisions of the economy as to whether the deal should be given a green flag or not.

    UAE as an economic and commercial hub in the Middle East and North Africa (MENA) region, has numerous foreign and domestic investors who are attracted towards the region's incentives like the tax regimes, free zones, etc. operating in the region. While some establish their own ventures, some businesses opt to enjoy the market reputation of the existing operations and employee base of established corporates in the UAE via mergers or acquisitions. Due diligence investigation is a useful tool to analyze the potential benefits and risks of investments. But easier said than done, the legal due diligence of a company is often a tedious task, which can significantly decide the timeline of the transactions.

    In plain terms, legal due diligence is a process through which substantial and reliable information about a business entity to discover any facts, circumstances or legal risks that are likely to influence a business decision. A snapshot of due diligence is depicted below:

    Although due diligence is not mandated by UAE law, it is always recommended to the buying entity that extensive due diligence for actual or constructive liabilities of target entity should be done. Also, legal and regulatory approvals and restrictions on transaction become clear to the purchaser.

    The information of the target company that is of the essence for the purchaser company is presented as follows:

  • Corporate Information
  • Legal entity structure, including name, location and function of all divisions, subsidiaries or related entities
  • Memorandum of Association & Articles of Association (or Constitutive Contract), including all amendments
  • Minutes of all meetings and consent in writing of managers, the board of directors, board committees and other committees and shareholders.
  • Shareholder/Partner (Owner) Information
  • Lists of all existing owners of shares with their address, number of shares they own, dates of issuance of shares and full payment, the consideration received by the Company.
  • List of all options and other rights to acquire equity securities.
  • Material Contracts
  • Debt financings
  • Bank line of credit or loan agreements and guarantees
  • Standard sales or license agreements
  • Indemnification agreements
  • Products, Manufacturing & Competition
  • Copies of any non-competition agreements of the Company with employees and subsidiaries
  • List of the top customers of the Company, indicating the products and the amounts of each purchase.
  • List of service and support contracts
  • Forms of warranties and guarantees provided to customers
  • Litigation & Audits
  • All management letters or individual reports from the auditor and responses to internal accounting controls.
  • Settlement documents
  • Decrees, order and judgments of courts or governmental agencies concerning the Company
  • Employees & Management
  • Management and organization of the company
  • Personnel handbooks and manuals
  • Government Contracts
  • Tenders and Government contracts and assignments
  • Technology and Proprietary Rights
  • All patents and applications pending or held by the Company
  • Copies of the agreement pertaining to confidentiality, non-disclosure, and assignment of invention agreements, between the Company and employees.
  • List of all copyright and trademark registrations and applications of all intellectual property
  • General
  • Report on all actual or potential conflicts of interests that the Company's directors, officers or employees have due to their relationship with any other person or entity which has any interest, financial or otherwise, in the Company
  • List and description of all transactions between the Company and its employees, directors or shareholders.
  • Any other documents which are relevant to the company and the sector in which it is operating as the due diligence and the perusal of documents differs from one domain of operation to another domain. But the above gives a bird's view of the same.

    The basic aim of drafting observations and action points in a due diligence report is to bring out or raise red flag over a gap of information or at the time of a non-compliance or an additional consent etc. required from the third party which was not known till the time it was raised in the due diligence report. Now, when it comes to the drafting of the observations and action points, lawyers need to keep one thing in mind that the due diligence report which is being prepared before a transaction would be discussed amongst or may be referred to a certain class of people who may not be lawyers. They could be read by business people, CEOs, CFOs or board of the company, general counsels, investor's legal advisors, investment managers, etc. Therefore, the correct and the most favoured way of drafting is first to tell the reader what has been provided for review, then your observations and lastly, the consequence of the observation (for, example, if it is a non-compliance, then the consequence of it, such as a penalty, etc.) so that even a non-lawyer could understand the basic requirement of such an observation.

    Action points are stated in the report but at an interim stage for the purpose of internal communication so that the target or investee company representatives can rectify the anomalies. They are often removed in the final report. The due diligence report generally has the following points in it to make a credible document: -

    PROJECT NAME

    SUMMARY OF CONTENTS:

    Transfer of Control

    • Key Commercial Terms

    • Duration of Material Contracts, Penalties, IPRs, etc.

    • Assignment

    • Termination

    • Governing Law/Jurisdiction

  • KYC Details and Background Check
  • It involves identifying the entity such as incorporation certificate, commercial license, shareholders, key directors and media releases.

  • Dubai Chamber of Commerce and Industry
  • The credit ratings and recommended credit limits of the company, besides companies' and financial information, such as shareholders, directors, bankers, payment history, etc.

  • Department of Economic Development (DED) database
  • It provides trade license number of the company, status of activity, expiry date, its activities, and the contact information and location of the company.

  • Al Etihad Credit Bureau (AECB)
  • It is a federal company [AA1] which is mainly a public joint-stock company (PJSC) which is wholly owned by the Federal Government of UAE. As per the Federal Law No. 6 of 2010 of UAE pertaining to the credit information, AECB is mandated to recurrently gather credit information from UAE's financial and non-financial institutions. It keeps details from all UAE banks, financial institutions and individuals and it provides credit reports for a nominal fee providing details of the debt levels and financial creditworthiness of UAE entities.

    Either the individual himself or by executing the power of attorney to the lawyer, an entity can check the credit information from the above-listed sources.

    Though the process and report of due diligence seem to be an exhaustive and in-depth one but the gross limitation of the process is that it is limited to two to five years during the examination. Moreover, legal due diligence doesn't reflect the financial and other due diligence, which is an expert domain of investment or merchant bankers or private equity firm.

    As Dubai envisions itself to be a smart city and with Expo 2020 UAE plans to be the hub of financial and commercial locus of the world, due diligence as a requirement would definitely pick the ground.

     

     

     

    ]]>
    Tue, 04 Feb 2020 10:08:00 GMT
    <![CDATA[Competition Law in Hong Kong]]> Competition Law in Hong Kong

    Competition laws (also referred to as antitrust laws), in an economy, seek to promote innovation and the efficiency to reduce prices for the consumer, in a fair manner amongst businesses, by the regulation of anti-competitive conduct by businesses, and by ensuring that businesses act independently of one another whilst being subjected to competitive market pressure by other businesses in a fair manner.

    In Hong-Kong however, the advent of competition law was seen much later in comparison to the rest of the global economy. This is an irony considering the fact that Hong Kong was named the third biggest financial center by the Global Financial Centers Index (GCFI) as of March 2019, just slightly edging out Singapore, to take the crown as Asia's largest financial center.

    After years of legislation on this matter, on 14th June 2012, the Competition Ordinance (Cap. 619) (the "Ordinance") was passed by the Hong Kong Legislative Council, which later came into full effect on 14th December 2015. This introduced Hong Kong's first-ever all-encompassing cross-sector antitrust law. Prior to this, only telecommunication and broadcasting businesses were subjected to competition law of some kind, under the Telecommunications Ordinance (Ch. 106 of the Laws of Hong Kong), and the Broadcasting Ordinance (Ch. 562 of the Laws of Hong Kong) respectively, with the Hong Kong Communications Authority placed in charge of enforcing these antitrust laws.

    Upon going into effect, all antitrust matters, from a broad range of industries, were subject to the jurisdiction of the Competition Commission (the "Commission"), and the Competition Tribunal (the "Tribunal") under provisions outlined in the new Ordinance. The two aforementioned bodies of antitrust regulation seek to complement the work done by each other, under the Ordinance.

    The Competition Commission has served as the primary regulatory authority for enforcement of the Ordinance. Its main role and purpose are to carry out investigations of suspected breaches of the competition law. The Commission may initiate its investigations on the basis of complaints received, by referral from a government body or a court, or by its individual initiative. Under the Ordinance, the Competition Commission has been granted with an exhaustive range of investigative powers, that have allowed the body to, inter alia, demand production of documents and information by businesses, and conduct raids on business premises.

    The Competition Tribunal consists of judges of the Court of First Instance, and as a part of the judiciary, hears and decides on cases pertaining to competition law in Hong Kong.

    The following article aims to analyze the mechanism of functioning of competition law in Hong Kong, and the landmark cases that it has witnessed since its inception.

    Mechanism of Hong Kong's Competition Ordinance: Ensuring a Level Playing Field

    The primary outlook of the Hong Kong Competition Ordinance seeks to lay out a level playing field for all businesses operating in Hong Kong, in particular, it seeks to ensure better choices and products on the consumer's end, and greater opportunities for businesses. It is certain that in a fair market, competition drives innovation and efficiency, thus propelling businesses to offer to meet the demands of their consumers at the right price.

    With regards to the Competition Ordinance, the Competition Commission and the Communication Authority have released three primary guiding principles that constitute the antitrust law:

    • First Conduct Rule: The rule of first conduct (or the FCR) basically restricts businesses from creating or giving effect to agreements and/or decisions that have an effect of harming competition laws in Hong Kong. Simply put, if businesses agree to cooperate with competitors rather than compete, it would violate the FCR. The key points under the FCR are as follows:
      • The FCR lays out the definition of "serious anti-competitive conduct". In the event that the conduct by businesses is not of a "serious" nature, they may be granted a Warning Notice by the Competition Commission prior to being tried by the Competition Tribunal. The four broad categories that classify as "serious anti-competitive conduct" under the FCR are market sharing, price-fixing, bid-rigging, and placing output restrictions.
      • The FCR also restricts businesses dealing a wide range of other agreements, even though they may not classify as "serious". Examples include special types of franchise agreements, joint ventures, and selective distribution agreements. Whilst such measures may not seem to be anti-competitive on the surface (they may rather seem to be pro-competition), they may have the effect of distorting competition in certain contexts.
      • The FCR also allows for the functioning of a "safe harbour" for the protection of small and medium enterprises (SMEs). If a business's combined turnover from certain undertakings does not exceed HK$ 200 million for the time period that the undertaking was taking place, the agreements and decisions of associations (unless they amount to "serious anti-competitive conduct") will be excluded from the FCR.
    • Second Conduct Rule: The SCR usually applies to businesses with a great degree of market power and influence. The SCR restricts businesses in such positions to engage in conduct which has the intent or effect of harming the competition. Such conduct can have effects to a greater degree, such as excluding competitors from the market, which results in the limiting of choices available to consumers. Under the SCR, a threshold of HK$ 40 million is set, whereby if certain business conduct generates lesser than the aforementioned amount as turnover for that relevant period, it will be excluded from investigation. However, it is important to note that that merely crossing this threshold does not render businesses under the jurisdiction of the SCR. The SCR lays out guidelines on business practices mostly associated with conduct such as, but not limited to, the refusal to deal, predatory pricing, and tying and bundling. Also, with regards to the term "substantial degree of market power" outlined in the SCR, although not precisely defined, it usually refers to upwards of 25%.
    • Merger Rule: The merger rule is quite simple. It prohibits businesses from participating (directly or indirectly) in mergers that may have the effect of diminishing competition in Hong Kong. However, in the first instance, the rule only applies to businesses in the telecommunications industry. Also, the Merger Rule also has applicability over mergers that may take place outside of Hong Kong, in the event that even party involved in the merger has a presence in the Hong Kong market.

    Exclusions and Exemptions under the Ordinance

    Under the Ordinance, certain exclusions and exemptions are afforded to businesses found to be in violation of the FCR and SCR. The exemptions are outlined as follows:

    • Exemptions under FCR: Under Schedule 1 of the Ordinance, the FCR would not be imposed on certain types of anti-competitive behaviour. Exclusions in such cases include the following examples:
      • where agreements between businesses enhance the overall economic efficiency of Hong Kong,
      • where agreements between businesses are made for the purpose of complying with other legal requirements,
      • where agreements between businesses are of low significance.

    In addition to these general exclusions, the Ordinance also provides for two other grounds of exemption, whereby an order from the Chief Executive of the Competition Commission is required to come into effect. In such cases, the Chief Executive may deem that:

    • the agreements between businesses possess exceptional and compelling reasons of public policy, or
    • the agreements between businesses, if not exempted, would lead to a conflict with an international obligation that Hong Kong is a part of.
    • Exemptions under SCR: Under the SCR, the exclusions are analogous to the ones outlined in the FCR, with the exception that businesses will not be subject to the Ordinance in the case of abuse of a substantial degree of unfair power, if the undertaking's worldwide annual turnover does not go over the aforementioned threshold of HK$ 40 million. Similarly, the Chief Executive of the Competition Commission may also grant exemptions in exceptional cases only for offences under the SCR.

    Sanctions under the Ordinance

    The Competition Tribunal issues sanctions pertaining to offences under the Competition Ordinance in Hong Kong. Usually, it imposes a pecuniary penalty under Schedule 3 of the Ordinance which includes awards or damages for the aggrieved parties, injunctions and disqualifications orders against directors of companies, interim injunctions during the investigations, and disgorgement (repayment) orders.

    In the cases of pecuniary penalties, they are usually issued for a maximum time period of 3 years and are to be capped at a maximum of 10% of the gross revenues obtained by the company only in Hong Kong. In the event that the actions of the business have lasted for more than 3 years itself, the Tribunal may choose to select the 3 years (of the total) wherein the business had its highest turnover, for the purpose of issuing the penalty.

    Case Law: The Ordinance in Action

    We shall now look at some of the landmark cases that have pertained to the competition law in Hong Kong since its inception.

    The first ever case to be assessed by the Tribunal, and one of the most prominent was that of the YWCA (Young Women's Christian Association") IT tender case. In Competition Commission v Nunatix & Ors [2019] HKCT (CTEA 1/2017), the tribunal had sought proceedings against five IT companies (namely, Nutanix Hong Kong Limited, BT Hong Kong Limited, Innovix Distribution Limited, Sis International Limited, Tech-21 Systems Ltd. The Hong Kong YWCA had issued a tender in July 2016 for the replacement of servers at its headquarters. The Tribunal had suspected that the five IT companies who had placed bids for this tender had entered into various bilateral and trilateral agreements with one another so that one company would win the tender. On the 17th of May 2019, the Competition Tribunal had found four of the five companies to be involved in vertical bid-rigging, an offence under the First Conduct Rule of the Ordinance, and had found four of the companies to be "in distortion of competition".

    Another monumental case was that of Competition Commission v Fungs E&M Engineering Company and Others [2019] HKCT 3 (CTEA 2/2017), wherein the tribunal had found that 10 decorating companies had violated the Competition Ordinance under the First Conduct Rule by fixing prices and dividing up markets amongst each other. The Tribunal had found that the companies had divided up areas of three buildings in a public rental housing estate (which they were tasked to renovate), to the extent that they had divided up separate floors amongst each other. It was found by the court that the companies would refuse business from tenants of floors that they were not responsible for, a decision that they made amongst themselves with no oversight, whilst in fact, they were supposed to work together on all facets of the renovation.

    Conclusion

    It can be seen from the aforementioned case laws that soon, Hong Kong will build up its exclusive legal precedents over time to tackle offences pertaining to Competition Law. However, as the competition laws in Hong Kong are still in their infancy, the Tribunal still refers to EU case law for its precedents. This highlights that Hong Kong's competition law practice would still need to maintain an international outlook for the years to come.

     

    ]]>
    Mon, 03 Feb 2020 17:12:00 GMT
    <![CDATA[CCTV - Invasion to Privacy in the GCC]]> CCTV & Invasion to Privacy in the GCC

    The world in this millennium is techno-dependent for almost every aspect of life whether its payment of debts through credit card, entering into contracts by parties distant through online, i.e. e-contracts, e-booking of railway or air tickets and even social networking platforms. The technology and communication revolution is at a global level, as this revolution has crossed political boundaries, demolished economic barriers and proved effective in making up of cultural differences. Technology has spread its roots in even far-flung areas so that individuals from different corners of the world can communicate freely and cost-effectively. This has compelled governments all over the world to review the laws and policies related to information technology.

    Privacy as defined in Black's Dictionary right of a person and the persons' property to be free from unwarranted public scrutiny and exposure. Privacy as a right has changed by leaps and bounds in recent times. One of the most basic liberties of the individuals after the right to life is right to privacy that has been incorporated in the legal system through legislative measures or through judicial pronouncements in various jurisdictions. The right to privacy holds high pedestal as privacy helps to create barriers and manage boundaries to defend ourselves from unwarranted interference with our personal lives and allows us to negotiate who we are and how we desire to engage with the outside world. Privacy essentially limits access to domains related to us. For example, limiting who has access to our personal details, communications and information. Also, significant to bear in mind is that there is a slew of international conventions and charters which exist to reinforce the norm that right to privacy is an essential component of human life which makes life more than mere animal existence. Some of the international conventions and charters which uphold right of privacy are as follows:

    • Article 12 of Universal Declaration of Human Rights;
    • Article 17 of the International Covenant on Civil and Political Rights;
    • Articles 16 and 21 of the Arab Charter on Human Rights;
    • Article 14 of the United Nations Convention on Migrant Workers;
    • Article 16 of the UN Convention on the Rights of the Child;
    • Article 10 of the African Charter on the Rights and Welfare of the Child;
    • Article 4 of the African Union Principles on Freedom of Expression (the right of access to information);
    • Article 11 of the American Convention on Human Rights;
    • Article 5 of the American Declaration of the Rights and Duties of Man,
    • Article 21 of the ASEAN Human Rights Declaration; and
    • Article 8 of the European Convention on Human Rights.

    Relevant conventions for our perusal in the aforementioned list are:

    • Article 12, Universal Declaration of Human Rights: No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.
    • Article 17, International Covenant on Civil and Political Rights: (1) No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour or reputation. (2) Everyone has the right to the protection of the law against such interference or attacks."
    • Article 16(8) of the Arab Charter of Human Rights: The right to respect for his security of person and his privacy in all circumstances.
    • Article 21 of Arab Charter of Human Rights: (1) No one shall be subjected to arbitrary or unlawful interference with regard to his privacy, family, home or correspondence, nor to unlawful attacks on his honour or his reputation. (2) Everyone has the right to the protection of the law against such interference or attacks

    Similarly, in line with the discussion in above paragraphs the legal regime of protecting privacy intrusion through CCTV is covered by mainly two legislations- firstly, Article 378 of the Federal Law Number 3 of 1987 of UAE Penal Code (the UAE Penal Code) as amended by Federal Law Number 34 of 2005 states as follows: 

    "Shall be sentenced to detention and to a fine, whoever violates the private or familial life of individuals, by perpetrating one of the following acts, unless authorized by law, or without the victim's consent:

    i. If he lends his ears, records or transmits, through an apparatus of any kind, conversations that took place in a private place or through the telephone or any other apparatus.

    ii. Captures or transmits, through any kind of apparatus, the picture of a person in a private place. Should the acts, referred to in the two-preceding paragraph, be perpetrated during a meeting in front of the attending persons, their consent shall be presumed.

    Shall be sentenced to the same penalty, whoever publishes through any means of publicity, news or pictures or comments related to the secrecy of private or familial life of the individuals, even if correct.

    Shall be sentenced to detention for a maximum period of seven years and to a fine, the public servant who perpetrates one of the acts mentioned in the present article relying on the strength of the authority of his position.

    The apparatuses and other objects that that may have been used in perpetrating the crime shall, in all cases, be confiscated and order shall be given to erase all relative recordings and destroy the same."

    Secondly, Article 21 of Federal Decree Law Number 5 of 2012 On Combating Cybercrimes states: "Shall be punished by imprisonment of a period of at least six months and a fine not less than one hundred and fifty thousand dirhams and not in excess of five hundred thousand dirhams or either of these two penalties whoever uses a computer network or and electronic information system or any information technology means for the invasion of privacy of another person in other than the cases allowed by the law and by any of the following ways:

  • Eavesdropping, interception, recording, transferring, transmitting or disclosure of conversations or communications, or audio or visual materials.
  • Photographing others or creating, transferring, disclosing, copying or saving electronic photos.
  • Publishing news, electronic photos or photographs, scenes, comments, statements or information even if true and correct. Shall also be punished by imprisonment for a period of at least one year and a fine not less than two hundred and fifty thousand dirhams and not in excess of five hundred thousand dirhams or either of these two penalties whoever uses an electronic information system or any information technology means for amending or processing a record, photo or scene for the purpose of defamation of or offending another person or for attacking or invading his privacy"
  • There has been an increasing number of incidences in UAE in which usage of CCTV as an apparatus to commit infringement of privacy have come into light. CCTV recording the details such as our face, the time of our presence, car numbers or our leisure time with family and friends. Though there is no law at Federal level with regards to CCTV control and regulation but certain Emirates have regulation such as Dubai Law Number 24 of 2008 which has Article 16 according to which the business concerns that must satisfy certain security specifications including employing CCTV such as: hotels and short-stay residences, financial and monetary institutions, manufacture and sale of precious metals and stones, shooting ranges, military and hunting equipment stores, shopping and leisure centers, precious materials storage facilities, hazardous materials storage facilities, precious commodities stores/outlets, large department stores, petrol stations, internet services, storage services, aircraft and balloon clubs. Besides Dubai, even Abu Dhabi under Smart Abu Dhabi Vision Abu Dhabi Law Number 5 of 2011 was passed by the Executive Council with statutory aims of:

  • establish Monitoring and Control Centre;
  • Electronic monitoring of public and private places and establishments; and
  • developing the infrastructure of follow-up and control systems to serve the competent authorities of Emirates.
  • Also, operating monitoring devices without Monitoring and Control Center's (MCC's) approval is an offence punishable by imprisonment of up to two years and/or a fine of no less than AED 50,000 to AED 200,000.

    Similarly, Kuwait under Law Number 61 of 2015 concerned the regulation and installation of surveillance cameras and security also provides for installation of CCTV at hotels and hotel apartments, commercial complexes, cooperative societies and residential complexes, banks and money exchange shops and shops selling gold and jewelry, sporting and cultural clubs and youth centers, shopping malls, entertainment, hospitals, clinics, warehouses and stores precious materials and hazardous materials and refueling stations, and other facilities to be determined by a decision of the Council Minister at Kuwait.

    Oman has stipulated law for CCTV to be installed at food eateries, according to which CCTV is mandatory and in event of its malfunctioning or stopping the establishment would be fined RO 100 minimum to RO 3000 maximum.

    Though howsoever, genuine the CCTV regulations may be and which serve the purpose of security and protection of people from anti-social and criminal elements there has been news report which reveals how CCTV recordings have been used as an intrusion to privacy of another person for malicious fun or as a nuisance. Recently, three government officials were accused of breaching the privacy through use of CCTV and the case is under hearing at Al Ain Misdemeanour Court. Also, in UAE taxis have started installing the CCTV cameras which are sparking anger from the customers. But given GCC being new domain for regulation for such sensitive and sophisticated CCTV regulations and surveillance much depends to be seen how the legal regime works.

    In conclusion, it could be said that institutions are keeping an electronic eye on people without involving the subjects how the information collected should be processed.  The law and technology should balance the national security concerns with individual rights of privacy.

    ]]>
    Sun, 02 Feb 2020 17:11:00 GMT
    <![CDATA[Grounds for Rejection of Plaint]]> Grounds for Rejection of the Plaint: Civil Procedure Code

    The plaint is petitioned for instituting a suit in the civil or commercial courts. A court of civil jurisdiction will be administered by the provisions of the Civil Procedure Code, 1908 (CPC). Order VII of CPC is visualized with the provisions of the dismissal of the plaint by the Court. This article will talk about the grounds of dismissal, the impediment time frame after dismissal inside which the plaint should be filed again and other enlightening things. This procedure is simply a principle which guarantees only the best possible utilization of the Court Fees Act, 1870.

    The court is vested with the duty that, before a suit is established, to appropriately inspect the plaint, to decide, regardless of whether it ought to be returned, or dismissed and so as to decide, the subject of dismissal. It is the court's obligation to take into consideration, different materials as well, Order VII Rule 11 of CPC describe situations where plaint ought to be dismissed.

    Order VII Rule 11 of CPC explains on the dismissal of plaints in specific circumstances and conditions. It has referenced certain grounds based on which the courts dismiss the plaints. One of them is not referencing the reason or the cause of action that the offended party looks for against the respondent.

    It is essential to decide upon the application of dismissal of the plaint under Order VII. The litigant cannot be forced to record a written statement or a composed proclamation without settling on such an application if any.

    Besides, this rule can be applied at any phase of the procedures. For a situation under the steady gaze of the Calcutta High Court, Selina Sheehan vs Hafez Mohammad Fateh Nashib [AIR 1932 Cal 685], the plaint was dismissed much after it was given a suit number.

    The Court must analyze the plaint altogether and decide whether the plaint ought to be accepted or sent back for offering some reparation to it. In any case, the plaint will undoubtedly be dismissed by the Court in the accompanying conditions –

  • Order VII Rule 11 (a) - When the cause of action is not mentioned in the plaint
  • Cause for Action has been referenced under plenty of provisions in the CPC. It is a set of claims or actualities which compensate for the grounds for accepting a civil suit. One instance of the cause of action is under Order II Rule 2 of CPC. In that, it has been expressed that to establish a lawsuit, the reason should be unequivocally referenced to in the plaint.

    If it has not been referenced, at that point the plaint will be dismissed by the Court.

    It is the sole motivation behind why a civil suit exists in any case. It determines the legitimate damage which the individual who is founding a suit has endured. It likewise has the cure or help which the offended party will request that the Court award.

    The individual initiating such suit likewise needs to demonstrate specific components like: -

  • that there existed an obligation or a duty;
  • the event of a breach or break of that obligation;
  • the reason for such a breach; and
  • the harms inflicted by the offended party.
  • Along these lines, if the plaint does not affirm the facts which are required for facilitating the case of the offended party, the plaint will be expelled by the Court referring to the justification and grounds for such dismissal.

    It is pertinent to note that one person should not be bothered twice for the same cause of action. The real test for the adjudicating authorities is that the cases falling under these provisions of CPC must reply the query that the case in the new suit is found upon an alternate reason for the activity. In any case, the offended party is at full freedom to discard any piece of the evidence.

    For instance, 'ABC' rents an apartment from 'XYZ' at a lease of INR 100,000 per anum. The contract for the entire of the years 2015, 2016 and 2017 is still pending and is yet to be realised. 'XYZ' institutes an action against 'ABC' in 2019 for asserting the sum which was expected. The suit was regarding the lease due in 2015. Hence, 'XYZ' cannot sue 'ABC' subsequently for the rent due for the rest of the years.

    The Supreme Court in Alka Gupta vs Narendra Kumar Gupta[(2010) 10 SCC 141] reiterated on the fact that the cause of action in the preliminary suit was not compensating the cost under the sale agreement, though, in the subsequent suit, the reason for activity was non-settlement of records of the partnership that was dissolved. Order II Rule 2 discovers substance when both the fits depend on a similar cause of action.

    Joint Cause of action

    Order II Rule 4 of CPC sets out the circumstances in which the cause of action would not be joined or heard together except if the Court has permitted doing as such. Following are the exemptions to the preceding –

  • Cases for claiming mesne benefit or amount outstanding of the lease regarding the claimed property or any part thereof;
  • Cases for claiming damages or harms for breach of any agreement under which the property or any part thereof is held.
  • Misjoinder of Cause of Action

    At the point when the different cause of actions is being brought together in the suit which cannot be combined, there can be no such joinder. All complaints concerning the misjoinder of a cause of action should be tended to as early as could be possible. It is a presumption that if a complaint is not raised against the misjoinder, this privilege is considered to be waived off.

    Subodh Kumar Gupta v. Shrikant Gupta [1993 (3) ALT 59 SC]

    There was an organisation firm which had its registered office in Bombay, and the processing plant was in Mandsaur. Two of the three partners in the firm had their living arrangements in Mandsaur though one was living in Chandigarh. Subsequently, an agreement was executed among them for dissolving the firm. Rendering of records of the firm was likewise mentioned on the supposed misappropriation of the assets of the firm.

    A suit was filed by one of the partners in Chandigarh. The Supreme Court had held that the Courts at Chandigarh had no kind of jurisdiction in the issue. Courts at Bhilai had the authority instead of considering the agreement.

    K. Thakshinamoorthy vs State Bank of India [AIR 2001 Mad 167]

    Upon filing the revision petition against the Additional Judge had dismissed the plaint because there was no cause of action referenced. The respondents tried to get the plaint dismissed all things considered. Eventually, the plaint was dismissed on the grounds of an absent cause of action.

    The relief afforded under CPC

    Relief must be explicitly expressed in the plaint. Rule 7 of Order VII of CPC necessitates that a plaint needs to contain the recourse that the offended party claims. It very well may be anything, for example, harms, a directive, revelation, arrangement of a collector, and so on.

    If an offended party except when permitted by the Court excludes any alleviation to which he is qualified for sue, he would not be conceded such help a while later. At some occasions, the Court awards help on an unexpected ground in comparison to express in the plaint. The help asserted by the offended party or the respondent might be a general alleviation or an elective alleviation.

    Raghwendra Sharan Singh vs Ram Prasanna Singh [AIR 2019 SC 1430]

    The cause of action, in this case, had emerged when the offended party challenged the gift deed after a time of roughly twenty-two (22) years from the date of the execution of the equivalent. The offended party for the situation has challenged the deed of gift with the charges that the gift deed is a gaudy one subsequently not authoritative.

    The Hon'ble Supreme Court, after hearing the two sides, in perspective on the realities of the case, held that the Law of Limitation unequivocally restricts this suit. What's more, the plaint should be dismissed under Order VII Rule 11 of CPC.

  • Order 7 rule 11 – Locus Standi
  • To file a suit, the offended party needs to have a locus standi. One needs to show that some legitimate right of the individual has been damaged. Such infringement ought to likewise bring about some damage caused to the individual.

    If no lawful right has been disregarded, the individual would not have a locus standi for recording a suit. The gathering fundamentally can show the Court that there was an adequate reason for activity behind the documenting of the suit.

    The locus standi of the suit relies on whether any grounds were abused which brought about the dismissal of the plaint.

    Pirthi Singh and Ors. vs Chander Bhan and Anr.

    In this case, a revision petition was filed by the defendant, who was the petitioner, against the order of the judge of the junior division. The offended party argued that the respondent had deluded the Court by expressing an inappropriate fact.

    Accordingly, the application was expelled wherein the Punjab-Haryana High Court expressed that there was no wrongdoing in the request passed by the Ld. Judge. What's more, consequently the candidates had no locus standi to document the case. Therefore, such rejection.

    • Undervalued relief claimed in the suit

    If it is brought to the knowledge of the court, that the valuation of the suit if fabricated or baseless, the court can order the plaintiff to re-evaluate the amount and may allow sufficient time for the correction. Subsequently, the plaint can be rejected if the plaintiff fails to abide by.

    • Insufficient stamps under the Court Fee Act, 1870

    The recording of the plaint initiates each suit, one of the prerequisites for the correct institution of the suit is that it must be appropriately stamped for the reasons for the court fees under the Court Fee Act, 1870. If the plaint is lacking stamp, the court dismisses the plaint under Order VII Rule 11 of CPC and give an adequate time to explain the reason for disappointments.

    Dismissing a suit as compare to rejection of the plaint

    The distinction between the dismissing a suit and rejection of plaint is that there no particular grounds on which a lawsuit may be rejected. On the off chance that the request has not been appropriately served upon the litigant, the suit is at risk to be expelled.

    Another ground is that neither one of the parties shows up upon the arrival of hearing, at that point the Court can make a request dismissing the suit. Order IX of CPC expresses specific grounds based on which a lawsuit can be rejected. Then again, rejection of plaint happens just under Order VII Rule 11 of CPC.

    CPC is a thorough resolution which covers the entire methodology which should be trailed by all the civil courts in India. The plaint is the initial step to recording a suit in the court. It should be drafted with due steadiness and diligence. It must incorporate every one of the points of interest that have been referenced all together in Order VII.

    • When the statement of the suit appears to be barred by the law

    It is important to note that, when the suit filed appears from as barred by any statute and gives no such right to the plaintiff for instituting the suit, it shall be liable to be rejected.

    • When the plaint of not filed in duplicate

    When a suit is to be instituted, a duplicate copy must be submitted. Failing which, the court has the right to dismiss or reject the lawsuit.

    Two modes of rejecting a plaint

  • The defendant can apply the form of Interlocutory Application at any stage of the procedures.
  • Suo moto rejection - Order VII Rule 11
  • By its motion, the court can, on its own, try or reject the suit, if the conditions mentioned explicitly in CPC, are fulfilled.

    To conclude, one needs to understand the following grounds where a plaint can be rejected: -

  • Where the suit is undervalued
  • Where there is an absence of a cause of action
  • Where any statement in the plaint is such that it is barred by law
  • Plaint is not filed in duplicate
  • This article is meant for the readers to get an exhaustive comprehension of these provisions and how it can get value for them to understand. CPC is the most significant subject for any individual who needs to get in the suit and who needs an added insight in a typical case.

    Aside from this, different utilizations are endorsed in Code of Civil Procedure, 1908 to meet the parts of the bargains counteract unfairness. These applications need to record with the first reply from the defendant or at some other phase of procedures.

     

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    Sun, 02 Feb 2020 16:22:00 GMT
    <![CDATA[forensic evidence in courts USA ]]> Admissibility of forensic evidence in courts – USA overview

    Introduction

    Miscarriage of justice is an existential problem, reigning throughout the years with what looks like no end in sight. Worldwide, several people are wrongly convicted and executed for crimes they did not commit. This ultimately leads to the individual who has been wrongly convicted being robbed of opportunities (job, education, etc.,.) and losing social standing. Many of these wrongful convictions are based on forensic evidence found in crime scenes. Thus, came the need to address the issues surrounding forensic evidence, their admissibility in courts and their authenticity.

    What is forensic science?

    Any evidence or trace of physical matching which can be used to identify a missing perpetrator of in a crime scene amounts to forensic evidence. This includes fingerprints, strands of hair, glove prints, tire marks and others.

    Technically, forensic science includes applying scientific principles to criminal proceedings; the term "forensic" in itself means "belonging to the law." Forensic scientists are analyzing evidence received from police officers and detectives and preparing detailed reports of their findings. Forensic science encompasses a variety of research areas.

    It can point in the right direction to a criminal investigation or provide evidence of the guilt or innocence of a suspect. Most forensic scientists are analysing in either the investigation of the crime scene or the analysis of the laboratory.

    How does it help investigations?

    The proof helps to demonstrate the existence of a violation in a criminal trial and to decide who the perpetrator is. In general, the jurisprudence behind criminal law recognizes all types of evidence that they have been studied and generated by certain means and laws, as well as the published and discussed debates, under the principle of the freedom of evidence. The evidence can be established by various types, namely flagrante delicto, confession, testimony, evidence, and clues. It was not until the arrival of forensic science to the latter category of evidence occupies a leading position in a police investigation and criminal proceedings.

    Forensic science in the index of computer processing equipment brings together professional and forensic police, the 'Forensic Science Strategy' policy encompasses both technological methods and techniques and scientific methods of studying, investigating, evaluating and examining evidence in criminal proceedings. This specifically applies to police context and spiralized in applying these procedures and offers permanent police assistance to investigators as prosecutors and training in the battle for offenders' identity.

    How reliable is it?

    It does not make sense, in the abstract, to test the performance of any forensic technique. A forensic method is only 'reliable' in so far as it helps in the context of a specific case to answer the specific questions asked. Asking the wrong questions leads to wrong answers even if the best authentic authorised forensic method or science used. Besides, it is perceived that some forensic techniques have less intrinsic value or even doubtful validity by some commentators. However, these approaches could provide the answer to a question of vital relevance. For instance, instead of pinpointing the perpetrator forensic evidence can at least help eliminate persons of interest.

    United States of America

    In the US, DNA testing, identifying tool marks, measuring bite marks, or analysing blood spatter is assumed to be reliable, consistent, and valid criminal activity measures. However, there is a growing problem relating to forensic fraud in this region. In 2015, the FBI revealed serious mistakes in criminal proceedings with decades of relying on unreliable DNA analysis in courts. There are 32 defendants sentenced to death among those convicted on fabricated evidence, 14 of whom either died in prison or have already been executed. This problem which was first posed in the early 1920s has been continuing for decades.

    General test

    For instance, in Frye v United States [293 Fed. 1013 (1923)] the District of Columbia Court rejected the scientific validity of the lie detector (polygraph) since, at that point, the invention had no substantial general acceptance. The court gave guidelines on the admissibility of experimental examinations as they found it difficult to define just when a scientific principle or observation crosses the line between the experimental or demonstrable levels. The evidential power of the theory must be accepted somewhere in this twilight zone, and while the courts will go ann elongated way toward accepting observational evidence arising from a well-recognized scientific principle, the object from which the inference is produced must be known enough to have achieved general acceptance in the specific field applications. Essentially, in order to apply the 'Frye Test', a court had to determine whether a reasonable proportion of the relevant scientific community generally approved the method, methodology and concepts in dispute. That norm has been prevalent for many years in federal courts.

    Modification

    The Frye Test standard was remodified in 1975 when the federal courts adopted Federal Rules of Evidence. This brought about more flexibility as it did not impose the strict general acceptance requirement. These rules also contained guidelines on evidence by experts. Their response to the Frye Test standard came to be used more widely as it did not necessitate purely general acceptance and was seen as more versatile. The first edition of Federal Rule of Evidence 702 requires that a person certified as an expert can testify in the form of an opinion if: -

    • The science, technological or other specialized knowledge of the expert may help the trier in interpreting the proof or in assessing the truth in dispute.
    • The evidence was founded on sufficient information and truth.
    • The evidence is the result of reliable methods and values.
    • The expert adapted the theories and techniques to the facts of the case with accuracy.

    Which test to use

    Although states are allowed to enact their own laws, many Federal regulations have been implemented and changed, including those governing expert testimonies. But the question remained: does the precedent set in Frye v United States overthrow the Federal rules which were adapted? In a 1993 decision, Daubert v. Merrell Dow Pharmaceuticals, Inc,[509 U.S. 579 (1993)]the US Supreme Court ruled Federal Rules of Evidence surpasses the Frye general test. In Daubert v. Merrell Dow Pharmaceuticals, Inc, General Electric Co v Joiner [522 U.S. 136 (1997)]and Kumho Tire Co v Carmichael [526 U.S. 137 (1999)], the Courts clarified that, while the federal standard required general acceptance, trial judges are the ultimate arbiter and 'gatekeeper' on the permissibility of evidence and the recognition within their own courtrooms. In making such decisions the judges should consider the following:

  • What is the underlying principle and was it tested?
  • Is the methodology regulated by standards?
  • Has peer review or publishing been subject to the concept or technique?
  • What is the established or expected level of error?
  • Is the principle acknowledged in general?
  • Has the specialist found possible theories adequately?
  • Has the specialist extrapolated unjustifiably to an unfair inference from an agreed premise?
  • The Daubert ratio further recognizes that questions regarding shaky evidence could be addressed by cross-examination, analysis of evidence to the contrary, and thorough guidance on the standard of evidence. This Daubert principle is now subject to medical expert testimony in many countries. But some jurisdictions still use the Frye standard's update.

    The issue with this

    There is a long-standing issue of presentation and hearing of cases involving forensic as a civil or criminal proceeding. It was argued that since judges have the power to make the often-subjective determinations which result in forensic evidence being accepted and removed, they may also have a general tendency to support one side's proof over the other. A lively discussion arose, culminating in general agreement that judges can implement Daubert to criminal and civil cases separately. Many researchers say that experimental and technical proof is more likely to be used to criminal cases in favour of the government and rejected from civil cases where defendants give it. Therefore, there was a need for experts to check the credibility of forensic science presented in courts.

    Why the experts?

    Over the years, it has become increasingly difficult for the average juror to grasp the evidence presented at the trial. Through relying on an expert witness to explain complicated facts and research in an easy-to-understand way, prosecutors in the courtroom can interpret their arguments correctly and judges can be better equipped to weigh the evidence. However, this gives rise to further difficult questions. How does the court decide if an applicant is an expert? Which requirements do they have to meet in order to give their opinion in a trial court?

    Such issues are also dealt with in Rule 702. It only requires "trained... through expertise, ability, practice, learning, and schooling" specialists. Typically, a substantial amount of training and experience is needed to be deemed a genuine specialist in any area. The various forensic professions follow different training plans, but most of these provide in-house training, tests and realistic reviews, as well as continuing education. When training examiners for interrogation in a courtroom, oral presentation preparation, like moot court knowledge (simulated court proceeding), is very beneficial.

    The individual who presented the laboratory document and takes credit for the study by releasing a report will usually act as the court expert. The defendant may also turn to their own experts to counter this evidence, and both parties are subject to that court's level of competence (Frye, Daubert, Law 702). Obviously, individuals who appear as expert witnesses need to understand how to respond to such queries. Regardless, it is essential to note that the decision if forensic evidence is admissible is solely up to the judge presiding the case.

    More recent reforms to check the credibility

    The National Academies Study 2009 (NAS Report) called for all forensic science service providers to be compulsory certified. Recommendation 7 of the NAS report states that all laboratories and facilities (public and private) should be certified and that defined and recognised international standards such as those issued by the International Organization for Standardization (ISO) should be taken into account when deciding acceptable accreditation standards. Forensic science suppliers may expect a necessity for them to be accredited by authorized training agencies, although not entirely in action. Accreditation of the crime laboratory is thus one way of conveying to the court that testing procedures follow high standards.

    Forensic Laboratories

    Laboratories certified under ISO 17025 are required to keep track of a number of quality assurance documents, retain standardized research procedures (which may vary periodically), keep records of reagent use and storage, repair of facilities, employee training and ability evaluation, employee mistakes, and a variety of other performance-related issues in laboratory operations.

    Forensic science suppliers may expect a necessity for them to be accredited by authorized training agencies, although not entirely in action. Accreditation of the police laboratory is thus one way of conveying to the court that testing procedures follow high standards. Laboratories certified under ISO 17025 are required to keep track of a number of quality assurance documents, retain standardized research procedures (which may vary periodically), keep records of reagent use and storage, repair of facilities, employee training and ability assessments, employee mistakes, and a variety of other performance-related issues in laboratory operations.

    Laboratory Information Management Systems, or LIMS, have been built to handle the broad range of information collected by forensic laboratories. Systems can collect information from people, observer teams, research areas, and the whole facility to generate documents that can demonstrate to a jury that the operation of the laboratory follows standard protocols and is conducted correctly in a given case. However, while a LIMS cannot compel examiners to use controls, it can implement reporting whether controls have been used in an examination and impose tracking of the effects of such controls, such as positive control, negative control, reagent blanks, etc. Although crime laboratory accreditation can never conclusively guarantee that errors have not happened, it is an important step to reveal the level to which laboratories uphold quality control, and laboratory accreditation and LIMS schemes are ways to demonstrate the degree of effort.

    Certainty of opinion

    Another question to explore is how we convey degrees of certainty- how certain is an individual's (no matter how qualified) understanding of something? During one point, experts were allowed to state that two proof objects were different and originated from a common source, with virtual certainty. It was not unusual for a fingerprint specialist to claim the two prints come from the same individual to anyone else's exclusion. A statement today that communicates the degree of certainty is troublesome.

    The primary cause of this transition is DNA evidence, and probabilistic assumptions are seen as the correct way to express degrees of possibility. But here's a complication: how can they convey the probability of two items coming from a common source if their frequency chances are unknown? With a shoe print of healing or toe wear patterns and gouges, should we give the object a statistical likelihood quality, and how can we testify when those changes may not be understood until sometime in the future, if ever?

    Conclusion

    In forensic science, chemistry plays an indispensable role, which plays an increasingly vital role in our judiciary. Chemistry is used in all forms of forensic evidence- from fingerprints and blood to DNA. But it is not possible to use forensic science alone to determine guilt. First and foremost, every judicial system is a human endeavour, and human beings will always be fallible. The degree and extent of how this forensic evidence is to be judged as credible or admissible depend on trail judges and experts on the topic but ultimately and unfortunately there is always a risk of such evidence being misused and manipulated. Nonetheless, before these problems are fully addressed

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    Sun, 02 Feb 2020 15:48:00 GMT
    <![CDATA[Inventions made in Outer Space]]> Inventions used or made in Outer Space

    "Science soars like an eagle however law drags on like a turtle" implied by Carl Cristo in 1964. This quote is the current situation to protection laws of intellectual property.

    Space technology is the most advanced technical area in the world. Outer space activities were, in fact, the start of all intellectual creations. Recently there has been an increase in intellectual property issues regarding extraterrestrial activities. The reason for the rapid growth is that most space activities are changing to private or commercially owned expeditions rather than being state-owned. The space activities are typically operated under international cooperation schemes, thus requiring a reliable and inflexible legal framework. The most pressing issue on inventions made or used in outer space in which national patent law would be applicable.

    The patent protection law is subject to the specific national legal framework. Space law allows full rights and control over the object in whichever jurisdiction the space inventions is registered. Because uncertainty exists on how the domestic law of the jurisdiction would apply as there is no explicit rules and regulations an agreement, the agreement states that space invention made or used would be treated as "quasi-territory" in light of it being an Intellectual property. This article recognizes the area of patent law in outer space could prove problematic, thus exploring possible solutions for these issues.

    History of Legal Regulations of Activities in Outer Space

    The age of outer Space began on 4 October 1957 when the world's first artificial satellite, SPUTNIK-1 launched by the Union of Soviet Socialist Republics (USSR).

    International Space Law as current consist of five space treaties:

    • The Outer Space Treaty: The Moon and Celestial Bodies of 27 January 1967 i.e. treaty governing the activities of States in the Exploration and Use of Outer Space. This treaty was adopted by the General Assembly vide Resolution 2222 XXI, which was open for signature in January 1967 and finally came into force on 10 October 1967. Some basic framework with regards to the international space law under this treaty is as follows:
  • The use and study of outer space must be carried out in the interest and benefit of all countries coupled with being a province of all mankind;
  • The exploration shall be free for use and exploration by all States;
  • States shall not place weapons of mass destruction or nuclear weapons on celestial bodies or in the orbit in any manner;
  • States to be liable for any damage caused by their space objects;
  • States to ensure that there should be no harmful contamination of celestial bodies or space, etc.
    • The Rescue Agreement of 22 April 1986 i.e. Rescue of Astronauts, the return of Objects. This agreement was adopted by the General Assembly vide Resolution 2345 XXII, which was open for signature in April 1968 and finally came into force on 03 December 1968. This agreement essentially provides that all steps to rescue and help astronauts in distress. Additionally, the state must promptly pave way for their return to the launching state. Further, upon request, the states shall also assist launching states in order to recover space objects that have returned outside the territory of such state.
    • The Liability Convention of 29 March 1972 i.e. Convention on International Liability for Damage caused by space objects). It was adopted vide Resolution 2777 XXVI which was open for signature in March 1972 and came into force in September 1972. Under the Liability Convention, it clearly provides that the state shall be liable for defrayal of damages that are caused by its space objects to the aircraft of the surface of the Earth. Additionally, the state shall also be liable for any damage due to the state's fault in space.
    • The Registration Convention of 14 January 1957 i.e. Registration of Objects Launched into Outer Space. It was adopted vide Resolution 3235 XXIX which was open for signature in January 1975 and came into force in September 1976. This convention essentially addresses the issues which are related to States Parties' responsibilities with regards to their space objects. Therefore, the Secretary-General was required to main a register whilst ensuring its open and full access to the information therein which is provided by the international intergovernmental organizations and the states.
    • The Moon Agreement of 18 December 1979 i.e. Governing all Activities on the moon or other Celestial Bodies). It was adopted vide Resolution 34/68 which was open for signature in December 1979 and entered into force in July 1984. This agreement encompasses that celestial bodies and moon should be used exclusively for peaceful purposes. Additionally, their environment must not be disrupted. Further, the United Nations should be informed with regards to the purpose and location of any station which are established on such bodies.

    Principles:

    The five legal principles and declarations with regards to outer space are as follows:

    • The Declaration of Legal Principles of December 1963: Adopted by the General Assembly vide Resolution 1962 XVIII;
    • The Broadcasting Principles of December 1982: Adopted by the General Assembly vide Resolution 3/92;
    • The Remote Sensing Principle of December 1986: Adopted by the General Assembly vide Resolution 41/65;
    • The Nuclear Power Sources Principles of December 1992: Adopted by the General Assembly vide Resolution 47/68;
    • The Benefits Declaration of December 1996: Adopted by the General Assembly vide Resolution 51/122.

    The Challenges for Patents in Outer Space

    Virginia Galactica launched its first successful flight into space on 18 December 2018.  The Virginia Galactica invention made on earth for Outer Space indicates how technology is forever evolving.  Virginia Galactica is only one example of an invention created on earth. The Solar Panels in the International Space Station (ISS) is another example.

    One other issue related to Article 5 of Paris Convention The Paris Convention on Protection of Industrial Property, provides certain limitations of rights (exclusive) conferred by a patent in the interest of the public in order to guarantee freedom of transport.  This convention was adopted in 1883 which applies to industrial property in its widest sense, including trademarks, utility modes, patents, geographical indications, trade names as well as repression of unfair competition. Now, the question which remains is whether the doctrine of temporary presence (freedom of transport) applies to space objects? For example, considering the transport of patented articles from or to a certain space station through, say a launching site in a foreign country.

    Patenting Space Related Inventions

    The United States, Japan, Canada, Russia and the Member States of European Space Agency, are working together to establish the legal framework in order to define the rights and obligations of each of state, as well as their jurisdiction and control over their International Space Station Intergovernmental Agreement, 29 January 1998.

    Clarifying patent law in space would allow for invention and exploration to increase by protecting the rights of inventors and creating incentives to continue their work. With the significant financial investment required to break into the market, inventors need to know their legal rights in space. In particular, establishing space patent jurisdiction, liability, and duty to enforce would provide certainty and encourage exploration. Setting patent law in space would prevent space companies from gaining an advantage based on their country of registration.

    Solutions worth considering:

    The journal of Patent and Trademark Office Society 98 explore the option of creating a 'Space Patent' regime that would be administered by the United Nations Committee on the Peaceful uses of Outer Space; working alongside the Scientific, Technical and Legal subcommittee. The new committee for Space Patent will handle registration after receiving and assessing the patent. The committee will be able to handle any disputes arising from the patent with the support of the legal subcommittee; as an arbitration centre. This will require the need for the Space Treaty to be modified. Although there is still some criticism surrounding the "Space Patent" regime. Not being politically feasible is the main criticism on the suggested scheme, as every country might claim that their legislation should be included in the legal framework.

    Another solution is mentioned by the WIPO proposing a universal patent law and a corresponding space patent jurisdiction. This method would establish space as its own territory for patent rights with a separate jurisdiction to create and enforce patents. Inventors would file one patent application that would be universally enforceable and protectable throughout space.

    Although WIPO has not yet identified a governing body for this system, the primary advantage is that this system provides greater protections to inventors by creating uniform rules and closing the loophole that allows companies to infringe on patents only by their country of registration. Furthermore, a uniform system simplifies and clarifies the patenting process by requiring inventors to file only one patent application, instead of a separate application for each country in which they want to enforce their rights. A significant obstacle to the creation of a space patent jurisdiction, however, is the traditional unwillingness of states to part with their sovereignty to give power to an international governing organization.

    Conclusion

    The current status of international space law lacks patent protection in space. One proposed solution, from WIPO, is creating a single patent application and jurisdiction that a governing organization will enforce universally for all patents in space. The other proposed solution is the patent law regime, which should be considered as a valuable and reliable type of solution. Financial input from the private sector into Outer Space inventions will be beneficial for the future development of space activities. The idea of Outer Space is attracting more capital from private companies; therefore, intellectual property protection will become vital in inventions made or used in Outer Space.

     

     

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    Sun, 02 Feb 2020 14:26:00 GMT
    <![CDATA[Musataha Agreement]]> Musataha Agreements in the UAE

    Introduction

    The Rights of Musataha is a vital tool for real estate development in the United Arab Emirates (UAE). It enables the investors to establish stable and safe investment projects whilst achieving the adequate balance between the rights of the proprietor and those of the investor; thus, an investor is able to avoid the restrictions preventing the foreigners from owning land in the region coupled with avoiding the exorbitant expenses therein in the investment zones. Additionally, the proprietors benefit from the ideal utilization of their lands, which in turn also helps the State (UAE). Therefore, the state has tended to expand the implementation of musataha agreements with regards to government lands allocated for rather specific investment purposes. Dubai Municipality along with the Abu Dhabi Municipality has obliged the investor by a contract for the utilization of its lands under this system.

    General Framework

    Rights with regards to property ownership are entrenched in Federal Law Number (5) of 1985 commonly known as the Civil Code. Under the Civil Code, the property rights include, usufruct, freehold and musataha. Each Emirate has the respective laws that govern long term leases.

    A freehold is right in rem which is granted in perpetuity. Usufruct contract is an investment contract between the person(s) or entities developing the land and the owner of such land. It is important the vacant land must be intended for commercial use only. Further, under a usufruct contract, the land developer must be a UAE national where such land is not in a freehold area. Musataha Agreement invariably is a right in rem that entitles the real estate holders to construct, invest in, lease, sell, mortgage, purchase a plot of land of a third party for a term of up to 50 years with condition that such acts are not contravening any Executive Council resolutions. This term is further extended to 50 years by mutual agreement of two parties. Amongst the above-mentioned property rights, freehold is the most superior form which allows full ownership. On the other hand, musataha and usufruct are a tad bit stringent in terms of allowing ownership only for a limited time and with some restrictions.

    This article shall focus on musataha agreements.

    Dubai

    As the central land register, all real estate transactions in Dubai must be registered with the Dubai Land Department (DLD).  The ownership of property in Dubai is largely governed by Law Number (7) of 2006 concerning registration of real estate property in Dubai, which allows only the UAE and Gulf Cooperation Council (GCC) nationals to purchase real estate in the UAE, with some exceptions. Indubitably there are certain restrictions that prevent foreign companies and nationals to own real estate in Dubai. UAE nationals, GCC nationals and companies incorporated in the UAE (excluding free zones) which are wholly owned GCC/UAE nationals are able to own any property interest in the Dubai (except public joint-stock companies which are listed in Dubai which are not wholly-owned by GCC or UAE nationals). However, non-UAE and GCC nationals may own property interests like musataha leasehold in certain designated areas including but not limited to, Downtown Dubai, The Palm, Dubai Marina, Emirates Hills, etc.

    The direct ownership of property of Dubai International Financial Centre (DIFC) registered companies is permitted within the DIFC only for the reason that it has its own property laws, thereby maintaining a separate property register for real estate in the free zone.

    The courts in Dubai have a definite stand when it comes to deciding whether a leasehold is musataha agreement and whether the due procedure has been followed to register the same. In a decision by the Dubai Court of Cassation (Civil Appeal Number 498/2016) dated 9 February 2017, it was held that registration of the lease is essential. In the abovementioned case, the owner of the land wished to terminate the rental relationship that she had with the defendants upon payment of an amount of AED 3,629,581. However, the defendants pleaded that the registration of the lease was not done in accordance with the law, hence, they are not obligated to pay her the sum as well as evacuate the land. In the plaintiff's defence, she presented a letter from the Dubai Land Department which stated that she is the owner of the land and that she could conclude contracts with others, rent or lease the same to use the plot of land upon fulfilling relevant registration procedures. The plaintiff has leased the plot of land to the defendants for a period of thirty years and claimed that in accordance with tenancy contract, the obligation was on the tenants for the registration fee, issuance of approval of government permits for building, etc. The Court of First Instance was of the opinion that the present contract was, in fact, a musataha agreement. Further, the court in the present case disregarded the contract and directed the defendants to evacuate the land and return it to the plaintiff without making the payment. When this decision was appealed, the Court of Appeal seconded the decision of the Court of First Instance. When the decision was further appealed before the Court of Cassation, the present court agreed with the Court of First instance in deeming the contract to be a musataha agreement. The Court of Cassation further held that the registration of the lease was the responsibility of the plaintiff, and since the same was not done by her, she was not entitled to the payments she was claiming, though the defendants were directed to evacuate and return the plot to the plaintiff.

    Another judgement by the Court of Cassation in Civil Appeal 30/2010 and Civil Appeal 208/2010 further provides more clarity with regards to the provisions which apply to musataha agreements. The facts of the case are: the owner of the plot passed away without a valid will, and the legacy was kept with the public treasury since there was no inheritor. However, the land was being used by the defendant. The treasury being the claimant, filed a suit against the defendant for unlawfully using the land that belonged to them. In the defendant's defence, he mentioned that the owner of the land before her death provided him with a will wherein he inherited the plot. However, when the will was brought in question, it was held that adequate procedures were not followed in accordance with the law for the registration of the will, thereby not being accepted by the courts. The defendant further contended that he had been residing in the plot for several years and spent his hard-earned money to build a house on the plot. He mentioned that he did not forcefully utilize the land, and only in good faith resided and built the plot. The Court of Cassation relying on Articles 1317 and Article 1318 of the Civil Code which states that a person who possesses an unregistered immovable property considering himself to be the owner of such property, and such possession continues uninterrupted for a period of 15 years, he shall not be actionable in property or the rights in rem by any person who does not have a legitimate justification; though the claimant had a valid justification. Further, the Court of Cassation also mentioned that the valid cause is a document which provides proof of possession of real estates, like a transfer of title by legacy or inheritance, gift with or without consideration or a sale and bartering. It is pertinent to note that none of these were fulfilled by the defendant in the present case, as the mere possession of the property does not give the defendant the ownership irrespective of the period of time whether short term or long term with good faith. In case the property was not registered, the defendant may have been able to get possession/ownership of the plot, however, in the present instance, the plot was registered with the claimant. The Court of Cassation further highlighted Articles 1353, 1354 and 1358 of the Civil Code with regards to musataha agreements, stating that musataha agreement gives the owner the right to establish a building on a land which belongs to another individual which is acquired by agreement or over time, and this gives rise to obligations under the agreement such as paying dues, registration fee, etc. In this case, the defendant did not have a musataha agreement with the claimant. Therefore, the court held that the right of benefit/use, as well as the musataha, are not transferred except by registration. Since the property which was registered in the name of the deceased, post which the claimant, the defendant is obligated to pay dues to the claimant in return of him enriching or benefiting from the property.

    Abu Dhabi

    In the Emirate of Abu Dhabi, a lease is essentially a personal contract of hire which is more akin to a license, and not an interest in land. The non-owner occupiers in both commercial and residential sectors are lessees under the leases. Companies owned in whole or part by a non-UAE national as well as non-UAE nationals are only granted long leases (a minimum of 25 years) within designated investment areas, much like Dubai. A musataha agreement in Abu Dhabi is considered an investment interest which allows exploitation, development and occupancy of the land. The Abu Dhabi Municipality (ADM) have deemed leases for a term of over four years which is granted in favour of a non-UAE national or a company which owned wholly or partly by a non-UAE national with regards to land outside the investment zone coupled with the land that contain rights to sublet, to be considered as usufructuary rights.

  • Registration with regards to leasehold interest which is located within the Emirate of Abu Dhabi but outset the ADGM (short of Abu Dhabi Global Market) are different for leases over less than and over four years. For leases of four years or less, the buildings and units in the Emirate are required to be registered under a system which is known as Tawtheeq. The registration process and fees for the same is the responsibility of the lessor. The registration fee differs for building, new lease, renewal, termination as well as further administration. There are various requirements of the Tawtheeq system wherein a number of fields including trade license, issuance authority, company activity, the rental value of the lease, expiration of the lease, etc need to be filled out. STA Law Firm's real estate lawyers in Abu Dhabi assist individuals as well as entities at various stages of registration of the Tawtheeq on a regular basis. For a lease of over four years, the buildings and units in the Emirate are required to be registered under a system which is known as Tamleeq, and two different types of registration fees are payable which depends on the term of the lease:
    • For lease over four years (but less than 25 years): 1 per cent of the first year's rent
    • For lease over 25 years: 4 per cent of the value of the consideration.

    Resolution Number 127 for 2019 by the Abu Dhabi Executive Council amends the Resolution Number 49 for 2018 by reducing municipal fees for Musataha agreements in Abu Dhabi from 4 per cent to return value of 0, 1 or 2 per cent, depending on the land classification. There is a fee cap stipulated in the resolution for projects in the educational, services, industrial and healthcare sectors, to increase the investors' appetite by acting as a catalyst for all new projects.

  • With regards to leasehold interest located within the ADGM, the free zone maintain the ADGM Land Register which provides a defined list of conveyances as well as subsequent variations which must be registered with the ADGM Land Register. It is also pertinent to note that the obligation for registration is on the grantor. Following the common law system, the ADGM required the conveyances to be executed in English, and if not, a translation to English must be provided. the registered owner holds such interest free from the other interests excluding:
    • Easements or public rights of way
    • Statutory charges
    • Rights in favour of a relevant authority
    • Pre-registered interests, and
    • Implied easements.

    The registration fee for a term of fewer than 10 years which includes renewal is AED 100 per annum, and for a term of 10 years or more (inclusive of renewals) is 2 per cent of the total value of the contract. Further, there is no maximum limit to the fees for lease with a term of 10 years or more.

    The types of arrangement where the law in Abu Dhabi recognizes the occupation, as well as the use of the real property for a limited period of time, includes:

    • Residential
    • Commercial
    • Offices
    • Hotels
    • Furnished apartments

     

    Saudi Arabia

    In contrast, both GCC nationals and foreigners are entitled to purchase own land in the region for development, lease or sale, on the condition that they have a legal presence in the Kingdom of Saudi Arabia (KSA). In the case of foreigners, they must obtain and have a valid license to carry our activities with regards to real estate development.

     

    Bahrain

    Under Law Number (27) of 2017 concerning promulgating the real estate sector, a musataha right is defined as "a right which authorizes the holder of such right to construct buildings or facilities on land which belongs to another for a limited period." In accordance with Article 78, a musataha terms cannot exceed 99 years. Under the same article, if the musataha right is for a period of more than 10 years, the holder of such right may dispose it or mortgage it without the permission of the owner, unless it has been agreed otherwise in writing.

    Conclusion

    Therefore, to distinguish a lease from musataha or usufruct can be fairly difficult and the substance of the document is what determines its nature, rather than its form.  Regardless, in the UAE, leasehold interests are treated as personal rights, and not real rights between the two parties. However, in all cases, usufructs are restricted to a term of a maximum of 99 years, whereas musatahas to a term of a maximum of 50 years (subject to one renewal of 50 years).

     

     

    ]]>
    Sun, 02 Feb 2020 13:51:00 GMT
    <![CDATA[Security Tokens and Blockchain]]> Security Tokens and Blockchain- An Edge over other Jurisdictions

    The new age of technology and interconnectivity around the globe and beyond has revolutionized the methods in which we carry out the activities of daily life. Communication, banking, shopping, travelling- technology has eased these areas of our lives to a simple touch on a screen or a click of a button, so it comes as no surprise that this technology can innovate the very basic commodity of our society; currency, to a whole new level.

    Capitals, property, and profits are now being digitized as this is cost and time-efficient. But how is this possible? The answer is a cryptocurrency, which is a binary (the computer number system of 0 and 1s) asset which possesses the right to be used.  Blockchain was invented by a person alias Satoshi Nakamoto in 2008 serving as the public transaction ledger for the bitcoin which is a form of cryptocurrency.Thereafter, there has been a proliferation in the entire world with regards to it.

    How does Cryptocurrency work

    The transaction of cryptocurrency is enabled through the help of strong cryptography which consists of blockchain and security tokens. Say that you are transferring money to your friend's account, the bank will retain the information of the transaction and update this information on both sides, the sender and the receiver, this information, however, can be easily tampered with by anyone who knows how the banking system works. Blockchain acts as an 'only read' information sheet. Blockchain is in simple terms a chain of blocks, where each block is a single collection of data, this data once added is difficult-almost impossible to change as the blockchain is not governed by any central body but simply abides by the protocols of cryptography.  Security tokens are the newest category under cryptocurrency, its main purpose is to remove the middle area or middleman that exists between a transaction.  When the middleman is removed it reduces the chances of risk, fees, and delays and leads to lower fees, faster deal execution, free-market exposure, larger potential investor base, automated service functions, and lack of financial institution manipulation

    The Emergence of Blockchain

    UAE is an innovation-led society that aims at integration between leading technologies and everyday activities to create an efficient, productive and leading community. Dubai is always at the forefront of achievement, progression and envisions at becoming one of the first 'smart cities' in the world. The competent and enduring nature of the blockchain technology is expected to make things more secure, reduce operational cost and accelerate decision-making.

    Emirates Blockchain Strategy 2021

    In April 2018, His Highness Shaikh Mohammad Bin Rashid Al Maktoum launched the 'Emirates Blockchain Strategy 2021', a collaboration between the Smart Dubai Office and the Dubai Future Foundation, its aim is to make Dubai the first city fully powered by Blockchain by 2020 which would result in saving AED 11 billion, 398 million printed documents, 1.6 billion kilometres of driving and 77 million work hours annually, this is made possible as the integration of Blockchain will handle 50% of all federal government transaction.  

    The key factors of the strategy are Government Efficiency-increasing efficiency through a digital layer for transactions, Industry Creation- enable citizens and partners to create new business through a technological platform and International Leadership- to open its Blockchain platform for global partners.  

    Furthermore, alongside the development of Blockchain within the city, Dubai has also introduced an essential factor of international Blockchain development by establishing the Global Blockchain Council; founded by the Dubai Future Foundation. The council is made up of 46 members, consisting of government entities, international private companies, leading UAE banks, free zones and international blockchain technology firms. The council aims to explore, discuss current and future applications, and organize transactions through the Blockchain platform. The council will regulate the implications of the new innovation by only allowing transactions on Blockchain to be successful if all members of the council approve, this reduces the risk of fraud and money laundering which in turn leads to the advancement of prosperity of the current and future business and finance sectors, which in turn boosts transactions between financial and non-financial sectors.

    A prime example of a blockchain project in UAE is of Roads and Transport Authority (RTA). RTA is executing a project in order to devise a vehicle lifecycle management system with the use of blockchain technology. The aim of this project is to provide car manufacturers, regulators, dealers, buyers, sellers insurance companies and garages with a clear record regarding the vehicle's history from the manufacturer to the scrap yard. This blockchain executed system would boost transparency in vehicle transactions, prevent disputes and lower the cost of services.

     

    The Regulation of Cryptocurrency

    Although there is no doubt that blockchain is indeed the future of transactions, the success of blockchain demands the regulation of existing legislation with the introduction of the new technology cryptocurrency, which is essentially the running power of blockchain. The regulatory regime regarding cryptocurrency will be developed in accordance with the new technology as well as keeping in mind the pre-existing financial regulatory authorities. The current digital payment regulation prohibits "virtual currencies" although it was later followed up by a statement in which it was clarified that this regulation does not apply to cryptocurrencies.  In the various free zones around the UAE, only a handful of them has issued licenses to cryptocurrency companies and only one has a specific regulatory regime regarding cryptocurrency. 

    Abu Dhabi Global Markets (ADGM) and Dubai International Financial Centre (DIFC) are the two most popular financial free zones in the UAE. The Dubai Financial Services Authority (DFSA), the regulatory vehicle of DIFC, launched the "Innovation Testing License" for fintechs, allowing firms to test their concepts, largely based on Blockchain technologies within DIFC's territory, whereas the Financial Services Regulatory Authority (FSRA), the regulators for Abu Dhabi Global Markets (ADGM), launched the RegLab sandbox, one of the pioneering licensing frameworks for fintech in the region to test for the same. RegLab is basically designed to proactively develop and anticipate future legislation with regards to the governance of the use and applications of evolving technologies in order to minimize the risk and maximise the benefits. Further, it shall work closely with the lawmakers from local and federal government entities, private sector leaders and businessmen to develop legislations that will be governing vital future sectors which influence humanity and support the region's role as a global incubator of creative and innovative projects.

    In October 2017 a Guidance on the Regulation of Initial Coin/ Token Offerings and Crypto Assets was issued by the ADGM, which provides a framework that ensures the regulation of the system providing reassurance and comfort to individuals, companies, and investors.

    Furthermore, Federal Law Number 1 of 2006 on Electronic Commerce and Transactions appears to allude to 'smart contracts' in its Article 12 as it states that, "Contracts between confidential electronic mediums that include two or several electronic information systems, designed and programmed in advance to perform so, shall be deemed valid, enforceable and giving its legal effects even in the instance of no personal or direct interference of any physical person," adding that, "concluding contracts between a confidential electronic information system in the possession of physical or juristic person and another physical person is further allowed should the latter knows or is supposed to know that the system shall conclude the contract automatically." This shows that precise and detailed structure is being given to the legislation regarding Blockchain.

    Crossing International Borders

    The ability to add a block to a Blockchain creates an interlinking network around the globe leading to the chance to make international connections, the DFSA collaborates with other regulators on technologies and innovation including with the United Kingdom's Financial Conduct Authority (FCA), Bank Negara Malaysia and the Monetary Authority of Singapore (MAS). The nature of the Blockchain integration is such that it cannot be confined within certain geographical boundaries and so cannot be governed by a single jurisdiction. This is because each block of the blockchain arises from different parts of the world. Obligations of various countries differ from each other, this challenge can be overcome by adding a governing clause which would decide the jurisdiction they would be under if any dispute would arise by the parties who enter into transactions and other contractual obligations with each other.  

    The Future is Bright

    The direction of growth and commitment seen over the years as we come closer to 2021 makes it abundantly clear that UAE is a forerunner in creating a highly innovated society that integrates the latest technologies and developments.

     

    ]]>
    Sun, 02 Feb 2020 12:31:00 GMT
    <![CDATA[Owners Association in Dubai]]> Owners Association in Dubai

    "Home ownership is the cornerstone of a strong community."

    – Rick Renzi

    On the bright sunny morning on 9 November 1987, the United States District Court (E.D. Virginia - Alexandria Division) ruled on a very important question in the real estate sector at that stage – the validity of third-party claims when there is no evidence of secondary liability [117 F.R.D. 576]. This case was filed by the Watergate Landmark Condominium Unit Owners' Association who were grossly discontented by certain construction works that were done on the balconies by Wiss, Janey, Elstner Associates (engineering firm), and Legum & Norman Realty (real estate management firm). The topic of this article is not simply the validity of such claims, but the legal standing itself of owners' associations to file claims against third parties. Ergo, we would rather cut to the chase in the abovementioned case and inform our readers that the court ruled that claims against third party entities are permissible only when the third parties would be liable to the first defendant in cases where the first defendant is held liable to the claimant. As an individual, many amongst us consider the ownership of a permanent home as a personal milestone. Be it an apartment or a house within a community, the joy of having a permanent space within a property is nothing short of unparalleled. Living in such a community has its own set of benefits, with the inclusion of having access to various common areas that can be utilized as and when residents wish to do so. It is a common practice in such communities to establish an owner's association in order to maintain and manage common areas of the community, wherein the association will be tasked with catering to issues such as security, enforcement of rules, maintenance and engagement with relevant authorities.

    Being a part of the Owners Association necessitates a payment known as the annual service charge, which will be utilized for the maintenance and preservation of the community. In Dubai Law Number 27 of 2007 was introduced as the Strata Law, to establish the regulations with regards to the ownership of jointly owned real property and the establishment of an owner's association. The reason for beginning this article with this case was to illuminate the readers of the rights of owners' associations to file cases. We all know that only legal persons have the right to sue or be sued. According to the Law Number 27 of 2007, once the sale of the first unit of the Jointly Owned Real Property is registered in the Property Register of the Dubai Land Department, an Owners Association will be legally constituted, which will comprise of the owners of the units in the Jointly Owned Real Property (and the Developer, in the case of unsold units). Some of the features and responsibilities of an Owners Association are:

    • It is to be a non-profit body that has a legal independent personality separate from its members, that can sue or be sued in its own name.
    • The Manager of the Owners Association will represent it before Courts and other relevant authorities.
    • The responsibility of management, operation, maintenance and repair of common areas lies with the Owners Association, wherein the Association must obtain a license from the Land Department.
    • The Owners Association can delegate its powers and responsibilities to any person or company, if applicable, in accordance with agreed terms and for remuneration.

    The Strata Law further mentioned that the Chairman of the Land Department is empowered to issue further resolutions and bylaws that are deemed necessary for the implementation of the provisions of the law. In accordance with this provision, in April 2010, the Chairman of the Land Department issued the Implementing Regulations of the Strata Law. It must be noted that this was issued as a series of 'guidelines' rather than 'regulations'. These guidelines were split into the following:

    • General Regulations: These regulations covered matters such as consumer protection, collection of service charges, financial disclosures and appointment of administrators to name a few.
    • Jointly Owned Property Declaration Regulation: The Jointly Owned Property Declaration Regulation laid out the details with regards to how Unit Owners can establish a Jointly Owned Property Scheme in the scenario the developer fails to do so. The regulation also provided for up to three layers of Jointly Owned Property Schemes within one Jointly Owned Property development.
    • Constitution Regulation: The Constitution Regulation specifies the manner of the constitution for each Owners Association. If the Developers had previously specified any other manner, it must be noted that with the issue of this regulation, it will no longer be valid.
    • Survey Regulation: The Survey Regulation specifies the registration and accreditation of surveyors and also the duties of these registered surveyors.

    The Legal Status of Owners Association

    According to Article 18 of Law Number 27 of 2007, the Owners Association is to be a non-profit entity with a separate legal personality that is independent of its members. Furthermore, it may sue and also be sued in own name and also take ownership of any movable property. Article 21 of the same law further states that for the purpose of management, operation, maintenance, and repair of Common Areas, the Owners Association is required to obtain a relevant license from the Land Department.

    Unfortunately, following the enactment of the guidelines, the Owners Association have not been able to function as a fully-fledged legal entity. This has resulted in developers still having an active role and being involved in the management and operation of these Jointly Owned Real Properties. In order to counter this situation, the Real Estate Regulatory Authority (RERA) began granting several Owners Association an interim status to carry out specific purposes. These Owners Associations were only allowed to carry out and involve themselves only in activities that were permitted in accordance with the granted status. This led to various Owners Associations having varying degrees of control over the management of the property and being heavily dependent on cooperation from the Developer. In the event any differences arose between the Developer and the Owners Association, it would become extremely difficult to manage the property, with RERA intervening to resolve such disputes and determine the legal rights of the Owners Association on a case-to-case basis.

    Since the Implementing Regulations of the Strata Law were issued as mere guidelines and not regulations, it has led to the following challenges:

    • The inability of Owners Association to enter into contracts with third parties;
    • The inability of Owners Association to open bank accounts;
    • The full-time status of Owners Association, due to permits being issued for specific purposes only, at present;
    • The ability of owners to sue or to be sued.           

    Such uncertainties have led to questions being asked about the effectiveness of the Strata Law, as one of the cornerstones of the law is the establishment of an Owners Association and how it manages the Jointly Owned Real Property, independent from the developer.

    The Merriam-Webster Dictionary defines a 'legal person' as a body of persons or an entity (as a corporation) considered as having many of the rights and responsibilities of a natural person and especially the capacity to sue and be sued. But is an owners' association a legal person? The laws pertaining to and surrounding owners' associations and jointly owned properties are substantially different in each jurisdiction. This depends on various factors such as the history of ownership rights in the locality, fundamental rights of the country, the legal standing of organized and unorganized (registered and unregistered) bodies etc. Let us move on and discuss the status quo of this subject in the Emirate of Dubai. H.H. Sheikh Mohammed bin Rashid Al Maktoum recently announced the implementation of Dubai Law Number 6 of 2019 regarding the joint ownership of the real estate.

    What is an Owners' Association?

    An owners' association is a not for profit establishment and is a separate legal entity which comprises of the units or apartments that are in joint ownership. The owners' association is divested with the responsibility of managing, monitoring, and maintaining the areas that are used in common and that each owner of the unit is a member of the association.

    This implies when you buy a condo or house in a structure or network, you become a member of the owners' association. What's more, that requires an installment of what is known as the annual service charge, for the support and upkeep of the standard zones of the community or the building. Owners' associations oversee, control and direct the common areas for the benefit of the considerable number of proprietors of a property, including matters like enforcement and authorization of statutory guidelines, network or building principles, support and upkeep, and security. They likewise assume property management in the facility, just as vital monetary administration required to release their job dependably. Why funds, one may inquire? Since properties need extensive money related duty to keep up and improve over their maturing life cycle.

    The owners' association is generally represented by a leading group of five to seven chosen unit owners, who work intentionally for the advancement of their locale. It is going by an owners' association chief, who might be a proprietor acting in a willful limit, yet there is a developing pattern for naming owners' association supervisors from an expert organization authorized and enrolled by the Real Estate Regulatory Agency (the RERA).

    RERA assumes a significant job regarding the administration and directs the connection between parties, including proprietors, landowners, designers, proprietor affiliation the board organizations and owner association management companies and specialist co-ops of offices in a land improvement or undertaking.

    Law Number 27 of 2007 on Ownership of Jointly Owned Properties in the Emirate of Dubai (the JOP Law)

    The latest execution by the Dubai Land Department is as two circulars. The first circular was given on 26 February 2014 for every one of owners' associations, being Circulation Number 1 of 2014 on Regulating Service Fees Claims. The second circular was given on 10 March 2014 for property engineers, being Circulation Number 2 of 2014 on Establishment of Owners Associations.

    In spite of desire following a few media releases and reports that the owners' associations enrollment and permitting procedure will be additionally explained and executed, the issuance of the developer circular and owners' associations circular does not give the truly necessary explanation that one would have sought after. In any case, the presentation of the developer circular and owners' associations has no uncertainty featured DLD's goal to perceive the owners' associations lawful status by slowly moving engineers' administration capacities to the OA.

    Common Properties Law Number (6) of 2019

    The Common Properties Law Number (6) of 2019 which has come into effect on 19 November 2019 brings about certain key changes under this law. Under this law, the developers in Dubai shall no longer be allowed to collect service charges from property owners. In other words, property owners or their approved property management companies shall assume all collection responsibilities. These collected funds essential go into the seven (so far) approved banks under this law. Additionally, in accordance with this law, all "fractional ownership" properties in the Emirate of Dubai must have owners associations as well as property management companies that act on their behalf. Dubai Land Department, through RERA, has launched an online system called "Mollak", which means 'owners' in Arabic, to essentially regulate jointly owned properties, monitor payment of service charges, to name a few. Additionally, Mollak also provides an integrated and new system to monitor and maintain accounts that are related to service charges whilst providing support services to all individuals/parties that are involved in jointly owned properties in the Emirate of Dubai.

    Murphy vs Yacht Cove Homeowners' Association [345 S.E.2d 709 (S.C. 1986)]

    The connection between the owners and their locale affiliation has been progressively characterized in litigation as of late, because of the fast development of regular intrigue networks and the issues being introduced to the courts. The owners' association is typically a consolidated substance working under corporate not-for-profit status. The owners' association was made by the developer/declarant to deal with the common interest community. The owners' association is financed by levy or appraisals contributed by the individual unit proprietors (or individuals) and is controlled by an Executive Board, Board of Managers, Trustees or a Board of Directors made out of unit proprietors who ordinarily fill in as volunteers. The owners' association is a different legitimate personality and may sue and be sued free of its individuals. Courts have held that even unincorporated network affiliations might be sued by property holders.

    Existing law in many states sees the connection between owners' association and an owner as being similar to the connection between a landlord and tenant. As a landlord, the owners' association is considered answerable for the upkeep of those regions over which it practices territory and control. In a typical intrigue network, these zones will for the most part be the 'common areas', 'normal components' or those zones outside of the individual units yet inside the basic intrigue network. Several areas where owners' rights have been documented by multiple appellate courts from across the jurisdictions:

  • Breach of the covenant by the owners' association
  • Breach of the fiduciary duty owed to owners by owners' association
  • Association director liability
  • Negligence of the owners' association
  • ]]>
    Sun, 02 Feb 2020 11:57:00 GMT
    <![CDATA[Counterfeit Goods and Piracy UK ]]> Laws surrounding Counterfeit Goods and Piracy in the United Kingdom

    The terms "piracy" and "counterfeiting" of goods refer to manufacturing, distributing and selling inferior copies of products which have been made without the permission of the intellectual property rights holder in the said goods. Inferior copies of goods are intended to appear similar to that of the original product and to be passed off as genuine items. However, the scope of goods differs in both violations. Piracy is the sale of unauthorised copies of usually copyrighted information such as music, films, television show etc. and counterfeiting refers to the selling of an inferior copy of a product like clothing items, bags etc. As these unauthorised inferior copies are circulated in the market, they hamper its original creator in more than one way.  It not only tarnishes the name of the creator but also harms them monetarily.

    Piracy and counterfeiting are two concepts, which are generally used to indicate intellectual property rights violations. Under both these violations, certain acts are carried out without the consent of the rights' holder. Pirated and counterfeit products have profoundly contributed to intellectual property theft around the world. Governments across many countries along with international organisations like the World Intellectual Property Organization (WIPO) have been working tirelessly to fight against these violations and to strive for economic independence and progression. Counterfeit and pirated products cover virtually all areas of consumer goods, including pharmaceuticals, food, books, films, music, compact disc, and textile material, and footwear, among others.

    The term 'piracy' is a colloquially used word for copyright infringement. It refers to an unauthorised reproduction or theft of someone's creative work for financial gain. This illegal use results in violation of rights of copyright holder granted to them by law. Individuals and companies who develop new works ensure that they can profit from their creation; therefore, they register for copyright protection. The owner of the copyright may grant permission to other parties to use their work by giving them a license or assignment and charging a fee. However, there are several instances where someone may engage in use/reproduction/distribution/sale of copyrighted work without the creator's permission and engage in copyright infringement. It is important to note that the ethos of copyright law is to protect the value of the creative work of a creator. When a person makes an unauthorised copy of someone's original work, they are taking something of value from the owner without their permission, which is just like taking something tangible from a person without their consent like a pen, car, bag.

    Piracy and illegal file-sharing in the online digital world of music, film, television, video games and book publishing industries have become an increasing problem since the inception of the internet. Online piracy has resulted in a considerable loss in revenue in various economies. As per the Motion Picture Association of America, worldwide study of losses to the film industry and international economies due to piracy, the estimated loss from film piracy was as much as USD6.1 billion in 2005 alone. Due to the developing technological advances, lawmakers have been struggling to keep up with the new ways of piracy evolving. Governments continue to search for ways to shoot down the flow of piracy, as well as to discourage consumers from engaging in piracy in the first place. Piracy and primarily, online piracy creates hurdles in the growth of the creative industry. Illegal downloading/streaming devices grants illegitimate access to people who use the original works without paying and rewarding the creators of the work. Copyright protection varies from country to country, with different recourse and varied amount of protection available. UK copyright law - Copyright, Designs and Patents Act 1988 - belongs to common law/copyright legal traditions, and it focuses on both rewarding the authors for the effort they put in for creating the work and also to incentivise the creator for creation of new works. Hence, the UK law tackles the issue of piracy head-on. The UK lawmakers are set out to make it easier for creative businesses to get their due share.

    In the United Kingdom, copyright is governed by the Copyright, Designs and Patents Act 1988 (CDPA). Among other things, the CDPA aims at protecting the rights of the copyright holder. CDPA states that the author of a work is the first owner of the copyright. It further states that the infringement of copyright occurs by doing any of the acts restricted under the act without authorisation from the relevant copyright owner. Section 16 of CDPA lays down the list of such restricted acts that lead to copyright violation. The section states that making copy of any work without permission of the creator of the work constitutes a violation; renting, lending or issuing copies of the work to the public will result in copyright violation; performing, showing or playing the work in public will amount to copyright violation; broadcasting the work or including the work in a cable program service will be considered a breach of copyright of the authors of the work and making an adaptation of the work or doing any of the above in relation to making an adaptation will lead to copyright violation.

    As the music industry raised several concerns about the growing problem of piracy and illegal-file sharing, the Department of Business Innovation and Skills along with the Department for Culture Media and Sport in 2009 introduced the Digital Economy Bill and eventually in April 2010 The House of Commons passed Digital Economy Act 2010. This statute created a procedure for dealing with online copyright infringement – pirated books, films and, of course, music. The Digital Economy Act 2010 further provided additional solutions to online copyright infringement along with making the copyright protection law in the UK closer in line with technological developments. Sections 3 to 16 of the Digital Economy Act 2010 deals with imposing obligations to Internet Service Providers (ISP) to reduce online infringement of copyright. The copyright protection procedure under the Digital Economy Act 2010 involves identifying infringement, notifying the ISP of infringement along with proof of infringement and the IP address, ISP notifying the alleged infringer and monitoring any future violations. ISP keeps track of how often each alleged infringer is identified, and if they reach a certain threshold of alleged infringements and if the possible infringer meets the set criterion, then their IP address is entered into an anonymous copyright infringement list (CIL). Even though the CIL is anonymous, the copyright owner can seek a court order ­requiring the ISP to identify some or all of the subscribers on the list. If the court grants the order for disclosure, the copyright owners can then commence infringement proceedings against the alleged infringer. Penalty for online copyright infringement is increased as per section 42 of Digital Economy Act 2010, to a maximum of £50,000. It also gives the secretary of state the power to order ISPs to impose technical measures like temporary suspension of an account on users who meet a certain level of infringements.

    Digital Economy Act 2010, whose most provisions largely were not passed into law, was then accompanied by a rather extensive Digital Economy Act 2017, which has introduced a broad range of reforms in the areas of electronic communications networks and services, measures to counter online bullying and protection of IP in broadcast material, data sharing and direct marketing. Digital Economy Act 2017has introduced new developments concerning UK's copyright laws; the new act is primarily focusing on targeting people or groups of people doing business out of selling illegal content and not individuals caught file sharing and people unlawfully sharing content online. Therefore, criminal sanctions under the Digital Economy Act 2017may apply to people hosting copyrighted works and offering the works without the consent of the copyright holder. The offences to which this increased sentence apply are those is primarily making copyright works available to others.  It is therefore unlikely that the new act will extend to end-users who are not communicating the work to the public. Nonetheless, users who stream illegal content may still be infringing copyright by copying and could face action by the copyright owner. These new provisions could, however, arguably apply to those downloading infringing content using the BitTorrent protocol, where the downloader also uploads the content they have downloaded. Sections 107(2A) and 198(1A) of CDPA provide a maximum two-year sentence for a person who infringes copyright in any work. Digital Economy Act 2017has extended the maximum custodial sentence for online copyright infringement from two years to ten years, which puts it in line with the maximum custodial sentence for violation in respect of 'physical goods'. As a result, anyone caught illegally streaming or downloading copyright-protected content can now face a custodial sentence of up to ten years. The ten-year sentence would, however, be reserved for the most serious of criminal circumstances.

    To understand the concept of counterfeit better, it is first essential to understand what is a trademark. A trademark consists of a recognisable sign, design or expression, which helps a consumer in identifying the source of goods/services, for instance, the golden arch of the famous fast-food chain McDonald's.  This recognisable mark is protected by law; however, trademark infringement is said to have taken place when an unauthorised person uses a registered trademark on or in connection with any goods/services in a manner that the use by the unauthorised person is likely to confuse the consumer about the source of the said goods/services. 'Counterfeit' means to imitate something authentic, intending to deceive people into believing that the imitation of the product is of equal value to the genuine thing. Counterfeit goods are often of inferior qualities, which are passed off as goods made by the well-known brand owner. The colloquial term 'knockoff' is often used interchangeably with the term counterfeit. Counterfeiting differs from trademark infringement in its scope. Counterfeiting is narrower in scope and applies only to marks made to look similar to the genuine well-known registered trademark. Counterfeit crimes are associated with crime to trademark infringement.

    Counterfeiting remains a growing problem in the modern world economy. Counterfeit goods primarily hit the apparel industry hard, Louis Vuitton estimates that two to three million counterfeit Louis Vuitton pieces are produced each year around the world, which is twice the number of original products manufactured by the company. Due to counterfeiting apparel and footwear, companies lost 22 per cent of their sales in 1991-1995, which is around USD 2.1 billion according to the International Trademark Association (INTA). Counterfeiting was the most significant criminal enterprise in the world in 2018, according to Forbes. Just like any other IP infringement, counterfeit products are also produced with the intention to take advantage of the superior value of the imitated product.

    In the UK, the legal framework regarding anti-counterfeiting arises out of both UK national laws and European Union legislation. In the UK, the primary piece of legislation concerning the trademarks is the Trademarks Act 1994 (TMA). The act contains provisions covering trademark infringement and provides both civil and criminal remedies in case of any infringement caused by unauthorised use of the mark. The protection granted is for not only identical goods/services but also for goods/services, which are similar to the registered trademark.

    Legislative civil provisions relating to trademark infringement are set out in Section 10 of TMA. Use of an identical/similar trademark in the course of trade and relation to same/similar goods/services will constitute as infringement under the section. Civil remedies provided under TMA are permanent injunctions against future infringement are- offender to pay damages or an account of profits to the trademark owner; infringer to deliver up or destroy the infringing goods; and costs awards in favour of the trademark owner. In case of urgent action, UK courts can grant interim injunctions and search and seizure orders against the infringer.

    Legislative criminal provisions relating to trademark infringement are set out in Section 92 of TMA. As per the section, it is a criminal offence for a person, to act with an intention to cause loss to another and to gain oneself by sale/hire/distribution of goods that bear a sign identical/similar to a registered trademark and the said acts are done without the consent of the trademark owner. The UK Supreme Court has held that the provisions under section 92 could also apply to goods that are manufactured with the trademark owner's consent but sold without their permission. As decided in R v Keane [2001] FSR 7, in cases relating to trademark infringement, the prosecutor does not have to prove mens rea (knowledge) and that the offence is one of "near-absolute liability" - Torbay Council v Satnam Singh (1999) 163 JP 744. For infringement, the sentence is six months imprisonment and/or GBP 5,000 fine. The maximum conviction on indictment is ten years' imprisonment and/or an unlimited fine.

    Trademark Act 1994 was amended, and the Trade Mark Act 2019 came into force. Under the new legislation, the law provides trademark owners right to bring infringement proceedings for preparatory acts. It means that trademark owner can bring proceedings against a person at a mere risk of infringement, like production of packaging labels, tags, authenticity features bearing a trademark which will be used for infringing goods or services. This provides brand owners with an enormous scope to enforce their rights and to take action even before the infringement has occurred. Under the new act along with bringing in, proceedings trademark owners also have the power to prevent counterfeit goods entering the UK, without proving that the products will necessarily put on the market in the UK. The burden of proof is on the person shipping the goods to show that the trademark proprietor has no right to stop them selling in the country of destination. Comparative advertising is also explicitly included as an infringing act if it is contrary to the Business Protection from Misleading Marketing Regulations 2008.

    Other pieces of legislation in the UK dealing with the problem of counterfeiting are The Fraud Act 2006 and the Proceeds of Crime Act 2002. Under the Fraud Act, dishonestly making a false representation with an intention to make a gain for oneself or an intention to cause loss to another and to make or possess articles for use in or in connection with fraud, and to make or supply articles for use in fraud, it is a criminal offence. The Proceeds of Crime Act provides for confiscation of assets and proceeds obtained through crime, including IP crime. It also provides for recovery of proceeds of crime through civil proceedings where a criminal conviction has not been possible.

    Counterfeit goods are increasingly sold and distributed online; it is no longer just auction sites or online marketplaces social media platforms are now increasingly considered to have overtaken the use of outdated online sale platforms. The UK government very well recognises the challenges that online counterfeiting represents in today's time. Therefore, the government has engaged various national agencies dedicated only towards tackling counterfeiting issue along with assisting right holders in enforcing their rights against counterfeiters. These agencies work together and collaborate with international anti-counterfeiting initiatives to increase the effectiveness of their work. For instance, Operation Ashiko was launched in April 2017 by the UK government, a joint initiative with the International Anti-counterfeiting Coalition Rogueblock program. The aim of the program was to suspend '.uk.' domains being used to commit IP crimes.

    Further ISPs through the courts, can be made subject to a blocking order which is available under Section 97 of CDPA, whereby ISPs are ordered to block websites known to host infringing content. Her Majesty's Revenue and Customs (HMRC) and the Border Force are the UK government authorities responsible for protecting the UK borders, including enforcement of IP rights. Border Force practices in dealing with suspect counterfeit, infringing or pirated goods found at the UK border. They identify the counterfeit products, notify the right holder of the infringement; after that, the right holder confirms if the goods are counterfeit; owner of suspected goods must confirm agreement of destruction of products; if the owner of goods resists destruction, then the right holder must commence legal proceedings.

    In addition to the above-discussed provisions, there are several UK government agencies operated initiatives which aim at tackling counterfeiting and infringement issues. There are agencies like Anti-Counterfeiting Group (ACG) working with brands government bodies and enforcement agencies to engage in anti-counterfeiting efforts. The National Markets Group, as part of its Real Deal Campaign, runs a cross-sector initiative to curb the problem of counterfeiting, the group, along with the UK police, the UK Intellectual Property Office (UKIPO) and organisations represent rights holders to tackle the trade of counterfeits at physical markets and works towards increasing consumer awareness and trust. Also, the UKIPO's Intelligence Hub coordinates intelligence into counterfeiting and piracy activity received from enforcement agencies and rights holders to disrupt the supply chain and trade of counterfeits.

    Online piracy and the sale of counterfeit items is a massive industry, which continues to grow. The consequences of piracy and counterfeit market are not only detrimental to IP rights holders but the economy of a nation as well. Pirated and counterfeit goods deprive the right holders of the fruit of their labour and their positive image. It also harms innovation and investment; companies are less inclined to invest in research and development if the results are not efficiently protected. The loss of revenues from piracy and counterfeiting is estimated at hundreds of billions of euros worldwide. An effective way to fight counterfeiting and piracy is therefore of utmost importance. While there seems to be no easy solution to the problem of piracy and sale of counterfeit items, the way of dealing with these problems appears to be to use legal remedies along with increasing education and awareness among the public creation of.

     

     

    ]]>
    Sun, 02 Feb 2020 11:21:00 GMT
    <![CDATA[Indian Civil Procedure Code: Reciprocating Territory and Superior Court]]> Reciprocating Territory and Superior Court in the Indian Civil Procedurs Code 

    George SK and N. Anand

     

    The Ministry of Law and Justice of India has passed a notification on 17 January 2020 in the official Gazette of India declaring United Arab Emirates to be a reciprocating territory in respect with Explanation 1 to Section 44A of the Indian Code of Civil Procedure, 1908 (the CPC), read with Order XXI of the CPC. Per the above provisions, any certified copy of decree passed by a superior court of any reciprocating territory once filed before a District Court in India, such decree can be executable in India. Furthermore, such execution would have the same effect as if the local District Court passed the execution decree in India. (Algemene Bank Nederland Nv vs Satish Dayalal Choksi, AIR 1990 Bom 170). Section 44A of CPC sets out that the decree must be of a superior court of a reciprocating territory. A 'reciprocating territory' (as per CPC) means any country or territory outside (of) India, which the (Indian) Central Government may, by way of notification in the Official Gazette, declare to be a reciprocating territory and 'Superior Courts' in relation to such a territory for this section. The decree must be filed in a District Court, and it may be executed in India as if the District Court had passed it and a certificate shall be submitted along with the certified copy of decree which shall be conclusive proof of the decree to the extent of such satisfaction or adjustment to the decree. Provisions of Section 47(questions to be determined by the court executing the decree) of the CPC shall apply, subject however to the exceptions set out in clauses (a) to (f) of Section 13 and the decree would be defined as a decree under which a sum of money is payable (as provided in explanation 2 of section 44A). Section 44A of CPC, thus, indicates an independent right, conferred on to a foreign decree-holder for enforcement of its decree in India. A judgment creditor seeking enforcement of a decree of a court of a reciprocating country is required to file execution proceedings in India, while in case of a decree from a non-reciprocating country, a fresh suit or claim needs to be filed before the relevant court in India, based on the foreign judgment or the original cause of action, or both. UAE has been declared a reciprocating territory by this notification and certain Federal and Local courts of UAE are termed as Superior Courts rendering such judgments, if executed, via a decree along with a certificate in district courts of India shall be deemed to be decreed as if executed by the District court itself. 

     

    FOREIGN JUDGMENTS RENDERED INCONCLUSIVE CONCERNING SECTION 13, CPC

     

    As discussed above, foreign judgment is generally conclusive in all respects between the parties except for matters outlined in Section 13 of CPC. The foreign judgment would be inconclusive if it fails to pass the test of the provisions laid out in Section 13 (Middle East Bank Ltd. vs. Rajendra Singh Sethia, AIR 1991 Cal 335). Section 13 of CPC provides that a foreign judgment can be rendered inconclusive in the event judgment has:-

    i. Not been pronounced by a court of competent jurisdiction, 

    ii obtained without any merits of the case, 

    iii Is not recognized by the Indian law, 

    iv Violates the principles of natural justice, 

    v been obtained by fraud, and 

    vi Stands to breach any Indian law in force at the time.  

    If the judgment covers within any of the above, such judgment(s) will cease to be conclusive as to any matter, thereby adjudicated or decided upon. The judgment will then be open to a collateral attack on the grounds mentioned in the clauses under section 13. 

     

    In the case of R. Viswanathan vs. Rukn-Ul-Mulk Syed Abdul Wajid (1 1963 SCR (3) 22), it has been held and affirmed that in considering (or; deciding) whether a judgment or decision of a foreign Court is conclusive, the courts in India will not inquire or consider whether conclusions recorded thereby or therein are supported by the evidence, or are otherwise correct, because the binding character and nature of the judgment may be displaced only and only, by establishing that the case falls within one or more of the six clauses of section 13, and not otherwise. An analysis of Section 13 leads us to believe that there can be different interpretations of the clauses laid out in this section, and different courts may interpret the meaning of this in a manner that may not always be similar. 

     

    A LOOK AT DECISIONS BASED ON RECIPROCATING TERRITORIES AND SECTION 13 OF CPC

     

  •       In Kevin George Vaz vs Cotton Textiles Exports (2006 (5) BomCR 555), the term "reciprocating territory" was extensively defined to mean any country or territory outside India. For the record, the United Kingdom has been a reciprocating territory with India under the provisions contained in Section 44 (1) of the Indian Civil Procedures Code, 1908 (as amended). Hong Kong (which was a colony and British dependent territory of the United Kingdom) was restored to the People Republic of China in the year 1997. The present case proceeded when Hong Kong was under British Rule but part of the Republic of China and/or under its sovereignty. Accordingly, the key issue facing the above contingency was whether an act of Central Government recording a territory as 'reciprocating territory' would lose its legal stand and authority by virtue of such country ceasing to be a party of a country that is in fact a reciprocating territory. In deciding on such contingency, the Court took a considered view of the legislature's intent and stated that the legislature was well aware of all such contingencies. Specifically, the Court interpreted the term 'a territory outside India' to include territory that may be part of a country in addition to territory that may have ceased to be part of a country. To support such view, the Court examined the legislature's intent and rationale to hold that when such contingencies occur, care is taken to see that holder of a foreign decree does not suffer. Accordingly, and in view of foregoing, the Courts did not accept the contention of counsel that upon Hong Kong becoming part of PRC, it ceased to be a reciprocating territory and would have no legal effect or implication post 1 July 1997.
    • term "Foreign Court" was also examined in the present claim with a broader view to understand whether tribunals and other quasi-judicial bodies are covered within the ambit and scope of Section 44 (1) of the CPC. In sum, the counsel for the plaintiff had contended that the decision passed by one labor tribunal in Hong Kong did not "in-effect" qualify as a 'superior court' and consequently lacked jurisdiction. The courts based their rationale on the doctrine of reciprocity and submitted two key points in deciding court orders or judgment covered within the legislature's intent. The doctrine of reciprocity as accepted and recognized under the legal system is 'Principal courts of Original Civil Jurisdiction' and also enjoying 'appealable and revisional powers'. Accordingly, the test laid out in this decision provides that courts can be called upon to execute and enforce foreign decrees if and only if courts that awarded the judgment:
  • are 'at least equivalent'; or 
  • b. are 'superior'.
    • case further paved the way to determine one of the other key issues, being – whether in deciding the merits as to the enforcement of the judgment of a reciprocating territory, the courts can consider or question the authority of the reciprocating court that decided on such claim. Simply, the claim was that an Indian national, employed by an Indian entity, was deputed in Hong Kong, and terms of appointment (or; potential dispute) were subject to laws of India. Although a decision was passed by certain labor tribunal in Hong Kong, the Indian courts took a clear view that a permanent employee of an entity in India cannot refer or invoke jurisdiction to the Hong Kong Labor Tribunal. Accordingly, any decision passed by such a foreign tribunal was irrelevant for the purpose of Section 44 (1) of the CPC. 

     

  •      In M/S Alcon Electronics Pvt. Ltd. vs. C Elem S.A. Of Roujan, France & Anr (Civil Appeal No. 10106 of 2016 ), it was held that it is to the reciprocal benefit of the Courts of all nations to enforce and respect foreign rights as far as they are practicable. Accordingly, broad recognition of substantive rights should not (in any manner) be defeated by some uncertain assumed limitations of the Court. When substantive rights are so bound up in a foreign remedy, the refusal to adopt the remedy would substantially deprive parties of their respective rights. Therefore, the necessity of maintaining the foreign rights outweighs the practical difficulties involved in applying the foreign remedy.
  •    In M.V.A.L. Quamar vs Tsavliris Salvage(2000 (8) SCC 278), the enforcement and jurisdiction of the execution of foreign decrees was discussed, and it has been stated that "Assuming Section 44-A of the Code is applicable for the execution of a decree in personam obtained from an Admiralty Court in Britain but since Section 44-A is not a self- contained Code for execution of a decree, the same is not exhaustive and the same, as a matter of fact, does not displace the common law and it has to be read along with the well-settled principles of common law in matters relating to execution of decree for a sum of money." Hence, the Code of Civil Procedure was applicable even in an Admiralty jurisdiction of the reciprocating territory in this case. Section 13 of CPC is replete with various conditions, and as such independently of any other common law rights, an enabling provision for a foreign decree-holder to execute a foreign decree in India has been engrafted under section 44A of the Code. It was also held that on the jurisdiction aspect, as a decree of a superior foreign Court having reciprocity with India, it would by itself be sufficient to bring it within the ambit of Section 44A. 
  •  

    CASES WHERE DESPITE RECIPROCITY, DECISIONS PASSED WERE ADVERSE IN NATURE 

     

    Anything that is prohibited by the law directly is not permitted to be achieved indirectly. Section 13 lays down that what is directly prohibited by law under the clauses laid down in this section, shall render a judgment inconclusive. However, many a time, the grounds can consist of something that lies outside the scope of the clauses set out in this section and may or may not be perceived by a court as a ground for rendering such foreign judgments inconclusive and is subject to the interpretation of such Courts. Consistent with the provisions set out in Section 13 of CPC, a foreign judgment can be inconclusive on the clauses laid out under this section and sometimes even on the grounds that can be interpreted to be laid out under this section. Some of the judgments despite reciprocity were adverse in nature are discussed below:-

     

  •       Section 44A of CPC creates a narrative that if the decree of a superior Court of a reciprocating territory is filed for the purpose of execution in a district court in India, then it can be executed as if it had been passed by the Courts in India. The corollary to that narrative is that the execution would not uphold if, in respect of a decree passed by the executing Court, the period of limitation as prescribed in India had expired. In Uthamram vs. K.M. Abdul Kasim Co.AIR 1964 Mad 221, this aspect of limitation is seen to come into play, where it has been held that the application for execution was barred by the Indian Limitation Act of 1963. Under the broad rules of International Law, the law(s) of limitation of the country where the decree would apply, is a fundamental rule of Interpretation and due consideration must be paid to the language employed in a statute for the purpose of ascertaining its scope, and therefore, the execution petition was barred by limitation. Another ground that has been discussed in the same case is that the certificate required under Section 44A(2), being a condition to the exercise of jurisdiction, cannot be equated to a non-satisfaction memo and hence, the application for execution, cannot lie in the absence of the certificate. Sub-clause 2 of Section 44A mandates that the filing of a certificate from the superior court will be obligatory on the decree-holder. Hence, for the execution of a foreign judgment, sub-clause 1 cannot exist without sub clause 2 and a certificate shall be deemed necessary to render the judgment conclusive and is a condition to the exercise of jurisdiction under Section 44A(1). 
  •      The jurisdiction of a foreign court will not bind a party if it has not submitted to such jurisdiction of the foreign court (Raj Rajendra Moloji Nar Singh Rao v. Shankar Saran & Others, AIR 1962 SC 1737). In this particular case, the Supreme Court refused to enforce an ex parte decree rendered by a foreign court for the reasons that, i) The respondents were not subjects of the foreign country; ii) The respondents did not voluntarily appear in the court; iii) They were not the residents of that foreign country; iv) They did not contract to submit to the jurisdiction of the foreign court; v) They did not choose the forum of the court which passed the decree against them and vi) They were not temporarily present in the State when the process was served on them. For the above reasons, the court had no power in this instance to execute the foreign decree, and the parties were not bound by such jurisdiction of the foreign court. 
  •    A foreign Judgment obtained without notice of the suit to the defendant is contrary to (any of) the principle(s) of natural justice, and the said judgment is said to be not maintainable in Indian courts. It is the essence of a judgment of a Court that it must have been obtained after due observance of the judicial process. In other words, the Court deciding and rendering such decision must (carefully) observe the minimum requirements of the principles of natural justice. It must (in effect) be composed of impartial persons acting fairly, without bias, in good faith, and it must (at all times) give reasonable notice(s) to the parties of the dispute and afford each party an adequate and fair opportunity of presenting the respective cases. However, it is also laid out that a foreign judgment passed by a competent court is (or; will be) conclusive even if it proceeds on an erroneous view or basis of the evidence or the law provided that the minimum requirements of the judicial process are assured which includes but is not limited to correctness of the judgment in law or on evidence is not predicated as a condition for recognition of its conclusiveness by the municipal court (R. Viswanathan vs. Rukn-Ul-Mulk Syed Abdul Wajid, AIR 1963 SC 1).
  •    Whether the judgment is one (based) on the merits must be apparent from the judgment itself, and a mere decision passed by a foreign court shall not suffice. The non-appearance of the defendant will not by itself determine the nature of the judgment one way or the other and which is why Section 13 does not refer to ex parte judgments falling under a separate category by themselves. (International Woolen Mills vs. Standard Wool (U.K.) Limited in Civil Appeal 3317 of 2001). In the case of Trilochan Choudhary vs. Dayanidhi Patra (AIR 1961 Ori 158), it is held that under Section 13(6), even an ex parte judgment in favor of the plaintiff may be deemed to be a judgment given on merits if some evidence is adduced on behalf of the plaintiffs and the judgment, provided that it is based on a consideration of that evidence. If no evidence is, however, adduced on the plaintiff's side and his suit is decreed merely because of the absence of the defendant either by way of penalty or in a formal manner, then the judgment may not be deemed to be one that is based on the merits of the case.
  •     The foreign judgment cannot be said to be inconclusive and termed to be in violation of the principles of natural justice on account of procedural irregularities adopted by the adjudicating court. When the Court gave the defendant adequate opportunity, then the plea of natural justice cannot be invoked to claim an inconclusive foreign judgment (Algemene Bank Nederland NV Vs. Satish Dayalal Choksi, AIR 1990 Bom 170). 

     Hence, after reading the above judgments on the enforcement of the foreign judgment, it can be concluded that the position of the courts in interpreting foreign judgments does emphasize the clauses laid down in Section 13 of CPC, but the interpretation of these clauses is done after due consideration and keeping in mind the proper meaning of such grounds laid out. Even though UAE has been declared as a reciprocating territory, the recognition and enforcement of a foreign judgment via UAE Courts can be opposed on any of the grounds listed in Section 13 of the CPC, but the meaning of the grounds laid out in this section shall be subject to interpretation. 

     

     

     

     

     

    ]]>
    Sat, 01 Feb 2020 14:04:00 GMT
    <![CDATA[Freezone Bahrain International Investment Park]]> 1. What law established this free zone?

    The Bahrain International Investment Park (BIIP) was established in 2005 by the Industry, Commerce and Tourism Ministry (MoICT). The BIIP is considered the flagship business park. It houses over 114 multinational and manufacturing service companies.

    2. What are the main internal regulations governing this free zone?

    The internal regulations of this Free Zone are managed by the MoICT. It intends to devise clear legislative, legal and regulatory framework in current Free Zones as well as future Free Zones.

    3. Does this free zone has reciprocal arrangements with other Free Zones?

    No, BIIP does not have reciprocal arrangements with other free zones.

    4. What key areas of local legislation must a business operating in this free zone still comply with? What are the most important examples of how this affects operations?

    The key areas of Bahrain legislation which businesses operating in this Free Zone must comply with are:

    Commercial Companies Law, Bahrain Decree-Law No. 21/2001 as amended by Bahrain Law No. 1/2018.

    • Bahrain Ministerial Decision No. 17/2018.
    • The GCC Common Customs Law by Bahrain Royal Decree No. 67/2003.
    • Bahrain Decree Law No. 48/2018 on Value Added Tax (VAT Law).
    • Bahrain Decree-Law No. 7/1987 (Law of Commerce).
    • Bahrain Law No. 31/2018 (Competition Law).

    The above list is not exhaustive, but any laws which are not covered by the internal regulations of the Free Zone must be complied with.

    5. What key agencies do businesses operating in this free zone need to register with or be aware of?

    The agencies which a business operating in this Free Zone needs to register with mainly depends on the type of activity carried out by the company. For example, for industrial projects, a clearance is needed from the Environment and Climate Affairs Ministry.

    Some agencies include the:

    • Commerce and Industry Ministry.
    • Foreign Affairs Ministry.
    • Chamber of Commerce and Industry.
    • Environment and Climate Affairs Ministry.
    • Interior Ministry.
    • Justice, Islamic Affairs and Awqaf Ministry

    6. How does a company set up in this Free Zone?

    On receiving the completed application form, the registration of a new company in BIIP is pretty quick and straightforward.

    These are the steps generally involved:

    a. Submission of a completed Application Form.

    b. Documents reviewed by officials.

    c. Project Approval-payment of administration fee.

    d. On the approval of the officials, the business entity needs to be registered with the MoCIT.

    e. Once the above is completed, the entity needs to obtain an industrial license. There are several documents required for the incorporation of an entity in this Free Zone. These are:

    • BIIP application form.
    • Preliminary industrial license.
    • Entity's Company Profile.
    • Copy of the applicant's CPR/passport.
    • Registration Documents.
    • Tenancy Agreement: Lease of Plot.
    • Environmental and Industrial Approval.
    • Outline a business plan.
    • Preliminary site development plan.
    • Legal.
    • Financial.

    7. What features go companies set up in this Free Zone have?

    Like most other Free Zones which are granted benefits, incentives and other facilities, BIIP offers various incentives which attract foreign and local investors. BIIP is favoured because it is cheaper as compared to other Freezones. BIIP operates 24 hours a day and provides access to a variety of facilities which makes it an ideal free zone to set up a business in Bahrain. It also offers tax exemptions on tax duty for GCC and other Arab industries. BIIP is an exclusive investment park in the Middle East with enhanced facilities and customs services. BIIP is setting up a 'one-stop-shop' which will help potential investors with their application process as well as guidance on all the legal requirements.

    8. What can companies set up in this Free Zone do?

    These are the activities which a company in BIIP can carry out:

    • Manufacturing.
    • International services.
    • Food processing and packaging.
    • Aluminium smelting, rolling and export industries.
    • Iron and steel engineering.
    • Medical (i.e. Pharmaceuticals, medical devices).
    • Construction material manufacturing.
    • Material and chemical processing (i.e. Plastics, Fiberglass, Petrochemicals).
    • Information technology.
    • Consumer goods (i.e. Electronics, garments and textiles).
    • International services (i.e. consulting, marketing, logistics, knowledge-based services).

    9. What can companies set up in this Free Zone not do?

    Generally, any activity which conflicts with the applicable laws in Bahrain is not permitted in BIIP.

    These include:

    • Security threats.
    • Disruption of the computer or information technology services.
    • Activities not stipulated in the license.
    • Storage or possession of goods that are prohibited.
    • Commencing operations in BIIP without relevant approvals from authorities, like the environment approval.
    • Any other activities or acts are not permitted by a decision of the appropriate authorities.

    This list is not exhaustive, but rather the essence of what is prohibited in this Free Zone.

    10. What types of business are allowed to operate in this Free Zone?

    These are the activities which a company in BIIP can carry out:

    • Manufacturing.
    • International services.
    • Food processing and packaging.
    • Aluminium smelting, rolling and export industries.
    • Iron and steel engineering.
    • Medical (i.e. Pharmaceuticals, medical devices).
    • Construction material manufacturing.
    • Material and chemical processing (i.e. Plastics, Fiberglass, Petrochemicals).
    • Information technology.
    • Consumer goods (i.e. Electronics, garments and textiles).
    • International services (i.e. consulting, marketing, logistics, knowledge-based services).

    11. What inheritance laws apply in this free zone?

    The inheritance law is governed by Islamic Sharia Law.

    12. What taxation applies?

    There is no tax on income, capital gains, sales, estate interest, dividends or royalties. However Bahrain Decree-Law No. 48/2018 on VAT applies in BIIP.

    13. What accounting and auditing rules do businesses operating in this free zone need to adhere to?

    Companies have to undertake and maintain accounts for all the trading activities which are carried out by them.

    14. Where do businesses operating in the free zone generally locate their bank accounts?

    The companies are required to open a local bank account before obtaining BIIP. For the same, copy of the authorised signatory forms, commercial registration, MoCIT affiliation certificate and other relevant documents are required.

    15. Are there any specific rules governing when the moveable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?

    Activities are generally confined to BIIP. Operation in other zones may require execution of a local agency agreement.

    16. Are any specific licenses required to operate as a particular type of company in this free zone?

    The companies in this Free Zone only carry out economic activity post obtaining the relevant license. Additionally, the company cannot practice an activity which has not been specified in the permit. Licenses issued in this zone are:

    • Industrial License
    • Manufacturing License
    • International Services.

    17. Is there any specific ongoing regulation or monitoring firms operating as particular types of companies by this free zone authority?

    The Operations of BIIP are monitored and regulated by the MoCIT.

    18. How are disputes settled in this free zone?

    Generally, the agreement stipulates the dispute resolution mechanism to be followed in a situation where a dispute arises. In the absence of the same, the courts in Bahrain assist in resolving disputes. The main mechanisms in Bahrain are:

    a. The Civil Courts and Sharia Courts.

    b. The Court of Appeal.

    c. Court of Cassation.

    d. Bahrain Chamber of Dispute Resolution (BCDR).

    19. How are disputes between onshore companies and companies in this free zone settled?

    Generally, the agreement stipulates the dispute resolution mechanism to be followed in a situation where a dispute arises. In the absence of the same, the courts in Bahrain assist in resolving disputes. The main mechanisms in Bahrain are:

    a) The Civil Courts and Sharia Courts.

    b) The Court of Appeal.

    c) Court of Cassation.

    d) Bahrain Chamber of Dispute Resolution (BCDR).

    20. What are the main rights and duties of an employer and employee working in this free zone?

    Bahrain Decree-Law No. 36/2012 promulgates Bahrain's Labour Law (Labour Law). Article 71 of Bahrain Decree-Law No. 36

    /2012 provides tthe worker is under an obligation to perform the duties which are entrusted to them under the provision so the

    employment agreement and the work regulations. They have to execute these instructions and orders of the employer for

    performing the work.

    21. How are employment disputes between employers and employees working in this free zone

    settled?

    In addition to the Labour Law, unless a separate mechanism has been agreed on in the employment contract, the labour

    dispute resolution is addressed before a designated body which is the Authority of settlement of individual labour disputes.

    22. What entry qualifications and permits are required for staff working in this free zone, and

    how are employees registered with the authorities?

    All the employment contracts must be registered with the authorities.

    While employing expatriates, three mandatory processes must be completed:

    a) Clearance by the Labour Ministry.

    b) Issuing of employment visas by the Immigration Department.

    c) Issuing of resident cards by the Immigration Department.

    23. How are staff working within this Free Zone registered with the authorities?

    Once the visa is issued, it is collected by the BIIP representative and deposited at an entry point in Bahrain, post which a

    deposit slip is issued. The copy of both is sent to the company.

    24. What rules govern the remuneration and minimum benefits of staff working in this Free

    Zone?

    The Labour Law provides a comprehensive framework for employment in Bahrain and it governs the remuneration and

    minimum benefits of staff working in this Free Zone.

    25. What rules govern the working time and leave of staff working in this Free Zone?

    The Labour Law provides a comprehensive framework for employment in Bahrain and it governs the remuneration and

    minimum benefits of staff working in this Free Zone.

    26. What are the main features of a property lease in this free zone, and what are the key

    restrictions when leasing a property?

    Once the company receives approval for the industrial license, the lease agreement has to be signed for that specific industrial

    area. BIIP provides a lease term of 25 years and competitive rental lands in an environmentally and professional positioned

    landscapes.

    27. Is it possible to apply for a building permit in this free zone? How is this done, and what

    steps are required?

    Yes, it is possible to apply for a building permit. Once the company obtains an industrial license and the application for the

    lease has been approved, the company then can proceed for securing a building permit for commencing construction.

    28. What environmental requirements must construction companies building in this free zone

    consider, e.g. form of building, landscaping or building height?

    Before signing the lease with BIIP, the company has to abide by the requisite environmental approvals from the environment

    protection agency. The Unified Guidebook of Building Permit Regulations provides for a detailed description on how buildings

    are permitted in Bahrain.

    29. What are the key restrictions when leasing a property in this Free Zone?

    Once the company receives approval for the industrial license, the lease agreement has to be signed for that specific industrial

    area. BIIP provides a lease term of 25 years and competitive rental lands in an environmentally and professional positioned

    landscapes.

    30. What are the rules governing the use of utilities in this free zone?

    Utilities in BIIP come under the Bahrain Electricity and Water regulations.

    31. How do retail premises establish themselves in this Free Zone?

    There are no particular restrictions prohibiting retail establishments from operating in BIIP. The same process would apply as

    for any other type of company incorporation.

    32. Is it possible for hotels and retail establishments to operate in this free zone- how do they

    establish themselves?

    The incorporation procedure is similar to that of any other company incorporation in BIIP.

     

    ]]>
    Tue, 28 Jan 2020 17:03:00 GMT
    <![CDATA[Freezones Bahrain International Airport]]> 1. What law established this free zone?

    Bahrain International Airport is not actually a Free Zone, although it is sometimes mistakenly referred to as one. The Airport Zone is governed by the Sovereign wealth fund of the nation, Mumtalakat.

    2. What are the main internal regulations governing this free zone?

    As the BIA is not a Free Zone, the regulations governing it are the same as any ordinary area of the nation. There are no specific internal regulations governing companies formed in it.

    3. Does this free zone has reciprocal arrangements with other Free Zones?

    No, there are no reciprocal agreements with other free zones.

    4. What key areas of local legislation must a business operating in this free zone still comply

    with? What are the most important examples of how this affects operations?

    Considering the nature of this area and the fact it is not a true free zone, the external regulations of the country are the primary regulations which must be abided by in the BIA. Some of the key laws are:

    • The Commercial Companies Law, Bahrain Decree-Law No. 21/2001.
    • The Labour Law issued in Bahrain Legislative Decree No. 36/2012.
    • The GCC Common Customs Law of 2001.

    5. What key agencies do businesses operating in this free zone need to register with or be aware

    of?

    The crucial agencies to register with and obtain approval from depend on the businesses activities. Some of the key agencies are:

    • Foreign Affairs Ministry;
    • Industry, Commerce and Tourism Ministry.

    However this list is not exhaustive.

    6. How does a company set up in this Free Zone?

    A commercial company is set up by:

    • Completing an electronic application and submitting it to the relevant authorities in the MOICT to obtain approvals;
    • Paying any municipal fees;
    • Obtaining any external approvals;
    • Documenting the Articles of Incorporation and Association;
    • Publishing in the Official Gazette.

    7. What features go companies set up in this Free Zone have?

    As this is not a free zone company, there are no specific special features.

    8. What can companies set up in this Free Zone do?

    The key economic areas companies can have as their business activities are:

    • Retail;
    • Cargo Facilities;
    • Advertising.

    9. What can companies set up in this Free Zone not do?

    Anything not related to the activities mentioned cannot be done in this airport zone. However, offices for companies as well as warehouses can be obtained for numerous purposes.

    10. What types of business are allowed to operate in this Free Zone?

    The key economic areas companies can have as their business activities are:

    • Retail;
    • Cargo Facilities;
    • Advertising.

    11. What inheritance laws apply in this free zone?

    Bahrain is an Islamic nation and so the key regulation regarding inheritance is Islamic Sharia law apply.

    12. What taxation applies?

    There is no corporation tax in Bahrain at this point in time except in the oil and gas industry. There is a municipality tax of 10% on commercial properties and VAT has applied since 1 January 2019.

    13. What accounting and auditing rules do businesses operating in this free zone need to

    adhere to?

    The regulation concerning Bahrain's commercial companies and their financing and auditing is Bahrain Decree-Law No. 21/2001 as amended by Bahrain Decree-Law No. 50/2014.

    14. Where do businesses operating in the free zone generally locate their bank accounts?

    As the BIA is not a Free Zone, the corporate bank account has to be opened on the mainland as any other ordinary corporate bank account.

    15. Are there any specific rules governing when the moveable property is removed from the free

    zone area or transferred into the free zone area from another jurisdiction?

    Bahrain Airport is not a free zone and so when it comes to moveable property, the regulations which apply onshore apply in BIA.

    16. Are any specific licenses required to operate as a particular type of company in this free

    zone?

    Licences are the same as those found onshore and are dependent on the business activities being applied for and performed.

    17. Is there any specific ongoing regulation or monitoring firms operating as particular types of

    companies by this free zone authority?

    Bahrain Airport Zone is managed and run by Mumtalakat, the nation's sovereign wealth fund. Companies are also monitored by the Labour Ministry for employee-related matters and other ministries depending on the specific business activities.

    18. How are disputes settled in this free zone?

    There are a few methods to settle disputes. The Bahrain Chamber for Dispute Resolution is one entity. It was established by Bahrain Decree-Law No. 30/2009 and is an independent body responsible for settling corporate and Government disputes.

    However, the types of disputes covered include arbitration and mediation rather than litigation.

    The Bahrain Courts, which are made up of the civil law courts and the Sharia law courts handle litigation matters.

    19. How are disputes between onshore companies and companies in this free zone settled?

    This airport zone is not a free zone and so disputes are handled no differently.

    20. What are the main rights and duties of an employer and employee working in this free zone?

    The Labour Law contained in Bahrain Decree-Law No. 36/2012 covers labour matters including employer and employee duties.

    The duties covered include working hours, end of service benefits and employee leave

    21. How are employment disputes between employers and employees working in this free zone

    settled?

    There are a few methods to settle disputes. The Bahrain Chamber for Dispute Resolution is one entity. It was established by Bahrain Decree-Law No. 30/2009 and is an independent body responsible for settling corporate and Government disputes.

    However, the types of disputes covered include arbitration and mediation rather than litigation.

    The Bahrain Courts, which are made up of the civil law courts and the Sharia law courts handle litigation

    22. What entry qualifications and permits are required for staff working in this free zone, and

    how are employees registered with the authorities?

    All requirements from employees are mentioned in the Bahrain Labour Law, Bahrain Decree-Law No. 36/2012. Requirements depends on the position of the employees as well as what is stated in their contracts concerning their benefits.

    Employees must be registered by the company with the Labour and Social Affairs Ministry in order for them to receive a Certificate of Registration. An additional registration must be made with the General Organisation of Social Insurance and regular fees must be paid. For Bahraini nationals, these relate to pension as well as work related injuries, although for nonnationals, it only relates to work injuries. These registrations are performed through the appropriate online portals.

    23. How are staff working within this Free Zone registered with the authorities?

    All requirements from employees are mentioned in the Bahrain Labour Law, Bahrain Decree-Law No. 36/2012. Requirements depends on the position of the employees as well as what is stated in their contracts concerning their benefits.

    Employees must be registered by the company with the Labour and Social Affairs Ministry in order for them to receive a Certificate of Registration. An additional registration must be made with the General Organisation of Social Insurance and regular fees must be paid. For Bahraini nationals, these relate to pension as well as work related injuries, although for nonnationals, it only relates to work injuries. These registrations are performed through the appropriate online portals.

    24. What rules govern the remuneration and minimum benefits of staff working in this Free Zone?

    The Bahrain Labour Law, Bahrain Decree-Law No. 36/2012 concerns all labour matters including minimum benefits and remuneration. Chapter 10 covers employee wages.

    25. What rules govern the working time and leave of staff working in this Free Zone?

    The Labour Law, Bahrain Decree-Law No. 36/2012 covers working times and leave for staff members. Article 82 of Bahrain Decree-Law No. 36/2012 for example covers sick leave and Chapter 11 of Bahrain Decree-Law No. 36/2012 covers working hours.

    26. What are the main features of a property lease in this free zone, and what are the key

    restrictions when leasing a property?

    Office space as well as warehouses are available in the zone. The area is fairly significant, although land itself is not available to purchase. Only pre-made spaces are available.

    27. Is it possible to apply for a building permit in this free zone? How is this done, and what

    steps are required?

    Building permits are not available in the airport zone.

    28. What environmental requirements must construction companies building in this free zone

    consider, e.g. form of building, landscaping or building height?

    Construction companies cannot form and build in the airport zone.

    29. What are the key restrictions when leasing a property in this Free Zone?

    Office spaces and warehouses related to the permitted activities can be leased.

    30. What are the rules governing the use of utilities in this free zone?

    Utility related regulations do not concern this airport zone as it is not considered a free zone.

    31. How do retail premises establish themselves in this Free Zone?

    Retail premises must obtain a license for their particular activity and can then obtain office space or warehouse in the airport zone.

    32. Is it possible for hotels and retail establishments to operate in this free zone- how do they

    establish themselves?

    Retail premises must obtain a license for their particular activity and can then obtain office space or warehouse in the airport zone.

     

    ]]>
    Tue, 28 Jan 2020 15:24:00 GMT
    <![CDATA[Commercial Agency Agreements in UAE]]> Commercial Agency and Distribution Agreements in the UAE

    "We become what we behold. We shape our tools, and thereafter our tools shape us."                                                                                                      ― Marshall McLuhan

    What is the difference indeed between using a commercial agency or a commercial distributor in the United Arab Emirates (UAE)? Principals (foreign companies and brands in this case) face difficult decisions day in and day out to this end. Companies tend to only rely on the tools they are equipped with to help make business decisions; however, in unfamiliar territory, new decision-making tools can expedite the growth of the business substantially and place you ahead of any competition. Every business leader will agree that knowledge is power, therefore, this article will aim to equip businesses, no matter how big or small, with the knowledge on the best route to introduce their products into the UAE with the support from a commercial agent or distributor, whichever suits the toolkit (company) best.

    A popular method of conducting business in the United Arab Emirates (UAE) is the formation of commercial arrangements with local and licensed agents or distributors. This is one of the primary methods of conducting business for companies based outside the country, who desires to sell their products in the UAE by foregoing the establishment of subsidiary companies in the region. Instead, companies based in foreign jurisdictions choose to contract with local companies and/or individuals, who may already have a well-established sale network in the country. In the UAE, such agreements can entail parties of two types: local agents and distributors. This section will deal with and analyse the presence of agents in the UAE, thus outlining the various facets of the legislation that governs the functioning for the same.

    In theory, such arrangements, which are known as commercial agency agreements, carry far less risk, and require minimal investment from the "principal party", the foreign commercial party that wishes to conduct "on-shore" business in the UAE (as compared to establishing local subsidiary companies). Commercial agency arrangements allow foreign businesses to leverage the invaluable local knowledge and experience that comes from having local agents, allowing the principal party to benefit from the agent's pre-existing relationships.

    However, whilst commercial agency agreements may seem to be of great advantage to the principal party, an understanding of the intricacies that govern local customs and laws on this matter, would ensure that the parties entering into agency contracts stay aloof of any misunderstandings or complications.

    UAE Legislation on Agency Law

    In the UAE, commercial agencies are governed by the Federal Law Number 18 of 1981 concerning "Organizing Trade Agencies" (as amended by Federal Law Number 14 of 1988, Federal Law Number 13 of 2006, and Federal Law Number 2 of 2010). This law is often simply referred to as the UAE Agency Law.

    Article 1 of the UAE Agency Law defines the terms "trade agency", and "principal" (primary parties to an agency agreement), as follows:

  • Trade Agency: It refers to the representation of the principal by the agent for the purposes of distribution, display, selling, or the rendering of a service or a commodity in the State (the UAE), for a profit or commission.
  • The Principal: It refers to the producer or manufacturer of the commodity, noting that the producer does not carry out any marketing functions himself in the UAE.
  • Pursuant to the provisions of the UAE Agency Law, commercial agencies must adhere to the following requirements with regards to their nature, and the nature of the agreement:

  • the agent must either be a UAE National or a company that is wholly owned by one or more UAE nationals (under article 2);
  • the commercial agent and the agency agreement must be registered in the Commercial Agency Register of the Ministry of Economy (MoE) (under article 3);
  • the agency agreement will only be effective if it is of a written nature, and is notarized (under article 4);
  • the agency agreement must specify the defined territory of the agency, within which it is allowed to operate (which can be one, several, or all of the Emirates), and that the agreement must grant the agency exclusivity to operate in that defined territory (under article 5).
  • Under the UAE Agency Law, the trade agent enjoys a wide range of privileges and legal protections. Once registered, trade agents are greatly protected under UAE laws. The UAE Agency Law provides for the following significant statutory protections for trade agents: -

    • the exclusive right to seek commission on all sales that are made within the aforementioned 'defined territory' in the UAE, irrespective of whether or not the agent contributes to those sales (under article 7);
    • the protection from termination or non-renewal of the agreement (i.e., even if the agreement was for a fixed term, and may have expired, it automatically gets renewed in perpetuity) (under article 8);
    • the right to restrict the principal party from replacing the current agent with a new agent (under article 9); and
    • the right to prevent any unauthorized parties from importing the principal party's products into the defined territory (under article 23).

    Of the aforementioned protections, perhaps the most important and contentious provision of the law is article 8, which safeguards the agent against termination. Under this article, the law only allows for termination under 'material reasons'. However, noting the limited number of cases in the UAE which have dealt with this matter, the definition of "material reasons" is unclear and vague. The reasons behind this are twofold: (a) most cases pertaining to the termination of contracts in the UAE are settled out of court, and (b) each case is decided independently from one another, and on the basis of its own facts (in most cases, the court assigns an expert to ascertain the facts), thus leading to a system wherein there is effectively no judicial precedent.

    However, in most instances, a 'material reason' may account for any one of the following: -

  • non-performance on the part of the agent;
  • the breach of the UAE Agency Law by the agent;
  • failure of the agent to uphold the image of a principal party in the defined territory or the actions of the agent in such a manner that it deteriorates the image of the principal party in the defined territory; or
  • the engagement of the agent in any activity that seeks to compete with the products or services provided by the principal party.
  • As stated earlier, these outlined 'material reasons' will not always be applicable without question, as each case is decided on independently. Thus, it would serve foreign companies very well to keep abreast of the functioning of the dispute resolution process pertaining to the UAE Agency Law.

    Dispute Resolution on UAE Agency Law: A Unique Process

    In the event of any dispute arising out of a commercial agency agreement under the UAE Agency Law, the parties are to first approach the Commercial Agency Committee, established with the Decree Number 3 of 2011, which is applicable in the UAE. The Committee's primary role is to review any dispute concerned to any and all commercial agencies registered with the MoE. Once a mater is decided upon by the Committee, parties are free to appeal to the courts of competent jurisdiction. The Committee was established with the outlook of instituting a purpose-built judicial body to address agency law disputes, given the proliferation of such agreements in the UAE.  

    It is important to note that the UAE Agency Law does not provide any special legal recourse in disputes concerning unregistered commercial agency arrangements. Consequently, such disputes would fall outside the scope of the UAE Agency Law, and would instead, most likely, come under the Commercial Transactions Law (Federal Law Number 18 of 1993) (for example, in the cases of distributors).  

    The flowchart outlined below seeks to elucidate, in a simple manner, the dispute resolution process followed by the Committee:

    Case Analysis

  • The case investigates the issue appeared between two companies: the supplier and distributor of a cigarette brand. The distributor filed a claim demanding payment of AED 2,498,000 as the supplier was allegedly non-compliant with the terms of the agreement and did not supply the agreed quantity of cigarettes for the period of four (4) months, which led to the total loss of USD 200,000 USD. Both Court of First Instance and Court of Appeal supported the claim and ordered the defendant to pay the amount. The matter was taken to the Court of Cassation by the defendant where the court, referring to the articles 3, 4 and 7 of the UAE Agency Law, as well as to Paragraph 12 of the commercial agency agreement between the parties, upheld the decision of the Court of First Instance and stated that the claimant is entitled to the payment ordered.
  • In another case, an issue arose between a bank and the company, wherein the bank requested the company to pay AED 2,590,136.67 with the 12% (legal) interest in respect of the tourism check in accordance with the agreement between them dated 25 September 1991. In order to ensure the amount is paid, the bank filed a lawsuit against the company itself and its insurance firm. Initially, the case was dismissed on the ground that the court does not have jurisdiction over it as the cited agreement was finalized in India. When the case went to the Court of Cassation, the main issue to decide was whether the claim is eligible to be heard or not due to the lapse of time. The agreement was terminated in August 1998, and the case was filed in July 2002, which constitutes the period of 3 years and 11 months. According to the Article 228 of the Commercial Transactions Law 'in case of denial and lack of legitimate excuse, all cases arising from an agency agreement are not admissible after the lapse of three years from the expiry of the agency agreement.' Hence, the Court of Cassation ruled to dismiss a case on the ground of lapse of time.
  • The last case for this section pertains to a dispute between the principal party, a Canadian pharmaceutical company, the defendant, and two other parties, which were the two plaintiffs. Here, the principal party employed company A as its exclusive agent for a defined territory over a certain area, and also entered into a contract with company B, whom it had led to believe that it was the exclusive agent for the principal party. However, it was later revealed by the first plaintiff, that the principal party had drawn up what was essentially a distribution agreement. Following this development, the dispute was taken to court, where both the two plaintiffs were present. The court held that the principal party had unfairly drawn up a false agreement with the intent of limiting the rights of the plaintiffs. The Court ultimately decided for the two contracts to be terminated, and issued damages for the afflicted parties.
  • A Brief Comparison between Distribution and Agency Agreements

    Whilst most foreign businesses opt for the agency route for the establishment of their presence in the UAE, there is another mechanism of agreements that allow for the same. Such agreements termed as distribution agreements, fall on the opposite end of the spectrum for all characteristics pertaining to agency agreements. In almost every aspect, distribution agreements represent a differing outlook on commercial agreements, when contrasted with agency agreements. The following sections of this article will seek to elucidate and outline the attributes of distribution agreements and contrast them with those of agency agreements.

    Distribution Agreements vs Agency Agreements

    Distribution Agreements

    Agency Agreements

    Explanation

    Distribution agreements are generic and non-specific in nature

    Agency contracts are specific and definite in nature

    The principal – agency relationship in agency agreements are governed by the UAE Agency Law (Federal Law Number 18 of 1981), under which the agreements are protected, and renewable. This does not apply in the case of distribution agreements. Distribution agreements are governed by the UAE Commercial Transactions Law (Federal Law Number 18 of 1993), which is a law with a wide and general purview.

    Distribution agreements do not require the distributor to be a UAE national or a company that is wholly (100%) owned by a UAE national

    Agency agreements require that the agent has to be a UAE national or a company that is wholly owned by a UAE national

    As established under article 2 of the UAE Agency Law, the agent has to be a UAE national or a company wholly owned by a UAE national. No such restriction is placed on distributors, and in the case of a principal – distributor relationship, the distributor may appoint any party (a free – zone company, an LLC, or any other company that is not 100% owned by a UAE national) as a distributor.

    Distribution agreements do not require the distributor to be registered with the UAE Ministry of Economy (MoE)

    Agency agreements require the agent to be registered with the UAE MoE

    Article 3 of the UAE Agency Law necessitates the registration of agents with the UAE MoE. However, distributors, as long they are based as UAE entities, do not need to register themselves with the MoE.

    Distribution agreements may be expressed or implied, i.e., written or non-written

    Agency agreements can only be of a written and expressed nature and must be notarized

    As specified in Article 4 of the UAE Agency Law, agency agreements have to be written and notarized to gain legitimacy. Distribution agreements can be implied or expressed.

    Distribution agreements may grant exclusive, or non – exclusive rights to the sale of the product to the distributor

    Agency agreements are always granted the exclusive right of sale to the agent

    Under article. 5 of the UAE Agency Law, the agent is granted exclusive rights to sell the principal's product, and this exclusive right to sell must apply to a defined territory. However, a principal party may appoint multiple distributors in the same area. 

     

    Distribution vs Agency

    Now that a clear distinction between distributors and agents has been established, a question thus arises, whether an agency is a more preferred means of conducting business for foreign companies in the UAE, or are distribution agreements more prevalent?

    Whilst this may be an issue of a subjective nature, agency agreements have long been the preferred route or mechanism for most foreign businesses to grow in the UAE. It is to be noted that agency agreements bode well for foreign businesses that have enjoyed a great reputation and success overseas. Such businesses have often enjoyed a long-standing reputation amongst their customers, and are likely to be of a capital-intensive nature. Such companies have leveraged the deep ties that their agents possess in the region, by virtue of which they have enjoyed great success. Thus, the formation of agency contracts proves fruitful for foreign businesses that seek to grow a large consumer base within the UAE, and have the accordant capital to facilitate the same.

    Whilst the majority of such commercial agreements are comprised of agency agreements, distribution agreements also have great utility for smaller companies that wish to enter the UAE market. Take, for example, companies with limited resources and capital, that operate in niche markets and product categories overseas. It would be in the best interests of such companies to employ distributors in the UAE, as it would render their agreements to fall outside the scope of the UAE Agency Law, thereby alleviating concerns of the tight restrictions and statutory protections offered to agents under the law. Thus, distribution agreements in the UAE grant greater influence to the principal party, whereas the opposite case is true for agency agreements.    

    Intricacies under the UAE Commercial Transactions Law & Dispute Resolution in Distribution Agreements

    There are some aspects of the UAE Commercial Transactions Law, which governs distribution agreements in the UAE, which overlap and intersect with the UAE agency law, which would be later analysed in detail with case law. For example, under article 227 of the Commercial Transactions Law, if a distributor is granted the sole and exclusive right of sale of the principal's product in a certain geographic area, it may be considered as an agency, and some elements of the UAE Agency Law may apply. Similar provisions in the Commercial Transactions Law often constitute the basis for contentions and disputes amongst parties in such agreements. For example, inter alia, the most common issue includes the differentiation of distributors from agents.

    In the event of such disputes, the question thus arises, as to which laws would govern the dispute resolution process for distribution agreements. In the event of a dispute between the principal party and the distributor, the UAE Commercial Transactions Law would apply (and not the UAE Agency Law). The courts would honour and respect the terms of the distribution agreement, as long it is compliant with the aforementioned law.

    With regards to the termination of distribution contracts, there are no statutory restrictions on a principle's/supplier's right to terminate the distribution relationship without cause where the agreement permits it, or when the deal reaches the full contract term. The UAE Civil Transactions Law is the guiding legislation in such matters.

    For a clearer understanding of the dispute resolution process with distribution agreements, we turn to case laws.

    Case Analysis for Distribution

  • The more recent case in the Abu Dhabi Courts between the defendant (distributor) and the plaintiff (principal) showcases a successful defence claim for compensation brought by the distributor upon termination by the foreign principle without any notice. There was no written agreement between the parties, only a commercial relationship. The distributor claimed for loss of profit from the date of termination without notice up to the date of the judgement. The claim was unsuccessful in the Court of Cassation and all the courts prior due to the lack of proof and specific terms specifying the duration of the relationship; thus, either party could terminate the relationship at any time. The distributor failed in the claim for compensation as there was no proof of his losses or damages. The case proves that there is still a possibility to have commercial relations without a detailed distribution agreement; however, with a written agreement, the chances of possible compensation increase significantly. 
  • In another case, an agreement was signed between a principal and an 'agent' (who was in fact, not a wholly 100% UAE owned entity), and the agreement was expressly termed as an 'Agency Agreement'. The agreement put the agent in a position for the management for 5 to 6 restaurants. The contract had also included an arbitration clause for the resolution of any disputes between the parties. Whilst this article does not wish to go into the merits of arguments put forth by the principal party and the agent, it seeks to analyse the judgment in this case, which distinguishes between agents and distributors. In this case, where the issue was whether the contract had formed a distribution or agency agreement. The court held that agreement did not constitute agency, for primarily 2 reasons: (i) the agent was not a company which was 100% owned by a UAE national, and (ii) the agreement contained an arbitration clause, which is against the public order that prevails in matters relating to commercial agency, as the dispute resolution capacity in such matters is vested purely with the Commercial Agency Committee, and thus local courts, arbitration bodies, and tribunals do not possess primary jurisdiction required.
  • The case concerns the issue between the commercial agent and client – according to the contract signed by the parties, the commercial agent is under obligation to give a full effort to promote the products of the client. The client has filed a claim for the breach of contract. According to the facts of the case, the client has brought a large number of its products into the country without the knowledge of the defendant, who is the exclusive distributor of these products. It caused the defendant to be unable to perform its duties as such act did not allow the respondent to increase the demand for those products and urge customers to buy them and fulfil their obligations to increase demand for those products. Therefore, it was held that the plaintiff's request to terminate the contract is based on unfounded fact and shall be dismissed.
  • Conclusion

    In conclusion, the process of decision making involves; identifying problems, generating alternatives, choosing an alternative and implementing the decision. Every single step is important as the business targets cannot be achieved without a well-rounded decision process. Thus, this article has sought to summarise and encapsulate the two major avenues for conducting business in the UAE for foreign businesses, in great detail, by covering elements such as, but not limited to, agency law, distribution law, and the dispute resolution processes and practical case law for the same.

    With the necessary consideration given to the legal implications within the cases discussed above, the principal will be able to make an informative decision to achieve success for the business. It is vital for any principal to identify all the risks involved and law governing these areas to determine the best option suitable to them.

     

     

    ]]>
    Sun, 05 Jan 2020 11:39:00 GMT
    <![CDATA[FDI Law in India]]> A Guide to Foreign Direct Investment in India

    Imagine that you are a child in India during the 1980s. Your uncle, who resides abroad in Switzerland, has come for his vacation and gifts you a goody bag filled with exquisite chocolates such as Lindt, Milka and Toblerone, all of which you adore. After he departs, you search for these chocolates at different markets and bakeries, only to find out that they are not sold there. Fast-forwarding 25 years, in the 2000s, you visit a supermarket and voila! There, in the chocolate section, your eyes feast upon various packets of Lindt, Milka, Toblerone and other chocolate brands. Reading this, one can wonder what happened during those twenty-five years that brought these chocolate brands to India. Well, the answer is simple. Foreign Investment.

    In simple terms, investment is the acquisition of an asset with the intention of generating monetary benefit from it in the future. Foreign Investment is an international investment that is made into a country by an entity that is foreign to it. A variation of Foreign Investment is Foreign Direct Investment or FDI. In India, the regulation of FDI was promoted during the 1970s, with the aim of liberalising the trade and economy of the nation while promoting investments into the country. This was done with the help of the Foreign Exchange Regulation Act (FERA) of 1973, which empowered the Reserve Bank of India to act as the statutory governing body for regulating and controlling activities like:

    • Export and import of currency notes and bullion
    • Transfer of securities between residents and non-residents
    • Acquisition of immovable property in and outside India
    • Foreign exchange payments outside India

    But at the same time, FERA 1973 restricted the growth of foreign companies by imposing restrictions on foreign equity and was seen as controlling legislation rather than one that provides incentives for foreign companies. The provisions of FERA 1973 stipulated that foreign companies must reduce their shareholdings in the Indian companies to a maximum of 40 per cent in order to continue operations and if that percentage was higher, they would require authorization from the Reserve Bank of India to continue with their operations. This led to a reduction in the amount of investments flowing into the country. Over the following years, the Government adopted policies that promoted liberalising FDI regulations, which were incompatible with the existing legislation. Therefore, the Foreign Exchange Management Act (FEMA) of 1999 was introduced.

    The Foreign Exchange Management Act, 1999 brought about a liberalization on the foreign exchange controls and reduced the restrictions on FDI, by managing rather than regulating foreign exchange, with the significant change being offences were now of a civil nature than a criminal one. The Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000 regulates foreign direct investments in accordance with the FEMA 1999. Under the provisions of the Regulations, a foreign investor i.e., a person residing outside India who happens to be a citizen of a foreign state or a body corporate registered outside India, can make investments through a domestic asset management company or a portfolio manager (who are affiliated with the Securities and Exchange Board of India (SEBI) as a foreign institutional investor) who will manage the funds of a sub-account that will be used for investment. This was governed by the Department of Industrial Policy and Promotion, which recently changed its name to the Department for Promotion of Industry and Internal Trade (DPIIT). The DPIIT focused on the facilitation of FDI into the country by issuing the Consolidated FDI Policy (issued every 6 months), that governs the limit at which foreign investors can invest in the different sectors and contains the regulations that the investors must adhere to. Certain sectors were prohibited from investors initially or had a cap on the amount of investment that could be done.

    Under the new regulations, there were 2 ways in which foreign investors could invest in India. There are:

  • Automatic Route – Under this route, the investor does not require approval from the government for their investment.
  • Government Route – Under this route, any investment that is done in an industry will require prior approval from the government, that would be given by the concerned department.
  • The procedure to obtain approval under the government route is as follows:

  • A proposal for the foreign investment must be submitted along with the supporting documents to the Foreign Investment Facilitation Panel of DPIIT via an online portal.
  • Once the DPIIT receives the proposal, it will identify the relevant Ministry/Department and forward the proposal within 2 days to them and simultaneously to the RBI as well, in order to inspect it from a FEMA perspective. The relevant Ministry/Department must provide its comments with relation to the proposal within 4 weeks from the receipt of the proposal. If any additional information is a requirement, the DPIIT will request the applicant to furnish the same within 1 week. It must be noted that proposals which involve an FDI of more than INR 50 billion will be placed before the Cabinet Committee of Economic Affairs.
  • Once the proposal is complete, the required approvals will be granted within 8-10 weeks from the date of application.
  • The following table illustrates the various sectors and the permitted percentage of investment via FDI:

    Table 1

    Sr. #

    Sector

     

    Percentage of Investment in Automatic Route

    Percentage of Investment in Government Route

  •  
  • Agriculture and Animal Husbandry

    100%

    -

  •  
  • Air Transport Services (non-scheduled and other services under civil aviation)

    100%

    -

  •  
  • Air Transport Services (scheduled and other services under civil aviation)

    Up to 49%

    Above 49%

  •  
  • Airports (Greenfield & Brownfield)

    100%

    -

  •  
  • Asset Reconstruction Company

    100%

    -

  •  
  • Auto components

    100%

    -

  •  
  • Automobiles

    100%

    -

  •  
  • Banking (Private Sector)

    Up to 49%

    Above 49%

  •  
  • Banking (Public Sector)

    -

    Up to 20%

  •  
  • Biotechnology (Brownfield)

    Up to 74%

    Above 74%

  •  
  • Biotechnology (Greenfield)

    100%

    -

  •  
  • Broadcast Content Services (up-linking of non "News & Current Affairs" TV Channels/Down-linking of TV Channels

    100%

    -

  •  
  • Broadcasting Carriage Services

    100%

    -

  •  
  • Broadcasting Content Services

    -

    Upto 49%

     

    ]]>
    Sun, 05 Jan 2020 10:43:00 GMT
    <![CDATA[Liquidated Damages upon Contract Termination]]> Liquidated Damages upon Contract Termination

    Liquidated damages while not present in every contract, there will arise occasions where liquidated damages are mentioned within contracts and provide necessary assurance and security. There are numerous benefits, though also some drawbacks to this type of clause. The method of awarding damages also differs around the world depending on the type of legal system in place within a jurisdiction and nation.

    Common Law and Civil Law nations have differing ideas when it comes to this topic. In this piece, we will look into the concept of liquidated damages to summarise what the implications are across a few jurisdictions.

    Common Law Jurisdictions

    Common law was first introduced in England in the King's Court following the Norman Conquest around the 11 century. The system spread across the globe and throughout the British Empire. Many of these nations still adopt the common law legal system to this day to varying extents.

    Case laws hold a significant sway in court cases though the concept of binding precedence. Further to this, judges play an active role in effecting and evolving the legal system throughout the nation. This is all possible due to the fact it is not codified.

    Under common law, liquidated damages receive a level of scrutiny. Often, the damages will not be awarded if they are present in the contract as a form of punishment. The reason for this is so that one party cannot take advantage of the other by introducing a clause which would likely come to pass. Often, a party with greater power in a situation such as a company, could abuse an ordinary individual in this way. However, liquidated damages are not simply ignored; this acts as more of a caution than anything else.

    There are two crucial aspects of the clause which must be analysed and conditions are required before it can be upheld. These are as follows: -

  • The value of the damages should reflect the damages caused;
  • The act mentioned in the clause should not be a certainty. If it certain or highly likely to occur, the clause is considered as one party taking advantage of the other.
  • One particular case from the United Kingdom, England, was that of Office of Fair Trading v Abbey National plc and Others [2009] UKSC 6. In this case, an issue arose when an individual wished to take an overdraft from their bank. Certain charges were imposed upon the individual, and the Office of Fair Trading (OFT) wished to look into the fairness of the charges.

    A decision was reached by the Supreme Court in which it was stated that a banking entity would not be in a position to impose penalties on their customers in their contracts. However, in this particular case, the 'fine' could be considered more as a charge for a service that a punishment to the client. This fact thus made the charge fair.

    Another case from the UK which had a similar result was that of Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67; this is a leading contract case law in the nation. In the case, an agreement was entered between the two parties in which Cavendish would purchase a significant share in a leading Middle Eastern marketing company. The contract between them included two specific clauses which stated the following:

    • If certain clauses of the contract were breached, Mr Makdessi would no longer be liable to receive the two final payments promised;
    • Mr Makdessi would also be liable to sell his remaining shares at a rate far below their true value and the value agreed for the initial shares.

    A breach did occur, though Mr Makdessi stated in his defence that the clauses were unfair and being utilised as a penalty. If the court found this to be the case, the clauses would not stand. However, in the final judgement in the Court of Appeal (the Supreme Court in this case), held that the clauses were not penalties. They did not go against the EU directive, Unfair Terms in Consumer Contracts Directive 93/13/EEC.

    While the EU consists of a number of nations that do not use the common law system, the law still applies across the UK and also EU countries.

    The US is also a common law nation and their key regulation on the matter is the Uniform Commercial Code. This code was first published in 1952 and has been adopted across the nation in whole or in part depending on the specific jurisdictions. Section 2-781 subsection 1 states that liquidated damages are permissible in sales contracts so long as the value of the damages are fair. They should have a similar value to the actual damages that arise. Further to this, they should be unforeseeable damages.

    Altogether, these are largely the same as the United Kingdom's approach.

    Civil Law Systems

    The other predominant legal system found throughout the world and perhaps the more common of these two. Civil law was the roman legal system and was used across their empire in an attempt to unify the people under a singular method of judgement. Today it is found in its purest form across the continent of Europe, and further across the world it is either used or altered in different ways.

    This system is codified and thus is not limited by prior case laws. Statues are used by judges to identify issues and arrive at conclusions.

    In general, civil law nations are far more open to the concept of liquidated damages. These are seen as adding certainty to a contract and accounting for different eventualities. One of the best examples of this is found in the French Civil Code. This code was established in 1804.

    Article 1226 of the code concerns clause pénale which is a form of liquidated damages. These can be used to ensure specific performance from the parties to the contract. While it often ensures performance, another use is to provide compensation in the event of a breach.

    These clauses are generally accepted in France and other civil law jurisdictions. However, in the case of excessive penalties, a court may order the fines to receive a reduction. As per article 1230 of the code, the party must be aware of the clause and specific punishment in the case of a breach.

    The UAE is another civil law jurisdiction and it holds much the same position as the French. The Civil Transaction Law (Federal Law Number 5 of 1985) considers this under Article 390. Herein, it is stated that parties to a contract may pre-determine the compensation in case of a breach. However, subsection 2 states that a judge may order a party to alter the amount to a reasonable level if this is deemed necessary and there may exist no clause within the contract to counter this.

    The clause is used to a considerable degree in construction contracts, this makes them all the more useful in the UAE which is known for its considerable real estate and construction industries.

    Japan follows suite in this respect, though it also takes things a step further. Under the Japanese Civil Code, Article 420-1, three specific points are made. These are as follows:

  • Parties may agree upon punishments in the case of a contract breach. These cannot receive adjustment whether they are an increase or decrease, from the courts;
  • The clause shall not prevent any party from demanding further in the case of an issue arising that is not stated in the contract, nor shall it prevent the right to cancel the contract;
  • Any penalties mentioned within a contract are considered liquidated damages.
  • In a way, the Japanese system is quite the opposite of the common law idea, and it goes beyond even many other civil law jurisdiction.

    Conclusion

    The concept of liquidated damages are handled differently depending on the legal system of a nation. There a few constants across the majority of countries regardless of this though which include the idea of fairness and protecting the interests of the parties. However, the common law system found in the likes of the UK and the US is generally not the friendliest when it comes to any form of penalty clause in a contract due to the potential issues that may occur. These include the abusing of power by those in the more powerful position.

    Japan is the most extreme in their support of the idea of liquidated damages, as even the court cannot force alterations to such contract clauses. Whether the system is good or bad is for no one to say. Both sides have their advantages and disadvantages. Considering the differences in the two types of legal systems, either argument has its merits.

     

    ]]>
    Sat, 04 Jan 2020 14:46:00 GMT
    <![CDATA[Import - Export Regulations in the United Kingdom]]> Import & Export Regulations in the United Kingdom

    The United Kingdom (UK) has long been a key player in the global import and export business, since the era of colonization. To service the needs of its citizens, SMEs (Small to Medium Enterprises), and to facilitate trade, the UK imports a great deal of goods, FMCGs (Fast Moving Consumer Goods), and machinery, whilst simultaneously exporting a great deal of precision goods such as, but not limited to, industrial machinery, motor vehicle parts, and pharmaceuticals.

    Whilst many European Union (EU) members who are part of the European Single Market within the Schengen Area have scrapped physical borders across the single market by eliminating any form of border control, the UK does have a physical border with checkpoints to enforce border control, movement of goods and people, and apply customs on imports and exports. The responsibility of the enforceability of customs and duties on imports and exports in the UK rests on the shoulders of the HMRC (Her Majesty's Revenue and Customs), which is a department of the UK government tasked with collecting taxes, payment of state support, and regulation of the national minimum wage.

    The HMRC take an interest in imports and exports for a number of reasons, such as but not limited to, compiling trade statistics for the UK and the EU, ensuring a balance in trade figures for imports and exports so as to close the trade balance between the two figures, enacting strict policies on the prohibition of certain goods, and certainly for ensuring correct payments of any duties and/or value added tax.

    This article will seek to lay out the legislation that binds importing and exporting procedures with regards to the United Kingdom. It will also analyze the various restrictions and caveats that arise when carrying out importing and exporting with the UK.

    Regulations

    The HMRC lays out all of its general information for importers and exporters in the document titled 'UK Trade Tariff: Volume 1', published on the 1 January 2009. The collection details topics such as, but not limited to, the following:

    • Value Added Tax (VAT);
    • Suspensions;
    • Duties;
    • Reliefs;
    • Prohibitions & Restrictions; and
    • Other relevant rules and charges that may apply when importing or exporting from the UK.

    VAT

    Value Added Tax, or VAT, is applicable on goods imported into (and exported out of) the UK, and is governed by the Value Added Tax Act 1994 (an act of Parliament (Westminster), particularly Section 15 to Section 17 of this statute, which details the charge to the tax applicable in the case of 'Imported Goods from Outside Member States' (i.e., outside the EU).The VAT is charged as though it is a custom duty, and provisions in the Community Customs Code (from the European Economic Community), and the Customs and Excise Management Act 1979 apply whilst appropriating VAT in relation to imported goods.

    The liability of VAT on goods is ascertained by assigning them 'commodity codes', which are again detailed in the 'UK Trade Tariff: Volume 1' from the HMRC. There are currently 3 codes, for goods imported into the UK, specified by the Trade Tariff, which are as follows:

    • Code "S": Goods falling under this category are liable to VAT on import, which is at the standard rate of 20% on the value of the goods, and was introduced on the 4 January 2011,
    • Code "Z": Goods falling under this category are liable to zero VAT (0%) on import,
    • Code "A": Goods falling under this category are liable to VAT on import at an effective rate of 5%.

    On exportation, however, VAT is generally not applied, i.e., nil rate applied on VAT. Merely providing proof of evidence of export is enough for an export to be cleared. The rate of the VAT may increase or decrease, and Section 2(2) of the Value Added Tax Act 1994 grants Her Majesty's Treasury (HM Treasury, or Treasury) to decrease or increase the rate of VAT by 25%, for up to periods of one year at a time.

    Suspensions/Reductions for certain goods against Custom Duty and UK Trade Tariff

    Under current EU legislation, some goods benefit from a temporary tariff suspension, which are designed to allow manufacturing industries amongst EU member states to compete on a level playing field with non-EU manufacturing industries. Thus, partial or complete suspensions are placed on goods, components, or raw material which is not available in a sufficient and sustainable quantity within the EU. The decisions of classifying products and granting them suspensions from taxes are taken individually by member states of the EU, however, in cooperation with other EU member states (and upon a case-by-case request basis), taking into account factors such as economic criteria surrounding each suspension/deduction request. In the UK, such requests are made directly by individuals to the Department for International Trade (DIT), manages all enquiries other than the actual classification of goods, which is dealt by the HMRC.

    Suspensions issued against goods are of primarily one the following three categories, which are classified on the basis of the type of goods in question:

    • General Temporary Suspensions: Such suspensions cover goods in sectors such as, but not limited to, chemical, microelectronics, fisheries, and some agricultural sectors. Under the UK Trade Tariff, such goods are classified under the aforementioned "S" code of VAT liability, and enjoy suspensions/deductions for a definite period of time,
    • Goods Imported for Use in Particular Aircraft: This category of suspensions applies particularly to certain goods utilized in the repair, construction, or maintenance of aircrafts,
    • Goods for certain types of Boats, Ships, and other Vessels: Custom duties are nullified and suspended for goods that are utilized in the repair, construction, or maintenance for particular types of cruise boats, excursion boats, fishing vessels, fishing boats, yachts, light vessels, warships, etc.

    Also, to note, certain goods from states such as Turkey, which are imported into the EU via the UK, may additionally enjoy deducted custom duties. Direct bilateral arrangements between nations may also lead to the conception of other forms of reduced rates.

    Excise Duties

    Excise duty, which is charged in addition to 'Customs Duty', are specific to certain products.

    The excise duty is placed on the aforementioned goods under one the following circumstances:

    • They are made available for consumption,
    • Missing shipments or other dutiable consignments are found,
    • Goods which are imported intended for personal use are later employed in commercial use,
    • The goods are sold under distance-selling arrangements via a middle-man/broker/vendor.

    The appropriate excise duty payable is assigned to individual items under Section 47 of the UK Trade Tariff, which details the "tax type codes" for each category of the aforementioned items.

    Reliefs from Excise Duty

    Items subject to excise duties may also be liable to reliefs from the same, however, these reliefs do not extend to include custom duties (such as VAT) to which these items may be liable. Such reliefs are applicable to select alcoholic liquors, spirits, and beers through various provisions under the Alcoholic Liquor Duties Act 1979, to tobacco products through Section 2(2) of the Tobacco Products Duty Act 1979, and to hydrocarbon oil via provisions under the Hydrocarbon Oil Duties Act 1979, respectively.

    However, in certain cases, excise duty may be subject to drawback/refund under certain conditions. Per reg.7(6) of the Excise Goods (Drawback) Regulations 1995, the duty owed on the good must have been paid prior to 3 years after the import/export of that good.

    Import Prohibitions & Restrictions

    According to the terms of the UK Trade Tariff, certain restrictions are placed on the import of certain goods. Examples of these restrictions include the following:

    • Licensing Restrictions: Licensing restrictions have been placed in the UK under EU Law and have been integrated into the provisions of the UK Trade Tariff. Goods which are imported into the UK, are primarily done so under the power of an Open General Import License (OGIL), which is issued by the Secretary of State with the powers conferred upon him/her under the Import of Goods Control Order 1954, which is bound to the act of parliament, the Import, Export, and Customs Powers Defence Act of 1939. This is the primary licensing restriction in place in the UK. In addition, specific licenses are needed to be issued by the Department for Business Innovation and Skills (or a similar EU issuing authority) for the import of specific goods originating from specific countries,
    • Restrictions & Prohibitions imposed by customs upon goods originating from all countries outside the UK: Such restrictions are placed on goods such as, but not limited to, controlled drugs (under the Misuse of Drugs Act 1971), explosives, firearms, fireworks (under The Fireworks (Amendment) Regulations 2004), anti-personnel mines, indecent or obscene media, nuclear materials, offensive weapons, mammals which are susceptible to rabies, torture equipment, and realistic imitation firearms (under the Violent Crime Reduction Act 2006),
    • Restrictions & Prohibitions imposed by customs on goods from third countries only (outside the EU): Such restrictions are placed upon goods such as, but not limited to, the following: animals, birds, livestock, animal pathogens, animal carcasses (by way of the EU Veterinary Checks regime), bushmeat, cat & dog fur, Chlorofluorocarbons (CFCs) and other ozone depleting chemical substances, counterfeit currency notes, counterfeit and pirated goods and media, embryos, goods bearing false indications of origin, goods infringing a trademark (under Section 89 of the Trade Marks Act 1994), goods infringing copyright (under Section 111 of the Copyright Designs and Patents Act 1988), hair & wool (under the Anthrax Prevention Order 1971), prison-made goods, and whale products.

    Export Prohibitions & Restrictions:

    Per the UK Trade Tariff, certain restrictions are placed on goods leaving the UK. Restrictions are placed on primarily three categories of goods leaving by the UK:

    • Strategic Goods: These refer to military and dual-use goods, i.e., civil goods that may have a military use. Such goods are under the jurisdiction, and require a license from the Department for Business Innovation and Skills (BIS),
    • Cultural Goods: Such goods, which may hold cultural and/or historical significance, are monitored by, and require a license from the Department for Culture, Media and Sport,
    • Controlled Drugs & Precursor Chemicals: A license is required from the British Home Office to export goods that classify as "drugs" or may be used for the preparation of the same.

    To facilitate the export of the aforementioned goods, the BIS, and the Department for Culture, Media, and Sport issue the following licenses:

    • Open Export General Licenses (OGELs): such licenses sanction the export of specified goods only to particular destinations by the exporter,
    • Open Individual Export Licenses (OIELs): such licenses give the exporter authority to export unlimited quantities of specific goods to particular destinations,
    • Community General Export Authorization (CGEA): such licenses grant the exporter authority to export most (not all) dual-use goods to the United States of America, Australia, Japan, Canada, Norway, New Zealand, and Switzerland,
    • Standard Individual Export Licenses (SIELs): such licenses grant the exporter authority to export goods in particular amounts only to specific destinations.

    It is interesting to note that the need for having an export license is waived in the following cases:

    • In the events that the goods are being transported/exported onboard flights abroad on aircraft which are owned and operated by the Civil Aviation flying unit,
    • In the events that the goods are bring transported on behalf of the British Council,
    • In the events that the goods are being exported on behalf of UK government departments, such as, but not limited to, HM Ambassadors, High Commissioners, and Governors of certain Commonwealth countries.

     

    ]]>
    Sat, 04 Jan 2020 14:09:00 GMT
    <![CDATA[Patents Rights in Developing Countries Exceptions]]> Patents Rights in Developing Countries: Exceptions

    Intellectual Property Rights (IPRs) have never been more economically and politically important than they are today. Elements of IP law such as, but not limited to, trademarks, copyrights, patents, and utility models, are of prime importance in debates on IPRs in various sectors such as education, industrial policy, biotechnology, entertainment, media, etc. In the 21 century, economies function as "knowledge-based economies", thus making the appropriate understanding IPRs of paramount priority in all spheres and economic development.

    However, the impact of proliferation of IPRs has not been universal across the globe. Conflicting views still persist with regards to the impact of IPRs on development in various parts of the world. Some statutes such as the World Trade Organisation's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) have sought to bring the benefits of the creation of incentives for individuals to pursue knowledge generation to developing countries. Whereas, a differing outlook on IPRs suggests that some of its elements such as, but not limited to, a patenting regime, would have an adverse effect on developing countries, and would disrupt the sustainable development of products, for example, raising the price and limiting the availability of unique yet essential drugs, or perhaps limiting the availability of educational materials, that may have otherwise been proliferated for the greater good of the society.

    Thus, developing countries are faced with a series of tough challenges, and even tougher questions in this regard:

  • What are the major concerns surrounding IPRs in developing countries?
  • Which countries classify as "developing" countries?
  • Is sustainable development directly affected by issues in intellectual property?
  • Are developing countries, particularly the least economically developed ones, in a good-enough position to negotiate on intellectual property rights on a global scale?
  • Such questions, and many more, are essential issues that ought to be tackled by policy makers so as to address intellectual property laws in a manner that best meets the needs and desires of people within developing countries, and works to protect their best interests.

    The classification of countries as 'developed' and 'developing' is extremely complex, as the United Nations (UN) have themselves acknowledged that there is no specific established convention for the aforementioned terms. The UN, in 1999, as a part of their so called M49 standards, have outlined that the terms 'developing' and 'developed' are intended for 'statistical convenience' only, and does not necessarily express any judgment on part of the UN with regards to the progress achieved or stage reached by a particular country in its development process.

    However, the World Bank, which is a UN institution, does provide an insight into which countries may classify as 'developing', as its main function is to provide loans and grants for capital and infrastructure projects in Lesser Economically Developed Countries (LEDCs), as opposed to More Economically Developed Countries (MEDCs).

    As per the 'World Development Indicators' published by World Bank for the 2019 fiscal year (FY), the World Bank identifies 'low-income' economies as those countries which have a Gross National Income (GNI) per capita of USD 1,025 or less. The World Bank establishes 4 categories of countries, on a "by income" basis:

    • Low Income Economies (GNI per capita lesser than or equal to USD 1,025) (31 countries identified for FY 2018)
    • Lower – MIiddle Income Economies (GNI per capita from USD 1,026 to USD 3,995) (47 countries identified for FY 2018)
    • Upper – Middle Income Economies (GNI per capita from USD 3,996 to USD 12, 375) (60 countries identified for FY 2018)
    • High – Income Economies (GNI per capita of USD 12,376 or more) (80 countries identified for FY 2018)

    Exceptions to Patent Rights under the TRIPS Agreement

    Prior to the establishment of the TRIPS agreement in 1994, countries had free rein to adopt exceptions to their domestic patent laws, as they saw fit. However, the TRIPS agreement was envisaged with the outlook that it would introduce some substantive provisions on exceptions to patent rights that would have a global outlook.

    The following sections of this article will analyse the history and nature of the aforementioned exceptions to patent rights. Such exceptions pertain to a wide range of policy issues that range from issues such as science & technology, public health, international trade, international travel, particularly those with applications in 'developing' countries.

  • Private & Non-commercial Use Exception:
    • It has been a long-standing feature of patent rights that they apply exclusively to commercial activities, with little thought or consideration being given to non-commercial activities. It was constituted earlier that patent laws recognise a patentee's right being limited with regards to acts that constitute non-industrial or non-commercial applications. However, the precise definition of the aforementioned terms, and their distinction has been separated for all countries.  
    • Two different approaches have been considered for establishing a boundary between commercial and non-commercial acts with regards to patent rights:
      • On one hand, the rights of the patent holder could only be limited to restricting unauthorised third parties from carrying out activities that may classify to be of a "commercial" or "industrial" nature, i.e., any activity that may be carried out for the purposes of deriving an income. In this manner, an implicit exception is placed to the patent holder's rights for non-industrial and non-commercial purposes. Prior to the TRIPS agreement, developing countries, or those with poorly developed IP laws, followed this system of distinction.
      • On the other hand, patent holders may be granted a set of broad rights over a large spectrum of activities by means of an explicit exception to the rights of the patent holder over non-commercial activities. This approach is most often adopted by developed countries, where explicit exceptions for "private and non-commercial" acts are provided.
    • For example, under section 60(5)(a) of the UK Patents Act 1977, any act done for private and non-commercial purposes would not constitute an infringement of a patent holder's rights.
    • It is important to note that the aforementioned means of distinction have had a profound effect on the interpretation of IP laws in MEDCs, especially at the intersection of fields such as medicine and philanthropy.
  • Experimental/Scientific Use Exception:
    • This has been one of the most widely contested and known exceptions to patent rights globally. Exceptions to patent rights in the field of science came about as an early conception that patent rights were not supposed to restrain non-commercial activities done by, inter alia, Non-Governmental Organisation (NGOs). It was a long-standing concern that patent rights ought not to hamper bona fide experiments and scientific developments.
    • However, the long-standing question with regards to the scientific use exception pertains to extent to which this exception applies. The sole essence of this matter is the permissibility of experimental and scientific activities under the exception to non-commercial activities. In many cases, when a certain scientific activity, originally intended for a non-commercial purpose, grows and evolves, and crosses into the territory of commercial application, it would require a patent licence.
    • For example, under section 60(5)(b) the UK Patents Act 1977, any act, which is done for experimental or scientific purposes, shall not be deemed to infringe a patent.
  • Prior Use Exception:
    • This exception pertains to instances wherein an inventor makes an application for patent rights; however, it turns out that a third party had already (and independently) made an application for the same invention, in secret, i.e., the public was not in possession of the details of the patent for the invention as it was not published. In such instances, a roadblock arrives wherein two individuals have filed for the same patent, with a dilemma arising due to one of them being justifiably unaware of the other's filing.
    • In such cases, it was widely regarded as fair and just that the inventor be granted a patent. However, it is also equally widely considered that it would be unfair to permit such a patent holder to enforce his/her patent against the invention of the secret prior patent holder.
    • Thus, in such cases, a "prior use exception" may be provided, which grants a permit to the prior (secret) patent holder to carry on with what he/she was doing earlier.
    • However, the paramount issue with regards to this exception is the scope of what this exception ought to be. For example, if the prior paten holder is a small or medium sized enterprise (SME), factors such as the scope of the activity in question, could adversely affect patent holder and the effects of the same could be potentially very large.
  • Extemporaneous Preparation of a Medicine in a Pharmacy Exception (Pharmacy Exception):
    • This is one of the areas of the TRIPS agreement which outlines exceptions to patent rights, whose profound effects can be seen in direct applications.
    • During the last fifty to one hundred years, there has been a shift in attitudes pertaining to the patenting of inventions in the medical field. Previously, it was a self-evident idea that the promotion of patent monopolies for essential commodities such as food and medicines was harmful.
    • A number of differing stances have arisen on this issue, with suggestions coming from all across the spectrum:
      • allowing all medical inventions unpatentable,
      • allowing all medical inventions to be patentable, but providing for patent exceptions for patents filed for by pharmacists and doctors,
      • allowing for only some medical inventions to be patentable, such as medicines, which have unique chemical compositions, but restricting the permissibility of patenting to medical processes and medical treatment methods,
      • allowing for all medical inventions to be patentable.
    • Europe, for example, has struck a policy balance on this matter, which excludes methods of medical treatment from the scope of patentability, but retains the permissibility of patentability for patent exceptions relating to pharmacists. This exception, described as "extemporaneous preparation of a medicine in a pharmacy" (the term "extemporaneous" originates from the Latin term ex tempore, meaning "in the spur of the moment). This aforementioned exception allows a pharmacist to create a generic version of a patented drug, in accordance with a doctor's prescription allowing him/her to do so. Such a development has massively aided the proliferation of pharmaceutical industry in Europe.
    • However, it is important to note that this only represents a European or MEDC outlook on the matter. In LEDCs and developing countries, no such distinction has been instituted which differentiates the medical and economic reasons for production of drugs. Such developments would prove key to facilitating the assignment of correct patent rights in the medical field.
    • Yet, even in the MEDCs, a quantitative limit needs to be introduced that pharmacy could theoretically produce under the Pharmacy Exception.
    • At present, the Pharmacy Exception is prevalent in mostly European Patent Legislation. For example, Section 60(5)(c) of the UK Patents Act 1977 allows for the "extemporaneous" preparation of medicine for an individual in a pharmacy, as long as it is in accordance with a prescription provided for by a doctor or a dental practitioner, and this, would not constitute a patent infringement. Such legislation is lacking amongst "developing countries", and would likely need to witness great progress in order to ensure sustainable development with regards to IPRs.
  • Conclusion

    In conclusion, the aforementioned sections of the article outline a few of the primary and important exceptions to patent rights under the TRIPS agreement instituted by the WTO. However, most of these exceptions are afforded to all countries that are signatories to the TRIPS agreement, and are not exclusive to developing countries. What is exclusive to developing countries is the lack of interpretation of these agreements into their domestic laws, which has been carried out to a great degree by MEDCs, particularly those Europe and North America. Thus, developing countries need to exercise a great deal of importance to such issues, and legislate on the same, so as to ensure better compliance with IPR standards on a global level.

     

    ]]>
    Sat, 04 Jan 2020 12:34:00 GMT
    <![CDATA[DIFC-LCIA Arbitration vs DIAC Arbitration]]> DIFC-LCIA Arbitration comparison with DIAC Arbitration

    Manchester United is playing Arsenal. In an incredibly intense contest between the two, at the 85thminute, there is a coming together between the players inside the penalty box. The referee, to understand the incident and know who the perpetrator was, uses the help of Video Assistant Referee (VAR). The referee, with the assistance of VAR, was able to identify and resolve the issue at hand. Similarly, Alternative Dispute Resolution (ADR) works in the same manner. When two parties have a dispute, resolving it through the process of litigation can often be an extremely lengthy and time-consuming process, not to mention, rigid as well. ADR, in the form of arbitration, mediation, etc., brings various other options in settling these disputes without going through the process of litigation.

    In this article, we will run through a brief comparison of the procedural and substantive laws in the DIFC-LCIA Arbitration Centre and the Dubai International Arbitration Centre (DIAC).

    The DIFC-LCIA Arbitration Centre:

    The DIFC was established as a financial centre and free zone 2004. In 2008, in agreement with the London Court of International Arbitration (LCIA), an arbitration centre was created with the primary objective being the promotion and administration of effective and efficient arbitration proceedings for parties based in the Gulf and MENA region. The Arbitration Rules 2016, issued by the DIFC-LCIA Arbitration Centre, govern all arbitration proceedings of the Centre, with some of the sectors being construction, media, financial and telecommunications.

    All arbitration proceedings will be conducted by an Arbitration Tribunal which will be formulated by the LCIA Courts, who have the exclusive authority to appoint arbitrators. The nationality of the arbitrator must not be the same as that of either of the parties unless the party with the different nationality agrees in writing otherwise. The appointed arbitrator may be revoked by the LCIA Court if:

    • The arbitrator gives a written notice stating his/her intention to resign.
    • The arbitrator becomes seriously ill and unfit to act and carry out the duties of an arbitrator.
    • The impartiality and independence of the arbitrator are reasonably doubted due to circumstances.

    Once the Arbitration Tribunal has been formed, the parties must contact the Tribunal within 21 days in whichever manner possible. The duties of the Tribunal are as such:

    • To act justly and impartially between all parties.
    • To ensure that the procedures adopted are suitable to the circumstance and provide an efficient and expeditious way to the final resolution.

    After the Tribunal has been formulated, the claimant must deliver a written statement of the case to the Tribunal and the other involved parties within 28 days of the formulation of the Tribunal. Along with the written statement of the case, all legal submissions and details of relevant facts, as well as the relief being claimed, must be submitted. Once the claimant's documents have been received, the respondent must deliver to the Tribunal and all other parties the statement of defence and any counter-claim, if applicable, along with relevant legal submissions and other essential documents. Without exceeding 28 days from the date at which the respondent made the submissions, the claimant must make a statement of reply and any statement of counter-claim, if applicable, that is supported with the relevant documentation. If there is a statement of counter-claim by the claimant, the respondent must, within 28 days, must deliver a written statement of reply. Should the respondent fail to do so, the Tribunal can go ahead with the proceedings and issue the award as necessary.

    The seat of arbitration can either be mutually agreed by the parties before the formulation of the tribunal and in the event that it is being decided after the formulation of the Tribunal, the decision must be taken with the consent of the Tribunal. If any such agreement has defaulted, the seat of arbitration shall be the Dubai International Financial Centre (DIFC). The tribunal can also conduct the hearings at a geographically convenient place other than the designated seat upon consultation and agreement with the parties. With respect to the language of the arbitration, initially, the parties will use the language in which the Arbitration Agreement is formed unless the usage of a different language is specified in the agreement. If mutliple languages are used, the LCIA Court can determine which language can be utilized. If any document is submitted to the Tribunal in a language different from that in which the Arbitration is being conducted, then a translation must be provided.

    The Arbitral Tribunal is empowered to issue interim orders, after a reasonable opportunity has been given to the parties to respond to the claims, such as:

    • Issue order to any party to provide security for the amount in dispute in the form of a deposit/bank guarantee/any other manner.
    • Issue the storage/sale/disposal of any documents, goods, property which is under the control of any of the parties and is related to the subject matter of the arbitration.
    • Issue an order for provisional relief, pending the final award, in the form of payment of money or disposition of property in between the parties.

    With regards to the final award, it can be made in any currency provided the parties have agreed otherwise. The award issued is considered to be final and binding on the relevant parties and must be carried out immediately. The parties won't have any right to appeal or review the award. The choice of law that is to be followed in such agreements is mutually agreed upon by the parties.

    The jurisdiction of the DIFC-LCIA Arbitration Centre has been contended several times. The UAE is a party to the New York Convention on the Recognition and Enforcement of Arbitral Awards. The convention is of the view that an arbitration award issued in any contracting state can be enforced without any unreasonable restriction in any other contracting state except on the following grounds, as per Article 5 of the convention:

    • The invalidity of the arbitration agreement according to the governing law.
    • The defendant was not given proper notice of the proceeding or was unable to present his or her case.
    • The subject matter of the arbitration cannot be settled by arbitration in the jurisdiction where recognition/enforcement of the award is petitioned.
    • The recognition or enforcement of the award is against the public policy of the jurisdiction where the award is seeking to be recognized or enforced.

    The recognition and enforcement of awards have been further set out in Part 4 of the DIFC Law No. 1 of 2013, which states that arbitral awards will be recognized and enforced not just within DIFC, but outside the DIFC as well, in accordance with Article 7 of Law No. 12 of 2004. The jurisdiction of DIFC-LCIA Arbitration Centre was further affirmed in the case (1) Egan (2) Eggert v (1) Eava (2) Efa [2013] DIFC ARB 002, where the claimant wanted to enforce an award, that was issued outside DIFC but within the emirate of Dubai, in DIFC. The defendants contested that since they did not have anything to do with DIFC and did not have any assets in DIFC, the DIFC Courts did not have any jurisdiction over the same. It was held that the defendant is not required to be present in DIFC or have any assets in order to recognize an award, which was in accordance with Article 42 of Part 4 of DIFC Law No. 1 of 2013.

    The Dubai International Arbitration Centre (DIAC):

    The Dubai International Arbitration Centre (DIAC) was established by the Dubai Chamber of Commerce and Industry in 1994 as a Centre of Commercial Conciliation and Arbitration. The DIAC is an independent and autonomous organization that is governed by the UAE Federal Laws. The primary objective of DIAC is to provide arbitration services with the help of internationally qualified arbitrators at an affordable price. The services offered include:

    • Overseeing arbitral proceedings and disputes.
    • Appointing arbitrators
    • Choosing the venue for arbitration
    • Fixing the fee of arbitrators and mediators

    The Dubai International Arbitration Centre is governed by the UAE Civil Procedural Code Federal Law No. 11 of 1992 and the DIAC Arbitration Rules 2007. The arbitration proceedings that are followed are quite similar in nature to that of the LIAC/DIFC Arbitration Centre. The structure of DIAC is as follows:

    • Board of Directors of the Chamber (Dubai Chamber)
    • DIAC Board of Trustees
    • DIAC Executive Committee
    • DIAC Manager
    • DIAC Administrative Body

    The Board of Directors advises the Ruler on the appointments of the Board of Trustees, and their primary function is to oversee the structure and operations of the Arbitration Centre and appoint the senior management. The Board of Directors is not tasked with handling any of the cases that comes the way of the Arbitration Centre. The Board of Trustees, on the other hand, are entrusted with the responsibility of the overall management of the DIAC and is comprised of 15 members having experience in the field of arbitration with the term of the appointment being three years. The Board also has to provide the approval to organizational structure, regulations and bye-laws of the Arbitration Centre, give guidance in the adoption of DIAC's general policies and propose possible changes to the rules and procedures, if any. The Executive Committee is responsible for the implementation of the decisions that are taken by the Board of Trustees and carry out other functions under the DIAC Rules. The Manager, who is appointed by the Board of Directors, is expected to control and administer the rules of DIAC and its bodies. The Administrative Body of DIAC ensures that the arbitration services provided by DIAC run in an efficient manner, that adheres to the DIAC Rules.

    The Arbitration Tribunal, as set up by mutual agreement between the parties or at the discretion of the Centre if the parties are not in agreement, must always be uneven in number. The arbitrators appointed by the Centre must be impartial in nature and must not, in any manner whatsoever, attempt to act as advocates for either of the parties involved. As per the DIAC Rules, the seat of arbitration can be mutually agreed upon between the parties, and if on the contrary, the seat shall be Dubai, unless the Executive Committee determines a more appropriate seat.

    Once the Arbitration Centre receives the request for arbitration, it shall transfer the file to the Tribunal at the earliest of its formation. Within 30 days from the date at which the Tribunal receives the file, the Tribunal must let the parties know the date and venue of a preliminary hearing and accordingly, the Tribunal will fix a schedule for the proceedings. If the Statement of Claim, which has a comprehensive outline of the facts and legal arguments supported with the relief being claimed, was not submitted with the request for arbitration, it must be done so in a span of 30 days of the receipt of notification from the Centre on the establishment of the Tribunal, with a copy being submitted to the Respondent, the Tribunal and the Centre. The Statement of Claim must be accompanied with the required documents the Claimant might be required to rely on. The Respondent shall, within 30 days of receiving the Statement of Claim or the receipt of formation of the Tribunal by the Centre (whichever is later), must submit a Statement of Defence to the Claimant, the Tribunal and to the Centre and this statement must be supported by the required documentation that the Respondent intends to use. If the Respondent intends to pursue any counter-claim, the same must be made in the Statement of Defence. In addition to the Statement of Claim by the Claimant and the Statement of Defence by the Respondent, it is the discretion of the Tribunal to allow any further written statements. In the event that it does, all submissions must be made within a time limit of 30 days.

    The Arbitration Tribunal of DIAC has the power to evaluate the evidence that is submitted, including the admissibility, relevance and expert opinion, if any, on a case-to-case basis and is even empowered to determine the time, manner and format which the exchange of evidence happens between the parties. The Tribunal further has the discretion to hold hearings, allow oral arguments and bring in witnesses. If the witness needs to be heard by the Tribunal, the following must be submitted before the Tribunal at least 15 days prior:

    • Identity and address of the witness
    • The subject matter of their testimony
    • Relevance to the issue at hand
    • Language of testimony

    The Tribunal is also empowered to issue any provisional/conservatory orders it deems necessary. If any party requests a competent judicial authority for an interim or conservatory measure or for the implementation of any directive issued by the Tribunal, it will be deemed to be compatible with the Arbitration Agreement entered between the parties. In the event that the Claimant does not produce a Statement of Claim, the Tribunal can refuse to proceed with the claim, but this will not stop it from pursuing the Counter-Claim of the Respondent. If any party fails to utilize the opportunity to present its case to the Tribunal and does not show any reasonable cause for the same, the Tribunal can draw any inference it deems appropriate from such conduct.

    With respect to the rules of law, the Tribunal can decide to implement the rules of law as mutually chosen by the parties, and if that is not the case, then the Tribunal is to apply the law which it deems to be most appropriate. Once the Tribunal decides that it is satisfied with the opportunities given to the parties to present their submissions and pieces of evidence, it can declare the proceedings to be closed. In exceptional circumstances, the Tribunal can re-open the proceedings, either on its own motion or at the application of either of the parties, at any moment before the award is made. Within six months from the date at which the Tribunal received the file, the Tribunal must issue the award and can extend the time-limit for an additional six months. If the Tribunal feels that it needs further time, then it can request the Executive Committee to do so. The awards made by the Tribunal are binding on the parties, and since the parties wave their right to appeal in agreeing to proceed with the arbitration proceedings, it is final. If the parties need any further clarification on the award, within 30 days from the date of receipt of the final award, the parties can request the Tribunal for an interpretation of the said award.

    The UAE is a signatory to GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications as well as the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. This means that an arbitration award that is made in any of the contracting states can be recognized and enforced in any of the other contracting states. If the enforcement of the award by a contracting state is against the public policy that it follows, then the award cannot be enforced.

    Conclusion:

    The resolution of disputes using the method of arbitration has been exceptional in giving the involved parties a sense of flexibility and pace with the proceedings. With the bilateral treaties between countries and conventions like the New York Convention and the GCC Convention, arbitration proceedings and awards can be easily recognized and enforced in various countries throughout the world.

     

     

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    Thu, 02 Jan 2020 17:54:00 GMT
    <![CDATA[Political Boundaries in Cyberspace]]> Political Boundaries in Cyberspace

    As Information and Communication Technologies (ICTs) continue to suffuse through every aspect of human life in the twenty-first century, they have skewed the perceptions of citizens, and the outlook of jurisdictions worldwide. As societies continue to reshape themselves into digital economies, there has been a surge in the dependence of individuals, organizations, and governments on digital infrastructure. Whilst cyberspace has profoundly altered human life, and presented significant new opportunities, it has also blurred the lines between digital and 'tangible' citizenships of individuals, consequently leading to states legislating on issues pertaining to cyberspace law, such as, but not limited to, intellectual property, cybercrimes, fraud, identity theft, e-commerce, freedom of expression, and privacy concerns.

    The ubiquitous and decentralized nature of the internet has led to issues in areas of policing free speech, hate speech, and privacy intrusions for governments, leaving governments and judiciaries to carry out a balancing act among citizens' digital rights. The aforementioned factors dictating the practice of cyberspace law have had a profound effect on enforcing political boundaries on the users of ICTs. Government cyberspace regulators have moved to establish safeguards to curtail cybercrime. This has given flexibility to states to exercise confidentiality over their affairs, while also preserving a great deal of freedom to information, a provision that ought to be provided to citizens of democracies and high-ranking countries on the Human Development Index (HDI). 

    The following article will seek to elucidate the complicated relationship that exists between nations, their citizens, and non-state actors (particularly, commercial parties), and the legal and political issues pertaining to this tri-partite association with regards to cyberspace.

    State Sovereignty & Confidentiality in Cyberspace

    Although sovereignty over cyberspace may seem to be a vague concept and given the open nature of cyberspace today, states still exercise a great deal of privacy and caution while operating with large amounts of confidential data over the internet due to the omnipresent threats from non-state actors (hacktivist groups) and other nations. This has often come into clash with the states' citizens own rights and desire for transparency with regards to government dealings. The aforementioned provision has been realized in many forms across democracies. Notable examples of the same include the Freedom of Information Act (FOIA) 1967 within the United States of America (USA), which entails the partial disclosure of information (upon request) from agencies of the USA Federal Government, unless the said request contradicts interests such as law enforcement, personal privacy, and/or national security, and the Right to Information Act (RTI) 2005, which empowers any citizen of India to request information from a 'public authority'.

    Such pieces of legislation were conceived at a time when ICTs were not commonplace and/or accessible to a large proportion of the population.

    A landmark case about the FOIA 1967 was the case of Department of Justice v. Reporters Committee for Freedom of the Press [489 U.S. 749.1988], which was ruled at the US Supreme Court. At the Court of First Instance, it pertained to a request from a group of journalists, who sought that the Federal Bureau of Investigation (FBI) and Department of Justice (DOJ) (agencies of Federal Government) release criminal records of four brothers who had entered into dealings concerning defense contracts with a corrupt Congressman. The DOJ withheld the criminal records of three of the brothers, and only released the records of one, who was deceased at the time. At the Supreme Court, it was held unanimously by the judges that under Exemption 7 (c) of the FOIA 1967, which states that the information held by the federal agencies did not reveal anything 'how' the government operates, the agencies in question were not obliged to disclose that information. Thus, this case set a precedent, that in the event a reporter requests information under the FOIA 1967 that does not seek to reveal any information concerning governmental activities, it does not constitute 'public interest', and rather is thus only pertaining to 'private matters'. This is an excellent case which throws light on the balancing exercise needed between public interest, the confidentiality of the state's dealings, and privacy intrusion.

    However, from a legal perspective, it is important to note that such legislation will need to evolve to encompass cyberspace. Taking an example from the FOIA 1967, it was reported that one in six individuals is unable to access their desired public information via the act. The quality of the search results and requests under this act have also been put into question, with questions being raised by inquirers about the integrity of the results being provided. The challenges to extend this legislation onto digital infrastructure are thus quite clear. Governments are tasked with keeping up with rapid advancements in technology, whilst simultaneously balancing the competing interests of privacy and freedom. 

    Commercial Parties and Political Influence in Cyberspace

    A great deal of influence today is exercised by commercial parties in cyberspace. Recently, a lawsuit was filed against Google at the US District Court in California by 2020 US Presidential hopeful Tulsi Gabbard, who claims that her Google Ads account was temporarily suspended intentionally, at a time right after the Democratic Party's debate in June 2019, particularly at a time when her campaign experienced a spike in search interest online. The claimant in the suit Tulsi Now, Inc. v. Google, LLC [Case number 2:19-cv-06444, California] filed complaints about, inter alia, violation of the First Amendment to the Constitution of the USA, and is claiming damages of USD 50 million.

    Nonetheless, a more worrying issue is that of competition law and privacy intrusions on the part of commercial parties over ICTs. In July 2019, the US DOJ launched a sweeping antitrust investigation into the big tech companies, off the back of years of claims of monopolization, and compromising users' privacy on cyberspace. The claims pertaining to the monopolization of the market have reached such an extent, that the US Federal Trade Commission (FTC) has dabbled with the notion of splitting up the big tech companies.

    From a legal perspective, the collection action lawsuit of Richard Lloyd v Google, LLC [(2019) EWCA Civ 1599. Case No: HQ17M01913] at the England and Wales High Court (EWHC) in the year 2018 reiterated the scope of technology companies. The claimant, Richard Lloyd, applied for a request to serve proceedings to Google LLC (based in California, USA) from England, which was obviously out of the jurisdiction of the respondent. The claimant had asserted that section 4(4) of the Data Protection Act 1998 (DPA 1998) (an act of Parliament in the United Kingdom) (supplanted by the Data Protection Act 2018, which complements the EU's landmark General Data Protection Regulation (GDPR) 2018) was being violated by Google LLC by means of sale of browser-generated information of iPhone users to advertisement organizations. Such information was thought to have included sensitive data, such as, but not limited to, the user's political views, geographical location, and financial condition. Being a collective action suit, the claimant had also sought to represent other individuals who were affected by this in England & Wales.

    The application was refused by the presiding judge on the basis of the outcome of three legal tests:

  • the question of England being the appropriable jurisdiction for the claim, which was ruled to be apt, but the judge saw no reason as to why the claims were to be brought to the USA;
  • the question of the jurisdictional gateway that was sought for recourse, and the claimant had relied upon the notion in tort that the damage sustained, and the acts committed to creating the damage were exclusively within the same jurisdiction, to which the judge had stated the court could see no "damage" to the right of autonomy to the claimant through the non-consensual use of personal data by Google LLC; and
  • the question of the feasibility of the prospect of success the collective class, to which the court had ruled that the consequences of the actions of respondent were not uniform across the entire class, and that even if the class were hypothetically defined, several insurmountable practical challenges would arise from the same.
  • The results from the tests above rendered the case shut, thus establishing the supremacy of cyberspace operators in late 2018, before their unforeseen antitrust probe in 2019. This case truly highlights the hollow nature of privacy safeguards against exploitation from cyberspace operators in a leading jurisdiction of the world, prior to the enactment of GDPR in 2018. However, still in many jurisdictions today, it is the commercial parties who dictate the political narrative, both on a macro as well as the micro scale.

    Partisan Politics by States in Cyberspace

    Perhaps the most recurrent acts of partisan politics on cyberspace are carried out by states (instead of the heads of states) themselves. Passive means of doing so include creating obstacles to access to cyberspace and ICT infrastructure, and/or placing restrictions on certain types of content that may be accessed over the internet. Active means, however, entail the direct violations of the rights of users and include acts of surveillance, invasion of privacy, the carrying out of consequential repercussions for online activities by means such as, but not limited, to censorship, imprisonment, and harassment. 

    In conclusion, as cyberspace continues to reshape the boundaries of political activity across the world, it is the legal sphere which serves as a deterrent to ensure the mutual exclusivity of partisan politics and civil liberty within cyberspace.       

     

     

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    Thu, 02 Jan 2020 15:37:00 GMT
    <![CDATA[The Countermeasures of drug laws in the UAE]]> The Countermeasures against Narcotic Drugs and Psychotropic Substances under drug laws in the UAE

    "Drugs are reality's legal loopholes."

    Jeremy P. Johnson

    Drugs have destroyed many lives; however, flawed governmental laws have killed many more. After years of drug regulations set in place, the world is still facing the same problems day in and day out. Does the question then arise whether these problems will be solved with the decriminalization of drug abusers within the law? Perhaps this is the approach of the United Arab Emirates with relation to their recent amendment (the Federal Law Number 8 of 2016), amending the long-standing Federal Law Number 14 of 1995 on the Countermeasures against Narcotic Drugs and Psychotropic Substances. This article will aim to explain the amendments made together with why the UAE felt the need to implement the change and finally whether the amendments achieved the justice the UAE longs for on the abuse of narcotic drugs and psychotropic substances.

    The amendment on the use of illegal drugs has substantially been downgraded on the severity of punishment and options other than jail time has been introduced for first-time offenders under the changes to the anti-narcotics law. The first amendment is that the minimum four-year jail sentence has been reduced to only a two-year sentence.  Another significant amendment is that the Attorney General now possess the power with the advice from police and prosecutors to send an offender to rehabilitation treatment without the case going to court. First-time offender options include sending them to the rehabilitation center or community service and can receive a maximum fine of AED 10,000. With serial offenders, the courts have the option now of adding a minimum fine of AED 10,000 with sentencing.

    In the UAE it is encouraged to offer any help necessary to individuals struggling with narcotic abuse, and therefore, implemented the change in the law that in cases where family members hand over drug users to police, prosecutors or a rehabilitation center, they will be exempted from any penalty. The drug user will remain in treatment until the rehabilitation center releases the individual. Within the previous legislation in the UAE, the exemption would only be considered if the drug user turned themselves in. The time duration spent within these rehabilitation centers has been reduced now from three years to two years.

    The UAE is a leading example of trying to view any drug dependency or drug abuse from a health care perspective. The UAE has been successful in changing the required legislation and making these amendments to improve the legal system and justice and the changes is remarkable. The fact that the UAE Courts decide on a case-by-case basis set them apart from some other countries such as common law jurisdiction, that apply precedent and legislation contributing at times in injustice in not judging cases on a case-by-case basis.

    The amendments create alternative solutions in the drug policy, especially for first-time offenders. The Dubai Police are consistently trying to raise awareness to these changes to remove the fear of criminal charges and criminal proceedings concerning drug abuse through nationwide campaigns such as the International Day against Drug Abuse and Illicit Trafficking.

    Main amendments added to the Federal Law Number 14 of 1994

    The main amendments provided within articles 43, 44, 45, 59, 61, 63, 65, 65 have been listed below:

    Article (43)

    Criminal proceedings shall not be implemented against those who pass the treatment program.

    Article (44)

    Any publications promoting abuse of narcotic drugs and psychotropic drugs shall be punished with a fine not less than AED 50,000 together with all publications being confiscated.

    Article (45)

    Any person intoxicating another with narcotic drugs or psychotropic substances through food or drink, or who makes them abuse the substance unaware, shall be punished by imprisonment for no less than five years. If there was a direct intent to intoxicate another, the imprisonment would not be less than seven years. Further, if the offender commits any crime towards the victim after intoxication, the punishment will be life imprisonment. In the case of death of the victim, the sentence will be the death penalty for the offender.

    Any person who intentionally transfers narcotics or psychotropic substances provided for in the tables attached to this law to the possession or custody of others without his knowledge of the truth shall be punished by imprisonment.

    Article (59)

    Any convicted person for the use abuse of narcotic drugs, psychotropic substances to whom Article 43 applies, shall be subject to periodic examination during the execution (not exceeding two years) of the penalty or during the period of placement. The Minister of Interior shall determine the rules and procedures of this inspection. Any convicted person violating any of these rules and regulations shall be punished with imprisonment for a period not less than one year. If the sentenced refuse to give the necessary examination sample shall be even further punished with two-years imprisonment and a fine of no less than AED 10,000.

    Article (61)

    The police officers shall have the right to use force or weapons required to implement the provisions of this law, provided that this is necessary and proportionate to the purpose of use.

    Article (63)

    In the case of first offenders, the offences outlined in Articles 39, 40 and 41 of this Law shall not be considered as a precedent for rehabilitating them.

    Article (65)

    The federal courts located at the headquarters of the Federation's capital shall be competent to decide on the crimes punishable by the provisions of Articles 48 and 49 of this Law whenever they are committed for trafficking, in addition to the crimes associated with them.

    Case Analysis:

    • Case 1:
      • Facts: The accused was found to have been a recurring user and possessor of narcotic drugs and psychotropic substances. It was established that the accused had been a returning user of the aforementioned substances, and had committed an offence three (3) years prior to the end of his earlier sentence. After being apprehended by police department and tried by the Public Prosecutor, the accused was brought to the Court of First Instance, where it was held by the Court that the individual be sentenced to two (2) years imprisonment for the charges of possession and consumption of drugs. Upon appeal by the accused, the Court of Appeal changed the ruling, now suggesting that he be placed in an addiction treatment unit, where he would be monitored by a competent committee for rehabilitation. Subsequently, the Public Prosecution appealed to the Court of Cassation.
      • Issue: The primary issue was whether the accused was entitled to being put in an addiction treatment unit, as specified under Article 4 of the abovementioned statute, although he was a reoffender?
      • Judgment: The Court of Cassation overturned the Court of Appeal's ruling, and upheld the appeal of the Public Prosecution. The Court of Cassation sentenced the accused to a further six (6) months imprisonment. The Court of Cassation had found that the Court of Appeal had wrongly assumed that the accused was not afforded his legal right to protection in the Court of First Instance; however, this was not the case, as the accused had been a reoffender.
      • Impact: This judgment confirmed that drug addicts should not be placed in an addiction treatment unit if they have been found to be repeating drug-related offences.
    • Case 2:
      • Facts: An individual was accused of 3 offences under Federal Law Number 14 of 1995: (a) the abuse of psychotropic substances for three other individuals, (b) using his apartment as a place for the proliferation of drugs, and (c) assaulting anti-drug federal officers. The Public Prosecution penalized him and initiated legal proceedings at  the Court of First Instance, where it was held that the individual would be sentenced to five (5) years imprisonment and a fine of AED 20,000, following which he was to be deported from the UAE. Upon appeal to the Court of Appeal, the sentence was further extended to 10 years. The accused opned that his sentence ought to be lowered, or exempted, given that he confessed the identity of another individual who sold him the drugs as a part of his confession. On this basis, he appealed to the Court of Cassation.
      • Issue: Could the accused's charges be lowered under article 55 of Federal Law Number 14 of 1995?
      • Judgment: The Court of Cassation rejected the appeal, stating that the confession made by the accused was a ''bare saying with no evidence', and thus did not grant him any exemptions under article 55 of Federal Law Number 14 of 1995. The court upheld the sentence.
      • Impact: The Court of Cassation established that the accused's  sentence may only be lowered in one or more of the following three cases only:
      • the accused individual makes the authorities cognizant of the offence prior to it taking place;
      • the accused contributed to the start of the investigation in some manner; and
      • the accused helped the authorities during the investigation or trial to arrest another criminal.
    • Case 3:
      • Facts: An individual was suspected of possessing narcotic drugs while arriving at the Dubai International Airport; therefore, was stopped and searched by authorities. The individual had been found to have, in his possession, traces of 'Morning Glory', the seeds of a type of plant, which has psychedelic effects. Although the individual had no history of drug abuse, he was taken to court for ascertaining a sentence.
      • Issue: What would the sentence in such a case amount to for the individual?
      • Judgment: Under article 39 of Federal Law Number 14 of 1995, the use or distribution of any drugs for purposes other than medical reasons would normally be punishable under a jail sentence of not more than two (2) years. In the case of 'Morning Glory', the sentence would not normally amount to more than six (6) months. However, the court may also issue a fine of not more than AED 2,000 in this matter. Under article 63 of the Federal Law Number 8 of 2016, the accused may also be deported once the sentence is fully served.
      • Impact: In any case, the court does not usually look at the criminal history (or lack of) of an individual whilst ascertaining the sentence under Federal Law Number 14 of 1995. A strict policy of no-leniency is followed, even in what may appear to be minor offences.  

     Conclusion:

    In conclusion, the amendments to the UAE Federal Law Number 14 of 1995, have proved to be of great utility in educating and informing the residents of the UAE of the importance of ensuring a drug-free society. As evidenced by the amendments and their application in the aforementioned case laws, the UAE drug laws cover and encompass a wide range of offences, and are applicable to all individuals from a host of different backgrounds. Whilst dealing with the UAE drug law, it is important to note the strict no-leniency policy that is followed by public prosecution authorities and courts. 

    For example, youth in the UAE was requesting stricter laws, better law enforcement and education on illegal drugs abuse; and therefore, the National Rehabilitation Centre (NRC) in Abu Dhabi was established for the prevention, treatment and rehabilitation for alcohol and drug addiction in May 2002. The institution of the NRC has not only been monumental towards curbing the proliferation of narcotic substances in the UAE, but it has also offered an incentive for more offenders to voluntarily come forward to get themselves treated, without the fear of being prosecuted.

     

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    Thu, 02 Jan 2020 14:59:00 GMT
    <![CDATA[Advantages of Intelligence Policing]]> Advantages of Intelligence Policing

    The terms 'intelligence' and 'policing' put together often strike thoughts pertaining to some fashion of covert surveillance system that is used to gather information in an undisclosed manner. However, the true meaning of the term intelligence policing, or "intelligence led policing" (a more meaningful way to put it) is far from this assumption.

    As technology continues to accelerate at a rapid pace in the 21 century, it is imperative that law enforcement agencies keep up with this rapid change. Law enforcement agencies, particularly, police forces are always coming up new methods to fight crime in a more effective manner. As a part of this never-ending search, police forces have come up with a method to help prevent crime by ensuring that it never takes place in the first place.

    In the early 1990s, UK police forces (i.e., Her Majesty's Inspectorate of Constabulary) began advocating for the increased usage of surveillance and intelligence to target serial criminals, who were reoffending constantly. It was not until the terror attacks on 11 September 2001 that Intelligence Led Policing (ILP) started becoming heavily incorporated into policing styles across the globe. Prior to this incident, most government agencies would not often divulge information to each other.

    Noting that the resources available to criminal individuals have grown exponentially with the advent of technology, police forces moved towards a system of prevention over cure, ensuring that crimes had been taken care of prior to happening.

    The first-ever instance of intelligence being police in action was the incorporation of the practice into the functioning of the Kent County Constabulary in England in 1997. In the wake of budget cuts and upon noticing that it was only a small percentage of individuals committing the vast majority of property-related crimes, the constabulary employed a larger number of units to focus solely on analyzing property crimes. Not surprisingly, the Kent Constabulary was able to see a 24% drop in property-related crimes. This was the first evidence of ILP in action, and owing to its great success, this model of policing crimes was soon adopted in Europe and the United States of America (USA).

    To clarify, ILP is not the same as predictive policing, although they are not mutually exclusive from one another. Predictive policing employs computers to scan and examine large amounts of data pertaining to certain types of crimes in certain geographical regions, in order to anticipate when and where a crime will happen. Whilst this method of policing does not inform who will commit a crime, it does point out hotspots and frequency of crime within a certain region.  ILP, on the other hand, is a method that entails identifying trends, and potential victims and repeat offenders.

    This article will seek to define, outline, and analyze the practice of intelligence-led policing, and weigh its merits and advantages.

    Defining Intelligence-Led Policing (ILP)

    Simply put, ILP refers to a management framework for tracking criminal intelligence and outlining future/planned police work, wherein intelligence is paramount. The intelligence acquired guides the police forces' strategic and operational objectives, and priorities so that they may efficiently suppress crime and other security threats. It also seeks to guide the decisions on operational work done by the police, and the rational allocation of human, material, and technical resources.

    ILP seeks to challenge the traditional style of policing, which has long been a style of work dominated by response-based policing. ILP changes this to a style of law enforcement that encourages collaboration between agencies, and proactive thinking, however, planning and prioritization in such means do not undermine the fact that police forces always need to be reactive and vigilant to security threats. In essence, ILP complements traditional and response-based policing.

    Intelligence-led policing initially took shape as a top-down managerial model, wherein the power decide the outlook for a certain law enforcement agency is concentrated at the top, by means of communication and information sharing, which feeds itself to the higher-ups, who would then make calls as to how the police force would operate. In contrast, the traditional model of community policing is a bottom-up approach, which is aimed at primarily enhancing between members of the public and the police.

    Although the sophisticated technology and data-driven approach of today's ILP did not exist in years prior, it still has been in existence in a rudimentary form for decades. Police forces have long been using crime data to identify patterns, and roughly anticipate when the next crime will occur. With the rapid advancement in technology, data models are being employed, with factors such as weather, time of day, crime hotspots, and the criminals' backgrounds being fed into them. This allows for law enforcement agencies to build out complex models that can allow them to focus their resources on particular activities. This data collected, is usually harvested straight from the information that is stored within the law enforcement agency's system, and mostly centers around the analysis of the individual's characteristics. Such characteristics may include records of arrests, gang activity, domestic incidents, and familial relationships of that individual. This allows law enforcement agencies to leverage data for the greater good of better policing.

    Jerry Ratcliffe's latest visual representation of the ILP model is perhaps the best method to visualize ILP in action. The 4-i model (intent, interpret, influence, and impact) is key towards outlining the main factors in the ILP model: the criminal intelligence analyst, the criminal environment, and the police decision-maker. For the ILP process to work at its full potential, all the "I's" must function properly. 

    At first, the decision-makers ensure that the intentions of the criminal act/individual are understood. The intentions are then passed onto the analysts, who are able to interpret the criminal environment behind the intention. This is then used to influence the decision-makers at the top of the chain to create an impact on the criminal environment, by means such as, but not limited to, action plans, strategic management, and investigations and operations.

    Advantages of Intelligence-Led Policing

    It is of no doubt that law enforcement agencies receive a massive strategic advantage whilst employing information, knowledge, and intelligence into their functioning. However, the mere possession of knowledge does not grant law enforcement agencies an upper hand whilst combating crime. As stated earlier, law enforcement agencies are able to harness data to its maximum potential, to ensure utmost compliance with national laws and international human rights standards.

    ILP allows for the existence of a forward-looking and pro-active approach to curbing crime. Its proven application in a number of countries in recent years to address issues such as, but not limited to, terrorism, crime, and transnational threats, has pushed ILP from the realm of being a concept, to a general application strategic business model to address a plethora of policing issues at local, regional, and national levels.

    In recent years, the demand for law enforcement services and response needed, have far outpaced the availability of police officers available, thus pushing law enforcement agencies to increase efficiency and output per employee. Intelligence-led policing has offered the ideal solution for this problem.

    "The need to introduce intelligence-led policing (ILP) should not be questioned. In times of budgetary and resource restrictions, each responsible individual and organization has to identify priorities to tackle major problems. To assist in prioritization, decisions have to be made based on facts and intelligence, the basis of all of which is information. ILP will contribute to optimizing the allocation of resources and concentrate efforts in a more structured manner. This helps to cope with increased sophistication and operational agility of criminals to subvert law and order."

    European External Action Service (2013: 12)

    The advent of international terrorism has highlighted the need for a system of centralized analysis and comprehensive data and information sharing. This was especially evident after the 9/11 attacks. Thus, risk identification has become a central part of modern policing. A solid functioning ILP approach to data and information gathering and analysis allows police forces to assess a greater number of crime-related parameters.

    The ILP model employs the use of clear organizational and management structures, which include decision making and tasking mechanisms and a clearly defined cooperation and communication pathway between domestic and international law enforcement authorities. The International Police (Interpol) is a by-product of this practice.

    Perhaps the biggest takeaway from the implementation of ILP is the improved data and information management systems that are employed. In today's age of incessant information flow, the ILP data management structure provides for the directed and focused collection of relevant data and information, keeping in mind a well defined and outlined policy for objectives, strategies, and priorities.

    The figure below gives a visual representation of ILP in action, particularly in the European Union (EU), which experiences a great deal of inter-police force collaboration on investigations. The policy guiding the investigations is the European Union Serious and Organized Threat Assessment (SOCTA).

    Concerns of Social & Civil Rights

    One of the primary concerns pertaining to ILP is that there is a chance of over-policing, and sometimes may be racially or ethnically motivated, and may lead to the perpetuation of bias against criminals from certain backgrounds.

    Some of the concerns raised against ILP are as follows:

    • Since the data is being entered by humans, it may perpetuate preconceived bias against racial and ethnic minorities, which may have a higher occurrence of crime than other groups.
    • Predicting more crime in a particular neighbourhood will encourage greater policing in a certain geographical area.
    • The tracking of certain individuals, who may be considered to be potential perpetrators, in spite of them having done nothing wrong, comes very close to an invasion of that person's right to privacy.

    However, proponents of ILP have raised some very valid counter-arguments. ILPs have always had a very high rate of success, i.e., they have been very accurate in pointing out the right individuals, and very rarely the wrong ones. Moreover, they claim that, since the data is processed through a computer, it removes any inherent human bias that may exist whilst entering the data, since the data entered is always referenced with past information and trends pertaining to the crime.

    Conclusion

    In conclusion, the trend of reducing crime across the world could, in part, be owed the functioning of proper ILP measures. For example, the United States Federal Bureau of Investigation (FBI) reported that overall crimes reported had reduced from 2017 over 2016. While it is still hard to pinpoint empirical data to suggest that this was solely down to the implementation of ILP by the FBI, one may look at the strides made by governmental intelligence agencies over the past couple of years, in detected and preventing more terror-related crimes.

     

     

    ]]>
    Thu, 02 Jan 2020 14:22:00 GMT
    <![CDATA[Abu Dhabi Land disposal]]> Granted Commercial and Residential Land in Abu Dhabi and its Disposal

    Land has been a bone of contention since times immemorial, wars have been fought for controlling the land. Similarly, in modern times as well as in almost all the countries of the world with well-developed legal systems codified or uncodified land has been dealt through either constitution or enacted legislation. Similar is the case with the statutes pertaining to lands situated in Abu Dhabi i.e. it is necessary for the purchasers or lenders to first check that if the property labelled as Granted Land in case the property is duly registered as a government grant to the current or the previous owner. In the event the property due diligence that the said property was a granted land, then it is crucial to dive into rules and regulations governing granted land.

    With regards to legislative history it is important to take note of the Law Number 3 of 2005 regarding the Regulation of Real Estate Registration in the Emirate of Abu Dhabi was enacted to regulate the real estate market in Abu Dhabi through establishment of the Abu Dhabi Department of Land Registration Department as well as the Al Ain Municipalities. The law also mandates that every deed which creates, transfer or extinguishes real estate rights inclusive of the lease with a term of more than four years should be registered or else the transaction would be void. In addition to aforementioned law, the Law Number 19 of 2005 which was later amended in 2007 clarified the categories and differential rights regarding ownership, leasing and mortgaging of real estate properties in Abu Dhabi for UAE nationals, GCC citizens and non-UAE and non-GCC nationals.

    The latter law also created 'investment zones' in which GCC nationals, as well as the non-GCC nationals, are entitled to own real estate. The Executive Council Resolution Number 64 lays down directives for the Registrar of Land Registration Department in the Emirate of Abu Dhabi with regards to: -

    • Issue title deeds to non-UAE nationals' property located in the investment zones
    • Register ownership title on the property located outside investment zone
    • Register mortgaged properties within or outside investment zone

    Despite the encouraging provisions of law for the development of real estate sector in Abu Dhabi, there has been new resolution viz. Administrative Resolution Number 289 of 2017 on the Ceasing of Real Estate Disposals relating to Granted Land in Abu Dhabi with effect from 20 September 2017 with regards to restrictions or disposal of residential or commercial land granted by the government in Abu Dhabi. The prohibition on disposal through sale or mortgage of residential and commercial granted land in Abu Dhabi focus on preventing the sale and purchase and transfer of such land as mentioned in Resolution 289. The Resolution explicitly proscribes any mortgage, musataha, usufruct rights, long-term or other real estate rights, over such granted estates.

    The prohibition mentioned in the Resolution is not applicable to commercial land located in Investment Areas of Abu Dhabi which are designated for foreign real estate investment. The Abu Dhabi Executive Council usually determines and notifies these Investment Areas as per Law No. 19 of 2005 on Property Ownership in the Emirate of Abu Dhabi amended via Law No. 2 of 2007 and implemented by Resolution No. 64 of 2010 which was issued by the Chairman of Abu Dhabi Executive Council. The vital Investment Areas in Abu Dhabi include:

  • Abu Dhabi Ports Company with part of KIZAD (Executive Council Resolution No. 60 of 2010);
  • Al Raha Beach (Executive Council Decision No. 23 of 2005);
  • Reem Island (Executive Council Decision No. 23 of 2005);
  • Al Reef (Executive Council Resolution No. 36 of 2005);
  • Lulu Island (Executive Council Resolution No. 38 of 2008);
  • Yas Island (Executive Council Resolution No. 15 of 2008);
  • Saadiyat Island (Executive Council Resolution No. 14 of 2008);
  • Seih Al Sedira (Executive Council Resolution No. 49 of 2008);
  • Masdar City (Executive Council Resolution No. 50 of 2008);
  • Al Maryah Island i.e. Abu Dhabi Global Market (ADGM) (Executive Council Resolution No. 24 of 2009);
  • Nurai Island (Executive Council Resolution No. 37 of 2017)
  • It is to be noted that, there are exceptional circumstances in which the Abu Dhabi Executive Council may consider exceptions to the law on prohibition of disposal of commercial Granted Land. But usually, short-term leases i.e. of term less than four years are not taken into consideration of such restrictions.

    Akin to as what is discussed in abovementioned paragraphs in relation to the restriction on disposal of granted land for commercial property, in a similar vein there is a general prohibition on disposal of residential granted land in Abu Dhabi. Due to this, the UAE nationals are not permitted under the law whether inside or outside Investment Areas to sell, lease or mortgage granted residential land. The prohibition is all-encompassing i.e. short term lease registered in the Tawtheeq Register and long-term leases registered with Registrar of Land Department.

    But again, as an exception, the residential granted Land in the Emirate of Abu Dhabi would be permitted if below-mentioned conditions are all complied with:

    • The villa/building has been fully constructed and licenses such as building completion and occupation have been issued;
    • The housing loan that has been provided to the owner by the government has been paid off and the mortgaged property is released with a no-objection certificate;
    • There is another property as a family residence with the applicant in the Emirate of Abu Dhabi.

    The Resolution Number 49 of 2018 on the Municipal Services Fees in the Emirate of Abu Dhabi issued by the Chairman of Abu Dhabi Executive Council which came into effect on 27 May 2018. This Resolution is a leap ahead with its new schedule of fees which would be applicable over real estate disposals in Abu Dhabi.

    This Resolution Number 49 has brought a significant change as it has lifted the proscription with regards to the disposal of commercial land which is under the "granted category" in the Emirate of Abu Dhabi but it has been subject to the payment of 15% of the land value to the Relevant Municipality but with the condition that the granted commercial land is bare land at the time of disposal. Under Resolution 49, mortgaging is not included and it defines disposal only as sale, gift and public auction.

    In conclusion, it could be said that the restriction on disposal is not for short term lease when commercial land is considered but with changing times and priority of liberalizing the economy, the Abu Dhabi Government has changed the rule to allow the foreigners to own the property on freehold basis in zones designated by the rules. This would prove to a boom in the real estate market for investors and private developers. Previous law allowed that foreign investors were granted leased property with maximum term of 99 years but the change in law is move by the Abu Dhabi Government to strengthen the economy.

    This declaration of the change to amend the law of real estate on disposal is a welcome change as to achieve the sustainable development goals and priority of economic diversification which are underlined under the UAE Vision 2021 as well as by the Abu Dhabi Economic Vision 2030 which lay emphasis on boosting ease of doing business as well as enhancing the competitiveness of the Economy.

     

     

    ]]>
    Thu, 02 Jan 2020 13:29:00 GMT
    <![CDATA[Victim-Offender Mediation]]> Victim-Offender Mediation: An alternative to the Criminal Justice System?

    Abstract: Victims feel progressively baffled and estranged by our current frameworks for justice. Despite the fact that the criminal justice framework exists accurately, victims abused by criminal conduct have no legitimate remaining during the time spent getting justice. Traditionally, mediation is seldom used as a method of dispute resolution. Does restorative justice bring justice to the victim for the crimes of the criminal offender? The idea of mediation is to create an opportunity for both sides to voice themselves; to give the victim the opportunity to articulate the effect the crime has had on them while simultaneously allowing the offender to show repentance for his offence, owning up to his actions that have profoundly affected the victim while atoning for it.

    1. Introduction

    Therapeutic victim-offender mediation is a relatively niche area within the traditional criminal justice process. This method of mediation has a high potential for rehabilitation of the criminal offender giving him the opportunity to redress whilst righting his wrongs under the alternate dispute resolution philosophy. Ideally, any judiciary's opinion about restorative justice depends on their belief of how much potential a criminal offender to rehabilitate himself, and whether the level of seriousness of his crime even gives him access to this method of mediation. In simple words, if the court believes there is very little scope for the rehabilitation of the criminal offender, they would not allow a victim-offender mediation program.

    It is debatable whether the justice system concentrates on the wounded or even the wrongdoers, however, the justice system is concerned about reprisal and finding suitable types of discipline and punishments. Victim-offender mediation usually handles crimes of not the most severe nature but ones like minor property related matters, juvenile crimes, etc.

    It is again debatable whether an adequate opportunity is provided to either the victim or the criminal offender in the justice process. If provided a measured environment with enough supervision, having the criminal offender and victim face each other and express themselves may give positive outcomes in the long run. The victim is able to completely realise the gravity of the situation and how it has affected them, whilst voicing it directly to the criminal offender, who is made to realise the negative and deep impact it has on the life of a person, in the hope that rehabilitation is an option, and that restorative justice could be an essential tool to humanizing the criminal justice process. It may not match up to the turmoil that the victim has faced, but it may provide a level to satisfaction that the victim was given an opportunity to face the offender and say things to relieve them of the trauma mildly, if not substantially, instead of having to hold their peace about not being given the chance to do the same.

    Victim-offender mediation may prove to be an excellent alternative to the current criminal justice procedure around the world. It is pertinent to note that it is voluntary, which means if only the victim wants to pursue this method of alternative dispute resolution, should they be allowed this option. Alternately, there is always the traditional criminal proceeding mechanism available.

    2. What Is Restorative Justice Practice?

    Tony Marshall of the Restorative Justice Consortium (United Kingdom) proposed a valuable working meaning of Restorative Justice:

    "Restorative justice is a process whereby all the parties with a stake in a particular offence come together to resolve collectively how to deal with the aftermath of the offence and its implications for the future."

     While Tony Marshall's definition feels incomplete, it provides a gist of the concept behind restorative justice, which is two-fold:

  • Victims and their wrongdoers in the case are in an up-close and personal space, and
  • The aim of this congregation is to arrive at a conclusion.
  • According to Marshall, each subdivision of mediation developed freely and have impacted and complemented one another. The branches are mainly: community mediation, victim-offender mediation and victim-offender reconciliation programs.

    Therapeutic restorative justice depends on qualities that stress the significance of giving open doors for the increasingly dynamic association through dialogues in the procedures of offering backing and help to the aggrieved party. It is important that the victim is actively involved in the criminal justice procedure.

    The focus of restorative justice is to repair the harm. It focuses on giving the offender the chance and opportunity to hold himself accountable for his actions, to realise the gravity of his actions, and if permissible, be granted a way to right his wrongs. Restorative justice promotes addressing of all the issues in person and to mutually reach an understanding of what the next step should be towards the justice of the victim.

    Conferencing, which is branch of victim-offender mediation, refers to the procedure where the victim, the offender and their supports (moral supporters or otherwise) along with certain community members work towards reparation in the presence of a neutral and unbiased third party.

    3. How Does Victim-Offender Mediation Work?

    An unbiased third party intercedes an exchange among victim and the guilty party who:

    • Talk about how the wrongdoing influenced them;
    • Express their side of the story;
    • build up a commonly acceptable composed compensation assertion;
    • build up a subsequent arrangement, in this way empowering the aggrieved and the offender to conclude the remedial procedure.

    4.  Need For Restorative Program In The Criminal Justice

    In the traditional retributive justice system, crime is demarcated by the violations of the prevalent criminal legislation of a country. Restorative justice, on the other hand, takes into the account that the crime against the victim is defined by the harm caused. Restorative justice humanises the criminal justice process.

    In a victim-offender mediation, the victim and the offender directly involved in the case are the primary parties. They have direct involvement at each stage of the mediation process which evolves with the changing needs of the parties.

    While retributive justice focuses on the offender being punished for the crime committed, restorative justice, on the other hand, demands that if the case allows, the offender be allowed to make his wrongs right. It demands that the victim direct in deciding how he wants justice to be served, and what action needs to be taken. It is essential that the victim is satisfied at the end of any proceeding or path he chooses. When victims have the open door for direct association with the offender, such cooperation can be transformative- from enduring in silence to shared mending, from detachment to network support, from frailty to strengthening, from melancholy to reengagement.

    Restorative justice additionally takes into account 'society' as an interested party in criminal cases. The crime committed by the offender not only affects the victim directly or abuses the legislative system of a country, but also affects the general public at large.

    5. Advantages Of Victim-Offender Mediation

    5.1 The Victim

    It is essential that at apposite stages of a case, inputs of the victim should be inculcated while arriving at an outcome suitable. The fact that the restorative justice system adds the human factor while delivering justice, is the main reason that it benefits the victim. This form of mediation and justice process gives a chance to the victim to recuperate from the deep, traumatising effects of the crime, mentally and emotionally, by allowing them to sit face-to-face with their offenders and talking to them at intervals convenient to them. This has a liberating advantage for the victim since it relieves them of the questions about the crime that daunts them, as they can directly get answers from the offender.

    An important benefit of this system to justice is that victim-offender mediation allows the victim, who is directly affected by the crime, to devise a personal restitution agreement. It is important to note that the intention is not to let the victim individually decide what the punishment for the offender should be, but to allow the victim to have a say in an outcome favourable to him, or to his satisfaction. The idea of justice differs from person to person and it is important in a case where the victim is affected, that he has a say in what would bring him justice.

    The involvement of victims in criminal cases is unique to that followed traditionally by criminal courts. The courts ordinarily are worried about reformatory compensation fundamentally through fines or detainment; victim-offender mediation uses individual restitution that is fittingly custom to the victim and the offender. Mediations are tailored for each case.

    In an article by Howard Zehr titled 'Justice paradigm shift? Values and visions in the reform process', six questions were stated that goes through the mind of the victim which he/she seeks answers to. The questions are as follows:

  • "What happened?
  • Why did it happen to me?
  • Why did I act as I did at the time?
  • Why have I acted as I have since that time?
  • What if it happens again?
  • What does this mean for me and for my outlook, my faith, my vision of the world, my future?"
  • The benefit of victim-offender mediation for the victim is that the victim can personally get the answers to these questions directly from their criminal offender. Once the victim has the responses to these questions when they are given an opportunity to reflect on them, they also have the chance to be heard, and more importantly, it allows them to directly say it to the offender.

    In line with Zehr's opinion on what victims demand, Heather Strang in an article titled 'Repair or Revenge: Victims and Restorative Justice' also concluded in her own way what the victim needed; in her opinion, she felt the following was needed by victim in a criminal justice system:

  • Involvement in the process as well as the end result.
  • To be dealt with consciously and reasonably.
  • An expression of remorse for emotional rebuilding.
  • Being allowed to take part in their case.
  • Monetary compensation.
  • A semi-formal procedure where they are valued.
  •  

    ]]>
    Sun, 22 Dec 2019 11:36:00 GMT
    <![CDATA[Why is Copyright a Preferred Choice than Trademark Registration in UAE for Business Startups?]]> Today, UAE proffers potential opportunities in almost all business sectors with its genial business ecosystem and has become home to multinational companies and entrepreneurs. So whether you have just popped up with a unique business idea, protecting your business idea is a whip-smart move.

    Pondering over the past decade, applications for intellectual property (IP) protection in the UAE have increased tremendously, and trademarks in particular have boomed- with around 18000 more applications in 2017 than 2011.

    However, if you are thinking of a startup with a unique business idea, product or service, it is usually recommended that you copyright your idea, instead of getting it trademarked. But why? Let's dip in!

     

    Difference between Trademark and Copyright

    Both trademarks and copyrights protect intellectual property but both serve different aspects, lie-

    • With trademark registration in UAE, you can protect anything that you use with your branding, including fonts, logos, designs and colors which are distinctively yours.
    • With a copyright, you protect literary, scientific or artistic works. It can also include created works, like marketing content, computer software and industrial designs

     

    Why is Copyright better than Trademark Registration in the UAE?

    Although shielding your intellectual property is not compulsory in the UAE, but it is worth doing in order to steer clear of the conflicts down the line. So if you are a startup with an amazing business idea, it is usually recommended to copyright your product rather than trademark it. Let us go through it as to why copyright is more preferable than trademark registration in the UAE:

     

    • Rapid Process

    The process of applying for a trademark registration in UAE is comparatively slow and your competitor who could steal your idea might influence the market and appear to be the business with an original idea. But copyright comes with speedy application process, enabling you to protect your idea quickly before anyone else comes across it.

     

    • Extensive Protection

    With copyright, you get prolonged protection, even 50 years more after the death of the author. On the contrary, trademark registration in UAE expires after 10 years. As a result, you will then need to reapply for the trademark and pay the required fees again.

     

    • Global Cover

    Trademark registration in UAE is only applicable within the UAE, whereas a copyright covers 167 countries all across the globe. Copyright means that if a competitor anywhere in the world tries to imitate your business idea, you will have full authority to drag them to the court.

     

    At STA Law Firm, we can assist you with all your legal concerns. Feel free to contact our Intellectual Property Lawyers for any query pertaining to trademark registration in Dubai.

    ]]>
    Wed, 18 Dec 2019 15:19:00 GMT
    <![CDATA[Value Added Tax Penalties in UAE]]> Value Added Tax Penalties in the United Arab Emirates

    Abstract: Value Added Tax (VAT) is an indirect tax levied on consumption or the use of goods and services at each stage in the chain of its production and distribution; from raw material to its final sale based on the price (value) added at each stage incrementally. It is pertinent to note that it is not a cost that the distribution or production chain members incur, but the end consumer bears its full brunt. VAT saw its inception in the United Arab Emirates (UAE) on 1 January 2018.

    Why did the UAE implement VAT?

    The UAE provides its nationals and residents with an array of high-quality public services, including but not limited to, roads, parks, hospitals, civil services and public schools; these services are paid for by the government. Indubitably, levy of indirect taxes on most goods and services provides the country with a new source of income which ensures the continued provision of such public services. additionally, it assists the government in achieving its vision of reduced dependence on oil, thereby building a sustainable economy for the future.

    Legal Framework of VAT in the UAE

    Federal Decree-Law Number (13) of 2016 on the Establishment of the Federal Tax Authority (FTA): FTA has an independent legal personality; the essential legal capacity to act, and the administrative and financial independence. In accordance with Article 4 of Federal Decree-Law Number (13) of 2016, FTA has jurisdiction over the administration, enforcement and collection of Federal Taxes and Relevant Penalties.

    Federal Law Number (7) of 2017 on Tax Procedures (the Tax Procedures Law) aimed at regulating the mutual rights and obligations between FTA and the taxpayer as well as any other person dealing with the FTA, and also aimed at regulating standard procedures and rules that apply to all tax laws in the UAE.

    Federal Decree-Law Number (8) of 2017 on Value Added Tax (the VAT Law) was published in the Official Gazette and came into effect on 1 January 2018. Article 2 of the VAT Law clearly states that tax shall be imposed on:

    • Every deemed supply and taxable supply made by the taxable person;
    • Import of concerned goods; apart from goods specified in the Executive Regulations of the VAT Law vide Cabinet Decision 52 of 2017.

    UAE Cabinet Decision (52) of 2017 on the executive regulations of the VAT Law defines the mandatory and optional tax registration coupled with those liable to exceptions, tax group, and also deregistration. These regulations set out the rules with regards to supplies, taxes due as of the date of purchase as well as the place of supply of such goods including transport services, real estate services, electronic services, telecommunication services. It also includes profit margins, its calculation and charging tax based on such profit margin earned.

    Cabinet Resolution Number (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE imposes administrative penalties on the violations that are categorised into three tables as under:

    Violations and Administrative Penalties with regards to the implementation of the Tax Procedures Law:

    Description

    Penalty (in AED)

    1

    The failure of an individual conducting business to maintain the required records and information

    • 10,000 (First time)
    • 50,000 (Repetition)

    2

    The failure of an individual conducting business in submitting records, documents or data when requested

    20,000

    3

    The failure of a taxable person to timely submit a registration application

    20,000

    4

    The failure of a registrant to timely submit its deregistration application

    10,000

    5

    Failure of the registrant to inform FTA of any circumstance which requires the amendment of information with regards to his tax record

    • 5,000 (First time)
    • 15,000 (Repetition)

    6

    Failure of a person who is appointed as a legal representative of a taxable person to inform FTA for his appointment within the stipulated time period

    20,000

    7

    Failure of a person appointed as a legal representative to file a tax return within a particular period

    • 1,000 (First time)
    • 2,000 (Repetition within 24 months)

    8

    Failure of a registrant to submit a tax return within the particular period

    • 1,000 (First time)
    • 2,000 (Repetition within 24 months)

    9

    Failure of the taxable person to settle any payable tax in the submitted tax assessment or tax return within the specified period

    Obligated to pay late penalty consisting of:

    • 2 per cent of the unpaid tax is immediately due;
    • 4 per cent on the seventh day post the deadline of payment;
    • 1 per cent every day of any amount which remains unpaid one month post the deadline with the upper limit of 300 per cent.

    10

    Submission of an incorrect tax return by the registrant

  • Fixed penalty:
    • 3,000 (First Time)
    • 5,000 (Repetitive)
  • Percentage based:
    • 50 per cent in case the registrant does not voluntarily disclose;
    • 30 per cent in case the registrant discloses post notification of the tax audit;
    • 5 per cent in case registrant voluntarily discloses before the notification of tax audit.

    11

    Voluntary disclosure by taxpayer/person of error in tax assessment/refund or tax return

  • Fixed penalty:
    • 3,000 (First Time)
    • 5,000 (Repetitive)
  • Percentage based:
    • 50 per cent in case the registrant does not voluntarily disclose;
    • 30 per cent in case the registrant discloses post notification of the tax audit;
    • 5 per cent in case registrant voluntarily discloses before the notification of tax audit.

    12

    Failure of the taxable person involuntarily disclosing error in tax assessment/refund or tax return

  • Fixed penalty:
    • 3,000 (First Time)
    • 5,000 (Repetitive)
  • 50 per cent of the unpaid amount to FTA for error resulting in a tax benefit.
  • 13

    Failure of person conduction business in facilitating the work of the auditor

    20,000

    14

    Failure of a registrant to calculate relevant tax on behalf of another in cases where the registered taxable person is obligated to

    Obligated to pay late penalty consisting of:

    • 2 per cent of the unpaid tax is immediately due;
    • 4 per cent on the seventh day post the deadline of payment;
    • 1 per cent every day of any amount which remains unpaid one month post the deadline with the upper limit of 300 per cent.

    15

    A person not accounting for any tax which may be due on importation of goods

    50 per cent of the undeclared or unpaid tax.

     

     

    Violations and Administrative Penalties related to Implementation of Federal Decree-Law Number (7) of 2017 with regards to Excise Tax:

    Description

    Penalty (in AED)

    Failure of the taxable person to display the prices which is inclusive of tax

    15,000

    Failure to comply with procedures and conditions with regards to the transfer of excise goods between two designated zones, and the mechanism of storing and processing such goods

    Higher of 50,000 of 50 per cent of the tax, in case chargeable with regards to goods as a result of such violation

    Failure of the taxable person in providing FTA with price lists for goods sold, imported or produces thereby.

    • 5,000 (First time)
    • 20,000 (Repetition)

     

    Violations and Administrative Penalties with regards to the implementation of VAT Tax:

    Description

    Penalty (in AED)

    Failure by a taxable person to displace the prices which are inclusive of tax

    15,000

    Failure by a taxable person in notifying FTA of applying tax based on margin

    2,500

    Failure to comply with procedures and conditions to keeps goods in designated zones or moving them to another

    Higher of 50,000 of 50 per cent of the tax, in case chargeable with regards to goods as a result of such violation

    Failure by a taxable person in issuing a tax invoice/alternative document when making any supple

    5,000 each

    Failure by a taxable person in issuing tax credit note/alternative document

    5,000 each

    Failure by a taxable person in complying with procedures and conditions with regards to issuing electronic tax invoices/credit notes

    5,000 each

     

    Tax Assessment and Administrative Penalties Assessment

    In accordance with Article 24 of the Tax Procedures Law, the FTA can issue a Tax Assessment in order to determine the payable tax and notify the taxable person within five (5) business days of such issuance in circumstances as mentioned above. Based on any new information, the Tax Assessment can be amended by the FTA. In accordance with Article 25 of the Tax Procedures Law, the FTA may issue an Administrative Tax Assessment for a person, and such person must be notified within five (5) business days.

    Article 26 of the Tax Procedures Laws states that "without prejudice to a more severe penalty that may be applicable under any other law, a prison sentence and penalty of maximum of five (5) times the amount of evaded tax (or either of the two)" may be imposed on a taxable person as mentioned in the tables above.

    Tax Penalties Redressal Procedures

  • Application for Reconsideration: In accordance with Article 27 of the Tax Procedures Law, any person may submit a request to the FTA to reconsider its decision which has been issued connected to him, wholly or partially, on the condition that the reasons are included. The same must be filed within twenty (20) business days of notification of such decision. Further, FTA reviews and issues a justified decision within twenty (20) business days from the receipt of such application.
  • Objections to Tax Disputes Resolution Committee (TDRC) (the Committee): the Committee is chaired one member of the judicial authority assisted by two experts who are registered in the 'Register of tax Experts' that are appointed by a decision of the Ministry of Justice along with the Minister. In accordance with Article 29 of the Tax Procedures Law, the Committee decides the objections that submitted with regards to the decision of FTA on applications fr reconsideration.
  • Procedure for Submitting Tax Disputes Objections: In accordance with Article 31 of the Tax Procedures Law, the Committee reviews such objections and provides a decision within twenty (20) business days of receiving the objection, subject to extension to a maximum of another twenty (20) business days. It is pertinent to note that, in no case may any tax dispute be taken before a competent court in case an objection has not been filed with the Committee first.
  • Enforcement of Decision: The Committee's decisions which do not exceed AED 100,000 in value are deemed executory instruments under the Tax Procedures Law. Decisions wherein the value of the decision exceeds AED 100,000 shall be deemed the same if it has not been challenged before the competent courts within twenty (20) business days.
  • Challenge before Courts: In Accordance with Article 33 of the Tax Procedures Law, the Committee's decision may be challenged (appealed) before the competent courts within twenty (20) business days from the date of objection's notification. There are two instances where challenges may be made:
  • If it is an objection in whole or in part of the decision of the Committee.
  • If a decision is not issued by the Committee in accordance with the provisions of the Tax Procedures Law.
  •  

    ]]>
    Tue, 17 Dec 2019 12:51:15 GMT
    <![CDATA[Inheritance under Shariah Law]]> Inheritance under Shariah Law

    The United Arab Emirates Law of inheritance is very broad. It is suitable for not only Muslims but can be applied to inheritance cases involving people of any religion and nationality. Sharia law, without question, applies to all Muslims; however a non-Muslim foreign national may choose to have his estate either be administered under Sharia Law or can opt for the law of their nation of origin. The Law of Shariah is open for modification and further interpretation. Further, as the United Arab Emirates (UAE) is a civil law jurisdiction, the effect of precedents is invalid when compared with common law jurisdictions. The UAE does not pursue the right of survivorship, wherein the mutually possessed property is given to the enduring proprietor, and the UAE courts have a restrictive expert to choose such issues.

    The Muslim law of succession comprises of four sources of Islamic law:

    • The Holy Quran;
    • The Sunna - the act of the Prophet;
    • The Ijma - the agreement of the scholarly men of the network on what ought to be the choice on a specific point;
    • The Qiyas - an analogical conclusion of what is correct and just as per the high standards set somewhere near God.

    Muslim law recognises two types of beneficiaries or heirs, Sharers and Residuary. Sharers are the ones who are qualified for a specific offer in the deceased's property. As per the law, the Sharers can be any of the following:

  • Husband
  • Wife
  • Daughter
  • Daughter of a son
  • Father
  • Paternal Grandfather
  • Mother
  • Grandmother on the male line
  • Full sister
  • Consanguine sister
  • Uterine sister, and
  • Uterine brother
  • Generally, there are three types of nasabi residuary, namely, residuary by himself, residuary though another and residuary along with another.

    Governing law

    It is also important to note that the chief source of the law of inheritance in the UAE is Shariah, and based on the same Shariah Law, a few Federal Laws in the UAE have been enacted. The federal laws are –

    • Federal Law Number (5) of 1985 with regards to the Civil Transactions Code (the Civil Code)

    Article 17 of the Code states that

    i. "Heritage shall be governed by the law of the testator upon the death thereof.

    ii. The state shall be entitled to the financial rights present on its territory and belonging to the foreigner having no heirs.

    iii. The objective provisions of the will and all actions related to the after-death stage shall be governed by the law of the State of the person carrying out such action upon the death thereof.

    iv. The form of the will and all actions related to the after-death stage shall be governed by the law of the State of the person carrying out such action upon the issuance thereof, or the law of the State in which such activities took place.

    v. Provided that the law of the United Arab Emirates prevails regarding the will issued by a foreigner about the real estate thereof in the State"

    • Federal Law Number (28) of 2005 concerning the Personal Status Law (the Personal Status Law).

    Article 1(2) "The provisions of this Law shall apply to citizens of the United Arab Emirates State unless non-Muslims among them have special provisions applicable to their community or confession. They shall equally apply to non-citizens unless one of them asks for the application of his law."

     

    • Federal Law Number (25) of 2017 concerning on inheritance, wills, and probate for non-Muslims living and working in the Emirate of Dubai. The law affirms that foreign non-Muslims expatriates can now register wills in English by virtue of internationally recognized Common Law.

    Right to claim the deceased's estate

    As per inheritance Law in the UAE, beneficiaries and relatives reserve the privilege to claim the estate of the deceased, an estate is guaranteed for non-Muslims, if there exists a legitimate will. However, in case of death of a Muslim, the estate may be moved to the individuals who qualify as a beneficiary under standards of Shariah Law.

    In case of the death of a Muslim, the courts decide the beneficiary and reconfirm the same with two male witnesses along with the evidence, the evidence must be in the form of documentary proof, like marriage or birth certificates. Life partner, guardians, grandkids, kin, grandparents, uncles/aunties, nephews/nieces are considered as beneficiaries by the Shariah Law. The Shariah Law also imposes a few conditions on who can become an heir. As per the law, the following people cannot be an heir-:

  • An illegitimate child, as well as adopted children, are not considered as beneficiaries;
  • An individual murdering to benefit from the property will be ineligible to claim the estate;
  • Divorced women cannot claim from ex-husband's property unless they are undergoing the "iddat" period. Iddat is the period in Islam wherein a woman must observe after a divorce or after the death of her husband, during which period she may not marry another man. The purpose of the same is to ensure that the male parent of an offspring produced after the cessation of marriage (nikah) would be known.
  • Division of estate among the heirs of the deceased

    In the event of the death of a Muslim, the transferable rights will include every one of the rights relating to the property, usufruct and any other dependent rights. It is important to note that transferable rights will also cover the obligations of the deceased, which can be paid off from his estate. After fulfilling all the commitments and making payment of funeral obligations, whatever is residue shall be divided among the heirs. Below mentioned are the ways by which the assets will be distributed:

     I. One half of the assets will be given to:

    • The husband if no descendant;
    • The daughter;
    • The daughter of the son,
    • The sister, if she has no brother or sister, a successor of the deceased, father or grandfather;

    II. One-fourth of the property will be given to:

    • The husband, if wife has a descendant;
    • The wife, if the husband has no descendant.

    III. One eight of the property will be given to:

    • The wife, if the husband has a successor.

    IV. Two-third of the property will be given to:

    • daughters, if no son;
    • daughters of son, or his successors, of the deceased, has no son, grandson of the same degree;
    • germane sisters, if there is no germane brother, successor, father or grandfather;
    • consanguine sister, if there is no consanguine brother, a germane brother or sister, a successor, father or grandfather.

    V. One-third of the property will be given to:

    • The mother, if the deceased has no successor;
    • Mother's children, if there is no successor, the property shall be divided equally;
    • The paternal grandfather, if he concurs the estate of germane or consanguine brother and in the absence of forced heirs;

    VI. One-sixth of the property will be given to:

    • The father upon concurring with succeeding descendant;
    • The paternal grandfather, if the deceased has a successor,
    • Mother, along with the successor of deceased;
    • Grandmother, if she is not ineligible for an inheritance;

    Division of estate under the law, among the heirs of a deceased non-Muslim, who is a foreign national

    The Law in UAE permits the non-Muslim, foreign nationals to draft their will and to divide their property according to their will. However, in case a non-Muslim foreign national dies intestate, the Courts, as per the Civil and Personal Law of the UAE will distribute the assets of the deceased according to the principles of Shariah Law. It should be noted that as per Article 17(1) of the Civil Law, the inheritance of a person will be regulated by the law during the time of his death. Whereas, Article 17(5) states that the UAE law will apply to the wills of non-Muslim foreign nations, no matter where their property is located, in the UAE of outside of UAE. In addition to the aforementioned law, Article 1(2) of the Personal Law mentions that the said law will be applicable to non-Muslim unless he chooses to be administered under the law of his country. To explain further, this means that if a non-Muslim foreign national dies in the UAE and has assets in his home country, then, in that case, the laws of the home country can be applicable if his heirs request the Court. However, there is a restriction on dealing with the assets located in the UAE.

    As mentioned above, foreign nationals are given a choice to chose the law of the deceased during the time of his death. This can be done when the heirs first appear in the Court, they must request the court for application of home country law of the deceased. Heirs seeking to be governed by the law of the home country of the deceased shall submit the following as per Article 276 of the Personal Law

  • The duly legalised death certificate;
  • Last domicile of the deceased;
  • duly authorized will of the deceased.
  • Although the Personal Law allows the request for application of home country law, the Law does not expressly set aside the civil code, which leads to a level of uncertainty as to whether a non-Muslim will be considered under Shariah Law or under home country law.

     

    ]]>
    Mon, 16 Dec 2019 09:21:00 GMT
    <![CDATA[Amendments to Canadian Trademarks Act]]> Amendments to the Canadian Trademarks Act

    Introduction To Intellectual Property

    Since the beginning of history, the commercial exchange has been an important sphere of concern for every organized society. Nowadays, the international community is undergoing a surge in international trade relations, manifested in the adoption of several international trade treaties and the creation of the International Chamber of Commerce (CIC). This phenomenon can be explained by two main reasons: globalization and improvement of communication technologies. Trade has become a complex area in the heart of every state's concerns. Now, more than ever, it is important to find effective techniques to ensure a growing economic market and the fluidity of global resources.

    Therefore, intellectual property rights play a fundamental and vital role in the life of business by regulating the freedom of competition. Moreover, the intellectual property rights grant private rights to the business owner's that will ensure healthy economic competition between the various commercial actors. In Canada, intellectual property rights are found in three different legislative regimes: the Trademarks Act ('the Act'), Copyright Act, Patent Act, Integrated Circuit Topography Act and Industrial Design Act. In the following section, we will make a brief overview of the Trademark Act, and then, we will discuss the recent amendments that have affected this law.

    I. Validity And History Of The Trademarks Act

    Canada is organised in a federal structure, which means there is one federal government, seven provincial governments, and three territories government. The Constitution (s. 91-92) imparts different power to each of the governments. If an act is adopted in violation of this power division, this act will be invalidated by the court.  The Trademark Act has been adopted by the federal government. It is a valid exercise of Parliament's general trade and commerce power under Section 91(2) of the Constitution Act, 1867 (Kirkbi AG c Gestions Ritvik Inc., [2005] 3 RCS 302). In 1868, the federal government adopted, for the first time, the Trademarks and Patent Act, this law was replaced in 1932 by the Unfair Competition Act. Then came the 'Report of Trade Mark Law Revision Committee to the Secretary of State of Canada' of January 20th, 1953. This report gave birth to the actual Trade-Marks Act, which came into force on July 1 1954. Since then, many amendments have affected this law in order to ensure a modernized and effective law that suits the contemporary reality of commerce.

    II. Guiding Principles Of The Trademarks Act

    First, it is vital to understand why investors put a lot of time and money in order to develop the right symbol that will become the ambassador of the product made by their company. This symbol or trademark is an important tool to assist consumers and businesses because it serves as an indication of provenance. In other words, the trademark will allow consumers to know when they purchase a product, who stands behind it. In this way, trademarks provide a "shortcut to get consumers to where they want to go" (Mattel Inc. v 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772)

    One of the most important aspects to notice about the Canadian statute is that it protects both local trademarks, the registered one, and the unregistered one. In fact, the Trade-Mark Act is more than a simple system of registration; it has been created to "regulate the adoption, use, transfer, and enforcement of rights in respect of all trade-marks". If trademarks are intended to protect the goodwill or reputation associated with a business and to prevent confusion in the marketplace, then it is perfectly logical that the unregistered trademarks are also covered by the protection of this Act.

    However, when a mark is registered, it grants the holder more effective and extensive rights against third parties. It also grants exclusive rights to the use of a distinctive designation or guise throughout Canada, and a right of action to remedy any violation of that right (ss. 19-20 of the Act). Also, in order to exercise that right of legal action, the existence of the mark itself does not have to be established, registration is evidence enough.

    Furthermore, the Canadian Trademarks Act creates a legislative regime of protection against misleading marketing or "passing off" action, under Section 7(c) of the Act. The passing-off action is established in order to ensure first, that buyers know what they are purchasing and from whom they are buying, second, for the protection of the interests of traders in their names and reputation. According to the case law, three components are necessary to prove: 'the existence of goodwill, public deception due to misrepresentation and actual or potential damage to the plaintiff'.

    III. Important Amendments To The Canadian Trademarks Act

    In the past year, the liberal government of Canada has shown serious ambitions about modernizing and innovating its intellectual property legislation. The main objective was to adapt Canadian legislation to international conventions.  As a matter of fact, on the 17th day of June 2019, sweeping changes to the Canadian Trad-Marks Act came into force. We will now analyse briefly the most important modifications.

  • Bad Faith (s. 38 (2) a.1))
  • The insertion of the concept of bad faith in the Act will allow the holder of a trademark that is used and known abroad, but not in Canada, to invalidate or discredit the registration of the trademark. The litigant will have to prove that the application was filed in bad faith.  In other words, trademark holder from all around the world will be able to stop registration of a trademark in Canada, by another company, who try to steal their trademark.

    38 (1) Within two months after the advertisement of an application for the registration of a trade-mark, any person may, on payment of the prescribed fee, file a statement of opposition with the Registrar.

    (2) A statement of opposition may be based on any of the following grounds:

    (a) that the application does not conform to the requirements of section 30;

    (a.1) that the application was filed in bad faith;

  • Cost and Confidentiality (s. 11.13 9) and s. 45.1 (1))
  • The new modifications of the Canadian Trade-Mark Act include the possibility that a penalty cost will be awarded to the prevailing party and the possibility to obtain confidentiality orders concerning sensitive commercial information from the Court. Indeed, allowing a penalty cost will make a litigant be more careful when pressing ahead with a losing case. The confidentiality order will allow parties to present extensive sales data to the Court without worrying if their information's are being exposed to their competitors or the public at large.

    (9) Subject to the regulations, the Registrar may, by order, award costs in a proceeding under this section.

    45.1 (1) A party to a proceeding under section 11.13, 38 or 45 may make a request to the Registrar, in accordance with the regulations, that some or all of the evidence that they intend to submit to the Registrar be kept confidential.

  • Removal of the use requirements
  • All new registration applications or pending applications were exonerated from filing a declaration of use or providing a date of first use. However, the registration fee of 200$ is still required. To register a trademark in Canada, the applicant will be required to have to use the product mark in the Canadian territories or have the intention of using it in the future. Indeed, all the elements for the registration of a mark, such as use or making known in Canada, foreign registration and use, and proposed use in Canada, will be removed.

  • Nice Classification (s. 26(2) e.1) of the Act)
  • Nice Agreement Classification is an international treaty concerning the classification of goods and services. It is administrated by the World Intellectual Property Organization (WIPO). It consists of a list of 45 classes. The amendment to the Canadian Trademark Act will be conciliated with this classification.  All goods and services of the new or pending applications, or the expired registrations have to be classified according to the Nice Classifications. 

    (e.1) the names of the goods or services in respect of which the trademark is registered, grouped according to the classes of the Nice Classification, each group being preceded by the number of the class of the Nice Classification to which that group of goods or services belongs and presented in the order of the classes of the Nice Classification.

  • Filing fees, Term and Renewal of Registration of Trademarks (s. 65 – fixed by regulations)
  • The filing fee for a trademark application filed electronically is $330 for the first class of goods or services, plus $100 for each additional class. Trademark applications filed before June 17, 2019, will not be subject to the payment, the fixed rate of $250 will remain for those applications, there could be significant savings in filing an application before that date. Registration of trademarks will be in force for ten years instead of 15 years. Also, the electronic renewal fee of a trademark rose to $400 for the first class of good or service and an extra $125, for every additional class. Renewal applications filed before June 17, 2019, for registration expiring after that date will not be subject to the payment of the renewal fee by class. The previous renewal fee of $350, if filed electronically, will apply.

    Additionally, any new application for registration will be exanimated in order to prevent confusion between two different trademarks and to ensure the distinctiveness of the trademark. Also, it will be possible to register a non-traditional mark, including a hologram, moving image, scent, taste, colour, three-dimensional shape, texture… The definition of "distinguishing guise" in Section 2 of the Act is repealed.

     

     

    ]]>
    Sun, 15 Dec 2019 11:23:00 GMT
    <![CDATA[Running a Private Equity Real Estate Fund]]> The Cost of Running a Private Equity Real Estate Fund

    Private equity real estate is an advantage class that comprises of pooled private and public interests in the real estate market. Such contributing includes the obtaining, financing and proprietorship of property or properties utilizing a shared vehicle. Private equity real estate ended up prominent during the 1990s amid falling property costs as an approach to gather up properties as qualities fell.

    A private equity fund is an aggregate investment plan utilised for making investments in different value (and to a lesser degree obligation) securities as indicated by one of the investment strategies related to private value. Private value assets are usually restricted associations with a fixed term of 10 years.

    At origin, institutional investors make an unfunded duty to the restricted organization, which is then drawn over the term of the store. From the investors' perspective, assets can be conventional, where every investor contribute with equivalent terms or deviated, where various financial specialists have distinctive terms.

    A private equity fund is raised and overseen by investment professionals of a particular private equity firm (the general accomplice and speculation counsel). Ordinarily, a single private equity firm, will deal with a progression of private equity funds reserves and will endeavour to raise another fund each 3 to 5 years as the past store is entirely and fully invested.

    Breaking Down Private Equity Real Estate

    Investing resources into private equity real estate, for the most part, requires a financial specialist with a more extended term standpoint and a critical forthright capital responsibility. Little adaptability and liquidity are offered to investors since the capital commitment window usually requires quite a while. Lock-up periods in case of private equity real estate can now and again keep going for more than twelve years approximately. Also, dispersions can be moderate, as they are regularly paid from income, as opposed to through and through liquidation where the investors stand with no right to request settlement.

    In any case, given real estate's prominence as an asset class, it can furnish high potential degrees of pay with substantial value appreciation. Yearly returns in the 6-8% for strategies and 8-10% for techniques are considered reasonable. Returns for worth included or opportunistic approach can be significantly higher. So, private equity real estate is risky enough that investors can lose their entire investment if a reserve fails to meet expectations.

    Types of PERE Funds

    • Core
    • Core Plus
    • Value Add
    • Opportunity

    Fund Structure

    The essential PERE subsidize vehicle will more often than not be a limited partnership. The more extensive reserve structure may, in any case, include various other store vehicles, for example, feeder assets and parallel assets, which, thus, may incorporate companies or private REITs especially for US PERE reserves that craving to restrict unrelated business taxable income for US expense absolved financial specialists and duty payable under the Foreign Investment in Real Property Tax Act of 1980 for non-US speculators. A fund additionally contains various parts, including a cast of players that incorporates the fund's advisers, chiefs and investors.

    Common Private Equity Real Estate Investments

    Office buildings, tall structure, urban, rural and garden workplaces; modern industrial properties including stockroom, innovative work, adaptable office/mechanical space; retail properties, shopping centers, neighbourhood, network and power centers; and multifamily condos, are the most widely recognized private equity real estate ventures. There are additionally speciality property investments, for example, senior or student lodging, inns, self-storage, medicinal workplaces, single-family lodging to own or lease, undeveloped land, producing space, and the sky is the limit from there.

    Who Invests in Private Equity Real Estate?

    Organizations (annuity assets and not-for-profit reserves), third parties, for example, asset managers and resource directors contributing for the benefit of foundations, private licensed investors and high-total assets people put resources into private value land.

    Private equity real estate investments are generally pooled and can be organized as constrained organizations, LLCs, S-corps, C-corps, aggregate venture trusts, private REITs, guarantor separate records or other lawful structures.

    The development of PERE assets since the 2008 global financial crisis (GFC) has been staggering – and it is a pattern that appears to keep grabbing speed, notwithstanding when vulnerabilities from exchange wars and debilitating economies loom overhead.

    The actual fund cost from the Asia perspective

    There are a couple of basic structures being utilized and supported by speculators all-inclusive. Considering USD 500 million reserve utilizing a typical GP/LP structure through the lense of an Asian-based store supervisor putting into Asia Pacific real estate - a significant part of the literature distributed has been it is possible that the US or EU driven, with very little spotlight on this piece of the world to date.

    The costs can generally be classified into the following:

  • Set-up
  • Annual Ongoing
  • Ad-hoc
  • Pre-launch and set-up costs

    At the pre-launch stage for another shop, support supervisors and fund managers are generally focused around raising money and leading roadshows while working intimately with external legal counsels to have the store record pack arranged. This forms the main part of the set-up expense; in APAC, this can cost at least USD 35,000, and the charges can without much of a stretch reach USD 100,000.

    Specialist organizations, for example, legal advice, banks and store directors, have seen costs expanding as of late, to a great extent because of expanded Know Your Client (KYC) and compliance prerequisites.

    Normal extra costs that kick in are express documenting expenses and odds and ends, which can expand the set-up expenses by up to 10 per cent.

    When it is set up and is running, one should consider paying salaries for a group of at least four experienced portfolio supervisors to help the store administrator and standard overheads of physical office space.

    Unscheduled capital calls, drawdowns, extra dedicated capital and new financial specialists are on the whole uplifting news, however, when such changes are not overseen in an effective manner. Factor in rebuilding because of amendments in tax laws and the fees can multiply.

    Mitigating costs exceeding the planned budget

    With every one of the charges included, the expenses frequently surpass the first original proposed budget and store supervisors would be hard squeezed for results while explaining increased operational costs.

    Are there approaches to oversee such circumstances?

    Honestly, without a doubt. Transparency and communication, along with openness, are of the utmost importance. We urge finance directors to request their fund administrator to their structure planning as right on time will be expected under the circumstances.

    Being a piece of the discussion implies the fund administrator can give an autonomous perspective, and an accomplished proficient will probably feature areas which may have been neglected.

     

    ]]>
    Sat, 14 Dec 2019 14:44:00 GMT
    <![CDATA[ Enforceability of Smart Contracts in India]]> The Enforceability of Smart Contracts in India

    Introduction

    In 1994, Nick Szabo, a legal scholar and cryptographer found that decentralized nature of cryptography could be used in smart contracts, which are basically self-executing contracts and ensure the performance of virtual agreements through blockchain technology to provide a hassle-free contract execution. The highlighting aspect of blockchain is its decentralized nature as it takes away the requirement of intermediaries (middlemen) and this, in turn, saves time and any conflict that may arise due to a third party.

    A smart contract is a self-performing contract whereby the terms of the agreement that exist between a buyer and a seller are written directly into lines of code. A distributed, decentralized blockchain network contains the code, which consists of all the agreement terms. In addition to the agreements, the code also consists of information that executes the transactions and ensures that these transactions are tracked and are irreversible.  

    Thus, it can be said that a smart contract is mainly a kind of computer protocol to digitally perform the function of facilitation, verification as well as enforcement i.e, the performance of the contract. The key factors of a smart contract are as follows:

    • Once the smart contract has been released, no one can change its terms, including the creator or owner;
    • The execution and completion of the contract does not require and physical documents or submission;
    • Although a user can be anonymous, the transaction details are recorded and registered;
    • Transactions of smart contracts are irreversible.

    How do Smart Contracts Work?

    The code of the contract itself consists of the terms of the contract in concern. Smart contracts interpret, verify and automatically execute any transaction in tangent with the terms.

    Let us take an example of a contract of rent made into a smart contract, to see the efficiency and effectivity of a smart contract. The tenant will pay the house owner the rent in cryptocurrency, as soon as the payment is made the code carries out the transactions in accordance with the terms of the contract as entered into the code. The homeowner will receive a receipt when the transaction is successful and will release the key to the house. The system operates on the If-Then principle, and hundreds of people involved in the blockchain will observe the transaction and become witness to the contract. If the home-owner gives the key, then he will surely be paid. If the tenant pays the amount, then he will surely receive the key. One action will not be completed without the other, hence providing an efficient and effective system.

    Smart contracts not only specify the rules and penalties relating to an arrangement in the same way as a conventional contract but also implement those obligations automatically. These contracts are implemented using the "Ethereum" platforms, which consists of two elements: currency and contracts.

    Smart contracts are essentially contracts in which the medium of interaction shifts from paper to an electronic platform. This raises the concern if these smart contracts can still be regulated by the existing legal framework or require a new legal system to govern such contracts.

    The Benefit of Secured Transactions

    Smart contracts allow a safe transaction to be enforced between the two parties concerned. The concept of a smart contract is that while one person shall gain something of value from the second party for collateral, the second party is ensured to be the only prioritized party to that collateral. It would be hard to implement this kind of functionality in the real world as various other factors would come into play, such as third or foreign parties entering into the contract.

    "Ethereum" has made this possible because the ethereum network is transparent and the ability to determine and formulate who has priority over the collateral in question and can therefore easily accept or reject the collateral in question and can easily accept or reject the collateral and thus promote quicker and more efficient implementations of contracts.

    Regulation of Smart Contracts Around the World

    The elemental factors of a conventional contract must be met by smart contracts in order to qualify as a valid contract are: -

    • A legitimate offer;
    • A properly communicated acceptance;
    • Lawful consideration pertaining to the subject matter;
    • Consideration;
    • Consent of all competent parties in regards to all aspects of the contract.

    The Uniform Electronic Transactions Act (UETA) was implemented in about 47 states in the United States in the year 1999. The UETA placed regulations on electronic contracts, records and signatures and stated that electronic contracts would be valid, and the use of electronic signatures was a valid way of providing contractual consent.In the European Union (EU), Rome I Regulation is the legislation which determines the legality of all EU civil and commercial contracts.

    The United Kingdom is keen on integrating smart contracts into their legislation, the UK Law Commission which is an independent law commission formed by the Parliament under the Law Commissions Act of 1965 to review and propose changes in England and Wales Law, has begun a research project on reforms that would make the use of blockchain-based smart contracts legally clear.

    The Law Commission claims that smart contracts have the benefit of increasing "confidence and certainty" and enhancing business-to-business transaction performance. As such, in order to make the current UK legal system adapt to emerging technology and boost business.

    Statutory Overview of Contract Law in India

    The Indian Contract Act of 1872, is the predominant statuary regulator of contracts.  The act lays down the basic elements of which a contract comprises of in Section 10 that "all agreements are contracts if they hold the free consent of parties willing to contract, for a lawfully accepted consideration and with an object."

    Any agreement can become enforceable by law as a contract if it consists of an offer, acceptance and consideration. It would seem by definition, smart contracts are allowed under the Indian Contract Act 1872. A smart contract consists of the offer, the acceptance and consideration in the form of crypto-currency, this raises the issue of whether crypto-currency is acceptable as consideration under Indian law.

    Section 5 and 10 of the Indian Information Technology Act 2000 legally accept digital signatures and find a contract to be legitimate and enforceable by electronic means.  Furthermore, Section 65B of the Indian Evidence Act 1872 states that contracts digitally signed shall be admissible in the courts. The government is therefore enabled to take legal action to settle the conflicts between the parties. 

    Legal Functioning of Smart Contracts in India

    Smart contracts basically provide a platform for contracting with parties who may or may not know each other and may also become liable to the risks. Smart contracts may be enforceable under Indian law, but if caution is not maintained in regards to the party that you are contracting with, the consequences of a failed transaction must be carried alone, as the legal system has no intricate system in place to regulate smart contracts.

    Situations in which a smart contract may not be enforceable under Indian law could be if the consideration of the contract was not mutual. This can occur if the contract is unilateral in nature. The Indian courts do not allow contracts to be valid without mutual consideration, however, smart contracts without mutual consideration can still be enforced through code, but a breach of such a contract would not be held as a breach in Indian courts as, in the eyes of the court there wouldn't be a contract in the first place due to a lack of mutual consideration, an important factor of a contract.

    The legality of smart contracts in India allows for the use of smart contracts, however, it does not provide the protection of the law to the parties involved in the smart contract become liable or incur damages as there is no regulatory framework in place to govern the smart contracts, the law will help to the best of its extent if the smart contract falls within the boundaries of contract law as defined in statute.

    Risks of Smart Contracts

    Despite Indian law allowing electronic contracts, Ponzi schemes which are further facilitated with the help of blockchain technology questions the viability of safeguarding people's interest.

    Here arises the problem there are no well-established legal frameworks to regulate Crypto-transactions, be it in India or anywhere else in the world. According to Section 35 of the of the Information Act, an electronic signature can only be obtained from a government-designated certifying authority. This raises the concern, as for the contract to commence it is the blockchain technology that generates the hash key that is to be used as an identifier to authenticate the smart contract, there is no legal authority that sanctions electronic signatures.

    Section 88A of the Indian Evidence Act states that the court presumes that an electronic record produced in court is genuine, but does not make any presumptions about the sender of the contract. Therefore, if a signature obtained through the blockchain technology is used, it will only make the admissibility of a smart contract more complicated as the signature was not obtained under the  Information Act. This not only vitiates the system of encryption present in the blockchain technology for smart contracts but also disallows the submission of smart contracts as evidence before the tribunal.

    Smart Contracts in Practice

    Bajaj Electrics is a leading electrical equipment manufacturing company which is part of the Bajaj Group. It is easily one of the key players in the Indian Economy, the business activities of the company affect several sectors and vendors both inside and outside the company.

    The payment process for vendors was long and cumbersome, this is so as there are various vendors that Bajaj deals with and they must ensure that the transaction between each vendor had taken place appropriately.  The process of payment involves the vendor to show Bajaj Electricals' verification of delivery, raising a supplier's physical bill of exchange, and submitting an invoice and transport documents to Yes Bank as proof of delivery to receive payment.

    This prompted the management of Bajaj Electricals to explore a fast and safe solution to replace its system of manual billing. Blockchain was the solution which they decided upon. In January, the company declared that it was going to use a solution developed by Yes Bank focused on blockchain vendor financing also known as supplier financing.

    According to Chetan Bhanushali, Treasury General Manager, Bajaj Electricals Ltd, the use of blockchain removed the numerous steps involved in the bill discounting process of the business and the entire transaction became paperless. The new process has reduced the entire system cycle for the payment at Bajaj Electricals from five-four business days to almost real-time.

    Yes Bank in India is not alone in pursuing and experimenting with supplier finance blockchain. For example, the Mahindra Group and IBM revealed in November 2016 that they are co-developing a cloud-based blockchain framework with the potential to reinvent supply chain finance in India.

    Meanwhile, the Institute for Banking Technology Development and Research, an RBI agency, recently published a white paper on blockchain technology to allow banks and financial institutions in India to look forward to their own blockchain journey.

    Conclusion

    There is no question that the implementation and growth of smart contracts is the next step of innovation and can lead directly to billions of overhead costs being minimized while making the whole system more efficient.

    Regulatory issues, however, exist, especially in India where there are no regulations regarding the finer details of a smart contract. If specific regulations are not made, a wide-ranging adoption of the technology will require the government to make amendments to the Indian Evidence At, 1872 and the IT Act.

    Therefore, although there is certain progression of the legislation as well as business sector growing into the smart contract concept, the law is still functioning in a grey area, vigorous dedication is required to establish an intricate framework to regulate the functioning of smart contracts in India.  

     

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    Wed, 11 Dec 2019 17:10:00 GMT
    <![CDATA[Collective Bargaining Instruments and Challenge]]> "Collective Bargaining Instruments and its implementation Challenge"

    Introduction

    For running a successful business, among other things, it is vital to have good relations between an employer and his employees. To uphold those good relations, it is further essential that industrial disputes, i.e. conflicts or disputes between an employer and an employee are settled quickly and harmoniously. Therefore, an efficient way to resolve industrial disputes is "Collective Bargaining", a method that is widely used by businesses, both small and large.

    Collective Bargaining is a method wherein the management of a business and the representatives of employees meet and negotiate the conflicts at hand along with the terms and conditions of employment for shared benefit. The term 'Collective' is used since both the parties, namely employer and employee,  negotiate and discuss conflicts or any terms of employment. The word 'Bargaining' is used because it is a process to reach an agreement involving proposals and counter-proposals made by both parties.

    Collective bargaining extends to all mutual negotiations which take place between an employer, a group of employers or employers' organizations and the workers' organizations, for determining the working conditions and the terms of employment, along with regulating relations between employers and workers. It is a process of negotiation which involves any form of discussion, formal or informal, with the end goal of achieving an understanding which eventually leads to better working conditions and better productivity. For the process of collective bargaining to be effective, these negotiations must be conducted in good faith, involving a process of joint decision making, which makes it easy to build trust and mutual respect between the parties. This article will aim to discuss the objectives, process, forms, advantages and challenges faced during the process of collective bargaining.

    Objectives and the Process of Collective Bargaining

    There are five main objectives of the process of collective bargaining are:

    • To maintain friendly relations between the employer and employees;
    • To protect the interests of workers and by preventing one-sided actions from being taken by the employer;
    • To guarantee the contribution of trade unions in the industry;
    • To avoid the need for government intervention; and 
    • To promote industrial democracy.

    There are also five core steps that help to achieve the objectives mentioned above, these steps are:

    • Preparation;
    • Discusussion;
    • Propose;
    • Bargaining, and
    • Settlement.

    Any collective bargaining process begins with preparing the composition of the negotiating terms for both parties. It is essential for parties to the bargain to chose representatives with adequate knowledge and skills. These chosen representatives must now analyze the issues at hand and decide if there is any reason to negotiate. In order for the negotiation to commence, representatives must have a proper understanding of the main problems, knowledge of operations, working conditions, production norms and other relevant conditions.

    Once the parties to the negotiation have prepared for it, now the discussion round commences. The parties begin with deciding the ground rules that will guide the negotiations; hence, an environment of understanding and mutual trust is created, so that the collective bargaining agreement can be reached. After the parties have set the ground rules, the parties enter the third stage, i.e. the Purpose stage. Here, each party representative makes the initial opening statements and explores the possible options that exist to resolve them. In one word, this stage could be described as 'brainstorming', which involves the exchange of messages and opinions of both the parties.

    The parties now reach the crucial stage of bargaining, and after all the discussion once the parties are done with negotiating terms and conditions and reach an amicable solution, a consensual agreement is reached wherein both the parties reach a joint decision about the issue. This is described as the final settlement stage as it consists of effective joint implementation of the agreement through shared visions, strategic planning and negotiation.

    Forms of Collective Bargaining

    The four most widely accepted forms of collective bargaining are:

    • Distributive bargaining;
    • Integrative bargaining;
    • Restructuring;
    • Intra-organizational bargaining.

    Under Distributive bargaining, economic issues like wages and bonus are discussed. Academics explain this most commonly in terms of a pie, where disputants can work together to make the pie bigger, so there is enough for both, and they can focus on cutting the pie up, trying to get as much as they can for themselves. In general, distributive bargaining tends to be more competitive. In distributive bargaining, one party's gain is another party's loss. Integrative bargaining is also known as cooperative bargaining, and it involves negotiation of an issue on which both the parties may gain, or at the least, neither party loses. In general, this type of bargaining tends to be more cooperative than distributive bargaining.

    Restructuring involves reshaping some attitudes like trust, friendliness or hostility between labour and the management. When there is an accumulation of bitterness between both the parties, attitudinal restructuring is required to maintain smooth and harmonious industrial relations as it develops a bargaining environment and creates trust and cooperation among the parties. Intra-organizational bargaining usually aims at resolving internal conflicts, this is a type of manipulation to achieve an agreement with the workers and management as even within the union, there may be differences between various groups.

    Essential Pre-Requisites for Collective Bargaining

    Existence of a strong representative trade union is fundamental in having an effective collective bargain along with the presence of a fact-finding approach and willingness to use new methods and tools for the solution of industrial problems. It is also necessary to have an existence of strong and enlightened management which can integrate different parties involved as well as agree on mutual rights and obligations between the employer and the employees which need to be present.

    For collective bargaining to function correctly, unfair labour practices must be avoided by both the parties and proper records for the problem should be maintained. Collective bargaining is conducted at the plant level, which means that, if there is more than one subsidiary of the firm, the local management should delegate proper authority to negotiate with the local trade union. There must be a change in the attitude of employers and employees, and they should realize that differences can be resolved peacefully with negotiation without the assistance of a third party. Parties should enter into a negotiation with a view of reaching an arrangement. Once the settlement is reached after negotiations, it must be in writing incorporating all term of the contract.

    Advantages of Collective Bargaining

    Perhaps the main advantage of this system is that, by reaching a formal agreement, both sides are aware of what to expect from the other party and the rights that each party has. This can, in turn, reduce the number of conflicts that can arise later and can also make operations of an organization more efficient. Additionally, employees who enter collective bargaining know that they have some degree of protection from employer retaliation. This approach is practical in larger companies where the employer might have hundreds or even thousands of workers on his payroll. Agreements reached through these negotiations usually cover a period of at least a few years, which gives employees some reliability in their workplace and its policies. On a broad scale, using this process can result in a more ethical way of doing business as it promotes ideas such as fairness and equality.

    Disadvantages of Collective Bargaining

    Disadvantages of using the collective bargaining negotiation process are that even though both parties have a say in negotiation, but the majority decision usually prevails, which means that numerous people, mainly in the general workforce, can be overshadowed. It can sometimes cause severe division and hostility in the organization. Collective bargaining can also be costly, both in terms of time and money.

    Collective Bargaining always involves at least two parties, and the process is supposed to bring both parties together. During the process of trying to reach an agreement, people can adopt an us-versus-them approach, and when the negotiations are over, this way of looking at each other can be hard to set aside, as a result, harmony in the company can suffer.

    Further, the goal of the system is always to reach a collaborative agreement, but sometimes tension boils over, consequently, one or both parties might feel they have no choice but to influence the other side into giving up. Workers might do this by going on strikes, businesses might do this by staging lockouts, and neither of these decisions helps any of the parties.

    Challenges of implementing collective bargaining

    Along with many advantages of the process of collective bargaining, there are also a set of problems that may arise during the implementation of the process. Collective bargaining is mostly becoming a competitive process, i.e. labour and management compete during these negotiations. A situation arises where the attainment of one party's goal appears to conflict with the primary objectives of the other party, as management and workers come to the negotiation table without doing any research, and both the parties start negotiations without being fully equipped with information which can easily be obtained. To begin with, there is often a kind of ritual, of charges and counter-charges, generally initiated by the trade union representatives. In the absence of requisite information, nothing concrete is achieved.

    The immediate objective of the workers' representatives is monetary or for other gains, which may be fulfilled when the economy is buoyant, and the employers can pay. But in a period of recession, when the demand of the product and the profits are falling, it is tough for the employer to meet the needs of the workers, he might even resort to cost-cutting or even closure, and collective bargaining is no answer to such a situation. Additionally, in industries, where the government fixes the prices of products, it becomes challenging for the employer to meet the demands of workers which would inevitably lead to a rise in the cost of the products produced. In contrast, the supply price to consumers cannot be increased. It will either decrease the profits of the firm or increase the loss. In other words, it will lead to the closure of the works, which is not in the interest of the workers.

    Most of the trade unions are led by outsiders who are not the employees of the concerned organizations,; therefore, leader's interests are not necessarily identical to that of the workers. In the present situation, without strong political backing, a workers' organization cannot often bargain successfully with a strong employer.

    Another drawback of collective bargaining is that the management deputes a low-status executive for bargaining with the employees. Such executives have no authority to commit anything on behalf of the administration. Which indicates that the management's seriousness and therefore, union leaders adopt other ways of settling disputes.

    When the previous negotiation agreement is approaching its termination date or well before that, employees representatives come up with new demands. Such demands are pressed even when the industry is running into loss. If a management can not accept the demand for higher wages and other benefits, it would prefer to close its doors. However, an affluent industrial unit in the same region may agree with the trade unions for a substantial increase in wages and other benefits. In contrast, a losing industry cannot do that. There is always pressure on the losing industries to grant salaries and benefits like those given in other relatively affluent units in the same region.

    Conclusion

    Collective bargaining is undoubtedly a useful tool for dispute resolution in any organization, and it is of great importance to organizations as human resource is the most crucial aspect of any business. For collective bargaining to be effective, it is essential that there is trust between the union and the management. However, there has been a shift of attitude towards collective bargaining of union and management, which is due to misconception about the system as well the negligence on part of the administration. There is a need for mutual trust and proper communication between both the parties and in the absence of these factors could create confusions and misunderstandings between union and organization.

    ]]>
    Tue, 10 Dec 2019 15:49:00 GMT
    <![CDATA[Brexit on the Businesses in UAE]]> Implications of Brexit on the Businesses in the United Arab Emirates

    "Brexit", is a blend of words British and Exit and was coined by Peter Wilding. The Oxford English Dictionary in 2016 added Brexit to its volumes and awarded the honour of coining the term to Mr. Wilding. It is believed that the term Brexit was coined on the pattern of Grexit- a term for withdrawal of Greece from the eurozone. Brexit is now used worldwide to refer to the United Kingdom's (UK) official withdrawal from the European Union (EU).

    On 23 June 2016, a referendum was held in the UK where 17.4 million people voted in favour of Brexit. Even after almost three years of the referendum, the UK has not officially left the EU because the Members of Parliament are yet to make a decision with regards to the Brexit deal. The EU has now agreed to further extend the deadline for Brexit until 31 January 2020. If the UK leaves, it would be the first member state to withdraw from the EU.

    Impact of Brexit

    It is believed that the UK's exit from EU will among other things have a significant, negative impact on many businesses around the globe, regardless of the sector they operate in, even if these businesses do not operate in the UK or even in Europe. It is believed that every functioning industry will be affected by Brexit and will face different challenges; some industries will be affected more than others. For instance, Brexit will bring real risks of increased costs and delay to supply chains, and there will be several changes in the customs laws. How Brexit will affect business will be different across the board. Prof Ashish Arora, Duke University, states, "The interesting question is who will make money out of a Brexit. Brexit is bad for business. Even firms not in the UK or Europe will feel the pain because value chains are globally integrated. On the demand side, EU growth will be slower, which will hurt as well."

    As UK is yet to decide on their exit from EU, countries around the world are evaluating how Brexit will affect their interests. As a result of Brexit UK's trade policy are likely to change. This change could have dramatic consequences for some developing countries. While the UAE's economy may be protected by shockwaves created by Brexit, some impacts are likely to be still felt in the medium to longer-term, with some sectors benefiting and others being put at a disadvantage.

    The UAE and the UK have had a long-standing peaceful relationship, which extends to their trading relationship as well. Owing to their long-time trading partnership, the UAE is one of UK's largest export market in the Middle East.

    However, in the UAE, there is a consensus among economists that any adverse effects of the Brexit on the UAE business will be short-lived and that the UAE economy would escape unscathed. This is because the UK has time and again shown a keen interest in maintaining the most robust possible trading relationship with the UAE after the UK leaves the EU. A spokesperson for the UK's Department for International Trade (DIT) in a statement also stated that the UAE is a vital global trading partner for the UK.

    The UAE is among the top markets for UK food and drinks globally, and the UK has been working with the UAE to ensure British companies gain an understanding of the UAE food market to encourage more products to enter the market. The DIT also highlighted that the UK-GCC Trade Working Group was announced in December 2016 to essentially examine how the two regions can best seek to deepen the trade relationship post-Brexit. This includes exploring non-tariff measures, such as regulatory barriers to market access, which could help facilitate free-flowing trade. The UAE would see the most significant gain, with predicted profits of USD 425 million approximately due to increased exports to the UK.

    The UK and the UAE have had long diplomatic, cultural and business links; the UK government has been working to maintain the said links by making new post-Brexit trade deals.  As the UAE is one of the important trade markets for the UK, the UK has already begun making efforts and has approached UAE to secure a possible free trade pact, post-Brexit. Through these trade pacts, the UK wishes to eliminate trade barriers wherever they can. Legally, the UK cannot sign trade deals yet, at least not until it is out of the EU, but they can have preliminary discussions and secure their position.

    Additionally, the UK is trying its best to foster deeper relationships between the UK and the UAE and to encourage further investment into the UK. Gulf countries and primarily, the UAE, are strong investors in the UK. Experts state that as the UK will leave the EU and as the value of GBP will deteriorate (should that be a consequence), Among other sectors, real estate investors will benefit the most. Real estate is one UK market in which Middle East investors still have a strong presence, despite concerns about Brexit and how it would affect the property. It was revealed that two-thirds of the capital tracked from GCC countries was in Britain's property sector.

    No-Deal Brexit

    In today's political climate in the UK, it is also essential to talk about "no-deal Brexit". Currently, the UK government is planning for a "no-deal Brexit". This means that the UK would leave EU without any agreements in place about what the relationship between the UK and the EU will be in future, including agreements about how UK and EU companies would work and trade with each other. If an exclusive deal between EU leaders and UK politicians is not agreed upon, then the UK could leave the EU with no agreement in place, and this would not be good for any businesses, trade, border security etc.

    In case of a no-deal Brexit, trade between the UK and EU would initially have to be on terms set out by the World Trade Organization (WTO), an agency with 162 member countries. Many companies worry that they could make their goods less competitive. Trading on WTO terms would also mean border checks for products. No deal would affect everyone from bankers and lawyers to musicians and chefs.

    A majority part of the trade between the UK and the UAE comprises of the food products -while bilateral trade will not be affected by a no-deal Brexit, the overall supply of British food products and fresh produce could get scarcer and more expensive. Supermarkets in the UK have informed that there could be less available supply and higher price of food products. The reason for scarcity and higher prices would be the modified tax structures and transport delays  - but for British exports to the UAE that could be mitigated by a fall in the value of the pound.

    GCC will be among important beneficiaries if the UK exits the European Union without a deal. According to a United Nations (UN) report, the Gulf countries will post more than USD 1.1 billion (AED 4 billion) gains, as the GCC nations will be able to increase its exports to the UK in case of no-deal Brexit. The UAE will emerge as the biggest beneficiary among the GCC states and 13th worldwide (benefits of USD 425 million approximately) due to higher exports to one of the biggest economy. 

    In 2017, bilateral trade between the UAE and the UK totalled GBP 17.5 billion (USD 22.7 billion), up 12.3 per cent from 2016, according to official figures. By 2020, the UK government aims to increase its trade to about GBP 25 billion said the United Nations Conference on Trade and Development's (UNCTAD). As per another UN report, the UAE will see the most significant gain from a no-deal Brexit with profits of around USD 425 million due to increased exports to the United Kingdom. If both sides can forge beneficial trade deals with each other, this has the potential to stimulate economic growth as key services and products from the UK make their way into the UAE.

    Conclusion

    Whether we have a Brexit deal or a 'no deal' Brexit, one thing we know for sure is that it will affect all parts of the economy and every sector in which the UK operates. However, deal or no deal, UAE stands to benefit in both scenarios. We, along with the rest of the world have to now wait for 31 January 2020 to see in which direction does Britain go.

     

     

    ]]>
    Tue, 10 Dec 2019 14:48:00 GMT
    <![CDATA[Aircraft Repossession Cape Town Convention]]> Aircraft Repossession Under the Cape Town Convention in the United Arab Emirates

    Let us face this: aircrafts are expensive, and we always tend to lease expensive assets with a depreciated value as opposed to purchasing the same. Therefore, one could safely say that aircraft leasing is one of the most significant elements in the aviation industry. Since securities, title retention agreements, and lease agreements are approached differently by different legal systems in the world, the lessors and the financial institutions that provide loans for the aircraft are left with uncertainty regarding the enforceability of their rights. This leads to difficulty in financing aviation assets and often includes a high cost of borrowing. However, a country where the rights and remedies are clearly defined under a sophisticated jurisdiction and are a party to international treaties; it provides a double-sided advantage to both the lessee-operator and the creditors or lessors:

    • If the lessors or creditors have a defined right and remedies to recover the aircraft in the event of a continued default by the lessee-operator, it will assist in the prediction and planning the provisions of finance.
    • The lessor airlines benefitting from the reduction of risk in aircraft financing, are able to obtain financing or lease aircraft at much lower rates and save costs, as well as, grow its fleet size.

    The Cape Town Convention

    Before the Cape Town Convention, the Geneva Convention on the International Recognition of Rights in Aircraft of 1948, assisted in developing an international system, recognizing the rights in aircraft, protecting the property interest, consensual liens, and mortgages and defined the orders of priority. However, there were certain pitfalls because there was no international system in place to protect the lessors who were unable to repossess their aircraft after a continuous failure by the lessee to pay the lease rent since the legal provisions for this regard was inadequate in the relevant country where the aircraft was based. Thus, a general demand arose for a uniform system regarding the protection of international interests in aircraft.

    As a result, on 16 November 2001, the Convention on International Interests in Mobile Equipment was concluded along with the Protocol on Matters Specific to Aircraft Equipment in Cape Town, which together formed the Cape Town Convention. The Convention primarily addressed the above-explained problem, especially with regard to the rights to high-value aviation assets, namely the aircraft engines, airframes, and helicopters which, because of their nature, have no fixed location. The terms of the Convention and its remedies applied along with generally accepted principles of international law are to be exercised in conformity with the local procedural law.

    This Convention helped reduce the risk of aircraft financing and leasing transactions by:

    • Providing clear time-bound remedies relating to repossession of aircraft and engines;
    • Permitting the creditor to offset unpaid contractual obligations by immediately repossessing and selling or redeploying the concerned aircraft or engines; and
    • Regulations on protecting and preserving the value of such aircraft or engine, pending such sale or redeployment. The Convention recognizes that aircraft assets are highly valued, which rapidly deteriorate, requiring constant care and maintenance to protect their collateral value.

    Overview of the Convention

    The Cape Town Convention superseded the Geneva Convention with regard to aircraft and the Rome Convention for the Unification of Certain Rules Relating to the Precautionary Attachment of Aircraft 1933.

    The Convention acts a multi-equipment treaty with protocols on aircraft equipment, railway rolling stock and space assets; however, only the Aircraft Protocol has been adopted so far. The said Protocol applies to airframes, aircraft engines, and helicopters which

    • carry at least goods in excess of 2750 kgs or more than eight passengers;
    • aircraft with 1750lb of thrust in case it is jet-powered or 550 HP of turbine power; and
    • helicopters carrying over five passengers.

    The main aim is to reduce the cost of finance for high-value mobile assets such as aircraft that cross international borders regularly.

    Main Mechanism

    • Provides for the creating of 'international interests' in likes of a mortgage or an aircraft finance lease capable of being recognized in all contracting states;
    • Provide remedies internationally available to the creditors in the event of default by an airline or operator with regard to repayments;
    • Also creates an additional electronic international register for the registration of the international interests;
    • Under Article 13 of the Convention, the mechanism to make an application to the court and the lessor's right to request relief from the court originates from the aviation lease documentation which contains the contractual agreement between the lessee and the lessor, agreed in accordance with Article IX of the Protocol, that the provisions of the Convention and the Aircraft Protocol shall apply.

    What is International Interest?

    International interest is essentially an interest in separately identifiable aircraft objects and extends to the proceeds of the said aircraft or object. It may be:

    • Granted under a security agreement by the charger, or by the seller in a sale agreement;
    • Vested with the lessor under the leasing agreement;
    • Vested in the conditional seller by the title reservation agreement; or
    • Held by an assignee.

    In order to be constituted as International Interest, the instrument creating or providing such interest must:

    • Be in writing;
    • Relate to an object over which the charger, lessor or conditional seller has the power of disposal;
    • Must enable the identification of the object in accordance with the Convention;
    • In the case of security agreements, the secured obligations must be determined; however, there is no need to state the sum secured.

    Remedies

    Under the Cape Town Convention and the Aircraft Protocol, following the event of default by the airline or the lessee-operator, the lessor or the creditor has the following remedies:

    • Remedies under the Convention
    • Take possession or control of an aircraft or part;
    • Receive profits or income arising from the management or use of the aircraft;
    • Sell or grant a lease of the aircraft or part;
    • Vest an object in satisfaction or redemption;
    • Interim reliefs pending final determination of a claim;
    • The right to require the aircraft to be removed from the national civil aircraft register; and
    • The ability to export the concerned aircraft.
    • Remedies under the Aircraft Protocol

    Under Article IX of the Protocol, the remedies under Articles 8 to 15 of the Convention are expanded to include deregistration, export and physical transfer of the aircraft from its current territory accompanied by the subsequent re-registration of the concerned aircraft.

    Cape Town Convention in the UAE

    The United Arab Emirates ratified the Cape Town Convention which came into effect in UAE on 1 August 2009. This has benefitted the lessors and financiers to reduce their risk and the cost of credit supply, since the leasing and finance structures drafted in UAE has incorporated the rights and remedies provided under the Convention

    The UAE, when ratifying the Cape Town Convention, made the following Declarations with regard to the provisions of the Convention:

    • Cases with regard to the payments or repossession of an aircraft, arising within the jurisdiction of the UAE Courts necessitate applications to the Court to enforce any remedies provided under the Convention, including the self-help remedies granted to the lessors.
    • UAE recognizes the validity of International Interests registered with the International Register. No subsequent filing, registration, government approval or submissions are necessary to ensure the protection of the parties' rights or interests provided under the Cape Town Convention. These interests are also enforceable against third parties in the UAE.

    General Civil Aviation Authority (GCAA) and the Civil Aviation Law

    The GCAA recognizes the validity of IDERA. IDERA or the Irrevocable Deregistration and Export Power of Attorney allows the person in favour of whom the document is issued to exercise the rights and remedies contemplated by the Convention.

    In accordance with the provisions of Article 28 (2) of the Civil Aviation Law (Federal Law Number (20) of 1991), the GCAA maintains a national aircraft register. Article 5(2) of the Civil Aviation law requires the aircraft to be on the aircraft registers in order to be legally disposed of without the prior written consent from the GCAA.

    When the aviation finance lease is terminated, and the IDERA is filed with the international register, the party in whose favour the document is created will, subject to an application to the court, have the right to:

    • Repossess the aircraft;
    • De-register the aircraft from the GCAA aircraft register and the international register
    • To export the aircraft from UAE without any further consents, licenses or approvals from the GCCA.

    General Repossession Procedure in the UAE

    Though an application for an order of repossession of an aircraft is rare, in contractual disputes in the UAE, it is common for a creditor to issue an ex-parte application in the UAE Courts, requesting the Courts to attach the assets of the defaulting parties in contractual disputes. In the event of default by the airline or the aircraft operator to fulfil his obligations, the creditor or the lessor can take recourse to the UAE Courts in the same manner as in other contractual disputes.

    Under the UAE Civil Code (Federal Law Number (11) of 1992), a plaintiff with a valid claim against a defendant, like a creditor or owner of an asset, is allowed to request the attachment of an object in possession of another.

    That is, in the event of a dispute over the possession of the aircraft, the lessor may file retrieval proceedings for the attachment and physical retrieval of the aircraft through Court under whose jurisdiction the disputed aircraft is situated. The basic procedure for an attachment entails filing an ex-parte application to the duty judge, who then makes a prompt decision on the merits of the proposed attachment and grants an order based solely upon the documents provided. The proceedings do not involve any affidavits or witnesses, and if successful, an attachment order granted by the judge is sent by the court bailiff for the execution of the same.

    Within eight days from the date of filing a successful attachment proceeding, the lessor will also be required to file a substantive action before the competent court. This usually entails the process of the lessor, proving that he has the actual ownership of the aircraft which is currently in possession of another party. If the lessor fails to file a substantive action within the specified time, the attachment order will be considered void.

     The matter will then be litigated till resolved with a final and conclusive judgement by the Court, ordering the return of possession of the aircraft to the lessor. Where all the appeal stages are exhausted, and the lessor has a judgement in his favour, he can proceed with the execution of the said judgement through the relevant execution department of the Court.

    As seen above, retrieval proceedings under the UAE Civil Code are time-consuming and can take years for an executable judgement to be rendered and be enforced.

    Conclusion

    The Cape Town Convention primarily aims at creating an environment for the airlines to grow and increase its fleet size. The Convention provides certainty to the rights and obligations of parties, protects the international interests, and enables the reduction of risk and the cost of obtaining financial assistance for high-value assets like aircraft. The UAE airline industry, with its abundant growth, utilizing aircraft financing is a prime example of the benefits that can be reaped by following the guidelines and provisions of the Convention. Even in the event of a dispute, the lessor has the protection of the UAE jurisdiction, which will grant the necessary orders and remedies where applicable, thus protecting the rights of the parties.

     

    ]]>
    Tue, 10 Dec 2019 14:09:00 GMT
    <![CDATA[Defective Handed Over Real Estate]]>  

    Defective Handed Over Real Estate Units

    As Winston Churchill once said: "Land monopoly is the mother of all monopoly". Decades later, this statement has still proven to be accurate as real estate is a booming industry all over the world. Real estate in the United Arab Emirates (UAE) in particular, has seen a vast development in recent times. This article is tailored to address real estate in the UAE and in particular how the law deals with defective real estate units that are handed over.

    Development of real estate in the UAE

    Legislation has been passed where now foreign expats can own property in the UAE (subject to the Emirate and free zone). Prior to this, only UAE and GCC nationals could own property in the UAE and expats were only allowed leases for 99 years. How it worked beyond 99 years was unclear, therefore, new structured law governing this area of real estate owned by non-nationals was long overdue. In 2006, HH Sheik Mohammed bin Rashid Al Maktoum, Ruler of Dubai issued Law Number (7) of 2006 Concerning Land Registration in the Emirate of Dubai which for the first time facilitated the right of a foreign national to own property in Dubai. Article 4 of this law states that a foreign expat now has the right to 'acquire absolute ownership of land without restrictions as to time.'

    As this legislation came into force, foreign investors flooded to Dubai mostly to invest in real estate. Bearing this in mind, more legislation has been passed in recent time to regulate the buying and selling of property so as to promote real estate business in UAE with integrity. A few such examples are:

    • Law Number (8) of 2007 concerning Escrow Accounts for Real Estate development in Dubai; ensuring that developers do not misuse money invested by foreign and national investors.
    • Decree 43 of 2013; passed to bring rent control and allow foreign investors to profit from their UAE investment by renting it out without interfering with tenancy rights.
    • Upcoming law; to be passed in relation to wills and probate to enable foreign nationals to pass down their freehold property without being subjected to Shariah law.

    Defective property – patent or latent:

    Firstly, it is important to understand and differentiate the types of defects that are seen in real estate units. These defects can either be latent or patent. Patent defects are those which are apparent to any reasonable person viewing a property, i.e. broken windows, dry walls, infected ceilings etc. As these defects are noticeable, it is up to prospective buyers to make a decision or negotiate with the seller. Latent defects, on the other hand, are those flaws which are only identifiable by experts in the field and are sometimes not even visible to the naked eye. As per Article 544 of Federal Law Number 5 of 1985 (commonly known as the UAE Civil Code), a latent defect is defined as one which 'cannot be observed by external inspection'. The general rule for defective property is that the builders/sellers have to compensate the buyer for any latent defect (patent defects are known to the buyer and he can enter into a contract knowing about the defect at his own discretion).

    UAE law:

    Rules of contract law apply for cases dealing with property, and the validity and legality of the contract generally cover any issues. For instance, in Appeal Number 2017/452 (Real Estate Appeal), the Dubai Court of Cassation ruled on 14 March 2018 that as per the contract a buyer had to be compensated for the lack of 5 per cent space of the real estate he had contracted to buy from the defendant.

    UAE Civil Code on defective property:

    The UAE Civil Code provide guidance when it comes to defective property which is almost always applied in cases with latent defects. Article 237 states that a contract can be terminated if there is a defect even if the contract does not call for such a clause. If a person wishes to terminate a contract on reliance of this article, then, Article 240 which states that when a contract is cancelled due to a defect, the subject of the contract should be returned to the owner is also applicable. The article goes on to say that the contract price is recoverable by the affected party. However, it is important to note that this option to terminate the contract would not be applicable if a party accepts the defect or chooses not to exercise this right (Article 241(1)) but not when the party in question dies (Article 241(1)).

    The law also requires any person who has carried out, enabled or caused any defect in property to be bound to repair it. Article 282 states that a person liable for any tort is to repair the same. The party seeking compensation of any latent defect can claim for compensation for moral as well as financial damage (Article 293). However, the tricky part here is the statute of limitation, and if the buyer (or any affected person) is aware of the property defect and wishes to act within the expiration of the time period. The limitation period, however, does not apply if the defect in question is a part of a criminal proceedings claim (Article 298 (2)).

    But, what about property contracts which are contracted out to third parties?

    Decennial liability

    Decennial liability is a form of liability which initially arises from the French Civil Courts but is applicable in the UAE as well. In short, it means the person who hands over the property is liable for any defects found in the property for 10 years after the handover. This is applicable to the contractors but not to the subcontractors who help build the property. As the subcontractors are employed by the main contractors, vicarious liability applies here.

    The UAE Civil Code Articles 880 – 883 govern decennial liability. It provides that when the stability and the safety of the building is concerned, the contractor and the supervising architect/engineer is liable for it for a period of 10 years after handing over the property (Article 880(1)). This period cannot be negotiated between the parties for a shorter amount of time neither can the contractors contract out of this mandatory obligation (Article 882). This liability arises when the work on the property in question commences (Article 880(3)) and in case of liability, the affected party is to be compensated (Article 880(2)). This was seen in the case of Dubai Court of Cassation 150/2007, where it was held that a contractor/engineer would be liable to compensate the party to whom the property was handed over. This case also underlined an important principle that liability does not extend to affected third parties who are not part of the contractual agreement. Another important point to note is that, contractors will not be held liable for defects during the construction of the property as the decennial liability applies only after the handing over of the property. This principle was used in Abu Dhabi Court of Cassation 293/Judicial Year 3.

    Limitation

    When can an affected party make a claim for a defect in property? The general rule on limitation is 15 years from the date of loss suffered to bring about a claim as per the UAE Civil Code Article 473. In terms of commercial contracts, the general rule is 10 years as per Commercial Code Article 95. Article 880 of the UAE Civil Code deals with building contracts which is also a period of 10 years. The 15-year time period does not apply to defected property handovers in terms of decennial liability as per Article 883 of the UAE Civil Code.

    However, it is important to note that no claim can be made if the affected party claims for compensation after 3 years of discovering the defect in the property (Article 883 of the UAE Civil Code). This was seen in the UAE Federal Supreme Court Case Number 211 of 2019 in the Civil Circuit where it was held that a defective property dispute cannot be heard in this court on the basis that the case was time barred as the appellant brought about a claim after the three-year expiration date.

    With real estate booming in the UAE, it is important to acknowledge that there are laws governing various aspects which protect the rights of both parties. As seen from the case laws, the Courts generally uphold the relevant Codes.

     

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    Tue, 10 Dec 2019 13:55:00 GMT
    <![CDATA[Distribution of Pharmaceutical Products Kuwait]]> Distribution of Pharmaceutical Products: Kuwait

    Introduction

    The area of the Gulf Cooperation Council (GCC) is regarded as an "emerging market" for pharmaceutical exports and bilateral trade. Learning this region's regulatory requirements can be beneficial for pharmaceutical exports. The Gulf countries ' regulations promote the importation of quality generic products, which facilitates a boost in the trade and economy.

    In GCC countries, the drug industry reaches USD 6 billion approximately. This demand is rapidly growing and is expected to reach around USD 10 billion by 2020. Given this market's rise, local manufacturing is unable to meet the growing demand, and GCC countries continue to import most (90%) of their drug needs from abroad. Therefore, there are substantial opportunities for growth and development of this sector in GCC Besides, expanding growth in this industry will help achieve the region's strategic objectives in terms of industrial diversification into knowledge-based sectors.

    The emerging sector aims at achieving the following objectives:

    • Establish a forum for the exchange of ideas and dialogue between pharmaceutical companies in the GCC
    • Propose a multi-client study to address the needs of the region's pharmaceutical industry
    • Identify the need for GCC producers to create a pharmaceutical trade association.

    With Kuwait accelerating its plan for healthy growth as part of Kuwait's 2035 dream, the Ministry of Health (MoH) is also focusing on expanding their projects. Both the pharmaceutical and healthcare industries in Kuwait have been identified as high-priority sectors, with many initiatives under public-private partnerships (PPPs) are being carried out.

    Kuwait Pharmaceuticals Market Overview

    With the boost from the government's healthcare initiatives, the pharmaceuticals market in Kuwait is currently at a growing stage. Initially, the domestic manufacturing of medicines in the country was low due to the focus inclining towards the booming oil and gas industry coupled with limited diversification into various other sectors. It is pertinent to note that the pharmaceutical industry is closely monitored by the government, and the demand for branded and patented products has stretched the government's budget for the same. The growing trend of preventive healthcare such as the demand for pseudo pharmaceutical products like supplements and vitamins, smoking cessation aids, weight loss formulations, etc, have supported the expansion of healthcare awareness, thereby witnessing the inception of government initiatives for driving pharmaceuticals to build factories which are in line and in collaboration with the Public Authority for Industry.

    The Regulation Process

    Medicines in Kuwait are regulated on the basis of standards of quality, safety and efficacy, price control and patent protection. The nation has 40 years of regulatory framework experience and plays a leading role in the regulatory environment of the GCC.

    The pharmaceutical sector of Kuwait entertains various multi-source products which are imported from multiple countries and regions. The regulatory framework set in place attempts to ensure the following objectives:

    • The product has been licensed and sold for at least twelve months in countries with recognized and competent regulatory authorities
    • That the product follows the desired quality standards, globally accepted, to ensure that the product is manufactured for its intended use
    • That the product remains stable throughout the projected shelf life
    • For local patients, the price of the product must be reasonable and affordable.

    The regulation framework consists of different phases to ensure that the pharmaceuticals products that help ensure that the products are of the best quality to provide steady growth and development; the stages are as follows:

    1. The Submission Phase

    The review process begins with the local agent (or sponsor) sending the registration dossier together with a covering letter to the Kuwait Drug and Food Control Manager (KDFC) formally demanding the pharmaceutical material registration.

    2. The Evaluation Phase

    In this phase, the reviewer will evaluate the Chemical and Manufacturing Control (CMC) data after entering the scientific review stage, focusing on the following data:

    •  Material descriptions and detailed analytical methods for finished products
    •  Total stability analyses of the expected consumer shelf life 
    • Specifications of raw materials and their procedures of analysis

    3. The Authorization Phase

    Upon completion of the full evaluation, the final approval decision is taken by the DRRS, which is officially endorsed by the authority's director

    The Data Required for Registration of Pharmaceutical Products

    In accordance with Ministerial Decree 302/8, the Kuwait Food and Drug Authority (KuFDA) is the head regulatory agent to register pharmaceutical products.

     

     

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    Sun, 08 Dec 2019 11:46:00 GMT
    <![CDATA[Georgia Hands-Free Law]]> Georgia Hands-Free Law

    Introduction

    Vehicles such as cars and trucks have progressed the world to a significant degree. It would be almost impossible to picture a city or town without cars driving around and traffic filling the streets. This form of transport has arisen over the last century and has quite literally changed the world. To visualize the impact and prominence, simply try to picture a major city from around the world, whether that is Dubai, London or New York. Now, remove all vehicles from the roads. It would be like something from an apocalyptic movie. The often continuous drone of engines would be entirely absent, and roads, as we know them, would not be required.

    There is so much infrastructure in place specifically for vehicles. Most nations are entirely connected through their road systems. These act as the veins and arteries, allowing for the transport of vital supplies and also allowing people to travel with ease. Many advantages have come through this change, such as the ability to seek out jobs and live further from where one was raised. Travelling by vehicle has become such a prominent feature of life, and the laws that govern it have become integral.

    While driving is incalculably useful in the modern world, it also presents dangers to both the drivers as well as pedestrians and bystanders. Compared to a horse and cart, a car is far more predictable, but also substantially faster. It also relies entirely on a driver's concentration and attention to prevent accidents. The higher the speed being travelled at, the more potential for serious incidents to arise. In the majority of nations, the maximum speed limits range from around 70 mph or approximately 120 kph with a certain level of leniency depending on the laws of the state or region. There are specific exceptions including the German autobahn which does not have a speed limit. Beyond the few exceptions, the limits exist to ensure drivers have time to react based on the type of road they are driving on. Changes may arise as technology improves, and self-driving cars are becoming a more realistic and impending prospect. Machines are largely more reliable that people as they do not have to worry about tiredness or loss of concentration. As such, rules of the road will apply differently to them. However, we have not yet reached a point where this is an immediate matter to consider. It is currently the exception rather than the norm.

    With all of the difficulties and complexities that accompany driving, the use of phones is generally illegal in most jurisdictions. However, with mobile phones being a necessary part of everyday life, people often use them regardless of the potential negative repercussions. Some areas have adopted more significant preventative measures, with Georgia being one of them.

    Georgia Hands-Free Law

    The state of Georgia has adopted House Bill 673. It provides a set of strict limitations regarding mobile device use. Some of the limitations may seem over the top, though public safety is considered the bigger concern. The Bill is summarised as follows.

    The main use of phones within vehicles is often to make or receive calls. Working people especially have this issue. Often times, a commute may take up significant time and urgent calls cannot wait. However, as per the hands-free law, making contact with the phone in any way is not allowed. This limitation is highly stringent. Even the slightest contact, if recorded or witnessed by a police officer, is liable to receive punishment and fine, which will be discussed further on.

    Further to this, it is not permitted to read any form of message or text displayed on a phone device. Videos and photographs should not be viewed as these all cause distractions to the driver. Further to this, listening to music is also subject to the rules. While one may listen to their selected music, it should be chosen and activated while the car is in a parked position. Further to this, no changes can be made once on the move.

    There are exceptions to the regulation and also some workarounds that can be used. The reason these exist is that the busy nature of life is recognised and cannot be stopped. These are shown below.

    Using a hands-free set of some form is allowed and phone calls can be taken only if they are done so through these means. Further to this, any text to speech-based technology can be used to listen to messages one receives, though this does still require that the individual refrains from touching their phone. One point of note is that any headsets and hands-free kits that are used are not to be used to listen to music. Rather, they should only receive use when a call is taken.

    While videos cannot be watched, one can still use navigation systems as these are intended and designed for use in vehicles. Once again though, these should receive attention prior to the journeys start.

    There are also types of devices that are exempt from the limitations previously presented. These include the likes of:

    • Radios;
    • Navigation systems;
    • Medical devices that are prescribed;
    • Emergency communications;
    • Vehicular maintenance systems that require monitoring.

    There are further examples, though these are of key note.

    Further to this, there are other situations and circumstances that receive a special exemption. For example, in the case of an accident or situation being reported, mobile devices can be utilised. As such, police officers and respondents, while in the line of duty, can communicate through their devices. Finally, if there is ever a serious need to use a phone or if one simply wishes to change their music, there is a simple solution. Pullover and park the vehicle in a safe location, and all functions become possible again.

    Fines and Enforcement

    Upon the introduction of the regulation In July of 2018, there was no grace period provided for people to adapt to the new law. The reasoning for this was simple. The purpose of the legislation is to ensure the safety of all people whether they are in a vehicle or a pedestrian. Further to this, many restrictions of the law were already illegal and were simply added to or cemented here. Due to the potential seriousness of vehicle accidents, the safest option was to immediately enforce the law with no grace time.

    The fines work as follows.

    • First offence: USD 50 fine and 1 point on the individual's license;
    • Second offence: USD 100 fine along with 2 points;
    • Third offence: USD 150 fine accompanied by 3 points.

    While the fine does not appear extreme, the points can add up over time. Acquiring 15 points within a two year period will result in a license suspension, and points can only be removed by request once every 5 years. Points can receive reduction by up to seven after this period of time.

    The bigger concern with the system is that points are considered by insurance companies when provide or renew their policies to an individual. This situation acts as a more significant and indirect monetary punishment. These combined are the two-key means of enforcement. However, the true test comes from looking at the statistics concerning road-related incidents and the number of fines provided.

    How Effective has the Law Been

    With just over a year having passed since the introduction of the hands-free law, the effectiveness can be measured. However, it should be borne in mind that the legislation was introduced at the mid-point of the year, and this does complicate the issue. Further to this, not all who use their phones while driving are caught or known about.

    In general, the number of distracted drivers is reported to have seen a slight decrease. Further to this, the total time distracted while driving also saw a fall. These are tough recordings to obtain though due to the numerous complex aspects of driving. Accidents may occur while an individual is using a device though the device is not what causes the crash. Faults may exist in vehicles which are not discovered, and so the data we have is only partial or perhaps incomplete.

    The fines and points system has a serious impact on the potential insurance policies one can apply for. There are also increasing fines depending on the number of offences, and after 15 points will result in license suspension.

    Conclusion

    Safety while driving is a crucial concern around the world. Almost every nation has strict regulations for the road and it is one of the biggest areas of danger and potential fatality in the relatively safe modern world.

    Any form of touch to a mobile phone outside of an emergency situation will result in a fine, and identifying when this is the case is troublesome. Statistics concerning accidents are also not entirely reliable though, the first year has seen a reduction in the time people are distracted behind the wheel.

    The move is one which can only bring improvement though. Increases in concentration even to a small degree will ensure the drivers it does effect are safer. The bigger impact will require a greater degree of study, though as we move into a more technologically advanced future, laws relating to road safety are likely to see substantial change. In the coming decades, regulations including the Georgia Hands-Free Law will be realty challenged.

     

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    Thu, 05 Dec 2019 14:46:00 GMT
    <![CDATA[Insolvency and Restructuring in Singapore]]> Insolvency and Restructuring in Singapore

    Introduction

    Singapore is not only an attractive tourist and shopping destination. On 23 May 2017, the Ministry of Law (Singapore) officially amended the Companies Act of 1967 with certain provisions to simplify the restructuring companies' debts. The South East Asian country became a potential indebtedness restructuring hub. To transform Singapore into the regional and international insolvency and restructuring forum of choice, the Singapore Companies Amendment Act of 2017 was enacted.  

    General Overview

    Restructuring refers a process wherein debtors and creditors agree on a proposed method for a debtor who is in financial trouble to repay a debt, without the debtor becoming insolvent. Restructuring entails making significant modifications to debts, and alternatively, the operations or structure of a company with its creditors' consent. Debtors and creditors in such a situation must agree on negotiating agreements and repayment schedules. The purpose of restructuring is to facilitate debt repayments, which may divert the entity in financial trouble away from insolvency proceedings. 

    Insolvency law refers to the legal guidelines outlining the process through which businesses and individuals who have encountered financial difficulties and are struggling to pay their debts are to follow. Insolvency proceedings involve the instituting of legal action against an insolvent entity. Insolvency proceedings encompass a wide array of processes that are purposed to rescue or wind up a bankrupt company.

    The insolvency process involves negotiating scheme arrangements. This is a legally binding agreement concluded between a struggling company and its creditors. Scheme arrangements are concluded if it is certain that a reduction in debt repayments can rescue the company. Apart from voluntary company agreements, insolvency proceedings also involve administration. Under administration, an administrator manages the company's affairs. Administration protects companies from creditors who would enforce their debts. The administrator has the task of determining whether a company can be rescued or not. If the administrator is confident that the company can be saved, the administrator will create a recovery plan and implement it. A recovery plan aims to ensure that a company maximises profits. If the administrator is satisfied that the company's financial affairs cannot be salvaged, then the company will be sold. Alternatively, the administrator may elect to liquidate the company. The liquidation procedure involves giving a liquidator control of the company's assets. Once the liquidator has power over the assets, the company ceases to carry on business. The liquidator will then sell the company's assets and distribute the proceeds amongst the creditors.

    Insolvency proceedings also include a process name receivership. Receivership is a process through with a receiver is appointed by the court at the initiative of the company's creditors. The receiver is tasked with recovering as much money as possible from the company to settle creditors' claims. Receivership is advantageous to creditors but places the company in a precarious position where survival is unlikely.

    Overview of Singapore's Insolvency and Restructuring Legal Regime

    The Singapore Ministry of Law convened the Insolvency Law Review Committee in 2010. The purpose of the Insolvency Law Review Committee was to review the Singapore legal regime surrounding bankruptcy and corporate insolvency regimes. The Insolvency Law Review then submitted a report in October 2013, which outlined suggestions to the corporate rescue mechanisms. The Insolvency law review also recommended that the UNCITRAL Model Law on Cross-Border Insolvency be enacted into Singapore law through a single consolidated Insolvency Act. The Ministry of Law then constituted a Committee to strengthen Singapore as an International Centre for Debt Restructuring (CSSICDR). The task of the Committee was to suggest a way to enhance Singapore's effectiveness as a centre for international debt restructuring. In April 2016 the  ILRC Committee issued a report set out seventeen recommendations.  

    The two reports, by the Insolvency Law Review Committee and the Committee to Strengthen Singapore's bankruptcy and corporate insolvency regime led the Ministry of Law to update and strengthen Singapore's Insolvency and Restructuring law through a three-stage approach. The first stage was the Bankruptcy Amendment Act 2015 (Act 21 of 2015). The Act is an amendment to the Bankruptcy Act. The Amendment Act regulates personal insolvency based on the suggestions in the Insolvency Law Review Committee of 2013. The second stage was the Companies Amendment Act 2017 (Act 15 of 2017), which was enacted in May 2017. The Amendment Act updated the corporate restructuring and insolvency framework based on recommendations in the report by the CSSICDR report.  The third and final stage was the Omnibus Bill or the Insolvency, Restructuring and Dissolution Bill, which aims to implement the remaining recommendations contained in both the ILRC and the CSSICDR reports.  

    Singapore Companies (Amendment) Act of 2017

    The purpose of the changes to the Singapore Companies Act is to encourage transparency about the ownership and control of the company, reduce regulations, facilitate ease in business and simplify the restructuring of a company's debt.  The Amendment Act governs Schemes of Arrangement in terms of section 211, Judicial Management in terms of section 227, winding up of a foreign company according to section 351 and cross border insolvency according to section 354 A-C and Schedule 10.

    As stated above, a  scheme of arrangement or scheme of reconstruction is an agreement concluded between a company facing financial hardship and its creditors. The purpose of a scheme of arrangement is to assist a company in repaying its debts by restructuring the company's debts and altering creditor's rights. Creditor's rights are changed by creditors agreeing to receive only a portion of the debt owed to them. Schemes of arrangement are attractive to companies because the company can pay a share of the debt and avoid default on the whole debt. Courts supervise and sanction schemes of arrangements which makes the scheme legally binding on all creditors if approved by the Court. Creditors are bound to the scheme even if some creditors do not accept the scheme in terms of s211 H of the Companies Amendment Act. If 50% of creditors, or creditors to which the company owes 75% of the total value of the debt agree on the scheme arrangement, then the scheme comes into effect.  This provision benefits the company as the company avoids creating individual arrangements with all the creditors to achieve the restructuring of debts.

    A scheme of arrangement is a viable solution for a company's financial challenges if the company want to keep its affairs private. The scheme also does not require that a company's directors give control of the company. Furthermore, the scheme is enforceable as the Court may grant an order to achieve those desired ends.   

    The old scheme of arrangement in section 210(10) of the Companies Act of 1967 stated that the court was only empowered to grant a stay of proceedings that had already started. Additionally, under the old regime, creditors had to be placed into a separate class if their rights were so different that they could not be expected to agree on a scheme of arrangement. However, this meant that creditors in belonging to class were a small amount was owed by the company could still block a scheme.

    Relevant Provisions of the Companies Amendment Act

    Section 211 B (1) states that if a company proposes or intends to submit a scheme arrangement between the company and its creditors or any class of creditors, then that company may apply. After such application, the court will make one of six orders. The first order that a court could make is an order restraining the passing of a resolution for the winding up of the company. Secondly, the court may also make an order restraining the appointment of a receiver or manager over the property or undertaking of the company. Thirdly, a court order could have the effect of any proceedings against the company and subject to such terms as the Court imposes. Fourthly, a court order can restrain the commencement, continuation or levying of any execution, distress or another legal process against the company's property except with leave from the court.   Fifthly an order that encumbers a party from enforcing any security over any property of the company or a request to repossess any goods held by the company under any chattels leasing agreement, hire purchase agreement except with the leave of the Court. Lastly, an order restraining the enforcement of any right of re-entry or forfeiture under any lease in respect of any premise occupied by the financially distressed company except with the leave of the court.

    There are several amendments regarding schemes of arrangements in the Companies Amendment Act. Section 211 B requires that debtors disclose the state of the company's financial affairs. According to the case of Wah Yuen Electrical Engineering v Singapore cables Manufacturers ([2003] 3 SLR(R) 629) the court stated that it is an established and independent principle of law that the creditors should be furnished with such information as is necessary to make an informed decision. In the Royal Bank of Scotland NV v TT International Ltd([2012] 4 SLR 1182; [2012] SGCA 53) case, the court said that accurate information is the creditor's rightful entitlement. This is because it allows the creditors to examine whether the scheme arrangement is appropriate for the company, whether in the long or short term.

    Section 211 B (8) of the Companies Amendment Act of 2017 provides an automatic 30-day moratorium which runs from the day the application is made. This section addresses the inadequate protection that was accorded companies under the old regime because it further allows the court discretion to order a variety of stays including stays against future proceedings, resolutions to wind up the company and steps to enforce security and where necessary, to give it a worldwide in personam effect.  The concept of a worldwide stay of proceedings was coined in the Chapter 11 filing in the United States of America Bankruptcy Code. Section 211 C (5) (b) states that subsidiaries who play a necessary and integral role in the scheme of arrangement will also benefit from the moratorium. Section 211H of the Companies Amendment Act of 2017 removes the veto right that was available to each class of creditors.

    Section 211D

    Section 211D prevents debtors from dissolving assets during the moratorium period.  A moratorium or stay is a temporary restriction on the performance of a specific activity. Section 211 D (1) states that the Court may, make two different kinds of orders regarding a moratorium which is in force for such part of the moratorium period as the Court thinks fit. The first order referred to is an order restraining the relevant company from disposing of the property of the concerned company other than in good faith and the ordinary course of the business of the relevant company. The second order referred to is an order preventing the company concerned from transferring shares, or altering the rights of any member of the company. An issue that may arise from this provision is the definition of the term "debtor". The United States case of AH Robins Co v Piccinin (788 F.2d 994 (1986)) the court stated that in unusual circumstances, a moratorium might affect a non-debtor party. The unusual circumstances are described therein as where the identity between the debtor and the non-debtor is such that the non-debtor could be said to be the real defendant. In such an unusual circumstance, the judgment against the non-debtor who is the real defendant will also be a judgment against a debtor. Thus, a debtor may not be the actual person owing the debt. In the case of Queenie Ltd v Nygard International (321 F.3d 282) the court held that an automatic stay could apply to non-debtors if a claim against the non-debtor will have "an immediate adverse economic consequence for the debtor's estate".  Therefore, a debtor who may experience an economic disadvantage because of the moratorium can be excluded from the effect of the moratorium while a non-debtor is affected by such moratorium.

    Section 211 D (2) states that the 'moratorium period', in relation to a relevant company, means the automatic stay period referred to in section 211B (8) of 30 days. Section 211 D 2 (b) states that the moratorium period means the period when an order under section 211B (1) is in force.  In terms of section 211 B (1), a financially distressed company may request the court to restrain the institution of legal proceedings against them. For instance, under section 211 B (1) CA, a court can grant an order to suppress the passing of a resolution ordering the winding up of the company. The moratorium also protects a company because it prevents creditors from taking legal action overseas.

    The Oriental Insurance Co Ltd v Reliance National Asia Pte Ltd  ([2008] SGHC 236) case suggests that the Singapore Appeal Court prefers a more flexible jurisdiction to amend a scheme. This case is supported by the TT International case where the court set aside a scheme arrangement because failure to disclose specific information by scheme manager. However, it is of significance that the court exercises this flexible jurisdiction on rare occasions.

     The purpose of a moratorium is to allow companies to negotiate the terms of the scheme, although the case Re IM Skaugen SE  ([2018] SGHC 259) says that this breathing space is not uninhibited; hence the 30-day moratorium. Thus, it is debtor misconduct for a financially distressed company to dissolve its assets during the moratorium period. Moreover, it is against the principles of good faith to do so.

    An automatic filing does not protect the interests of creditors because there is no removal or displacement of the company's director or management. This puts creditors in a vulnerable position as they must agree on a scheme arrangement without the assistance of an impartial third party.

    Section 211 D has not been subjected to fair assessment yet; therefore it is unclear when as 211 D should be granted. Section 211D undoubtedly champions debtor protection. Even after the enactment of the Insolvency, Restructuring and Dissolution Bill passed on the 1st of October 2018,  this section will continue to be of relevance. It is necessary then to determine what the appropriate test is to grant a section 211 D order.

    The principles to be used in determining what the section 211D test are to be extracted from the JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd ([2018] SGCA 27) case. The purpose of section 211D is to prevent abuse of the process by company management as well as provide protection for creditors. The section thus has a pre-emptive application. A balance must be struck between the debtor's interests in benefitting from a moratorium and the creditor's interests in preventing abuse of the moratorium at the creditor's expense. The way to strike this balance is to ensure that section 211 D orders are granted infrequently. If section 211D orders were to be granted often, this would undermine the practicality, expedience and effectiveness of the scheme arrangement procedure.

    In this case, the appellant JTrust Asia Pte Ltd had brought an action against Group Lease Holdings alleging that Group Lease Holdings had conspired to defraud the appellant through sham loans. The court ruled that the JTrust had suffered some economic harm which constituted actionable damage. JTrust alleged that there was a real risk that the respondents would dissipate their assets to frustrate the enforcement of the judgment. The court, in considering JTrust's claim considered the test of whether there was a real risk that the defendant would dispose of their assets. The court considered whether there was, objectively, a real risk that the judgment would not be enforced because of the respondent's dealings. According to the Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA ([2002] SGCA 45) case, the plaintiff must adduce substantial evidence to support their belief that the respondent will dissolve the assets. The court considered factors such as the nature of the assets, the ease at which they can be disposed of, the nature and financial standing of the respondents business, the length of time the respondent has been in business, the domicile of the respondent, whether the respondent is a foreign entity.

    The reasoning of the Court in determining whether there was a real risk of company property being disposed of,  can be used to formulate a section 211D order test. The legal community eagerly awaits the formulation of such an analysis as it will develop the Insolvency and Restructuring framework in Singapore.  

    Conclusion

    The key achievements of the Companies Amendment Act are an ability to cram down on dissenting classes of creditors, an automatic stay of proceedings available upon the filing of a stay application. Furthermore, the court can order a worldwide in personam stays against a wide range of activities including future proceedings and enforcement of security against the company. Of particular interest, section 211 D prevents the dissipation of company property by debtors. However future judicial scrutiny of this section will determine when a section 211 D order will be granted. This will lead to further development of the Insolvency and Restructuring regime in Singapore.  

     

     

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    Sun, 17 Nov 2019 10:58:00 GMT
    <![CDATA[Hedging Strategies for Power Contracts]]> Hedging Strategies for Power Contracts

    Introduction

    The worldwide establishment of the power markets is primarily due to the global restructuring and reorganisation of the electricity and other energy supply market. Since the electric power industry is structured in three distinct segments of power generation ranging from production to transmission and distribution, this calls for different levels posing different attributed risks.

    The diverse features of the power markets create an environment of the most volatility of prices for power, fuel and emissions allowances. It deals with high price volatility. Noting this, the power plant giants engage in customized long-term business transactions to hedge the risks. Majority of the power projects are structured on power purchase agreements. In here, the long-term contracts take place where the investor seeks and anticipates for a high(er) degree of certainty.

    The international commodity market carries with itself various difficulties and gradations, but certainly, the power and the electricity market stand apart from the rest. Power prices have an extreme level of volatility and fluctuations and are vulnerable to price spikes. This, in turn, relates "to the lack of economic storage for electricity and the concomitant requirement that production match consumption in real-time".

    Hedging in the literal sense

    Hedging deals with executing several transactions where the expectation is to substantially offset the risk that is exposed in the project. Hedging involves commercial transactions to reduce risks by transferring the risk to those with opposite risk profiles or with investors who are willing to accept the risk in exchange for an opportunity of profit.

    Global Strategies for Hedging Power Contracts

    I.Delta Hedging

    Delta hedging is a strategy involving the execution of transactions having equal but opposite delta exposures. This makes "the combinations of the initial portfolio and the hedge transactions" as delta-neutral. Delta neutral means delta of zero. This is generally encountered by forwarding trading or future based contracts. Hedging with futures eliminates the risk of fluctuating prices, but also means limiting the opportunity for future profits should prices move favourably. This occurs because the delta of an option depends on the underlying price.

    II.Market-Based Valuation

    The model involving the market-based approach is essential for pricing and risk managing these bilateral (sometimes multilateral) power transactions. The valuation involved is conducted by adding the price of the electricity being the variable together with a discounting factor, which significantly increases the intricacies of pricing electricity contracts.

    III.Dynamic Hedging

    Dynamic hedging for reducing risks creates least exposures for price volatility and makes more money on the other hand. The market is approached with long flexibility, and there is more active participation in the short-term markets.

    In its general nature, the risks that are dynamically hedged are a future commercial setting based on production in the future. The risks are hedged through the trade via commodity prices, creating a stabilized environment for the expected cash flow.

    IV.Hedging Tolling Contracts

    Tolling stands out as an innovative structured transaction employed in the power industry. Electricity tolling agreements, as well as other structured transactions, have played important roles in facilitating risk-sharing and risk-mitigation among independent power producers, utility companies and unregulated power marketers in the restructured power industry. Because of the continuous evolution of the power markets, there will be more transparency of pricing for these complex structured transactions.

    V.Pure Merchant Setting

    In a pure merchant setting an investor can collect the revenue where power is traded based on a spot market. But on the other hand, the collections are highly unanticipated since they are not independent of the availability of prices when the sale of the project is put up.

    VI.Revenue Put Option

    The Revenue Put Option creates a definite revenue flow from trading power while hedging subsists. It makes sure that the Power project does not suffer, and considerable revenue is generated during the hedging takes place, to secure project financing

    This option opens a path for the project owner by entering into an option contract with the seller which are generally the sophisticated financial institutions which are not interested in buying electricity but to act as a financier to arrange a deal. The hedging counterparty can sometimes be an unrelated third party. This starts with the seller generally called as the hedging counterparty to "pay the difference between the hedge-specified floor revenue and the power plant's actual revenue from power sales" in case the revenue generated from the sales is less than the hedge price.

    Internationally, the current scenario calls for 12-13 year option available in the market, which is expected to expand and enhance the investments in new and upcoming electricity plant projects.

    VII.Synthetic Power Purchase Agreements

    This strategy specifically aids as insurance in cases of decline in power prices, which creates access to certainty for the lenders and more clarity about the project.  In this model, the owner trades the electricity in merchant basis by entering into an agreement with the seller who can provide a steady stream of revenue. This strategy sets a revenue price range benchmark where if the sale happens in the range, no risk is attributed. The owner must pay the difference under the synthetic PPAs according to the price fluctuations. Synthetic power purchase agreements give an edge to the provider of the agreement.

    VIII.Rolling Hedges

    The rolling hedge model reduces the risk by the creation of "new exchange-traded options and futures contracts to replace expired positions". A contract with a new maturity date close to the exposure dates on similar terms is awarded to the investor in a rolling hedge strategy. This model is an effective way to quantify the risk by multiple revelations over time. A roll-over strategy can be implemented "when the holding period exceeds the delivery dates of active future contracts".

    IX.Long and Short Hedges in Future Contracts

    Short hedge, generally known as the seller's hedge in used in protecting the inventory value. Since the commodity value in storage or transit in known, a short hedge can be used to essentially lock in the inventory value. A long hedge is the purchase of a future contract by someone who has the commitment to buy in the cash market. It is used to protect against a price increase in the future.

    X.Volumetric (neutral) Hedge

    The model involving Volumetric Hedging minimizes the residual between Base/peak contracts and the hourly forecasted demand/generation.

    XI.Financial (value-neutral) Hedge

    The financial Hedging model minimizes the difference between the value (costs) of the Base/Peak contracts and the value of the hourly forecasted load curve with the usage of an hourly price forward curve (HPFC) which is a very abstract forecast of the spot price in the future. Here the sum of Base and Peak contracts shall not mandatory result to 100% of the forecasted demand but close to this. Important here is as I told above the hedge value to be zero or close to zero.

    Summary

    In a highly volatile market like that of electricity and power, the market players must have a broad range of understanding of the risk management strategies. An appropriate amount of management instruments is required for the certainty of the global performance of the electricity and power markets. It is, therefore, a challenge to the energy regulators to enhance the liquidity of risk management instruments such as intra-day options. The primary motive behind hedging for a corporation should be maximising the standing and value of the firm on a global standing. The value of the product and the prices are enhanced by a reduction in the financial distress and variance of taxable incomes.

     

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    Sun, 17 Nov 2019 10:19:00 GMT
    <![CDATA[European Union Anti-Takeover]]> European Union Anti-Takeover

    Takeovers or mergers have been common economic activity since the wave of globalization has swept the countries. According to United Nations Conference on Trade and Development (UNCTAD), there has been increase in takeover and mergers with opening up of economies due to Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO) and others institutional factors., Even the formation of European Union is an effort for harmonization of economic, political and social harmonization of policies to create an effective internal market for free movement of capital, people and trade. Deliberations to create a set of regulations to govern public takeovers across Europe began since the mid-1970s. However, on 21 April 2004, the European Parliament and Council passed the Directive 2004/25/EC on takeover bids (hereinafter the "Takeover Directive"). The Takeover Directive aimed at harmonizing European Union capital markets and strengthening the market competitiveness at international level. It also envisages a framework of national regulations on the topic and serve as guiding light for those who wish to involve in such take-overs.

    At the outset, it is important to understand what it means by takeover - in common parlance take-over means 'takeover can be defined as a transaction or series of transactions whereby a natural or legal person or group of persons acquires control over the assets of a company, either by becoming the owner of those assets in a direct way or indirectly through obtaining the control of the management of the company.' Scholars consider it as one of the strongest regulatory examples of the EU market for corporate control that oversees complete interrelation between EU internal corporate governance and therefore fulfill the articles 49 and 50 of EU Treaty's principles of freedom of establishment.

    This Directive aims to improve the healthy competitiveness among companies in the European Union. The European Commission hinted that the aim of the Takeover Directive is to integrate European markets, bring legal certainty, protect minority shareholders, and establish legal framework for Member States. Secondly, that takeover is one of the vehicles for the investors to create synergies between existing businesses and target. Therefore, another aim of establishing the Takeover Directive was to harmonize the company laws in the takeovers field and bring in consonance in the countries where there was no takeover regulation at all. It can also be believed that the harmonization attempt is a mean to prevent the Member States to regulate the takeover bids in a protectionist way by encumbering the access of potential investors from other Member States.

    The main objective of the Directive is to establish a 'level playing field' for the takeovers in the EU internal market. Mergers allow corporations to allocate assets more efficiently, to ease the entrance to the new markets, to gain access to new know-how, and to replace incumbent management teams.

    Prior to the Takeover Directive of the EU became effective, the rules relating to the takeover transactions varied and due to which it was difficult to conduct takeover in different EU member states.  Also, general overview of the Takeover Directives is essential to get understand the subject holistically. Takeover Directive aims at harmonization of the rules relating to: -

    • the takeover offers; and
    • the protection of shareholder esp. minority shareholders of target companies.

    The Takeover Directive is a skeleton or framework regulation which establishes minimum standards of common principles and a various general requirement that the EU member states had to formulate for a detailed implementation but in accordance with respective EU national laws of the member state. While implementation of the Takeover Directive, the EU member states had to incorporate the following general principles in its specific principles: -

  • target shareholders of same class must be given same protection;
  • a person has to give mandatory takeover offer when he acquires control of a company;
  • the target company's shareholders must have sufficient information before the takeover comes into effect;
  • the target company's board must make a public statement the board of the target company must with regard to its opinion about the effects of the offer on all the interests of the target company as well as on employment;
  • false markets must not be developed in the securities of the target company, such that the bidder or any other company may see rise or fall in the share prices;
  • a bidder must declare the takeover offer only after ensuring that he can fulfil any cash consideration in entirety and after taking all reasonable measures to secure other consideration.
  • there should be no hindrance to do business for longer than reasonable by takeover for its securities.
  • Also, the scope of application of takeover code is applicable to:

    • takeover offers;
    • for the companies securities governed by the EU law.;
    • where the entire or few of the securities are traded on the regulated in one or more EU member states.

    Under the Takeover Directive:

    • a "takeover offer" means a voluntary or mandatory public offer made to the shareholders of a company to acquire all or some of its securities, with objective the acquisition of control of the company in accordance with the national law of the respective EU member state;
    • "securities" shall mean transferable securities carrying voting.

    The Takeover Directive does not apply to public offers:

    • Offered by the target company;
    • to acquire securities that doesn't have objective the acquisition of control;
    • for EU member states' central banks; and
    • for securities issued by companies with objective is the collective investment of capital provided by the public at the holder's request, repurchased or redeemed out of the assets of those companies.

    Anti-takeover measures are defined as periodic measures that the management of the company takes to discourage hostile takeovers. Anti-takeover defenses include all the actions, taken by managers of the company to discourage acquisition by the third party. The defenses are classified into categories one is pre-bid and other is post-bid.

  • Pre-Bid Defense aims to prevent successful takeover or acquiring excess control
  • Post-Bid Defense aims to increase the cost to acquire control.
  • The defense against take over as per the EU Directive are:

  • Shareholder Agreements;
  • Multiple Voting Right Shares;
  • Non-Voting Preferred Shares;
  • Golden Shares;
  • Macaroni Defense; and
  • Cross shareholdings.
  • But despite these defenses available, there are numerous provisions in the Directives to thwart the hostile takeover because the main aim of Takeover Directive is to develop integrated market.

    Therefore, in conclusion it could be said that Takeover Directive leaves significant flexibility to the EU member states in various facets, hence has remained an uneven playing field for public takeovers. Nevertheless, as per the report of the European Commission released in June 2012, the law framework created by the Directive is working satisfactorily.

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    Sat, 16 Nov 2019 16:19:00 GMT
    <![CDATA[Dishonour of cheques in India]]> Dishonour of cheques in India as per Negotiable Instruments Act 1881

    Introduction

    The whole concept of using cheques, even at this day and age where other progressive modes of transactions are available, is to keep proper record and use it as proof of payment. There are more security and surety amongst individuals using cheques in comparison to those using other modes. Needless to say, cheque giving and receiving is routine of the society we will in. However, there are some implications surrounding the issuing, bouncing and clearing of cheques. This article is designed to discuss in depth the dishonour of cheques in India with reference to section 138 of the Negotiable Instruments Act.

    Negotiable Instruments Act 1881

    Economic globalization has brought India a significant boost. When commerce and exchange rapidly increased, the use of the cheque often expanded. This lead to concepts such as post-dated cheques which again brought about the need to protect people from potential abuse. The Negotiable Instruments Act 1881 (the Act) was passed with this objective which has proved to encourage the efficiency of banking activities and to guarantee that business transactions are legitimate by checks.

    Objective of the Act

    The Act discusses negotiable instruments such as promissory notes, trade bills, certificates, etc. The object of Chapter XVII, comprising sections 138 to 142, was to instil confidence in the effectiveness of banking operations and to give credibility to negotiable instruments used in business transactions. If a party issues a cheque as a deferred payment option and the payee acknowledges the same confidence that he will collect his fee on the due date, then he should not suffer as a result of failure to pay.

    Compliance with Section 138 of the Act

    Section 138 imposes a criminal liability punishable by imprisonment or penalty or both on an individual who issues a cheque for the discharge of a debt or liability in its entirety (or in part), and that cheque is dishonoured upon presentation. Section 138 has been imposed to prosecute unscrupulous cheque drawers who, while they wish to discharge their liability by issuing a check, have no intention of discharging their liability. In contrast to civil liability, the said clause seeks to impose criminal liability on such malice. However, in order to prevent unfair prosecution of an innocent man with a dishonoured cheque and to give him the opportunity to make amendments, the prosecution pursuant to Section 138 of the Act was rendered subject to certain provisions. The requirements needed to comply with Section 138 are as follows:

    • an individual must have drawn a check for payment of money to another party for discharge of any debt or other liability;
    • the check has been submitted to the bank within three months;
    • that the bank returns the check unpaid, either because the funds are inadequate or because it exceeds the sum agreed for payment;
    • The register fails to pay the payee within 15 days of receiving the notice.

    Certain actions set out in this provision are distinct from the components of the crime enacted by the clause. However, action against the dishonour of a cheque under section 138 by any tribunal is forbidden so long as the claimant has no cause of action to lodge a complaint under clause (c) Section 142 as held in Dashrath Rupsingh Rathod v. Maharashtra State.

    Grounds of Cheque Dishonour

    Insufficient Funds

    Section 138 explains the ground for insufficient funds in the check drawer's account by stating that if: -

  • the amount of money in the drawer's account on which the cheque is paid is insufficient to satisfy the check; or
  • the value of the cheque equals the sum that the bank may charge under an agreement between the bank and the drawee.
  • Then such a situation can be reviewed and prosecuted according to section 138 of the Act. If there are insufficient funds available, then it will amount to grounds of dishonouring the cheque as seen in Lily Hire Purchase Ltd. Vs. Darshan Lal.

    Closed Account

    It was held by the Hon'ble Supreme Court of India in- Neps Micon Ltd. And Others Vs.  Magma Leasing LTD. It is a crime under section 138 of the Act – Account closing would be an eventuality after the full amount in the credit has been deducted – this indicates that there was no sum in the ' other fund ' credit on the specific date when the request is made to uphold the same number.

    Stopping payment instructions

    As held in Mahendr S. Dadia vs. State Of Maharashtra I (1999) BANKING CASES (BC) 133 (17/03/1998) that once the receipt is drawn and given to the payee and the payee has sent the request, the orders to ' stop paying ' would lead to the dishonour of the cheque.

    Clearing member requirement

    In order to attract the provisions of section 138 of the Act, the cheque should be presented to the bank on which it is drawn-If the check is not presented to the bank on which it is drawn, then sec 138 will not be attracted. If the bank on which the test is based is not a Reserve Bank of India clearing participant, section 138 would not invite unpaid return of the check. This principle was laid down in Chairman, Jawahar Cooperative Urban Bank Ltd. And Others  Vs.  Ramanjaneya Enterprises, Hyd. And Another.

    Other grounds

    Courts have repeatedly held that manifesting the drawer's dishonourable intention resulting in cheque dishonour would result in prosecution under section 138 Negotiable Instruments Act regardless of the actual ground of dishonour.

    How do we proceed if a cheque is dishonoured?

    The procedure followed in respect of Section 138 of the Act is as follows: -

    Firstly, within 15 days of cheque dishonour, a legal notice (by registered post with all relevant facts) shall be issued to the drawer. The drawer will be given 15 days to make the payment if the payment is made, then the matter will be served, and the matter will be settled. On the other hand, if the payment is not made, the complainant must file a criminal case proceeding under Section 138 of the Act against the drawer within 30 days of the 15-day expiry date specified in the notice, with the court in question within the jurisdiction.

    With regards to the latter, the defendant and his authorized agent must testify in the witness box and provide relevant details for the complaint to be brought. If the judge is pleased and considers validity in the complaint, the defendant will be given summons to appear before the jury. If the defendant refrains from appearing after being served with the subpoena, then the court may issue a bailable warrant. Even after this, if he does not appear, a non-bailable warrant will be given by the cabinet. He can supply a bail bond on the presence of the drawer or accused to guarantee his compliance during the case. After which the accused's complaint is registered. The court must submit the matter of sentencing in which he pleads guilty. If the defendant refuses the allegations, then the petition version will be delivered.

    In support of his case, the Defendant can submit his proof by affidavit and produce all documentation, including the original. The defendant and his lawyer must cross-examine the claimant. There will be an incentive for the defendant to lead his evidence. The defendant will also be given the opportunity to show his records and testimony in favour of his claim. The plaintiff must cross-examine the suspect and his evidence.

    The final stage of the trial is that of the proceedings after which the jury must issue a verdict. If the defendant is acquitted, then the case concludes, but the plaintiff may continue to further appeal in the High Court, likewise, if the accused is convicted, he may appeal to the Court of Sessions. It should be remembered that the crime is made compoundable under Section 138 of the Act.

    Recent case law with regards to section 138

    Dayawati v. Yogesh Kumar Gosain

    In 2017, the Delhi High Court in Dayawati v. Yogesh Kumar Gosain took into account the issue of whether arbitration can resolve an offence under Section 138, which is a criminal case. The Court held that although there was no clear legal clause requiring the criminal court to refer the claimant and the defendant to alternate conflict resolution structures, the Code of Criminal Procedure ("Cr. P.C.") requires or accepts arbitration without the mechanism through which it can be achieved being stipulated or prohibited.

    There is, therefore, no restriction to the use of alternate conflict procedures, like negotiation, consultation, conciliation (recognized in compliance with Section 89 of the Civil Procedure Code, 19083) for the purposes of settling disputes that are the result of offences protected by Section 320 of the Cr.P.C. It also claimed that the prosecutions pursuant to Section 138 of the Act are different from other criminal cases and are in essence in the form of a civil error granted with criminal overtones.

     

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    Sat, 16 Nov 2019 15:37:00 GMT
    <![CDATA[Pre-Nuptial Agreements in UAE]]> Pre-Nuptial Agreements in UAE

    Due to rising income and wealth, marriage and divorce have now started becoming a complex transaction. Pre-nuptial agreements have come to rescue for such complicated marital issues arising out of marriages either among Muslims or non-Muslims. Pre-nuptial agreement in general is a tool to legal and financial risk mitigation and regulate how division of the assets between future spouses should be divided in the event of divorce. Such pre-nuptial agreements include various issues, inter alia, spousal support, assets movable or immovable or the residence after the divorce or custody of children.

    There are certain situations in which the parties to dispute may consider having a prenuptial agreement drafted: -

    • The inheritance rights of children from previous marriage needs to be protected;
    • Both or either one of the party has inherited the assets and are expecting the same;
    • The parties want to protect their bank balance; and
    • The husband and wife want to decide how the asset would be divided in case of divorce.

    As reported in leading newspapers and articles, there has been a steady rise in divorce rate among parties in UAE, not only among expats but among GCC nationals and Emiratis. In fact, the Emirati nationals had divorce rate of 35% by 2015 as per one estimate which is observed to have increased by 2019.

    In UAE, there courts with legal system that deals with such matters but the matters have been divided between Muslims and Non-Muslims when the court seize of such matter. In fact, UAE courts believe in the legal principle that wherever a person travels he/she carries with him/her their personal set of laws. Hence, the UAE courts provide a choice to an expatriate to enforce divorce law of the country of citizenship of the parties. For Muslims, the UAE Courts follow the Shari'a principles of law and pre-nuptial agreements are permitted only as long as they do not conflict with these laws. The UAE Federal Law Number 28 of 2005 regarding Personal Status (the Personal Status Law) creates a distinction between non-Muslims, Muslim expatriates and UAE nationals along with the validity of pre-nuptial agreements.

    The non-Muslim pre-nuptial and post-nuptial agreements are generally permissible if the national laws of the contracting parties i.e. the country of nationality or of marriage provide for matrimonial division upon marriage dissolution or it allows enforceability of such agreements. Also, there is a distinction between assets movable or immovable that may be located in the UAE and abroad. With regards to the UAE assets, Article 1(2) of the Personal Status Law reads as:

    "The provisions of this law shall apply to the citizens of the United Arab Emirates unless the non-Muslims of them are subject to special provisions applicable, its provisions shall also apply to foreigners as long as none of them insists on applying his law."

    Further, Article 5 of Personal Status Law states that "The state courts shall be competent to try personal status actions initiated against citizens or foreigners having a domicile, residence or workplace in the state."

    Hence, a bare reading of Article 1(2) in conjunction with Article 5 provide that the pre-nuptial and post-nuptial agreements amongst foreigners which complies with the parameters in Article 5 shall be enforceable in accordance with the governing law agreed in the pre-nuptial agreement. Also, for the UAE assets and the assets outside the UAE, the contract enforceability shall be subject to the law of the place where those properties are situated.

    In case of the Muslim expatriates, it is crucial to make difference between expatriate Muslim who wish to enforce pre-nuptial agreement

    • Divorce law within UAE
    • Divorce finalized some other country outside UAE

    For divorce procedure set in motion within the UAE, the Personal Status Law shall be applicable and the status of the pre-nuptial agreement shall be at par with that which would be applicable and enforceable for UAE nationals. But in the event the pre-nuptial agreement is enforced after the conclusion of divorce which is being finalized outside UAE, the agreement would be regarded as enforcement of a contract subject to UAE Federal Law Number 5 of 1985 regarding Civil Transactions Law.

    When it comes to UAE nationals, Islamic Shari'a law does not recognize the validity of legal principle of matrimonial property and rather proclaims the autonomous financial status of the spouses. Therefore, every property gained or established by either of the spouses during the term of the marriage would and remains the sole property of that spouse with no rights of division or any right whatsoever.

    Shari'a law as matter of fact and custom allows the contracting parties of nikah to enter into any sort of agreement that governs their rights and obligations unless they stand contradictory to the Holy Quran and fundamental principles of Shari'a law. It is also notable to point that this allowance of such contract is laid down in Article 20 of the Personal Status Law that permits written conditions  to be elaborated and mentioned in the official marriage certificate without any limitation as to the scope of the conditions.

    The Personal Status Law also has an explanatory memorandum under its Article 20 that explicitly mentions that contracts which are meant to codify best interests of the parties are valid but then that marriage contract does not differ in its treatment similar to that of a civil-nature contract. Therefore, under the law for UAE nationals, in the marriage certificate certain conditions can be included and is permissible under the law. But there is a divergence of opinion amongst Shari'a scholars with regard to the scope of conditions that could be included in the marriage certificate. Some favour wider conditions and some limit it but in all they stress on omnipresent factor being it should not contradict Shari'a Law.

    An explanatory memorandum to the Personal Status Law mentions that the legislators have adopted the views of the Islamic scholars and hence encompass eclectic scope to strike the correct balance between public and private interests. Thus, such wide option would quarter the aspirations of changing society with Sharia' law and also protect parties from unnecessary harassment by other parties when divorce takes place thereby protecting the rights. Thus, pre-nuptial agreement provide transparency, flexibility, and saves time in divorce cases. It also helps to conclude divorces in an amicable manner rather than boisterous or in mud-slinging manner.

    The case in point is Court of Cassation, Dubai Case Number 2 of 2010, in which wife sought to file divorce on the ground of cruelty and mental and physical harm and pleaded dissolution of marriage as it was irretrievable breakdown. She sought to impose a post-nuptial agreement executed with her husband as per the terms of which her husband promised her a residential property in her name in UAE. The Court on 28 September 2010 granted her the divorce, but held that it was not legal to enforce post-nuptial agreement as the conditions were not written down into the marriage certificate; and therefore article 20 of the Personal Status Law would not be applicable. Hence, the Court adopted the stance of interpreting such pledge by the husband as any ordinary contract would be governed by the Civil Transactions Law. But ultimately even that post-nuptial pledged was not upheld by the Court as the clause of the agreement did not satisfy the requirements of the Civil Transactions Law, i.e. offer and acceptance of a contract, were missing in the agreement.

    Foregoing paragraphs have given us a brief idea of the status of pre-nuptial agreements in UAE among UAE nationals, Muslim expats and the non-Muslims. The main benefit of pre-nuptial agreement lies in the fact that the property enlisted in the official marriage contract, rather than annex agreement, is that the terms are understood to be agreed upon and accepted by the parties to the marriage. In the case of a post-nuptial agreement, one must take cognizance of the fact the terms have to be in line with the Civil Transactions Law in order to ensure all legal requirements are met.

    In view of the above, it can be easily inferred that a pre-nuptial contract entered into (prospective) between spouses as per which matrimonial assets or alimony is dealt with or where one spouse undertakes to transfer certain assets to the other upon divorce are usually held valid by the personal status courts and made binding on the party which had taken the obligations to itself.

    Besides, pre and post-nuptial agreements are significant when it deals with the properties which are located outside the UAE and in countries which enforce such agreement and with certain legal formalities fulfilled. Also, pre-nuptial agreements are risk mitigators in case any UAE national has wife who is a foreign national and would be in position to file a divorce proceeding for the assets located in UAE but the husband does not want foreign courts to decide on such UAE based property.

    As a final note it is stressed that while drafting pre-nuptial agreement, to safeguard rights over matrimonial assets, it is important that legal advice should be sought so that in case of UAE nationals the scope of such conditions does not conflict Shari'a principles and in case of expatriates Muslim or Non-Muslims, there is no biasness to one party.

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    Sat, 16 Nov 2019 14:30:00 GMT
    <![CDATA[Omani Banking Regulations]]> Omani  Banking Regulations

    The banking business is an extremely vital activity in any economy and banks have a primary and synergist task to carry out. The behaviour of the banking and finance industry is dependent on the investors' trust, and trust will be rested and held by how banks work together, associatively adding to development, strength and stability.

    It is nevertheless fitting that the sectoral precision, consistency and validity are kept up by efficiently and straightforwardly set guidelines. Laws and guidelines, essential enactments, add to them with elaborations, explanations and direction originating from roundabout guidelines. In Sultanate of Oman, there are established laws like Oman Commercial Law and Commercial Companies Law.

    Explicit laws like Banking Law and Capital Market Law structure establishments for banking organizations and capital market-related foundations, while bank related requirements are guided by required judiciousness, capital market guidelines revolve around disclosure.

    Banks in Oman can do widespread international banking and finance, i.e., both business and speculation banking business - subject to explicit licenses and necessities. While Banking Law accommodates authorizing, directing and overseeing Islamic banking as well, there are other strong laws on Combating Money Laundering and Terrorism Financing moreover.

    Banking Law, like different laws, is drafted on best industry practices and universally certify principles. The requirements alongside guidelines and directions and rules get refreshed for new and advancing needs and models and add to huge open premiums including reasonable financial practices and shopper security other than encouraging money related consideration and steadiness and differentiated development.

    Banking Law 2000, an amendment of 1974 Law, sets its goals, among others, to be the advancement of improvement of banking establishments to guarantee financial strength and development and engaging the Central Bank for support of estimation of the residential cash and supervision of banking business.

    The Law has figured certify worldwide gauges and standards and best Central Banking practices and engages the Board of Governors appropriately and features the elements of the Central Bank, expansive parameters on authorizing, controlling and regulating banks and banking business and specific prudential standards and restrictions - other than path forward during the time spent willful or automatic exit of banks.

    Some ongoing alterations incorporate forces for the Board of Governors to receive fitting proposals of global offices and supra-national associations and expansion of Title Six to empower approve, direct and regulate Islamic Banking in Oman. The outlook for Oman's banking industry is constructive and wholesome profits increase has only been slightly toughened by way of the advent of new accounting necessities.

    Shifting regulatory changes over the past 12 months, combined with the muted financial increase, have now not adversely affected the banking sector. Directives and policy amendments issued via the Central Bank of Oman imply Oman's intention to align with first-rate global practices in phrases of prudent marketplace law and client protection.

    Despite these trends, Omani banks have recorded healthy growth in margins. So as opposed to taking a step returned, banks can utilize these surroundings as a possibility to innovate and fill gaps inside the marketplace, potentially improving operational efficiency and aggressive positioning.

    The approach that is carried by the banks has been substantially changed or instead transformed by way of implementation of the International Financial Revenue Standards (IFRS) 9, which took place in the year 2018. Enhanced digitalization and expectations from the customers for the world-class experience, may have led the majority of the banks to exercise Customer Identity and Access Management (CIAM) for building strong relations with the customers.

    CIAM's salient features assist in addressing diverse needs, which includes delivery of the personalized experience, protection against cyber fraud and intelligent solutions and easiness of digital interaction.

    The risk functions associated with the banks are operating against the background of the regulatory evolution. The London Interbank Offered Rate (LIBOR) is undergoing a phase-out which is to be replaced by various alternatives like Risk-Free Rate (RFR). The banking institutions are advised for incorporating a reduction in exposures to LIBOR and building RFR-like products.

    The operational risk is in the spotlight when the issues surrounding anti-money laundering fines, cyber threat and third-party is concerned. To avoid financial frauds, it is highly essential to comply with. These compliance regulations have been outlined by the Central Bank of Oman where the rules for governance along with identification, assessment, mitigation and control as well as business continuity management and information technology.

    Risk around financial crimes may evidence substantial reduction by exploiting machine learning for maximizing operational efficiency and risk mitigation techniques for complying with regulatory provisions and sanction prepared for the Financial Action Task Force (FATF) Mutual Evaluation which is expected for the year 2021.

    The critical growth aspect in Oman is Islamic finance, where the country enters into a consolidation stage as an international economic hub. Steady growth is encouraged together with greater transparency and improving with the more Islamic banking and finance experts. This, in turn, strengthens the public's confidence in products and services that are Shariah-compliant.

    It is reported in the sustainability report that Omani banking and finance regulations have been mostly considered for the benefit of the sector. Banks have been benefitted by the sustainability disclosure where new market access has been provided, and the implementation of more all-rounded risk management is undertaken.

    Objectives of the Oman Banking Law Royal Decree Number 114 of 2000:

    1.    Promotion of the development of the banking and financial institutions for ensuring the maintenance of financial stability and contribution to the industrial, economic and commercial growth

    2.    Enhancing the position and situation of the country within the international financial spectrum

    3.    Empowering the Omani Central Bank for issuance of currency and maintenance of the domestic and foreign currency value.

    4.    Supervisions of the banks and the banking business for advising the government of Oman and the international economic affairs

    Powers of the Board of Governors:

    1.    The Board of Governors is authorized and empowered to establish an effective monetary policy for the country.

    2.    Examining the accounts, records, books and any other affairs of the bank.

    3.    Reviewing the reports and the bank applications for the requests for establishing branches and taking actions in the event suitable supervision and regulations is concerned.

    Regulatory framework of the Oman Central Bank:

    With the adoption of the IFRS with effective from 1 January 2019, the banks in Oman are under an obligation to comply with the other established laws of the country. The Islamic banking entities will also be governed by the remote Islamic banking and regulatory framework.

    Oman's Islamic Banking:

    The Islamic Banking in Oman is comparatively younger as compared to the other jurisdiction. This system was launched in 2013 when the Central Bank of Oman gave license to the first two ever Sharia-compliant banks, i.e. Al Izz Islamic Bank and Bank Nizwa.

    The Central Bank of Oman regulations does not permit the products that the banks are allowed to trade in certain other parts of the GCC.

    New regulations:

    For facilitating the development of the Islamic banking segment, the Central Bank of Oman is working towards creating liquidity management tools to be sharia-compliant deposits and reposition for the Islamic banking entities. The additional regulatory initiative is the deposit insurance scheme introduced for the banking segment together with takaful that is the Islamic insurance principles.

    Conclusion:

    The Omani banking sector is highly regulated, which has undoubtedly helped the reliability on the regulations despite the economic slump due to the sudden fall in the global energy prices. The new regulatory requirements consolidate the industry's stability. But it is an essential initiative that the improvements in the oil prices are intended to reinforce the liquidity in the banking and finance system.

    In the meantime, the technological improvements and the pressure from the concerned authorities are driving the financial inclusions. The banking system is set to develop rapidly and further increase its lending share by moving to reinforce the sector via the liquidity-management tools and the proposed takaful insurance scheme.

     

    ]]>
    Sun, 10 Nov 2019 15:21:00 GMT
    <![CDATA[International Civil Aviation Dispute Settlement]]> International Civil Aviation Dispute Settlement

    Introduction

    According to Grotius, "Every nation is free to travel to every other nation and to trade with it". Nevertheless, the advent of aeronautics has brought with it the accumulation of unresolved disagreements in the global arena and the increase of international tensions. These disagreements have contributed to a sense of instability in the world arena. There is no doubt that the availability of machinery to achieve a non-violent solution to differences is crucial.

    Background

    Aviation is all activities relating to the mechanical flight and the aircraft industry. Civil aviation refers to non-military flying, general aviation and scheduled air transport. The significance of aviation cannot be understated because all nations connect through aviation. Aviation facilitates trade, travel and the maintenance of links between countries. Aviation has increased the quality of life for many around the world. Aviation triggers a lot of disputes and discontent because it is an integration of economic interests and international prestige.

    In the Mavrommatis case, the Permanent Court of International Justice defined dispute as a disagreement on the point of law or fact. A dispute is also characterised by a conflict of legal views or interests between two persons. A dispute is one that is specific and understandable and its subject, concerning a matter of fact, law or policy. When one party to make a claim or an assertion while the other party denies or refuses that claim, a situation of dispute is said to have arisen. The parties to an international dispute can either be governments, institution, jurists or private individuals from different states. The elements of a dispute outlined in the Mavrommatis case must be illustrated through governmental statements, diplomatic notes and other specific actions. In addition, a dispute has to be more than mere disagreement. The disagreement must reach the level of active assertion where the established methods of dispute settlement can be used. Legal Framework for the Settlement of Disputes

    Methods of peaceful settlement can be distinguished between methods used before the Conference on International Civil Aviation 1944 and methods used after that convention.

    Prior to the Convention of 1944, three multilateral agreements were signed. These were the Paris Convention of 1909. One principle of this Convention was the recognition that every state has complete sovereignty over the airspace above its territory, as stated by Article 1. Another principle is the freedom of innocent passage of aircraft of contracting States in terms of Article 2. The flying of aircraft may be prohibited over certain areas due to military reasons in Article 3. 

    Another multilateral convention is the Madrid Convention of Air Navigation of 1926. In this convention, the Ibero-American Commission was accorded the power to pass upon disputes pertaining to the technical regulations annexed to the agreement between Spain and twenty South American States.

    The Havana (Pan American) Convention on Commercial Aviation 1928 made provisions for arbitration. The Bilateral agreements included Greece Poland Agreement of 1931the Hungary- Netherlands Agreement of 1936 and France Hungary Agreement of 1935.

    The Chicago Conference of 1944 led to the birth of the Convention on International Civil aviation. Dispute Settlement provisions are set out in Articles 84 to 88 of the Chicago Convention. Article 84 of the Chicago Convention states that the interpretation or application of the Convention and the provisions of the Convention shall on the application of any State concerned in the disagreement, be decided by the Council. According to this provision, no member of the Council shall vote in the consideration if they are a party to the dispute. A party to a dispute can appeal to the International Court of Justice, the decision taken by the ICAO Council. Article 88 states that the ICAO Assembly shall suspend the voting rights in the Assembly and in the Council of any Contracting State that is found to be in default of the provision. This convention is the constitution of international civil aviation. The convention permits parties first to settle their dispute by direct negotiations before the matter is brought to the Council. This allowance is advantageous because the conflict may be resolved before it is even brought to the Council.

    The Chicago Convention is supplemented by the Rules of Procedure for the Settlement of Differences. A document named Rules of Procedure for the Settlement of Differences places a priority on mediation and conciliation. Article 14 of the Rules states that any contracting State submitting a dispute to the Council for settlement shall demonstrate that negotiations to settle the dispute have taken place but were not successful. To facilitate negotiations, the Council has the power to designate an individual or group of individuals to act as conciliators between the parties. This shows that Article 84 mandates the Council to assist in settling rather than adjudicating disputes.

    The next agreements to be signed were the International Air Services Transit Agreements and the International Air Transport Agreement which were approved by thirty-two states. The freedoms under these agreements are passage without landing and landing for non-traffic purposes. Article 66 of the Chicago Convention has also jurisdiction over the settlement disputes under these two agreements.  The Convention on Damage by Foreign Aircraft to Third Parties on the Surface (ICAO) of 1952 was the inaugural conference on international private air law. The European Civil Aviation Conference of 1954 convened at Strasbourg in 1954 to review the development of intra-European air transport with the object of promoting coordination for better utilisation and orderly development of such air transport.

     The International Civil Aviation Organisation (ICAO) has seven organs they are the Assembly, the Council, the Air Navigation Commission, the Air Transport Committee, the Legal Committee, the Committee on Joint Support of the Air Navigation Services and the Secretariat.

    Council adjudicates legal disputes concerning the interpretation and the application of the Chicago Convention. Article 66 of the Chicago Convention has also jurisdiction over the settlement of disputes under the International Air Services Transit Agreement and the International Air Transport Agreement.

    Causes of Disputes in International Aviation

    There are several causes for conflicts in aeronautics. The causes can be divided into non-commercial and commercial disputes. Non-commercial are those regulated by Bilateral agreements. The Chicago Convention controls commercial disputes. The six common reasons are firstly restrictions in airline marketing, ticket selling and currency remittance. The second common cause is the dumping of air transport services. The third cause is restricted access to travel agents and computer reservation systems. Fourthly, discrimination concerning frequency and capacity and other operating restrictions. Fifthly, discriminatory charges for Air Traffic Control (ATC) and Air Traffic Navigation (ATN). Lastly, ground handling restrictions and unfair taxes.

    The first cause occurs where, to protect the local flag carrier, restrictions are placed on airline marketing and selling. Any international air transport provider can increase effective market access, based on transparency and non-discrimination and fair competition. This global air transport provider can also create a safeguard against problems of market distortion and predatory or excessive competition. Market flows determine traffic flows and the government should not be allowed to govern traffic flows.

    Recommendation 17 of the First Special Air Transport Conference of ICAO in 1977 provided a solution to the problem of a local flag carrier restricting airline marketing, ticket selling and currency remittance. This recommendation suggested that in "adopting tariff agreements, each airline operating on a route or parts thereof should be given equal opportunity to participate in the carriage of the traffic". At the 1985 ICAO Third Air Transport Conference the delegations violations of "fair and equal opportunity". There were also many Bilateral Air Transport Agreements (BATAs). BATA  sets out six restrictions that countries are to refrain from transgressing. The restrictions noted are, first, that certain users such as governmental authorities and travel agents are not to favour national flag carriers. Secondly, parties are prohibited from introducing limited carrier point to point fares, designed to restrict fifth freedom access. Thirdly that foreign airlines are not to issue their travel documentation, thus delaying and reducing airline revenues. The fourth restriction is that ticket sales to non-residents shall not be made in foreign currencies as this usually increases the cost of travel. Fifthly there must be no condition placed on the issuing of visas that obliges persons to use a national airline. Sixth, restricting the establishment of staffing of offices by foreign airlines is prohibited. The United States "Open Skies" initiative led to the conclusion of a few bilateral agreements.  The Open Skies initiative is an international policy concept that demands the liberalisation of the rules and regulations of the global aviation industry. It is focussed on the commercial aviation industry and creates a free-market environment for the airline industry. An open skies agreement usually provides for free-market competition, pricing determined by market forces, fair and equal opportunity to compete, cooperative marketing arrangements, provisions for dispute settlement and consultation, liberal charter arrangements, safety and security, and lastly freedom of all cargo rights.

    Country remittance problems affect a few countries. Some of these countries are Zaire, Brazil, Ghana, India, Nigeria, the Philippines and other countries in Latin America. In 1981, at an annual general meeting of the IATA, there was a resolution requiring member carriers or airlines to persuade their governments to permit foreign airlines to send their net surplus revenue to their home states. This transfer was to be done within thirty days of the application into a freely convertible currency, at the official rate of exchange for the conversion of local currency as the date of submission.

    The second cause is the Dumping of Air Transport Services. Dumping refers to selling a product at an export price that is below the normal value of the product in the exporting country. Dumping a method to protect the economic identity of a state. An example of this in the air transport sector is the communist regimes of Eastern Europe. Before the collapse of communism in the region, the communist countries were fruitful ground for such practices. The governments of the communist countries would subsidise their international air industry by supplying the difference between the average value and the export price.  Singapore Airlines was also supported by some firms so that it could provide air transport services in the United States of America at reduced fare prices. The purpose of the subsidies was so that Singapore Airlines could spread out their services at the expense of US airlines. Consequently, US airlines were squeezed out from their routes. Unfortunately, the United States was unable to prevent such predatory pricing. 

    The third cause is restricted access to travel agents and computer reservation systems. Computer Reservation Systems are a vital element of marketing in the aviation industry. These systems are useful because they determine air carrier schedules, space availability, tariffs and make reservations for many city-pair combinations. Effective marketing is determined by the listing of their flights on the bias of computer reservation systems. Computer Reservation Systems display bias, unfair or unreasonable restrictions on carrier access, incorrect information or abuse of data is the misuse of the Computer Reservation Systems which occur at international level.

    The fourth cause is discrimination concerning frequency and capacity and other operating restrictions.  It would be ideal if the frequency, capacity, route and other traffic rights are made mandatorily available to all states and entities. The universal principles of reciprocity and equal opportunity guide the principles for the freedom of the air. The International Air Transport Agreement and the International Air Transit Agreement introduced the concept of freedom of the sky. States have, however, not adhered to these agreements which creates friction between several countries.

    The fifth cause is discriminatory charges for air traffic control (ATC) and Air Traffic Navigation (ATN). According to the ICAO's Future Air Navigations Systems (FANS) Committee established in 1983 defined Air Traffic Management as a universal concept to be achieved through regional implementation. Several mechanisms provide the incentive for all States to fight discrimination. These are the Advanced Automation System (AM) which encompasses the Automated en-route Air Traffic Control (AERA) as well as the Terminal ATC Automation (TATCA) in concert with the Programme for Harmonised Air Traffic Management (ATM) Research in EUROCONTROL (PHARE). There are no Air Traffic Control charges for foreign air carriers flying through the airspace of the US. 

    The sixth cause for international aviation systems is the group handling restrictions and discriminatory taxes. In the aviation industry, there are diverse supplies and services. There are also different authorities and jurisdictions in the industry. Urgent solutions for problems arising from excessive charges and taxes imposed on the aviation industry are needed. ICAO and IATA are the main international civil aviation bodies that are involved in the resolution of problems concerning excessive charges and taxes.

    Non-Legal Methods for the Peaceful Settlement of Disputes

    There are political methods to settle a dispute peacefully. The three ways to resolve are direct negotiations, good offices and mediation, as well as inquiry and conciliation.

    Direct Negotiations refers to a commonly used method of settling an aviation dispute. According to the Chicago Convention, negotiation is the first step in the procedure of dispute resolution. This method has a few notable shortcomings. Parties to negotiation usually demand more than they need, leading to a protracted negotiation process. Despite this, negotiation remains a popular method of dispute settlement. The UN Charter in article 33 (1) states that parties must negotiate prior to invoking the jurisdiction of the UN security council.

    Good offices and mediation is a method of settlement that includes a neutral third party. The task of the third party is to support the parties in reaching a successful resolution of the dispute. The impartial third party performs mediation, conciliation and inquiry. The independent third party conducts negotiations with the parties. In terms of Article 14 of the Rules of Procedure for the Settlement of Differences,  ICAO's Council is mandated to allocate good offices for its parties in dispute. 

    Inquiry refers to a procedure of investigation. It involves fact-finding, and it was validated by UN Charter Article 33. Article 26 of the Chicago Convention contains the institution of inquiry in the case of an accident. An inquiry is carried out in the state in which an accident happens. The ICAO may recommend an inquiry but does not have the power to perform the investigation itself. Article 55 e grants ICAO investigating power.  The procedure of inquiry is often combined with conciliation. Conciliation is defined as a method for the settlement of international disputes of any nature in terms of which a commission is set up by parties, either permanently or on an ad hoc basis to deal. The dispute proceeds to impartial examination and the Conciliator determines the terms of a settlement susceptible of being accepted by the parties.  The Conciliation Commission was established to assist in settling disputes by the Hague Conventions 1899 and 1907. The Pact of Bogota explains that Commissions of Investigation and Conciliation must be convened by the Council of Organisation of American States. Any party involved in a dispute may request the Council of Organisation of American states to convene the Commission of Investigation and Conciliation.

    The political methods to resolve a dispute in an International Aviation are used in conflicts in noncommercial aviation. The political methods are also backed up by diplomacy tactics. However, in the case of commercial disputes, legal methods to dispute resolution are to be applied. The legal methods are arbitration, judicial settlement and advisory opinions of the ICJ.

    Legal Methods For Peaceful Dispute Settlement

    Arbitration refers to resolving a dispute between states through a legal decision made by an independent, impartial tribunal or certain persons called arbitrators. The parties freely choose the tribunal or arbitrators. Articles 16 and 38 of the Hague Convention of 1809 and 1907 state that that arbitration is one of the most efficient and peaceful means to settle international disputes. The Hague Convention of 1899 outlined the law relating to arbitration and laid the foundations of the Permanent Court of Arbitration.

    The case of  United States v, France 1963 was the first aviation case to be resolved by arbitration. The dispute concerned the interpretation of the traffic rights established in 1946 by the United States France Air Transport Services Agreement. In terms of the Agreement, the US flag carrier (TWA – Trans World Airline and Pan Am) were authorised to operate between the US and Near East via Paris granted to the US by France. Pan Am began to fly from the US to Turkey, and then later to Iran via Paris. Because of the agreement France objected to this. Pan Am, however, continued to fly that route and eventually began to fly beyond Beirut to Tehran. France then withdrew its permission. The traffic was directed to France's own flag carrier Air France.  In 1958 France announced an intention to terminate the United States France Air Transport Services Agreement. In 1960 the agreement was approved again. In 1962 France withdrew from the contract again. This led to the Pan Am incurring a significant economic loss. The United States invoked the compulsory arbitration clause under Article X of the Bilateral Agreement. Article X did, however, state that the Tribunal's decision is only advisory. The United States and France then agree that the Tribunal decision is only advisory.

    A judicial settlement is a procedure that is closely related to arbitration. The general organ of judicial settlement is the International Court of Justice. While arbitration tribunals are not constituted permanently, the ICJ is a permanent body established by Article 92 of the UN Charter. As a permanent body, the ICJ can develop a continuity of legal outlook. The jurisdiction of the Court is triggered in all legal disputes where parties disagree on the interpretation of a treaty. This jurisdiction is also triggered if there is a question of international law. Furthermore, the presence of any fact which if proven, would constitute an infringement of an obligation in international law also calls for adjudication by the ICJ.

    According to Article 65 of the Statute, a court may give an opinion, which is advisory in nature, concerning any kind of legal question. This opinion is given at the request of a body which is authorised to pose the legal question by the UN Charter. According to Article 96,  the Charter names these bodies as the General Assembly, the Security of Council and other organs of the UN and specialised agencies of the UN by the General Assembly to ask for advisory opinions.

    There is also treaty agreement of settlement of disputes.  The Charter of the United Nations enumerates in Article 14 of the Charter that the General Assembly is given authority. This authority is subject to the peace enforcement powers of the Security Council. This authorises the General Assembly to recommend measures for the peaceful resolution of any dispute which has the potential to undermine the general welfare or diplomatic relations among them. The Charter of the Organisation of African Unity was signed by 30 states. The Charter has provisions relating to the peaceful solution of international disputes. The European Convention for the Peaceful Settlement of Disputes is modelled on the General Act for the Settlements of Disputes. There is a provision for the judicial settlement of all international legal disputes and conciliation and arbitration of others. The Bilateral Treaties of Commerce and Navigation usually contained clauses on a peaceful settlement. One example of this is the Treaty of Friendship and Commerce and Navigation between the USA and Japan of 1953. Another example is the Treaty of Friendship and Commerce and Navigation between the USA and Ireland of 21 January 1950.

    Cases: Peaceful Dispute Settlement

    In the Pakistan v India 1971 case, India suspended all Pakistani aircraft overflight over Indian territory. India denied the Jurisdiction of the Council. India then applied to the International Court of Justice which later confirmed the Council's decision. Both parties subsequently entered into negotiations which led to an agreement to discontinue proceedings. In the 1988 case of United States v Cuba, the United States refused for Cuban aircraft to fly over US territory towards Canada. The President of the council then acted as a Conciliator, and conciliation was the method used to settle the dispute. The most recent dispute involves the United States and European Union member states. The issue between the two parties was how an EU directive on the noise of aircraft engines also known was the hush kit Regulations were to be applied. This meant that the United States would be unable to fly older aircraft to Europe. The President of the Council was then appointed as a Conciliator, and the case was settled when the Hush kit regulations were repealed. The parties adopted a Directive that was satisfactory to all.  

    International Civil Aviation Dispute Settlement and the UAE

    In 2002, the United States and the United Arab Emirates concluded an agreement whereby their carriers would have unrestricted flight rights into either country. However, United States carriers have since alleged that airlines from the Gulf were able to grow at a rapid pace because of government subsidies. This violated the terms of the agreement as it constituted dumping. The UAE's biggest carriers denied these allegations. The US then decided to institute a series of travel-related restrictions against Gulf airlines.  This sped up the need for Gulf airlines to resolve the dispute.

    In March 2018 the US and UAE  completed negotiations about whether Emirates and Etihad could continue to fly to the United States according to the Open Skies accord.  After negotiations, the United States and the United Arab Emirates would be able to operate their airlines as per the original agreements. This is a demonstration of dispute settlement in international civil aviation between two of the largest state with the most international carriers.

    Conclusion

    International Civil Aviation is a source of disputes in the international arena. Peaceful dispute settlement methods are essential for the resolution of international civil aviation disputes. Negotiation and conciliation are the most popular methods. These methods have provided the necessary machinery for the continuation and growth of the global aviation industry.

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    Thu, 07 Nov 2019 20:18:00 GMT
    <![CDATA[European Foreign Investment Regulation]]> New European Foreign Investment Screening Regulation

    Introduction

    The European Union (EU) spans with twenty-eight (28) member states which have a combined population of approximately 500 million people. It is a massive draw for foreign investors in part due to its scale. With 28 member states spread across a large proportion of the continent of Europe, there is a vast selection of nations one can choose to invest in. With significant populations and large markets found all around, even those that are niche can find great significance.

    The EU is a highly developed jurisdiction with the help of some of the large global economies contributing towards it. Within these last few years, there has arisen some commotion in the EU with the UK voting to leave. The UK is the second-largest economy in the Union, and so the impact of them going will undoubtedly be felt.

    Another critical draw relates to the regulatory structure of the EU. It is an incredible achievement when looked at in detail as the legislative fabric covers the entire area of the EU and is accessible on the most comprehensive scales. While each of the member states is sovereign and thus cannot truly be controlled by the EU or its regulations.

    Their member states benefit from laws throughout the EU, some of which are as follows:

    • Treaties are discussed and agreed upon by the member states of the EU, and once the Treaty is formed, it must be ratified by each member state into their legislations.
    • Regulations are created by the EU, though they must be introduced within each state individually utilising their respective processes.
    • The EU provides directives and gives the states specific goals, though they can be achieved through any means the members see fit.
    • Decisions by the ECJ (European Court of Justice) are also binding for future related cases as court decisions generally are treated in common law jurisdictions.

    Such a structure allows for harmony between the different countries of the EU concerning their laws. With a regulatory body governing multiple nations, the standards of services and goods produced in the Union are among the best in the world.

    All of these combined make the region one which receives much international investment from various locations and with many interests. As such, a recent new framework for screening foreign investments has come into the fold, which allows for a more significant amount of selectiveness in who can and cannot invest.

    What the Changes Entail

    The new screening regulation was initially brought up in 2017 during a State Union Address. If one were to consider the scale of the rule, it is rather impressive that such a wide-reaching change was proposed and adopted in two years.

    Foreign Direct Investment (FDI) is a massive topic in the EU with billions of Euros worth of it occurring annually. This Regulation EU 2019/425 (the Regulation) came into initial force as of 11 April 2019. However, the actual provisions will go into effect 18 months after this date in October of 2020. Any investments that occur before this time will not be subject to the Regulation.

    The primary purpose is to provide greater freedom to the EU and its member states when it comes to investments from beyond the EU. This freedom will allow for greater control over the market and the interests of the nations.

    The member states will not be required to observe the screening processes within their borders if they choose not to do so. It is very much optional, though if they wish to follow, the European Committee will and the Regulation will be able to make particular demands of them.

    The critical powers provided to the EU and its member states when it comes to screening can be summarised as follows:

  • A mechanism will exist to allow the members states as well as the EU Commission to raise their concerns regarding particular investments that arise. This matter relates to security concerns that any party feels is of great importance and worth sharing.
  • Member states will have the actual and final say regarding any investments, as the Regulation is more concerned with the cooperation of the members and the sharing of information.
  • The power to ensure more excellent protection of assets and interests from foreign entities and provide security from an economic and state angle.
  • The ideas of freedom and business-related endeavours are pushed considerably within the borders, and now they can be promoted through the screening process. The Regulation recognizes that the member states are at a disadvantage as the countries that competing with them have better structured processes and frameworks to properly screen any potential risks. This, therefore, implies that for EU to have a stronger position they should have a well-structured system of screening.

    There may already exist member states that have specific processes in place relating to FDI, though there is little to no legal backing from the EU. However, this will now change upon the implementation providing further structure and certainty. The Union allows for great freedom within itself in terms of business and the movement of goods and people, and so cooperation on larger foreign-related affairs will bring the nations closer.

    Article 9 specifies that the Regulation should cover a broad set of investment types, and these should cover investment from external countries as well as state entities to ensure maximum effectiveness of the screening framework. However, portfolio investments are not to be included and should receive different treatment.

    Further to this, Article 12 considers specific factors that the member states should take into account when considering foreign investments. Considering that some of the members already have their processes, their experience and expertise should be provided to the others to ensure uniformity of quality across the different nations.

    With cooperation being one of the crucial aspects, the legislation sees it as vital that even those nations which do not incorporate the FDI screening into their foreign investment-related practices should still receive assistance. To this end, if individual countries have experience with particular international entities or are aware of some facts related to specific investments, they should be able to share this knowledge with any other member of the EU. After all, the aim is to provide further security and protection across the European Union.

    Why the Implementation Delay?

    While the Regulation has seen much consideration over the past two years, there is still an 18 month period until it truly comes into effect. That means that any investments over the next year and a half will not fall under the consideration of the rule. The period has been allotted to allow the European Commission as well as its member states to prepare and make the appropriate changes and implementations so that when the date comes around, the transition will be entirely expected and smooth.

    Points of contact will be crucial to ensure smoothness of communication between the nations as well as the EU Commission. Further to this, as previously mentioned, the member states of the EU are sovereign, and so the Regulation should receive ratification or some form of official introduction to the state's legislative structure to make the law official therein.

    Sectors FDI is not allowed

    Though the EU encourages foreign investments, they do entail certain restrictions though not many. Currently, the screening mechanisms cover investments in specific sectors that are considered strategic (e.g. energy, telecommunications, transportation) while other sectors are not restricted. On the whole, the grounds of restricting FDIs is based on protecting public policies and national security. Therefore, it naturally leads to restrictions on trade of arms, specific unauthorised drugs, publications, war material, nuclear weapons and other related sectors. The main aim which has been preserved and which will be preserved with the Regulation's passing is the protection of public order and safety. It is noteworthy to mention that the Organisation of Economic Cooperation and Development (OECD) has claimed EU to be the least restrictive region in relation to direct foreign investment sectors.

    Conclusion

    Security and protection of interests is a more important than ever today. With the most significant economies around the globe, this especially cannot be understated. It is one of the world leaders when it comes to FDI from beyond any of its nation's borders.

    Numerous states around the world have implemented such screening regulations to protect themselves, and the EU has decided that it is certainly time to do so itself. However, a further benefit that will come about within the EU is that there is a vast amount of different experience available and so cooperation is vital. The final implementation of the Foreign Investment screening regulation will occur on 11 October 2020.

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    Thu, 07 Nov 2019 17:05:00 GMT
    <![CDATA[outstanding bank loans payment]]> Do you have outstanding bank loans and credit card payments?

    "Some debts are fun when you are acquiring them, but none are fun when you set about retiring them."

    Often, unexpected events can astound an individual in an array of ways like a change in employment, personal emergency, etc., which may rapidly throw the individual off track. Consequently, in the long run, one may "default" in payment of credit card bills or loans. Bank settlements in today's times can be monotonous as well as painstaking. The jocundity of swiping your credit card whilst forestalling the incapacity to repay the same or default in repayment of loan could lead to drastic and harsh scenarios such as the bank imposing travel bans or resorting to severe legal action including cheque bounce and civil cases filed for recovery. How does one sleep peacefully at night with the scare of such legal action hovering in his mind whilst staying perturbed about negotiating with banking sharks as well as obdurate debt recovery agents?

    Matters that involve corporate defaulters or wilful absconders will face legal consequences that include prosecution, court claims and other legal remedies banks and/or their lawyers in Dubai or overseas may choose to initiate. Further, Interpol red alert is also a consequence of such default. Additionally, there are also cases where individuals are unable to return to Dubai on account of domestic/family emergencies, untimely loss of employment being communicated while they are in their home country, or where an employee is undergoing medical treatment for a long time. The so-called "unintentional defaulters" desire to settle their claims with banks and wish to return to the United Arab Emirates (UAE) to secure their future and work in the country.

    Naturally, every lender is suspicious and it is valid for loan specialists independent of whether it is an individual, an association, a foundation or a sovereign government. The Oxford Dictionary meaning of "default" signifies the inability to pay, act, not meet cash calls, and so forth.

    Limited understanding of the UAE laws and regulations, lack of language or procedural knowledge, inexperience in negotiating skills, unreasonable and untimely pressures from collection agents, coupled with lack of security deter or prevent the unintentional defaulters from settling their matters in a timely manner. It is vital to be conversant with the local laws, understanding your legal rights, obtaining the proper set of settlement documents, knowledge of penalty and interest charges that can be imposed, the return of security documents, grasping the precise process besides ensuring fair negotiations as they are all very important in such process. A default is also overlooked by a bank as serious and grave offence which often compromises communication between the parties leading to a dead-lock, thereby preventing the defaulter from re-entering the UAE. 

     

    Dishonour of cheques and travel ban?

    In most situations of default in loan and credit card payments, one simply hands over blank signed cheques as a guarantee to the banks and/or their agents for quick imbursement of loans or acquiring a credit card, which now is the trump card held against the debtor in a bank settlement by the bank. These cheques are used by the creditors as a weapon against the debtors by bounding the cheque and proceeding towards immediate criminal complaints followed by a travel ban.

    In addition to criminal action, the banks may additionally evaluate and opt for other remedies such as civil claim or consider other steps that their counsels may deem expedient in the best interest of their client, the bank.

    That said, it is imperative to understand that in line with a criminal order being Decision Number (1) of 2017 (Emirate of Dubai), Decision Number (119) of 2019 by the UAE Chief of Public Prosecution (for United Arab Emirates) as well as Decision Number (2) of 2018 (Emirate of Ras al Khaimah), cheques amounting up to AED 200,000 (UAE Dirhams two hundred thousand) can be subject to a jail term towards any cheque bounce or for small claims which is upon the discretion of the Prosecutor to forward the matter to the courts of UAE or not. Banks can, however, present these claims before the authorities, wherein the defaulters will be subject to a fine (without undergoing any court order or prosecution).

    The events which may constitute a default in loan agreement includes, but is not limited to:

    • Evasion of judicial judgement;
    • Bankruptcy or insolvency proceedings against the borrower;
    • Significantly opposing change;
    • Breach of warranties, covenants and representations;
    • Force majeure.

    General Clauses in Loan Agreement

    Certain clauses that are generally integrated within a loan agreement include:

  • Waiver: This is where the lender agrees to waive the breach or the event which gives rise to the occurrence of a default;
  • Forbearance: This is where the banks concur not to announce an occasion of default to practice any cures;
  • Negotiate through an expert…

    It is in difficult situations like these wherein banking experts specializing in bank negotiation and loan settlements come in the picture. Yes in a land of expats there are multiple changes in one's living standards and financial situations which at times leads to default in loan, but does not make someone a wilful defaulter.

    Specialized lawyers in bank settlements will examine the situation along with the facts post which shall represent you before the disturbing debt recovery agents and the respective loan recovery bank associates. Having a specialized lawyer shall give the debtor a consolidated chance to have a flexible payment plan or a concession on your interest amount at times along with the principle and shall provide you the cushion to plan your finances.

    A bank settlement expert helps to mentally secure the debtors for the outstanding amount, who are now post their involvement looking forward to a logical loan settlement rather than chasing a defaulter.  The services provided by the banking lawyers shall include drafting and responding to legal notices, corresponding via telephone, email and letters with the creditors and banks, as well as attending settlement meeting on behalf of the creditor.  

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    Sat, 02 Nov 2019 11:13:00 GMT
    <![CDATA[Tort of Trade Mark Passing Off]]> The Tort of Trade Mark Passing Off Around the World

    Introduction

    The reason trademarks are so crucial in the modern business world is due to how the customers and consumer loyalty work. Often, when considering a particular industry such as, for example, fast food, there will be specific names which come to mind immediately. However, the names are not the only thing that comes to mind. The image and branding associated with those names are just as ingrained into the minds of the people. Think of a burger, and the Golden Arches creep their way into the imagination, or perhaps Colonel Sanders will come to mind.

    These images are incredibly recognisable and have their own draw. Driving down the motorway, one has but to catch a glimpse of one of these trademarked concepts, and their memories will fill out the remainder of the details. With such significant power, it should not come as a surprise that companies treat the topic with extreme protection.

    Trademarks are a wide and varied topic as it stands, and one concept which we shall take a closer look at here is that of Passing-Off Trademarks. This concept only truly exists in the jurisdictions around the world which have a Common Law system.

    The reason the idea of passing off is unique to the Common Law system is that it is a tort. Torts are civil wrongs caused by one party towards another, which gives rise to a loss for which the other party is liable. Likely the most common example of a tort is that of negligence, though there are a considerable number is total.

    The tort of Passing-Off protects the name and image of a group by preventing others from causing misrepresentation. This misrepresentation would occur through the use of the Trademarked designs.

    Important to note is the difference between Trademark infringement and Trademark Passing Off. Infringement is the more severe and usually more challenging to prove issue and can be treated as a civil or criminal matter depending on the seriousness of the breach. On the other hand, Passing Off relates more to cases where misrepresentation occurs, and Goodwill between parties is tarnished.

    Expanding Upon the Tort of Passing Off

    Successful Claims of Passing Off:

    For a tortious claim to arise, Five elements must exist or have a breach. These five were introduced and brought into effect in the UK case of Ervan Warnink v Townend & Sons Ltd [1979] AC 371. In this case, a specific alcoholic drink was produced by the Claimant, which was known as Advocaat, and it was reasonably well known to the people. The defendant, in the case, delivers a similar drink with specific differences among the ingredients, and they named the product 'Keeling's Old English Advocaat'. The court utilised a particular set of criteria to decide whether the defendant's drink was passing off as the Claimant. These were as follows:

  • Was there misrepresentation by Townend;
  • Was Townend a trader who partook in the specific trade;
  • Did he sell to prospective customers;
  • Were these practices aimed to impact the Goodwill of the Claimant negatively, and finally;
  • Were there damages caused to the Claimant of substance.
  • These were the five criteria the court used, and through them, they found Townend to by in Breach of the tort of Pass Off.

    These steps were summarised to be more practical by Lord Oliver, who summarised them into three points as follows:

  • Is Goodwill Owed between the parties;
  • Did misrepresentation Occur and;
  • Was the Goodwill damaged?
  • These are still the necessary steps looked through by courts in dictating whether the tort of Pass Off has seen a breach or not.

    Another case on this topic is that of Danone Biscuits Manufacturing SDN BHD v HWA TAI Industries BHD of 2001. This case took place in Malaysia and involved a British biscuit manufacturer that had sold their brand of biscuits called 'ChipsMore' in the country. Their name had a substantial presence and image, and so it came as a surprise to them in 2001 when they discovered another brand of similar products developing a presence. The name of this brand was 'ChipsPlus', which bears a striking similarity to the British company. However, the packaging and branding were also all too similar.

    This case proceeded to the high court where the two products received deep analysis, and the court stated the following:

  • The use of the word 'Chips' was of explicit importance as it was not the only or even most common term to use, and bore a significant similarity across the two brands.
  • The names of both brands also have a single word following 'Chips' which produced a similar tone and structure to the name for which the British company held a Trademark.
  • Further, the styling and designs of both products had similarities in terms of the fonts used and as well as the same structural use of capital and lower case letter with no spaces between the two words.
  • The British company sued and pursued both copyright infringement claims as well as Pass Off claims. The court decided that the similarities were too striking and the defence party intended to utilise the imagery and branding of the well-known and developed British company for their personal gain. Further to this, the similarities also could confuse the general public.

    The court decided that there was an apparent infringement of the Trademark, though this was clear to see. On the topic of the Pass Off tort, there was also deemed to be a breach. The British Company had developed significant Goodwill in the region as its presence had arisen and developed over 20 years at the time. Due to the branding similarities, there was also clear misrepresentation by the defence party. As such, they were further liable as per the tort.

    These claimants saw success in claims of the defence breaching the Tort of Pass Off, and their respective jurisdictions now have these cases as guidance and examples of this.

    Unsuccessful Claim

    The Australian case of Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd [2018] FCAFC 29 considered the dispute between two manufacturers of beer that were both established within the country.

    The Claimant was a company based in the New South Wales Region of the country, and their business revolved around the sale of beer. There was a wide variety under their business umbrella, including a specific drink called 'Pacific Ale' which they had sold since 2010. It was also their bestselling product. The respondents, in this case, was the company Elixir. They were also producers of beer who were based in Melbourne, Victoria. Elixir launched a specific beer in 2015 which was called 'Thunder Road Pacific Ale' though this name received alteration in 2015 due to the demands of Stone & Wood. The alteration removed the word 'Pacific' from the name.

    The case initially arose in 2015 with Stone & Wood claiming Pass Off and deceptive business practices on the part of Elixir, and the claim was later amended to include a Trademark infringement also. The respondents responded with a cross-claim for baseless threats and bringing forth an unfounded claim under Section 129 of the Trademark Act. The court found that the claims brought up were baseless and did not award anything under either infringement or Pass Off of Trademark concepts, and also agreed with Elixir's cross-claim.

    Following are descriptions of the two products and their appearance and also the regions in which they were primarily sold.

    Stone & Wood 'Pacific Ale':

    • Sold in Bottles, though this was not always the case. The original name of the bear was Draught Ale, though once the bottle was introduced, this no longer made sense and was changed;
    • Sold across the eastern seaboard of Australia including New South Wales, Queensland Sydney and Melbourne.

    Elixir 'Thunder Road Ale':

    • Thunder Road is one of the Brands under Elixir, and the branding relating to this is heavily featured on the Bottles and kegs sold. This branding includes a depiction of the Norse God Thor and similar thunder related concepts
    • Sold across New South Wales, Western Australia, Victoria and Tasmania.

    The judge, in this case, found that Stone & Wood has a significant presence in the country with considerable sales occurring therein as well as a social media presence. The specific Pacific Ale also made up 80-85% of their total beer sales.

    However, The Elixir beer had significantly different branding images which were entirely unrelated to Stone and Wood, which were said to be 'significantly different' by the judge. Further to this, it was produced using differing ingredients resulting in a different taste.

    Elixir would have been aware of the presence of Pacific Ale and significant customer base, and so there was a balance to be found. In the end, the judge decided that Elixir was not attempting to take advantage of the image presented by Stone and Wood, and as such, there was no misrepresentation. As such there was found to be no Passing Off under Trademark.

    Conclusion

    The concept of Passing-Off is one which has been primarily developed in the last few decades. These are some crucial cases in establishing what is and is not considered a breach of the tort. On a basic level, the purposeful misrepresentation must be determined by a court. Any attempt to take advantage of the image of an entity with developed Goodwill is also a must. As such, branding and designs of products play a significant role in deciding case outcomes.

    Among these cases, we see the introduction of the basic requirements by Lord Diplock and further clarified and simplified by Lord Oliver in the UK around 1979. We also witness the concept in action in different jurisdictions and just when and why cases are successful.

     

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    Thu, 31 Oct 2019 16:20:00 GMT
    <![CDATA[Patent Infringement Global Perspective]]> Patent Infringement: A Global Perspective

    Ideas and innovation are the cornerstones of any successful corporation. Given that modernisation and globalisation has had a significant impact on corporations, it is only fair that the ideas defining these businesses are given protection from being misused, manipulated or stolen. Stolen ideas is a modern-day problem playing on capitalism by generating revenue to the 'thief'. With the view of preventing this, ideas and innovations are being granted patents now.

    A patent, in simpler terms, is a right granted to an inventor over his invention by a sovereign authority providing the inventor with exclusive rights over the ownership of the process, design or invention. A patent granted to the investor is for a set period in return for disclosure of the invention. Infringing such a right gives the inventor a right to claim for remedies against the infringer. The claim includes and is not limited to injunctions, damages, account of profits, declarations and so much more depending on the jurisdiction of the disputed invention.

    Infringement of patents reign in all industries, from Apple making a claim against Samsung over an infringing patent on their smartphones and tablets to the 'Da Vin Ci Code' book to movie rights disputed.  This article aims to give a global perspective on patent infringement by analysing the different rules and regulations governing these jurisdictions and the various remedies available, respectively.

    United Kingdom (UK)

    Governing Law and Overview

    Patent infringement is a statutory tort as per the common law. In the United Kingdom, there exist well-structured legislations to govern patent rights and infringement. The Patent Act 1977 (as amended) (PA 1977) sets out the various rights and remedies governing patents in the UK. The later legislation Patent Rules passed in 2007 deals with the procedure involved in filing a patent with the UK Patent Office (known as the Intellectual Property Office), filing a patent infringement lawsuit, challenging the validity of the patent, opposing the grant of a patent and other related matters. There are Civil Procedure Rules governing patent rights in the UK as well however these CPR apply exclusively to England and Wales and not to Scotland and Northern Ireland as they have their own rules and regulations in the local courts.

    Overview

    As with all jurisdictions, in the UK a patent is perceived to be infringed when the invention is put to use by someone who is not authorised. Section 60 of Patent Act 1977 states that a person/entity is said to have infringed a patent only if the patent is granted and in force.

    Additionally, the person/entity in question should have done any of the following without the consent of the proprietor to have infringed a patent in the UK:

    • If the invention is a product: the person/entity disposes of, offers to dispose of, uses or imports the original product
    • If the invention is a process: the person/entity uses or offers the process of creation in the UK in addition to the point mentioned above

    To understand how to apply for a patent in the UK, firstly, it is essential to note that patent right is a negative right granted to the applicant, which prohibits an action relating to his invention. However, for this act, there would be no infringement if the patent is used for non-commercial, research, anti-terrorism, experimental medicines and related purposes. The reason for this was explained in the case of Corvalve Inc v Edwards Lifesciences AG [2009] EWHC 6 (Pat) where the courts held that experiments with the patent are allowed to encourage scientific research while still protecting the legitimate interest of the patentee. However, there is some debate over this subject as experimentation often leads to commercial gain (case of Monsanto v Stauffer [1985] RPC 515.)

    Procedure

    Section 1 of PA 1977 states that for a patent to be valid and granted it needs to be new, should involve an inventive step, should be capable of industrial application and is not excluded from being protected as a patent. Once the validity of the patent is granted and is deemed valid, opposing parties can apply directly to the courts to revoke the patent or declare infringement of the patent, regardless of whether the inventor of the patent or the owner is threatened with litigation.

    A patent awarded to the United Kingdom is through either the United Kingdom Intellectual Property Office (UKIPO) or the European Patent Office (EPO). Additionally, the possibility of joining either process under the Patent Cooperation Treaty (PCT) can be made through a foreign request. When issued, a patent provides an exclusive and absolute right to exploit what is protected by the patent and can provide coverage for 20 years as long as it is renewed (and the applicable fee paid) every year from the fourth anniversary of the filing date. A term of protection can be expanded by applying for a Supplementary Protection Certificate (SPC).

    Infringement in the UK

    It is an infringement to sell a patented process for use in the United Kingdom if the person making the offer understands, or it is apparent to a reasonable person, that using the method without the permission of the proprietor would be an infringement of the patent. Furthermore, Section 60(2) Patent Act 1977 also allows the patent proprietor to prevent an unauthorized person from supplying or offering to in the United Kingdom means relating to an essential element of the invention when they know, or a reasonable person would have known, that the element was suitable for and intended to be used in order to put the invention into effect in the United Kingdom. This is referred to as contributory infringement.

    Section 60(3) Patents Act 1977 exempts commercial staple products from this provision: -a patent proprietor can not prohibit someone from selling standard commercial objects merely because they could be used to assemble an infringing device, or even if the manufacturer knows that they are intended for that reason. For instance, according to the precedent in Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2002], computer software is a patented entity although the manual to use it would not be.

    The nature of the various infringing acts in themselves is rarely ambiguous. Nonetheless, one issue that arises is whether fixing a copyrighted item can be infringed as a "making" operation. The response depends on the extent of the repair. Several factors such as the possible lifetime of different components, have to be considered. As per Schutz (UK) Ltd v Werit UK Ltd [2013], if the worn or damaged product continues to embody the entire claimed invention, excluding the component requiring replacement or repair, then it is likely that repair by replacing that component does not "make" the patented product.

    Another question arises when the product supplied is a package of parts that helps the user to assemble the component. Since the consumer has protection under Section 60(5)(a) Patents Act (discussed below), it can be argued that the selling of the package does not result in an infringing act of "making''. A similar argument occurs when the package is manufactured for sale so that there is no violation outside the jurisdiction. Nevertheless, these claims were not checked in case law. In any event, a supplier of such a kit might also be liable for contributory infringement. It is also essential to distinguish between direct and indirect patent infringement.

    Court Proceedings

    It is mainly in London that court proceedings involving UK and EP (UK) patents take place. They are heard either before the Patents Court (a High Court division) or before the Patents County Court, depending on the value and complexity of the case-more complicated cases or cases where the value of the case is more than £ 500,000 are heard before the Patents Court. The judges make their judgments; no jury exists. The procedure at the Patents Court is thorough and generally involves:

    • discovery of documents;
    • experiments (when necessary);
    • written facts and expert evidence (experts are appointed by a party, not appointed by a court); and
    • witness cross-examination at trial.

    In the United Kingdom, copyright disputes and patent validity issues were resolved in one court.  In comparison, in Germany, the two issues are addressed in separate trials (so-called 'bifurcation'). The Patents County Court provides a cheaper alternative to the Patents Court procedure. The level of complicated research information presented and the volume of cross-examination will be reviewed in the Patents County Court, providing small and medium-sized businesses and private individuals with a more open and generally cheaper process. If any party to a case at the Patents County Court thinks that the Patents Court is more suitable, a transfer request may be made.

    Damages

    In claims that proceed in the Enterprise Court of Intellectual Property, the court will make a summary assessment of the party's costs in favour of which any cost order is made. The extensive assessment is not valid. The court will not require a party to pay total costs in excess of:

    • £ 50,000 on the final determination of a negligence claim; and
    • £ 25,000 on a claim for damages or benefit account.

    The maximum amount of scale costs imposed by the court is as specified for each point of the case.

    Remedies

    Remedies for the patent proprietor, in either case, include a temporary or permanent order, products being shipped or destroyed, damages being paid, or an account of the infringer's earnings, or legal costs being incurred. UK patent judges ' decisions are also taken into account and often carry persuasive weight in circumstances where the same patent is litigated in other European countries

    European Union

    Concerning the EU, Section 60 of the PA 1977  of the infringing acts stems from the Community Patent Convention (Articles 25 and 26), revised and replaced by the Community Patent Agreement (89/695/EEC) (OJ 1989 L 401/1) (CPC). Similar provisions are introduced by other European countries. Section 60 was framed in compliance with Section 130(7) of the PA 1977 to have the same consequences in the United Kingdom as almost as possible as the relevant provisions of the CPC. Section 130(7) stems from the Community Patent Joint Declaration Agreement (OJ 1989 L 401/57) which is further implemented by the EEC member states.

    In Bristol Myers Squibb v Baker Norton Pharmaceuticals [ 1999 ] RPC 253, Jacob J held that since there was no distinction between Articles 25 and 26 of the CPC and the relevant provisions of section 60, it was easier to work based on the direct effect of the CPC provisions. Nevertheless, as section 60 has tended to focus mainly on that provision, this report is equally based on that provision as it represents the law in the UK and UK case law. Nonetheless, when interpreting the provision, the UK courts often turn to national European (mainly German) case law.

     

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    Wed, 30 Oct 2019 13:07:00 GMT
    <![CDATA[Common Intention Singapore Criminal Law]]> Common Intention Under Singapore Criminal Law

    Introduction

    The settlement in the former British crown colony on the Strait of Malacca which consists of four trade centres, namely, Penang, Singapore, Malacca and Labuan often referred to as the Straits Settlement which was taken over by the British East Indian Company. The British settlement at Penang was founded in 1786 at Singapore in 1819; it was transferred to the East India Company in 1824, occupied by the British during the Napoleonic Wars. As a crown colony in 1867, the three territories are conventional. Labuan, which in 1907 became part of the Singapore Settlement, was founded in 1912 as a fourth separate settlement.

    Criminal law: The Penal Code

    The Straits Settlements (including Prince of Wales Island (Penang), Singapore and Malacca) was recognised in these territories for most of the 19th century as that of the United Kingdom, as far as local conditions permit. Nevertheless, the Straits Settlements Penal Code 1871 ratified in 1871 (the Penal Code) due to issues such as questions as to the applicability of Indian Acts. Released on September 16, 1872, the Code is primarily an Indian Penal Code re-enactment.

    The Penal Code was amended many times over the years. Sentences for certain crimes increased in 1973, and mandatory minimum sentences imposed for certain offences by the 1984 Penal Code (Amendment) Act, which came into force on 31 August 1984. Though there are changes made over time, the cycle is still going on.

    Criminal procedure

    Before 1870, the law on criminal proceedings in effect in Singapore was found mainly in the Indian Criminal Procedure Act 1852, which was valid because the Indian Supreme Court had the power to legislate for the Straits Settlements. After the passage of the Penal Code in 1871, the Ordinance replaced by the Indian act. However, the English system for criminal proceedings continued to adhere to the Penal Code. It was later found unworkable as the Penal Code abolished the classification of crimes into felonies and misdemeanours. Therefore, to remedy the situation, the Criminal Procedure Ordinance 1873 was passed. The Ordinance also eliminated prosecution proceedings instead of charges for all criminal offences. The grand jury and other juries also abolished.

    1902 saw the introduction of a new Code of Criminal Procedure which was later adopted by the Singapore Colony Legislative Council on January 28, 1955. Under the Code of Criminal Procedure, all criminal offences under the Penal Code or other statutes are prosecuted and tried. The criminal law of Singapore is classified and primarily included in a penal code passed in 1870. Based on the Indian Penal Code, its rules are not always similar to the English Criminal Law intended to be improved by its drafter, Lord Macaulay.

    The Penal Code, Singapore's principal criminal law code, has more than 500 sections and is categorised into 24 subsections.

    Section 34 dealing with the "common intention" is the general clarification in Chapter ll. The general-purpose rule on criminal liability was contentious for many years.

    Section 34 Of the Criminal Code contains the relevant legal requirement:

    "When a criminal act is carried out by several persons, in the pursuit of the common intention of each, all  such persons is liable for that act just as if the act were done by him alone."

    Section 34 suggests no specific crime in any way and states the only law of evidence. It only goes to the point of establishing vicarious liability in the perpetuation of popular purpose in certain acts committed by several individuals. Section 34's crux is collective unanimity of the minds of persons involved in criminal proceedings to bring about a specific outcome. On the spot, such consensus can be formed and thus expected by all of them.

    In 2008, V.K. Rajah headed the Court of Appeal in Lee Chez Kee v Public Prosecutor, a systematic study of the common purpose rule was conducted. It determined that the correct definition, based on Section 34 legislative history and the most likely harmonisation of cases, was that four conjunctive elements are to be proved:

    • Criminal act;
    •  Involvement in the doing of the act;
    •  The common intention between the parties; and
    •  An act done in furtherance of that common intention.

    Analysing the ingredients of Section 34:

    Criminal Act:

    The criminal act is a broader term used in criminal law. ' The crime ' refers to the ' criminal act, ' meaning the cohesion and peace of criminal behaviour, culminating in something that there would be punishment for a person if it were all done alone in a criminal offence. In some act, each person has to disclose to achieve a common goal, such as death or terrible injury to a person. It should be noted that each person must perform an act, no matter how big or small, in order to complete the entire act of an intended offence.

    It is impossible to conceive of two men doing the same act in the same way. It is impossible to do that. Therefore, to have any sense, the word criminal act committed by several individuals' should conceive of an act that can separate into sections of each part performed by another individual, the whole of the criminal act that was the shared intention of everyone. In other words, the one criminal offence may be deemed to consist of several acts committed by the various conspirators, the consequence of their acts being the criminal act that was their common purpose.

    Participating in the act:

    There must be several parties involved in carrying out the criminal act. Two presumptions withheld from this are:

  • If several people do not commit the criminal act, Section 34 is unreliable.
  • The parties must carry out the criminal act, i.e. each party must have engaged in such criminal act.
  • For Section 34, the mere agreement between parties to commit a specific criminal act would not be appropriate.

    Now, what constitutes participation?

    Participation may be passive or aggressive in some situations. Moreover, where the mere presence is passive, it suffices. Nevertheless, cases such as PP v Gerardine Andrew propagated the view that presence is not merely an indication of participation but the only possible indication of participation.

    There should be no emphasis on the presence at the criminal activity scene, regardless of whether it is a single or a "twin crime" case.  The critical issue is whether there has been involvement, not appearance; - participation does not always need to be decided by physical presence. Participation should be a question in every case as to whether the accused person has participated in such a degree that he can be is considered as guilty as the primary offender.

    Technology has reached an age where there is a possibility to participate in a crime by not being in the real place of the crime. Therefore, in some instances, being present at the criminal act does not do justice.

    Exercise caution when evaluating a party's involvement in which there is no presence. As mentioned in Too Yin Sheong v PP, "the presence of co-conspirators gives encouragement, support and protection for the person committing the act".

    If the criminal act applies to all the acts performed by each person who has engaged in the crime by performing various small acts, then it should also be noted that instead of punishing for doing the individual acts, Section 34 punishes a person for the continuity of the criminal behaviour.

    The court instead ruled that Gerardine Andrew had wrongly decided to address both the secondary criminal act and the first criminal act. It held that insisting on involvement in the collateral criminal act was likely to mean that the primary purpose of the common intenders was to sanction the collateral criminal act. Participation in the first criminal act would, therefore, be enough to determine liability.

    Common intention

    In the earlier days, one had to show that the illegal act was done in compliance with a pre-arranged scheme to conclude collective will. As the cases grew, it was the opinion that common intention is formed by:

    • just a moment before the crime was committed;
    • on the spot, or
    • during the offence committed.

    Wong Mimi v PP, determined that secondary offenders should be held liable by Section 34, there must be no shared motive between the actual perpetrator and the secondary perpetrators to commit the act committed by the actual perpetrator resulting in the offence charged by all the perpetrators; All that is necessary is for the said act to be in support of the criminal act generally expected by all criminals and not incompatible with it.

    It is impossible to prove in many situations that there was a prior agreement among the parties. The actions of the participants, weapons used, injuries inflicted, etc., leads to common intention inferences.

    Consider the entirety of the current circumstances must assess whether there was a common intention.

    Simultaneously, there should not be an inference of common intention unless it is "a valid conclusion excluded from the circumstances of the case."

    Eminent Indian publicists have written:

    Care must be taken not to mistake with common intention same or similar intention; the partition that divides their boundaries is often very thin, but the difference is real and substantial, and if it is overlooked, the result is a miscarriage of justice. The strategy does not need to be complicated, and there is no need for an extended period. It could unexpectedly emerge. Nevertheless, pre-arrangement and deliberate concert must be in place. A simple example of a scenario where the same or similar intention may occur but where leaders of a mob come together with weapons is not a common intention.

    Will leader of the mob will plan to kill, but as necessary, none may have a shared goal as no pre-arranged plan exists. In such a case, "each is separately liable for the injury he … caused but he … cannot be held vicariously liable for the injuries inflicted by the acts of the others".

    Common intention in twin-crime situations

    With respect to liability for common purpose in cases of "twin crime," Rex v Vincent Banka, was held, in the first relevant recorded Singapore ruling on liability for common intention, that "there must exist common intention to commit the crime actually committed, and it is not sufficient that there should be merely a common intention to 'behave criminally'". 

    Therefore, in situations of robbery-murder, the general-purpose must not be merely to commit theft, but also murder. Soon afterwards, in Rex v Chhui Yi, it is seen that a defendant could be held liable for the murder committed by his accomplices even if he did not intend the consequences, given he had the requisite mens rea for murder. The precedent set in Wong Mimi followed for a long time. Mimi Wong was a waitress who became intimate with a married Japanese scientist. His wife had arrived in Singapore and was found dead two weeks later. It was later found that Wong stabbed and killed the wife with the help of the scientist who poured detergent on her face. As throwing the detergent was the husband's idea, he was accused of having a clear intention to kill. The Court of Appeal held that the intention to commit the criminal act that constitutes the offence committed should not be a common intention.

    Moreover, as long as the primary offender's motive is compatible with the secondary offender's collective purpose, all will be responsible for the actual criminal act committed. The court provided the following illustration:

     … If A and B intend to come together to harm C with a knife and A holds C while B willingly stabs in the area of the heart; the stab wound is adequate to cause C's death in the ordinary course of nature, thereby, holding B guilty for his murder.

    Applying Section 34, it is also clear that the act of B in stabbing C is in the service of the common intention of causing harm to C with a knife because the act of B is explicitly consistent with the execution of that common intention and as its' criminal act,' i.e. the cohesion of criminal behavior has resulted in the criminal offense of murder punishable in accordance with s 302. A is also guilty of murder.

    Most cases followed the so-called definition of Section 34 after Mimi Wong's precedent, but the court disagreed with the same argument in Lee Chez Kee. The Court was aware of Prof. Michael Hor's objections against Mimi Wong. His writings include:

    It is necessary to read together with Sections 34 and 35 of the Penal Code. The latter provides that only if he held "any knowledge or intention" will the common intender be liable, thus rejecting Mimi Wong v PP.

    Furtherance of common intention

    The question is remaining for the court to decide when the collateral crime could be said to be in "furthering public purpose." Although it was clear from Mimi Wong (ibid) that secondary victims do not need to have any mens rea in the collateral offence, there was some uncertainty as to the probability that the collateral offence would occur.

    Academics recognised that it was not necessary to carry out the collateral offence in "consistent" with the shared purpose of the parties. Besides, based on Mimi Wong, several decisions are made with different positions in the area of shared purpose. Some of them are:-

    • Shaiful Edham bin Adam v PP, has taken the "subjective foresight" approach, while participants must have some awareness that an act can be performed that is consistent with, or would be in support of, the common intention.
    • PP v Tan Lay Heong argued that collateral crime must be "conceived or ordinarily carried out in support of a common intention" to commit the first crime.
    • PP v Too Yin Sheongmostly followed the strict liability approach, i.e. ' as long as the perpetrator carried out the act in favour of the collective purpose of all of them, the responsibility for that act applies equally to the majority of the secondary offenders.'
    • Asogan Ramesh s / o Ramachandran v PP follows a strict liability policy

    Ultimately, the court held that the mens rea requested of the secondary offender is that he must subjectively be aware that one of his parties is likely to commit a criminal offence constituting a collateral offence in support of the common intention to carry out the primary offence; there is no need to have known of the actual method of execution in a murder situation.

    The Court held in PP v Daniel Vijay S/O Kathirasan, "Section 34 asserts that constructive liability to a secondary offender by allusion to doing of a criminal act by doer in prolongation of a common intention shared by both the actual doer and the secondary perpetrator. It may not be to hold the secondary offender constructively liable for an offence arising from the criminal act of another person (viz, the actual doer) if the secondary offender does not have the intention to do that particular criminal act. It is especially true of serious offences like murder or culpable homicide not amounting to murder."

    The following passage in Daniel Vijay's precedent,

    "In our view, the requirement of common intention is, in principle, a stricter requirement than the "Lee Chez Kee" requirement of subjective expertise for purposes of imposing constructive liability. If A and B have common intention only to rob C but not to physically harm C, and A joins B in robbing C even though he has subjective knowledge that B has a history of using violence, it does not follow-assuming B does indeed use violence against C in the course of carrying out the robbery-that A had a common intention with B to use violence against C; A might simply have been callous about or indifferent to the fate of C. Even if A was aware that B was carrying a knife with him when they set out together to rob C, a court would be more likely to infer merely that A had subjective knowledge that B might likely use the knife to hurt or kill C in the course of carrying out the robbery, as opposed to inferring that A, by going along with B to rob C in those circumstances, spontaneously formed a common intention with B to rob and, if necessary, to use the knife to hurt or kill C so as to carry out the robbery."

    Is in contradiction with the following passage in Lee Chez Kee

    "I propose to lay down with this judgement a determinative pronouncement on the new mens rea required of the secondary offender for him to be liable for the collateral offence which was eventually committed…the supplementary mens rea required is that of a subjective knowledge on the part of the secondary offender concerning the collateral offence likely happening. To be more precise, the secondary offender must subjectively know that one in his party may likely commit the criminal act comprising the collateral offence in prolongation of the common intention of carrying out the principle offence. In this regard, in correlation with the representation "criminal act", I do not think it is essential for the actual method of execution to have been known by the other offender. The phrase "criminal act" is to be granted a broader understanding, and I think that it is sufficient that the secondary offender knew that one in his party might inflict a bodily injury which was enough in the ordinary course of nature to cause death."

    Conclusion

    The Singapore Criminal Court looked up the precedent in Mimi Wong v PP for a long time to decide in cases charged with Section 34. Having said that, in addition to a shared motive in twin crime cases, there is no obligation for the secondary perpetrator to have any mens rea to the collateral offence. The Court held that the desire to commit the criminal act that constitutes the crime committed should not be the principal purpose. Instead, as long as the primary offender's intention is consistent with the secondary offender's common intention, everything will be liable for the ultimate criminal act committed. This leads to several cases with a broad understanding of Mimi Wong.

    The court made a different precedent in Lee Chez Kee later. The court held that the secondary offender's mens rea is that he should have subjectively recognised that one of his partners may have committed a collateral crime in favour of the common intention of carrying out the primary offence. This enforcement of the secondary offender's condition for personal information would amount to his recklessness. It conveys the message that he turned away visible from his head. It has been said that generally speaking, no suspect should be tried, "for any act or omission or for bringing about any prohibited state of affairs unless he is morally blameworthy". Moral blameworthiness is conceptualized as the accused's state of mind as opposed to the reasonable person's state of mind. Then came Daniel Vijay's decision, which was basically at odds with the Lee Chez Kee. Following Lee Chez Kee's comprehensive attempts to explain the rule, the Court ruled that "provision of difficulty" remained. The precedent notes that collective purpose is, in theory, a condition more objective than personal information.

    To whether Daniel Vijay has replaced Lee Chez Kee or whether Lee Chez Kee is said to be reading in the light of Daniel Vijay remains unclear. Hypothetically let us say X and Y decide to rob a store together. Y starts stabbing the shopkeeper with a knife and X is aware that Y is abusive and is also aware that Y always has a knife on him. X also understood that Y could at any given point use the storekeeper's knife as well. Lee Chez Kee applied, it would have been held that X would have been "found to have anticipated a possibility that Y was likely to inflict injury sufficient in the normal course of nature to result in death" and that Y would be held for murder under s.302 (of the Penal Code).

    The academic believed that this result (i.e., the girl's death sentence) separated the girl's moral blameworthiness and her criminal responsibility. It can be said that under Daniel Vijay this conclusion would likely yield a different result, unless, of course, the girl had real knowledge that the knife would probably have triggered an s.300 (c) injury. The proof that Lee Chez Kee and Daniel Vijay are saying radically different things is thus presented. However, Daniel Vijay has only gone so far as to say that Lee Chez Kee has not fixed s's turmoil, and it did not state categorically that Lee Chez Kee would now be replaced. In reality, in the decision, it used the Lee Chez Kee test many times, which indicates that the Lee Chez Kee test was merely updated.

    As Daniel Vijay was pronounced after Lee Chez Kee, it, in essence, replaces Lee Chez Kee although it is specifically mentioned in Daniel Vijay's precedent that the Lee Chez Kee

    ]]>
    Wed, 23 Oct 2019 15:08:00 GMT
    <![CDATA[Enforcement of Foreign Awards in Kuwait]]> Enforcement of Foreign Awards in Kuwait

    Introduction

    With the world ever moving towards a more globalised structure, clarity and cooperation are more important than ever. The move towards a more integrated world has been occurring for decades, most notably following the end of the Second World War. Some of the most notable examples of this include the formation of the United Nations ("UN"), North Atlantic Treaty Organsisation ("NATO"), World Trade Organisation ("WTO") and the International Monetary Fund ("IMF"). There are numerous others, though these entities are of massive substance and promote and drive towards a more interconnected world.

    Technology has also been a major pushing factor and has been something of a vehicle of the interconnectedness. With the rise and spread of the internet towards the latter stages of the 20th century, and the increasing availability and ease of use of mobile phones, the workday never truly stops and nowhere is genuinely very far away.

    All of this has allowed for business to spread to every corner of the world with relative ease, and with the spreading of business, the people have followed. Kuwait is an excellent example of this. While the country is well known for its vast oil reserves, as it has the sixth most significant reserves in the world, it has also been a substantial business magnet. The country has many things going for it. It has a robust economy, and most consider it a high-income and stable nation from an economic standpoint and the World Bank has it ranked as the fourth highest income per capita globally.

    Further to this, the country has solid international ties. It is a critical non-NATO American ally and is a crucial ally to the ASEAN trade block. To top this all off, Kuwait has strong relations with China. These all come together to make the country an ideal location for businesses to expand to and grow.

    Finally, we come to the main topic at hand - the Law. As business and technology have connected the world, so have the laws and regulations which govern it. While each nation and in some cases, individual states within a country have their laws in place to dictate matters, we have also seen the rise of many international treaties and agreements. Due to the sovereign nature of countries, these treaties will have to be ratified and individually implemented within the system though. Beyond this, international agreements do not cover all topics. They relate more to the impactful matters such as international trade and environmental protection.

    However, the majority of laws are still unique to each country. As such, the question arises of what will occur when an international award appears. What will the implementations be in other countries? This article will look at Kuwait's stance on the matter.

    What is a Foreign Award?

    Foreign Awards are when judgements arise in countries other than the one in question. Due to the differences in legal frameworks and systems around the world, international decisions may not be in line with or go through the procedures present in other nations, and so the matter arises regarding just what will be done with these foreign judgements.

    With the international nature of Kuwait, contracts often arise on a global scale; there are numerous complications that one would expect when working in this nature. To deal with this, many countries have implemented systems and regulations which dictate how these topics are to be dealt with and handled.

    Often, contracts contain clauses which specify which jurisdiction's laws they will apply to a case if any issues or disputes arise, or which countries courts will handle matters. While this is certainly allowed and a choice the parties are free to make for themselves, whether an international award will be enforceable on a global scale is a different and more complex discussion.

    Foreign Awards in Kuwait

    Kuwait does allow for Foreign Awards to be applicable within the country, though there is a specific requirement before this will pass. The Kuwait Law Number 38 of 1990 mentions foreign awards. This legislation is the Civil and Commercial Procedures Law, and it is quite extensive. It concerns most aspects non-criminal in nature and sets out the following concerning these awards.

    Article 199 states that there must be a reciprocal benefit for Kuwait judgements allowing them to be applicable within a foreign jurisdiction. To put this directly, foreign judgements will be permitted in Kuwait so long as the country the judgement has come from also allows for Kuwaiti decisions to be applicable. This reciprocal effect makes sense with international contracts because depending on circumstances, disputes may require dealing with in either of the jurisdictions, and awards will need to be applicable in both.

    What are the Stages to Verifying a Foreign Award?

    For one to ascertain whether a Foreign Award is enforceable in Kuwait, there are four elements which must first be present. These are as follows:

  • The court in the foreign jurisdiction must be appropriate to deal with the matter;
  • The parties to the dispute require adequate notification of the actions that will take place, and where they shall take place;
  • The judgement must line up with and must not go against public policy or morality of either nation involved;
  • The decision is conclusive and does not go against the usual judgements of the country on issues of this variety.
  • With concerns to the third point mentioned above, Kuwait is a country which highly values its culture, and it is of great importance that the practices and norms are respected. With the population demographics of the country showing that around 70% are expatriates, it would add further importance to protecting the culture.

    Are there any Issues for Foreign Awards?

    While the above has demonstrated that the law does allow for Foreign Awards, it is rare that this does occur in practice. Judgements from other GCC countries have a higher likeliness of being implemented due to them often having somewhat similar systems, cultural beliefs and international trade and business situations. They also share many similar laws, and the relationships between the nations are quite close, which provides an element of certainty to Kuwait. Less time and work will have to be put in by a Kuwaiti court to ascertain whether the international regulations used are accurate, appropriate and line up with the nation's values.

    On the other hand, foreign jurisdictions, particularly those from the western world, are a little more distant. As such, there have been very few occasions where the upholding of a Foreign Award has occurred. There is only one recorded incident of this having taken place, which was for a case in the UK. During this specific case, the Prosecutor was in the UK and provided a letter stating that the UK would be willing to provide reciprocals to this judgement if it should ever arise within the UK, thus fulfilling that aspect and requirement. Generally, though, this evidence would be seen as weak in Kuwait and may be too much so for the judgement to be accepted.

    The principle still stands though, as the Kuwaiti government are very much aware of how attractive a prospect their country is to foreign businesses and businessmen, and must ensure their laws provide for all eventualities that may occur as a result of this.

    With all this considered, it should be borne in mind that if the parties to a contract wish to allow for the enforcement of Foreign Awards, due to the complicated nature and uncertain court outcomes, they may instead choose to use Alternative Dispute Resolution to solve their issues. Through this method, a Foreign Award can simply be implemented and accepted.

    Conclusion

    Having considered all of this, the concept of international awards is one which is certainly not foreign to the Kuwaiti government. However, it is a topic of significant complexity and depth. What is important though is that on the most basic level, the enforcement of international awards in Kuwait is an entirely legal and entirely possible situation.

    With parties that are involved with each other internationally, it is also crucial to look at the way those entities would react in a realistic situation. If an award arises in one jurisdiction, and the contract between the parties specified that jurisdiction's courts and laws, there will likely occur a mutual acceptance of whatever the award is. This reason is likely why we see very few cases such as the previously mentioned one in the UK, where a Kuwait court received an agreement from the UK confirming the reciprocal nature of the decision. Once a single court comes to a conclusion and provides a judgement, parties will be more likely than not to either approve or at the very least accept it.

    Enforcement of international awards is a topic that requires consideration under the regulations and legislation of a country, especially one with the scale of international business as Kuwait, even if issues, where it comes to the forefront, are few and far between.

    Kuwait has put itself in a strong position when it comes to their regulatory structure as they do not give unless they receive; this is a cautious though friendly enough arrangement which is open to foreign jurisdictions only if the foreign nation is willing and able to guarantee a reciprocal judgement if the opposite situation comes forth.

    Finally, it also allows Kuwait to maintain its culture and moral beliefs as Kuwaiti courts can overturn international awards if they substantially disagree with them, which is a far smaller problem in the GCC, and even on the greater foreign field, is an area that is respected and has little volatility.

     

    ]]>
    Wed, 23 Oct 2019 13:03:00 GMT
    <![CDATA[UAE Netting Law]]> UAE Netting Law

    As announced by the Dubai International Financial Centre ("DIFC") on 14 December 2014, His Highness Sheikh Mohammed bin Rashid Al Maktoum has enacted the DIFC Law Number 2 of 2014 (the "DIFC Law"), in his capacity as the Ruler of Dubai. This legislation came into power as a UAE Federal Law as well - Law Number 10 of 2018 (the "Law") as of 31 October 2018.  Provisions of this Law applies to all Qualified Financial Contracts, Collateral Arrangement and Netting Agreements which are entered in the UAE by any person, provided that the Law lists these abovementioned arrangements. The DIFC Law passed by the DIFC draws upon the International Swaps and Derivatives Association (ISDA) Model Netting Act 2006 and integrates the features of best international practice. It is most likely that this DIFC Law will bring about significant changes to those involved in the commercial and commodity markets both in the UAE as well as internationally.

    As stated by His Royal Highness Sheikh Hamdan Bin Rashid Al Maktoum, this DIFC Law will lead to a decrease in credit as well as settlement risks and will increase the efficiency of the regulatory procedures (including safeguards) concerning Netting. He also mentioned that this, in turn, will strengthen oversight and governance frameworks by improving the performance of the nation's economy and attract further foreign investments.

    Analysis of Netting

    In simpler terms, Netting is a standardised process used in banking and financial markets with the view of making payments for interests or any competing claims between parties. The goal is ultimately to decrease the number of transactions involved with the process. For instance, Bank X owes Bank Y AED 200,000, and Bank Y also owes Bank X AED 150,000. After applying the principles of Netting, the amount required for transfer will be a sum of AED 50,000 from Bank X to Bank Y (200,000 – 150,000). As a result, this new payment between the Banks has resulted in the same desired outcome economically for both the parties.

    Therefore, Netting is a method which decreases any financial, contractual risks like credit or settlement. It is done so by adding up multiple promises of payment and reaching a diminished net promise. Some of the critical features of Nettings are the decrease of credit, settlement, liquidity and systemic risks.

    Another example to understand payment netting (also referred to as settlement Netting):

    Two parties (Party A and Party B) are carrying out a transaction on a specific date. Here, Party A owes Party B £7,000,000, and Party B owes Party A £8,000,000. Here, usually, the parties will combine the amount of currency with being delivered to the other, and the party with a higher aggregated amount will deliver the difference to the other party. Applying this principle to our example, Party B will deliver the outstanding amount of £1,000,000 to Party A on the due date.

    Application of the Law

    Netting includes various cases such as clearance or acceleration of any payment for the delivery of claims under a Qualified Financial Contract entered into under a Netting Agreement. Article 3 of the Law covers this application of the law.

    Furthermore, the article also provides on the calculating, approximating or accepting the close-out or termination, market, liquidation or the replacement value. Any damages incurred which is contributed by a party's failure to follow the rules of the Netting Agreement taken into account for in value.

    Furthermore, it includes the exchange of values calculated into one currency, either by operation of set-off, offset or net out of obligations. It is noteworthy that entry by either of the parties into a transaction either according to or as a result of the net balance is payable either:

    • Directly
    • As part of some consideration for a specific asset
    • As a way of paying damages relating to the non-performance of any such transaction.

    Article 4 of the Law states that the following cases amount to a Netting Agreement:

  • Agreement between parties, including present/future payments or any obligation to deliver between the parties concerning one or more Qualified Financial Contracts. This agreement is commonly known as the 'Master Netting Agreement'.
  • A master agreement between parties relating to the delivery of Netting amounts through 'two or more Master Netting Agreements.'
  • Any Collateral Agreement also falls under this category. For this Article, Collateral Agreements are those agreements, contracts or transactions which fall under either the scope of Qualified Financial Contracts mentioned in Article (5) of the Law or fits in the definition of Netting Agreements mentioned in Article (4) of the Law.
  • Agreements that comply with the Shariah rules and have parallel purposes of the abovementioned Netting Agreements.
  • Agreements which come within the range of Qualified Financial Contracts mentioned in Article (5) of the Law.
  • Qualified Financial Contracts

    As for Article 5 of the Law, it states that Qualified Financial Contracts are deemed to be final and enforceable so as long as the provisions in Article 7 of the Law is not discriminated.

    For Netting to be enforceable, firstly it should be considered as final and enforceable under the Law; i.e. should not be considered void, unenforceable or unfinished for any related reasons to aleatory contracts. These contracts, known as Gharar contract, occur when the determination of rights and obligations of the parties are unclear. Article (7) of the Law, provides for the setting up of the "Committee for Designation of Qualified Financial Contracts''. The Committee is chaired by three representatives, one from the Finance Ministry and two from Regulatory Authorities in the State (Central Bank, Securities & Commodities Authority and the Insurance Authority). The responsibilities of this Committee are as follows:

    • Designate Qualified Financial Contracts (not referred to in this Law).
    • Substitute any financial agreement, contract or transaction from the directory of Qualified Financial Contracts described to in this Law (within its jurisdiction).

    Next, Netting Agreements should settle as final and enforceable by the Law. The terms incorporated in the agreement, including the terms against guarantors, an insolvent or any other person giving security in exchange for support of the insolvent party must be upheld and followed.

    Finally, the Law, regarding a Netting Agreement during bankruptcy and insolvency, states that the commitment of the parties is as stated in the Netting Agreement; - unless their responsibilities convert into obligations. Equally, the process applies to the transaction of financial contracts.

    Note that, Netting Agreements remain enforceable by the newly passed banking laws. These banking laws clarify that the settlement of any netting obligation which has been affected in bankruptcy or liquidation process will be determined according to if such an amount has been paid.

    Because it constitutes a preference due to a non-insolvent, it will not be permissible for the liquidator to annul, deny or stop the execution of any of the operations specified in compliance with the requirements set out in the DIFC Law. The DIFC Law also addresses many previous legal issues relating to the set-off of insolvency and the dissolution of insolvency contracts.

    In conclusion, the DIFC Law is seen as a progressive step which seems to give clarity and certainty to both local and international markets. In addition to this, it is also clear that the qualities of Netting will be acknowledged in the UAE. The DIFC Law has eliminated various legal issues concerning insolvency set off and contracts collapsing due to insolvency as per current UAE Federal Laws.

    The change brought about by the DIFC Law drastically helps to promote and encourages international recognition of the UAE as a well progressed state in the Netting jurisdiction. This, in turn, reflects in a positive note, the UAE's ever-evolving legal system leading to endorsements of more significant financial activity in the country boosting the growth of its commercial financial hub.

    Note that this article is designed only to provide a general overview of the subject matter. It is thoroughly recommended to seek specialist advice for specific circumstances.

    ]]>
    Mon, 21 Oct 2019 11:55:00 GMT
    <![CDATA[GM Food Technology in UAE]]> GM Food Technology in UAE & Global Purview

     

    "The Food You Eat Can Be Either The Safest & Most Powerful Form of Medicine or the Slowest Form of Poison"     -Ann Wigmore

    Since times immemorial humans have cultivated crops for food, they have been picky about beneficial traits for bumper breeding.  This motive of humans in the 21st century is served by modern biotechnology and associated invitro fertilization process. Food that is grown through genetic alteration via use of biotechnology and laboratory techniques at the cellular level are called genetically modified organisms (GMOs). Food and feed containing GMOs or produced from GMOs are known as genetically modified (GM) food and feed.

    With population burgeoning, climate change showing adverse impacts and intrusion of transnational companies in the domain of agriculture, there has been a hue and cry among marginal cultivators, environmentalists and health activists regarding the ill effects of GM food technology. Whether its United States (US), the United Kingdom (UK), India, Africa or Middle East Countries, there has been a considerable resistance and opposition to the introduction of GM foods in supermarkets and open culturable lands due to the risk it poses to environment and health of not only humans but also of flora and fauna and landscapes like soil and water.

    Digressing a bit from the scope of this article, it's quite significant to understand why there has been resistance all around the globe with regard to GM food. Firstly, create food totalitarianism that is only TNCs who have GM technology can manufacture seeds and food products thereby creating a monopoly through their patents and being price-makers in the economy. Secondly, GM crops require much more pesticides and water for cultivation which increase ecological footprint. Thirdly, the fear of unknown allergens and being carcinogenic. Fourthly, widespread cultivation of GM crops would reduce genetic variation among plants and create monoculture thereby reducing diversity in nature.

    It is important to have a bird's eye view of the GM food regulations around the globe to have a better picture of how GM food are dealt by jurisdictions all around the globe and international authorities vis-à-vis United Arab Emirates (UAE) regime regarding GM food.

  • USA: US Food and Drug Administration (FDA) evaluates if genetically modified crops are safe to consume, and stated that food labels are not obliged to mention GM content unless there are changes to the properties of the food e.g. a potential allergen.
  • European Union: European Union via Regulation (EC) No 1829/2003 of the European Parliament adopted labelling rules which require products to be labelled if an ingredient contains 0.9 per cent or more genetically engineered material so that the consumer can make an informed choice.
  • Australia and New Zealand: Both the Oceanic countries adopted mandatory labelling rules in 2001 if there is more than 1 per cent presence of any GM content.
  • India: Food Safety and Standards Authority of India (FSSAI) Regulations 2018 has issued guidelines for mandatory GM labelling if there is more than 1 per cent GM content in food. The Central Government though has set the threshold at 5 per cent of genetically modified content in the food product.
  • South Korea: The country has a higher threshold for GM food labelling i.e. above 3 per cent. It also has three categories viz.
    • genetically modified
    • partially modified
    • possibly contain genetically modified
  • Saudi Arabia: It requires labelling of information pertaining to genetic modification in different ink written in both English and Arabic and a triangle should be drawn.
  • The case of UAE is no different as there has been growing anxiety and cautiousness among the consumers and environment activists regarding the contents of food products. In 2011, the scientists at Abu Dhabi Food Control Authority conducted a study which revealed that GMO foods that were sold in the Emirates, has 16 out of 128 food samples tested containing GMO material, mostly soya or corn. Similarly, Greenpeace conducted a study of 35 items which were purchased in the UAE and Kuwait, and the results were astonishing as the majority of items were contaminated with genetically modified organisms (GMO). In UAE, 40 per cent of food is genetically modified yet without proper labelling laws here, consumers are unaware.

    An overview of the food safety regime in UAE gives more in-depth understanding about the responsibility the food manufacturers would have to take for food safety:

  • Federal Law On Food Safety: The law lays down the standards and regulations for maintaining the safety and quality of food to ensure the protection of public health and consumers. The law imposes strict penalties for companies endangering food safety across the UAE. In fact, no food could be imported for the first time without approval of Ministry of Climate Change and Environment. The Ministry through its National Food Safety Committee works to implement law on safety to ensure high standards of safety throughout food chain.
  • National Food Accreditation and Registration System: As per the Ministerial Decree Number 239 of 2018, food whether imported or locally produced or modified, its composition must be registered before being marketed locally. The ingredients before being marketed need to be registered in the electronic system viz. ZAD.
  • The National Rapid Alert System for Food: This was launched in 2017 to ensure effective implementation of response measures in case serious food risks are detected. The system has devised categories as either high, medium or low in case of risk.
  • Local Entities Ensuring Food Safety: Abu Dhabi Agriculture and Food Safety Authority is the authority which authenticates food safety in the emirate of Abu Dhabi and certifies that the food is fit for human consumption. It conducts the vital research and studies on safe food practices and issues rules, regulations and standards on the food items that could be sold and fit for human consumption.
  • Control of Imported Food: UAE is a signatory to the World Trade Organization Agreement on the Sanitary and Phytosanitary Measures (SPS). The agreement sets provisions on how governments can apply food safety and animal and plant health measures.
  • Besides above, UAE has National Strategy for Wellbeing 2031 which is in tandem with Vision 2021 and UAE Centennial 2071 and thus, line with it, the government is planning to introduce Federal Law to govern GMOs and its related products including food. Besides, UAE adopts positive labelling system to label GM products. To screen GM foods Dubai Central Laboratory has developed polymerase chain reaction (PCR) to test actual contents of food to conform to product description.

    The law in UAE pertaining to GMO food and related products are mainly two regulations covering GMOs, the UAE.S GSO 2141:2011 "General Requirements for Genetically Modified Unprocessed Agricultural Products." This technical regulation outlines general requirements for unprocessed agricultural products obtained through certain techniques of genetic modification and unprocessed agricultural products that contain genetically modified organism, if the GMO present is higher than one per cent. Secondly, the UAE.S GSO 2142:2011 "General Requirements for Genetically Modified Processed Agricultural Products." This technical regulation covers general requirements for processed food and feeds obtained through certain techniques of genetic modification and processed food and feed that contain or produced from genetically modified organism if the GMO present is higher than one per cent of the ingredients. In addition, GSO 2371:2014 specifies the typical terms and definitions of genetically modified food.

    The safety of GM products is also ensured via 8 safety guidelines formulated by the UAE government. The Dubai Government has delegated the authority to let importation of foodstuff as well as monitoring the labelling and testing of the products to Dubai Municipality (DM). Dubai Municipality liaises with the Emirates Authority for Standardization and Metrology (ESMA) in the context of adopted relevant standardization in the UAE. The labelling of the GM products must be done on the wrapper of the food product. The language which mentions the ingredients and other details should be in English and Arabic for ease of understanding of the consumer. If "GMO Free" status is claimed on a product label, the supplier must provide a GMO-free certificate from a competent authority which is empowered in the country of origin in case of imports.

    Conclusion

    Therefore, the implementation of new Federal Law on Biosafety of GM food has objectives to protect public health from the risks arising from genetically modified organisms or their products. It also covers protection of the environment in the development, manufacture, production, transfer or circulation of genetically modified organisms or their products.

    This new federal law is, therefore, a thoughtful step on part of the government as with increasing consumer consciousness and environmental deterioration due to exploitation of natural processes through use of modern biotechnology,  the new Federal Law is progressive in the sense that it would protect the human health and the environment as well as provide the food manufacturers clear guidelines with set of dos' and don'ts as to how they should label their product and mark it with GM label so they don't fall into controversial issues.

     

     

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    Mon, 21 Oct 2019 10:17:00 GMT
    <![CDATA[E-contracts in UAE]]> E-contracts in UAE

    Introduction

    In today's modern E-world, it should come as no surprise that businesses prefer communicating officially online. From arranging meetings to agreeing on legally binding contracts, this trend of electronic business is fast growing. This trend of communicating through emails and applications led to the formation of 'electronic contracts'.  E-contracts are treated in the same way as a written or oral contract, even though they are formed online. These contracts can be formed via emails or special computer programs or electronic agents that are programmed for this specific matter. This article is tailored to discuss the concept of e-contracts in the United Arab Emirates (UAE).

    UAE Legislation

    How an E-contract is formed:

    The UAE, to keep up with this trend of E-contracts, has its law now governing the same. Firstly, as per the UAE Federal Law Number (5) of 1985 with regards to the Civil Code, Article 125, a contract is formed when there is an offer made by one contracting party and acceptance provided by another contracting party so as far as the parties intend to create such a contract. So, in essence, there needs to be three elements:

    • Offer
    • Consideration
    • Intent

    With regards to E-contracts, the law remains the same as Article 132 of the UAE Civil Code, states that intention can either be in writing or just verbal; both of which does not allow or prohibit this being carried out electronically.

    How an  E-contract is valid:

    The Electronic Transactions and Commerce Law Number 2 of 2002 was brought about to govern electronic transactions; E-contracts fall under this bracket. Chapter III, Article 13 states that it is permissible for offer, acceptance, and intention to be carried out electronically for the contract to still be valid (Article 13(1)) and that the validity of the contract in question should not be subjected to a dispute based on such a formation (Article 13(2)).

    Article 14 further speaks to the above by adding and extending that if a contract is formed through an automated electronic medium (Automated Medium) such as electronic information systems that are programmed to perform such tasks, then such a contract would still be legally binding despite there being no communication between real people. Furthermore, it states that if a contract is formed via an Automated Medium with a natural person, it will be valid only if that person knows that the other party he/she is contracting with is an Automated Medium (Article 14(2)).

    Electronic signatures

    It is common knowledge that for a contract to be valid, all parties involved must sign the contract indicating their consent and approval. Similarly, E-Contracts may require e-signatures. As per Chapter I of the Electronic Transactions and Commerce Law Number 2 of 2002, an electronic signature is defined as a signature containing letters, symbols, numbers, voice, or processing systems in an Electronic Form. Additionally, this must be connected to electronic communication and stamped with the intention of authentication. An E-signature can be carried out in the following ways:

    • By clicking a button and agreeing to the terms and conditions as seen in applications, software, updates, etc.;
    • Typing his or her legal name in a box at the end of a contract indicating their intention;
    • Using cryptographic signatures – a concept similar to that of a bank PIN or a PIN-protected document;
    • XML based signature, which is commonly used. This requires digitally recorded fingerprints.

    Article 10 of Chapter I further reinstates that an e-signature is as reliable and equivalent to a hand signature, just as long as the parties are fully knowledgeable about their actions. However, reliance on these signatures must be reasonable. There is a list of factors to be considered with regard to the reasonableness of the reliability of e-signatures. For instance, the parties who rely on the signature must take reasonable steps to verify the identity of the signatory. They should check for any evidence that indicates that the contracting party has been rejected due to the e-signatures. If the parties have contracted before, it is their duty to verify that the contract is performed in a similar manner. In addition to these factors, any other factor relevant to the contract, and the circumstances surrounding it must be taken into consideration.

    Do the UAE Courts acknowledge E-contract as admissible evidence?

    Federal Law Number (10) of 1992 On Evidence in Civil and Commercial Transactions regulate and govern evidence in the UAE. Article 17, Section 1, which was added by the Federal Law No. (36) of 2006 dated 9 October 2006 widens the definition of the electronic signature by stating that any symbols, signs or letters which have unique characteristics which would allow persons to distinguish it from regular symbols, signs or letters would be considered as e-signatures. It further goes on to state that Sending, receiving, shifting, or storing of signs, symbols, inscriptions, pictures or voices, or any other information of any nature made via Informational Technology Medium shall be considered as an electronic document (Section 2). It is to be noted that an e-signature is to have the same ethnicity as the definitions contained in this legislation (Section 3(1)) and that electronic documents and records (as well as scripts) are to have the same authenticity as defined for the official and customary inscriptions and documents (Section 4(2)).

    Thus, an electronic document cannot be rejected on the ground that it is electronic. There need to be specific requirements to negate the validity of such a document to reject it. For instance, the authenticity of the information source, the credibility of the method used to secure the information, the trustworthiness of the presenting, saving and sending process, and the legitimacy of the identity of the author who serves/produces the information.

    Prohibited subjects of E-contract

    Although the trend of E-contracts is widespread and still growing, specific categories of contracts are not acceptable in electronic copy due to the threat of misuse of such documents and/or the vulnerability of the content. Following categories of contracts are generally not acceptable in electronic copy:

    • Documents associated with personal issues, such as marriage, divorce, child adoption, etc.;
    • Wills and trusts;
    • Deeds of title to immovable property;
    • Any transaction which involves purchase, sale or lease (for the term exceeding ten years), or any other disposition of immovable property;
    • Registration of any rights related to immovable property;
    • Any document which is required to be attested before the Notary Republic;
    • Any other document which is exempt by the provision of the law.

    What the courts have to say:

    The courts in UAE have always been strict about the validity of any contract. When it comes to E-contracts their outlook is still the same. As the validity of the contract makes it binding, it is inherently prudent that the contract is formed correctly. For instance, Dubai Court of Cassation 35, 2008 held that electronic records and documents hold the weight of its physical counterpart so as long as it is authentic. Furthermore, with evidence, the Dubai Court of Cassation (Matter 277 of 2009 and decided on 13 December 2009) held that e-signature is acceptable as evidence even if it is not in its original form. This is generally the case as courts accept e-signatures to be valid unless proven otherwise (Dubai Court of Cassation passed a similar decision (Matter 241 of 2007 and decided on 28 January 2008)).

    DIFC authority

    In the Dubai International Financial Center (DIFC), matters relating to electronic transactions are now governed by the new DIFC Law Number (2) of 2017. As per this new law, any contract cannot be deemed invalid solely on the ground that it is in an electronic form (Part 3, Section 10 (13)). The validity of these e-contracts can be found in Part 4 sections 15 and 16 which follows the same principle as the UAE Federal laws. Section 19 states that any contract made via Automated System cannot be denied its validity or enforceability on the sole ground that there is a lack of personal involvement by parties.

    With regards to the signatures being in electronic form, Part 5(22) of the Law states that an electronic signature is held valid if the e-sign used is appropriate for the document generated and it has proved to satisfy the required functions without further evidence. E-signatures are considered admissible evidence in the DIFC as well (Section 24).

    On the whole, the rules and regulations governing E-contracts in the DIFC free-zone seem to mirror and uphold the laws across UAE. In general, the contract, electronic or not, is valid and binding so as long as it is signed appropriately by permitted authorities who possess the necessary understanding.

    Overall, it appears that regulations in DIFC free-zone are similar to those across the UAE: electronic contracts are valid and legally enforceable, an electronic signature is recognized as an equivalent to a hand-written signature and is legally binding.

    Conclusion

    In the ultimate analysis, electronic contracts in the UAE are recognized by both local UAE law and DIFC free-zone law. As mentioned above there are three components governing any contract: offer, acceptance, and intention. So as far as these three components are upheld with accordance with the necessary legal requirements a contract will be deemed valid and binding regardless of the contract being electronic or not. Therefore, if parties through electronic communication have come to an agreement and formed an electronic contract, such contract will be considered as a valid and enforceable agreement that parties will have to adhere. Overall, the area of e-commerce is growing, and the legal system shall develop together with it to be able to manage current uncertainties and face future challenges. 

     

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    Sat, 12 Oct 2019 11:14:00 GMT
    <![CDATA[real estate market financing rules]]> Does the UAE real estate market need new financing rules?

    The United Arab Emirates (UAE) property market has experienced quite a few major developments within the past decade, with a host of new laws, initiatives, and real estate projects being announced. Moving into 2019, the UAE real estate market has been characterised with a great deal of positivity and improvements. Over the past five (5) years, the UAE real estate sector has been in a continuous remedial phase. For instance, the UAE's property market peaked in mid-2014.

    According to rating agency Standard & Poor's (S&P), the UAE property market, particularly in the Emirate of Dubai, will witness encouraged and enhanced recovery beyond 2021. Hitherto, investors have maintained a wait-and-watch stance on the property market, in spite of positive initiatives being taken up by real estate developers and the governments of the various Emirates. Amid a reasonably positive outlook, property prices have continued to fluctuate, but at a positive stance, since 2014, leading to the creation of buyer's, market within the past five (5) years.

    With the Expo 2020 coming up, which is set to align well with the proposed stabilisation of the UAE property market, there is an uptick in the market related to the Expo. The Expo 2020 has already been taken into account into the property market, and the impact of the same had already been absorbed, thus perhaps accounting for the peaking of property prices in the Emirate of Dubai in mid-2014, given the Expo's announcement in late 2013.          

    UAE Government Policies & Industry Response

    The UAE government has initiated a host of new changes to the real estate sector, to strengthen the industry and its fundamentals prior to embarking on the journey towards rejuvenation in the following couple of years.

    Perhaps one of the most publicised of such initiatives has been the institution of a 10-year residency visa for long-term foreign investors, along with a 5-year retiree visa, in 2019. Requirements for qualifying for the 10-year visa include, inter alia, public investments by an individual amounting to at least AED 10 million, and requirements for the 5-year visa necessitate the investing of AED 5 million into a property by the individual. Such initiatives have been instituted with the hopes of reinvigorating interest the UAE property market and increasing demand for real estate in the midst of the current oversupply of properties that exists in the UAE.

    In the Emirate of Abu Dhabi, property ownership laws were amended to permit freehold ownership by foreign investors for the first time in particular economic free zones. All across the Emirates, authorities have sought to further reduce government fees required to pay for property registration and real estate transactions, further relaxing the restrictions on foreign ownership in the efforts to create a more conducive environment for property investments.

    The Dubai Land Department (DLD) even launched a real estate self-transaction (REST) to facilitate quicker and more efficient means of processing real estate transactions. The REST platform has allowed for the digital management of all property transactions from 2018 onwards, and REST was launched as a part of the "Dubai 10x Initiative", a marketing campaign launched by the Dubai government to market Dubai as "the most innovative city on Earth in 10 years".  The Dubai Real Estate Regulatory Authority (RERA) also launched a smartphone application named "Taqyimee", that offers real-time market prices for properties, and connects real estate owners to investors, thereby reducing factors such as time and cost involved in the sale of real estate. The DLD hopes that the institution of such digital platforms would increase transparency in the Dubai property market, thereby making it more investor-friendly and providing a greater degree of access to the market to property buyers. 

    In Dubai, a great deal of property developers such as, but not limited to, have sought to "simulate" demand through employing various creative strategies. Such strategies have included rent-to-own schemes, allowing post-handover payments, sale-and-leaseback models, ensuring investors cannot resell until completion of set time or certain percentage of payments, and acquiring bank finance for the initial down payments of properties. Some of these aforementioned offerings pave way for rental revenues and returns for investors on behalf of the property developer, or 10-year payment plans for financing homes, that allow for payments to be made years after completion of real estate projects. Such initiatives have seen varying levels of success across the Emirates, but continue to have a profound effect on the UAE's real estate market. A recent Bloomberg Business survey revealed that Dubai was at the least risk of a property bubble (compared to Munich, Toronto and Hong Kong that were set at top of the list).

    Perhaps the more extensive solution to this issue lies in the resolution of credit issues in the region with regards to real estate and analysing the mortgage laws that govern the sale of properties in the UAE.

     UAE Mortgage Laws & Financial Developments

    Financing a property is the key question that constitutes an individual's decision whilst purchasing a property. Most investors in the UAE property market take a mortgage to finance their purchase. For simplicity purposes, this article shall further only concern the Emirate of Dubai.

    Dubai's mortgage law pertains to Law Number (9) of 2009, which amended certain provisions of Law Number (13) of 2008, which regulated the interim real estate register in Dubai, and was otherwise known as Dubai's "Mortgage Law". The core elements of the statute are as follows:

    • Articles 3 – 6: Articles 3, 4, 5, and 6 define important terms such as a mortgage, mortgagee, and mortgagor.
    • Article 7: This article concerns the registration of a mortgage. It states that a mortgage is rendered invalid unless and until it is registered with the DLD, and that any agreement thus formed contrary to this is void. Also, it states that the mortgagor, i.e., the owner of the property shall be the sole bearer of the costs outlined within the mortgage agreement/contract unless agreed otherwise. It stipulates the cost of the registration of the mortgage, which is a fee of 0.25% of the amount of the loan, in addition to AED 4,100.
    • Articles 10 – 20: These articles lay out the rights and restrictions of the mortgagee and the mortgagor during the duration of the mortgage.
    • Articles 25 – 30: These articles pertain to the relevant execution proceedings that take place on the mortgaged property. This outlines the instructions on the manner in which a mortgagee may choose to commence legal proceedings against a mortgagor in the event that the mortgagor is defaulting on his/her payments. This law stipulates that after all the requisite procedures and notice periods are met following the legal proceedings, the property be sold at a public auction.

    It is also important to note that this law outlines all the particulars (as specified by RERA) that ought to be accompanied with the mortgage application during the registration process.

    However, one of the most contentious issues surrounding the UAE real estate market is the mortgage cap that exists on loans, often described as the "loan-to-value" (LTV) limit on a mortgage. At the end of October 2013, the UAE Central Bank put into effect a new set of regulations on mortgage lending by banks and financial institutions, which entailed finance companies, banks, and other financial institutions to provide mortgages in accordance with "best practices", so as to better protect borrowers. The Central Bank also issued a threshold of 50% on the amount of an individual's income that can be committed towards paying off debts, including a mortgage. The figure below outlines the LTV ratios set by the aforementioned change:

      UAE NAtionals                          

    A few key takeaways from the impact of the mortgage cap; thus instituted are as follows:

    • For expatriates, mortgages became capped at 75% of the valuation of the first purchase of their property, and similarly, at 80% for UAE nationals.
    • Loans exceeding AED 5 million were further capped at 65% of the value of the property for expatriates.
    • For villas in Dubai valued from AED 5 million to AED 10 million, an up-front payment (in cash) would be needed to be made of almost 50% of the value of the property. For other property types, UAE nationals and expatriates would be required to make a down payment ranging from 20%-50% depending upon the value of the property.

    Many property stakeholders have continuously sought to change the LTV framework currently in place, to facilitate borrowing. Investors reckon that amendments to LTV limits would be able to guide the market towards a more balanced outlook. Investors have also sought to push the UAE Central Bank towards easing age restrictions for mortgage eligibility age limits from the current limits of 65 years for expatriates, and 70 years for UAE nationals, to limits along the lines of 80 years in the UNITED Kingdom (UK), or that of a no-limit level in the United States of America (USA). Amending the aforementioned limits to be based upon the mortgagor's ability to repay their obligations would seem as a reasonable measure to boost demand.

    In September 2018, a federation comprised of the UAE's leading banks cited the means of an amendment to the UAE's mortgage rules in order to enhance the real estate market.

    Role of Lawyers

    It is of high importance to hire a legal professional to under and to legitimize the ownership of the property. Investing in real estate in UAE is a worthwhile option, and now that Dubai is ever-growing as an international economic hub, there is an endless list of services that the Property lawyers in Dubai can advise their clients on. Evidently, foreign investors face challenges in terms of language (e.g. French speaking Canadian property buyer who does not speak English or Arabic desires to buy a property in Dubai on his own without the help of a lawyer or professional), understanding the commercial terms of sale and purchase, becoming aware of financing and possibility of availing the same, reading the fine print in the sale purchase agreement (the SPA) (which as outlined above, often restricts investors to resell their properties for a length of time), and negotiating the SPA. Likewise, investors also seek guidance on matters involving delayed handover, payment of transfer fees to Dubai Land Department, transfer of property to family members or subsidiary firms (which is set at 0.125% of the sale value/market value of the property), post-handover obligations, role of owners association and rights of property owners, default provisions, and insurance obligations, to name a few. These may also include the following: -

    • preparing and drafting of legal documentation;
    • title search;
    • legal filings;
    • facilitating the transfer of properties;
    • finalising and closing the construction deals; etc

    Change in Title and Property Gifts

    Our real estate lawyers have assisted majorly, when it comes to transferring gifts and with regards to the transfers which take place between siblings and if the transfer is possible on the same existing property. It is outlined specifically that the DLD shall not permit to conduct transfer via gifts amongst siblings, since only parent to child and husband to wife relationships gain eligibility. Further, it is not allowed to have multiple gift transfers on the same property to circumvent the earlier rule. That means, it is not permissible to transfer the gift from one sibling to the parent and then transferring the same gift to the other sibling. However, the most prominent exception to this rule is the transfer of gifts between companies and individuals.

    In high probability it is certainly possible to transfer a specific portion or entire rights in the property without the obligation of paying the transfer fees to the DLD.

    Transfer by way of Gifts

    Under the transfer by the method of gifts, the process of "Hiba" (in Arabic for gift) allows the first-degree relatives for transferring a portion or entire property rights by way of grant, donation or gift at the DLD. The procedure flows as under: -

    • obtaining the no-objection certificate
    • payment of transfer fees
    • finalising the transfer of title

    Conclusion

    In conclusion, a raft of the prior proposed changes ought to be instituted to the financing rules that govern the UAE's real estate market, in light of the recent developments that project the UAE's property market into the direction of a buyer's market in late 2020, or early 2021. To alleviate the risks that come along with this transition, and to expedite the recovery process, the UAE Central Bank must consider relaxing limits on its tightened credit rules, so as to facilitate borrowing and make buying property more attractive to a broader demographic of the UAE's population. While passive measures such as the implementation of a 10-year visa, and the waiving of auxiliary fees on transactions has helped to serve the purpose to a degree to a far more substantive move which would be a push towards hard changes in the legislation that governs mortgage rules in the UAE. 

     

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    Thu, 10 Oct 2019 12:49:00 GMT
    <![CDATA[Regulation on Pharmaceutical Industry in the UK]]> Regulation on Pharmaceutical Industry in the UK

    Imagine that you are an entrepreneur in the pharmaceutical industry having recently made a scientific breakthrough in a critical field. Your first instinct is to get this breakthrough certified and licensed, so it can be manufactured and sold to the masses who require it. You approach 'Authority A' only for them to tell you to get approval from 'Authority C' first. While trying to get approval from 'Authority C', the lack of required documentation from 'Authority B' causes the application to be rejected.  The lack of the technical know-how of how to go about with this process makes it seem like a very expensive, daunting and confusing task, making you nearly reach the point of not going through with it. The seemingly complex nature of multiple regulations can appear this way to countless individuals, whereas in reality, it is merely a straightforward and structured path that has been set up to follow. This article aims to provide a guidance for the same by explaining in detail how simple the regulations that govern the pharmaceutical industry are.

    In the UK, the pharmaceutical industry is primarily governed and regulated by the Department of Health and Social Care (DHSC). The primary objective of the department is to improve the quality of care through the issue of guidelines and policies that are to be followed by all personnel and establishments involved. The legislation adhered by the DHSC is:

    • The Medicines Act, 1968
    • The Poisons Act, 1972
    • The Health and Social Care Act, 2008
    • The Pharmacy Order, 2010
    • The Human Medicines Regulations, 2012

    The Department of Health and Social Care oversees 15 bodies that help provide healthcare-related services across the United Kingdom. With respect to pharmaceuticals, there is an executive agency under the DHSC, known as the Medicines and Healthcare Products Regulatory Agency (MHRA) which is responsible for regulating and assessing medicines and devices. The General Pharmaceutical Council established using the Health and Social Care Act 2008, is an independent statutory regulator which regulates pharmacists, pharmacy technicians and pharmacies.

    Regulations on Medicinal Products

    The Human Medicines Regulations, 2012 govern medicinal products across the UK. As per the guidelines, only an individual with a license may manufacture, import or distribute medicinal products. The MHRA is the competent authority to grant such permissions and has the right to refuse any application if it deems to be appropriate. It also has the power to suspend or revoke licenses, if it thinks fit, on the following grounds:

    • The information in the application was false.
    • There is a material change of circumstances in relation to the matters of the form.
    • The license holder has contravened any provisions of the license.
    • The license holder fails to provide the competent authority with relevant information regarding the medicinal products of the license.

    Regulation on Pharmaceutical Establishments

    Pharmaceutical establishments in the UK are regulated by the Medicines Act, 1968 and the Pharmacy Order 2010. The regulations require these establishments to acquire a license prior to setting up shop and prohibit anyone apart from the pharmacist who is responsible, from being in charge of the registered store. The establishments must comply with the guidelines set forth in the legislation, for which the registrar shall be the competent governing authority. Medical devices, on the other hand, are regulated by the MHRA.

    Regulation on Medical Devices

    The MHRA has issued a set of instructions that are to be followed for the registration and usage of any medical device in the UK market. The Medical Devices Directive (MDD), a directive issued by the European Union, describes a medical device as any instrument, apparatus or article that is used to diagnose, prevent, monitor, treat or alleviate diseases or injury, or investigate and modify a physiological process, or control conception. According to the MHRA, there are three types of medical devices, which are:

    • Active Implantable Medical Devices: Powered/partial implants left in the human body.
    • In Vitro Diagnostic Medical Devices: Equipment intended to use in vitro to examine specimens from the human body.
    • General Medical Devices: Devices that usually relate to other medical devices.

    Depending on the level of risk associated with them, medical devices are given the following classification:

    • Class I (regarded as low risk)
    • Class IIa (regarded as medium risk)
    • Class IIb (regarded as medium risk)
    • Class III (regarded as high risk)

    Once it has been established as to how the medical device will be classified, it is required to go through a conformity assessment as set out by the MDD. All classes of medical devices are required to have a declaration stating that the requirements set out in the MDD are met and inform the competent authority, in this case, the MHRA, in order to get approval and certification for the same.

    National Healthcare System and Funding

    The United Kingdom has a national public healthcare policy in the form of the National Health Service (NHS), an executive public body under the DHSC. The range of services offered by the NHS covers every aspect of healthcare, including medical services from general practitioners and medical treatment in NHS hospitals (for both emergency and non-emergency cases). There also exists a private health insurance system within the UK, although a relatively lower number of people opt for this due to the range of services covered under the NHS. Patients opting for a private health insurance program have quicker access to specialists, can avoid long waiting times and can avail better facilities. The premiums for these private health insurance programs on the level of coverage the person has enrolled for, their age and lifestyle, and any pre-existing medical condition.

    Within the UK, there are two arrangements of pricing that exist for medicinal products. They are:

    • The Voluntary Scheme for Branded Medicines Pricing and Access
    • The Statutory Scheme

    The Voluntary Scheme for Branded Medicines Pricing and Access is a voluntary agreement that exists (DHSC) and the Association of British Pharmaceutical Industry (ABPI). This scheme is applicable only within the NHS and aims to give the NHS access to good quality medicines at a reasonable price and at the same time, allowing the body to research and develop improved drugs. The decision to change prices lies with the DHSC upon evidence that suggests a need for the same in order to preserve an economical supply of drugs. Another way in which a member of the Voluntary Scheme can initiate a price change is if their assessed profits exceed the 'Return on Capital' percentage of 21%, by 50%. If such is the case, then the member reduces prices by an equivalent amount. If the member's profit exceeds 50%, but from below 21%, then they are entitled to a price increase.

    The Statutory Scheme of regulating the price of medicinal products is governed by the Branded Health Service Medicines (Cost) Regulations, 2018. According to the regulations, manufacturers are required to pay a rebate to the DHSC at a fixed percentage, which initially was at 7.8%, but subsequent amendments set the rates at 9.9%, 14.7% and 20.5% for the year 2019, 2020 and 2021. The Statutory Scheme can further establish a maximum price for a specific drug, at the discretion of the DHSC.

    Regulation on Clinical Trials

    Clinical trials are a critical part of any pharmaceutical product. In order to conduct clinical trials of medicinal products, there are a set of guidelines issued by the MHRA that must be followed. No clinical trial can be performed without prior authorization from the MHRA. An application for permission to conduct clinical trials must be submitted to the MHRA, while simultaneously getting an opinion from the Ethics Committee, which must be positive in nature. The application for clinical trials can also be submitted through the Common European Submissions Portal, which was created for the purpose of having a secure and straightforward mechanism to communicate with the regulatory authorities. Once the necessary approvals have been secured, the clinical trials can begin and are divided into 4 phases. It must be noted that only if a product passes the safety and effectiveness tests of one phase, can it go to the next one. The phases are as follows:

    • Phase I: In-human trials. The product is tested on a small number of subjects and aims to find the lowest effective dose and the highest non-harmful dose.
    • Phase II: The subject size is increased to several hundred who have a particular disease or a condition. This phase primarily finds out the common side effects and how the treatment is effective in more significant numbers.
    • Phase III: The therapy is now spread across several thousand patients in order to gather detailed information, and the results are utilized for prescription and patient information.
    • Phase IV: After the medicine has been licensed, trials continue in order to assess the long term harms and benefits of the drug.

    Upon submission of the application along with the relevant documents, an initial assessment will be conducted within 30 days (14 days in the case of healthy volunteer trials and Phase I trials in non-oncology patients). The possible outcomes that can arise are either an unconditional acceptance for authorization of the clinical trial, or conditional approval for authorization of the clinical trial, or non-acceptance for authorization of the clinical trial with specific grounds. Applications which are not given approval are given a chance to amend and resubmit.

    Medical devices, on the other hand, are required to a clinical investigation in order to obtain the CE marking before they can be used. An application must be made to the MHRA at least 60 days before the start of the investigation. Once the MHRA receives the request for an application that is supported by the necessary documents and upon payment of the fees, a reply will be sent within five working days regarding any issues with the form. Any problems that arise will only be cleared after a valid response is given, only after which the 60-day assessment will start. Either at the end of 60 days or before, a definite decision (either an objection or no-objection) will be given as to whether the clinical investigation can happen or not.

    Parallel Imports

    With regards to parallel imports of medical devices, the MHRA has issued a set of advisory guidelines that are expected to be followed. Once the medical device is in compliance with the CE standard of conformity, in accordance with the Medical Devices Directive, the importer will not be recognized as a parallel importer of the medical device unless:

    • Repackaging and rebranding of the product are done in a different market.
    • The medical device is modified in a certain way which is no longer covered by the initial CE standard of conformity

    Regulations on manufacturing and marketing of medicinal products

    The manufacturing and marketing of medicinal products in the UK are governed by the Human Medicines Regulations, 2012. Manufacturing is only allowed to those who have been issued a license for the same by the competent authority (MHRA). The holder of the manufacturing license must ensure that the manufacturing process must comply with Good Manufacturing Practice Directive set forth by the MHRA. Any manufacturing or assembling of medicinal products other than those specified in the license is prohibited, and the license holder must ensure that all staff, equipment and facilities provided at the place of manufacture are appropriate enough to maintain the quality of the medicinal products. In order to market the medicinal products in the UK, an application has to be made to the licensing authority specifying as to how the product would be marketed, i.e. on prescription, from a pharmacy or on general sale. The licensing authority must make a decision whether as to grant or refuse approval for marketing within 210 days from the date of application. Once the authorization has been given, the holder of the authorization must submit periodic safety update reports to the licensing authority. The licensing authority further has the following duties:

    • Make public any such approval.
    • Draw up and revise assessment reports with regards to the quality, safety or efficacy of the medicinal product.
    • Include a summary of the assessment reports in a manner that is understandable for the general public.

    The authorization for marketing is valid for an initial period of five years, which can be renewed for another period of 5 years subsequently. The MHRA has the discretion of revoking any such authorization if:

    • The positive therapeutic effects do not outweigh the risks of the product to the public.
    • The product is harmful.
    • The product lacks therapeutic efficacy.
    • The product composition is not in accordance with that on the application of authorization.

    Pharmacovigilance

    Pharmacovigilance is the practice of monitoring the effects a drug has once it has been authorized and licensed for marketing. In the UK, pharmacovigilance is regulated by the MHRA under the Human Medicines Regulations 2012. According to the regulations, the licensing authority is tasked with creating a creating and operating a competent pharmacovigilance system where suspected adverse effects arising from the use of medicinal products can be reported. The MHRA is empowered to take appropriate regulatory action it deems fit if any and must perform regular audits of its system. The authorization holder is obligated to ensure that it continuously has qualified persons at its disposal for the maintenance of the pharmacovigilance system. They are also tasked with monitoring the system to:

    • Scientifically evaluate the product.
    • Minimize and prevent risks associated with the product.
    • Take appropriate measures whenever applicable.

    The holder of the authorization is mandated to conduct periodic audits, make a report of the main findings and take an appropriate corrective action plan and implement it, whenever applicable.

    All data in the pharmaceutical industry is governed and protected EU General Data Protection Regulation effective from May 2018. This coexists with the pharmacovigilance system that is present throughout the country.

    Liability

    The MHRA is regulatory authority for medicinal products across the UK and under the Human Medicines Regulations 2012, penalties in the event of a breach of obligations by the manufacturer can be imposed by the authority. License and authorization holders have extensive obligations that are to be fulfilled, especially with respect to pharmacovigilance and risk management. The regulations place that for defective medicines, distributors, sellers, and prescribing physicians can potentially be held liable. The provisions are further protected by the Consumer Protection Act, 1987 (CPA). As per the CPA, the liability of the damage lies with the producer of the product. There exists a limitation time period of three years from the date at which the cause of action occurred in order to file a tortious claim, as per the Human Medicines Regulations 2012. The CPA provides a further time period of ten years after the date of the action. The remedies that are usually given out are in the form of damage and is decided by the court after considering the circumstances of the claimant, in accordance with the guidelines issued by the Judicial College and precedents.

    The license and authorization holders can also be held criminally liable for any breach of obligations under the Human Medicines Regulations 2012, which can result in a possible conviction and fine, with the maximum time period of imprisonment not exceeding two years.

    Conclusion

    The extensive regulations that govern the pharmaceutical industry in the UK are necessary to ensure that there is a fair practice in existence and the interest of patients and consumers alike are catered to and upheld. Without these regulations, it will be difficult to govern the ever-growing industry.

     

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    Mon, 07 Oct 2019 15:11:00 GMT
    <![CDATA[Redundancy of Employment]]> Redundancy of Employment

    Redundancy is one of the most contested and controversial aspects of employment, especially with regards to economies with unfavourable economic climates. Many employers may sometimes be faced with the unfortunate challenge of instituting changes into their business and their business practices in order to reduce operating costs and inevitably being forced to make redundancies. Perhaps the last thing that an SME (Small to Medium Enterprise) needs in such an event, is to become liable to further expenses due to poor execution of correct redundancy procedures.

    In a nutshell, the term "redundancy", in the context of employment law, refers to a scenario wherein an employer reduces their workforce in the event that a certain job/jobs are no longer needed, i.e., they become "redundant". Such situations may arise due to factors that are outside the control of the employee itself, such as, but not limited to, the business closing down, the employer needing to cut expenses, the advent of artificial technology (AI) or other technologies that have made that job unnecessary, the job no longer exists, or the business's ownership changing hands, and thus, in most circumstances, redundancy is not a reflection of the employee's ability to do their job, rather it is caused by auxiliary factors.

    In most cases apart from the closing down of the business, employers must provide reasonable justification for rendering an employee's position as redundant. It is important to note that redundancy can only take place in the event that the position itself is declared redundant, and does not take place if one employee is just replaced with a newer one. Colloquially, the terms redundancy, retrenchment, and layoff are used interchangeably. They can be either of a forced or voluntary nature, with regards to which employees are let go from a firm. In the case of voluntary redundancies, employers usually offer incentives such as severance packages or garden leave. Voluntary redundancies prevent the employer from having to choose which employee to terminate. In the event that voluntary redundancies are unsuccessful, a commonly used technique of "Last In, First Out" (LIFO) is employed in forced redundancies, whereby employees who have been with a business for the least amount of time are let go of first. Other factors that may be used in assessing redundancy possibilities include factors such as attendance records, disciplinary records, the standard of work performance of an employee, the employee's prior experience, or the contribution to the business as a whole. It becomes the onus of the employer to apply the test for redundancy and assess he/she requires fewer employees to carry out a certain piece of work, and not just simply the work becoming diminished or ceased.

    The following article will analyse the consequences, both for the employer and the employees, during a time of redundancy, and the legal aspects of the same. It will also seek to analyse the various means of legal recourse that may be available to employees during redundancies in various jurisdictions.

     

    Statutory Meaning of "Redundancy"

    The statutory definition of the term "redundancy" is outlined in the Employment Rights Act 1996 (ERA 1996), which is an Act of Parliament in the United Kingdom (UK). Under Section 139 of the ERA 1996, "redundancy" defined as follows:

    "For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to-

    (a) the fact that his employer has ceased or intends to cease-

  • to carry on the business for the purposes of which the employee was employed by him, or
  • to carry on that business in the place where the employee was so employed, or
  • (b) the fact that the requirements of that business-

  • for employees to carry out work of a particular kind, or
  • for employees to carry out work of a particular kind in the place where the employee was employed by the employer,
  • have ceased or diminished or are expected to cease or diminish."

    Thus, under this definition, the focus is not placed on the quantitative availability of the work, but rather on the question if the employer can evidence a reasonable need for a lesser number of employees to work with the business. The term "work of a particular kind" pertains to the actual work, and not the person in the position to do that work.

    Also, to note, Section 98 of the ERA 1996 outlines the legal reasons, under which a dismissal may occur. These are as follows:

    • the individual's fixed or limited-term employment contract culminates without any renewal,
    • the individual resigns with or without notice owing to a repudiatory breach of contract on behalf of the employer, i.e., on the event that an employee resigns due unreasonable proposals put forth by the employer during the course of a redundancy procedure,
    • the individual's employment contract gets terminated without any prior notice.

    Upon the establishment of an act of removal of an employee as a "dismissal", a simple test has to be applied to ascertain whether that dismissal qualifies as "redundancy". The test, established by various law, entails the following questions:

    • Was the employee in question dismissed?
    • If yes, was the employer's necessity for that certain work to be carried out by the employee ceased or diminished, or was it expected to become ceased or diminished?
    • If so, was the dismissal caused wholly or solely by this aforementioned reason?  

    This test was primarily set out Employment Appeal Tribunal (EAT), a superior court of record in England, Wales, and Scotland, in the case of Safeway v Burrell [1997 UKEAT 168_96_2401 Appeal No. EAT/168/96], and was later reaffirmed in the House of Lords (HL) case of Murray & Annor v Foyle Meats [1999 UKHL 30]. On the basis of this test, "transferred redundancies", i.e., situations wherein an employee who was previously not in a situation to fall into redundancy, gets replaced by an employee who was, are deemed lawful. In such situations, employees are "bumped" into positions of becoming redundant, the EAT analyses factors such as the employee's capabilities and conduct, that would have led the employee to fall into such a situation. The 2012 case at the EAT of Packman Lucas Associates v Fauchon [UKEAT/0017/12/LA] established that it was not necessary for the business to have a reduction in the number of employees, that are carrying out a certain piece of work, in order to satisfy the statutory definition of redundancy under ERA 1996. It is also important to note that should an employer choose not to renew a fixed-term employment contract that covers an absent employee (for example, an employee that is on sick or maternity leave), it would not amount to redundancy under the ERA 1996.

    In the United Arab Emirates (UAE), the Federal Law Number (8) of 1980 is the principal "Labour Law" (referred to as the "UAE Labour Law" hereon), and there is no express statutory definition of the term "redundancy", and thus, this causes a lot of uncertainty and confusion amongst business owners with regards to the correct legal approach towards dismissing an employee. In the absence of a statutory definition, courts have previously held that, in situations where a business dismisses an employee for cost-saving reasons, it would be deemed fair and legal. Under the UAE Labour Law, an employee, who is on an unlimited term employment contract, may only be legitimately dismissed in the following cases:

    • if the dismissal is caused by virtue of the nature of the employee's performance, or any other valid cause, and is done so by the provision of a notice which is in line with the terms of the employment contract;
    • if the dismissal is in accordance with provisions outlined in Article 120 of the UAE Labour Law, which includes, for example, the employee assuming a false identity or nationality or submitting forged documents, the employee revealing any confidential information of his employer, the employee being found in a state of drunkenness or under the influence of narcotic drugs during working hours, etc.

    Also, under Article 117 of the UAE Labour Law, any company is free to terminate any unlimited term employment contract for any given "valid reason", as long as they provide a notice of at least 30 calendar days. However, under the UAE Labour Law, any termination of an employment contract that would take place without a valid reason would be deemed to be of an "arbitrary" nature.

    One of the elements that are crucial to ensuring a smooth redundancy procedure, is ensuring that it takes place fairly. Under the UAE Labour Law, the redundancy procedure should be carried out in a broad and transparent manner, so that it involves a meeting with each affected employee. The employer should take up the responsibility of providing employees with formal and regular updates of the process, along with supplying appropriate documentary evidence pertaining to the procedure. If the employer undertakes a fair and transparent procedure for the redundancy process, the employer will be well-positioned to fend off against any subsequent labour claims. 

    Consultation & Compensation

    Following on from the actual redundancy procedure, the employee whose contract was terminated would be empowered to legally claim compensation and certain forms of consultation and compensation.

    In the UK, in the event that an employer proposes to dismiss 20 or more employees, within a time period of 90 days or less, the employees must engage in what is known as "collective consultation". In the European Court of Justice (ECJ) case of USDAW v Ethel Austin [UKEAT/0547/12/KN] (commonly referred to as the Woolworths case), which was decided in April 2015, the question of the obligation of the employer to provide collective consultation when multiple redundancies are triggered. The ECJ decided that the threshold was to be set at 20 employees undergoing redundancy under one establishment and that the dismissals should be conducted independently of one another. This duty to provide consultation by the employer could also be enjoyed by employees who may be affected by the proposed dismissals as well, i.e., not exclusively to employees who are undergoing redundancy. Thus, even the co-workers affected by the dismissal of their colleagues may seek consultation. When an establishment seeks to dismiss 100 or more employees as redundant, the consultation must begin 45 days prior to the dismissal going into effect, and where there are 20 to 99 employees being dismissed, the consultation period specified by the ECJ is 30 days.

    Along with consultation, any UK employee who is dismissed as redundant is entitled to receive the following:

    • a notice of dismissal or a payment in the event that the notice states that the employee is not required to work during the notice period;
    • a statutory redundancy payment (SRP), in the case, that the employee has worked for the employer for at least 2 years;
    • any other redundancy payment outlined in the employment contract, a collective agreement with any trade union(s), or any other payment at the discretion of the employer.

    The employee may lose the right to claim SRP if the employee, on unreasonable grounds, rejects an offer of suitable alternative employment.  

    In the event that the employee had been employed for a minimum period of 2 years under one employer, and that the employment period has not exceeded 20 years, the SRP will be calculated as follows:

    • 1.5 weeks' pay for each year of employment after reaching the age of 41;
    • 1 week's pay for each year of employment between the age of 22 and 40 (both inclusive);
    • 0.5 week's pay for each year of employment under the 22.

    Several situations may also arise wherein an employer may choose to pay the redundant employees an enhanced amount (ex-gratia or non-contractual pay). Such situations include:

    • instances wherein both the departing parties and the remaining employees wish to preserve some goodwill between them;
    • instances wherein the departing employees are offered an incentive to sign a compromise agreement;
    • instances wherein such payments are norms in a particular industry or market.

    Any of the aforementioned payments, such as the SRP, and the non-contractual payment, are exempt from any taxes up to a limit of GBP 30,000. Above this, the payment shall be subject to the appropriate taxes and National Insurance Contributions (NICs).

    In the UAE, the UAE Labour Law outlines an employee's entitlement and benefits upon the termination of his/her employment contract. They are as follows:

    • all accrued benefits such as accrued but unused leave must be paid to the departing employee;
    • a provision of notice or compensation in lieu of notice must be provided to the departing employee, and the notice must be served with a minimum of 30 days prior to the departure of the employee, and this restriction cannot be waived even with the consent of the employee;
    • if the employee does not find suitable employment in the UAE within a set period of time, the employer is obliged to repatriate the employee back to his/her country of origin;
    • given that the departing employee did not partake in any company-maintained pension scheme, he/she must be paid the end of service benefit (or gratuity) by the employer.

    Conclusion

    As outlined in the article, the redundancy of employment is an unpleasant matter that an employer would have to deal with in the event of letting go of his/her employees. However, if handled correctly by the employer, the process could lead to an amicable departure of the employee. As recapitulated in the article, several means of legal recourse are also offered to the employee in such situations, given that the employee is qualified to obtain the same.

     

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    Sun, 06 Oct 2019 10:29:00 GMT
    <![CDATA[Unveiling Dubai Expo 2020]]> Unveiling Dubai Expo 2020

     

    Introduction to Expo 2020

     "Our region deserves the chance to organize this great world exhibition. Our country is ready to host it. We will keep our promise in connecting great minds to build a better future and we will organize the best event in the history of the World Expo." – HE Sheikh Mohammed bin Rashid Al Maktoum

    Prior to the Expo 2020 vote being declared, some extremely memorable quotes rightly captured the quintessence of Dubai's bid. Consequently, the Bureau International des Expositions (BIE) in its general assembly hosted on 27 November 2013 awarded Dubai as the host of Expo 2020. The Director of Global Foresight and Innovation at Arup, Chris Luebkeman, rightly stated that "seven years is a short time but I can't imagine a better place to make that drive real."

    Being the first World Expo to be held in the region starting from the 20th of October, 2020, the United Arab Emirates (UAE) is welcoming the world for six months to celebrate culture, innovation and collaboration whilst aiming to leave a lasting and meaningful legacy. The mammoth trade fair shall be open for business against the backdrop of the scintillating skyscrapers and supermalls that Dubai is irrefutably renowned for. The Expo 2020 will be the largest event that has ever been staged in the Arab world and is set to welcome approximately 190 participant countries.

    It is pertinent to note that each World Expo held till date is based on a theme. For example, "Feeding the Planet, Energy of Life" was the theme of Milan Expo 2015; "Man and His World" was the theme of Montreal Expo 67. The theme chosen by Dubai for the Expo 2020 is "Connecting Minds, Creating the Future." Under this theme, millions of visitors from across the globe will experience hospitality at its finest, as well as the UAE's values of tolerance, cooperation and inclusion. Through this theme, Expo 2020 envisions to build partnerships as well as inspire ideas that forge the world of tomorrow. There are subthemes which form the key pillars:

  • Opportunity: Dubai, through the theme of Expo 2020, firmly believes that we possess the power to shape our future. Therefore, Expo 2020's goal is to unlock this potential in various ways, including supporting solutions to an array of social problems through Expo's Live Programme, as well as introducing the visitors to new ideas to inspire them to act.
  • Mobility: Indubitably, with the smarter movement of ideas, goods and knowledge, a whole new world of prospects and possibility unfolds. The Expo 2020 enlightens how this has assisted us to venture new frontiers, and how humanity is continually making grander leaps than ever through digital connectivity.
  • Sustainability: There is a growing need to live in balance with the world that we inhabit. The Expo 2020 embraces alternative sources of water, food and renewable energy, whilst emboldening us to reevaluate the ways in which we can preserve the planet.
  • Why is the World Expo important?

    Notably, the World Expo is a global destination for people from across the world to share their ideas, encourage collaboration, showcase innovation and rejoice human ingenuity. Some of the most dynamic inventions that were brought first to this world at an expo include the typewriter in Expo 1876 held in Philadelphia, the telegraph in Expo 1851 in  London, the diesel engine in Expo 1900 in Paris, etc. Most recently, inventions like solar trees as well as energy-saving elevators were showcased in Expo 2015 in Milan. Therefore, being the largest global gathering, the World Expo brings together the greatest mind from across the world to discuss how we can all shape the future, which is the very theme for Dubai Expo 2020. Below, we shall explore how World Expo will be beneficial for Dubai.

    Benefits of Dubai Expo 2020

    There are a number of changes that have been put in place to essentially embrace this event which includes new visa rules, infrastructure, business incentives, as well as various economy-boosting measures. Ever since the announcement of Dubai to hold the Expo 2020, there has been an exponential rise in the business setup in Dubai as well as company formation in the UAE. Further, Dubai's strategic location between the developing and developed nations is an advantage in regard to wider influx of expected visitors, not only during but also after the event. Let us explore how Expo 2020 boosts diverse industries in Dubai.

    Hospitality, Tourism and Leisure

    There is not even an iota of doubt that the event will have a noteworthy impact on these industries. Dubai is expected to host over 170 million visitors from across the globe. While Dubai has an array of different ranges of hotels to suit every visitor's convenience, the Emirate has witnessed the construction of various high rises which further indicates the creation of jobs. Amongst various researches and surveys, Dubai is expected to receive over USD 60 billion worth of purchases, most of which includes the culinary sector; which has resulted in investors establishing various retail restaurants and chains in the region.

    Construction and Real Estate Industry

    In addition to the residents that Dubai already births, the construction industry has seen a rise in demand in the number of properties to meet the needs of the expected visitors. Further, for the construction and infrastructure alone, the government has awarded contracts up to a tune of AED 12 billion. Incentive offering, guaranteed periods of rental income as well as lower service charge has encouraged potential buyers to invest in Dubai.

    Aviation and Transport

    A sum of approximately AED 28.6 billion has been apportioned by the UAE government for the expansion of DXB (Dubai International Airport). Furthermore, the Road and Transports Authority (RTA) has also invested an estimated USD 1.36 billion for the expansion of Dubai's Metro Red Line.

    Financial Services Industry

    The banking sector resourcefully supports the UAE well and additionally, is positioned and prepared for the anticipated visit. The UAE's Central Bank's tailored approach to Expo 2020 has put in place flexible regulations to assist the fiscal stability of investors who, in the wake of upcoming Expo 2020, are already tapping into an array of opportunities presented. For example, the combat on large financial exposure as well as the mortgage cap which has been introduced, curbs all forms of excessive spend. There various European and United States banks that have set up branches in the UAE.

    Residency Rules

    The government's introduction of the long term residency visa is a step towards ensuring the tourists who are interested in UAE residency are able to process the same at ease, before as well as after the event. There have been a plethora of professionals and entrepreneurs enquiring with STA's immigration lawyers in the UAE with regards to the possibility of obtaining the long term visa for their intended service sector. Further, the substantial turnaround in all the industries has been brimming with job opportunities in the UAE, especially in the construction, hospitality and the real estate sector.

    Legal Advisory Services

    Considering the rise in investments in the region since the Expo win, there is consequently a high demand for legal advisory services to secure oneself from business pitfalls. As one of the leading law firm in Dubai, we receive countless enquiries with regards to laws, rules and regulations which applies to individual entrepreneurs that earn large, medium as well as small enterprises. Furthermore, our lawyers in Dubai guide the clients against future disputes that a prudent businessman should understand at length, whilst carrying out comprehensive due diligence prior to committing to a transaction.

    Media

    Dubai Expo 2020 Bureau along with the Telecommunications Regulatory Authority (RTA) have mutually agreed to enhance the cooperation in various areas including organizing the use of Information and Communications Technology (ICT) systems and devices, coupled with the encouraging the participation of government entities in all programs that are launched by the center to host the Dubai Expo 2020. It is essential that these parties enhance their cooperation to ensure coordination with all authorized media entities in the Expo, essentially to identify the frequency requirements of the local and international media agencies that are participating in the exhibition, as well as to keep in place a mechanism for the submission of forms and applications for spectrum permits. Furthermore, it would also result in the cooperation of customs clearance to make sure the entry of all devices to the UAE is in the appropriate manner.

    Brand Protection Guidelines

    There is no doubt that entities and individuals in the UAE and across the globe would be eager to use the intellectual properties of Dubai Expo 2020 in order to boost their business activities by linking their services and products to Expo, consequently raising their own profile in the process.

    For the Expo's commercial partners, the apex beneficial asset is the intellectual property of Expo 2020 including the brand. Apart from the participant countries, below is the list of commercial partners that will be authorized to associate themselves with Dubai Expo 2020:

    • Official Partners;
    • Official Premier Partners;
    • Official Ticket Resellers;
    • Official Supporters like the government agencies who have signed a contract with the event;
    • Official Licensees and Retailers;
    • Official Providers; and
    • Official Media Partners.

    Why is it necessary to protect the brand?

    Without the financial support of various official partnerships, the Expo 2020 would not have been possible. The official partnerships are substantially devalued when businesses without the authority link themselves to the Expo 2020. These partnerships upon signing agreements with Dubai Expo 2020 commit to supporting and believing in the values that are embedded in the core of the brand, whilst working to bring Expo's vision, values and ideals to life.

    Ambush Marketing

    The act of creating a deceiving, authorized or false association with an event, with or without the intention, is referred to as ambush marketing. As an illustration, if a particular website uses the logo of Expo 2020 to enhance their services or products, it unjustifiably benefits from such association without actually paying for the privilege. This is ambush marketing. As another example, consider this situation: Supposedly the official media broadcast right is given to XYZ Media Company, though another Media Company ABC puts up billboards and advertisements outside the venue of the event; it is likely that a person would directly relate ABC to the event, even though XYZ is the official partner, thereby increasing the viewership of ABC where it enriches unethically. Hence, the Expo Brand Team is vigorously engaged in numerous monitoring activities in order to combat and prevent ambush marketing, and have asked the public to report any illegal or suspicious activity. Our media lawyers in the UAE are actively engaged in assisting client who is victims of ambush marketing and are glad to provide further tidings on the same.

    The Expo 2020 allows the editorial use of its protected marks. For example, when journalists provide more information or reports about the events in an article; on the condition that the statements are factual statements that are not made gratuitously for the purpose of marketing or linking to the commercial entity.

    Tawassul

    Tawassul, which means 'connect' in Arabic, is the operational tool that connects various media organizations to important updates and information on elements including licenses and permits, media accreditation, content assets like photographs, press releases, audio and video, electronic media kit etc. The Global Media Briefing is set to take place from the 20th to 22nd of October 2019, which is open to all genuine media organizations that wish to cover Expo 2020 to submit their interest through Media Accreditation Expression of Interest (Tawassul). This opens a window for all media organisations to receive a technical briefing to understand Expo 2020's plan for media to attend as well as cover the event.

    Conclusion

    Most certainly, Expo 2020 will cement Dubai's reputation and status as the epitome of business hubs in the world. Staging such a mega event as the World Expo has most definitely boosted the international profiles and economies of its host cities for over decades; and soon, it is Dubai's chance to step into the spotlight. When highlighting what the legacy of the event will be, it is pertinent to note that more than 80 per cent of the venue is premeditated in a way which can be repurposed and reused in the legacy phase.

     

     

     

     

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    Thu, 03 Oct 2019 17:42:00 GMT
    <![CDATA[Non-Disclosure Agreements for Business]]> Non-Disclosure Agreements for the Protection of Business

    To maintain a competitive advantage in the market, businesses ought to keep innovating, working on new projects, products, and services to best curb the pressure against their competition. This is applicable in a plethora of areas of business, from technology to finance. A non-disclosure agreement (NDA) is a legal document that serves to keep a lid on this aforementioned sensitive information. Within a larger legal document or contract, they made be referred to as confidentiality clauses, confidentiality statements, or confidentiality agreements (CA). Legally speaking, it is a legal contract amongst at least two contracting parties that seeks to detail the confidential knowledge and/or information that the parties wish to share only between themselves, and restrict from any access by any third-party/parties. In most commercial applications, this "information" is usually referred to as intellectual property, whereas the term may refer to other sensitive information in the cases of bank-client confidentiality, attorney-client privilege, priest-penitent privilege, and doctor-patient confidentiality. However, it is important to note that in all of the prior examples excluding commercial applications, the guarantee of non-disclosure is usually not embodied in the form of a written agreement between the parties.

    This article will seek the analyze the commercial application of NDAs only, looking at how they may be used for protection of businesses against, and address concerns such as, but not limited to, trade secrets, data-privacy, branding, consumer protection, copyrights, confidentiality, and patents, on ends of both the employer and employee.

    An NDA, ideally, should serve three important functions:

    • Protecting the vital information: The party/parties that sign an NDA consolidates a legal promise to not divulge any information that is defined as "confidential" under the agreement to unauthorized parties. Any breach of this agreement may be prosecuted as a breach of contract.
    • Assisting inventors to keep their patent rights: A well-drafted NDA should serve the best interests of innovators of new products and intellectual property, especially if the intellectual property is disclosed publicly.
    • Distinguishing clearly between confidential and non-confidential information: A good NDA should clearly state in black and white, so that parties cannot claim ignorance, or the absence of knowledge, in the case of any divulsion of confidential information.

    Also, an NDA must clearly incorporate the following elements within its documentation:

    • The parties that can access the information: In a non-disclosure agreement, all the contracting parties and their identities must be clearly outlined. Information sharing should take place on a need to know basis, and any individual that wishes to gain access to the confidential information should become a party to the NDA.
    • The length and duration of the NDA must be defined: NDAs may last for a definite period of time, or in the cases of information such as personal details, the NDA may be valid indefinitely.
    • The purpose of the NDA must be clearly stated: This is the most important aspect of NDA formation. The NDA must clearly answer questions such as "what" and "why" pertaining to the confidential information and the purpose for its confidentiality. This is of paramount importance, as parties would not be willing to sign an agreement that may hinder the business.

    NDAs and Protection of Trade Secrets

    Mostly, NDAs are of two types: mutual and non-mutual. A non-mutual agreement, or a one-sided agreement, is usually employed when only one party/side would be sharing confidential information with their counterpart, thus only requiring one signee to the agreement. Whereas, mutual agreements entail scenarios wherein two or more parties share confidential information of their own amongst themselves.

    A recent trend in the United States (US) case law, that has raised the possibility of including an expiry date in a non-mutual NDA, has greatly increased the risk of inadvertent loss of trade secret protection. The NDA would restrict the covenantor's (the party that agrees not to disclose any confidential information, for example, an employee in an employer-employee relationship) right to disclose or utilize any information defined as "confidential" by the covenantee (the party to whom the promise was made). Such "confidential information" may include trade secrets in a commercial environment. A "trade secret" may be simply defined as any confidential information that is of exceptional value to a business operation, and is usually subject to great efforts by members of the business to protect its secrecy.

    However, a "restraint of trade" may occur in the operation of some NDAs. A "restraint of trade", simply put, occurs if and when the covenantor's ability to carry out trade with third parties to the NDA is restricted. The existence of expiry date in an NDA would constitute to a restraint of trade, and lead to the creation of a scenario where a business owner may be unable to carry out any business operation, as it may risk the divulsion of some trade secrets. In such cases, the NDA may be deemed void. The use of expiry dates in NDAs may be able to limit the scope of the trade restraint in some cases. There have been many cases which have analyzed the question of enforceability of NDAs with regards to restraint of trade clauses present in them. Thus far, United States (US) case law is the most comprehensive on this subject.

    Under the Uniform Trades Act (UTSA) 1985, the Uniform Law Commission (ULC) of the United States of America (USA) defines trade secrets as the following:

    "information, including a formula, pattern, compilation, program, device, method, technique or process that:

  • derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
  • is the subject of efforts that are reasonable under the circumstances to maintain its secrecy"
  • This definition of trade secrets will serve useful in comprehending the case law that follows. These case laws have dealt with the issue of trade secrets being disclosed under NDAs upon expiration after a specific time period, and the consequences of expiration of the obligation by the covenantee to protect the trade secret(s) after a certain time period.

    In DB Riley, Inc. v. AB Engineering Corp., at the US District Court for the District of Massachusetts, (case ref. no. 977 F. Supp. 84 (D. Mass. 1997)), decided on 18th September 1997, the matter pertained to the plaintiff's claim that the defendant had unfairly acquired the plaintiff's trade secret information, and in spite of contractual agreements that disallowed disclosure by any means, that had existed between them prior to the suit, the defendant utilized the trade secrets to gain a "competitive advantage". Despite this finding, the court ruled in favour of the defendant, stating that it was the plaintiff's fault for not being able to take reasonable measures to preserve confidentiality. Also, as the plaintiff's confidentiality agreement was only valid over a limited period of time (in this case, for a period of 10 years only), the plaintiff could not claim "eternal vigilance" over the business's trade secrets. Thus, the court did not award any preliminary injunction to the plaintiff over the lack of merit in his claim, owing to the expiration clause in the confidentiality agreement. This case clearly outlines how definite (by time) NDAs can affect business practices, and highlights the importance of businesses exercising their power to contract eternal/indefinite agreements.

    A similar case, Silicon Image, Inc. v. Analogix Semiconductor, Inc., (case ref. no. 642 F. Supp. 2d 957(2008)) which was decided at the US District Court for the Northern District of California on 21st November 2008, pertained to a plaintiff's claim that the defendant had wrongfully misappropriated the plaintiff's trade secrets, and thus the plaintiff had sought to stop the defendant from selling copies of its work.

    Analogous to the prior case law referred, the court here also ruled that the information in question would only be qualified as a trade secret had the plaintiff taken reasonable steps to ensure its confidentiality, which, the court said, need not have included unduly expensive measures, but simple measures, such as, but not limited to, advising employees on the materiality of the trade secret, and limiting access to the same by the employment of a "need-to-know" basis. Since the duration of the agreement was only for 2 years, the defendant was free to implement the aforementioned practices upon expiration of that time period. Thus, the court ruled that the plaintiff did not possess a high probability of success of its misappropriation claim. 

    In both cases, the terms of confidentiality, which were time-limited, resulted in a loss of trade secret protection. Whilst the appropriate solution in such cases could be to implement perpetual terms of confidentiality, such agreements are deemed to be "unreasonable restraints on trade" in many US states and other jurisdictions across the globe, as it does not guarantee any concrete protection of the confidential information over such large periods of time. This dilemma exists to a great degree in other jurisdictions as well.

    Given the precedent that has been set by the aforementioned examples in case law, the way forward for businesses is to establish clear lines that distinguish between "regular" confidential information, and trade secrets specifically, in NDAs. The current implementation of a single system to broadly classify all information as confidential may deem beneficial, but its applicability would be expanded if businesses choose to include a separate section which exclusively carves out "trade secrets" from the rest of the information. Use of language along the lines of "whether or not a trade secret" would complement the definition of "confidential information" in confidentiality contracts.

    Another practice that businesses may employ would be setting distinct time durations for both confidential information and trade secrets respectively. This may allow for indefinite protection of trade secrets whilst ensuring definite protection for all other confidential information, allowing businesses to remain in compliance of confidentiality laws whilst simultaneously not rendering the NDAs to be void by placing "unreasonable restraints on trade".

    Apart from the time and duration of the agreement, there are a few additional provisions that should be included in NDAs to help businesses better protect themselves. Some of them include the following:

    • Injunction: Business owners ought to ensure that NDAs include a clause that grants them the right to injunctive relief to seek legal aid against the covenantees in the event of a breach of the agreement.
    • No rights in the receiving party: It may prove useful for business owners to include a clause that does not grant the receiving party (in most commercial applications, the employee), the right to enter into any further agreements or deals, just merely on the fact that they have signed an agreement to preserve confidentiality of some information.
    • Employee Solicitation: In the event that the party receiving the confidential agreement may have access to the business owner's employees, it would better serve the business owner's interests to include a clause in the NDA that restricts that party from soliciting, hiring, or engaging in business-related communication with the business owner's employees for the duration of confidentiality agreement. In some cases, the business owner may only desire that this clause apply to his/her employees that have come into contact, or are cognizant of, special confidential information, or trade secrets.
    • The jurisdiction in the event of a dispute: In most cases, where the business owner is the disclosing party, it would best serve the business owner that he/she detail exactly which jurisdiction a dispute would be resolved in (in the agreement), in the event of a breach or dispute. Furthermore, this would alleviate any logistical hindrances for dispute resolution.

    Protection of Employees under NDAs

    In many scenarios, NDAs may be used unjustly and unethically to silence employees that may suffer the harassment of various forms from their employers.

    A recent, high profile case that highlights this issue, is the case of ABC v Telegraph Media Group Ltd [2018] EWCA Civ 2329, decided on the 23rd of October 2018 by the Civil Division at the Court of Appeal in England & Wales (CoA). This was an appeal case that was filed by a business executive (who was later identified to be Sir Philip Green, a billionaire businessman who is the chairman of the Arcadia Group, an apparel retail company), against the decision of the High Court of England & Wales (HC), which had refused to grant an interim injunction which restrained the respondent (in this case, the daily newspaper The Telegraph) from publishing information that was previously disclosed by an alleged breach of confidence.

    The breach of confidence was alleged to have happened when 5 employees of the business executive, had accused the business executive of sexually harassing them. It is also important to note that these complainants had been signatories to NDAs, which entailed their harassment complaints, and had received substantial payments from the company prior to anything going on the public record. The High Court judge rejected the business executive's application for an injunction of this information, ruling that the confidentiality of the information was outweighed by public interest in the newspaper.

    Upon appeal at the CoA, the appeal was granted by the judge, citing that the publishing of confidential information by The Telegraph was indeed a breach of confidence and that the respondent was obviously aware of this. Whilst the CoA did appreciate the gravity of the matter of misconduct in the workplace and its interest in public debate, he said that ruling otherwise would undermine the importance of NDAs, which had a legitimate role in the settlement of this dispute. Moreover, there was no evidence that the NDAs were not signed consensually by five employees, or by the means of any threats or unreasonable force, and that prior to signing the NDAs, the employees were free to go public with their allegations.

    Conclusion

    In conclusion, such cases blur the lines between ethical behaviour and implementing the law correctly. An employer's best interest should always align with those of his/her employees. However, the use of NDAs to exploit employees and silence them turns the moral compass against NDAs, turning them sources of legal protection to sources of institutionalized harassment.  The use in NDAs in the correct context, both economically and morally, would serve as the ideal use of this legal tool.

     

    ]]>
    Thu, 03 Oct 2019 16:56:00 GMT
    <![CDATA[Abu Dhabi Oil and Gas Guide]]> Abu Dhabi Oil and Gas Guide

    Abu Dhabi, the capital of the United Arab Emirates, witnessed a massive average of 2.86 mill barrels of oil, in the first half of 2018, itself. Call it fate? No, Abu Dhabi is the only economy in the United Arab Emirate that has petroleum possessions in its womb. This womb is precious for the development of, not only the emirate but also the country, in all. Abu Dhabi has maintained its position in the list of Organisation of Petroleum Exporting Countries (the OPEC), to be the fourth-ranked when it comes to the production of crude oil. Abu Dhabi reserves a whopping 95% of UAE's proven petroleum reserves.

    It was only in 1939 that UAE signed its first oil concession agreement, which covered the whole of Abu Dhabi, including both onshore and offshore. Subsequently, multiple contracts were entered by other emirates in the UAE.

    Legal Framework:

    The Constitution of UAE makes explicit provisions that the natural wealth and resources belong to the public and that they are the public property whose 'community' has the full right to harness it in the best of the great and general interest of the economy. In consonance of the UAE Constitution, the Abu Dhabi Laws have also applied similar primary regulations for its oil and gas industry.

    Abu Dhabi's Supreme Petroleum Council (the SPC):

    The SPC is the supreme and the sole governing body, which is conferred with the responsibility of the oil and gas industry in the emirate of Abu Dhabi. Since, its establishment, SPC has taken over the varied duties for the board of directors (the BOD) of Abu Dhabi National Oil Company (the ADNOC). It has moreover, assumed the functions of the new department for petroleum in the Abu Dhabi government. SPC runs with the below purposes:

    • Formulation and overseeing of the implements of the emirate's petroleum policy
    • Following up with the said implementations across various regions of the industry
    • Ensuring that the goals and aims are established and accomplished
    • Promulgation of the regulations in the field of petroleum in the emirate
    • Ensuring its implementation and enforcement
    • Responsibility of fixing the fiscal framework via its secretariat
    • Overseeing the tax and royalty collection and assessment
    • Issuance of decisions apparent for the management of ADNOC, and other petroleum companies as well

    The ruling body of the emirate is the chairperson of SPC and is conclusive of other nine (9) members which comprise of the prominent members of the ruling family, etc.

    The Abu Dhabi Law Number 9 of 1978:

    The primary piece of legislation overseeing the petroleum operations in the emirate is Abu Dhabi Law Number 8 of 1978 (the Oil and Gas Law) concerning the Conservation of Petroleum Resources. Even though this law is drafted when all is said in done terms, it forces exclusive expectations on the business, specifically requiring the utilisation of 'the most proficient and scientific strategies' and the utilisation of materials and types of machinery that fit in with global benchmarks, including as respects wellbeing and effectiveness.

    The Oil and Gas Law covers all phases of upstream oil and gas operations. The development requires earlier consent and permission, including the accommodation of nitty-gritty examinations and specialized and monetary assessments and evaluations. All exploration activities require pre-established approvals, and any information acquired must be submitted to the SPC, together with interpretations of the data.

    The law additionally contains special arrangements and provisions controlling the upstream, downstream and midstream operations, completing, revising and relinquishment of wells, including the procedure for acquiring consent, least models to be met and revealing commitments.

    On production, an administrator must submit month to month production reports for each production, including daily rates, proportions, wellhead weight, dregs and water content and the API gravity of oil created. Examinations must be led to reservoir behaviour. Administrators should likewise direct oil-recuperation tasks, including gas, water or steam infusion assuming actually and monetarily legitimised to keep up a generation with the approvals of the SPC and to record month to month reports in regard of those exercises.

    Truces (treaties)

    The UAE consented to the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 21 August 2006. Abu Dhabi government-owned organisations frequently necessitate that agreements to which they are a party, especially if the spot of execution is inside the emirate, are represented by Abu Dhabi Law with debates being liable to the assertion in Abu Dhabi.

    The UAE has marked reciprocal arrangements with more than 50 nations, including China, France, Germany, Italy, South Korea and the United Kingdom, most of the whose international oil organizations (IOCs) or national oil organizations (NOCs) have put resources into the emirate's oil division.

    Licensing for Oil

    Unrefined petroleum concessions in Abu Dhabi are allowed by the SPC, for the benefit of the emirate. Even though there is no endorsed structure or model suite of oil concession agreements in Abu Dhabi, the latest concessions have embraced the accompanying structure:

    • an interest for the concession being referred to is conceded by the SPC looking for the benefit of the emirate to IOCs or NOCs with the same being so allowed to such organizations not surpassing 40 per cent in the total, with the parity being held by ADNOC;
    • the concession agreement gives that partaking companies are qualified for lifting their participating interest portion of crude petroleum created from the concession during its term and to trade that raw petroleum from the emirate;
    • ADNOC and different holders of concessionary rights consent to a joint venture arrangement, in which they consent to harness the concession together and set out concurred administration structures;
    • ADNOC and different holders of concession rights designate an operating organization to work the concession for their benefit on a non-benefit making premise. The operating organization is ordinarily an organization incorporated for this reason by the leader of Abu Dhabi
    • IOCs consent to boost innovation move to ADNOC and the working organization according to ace innovation understandings and to offer help to them as per labour supply agreements; and
    • IOCs consent to help different Abu Dhabi establishments, for example, the Petroleum Institute and the Masdar Institute, and to aid the preparation of UAE nationals.

    The SPC expects that the entity that is involved with the concession agreement is the parent organization of the gathering or that the parent organization ensures the accountability of the commitments of the significant element.

    Licensing in Gas:

    The Abu Dhabi Oil and Gas law vests in the emirate, the ownership of the resources found or to be found and awards to ADNOC the privilege to adventure and use all such gas either alone or in association with others, insofar as ADNOC's responsibility for a task is at any rate 51 per cent. Global investments in creating gas assets, along these lines, happens as per field section concurrences with ADNOC with the joint venture being paid an expense by ADNOC for gas delivered.

    Likewise, international investments in handling and moving the oil and gas concessions happen according to joint ventures, with ADNOC keeping up greater part possession and the venture being paid a process and transport charges. As on account of oil concessions, outside accomplices are relied upon to boost innovation move to ADNOC and the working organization according to innovation bolster understandings, to offer help to them as per labour supply agreements and to help different Abu Dhabi establishments, for example, the Petroleum Institute and the Masdar Institute, and to aid the preparation of UAE nationals.

    The harnessing, handling and transportation of the emirate's gas assets stay subject to the locale of the SPC, and any understandings require the earlier endorsement of the SPC.

    The Oil and Gas Law entitles oil organizations working in the emirate to utilize gas delivered by them for their oil operations, including to create control, to lift oil from repositories, to keep up reservoir pressure and as a component of upgraded oil recuperation activities. The Gas Law was altered in 2014 to permit ADNOC to charge oil organizations for the utilization of such gas. Subject to the abovementioned, the Gas Law requires all oil organizations working in the emirate to convey to ADNOC gas so delivered by them.

    By and by, ADNOC coordinates that gas be conveyed to Abu Dhabi Gas Industries Ltd or GASCO, a working organization occupied with the extraction of flammable gas fluids from related and petroleum gas, whose investors are ADNOC (68 percent), Royal Dutch Shell plc (15 percent), Total SA (15 percent) and Partex Gas Corporation (2 percent).

     

    ]]>
    Tue, 01 Oct 2019 10:56:00 GMT
    <![CDATA[Looking to Register your Trademark in UAE in 2019? These 5 Steps will Help You do the Same!]]> One of the most indispensable things you need to pay heed to before establishing your company in UAE, or anywhere for that matter, is to be well-apprised of the competitors and the business environment. However, possibilities are that you might find businesses similar to yours that provide same kinds of goods and services. But you can easily differentiate your brand with a logo of your choice to make your business easily recognizable. And this is why; you need to protect your brand so that no one else gets their hands on it without your express consent. Hence, the need of a trademark in UAE has increased over the years.

    What is a Trademark?

    A trademark is a symbol, a word or a group of words that depict and represent a company or a product. Since registration for trademark in Dubai, Abu Dhabi or anywhere in the UAE is a complete legal procedure, it would be better to hire a lawyer in Dubai to help you sail through the intricate legal procedures. No other business or organization can copy your trademark or use it for their own purpose without any explicit permission.

    Registering your trademark in Abu Dhabi might take a bit of time but it is really important to shield your company or business from impersonators. Well, let us walk you through the steps involved in registering your trademark in UAE:

    • Look into the Current Trademarks

    Before registering a trademark in UAE, your first step is to search whether the trademark you want is already taken or not. And this can be easily done by performing an online search. If the trademark you choose is used by a different business entity, that particular trademark cannot be used by you. Once you choose your unique trademark, comes the procedure of registering a trademark that becomes even easier when hiring lawyers in Dubai.

    • Fill the Application Form

    The application to register a trademark in Dubai needs to be downloaded and then filled in accordingly. You can download the form online and you would have to present the following documents when filling up the registration form:

    • Power of Attorney
    • Trading License
    • Contact details of Applicant
    • A sample of trademark design
    • ID or Passport of the person signing the application form
    • List of goods and services to be protected
    • Make the Payment

    After collecting all the necessary documents, you will be required to pay a particular trademark registration fee. You can make this payment online in the e-services portal of the Ministry of Economy. However, it also involved some additional legal costs or an added translation fee.

    • Assessment by the Ministry

    Once the payment is done, the MOE will assess your trademark application. Any mistake like an unfilled query or any incorrect answer can end up in the rejection of your trademark in UAE.

    • The Final Registration

    If there is no doubt or complaint against your trademark in UAE in a specified time, the Ministry of Economy would hand over a certificate of your trademark registration. This would involves the registration number, date of application, name of the business, name of the owner, your trademark and the description of your goods and services that are classified under your business name.

    The above 5 steps can help you get your trademark in Dubai registered. And once your trademark is registered, it would then be legally valid for around a period of ten years which can be further renewed after making a specific payment.

    ]]>
    Wed, 25 Sep 2019 19:00:00 GMT
    <![CDATA[Virtual Reality and Copyright]]> Virtual Reality and Copyright: Combining New Concepts with the Old

    Introduction

    It is a strange thing to look into the world of technology on occasion and genuinely be surprised by the significant leaps of progress that have taken place. In a way, it is almost impossible to consider the future as a lay-person truly. There are concepts which one day seem hopeless and nothing more than a dream of science fiction authors. Suddenly before you know it, those concepts are entering reality. Once an exciting and game-changing product becomes a reality, it often makes a significant impact and truly bursts on to the scene.

    Virtual Reality (VR) is a prime example of this. Go back just a decade or so and few people would have been expecting it to exist on the current scale we see today. It would have seemed a crazy prospect then, and yet now few will say that VR was not a logical move to take in the world of technology. An even better and more evolved idea would be the smartphone. These have been around for some time now, and it seems crazy to imagine a world without a smartphone in the hands and pockets of practically everyone. They provide so much that many would be unable to live without. Examples of this include access to critical information anywhere and anytime, access to the internet and far more. In the twelve years since though, the number of smartphone brands has become impossible to keep track of and the amount still arising is substantial.

    VR is currently still in its earliest stages, though its audience size is growing. Consider the likes of the movie 'Ready Player One'. In this movie, the world is depicted as being taken over by VR technology with everyone owning a system and the world almost revolving around it. Very few people will consider this to be an outlandish or overly distant prospect. Yes, we are certainly not quite at that level yet, though the groundwork is currently forming. VR is already becoming available to a significant degree with different levels available covering different niches of the market. There are cheap and straightforward forms which require phones along with a plastic (or even cardboard for the likes of the Google Cardboard) headset. Even more expensive types of VR are selling well, with the likes of the Sony PlayStation VR Headset having sold over 4 million units to date.

    One of the crucial aspects of this groundwork and perhaps one of the most important is that of the laws surrounding the technology. Of course, the law is like an ocean in terms of its depth and the areas it covers, though the area that will receive consideration here is that of copyright and VR.

    Copyrighting Virtual Creation

    One aspect of human nature that is significantly awakened within many when it comes to VR is that of creating or producing something. This creativity can yield amazing results, and as time goes on, we will surely see things that are impossible for most to imagine. These works though, are still tied to an individual or specific entity, and for true creative protection, copyright regulation will have to adapt to the unique aspects of VR creations. While creating in a virtual world, many tools are utilised therein and only there.

    Further to this, unlike a painting or a book, it is possible to interact with creation like never before. Imagine touching and exploring something in unprecedented depth, as if it were physically present, though it was nothing more than pixels on a headset. In a way, it is an entirely digital creation though it can be analysed and interacted with as if it were physically present.

    At a basic level, many jurisdictions have copyright regulations in place, and these will have been at work for many years now. Copyright provides the creator of any original idea or Intellectual Property with protection over the specific design, preventing its usage by others without the permission of the original owner. This concept still stands when it comes to VR as any creation, including those that are virtual, can receive protection through many current copyright rules.

    Specific mentions of VR are sparse within these texts though. It can, therefore, be assumed that the unique position of VR, being something of a middle ground between reality and digital works, might cause some issues to arise. However, at this time, registering a product or application in virtual reality requires any individual or entity to take the same steps as registering normal digital products. There are no special processes present at this time.

    Issues may arise as we head into the future with questions surrounding the nature of the digital products becoming prominent. With the greater level of realism and immersion available through VR, questions will arise. A crucial one of these will consider whether differing processes for application registration and copyright should exist. However, for now, the processes are the same.

    VR creations cannot be utilised by others digitally or contained in their work without the permission of the original owner and the full period of protection applies. However, it is also not permitted to replicate products from the real world directly in Virtual Reality. The reasons for this limitation is due to the closeness in nature between the two.

    One significant case on the matter of VR is that of Zenimax Media INC. And ID Software, LLC v Oculus VR LLC, Palmer Luckey, Facebook INC. Brendan Iribe and John Carmack. Zenimax's [Tex. Civil Case No. 3:14-CV-01849-P] claim related to violation of non-disclosure agreement terms and also copyright infringement. There was a further claim for the theft of trade secrets for which Zenimax was demanding USD 6 billion, though this was dismissed. However, on the additional two matter, Zenimax and ID were awarded USD 500 million.

    This case is especially significant as it related to the formation of the virtual reality technology as a whole and so it was an extremely high stakes case. This matter was furthered by the purchase of Oculus by Facebook just prior.

    There are not many cases, especially of this scale in the world of VR at the moment. Once again, this is because the technology is still in its infancy and very much uncharted territory. In time to come, there will undoubtedly arise many more cases, though this is the most considerable at this time.

    However, speaking in general terms, copyright regulations around the world can cover Virtual Reality as they exist now. The rules in the likes of the US, EU and UAE do not prevent the copyrighting of VR content or applications. The legislations covering the copyright of any digital content would be sufficient. The US has its Copyright Act of 1976 while the EU has the multiple directives on the topic. The primary guideline is Directive 2019/790. UAE Federal Law Number 7 of 2002 covers this, and Article 2 specifies in subsection 2, that computer programs and applications are covered. In time, there will undoubtedly be updates and amendments to these regulations to incorporate the concepts expressly. Copyrights are arguably not the primary area of concern for VR. There are further subject matters which have to be answered in the future and so of the crucial issues concern:

  • Rights of ownership of products based entirely in Virtual Reality.
  • Health and safety regulations.
  • One comparison that is here is to cases that arose against Nintendo concerning their Wii console. Due to the nature and exertion of the motion controls, there were reports of individuals sustaining injuries as a result of playing with the system, and specific individuals sued the company. Some of the injury stories that can be found are quite severe, with people falling and sustaining potentially life-threatening injuries as well as individuals exerting themselves, resulting in significant joint issues. A specific case is that of Elvig, et al. v Nintendo of America Inc. No. 08-CV-02616 (D. Colo.) in which a faulty wrist strap resulted in a motion controller being thrown and damaging a TV. However, the court found the claims of the plaintiff to be far too vague with false advertising being the critical claim. Nintendo retorted by stating that adequate warning is provided to customers regarding potential risks. In the end, the court chose to side with the defence.

    One of the most common uses for VR is video games, and due to the nature and level of immersion when playing, injuries are certainly a possibility. Disorientation and dizziness are a genuine problem, especially with particular movement heavy games. Further, since the headsets limit all vision to actual surroundings, tripping or falling into hazards is a real issue. However, all headsets are accompanied with warnings and guides on how to appropriately use them, and video games are likewise provided with such messages. An example of why this is required for video games arises as per the UK General Product Safety Regulations of 2005. This law requires companies to provide safety warnings for any foreseeable usage risks that occur when using the product. These warnings act as exclusion clauses for the developers of games or headsets and are accepted in courts as a method of removing liability. The Elvig, et al. v Nintendo of America Inc. No. 08-CV-02616 (D. Colo.) case once again demonstrates this.

  •     With many creations, another question that arises is that of trademarks and how their management is maintained. As previously mentioned, problems can occur when creating things in virtual space which have a likeness to objects and products that physically exist.
  • Again, consideration must be provided to the fact that video games are arguably the most common use of VR, and so when applying for trademarks, anything which has a resemblance to the real world will not necessarily be infringing on any rights.

    However, in cases where real-world locations are being simulated, and logos or branding is present, issues may then arise.

    The crucial point to note and one of the vital deciding factors here is of whether individuals will be confused as to who the owner of the trademarked logos is. The origin of any branding should not be surrounded in any confusion in this way.

    The Future of Virtual Reality

    It still, even in 2019, feels odd to be thinking about VR and the future. The concept is still just new enough and niche enough to feel like it could all be in our imaginations, though they are far more than that. And existing in the real world, there must be regulations to manage the concept as well as consider and protect creations that are made using it.

    Since the concept is still fresh, the regulations in place are often adaptions of laws governing ideas and concepts that most closely mirror VR in their creative nature, and over time, further developments will arrive, and the rules will amend to make the law and the VR technology easier to combine. However, understanding will take time and introducing new laws and modifying old ones takes more time yet.

    Copyright is also in a decent position as is, with the basic concepts being applicable to VR without the need for changes. In countries with common law systems, court cases will help to flesh out the specific attitudes towards Virtual Reality concepts, while civil law jurisdictions will require a little more law-making and amending.

    There are other issues besides copyright that are just as significant and in a way, more urgent, such as trademark matters as well as health and safety concerns. Individuals sue entities for all manner of things these days and companies take the most considerable precautions to protect themselves from liability.

    VR has an exciting future, and futuristic indeed seems an appropriate way to describe the concept. As with any new significant innovation or invention legislation will adapt and rise to meet it and create a secure legal backbone.

     

    ]]>
    Sun, 22 Sep 2019 17:33:00 GMT
    <![CDATA[Res Gestae]]> Res Gestae – The American Criminal Law Concept

    Introduction

    The United States (US) has a well-established regulatory structure and close to 250 years of growth and development in this respect. As such, the nation is known around the world as having one of the best, most open fair systems around. While it isn't at the very top areas of the rankings, the systems in place and the records are all impressive none the less.

    However, even with such deeply established systems and regulations, there is continued evolution to this day with considerable discussion arising on both civil and criminal law as well as court proceedings of both.

    Actions or activities that are considered harmful or threatening make up the bulk of these. The country has a common law system, and so the general process in the simplest terms for a criminal case is as follows:

  • A charge must initially arise. In criminal cases, this is usually done by the government, and a Bill of Information should be brought forth with the accusations;
  • Alternatively to the Bill, the evidence surrounding the case should go to a grand jury who will decide whether a claim should arise. If they choose as such, this will result in an indictment;
  • Following this, the court assembles with a Judge and Jury, and the court proceeding occur with evidence arising from both the defence and prosecution parties;
  • As this is a common law nation, it is the role of the Judge to then advise the Jury based on the evidence concerning the law. The Judge's duty is not to form a verdict but is present merely to ensure the standing of the law is known to the Jury. Further, they provide that the Jury is aware of concepts such as evidence beyond a reasonable doubt;
  • Once the Jury delivers the judgement, it is up to the Judge to dictate the appropriate sentence.
  • Another of the crucial details that arise when considering common law states is that case laws are law in themselves. They are referred to as Stare Decisis or Judge made Laws.

    Res Gestae is a legal doctrine found in the US which concerns the matter of hearsay evidence presented in a courtroom during a criminal case. This concept will be the primary concentration of this piece, and it shall de be delved into deeply.

    What is Hearsay Evidence?

    Hearsay evidence relates to pieces of evidence utilised and relied upon in the courtroom that arises outside of it. It often relates to third parties not presented as witnesses, or witnesses mentioning proof provided to them by others. Therefore, it is not considered as reliable or usable in many cases.

    The reason hearsay evidence often does not arise in a criminal case relates to the severe nature of the case. In criminal matters, the life of an individual is often greatly affected, whether that is through prison time, significant fines or even simply reputational damage. This severity is the very reason for the existence of the 'beyond reasonable doubt' concept. It would thus be foolish to impact someone due to hearsay evidence so adversely.

    However, this doesn't mean that hearsay evidence is not admissible in court. It would only be accepted, though, under the appropriate circumstances. The Federal Rules of Evidence is the US regulation regarding all evidence, and it states that hearsay evidence is prohibited unless a specific set of criteria occur.

    A crucial case which has expanded the understanding relating to hearsay is the case of Crawford v Washington, 514 US 36 (2004). In this case, Mr and Mrs Crawford confronted another individual who Mrs Crawford claimed had attempted to rape her. During the confrontation, Mr Crawford ended up stabbing the other man in the torso. Mr Crawford subsequently contended that at the time, he believed the other individual had a weapon, and the action was one of self-defence. Both the Crawford's were separately interviewed, though due to the spousal privilege law, Mrs Crawford was unable to testify during the hearings. In her interview, she claimed that she was aware that the stabbed individual did not have a weapon.

    However, the prosecution wished to utilise her interview statements in their argument, and the court allowed for this. Because Mrs Crawford could not testify in court, the evidence would fall under the category of hearsay.

    The reason it was permitted to be used in the court hearing was as such:

  • Mrs Crawford was not allowed to present her evidence for legal reasons, rather than merely being absent;
  • The evidence also held significant sway in the case and resulted in Mr Crawford being found guilty, and finally;
  • The evidence overlapped with her husbands to a significant enough degree.
  • This case was appealed, and the Court of Appeal overturned the conviction based on the fact that the wife's hearsay evidence was not allowed in court. Finally, though, the case went to the Washington Supreme Court, where the three above mentioned points were confirmed, and the conviction received reinstatement.

    What is Res Gestae?

    The Res Gestae doctrine is one particular method through which hearsay evidence can be utilised in a criminal case. The phrase itself literally translates to 'things done'. It related to a statement made by a person in an instant or spontaneously, and as such, the report itself can be taken to be true. Therefore, the account is admissible in court while also being hearsay.

    One case which utilised the concept of Res Gestae was that of State v Fetelee 151, 157 P.3d 590 (App.2007)of 2008, which occurred in Hawaii. In the case, the defendant was on trial for three specific acts. These included attempted murder of one individual as well as the assault of another. One of the first pieces of proof used related to this incident was a piece of Res Gestae evidence. However, Fetelee claimed that this evidence was not viable under the Hawaii Rules of Evidence (HRE), and as such further testing and evidence should receive more considerable attention.

    Further to this, there was evidence presented in the case supporting Fetelee. This evidence included an eye witness who saw certain parts of the 'attempted murder'. However, their viewing was not of the entire situation.

    The case was appealed, though the court agreed with the decision of the court of first instance. Thus Fetelee was convicted on all three counts he had been brought forth on. These included attempted murder, assault and also a theft of the fourth degree.

    Through looking at this case, it is clear that Res Gestae scan confuse the parties, though it can also act as evidence during times where there is no other. The issues brought forward concerning the topic can be summarised as follows.

    Issues Surrounding Res Gestae

    The fundamental nature of the Res Gestae doctrine relies on spontaneous statements for third parties who are not partaking in the court proceedings themselves. There have thus arisen concerns surrounding the legitimacy of the concept and its use.

    One of the vital issues or questions that comes up is that if a spontaneous statement is made, does that necessarily indicate it is true. That is the concept of Res Gestae at the most basic levels, and saying it as such gives rise to questions of its legitimacy by many.

    Further to this, considering the nature of the evidence, it can cause significant confusion in cases where there is differing evidence. In many ways, it can often be considered weaker than other types of proof and can be overruled.

    This is not to say that the concept does not have uses. Hearsay evidence may occasionally arise as the strongest available to a party, and under the appropriate circumstances, it can turn the tides of a case. As previously mentioned, criminal cases place the lives of the defendant in the hands of the justice system. As such, if appropriate information arises which finds the defendant not guilty, the court should consider it, and if it is relevant and reliable, utilise it.

    Conclusion

    Hearsay evidence in a court case is an interesting discussion. There are many cases where its use has arisen. However, there is a general guideline that courts follow to dictate their appropriateness, such as those found in Crawford v Washington.

    Res Gestae is a specific type of exception which considers spontaneous statements made by a third party outside of the courtroom (thus it is hearsay). It is then used as evidence for a trial. Questions have arisen concerning this method and whether it is acceptable, though it currently stands as one of the few exceptional situations in which hearsay evidence may enter a courtroom.

     

    ]]>
    Sun, 22 Sep 2019 16:07:00 GMT
    <![CDATA[Why Company Formation in DMCC is a Great Option as an Entrepreneur?]]> The UAE's free zones are quite popular in the world and it's not hard at all to find out why. DMCC's 0% corporate and personal tax, 100% company ownership, 100% repatriation of capital and profits, no currency restrictions, and 100% import and export tax exemption offer to those who look for company formation in Dubai, free zones offer one of the most exciting environments in the world to kick start your business.

    Apart from the above benefits, each free zone also comes with its own set of advantages that slightly differs from others in the region. And keeping that in mind and highlighting the key benefits of individual free zones, we will consider the Dubai Multi Commodities Centre.

    Situated in the heart of Dubai, at the center of the Jumeirah Lakes Towers district, DMCC is the perfect place to set up your business. Being twice crowned as the 'Global Free Zone of the Year' by the Financial Times fDi magazine, DMCC is home to an exuberant community, developing infrastructure and world-class business services.

    So if you are looking for company formation in DMCC, here are some of the key advantages:

     

    • Manifold Office Packages

    DMCC provides various office solutions- virtual, communal and permanent- each coming with its own set of benefits. The virtual package is ideal if you need your business presence in the UAE but have no need of a physical office space. However, for those looking for an occasional physical base, the flexi-desk package will fit the bill, offering entrepreneurs several business services like desk space or a conference room hire on ad-hoc basis. The main advantage of this option is that it enables entrepreneurs to apply for up to 3 visas.

     

    • DMCC Company Setup Expenditure

    Company formation in DMCC could cost less than AED 100,000. This comprises of the business registration fee, flex-desk package and share capital can be withdrawn afterwards- everything you need to get started.

     

    • Simple setup and registration

    Company formation in DMCC is quite simple and easy. You can complete your initial application online and you will only be physically required to meet with the free zone authorities once you sign the required legal documents. However, it is a good idea to work with a business setup expert to make sure that all the paperwork is done correctly and legally. And once all the paperwork is done, your new free zone company will be running in less than over two weeks.

     

    So now you are convinced on the advantages of company formation in DMCC, so what next?

    But, the specifics of this complete process will largely depend on the type of license you are applying for and the kind of business you are looking to start.

     

    ]]>
    Fri, 20 Sep 2019 11:00:00 GMT
    <![CDATA[Music meets Dance]]> Bollywood Deals: Music Meets Dance

    Who isn't a fan of Dilwale Dulhaniya Le Jayenge? The lens takes us to the romance set in the mountains of Switzerland to a typical wedding household in India with dance, music, drama, and emotion. Bollywood is one of the most prolific centers of film production in the world. It dramatically affects Indian society and culture from the past few decades and has influenced day to day life and culture in India from fashion trends to choreography of dance numbers, where it has been the most significant media outlet. In regards to ticket deals, Bollywood offers approximately 3.6 billion tickets yearly over the globe, contrasted with Hollywood's 2.6 billion tickets sold.

    Thousands of movies are signed each year, and it is essential to understand the contractual obligations to follow in the industry. The industry consistently goes into agreements under numerous types of unfulfilled promises from oral communications, casual correspondence, and draft contracts communicated through production and frequently stay unsigned. These unsigned arrangements refer to as "soft contracts"  are sustained by a theoretical risk of legal requirement combined with some prospect of reputational risk. The Indian film industry has been social relationship driven, under which the game plans and claims were either oral or insufficiently reported, and the debates settle without going into litigation or court.

     In the last couple of years, the Indian film industry has woken up to the requirement for composed contracts and security of Intellectual Property (the IP) rights. The need emerged because the Indian film industry saw a change in outlook in its structure in the recent period. After it was agreed the "industry status" in 2000 by the Government of India, the next years saw the movies accepting subsidizing from the banks, and Indian corporates, for example, Sahara, Reliance gathering, Mahindra and foreign studios, Warner Bros., Twentieth Century Fox and so forth. The banks, Indian enterprises, and remote financial specialists demanded composed contracts with the producers and required the producers to have legal agreements with the cast also, including a proper chain of title documentation. With the expansion in commercialization openings, the abilities that delayed to sign even a one-page contract until mid-2000 began introducing nitty gritty composed arrangements to safeguard their commercialization rights, e.g., marketing rights. On the one hand, however, the development of this industry has been spectacular, then again, the breath-taking universe of Bollywood has seen a surge of cases for breach of the agreement.

    In the past, legal contracts in Bollywood were pretty straightforward. The producers drafted a standard one-page contract stating the music rights for the record studios and one with the wholesaler for appropriation to the silver screen. More critical than the paper was the customary handshake, as no one was comfortable by prosecuting anybody or taking each other to court. The contented course of action crumbled with the happening of home review innovation, when there was a whirlwind of the prosecution to decide if the rights to the video were vested with the maker or the merchant. Today, things are getting more intricate with incomes from music deals, including screenings on planes and luxury ships.  Bollywood is marking a more significant number of agreements recently. Exploiting the rights of a film incorporates transforming it into a computer game, promoting garments associated with cinema, remix and copying the music, etc. The extent of the agreement can be as restricted as expected under the circumstances, while for those purchasing the rights, it is tied in with arranging terms that are as expansive based as would be prudent. For example, famous Indian actor Akshay Kumar has a clause that he won't be working on Sundays. Famous Indian actors have clauses in their legal contracts according to their ease. The famous Bollywood song "Khaike Paan Banaraswala" from the movie Don in 1978 claimed against the maker of the similar title, Don in 2006. The new Don had acquired the rights from Nariman Films, the makers of the first film, under a composed contract and joined the tunes in a different version.

    The Bombay High Court held that the agreement between the makers of the first movie and the offended party (and Kalyanji) was an agreement of administration and along these lines, the rights were with the maker and not the authors. The maker had the legitimate and appropriate power to cut out any part or entire of the reasons in the melodies to the litigants, and in this manner, the agreement between them was substantial. As partners in the filmmaking and appropriation process go into a few composed contracts to record their legitimate and business understanding, the scholarly debate emerges out of non-execution of legally binding commitments or non-payment of sums. Under the Indian Contract Act, 1872 (the ICA), one cannot mainly implement all agreements, and courts don't allow break orders for particular execution. In Indian, the courts cannot principally uphold the individual contracts administrations.

    India churns out over 1,100 films a year, more than any other country across the globe. Anupam Kher, famous Indian actor, and writer were one of the few skilled actors when he entered the film industry thirty-two (32) years ago, and that most of his 450 films did not even have scripts and with producers would have a casual talk and informally discuss the movie. They would only get paid after it was in the cinemas as there was the trust circle around the industry. However, times are changing, and actors are well informed about signing formal contracts. As investors in the filmmaking and dissemination process enter a few legally obliged contracts to record their right and business understanding, the lawfully binding question emerge out of non-execution of authoritative commitments or non-payment of the agreed amount.

    On the other hand, considering the non-performance, it is hard to look for a quick court order for a particular execution of the agreement, as under Indian law, we cannot mainly implement all arrangements. Courts don't allow interval orders for specific performance, and one cannot perform the contracts for individual administrations. Henceforward, if the desired person does not give concurred dates or if he does not convey the music on time, then the only remedy available would be in the form of damages. In case the parties to such agreements have agreed that arbitration shall settle the disputes arising out of the contracts, the parties can still approach the court for specific interim measures. Section (9) of the Indian Arbitration Act, 1996 sets out specific situations where individuals may contact the court for specific of provisional measures. The court was of the opinion that this authority of the Court might be practised even before an arbitrator has been arranged, overruling the prior position that the court can exercise power if demand for mediation has been available. The judge may concede such as interim measures of protection as may appear to the judge to be fair and just. The parties seeking the judge should need to establish prima facie and a comfort zone. For instance, if a satellite merchant has secured satellite circulation rights and does not pay the maker in a timely fashion, then the filmmaker may approach the court to seek an interim injunction.

    Indian Contract Act, 1872

    Without the ICA, it would have been hard to exchange or carry out any business movement in the corporate world. According to the ICA, an 'agreement' is a statement enforceable by law.  A 'declaration' signifies 'a guarantee or an arrangement of guarantees' framing consideration for each other. A statement comprises of an 'offer' and its 'acknowledgement.' The target of the Contract Act is to guarantee that the rights and commitments emerging out of an agreement are acknowledged and that the remedies are made accessible to the breach of rights individuals.

    Hollywood Deals

    Similarly, Hollywood regularly enters into promises under any backed up legal document. Oral correspondence, virtual communication, draft agreements, etc. negotiated between makers and production often remain unsigned and carry a threat of reputational liability. Decreasing formalization in agreements lessens its enforceability, which enhances adaptability and making it flexible with the terms to change contract terms at the party's expense of execution. Increasing formalization builds enforceability, which reduces flexibility by distinguishing an arrangement of conditions in which a nonterminating party can debilitate a legal course of action in light of a threatened withdrawal. Unformalized contracts or as known as 'soft contracts' are the preferred option among the industry as it achieves the same probable outcome with lower cost. Making a film requires a lot of funding, and the capital prerequisites have a tendency to be high, the chances of the movie being a success are thin, and the contracting dangers are remarkable. These variables give the premise to distinguishing the monetary justification behind Hollywood's particular contracting practices. 'The Motion Picture Association of the United States of America reported that in 2007, major studio films had an average production and distribution costs of US Dollars106.6 million.'  It takes a long time to create a movie, from the script writing to its release at the box office. At different points, parties must make what institutional financial experts call particular investments in the undertaking project that is, investments that have a lower value or no value in any alternative use-before having any authentic information as to the similarly commercial outcome. The high risk of business failure joined with the chance of uncertainty with the constant speculation and the disaggregated structure of the film business, represents what the Hollywood press calls the 'waiting game.'

    Exposure to conventional thinking and business-law practices show that parties favor formal enforceable contracts over oral communications or other casual interchanges that are uncertainly enforceable. Hollywood seems, by all accounts, to be a particular case: parties in high-stakes exchanges routinely select moderate levels of legally binding contracts that leave the enforceability of the parties' responsibilities misty. Lawfully enforceable agreements give the most proficient administration component at whatever point any elective instrument, from formal contract to transactional exchange, can't autonomously accomplish an unrivalled expected result net of detail and requirement costs.

    Validity of Soft Agreements

    In India, it is only under certain circumstances where an unsigned agreement is considered to be valid. An example of the same is the case of Union of India v. Rallia Ram [AIR 1963 SC 1685] wherein the agreement in question was an arbitration agreement which was not signed. It was assumed that a valid contract existed between the two parties, but the arbitration agreement which has been reduced to writing was not signed by either party, the same being the subject matter of the consideration. The Supreme Court, in these circumstanced held that this unsigned agreement would be considered valid. In the United States, can an unsigned agreement still be considered a contract? Yes, it can be, for the purpose of statute of limitation as held in the case of Blanchard & associates v Lupin Pharmaceuticals, Inc and Lupin, Ltd., 7th Circuit Court of Appeal, No. 17-1903 dated 20 August 2018. In this case, Judge Sykes while quoting Illinois Supreme Court confirmed that a contract would be counted as a "written" contract even if the same is unsigned. The same was to be considered for the purpose of statute of limitation. Blanchard wished to bring a claim for breach of contract, and the question was whether it survived the limitation period. It was held that the ten-year limitation period applied to the engagement letter between the parties even though it had not been signed.

    Indubitably, whether or not a soft contract is valid depends on the surrounding circumstances and additional evidence.

    What is Bollywood wanted to shoot a film in the United Arab Emirates?

    The shooting permit in Dubai is solely provided by the Dubai Film and TV Commission (DFTC), established by Dubai Government Executive Council Decision No 16 of 2012. The DTDC is the single point of contact to obtain the permit for shooting anywhere in Dubai. It liaises with different authorties such as Dubai Police, Dubai Municipality, general Directorate of Residency and Foreigner Affairs, the Roads and Transport Authority, as well as owners of different locations in the UAE to obtain the relevant approvals before the permit to shooting films is issued. Similarly, there various types of permits that be obtained for shooting in Abu Dhabi, like the aerial permit, private location permit, offshore permit, etc. Additionally, there are regulations governing the import of film equipments in Abu dhabi where temporary import license is granted upon completing the application process.

    Conclusion

    Bollywood films have progressively broken records on the box office accumulating millions of dollars, which have additionally influenced both multinational organizations and Indian companies to invest in Bollywood films.  The Indian film industry has been social relationship-driven, under which the movies and arrangements were either oral or inadequately recorded, and the debate settles without going into mediation or litigation. It implies the absence of an appropriate chain of title documentation is promoting individual rights for the agreed parties. However, recently, the Indian film industry has woken up to the need for formal contracts to mention their powers and duties expressly.

     

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    Thu, 19 Sep 2019 17:52:00 GMT
    <![CDATA[Intellectual Property Regime in UK]]> Intellectual Property Regime in the United Kingdom

    Introduction

    The European Union (EU) is one of the world most significant economic powers. There is a considerable population of around 500 Million that lives within its member states, and the GDP is about $19 trillion. However, while the EU, as an organisation, is a crucial global entity, it does not have total power over its member nations. Each country is sovereign, and as such, any EU regulations must be individually ratified and implemented. One such area which is covered under the EU is Patents and Intellectual Property.

    Patents Act 1977

    A patent is an intellectual property that grants the patent holder the exclusive right to manufacture and sell the invention, for a limited period. Upon expiration of the right, if a third party manufactures or sells the item in question, the patent holder, who is the inventor in most cases, will not be able to initiate any action to prevent them from doing so. In the UK, the laws and regulations with regards to patents and their application are governed by the Patents Act of 1977.

    The Patents Act of 1977 stipulates what the requirements for obtaining a patent are and further sets out the remedies for patent infringement. It also incorporates the European Patent Convention of 1973. According to the Act, for a patent to be granted for an invention, it must be new, must involve an inventive step and finally, it has to be capable of industrial application. If the following criteria are not fulfilled, then the patent application will be rejected. Apart from this, if the commercial exploitation of the patent is in contrary to public policy or morality, then the patent will not be granted. Typically, the patent is granted towards the person making the application and is assumed to be the inventor (it can be more than one). The application must be made in accordance with the format prescribed in the Act, wherein it has to include a request to grant the patent, a specification that describes the invention and an abstract that gives technical information of the invention. It must be noted that an application for the patent can be withdrawn at any time before it is granted.

    Once it has been established that the application has a date of filing, has not been withdrawn and the prescribed fees have been paid, the comptroller can send the said application for a preliminary examination, wherein an examiner will determine if the application is in accordance with the requirements of the Act. If it is found that any required drawing or description is missing, then the examiner will report the same to the comptroller, upon which the comptroller will give the applicant a period of time to amend the application to meet the requirements. Once the requirements have been fulfilled, the comptroller must publish the application as filed. It is then sent for a thorough search once the applicant has paid the necessary fee, known as 'search fee'. Upon completion of this search and a substantive examination, if it is found that the applicant has complied with all the relevant requirements, then the patent will be granted. On the contrary, if the applicant is found to have not adhered to all the required provisions, then the application of the patent will be refused. An application that has been refused or withdrawn at any time can be reinstated provided the applicant requests the comptroller to do so and complies with the relevant requirements. The comptroller must further be satisfied that the prior failure to comply with the regulations from the applicant's side was unintentional. A patent, once granted, will be valid for a period of 20 years and a certificate that states that the patent has been granted will be sent to the applicant as well.    

    The patent that has been granted to the applicant can be revoked upon application for the following reasons:

    • The invention was not a patentable invention.
    • The patent was granted to someone who was not entitled to be granted.

    The comptroller can also revoke a patent that was granted, but only after an opportunity is given to the applicant to make observations and amend the specification of the invention.

    One of the main aims of the Patents Act of 1977 was to bring the UK patent law in accordance with the European Patent Convention since the UK was a part of the European Economic Community. The Patent Act of 1977 is further supplemented by the following legislations:

    • The Copyright, Designs and Patents Act 1988 (which helped establish the Intellectual Property Enterprise Court, a specialized court for hearing matters involving intellectual property)
    • The Patent (Amendment) Act, 2004 (mainly incorporate the changes to the European Patent Convention 1973 of 2000, such as revised provisions for employee inventors seeking compensation and address the expenses related to patent litigation).
    • The Patents (Compulsory Licensing and Supplementary Protection Certificates) Regulations 2007 (which contains provisions related to the patents pertaining to the manufacture of pharmaceutical products for export to countries with public health problems).

    The UK Intellectual Property Office is the governing body to grant patents in the UK and can also receive applications for patents under the European Patent Convention. It must be noted that a patent that is granted in the UK gives the patent holder right within the UK. Should the patent holder desire protection for their work outside the UK, then the necessary application must be made at either the respective country or through an international patent system that is called the Patent Cooperation Treaty. A patent that is granted under the European Patent Convention implies that the patent holder is given protection throughout Europe.

    It is imperative that adequate patent legislation exists in order to protect the rights of those involved in the process of invention and the UK Patent legislation is extremely comprehensive in nature at doing so. 

    Patents and Designs Act 1907

    Patents and copyright are crucial aspects of an economic system as they promote creativity and innovation among individuals and businesses. They also protect those who make creative breakthroughs which could provide a financial benefit.

    The Patents and Designs act of 1907 was the primary regulation on the matter of patent application in the UK. It also covers many other related topics such as enforcement, legal proceedings, copyright matters and fees. However, this regulation is not the only one which covers these areas. The Trademarks Act of 1994 amends certain aspects of the 1907 law, and also acts in a complementary manner to all UK patent and IP regulations.

    The 1994 regulation was introduced to ratify and implement an EU Treaty. The changes that were brought about mirror the EU Directive, which is known as EU Directive Number 89/104/EEC. The European Union first introduced this directive on December 21 1988.

    Changes Introduced in the EU Directive

    The UK is a global financial and business centre and has been for centuries. Its regulations and legal systems go back through decades of growth and change which is evident through the fact that there has existed a patents regulation in the UK since 1907 and even prior.

    As such, a large number of changes brought about through the EU Directive are textual and not hugely significant. However, there are several more noteworthy changes which can be summarised as follows.

    One of the fundamental changes relates to Article 62 of the original act, which stated that a patent office is to be provided along with all the essential requirements. This office was to connect to the 1905 and 1907 regulation. The amendment now specifies that the Patent Office will provide for 1949, 1977 as well as the 1994 rules. Further to this, the Controller of the Patent Office has seen a change. Previously, the Board of Trade was responsible for managing the office, though the amendment now states that the Secretary of State is responsible for selecting and providing specific controllers who perform that job. Any controller selected by the Secretary requires their authorisation.

    Article 63 has also seen alterations. They relate to the controller-general of patents and design. This position, as well as any other officers, are to receive implementation through the Secretary of state. However, the approval of the Minister of Civil Service is also required. Removal of individuals from these positions follows the same concept. Before the amendment, these matters were all handled through the Board of Trade.

    Article 99 has not seen any alterations and shall continue as it is. This Article states that the short title of the law is the Patents and Designs Act of 1907. 

    Overview

    The changes to the original 1907 law are few in number and primarily textual alterations. The crucial changes relate to the management of the Patent Office in the UK. While the Board of Trade previously managed this, the Controller is now selected by the Secretary of State. The Secretary then reports to Minister of Civil Service.

    This change can ensure that any activities of the Patent Office are monitored and actions are performed per the requirements of the EU.

    It is also vital to know that, while the changes occurring through the 1994 regulation to the 1904 rule are relatively few, many further amendments occurred through the likes of the following Acts. The 1949 Patents Act, the 1949 Registered Designs Act and the 1977 Patents act are some of the crucial amending legislations.

    Plant Varieties and Seeds Act 1964 (Chapter 14, as amended up to the Beet Seed (Scotland) Regulations 2010)

    The Plan Varieties and Seeds Act 1964 (the Act) aims to provide the proprietary rights to people who bread and/or discover plant varieties and to issue the according licenses.

    Part II of the Act is dedicated to seeds and seed potatoes.

     

    Section 16

    Seeds Regulation

    Lists the instances in which the Minister may make seed regulations. It provides that seeds regulations may include provisions for regulating the marketing, importation or exportation, or any related activities. It also set regulations on collection of seed samples and describes the cases of exemption from the compliance with regulations.

    Section 17

    Civil liabilities of sellers of seeds

    Establishes that the statutory statement when received by the purchaser shall have effect as a written warranty by the seller. States that if a purchaser intend to buy a test of seeds he must give written notice to the seller.

    Section 18

    Defenses in proceedings for offences against seeds regulations

    States that it shall be a defense to proceedings for including in statutory statement any false particulars to prove that the mis-statements in the particulars alleged to be false do not exceed the limits of violation so prescribed.

    Section 19

    Presumption as respects statutory statements under seeds regulations

    Establishes that any statutory statement made as respect seeds which are in distinct portions shall be presumed to made both as respects the seeds as a whole and also as respects each portion taken separately.

    Section 24

    Official testing stations and certificates of test

    States that the Minister of Agriculture, Fisheries and Food and the Secretary of State shall continue to maintain the official seed testing stations. It also gives Ministers the authority to charge fees (subject to the approval of the Treasury) for the services given at an official seed testing station.

    Section 25

    Powers of entry

    Established the rules and regulations on entry into premises which are believed to be used for any purpose of the business of selling seeds.

    Section 26

    Use of samples in criminal proceedings

    Regulates the rules of using samples during criminal proceedings – that a sample has to be divided into at least two parts, that sample shall be sent as soon as practicable, etc.

    Section 27

    Tampering with samples

    Provides with the list of kind of tampers which if exercised would lead to the liability on summary conviction.

    Section 28

    Institution of criminal proceedings

    Establishes the rules and procedures for the criminal proceedings.

    Section 29

    Application of Part II to seed potatoes

    Established that this Part is applicable to seed potatoes or any other vegetative propagating material and to sulvicultural planting material as it applies to seeds.

    Section 30

    Interpretation of Part II

    Explains the meaning of the following terms: "authorized officer", "official testing station", "seeds", "statutory instrument"

    Section 31

    Repeals and consequential amendment

    States that the enactment mentioned in the Schedule 6 shall be repealed except for the purposes of proceedings for offences thereunder committed before coming into force of this Part of Act.

     

    Part III is dedicated to the control of imports and prevention of cross-pollination

     

    Section 33

    Measures to prevent injurious cross-pollination affecting crops of seeds

    Regulates the rules to maintain the purity of seed of any type and varieties of plants of any species of the genus Allium, Beta or Brassica.

     

    Part IX concerns the general aspects of seeds regulations.

     

    Section 34

    The gazette

    States that ministers shall use the gazette to publish notice of matters.

    Section 35

    General provisions as to offences

    States that where a punishable offence under this Act was committed the person shall be guilty of an offence and shall be liable to be proceeded against and punished accordingly.

    Section 36

    Supplemental provisions as to regulations

    Sets out rules for the regulations of this Act.

    Section 37

    Departmental expenses and payments into Exchequer

    Established what shall be paid out of the moneys provided by the Parliament.

    Section 38

    Interpretation

    Includes some terms and their interpretation under this Act.

    Section 39

    Extension of Act to Northern Island

    Establishes that this Act is not extended to the Northern Island.

    Section 40

    Extension of Act to Isle of Man and Channel Islands

    Established that this Act is extended to Isle of Man and Channel Islands.

    Section 41

    Short title and commencement

    States that this act shall be named as Plant Varieties and Seeds Act 1964.

     

    Trade Descriptions Act 1968

    (Chapter 29, as amended up to the Consumer Protection from Unfair Trading Regulations 2008)

    The sad reality of the modern world is that there are bad egg traders looking to rip others off in every industry. While being smart and knowledge is advisable, people still have to be able to trust what a business is offering them.

    To keep these bodies in line, there are many laws to protect consumers from being sold a product or service based on dishonest information. We will look at one of these laws, which is the Trade Descriptions Act 1968.

    The law took effect on 30/11/ 1968; this law has replaced the previous Merchandise Marks Acts by expanding what that law covers. The Trade Descriptions Act 1968 shows that it a crime for salespeople or businesses to sell a product or service based on false information. The Act forced them to be more honest about their product or service and not intentionally mislead consumers into spending their hard-earned money on false claims.

    The law gave the Courts the authority to sentence offending whether individuals or corporation from making false claims. And if they were found breaking the Act, the law gave authorities the power to investigate and confiscate documents or goods related to the service or product. Fines might be charged if they were indicting under the Act.

    Despite the fact that the Trade Descriptions Act 1968 is still binding, it has been mostly outdated by the Consumer Protection from Unfair Trading Regulations 2008. The CPRs was created on the Trade Descriptions Act by adding particular wording about false endorsements and other aggressive sales tactics.

    What does the 1968 Trade Descriptions Act do?

    This law shows that the seller or trader will be doing a crime if he:

  • Claim a false trade description to any goods/ merchandise.
  • If the trader supplied (or offered to supply) any goods that a false trade description is applied to.
  • If the seller makes specific kinds of false claims about the provision of any services, accommodation or facilities.
  • What is False Trade Description?

    A trade description is an index to any one of a number of matters listed in the Act. Such as

    • Quantity
    • Size
    • Measure

    For example:

    When/where the goods are made?

    Who made the goods?

    How were they made?

    What are the goods made of?

    How do they perform, or how do they fit?

    All the questions that the consumers usually have on mind.

    Especially if the goods have a statement stating that it has been tested or approved by certain authority.

    How can it be an offence?

    The sign/mark must be false to a material degree as it is not enough for it just to contain a quite insignificant inaccuracy to call it a crime. Also, It must be applied to the goods whether in writing or by means of an illustration or other marking on the goods, on containers, labels, in advertisements or in an oral statement.

    False Statements about Services, Accommodation or Facilities

    The law covers statements about the provision or services, accommodation or facilities. Such as their nature, the time they are provided, who/ how they are provided, their evaluation by a person.

    As mentioned above, the statement must be false to a material degree to conceder it a crime Whither Spoken or written statements.

    But keep in mind that not every statement that turns out to be wrong is covered. As a seller commits an offence only if the statement is false and the seller knows it to be false but don't care to fix it.

    Statements about houses are not covered by the Act unless they relate to for example holiday accommodation.

    Enforcement

    Local Trading Standards authorities are asked to enforce the provisions of this law, as the law gives them the authority.

    The local Trading Standards authority job is to investigate not compensate the consumer.

    Definition and Marking Orders

    Powers are available under the law by which definitions of the words traders use to describe their services could be laid down. Orders could also be made requiring goods to be marked with information necessary for consumers, or for such information to show in any advertisement.

    Legislation Guide on Registered Designs Act 1949

    The Registered Designs Act, 1949, is a "General Public Act" passed in the United Kingdom of Great Britain and Northern Ireland, and concerns legislation on, inter alia, issues pertaining to patents, copyright related rights, industrial designs, and the protection of undisclosed information. Complementing this, part IV of the Copyright, Designs and Patents Act 1988 (CDPA 1988), another Act of Parliament that pertains to copyright law, that was given "Royal Assent" (put into effect) on the 15th of November 1988, outlined a certain number of amendments to the Registered Designs Act 1949. 

    The Registered Designs Act 1949 was granted "Royal Assent", or was put into effect on the 16th of December 1949, and its sole purpose, as outlined in its preamble, is to serve as "an act to consolidate certain enactments relating to registered designs". It currently serves as the most important piece of legislation that governs design rights in the United Kingdom (UK). 

    For background context, at the time the law being legislated upon, the austerity of the Second World War was waning on the UK, which eventually paved the way for the evolution of the consumer driven society. The proliferation of technologies such as, but not limited to, record players, automobiles, and fridges, not only necessitated the correct functioning of the products, but also their stylistic and aesthetic appeal. Soon, manufacturers were altering designs of their products, to appeal to consumers, whilst differentiating themselves from the competition. Thus, the institution of the Registered Designs Act 1949 (RDA 1949) was a step towards complementing this evolution in technology, protecting the manufacturers' unique designs, and completing what the Patents and Designs Act of 1919 (PDA 1919) had initiated, in terms of separating the aesthetic and design characteristics of products from their utilitarian ones, and appropriately creating a scope of protection for such design elements.

    The RDA 1949 entailed the protection of any aspects of designs of products that could be deemed "appealing to and judged solely by the eye", i.e., industrial designs needed some form of "eye appeal", in order to gain protection under RDA 1949. Thus, this excluded any features or aspects of products that could only be identified through their function, and not through "eye appeal".

    s. 1 (2), of RDA 1949, which pertains to the "Registration of Designs", defines a "registrable design" as follows: " … the shape, configuration, pattern, or ornament applied to an article by any industrial process or means, being features which in the finished article appeal to and are judged solely by the eye but does not include a method or principle of construction or features of shape which are dictated solely by the function which the article to be made in that shape or configuration has to perform".

    Prior to the establishment of the RDA 1949, the notion of extending the scope of registrability to designs of a product was jarring given the social perception of the value of design at that time. Also, it is important to note that the value of a product of often ascribed to the identification of the form of the product, and the appropriate material composition of the product that enabled it to carry out its intended function. However, the RDA 1949 was a landmark move towards the establishment of protection of designs.

    Under ss. 7 & 8 of the RDA 1949, which pertained to "Rights given by Registration" the registered proprietor was empowered with the exclusive rights to sell, produce, and import articles to which the design was applied, barring that he or she was entitled to do so for a period of fifteen years from the date of registration, i.e., the registered proprietor was given an exclusive copyright on the design that would expire upon fifteen years of completion since its registration.

    s. 7 (1) of the RDA 1949 outlines the test for infringement of these designs. At an empirical level, the test essentially regards whether the alleged infringing of another design is "substantially different" from the registered design.

    In effect, such a vague definition of the test has led to the Courts struggling to identify where the "eye appeal" of a design stopped, and where the "functionality" began. In the then House of Lords (HL) case of Amp v. Utilix from 1972, which pertained to the registrability of the design of electrical terminals in washing machines which were shaped in such a manner so as to hold electric leads correctly, and do so in a stable manner. The HL thus defined the term "dictated solely by function" to avoid any future misinterpretations of the legislation. The court ruled that the features of a particular product's design that were present on it for solely functional, i.e., non-aesthetic purposes, would not be registrable under the RDA 1949. The HL later clarified that elements of design for "eye appeal" had to be present on the product for reasons beyond functionality and should entail to attract the customer's attention. Only under such conditions would the design be classified as "registrable" under RDA 1949. If the element was wholly functional, it would not be registrable, although, if it had at least one design element for "eye appeal" purposes, it was registrable.

    In the case of Interlego v. Tyco Industries from 1989 at the Privy Council, the distinction between functionality and eye appeal would be revisited. At the Privy Council, Lord Oliver would rule that "a designer who sets out to make a model brick is going to end up producing a design, in essence, that would inevitably be brick shaped", thus drawing a fine line between eye appeal and functionality. Lord Oliver's ruling would ultimately establish a doctrine that elements of a product's design certainly had elements of eye appeal as was intended by the designer of the product.

    Other sections of the RDA 1949 detail matters such as international arrangements (ss. 13-15), legal proceedings in the event of disputes against the design(s) (ss. 24(A)-28), powers and duties of the registrar of design(s) (ss.29-32), offences under the RDA (ss.33-35(A)), and the application of the RDA 1949 in the devolved jurisdictions of the UK such as Scotland, Northern Ireland, the Isle of Man (i.e., all jurisdictions outside England & Wales) (ss. 45-47). 

     

     

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    Thu, 19 Sep 2019 11:26:00 GMT
    <![CDATA[Importation of Private Aircraft into the European Union]]> Importation of Private Aircraft into the European Union

    Introduction

    Consider this scenario. An individual who has been a resident outside the European Union (EU) for ten or more years, intends to import a private jet into the United Kingdom. The aircraft is to be purchased by a British Virgin Islands (BVI) company and is based out of Canada. The person with a majority shareholding in the BVI company (and his office) has had sole ownership of the aircraft. The individual wishes to shift his place of residence to the United Kingdom. What might the tax consequences of importing an aircraft into the EU?

    Once the aircraft lands In the UK, it's imported to the EU [Council of Mutual Economic Assistance (CEMA) 1979 S 5(2)(b)] upon taking into induction customs duty and Value Added Tax (VAT) charges, which is solely dependent upon the fact if the aircraft is imported.

    The aircraft is to be affirmed free of circulation in the EU, which in turn is then subject to customs duty and VAT charges. The VAT charges adhere to customs charges (VAT 1994 s 16(1)). Nevertheless the applicable rate for customs duty on a civil aircraft is none. However, any civil aircraft imported to the UK will be charged VAT at 20 per cent.

    In the case of a temporary importation by a permanent resident of the EU, a benefit of total relief from customs duty and VAT is duly provided.

    Residence Exemption

    An individual who is not a resident of the EU, but wishes to shift his regular place of residence to the UK from outside the EU will be given the temporary admission relief in regards to the importation of a private aircraft. Once the aircraft is taken into importation, it will then be charged VAT and customs duty unless a transfer of residence relief is applied for.

    A transfer of residence relief applies only to a person who is shifting their normal place of residence from outside the EU (SI 1992/3192, Art 11). Upon entering in the UK, the individual is not subjected to pay VAT or customs duty that is chargeable upon the importation of "property" in the UK. There are certain conditions for the same, and they are as under:

    • He or she has been a resident outside the EU for a period of a minimum of twelve months;
    • He or she must be willing to become a resident in the UK;
    • The property in question (i.e., private aircraft) has been his or her possession and has been used for a minimum of six months before importing it into the EU.
    • Upon gaining a residency in the UK, the property must be declared for relief before six months of becoming a resident, and should not be more than twelve months from such date.
    • Her Majesty's Custom and Revenue (HMRC) must be satisfied that the property is cleared of all duties and tax norms that apply in the country where it is being exported from.

    An assessment of the individual whether he or she is treated as a normal resident in the county that the person originates from (SI 1992/3192, Art 3):

    • For a period amounting to a minimum of one hundred and eight-five days in twelve months;
    • Because of his or her occupational ties;
    • Because of his or her personal ties.

    If an individual does not have occupational ties in the UK, he or she will have to provide a source of personal ties in the UK. The date on which a person usually becomes a resident of the UK is the date from which he or she has given up their normal residency in a different county.

    There are more detailed rules that govern the classification of an individual's normal country of residence in cases where such an individual's personal and occupational ties show close links with several different countries respectively. [SI 1992/3192, Articles 3(4) and 3(5)]

    To be eligible for applying for transfer of residence relief, an individual should be able to demonstrate with adequate supporting evidence that the aircraft has continued to be in possession as well as has been used by in the country where he has been a normal resident for a minimum period of sex months before importation into the United Kingdom. Further, 'possession', in essence, means 'to have' as opposed to 'to own.' (HMRC Notice 3, September 2004)

    Essentially, the supporting documents for evidence of possession as well as evidence of use may include foreign registration papers, purchase invoices, insurance policies, to name a few.

    Additionally, it is also useful to know the structure of the ownership of the aircraft; whether such aircraft is owned by a certain company, and if so, what the corporate group structure is.

    Upon assuming that the abovementioned conditions are duly met, a declaration for relief, as in the HMRC Form C3, will have to be made within twelve months from the date of when the individual becomes a UK resident.

    Benefits

    In a situation where the aircraft which is being imported into the UK is owned by a corporate entity, the person who is importing the said aircraft will possession and use of the aircraft by virtue of his office. This essentially gives rise to further income tax liabilities with regards to his private use of the said aircraft, upon becoming a UK tax resident. The use of a private aircraft will be taxed as a type of benefit provided by an employer 'by reason and way of the employment.'

    A substantial rise in annual tax liability is triggered by way of benefit in kind charges. It is calculated based on the number of days that such aircraft are made available for a person's personal use. Therefore, the sum of the benefit which will be chargeable is the sum which is the cash equivalent of the benefit (that running charges in addition to the annual value of the aircraft) [Section 205(2)-205(5) HMRC Employment Income Manual].

    Potential problems with Temporary Admission (TA)

    One of the principal problems with TA is that the operation of the aircraft is likely to be interpreted different between the EU member states. While the concept of TA works well for the "private" flights, some of the EU member states may classify the private corporate operations to be "commercial operations." It considered that way because such flights are being a tool of business. Therefore, it is pertinent to note that in case member state of EU or the customs unit at the airport within the region view a business aircraft as a type of commercial traffic, there are chances that the TA may get rejected, unless such airport is being used for the sole purpose of transporting passengers in and out of the EU (but not within).

    Generall,y TA does not allow the aircraft for charter within the European Union.

    The temporary admission of an aircraft to the EU does not per se give one the right to engage in the business or activity of charger flights within the region. A third-party provider could possibly provide guidance with regards to the EU cabotage considerations and regulations. Additionally, it is advisable that temporary admission be in the form of writing.

    Considering the above, yes, the temporary admission may technically also be an oral declaration, even though there are a number of difficulties that arise in few parts of the EU as they not even member state accepts oral declarations. Therefore, it is advisable to reconfirm any oral declaration by obtaining an approval vide TA form with a customs stamp as well as written authorisation from the owner of the aircraft allowing the EU citizens to travel onboard.

    In a situation where a person is employed by a non-EU owner where private use of the aircraft is allowed as per the employment contract, a copy of the said contract should always be  carried on board.

    Rules for Private Use by an EU Resident

    An EU resident may use aircraft if the two conditions mentioned below are duly met:

    • The aircraft is temporarily imported by the registered holder of the aircraft who happens to be a non-EU resident, and for their own use; and
    • The non-EU resident who is the registered holder, has instructed the resident that he/she may occasionally use it while they remain in the EU.

    In cases where the aircraft is registered in the name of some non-EU trust or company, the member/employee of such trust or company must be a non-EU resident who is importing the aircraft for their personal use to meet the conditions. The non-EU residents who are employed or otherwise engaged only as a driver, crew member or pilot do not meet these conditions.

    Therefore, the written permission of such non-EU resident who is the registered holder of the aircraft must mandatorily be made available to border agency officers or customs office if the same is requested. They must confirm the following:

    • Name and address of the non-EU registration holder, including the email or number where they may be reached while they are in the EU;
    • Written permission from the trust of the company in case the aircraft is registered to such entities, as well as proof that such entities are in fact the registered holders;
    • Where a non-EU resident imports the aircraft, that the same has been imported temporarily for personal use;
    •  The dates on which the resident has the permission of the non-EU registration holder to use the aircraft;
    • That registered holder who is a non-EU resident will remain in the region during any such period of use by the resident.

    The above list is not exhaustive but gives a gist of the conditions that need to be met, which may vary from resident to resident.

    The validity of the TA

    It is pertinent to note that a TA may be valid up to a period of six months. Further, it terminated if the said aircraft leaves the European Union within the period of the sixth month. However, to start a new six months period with a renewed TA, the aircraft may leave the EU provided it returns on the same day. When the aircraft is returning to the EU, it is advisable that the customs authorities or both the countries be contacted for due stamping of the TA form to avoid complications.

    Conclusion

    Since the costs and rules with regards to permanent importation of an aircraft have recently dynamically changed, a number of operators are shifting over to TA. the However, TA may leave you open to certain risks and issues. It is essential that the operator weighs the pros and cons as well as carefully evaluate all available options before opting for TA.

     

     

     

     

     

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    Tue, 03 Sep 2019 10:09:00 GMT
    <![CDATA[Warranties in Marine Insurance USA]]> Warranties in Marine Insurance: USA

    It was in the 18th Century that, Lord Mansfield attempted to separate the concept by mentioning that warranties are a part of a policy that is written; however, the representations are created out of a written agreement and can be answered either equally or substantially. Whereas warranties are to comply strictly.

    Warranty, in general terms, is a statutory warranty or a warranty where an assured undertakes to perform or not perform a certain thing or satisfy a particular requirement. In this process, the assured negates or affirms the existence of a particular state of facts. This explanation will be inclusive of the following:

  • As far as the present or past facts – affirmative warranties
  • As to conduct that is future – continuing or promissory warranties
  • A condition which has been fulfilled
  • Marine insurance law in the United States of America provides that, a promissory warranty is an essential obligation of the assured, which he should perform to have the option to appreciate the security of the agreement. One reason for such guarantees is to make sure that the insured risk is not enhanced during the term of the insurance. This may clarify the way that the insurer will be released from the obligation under the protection contract if there should be an occurrence of minor rupture.

    Warranties are both implied, an instance being the ever-present guarantee of fitness for sailing, i.e. seaworthiness, and explicitly expressed in the insurance agreement. Express warranties might be viewed as unfair or out of line to the assured, since the policy is liable to the freedom of contract and such warranties may in principle concern any commitment of the guaranteed. Truth be told, a guarantee should not be material to the hazard, which is explicitly given in the Marine Insurance Act, 1906.

    This is particularly disputable considering the way that the assured should precisely agree to the warranty, and breach brings about the loss of protection cover, irrespective of the blame on the part of the assured. It is held that the guaranteed must conform to any commitment forced by a warranty, regardless of whether it appears to give preposterous impacts.

    The law of warranties in connection to Marine Insurance from the start seems, by all accounts, to be incredibly valuable to insurers and, some may state, uncalled for to assure. The black letter law puts forth that infringement of a warranty qualifies the insurance provider for keeping away from the obligation under the insurance policy even if the breach of warranty had nothing doing with the deficit and paying little heed to whether the guarantee was material to the hazard.

    This was frequently the outcome in a considerable lot of the more established cases. Be that as it may, the recent cases demonstrate an alternate tendency. In cutting-edge marine insurance cases, it is more probable, the insurer as opposed to the insured who will complain about the injustice, all things considered.

    This is particularly disputable considering the way that the guaranteed should precisely agree to the guarantee, and break brings about the loss of protection spread, paying little mind to blame on the part of the guaranteed. It has even been held that the guaranteed must conform to any commitment forced by a guarantee, regardless of whether it appears to give preposterous impacts.

    Warranty is as defined in Section 32(1) of the Federal Marine Insurance Act as pursues: ..." warranty" signifies "a promissory warranty by which the insured

    • undertakes that some particular thing will or will not be done or that some condition will be fulfilled; or
    • affirms or negates the existence of particular facts."

    A warranty must be actually agreed to whether it is substantial to the hazard or not. If not consented to, and the breach is not deferred by the underwriter, the underwriter is released from obligation as of the date of the breach, yet without bias to any risk brought about under the approach before the breach.

    A mere intention to breach a warranty, without really doing as such, is not a break of the warranty. Likewise, strict execution of the warranty is not abstained from by an unavoidable need forestalling or preventing it.

    The types of implied warrantied which are recognised in marine insurance is as under:

  • the warranty of the seaworthiness of the vessel
  • the legality of the marine adventure
  • warranty against any deviation during the voyage
  • Implied Warranties:

    The warranty of unbiasedness is not generally an implied guarantee as it applies just when there is an express warranty of impartiality as for insurable property. It just characterizes and delimits the express warranty of lack of bias. The implied warranty of seaworthiness and legality are, in any case, genuine implied warranties in that their presence is accepted and they will frame some portion of any agreement of marine insurance except if conflicting with an express warranty.

    Seaworthiness:

    The implied warranty of seaworthiness is associated with full impact just to voyage policies. The warranty is that the ship will be stable and seaworthy when the voyage commences for the specific voyage that is insured. A seaworthy ship is one which is sensibly and reasonably fit in all regards to experience the standard dangers of the adventure insured. In a time policy, there is no warranty of seaworthiness however where, with the privity of the guaranteed, the ship is sent to the ocean in an unseaworthy manner, the guarantor is not at risk for any misfortune inferable from unseaworthiness.

    Consequently, in a voyage policy, the insurer needs to demonstrate just a single thing; that the ship was unseaworthy at the initiation of the voyage. In a time policy, then again, the insurer needs to establish three things; that the ship was unseaworthy, that the unseaworthiness caused the misfortune, and that the assured was conscious of the unseaworthy condition of the ship.

    Despite the fact that this warranty is significant in issues including hull insurance, the issue is to a great extent irrelevant regarding cargo insurance. Cargo policies generally contain a "seaworthiness admitted" provision by which the freight guarantors concede the fitness for the sailing of the vessel wherein the merchandise is conveyed, along these lines nullifying the impact of the inferred guarantee as to cargo insurance.

    • Escombia Treating Company vs Aetna Casualty and Surety Company:

    In this case, the insurer made an attempt for avoiding the policy by claiming that the owner of the cargo and the vessel's voyage charterer was obliged under the duty of disclosing despite the clause of "seaworthiness admitted" in the policy. The insured argued that this clause would not be applicable when the insured had a substantial knowledge of unseaworthiness and its ability for controlling the voyage's conduct.

    Illegality:

    The guarantee of lawfulness is one which is regularly explicitly incorporated into insurance policies just as suggested. In the event there is an express warranty of legality it will have priority over the implied warranty to the degree the two are conflicting.

    • New Zealand Supreme Court Harbour Inn Seafoods vs Switzerland:

    In this case, the fishing vessel drifted upon a reef. The insurer declined the coverage based on the clause where it provided that the vessel was supposed to be operated in compliance with the rules and regulations as well as other laws which are applicable.

    The court, in this case, put forth that the practice of "laying to" was, in fact, a breach of the regulations dealing with collision and therefore a breach of the implied warranty of legality.

    • James Yachts Ltd vs Thames and Mersey Marine Insurance Co:

    In this case, the main issue that came up to the courts was that the boat manufacturer had stored his boats in his yard, which is contrary to the by-laws of the Municipality. A fire outbreak destroyed the vessels and the equipment that were stored. The court went ahead and agreed with the insurer that the insured acted in breach of the implied warranty of legality and hence he was discharged from liability.

    Utmost Good Faith:

    A marine insurance policy approach is "uberrimae fidei" the very pinnacle of good confidence and might be stayed away from by the harmed party where the other party neglects to practice the utmost good faith required.

    The Marine Insurance Act of 1906, Section 17, expresses the standard as pursues as, an agreement of marine protection is an agreement dependent on the utmost good faith, and, if the utmost good faith is not seen by either party, the agreement might be kept away from by the other party. The burden of proof is upon underwriters when they raise the safeguard of concealment or non-disclosure. The principles as for what must be revealed by the guaranteed are gone ahead in Section 18 of the Marine Insurance Act of 1906.

    Express Warranties:

    • Navigation/Trading Warranty
    • Private Pleasure
    • Towing Warranties

    Latest advancements in the law in connection to warranties in policies of marine insurance demonstrate that there has been a legal revision of, if not complete revocation of the Marine Insurance Acts. It is just in exceptionally uncommon conditions that a court will discover a policy to contain a genuine warranty. These conditions will basically be constrained circumstances where the guarantee is material to the hazard, and the breach has a direction on the loss.

    Methodology for an insurer to proclaim a breach ofthe warranty in the way that a breach of warranty might be deferred or banished by estoppel, underwriters ought to consider starting an activity for rescission and additionally for definitive judgment looking to dodge the policy. A fundamental component of starting such an activity incorporates the offering, as well as the return of, premium. It ought to be noticed that, under New York law, a state of inclusion, for example, "insurable interest" or "duration of the risk" may not be postponed.

    Just safeguards to, or avoidances from, coverage might be postponed. In spite of the fact that activities by the underwriter might be regarded to make waiver or estoppel issues, express arrangements of the "sue and labour proviso" may accommodate certain activities to continue on a "without prejudice" premise. Obviously, any examinations, activities or guidelines by the backup plan concerning the load and any expressed positions in regards to the declination of coverage ought to be joined by an express "without prejudice" explanation saving rights under the policy or something else.

    Conclusion:

    Marine freight insurance has advanced from restrictive inclusion terms dependent on "named dangers", to wide inclusion terms dependent on "all hazard." The "length of hazard" has constantly extended from "send stacking to ship release," at that point from "Warehouse to Warehouse" and now, well past.

    Custom clauses are seamlessly drafted by dealers to grow inclusion. From 45 the brokers' point of view, guarantees are by and large disfavored. From the underwriters' viewpoint, in any case, warranties remain a viable instrument for controlling risk exposure.

    The role of marine insurance has been to a great extent perceived in both residential just as global exchange and business. Generally, there has been an unfaltering increment in the sorts of instruments using various advancements. The amazing pace at which the route innovation has been changing in the ongoing years, there is a requirement for exhaustive modification of marine protection law.

    Late advancements in the laws identifying with warranties in marine insurance show that there has been a legal alteration of various Marine Insurance Acts. On these lines, it is normal that the IRDA alongside the concerned service ought to incorporate the progressions concerning the evolving innovations.         

     

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    Mon, 02 Sep 2019 15:30:00 GMT
    <![CDATA[Hong Kong Data Protection Privacy Regulations]]> Hong Kong Data Protection and Privacy Regulations

    Introduction

    Data protection and privacy matters are becoming a continuously more significant issue, and individuals are giving more consideration to it than ever before. A key reason for this is because of the ease with which information is obtained. Also, considerable numbers of groups and entities are provided with said private information regularly and freely. Social media is one of the primary areas of concern and one of the most significant sources of stored private information. These details are found and shared regularly on social media sites and more, and with such information stored therein, questions arise concerning their purpose. This concept is not the only matter which concerns data protection and its legislations, though it is the most commonly considered by the general public.

    Hong Kong is a very significant global centre, well known around the world as a financial hub. The city has a fantastic story of growth through recent decades, with it gaining independence and returning it under the sovereign powers of China only in 1997. Initially, the city functioned as little more than a fishing and farming location with a small population. It now has a population of around 7.4 million and is considered a global city with a considerable amount of international business and interest occurring.

    Honk Kong is also an exceptionally highly developed city and has one of the highest-ranked and freest economies on a global scale. The level of technological advancement is also substantial, and the nation is known for its advanced nature. As such, data protection and privacy is a vital issue, and the regulations concerning it are of the utmost importance.

    The central regulation that governs data privacy is the Personal Data Privacy Ordinance (PDPO), which came into effect in December of 1996. It was one of the first regulations of this type and nature in the region, and it arrived at a stage when the digital age was in its infancy. This timing can, in a way, be thought of as a great foresight as the concept of privacy only became a more significant concern as time went on from this point.

    Within this article, we will take a look into the regulations governing data protection and privacy in Hong Kong and how they have evolved over the years.

    The Crucial Data Regulations

    The primary rule for data protection is the PDPO legislation. While the introduction occurred in 1996, it did witness significant changes in 2012 and 2013. Beyond this law, though, there are no others on the specific topic. Alongside the regulation, there is also the Privacy Commissioner for Personal Data (PCPD) which was introduced to oversee and ensure the PDPO regulation is enforced. They are an independent organisation which look to provide a fair system and operate freely and impartially. Further to this, when it comes to enforcement of the rules, the PCPD has something of a duty to collaborate or partner with global jurisdictions or entities in ensuring the privacy regulations are maintained across borders.

    Enforcement is only one aspect and role of the PCPD, though. The PCPD must also actively look into the economy for issues and instances where breaches of data privacy are occurring. The reasoning here is to ensure large companies are kept in check and monitored, preventing problems from arising rather than fixing issues already emerged. One of the advantages to this is that it can help to maintain confidence in the people if there are no news stories or headlines concerning data breaches. However, this requires significant proactive action on the part of the PCPD.

    Beyond this, it is vital to ensure that concepts of data privacy and its importance are made common knowledge. For the regulations to be respected, a culture must be formed under which the rules of confidentiality are respected. The processes and technology surrounding the matter should be kept up to date and well maintained.

    To summarise the role of the PCPD, their main goals and responsibilities are as follows:

  • Enforcement of the PDPO Regulations and work with international organisations to ensure cross-border implementation.
  • Supervising the companies and entities that deal with private data and ensure data privacy and protection is upheld.
  • Promote good data protection practices to entities within their jurisdiction and also to promote the regulations on a large scale.
  • To maintain up to date technology on the matter and also keep up with more international trends on the topic.
  • The privacy protection regulation is the only one in Hong Kong and the organisation, PCPD, are the primary organisation responsible for this law.

    The 2012 Amendments to the PDPO

    The amendments to the regulation were introduced through a Bill. This Bill was approved of by the legislative council and initially came into effect in June of 2012. These were reasonably significant changes and had to be, as the regulation was around sixteen years old at the time. The process of introducing these changes was a lengthy one as significant thought and time were put into making sure the alterations carried real weight and impact.

    The changes will now be discussed in further detail.

    Some of the changes included repealing and altering definitions and grammar found in the original text. However, among the more significant changes was Section 35C and J. This related to using personal data in marketing. Before being able to do this, permission is required from the individuals. Information of the marketing must be provided as well as methods for the data owner to contact the entity should they have any concerns. In more recent years, this is becoming significantly more common a practice. The importance of informing people and making sure they are aware of where their information is being utilised and how it is being handled is expected.

    This information can be provided to the data originator either through written or oral means. However, in any case, where a data user wishes to pass the data on to a third party for any purpose, they must provide a written request.

    Often, these requests may arise on the first occasion when the data user wishes to utilise it for marketing purposes. Following this though further requests are not required every time a new need arises. All of these matters must be made clear to the individuals, and the application should understandably provide all necessary information.

    There were previously specific fines and punishments for failure to meet the standards, though these have now seen a significant increase from $10,000 to $500,000 along with potential imprisonment for up to 3 years. Further to this, in the case where an individual or entity looks to gain benefit or cause loss to the data originator, they may receive a fine. This fine can range up to $1,000,000 and imprisonment of up to 5 years. Section 66B also allows for the provision of legal assistance and aid to those who are wronged in terms of their private data

    A case which relates to this is Eastweek Publisher Ltd. V Privacy Commissioner for Personal Data. An individual found online, their data on a publically accessible site with specific links being available. Permission had not arisen for the data to appear therein, and so the case was brought forth. The Commissioner decided that the particular hyperlinks that led to the data should be immediately removed. This decision was appealed, and the claim was that the data user was a collector and was not using the information for personal gain or to target the claimant specifically. However, due to the intimate nature of the data, this appeal was dismissed.

    The Privacy Commissioner has also seen specific increases in their powers. In regards to the enforcement of PDPO regulations, the Commissioner can serve notices to any users of data who have breached some aspect of the rules. This notice serving is limited to the duration of time in which the breach is occurring, and so if the issue reaches a resolution and a repeat seems highly unlikely, no notice can arise.

    The regulation also now allows for third parties to provide consent for the use of personal data for others, specifically in the case of minors and individuals with specific disabilities. As with many aspects of the law relating to third party guardianship or care, the consent will only be accepted in cases where it is of benefit to data originator party.

    If any data user outsources work to third parties, which requires the sharing of private data, they will also be liable to form a contract with that third party. This contract must ensure that there is no misuse in handling the information, and the data is only kept for a specific period or for as long as is necessary. Unauthorised accessing of the information must not occur, and total protection is a must.

    There are exemptions to the regulations, though, found where one would commonly expect. Data held by judicial officers while undergoing their duties and also data that they are to locate, cannot be withheld. Further to this, legal guardians have the same power over the data of those under their care, and in emergencies where exceptions are understandable, the same shall apply.

    Conclusion

    Hong Kong has been at the forefront when it comes to data protection and legislation on the matter. While the subject of private details is thought of as significant in the technology and the social media-driven world, Hong Kong introduced its PDPO regulations as far back as 1996. It is this same regulation that they have maintained and continued to expand upon.

    The most notable recent expansion was the 2012-2013 amendment which brought the concepts up to date and the changes introduced within were undoubtedly needed. They are primarily changes relating to specific powers of individuals, as well as expansions to the fines that are in place.

    The PCPD is the entity which manages the data privacy and protection issues and ensures the lofty standards are maintained as well as spreading the message on the seriousness of this security.

    While Hong Kong was among the first in the world to make the step with a piece of legislation, the remainder of the world is certainly catching up. In the decades since the need for such legislation has grown and so the latest issue is ensuring the regulations can keep up with global demands and technological improvements.

     

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    Mon, 02 Sep 2019 12:58:00 GMT
    <![CDATA[Force Majeure Clauses Limitation of Liability]]> Force Majeure Clauses and the Limitation of Liability

    Introduction

    Force majeure roughly translates to 'superior force' and is used when referring to unforeseeable events taking place. For the most part, unforeseeable events are not attractive prospects for any individual, especially in the case of business agreements. While contracts generally do consists of plans for many potential eventualities, these are usually somewhat anticipatable. Force majeure on the other had are events which cannot be predicted or anticipated. The most common forms are natural disasters and certain types of changes in the law. Historically, this concept only referred to 'Acts of God'. Earthquakes, fires, floods and tsunamis occur and have arisen regularly across the globe. In the modern world, there are other concepts which fit the descriptions in many ways. Changes in international law and significant global events resulting from human activity are not entirely natural, though that may be unpredictable, and can have significant impacts on business agreements.

    In the event of such an occurrence, parties often share the opinion that it would be unfair to continue to apply the original contract's clauses. An example of this could be relating to tenancy contracts. If a natural disaster were to transpire resulting in damage to property, contracts would usually have a force majeure clause, allowing for immediate termination of the agreement and allowing the property owner to work on and repair their home freely.

    The force majeure clause is one which is relatively well known heavily used across many industries and throughout numerous contract forms. In the case of the UAE, they are found in often in tenancy contracts, due in part to situations such as the one mentioned previously. Another critical industry is that of construction. There are two points of note here. Firstly, it is fairly obvious that a natural disaster could have a negative impact on a project and this could extend so far as to make it impossible to continue. The other point relates to the country itself. The UAE has a huge construction industry, with the Emirate of Dubai being particularly famous for its large-scale undertakings. However, the land on which the city of Dubai lies is relatively stable. There are many complexities to the topic and numerous considerations to contemplate.

    The UAE Civil Code

    The UAE relies primarily on the UAE Civil Code (Federal Law Number 5 of 1985) in matters relating to contracts. In the code, Section 5 concerns the dissolution of contracts, and Article 273 elaborates on the topic of force majeure. Here, it states that in the case of an event that would lead to the agreement being impossible to complete, the obligations on both parties will cease, and beyond this, the cancellation of the entirety of the contract may transpire.

    However, there are occasions wherein part of the contract becomes impossible to complete while other aspects remain doable. In this case, Article 273, Subsection 2 states that the elements of the deal that are affected by the force majeure will become terminated while leaving the rest of the contract to continue as ordinarily as possible. The obligor of the agreement, in this case, will be able to cancel the contract provided the obligee is aware of their intent to do so.

    An example of a case in which force majeure was a key factor was the Dubai Court of Cassation, 213/2003 (195). In this case, a contractor was performing construction work, though they failed to complete it in time. However, a force majeure was claimed to be the cause, and therefore the judgement gathered that since the problem arose due to unforeseen circumstances, the contractor should receive the value of the work completed, and the termination of the remainder of the contractual agreement should take place.

    It is important to note that the civil code primarily covers the UAE mainland. While numerous free zones also follow the Civil Code in parts, there are some including the DIFC and ADGM which have their regulations in place. The DIFC Law Number 6 of 2004 covers contracts within the free zone's jurisdiction. Article 82 of the law regards force majeure clauses and instances.

    Subsection 1 of this Article states that, in the case of a non-performance of contractual obligations, a party may be excused should they be able to prove that their non-performance arose due to uncontrollable circumstances.

    Subsection 2 mentions temporary roadblocks. In the case of a temporary issue, the obligations may be held off until a time when it is reasonably possible to continue.

    A notice must be given by the party that is unable to complete their obligation as soon as the problem becomes known to them, as stated under Subsection 3.

    Finally, Subsection 4 indicates that if a party wishes to terminate a contract due to a force majeure event occurring, they shall be entitled to do so.

    DIFC

    A case that took place in the DIFC was the Judicial Authority of the Dubai International Financial Centre: Court of First Instance, 7/2013 CFI. The Claimant, in this case, had sold properties to numerous defendants, though these were then either delayed or cancelled. However, within the contracts between the parties, there was a force majeure clause within the contract. There were numerous delays during the construction period, though notices accompanied these. The critical issue here was primarily related to the provided warnings themselves, as the force majeure clause itself was acceptable.

    ADGM

    The ADGM, on the other hand, follows the UK court system and contract laws. It states that within the Market Infrastructure Rulebook (MIR), Article 2.6.2, that business continuity plans will be required in the contracts that need them. The Article then proceeds to list some of these, and Subsection d specifies that a force majeure clause should be included to provide some plan for emergencies.

    The UK

    Because the UK is a country that utilises a common law system, force majeure will only be applicable in a case that has it mentioned and specified in the contract. It is for the parties to decide on the extent of the clause.

    Further to this, the burden of proof is on the party that attempts to apply it. They must prove that the event in whole or in part prevented the completion of responsibilities. If this is possible, the clause as found in the contract can be applied.

    As a whole, the UK system is more customisable than general, though it must be included explicitly by the parties to the contract.

    The USA

    The US, much like the UK is a common law jurisdiction. As such, many of the same concepts apply here. There is no Federal Law in place which dictates force majeure, and therefore, if it is absent in a contract and such an event occurs, the concept cannot be relied on to shift the liability away from any of the parties.

    The clause is one which is often put into contracts in a very generic manner, partly due to the fact mentioned above. While problems can arise out of the use of a generic clause, the point remains, that force majeure is a well-known and utilised often.

    For a force majeure to be applicable, it must fulfil one of two requirements. The first is that of impossibility (or impracticality), while the second is the frustration of purpose. An example of a case in which the impossibility clause applied was Taylor v Caldwell. One of the parties owned a music hall which it had agreed to lease to the other. However, a fire arose which destroyed the building; this made it quite impossible for the agreement to be completed and enacted, and so under the impossibility force majeure clause, the contract would be terminated.

    India

    Once again, India is a common law jurisdiction much like the UK and US. The UK system heavily influences it due to the past the countries share, and so it should come as no surprise that they have much the same attitude on force majeure clauses. In India, there is the concept of Doctrine of Frustration, and this applies in any case wherein the initial purpose of the agreement is no longer a possibility.

    Section 56 of the Indian Contract Act of 1852 states that any case in which an act or obligation becomes impossible or unlawful, the agreement shall become void. However, it was confirmed by the Indian Supreme Court that this would not apply in any case wherein the defendant causes the impossibility to arise due to their personal actions or decision.

    Conclusion

    Force majeure is a fairly standard clause used in contracts around the world. It provides as much stability as is possible in the face of the world's instability, with numerous occurrences of unpredictable and uncontrollable natural disasters occurring regularly and human-made changes in legal systems taking place through government acts on national and international fronts. This clause is both specific in its outcomes, while simultaneously being vague enough to cover all possibilities. Depending on a nation's legal system, there may be different regulations controlling the use of the clause, with many of the common law jurisdictions sharing similar attitudes towards it, while civil law systems have their view of things. However, the fundamental outlook on the matter remains alike.

     

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    Mon, 02 Sep 2019 12:30:00 GMT
    <![CDATA[Cryptocurrency and Asset Exchange auh]]> Cryptocurrency and Asset Exchange in the Abu Dhabi Global Market

    Currency is defined as something, more often than not paper and coins, that act as a medium of exchange for goods and services. This practice of trade has been a constant for humankind throughout its various ages, occurring in multiple forms, yet resulting in the same outcome. While earlier transactions revolved around the exchange of physical forms of currency in the form of legal tenders, at present, with the advancements made in technology, the currency has taken an alternative system that's known as cryptocurrency.

    Cryptocurrency facilitates financial transactions in the same manner currency does, with the exception that it is intangible and acts as a digital asset. The standard currency relies on central banking systems and controlling authorities as a form of regulation, whereas cryptocurrency utilises a form of decentralised control. This decentralised methodology of control is made possible by the use of distributed ledger technology or distributed ledger technology (DLT). The technology is such that digital data is spread across multiple devices in an interconnected network and subsequently synchronised using a consensus of these devices within the network. The lack of a regulatory body overseeing these networks is considered as a significant security threat, but this hasn't stopped multiple variations of cryptocurrency being conceived including Bitcoin, Altcoins, Token, etc. With cryptocurrency gaining major traction and becoming mainstream, countries have looked into the same, and while some have expressed reservations in adopting the system, some have taken it up as an authorised medium of exchange. The United Arab Emirates (UAE) is one such country that has taken an active interest in integrating cryptocurrency into its economy through the Abu Dhabi Global Market (ADGM), an international financial centre and financial free zone in Abu Dhabi.

    Abu Dhabi Global Market

    The Abu Dhabi Global Market was established as a financial free zone in the Emirate of Abu Dhabi by Federal Decree No. (15) of 2013 and is governed by Abu Dhabi Law No. (4) of 2013. It is located at Al Maryah Island and is comprised of three independent authorities:

    • The Global Market's Registration Bureau (known as the Registration Authority or RA)
    • The Financial Services Regulations Bureau (known as the Financial Services Regulations Authority or FSRA)
    • The Global Market's Courts (known as the ADGM Courts)

    The responsibility of registration, incorporation and licensing of legal entities within the ADGM rests with the Registration Authority. It also works with government authorities and services and is in charge of issuing notices, circulars, permits in relation to ADGM. Any changes to the information provided by the entity have to be officially informed to the Registration Authority within a set time period. Any failure by the entity to do so will result in fines. Apart from this, the RA is tasked with enforcement of ADGM companies regulations, dissolution and restoration of ADGM establishments and registration of property located in Al Maryah Island.

    The Financial Services Regulations Authority conducts and facilitates all financial services in ADGM. Financial entities registered with ADGM must adhere to the obligations set out by the FSRA, that are in addition to the standard obligations of ADGM. The FSRA seeks to uphold the integrity of ADGM's financial system and acts to deter any such conduct or activity that disturbs the stability of the financial services industry. ADGM also has set up measures to towards prevention of financial crimes by adhering to Countering Financing of Terrorism (CFT) Anti-Money Laundering (AML) guidelines, with FSRA being the competent authority governing the same. The ADGM Courts consists of the Court of Appeal and the Court of First Instance, and function as per the rules and regulations enacted by the ADGM Board of Directors and its subsequent amendments.

    Guidelines related to Cryptocurrency

    In May 2019, the Financial Services Regulatory Authority issued a set of guidelines with respect to Cryptocurrency. The guidelines enacted were:

    • Digital Security Offerings and Crypto Assets Regulations under the FSMR (dated 13th May 2019)
    • Regulation of Crypto Asset Activities in ADGM (dated 14th May 2019)

    According to these guidelines, a Crypto Asset was recognised to be a value of digital representation that could digitally be traded and be utilised as a medium of exchange, but not having any legal tender status in any jurisdiction. The main objectives are to address the risks that arise when trading of crypto assets occur. At present, in the event of a theft or a loss of crypto assets, users do not have a safety net that will enable them to recover their assets. The mere adherence to AML and CFT guidelines is not sufficient enough to quell the broader risks of crypto assets. The issues addressed by the guidelines pertain to the areas of:

    • Consumer Protection
    • Safe Custody
    • Technology Governance
    • Transparency
    • Market Abuse

    Under the regulatory framework, any person (custodian, market operator or intermediary) dealing in crypto assets needed to be approved by the FSRA as a Financial Services Permission (FSP) holder in the business of operating crypto assets, otherwise known as OCAB. Apart from the above-mentioned guidelines, authorised persons must comply with the following additional guidelines:

    • The FSRA Conduct of Business Rulebook (COBS)
    • The FSRA General Rulebook (GEN)
    • Anti-Money Laundering and Sanctions Rules and Guidance under the FSRA (AML)
    • The FSRA Rules of Market Conduct (RMC)

    As per chapter 17 of COBS, there are seven key factors which the FSRA considers while determining whether a Crypto Asset becomes an Accepted Crypto Asset. They are:

    Maturity/Market Capitalisation:

    The volatility, sufficiency and the proportion of Crypto Asset in the free float are assessed. The FSRA does not prescribe a source for the calculation of market capitalisation of Crypto Asset. It instead uses recognised sources, as and when it may be available.

    Security:

    The Crypto Asset is determined if it is able to adapt and improve the risks and vulnerabilities it has and tested on their ability to allow secure private keys the appropriate safeguarding.

    Traceability/Monitoring:

    The ability of crypto assets to identify counterparties in transactions are assessed along with the ability of OCAB holders to demonstrate the origin and destination such crypto assets.

    Exchange Connectivity:

    The presence of other exchange centres which support crypto assets, their jurisdictions and regulations are investigated.

    Types of DLT:

    The security of the DLT that is used for the purpose of Crypto Assets is assessed to understand if it is stress tested.

    Innovation/Efficiency:

    The ability of the Crypto Asset to solve fundamental problems or create value for the participants or meet a need of the market is determined.

    Practical Application/ Functionality:

    The functionality of the Crypto Asset in terms of real-world quality is looked into and plays an important role in determining if it becomes an Accepted Crypto Asset.

    Anti-Money Laundering and Countering Financing of Terrorism Guidelines

    One of the primary concerns with the usage of Crypto Assets is money laundering (ML) and terrorism financing (TF). The ADGM introduced the Anti-Money Laundering and Countering Financing of Terrorism Guidelines in 2015 with the jurisdiction being exclusive to the Global Market area, and it is independent of any federal anti-money laundering legislation. The guidelines introduced to apply for all those persons who operate from or in the ADGM.

    Under the UAE criminal law, as per Article 3 of Federal Decree Law No. (20) of 2018, a person may be held criminally liable for money laundering if it is conducted intentionally in the name of the person or from their account. The following also constitute offences in relation to money laundering:

    • Failure to report suspicions related to money laundering
    • Assisting in the commission of money laundering

    An inter-governmental organisation called the Financial Action Task Force (FATF) helps develop and promote international standards to fight money laundering and terrorist financing. The FATF has identified certain critical risks associated with crypto assets, such as:

    Anonymous operation of Crypto Assets

    Since crypto assets are traded on the Internet with no face-to-face interactions, anonymous funding and transactions take place. This can result in the failure to identify the source of destination of the funds.

    Increased potential for ML and TF risks:

    The ease of access to Crypto Asset systems (even from a mobile phone) massively increases the global and can enable cross-border transactions, which can be challenging to monitor.

    Complex infrastructure:

    Crypto Asset systems are built on platforms that require complex infrastructures with multiple entities across different jurisdictions being involved. This can cause difficulty for law enforcement agencies to access them. The rapid increase of decentralised technologies which are used by Crypto Asset businesses further aggravates the issue.

    Jurisdictions not having adequate ML/TF tools:

    Since different components of the Crypto Asset system may be spread out across multiple jurisdictions, it is entirely possible that such jurisdictions may not have adequate framework and control over money laundering and terrorism financing.

    On the basis of the risks put forth by the Financial Action Task Force, the FSRA has introduced fundamental principles an OCAB holder should consider, which are:

    Risk-Based Approach:

    OCAB holders must understand the risks associated with the activities involved and should carry out periodic risk-based assessments, which identify, assess, manage and mitigate the risks related to money laundering.

    Business Risk Assessment:

    In accordance with the AML rules, entities must take appropriate steps to identify and analyse ML risks the business may be exposed to, with importance given to the use of new technologies that can be used. The FATF further recommends that financial institutions must conduct such risk assessment prior to the launch of any new practice, technology or product.

    Customer Risk Assessment and Customer Due Diligence:

    Procedures in relation to Customer Risk Assessment and Customer Due Diligence must be implemented by all OCAB holders and must rate the Clients according to their risk profile. The due diligence must be carried out in accordance with the AML rules as per FSRA. In the event that the ongoing due diligence happens non-face-to-face, the OCAB holders are expected by the FSRA to identify the client as a natural person. OCAB holders must ensure that the process of due diligence is not a simplified one and may use any technology available to them in order to mitigate any such risk associated with verifying the client.

    Governance, Systems and Controls:

    OCAB holders are required to implement the necessary technological governance systems and controls to ensure appropriate ML and TF compliance. Third-party solutions and technologies can be brought on in order to fulfil the regulatory obligations put forth. Effective transaction monitoring systems must be implemented in order to determine the origin and destination of Crypto Assets. A Money Laundering Reporting Officer (MLRO) must be appointed by the OCAB Holder, and this officer will be responsible for implementing and overseeing how the OCAB Holder complies with the AML rules.

    Suspicious Activity Reporting Obligations:

    OCAB holders must establish online connectivity with UAE's Financial Intelligence Unit for submitting such suspicious activity reports and must ensure that transaction monitoring systems are in place to identify any possible breach of domestic or international sanctions.

    Record Keeping:

    The FSRA expects record-keeping practices in accordance with the AML/CFT compliance guidelines, to be followed by OCAB holders. Such data must be kept in an easily accessible format and provided to the FSRA whenever required.

    Conclusion

    It is imperative that for the successful integration of crypto assets, the guidelines that are put forth by the Financial Services Regulations Authority are followed. These guidelines are quite comprehensive in nature and ensure that a safety net is available for those dealing in crypto assets and digital asset exchange. The ADGM has been a pioneer in international financial centres, with its unique outlook and it has certainly paved the way for further inroads in the field of cryptocurrency.

     

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    Mon, 02 Sep 2019 10:35:00 GMT
    <![CDATA[Finding the Best Law Firm in Abu Dhabi]]> In the UAE, many law firms exist but not all firms possess advocacy & legal consultancy license that allows a lawyer to present a case in the court of law. There are many law firms in Abu Dhabi who only possess the legal consultancy license and not the advocacy one. Today individuals and businesses seeking legal assistance are increasingly getting frustrated with the quality of legal service offered and the excessive amounts of legal fee charged by the lawyers. As a result of which, law firms today are facing demands to enhance the quality of service, charge less and become easily reachable.

    No matter you are seeking legal counsel for your company or yourself or your family, it is imperative to conduct your due diligence to identify the right lawyer to represent you in the court. You must consider your unique needs and match those to a law firm that has extensive experience in servicing those needs.

    Keeping all the above factors in view, we at STA Law Firm have liberated ourselves from the clutches of orthodox thinking so as to come up with ways to provide excellent client service and considerably bring down the cost related to legal counseling services. STA is an international law firm based in Dubai and our attorneys excel in providing legal and strategic advice on all forms of corporate, commercial and business affairs including but not limited to banking and finance, company and commercial law including construction, real estate, health care, employment law, insolvency and restructuring law. We at STA believe 'Good is not good enough', and therefore, we aim to set high standards in the legal proceedings.

    Reasons to Choose STA Law Firm

    • Professional and Adept Corporate Lawyers

    Whether you are seeking legal services for business setup in Abu Dhabi, trademark registration in the UAE, or any other corporate legal service, we at STA Law firm offer each service with utmost accuracy and attentiveness. We hold expertise in handling routine business issues together with more complex subjects. We at STA are proud to be one of the most prominent property lawyers in Abu Dhabi and criminal & shipping advocates in UAE. Moreover if you are looking for online lawyers in Dubai, look no further than STA Law Firm.

    • Reliable Service you can bank on

    At STA Law firm, our attorneys offer ably screened, high-quality legal services in all areas of law including commercial, corporate, property, construction, insurance laws and more.

    • Compliance Services

    STA' compliance and regulatory support group carries out preliminary assessments on companies and advises them about the potential threats within the industry, then fabricating and helping to execute comprehensive and enterprise-wide compliance programs. Our team of skillful lawyers provide legal counseling on all aspects of tourism comprising of inbound and outbound terrorism, hospitality relate real estate, resort, hotels, tours, and destination management companies throughout the GCC and Asia.

    The One-Off

    In order to achieve our vision to bring legal assistance within the reach of every individual and business, we at STA Law firm are a team of finest lawyers whose core value is to deal with legal matters with utmost honesty. We at STA, strive for excellence, esteem teamwork and consistent innovation.  Also, our lawyers are well-determined and make sure that they deliver the best no matter how challenging the situation is. And this eventually helps us develop trustworthy relationships with our clients and stakeholders.

     So are you looking for online lawyers in Dubai? Don't just think of it, it's time to find the right lawyer and get your case solved before it gets worse. With expert lawyers at STA Law firm, get rid of all legal worries now!

     

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    Sat, 31 Aug 2019 10:00:00 GMT
    <![CDATA[Dispute Resolution in Singapore]]> A Guide on Dispute Resolution in Singapore

    Introduction

    A conflict is virtually inevitable wherever there is human interaction. Some of these conflicts may erupt a dispute in any structure of interaction or relationship, and others may perhaps result in a multifarious international hostility and confrontation.

    Successively, dispute resolution processes have developed over a period of time to intervene and manage various types of disputes. Resultantly, there is a high diversity in fields in which non-profit organization and conflict resolution professionals take on a broad array of roles. In simple terms, dispute resolution is the process of resolving disagreements and arguments between individuals or different parties. There are various types of negotiations and resolutions which include but is not limited to, litigation, conciliation, arbitration, mediation, etc.

    This article delves into the court structure in Singapore as well as their mechanisms for solving different types of disputes and the options available to distressed individuals or parties.

    Introduction to Dispute Resolution Methods in Singapore

    The main type of dispute resolution method practiced in Singapore is litigation. However, with the growth of expertise in arbitration in Singapore, alternative dispute resolution mechanisms are largely being used in place of litigation.

    The civil justice system in Singapore has stemmed from the Common Law adversarial model. Generally, the applicable standard of proof for any civil claim to succeed depends on the balance of probabilities. There is an active case management system which has been established by the Registry of the Courts, which allows the courts in Singapore to play a greater role essentially in minimizing all unnecessary delays in proceedings.

    Further, SICC, short for Singapore International Commercial Court, was established in January 2015, primarily for the expansion of the scope of internationalization as well as the export of Singapore laws. Furthermore, with the increasing emphasis on the alternative dispute resolution, the Singapore International Mediation Institute (SIMI) and Singapore International Mediation Centre (SIMC) were established.

    Structure of the Courts

    The court system in Singapore is two-tiered:

    • The Supreme Court (which is made up of the Court of Appeal and High Court)
    • The State Courts

    The Supreme Court

    The High Court in Singapore is comprised of the judges of the High Court as well as the Chief Justice. In 1994, the Court of Appeal embarked at being the apex appellate court in Singapore. The Court of Appeal takes cognizance of appeals on judgements from the High Court in both criminal and civil matters.

    A civil claim of a value greater than SG$ 250,000 must be commenced in the High Court in the first instance. Consequently, large valued commercial claims are directly brought before the High Court in Singapore. There are not any specific divisions within the High Court to hear a specific type of dispute. However, in order to deal with complex commercial cases, there is a specialized list of judges that deal with specific areas of law that have been set up within the High Court of Singapore. Some of the specialized areas set up in the High Court include:

    • Securities, finance and banking;
    • Insolvency, trusts and company;
    • Arbitration;
    • Insurance and shipping;
    • Construction, shipbuilding, etc.

    The above list is not exhaustive, but only intends to give a gist of the classifications.

    The SICC is one of the division of the High Court which deals with disputes of commercial and international nature, and same was established pursuant to Section 18A of the Supreme Court of Judicature Act.

    The State Courts

    The State Courts in Singapore comprise of the Family Justice Court, the District Court and the Magistrates' Court. For claims that do not exceed the value of SG$ 60,000, it is the Magistrates' Court that hears the disputes. On the other hand, the District Court takes cognizance of the claims whose value does not exceed SG$ 250,000.

    Further, the Family Justice Courts which consists of both, the Youth Courts as well as Family Courts, hears all cases related to family disputes including but not limited to, guardianship cases, divorce matters, family violence cases, applications for deputyship as under the Mental Capacity Act, successions matters, etc.

    Litigation

    Starting Proceedings

    Generally, there are two ways to commence a civil proceeding in Singapore:

    • Writ of Summons: These are for actions that are likely to include a substantial dispute of facts;
    • Originating Summons: These are actions that are unlikely to include a substantial dispute of fact, or where it may be prescribed by law. For example, pursuant to Section 124(1) of Building Maintenance and Strata Management Act, it is clearly mentioned that all applications made to the court must be commenced by originating summons only.

    Notice to the defence

    The originating summons and writ of summons have to be personally served on each of the defendants. In the case where the defendant is within the jurisdiction, the same must be served within 6 months from the date of the issue.

    Pre-trial Stage

    After the summons has been filed, a Pre-Trial Conference (PTC) gets scheduled first. At this stage, the registrar enquires about the status of the action which has been commenced. Additionally, adequate direction is given to parties in order to proceed with litigation in a fair and expeditious manner. Further, at this stage, an application for either final or interim relief may also be made. Furthermore, each party discloses their documents which are relevant to the case, and in advance of trial, the parties exchange affidavits, which states the evidence that supports each party's case.

    Trial

    In the case where the matter is resolved by way of terminated summarily, settlement or any other way of interim judgement, the matter proceeds to trial. At this stage, witnesses for each party (if applicable) state their evidence with regards to the affidavits submitted.

    Post-trial

    Once the court proceeding has ended, the solicitor or the advocate for the party that wins the case must submit a breakdown of the bill of costs incurred on behalf of the client, or the list of costs as ordered by the relevant authority or court to be paid by a party to the other. It is pertinent to note that litigation may continue even after the trial in case a party seeks to enforce the judgement, or when the judgement is appealed.

    Interim Remedies

    One of the party may bring the case to be dismissed even prior to a full trial in the ways mentioned below:

    • In the case where the defendant does not appear or fails to file his/her defence within the specified time, a judgement in default can be claimed by the claimant.
    • In the case where the defendant appears as well as files the defence though there happens to be no real defence to claim, summary judgement can be applied for by the claimant against the defendant.
    • Pleadings are struck out if it:
    • Does not disclose an adequate cause of action;
  • Is frivolous, scandalous or vexatious;
  • Tends to embarrass, delay or prejudice the fair trial;
  • Is otherwise considered an abuse of the procedures of the court.
  • Appeals

    The appeals from SICC are heard by the Court of Appeal. It is pertinent to note that the Chief Justice may appoint an International Judge since it is at his discretion, who may sit in the Court of Appeal for an order or judgement of the SICC which has been challenged. Essentially, the time limit for the appeal a month (30 days) from the date of the judgement which needs to be challenged or appealed.

     

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    Tue, 27 Aug 2019 16:37:00 GMT
    <![CDATA[off-plan contract termination]]> The decision of the Land Department to cancel the registration

    In the judiciary of cassation in Dubai and Law 19 of 2017

    Due to the importance of the real estate market in Dubai, especially the sales system on the map, which allows the investor to buy through installments and allows the developer to implement the project with investors' funds over a period of time, the real estate legislation organized the sale on the map from the beginning until the end, The process as well as amendments to it in view of the flexibility of the legislation to keep pace with the development that occurs in the community in the sense that the legislation is amended whenever circumstances need this amendment.

    The judiciary also follows this development in legislation and applies the new rules, with taking into account the retroactive effect of the law.

    The contract may not be rescinded or amended except by the will of the parties or by a court order in accordance with the law.

    Since the contract of sale on the map is not a completed contract, it is a contract that takes time to implement, where there is a period of time between the contract and the implementation for years, and during these years may arise some things whether the seller or buyer can not complete the implementation or delay, The buyer may falter in pay the installments or change his opinion or the value of the property decreases, and the developer may falter in execution, delay for some time or stop performing for any reason.

    All these reasons raise the issue of termination of the contract, which means ending it without the implementation (annulment).

    Whereas, Law No. 13 of 2008, which included how to terminate the contract in the event of breach of any of the obligations of the developer or investor, stipulated in Article 11 that "If the buyer breaches any of the conditions of the contract of sale of the unit with the developer The latter shall notify the Department of this and the Chamber shall grant the purchaser, either in person or by registered mail, or by electronic mail for 30 days to fulfill its contractual obligations. 2. If the time limit referred to in item (1) of this Article has elapsed without the buyer having fulfilled its contractual obligations, the developer may cancel the contract and return what he has received from the buyer after deducting no more than 30% of the value of the amounts paid from him.))

    It was then followed by Decree No. 9 of 2009, under which Article 11 of Law No. 13 of 2008 was amended and states that "(Article 11) 1 If the buyer violates any of the terms of the sale contract of the real estate unit signed with the developer, (2) If the period specified in section (1) of this Article has elapsed without the buyer having fulfilled its contractual obligations, the following provisions shall apply:

    (A) In the event that the developer completes at least 80% of the real estate project, the developer may retain all the amounts paid with the buyer's demand to pay the remaining value of the contract. In case of failure, the developer may demand the sale of the property by public auction to demand the remaining amounts due to him.

    (B) In case the developer completes at least 60% of the real estate project, the developer may terminate the contract and deduct not more than 40% of the value of the real estate unit provided in the contract.

    C) In the case of real estate projects in which the construction started and did not reach 60%, the developer may terminate the contract and deduct not more than 25% of the value of the real estate unit stipulated in the contract.

    (D) In the case of real estate projects for which construction has not begun for reasons beyond the control of the developer and without negligence or negligence, the developer may terminate the contract and deduct not more than 30% of the value of the amounts paid by the buyer. 3- For the purposes of paragraphs (c) and (d) of Article (2) "Construction" means that the Contractor shall receive the location of the real estate project and start the construction work according to the designs adopted by the competent authorities.

    4. For the purposes of paragraphs (b) and (c) of item (2), the developer shall return the amounts owed to the buyer within a period not exceeding one year from the date of cancellation or within a period not exceeding sixty days from the date of resale of the real estate unit whichever is earlier. Notwithstanding the provisions of paragraphs (1) and (2) of this Article, the Foundation may, on the basis of a reasoned report, decide to cancel the real estate project. In such case, the developer shall return all amounts received from the buyers in accordance with the procedures and provisions stipulated in Law No. (8) for the year 2007 on the accounts of guaranteeing real estate development in the Emirate of Dubai. 6. The provisions of this Article shall not apply to contracts for the sale of land in which the sale has not been made on the map, and shall remain subject to the provisions of the contract concluded between its parties. 7 The provisions of this Article shall apply to all contracts concluded before the provisions of this Law. ))

    This was followed by the issuance of the executive regulation of the law by Decree No. 6 of 2010.

    Under this legislation, the law would have allowed the developer, in the case of breach of the investor's obligations, to resort to the Land Department to give a 30-day notice for the execution of the contract.

    Some developers have already resorted to the department and issued decisions in accordance with those provisions. The contract was canceled and the registration was canceled and the units were subsequently sold to third parties.

    However, when the buyer appealed this decision before the judiciary, some of the provisions of primary and appeal to support this decision and others not to be acclaimed because it was issued by the Department of Land and Property is not a judicial body has the right to decide the annulment and concluded that these decisions are just a recommendation does not prevent Of recourse to the judiciary and does not have the authoritative prevention of reconsideration of the subject.

    There may be no problem if the unit has not been disposed of to a third party and the court has concluded that the decision has been reviewed and concluded that the investor has been proved wrong and then the contract has been annulled in favor of the developer.

    However, the problem is that if the unit was disposed of to a third party after the decision of the Land Department to cancel the contract, when the appeal against this decision before the judiciary, the conduct to a third party makes the implementation of the contract impossible, which leads to the separation of the force of law and the court so without consideration In the extent of breach of contract because it is broken by the force of the law and it is useless to discuss the breach.

    This law was amended by Law No. 19 of 2017, which explicitly stated the right of the developer to apply to the Land and Property Department to request annulment without resorting to a court or arbitration after following certain procedures and obtaining a document from the Land and Property Department. Where it ruled that "Article (11) of Law No. 13 of 2008 regarding the regulation of the initial land registry in the Emirate of Dubai, as amended by Law No. 19 of 2017, stipulates that (A) The following rules and procedures shall be followed in the event of a breach by the buyer of its obligations to implement the contract of sale on the map signed between him and the real estate developer. (1) The real estate developer shall notify the department of the buyer's breach of his contractual obligations, The real estate developer and purchaser, the descriptions of the real estate unit that was the subject of the sales contract on the map, a clear description of the contractual obligations to which the buyer vacated, and any other data determined by the department, (2) the department immediately upon receipt of the notification and after verification (A) notify the buyer of the fulfillment of its contractual obligations with the real estate developer within thirty (30) days from the date of notification, provided such notice is in writing and fixed date, and shall be notified to the buyer by the Department either in person or (B) the friendly settlement procedure between the developer and the purchaser, if possible, and is evidenced by an annex to a contract signed by the developer and buyer, (3) If the period referred to in paragraph 2 (a) of paragraph (a) of this Article has expired without the buyer executing his contractual obligations or completing the friendly settlement between him and the real estate developer, the Department shall issue an official document in favor of the real estate developer stating: (A) The real estate developer's commitment to the procedures stipulated in paragraph (a) of this article; (b) Determination of the percentage of completion of the real estate developer's contract by the real estate developer on the map in accordance with the standards and rules approved by the institution in this regard. Of the official document referred to in the coffee (3) of paragraph (a) of this Article and according to the percentage of completion, the following measures shall be taken against the buyer without resorting to judicial or arbitration: (a) If the real estate developer accomplishes more than (80%) of the real estate unit, (1) to maintain the contract between the buyer and the buyer and retain the full amounts paid to him with the buyer's demand to pay the remainder of the value of the contract, (2) request the Department to sell the real estate unit of the contract by auction to require the remaining amounts owed to him, The buyer for all costs incurred by such sale; and (3) the contract is terminated by its own will And a deduction of not more than (40%) of the value of the real estate unit provided for in the contract of sale on the map, and refunds to the buyer within one year from the date of the dissolution of the contract or within 60 days from the resale of the buyer's real estate unit The third article of Law No. 19 of 2017 stipulates that "this law shall be implemented from the date of its promulgation and shall be published in the Official Gazette". This means that the amended article shall be effective from the date of the law. (A) The real estate developer's commitment to the procedures stipulated in paragraph (a) of e (B) to determine the percentage of completion of the real estate developer of the real estate unit in place of the contract of sale on the map, in accordance with the standards and rules adopted by the institution in this regard, as this was - and the court papers in front of the two degrees of litigation have been exempt from the official document provided for in the substituted article, Then there is no room here to confirm all the procedures followed by the appellant under the text of Article (11) of Law No. 13 of 2008 before replacing them for the absence of the article replaced by the text on the validity of those procedures. ))

    The law also stipulates that all contracts on the map should be applied to all the contracts on the map, whether before or after the law. The law also states that these procedures are considered public order and result in violating them. The law also allows the investor to resort to the courts in case of abuse of the real estate developer provided for in this Act.

    In light of the above, it is clear to us that the development of the legislation is accompanied by an evolution of the provisions to keep pace with the development in practice and to bring the law into line with reality. It is not logical that the law provides for a procedure that is not applied or recognized before the courts. In all cases, the victim is not denied access to the judiciary.

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    Tue, 06 Aug 2019 16:46:00 GMT
    <![CDATA[Non-insane Automatism in Criminal Law]]> Non-insane Automatism in Criminal Law

    There are many different terms and concepts in criminal law; one of the most interesting is automatism. Automatism negates and could avoid criminal responsibility. The term automatism is used in Criminal law to describe behaviour that occurs when a person is unconscious to the fact that the act is taking place. There are two types of automatism. In order to accurately understand the principle of the term mentioned above, it is necessary to distinguish the definitions of the concepts of insane automatism and non-insane automatism.

    First of all, insane automatism according to the criminal law is mental illness, due to which the defendant is unable to understand the actual character or social danger of his actions, cannot control his actions, unable to understand, that what he was doing was a wrongful act in accordance to the law.  The person is recognized as an insane, when he cannot distinguish fantasy from reality, failed to know right from wrong. In essence, the person is incapable of understanding whether the repercussions of his actions are good or bad as well as what consequences he may face for the same, in certain cases.

    In most of the states, there is a medical treatment for an insane person. For example in Criminal Code of the Russian Federation Article 21 p.2 states that it is necessary and compulsory to hold a medical treatment as it has been envisaged in the Code, and the same may be imposed by the Court of law towards a person who has committed an act which is socially dangerous in such state of insanity. The insane person is not subject to criminal responsibility.

    There are different ways to determine insane automatism. Depending on the jurisdiction of various states, courts use one or a combination of the following tests for legal insanity:

    TESTS FOR LEGAL INSANITY IN COURT

    The "M'Naghten Rule"

    This Rule basically means that the defendant in such case does not understand at all what he or she has done. In essence, the person fails to distinguish the wrong from the right, which is, in fact, the result and consequence of a diseased state of mind.

    The "Irresistible Impulse"

    Under this rule, it is said the person who is accused of a certain act of crime in fact such a person, who due to a mental disease does not have control over his actions, hence, unable to control the impulses, the consequence of which is such person engaging in an act which is criminal.

    The "Durham Rule"

    Under this rule, regardless or irrespective of relevant clinical diagnoses, it is said that it was the mental defect of the defendant which lead to the criminal act, and the same is directly related to the mental unstable health/defect of such person.

    The "Model Penal Code"

    According to this rule, upon diagnosed mental defect, it is said that the defendant has failed or was incapable of understanding the criminality of his or her action. Additionally, that such person was hence, unable to adhere to the laws and thereby act in accordance with the law.

    After numerous years of practice, the judicial system has developed many ways in order to successfully determine whether automatism took place in a particular case.

    Next, let us analyze the concept and definition of non-insane automatism according to the Criminal Law. The best and most understandable definition of non-insane automatism is contained in a case of Lord Denning who defined it as «an act, which is done by the muscles without any control by the mind or an act done by a person, who is not conscious of what he is doing.

    In order to recognize non-insanity, there is a requirement that the defendant has no control over his body parts, and in cases where the defendant have some control, the defense will fail. Such kind of failure was mentioned in Broome v Perkins (1987) 85 Cr App R 321, where a diabetic person suffering from a hyperglycemia attack was charged with driving without due care and attention. He had some control over his body, so the defense failed. The Court held that automatism basically implied the involuntary movement of the limbs or body. Additionally, whether this has happened is a question of law that requires to proven by way concluding evidence. In the circumstances, the Court refused to believe that a car could have been driven for miles without actually having some degree of control. It must therefore be concluded that for parts of the journey defendant's mind was controlling his limbs and that thus he was driving. Therefore, the automatism defense was not applicable.  In this case, we can see that if the person has the ability to control his actions, that type of case could not be recognized as non-insane automatism. The defendant had driven a car in an inappropriate way for almost five miles, during this period he was involved in an accident. Court did not accept that a car could have been driven for five miles without some control of a driver. Therefore, it could be concluded that the mind was controlling body parts and the non-insane automatism defense was not applicable.

    There is another interesting case, where the non-insane automatism was appropriate is Case of R v T [1990] Crim LR 256.

    Facts:

    One of three defendants, in this case, was charged with armed robbery. Upon arrest, the defendant was able to recall only parts of the events that had occurred. It was several days later that is found that she has been raped three days before her arrest but that she has not reported the same.  

    Issue:

    Whether the defense of non-insane automatism was applicable? Whether the fact that the defendant was raped before was an "external factor" that caused a malfunction of the defendant's mind?

    Held:

    Previously, there was no case where an incident of rape was considered an "an external factor" causing a malfunctioning of the mind. However, rape was an external event which would likely, rather indubitably, have an appalling effect on an average person, and hence, satisfied the necessities of an "external factor". The court considered that the defendant had been acting in a "dream", which could be considered as non-insane automatism. The case of R v Rabey (1981) decided by the Ontario Court of Appeal was distinguished and differentiated on the basis that the particular external factor comprised nothing more than the "ordinary disappointments and stresses of life", whereas defendant had suffered a severe assault, which would have affected any ordinary person.

    According to this case, we can clearly identify, what circumstances could be recognized as non-insane automatism. The court held that the defendant was diagnosed with Post Traumatic Stress Disorder (PTSD) and that it was caused by the external factor of the rape and thus was non-insane automatism. The non-insane automatism must occur due to some factor external to the mind of the defendant. In other words, the defendant person has a normal mind, but it was temporarily affected by some external factor.

    The last example, which demonstrates a refusal of Court to recognize non-insane automatism is Case R v Burgess [1991] 2 WLR 1206.

    The defendant visited a woman to watch a video in her flat. While watching the video victim fell asleep on the sofa. She was awoken by the defendant. He smashed a bottle over her head. Before she could stop him, he took video recorder and brought it down on her head causing cuts and bruises. At the trial, the defendant provided expert medical evidence that he had been sleepwalking at the time of the attack of the victim and that the defense of non-insane automatism should be put before the jury. And the jury found him not guilty by reason of non-insane automatism.

    After that, The Court of Appeal dismissed the defendant's appeal. Lord Lane CJ considered that this «disease of the mind» connected with «internal» cause.

    Also, Lord Lane stated, that he accept that sleep is a normal condition, but the evidence in the instant case indicates, that sleepwalking, and particularly violence in sleep, is not normal. Consequently, based on the evidences, the judge was right to conclude, that this was an abnormality or disorder, because of an internal factor, which had manifested itself in violence and which might recur.  This is one more case, which clearly demonstrates that, for example, the sleepwalking was violent and had a possibility of recurrence, so it could be considered a form of insanity. Thus, the appeal was subsequently denied.

    In accordance with the facts stated above, examples, principles of non-insanie automatism, it can be concluded, that in some cases the defendant is not responsible for his actions in accordance with the law. Many criminals tried to prove that non-insane automatism took place in order to avoid punishment. But now judicial practice can clearly recognize, who is not conscious of what he was doing, and who wants to avoid penalty.

     

     

     

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    Tue, 06 Aug 2019 16:20:00 GMT
    <![CDATA[Dispute Resolution UAE FDI Law]]> Dispute Resolution under the New UAE FDI Law

    The United Arab Emirates' new law on Foreign Direct Investment (FDI), which came into effect on October 30, 2018, will set a new point of reference by permitting 100 percent foreign ownership of companies in UAE. The new enactment, which plots who is an investor and what is a venture under the FDI Law, additionally details the sort of insurances stood to foreign investors who qualify under it. This will prove to be a game-changer for the UAE international investment law which will surely be a decider in diversifying the business and investment landscape by providing measures and incentives to the foreign investors.

    On 30 October 2018, His Highness, issued Decree Law No. (19) of 2018, on FDI, which sets out national enactment for the advancement and improvement of UAE's foreign investment scenario. The new enactment sets out arrangements including yet not restricted to who is an investor and what is a venture or an investment under the FDI Law, and the sort of insurances stood to foreign investors who qualify under the FDI Law. The United Arab Emirates is a hot destination for the foreign investors where FDI flows around 11 Million Dollars in 2017.

    The new enactment likewise gives a road to a plan of action if the foreign investor is hurt by the UAE or one of its elements. The dispute resolution procedure under the FDI Law accommodated Alternative Dispute Resolution ("ADR") and expedited local court process in the UAE. Following a progression of the Government of UAE, declarations and much theory in the market, another Foreign Direct Investment Law has been distributed in the UAE Official Gazette and is currently in power. Likewise, with most, if not all, new enactment, the FDI Law is available to understanding, and we anticipate further clearness in the coming many months.

    In this article, an overview of the dispute resolution mechanism contained in the new enactment and certain imperative contemplations for remote financial specialists under the FDI Law will be given.

    Dispute Resolution under the New FDI Law

    Under the new UAE FDI Law, Article 12 gives a distinct provision on the dispute resolution mechanism where it mentions that:

    "Without prejudice to the right to litigation, disputes or differences which arises from a foreign investment project may be settled by any ADR."

    Under this, any disputes or claims by the foreign investors would be sufficiently be heard in the competent court of Law in the UAE in a fast track and an expedited manner.

    A foreign entity investing will likewise have the alternative of heading off to UAE's local courts. The arrangement explicitly gives that if the investor chooses to continue to prosecute its dispute in the local courts, it will be done as such in an expediate way. Nonetheless, the arrangement does not give explanations regarding how it will be expedited. At present, there is no specialty courts or expedited process set up in the UAE courts to manage FDI claims and disputes.

    Further, under this provision, the investor can pick arbitration on an international front consisting of ad hoc, ICSID, ICC, LCIA, etc. for the settlement of the disputes and claims. The provisions do not mention the way the arbitration ought to be standing upon like the number of arbitrators, the seat of arbitration, the language supposed to be used, etc. Therefore, this will be settled on the gatherings once the procedures are started. Notwithstanding, for an investor to have their disputes and claims resolved by international arbitration, the UAE would need to give its approval and consent.

    The UAE Cabinet has to form a foreign direct investment committee under Article 6 of the new FDI Law of the UAE. The committee shall endeavour with the responsibility of proposing a what is called as the "Positive List" directly to the Cabinet. The Cabinet has to consider certain terms before determining the "Positive List."

    Considerations of ADR under UAE Law

    Specific concerns that an investor should investigate before initiating an arbitral proceeding under the UAE Law. Under the law, it is to be evaluated whether UAE has given its consent for the dispute resolution mechanism which is the choice of the investor, and the compensation criteria that the investor is entitled to via the FDI Law.

    Approvals and Consent:

    The New FDI Law brings out an issue whether the United Arab Emirates would be consenting to any such form of venue or alternative for the foreign investor. Article 12 fails to provide for any specific method for the resolution of disputes. Instead, it gives an "optional" dispute resolution proviso for deciding and choosing a strategy for dispute resolution. In any case, does this mean the UAE has assented to whatever the remote speculator has chosen to determine the debate?

    At first look, an idea to any question goals system at the tact of a foreign investor contained in law may show up as assent since it can establish as an idea to the international company. Nonetheless, foreign investment legislation that incorporates an "optional" dispute resolution provision does not mean the state's approval to arbitration or some other strategy chosen by the foreign investor. It just suggests a specific structure (or decision) of a plan of action to settle the debate.

    Several foreign investment legislations' have comparable arrangements where the foreign investor may pick between strategies for settlement. For instance, Article 5(3), Part II, of the Investment Code of Seychelles Investment Act, 2010 gives that an aggrieved investor may "resort to different techniques for dispute resolution…" to settle its question if the host state improperly dispossesses or nationalizes investments. Another model is Article 43 of Jordan's Investment Law of 2014 which expresses that a financial specialist may "resort to elective methods for settling the debate...".

    Most FDI Laws that have a "discretionary" debate goals arrangement will require a previous agreement like an arbitration clause in the investment agreement, or a consequent contract between the host state and the foreign investor. There is no understanding in another instrument, at that point there is no assent by the state to the strategy chosen by the investor.

    Under the FDI Law, the UAE has not assented to a particular strategy for settling any question with a foreign investor. The dispute resolution mechanism gives options to the foreign investor. A different agreement is necessary for the UAE to agree to international arbitration to settle the dispute. Be that as it may, the FDI Law gives the alternative to the foreign investor to look for the plan of action in the UAE courts.

    Reimbursement

    The second issue under the new FDI Law is the kind of reimbursement the foreign investor will be qualified for on the chance that it is hurt by the UAE or one of its substances. The new FDI law does not explicitly accommodate compensation. The principal exemption is on account of confiscation. Article 9 of the FDI Law gives that an investment won't be dispossessed aside from if the taking is for the clear advantage and the UAE gives satisfactory pay.

    The inquiry is to what sort of remuneration and compensation can a foreign investor recoup under the new Law if the venture is not expropriated, and by what method will the pay be resolved?

    Remuneration is more likely to be resolved on standards of compensation which is dependent via the International Law. The UAE has adequately made one-sided endeavours under the new enactment which could be considered as having "internationalize" or made international Obligations. As it were if a resolution process is initiated under the FDI Law, the tribunal situated will more than likely decipher any hurt brought about by the UAE or one of its elements to the foreign investor as a break of universal law and grant harms following global gauges of pay. Standards of compensation under UAE law would more than likely not be considered.

    Further, the FDI law contains arrangements where it exhibits the UAE's plan to join universal benchmarks to its enactment. For instance, Article 2 of the FDI Law states:

    "This law goes for creating and advancing the outside direct venture condition and joining remote direct speculation by building up the policies of the UAE."

    The new FDI law does not explicitly accommodate remuneration. The main particular case is on account of the seizure. Article 9 of the law gives that speculation won't be dispossessed except for if the taking is benefiting the public and the UAE provides enough pay with. Remuneration will more than likely be resolved on standards of global law, the law office said.

    "The UAE has viably made one-sided endeavours inside the system of the new enactment which could be considered as having "internationalize" or made global commitments in the FDI law. At the end of the day, if an assertion is initiated under the FDI law, the arbitral court situated will more than likely translate any hurt brought about by the UAE or one of its elements to the remote financial specialist as a break of worldwide law and grant harms in accordance with global gauges of pay," the announcement explained. Standards of pay under UAE law would "more than likely" not be thought of it as included. The hotly anticipated FDI law is relied upon to enable the UAE to end up more financial specialist well-disposed and pull in increasingly worldwide speculators.

    This arbitration law is "an extremely energizing improvement" for the entirety of the UAE. "While the state has built up notoriety for being the pre-prominent seat in the Middle East for intervention, it risked falling behind different countries who have presented complete new laws. That issue has now been tended to, and I am certain the new law will help bond the UAE's situation in the worldwide mediation advertise. By the introduction of the Foreign Direct Investment Law in the UAE, it will significantly develop and lead to a majority of investments in the UAE by foreign investors.

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    Tue, 06 Aug 2019 11:32:00 GMT
    <![CDATA[The Indian Copyright Law]]> The Indian Copyright Law Structure (IPR)

    "The right to be attributed as an author of a work is not merely a copyright, it is every author's basic human right"

    ― Kalyan C. Kankanala

    The copyright law in India is in equal parity with the standards set by the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The Copyright Act, 1957 (the Act) has evidenced amendments on quite numerous occasions, pursuant to which it clearly reflects the features of the Berne Convention for Protection of Literary and Artistic Works, 1886 as well as the Universal Copyrights Convention.

    For keeping up with the international requirements of organisation and harmony, the Act has effectively brought the Indian copyright law on the same lines as that of the developments in the technology sector. The Act provides for the minimum standards for safeguarding the rights of the authors and to protect and reward their creativity. The protection is awarded to the creativity of the artists, writers, dramatists, architects, musicians, etc.

    Work:

    The term 'work' under section 1(y) of the Act states that

    "(y) "work" means any of the following works, namely: - (i) a literary, dramatic, musical or artistic work; (ii) a cinematograph film; (iii) a sound recording"

    It briefly comprises of artworks, sculptures, paintings, drawings, etc. It subsists in the following classes of works:

    • Original literary, dramatic, musical and artistic works;
    • Cinematograph films; and
    • Sound recordings.

    Authorship and Ownership:

    The basis of ownership under the Act means that, if the work is literary or dramatic, it is the person who has created the work, the composer is the owner in case of a musical work, the producer is the author in case of a cinematograph film or a sound recording, and in case of a photographic picture, it is the photographer.

    Assigning rights under the Act:

    The owner of the copyright in the existing work or future work may at his own wish and will assign whole or partial rights in the copyright to any person. The assignment has to be in writing by the person assigning the rights or any of his authorised agents. The deed of assignment shall specify the assigned rights as well as the duration and the extent of its territorial jurisdiction. It shall also mention the consideration to be paid by the assignee to the assignor as well as any limitation, extensions and terminations on the conditions and the contractual terms agreed upon.

    Registration guidelines:

    The status of copyright comes into existence as soon as the work is created. It is implied that the actual creator is the owner and the author of the created work and subsequently not formal acquisition is required. But the Copyright Authorities make it a point that the 'work' is registered legally and the records in the copyrights register shall be of evidentiary value.

    Term of copyright:

    As per the Indian Copyright Law, the interests in the copyright lasts for a term of 60 years. For original literary, musical and dramatic works, the term of the copyright is calculated from the year following the author's death. For cinematograph films, photographic films, publications, and other works of international entities, the term is counted from the publication date.

    Civil Action against infringements:

    There are certain critical aspects to be considered when initiating an action against the infringer. Following are the requirements:

  • Proof of the ownership of the copyrighted work
  • Significant similarities between the infringed copy and the original work
  • The Copyright law mandates and provides for a step by step procedure to initiate and action in the following manner:

  • A legal notice to be sent to the person alleged to have committed infringement
  • A civil action can be brought against the accused as per Section 55 of the Act and the court is empowered to grant interlocutory injunction in order to prevent the infringer to commit any kind of infringement of copyright
  • Secondly, a financial relief can be granted as per the provisions of Section 55 and 58 where the claim can be for the profits made through unlawful acts, conversion damages and compensatory damages
  • Further, the Anton Pillar Order will restrain the accused from dealing with the infringing goods or even destroying the said goods. It permits the owner to gain entry and search the premises in order to take the goods in the owner's custody. The court makes it mandatory for the infringer to make disclosures with regards to the specific details of the customers and the suppliers of the goods that have been infringed.
  • Additionally, the Mareva injunction acts as an order where the court can obtain the standby custody of the infringed goods to ensure that the disposal is prevented
  • Finally, the Norwich Pharmacal Order can be obtained to discover and gather critical details from a third-party source.
  • Copyright Societies:

    Copyright collective administration is a newly developed concept. In this the course of protection and management of the copyright work is undertaken by a society or a group of owners. It is to be noted that an owner is not in the capacity to track the usage of his copyright work. Upon becoming member of an international organisation or a society, the copyright owner has the capability to keep up on the usage of the work. There is a high chance of the copyright owner to have the membership in international treaties as well as have agreements with likewise conventions in other countries. It is in the best interest of the owners to become a member of such organisations for ensuring better protection and achieving optimum utilization of the copyrighted work and benefits thereof.

    Copyrights societies is one of a registered collective administration which is formed by copyright owners coming together. There is only one registered society for doing business with respect to one class of work.

  • R. G. Anand vs Deluxe Films [AIR (1978) SC 1613]
  • It is prominent to note that the Hon'ble Supreme Court of India in this case held that the play and the film were surrounded by similar theme. But it is an established principle that a simple idea is not to be considered as the subject matter of copyright. In this case, the story put forth two apprehensions of the theme. Going further, it also dealt with the tribulations caused by caste discrimination and dowry.

    It was held not to be an instance of copyright infringement, since the resemblance was minimal and not substantive replica of the original play. Here the court stated that the dissimilarities countered more over the similarities. Consequently, when the play was watched together with the film, a prudent individual would not conclude that both are similar. All the elements including the scene by scene depiction, the climax, representation, etc, is significantly picturised different from what is depicted in the play. Finally, this case failed to fulfill the requirements of copyright infringement.

  • Eastern Book Company & Ors vs D.B. Modak & Anr [(2008) 1 SCC 1]
  • In this case, Eastern Book Company ("EBC") was a registered partnership firm established for carrying out the task of publishing legal books. The defendant-respondent who was Spectrum Business Support Limited Ltd. where it introduced software to be published on CDs. EBC alleged that the information and the case laws on the CDs were in exact same order and style and formatting as that of the legal books published by EBC. EBC filed for an interim injunction which was disposed off and the defendant-respondent was permitted to use the CDs till the pendency and duration of the appeal.

    The Supreme Court finally held that the respondents were entitled to execute the sale of the CDs for the texts of the judgements, but they should refrain from using the headnotes and footnotes as well as the editorial notes as appearing on the plaintiff's journal.

    It was further held that the defendant shall not make use of the paragraphs in the edited version for internal references. The Supreme Court held that the judgement of the High Court stands to be modified in the extent to the interim relief which was already granted.

    Conclusion:

    The Copyright Act, 1957 along with the Copyright Rules, 1958 and the amendments thereof intend to protect the rights and interests of the creators and owners of the intellectual property as well as protecting the interests of the world at large.

    It is to be noted that the Act is a full comprehensive regulation which stands on the pillar that the works of the owners shall not be stolen. This Act is drafted in consonance with the English and the American Intellectual Property Laws. This Act is determined to provide safeguards to the owner as well as the 'work'. In India, copyright is considered as an architectural work which will subsist only if the work is located in the country of its origin that is India.

     

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    Sun, 04 Aug 2019 13:21:00 GMT
    <![CDATA[Cross Border Mergers]]> Cross Border Mergers

    Introduction

    Recently there has been a noticeable wave of mergers (especially in the banking sector) within the GCC. Just in 2017, there were 85 mergers in the UAE and over 400 mergers in the GCC. Many of those mergers were cross border mergers; for instance, in the UAE, over 50% of the mergers were of cross border nature. Many factors are attributable to this vibrant market, such as the locality, the resources and the seemingly endless liquidity. However, it is evident that the approach taken by the legislators and regulatory divisions form a fertile ground for these investments to flourish. It well established that commercial law in the UAE is specifically tailored to attract promising and prominent foreign investments, obviously while securing local concerns. Hence, you find various options with minor restrictions with regards to foreign direct investments and cross border mergers. Although the law regarding cross border merger is considered vague by some critics, many find in this an opportunity to create larger robust firms that contribute more to the economy. As a result, the UAE and other GCC nations continue to ease restrictions and create more opportunities for foreign investments.

    Licensing

    The United Arab Emirates is composed of seven emirates joined together by a federal constitution which gives each emirate specific legislative authority, while retaining some at the federal level. All businesses in the UAE need to obtain licensing from their respective emirate to operate within their borders. Different licensing options are available according to several factors, such as the trading zone, the origin of the business activity and the formation of the business.

    There are two types of zones available for businesses to operate within the UAE; those are mainland and free zones. There are various exemptions on Free Zones from the requirements on the mainland. For instance, a business does not need to be owned by a local majority or even have local shareholders. In addition to that, companies may benefit from zero-tax rates and relaxed custom duties.  On the other hand, businesses on the free zones find it challenging to build a presence in the local market due to limited access and customs duties. Either way, companies need to consider the location of their business to determine the applicable law. Mergers are no different, for a merger to be successful on the mainland, companies need to fulfil the requirements of the Federal Law No.2 of 2015 on Commercial Companies; while mergers within the free zone need to consider and apply the provisions of Federal Law No. 8 of 2004 on the Financial Free Zones in the UAE.

    Tax

    Corporate tax

    The legislation does not impose a corporate tax; however, states impose a corporate tax on foreign banks and oil companies by local decrees. The taxes imposed on foreign oil companies extracting oil in the UAE can be as high as 80%.

    VAT

    Recently, the UAE introduced the VAT tax at a standard rate of 5%. Businesses are required to register for the VAT if their turnovers are over $100,000.

    Merger process

    There are two possible ways to merge in the UAE; those are absorption and combination. Companies that intend to form any merger in the UAE need to follow the prescribed procedure and fulfil the respective requirements.

    As previously mentioned, the law regarding mergers is particularly vague; in fact, there isn't a specific article or part of legislation dedicated to cross border mergers. Instead, companies need to satisfy the general legal requirements of the concerned merger region(s). Some companies (such as Oil and Gas companies) are subject to certain exceptions. 

    In Practice, the acquiring and the target company need to verify each other; then the merger agreement needs to be drafted and accepted; it is the most significant part of the process. The relaxation of the merger laws in the UAE and the GCC makes the agreement a detrimental factor for the parties to secure their rights. The agreement shall specifically define the conditions and the method of the mergers and the process of the transfer of shares. Additionally, the merger agreement should determine the memorandum of association of the newly formed company and the particulars of the board members. The merger agreement like any contracts is subject to the Federal Law No. 5 of 1985 on Civil Transaction Laws.  

    Addition requirements for a successful merger include the approval of at least three-quarters of the shareholders within each company. Members who object to the merger may withdraw from the company and retrieve the full value of their shares. Those members will need to provide a written request within 15 days of the merger's decision, and the merger may not be finalised until those members are fully paid.

    Merging companies will also need to notify their creditors as soon as ten days after the approval of the general assembly. Objections to the merger may dispute the issue in a competent court. Finally, a company will need to issue a declaration of incorporation in the registrar of companies. However, the merger shall be suspended for three months following the date of the declaration. In no valid objections were made during that period, then the companies are considered legally merged, and the newly formed company bears the liabilities of the former two.

    For two (or more) limited liabilities companies to merge both the companies are dissolved, and their corporate personality is abolished. Subsequently, a new company shall be formed where it will bear all the liabilities and debt of the previous two companies. Shareholders in the target company may have their shares transferred as to the agreed upon transfer rate or bought by the acquiring company.

    Once the companies are legally merged, then they may not raise any claims or objections against each other, since they have the same single corporate personality. Only the company may vindicate any wrong done against it, while it is responsible for the rights and obligation it agreed to uphold.

    Merger clearance

    In some cases, parties may need to apply to the Ministry of Economy for a Merger clearance pursuant to the competition law. Unless an exemption applies, a merger clearance form shall be submitted where there is an economic concentration.  The Competition Law provide the definition of economic concentration as "any act resulting in a total or partial transfer (merger or acquisition) of property, usufruct rights, rights, stocks, shares or obligations from one establishment to another, empowering the establishment of a group of establishments to directly or indirectly control another establishment or another group of establishments".

    Restriction on foreign ownership

    The restriction on foreign ownership is considered the toughest restriction on foreign investors within the GCC. Traditionally all businesses in the UAE needed to be owned majorly by local entities; therefore, foreign investments may not constitute over 49% of the total shares in a company. As many investors found this impractical, a culture of side agreements was developed where the Local shareholder would limit their rights in profitability and management to an agreed extent. This practice was then outlawed, and those agreements were considered unenforceable. However, that law was deferred, but the enforceability of the agreement remains a grey area.

    Recently, the UAE has announced certain changes that will be applied to the foreign ownership limitations which may allow companies (that are not part of the restricted sectors) to be 100% foreign owned even on the mainland. However, a list of (negative) industries has been drafted that won't be included in the waiver. Either way, such a change will definitely give rise to a new wave of cross border mergers that will hopefully drive the economy to set new records. 

    Noncompliance

    Following Articles 313, 314 and 316 of the Commercial Companies Law, any foreign company based outside the UAE may not operate within its borders unless it has acquired a permit from the Ministry of Economy and Commerce and the concerned authorities in the respective state. Noncompliance with these requirements will render the company's persona inexistent, and therefore the member will be personally liable for any breaches.

    If the merger clearance is required and not obtained, the enterprise will be subject to a fine representing between 2 to 5 per cent of their total annual revenues, or a fine ranging between AED 5,000 and AED 5 million.

    Conclusion

    The UAE is currently the most targeted country in the whole of the MENA region for foreign investments and cross border mergers. The wave of mergers and cross border mergers seems to be continuous all the way through the first quarter of this century. The hosting of EXPO 2020 and the continuous modernisation of the region play a vital role. More significantly, the introduction of appealing legal reforms and the ease of restrictions is the key factor for the smooth flow of direct foreign investments. However, businesses and corporation need to exercise due diligence to fulfil and apply all the legal requirements to avoid hefty fines and penalties. The requirements imposed are merely used as a tool to effectively control the market while allowing as much freedom as possible for investors.

     

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    Sun, 04 Aug 2019 12:09:00 GMT
    <![CDATA[Churning Is it Ethical]]> Churning: Is it Ethical?

    What is Churning:

    Churning takes place when a broker undertakes excessive trading, i.e. buying and selling of securities in the investor's account for generating commissions that may benefit the broker or the securities agent. The broker has to exercise unwarranted control over the critical decisions about the investor's account. Evidence of churning is where there are frequent in-out buying and selling of securities which do not fulfil the investor's investment goals.

    When the agents trade securities, they make a potential commission from the transactions, churning takes place when an agent or a broker undertakes to buy and to sell off securities to increase the commission instead of working in the best and compelling interests of the investor. In the process, the agent gains considerable control over the critical investment decisions of the investors.

    Legality and Ethicality of Churning:

    Churning is unethical as well as illegal. It constitutes violation and infringement of Securities Exchange Commission ("SEC") Rule 15c1-7 and other aspects of securities laws.

    SEC Rule 15c1-7 – Discretionary accounts

    • Section 15c defines the terms manipulative, or fraudulent device, deceptive or contrivance for including acts of the agent or the dealer, which substantially affects the investor's account. In the process, the agent gets the discretionary power for trading in excessive quantity or frequency according to the financial status of the account.
    • Secondly, it consists of any acts of the broker where the discretionary power vested allows the agent to record the names of the investor, the price and amount of the security in place and the time as well as the date as to when the deal took place.

    It basically states that an agent acts in a deceptive and manipulative manner constituting fraudulent ways where the agent has a discretionary control and authority over the client's accounts and makes the excessive transactions of the account.

    Financial Industry Regulatory Authority ("FINRA") Rule 2111:

    The FINRA Rule 2111 requires the agent to substantiate a "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the [firm] or associated person to ascertain the customer's investment profile."

    New York Stock Exchange ("NYSE") Rule 408(c): Discretionary Power in Customers' Accounts

    • The underlying principle behind the NYSE rules is to restrict a member of an organization who if he exercises control over the account, should first obtain written consent from the investor.
    • The member must notify and obtain approval from a person delegated by Rule 342(b)(1)  for handling the accounts. Every order entered by the member must be considered as a discretionary at the time of entering into the records. These accounts are to be overlooked and reviewed by the person who is delegated with such responsibility under Rule 342(b)(1) who shall provide a written statement for the supervisory procedures.
    • No member exercising the control over the investor's account shall trade in and out of securities which are larger considering the financial resources of the investor.

    It basically prohibits the NYSE members from exercising unrestricted power in order to effect the transactions which in fact are excessive in quantity of the investor's resources.

    All and all, churning results in violation and infringements of the agent's basic duty to act in the best interests of the investor, which results in securities fraud.

    Ways to perceive Churning:

    Following are the steps to analyse and detect churning:

  • Constant check on the resources and the investment aims of the investor's account
  • Establishing excessive trading activity
  • Turnover rate
  • Use of in-and-out trading in the investor's account
  • The ratio of Cost to equity
  • The Cost to Equity ratio determines the annual costs, which may be incurred on the investment policy. Sometimes, called the 'breakeven rate of return'. The ratio is calculated as under:

    Cost-Equity Ratio=Total annual cost                                       

         The average balance in the account

  • Proof of the agent's control
  • Establishing control is another aspect. That means, we have to establish as to who decided the was of the transaction and the terms of it.
  • Once churning is detected, filing a complaint with the SEC at https://www.sec.gov/complaint/select.shtml or FINRA's Complaint Center at http://www.finra.org/investors/investor-complaint-center
  • Claiming against Churning:

    The victim of unethical churning will be able to claim compensation and damages for the loss and the commissions that the agent received in the due course of frequent trading in and out of the investor's account.

    The claim will be successful if the investor is able to prove the following:

  • The agent and not the investor exercised excessive control over the investor's account
  • The churning took place on the basis of the rise in the account activity and the client's risk tolerance and investment aims
  • Arbitration:

    In the event that the investor is suspecting illegal activities in his account and that Churning is established, the aggrieved party can institute an arbitration claim against the agent and his firm. The Arbitration tribunal will look into some of the following aspects in order to determine control:

  • Client sophistication
  • Trust and reliance on the agent
  • The time given by the client on his investment portfolio
  • Client's past investment experience
  • Level of understanding concerning the investment strategy
  • Arbitrary Action against 'Churning' Firms:

    In this case, the Arbitration Center at the FINRA made an award for more than USD 1 Million to a customer who contested churning. The investor had invested USD 10,000 but lost around USD 375,000. These damages were awarded in line with the enormous amounts being traded and due to excessive turnover in the investor's account. The brokerage firm involved in the matter was expelled from its authority.

    Case Laws for Churning:

    The SEC has successfully brought arbitrary actions against the agents who have committed fraud with innocent investors by the way of churning.

    • SEC vs Dean and Fowler:

    Two were charged for 'churning' the brokerage accounts for three investors and making a recommendation of an investment strategy on an unreasonable standing to make it as a belief that the strategy is suitable for the investors. The SEC held that the strategy employed by the agents were not suitable and incurred heavy losses to the investors.

    • SEC vs Paul T. Lebel:

    SEC held liable the agents and the firms for churning brokerage accounts where no explanation or justification was provided to the investors for laundering in and out of their portfolio accounts.

    Financial Fraud measures in UAE

    UAE allows the victims of Financial Fraud to initiate criminal proceedings and claim compensation for the losses and damages suffered by them. The UAE Federal Law Number 35 of 1992, under Article 22 states that the individuals who have suffered a direct loss in consequence of the crime are eligible to file a civil claim, during procuring evidence, the investigation stages, or at any stage before the criminal court before the completion of closing submissions…"

    Conclusion

    Churning is illegal in most parts of the world. With the growth and development in the economy, there are several instances of money laundering. Majority of the jurisdictions have laws in place to curb the unnecessary and unwarranted occurrences of churning. As for the UAE, the Federal Laws make solid provisions for curbing the menace of securities fraud.

     

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    Sun, 04 Aug 2019 10:32:00 GMT
    <![CDATA[Music Modernization Act ]]> Music Modernization Act – October 2018

    Introduction

    Spotify, Apple Music, Google Play Music, and Deezer are some widely used music streaming services. Have users of these streaming services ever wondered whether the artists receive revenue whenever their music is streamed? Do listeners ever think about or acknowledge the exceptionally gifted individuals responsible for the music and lyrics? The Music Modernisation Act of October 2018 lays these questions to rest.

    Background

    A musical recording is comprised of a musical work or the composition with lyrics that accompany the lyrics; and a sound recording, which is the particular performance of the musical work that has been fixed in a recorded as CD or digital file. Musical works and recordings are often confused; however, these can be given copyright rights separately.

    Musical works can be created, owned and managed by different entities. Authorship for a musical work is attributable to the composer, lyricist and or a songwriter. A songwriter is one that creates the music, or the lyrics, or both. The Songwriters Guild of America (SGA) and the Nashville Songwriters Association (NSAI) represent the rights of artists.

    Another key player in the music marketplace is music publishers. Songwriters enter into publishing agreements with music publishers. These agreements usually the publisher pays an advance to the songwriter to help finance the songwriter's writing. The publisher then promotes and licenses the songwriter's works and collects the songwriter's royalties. The songwriter may then assign a portion of the copyright in the compositions he or she writes during the subsistence of the agreement.  The publisher can also claim a part of the royalties. Some major publishers in the United States are Sony Music Publishing, Warner Chappell Music and Universal Music Publishing Group.

    Both songwriters and publishers usually attach themselves to Performance Rights Organisations. A Performance Rights Organisation is an entity responsible for licensing public performance rights. Two such organisation are  The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc (BMI). These two Performance Rights Organisations(PRO) constitutes 90% of the songs available for licensing in the United States. The two main PRO's work on a nonprofit basis.

    Mechanical Rights Administrators are third-party administrators that handle the administrative tasks that a license imposes. Mechanical rights administrators carry out tasks such as a service of notice on the copyright owner and monthly reporting of royalties on a song by song basis. The most prolific of these organisations is the Harry Fox Agency, which serves 48 000 publishers.  Music Reports Inc (MRI) also assists with mechanical licensing.

    A recording artist is a singer or a member of a band featured in a sound recording. Some non-featured musicians and vocalists enrich a sound recording with their talents, such as backing vocalists. The difference between featured and non-featured artists is that featured artists are paid as per a recording contract, yet non-featured artists are paid on an hourly basis. A producer is an individual who manages the recording process, as well as steers the project in a particular direction to suit his vision.

    The organisation called Sound Exchange is tasked with collecting and paying royalties owed to featured, recording companies and the non-featured artists for non-interactive streaming. The Recording Academy or the National Academy of Recording Arts and Sciences represent musicians and producers, recording engineers in all kinds of industry matters. The Future of Music Coalition represents musicians, producers, recording engineers and other recording professionals. There are also labour unions that serve the interests of nonfeatured musicians and vocalists such as the Federation of Musicians of the United States and Canada.

    Record Companies are record labels that conclude contracts with recording artists to finance the production of sound recordings, promote the recordings and arrange to distribute the recordings. Nowadays record companies distribute the recordings either physically or through digital distribution channels. There are two classes of labels: major labels and independent labels. Independent labels are record companies that are not wholly owned by a major label. The interests of labels, major or independent are represented by the Recording Industry Association of America and the American Association of Independent Music.

    Music Providers is a term that encompasses music broadcasters, distributors. This term includes television, radio, digital music companies, physical record stores and online record stores. Music providers supply consumers or fans with music. Digital technology now allows fans to copy, share and remix musical content.  

    Legal Framework

    Although the United States is the most innovative music culture in the world, the legal framework surrounding the licensing of music is ancient. The Copyright Act 1790 was the first to regulate this area of law in the United States. The Act protected musical composition, but they were registered as books. In 1831 Congress amended this Act. For the first time, there was an express provision that musical works were subject to federal copyright protection. The 1831 amendment, however, only provided persons with the right to print and sell sheet music. At that time performances were how to encourage the sale of sheet music. Several years later, in 1897, the rights to music owners were expanded by Congress to include the absolute right to perform their works publicly.  In 1909 the United States passed the Copyright Act that gave music owners the right to create mechanical reproductions of songs. These were made as phonorecords which were piano rolls, and later vinyl records and CDs.  The phonorecord right was limited by enacting a compulsory license.

    The technology era has changed the way people consume music. People are no longer buying and playing sheet music, or using player pianos, neither are they utilising phonographs or stereo systems. It was only in 1971 that lawmakers acknowledged that sound recordings should be a distinct class of copyrighted works. This amendment meant that sound recordings were entitled to federal copyright protection. Of note, this protection was only available for recordings fixed on or after February 15, 1972.

    In 1976, the Copyright Act came into being. The Copyright Act of 1976 is the governing legislation for copyright law. To understand the Music Modernisation Act one must first understand the United States Copyright Act of 1976 and its ambit. Copyright law protects music at two levels: musical works and sound recordings. Firstly, the underlying musical notes and lyrics are protected by copyright. Copyright rights to the composition usually belong to the songwriter. A publisher may also be the owner of the composition if the songwriter transfers some or all these rights to a music publisher. A songwriter or a publisher is entitled to royalties if the composition or musical work is copied, distributed, publicly performed or used for commercial purposes. 

    The second level at which music is protected by copyright is at the sound recording level. The performer of a song obtains copyright rights in the specific performance of the musical work. The performer is usually a singer or a musician. The performer can also transfer a portion of the rights or all of the rights to a record label. A songwriter or publisher will be entitled to royalties whenever the sound recording is reproduced, distributed, digitally performed or used in another work for commercial purposes. Together, the musical work and the sound recording are needed for one to use a sound recording. According to the United States Copyright Act, performers and publishers can grant third parties a compulsory license. This license permits third parties to reproduce and distribute their musical compositions. The license can be subject to certain conditions. This license is called a compulsory mechanical license. If a party wishes to place reliance on a compulsory mechanical license, they must adhere to statutory notice, accounting and other requirements. Because this can be cumbersome, one can obtain voluntary licenses from each of the right holders separately, in the alternative. 

    The U.S. Copyright Act states that performers and record labels can grant compulsory licenses to non-interactive digital public performances of a sound recording. This license is issued to third parties subject to certain conditions.

    Challenges presented by the Old Legal Framework

    According to the case of Harper & Row Publishers, Inc v Nation Enters, the purpose of copyright is to increase the "harvest of knowledge". This is done giving creators the certainty that they will be given "a fair return for their labours". The old music licensing regime was not achieving this worthwhile goal. Congress decided that mechanical royalty rates were to be decided every five years by a panel of three judges according to sections 801 and 805 of the Copyright Act. However, songwriters and recording artists still could not make a living under this framework. Frustration was rampant among music publishers and performance rights organisations as their licensing activities were subject to government control. This presented constraints to them in the marketplace. The burdensome licensing process made it difficult for record labels and digital services to innovate.  

    Creators were receiving remuneration from three primary sources. These are royalties, namely synchronisation, performance and mechanical royalties. Recording artists also receive a share from the revenue that the record company collects from the sale of digital and physical albums and singles. Revenue is also obtained from digital performance royalties and sound recording synchronisation royalties. Live performances are also a source of income for recording artists.

    In the last five to ten years, there has been a change in the way that people consume music. People no longer purchase physical albums, but they access music through a digital streaming service. It has been debated whether digital music streaming services compensate rightsholders fairly. The Digital Streaming providers have stated that they have created a new stream of revenue for copyright owners. However, the compensation has not correlated to the number of plays an artist gets.

    Before the Music Modernization Act, companies would have to go out and find songwriters. This was undoubtedly a difficult task as some songwriters were not popular enough to be found. If the said songwriter was deceased, it became complex to determine a line of succession for the rights to a song. The new Act thus eliminates some paperwork.

    The federal government regulates 75% of what songwriters are paid currently. The government was unusually and extensively involved in the music marketplace. The Copyright Act obliged copyright owners to license their works at rates set by the government set rates. The government regulated music publishers and songwriters in two most significate areas of their government. These two significant areas are the mandatory licensing and rate setting. Mandatory licensing removes choice and control from songwriters and publishers from being able to protect and maximise their assets. There was thus a need for certain aspects of the compulsory licensing process to be relaxed.

    According to sections 112 and 114 of the US Copyright Act, a statutory license is to be granted to certain digital services engage in noninteractive streaming activities. However, this section shows that the Copyright Act sets different standards for differing classes digital. There were different standards set by Act for online radio services. This indicates that there was a need for rules that would be implemented systematically.

    Before Music Modernisation Act if one wanted to use or perform someone's musical work, then they would look to the music society databases. Examples of such databases are those that are maintained by performing rights organisations like the American Society of Composer, Authors and Publishers (ASCAP) and Broadcast Music, Inc (BMI). Another example is a digital performing rights organisation called SoundExchange. These databases would be used to determine who controls the rights in the song.

    The Music Modernisation Act

    The formal name of the Act is the Musical Works Modernization Act of 2018. It was signed into law on the 11th of October 2018. Primarily, the Act aims to modernise copyright-related issues for music, audio recordings due to new forms of technology. In simpler terms, the Bill looked to improve how music licensing and royalties would be paid in consideration of streaming media services.  The Act aims at creating a blanket license for digital music providers to make permanent downloads, limited downloads and interactive streams. The Act also establishes a collective to administer the blanket license and makes various improvements to royalty rate proceedings.

    The Music Modernisation Act (MMA) incorporates three Bills introduced in the 115th United States Congress. These Bills are the Music Modernisation Act of 2018, the Classics Protection and Access Act and the AMP Act. The Bill was passed in the House of Representatives in April 2018 and adopted by the Senate in September 2018.

    The purpose of this law is to assist creators in the music industry to make their livelihood through their creativity. Creators will be able to make a living as the law improves compensation to songwriters and streamlining how their music is licensed. For instance, audio producers and engineers who contributed to the creation of musical recordings will start to be financially rewarded when their recordings are streamed online or on satellite radio. The Legislation also enables legacy artists or artists who recorded music before 1972 to receive royalty subscriptions when their music is played on digital radio. The Act also provides a consistent legal process for studio professionals – including record producers and engineers to be paid royalties for their contributions to music that they help create.

    Blanket License

    The Act creates a compulsory blanket mechanical license. A mechanical license is a license that allows, in a limited sense, permission to work with, study, improve upon, reinterpret and re-record something that is neither a free/open source item nor in the public domain. Therefore, a mechanical license is copyright that covers the composition and lyrics of a song.  This license encompasses activities related to the making of permanent downloads, limited downloads and interactive streams of the musical works embodied in sound recordings. These activities are termed "covered activities". For parties to participate in these covered activities, they must strike voluntary licensing deals. Alternatively, parties may obtain authority for a permanent download for a musical work from a record company subject to an individual download license. At present these licenses can only be obtained on a song by song basis. In determining the rates for this new blanket license, a willing buyer/willing seller standard will be used. This is a market-based standard.

    Mechanical license Collective

    The Act authorises the Register of Copyrights to create a Mechanical Licensing Collective.  This is an update to section 115 of the U.S. Copyright Act. This section details a 106-year-old compulsory license for mechanical reproductions of musical works. The board of the Mechanical Licensing Collective will be comprised of publishers and songwriters. The Mechanical Licensing Collective will begin operation by the 1st of January 2021. The task of the mechanical licensing collective is to issue and administer the new blanket and voluntary licenses for digital downloads and reproductions. The MLC also determines the establish blanket royalty. Specifically, the tasks of the Mechanical Licensing Collective are four-fold. The first task of the MLC is to collect, distribute and audit the royalties.These royalties are to be generated from these licenses to and for the respective musical work owners.   Secondly, the MLC create and maintain a public database that identifies musical works with their owners as well as ownership share information. This is to be done with the help of major music publishers.  Thirdly, the MLC must furnish information to assist with and engage in matching musical works with their respective sound recordings. The final task of the MLC is to keep unclaimed royalties for at least three years before distributing them on a market share basis to copyright owners. If, after three years, the royalties have not been claimed, then they are to be distributed to copyright owners or simply, music publishers. The MLC will be financed through administrative assessment fees paid out by blanket licensees and by significant non-blanket licensees. Having bot songwriters and publishers on the board will ensure that songwriters get paid the correct amount. The funds for the MLC will be generated through administrative assessment fees paid out by blanket licensees and by significant non-blanket licenses.  

    The Act creates a uniform willing buyer/willing seller rate-setting standard for section 114 license. At present, this rate-setting standard does not estimate rates that would have been negotiated in a free market. 

    Prior to the Act, ASCAP and BMI were each assigned a judge for life who monitored rate proceedings as part of consent decreesorganisations. In terms of the Act district court judges originating from the Southern District of New York will be randomly selected to monitor the public performance royalty rate proceedings to which ASCAP and BMI are subject. Once the judge is appointed, that judge will continue to monitor non-rate processes such questions of consent decree interpretation. The Act also permits performance royalty rate-setting judges to consider sound recording royalty rates when determining the rates for the performance of musical works by digital audio music services.

    Title II of the Music Modernisation Act is the Classics Protection and Access Act. This act was initially called the Compensating Legacy Artists for their Song, Service and Important Contributions to Society Act. This Act makes provisions for a federal right for sound recordings fixed before February 15, 1972. Before this Act these were not protected under federal copyright law. Non-interactive digital audio transmission of pre-72 sound recordings is now regulated by the same statutory licensing provisions that regulate sound recordings protected by federal copyright law. The Act provides that 50 per cent of payment s received from non-interactive digital performances be distributed directly to artists via Sound Exchange.

    The Act prevents state and common law claims involving pre-72 sound recordings. The prohibited claims are for activities taken on or after the enactment date and those activities protected under statutory licenses for digital audio transmissions for post 72 sound recordings. The Act also prevents state copyright law claims regarding manufacturing and distribution rights for pre 72 sound recordings as well. Performances of pre 72 sound recordings would be subject to exceptions and limitations under federal copyright law if such returns are unauthorised. These limitations include fair use in terms of section 108 of the Copyright Act. These limitations are the safe harbours under sections 512 of the Copyright Act. There are limitations on actions under section 507 of the Copyright Act. Remedies for infringement of copyrighted works are found in parts 502-505 of the Copyright Act and would be available to owners of pre 72 recordings. The Act includes a rolling timeline for pre72  sound recordings to enter the public domain, with sound recordings receiving protection for at least 95 years after publication. The Act also ensures that 50% of royalties are paid to the label, and then 50% to Sound Exchange. The label and SoundExchange are then to pay to the artists. This allows artists, especially those that are from previously disadvantaged groups of the population.

    Title III is the AMP Act. The full name of this Act is the Allocation for Music Producers Act. Recording Artists who have agreed to distribute a portion of the royalties they receive to any contracted producer are to send letters of direction or instructions to Sound Exchange.  A contracted producer is one that was involved in the creative process of making a sound recording the recording artist was featured on. Once Sound Exchange receives a letter of direction from a recording artist, a portion of the royalties an artist gets for a sound recording will instead be distributed directly to producers involved in the making of that sound recording. In cases where the sound recording was fixed before November 1995, Sound Exchange will give 2% of royalties for a sound recording to producers involved in the production of that recording even without a letter of direction.

    Impact of the Music Modernisation Act

    Advantages

    Flowing from the Mechanical Licensing Collective, there are several advantages. The first is the consolidation of rights in sound recordings into a single comprehensive database. This will enable those wanting to make commercial use of a sound recording to know who the owner of the song is, and who is entitled to the payment of royalties.

    In addition, an advantage is digital services such as Spotify and Amazon music will be able to obtain a blanket mechanical license for musical compositions. This blanket license will enable digital services to play songs without the risk of legal action being taken against them for copyright infringement. The new MLC will also benefit from the statutory license fees paid by digital services to the collective. These license fees are distributed to songwriters and publishers.

    Furthermore, the enactment of the Act is advantageous to songwriters and publishers because it enables them to receive proper payment for their creativity. The Act better allows for songwriters and publishers to track who uses their compositions but does not compensate them.  

    Also, unclaimed royalties that are rightly due to industry professionals will be kept for three years by the Mechanical Licensing Collective.

    In essence, the advantages of the MMA are that it proves that federal laws can adapt to modern technologies and business methods. The Act will benefit consumers, business owners and IP owners.

    Disadvantages

    The Music Modernisation Act has the effect of rejecting any potential legal claims for unpaid mechanical royalties. Applications that could have been filed before January 1st of 2018 will be dismissed. Removing the ability of copyright owners to institute legal proceedings for statutory damages in copyright infringement suits against unlicensed digital distributors filed after December 31 of 2017 may be unconstitutional. 

    One of the main disadvantages of the Bill is that it sets up an unbalanced board for the Mechanical Licensing Collective. There is no 50/50 representation for music publishers and creators on the board: the majority was given to music publishers. This means that a group that is susceptible to exploitation will be underrepresented. Moreover, the publishers are to decide which writers sit on the board.

    The unclaimed royalties that are to be kept by the MLC for three years may end up in the publisher's hands. This is because the Act will not eradicate problems of song misidentification, song misspellings and missing data. If songwriters and recording artists fail to collect their royalties music publishers will get 100% of the royalties.

    The Act does not make provisions for independent songwriters. It follows then that independent songwriters will not benefit from the Act. Moreover, for songwriters and recording artists that are signed to recording companies, obtaining the full amounts that are due to them is dependent on music publisher transparency. Due to the unequal bargaining power between the music publishers, songwriters and recording artists could be defrauded.

    Conclusion

    The Music Modernisation Act has indeed modernised the music marketplace. There have been some significant reforms to the music licensing framework because of the Act. However, it seems that the big winners are music publishers and digital streaming services. The songwriters and musicians are still facing significant challenges, even though their income may increase slightly. Amendments to this Act should remedy these shortcomings and result in a more equitable music licensing regime in the United States.

     

     

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    Sun, 04 Aug 2019 10:05:00 GMT
    <![CDATA[India Anti-Bribery Anti-Corruption Regulations]]> India Anti-Bribery and Anti-Corruption Regulations

     

    Introduction

    India is a crucial country from a global perspective and is one of the largest economies in the world. The growth is also significant with the nation projected to climb further up the worldwide economic ranks in the coming years. Further, the country is the second most populated in the world, with over 1.3 billion residents. With it being such a vast nation, there are many things which must be taken into account from an economic and political perspective.

    One issue which India has unfortunately become known for relates to the level of corruption that occurs. Considering that it is among the most significant of economies in the world, it is ranked at number 78 in the global ranking, though this position is also one which was worse in the years past. Bribery is also a concern, though it generally falls under the branches of corruption.

    The issues that this gives rise to are severe and numerous. Corruption significantly impacts the development of the nation and its economy overall. When considering just how rapid the growth currently is, the countries position could have been even higher among the ranking than it is.

    Corruption is an issue that many governments have had to combat through the ages; it is something that will likely always exist. However, a vital step to preventing and limiting it is to ensure the legislative structures in place considers the possibilities and provide repercussions which can receive enforcement through the appropriate means.

    India has successfully introduced regulations in recent years attempting to achieve just this. When considering its recent climb up the global index, there are certainly improvements which can be felt and calculated. If the nation manages to stem the flow of corruption and bribery significantly enough, the results in terms of economic development will be highly visible. The country will propel forth at a rate unseen before the improvement, which can only be seen as good for India.

    The current regulatory structure of India will receive exploration and analysis here, and the potential future of the country will also be looked into and explored.

    The Original Preventative Regulation

    The original regulation which originally concerned or discussed bribery and corruption was the Indian Penal Code. This law forbade the providing of bribes to individuals and also forbade officials, public servants and those in certain positions of power from accepting valuable gifts.

    The Indian Penal Code was enacted initially in 1860, making a significantly old regulation. It was also a regulation which did not adequately manage the concept of bribery and corruption either, as the issue is still prevalent to this day.

    The reason the law was this ineffective at tackling the matter was that it was a substantial regulation covering all aspects of criminal law in the country. As such, only a small section related to the topic at hand. To truly tackle the issue head-on, a specific regulation related to anti-corruption and bribery needed to arise. That is where the POCA came in.

    Prevention of Corruption Act (POCA)

    In 1988, the Prevention of Corruption Act (Act Number 49 of 1988) received its introduction in India to put the brakes on corruption and allow the nation to break free of the shackles. It also aimed to allow for more considerable progress towards more clean and rapid development. To this day, it is the primary law on the matter, though there have occurred amendments during its 31 years of effectiveness. The most recent of these amendments arose in 2018, and all of this shall receive discussion ahead. Further to this, the regulation shall receive a close look from an international perspective, and the effect shall be sifted through thoroughly.

    Thus, to begin with, the regulation relates to public servants. These are individuals who are often most approached due to their positions and responsibilities, with bribes. This concept receives a definition under Section 2C of the POCA. However, they are not the only group of people, and as such, it would initially seem as though the regulation is lacking. However, there are certain additions here.

    The case of Central Bureau of Investigation, Bank Securities & Fraud Cell v. Ramesh Gelli and Ors, which occurred in 2013, specified a new party which would fall under the umbrella of a public servant. India has a hybrid legal system which is somewhat between the civil and common law types. However, overall, it relates more closely to the common law system, and as such, case laws play a crucial role in deciding court outcomes. This specific case occurred in the Supreme Court, the court of the highest power in India, and as such, its decision is law.

    The case itself concerned banks and their CEOs. The decision was reached that such individuals fall under the category of a public servant and therefore are not allowed to receive bribes from any individual or organisation. The case judgement mentions any individual who holds office through which they perform civic duties, should fall under the category bank CEOs do indeed.

    The methods that constitute a bribe are as follows:

    • Anything that could give rise to undue advantage for one party over another would constitute as such; this could include financial gain, though;
    • This matter was initially the case. However, any form of undue advantage is now also specified and covered by the law.

    A case which relates to this is that of K.M.Subramanian v State of Tamil Nadu Rep in which the defence party was accused of accepting a bribe. They were considered a public servant and received gratification beyond what is allowed. The only type of gratification permitted is remuneration only. As per the POCA regulation, they were found guilty beyond a reasonable doubt. An appeal was attempted, though the idea dismissed.

    However, once again, this does not cover the entire picture. The public sector entities feel the effects, though private companies do not fall within the law's boundaries. Compared to many other nations, this is a significant disadvantage as the law only covers a proportion, all be it an essential portion of the overall economy.

    Until more recently, the regulation had a further issue. While the receiver of the bribe has and always will receive punishment as per the law, the individual who provides the inducement could only be penalised for the act of abetting the receiver. As such, the act of giving a bribe was not overly risky.

    Amendments to the POCA through the Years

    2018 brought about some crucial changes to the POCA regulation. One fundamental change relates to the issue as mentioned earlier concerning those individuals who provide bribes. As of the amendment, these individuals can be criminally prosecuted rather than being prosecuted as an abettor to the situation. This change offers significant repercussions for the other side of the bribery situation and will likely reduce the rates of bribery by merely making the risk far greater. If one is found to be guilty, they can receive up to seven years of jail time.

    Further, commercial organisations will also be liable in the cases where they or an individual from within is found to provide bribes. Any individual in a position of power in those commercial entities will also be liable to receive prison time and a fine.

    Another aspect that has seen an amendment relates to property that is attached to the bribery situation. It is now easy to connect said property to the claim which was not possible in the past though this regulation but rather through the likes of the anti-money laundering law. This change will simplify the processes which are necessary to help optimise the rules and their enforcement.

    Finally, the amendment Bill requires that such cases are brought forward as soon as possible and should receive their judgements within a period of two years.

    Conclusion

    India is not in an ideal place when it comes to corruption and also global perceptions of corruption and bribery. There is certainly an issue in the country, though regulations and changes have arisen in more recent years to combat the problem.

    Arguably the biggest concern for India is that they are among the largest and fastest developing nations in the world. Currently the number 6 largest economy and projected to move up the ranks in the coming years, and with one of the most significant global populations, there is, this growth is none the less being severely hindered.

    Changes are coming, though, and the regulations that are currently in place have risen because the issues are known. The only matter now is to find the appropriate solutions for which the government is hard at work. There are also definite signs of progression with the global index of corruption ranking on a steady and continuous rise. The recent 2018 amendment Bill also brought about changes as previously mentioned to further the goal of a corruption-free India.

     

    ]]>
    Wed, 31 Jul 2019 15:57:00 GMT
    <![CDATA[Tax Regulations in Hong Kong]]> A Guide to Tax Regulations in Hong Kong

    Introduction

    While considering moving a business into a new market, one of the key consideration is that country's tax regime. What are the incentives that would attract foreign investment? Are there any double tax treaties in place? What is the rate for corporate tax?

    Hong Kong is a Special Administrative Region of China. The language spoken most popularly is Cantonese (Chinese), and the monetary unit is the Hong Kong Dollar (HKD).

    This guide aims at providing the structure for tax regulations in Hong Kong-based on current practices and taxation laws.

    Income Tax

    In Hong Kong, the Inland Revenue Ordinance charges the income from an office, a pension to salaries tax, employment, and profits from business or trade to profits tax and income from the real estate to tax on property. Indubitably, any income which does not come within the ambit of any of the abovementioned categories is not subject to tax. At present, some of the categories which are not yet taxable in Hong Kong are:

    • Value Added Tax
    • Gift
    • Capital Gains Tax
    • Sales
    • Turnover
    • Estate Duty
    • Payroll

    The list is not exhaustive, but a gist of the categories on which tax is not levied.

    What is the Basis of Taxation?

    The basis for imposing taxes in Hong Kong is territorial. Generally, the income is tax in Hong Kong on a condition that the same is derived or arises from Hong Kong. However, there are a limited number of separate business receipts which may be taxable in Hong Kong.

    What is the Assessment Year?

    The year of assessment or the tax year is from the 1st of April to the 31st of March of the following year. The assessment is based on the income that is accrued in that particular tax year for property and salaries tax. However, while considering profits tax, the assessment is based on the accounting profits of that financial year that ends within the assessment year whilst maintaining appropriate adjustment for the purpose of tax.

    Are there any Double Tax arrangements or Agreements with other countries?

    As seen below, Hong Kong has entered into comprehensive tax treaties or arrangements with numerous countries.

    Following is the list of countries for the same:

    • Austria
    • Italy
    • Pakistan
    • Belgium
    • Japan
    • Portugal
    • Belarus
    • Jersey
    • Brunei
    • Korea
    • Romania
    • Canada
    • Kuwait
    • Russia
    • Czech Republic
    • Latvia
    • Saudi Arabia
    • Finland
    • Liechtenstein
    • France
    • Mainland China
    • South Africa
    • Spain
    • Malaysia
    • Guernsey
    • Switzerland
    • Hungary
    • Malta
    • Thailand
    • India
    • Mexico
    • United Arab Emirates
    • Indonesia
    • Netherlands
    • New Zealand
    • United Kingdom
    • Vietnam
    • Ireland

     

    ]]>
    Sun, 28 Jul 2019 10:56:00 GMT
    <![CDATA[Anti Bribery & Anti Corruption UK]]> Article on Anti Bribery & Anti Corruption Law in the United Kingdom

    "In these times, a great leader must be extremely brave. Their leadership must     be steered only by their conscience, not a bribe." – Suzy Kassem

    This article sets out brief summaries of the United Kingdom (UK) Anti Bribery &Corruption law and emphasizes the significance of the compliance of provisions by individuals, Businessmen, professionals while conducting themselves.

    The main legislation in the UK governing bribery & corruption is Bribery Act, 2010 which came into force on 1 July 2011.  This act is basically a consolidated scheme of bribery offences to cover bribery in the U.K & abroad. The act defines criminal offence of bribing another person, public official, being bribed & liability of commercial organisations to prevent offence of bribery. The act has the extraterritorial jurisdiction meaning thereby that a person who is a citizen of the UK or a resident of UK would be held liable for the offence of bribery under this Act irrespective of the place of the offence. Likewise, a body incorporated under the U.K law would be liable under the act if the offence of bribery is committed by it while operating in the UK or elsewhere. A maximum penalty of 10 years or an unlimited fine or both has been incorporated for all the offences except offences under section 7 of the Act relating to the prevention of the offence of bribery by commercial organisations which carry the punishment of an unlimited fine.

    The principal bribery offences:

    Sections 1, 2 & 6 of the Act deal with the offence of bribing, being bribed and bribing foreign public official respectively. In common parlance, Bribery means when a person gives money to another person for some financial advantage to him or his relation. In legal terms as in the Act, Bribery has been defined in wide terms. According to section 1 of the Act, a person is liable for the offence of bribery when he offers, promises or gives a financial advantage to another person for the purpose of improper performance of relevant function or activity on latter's part. It is not necessary that offence should be completed, merely offering a bribe to another person makes the person liable under the definition. Similarly, a person would be held liable whether the offence is committed by him directly or through someone else.

    It is not imperative that the person to whom bribe has been offered has to engage in improper performance of a relevant function or activity meaning thereby that offeror of the bribe would still be held responsible even if it is performed by someone else.

    As per Section 2 of the Act, a person is liable for the offence of bribery when he requests, agrees to receive or accepts financial advantage or other in relation to improper performance of a relevant function or activity. A person would be held liable for the offence under this section whether the advantage is for himself or for somebody else. Similarly, he would be responsible whether he undertakes upon himself to perform of relevant function or activity improperly or engages someone else.

    Section 6 creates a distinct offence of bribery of a foreign public official. A person commits offence under this section if he offers, promises or gives any financial or other advantages to a foreign public official with the following intention:

  • to influence the Public official in the performance of his/her functions as a public official and
  • to obtain/retain business or advantage in the conduct of the business.
  • In this section, a bribe may be offered by the person himself or through a third party and likewise, the advantage may be for the recipient himself or for some other person on the latter's request.

    This section makes it clear that mere offering/promising of a bribe to a Foreign public official makes a person liable meaning that acceptance on the part of a public official is not necessary, subject to the following two conditions:

  • Such official should not be permitted/required by the applicable written law to be influenced by the financial or other advantages (offence under this section is not committed if he is permitted to be influenced by written law).
  • Above mentioned two intentions on the part of the person offering the bribe must be proved.
  • Foreign Public Official as per sub-section 5 of the act includes officials whether elected or appointed who hold the legislative, administrative or judicial position of any kind of a country or territory outside the UK or an official who performs a public function within such country/territory. It also includes officials of Public International Organisations.

    Written law applicable to the foreign public official is that part of U.K Law to which he is subject and if UK Law does not apply to him, the law of the country (in any written form) in relation to which he is such official would be applicable. If he is an agent of Public International Organisation, the rules of such an organisation would be applicable as per subsection 7.

    Improper performance of function or activity to which bribe relates:

    As defined above, Bribe is when a person offers a financial advantage to another person for doing an improper performance of a function or activity. Section 3 to 5 deals with the same. Function or activity to which bribe relates include all functions of public nature and all activities connected with business, trade or profession carried out either in the UK or abroad, and need have no connection with the UK as per Section 3 of the Act.

    Now the question arises how the improper performance of the function or activity would be judged?  The answer lies in the Expectation Test described as under:

    Subjective test or Expectation Test is what would a reasonable person in the United Kingdom would expect in relation to the performance of function/activity. If the performance of any act by a person does not meet the expectation test, performance would be held improper as per section 5 of the Act.

    Further Section 5 clarifies that the performance of a concerned person in relation to function or activity expected by a reasonable person should be subject to any part of UK Law. Any local custom or practice in this regard is to be disregarded unless permitted/required by written law applicable to the country.

    Responsibility of Commercial organisations to prevent bribery.

    Commercial organisations include a body incorporated or partnership firm formed under the law of the UK carrying on business in the UK or somewhere else, or a body incorporated, or partnership formed somewhere else but carrying on their business in the UK.

    Commercial organisations would be liable for any improper performance of a function or activity committed by a person who is associated with them as an employee, agent or subsidiary as per section 7 of the act which embodies the principle of Vicarious liability.

    Section 15 of the act deals with proceedings for an offence against a partnership under Section 7. Such proceedings must be brought in the name of the partnership and any fine imposed on the partnership on the conviction must be paid out of the partnership assets as per subsection 3.

    Defences for bribery offences

    Section 7 & 13 deals with the defence available to commercial organisations and persons respectively.

    The only defence which is available with the organisation under section 7 (2) is that it had adequate procedures in place to prevent such person associated with it from committing bribery offences.

    On the other hand, within Section 13, two defences are available to the person (charged with the bribery offence) if his conduct is necessary for:

  • the proper exercise of any function of Intelligence Service or
  • the proper exercise of any function of armed forces when engaged in active service.
  • Guidance about Commercial Organisations to prevent bribery

    As per Section 9 of the act, duty has been imposed on Secretary of State to publish guidelines on procedures to be adopted by the organisations to prevent bribery by the persons associated with them.

    Prosecution

    According to section 10, prosecution for the offences under this act is initiated in the UK with the consent of one of the directors of the Department of Public Prosecution or Serious Fraud Office or Revenue and Customs Prosecution.

    Penalties

    Section 11 of the act deals with it. Any individual who is guilty of an offence under sections 1, 2 or 6 is liable for imprisonment not exceeding 12 months or to a fine up to statutory maximum or both upon summary conviction and in the cases of conviction on indictment for imprisonment not exceeding 10 years or an unlimited fine or both.

    On the other hand, under section 7 in the cases of conviction on indictment, a person is liable to a fine only.

    Offences under sections 1, 2 or 6 by bodies corporate etc.

    Under Section 14 if it is proved that any offence mentioned within sections 1, 2 or 6 is committed either by body corporate or partnership, the senior officer, director of such body or partner would also hold liable subject to the following two conditions:

  • He has consented to or connived in the commission of the offence and
  • He must have a close connection to the U.K as defined in section 12(4).
  • Conclusion

    From a legal perspective, Bribery Act 2010, has been defined widely by covering all the persons who have a link to the United Kingdom or even if they have no connection to the UK, they still are held liable if they engage in a conspiracy to commit bribery with a person who is in the UK.

    In the end, it could be said that in addition to violating legal and moral codes, bribery poses serious problems for economic development and international trade. Fostering a culture within the organisation to prevent the bribery is need of the hour. Due diligence procedures should be in place within the organisation to mitigate bribery risks. Along with it, the organisation should monitor and review procedures designed to prevent bribery and make improvements wherever necessary.

    ]]>
    Tue, 16 Jul 2019 12:35:00 GMT
    <![CDATA[Arbitration Law under the UN]]> Arbitration Law under the United Nations Commission on International Trade Law

    Established on 17 December 1966, The United Nations Commission on International Trade Law (UNCITRAL) was founded in response to the realization that the trans-global community is acutely economically connected. Understanding this assembly, UNCITRAL was enacted to govern bodies participating in international trade and investment. UNCITRAL's parent organization, the United Nations General Assembly, developed the legal framework "in pursuance of its mandate to further the progressive harmonization and modernization of the law of international trade by preparing and promoting the use and adoption of legislative and non-legislative instruments in a number of key areas of law."Involving multiple tiers of domestic and international legislative enforcement, UNCITRAL represents the focal point of United Nations international trade law. UNCITRAL legitimizes its mandate through encouraging cooperation amongst Member States, promoting the growth of international participation, modernizing and adopting international conventions benefitting trade, ensuring clear and uniform interpretation by signatories, cultivating unity with other branches of the UN, and interceding when necessary to execute its functions. As of 2004, 60 states, representing both developing and developed economies, held membership in UNCITRAL. Expressed in the Preamble of the General Assembly Resolution 2205 (XXI), the establishment of UNCITRAL is predominantly founded on the belief "that the interests of all peoples, and particularly those of developing countries, demand the betterment of conditions favouring the extensive development of international trade." Through the enactment of the Commission, legal barriers hindering the progress of international trade, are circumvented. Legislatively, UNCITRAL addresses several matters related to trade, including (but not limited to): international sale of goods, international payments, electronic commerce, international transport of products, and international dispute resolution (including arbitration).

    International Commercial Arbitration and UNCITRAL

    Seeking to both modernize and fuse international trade laws, three categories of techniques have been adopted by UNCITRAL. These systems include: legislative procedures, contractual texts, and explanatory doctrine. Under UNCITRAL, numerous legislative documents govern international commercial arbitration. For the purpose of this article, discussion of UNCITRAL arbitration regulations will be narrowed to: the Convention of International Settlement Agreements Resulting from Mediation, UNCITRAL Arbitration Rules, and the UNCITRAL Model Law on International Commercial Arbitration.

    • United Nations Convention on International Settlement Agreements Resulting from Mediation (not yet in force)

    Disclosed in the draft's Preamble, UNCITRAL Member Parties recognize that arbitration holds prospective amicable value in settling commercial disputes arising from international trade. Also outlined in the Preamble is the Convention's intended purpose. Parties to the Convention hope to establish a "…framework for international settlement agreements resulting from mediation that is acceptable to States with different legal, social and economic systems [which would] contribute to the development of harmonious international economic relations."

    Article 1 of the drafted Convention explains the "Scope of Application" for international settlement agreements resulting from mediation. A settled agreement is considered international (and therefore governable by the Convention) if at minimum, two parties involved in the settlement operate their places of business in different states (Article 1(1)). Should either party have their businesses within the same state, the scope can still be considered international under Article 1(1(b)) if the state which houses the businesses is different than the state "in which a substantial part of the obligations under the settlement agreement is performed; or…The State with which the subject matter of the settlement agreement is most closely connected." Article 1(2) also defines various types of settlement agreements that are nonapplicable under the Convention. Concisely, any settlement agreement involving a consumer transaction dispute, inheritance or employment law, or previous court proceeding, does not apply to the Convention.

    Should a party wish to use the Convention to seek relief, Article 4(1) requires that party to provide: 1) A settlement agreement signed by each party, and 2) Proof the agreement resulted from mediation technique. The Convention requires all relief requests be handled "expeditiously" by an authority of the Party to the Convention (Article 4(5)).

    Just as an authority of the Party to the Convention can grant relief, they are also able to refuse assistance. Relief can be denied (Article 5) if the non-relief seeking party can prove: party incapacity occurred during settlement agreement, the settlement is void or impracticable in relation to the law subjected, the arrangement is not binding, settlement obligations are unclear, or "granting relief would be contrary to the public policy of that [State] Party."

    Notably, the Convention stresses in Article 7 "Other laws or treaties" that the Convention will not revoke a relief seeking party its right to obtain a settlement agreement in a method permitted by "the law or the treaties of the Party to the Convention where such settlement agreement is sought to be relied on."

    • UNCITRAL Arbitration Rules

    The UNCITRAL Arbitration Rules (1976) offer member parties a detailed selection of procedural rules outlining the conduct of commercial arbitral proceedings. Beyond guiding all stages of and roles involved with the arbitral process, the Arbitration Rules also include a model arbitration clause. The text can be utilized to resolve a variety of disputes such as those occurring between private commercial parties, an investor and a State, and between two States. Since 1976, the UNCITRAL Arbitration Rules have been revised three times, resulting in an enhancement of efficiency and innovation. The 2010 revision included Rules on Transparency in investor-State arbitration.

    • UNCITRAL Model Law on International Commercial Arbitration

    Adopted in 1985, the UNCITRAL Model Law on International Commercial Arbitration is fashioned as a recommendatory document encouraging Member States to consider "the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice" (Preamble).  The Model Law was initially designed to address previously perceived incongruities existing within national laws on arbitration. Although the Model Law is a prescriptive document, numerous states have structured their national arbitration laws based on the protocols. The UAE's recently issued Federal Law No. 6 of 2018 (the Arbitration Law) is broadly designed around the Model Law.

    Chapter 1: General Provisions

    The Model Law, according to Article 1, applies to international commercial arbitration amongst Member States. Due to the fact the Law is intended to govern multiple states, Article 2 (A) clarifies the need for interpretive regard to the Law's "…international origin and to the need to promote uniformity in its application and the observance of good faith." Under the Law (unless specified within the provisions), courts are not permitted to intervene in governed matters.

    Chapter Two: Arbitration Agreement

    Distinguished in Article 7(1), an "'Arbitration agreement' is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship…." The Law requires courts presiding over cases subject to an arbitration agreement to refer parties to arbitration. However, Article 9 permits parties of an arbitration agreement to request "…from a court an interim measure of protection and for a court to grant such measure."

    Chapter Three: Composition of Arbitral Tribunals

    The prescribed composition of an arbitral tribunal is outlined in chapter three of the Law. While parties can select how many arbitrators they choose to have present, arbitrators "…shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence" (Article 12). If justifiable doubt develops, an arbitrator may be challenged. The challenge procedure is established in Article 13. Granted freedom to choose the method through which the party intends to challenge the arbitrator, a party must send a statement (describing their grounds to challenge) within 15 days of becoming aware of the justifiable doubts.

    Chapter Four: Jurisdiction of Arbitral Tribunal

    The Law permits a tribunal to operate within their own jurisdiction, however, should a plea be raised questioning a tribunal's scope of authority, that plea cannot be issued later than the statement of defence's submission (Article 16).  

    Chapter Five: Interim Measures

    Article 17 endows arbitral tribunals the power to grant interim measures per party request. According to this section (Article 17(2)), a temporary rule can be issued to order a party to: "(a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and material to the resolution of the dispute." Through Article 17 D., a tribunal is also capable of modifying, suspending, or terminating granted interim measures.

    Chapter Six: Conduct of Arbitral Proceedings

    The Law (Article 18) requires all parties to be equitably treated and allowed "full opportunity." Parties, upon agreement, are permitted to select their arbitration location and preferred language used during the proceeding. During the proceeding, according to Article 23(1), "the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars…." In the case of contrary agreements (Article 24(1)), an arbitral tribunal can choose to hold an oral hearing to present evidence, "on whether the proceeding shall be conducted on the basis of documents and other materials."

    Chapter Seven: Making of Award and Termination of Proceedings

    Under Article 28, disputes are decided through applying the appropriate rule of law selected by the parties. The designation "…of the law or legal system of a given State shall be construed…as directly referring to the substantive law of that State and not to its conflict of laws rules" (Article 28(1)). Decisions must abide by the terms of the contract and consider trade applicability to the transaction.

    Chapter Nine: Recognition and Enforcement of Awards

    Regardless of the country in which the arbitral award was decided, the award is considered binding. Enforcement of an award can be refused under certain conditions (Article 36(1)), which include: during the agreement a party was under incapacity, a party was not granted proper notice of the appointment, the award does not fall within arbitration's jurisdiction, or the award is not yet binding.

     

    ]]>
    Thu, 11 Jul 2019 15:03:00 GMT
    <![CDATA[Regulation of Media in the United Arab Emirates]]> Regulation of Media in the United Arab Emirates

    I. Introduction

    Indubitably, the inception of mass media was with newspapers that delivered information and news from the 1690s till present. Having been cultivated in the minds of the people, several other modes have been devised that make an intricate part of our lives today. Undoubtedly, the internet wins the title for most used media amongst the younger generation, though there remains loyalty to other modes like the newspaper, radio, television, etc.

    It is important that these platforms be adequately regulated and monitored. The regulation of media includes enforcing standard regulations and rules that must be adhered to, along with remedies and consequences of breaking them. As a means of consuming content, the internet's exponentially rising use generally makes regulations ineffective, though the case is different in the United Arab Emirates (UAE), which has laid down comprehensive rules and regulations that govern media in the region. Additionally, it has laid down various prohibited conducts on social media as well. Below is a skeleton of how media is regulated in the UAE.

    II. Regulators of Media in the UAE

  • Federal Level
  • The National Media Council (NMC), according to Federal Law No (11) of 2016, is the federal governing body which is entrusted with undertaking the media affairs and overseeing the same in the UAE. Along with traditional media such as magazines and newspapers, various digital media platforms fall within the scope of NMC. This governmental body is affiliated with the Cabinet, and its main seat is in the Emirate of Abu Dhabi.

    The NMC issues license to media institutions, and it follows up on the published, printed and broadcasted media content in the UAE. Additionally, the abovementioned content which is imported from abroad also comes within the ambit of NMC's administration. It is mandated to:

    • Draft the media legislation, followed by monitoring proper execution of the same
    • Develop the media policy in the UAE
    • Ensure support for the federation and encourage national unity
    • Co-ordinate legislation between different Emirates to check whether they are in tune with the foreign and domestic policy of the UAE

    All the UAE media organizations are obligated to comply with the rules and regulations that are issued by NMC. Additionally, they agree to provide such data and information on the demand for NMC as required. Several eServices are provided by NMC to government and individual entities in the media sector.

  • Local Level
  • There are several bodies in the media sector that locally contribute to the development of media transactions in the UAE. They include:

    • Department of Culture and Information in Sharjah
    • Media Zone Authority in Abu Dhabi
    • Fujairah Culture and Media Authority  

    III. Media Acrivities andits Regulatory Framework

    Every media institution which engages in the creation of audio, print, visual and digital content in the UAE, both Free Zones and Mainland, are obligated to adhere to the standards contained in Federal Law No (15) of 1980 Concerning Press and Publications, along with other regulations and laws in force.

  • Federal Law No (15) of 1980 Concerning Press and Publications
  • The publishing and printing licensing activities are regulated under the law above. It also applied to media content that is traditional, such as magazines, newspapers, television broadcasting, etc.

    Within the law, there are certain guidelines on materials that prohibited from publication. There are penalties imposed on such publishing company, or its associated staff if they are found to violate the Publications Law. Some of the provisions that the law covers are as follows:

    • Circulation of publications
    • Exporting and importing publications, newsletters and newspapers
    • Newspapers, new agencies and periodic publications
    • Publications and publishing houses
    • Prohibited content from the publication
    • Films and related work
    • Penalties
  • Media Content Standards as per NMC Chairman's Decision No (20) of 2010
  • Very clearly mentioned in the Decision is that the media institutions engaged in activities such as digital, audio, visual and print must comply with the expected standard of media contents, and the same must be in accordance with Federal Law No (15) of 1980.

    This Decision requires all the institutions within its ambit to keep archives or record of all material produced, distributed, printed and broadcast by them in the last three consecutive months. Additionally, they are required to provide the Council with monthly reports which must reflect their compliance with these standards.

    IV. Media System: Electronics

    The UAE NMC in 2018 implemented the latest system to govern and oversee all digital and electronic media activities, both in the Free Zones as well as Mainland. All means of expression including but not limited to writing, music, painting, photography, and all other expressions that may be transferred between individuals in any mode or form are covered under the new system. All related institutions were given a deadline to comply themselves, and correct wherever they lacked, to ensure that their activities fully comply with the new guidelines.

    The Electronic Media Regulation in detail provides:

    • Objectives of the regulation;
    • Obligations of all licensees;
    • The fee structure for licenses;
    • Conditions to be fulfilled by the applicant of the eMedia activity for its license;
    • Regulations and instructions for carrying out all the activities.

    Activities that need prior approval are as follows:

    • Electronic publishing and on-call printing;
    • Electronic advertisements;
    • Trading, selling, printing and showcasing audio and video material on social media platforms and websites;
    • News publishing
    • Any other activity that the Council deems appropriate to require such approval that may be added.

    V. Prohibited Content in Media in the UAE

    There are national standards set by the UAE for media content requires each mass media institution that operated within the UAE to abide by such standards without any margin for error. These include a certain list of activities and conducts on social media (and other media platforms) which are strictly prohibited. There are penalties for those who engage in such activities. Certain standards that one cannot stray from are:

    • Respect the regime of the UAE, its political system and symbols;
    • Respect the heritage and culture of the UAE;
    • Respect policies and direction of the UAE at both international as well as domestic levels;
    • Must not offend the national Unity. Additionally, the social cohesion of regional and tribal conflict is strictly prohibited;
    • Respect the Islamic and divine beliefs, while showing respect to other religions as well;
    • Must not harm the economic system of the UAE;
    • Must not spread rumours, biased or misleading news;
    • Respect codes of ethics and principles of media work
    • Respect copyright regulations and rules;
    • Respect the government's policy to promote national identity as well as the integration of citizens in the labour market of the media sector;
    • Refrain from publishing and broadcasting information which is harmful to women, children and other social groups. Example: Hatred and violence related content;
    • Refrain from disclosing confidential official contacts, military treaties, conventions or matters that have been concluded by the government with proper authority;
    • Refrain from reporting distorted deliberations of courts and other regulatory bodies;
    • Refrain from disclosing information related to an ongoing criminal investigation, or on such investigations which have ordered to be confidential;
    • Refrain from fabricating, forging documents or present unfounded news with bad intent;
    • Refrain from publishing photographs, news and comments that invade the privacy of an individual, family or destroys their reputation;
    • Must not defame public officials.

    The above list is not exhaustive, but only lays a gist of the prohibited content on every media platform.

    VI. Advertising Content Policies: Official Guide for advertisers

    The NMC in October 2018 issued an official advertising guide. This guide aims to clarify the standard for this sector in the UAE, further aiming to protect the public from marketing such promotions which do not conform to the standards. It additionally lays down the terms of licensing for all advertising activities for not just individuals, but also institutions and other companies.

    Decision No (35) of 2013 by the NMC Chairman encompasses the regulations related to the content of advertising materials. In accordance with the same, each advertisement placed, produced and distributed within the UAE or the ones imported into the region must adhere to these standards for content, as well as should be in accordance with the Federal Law No (15) of 1980 Concerning the Press and Publications.

    Certain specialized advertisements that require prior approval from the competent authority before being published include, but are not limited to:

    • Medicine;
    • Food;
    • Drugs;
    • Universities;
    • Real estate;
    • Special offers;
    • Promotional campaigns.

    Additionally, according to the rules and regulations of the guide, an advertisement content must:

    • Not promote acts of astrological predictions and black magic;
    • Respect the intellectual property rights of others;
    • Comply with regulations and conditions that are related to the UAE flag, anthem and national emblem;
    • Not advertise narcotic substances, alcoholic beverages, smoking, tobacco or any related goods and services;
    • Not be ambiguous in any way. It should not include any misleading and false information;

    The above list is not exhaustive, and there various other conditions mentioned in the guide that advertising institutions must abide with.

    VII. Internet Media Regulations

    Internet Access Management (IAM) Policy

    IAM is implemented by the Telecommunications Regulatory Authority (TRA), and the same is done in coordination with NMC, Du and Etisalat, which are the licensed internet service providers in the region. This policy entails certain frameworks along with categories related to the internet that must be taken into consideration by these providers to ensure that security of the internet from harmful websites that contain materials which are contrary to the ethical and religious values in the UAE.

    If there is any potential breach of the IAM, the TRA notifies the website operators based in the region. TRA additionally monitors online advertising. The internet service providers such as Du and Etisalat are obliged to block content if the TRA requests it. A few categories of content which are prohibited by virtue of policy are:

    • Invasion of privacy
    • Defamation, insult and slander
    • Fraud, phishing and impersonation
    • Bypassing blocked content
    • Drugs
    • Pornography, vice and nudity
    • Pharmaceutical and medical practices in violation of the laws
    • Racism, contempt of religion and discrimination
    • Malicious programs
    • Illegal communication services
    • Terrorism
    • Gambling.

    The above list is not exhaustive and includes various other headers of the content that violate the abovementioned policy in the UAE. If an individual comes across prohibited content, they can report online to the TRA under this policy.

    VIII. New Media

    Facebook, Instagram, Twitter and YouTube are examples of the now widely used new social media platforms in the UAE (and worldwide). The government in the UAE also have social media accounts through with they actively interact with the public. This enables the government to hear the needs of the public, by providing them with feedback channels through social media.

    Laws for using Social Media

    Federal Law No. (5) of 2012 regarding Combatting Cybercrimes along with its amendment by Federal Law No. (12) of 2016, couple with application of several other applicable laws that protect reputation and privacy, defamation apply to everyone using social media. The residents as well as citizens of the UAE must be aware about the provisions of law that call out actions which would amount to a criminal offence.

    The UAE Social Media White Paper was issued by the TRA with the objective of creating awareness related to obligations and rights while using social media. Certain examples of criminal offences are:

    • Posting videos and pictures of others without their prior consent;
    • Spreading information or news that is not verified by official sources;
    • Threatening people.

    The above list is not exhaustive, and are only example of certain conducts on social media that amount to a criminal offence.

    The law on Combatting Discrimination and Hatred which is Federal Decree Law No. (2) of 2015 criminalizes an act which insults a religion and/or triggers religious hatred through any form of expression including written words, speech, pamphlets, books or online media. Insulting God, his apostles of prophets or the holy books come within the ambit of the abovementioned law.

    An individual or a group of individuals engaging in conducts on social media which amount to a criminal offence under the law may become liable to a fine or a jail term as stipulated by the laws or as awarded by any competent court.

    Licensing of Social Media Influencers

    The social media influencers must obtain a license granted by the NMC, if paid ads are accepted to be published on their accounts. The license is generally granted for a period one year which costs AED 15,000, and the same may be renewed frequently. The license or the renewal, as the application submitted to the NMC may be, is generally issued within 30 days of such submission according to the rules.

    IX. Media Office and Official Media Agencies

    WAM, short for Emirates News Agency, is the official news service in the UAE. It began operations in 1976. The agency transmits news on regional, national and Arab affairs. Additionally, it is recognized as a credible source for international media. WAM Editor was recently launched by WAM which enables journalists around the world who work with various news agencies to publish stories from different corners of the world through smart phones and tablets.

    X. Conclusion

    The UAE's diverse range of media platforms are well regulated according to the international standards while taking into consideration the socio-economic needs of the country. The UAE does not only monitor the current media regulations, but also works towards its development through various approaches. Media cities were formed by the local government to encourage local, regional and international entrepreneurs to set up offices that produce the best art in all forms. Additionally, the UAE has taken keen interest in promoting films. Since such media platforms are an intricate part of all our lives, it is necessary  to be aware of the legal implications of its misuse.

     

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    Thu, 11 Jul 2019 13:22:00 GMT
    <![CDATA[filing a wrong police complaint UAE]]> What are the consequences of filing a wrong police complaint in the United Arab Emirates?

    Introduction

    A simple Google search of the name "Jussie Smollett" will lead to a finding of what the consequences of filing a wrong police complaint can be. Fortunately for Mr Smollet, the felony charges for fabricating the existence of a crime were later dropped. One wonders whether a complainant who files a wrong police complaint will face the same consequences that Mr Smollet was to face in the United States are as dire as anywhere else in the world. Examining the effects of filing a wrong police complaint in the United Arab Emirates, the United States of America, Canada, the United Kingdom and New Zealand will provide the answer.

    Background

    Lawmakers and law enforcement authorities, encourage citizens to cooperate with them in maintaining law and order. Citizens are expected to report any violation and to act responsibly regarding crimes and violations they may be aware of and inform the authorities. A false report confuses relevant authorities, disperses their efforts and wastes state resources.

    There are several reasons that one may decide to file a wrong complaint to the police. A person may be tempted to file a false complaint to defraud their insurance company. One may also want to frame someone else for a crime they committed before it is discovered that they are the real culprit. One can file a wrong complaint to gain financially, should they be able to obtain damages in a court of law.  Regardless of the countless reasons one may wish to fabricate a crime, the consequence of doing so are grossly unpleasant. 

    olice Rights and Freedoms Protection. The complaints section is part of the Department of Human Rights. In the United Arab Emirates,  Out of 687 complaints received between January and September 2014, only 98 were valid. Out of 506 complaints received January to September 2013, only 92 were correct.  It is crucial to examine the consequences of filing a wrong police report.

    Filing a wrong police complaint in the United Arab Emirates

    False accusations are differentiated from unsubstantiated and unfounded allegations. Baseless accusations are those where there is inadequate supporting evidence to determine whether an accusation is true or false. A false report is defined as deliberately furnishing a relevant authority with incorrect information to harm someone.

    False allegations are those that fall into of three categories. The first kind is allegations that are wrong because the events referred to by the complainant, did not occur. The second category is where the complainant describes events that did happen, but the complainant has mistaken the identity of the wrongdoer. Simply put, this refers to a situation whereby one describes a crime that was not committed by the accused, and the accused is innocent. The third category is one where there is a misconception on the part of the complainant, as to what events did occur and which did not.

    Article 266 of the United Arab Emirates states a person who submits false information in respect of a crime will be sentenced to detention if the person did so knowingly. Article 275 of the UAE Penal Code stated that any person would be imprisoned for a term less than six months and or a fine not exceed three thousand dirhams if he or she reports a crime which he knows does not exist or a crime which he or she knows was never perpetrated.  Article 276 states that a person shall be sentenced to detention or be liable to pay a fine if one falsely and in bad faith makes a false report. The crime reported must be one that warrants a criminal or disciplinary action. According to this section whoever fabricates false material that someone has perpetrated a crime which triggers legal action against that person, that person shall be imprisoned or fined. In case the false accusation results in inflicting a felony penalty, the slanderer shall be punished with the same sentence with which the accused person would have been charged.

    A person who files a wrong complaint with police may also be liable for slander and defamation. The person who was falsely accused as a result of the false police report can file a separate criminal complaint against the complainant who filed a false accusation.

    Article 63 of the Penal Code states that a law enforcement officer who investigates a false accusation cannot be charged with a crime. This provision protects police officers who have investigated a fake crime from being prosecuted or being sued. The UAE penal code allows for a wrongly accused person to file a separate criminal complaint against whoever has submitted a false accusation against him.

    The courts have outlined that penal judgements should be based on certainty rather than on suspicion and speculation. The courts will give a punishment that is comparable to the extent of the harm suffered by the wronged person.

    Filing a wrong police report in the United States.

    In the United States, a complainant who files a wrong complaint with the police will be charged with the crime of "false report to a peace officer". The legislation on submitting an incorrect police report changes from state to state. In the California Penal Code, article 148.5 states that it is a criminal offence to misreport a crime. The charge also differs proportionally with the extent of the deception. Filing a false report can either be a misdemeanour or a felony. A misdemeanour is a non-indictable offence whereas a felony is a serious crime. Deciding to charge a complainant with a felony or a misdemeanour is dependent on whether the case causes inconvenience to the police or other authorities. Incidents that cause less of a nuisance to police and other authorities will be classified as misdemeanours, while those that cause more inconvenience, confusion and harm will be classified as felony charges.

    The definition of filing a false report varies from state to state. It can be generalised, however, that filing a wrong complaint entails lying to the police. Making positive statements that are false is one way that persons may file a wrong complaint to the police. A false report in the United States could also be the result of making material omissions which paint a false picture to the police. One may be liable for a false report charge if they neglect to mention specific details when filing the complaint with the police. The account of the false incident or incorrect details of the event can be given to a police officer, grand jury, prosecutor or 911 operator.

    According to the California Penal Code, filing a wrong police report includes making a false report of a crime where no crime occurred. Section 148.5 of the Penal Code also includes using a fictitious name or identity when filing the police report as stated in Penal Code Section 529 PC. Furnishing false information or details about the incident is also a crime. Making a false report of theft or damage also constitutes false reporting. Finally, knowingly lying about the actual value of items stolen or damaged is also a crime.  

    The United States laws acknowledge that a person's memory may be unreliable or that a person may have been supplied with inaccurate or false information by another before filing the police report. There are two elements to the crime: firstly, that the defendant filed a report with a peace officer, secondly that the defendant knew or had reason to believe that the statement was false.

    Regardless of whether the false report results in a misdemeanour or a felony, imprisonment is a viable form of punishment. For a misdemeanour, the complainant may face one or two years in county jail. For a felony, one may face probation, but a much higher prison sentence from 2 to 10 years is possible. Defendants who file a false police report may also be ordered to reimburse funds to the community. This order is used because the criminal justice system would have wasted its limited resources investigating a crime that does not exist, or the wrong accused altogether. In limited cases, one may also be charged with obstruction of justice, if the crime so reported led the police on a wild goose chase.

    One may also incur civil liability for a false police report. A defendant may also be financially liable for defamation. Another claim that may be founded on this cause of action is the intentional infliction of emotional distress. These can be sustained because filing a wrong police report can lead to the defamed party losing their job.

    In the United States, there are defences available to a complainant who wishes to escape a criminal charge of false reporting. One can adduce evidence to show that they did not make a false report. A complainant can also show a court of law that at the time of making the report, they were under the misapprehension or under the impression that it was true. A complainant can also show that a classic case of mistaken identity has occurred.  

    The rationale behind having such dire consequences for filing a wrong police report is because trust in the victim or a witness is the necessary foundation of the criminal justice system. False police reports usually lead to the arrest of the person that the report was filed against.

    Consequences of filing a wrong complaint with the police in Canada

    The definition of a wrong complaint or a false report in Canada is identical to that of the United States. Under the Criminal Code of Canada, a complainant filing a wrong police complaint would be charged with committing public mischief. The crime of committing public mischief is codified under section 140 of the Criminal Code. Section 140(1) states that anyone who commits the crime of public mischief, if they, with intent to mislead, cause a peace officer to initiate or continue an investigation in one of four ways. The first way is by making a false statement that accuses another person of having committed an offence as enumerated by in section 140 (1) (a). The second way, outlined in section 140 (1) (b) is by doing something that causes another innocent person to be suspected of having committed an offence. One can do this by diverting suspicion away from him or herself. The third way one commits public mischief is by reporting that an offence has been committed. The fourth way can ensure that they are charged with the crime of committing public mischief is by reporting a death where one has not occurred or made the fake death known in any other way where the complainant that such person has not died. For our purposes, section 140 (1) (c) is pertinent as it relates to false reporting.

    Under the Criminal Code, there are other competent crimes that one could be charged with if said person files a false police report with the police. One could get charged with perjury under section 131 of the Code. A conviction on a charge of perjury could lead to imprisonment for a maximum of fourteen years.  A charge of this crime is possible if the complainant intended to mislead and knowingly gave an inaccurate statement under oath or affirmation. A conviction on a charge of fabricating evidence can also attract a prison sentence of up fourteen years. A complainant may also be charged with a crime under section 137 of the Code. This crime is one of fabricating evidence. A false police report constitutes evidence under this section. Section 139(2) of the Code refers to a person who intentionally tries to obstruct justice.

    This charge is a possible charge against a complainant who has given false information to the police.

    Undoubtedly, the lawmakers intended to discourage and punish false reporting. The law is also a deterrent which stops people from falsely accusing others.

    Consequences of filing a false report to the police in the United Kingdom

    In England, Wales and Northern Ireland section 5(2) of the Criminal Law Act 1967 applies. This section states that where one knowingly makes a false report to a person and cause any wasteful use of police resources, that person is charged with an offence. Filing a false report is one that purports that a criminal offence has been committed. The report may be made either orally, or in writing. It also includes creating an apprehension that there is a threat to the safety of any persons or property. Making a false police report may also be indicating that one has information that is material to a future or ongoing police investigation. In Scotland, the High Court of Justiciary held in Kerr v Hill that giving false information to the police constitutes a crime under the common law. 

    If one is court makes a false report in the United Kingdom, they may also be charged with perverting the course of justice. The maximum penalty for this is life imprisonment. A complainant will be accused of this more serious crime if it is proven that the false report was motivated by malice. If one is given multiple opportunities to retract their false story, but they chose to continue telling the fake account, then they will be charged with perverting the ends of justice. If a complainant files a wrong police complaint that leads to the conviction and imprisonment of an innocent person, they will be charged with perverting the course of justice. If the falsely accused person suffers significant harm to their reputation, then the crime of perverting the ends of justice is also a competent charge. If the complainant has previously been convicted of the crime of making false reports or wasting police time, then the complainant is likely to face the crime of perverting the course of justice.

    filing a wrong police report in New Zealand

    In New Zealand, the consequences of filing a false police report are that one can be charged under section 24 of the Summary Offenses Act of 1981. The Summary Offences Act of 1981 states that every person who makes a false allegation or false report to police is liable to imprisoned for a term not exceeding three months. An alternative punishment is a fine not exceeding $2000. A complainant is one who, despite the facts, and without a belief in the truth of the statement, makes or causes a report to be made to any Police or police employee. The account may be in writing or verbal, and it must allege that an offence has been committed. The report may also be made to cause wasteful deployment of police resources and personnel. An account of a crime can also be created to divert police personnel or resources. The individual reporting the crime may also be reckless as to the result of diverting police personnel and resources. The report must give rise to a severe apprehension that one's safety or the safety of any person or property is threatened while the maker of the statement is aware that no such threat exists.  The complainant is also liable if he behaves in a manner that is likely to cause another to perceive a threat, knowing that such perception is baseless.  These legislative provisions are very similar to the legal framework in the United Kingdom

    Comparing the United Arab Emirates, the United States of America, Canada and the United Kingdom

    In the United Arab Emirates, there is a narrow definition of what a false police report is. Any kind of false statement to the police can lead to a conviction unless one can prove that the report was made in good faith. Contrastingly, in the United States, the laws are more descriptive of what a false report entails.

    Furthermore, the laws acknowledge that memory may be unreliable, and some complainants may not mean to make a false report to the police. Such a complainant is merely charged with a misdemeanour which does not attract any kind of punishment. The legal framework of the United Arab Emirates is inflexible because it does not differentiate between false reports where the complainant simply failed to remember details correctly and ones where the complainant deliberately fabricated a crime. Furthermore, if the accused person would have been charged with a felony, then the complainant will also be charged with a felony regardless of the intentions of the complainant. This punishment may be considered unduly harsh considering that the wrong police complainant may be due to faulty memory. 

    The crime of filing a wrong complaint with the police is not uniquely named in the United Arab Emirates or in the United States where it is merely called the crime of submitting a "false report to a peace officer". In Canada, the crime under the umbrella of the crime of committing public mischief, but one may also be charged with perjury and fabricating evidence. In the United Kingdom, the crime is of wasting police time and perverting the ends of justice. Perverting the ends of justice can result in life imprisonment, which makes felony charge in the United Arab Emirates or the United States seem fair in comparison.

    It is vital that in all the jurisdictions stated there is a possibility of claiming damages for defamation or slander. Thus complainants who have been wrongly accused can claim for emotional distress, loss of opportunity and financial loss they have suffered because of the wrong complainant.

    Conclusion

    The consequences of filing a wrong police complaint can be dire anywhere in the world. Citizens should take their duty to report crimes accurately and in good faith seriously to avoid criminal and civil liability. With sentences ranging from 3 months and life imprisonment depending on where you are in the world, citizens must be cautious not to file a wrong complaint.

     

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    Thu, 11 Jul 2019 12:15:00 GMT
    <![CDATA[Dual License Initiative in Auh]]> Dual License Initiative in Abu Dhabi

     

    Introduction

    In September 2018, the Abu Dhabi Department of Economic Development (ADED) had announced its first phase of the Dual Licenses Initiative. This enables the companies to carry out their commercial activities both onshore in Abu Dhabi, Al Dhafra and Al Ain, as well as operate in the Emirate's free zones. In essence, the aim of this new scheme was to encourage investment and also to drive economic development across the Emirate of Abu Dhabi.

    This move was in alignment with economic initiatives of His Highness Sheikh Mohamed bin Zayed al Nahyan, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the United Arab Emirates (the UAE) Armed Forces, and also the Chairman of the Executive Board of the Emirate of Abu Dhabi. This included an array of initiatives that would improve the ease of carrying on business in Abu Dhabi, and to support entrepreneurs, Small and Medium-sized Enterprises (SMEs) and the private sector. His Excellency Saif Al Hajeri, Chairman of the Department of Economic Development of Abu Dhabi, affirmed the purpose of this initiative as above, to widen the horizons of business transactions in the Emirate.

    INCEPTION OF DUAL LICENSE INITIATIVE

    With the aim to attract foreign investment and drive forward the economy, the Dual License Initiative forms a vital part of the 50 billion dirhams stimulus package. This package was announced in June 2018, and it was welcomed by many in the Emirate of Abu Dhabi, as it was benefitting numerous sectors in the industry to include services, financial and trading consultancies.

    The Dual License will be open to the companies that are headquartered in Abu Dhabi and its various Free Zones, which include Abu Dhabi Global Markets (ADGM), Khalifa Industrial Zone (KIZAD), the Abu Dhabi Airport Free Zone, Twofour54, MASDAR also called Abu Dhabi Future Energy Company, etc.

    Such creation of the new freelance licenses that are exempt from requiring to rent workspace or office space for two years in the Emirate, and allowing them to officially work from home for the first time, will be done by an instant licensing system for most of the commercial licenses and the governmental services.

    CONDITIONS OF ELIGIBILITY

    To be eligible, there are several documents that the free zone companies must present, as the requisites for the application, that would enable them to obtain an onshore license.

    Limited Liability Companies registered in one of the Free Zones of Abu Dhabi will have the option of obtaining a Dual License. Dual License Initiative will apply to such entities which are registered as a foreign branch in such Free Zones. Additionally, Special Purpose Companies (SPCs) or Special Purpose Vehicle (SPVs) will not be able to open a branch onshore.

    Following are some of the documents that need to be presented, and they include, but are not limited to:

    1.    A No Objection Certificate from the respective Free Zone Authority

    2.    An undertaking mentioning that the company does have a branch in the Emirate which is outside the Free Zone.

    3.    A copy of the Free Zone license of the parent company.

    PROCEDURE FOR OBTAINING DUAL LICENSE

    Once the documents are in place, the application may be submitted, which requires an initial approval. After the initial approval is received, the license then goes for printing post the payment of the applicable fees. Ultimately, the dual license is then issued.

    Standard fees apply to dual licenses, as they do for other licenses, and the same is in accordance with the statement of the Abu Dhabi Department of Economic Development. But it is pertinent to note that, the fees may vary between different companies, and the same depends on several factors, of which one is what type of a company is applying for such license, and what are the activities carried out by such company.

    The signboard and physical address are not included in the dual licenses. For this reason, the costs incurred by the company is reduced by approximately 80% according to the Abu Dhabi Department of Economic Development.

    TIMELINE FOR RECEIVING THE LICENSE

    The timeline for the issuance of the dual license also differs according to the type of activities that are carried out by the company applying for this license. It was advised by the Abu Dhabi Department of Economic Development that about 90% of the list of activities follow a relatively quick path for the issuance of the license, and the same is almost immediate. The activities which are more technical in nature, that require additional approval from different relevant governmental authorities, may take approximately two to three business days for the issuance of the dual license.

    IMPACT OF DUAL LICENSE INITIATIVE ON THE ECONOMY AND LOCAL BUSINESS

    The Dual License Initiative is indubitably a positive step that encourages businessmen and investors to be motivated for the expansion of their investments in Abu Dhabi, as a result of which, the advancement of economic development, prosperity and growth in Abu Dhabi is boosted. 

    Previously, the Offshore companies were restricted and confined to the limitations under the Free Zone in which they were established. The only conditions under which they were able to expand their geographical scope, as well as the legal scope of their respective businesses, were when certain conditions were met; such as:

    1.    When the Offshore company partnered with an Onshore company or agent, which enabled them to secure a larger market. However, this expansion condition came at the cost of sharing the profits therein.

    2.    When the Offshore company applied for a license Onshore, which resulted in such an Offshore company incurring additional costs (like leasing an office). Additionally, with the issuance of such Onshore license, the Offshore company would then be restricted with the regulatory and compliance obligations Onshore.

    Hence, practically speaking, a foreign investor who owns a Free Zone company under the Dual License Initiative can expect to commence business onshore without sharing their profits, and without the need of a local partner.

    WHAT IMPLEMENTED WITH THE DUAL LICENSE?

    With the abovementioned announcement of the Dual License Initiative, the following amendments were brought about:

  • Additional Branch Address Elimination
  • Formerly, a branch in one of Abu Dhabi's Free Zone was required to have its distinct address that leads to a separate office. This consequently called for an additional agreement (lease).

    With the introduction of the Dual License Initiative, the is no particular requirement for an address or nameplate that needs to be submitted with the branch application in the Department of Economic Development. Hence, with a Dual License, the branch will not need a distinct address that needs to be registered with the Department of Economic Development, and the branch may operate from the same office as its parent company.

    It is still possible for the Dual License Branch to have an address of its own, however, this new approach provides a far more cost saving and flexible by not setting this as a prerequisite for setting up business in this manner.

  • Elimination of Local Sponsor for Registration of Dual License
  • The Parent Company acts as the sponsor for the registration of the Dual License. This is another attractive feature of the initiative that encourages foreign investment in Abu Dhabi, and it is unlike any other Emirate where the local sponsor is required for such registration.

    With the elimination of the need for partnering with a local agent, the companies which are interested in obtaining the Dual License are able to avoid additional costs. They are saved from comprehensive paperwork associated with the need of a local sponsor, where additional documentation is needed on the domestic agent's behalf. As a result, the process is expedited, since the need to find a suitable domestic agent is eliminated.

  • Mandatory Appointment of the Branch Manager
  • The Dual License Branch is not issued with its establishment card, or a Ministry of Labour file since the same is the responsibility of the parent company. Therefore, the hiring of the employees in the Dual License Branch is far more feasible and is sponsored by the parent company of such branch. It is compulsory for a Branch Manager to be appointed for the Dual License Branch. Favourably, the Branch Manager so appointed should also hold a Power of Attorney to have the authority of the established Dual License Branch. This is to enable that the Branch Manager has adequate authority to act on behalf of its Dual License Branch.

    CONCLUSION

    It is believed that boosting the key engines of the economy such as entrepreneurs, the private sector and SMEs was vital for the overall development and expansion of businesses in Emirate of Abu Dhabi. Abu Dhabi Department of Economic Development's Chairman, HE Saif Al Hajeri in his words reiterated that 'in the first phase of the Dual License Initiative, companies will be offered more opportunities to carry out their businesses, and to expand by giving them the chance to partner and work with different government entities.'

    At present, it is unclear whether the Dual Licenses will qualify for some regulatory approvals onshore, such as Health Authority, Training, Education, Oil & Gas, and other similar requirements.

    In the coming years, Abu Dhabi's economic growth will be accelerated with the approval of the 50 billion dirhams stimulus package. As announced, the Dual License Initiative seems to form part of a much larger economic plan. It has required the already existing companies, as well as new investors to consider their existing business ventures and structures, as well as the evolving economic dynamics from a legal perspective, both, at an external and an internal level.

    To embark at the end of this article, under this initiative, the companies that are based in the capital of the UAE's Free Zones will be able to carry out their business in mainland as well, which reduces the cost of carrying out such business, improve the competitiveness in the Emirate of Abu Dhabi, and encourage foreign investors to invest in the Emirate.

     

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    Thu, 11 Jul 2019 10:54:00 GMT
    <![CDATA[Censorship of Films in India]]> Censorship of Films in India

    I. Introduction

    Censorship is defined by the Oxford Dictionary as the 'prohibition or suppression of any part of the news, books, films, etc. that are considered politically unacceptable, obscene, or a threat to security.' Films are considered an excellent medium of communication with the general public. The evolution of technology has brought a sea of change in the way films have been able to reach the public in every corner of India. Additionally, it has boosted the power of films to significantly contribute to the cultural and social development of the country. Generally, Press and Films enjoy the same right and status as far as the constitution freedom related to expression and spreading of an idea is concerned. Article 19(1) of the Constitution of India guarantees freedom of speech and expression. Hence, both Press and Films are regulated under this provision. It is pertinent to note that the above right is not absolute and has certain limitations. Matters that are against foreign relations, public policy, integrity and sovereignty of the State, decency and morality, public order, etc. are certain limitations to the above, as mentioned in the Article 19(2) of the Constitution of India.

    II     Censorship of Films

    The Cinematograph Act, 1952 (the Act), ensures that films fulfil the objectives prescribed by law. In the Act is a provision for the establishment of a Central Board of Film Certification (the Board). This is the regulatory body in India that issues a certificate to the makers of films for public exhibition. Once the Board has examined a film, the Board can:

    • Sanction the film for unrestricted exhibition;
    • Sanction the film for public exhibition limited to adults;
    • Direct such modifications and excisions in the film before sanctioning the film to any of the above;
    • Refuse to sanction the film for exhibition completely.

    One of the first cases where the issue of censorship of film was raised is K A Abbas v Union of India, where the Supreme Court of India considered the vital question related to pre-censorship of cinematography in relation to the freedom of speech and expression that is guaranteed under the Constitution of India. It was held by Hidayatullah, C.J, that censorship of films which includes pre-censorship was constitutionally lawful. Though, he added, that unjustified restriction on freedom of expression by the Board should not be exercised. In the case of S. Rangrajan v Jagjivan Ram, Supreme Court faced a similar question, and was of the view that 'if the exhibition of the film could not be validly restricted under Article 19(2), risk of procession and demonstration was not a valid ground to suppress the same.' The Supreme Court added that it was the State's duty to protect the freedom of expression. The Supreme Court of India in giving its judgement in the case of Bobby Art International v Om Pal Singh Hoon was of the opinion that, a film must be judged in its entirety. The court added that where the theme of the film is to condemn violence and degradation, scenes of expletives to advance the message, which was the main intention of the film, is permissible.

    III     Types of Certifications

    There are mainly four kinds of certifications given by the Central Board of Film Certification:

    1.Universal (U)

    This type of certifications is the Unrestricted Public Exhibition, and the same holds no limitations for the age groups that may watch the same. They could be family, educational or social oriented themes. This category has fantasy violence and minimal foul language. When a movie is being certified U by the Board, it must ensure that the movie is suitable for a family to watch it together including the children.

    2.Parental Guidance (UA)

    This type of certification explains that the film is appropriate for all age groups. However, it is in the interest of the children below the age of 12 to be accompanied by their parents. The reason could that the theme of the movie may not be the most appropriate for the child without the guidance of their parents.

    3.Adults Only (A)

    As the certification suggests, this type of film is restricted to adults only. Persons above the age of 18 are adults, for the meaning of this certification. The theme may contain disturbing, violent, drug abuse and other related scenes which are not considered suitable for viewing by children who may be influenced by the same negatively. Films that meet the requisites of the abovementioned criteria but are not suitable for exhibition to children or those below the age of 18 shall be certified A.

    4.Restricted to Special Class of Persons (S)

    This is the last type of the certifications under the board, and the same explains that the films which are rated S are meant for a special class of persons only. For example, doctors. If the Board is of the opinion the with regards to content, nature and the theme of the film is to be restricted to members of a class of persons or any profession, the above certification shall be given to such film.

    IV     OBJECTIVES OF FILM CERTIFICATION

    A.The main objectives of the Board for the above are as follows:

  • To ensure that the medium of the film responsible. Additionally, to safeguard the sensitivity of standards and value of the society.
  • To ensure that creative freedom and expression are not unjustifiably curbed.
  • To ensure to adapt to the social changes.
  • To ensure the theme of the film provides a healthy and clean entertainment.
  • To ensure that the film is of cinematically an adequate standard and aesthetic value.
  • B.In pursuance of the above, the Board must ensure that:

  • Activities that anti-social such as violence are not justified or glorified;
  • The way criminals are depicted, and other related words or visuals must not incite the commission of any kind of offence;
  • The scenes showing ridicule and abuse of mentally and physically handicapped, cruelty or abuse of animals, involving children as victims of violence and abuse must not be presented needlessly;
  • Avoidable or pointless scenes of cruelty, horror and violence that are intended to provide entertainment but may have the effect of dehumanizing or desensitizing people are not shown;
  • Scenes that glorify or justify drinking are not shown;
  • Scenes that tend to justify, glamourize or encourage drug addiction are not shown. Additionally, similar scenes for the consumption of tobacco or smoking must not be shown;
  • Human susceptibilities are not offended by obscenity, vulgarity or obscenity;
  • Words with dual meanings that cater to dishonourable instincts are not used;
  • Scenes denigrating or degrading women in any manner is not shown;
  • Scenes that involve sexual violence against women in the form of rape or any other form of molestation are avoided. If the theme of the movie requires so, the same must shall be reduced to a minimum and no details are to be shown. The same goes for scenes that involve sexual perversion;
  • Words or visuals contemptuous of religious, racial or other groups must not be presented;
  • Words or visuals that promote obscurantist, communal, anti-national and anti-scientific  attitude are not shown;
  • The integrity and sovereignty of the country is not called in question;
  • The security of the country is not endangered or jeopardized;
  • Relations with foreign states are not overwrought;
  • Public order is maintained, and not hindered;
  • Words or visuals involving defamation of a body or an individual, or contempt of court are not shown;
  • National emblems and symbols are not presented except according to the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950 (12 of 1950).
  • C.The Board shall additionally ensure that a film:

    a)       Is judged as a whole from the perspective of its overall impact; and

    b)      Is inspected in the light of the period illustrated in the film along with contemporary standards of India and the people who the movie is related to, to ensure that the firm does not corrupt the morality and ethics of the audience.

    Applying to all of the above categories, the Board shall ensure the titles of each film is carefully scrutinized to ensure they are not vulgar, violating, provocative or offensive to the guidelines mentioned above.

    V.  CONSTITUTION of the Censor Board

    The Board consists of a Chairman and non-official members, all of whom are appointed by the Central Government. It is headquartered in Mumbai, Maharashtra. Additionally, it has nine Regional offices, namely, Chennai, Bangalore, Hyderabad, New Delhi, Guwahati, Cuttack, Kolkata and Thiruvananthapuram.

    Regional Offices, as mentioned above, are assisted by the Advisory Panels. The Advisory Panels, like the Board, is selected by the Central government. The members chosen for the panel are from different walks of life, and they are chosen for a period of 2 years.

    It has a two-tier jury system, the Examining Committee and the Revising Committee.

    VI. Common Reasons for Censorship or Banning of a Film

    In light of the history of why a film has been banned, or parts of it are censored, the main categories for why the same is done are as follows:

  • Sexuality:  A rigid social structure has been followed in Indian society. Hence, a medium which portrays sexuality regardless of the audio, written or visual form, which has not been fathomed by the society and is concerned a social stigma is banned on the grounds that it might have the effect of undignified morals of Indians.
  • Politics: The isolation of political forces is not far when one talks about censorship. The description of an allegorical political scene, directly or indirectly, is banned by the authorized party to it.  Overt political overtones are not appreciated by the government and hence is a common reason why certain films are either entirely banned, or such scenes are censored or removed.
  • Communal Conflict: Under a heterogeneous nation like India, if a film incites or spurs any type of communal conflict, the same is censored. The aim is to avoid the consequences such a film would have on the audience it intentionally or unintentionally targets. If the state believes that a movie would open a window for riots by a community for the way they have been portrayed in the film, the same is banned by the Board or censored.
  • Incorrect Portrayal: Sometimes, a situation arises where a well-known personality objects his own depiction in a medium which would be exhibited, and consequently goes for censoring the same. For more clarity, in a situation where the medium is of biographical nature, and the person on whom it is based does not approve the authenticity of the same, there have been times when the person has sued for the medium not to be released, or be edited and released upon approval of such person.
  • Religion: Religion does not appreciate any type of defiance or disobedience towards the values it proliferates. Hence, any medium which directly or indirectly distorts any aspect of the religion including its preaching, values, idols, to name a few, is highly criticized and therefore, censored.
  • Extreme Violence: Indubitably, the portrayal of extreme gore and violence may meddle and disturb the human mind. Viewing such scenes may have a negative psychological effect on the mind. If the Board of a similar opinion that such a scene through any medium may have an underlying negative impact on the viewer, contrary to the entertainment or knowledge such scene tries to bestow, the same may be banned, edited or censored by the Board in public interest.
  • VII. Conclusion

    In India, the basis on which a film is censored or banned has been evidently traditional norms.  That being said, what is censored today, may not be censored tomorrow. The socio-economic dynamics of a country is continually evolving. Hence, all regulations must try to adapt to the same. The Constitution of India guarantees freedom of speech and expression with justifiable limitations on certain expressions like contempt of court, morality and decency, the security of the State, public order, incitement to an offence, defamation, etc. and rightly so

    ]]>
    Wed, 10 Jul 2019 10:42:00 GMT
    <![CDATA[5g]]> 5g

    Introduction

    ICTs, short for Information and Communication Technologies, is used for social and economic development. With the introduction of new technology, there is an improvement in the quality of life of people using such technology because of the unique benefits and conveniences that this new technology has to offer. 4G wireless network services allow people the comfort is using broadband services on their mobile devices. However, a need arose for high speed, highly reliable, rapid response and energy efficient mobile services. Hence the introduction of 5G technology. Developed countries have aimed to introduce 5G mobile networks for commercial use by 2020. This fast-track introduction of the technology has resulted in the need to regulate how 5G technology is implemented and its environmental impact

    Background

    What is 5G

    5G stands for the fifth generation. It is the next generation of broadband connection, and it will replace or improve the 4G connection.  It is a specification that refers to how a network will respond to the needs of cellular networks that are growing. 5G will lead to higher data rates, quicker reaction times, faster upload and download speeds. 5G supplies an enormous amount of spectrum of wireless communication, smaller sizes cells and more modulation schemes, letting higher numbers of wireless users share the spectrum. 5G also leads to broader coverage and more stable connections. These new features allow for smart transportation, instantaneous cloud services, 360-degree videos and holograms while guaranteeing the quality of experience to mobile users. 

    5G operates on three different spectrum bands, namely the Low band spectrum, Mid-band spectrum, and High Band spectrum. Low band spectrum refers to data speeds that only reach 100 Mbps. Mid-band spectrum refers to faster data speeds at 1 Gbps. Whereas high band spectrum is one that offers speeds of 10Gbps.There are different categories of 5G services. Firstly, there are immersive 5G services, which are concerned with virtual reality, augmented reality and massive contents streaming. Secondly, there are intelligent 5G services that are user-focused and provide for better mobile services in crowded areas. Thirdly, there are Omnipresent 5G services used in the Internet of things. The Internet of Things refers to interconnections of all kinds of devices even household appliances. The fourth category refers to Autonomous 5G services which would be used in self-driving cars. Mainly this fourth category involves smart transportation, drones and robots. The final type is the Public 5G services which would enable more efficient and effective disaster monitoring, private security, public safety and emergency services.  

    How does 5G technology works?

    5G mobile wireless systems are a way for devices to send and receive data wirelessly. 5G signals use wavelengths that measured in millimetres. 5G has higher frequencies, which means there is only a shorter range of coverage. Thus, 5G will use a system of cell sites that send encoded data using radio waves. Each cell site is then connected to a network backbone. 5G will use Multiple Input Multiple Output ports which facilitates signals that travel faster in all directions.  To eliminate interference that may occur as a result of the complexity of the network, a method called beamforming will be used. Beamforming refers to a situation whereby a single port sends higher beam signals in distinct directions to reduce interferences.

    The implication of 5G technology

    Advantages

    The advantages of shifting to 5G are numerous. 5G will lead to faster and improved broadband. 5G will allow the proliferation of self-driving cars that will communicate with other cars on the road. 5g will allow such vehicles to obtain information about road conditions, provide information to drivers and automakers. This technology will enable autonomous vehicles to avoid car accidents and save many lives. 5G also enables the effective operation of cities and municipalities. Municipalities will be able to perform their duties more efficiently. Remote control of heavy machinery is also made possible by 5G. in the Healthcare sector it is expected that 5G will lead to improvements in precision surgery and may even lead to remote medical operations. One of the most significant aspects of 5G is the internet of things. 5G will allow communication between sensors and smart devices. A result of 5G is advanced manufacturing which will require no human input. This advanced manufacturing is what is called the Internet of things.

    Disadvantages

    The needs of people have been the driving force for the creation of mobile broadband networks until now. The needs of machines were at the forefront of 5G technology development. The low latency and high-efficiency data transfer of 5G networks ensure seamless communication between devices. The technology may lead to a wide array of troubles and challenges for people and the environment. The introduction of 5G necessitates the need for new infrastructure. This new infrastructure is called small cells. These smalls cells are a departure from macro cell towers. The small cells are barely noticeable cell towers situated closer together. The small cells will have more input and output ports than there are on the macro cell towers. Smalls cells generate less power, collect and transmit signals in a short range from one another. Thus that the deployment of 5G technology will likely lead wireless antennas every few feet on lamp posts and utility posts. The small cells may also be placed every two to ten homes in suburban areas. Deploying 5G technology will require an unprecedented and immensely large number of wireless antennas on cell towers and buildings. These would be placed much closer together. Each of these cells emits radiofrequency radiation. This radiation will be much harder to avoid because these towers will be everywhere.

    The presence of radiofrequency radiation is an essential consideration in deploying 5G technology. The current wireless technologies of 2G, 3G and 4G technologies created health risks to humans, animals and the environment. Wireless company documents outline information that suggests that 5G will increase the levels of radiofrequency radiation. The World Health Organisation's International Agency for Research on Cancer categorised radiofrequency radiation is a possible carcinogen. Low-level exposure to radiofrequency radiation leads to a myriad of health effects including DNA single strand and double strand breaks, melatonin reduction and generation of stress proteins, all of which lead to cancer and diseases. 5G technology will lead to higher exposure to radiofrequency radiation which presents risks to both human and environmental health.

    Regarding human health, there is a concern that the radiation emitted from the small cells will have adverse effects on human skin. Human skin has been found, and it is likely that it will also soak up radiofrequency radiation. Inevitably, this will lead to cancer - furthermore, the sweat ducts located on the upper layer of the human skin act like antennas. Therefore, mortal bodies will become far more conducive to this radiation, increasing the risk of growing cancerous cells. High exposure of radiofrequency has an impact on motor skills, memory and attention. The effects of such high exposure are neuropsychiatric problems, genetic damage and elevated diabetes.

    More conclusive information on the harmful effects of the radiofrequency radiation on animals is available. The US National Toxicology Program carried out a study that found that exposing rats to radiofrequency radiation for nine hours in two years led to the development of heart and brain tumour, as well as DNA damage. Various studies carried out elsewhere in the world have indicated that the radiation damages eyes, immune system, elevated lymphoma, cell growth rate, lung and liver tumours, and bacterial resistance. 

    5G also harms the planet as it poses a severe threat to plant health. Exposure to radiofrequency radiation led to necrosis, which is the death of tissue cells. Exposure to such radiation could lead to the contamination of our food supply.

    5G deployment requires many temporary satellites that are propelled by hydrocarbon rocket engines. Such satellites emit black carbon into the atmosphere. Black carbon in the atmosphere will affect the distribution of the ozone, as well as the temperature. These rocket engines will also emit chlorine, which is known to be a chemical that destroys the ozone layer.

    5G may even threaten natural ecosystems. Radiofrequency radiation affects birds and bees' health. Radiation may ultimately lead to birds' death, and the egg laying abilities of bees are compromised.  

    5G technology also requires collocating the cells on other infrastructure. Small cell wireless facility development necessitates streamlined federal, state and local permitting rights of way, application timelines and other siting and application fees and application review timelines and appeal processes to make it economically feasible for wireless companies to deploy the technology across communities.

    Legal considerations for the use of 5G networks

    The legislative frameworks throughout the world were designed mainly to regulate human to human interactions and were not intended for machine to machine communications. The laws on telecommunications relate to privacy, roaming and other rules that were designed to protect interpersonal connections between humans. It is essential to compare the telecommunication laws in the United States of America, China and the EU to assess readiness for the deployment of 5G. These laws will be evaluated based on whether they mitigate the environmental and risks of 5G.

    The United States of America

    With the advent of 5G technology comes a need to reexamine the law and how it will need to adapt to 5G technology. The United States' Federal Communications Commission issued a 5G Technology Plan or the 5G Fast Plan which was aimed at achieving three main goals. These goals were, firstly the releasing of more spectrum into the marketplace; secondly modernising regulations and thirdly limiting the barriers to wireless infrastructure deployment.   The Federal Communications Commission's Spectrum Frontiers Orders has stated an intention to lay the groundwork for the use of 5G technology in the United States by 2020. In the United States federal law, the Repack Airwaves Yielding Better Access for Users of Modern Services Act a wide range measures to facilitate the use of 5G networks in the US has been approved by the US House of Representatives. There are two Acts drafted to streamline the auction and use of airwaves to send and receive 5G signals the Spectrum Deposits Act and the Mobile Now Act of 2016. The Spectrum Deposits Act allows the federal government to identify future spectrum for 5G use. The Spectrum Deposits Act also provides for the government to speed up the installation of 5G equipment on federal property.

    In the United States of America, 21 states have enacted small cell legislation. This legislation streamlines regulations to facilitate the deployment of 5G small cells. Each state considered its state and local environment before passing the legislation. The fundamental principles of the legislationis are streamlined applications to access public rights of way. This allows mobile network providers to place poles and facilities in public rights of way. The legislation places a cap on costs and fees. The small cells are to be attached to public structures. All states enacted must impose annual fees on new attachments to public structures. The legislation also regulates the streamlined timelines for the consideration and processing of cell siting applications.

    The United States Courts of Appeals decided to quash a motion to stay the Federal Communications Commission's revised rules relating to the rollout of small-cell 5G technologies. This decision allows for telecommunications companies to mount small cell 5G equipment on street lights. This decision goes against the need for community decision making relating to public safety and well being.

    The Secure 5G and Beyond Act was introduced by US senators which obliged to President to develop a security strategy for next-generation networks. The Act, however, prevents the President from nationalising 5G networks. The Bill advocates for a National Telecommunications and Information Administration to ensure that the advantages of 5G are harnessed in a way that minimises the risks of using the 5G networks. The Bill also tasks the President with providing that foreign allies maximise the security of their telecommunications networks and software.

    The Federal Communications Commission is in the process of assigning additional high band spectrum, mid-band spectrum, low band spectrum and unlicensed spectrum. Assigning these spectrum bands will allow for an increase in low latency data traffic. This allocation will be beneficial to the Internet of Things (IoT) devices. 

    The US government is keen to foster the development and advancement of the IoT. The National Telecommunications and Information Administration's Internet Policy Task Force has reviewed the benefits, challenges and potential role of the government accordingly.

    The European Union

    According to the European Commission's Digital Agenda for Europe targets, at least one major city in every Member State of the European Union should have a commercial 5G network by 2020.

    The Council of the European Union met in Brussels in December 2018 to reach an agreement on the European Electronic Communications Code. The code encourages spectrum allocations across the European Union. A minimum license lasts for 15 years, but it can be extended quite easily for another five years. The code includes an outline for the renewal, transfer, sharing and lease of spectrum rights processes. The code obliges for 5G spectrum bands to be assigned by the 31 of December 2020.

    Like the United States, operators and mobile service providers are granted a right of way on public infrastructure. But unlike in the United States, it is not necessary for the mobile services providers to be subject to prior permits, fees or charges.

    The European Communications Code has been criticised as failing to pre-empt some of the long term challenges of the European telecommunications sector. This lack of foresight could mean hindering the deploying 5G networks in Europe. The Code has been said to be unclear as it involves complexities that confuse electronic communications service providers and machine to machine service providers.

    The European Communications Code is said to be fragmented because of the level of 5G service regulation in Europe will differ from state to state. The Code does not include measures to promote the harmonised availability of 5G across EU member states. As stated before, the deployment of 5G services requires new frequency bands. New frequency bands are possible when a copious amount of small cells is deployed because higher frequencies have a shorter transmission range. Previous regulations were primarily focused on more massive high power macrocells. These regulations are not appropriate in the case of networks using these smaller cells.  Some European countries such as Italy and Greece have failed to create legislation that is welcoming to 5G technology because of the ineffectiveness of law-making bodies as well as the burden of government regulation. Luxembourg, on the other hand, can make the required regulatory interventions as a result of the effectiveness of the law-making bodies and the law relating to ICT.  Switzerland is a non-EU country but stands in better stead than EU nations to issue effective regulations and policy in the realm of 5G technology. The Netherlands, Norway and the United Kingdom are EU member states that have powerful law-making capabilities that enable them to harness the advantages of 5G technology.

    The Code does indeed create a more efficient and flexible framework for the introduction of 5G technology. The drawback is that the code will only be implemented in 2020, but by then the deployment of 5G technologies would already have been implemented.

    The People's Republic of China

    The Chinese government has keenly promoted the development of 5G technology and the IoT. The Chinese government has developed many laws and regulations including legislation on information security, intellectual property rights and data protection.  Unfortunately, China does not have a comprehensive regime for the introduction of 5G technology and IoT.  The Ministry of Industry and Information Technology (MIIT) of China has been driving the implementation of 5G technology. The Ministry of Industry and Information Technology is tasked with issuing licenses to mobile networks to deploy 5G hardware and software.

    China would have been an ideal country for supplying the United States, Japan and Australia with the hardware needed for 5G mobile networks. The National Intelligence Law of 2017 and the Counter Espionage Law of 2014 enacted in China state that Huawei, a company with its parent plant in China, would be obliged to provide the Chinese government with any information it requires. Article 7 fo the National Intelligence Law states that any organisation or citizen must cooperate with the state intelligence authorities in terms of the law". The Counter Espionage law states that "when the state security organ investigates and understands the situation of espionage and collects relevant evidence, the relevant organisations and individuals shall provide it truthfully and may not refuse". Huawei was otherwise poised to become the core backbone of 5G infrastructure in advanced western liberal democracies.

    Regulating Environmental Impact

    Although China and the United States, as well as the European Union, have created a legal landscape to support the introduction of 5G technology. It is however interesting that neither of these countries has enacted or proposed legislation that regulates the environmental harm and the adverse effects on humans.

    The European Commission has absolved itself of responsibility for any potentially harmful effects of radiofrequency radiation. The Treaty on the Functioning of the European Union states that the primary responsibility for protecting the public from potentially adverse effects of such radiation remains with the Member States. The regulation of the environmental impact will undoubtedly be varied amongst the Member States.

    In Brussels, plans for a pilot project to provide high speed 5G wireless internet in Brussels were stopped. The halt is because it is not possible to estimate the radiation from the antennas of the small service required for 5G service. In the Netherlands, political parties were anxious to know what the potential dangers if the small cells were installed on a large scale. The Netherlands Parliament, therefore, urged the Health Council of the Netherlands to carry out an independent investigation into 5G radiation. In Germany, a petition with 56 643 signatures requested that the German Parliament suspended the procedure to award 5G frequencies because of doubts as to the safety of this technology.

    There is an International Appeal to Stop 5G on Earth and In Space addressed to the United Nations, the European Union, the Council of Europe and the World Health Organisation with 63 379 signatories from at least 168 counties as of March 29 2019.

    In the United States, more than two hundred and forty scientists and doctors originating from 41 different member states have appealed to the United Nations calling for urgent action to reduce exposure to radiofrequency radiation. This appeal has clout as these scientists and doctors have all published peer-reviewed journal articles on electromagnetic radiation or 5G health dangers. These academics also sent a letter to the Federal Communication Commission asking for a moratorium of 5G technology deployment because of the potential impact on human health and the environment.

    It is questionable whether citizens of the affected future smart cities can challenge the introduction of 5G technology on the basis that it is a hazard to human and environmental health. Section 704 of the Telecommunications Act of 1996 stops state and local government from considering the potentially harmful environmental effects of cell tower radiation if the radiation does not exceed FCC limits. It is clear that 5G radiation exceeds these FCC limits, but rulings of the courts on this section has shown that the court prefers to interpret such a provision in favour of the mobile service network  

    Recommendations

    Scientists have cautioned that before deploying 5G technology, the effects of this technology on human health must be studied. Parliaments of the developed countries should draft legislation to mitigate the impact of 5G technology. 

    Conclusion

    The United States and the European Union have regulated the deployment of 5G technology through legislation, and China has done so through the Ministry of Industry and Information Technology. Neither the United States, the European Union and China have tried to lessen the potential environmental and health impact of 5G technologies. It is likely that environmental laws will be enacted in reaction to such effects when the full ramifications of the using 5G technology are known.

     

    ]]>
    Tue, 09 Jul 2019 17:52:00 GMT
    <![CDATA[Hong Kong china IPR]]> Mutual Recognition of award between Hong Kong and Mainland China with regards to Intellectual Property Rights

    Introduction

    For 22 years, Hong Kong and Mainland China have been described as "one country, two systems".  Since the handover of Hong Kong to the People's Republic of China in July 1997, both these parties have concluded agreements that create a metaphorical bridge between the two systems. One such bridge is the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial matters by the Courts of the Mainland and the Hong Kong Special Administrative Region.

    Background

    Hong Kong was transferred from the control of the United Kingdom and became a special administrative region of the People's Republic of China on 1 July 1997. Since the Handover, the judgments of the Hong Kong Courts were not enforceable in the People's Republic of China or Mainland China.

    Hong Kong and People's Republic China have concluded arrangement relating to aspects of mutual legal assistance in civil and commercial matters. Arrangements providing for seamless cross-border recognition and enforcement of judgments between Hong Kong and the People's Republic of China (PRC) have been in effect since 1997. The two countries included the Arrangement on Reciprocal and Recognition Enforcement of Judgements in Civil and Commercial Matters by the Courts of the Mainland and the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned signed in 2006. This arrangement was modelled on the Hague Convention of 2005, and this Choice Court of Arrangement took effect on August 2008.

    On the 18th of January 2019 Hong Kong and the People Republic of China signed yet another agreement. The arrangement follows a Consultation Paper that was issued by the Department of Justice in July 2018. The agreement was named the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region. The purpose of this arrangement is to establish bilateral mechanisms that foster clarity and legal certainty in commercial and civil matters between Hong Kong and Mainland China, thereby encouraging judicial cooperation between the two nations. This arrangement eliminates the need for re-litigation of the same disputes in Hong Kong and Mainland China. Additionally, this offers better protection to litigants interests. The agreement also establishes Hong Kong as a regional centre or an attractive forum for international legal and dispute resolution.

    The agreement is not yet in force, but it is intended to replace the old arrangement which came into effect in 2008. The former arrangement applied if judgments were only mutually enforceable between Hong Kong and the People's Republic of China courts if the judgment concerned was for the payment of money in a civil or commercial case. The arrangement was also enforceable if the parties had agreed to a choice of court agreement in writing prior to the dispute.

    The new arrangement applies to a wider range of cases. According to Article 1, not only will the new agreement apply to all commercial and civil cases but also cases related to civil damages in criminal cases. In addition, parties will no longer have to have concluded a choice of court clause in their contract for them to choose the most convenient forum between Hong Kong and the People's Republic of China. All agreements, whether including such a clause or not, will benefit from the New Arrangement. All monetary and non-monetary rulings for either court will be recognised and enforced as such. However, the new arrangement allows for the partial recognition and enforcement of awards. Furthermore, the new arrangement provides for decisions of the Hong Kong Labor Court, Lands Court and Small Claim Tribunals to be recognised by the People's Republic of China.

    The new arrangement expressly excludes judicial review cases, and administrative law cases heard by the Hong Kong Courts. Judicial and non-judicial proceedings relating to regulatory matters are excluded. Orders for interim relief and rulings on anti-suit injunctions and preservation measures are also not within the realm of the arrangement. Article 3 states that the arrangement does not apply to a judgment which relate to family law in maintenance cases, cases on succession, administration and distribution of estate, bankruptcy insolvency cases, cases on marine pollution, cases on the recognition and enforcement of judgements, cases on the confirmation and setting aside of an arbitral award.   

    The arrangement will be implemented in Hong Kong through the enactment of local legislation to this effect. The arrangement applies to judgments made on or after the commencement date.

    Legal Framework: Intellectual Property Rights

    Regarding Intellectual Property Rights, Article 1(2) of the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) applies. Intellectual property rights are the rights that a legal entity holds and protects as his or her creations of the mind. Conceptions of the mind may be plans, ideas, inventions or other intangible assets. The definition contained in Article 1(2) includes therein includes copyright and related rights, trademarks, patents, geographical indications, industrial designs, integrated circuit designs and trade secrets. Copyright rights are those that protect and accord exclusive rights to the creator to print, publish, perform, film or record literary artistic or musical material. A trademark refers to the symbols and words that are legally registered or established by use as representing, referring and belonging to a company. Trademarks include stamps, logos, crests, seals, emblems, signs and other symbols that are recognisable as expressions which identify a product or service as belonging to a particular company. A patent is a right or title to make, use or sell an invention issued by a government authority or license for a specified period. Geographical indications are distinctive signs used on products that have a specific geographical origin as well as possess qualities or other characteristics, or reputation that rea due to that origin. A geographical indication may refer to not only a product or service but also to signs, emblems and symbols that can be understood as indicating the source of goods.  An industrial design is a process of creating and developing concepts and specifications that optimise the value, function and overall appearance of products and systems. This process of design is usually applied to products that are to be manufactured through techniques of mass production.  Industrial design is done for the benefit of both the use and manufacturer. An integrated circuit design is a form of electronics and engineering that refers to the logic and circuit design techniques to design integrated circuits. Trade secrets are the sales methods, distribution methods, consumer profiles, advertising strategies, practices, formulas, processes, design instruments about a company that are not generally known or reasonably ascertainable by others.

    The New Arrangement lengthens the list contained in the Trade-Related Aspects of Intellectual Property Rights as it also includes plant variety rights. The New Arrangement includes plant variety rights as stipulated in the Hong Kong Plant Varieties Ordinance and Article 123(2)(7) of the General Provisions of the Civil Law of the People's Republic of China. A plant in terms of the Hong Kong ordinance is any multicellular vascular organism with a root system. A plant also refers to all kinds of algae or all types of fungi. Variety in terms of the Hong Kong Ordinance is a cultivar of a plant and also applies to any clone, hybrid, stock or line or a plant. The term variety does not however refer to a botanical array of such a plant. Plant variety rights are rights that are granted to the be cultivar or the breeder of a new variety of plant. These rights give the breeder or the cultivar exclusive control over certain material such as seeds, divisions, cuttings, and tissue culture. The breeder also holds exclusive rights to cut flowers, foliage, fruit and other harvested material. Plant variety rights were first included in Article 123(2)(7) of the General Provisions of the Civil law and were classified under Intellectual Property rights.

     The inclusion of plant variety rights in the New Arrangement is significant because it is the first time that plant variety rights have been recognised as intellectual property rights in the recognition and enforcement of judgments arrangement between in the People Republic of China and Hong Kong

    The New Arrangement covers judgments ruling on contractual disputes involving intellectual property rights. The New arrangement introduces more requirements to cases involving infringement of intellectual property rights. In a judgement that concern intellectual property rights will only be enforceable in two instances according to Article 11. The first instance is when the judgment concerns the act of infringement was committed in the requesting place. The second instance is when the intellectual property rights or interest related is subject to protection under the law of the requesting place.

    There are, however, some judgements that concern intellectual property rights that are excluded from the New Arrangement. If the People Republic of China Court has heard a case on the infringement of invention patents and utility model patents, then it is excluded from the New Arrangement. Judgments on the violation of standards patents including original grant patents are also outside the ambit of the New Arrangement. If the Hong Kong Court heard a case in the short-term patent cases, then it is not included in the New Arrangement. If either the People's Republic of China or Hong Kong issues a judgment on the confirmation of the license fee rate of a standard-essential patent, then that judgment is outside the scope of the New Arrangement. Intellectual Property Rights that are not covered by Article 5 of the New Arrangement are also not regulated by the New Arrangement. Lastly, a ruling on the validity, establishment or subsistence of intellectual property rights is also not within the ambit of the New Arrangement.  It is, however, essential to note that Article 15 states a ruling on liability based on a judgment on the validity, establishment or subsistence of intellectual property rights is within the ambit of the New Arrangement. These will be recognised and enforced, so longs as the judgement comply with the relevant requirement of the New Arrangement.

    There are grounds for a requesting court to be denied the recognition and enforcement of a judgment. This denial will occur when a litigant was not summoned in accordance with the law of the requesting place as enumerated in Article 12. Another ground of refusal is that the litigant is not given a reasonable opportunity to make representations or defend the case. Lastly, the requesting court will be denied recognition and enforcement of the courts if the judgment referred to was obtained by fraud. It is important to note that the only People's Republic of China may refuse to enforce or recognise a judgment, but the inverse is not true.

    If an applicant in a case that involves an infringement of a right that occurred in the requesting place or where an intellectual property right or interest is protected under the law of the requesting place, they have to follow the procedure set out in Article 8. The applicant has to apply, a copy of a legally effective judgement. A legally effective judgment on intellectual property rights in Article 4 is a judgment by a court of second instance or the judgment of a court of first instance of a court in Mainland China where no appeal is available or where no appeal has been filed within statutory limits. Article 4(2) states that a legally effective judgment in the case of Hong Kong is a judgment issued by the Court of Final Appeal, or Court of Appeal. A legally effective judgment also refers to the Court of First Instance of the High Court, the District Court, the Labour Tribunal, the Competition Tribunal or the Small Claims Tribunal.

    The applicant must also submit a certificate issued by the court which gave the legally effective judgement. The purpose of this is to certify that the judgment is a legally effective judgment. The certificate must also show that the judgment has content that must be enforced. The certificate must also confirm that the judgment is enforceable in the requesting place. The applicant must also submit identification documents. The identification documents, if issued in a country that is not the requested place, then they must be certified in the manner prescribed by the law of the requested place. It is also important to note that Article 6 refers to a place of business, as the place incorporation or registration, place of the principal office and principal place of management. This definition is wider than that given in the General Principles of Civil law of the People's Republic of China. This expands standing for the victims of intellectual property rights infringement.

    Article 9 states that a person applying terms of the New Arrangement must outline the details of the request and motivation and justification for the application. If the applicant is applying for enforcement, they must also submit details on the status and location of the property of the respondent. The applicant must also notify the court of the requested place if another application for the enforcement of the judgment in any other forum is pending. Article 10 states that the law of the requested place governs time limits, procedures and manner for making an application and enforcement of a judgement.

    Finally, it is vital to mention that those wanting for judgments relating to intellectual property rights infringement to be recognised or enforced may apply for the appeal if the order was made by a Hong Kong court, or for a review for a request made by a court in Mainland China.

    Remarks

    The reforms ushered in by the New Arrangement are significant for a couple of reasons. Firstly, the remedies available for infringements committed in the two jurisdictions are very similar. For instance, Intellectual Property rights holders in China and Hong Kong may elect to enforce their rights through civil remedies. Civil remedies are available through the local courts in both jurisdictions. Within the People's Court, there are special Intellectual Property chambers that have expertise in dealing with Intellectual Property rights and disputes concerning such rights. These People's Courts are available in all major cities in China. Although Hong Kong still regards the decisions of the courts in the United Kingdom as precedent, the new arrangement is still useful in creating a bridge between the two jurisdictions.

    China is the world's leading intellectual property rights infringer. It is estimated that China produces over 80% of the world's counterfeits. Although China's local Intellectual Property Laws comply with its commitments under the World Trade Organisation's Agreement on Trade-Related Measures on Intellectual Property rights (TRIPS), enforcement seems to be the major hurdle. It is therefore significant that judgments on the infringement of intellectual property rights will now be recognised and enforced in Hong Kong as well. This may help to improve the problem that the Chinese Courts have been having in enforcing such judgements.

    Furthermore, the Arrangement on Reciprocal Recognition and Enforcement of Judgements in Civil and Commercial Matters by the Courts of Mainland China and the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned continues to apply. This means that parties can conclude a choice of court agreement in writing. Thus, the new Arrangement does not eliminate the choice of forums that are most favourable and convenient considering the different precedents followed in the two courts.

    Conclusion

    The New Arrangement has many favourable implications for parties in commercial and civil disputes. The New Arrangement regulates the enforcement of intellectual property rights issues and extends this protection to new plant varieties. The New Arrangement, undoubtedly, is much needed legal reform in the area of enforcing intellectual property rights.

     

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    Tue, 09 Jul 2019 16:47:00 GMT
    <![CDATA[Termination for Convenience Clauses]]> The Legality of Termination for Convenience Clauses

    Under the global laws for international contracts and agreements, it is highly significant to identify the clauses which put forth the concept of termination for convenience. In general terms, it may sound that, via this clause, either party can conveniently step out from the agreement, without the liability for justifying their actions. This is when the termination for inconvenience clause comes into play.

    Of course, there are numerous reasons where an entity, who is a party to the contract, terminate the same, for reasons like poor performance, delay, unable to meet specific standards, etc. The doubt remains the same, whether a party who has the right to terminate, will base on what applicable law for termination of the contract.

    Terminating a contractual relationship is a rigid and tough task to come forth. In the event, that the agreement contains express terms for termination, the contract can be terminated by the said clause. The clause for terminating an agreement for convenience creates an empathy that the contractual obligations and relations are coming to a closure where a party is allowed to end the terms without the accountability of a cause for such termination. This is a mechanism put to use when the parties involved want to avoid costly legal scenarios.

    The Termination for Convenience clause is popular in the construction contracts. But it is crucial to take note that these clauses can be unclear and constructed on ambiguous terms. It is the right and duty of the parties to make sure that the clause is clear as well as unambiguous and establishing terms on how the clause is applied and further liability.

    In the UAE, majority of the contracts contain the clause for the right to termination for convenience, generally without a restriction, though a fee may apply for early termination. The party is allowed to terminate the agreement at any given moment. It may be with or without notice or without considering proving that certain breach on the contractual terms has occurred. Bearing in mind, the current industry scenario and the market conditions, there are possibilities as commercial reasons why the contract gets terminated and why the party who receives the notice is feeling distressed.

    • Monde Petroleum SA vs Western Zagros Limited [2016] EWHC 1472 (Comm)

    A contract governed by English laws may quickly dismiss an instinct for claiming the termination under convenience failed to be done in good faith. The concept of good faith is far developed in English Law cases where it is relevant to the prevalence of the right where a contract is terminated for convenience. In the case of Monde Petroleum SA vs Western Zagros Limited [2016] EWHC 1472 (Comm), where it was held that English law would not make an implication for the duty of acting in good faith for terminating the contract when no contractual duty is in existence. So, under English law, it gives the party a right to terminate the contract for convenience in the absence of the requirement of good faith.

    • Atos IT Solutions and Services GMBH vs Sapient Canada Inc., 2018 ONCA 374 (CanLII)

    An Ontario Court of Appeal Judgement where the question of determining the damages when the contract was terminated for convenience. The court held that the termination clause did not expressly provide for the payment of the last milestone to be due only if it was not paid already.

    Termination without proving default can be a tedious job but of significant benefit. To make it operative, the clause has to be drafted clearly with the circumstances for its invocation, the measurement of its compensation, etc. it can cost high for litigation if the contracting parties fail to include what they actually intended and draft the clause appropriately.

    • Centre for Maritime and Industrial Safety Technology Ltd vs Ineos Manufacturing Scotland Ltd [2014] CSOH 5

    In this case, the court got into considering the termination or convenience clause which stated that the services "performed till the date of termination and other substantiated associated direct costs". Finally, the contractor was held to be entitled to payments of all the works up till the date of termination.

    • Basetec Services Pty Ltd vs Leighton Contractors Pty Ltd (No 6) [2016] FCA 1534

    The court in Basetec vs Leighton applied the same approach where it was confirmed that the object and intention of the clause for termination for convenience are to "identify the amounts which may be recovered by the Contractor".

    • Good Faith under UAE law

    Good Faith is differently applied under the UAE law. Under Article 246 of the Civil Code of the UAE, "The contract must be performed by its contents, and a manner consistent with the requirements of good faith."

    Additionally, Article 106 states that there can be no unlawful exercise of the rights, which includes intentionally infringing of other person's rights and violating the rules of Sharia Law and public order. It can be seen that these two Articles if read together, may deter the right to terminate for convenience where there is no good faith.

    Finally, it comes down to the issue of establishing as to what constitutes good faith. Good faith is described as an obligation to act with honesty and in a cooperative manner. In the Monde Petroleum case, the contract was terminated right before the completion of the object of the contract. It was conflicted, whether it constituted good faith. Under English law, it will allow the party to go ahead with the breaking of the contract, but there is a different answer under the UAE Law.

    Further, the difference between the English and UAE law is the extent of the freedom awarded to the parties to negotiate the situation regarding good faith. UAE law offers that the parities have to abide by the terms of the contract under good faith as imposed by Article 246.

    UAE law imposes strict compliance of good faith when terminating the contract. There is uncertainty on unilateral termination of contracts in UAE.

    • Law under UAE Civil Transactions Code

    Termination of contracts can be done via either of the following ways:

  • the parties' agreement;
  • a judgement of the court
  • by law.
  • Article 267 of the Civil Transactions Law in the UAE:

    "If the contract is valid and binding, it shall not be permissible for either of the contracting parties to withdraw, change or terminate the contract save by mutual consent, an order of the court, or under a provision of the law"

    • Drafting the Termination for Convenience clauses

    Clarity on the drafting language of the clause is important when it comes to the damages payable for termination of the contract for convenience. Given the fact that the exercise of the clause does not require a default to be in place, it is only fair that compensation is awarded to the aggrieved party.

    • Limitations on the ability to Terminate for Convenience

    The termination for convenience is one which cannot be exercised in bad faith. There are certain limitations when this clause is existing in a contract. It is implied that the parties who enter in a contract, do so, in good faith and intention of fair dealing.

    To take an example, where a client terminates the contract when the work is 90% complete to avoid paying him. This is bad faith. Also, it is apparent to note that a customer cannot terminate the agreement to terminate before completing the object of the contract.

    Second example would be, terminating the contract to award the remaining work to someone else. This can be an act of bad faith on the part of the party terminating the contract.

    Points to remember when drafting the termination for convenience clause

  • Terminating the contract on the agreement can take place before or after the contract is entered upon. But, when the parties are at dispute and at the path of breaking the contract, it becomes difficult to agree on terms, leave alone the mutual termination of the agreement.
  • An employer can, by notice make it obligatory to the contractor to remedy the default within a substantial period.
  • The similarly worded provisions in the contract do not allow the automatic termination of the agreement. The clause providing for the termination should state that termination shall occur automatically and not court order or further notice is required.
  • Article 271 of the UAE Civil Code specifically provides that the agreement would be terminated without the need for judicial order on non-performance unless it is agreed between the parties.
    • Dubai Court of Cassation Judgment 187 of 1999

    It was held that, to terminate a contract that is binding, the claimant who seeks the termination should not have neglected the obligations on his part under the agreement and the breach by the respondent must be due to the neglect instead of failing to exercise a legal right. This is in pursuance to Article 243 (2) of the Civil Code, where it is stated that each contracting parties should perform what has obliged him to do.

    • Dubai Court of Cassation Judgment 313 of 2007

    For determining the legality of the termination for convenience clause, the courts relied on Article 218 (1) and (2) where it was held that a contract is "non-binding with regard to one or both of the contracting parties, despite the validity and effectiveness thereof, if such party is given the right to cancel it without the consent of the other or without the order of the court, pursuant to Article 218 of the Civil Code." If these Articles are read together, there is a strong possibility that the court may invalidate the termination for convenience clause.

    • Dubai Court of Cassation Judgement 440 of 2016

    It was held that neither of the contracting parties might revoke, rescind or modify the agreement except by mutual consent as mentioned in Article 257 of the Civil Law. Further, it provided that the agreement has to sufficiently satisfy good faith requirements under Article 246 of the Code.

    Conclusion

    Hence, before employing the case of terminating the contract for convenience, the party intending to terminate should check for possible deficiency in the other party's work as assigned under the contract. In case a deficiency is evident, the party must give a notice disclaiming an opportunity to remedy the deficiency for offsetting the repair costs. The party must give a valid and substantial reason for the default because it will be further difficult to prove the basis for the termination in the court. 

     

     

     

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    Sun, 07 Jul 2019 17:46:00 GMT
    <![CDATA[Tax Regulation in the GCC]]> Guide on Tax Regulation in the GCC

    Introduction:

    Gulf co-operation council is the abbreviated form of GCC. It came into force in 1981.   It is the union of all Arab state except Iraq and UAE is one of its member states. Saudi Arabia has head first a proposal to make the GCC into Gulf union for the betterment of its administrative functions. There are six gulf countries Bahrain, Oman, Kuwait, Qatar, Saudi Arabia and UAE are the main GCC countries. The purpose of GCC is to maintain unity among its member countries. The main objectives for the formation of GCC countries are for the common currency, common market and customs union which was set forth by the GCC supreme council. And the other objectives include formulating rules in the field of trade, finance, legislation. scientific progress in the field of agriculture, mining, and encouraging the private sector and bonding with the people.  The economic growth of the GCC countries depends  on its vast petroleum, oil and natural gas resources , but at present situation many countries have found out its own oil and natural resources hence its effect the economic development of Gulf countries as a result of it the gulf countries introduced the lowest rate tax of 5 per cent in order make a stable economic development. A common market system was established for the nice movement of goods and services in the GCC countries, it provides equality for the GCC citizens to work in all fields mainly public and private sector but the disadvantage is some bar in the movement of goods and services.  Coordination of taxation system, accounting and civil legislation is still in progress.

    Tax:

    Tax is a compulsory payment of financial charge which is imposed on individual or entity by the governmental organization in order to develop various public expenditure. Non- payment of tax is punishable by the law. The State can impose civil penalties or criminal penalties for the non- payment of tax fully.  Taxes are of two types Direct tax and Indirect tax.

    Tax in GCC:

    It was in the year of 2015 the oil and petroleum price of Gulf countries came to its much lowest price. So, in order to meet future needs, the GCC countries representative agreed to sing the VAT treaty. It was in the year 2016 they entered into this agreement. it was not the oil and gas which made the economic growth of the GCC countries disappeared completely, the true fact is that many countries started using non- renewable resources.  For example, the developed countries like the United States they started producing their own oil and petroleum hence it becomes a tough competition for the Gulf countries because they were the sole distributors of oil and gas in the whole world. By keeping it in mind the gulf countries planned for the future and contributed money for the future growth of their nation. But it was in the year 2015 they faced a budget deficit. So, to overcome this deficit they realized the need for a new source of income and they thought about tax. Hence in the year 2016, each representative of the GCC countries signed the VAT agreement.  The VAT is value added tax by entering into this agreement the GCC countries started imposing VAT at a rate of 5 per cent on some goods and services.  Health and education are exempted from the VAT. Now people in the GCC need to pay a VAT of 5 % per cent on food, cars and other entertainments.

    In Saudi Arabia and in UAE the VAT system has started smoothly these two countries had only met the deadline of VAT treaty in the year 2018 and other member countries are still on the run. Bahrain is the only GCC country who had not introduced the VAT.  Even though the implementation of VAT has been done smoothly in two countries but in the business, many problems are arising as they are confused that how to apply the VAT system in goods and services mainly in the Free Trade Zone area of these countries.

    Following are the types of taxes in GCC: 

    Corporate Tax: It is imposed on the profit of the entities. UAE corporate tax is levied on oil companies and foreign banks only. As per the GCC rules, residents are not subject to corporate or withholding tax.

    Withholding Tax: This tax is imposed on any income. It is imposed when the income is transfer to another country. Withholding tax applies to corporate income and the income of private persons.

    Zakat: Zakat is an Islamic tax, which is made compulsory to every abled individual to serve the needy ones in Islam.

    VAT: Value Added Tax is a tax imposed on the supply of goods and services. The GCC countries have agreed to implement VAT at a rate of five per cent. VAT provides UAE with a new source of income and it also provides a high quality of public service. The GCC VAT Agreement lays down a broad principle that needs to be followed by all the GCC countries in their VAT laws providing flexibility in certain matters.  Every GCC country will be having its own VAT legislation. Value added tax came into force in UAE on the 1st of January 2018. The Implication of VAT on Individuals: VAT general consumption tax is mainly levied on the transaction of goods and services. As a result, the cost of living of people will increase slightly, but this will depend on an individual's lifestyle.

    The Implication of VAT on business: Businesses will be responsible for all their business transactions and auditing. Mainly documenting their business income, costs and associated VAT charges.  All registered businesses and traders will levy VAT from all of their customers and also incur it from the goods and services which they buy from the supplying agents.

    Excise Tax: it is an indirect tax imposed on goods which are harmful to human life and property and also to the environment at large. for preventing the use of these harmful commodities, the GCC countries agreed to enact the excise tax by signing the excise tax agreement.

    Customs Duty: GCC countries have an amalgamation of customs duty rules. whenever any goods are transported into the GCC countries for the first time they impose customs duty on the goods. The customs duty of imported goods is at the rate of 5 per cent of the invoice value. Some goods may be imposed with the highest rate and some will be totally exempted.

    Stamp Duty: It is levied on documents such as legal documents. it is imposed on the transfer or registration of real estate in Oman and also in Bahrain. In the UAE whenever ownership of land or shares of a company is transferred a registration fee is levied on both.

    Sectors in VAT Implementation

    • Real estate and construction

    • Tourism

    • Oil and gas

    Real estate and construction industry are a huge importance for the GCC countries because it provides many benefits like supporting a large number of livelihoods, providing residential places to live which is one source of income for the GCC countries and it also develops a region. By introducing the VAT by GCC countries it does not create any problem to the real estate and the construction fields future project.  It's a positive approach by the government to make the real estate and construction field to contribute to the welfare of the state. Because a large sum of money is coming from this field. Supply of real estate is taxable at a standard rate in G C C.

     The Tourism industry contributes a huge sum to the Gulf economy and it provides many opportunities for individual tour operators in the G C C.  But the main challenge which they face is how to implement VAT. This industry is an amalgamation of various sectors which includes airlines, tour operators, travel agents, accommodation and so on, so by the introduction of VAT in this industry will affect each by one or the other way.

    The oil sector plays a very important role in the Gulf countries. Many multinational oil and gas companies are in the countries. Business in the sector includes international, national, and other oil companies.  VAT implementation will create a huge impact on this industry. There is complexity in the field of oil and gas industry and by the introduction of VAT in the G C C need to be given consideration in businesses.  Each and every industry in the Gulf countries is one way or the other is affected by the implementation of VAT and the more affected field is the tourism industry because it comprises various sections of employment.

     

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    Thu, 27 Jun 2019 09:41:00 GMT
    <![CDATA[The Insanity Plea]]> The Insanity Plea

    Introduction

    Insanity is a highly interesting topic when it comes to the law, and at the same time, is a topic which demands the utmost thought and care. Mental health, in general, is a topic that is consistently undergoing further research due to how it impacts people's lives. The concept of the insanity plea is one which has existed for some time now, though it most commonly comes up and is used in the United States.

    While the use of the plea is not too common in the real world, it is often a well-discussed topic among lawmakers and the ordinary layman. It has entered into pop culture and receives mention in TV shows, books and movies with one of the most famous and popular being 'One Flew over the Cuckoo's Nest'. The premise of the film is far more substantial than merely the concept of the insanity plea, though it is a crucial moment.

    The original concept of the insanity plea only ever arises in criminal cases, and the purpose of the defence is to ensure the protection and fair treatment of those who are mentally unstable and not in a position to be held liable for their actions. Punishing one who falls under the category of insane is ethically wrong, and the laws that are in place seek to deliver civil justice.

    In this article, the ideas and reasons, the laws and regulations and impacts of the insanity plea shall all receive discussion from the perspective of the nation that most often sees its use and has the most experience with it - the United States of America.

    The History of the Insanity Plea

    Only a few hundred years ago, insanity was generally not an excuse that could be used to defend one's self in the courts. People were punished severely and solely based on crimes committed. Of course, many things have changed and received alterations since then. There is now a far greater reliance on evidence, and the methods of obtaining evidence are far more reliable. Our scientific and medical understanding has also significantly improved since then, though individuals have existed through time who have sought to introduce. In ancient Rome and Greece, such concepts did appear, though there was no consistent way to identify when an individual was truthful, and further identifying and diagnosing the specific mental issue.

    Many centuries later than this, examples such as Edward II of England, who reigned in the early 14th century exist. Edward II specified that a person might fall under the category of insane if they should possess the mental capacity of a 'wild beast'; this is very different from the attitude in the modern world where many complex factors require consideration, and a person's wellbeing and health is an area that receives more considerable thought.

    More specific to the US, the Eighth Amendment of the Constitution prevents the use of excessive bail, fines and cruel and unusual punishments. The critical aspect of the Eighth Amendment to keep in mind here is that of cruel or unusual punishments. At the time, this was primarily intended to ensure that the penalties were not excessive when compared to the crime, and it also outlawed specific methods used in the past in executions. For example, drawing and quartering, disembowelling and burning at the stake were entirely forbidden and considered inhuman. Specific punishments were also prohibited depending on the crime such as painful labour and revocation of citizenship.

    It is important to note that insanity received no explicit mention within the Eighth Amendment. With a Common Law system in place in the US, it should be remembered and borne in mind that cases and their judgements carry significant weight proceeding into the future and they often almost carry as much importance as the legislation themselves. In many cases, aspects of the laws are expanded upon and clarified, and case judgements bind courts of lower influence such as the courts of first instance. Higher courts though are not bound by the decisions of courts beneath them, and so Supreme Court decisions are practically law unless a future Supreme Court decision overrules it.

    This particular topic, the insanity plea, and the Eighth Amendment protection for those deemed insane primarily came about as a result of the case of Ford v Wainwright, 477 US 399 (1986). While insanity was generally a valid excuse to avoid punishment under common law, the situation, as mentioned earlier solidified its position in the US. In this case, Alvin Bernard Ford was convicted of murder in the year of 1974. He was sentenced to death and was left on hold on death row for many years. During his time on death row, he began to experience mental health issues, and by 1982, it had diminished to such a point that he had what was consequently identified as paranoid schizophrenia.

    He was looked at by multiple psychiatrists and specialists who determined that there were undoubtedly severe issues at play. Mr Ford proceeded to sue Secretary of the Florida Department of Corrections, and he won the case. The judges had a few points which they used to demonstrate the reason for their judgement. One of the reasons provided shows the earlier point concerning societal progression. The modern developed world is a more humane and considerate place in general than ever before, and not only are the punishments less brutal, but the people under judgement are also under a higher and more informed level of scrutiny - as such, punishing an insane person would fall under the category of immoral and unethical.

    Further to this, the court agreed that the purpose of punishments in criminal cases is to prevent and limit others from performing the same actions in the future. Under this definition, criminal law, at least in part, exists as a deterrent to potential criminals and the punishments themselves are used as an example to others. In this case, then, sentencing an insane individual to death would not help to further this cause as a person with mental disabilities might not possess the understanding of the situation to learn from previous cases or understand the consequences of their actions.

    This case was not the first in which insanity was successfully used as an excuse for crimes, though it is a crucial one as it led to the insanity plea falling within the umbrella of the Eighth Amendment, thus causing it to be a fundamental right.

    The US now has a set system in place which allows them to determine whether a person is genuinely of appropriate mental instability to warrant their plea. There are a few tests that can and are to be conducted, and there is also a more solid procedure in place to follow carefully and consistently, and these will receive discussion now.

    The Modern Day Insanity Plea

    In the US Federal Courts, every individual can plead insanity as a defence for their crimes except in individual states including Idaho, Montana, Kansas and Utah. However, even in these states, if an individual is found to be insane, they cannot receive the same punishments as mentally healthy people; this may sound a little confusing, but it merely exists to ensure ethical and fair judgements.

    Firstly, there is the M'Naghten Test. This test arose based on the 1843 Scottish case of Daniel M'Naghten in which he had murdered the secretary of the Prime Minister. This act was performed in an attempt to assassinate the Prime Minister who the defendant believed to be responsible for certain negative occurrences in their life which were in actuality, utterly unrelated to the Prime Minister. Nine witnesses arose and claimed that M'Naghten was insane and should, therefore, receive fair treatment with this fact considered, and the jury acquitted him on the grounds of insanity. From here it was decided by the House of Lords that a court should question the defendant in an attempt to discover if either they did not know the action they performed was wrong or did not understand the nature of the act. If the questioning resulted in either of these two situations being met, the defendant could be found not guilty based on insanity.

    Another of the critical tests is the Durham/New Hampshire Test. The Test arose through the case of Durham v United States case of 1954; this is a far broader test than the previous one and considers a 'but for' situation. The court is required to find out whether the action performed occurred as a result of the mental illness and but for that illness, it would not have taken place. In a way, this test is far less lenient than the previous one as a connection and causation must be drawn between the act and the mental illness.

    Finally, there is the Model Penal Code Act; this was initially introduced after the previous two mentioned cases and was, in a way, a response to both. It saw the Durham/New Hampshire Test as being too lenient and was seeking to update the older M'Naghten Test. It acted as a compromise between these tests and fixed some of their shortcomings.

    While the tests are a critical part of the system judging insanity in the US, another vital area to keep in mind revolves around the burden of proof. There was a time, before the introduction of the Insanity Defence Reform Act of 1984, where the burden of proof lay upon the prosecutors. If a defendant pleaded insanity, the prosecutors would have to prove to the jury and court that they were not so. However, issues may arise alongside this, such as the fact that it is easier to prove insanity through psychological testing rather than disprove it through the same.

    Another fact to consider is that in a criminal case, a crime has taken place and a court is seeking justice. They have the individual who committed the crime present and accepting of the fact that they performed the act. With the severe nature of the matter at hand, it would require additional time and effort from the prosecutors to disprove the insanity of the person.

    Finally, consider also that it is the defendants who are using insanity as their key defence. They are the party who brings forward the claim, and so it would make logical sense that the burden should lay with them to prove it is, in fact, present and crucial to the matter at hand.

    Conclusion

    The insanity plea requires significant consideration, and it usually receives this appropriately in the modern world. In a way, it shows just how significantly we have progressed as a civilisation compared to where we not only were but also compared to the rest of nature. Our scientific and medical understanding of the mind is primitive in comparison to the rest of the body; we know that much. The mind can be complicated, and when issues arise involving it, the repercussions and outcomes can vary substantially. The general agreement is that people who suffer from such problems require help and assistance rather than punishment.

    In the US, punishment to the mentally ill for criminal activities, if the illness is proven to be of high enough impact on their mind and actions, is deemed as cruel. No good arises through sentences that severely punish, as punishments look to set examples to prevent repeats by the same person or similar people in the future. However, if one does not even have full control of their mind and proper understanding of their actions and the significance in the grand scheme of things, there is no use in severe punishments such as the death penalty.

    All in all, looking back through history, the position we are currently in does indeed seem to find justice under all cases. The system is not perfect and likely never can be, though almost everyone can agree that we are on the correct and appropriate path.

    ]]>
    Tue, 18 Jun 2019 14:24:00 GMT
    <![CDATA[artificial intelligence machines patented]]> Can artificial intelligence machines be patented or sued?

    Introduction

    Hollywood movies introduced the concept of artificial intelligence to the world. Following the portrayal of artificial intelligence, many have speculated that robots will one day take over the world and subdue humans as their subjects. For this to happen, artificial intelligence machines would have to attain full human capacities and surpass them. The question of whether artificial intelligence machines can eligible for a patent or can be subject of legal proceedings is a step in understanding whether artificial intelligence machines are progressively taking over the world.  

    Overview: Artificial intelligence

    Generally, artificial intelligence is the ability of machines or software to process information, make decisions and take actions to achieve an objective. More succinctly artificial intelligence is the development of computer systems able to perform tasks usually requiring human knowledge or programs that mimic how humans think. The core traits of such computer programs are visual perception or machine vision, speech recognition, decision making, understanding natural languages, learning, reasoning, planning, ability to manipulate, move objects and self-correction. Weak artificial intelligence and strong artificial intelligence are the two distinct forms of artificial intelligence. Weak artificial intelligence is that which is designed to perform a specific task. Strong artificial intelligence is that which has general human cognitive abilities.

    There are four types of artificial intelligence machines. The first type is reactive machines, for example, programs that can play chess. The second type is called limited memory, and it entails computers systems that can use memories to make a better future decision.  Self-driving cars use this kind of computer system among others. The third type of artificial intelligence is called the theory of mind, and this type of computer system respects the desires, beliefs and intentions that impact the decisions of others which affect their decision making.

    There are several examples of artificial intelligence technology. Automation is a system or process that functions automatically. Machine learning is a process that entails enabling a computer despite never being programmed. Machine vision allows computers to see in a way that is comparable to human eyesight.  Natural language processing involves a computer hearing and human process language through a program. Robotics refers to designing and manufacturing robots too complicated for humans. 

    Artificial intelligence can be used in healthcare to help in diagnosis, storing and examining patient data, assisting patients in scheduling appointments and following up meetings as well as helping them with the billing process. In business, artificial intelligence can be used to perform repetitive tasks that can be done by humans. Artificial intelligence can also be used in this sector to assist customers.  In education, grading papers and tutoring students are some of the uses of artificial intelligence. In finance, artificial intelligence provides financial advice and collect personal data. In the legal sector, artificial intelligence can be used to scan through high volumes of documentation to find relevant information. Lastly, in the industrial and manufacturing sector, weak artificial intelligence machines are used along the production line.  

    One cannot exaggerate the importance of artificial intelligence. Artificial intelligence eliminates human weakness and propensity to fatigue by performing high-volume and tedious tasks.  Artificial intelligence also adds intelligence to existing products thereby enhancing their functionality and usefulness. Artificial intelligence can analyse more data and more in-depth data. It is more accurate and gets the most out of the data. Artificial intelligence is highly adaptive and can react to input information changes and as goals and requirements evolve.

    Can Artificial intelligence machines be sued?

    Whether one can institute legal proceedings against artificial intelligence machines is dependent on whether the machined can be said to have a legal personality.  A legal person is an entity that has legally recognised rights and responsibilities.  Artificial intelligence machines do not inherently have a legal personality. Consistent with this view the 1984 case of United States v Athlone Indus., Inc.,  the court stated that robots could not be sued. There is a way to confer legal personality to an artificial intelligence machine. In the United States of America, an owner of a limited liability company in the United States can hand over his or her rights of ownership to a machine.  Legal personality and the ability to own assets go hand in hand. The artificial intelligence machine can then be said to hold a legal personality.

    Currently, an artificial intelligence machine cannot be sued because the law refers to it either as a product or a service. If it is a product, then the manufacturer can be sued for breach of warranty based in a contract, or a product liability claim can be instituted, holding the manufacturer strictly liable for the defect in the artificial intelligence machine.

    Case law on whether machines can be sued is limited because these artificial intelligence machines have been regarded as either products or services. For instance, In 2015 in Switzerland a robot was confiscated by the police because it was used to make illegal purchases on the dark web. It is important to note, however, that the robot was not charged with a crime.

    Existing intellectual property laws does not recognise the artificial intelligence machine's right to invent a new piece of technology that can be patented.

    Both the United Kingdom and the United States have repeatedly declined to impose liability on artificial intelligence machines. The rationale for this is that liability for a crime arises where the accused had the intention to commit the crime. The concept of intention includes a person who instructed a person who lacks mental capacity or an animal to commit a crime. These principles can also be applied in the case of artificial intelligence machines. The creator of an artificial intelligence machine can also be held liable if the typical functions of the machine could be used to perform a criminal act. If the programmer of the artificial intelligence machine was aware that this outcome was a probable consequence of its use, then he or she will be held liable. The inventor of the artificial intelligence machine can also be held accountable if the artificial intelligence system pursues a course of action that culminates in a criminal act.

    Patenting

    To understand whether artificial intelligence machines can be patented, one must realise what patenting entails. A patent is a version of the intellectual property. The World Intellectual Property Organisation (WIPO) defines intellectual property as a creation of the mind.  The owner of an invention is given patent rights which means that they are the only individual allowed to make, use, sell and import an invention for a period of usually 20 years. 

    Whether artificial intelligence machines can be patented is a multifaceted issue.  Existing law is insufficient and not evolving fast enough for the circumstances. Intellectual Property laws were drafted before the introduction of artificial intelligence and artificial intelligence machines.  According to these laws, only a human can be an author and therefore, just a human can qualify the rights and benefits acquired through a patent.

    Artificial intelligence machines are the result of a human being encoding or programming them. Some might argue that such programming is comparable to a literary work. If this argument were to be accepted, artificial intelligence is a work that creates other works. For the work of an artificial intelligence system to be patented, the machine would have to have an independent entity.

    In Europe, artificial intelligence can be patented subject to specific guidelines. The European Patent Office (EPO)  has published its guidelines for examination. The guidelines prescribe how the process of patenting should be carried out. These guidelines show how patent applications directed towards inventions for artificial intelligence should be handled. The EPO guidelines state software and abstract mathematical models are not patentable, but if the idea is implemented, it then becomes eligible for patenting.

    The Gulf Cooperation Council has stated that algorithms and code cannot be patented. Arguably the same rule applies to artificial intelligence machines According to the Copyright Designs and Patents Act of 1988 in the United Kingdom, the author of any literary, dramatic, musical or artistic work created by a computer is the person that made the arrangements necessary for the creation of the work undertaken. Artificial intelligence cannot be legally protected unless some human intervention takes place. The founder, or owner or the head of the company who owns the artificial intelligence will be named the inventor of the inventor.

    In the United States of America, the court in the 2015 case of Hewlett Packard Co. v. ServiceNow, Inc., No. decided that abstract ideas of future artificial intelligence were not eligible for a patent. The court remarked that one might be able to patent a specific implementation of an abstract idea involving a patent. However, the general tone of the judgment indicated that an artificial intelligence idea had to come into being before it could be patented.

    Regarding whether an invention created by the artificially intelligent machine can be patented, the United States Court in the case of New Idea Farm. Equip - Corp. v. Sperry Corp. stated that only people conceive ideas and not machines. The Copyright Office reinforced this decision by saying that it will decline to register works produced by a machine or mechanical process if there has been no creative input or intervention from a human.  

    Recommendations

    It is submitted that the legal framework that is currently in place regarding artificial intelligence machines is sufficient for the current state of affairs.  Although artificial intelligence can perform single specialised tasks more effectively and efficiently than a human ever could, there are certain limitations to the computer systems. While humans can perform many tasks; artificial intelligence machines can only perform one clearly defined function. A human can play a game of solitaire and then drive a car afterwards, whereas an artificial intelligence machine in the form of a self-driving car, is unable to do so.  Until artificial intelligence machines can perform multiple tasks, or even multitask as humans do, they should not be granted personhood under the law.

    There should however be extensive regulation of artificial intelligence machines. Driving requires making decisions, and sometimes those decisions are ethical. A computer program, when faced with an imminent car accident may decide to minimise damage to the car; however, this may result in more harm to the humans involved. A computer program is unable to exercise empathy when making a decision. For instance, in 2015 a man was crushed by an automated robot along the Volkswagen assembly line. It is assumed that a robot cannot form the necessary intention to commit the crime of murder and therefore the robot was not charged. If there were regulations that limited the interaction between humans and robots, perhaps such accidents could be avoided.  

    The current legal system, with its focus on humans, is unable to deal with the challenges related to the use of artificial intelligence machines. Where a human can argue the defences of intoxication or insanity, an artificial intelligence machine must be able to plead malfunction as a defence to escape liability.  New legislation and legal precedent to interpret such law are required. Until then artificial intelligence machines cannot be sued, and cannot be patented  

    Conclusion 

    Strong artificial intelligence is progressively becoming more and more common. Potentially, this may mandate a change in the legal standing of artificial intelligence machines. The legal definitions of "legal personality" and creations of the mind would have to be altered to accommodate artificial intelligence machines. Currently, artificial machines are not legal persons, therefore cannot be sued and are ineligible to obtain a patent

     

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    Tue, 18 Jun 2019 12:59:00 GMT
    <![CDATA[Debt Recovery in UAE]]> Debt Recovery in UAE

    "If you would know the value of money try to borrow some."- Benjamin Franklin

    What is debt?

    From the ancient times of the barter system, traces of debts can be found. This was when people exchanged goods and serviced for other goods and services. But now there comes an age when there are no goods or services to be exchanged. In a time like this, what are the measures that can be adopted in case a party fails to provide the promised services or goods? This creates a need to recover a debt. There were various ways of dealing with debts in the ancient age; from death sentence to slavery, to the right to take the debtor to court as per the governing laws.

    Over the passage of time, the legal process now has become very regulated. Most of the claims with regards to debt recovery are settled through courts. The Courts in the UAE have developed their system to deal with the various types of money claims.

    Do I need to go to court to recover my money?

    It is always a very good option to utilize the available sources and opportunities to recover once money before approaching the court of law. Making use of sources such as issuing a legal notice, making follow-up calls and trying to contact the debtor to repay are always the preferred options and have given good results. However, it shall always be kept in mind that the financial condition of the debtor, as well as the age of the debt, shall play a crucial role herein.

    In situation wherein the creditor is not aware of the contact details of the debtor, the creditors can make use of the services of a private investigation agency to verify as to if the debtor is still active and if there are chances for recovery.

    "Compromise is the best and cheapest lawyer" – Robert Louis Stevenson

    If it is a situation wherein the debtor admits to the debt that is owed but also confesses his financial difficulty in paying the creditor, then the next and best step would be to offer the debtor a payment plan to clear the debt. Herein, the debtor shall commit to pay the outstanding over an agreed period of time in the form of set installments. It is extremely important to attempt to reach a settlement with the debtor before knocking the doors of court, as the judges are likely to note the fact that the creditor did try to settle the matter in an amicable way, before taking the precious time of the court.

    However if the debtor fails to honor the payment plan and is irresponsible with his payments, then in that case serving a final demand notice before going to court shall be the only option left. The said demand notice shall be served to the debtor via email and registered mail. The demand notice should clearly mention a deadline before which the outstanding due should be paid, failing which there shall be legal proceedings initiated to recover the debt. If the debtor does not respond to the final request to clear the outstanding, then in that case there shall be no other option but to approach the court for justice.  

    The cheque you signed for a bright future, might be the reason for its darkness!

    Article 401 of the Penal Code of the UAE states that "A punishment of confinement or a fine shall be inflicted upon any person who, in bad faith draws a cheque without no existing or withdrawal provision, or after issuing the cheque, withdraws all or part of the fund so the balance becomes insufficient to settle the amount of the cheque, any person who endorses or delivers to another cheque payable to the bearer, whilst being aware that there are no existing funds covering its value, or it cannot be drawn, shall be liable to the same punishment."

    The above is the legal description of the criminal consequences of a bounced cheque in the UAE. The dishonor of a cheque creates the rights of the creditor to initiate to file a criminal case against the defaulter. It can, in fact, be said that the criminal liabilities shall automatically and immediately be triggered as soon as the debtor's account shall reflect insufficient funds to honor the cheque. 

    In addition to criminal proceedings taken against the defaulter wherein the defaulter shall be fined or ordered to confinement, the creditor can rely upon Article 246 and Article 710 of the UAE Federal Law No. 5 of 1985 of the Civil Code and file a civil case against the defaulter.

    Article 246

     "contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith."

    Article 710

    "A loan is the granting of ownership of property or fungible things to another with the condition that the other should return it like in amount, kind and description to the lender upon the expiry of the period of the loan."

    Both Article 246 and Article 710 of the Civil Code establish the civil liability of the defaulter to fulfill his/her obligation towards the contract. Upon obtaining a judgment from the civil court, the creditor shall have to file for an order for execution, post which the judge shall order the defaulter to honor the civil court's judgment or in the alternative face imprisonment till the period satisfactory to the court.

    What can I do as a creditor?

    As a creditor, one shall obtain all the correspondences from the bank that evidence the fact with regards to the defaulter having insufficient funds in his account at the time of cashing the bounced cheque. Post receiving the relevant correspondences and evidence for the cheque dishonor, the creditor should approach the police station to file a criminal case against the defaulter. Upon completion of the police investigation, the police shall refer the matter to the public prosecutor's office.

    Note: if six months have passed from the date of the cheque bounce, a police complaint cannot be filed.  Prosecution and its role in criminal proceedings.

    Once the police transfer the file to the public prosecutor's office, the public prosecutor shall investigate the said offence of cheque bounce. He shall examine the details of the bounced cheques such as its reason to be issued as well as the intent behind the same. At this stage, the public prosecutor usually examines and takes the statements of both the parties and post considering all circumstances, decides to grant or reject bail. In case the public prosecutor decides to grant bail to the defaulter, then, in that case, the defaulter shall either have to pay a bail "Kafala" which shall either be the amount equivalent to the cheque amount or else depositing his passport or that of another guarantor. In case, the public prosecutor decides to reject the bail; the prosecutor may order the defaulter towards imprisonment until the court chooses to date to hear the case. 

    Probable punishments a defaulter could face.

    Post the case being referred to the criminal court, the court shall decide a date to hear the case and shall examine the report of the public prosecutor along with each parties' allegations and defense. Upon examining all the circumstances and evidence present before the court, the court may order the defaulter to towards penalty and/or serve time in prison. The punishment granted to the defaulter may vary due to the circumstances of the case such as the reasons for the transaction along with intention and motive while drawing the cheque. In common situations, the confinement sentence in the majority of the situations shall range between one to three months and could reach till three years and/or fine which usually varies from Dhs 1,000 to Dhs 30,000 depending upon the amount of the cheque.

    Execution of Judgments

    A judgement cannot be executed unless the same is final and certified by the court as being fit for execution. The process of execution takes place in a separate department of the courts. The execution courts have specially assigned judges who are assisted by an execution bailiff and administrative staff to pass orders for execution. The execution judge is responsible for the entire execution process as well as the objections thereto. An order from the Court of First Instance can only be enforced wherein both the parties fail to file an appeal within 30 days from the date of judgment. If either of the parties files an appeal within the permitted time frame, the order is not considered to be final and cannot be enforced.

    What are the ways to enforce a local judgement?

    A local judgement can be enforced in various ways such as:-

    • Attaching or selling the property of the debtor.
    • Attachment of shares, stocks and bonds.
    • Attachment and sell real estate
    • Imprisonment of the debtor is a defaulter.

    In case either of the parties prefers an appeal to the judgment with 30 days from the date of order, then the case is referred to the court of appeals. In the court of appeal, the parties are allowed to introduce additional witnesses. The judgment of the court of appeal is final unless the parties wish to file a further appeal before the court of cassation within 30 days. The decision of the court of cassation is final, and hence the parties should be careful in assessing the case before choosing to file an appeal before the court of cassation.

    A crucial piece of advice. "A small loan makes a debtor; a great one, an enemy."

    Debt is a liability, and hence, it is suggested to consult a legal advisor before committing.  In case the debtor has left the country, he can come back post settling the dues and cancellation of all warrants against him. 

     

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    Tue, 18 Jun 2019 11:53:00 GMT
    <![CDATA[Capital Gains Tax UK Real Estate ]]> Non-Resident Capital Gains Tax on United Kingdom Real Estate:

    A New Regime

    Introduction

    The legislation encompassing the new regime for taxing non-residents' gains on the United Kingdom (UK) commercial real estate came into effect on 6th April 2019. Her Majesty's Revenue and Customs (HMRC) has additionally published draft guidance on this recently introduced regime. This article briefly summarizes the new rules.

    What is Capital Gains Tax?

    Capital Gains Tax (CGT) is such tax which is due as a result of financial gain, which is often referred to as profit which is received once an asset is disposed or sold off. When the sale value is subtracted from the original purchase value, the remainder is the total gain.

    For more clarity, if you are selling an asset, the sale value will generally be the sale price of that asset, or in certain cases, the current market value which the asset could be reasonably projected to sell for in an open market. The market value is used in instances where a property is given away, sold at subsidized cost or when the property is passed to a connected person, like a family member. Additionally, market value is used while calculating the original cost of the property in instances where such property was inherited or was owned prior to 31st March 1982. Costs of improvements made to such property during ownership, excluding maintenance and decorations, may be deducted.

    Upon the calculation of total gain, one may apply for any allowances and/or tax relief before calculating the CGT using appropriate rate.

    Background

    Historically, United Kingdom Capital Gains Tax had a territorial limit, and with a few recent exceptions (relevant to residential property) non-United Kingdom residents have remained outside the scope of UK CGT on their investments. Consequently, the UK made an attractive jurisdiction for inward investment, giving foreign investors an incentive to choose the UK over other jurisdictions that have long taxed foreigners on their gains. A great degree of flexibility was brought due to CGT's territorial limit in creating tax neutral fund structures and co-investment. The absence of Capital Gains Tax allowed investors with such exemptions which include charities, sovereign wealth funds and pension funds to co-invest in the real estate market along with those without such exemptions without tax leakage, and it is this flexibility which was vital to facilitating joint ventures between those with cash-rich institutions and management expertise.

    Basic Rules

    The non-UK residents are subject to tax on all gains realized on their assets in the UK real estate with effect from 6th April 2019. The new regime taxes both indirect and direct disposal of commercial as well as residential real estate by non-UK residents. The sale of interests in "property rich" vehicles are indirect disposals.

    A vehicle is considered property rich when it derives a minimum of 75 per cent of its value from real estate in the UK. Those investors who holder less than 25 per cent of the vehicle, in limited circumstances, will be considered outside the purview of the charge. Interests held with related parties are aggregated, and the above threshold of 25 per cent does not apply in cases where the vehicle is a type fund including real estate investment trusts. However, the 25 per cent threshold would apply to such investors who are marketed on the bases that not exceeding 40 per cent of their total investments are projected to be in real estate in the UK. This safeguards that investors with small stakes who were not marketed as real estate funds in the UK, but are property rich at the time when the investor disposes of such interests, will not be subject to CGT on their gain.

    For commercial properties, an option of rebasing was available till the 5th of April 2019, which meant that investors would only be subject to CGT on the gains that arise from the 6th of April 2019 onwards.

    Trading Exemption, Qualifying Institutional Investors and Substantial Shareholdings Exemption

    There is a trading exemption in the new rules which apply to the sale of companies with heavy trades in real estate. The above exemption is specifically valuable to private equity funds investing in restaurants, retail and hotel chains. The disposal of such company that some of its land used for non-trading purposes may benefit from this exemption on a condition that such company's non-trading land accounts for less than 10 per cent of the value of its total property.

    The already existing SSE, short of 'substantial shareholdings exemption', which is available for trading companies, continues to be available for them. It can be more plentiful on the basis that activities that non-trading in nature uses 20 per cent threshold to determine if the trading requirement is met or not.

    Where a property rich company is owned by qualifying institutional investors (sovereign wealth funds, charities and pension funds) with an appropriate proportion of 80 per cent, for SSE purposes, the trading requirement is dropped.

    The essential benefit of this trading exemption is its availability to non-corporate shareholders like unit trusts and individuals, which is unlike substantial shareholdings exemption. Where the trading exemption or the SSE is claimed on property rich company's sale, the target does not benefit from the similar rebasing of its real estate assets as entities sold by funds under the new regime.

    Double Tax Treaties

    A non-resident investor can only be taxed by the UK if the terms of a double tax treaty between the United Kingdom and jurisdiction of a non-residents permits it. Amongst the double tax treaties that the UK is a party to, most of them allow the UK to tax non-residents on disposals of vehicles that are UK property rich as well as the direct disposal of real estate in the UK.

    The Luxembourg/UK treat is an exemption to the above. This treaty prevents the UK from taxing on gains which are disposals by Luxembourg residents of interests in property-rich vehicles in the UK.  Several joint ventures and real estate funds use Luxembourg vehicles, and this protection under the treaty will effectually preserve the current capital gains tax treatment of such vehicles.

    The process of renegotiation by the UK concerning this provision in the Luxembourg Treaty is on, so it is fair to presume that such protection may not last long. But it is also important to note that renegotiating double tax treaties can take a lot of years. The new regime includes rules that prevent the establishment of new structures in Luxembourg to take advantage of the UK/Luxembourg Treaty protection from capital gains tax.

    Application of Funds

    When the new regime was announced, one of the main concern that arose was regarding the treatment of funds including other collective investment vehicles which commonly use non-UK holding vehicles for their investments in real estate. The pension funds in the UK and the other institutional investors hold a huge proportion of the real estate investments vide these structures, and additionally, without special rules these vehicles would be subject to tax, resulting in the investors suffering tax at the fund level, where they would not if they held these assets directly. They would have also faced from their sale prices being discounted by the buyers for "latent" gains in the structure. Also, funds with master holding vehicle could have been liable to multiple charges on a single gain.

    This issue has been largely addressed in the engagement between the industry and HMRC. Joint venture vehicles and funds can enter into elections, which will have the effect of shifting gains in the holding structure up to the investor's level. This would allow pension funds along with other exempt entities to benefit from such status of exemption, and receive their profit free of tax.

    It is important for these elections to ensure that tax leakage is prevented at the fund level and that exempt investors continue to be attracted to investing in real estate in the UK via joint ventures and funds without facing additional tax that they would as against their direct investments. The downside of such funds electing is that they will subject to more reporting obligations. The introduction of new rules is being considered by the government that would allow for returns to be filed for funds as well as pay taxes on behalf of their investors, which would indubitably alleviate this. However, any of these rules look unlikely to be introduced for a while. Blocked vehicles could be used in the meanwhile to shift the burden of compliance from investors to the fund, in cases where investors are not willing to file UK returns.

    The Transparency Election

    A collective investment vehicle that is transparent for income tax can elect to be so for CGT purposes as well. Where such an election is made, it will be considered as if the investor held the property directly or technically in partnership with another investor(s). When the property is sold, it is treated underlying property being sold by the investor.

    For clarity, it means that investors that are exempt, would not be taxed on disposals by the vehicle. Additionally, the taxable investor is subject to tax only once. Since the vehicle is transparent in nature, there is no latent gain in the vehicle due to which the buyer may discount the price. In light of the above advantages, it is likely that the investors will opt for transparency.

    It is pertinent to note that this election is irrevocable and it must be made within a year of such vehicle acquiring United Kingdom property. For transparency elections, the consent of all unitholders is required.

    The Exemption Election

    Joint ventures and real estate funds with non-UK vehicles that meet certain conditions may elect to be exempt from capital gains tax. The rules are complicated. In broad terms, a fund must either be non-close and have less than 25 per cent protected investors, or it must meet an extensively marketed test. Structures that are controlled by five or less than five participants are closed, though certain qualifying investors such as real estate investments trust, sovereign wealth funds, pension funds to name a new, are disregarded for these purposes. Several joint ventures where such investors are involved should be able to profit from this exemption election even though they have not been marketed.

    The fund vehicle in his entirety is tax exempt when this election is made. Additionally, all of its subsidiary vehicles will be exempt from tax as well.  Gains realized by joint ventures that hold a minimum of 40 per cent in the exempt fund will also profit from the proportionate exemption. Essentially, these exemptions apply to both non-Uk and UK subsidiaries. Real estate assets of the property holding vehicle are rebased when such vehicle leaves an exempt fund. This ensures that a buyer does not assume latent gains which result in price discounting.

    These funds must provide up to date and correct information related to the fund disposals and investors for each accounting year if they wish for such exemption to apply. HMRC realizes that certain fund managers would not hold relevant information that is required under the new rules, and in some cases, will not be permitted by their fund constitution to reveal details of their investors. The provisions may cause problems for groups with minority investors, and restructuring would be required in such cases, as to enable the vehicles to profit from the exemption.

    Conclusion

    The new regime reflects the government's intention of levelling the playing fields between overseas and domestic investors in UK real estate. CGT's net extension may have made an indirect investment in real estate rather prohibitively inefficient for investors that are exempt, though the exemption and transparency election options for co-investment vehicles should bridge the result of the changes that this new regime would bring to the investors.

     

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    Thu, 13 Jun 2019 17:19:00 GMT
    <![CDATA[BEPS (OECD)-taxation]]> BEPS (OECD?) - Massive Changes to Taxation of International Business

  • Introduction
  • The BEPS plan was launched during the 2008 financial catastrophe. The notion behind this launch was threefold (i) Firstly, to revise the international tax structure; (ii) Secondly, to align the framework with the enlargements of the global economy; and (iii) Lastly, for ensuring that profits are taxed at the place of the economic activities.

    The BEPS essentially stands for 'Base Erosion and Profit Shifting'. This expression is commonly used along with the tax evading strategies in which the taxpayers shift their profit from a high tax paying jurisdiction to a truncated tax paying jurisdiction. OECD once pointed out that unilateral measures by countries "could lead to global tax chaos marked by the massive re-emergence of double taxation." The world, therefore, recognised that some of the policies, especially relating to the taxation of e-commerce transactions, are inconsistent with general approaches and may be far beyond what the OECD has proposed. In the face of hostile international tax avoidance schemes, it can be said that BEPS is an attempt stemming from countries' efforts to protect their legitimate tax base.

    The framework abuses the gaps and disparities in the tax rules, which results in shifting of tax. To this end, the framework seeks to eradicate double non-taxation, end treaty abuse, etc. This requires countries to implement comprehensive changes to the existing tax treat network. The BEPS edge mirrors the budding commercial, economical and vibrant changing aspects between advanced and developing markets, and hints a major move in the worldwide tax and regulatory environment.

    The BEPS Action Plan ("B Action Plan") has identified 15 action items as carrying out changes to every treaty may have led to inconsistencies and would also have been time-consuming. To allow for a more coordinated approach and to avoid the time-consuming process, Action 15 of the BEPS Action Plan recognised Multilateral Instrument ("MLI").

  • An overview of the B Action Plan
  • Digital economy and tax challenges
  • To widen the scope of permanent establishment. This can be done by restraining exemption for preparatory/auxiliary activities;
  • If proximity is critical to the business model including a domestic warehouse for delivery of goods sold online to customers, and domestic entities principally involved in closing contracts which the foreign company habitually consents without alteration; and
  • The imposition of taxes on the country where the customer is located.
  •  

  • Hybrid mismatch arrangements and their effects
  • Strategies for countering multiple deductions or double-taxation by using specific hybrid instruments and hybrid entities; and
  • Speaking on issues about dual resident entities.
  • Controlled Foreign Company ("CFC") Rules
  • Limiting opportunities for tax rearrangement through blocker entities in low tax countries.

  • Interest deductions
  • Proposes specific fixed ratio rules based on net interest/EBITDA to limit an entity's deductions for interest pay-outs.
  • The OECD believed that due to excessive interest costs countries are losing out on tax receipts, which could have been used by multinational groups to reduce taxable profits in companies in high tax jurisdictions. For example, in comparison with some other countries, the UK has historically had a generous regime for providing tax deductions for interest expenses. The UK changed its favourable rules on the deductibility of interest payments to give effect to the OECD recommendations with effect from April 2017. If the fixed ratio rule results in an interest deduction restriction, this is intended to help groups with high external gearing for legitimate commercial purposes.
  • Interest relief restrictions are likely to have a particular effect on businesses in the infrastructure, energy and real estate sectors, where there are often high levels of debt funding for all countries. The B Action Plan mainly affects transfer pricing documentation and country-by-country reporting, permanent establishment status and hybrid instruments. For the business environment in Latvia, the B Action Plan is going to improve tax administration for multinational enterprises, reduce the distortion of competition, but it is not clear how it will be implemented globally.
  • Provision for addressing special tax regimes
  • Perceiving favoured tax regimes and preserving a framework of transparency including sharing of tax rulings, advance pricing agreements and providing substantial activities in a country to avail preferential tax regimes.

  • Avoiding treaty abuse
  • Countering treaty shopping through the following:

  • Clear statements in treaties that the treaty does not seek to provide opportunities for tax evasion or avoidance;
  • Including principal purposes test that denies treaty relief if one of the primary purposes of the transaction and arrangement is to obtain relief not consistent with the treaty's objectives;
  • Avoiding the artificial avoidance of permanent establishments Status
  • Contesting treaty provisions through statements and directions in treaties that the treaty does not seek to provide opportunities for tax evasion;

  • Bring into line transfer pricing outcomes with value creation
  • More direction on the ascription of profits to a permanent establishment for addressing the division of activities to avoid permanent establishment status.
  • Data gathering
  • Instigating better data collection and sharing tools for monitoring the scale of BEPS and determining counter-measures.

  • Disclosure rules
  • References for the compulsory discovery of specific 'reportable schemes' for countries to be able to recognise possibly hostile and unmannered tax planning measures, along with enhanced information sharing between countries.

  • Transfer pricing certification and country-by-country reporting
  • Widening transfer pricing documentation and reporting obligations to include a master file providing an outline of the groups global trade and global transfer pricing rule and a local file containing more detailed information relating to intercompany transactions; and Country-by-country report (where annual consolidated group revenue equal to or exceeding EUR 750 million) with details of distribution, taxes paid and activities in each jurisdiction.
  • The transfer pricing regime ensures that transactions made between connected parties are taxed on an arms lengths basis and in the same way that they would have been taxed had the connection not existed. BEPS project, therefore, majorly focuses on transfer pricing. The transfer pricing rules authorise adjustment of the amount of income earned for tax purposes or expense incurred on transactions between companies. However, where it appears that the deal did not take place at 'arm's length', the same terms would apply if the transaction involved an unrelated company. The mainstream proposals merely specify a 'general strategy direction' that countries could hypothetically choose whether, how and when to the device. The BEPS Project therefore acclaimed minimum principles in three zones which are required to be effected as and when required.
    • Building an effective dispute resolution mechanisms

    Developing minimum standards and best practices for resolution of disputes through in a timely (within an average timeframe of 24 months) and transparent manner.

  • Developing a multilateral instrument
  • Developing a multilateral instrument for amendment of all bilateral tax treaties between signatories for expediting implementation of BEPS action points.

  • Impact and Changes in the international tax system
  • The global tax system has changed rapidly as a result of synchronized actions by directions and independent measures designed by individual countries. These measures are intended to tackle concerns over the BEPS and supposed international tax avoidance techniques of high-profile corporations. The sanctions of the BEPS Project led by the OECD are at the root of much of the harmonized activity, although the timing and methods of portrayal differ.

    International businesses are a significant part of BEPS and are represented in several ways in the B Action Plans. When the BEPS package was finally accepted, it served as a stepping-stone for modern international tax limits, which is based on the base principle that multinational corporation income has to be taxed there, where they are collected, or business activities carried on. 

    The B Action Plan aims to resolve irregularities by fetching tax from a place closer to where it was created. The assessment will be demonstrated within the country, which has human resource and infrastructure.

    As regard permanent establishments, it is said that global market places may be compressed if immunities are reduced. In some cases, countries have argued that even a website or intangible property could itself create a permanent establishment, the OECD does not endorse such a broad concept of nexus based on significant economic presence.     

    The ultimate value of the B Action Plan will be determined by its implementation. About implementation, many parts of the package were already being introduced by member jurisdictions and the imminent agreement within the European Union of compulsory information sharing regarding tax rulings. Other measures will require domestic law changes. Although some actions do not require a lot of attention from businesses, some actions cause the most concern for accountants and experts, for example, country-by-country reporting of business activities. As mentioned above, many of the BEPS reports recommends changes to international tax rules vis-à-vis domestic rules. For valuation purposes, companies apply tax rules to allocate values within the entities and assets. Therefore, there may be a possibility that companies may not have the necessary expertise to deal with the situation.

    There are also concerns about security transmission, storage, handling, while it is too early to analyse the impact, it can be said that for advanced and developing countries revenue losses from profit shifting remain.

  • Conclusion
  • With the membership of 82 countries and jurisdictions in 2016, the general framework has expanded, and has brought together 116 countries and prerogatives, and includes numerous universal and regional parties. It is planned to be implemented by 2020. From a commercial point of view, this will lead to specific minutest criteria to be applied for achieving the desired results. However, the most pressing challenge is how to bridge the divide among the various points of view so that coherence of the international tax system is maintained. Importantly, businesses based on the manner of subjective application will gain the most. Developing countries, to protect its tax bases, have much to gain from the implementation of the BEPS measures.  Sequences of new data gathering processes and analytical tools have been established and are now being put in place, including data in respect of Country-by-Country reports, to address this issue. However, a major challenge of assessing the scale and impact of BEPS is the limitation of existing data sources.

    Most entities face the issue of high cost, ambiguity and complexity, which could hamper the growth of business on an international platform. Some of the B Action Plan may hold up investment within which may make it harder for the businesses to expand. Further, many 'brick and mortar' companies may expect minor changes.

    It is believed that the BEPS Project is the most aspiring bilateral global tax policy initiative ever undertaken. Nonetheless, the impact will be significant, and the framework will irretrievably change how businesses are taxed. The effort to device BEPS is indeed laudable, but there is also an equally compelling need to focus on providing certainty. However, with its implementation, world-wide companies, funds and international stakeholders will have to revisit prevailing structures for securing treaty relief and most notably additional tax acquaintance that may arise on account of permanent establishments and intra-group transfer pricing.

    Further, it is also believed that the developments taken together will show great progress. However, the implementation of the BEPS measures is still at an early stage, and more tangible results are yet to come.

     

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    Thu, 13 Jun 2019 15:35:00 GMT
    <![CDATA[Short-Term Contract Oil and Gas]]> The Legal Framework for the Transportation of Oil and Gas is similar and is predicated only upon a Short-Term Contract

    Introduction

    The O&G business has regularly witnessed extensive discussions about the decrease in the term of the natural gas contracts, and many have encountered different unforeseen results which relate to such diminishment. Usually, the best associates of long-term contracts for pipeline organizations are the business investors as they attempt to make life less requesting for themselves.

    It is argued that a long-term contract is essential for stimulating sufficient investments in gas pipelines which are expected to fulfil future petroleum gas need. It is foreseen that future contracts will be impressively shorter in length, in no small degree, the outcome of state commission techniques that as far as anyone knows to dislike long duration contracts.

    The move to the shorter span contract draws in numerous reasons; they are either market-related or regulatory related. It is said that the adjustments in the business and increase in spot-market liquidity for the recent decades affect the terms and span of the agreement. The shorter-term contracts have inflexibly expanded because of the formation of competitive markets in inflammable gas and to some degree focused markets in transportation.

    Spot markets have had a minimalistic but an essential role in balancing markets, although the cost fluctuations in spot markets provide information for contracts that need to be renewed or updated.

    Energy Security

    Energy security has a few measurements, first is physical security, which covers ensuring the advantages, foundation, supply chains, and exchange courses and arranging substitutions, when need be. Access to the energy is the second, managing the capacity to create and obtain vitality supplies-physically, legally, and financially. Thirdly, it is a framework involved of the national policies and universal foundations. What's more, last is the venture and progression to guarantee the ampleness of provisions and context for what's to come.

    Investing in the O&G Industry

    As of late, the oil-importing nations are changing the inquiry around and considering more security of interest as opposed to energy security and need to comprehend the visibility of the business sectors with the goal that they can structure their financial plans and legitimize future dimensions of the venture. This had prompted the assessment of details and clauses when entering upon any agreement, be it supply or generation, and so forth.

    Certain perspectives impact the organizations in choosing the correct contracts, its provisos and above all the span of the agreement, including the interest for the vitality, speculation limit, effect of the foundation on the earth just as guidelines.

    Industry and Long-term Contracts

    Since quite a while, gas reserves were purchased by the pipeline organizations on LTC for around 20 years. LTC was for quite some time pursued since the 1980s in the petroleum gas industry and was for the most part from 20 to 30 years, which remained at fixed rates. LNG ventures are mind-boggling in light of enormous speculations and workforce and the long term construction period, and the vulnerability of the market. The length of the term of the agreement, be it supply or generation, depends exceedingly upon the business system of the undertaking.

    It is trusted that as the solid challenge in the energy market and interest for the energy increase, the market expects a move from inflexible LTC to more spot trading opportunities. O&G industry is changing to a market-oriented, which has driven the contractual arrangements of action's to end up the present moment and adaptable.

    Why opt for short-term contracts?

    Spot exchanges are incredible where costs are dictated by short-run free market activity. Spot exchanges give adaptability to the purchaser in offsetting supply with interest. The decay of LTC has made the gas industry increasingly open and focused; with the exchange cost financial aspects, the expenses behind the transient exchanging have been diminished. By and large, the competitive pressures have made LTC a progressively costly for gas utilities just as different shippers by increasing hazard. Market players who incline toward greater adaptability go for STC which give them to adjust to the fluctuating business sector conditions.

    It was in 2002 that exporters like Algeria, Oman, Qatar, Trinidad, and Tobago and the United Arab Emirates and importing nations like the United States and Spain had entered spot exchanging.

    Significant oil organizations are deciding on shorter-term contracts with greater adaptability and different indexation to oil and gas. Petronas at the Asia Oil and Gas Conference in Kuala Lumpur communicated its readiness over going into temporary contracts and littler freight sizes to adapt to its over-provided advertises and diving costs. This view was bolstered by Ryan Schleicher who trusts spot, or mid-term contracts will supplant the long-haul agreements which are expected to terminate in the following ten years.

    Statistical data from the International Gas Union                             

     In 2016, the short term LNG trade came to 72.3 MT which totalled to 28% of the complete exchange. 2011 saw an impressive development in the trades, for the most part, because of the outcomes of the Fukushima emergency and the uprising of shale gas in the US which prompted the requirement for business advancement and adaptability. There was an activated fall for the time being and medium-exchange by 4% making vast numbers of the developing markets exchange on long haul contracts from 2016. Moreover, new liquefaction projects in Asia-Pacific district are expressed on the long haul gets that are coming into power.

    The advent of Long-term contracts

    As recently referenced, there has been a significant decrease in the organizations willing to go into LTC petroleum gas transportation contracts. Dynamically, more dealers are picking STC for transporting the vitality accessible.

    Long haul take-or-pay contracts accommodate the end of price instability, connecting vendors and purchasers for an extensive stretch into a bilateral monopoly, amid which both have entirely characterized commitments. The LTC guarantee the energy just as supply security and thus, gives the providers to design long haul speculations that require tremendous monetary assets in the vitality area.

    Low-price condition

    In the most recent two years, the LNG advertise blessed and reviled by the low oil price condition. The weak worldwide economy debilitated the LNG demand, though oil turned into an option for some LNG downstream clients because of diminished costs. All the more critically, lower LNG costs are expanding enthusiasm for long haul LNG contracts as purchasers try to exploit the right now ideal dimension of costs. Trends in contractual terms

    Take-or-Pay Formulae

    The ToP makes the purchaser take a conveyance of at the very least a predefined least amount of the item which identifies with oil, gas or power venture structure similarly as the put-or-pay/ship-or-pay condition in a pipeline venture. Take-or-Pay contracts are expected to share hazard among makers and purchasers because of long lead times in venture arranging and capital-concentrated tasks giving suitable motivating forces for legally binding execution.

    Risk Obligation

    The seller inclines toward LTC because, in the long-haul LNG SPA, the purchaser bears all the amount and volume chance. This gives assurance of income to the vender and an extensive income. The ToP is useful for dealers who need progressing and commercializing. In this way, this being a two-crease idea, the purchaser has given the advantage of long-haul supply at a fixed cost for expecting the dangers under the LTC SPA. Brokers going into LTC are well more ensured than the one going into STC in cases of power majeure occasions which influence somewhat or absolutely the venders' offices.

    Importance of Long-term Contracts in Pricing Stability

    The move from LTC to STC has driven market members to focus on the vital job of LTC to promote pricing stability in O&G markets. LTC is a compelling instrument to relieve and deal with the unpredictable value developments caused because of momentary estimating inside the business.

    Long-Term Contracts in Projects

    Pipeline Projects

    Long haul contracts in energy ventures, similar to the pipelines, oil, LNG, gas, and so on have been effective in ensuring sources of income. As the pipeline ventures include abnormal amounts of interests in direct and working costs, the component of the long recompense time of 10 years demonstrates gainful for the business dealers. Assignment of limit and levy are the two crucial issues while talking about the financing reasons for the pipeline structures.

    Shipping Projects

    In the ongoing news, Hyundai Merchant Marine has advanced its readiness to sign a long-haul contract with GS Caltex to dispatch unrefined petroleum. Likewise, the Spanish ship administrator Baleària marked a long-haul supply manage Gas Natural Fenosa for ship drive in Spain. It has been seen that development in the global gas markets has been impeded recognizably because of the high forthright expenses of structure the essential transport framework. The Long-term LNG SPA approves the consumption on the undertakings. As per the statements, it is necessary for replaying the credit and venture restores that the purchaser acknowledges the conveyance of the business contract amount or pay the agreement cost for any amount not taken.

    Conclusion

    The most critical rule behind the decline of LTC is the inflexibility in the interest and supply which the business players guarantee to alleviate by picking the terms of the agreement that diminish the requirement for costly arbitration and in the meantime proceeding with the appropriate cash flows from the delivery and pipeline ventures for O&G transportation. Energy trade between the producers and refiners was directed on LTC, far preceding the approach of the present moment, spot-market and future contracts.

    To the extent the trade on O&G is concerned, it is clear that many STC is concluded each couple of months. Consistently, we can foresee that with the advancement of world LNG markets towards a higher degree of volumes being exchanged on STC or spot market trade.

    History has appeared over-dependence on long haul contracts at costs that don't respond to market dynamics can create imbalances and liabilities for the parties to those agreements that can develop to undesirable dimensions. Over-dependence on fixed long haul fixed long-term makes counterparty dangers that can undermine the deal itself.

    However, when billions of dollars are on stake, the energy ventures must legitimize this by strengthening their contractual obligations dependent on LTC. It is of high significance for the wholesaling organizations to incorporate the component of long haul take-or-pay gas in their portfolios to guarantee the security and progression of energy supply.

    It is possible that LTC will win in the upstream area of the business. However, they will develop far from the conventional model. The market-based adaptability devices make it workable for the long-haul contracts to existing together with the STC, yet the volumes of the exchange by ToP will be decreased.

    To the extent the EU gas markets are concerned, the take-or-pay arrangements of the LTC are a useful component to separate the hazard and generously relieve it.

    After looking at all the parts of the long haul just as the spot contracts, it very well may be said that long haul contracts ought to be permitted to exist together with shorter-term contracts. In addition to other things, they convey the essential solidness to the business sectors. They likewise diminish vulnerability and accommodate venture boost. The transportation of oil ought to be predicated on temporary contracts as well as long haul contracts. The objective of the market members is to structure the agreement, so that enhances the common profit-maximizing behaviour.

    Eventually, it is the market player that goes out on a limb, and the O&G business isn't an industry where inherent risks can be taken when billions of monies are at stake.

     

    ]]>
    Thu, 13 Jun 2019 11:57:00 GMT
    <![CDATA[Regulatory updates Turkish Capital Markets]]> Regulatory updates in Turkish Capital Markets

    The Turkish Capital Markets Board is the financial, regulatory and supervisory agency where the Turkish Finance Ministry appoints its board. The Capital Market Law is passed for the regulation and supervision of the capital markets for ensuring the functioning and development via the security, transparency, efficiency, stability and in fairness and competitive environment together with protecting the investors' rights and interest.

    The Turkish financial framework has a sub-divided regulatory structure. Banking Regulation and Supervision Agency (BRSA) is accountable for the financial framework, though the Capital Markets Board of Turkey (CMB) is the fundamental controller or the regulator of the capital markets. The Undersecretariat of Treasury directs the insurance industry. For each section of the financial sector, there are self-administrative associations, to which membership is mandatory for market members.

    The Capital Market Law was passed in 1981, and after one year, the regulatory body, Capital Markets Board (CMB) was set up. In 1984, the Regulation for the Establishment and Operations of Securities Exchanges prompted the establishment of the Istanbul Stock Exchange (ISE) in which exchanging began toward the finish of 1985. Supplanting the past one, the New Capital Market Law came into effect on December 30th, 2012.

    The new law, as per the EU acquis sets another structure for financial markets with the objective of encouraging a progressively robust and well-working financial framework while fortifying the protection and securing the investor.

    The Executive Board represents the Capital Markets Board. Being the highest primary leadership body, the Executive Board is enabled to choose any issue within the expertise of the CMB. The director of the Executive Board is the Chief Executive Officer. The Executive Board comprises of seven individuals.

    Every one of the individuals from the Board is designated by the Council of Ministers for a time of five years and can be re-appointed once for a period of 5 years. One of the individuals is appointed as the Chairperson by the Council of Ministers while the Executive Board chooses one part as the deputy chairperson.

    The Capital Markets Board of Turkey (CMB), Borsa Istanbul, the Central Registry Agency (Merkezi Kayıt Kuruluşu) (MKK) and Istanbul Clearing, Settlement and Custody Bank A.Ş. (Takasbank) are the fundamental controllers of the equity markets in Turkey.

    On March 1, 2018, Capital Markets Board in its weekly Bulletin which included four provisions that have changed specific guidelines and standards concerning speculation reserves, retirement speculation reserves, funding speculation assets and investment organizations as well as the recent updates in the capital markets.

  • Disclosure of Control Changes for Publicly Listed Companies
  • The Communique on Material Events No. II-15.1 was amended where the primary change was that any sale or acquisition that takes place and results in increasing or decreasing below the limits of 5, 10,15, 20, 25, 33, 50, 67 and 95% any kind of direct or indirect changes to the shareholding or the voting rights of the shareholders shall be disclosed to public via the Central Registry Agency. The indirect changes in the shareholding and the voting rights are to be revealed by the shareholders.

  • Improved Rules in Trade and Reporting of Merkezi Kayıt İstanbul (MKK) -Trade Repository
  • The communique establishing the procedures and principles for the trade repositories states that the notifications are to be made via the electronic data storage system by the legal entities which are inclusive of investment organizations, management companies, etc. The primary responsibility of the trade repository is to compile and maintain the records of the derivatives. The Capital Markets Board recently authorized MKK as their trade repository.

  • Amendments to the Guideline on Pension Funds
  • CMB underwent significant changes as far as the Pension funds were concerned. The bills called for an automatic enrolment standard (ASE) and first pension funds to be introduced as a primary type of pension funds.

  • Portfolio of Investment Funds and Pension Funds
  • The Capital Markets Board allowed the trading of the capital market instruments with a commitment of purchasing them again under the CMB Bulletin issued on 13th December 2018

  • Asset-Backed and Mortgage-Backed Securities
  • The CMB amended the Communiques dealing with the Asset-Backed and Mortgage-Backed Securities with an intention to provide a reasonable convenience for the institutions providing funds by securitization of the liquidity constrained assets.

  • Simplified issuing process for Capital Markets Instruments
  • Under the recent amendments, the companies are allowed for the revision of their public offering prices, discount or interest rates and price ranges before launching the sale or book building.

  • Allocation changes in the Capital Markets
  • Under the law, previously companies were required for the allocation of 20% of the nominal value of capital market instruments for the localized investor institutions which via the newly amended legislation has decreased down to 10%. The CMB is granted for the authority for decreasing the minimum allocation limits to 0 or increasing the limits by one-fold.

    The Capital Markets Board regularly keeps on updating the regulatory structure of the financial system in Turkey.

     

    ]]>
    Wed, 12 Jun 2019 16:23:00 GMT
    <![CDATA[Ship Arrests and Indian Maritime Law]]> Ship Arrests and Indian Maritime Law

    "The safety of the people shall be the highest law" - Marcus Tullius Cicero

    India has a long-standing history in dealing with the sea and has had a distinguished tradition for several years with trade and commerce, both within the region and beyond its territorial borders. India's maritime history dates back to 3rd millennium BCE, and since then many ships have sailed from India and, to India. Therefore, though there was no codified law as the one which exists today, the customs and regulations concerning sea and maritime activities have been in existence since time immemorial.

    This article analyses the Maritime Law of India and the Law relating to ship arrests, including the jurisdiction, permissible claims and procedural aspects of ship arrests in India.

    Before Independence, the Law relating to maritime laws in India were governed under the British government. The Coasting Vessels Act, 1838, Inland Steam Vessels Act, 1917, Admiralty Offences (Colonial) Act, 1849, Indian Registration of Ships Act, 1841, Indian Ports Act, 1908, Control of Shipping Act, 1947 are some of the regulations which deal with various aspects of maritime in India.

    Meaning of Maritime Law:

    In simple words, Maritime Law is a set of rules and regulations which govern the matters relating to sea and ships. It is also known as admiralty law. Numerous legal luminaries have provided their definition of the term 'maritime law.' Some of them are as follows:

    Professor Grant Gilmore and Charles L. Black, in their 'Law of Admiralty', define maritime or Admiralty Law as the following:

    ''A corpus of rules, concepts and legal practices governing certain centrally important concerns of the business of carrying goods and passengers by water.''   

    Black's Law dictionary defines maritime Law as- "the body of law governing marine commerce and navigation, the carriage at of persons and property, and marine affairs in general; the rules governing contract, tort and workers' compensation claims or relating to commerce on or over water." 

    The definitions, given above covers wide range of activities concerning the sea, however now with the evolution of Law, the Maritime Law is comprehensive, and it is that branch of jurisprudence which covers all the matters relating to sea and ships.

    Ship Arrest

    Ship arrest is a process by in which a ship is prevented from trading or moving until the matter in question is decided. It is an exclusive jurisdiction that is granted to an admiralty court to detain a vessel to secure a maritime claim.

    Article 2 of the International Convention Relating to the Arrest of Sea-Going Ships, 1952 defines the term arrest as the following:

    "(2) "Arrest" means the detention of a ship by judicial process to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgment."

    Rationality

    A ship arrest may be exercised under the authority of a court having admiralty jurisdiction, for the following reasons:

    • Loss of life
    • Loss of property
    • Salvage
    • Collision
    • Execution of a decree
    • Violation of customs, usages, regulations or norms.

    Jurisdiction of Indian Courts 

    Before India gained Independence, under The Colonial Court of Admiralty Act, 1890, the High Court of Bombay, Madras and Calcutta were the only judicial authorities competent to deal with matters relating to Admiralty. The other courts of justice were restricted from dealing with issues concerning the Admiralty. Under the Admiralty Courts Act, 1861, the three presidency courts were vested with the same powers as that of the High Court of England.

    Section 35 of the Admiralty Courts Act, 1861 deals with the jurisdiction of Admiralty court, and it reads as the following:

    "35. The jurisdiction conferred by this Act on the High Court of Admiralty may be exercised either by proceedings in rem or by proceedings in personam."

    The Law relating to Admiralty jurisdiction is relevant even today under Article 372 of the Constitution of India.

    Therefore, in M.V. Elisabeth vs Harwan Investment and Trading, 1993 AIR SC 1014, the question was whether a court having no admiralty jurisdiction could entertain a case relating to Admiralty. The Supreme Court, in this case, widened the scope of admiralty jurisdiction in India.

    The Court held:

    "Although statutes now control the field, much of the admiralty law is rooted in judicial decisions and influenced by the impact of Civil Law, Common Law, and equity. The ancient maritime codes like the Rhodian Sea Law, the Basilika, the Assizes of Jerusalem, the Rolls of Oleron, the Laws of Visby, the Hanseatic Code, the Black Book of the British Admiralty, Consolato del Mare, and others are, apart from statute, some of the sources from which the Law developed in England. Any attempt to confine Admiralty or maritime Law within the bounds of statutes is not only unrealistic but incorrect."

    The Supreme Court made the following observation:

    "The High Court in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred,    and subject to the appellate or discretionary jurisdiction of this Court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their powers."

    Further, in this case, the International Convention for the unification of some rules regarding Arrest of Sea-going Ships (The Arrest Convention), 1952 was also made applicable to India, although it was not ratified.

    Similarly, In M.V Sea Success case, the Supreme Court held that the principles laid down in 1999 Geneva Arrest Convention could be applied in India on matters concerning Admiralty.

    In India, The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 was enacted on 9 August 2017 to consolidate the laws relating to Admiralty. The Act implemented, repeals all the outdated provisions relating to Admiralty.

    As per Section 3 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, the jurisdiction concerning admiralty matters shall be vested in the respective High Courts, and the courts shall exercise their authority within the territorial waters of their jurisdiction.

    Therefore, now the scope of admiralty jurisdiction has been widened, and apart from the presidency courts, the following courts (coastal regions) have jurisdiction to deal with admiralty matters:

    • High Court of Gujarat
    • High Court of Andhra Pradesh
    • High Court of Orissa
    • High Court of Kerala

    Permissible Claims

    The High Courts' as discussed earlier, has the jurisdiction to entertain claims as provided under Article 1 of the Arrest Convention, 1952 and Article 1 of the Geneva Arrest Convention, 1999. Therefore, before the enactment of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, the claims were as provided under the conventions as discussed earlier. However, now the Law relating to Maritime claim is provided under section 4 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

    Section 4 of the Act reads as the following:

    "The High Court may exercise jurisdiction to hear and determine any question on a maritime claim, against any vessel, arising out of any-

    • a dispute regarding the possession or ownership of a vessel or the ownership of any share therein;
    • dispute between the co-owners of a vessel as to the employment or earnings of the vessel;
    • mortgage or a charge of the same nature on a vessel;
    • loss or damage caused by the operation of a vessel;
    • loss of life or personal injury occurring whether on land or on water, in direct connection with the operation of a vessel;
    • loss or damage to or in connection with any goods;
    • agreement relating to the carriage of goods or passengers on board a vessel, whether contained in a charter party or otherwise;
    • agreement relating to the use or hire of the vessel, whether contained in a charter party or otherwise;
    • salvage services, including, if applicable, special compensation relating to salvage services in respect of a vessel which by itself or its cargo threatens damage to the environment;
    • pilotage;
    • goods, materials, perishable or non-perishable provisions, bunker fuel, equipment (including containers), supplied or services rendered to the vessel for its operation, management, preservation or maintenance including any fee payable or leviable;
    • construction, reconstruction, repair, converting or equipping of the vessel;
    • dues in connection with any port, harbour, canal, dock or light tolls, other tolls, waterway or any charges of similar kind chargeable under any law for the time being in force;
    • claim by a master or member of the crew of a vessel or their heirs and dependents for wages or any sum due out of wages or adjudged to be due which may be recoverable as wages or cost of repatriation or social insurance contribution payable on their behalf or any amount an employer is under an obligation to pay to a person as an employee, whether the obligation arose out of a contract of employment or by operation of a law (including operation of a law of any country) for the time being in force, and includes any claim arising under a manning and crew agreement relating to a vessel, notwithstanding anything contained in the provisions of sections 150 and 151 of the Merchant Shipping Act, 1958 (44 of 1958);
    • disbursements incurred on behalf of the vessel or iparticular average or general average;
    • dispute arising out of a contract for the sale of the vessel;
    • insurance premium (including mutual insurance calls) in respect of the vessel, payable by or on behalf of the vessel owners or demise charterers;
    • commission, brokerage or agency fees payable in respect of the vessel by or on behalf of the vessel owner or demise charterer;
    • damage or threat of damage caused by the vessel to the environment, coastline or relate interests; measures taken to prevent, minimize, or remove such damage; compensation for such damage; costs of reasonable measures for the restoration of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; or any other damage, costs, or loss of a similar nature to those identified in this clause;
    • costs or expenses relating to raising, removal, recovery, destruction or the rendering harmless of a vessel which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such vessel, and costs or expenses relating to the preservation of an abandoned vessel and maintenance of its crew; and
    • maritime lien. 

    Procedure

    The Law relating to the arrest of a vessel in rem is provided under Section 5 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

    Under the section, the High Court may order for the arrest of any vessel within its jurisdiction, where there is a reason to believe:

    • The owner of the vessel is liable for the claim, or
    • The demise charterer of the vessel is liable for the claim, or
    • The claim is based on a mortgage or similar charge, or
    • The claim relates to possession or ownership, or
    • The claim is against the owner, demise charterer, manager or operator of the vessel.

    Once the claim has been decided, the claimant has to state the detailed facts, along with the other particulars and must make application for the substantive suit.  The Admiralty suit should specify: 

    • The name of the claimant
    • The name of the vessel
    • Flag of the Vessel
    • Details of the owner of the ship
    • Facts relating to the dispute
    • Grounds and;
    • Prayer

    Once an arrest warrant is issued upon a vessel, the owner of the vessel has to appear and settle the claim or challenge the arrest made. The vessel may be allowed to sail subject to furnishing of security for the claim. At the default of the owner, the ship can be sold, and the sale proceeds may be used to settle the claim.

    Conclusion

    Therefore, the Law relating to ship arrest is now well settled in India. The admiralty law is an area of development, and it plays an inevitable role in protecting the citizens as well as ensuring that no organization or individual violates the Law of the sea.      

    ]]>
    Wed, 12 Jun 2019 14:05:00 GMT
    <![CDATA[Regulations in Association Health Plans-US]]> New Regulations in Association Health Plans – United States of America

    Introduction

    Benjamin Carson once said that Healthcare is one-sixth of the economy of the United States. He went on to state that if the government can control, then they control just about everything. Thomas Vilsack supports these views by stating that the future of healthcare security is dependent on flexibility from the federal government. This flexibility allows the healthcare system to serve the most vulnerable of citizens and to ensure that they are catered for. Association Health Plans represent an attempt by the government to ensure that vulnerable groups, those who work for small employers are catered for. The question of whether this goal will have been achieved by the new rule on association health plans is the focus of this article.

    Background

    Prior to the new rule on association health plans, federal law and regulations did not consider association health plans to be a single employer. The federal law and regulations prohibited employers for grouping together solely for health insurance. Federal law and regulations required that an association be in existence for five years before offering employees healthcare coverage. To determine what market rules, apply the Department of Labour would pierce the corporate veil to see who the individual or employer is. The Department of Labour would then enforce laws and regulations in accordance with their size. This meant that three separate members of the same association would have access to the plans in the market that correspond with their size. Other laws such as the Consolidation Omnibus Budget Reconciliation Act (COBRA) also apply in this way. 

    Previously, employers could only create associations that sponsor healthcare plans if they shared a commonality of interest other than the interest in providing multiemployer benefits. Thus, Association Health Plans were only available to members of large trade organisations.

    What are Association Health Plans

    Organisations, states and regulators and consumers have been attempting to understand the impact and feasibility of the new regulations issued by the United States Department of Labor on the 19th of June 2018. The expansion of Association Healthcare plans was the result of President Trump's executive order "Promoting Healthcare Choice and Competition Across the United States". The Promoting Healthcare Choice and Competition Across the United States executive order was a response to the legislative failure to repeal the Affordable Care Act. The United States Department of labour was tasked with writing the rules of the Association Health Plans expansion. The Department of Labour then considered over 900 public comments and the final draft of the Association Health Plans was issued on the 21st of June 2018.

    Association Health Plans are group health plans that employer groups and associations offer to employees to provide health coverage for employees. Association Health Plans give small employers the opportunity to offer the types of healthcare coverage that are usually provided only by large employers. Small employers can band together because several small employers can now pool their resources together to purchase such types of coverage. The small employers can group themselves according to common geography or common industry. The small employers will be recognised under the law as a single employer. There are certain specific criteria that a group of small employers must meet if they are to be regarded as a single employer. The criteria include proving commonality, structure and control of the association, health non-discrimination protections.

    A group of employers must meet the following requirements if they are to establish a group health plan. The group or association must exist to participate in a group health plan. It is not necessary that the entire purpose of the association of the group be to create a health plan. An employer is defined as a person acting directly as an employer. The employer must have at least one employee who is a participant covered under the plan. The group or association must have a formal organisation structure with a governing body and has by-laws. It is enough that the group or organisation has other indications of formality. The functions and activities of the group or association must be controlled by its employer members whether directly or indirectly. This control can be illustrated through a regular nomination and election of directors, officers or other similar representatives that control the group. These directors, officers and other representatives must manage the establishment and maintenance of the plan.

    The group of employers must have a commonality of interest. The commonality of interest is the criteria that require that employers may band together if they belong to the same trade, industry, line of business or profession. The second requirement is that the employers must have their principal place of business within a region that is within the boundaries of the same state or the same metropolitan area. Also, it is required that the group of association must not make health coverage available other than to employees, former employees, and their family members or other beneficiaries. The group of association must not issue or controlled by a health insurance issuer.

    The last requirement is that the health coverage offered by the group or association must not infringe on non-discrimination provisions. This requirement means that the group or association must not create conditions based on health factors which determine whether an employee, former employee or employee's family members can benefit from the healthcare plan. There is to be no discrimination on the grounds of health status, medical condition, claims experience, medical history, genetic information or disability. Compliance with non-discrimination premiums and contributions required by any participant or beneficiary under the plan is compulsory for the group health plan. Employers are not using a health factor as a means to define a similarly situated group. All similarly situated groups of people must be treated the same. The Association Healthcare Plans are permitted to sue non-health related factors to define groups

    Under the new Healthcare plan, a working owner qualifies both as an employer and as an employee of a trade or business.  A working owner is defined as a person who has an ownership right of any nature in a trade or business. Trade or business can be incorporated or unincorporated. The definition of an owner includes partners or other self-employed individuals. Independent contractors may be eligible to benefit under the Association Health Plan if they satisfy the definition of a working owner under the rule.

    All Association Health Plans are Multiple Employer Welfare Arrangements under the final rule. , and they are subject to state law regardless of size. State coverage mandates, certain consumer protection and the establishment of funding reserves and other risk management apply to Multiple Welfare Arrangements. Some states are more favourable to Multiple Employer Welfare Arrangements than others.

    State insurance departments are delegated authority to regulate the Association Healthcare Plans. States are at liberty to enforce existing regulations or create new regulations to limit or prohibit these Association Health plans. States may also make these subject to state law regardless of size.

    According to the 2019 Economic report released by the Department of Labour, it was stated that the association health plans must be short term, limited duration health plans. These health plans are supposed to create to $249 billion in value over the next ten years.

    The new Association Health Plan Department of Labor final rule expands the formation and treatment of Association Health Plans. These new Association health plans create a new methodology for multiple employer groups to come together as a single large employer to purchase a health plan. The new rule allows small businesses, including self-employed workers to band together and obtains healthcare coverage. Employers within a region or an industry can aggregate, which allows certain entrepreneurs to participate even If they do have any employees.  

    It is possible, in terms of the Association Healthcare Plans to charge different premiums to different classes within a given employer member. Different premiums can be charged as long as they are not based on the health factor. Premiums can also be charged based on employment classification that exists within the business, for example charging different premiums for full-time employees versus part-time employees.

    Several obligations are placed on groups or associations offering Association Healthcare Plans under the new rule. These responsibilities are derived from the provisions of ERISA, and they include fiduciary duty, required disclosures, for example, Summary of Material Modifications, as well as compliance with rules regarding the operation and administration of the Association Healthcare Plan. Furthermore, groups and associations offering Association Health Care Plans must fulfil the requirements of the Affordable Care Act. These requirements include a Summary of Benefits and Coverage, employer reporting, plan requirements and medical loss ratio requirements.

    Other laws that apply to health plans include Network adequacy, Pregnancy Discrimination Act of 1978, Federal non-discrimination laws, Mental Health Parity, COBRA, Medicare secondary payer rules.

    Impact of the Association Healthcare Plans

    The new methodology affects the implementation of the Affordable Care Act (ACA) and other laws that regulate the actions of employers. The success or failure of the new rule is dependent on the state, insurance carriers and each association itself.  Currently, the states that have the new association health plans include Texas, Florida, Ohio, Georgia, Michigan, Wisconsin, Minnesota, Virginia, Vermont, Nevada, Nebraska, West Virginia and Vermont. At the time of writing 71% of the new association health plans were launched by regional associations. Third-party insurers insure 86% of the new association health plans. 43% of the new association health plans are available to sole proprietors and the self-employed. 50% of the fresh Association Health Plans include a medical savings account. Multistate association health plans require additional preparation and insurance filings.

    Advantages

    The rhetoric surrounding the Association Health Plans is that it expands affordable health coverage options for small businesses and their employees in America. It has been argued that America's laws have had the effect of making healthcare coverage more expensive for small businesses than large companies. Accordingly, the Trump Administration is aimed at providing more choice, more access and more coverage. The Department of Labor wished to create more affordable alternatives for individuals and small employers. The Department of labour also wanted to offer plan options that are do not have to comply with the ACA or state coverage mandates. This change is advantageous because it would lower the cost and eliminate the requirement to purchase coverage that the individual may not need. The new Association Healthcare plans were purposed to bring affordable alternatives to previously uninsured business owners. Furthermore, there was a need to provide working owners with the group health care option as an alternative to the individual market.

    It is essential to evaluate these healthcare plans in light of the goals outlined by the Trump Administration. There are numerous advantages available to small employers under this plan. Firstly, small employers may now be able to attract the calibre of employees that large employers attract. This is because they can offer the same type of healthcare coverage that employees in large companies enjoy. Secondly, these small employers will be able to provide such cover inexpensively. Thirdly, the healthcare plans referred to can be tailored to the needs of their employees.

    Employers can avoid regulatory restrictions that pertain only to the small group market, enhance their ability to self-insure, offer a wide array of insurance options, avoid regulatory restrictions that are applied only to the small group market. Employers are also able to increase their bargaining power and secure more favourable deals. Administrative costs for employers are also reduced through economies of scale. Furthermore, there are more insurance options available.

    Disadvantages

    Much of the money that is said to be saved according to the requirements of the Affordable Care Act that is commonly referred to as Obamacare. The purpose of the rules issued by the Department of Labour was to undermine the Affordable Care Act (ACA) and the Employee Retirement Income Security Act  (ERISA) of 1974. The Affordable Care Act requires that insured plans offered in the individual and small group markets provide a core package of healthcare services. This core package is comprised of ten essential health benefits. The Affordable Care Act, however, does not apply to large employer group plans and self-funded plans. This means that the large employer plans are not required to offer their employees essential health benefits and have greater flexibility to plan the design of the healthcare plan. Association Health Plans fall under the category of more extensive employer plans, meaning that the Affordable Care Act does not apply. Less regulation for Association Health Plans makes them more susceptible to abuse. Furthermore, premiums are not to be based on individual demographic factors. 

    The Employment Retirement Income Security Act governs employee benefit plans. The Act provides certain protections to employees as long as there is a proved employment relationship. The Employment Retirement Income Security Act does not employer associations acting in the interest of an employer as employers for the act. Allowing associations created for the sole purpose of creating an association health plan undermines the objectives of the Employment Retirement Income Security Act.

    11 States and the District of Columbia have initiated a suit the United States Department of labour for extending the definition of an employer as stated in the Employee Retirement Income Security Act of 1974. California, Delaware, Maryland, Kentucky, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Virginia and Washington sued the Department of Labour for overreach and misinterpretation of the law. The states also noted that the Association Health care plans would not offer all the essential health benefits that the Affordable Care Act requires. The rule allows employers to evade the Affordable Care Act consumer protections. The effect of this will be that individuals will be underinsured. The States will then become responsible for those individual costs, or the full costs for those who cannot afford the coverage.

    The State stands to suffer considerable economic harm through the use of the Association Health Plans.  On the 29th of March 2019, in the case of State of New York v U.S Department of Labor, U.S. District Judge John Bates called the policy an end run around the patient protections and regulations established by the Affordable Care Act. As a direct consequence of the plan, states also stand to suffer economic harm including the loss of tax revenue and administrative fees that were previously received from small group and individual insurance plans. Besides, insurance companies stand to suffer as Association Health Plans may become large enough to self-insure, meaning there will be demand for group or individual fully-insured health coverage. Group and individual fully-insured health coverage are subject to premium taxes and other fees.

    Apart from financial concerns, the new Association Health Plans are a regulatory burden on the state. This is because, as more Association Health Plans form, state agencies are required to oversee their activities by reviewing new and existing health plans for compliance with state laws. The state agencies will also have to ensure that the Association Health Plans are stable enough to protect consumers. In addition, state agencies will have to respond to consumer complaints and respond to allegations of fraud and abuse enforcement. The state governments also have the burden of educating the masses on the Association health plans through media campaigns and other methods.

    The Judge stated that the Association Health Plan rule "does violence" to ERISA as it deconstructs the law's emphasis that employee benefits should arise from actual employment relationships. Essentially, Judge Bates ruled that the final rule widens the definition of an employer as the entity that can sponsor employee benefits plans beyond the scope of the Employee Retirement Income Security Act. The ruling by the district judge has been hailed to be a victory that will help ensure better health care for millions nationwide. The rule on association health plans is no longer valid in the eleven states that filed the lawsuit.

    The Association Health Plans also face opposition from the American Medical Association and the American Hospital Association. Moreover, It has been argued by finance experts that the rule for Association Health Plans could result in fewer insured American, higher premiums and for those who remain in the realm of the  Affordable Care Act. Consumers are at risk of fraudulent action by the new groups entering the field. For small businesses, this may mean that limited coverage and high deductibles. Such a situation can leave a small business you racing to bring in cash to cover an emergency. 

    Conclusion

    Although the new rule on Association Health Plans widens the definition of an employer, the rule has the effect of undermining previously established employee and consumer protections. As a result, the new rule benefits employers while leaving employees vulnerable to inadequate health coverage.

     

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    Mon, 10 Jun 2019 12:56:00 GMT
    <![CDATA[Arbitration Proceedings in Nigeria]]> Arbitration Proceedings in Nigeria

    Trade is connected with the potential for strife, and the development of globalization in business implies that the potential for conflict has also developed exponentially. Then what can be considered to resolve such disputes occurring out of these commercial proceedings? Disputes eventually need resolution, and in commercial tradings, this means litigation, arbitration or any other alternative dispute resolution procedure. Courts are described by solidness, the judges are randomly allocated, and the procedures are strict and rigid. On the other hand, formation, and construction, the arbitration system is unique and adjusts to every particular case. Judges might be designated by the parties to the case, the tenets of the system and the relevant law can be indicated, and, it very well can be chosen where the mediation will occur.

    Nigeria is one such jurisdiction which has adopted Arbitration as one of its alternatives to Court's Dispute Resolution procedure for the smooth and immediate solution of the conflicts. The principle law that governs arbitration in Nigeria is The Arbitration and Conciliation Act 1988(ACA), which is functional over the federation except for Lagos State as it has its law, The Lagos State Arbitration law, 2009 (LSAL).

    The Nigerian Arbitration law is derived mainly from statutes both international as well as local. The international statutes include:

  • The UNCITRAL Model Law; 
  • The UNCITRAL Arbitration Rules; and
  • The New York Convention.
  • While the local statutes are:

  • The Arbitration ACT 1914; and
  • The Arbitration and Conciliation Decree 1988.
  • Nigeria is a contracting state party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Nigeria endorsed the Convention on 17 March 1970, and it went into power on 15 June 1970.

    As for the Article I of the Convention, the pertinent Nigerian law gives that any international or foreign decree dependent on the Convention might be perceived and upheld in Nigeria if the contracting state party where the decree was issued has equal enactment perceiving the authorization of arbitral decrees made in Nigeria as per the arrangements of the Convention. That law also confines the applicability of the Convention to only conflicts emerging out of a lawful relationship that is legally binding.

    The essential legal requirement, as contained in section 1(1) of the ACA is that every arbitration agreement shall be in writing or must be contained in a written document signed by both the parties. Section 1(2) provides that: 'Any reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if such contract is in writing and the reference is such as to make that clause part of the contract.'

    The above requirements will be satisfied provided the agreement is contained in:

  • a document by both parties;
  • an exchange of letters, correspondences, telegrams or other means of communication that provides a record of the arbitration agreement; or
  • exchange of certain points of claim and defence.
  • Section 2 of the ACA is unequivocal on the non-enforceability of an arbitration agreement. It gives that, except if a contrary intention is mentioned in the agreement, an arbitration agreement shall be unavoidable except by agreement of the parties or by leave of the judge or a court. It must also be noted that there is no provision on joinder of any third parties in the ACA. Although, the LSAL, which is applicable only within the state of Lagos, provides that a party can, by application in writing and with the consent of the parties, be joined to arbitral proceedings.

    The Arbitration and Conciliation Act ("ACA") does not explicitly list conflicts that are not arbitrable. The test is whether the conflict can be settled legitimately by method for accord and fulfilment (United World Ltd Inc v MTS (1998) 10 NWLR 106). The accumulative opinion of the legal scholars is that any such matters that affect the legal status of any individual are not arbitrable. A recent court decision mentions that such commercial conflicts resulted out of the fiscal clauses of contracts are not arbitrable, as the debate impacts on the government's duty of tax collection.

    Some examples as to arbitrable and non-arbitrable matters are as follows:

     Disputes that can be settled by arbitration include:

  • Breach of contract
  • Matrimonial causes
  • Tort
  • Compensation for acquisition of land.
  • Arbitration cannot be used in settlement of the following matters:

  • Disputes involving crime
  • Disputes involving the interpretation of the constitution or other statutes.
  • The proceeding of arbitration is much the same as to that of usual trial where parties to the dispute go through the procedure of examination of witnesses. This is but subject to any contradicting agreement by the parties as to whether the arbitral tribunal shall decide whether the arbitral proceedings shall be conducted (Section 20 Arbitration and Conciliation Act).

    An arbitration proceeding is provided for under section 15 of the Arbitration and Conciliation Act.

    Section 15 provides thus:

  • The arbitral proceedings shall be by the procedure contained in the Arbitration Rules set out in the First Schedule to this Act.
  • Where the rules referred to in subsection (1) of this section contain no provision in respect of any matter related to or connected with a particular arbitral proceedings, the arbitral tribunal may, subject to this Act, conduct the arbitral proceedings in such a manner as it considers appropriate to ensure a fair hearing.
  •  The power conferred on the arbitral tribunal under subsection (2) of this section shall include the power to determine the admissibility, relevance, materiality and weight of any evidence placed before it.
  • JamesMiller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd (1970) A. C 583 at 606.

    In arbitral proceedings, where the tribunal for arbitration determines on its own procedural rules, it is totally on its discretion to derive them from national law or formulate its own rules. It is imperative for the arbitral tribunal to observe the requisite rules of national law applicable to international arbitration in the national jurisdiction where the arbitration takes place to make sure that the decree to be made by it will be enforceable at law Arbitration being a matter of procedure as opposed to a matter of substantive law is governed by the lex fori (the law of the country in which an action is brought)

    As per section 14 of the Act, parties will be qualified for equal treatment, and they ought to be offered a chance to introduce their cases. The venue of arbitration will be decided by the tribunal with due respects to the issue and the convenience of the parties. The tribunal likewise can appoint and expected to provide details regarding the issue before it while it could also order the presence of a witness.

    The detailed procedure under ACA and its practice, certain procedural stages are required to be followed, especially for the institution to be valid or commencement of arbitral proceedings.

    These include:

  • Issuance of communication of the notice of arbitration by the claimant to the respondent in the format prescribed. As per Article 3 of the Arbitration rules, 30 days' notice is mandatory.
  • Constitution of the tribunal.
  • Meetings (preliminary meetings, pre-hearing meetings, pre-hearing review, an inspection of documents or subject-matter, etc.).
  • Hearing and determining preliminary issues if any.
  • Parties' presentation of cases, documents and evidences.
  • Hearing (if oral evidence is to be considered).
  • Re-hearing in the event of replacement of an arbitrator. Note that the re-hearing is mandatory in the event of replacement of the sole or preceding arbitrator, but in the event of replacement of any other arbitrator, re-hearing is at the discretion of the tribunal.
  • Final submissions (oral or written).
  • Publication of the final decree of the tribunal to the parties.
  • Apart from the above, there are other procedural steps under ACA, such as the procedure for the default of parties in appearance and presentation of a case and pleadings, the procedure for the challenge of arbitrators, the procedure for enforcement of an award or challenge of enforcements, etc.
  • Under ACA, parties have the autonomy in appointing arbitrators of their choice. This autonomy is although limited to the extent that the arbitrators appointed shall be independent and not partial and shall also give a declaration or disclose any such instances that may affect the independence or their impartial nature. The so chosen arbitrators shall possess the required experience and professional qualifications contained in the arbitration agreement to have a legitimately constructed tribunal and, consequently, a valid decree pronounced by it.

    Where the parties do not agree upon the method of appointment of the arbitrators, or where the method so chosen by them fails, the arbitrators will be appointed by the court.

    An arbitral award is perceived as binding and upon application recorded in writing to the court, be enforced by the court. The party relying on the decree or applying for its implementation will supply-(a) the appropriately authenticated original award or properly certified duplicate thereof; (b) the original arbitration agreement or a duly certified copy thereof. As per section 31 of the Arbitration and Conciliation Act, It ought to be noted that any of the parties to the agreement may ask for the court to reject acknowledgement or enforcement of the decree/award.

    Although the arbitration process is considered for several of its benefits ranging from speed and informality of the process, cost-effective, parties have the control over selection of the arbitrators, the processes are private and do not form the part of public records, it cannot be overlooked for its drawbacks as compared to a court proceedings. Like the absence of formal evidence process, lack of formal appeals process, mandatory arbitration clauses, arbitrators may not be unbiased, and the very fact that arbitration proceedings are not public may put one side at a disadvantage.

    Such an alternate dispute resolution process when putting to use minus the disadvantages can be beneficial in unloading the court's pressure of handling disputes.

    ]]>
    Mon, 10 Jun 2019 11:40:00 GMT
    <![CDATA[UAE Regulations Dormant Bank Accounts]]> UAE Regulations Concerning Dormant Bank Accounts

    Introduction

    Bank accounts are among the most critical and valuable accounts that can belong to an individual. Long past is the time when people would stash their money in hidden safes and secret location, and the concept of stashing ones valuables in a mattress is now nothing more than a joke, usually ending with another party questioning why the money wasn't merely stored in a bank account. In the developed world, the overwhelming majority of people have an account, and this also includes teenagers and kids.

    In the UAE, things are slightly different. The population of around 9.5 million consists overwhelmingly of expatriates, with the figure laying at around the 85-90% range being expats. These individuals are also mostly in jobs since the country will only provide visas to those currently employed. Due to these combined factors, Bank accounts are almost universally present.

    The UAE Central Bank governs banks and all activities performed by them. This entity is responsible for the financial sector of the country. It is to ensure the steady and healthy growth of the economy as well as managing the national currency. Most GCC countries have a Central Bank, which performs just this role, and the UAE is no different

    More importantly to this article, they also manage all banks and bank-related activities such as the producing of laws and regulations to be followed by all, as well as providing regular circulars to spread the word on updates.

    A recently produced circular concerned the matter of dormant bank accounts, and with so many expats in the country, people come and go all the time, and inactive bank accounts are an issue that would be more common than otherwise expected. It is imperative that there are tight regulations, and all are aware of them.

    2018 UAE Dormant Account Regulation

    The UAE Central Bank Circular Number 106/2018 was published earlier this year and covers the steps to be taken by banks for dormant accounts. It is essential to know just what will happen as the process in many countries is considerably different from those of the UAE. In the UAE, there are specific things to consider which aren't an issue elsewhere, and the question is one that many have, but not everyone has the answer.

    The circular begins by stating in its scope, that the following regulation is to apply to all banks in the UAE at all times.

    There are 10 Articles in total, and the objective of the law is to protect the balances of the bank's clients if a situation arises where a period of dormancy ensues.

    Article 1 first provides the criteria under which an account shall be considered to be dormant. There are different three types of accounts which are accounted for by this law, and each has a slightly different set of criteria surrounding them:

  • Personal savings or current account: Where there have been no deposits or withdrawals for six years from the last transaction (not including the bank's activities with the account);
  • Investment account: Where no communication with the customer can occur following twelve months from the date of final maturity;
  • Short term deposit account: Where no automatic renewal clause is present, but no communication from the customer in five years, or where the deposit has matured, though there has been no renewal or claim in 12 months.
  • If these periods have elapsed, and the bank has attempted to contact the customer to no avail, after two months, the bank will be able to notify the Central Bank of the dormant account. However, there are some certain caveats to this. If the individual has other accounts with the same bank or has a known current address, the above will not be applicable.

    Article 2 proceeds on the matter and informs banks of what is to happen with dormant accounts. Upon the confirmation of the position, the contents are transferred to a ledger, with a form to be filled in and a copy given to each department. Signature cards for the dormant accounts are produced and held separately from all other signature cards. The reason for this is to ensure no unauthorised persons can access the contents or perform any action. Further to this, all related documents for the account holder will require safeguarding.

    Article 3 looks at what the process will be regarding the reactivation or accessing of the account following the activation of its dormant phase. Herein it is stated that to commence the retrieval process, the owner of the account should approach the bank with the relevant documents proving their identity and open a claim to reopen the account. Following this, the bank should transfer the total value of the ledger back into the original account.

    Article 4 covers the responsibilities of the banks and specifies that there should be constant updates and check-ups with concerns to accounts to ensure up to date records. An important point to note is that banks cannot charge customers any fees to reactivate or close a dormant account; this is stated explicitly under Article 4.3.

    Article 6 covers Consumer Protection. 6.1 specifies that no matter what occurs, the account and all its contents will continue to remain their property. Any interest that the account would ordinarily accrue would still do so. On top of this, any credit owed to the account may yet be added to it without changing its status as a dormant account.

    Article 7 concerns accounts that remain dormant for extended periods of time. Should an account (so long as it has a value of over AED 3,000 and the individual who owns the account does not have a known address or different account with the same bank) be dormant for a period of seven years or more, its value should transfer to the UAE Central Bank under the 'Unclaimed Balances Account – Dormant Accounts. Article 8 covers the retention of accounts following this stage, and herein it is stated that the Central Bank will then hold on to them until a beneficiary comes to claim them.

    Finally, Article 10 specifies that this Circular will be published in the upcoming Official Gazette, and will become active one month following its publication.

    Impacts of the Circular

    Dormant bank accounts can be something of an issue for banks, as the primary methods through which the banks gain profit is from the interest earned on the loans they provide, and a vital source of the money these loans provide is the money that people save with the banks. However, in the UAE, since obtaining citizenship is not an option and instead, one must have a job and work in the UAE, there are many instances where people will leave their jobs and return to their home countries.

    If one were to consider these previous facts alongside one another, then, it could be surmised that in small quantities, dormant accounts would be of no real worry to banks. Though in the UAE, with the likely amount of inactive accounts being significantly higher, there is undoubtedly a need for regulations setting out the necessary processes so that the banks are aware of their duties and responsibilities.

    The circular itself is relatively simple, and from the bank client's point of view, there is not much of note here. The value of the account and all its contents remain the property of the customer, and at no stage can it be taken from them. All generally continues as it would otherwise, which includes interest earnings, and there can be no fees levied upon the account holder if they wish to re-establish their accounts or close them down.

    On the other hand, the banks must be aware of what they should do with accounts and at what point they are to act. Constant records are to be kept and updated, and there should be attempted communication between the parties to ensure that the account should remain under the dormant classification. The time before the designation of inactive arises may be relatively lengthy; thus, the importance of the records is highlighted by this.

     

    ]]>
    Sat, 08 Jun 2019 15:04:00 GMT
    <![CDATA[Domain Name Protection in UAE]]>  

    Domain Name Protection in UAE

    Nowadays, all kinds of information can be found on the internet. As a result, Governments, companies, organizations and individuals use websites to provide information online. These websites are domain names used in URLs, for example in the URL https://www.stalawfirm.com/en.html; the domain name is stalalawfirm.com. A domain in simple language is a field of thought, interest, or activity, over which someone has control, rights or influence.

    On the internet, a domain is a set of addresses that shows the category or geographical area to which an internet address belongs to. In short, domain names are used to represent particular IP addresses. Since the internet consists of IP addresses and not domain names, a Domain Name System Server is used by every Web Server to translate the domain names into IP addresses.

    Top Level Domains ("TLDs") are depicted as the suffix in a domain name and identifies something about the domain name such as the purpose, the organization to which it belongs to or the geographical area of its origin. They are a limited number of Top-Level Domains.

    SUFFIX

    ORGANIZATION/PURPOSE

    .org

    Organizations (non-profit)

    .gov

    Governmental Agencies

    .mil

    Military

    .com

    Commercial Business

    .net

    Network Organizations

    .edu

    Educational Institutions

     

     

     

     

     

     

    Suffix

    Country

    .in

    India

    .ae

    UAE

    .ca

    Canada

    .th

    Thailand

    Country Specific TLDs

     

     

     

     

     

    • Need for Domain Name Protection

    Principles similar to trademark infringement apply to domain name protection. Third parties, which are unrelated to the website owner, could create and register a domain name which is identical or like either the domain name or trademark of another party. These activities are commonly called as "cyber-squatting".

    Along with cyber-squatting, websites also run the risk of phishing, where fake websites are created like legitimate websites and are used to deceive customers into disclosing personal data. These fake websites often incorporate the trademarks belonging to the right website as well as the information provided in these websites, making the fake website appear genuine and confusingly like the legitimate one.

    • Domain Name in UAE and its Protection

    With the rapid growth of E-commerce in UAE and the other GCC countries, legislation has been put into place to ensure its protection. In the UAE, Internet Domain names fall under the authority of the ae Domain Administration with the Telecommunications Regulatory Authority. Enabled in 2007, ae Domain Administration:

    • Acts as the Registry Operator
    • Establishes and enforces policies for the regulation of the ae Domain
    • Facilitates dispute settlement about the domain names

    Brief History

    The ae Domain was initially under the UUNET and was later re-delegated to Etisalat in 1995 following a brief period of administration by the United Arab Emirates University. However, in 2006, the administration was transferred to the Telecommunications Regulatory Authority.

    Domain name registration in Dubai is permitted at the second or third level based on specific category labels. At present, only Dubai companies can use the.co.ae domain name for their websites.

    • Domain Name Licensing

    It is important to note that there are no proprietary rights about domain names in the UAE. Companies in Dubai and other emirates, to use the .ae domain name, are required to obtain a domain name license. Since companies cannot own a name, they are required to apply for a special permit which is granted based on certain conditions and for a specific period. The terms and conditions of the license are contained in several documents such as the domain name registration application, domain name license, applicant's agreement to use the .ae domain, and the policy by the ae administration. Additionally, companies in Dubai applying for a domain name reservation should also fulfil certain criteria of eligibility.

    Domain Name Licensing Zones

    There are two zones about the licensing requirements:

    Unrestricted Zone:

    Residing in an unrestricted zone, Unrestricted Domain Names may be registered by any Applicant and may be available through all Accredited Registrars.

    Restricted Zone:

    Located in the RESTRICTED Zone, the domain must meet the following eligibility criteria described in S11 to 16 of the Domain Name Policy.

    Eligibility Criteria

    The registrant must meet the following criteria, depending upon the suffix chosen, for registering Domain Names under 3LDS:

    • Commercial Entities/ Information Technology Service Providers

    For registering 3LDs ending with Suffix ". co.ae" and ".net.ae," the Registrant must either possess a valid UAE trade license, be a commercial entity licensed within the UAE free-zones, or an applicant or registered holder of a trademark in the UAE.

    • Not for Profit Organizations/ Schools and Academic Organizations

    3LDs with the Suffix "org.ae", "sch.ae" and "ac.ae":

    The Organization must ensure that the Administrative Contact is an employee or officer of the requesting organization and shall certify through the acceptance of the Registrant Agreement, that they have delegated authority to Register a Domain Name on behalf of that organization; and

    provide a copy of their Certificate of Registration or a letter to this effect from the competent authorities of the UAE (Ministry of Education in the case of "sch.ae" and Ministry of Higher Education and Scientific Research for "ac.ae")

    Domain Names

    For registering the Domain Names ending with (.co.ae), (.net.ae), (org.ae), (sch.ae) and (ac.ae) as suffixes the Domain Name  applied must be an exact match, acronym, abbreviation or closely connected to name, trading name or trademark of a company, organization or association to which the Registrant belongs to or controls.

    • Government Departments and Ministries of the UAE

    3LDs with the Suffix "gov.ae":

    A registrant must be a Government Entity in the UAE.

    The domain name can only be used for the official business of the organization.

    The Applicant must state in the application the purpose of the website associated with the specific Domain Name in respect of which the Domain Name License is sought. The Domain Name must be used specifically and exclusively for this purpose during the validity of the License period.

    The Administrative Contact must be an employee and shall certify through the execution of the Registrant Agreement that they have delegated to Register a Domain Name on behalf of the Registrant. The Applicants will also provide a Letter of Authorization from the relevant Minister or officer, authorizing such registration.

    • Military Authorities

    3LDs with the Suffix "mil.ae":

    The Applicant must be an organisation established in the UAE under the relevant laws and legislation as a military organization.

    Must be used only for the official business of the organisation, and specifically and exclusively for the stated purpose for the duration of the Domain Name License Period.

    The Administrative Contact must be an employee and shall certify through the execution of the Registrant Agreement that they have delegated to Register a Domain Name on behalf of the Registrant. The Applicants will also provide a Letter of Authorization from the relevant Minister or officer, authorizing such registration.

    • SETTLEMENT OF DISPUTES

    The United Arab Emirates Network Information Center (UAEnic) is a registrar for registering Domain Names under .ae (Top Level Domain). It is also LIR (the Local Internet Registry) that assigns IP addresses to the Local Internet Community.

    The UAE Domain Name Dispute Resolution Policy and related Rules provides for the grounds and mechanism of resolving disputes that arise relating to domain names.

    Grounds

    Any person or entity may initiate administrative proceedings against the Registrant of a Domain Name on the following properties:

  • The Domain Name is identical or confusingly similar to a trademark or service mark in which the Complainant has rights; or
  • Th respondent (that is the Registrant) should be considered as having no rights or legitimate interests in respect of the Domain Name in question; or
  • Domain Name(s) should be deemed to have been Registered or being used in bad faith.
  • The complaint can relate to more than one Domain registered under the same Registrar.

    • DISPUTE RESOLUTION MECHANISM

    Complaint- The complaint and all annexes are to be submitted in the electronic form with the concluding statement and other statements, requests, and specifications as provided in the rules.

    Administrative Compliance- On the receipt of the complaint, the Provider will first check for administrative compliance and when satisfied shall send the same with the annexes electronically and a written notice with the required documents to the Respondent. Where the Provider finds a regulatory deficiency, the Complainant shall correct such deficiency within five calendar days, failing which the complaint shall be presumed to have been withdrawn. The date of commencement of proceedings shall be the day the Provider completes all his responsibilities under S. 2(a).

    Response- Within 20 days from the commencement of the proceedings, the Respondent shall send his response to the complaint electronically with the same elements as the complaint along with his grounds and reasons as to why the Respondent should retain registration or use of the domain name.

    Panel- The parties can elect whether to have a single or three-member panel and specify the name and details of their candidates in the complaint/response. Where the parties have not specified any candidate, the provider shall make the election himself. After the Panel has been appointed, the Provider shall notify the parties about the appointment and the date by which the Panel shall forward its decision on the complaint. The decision in case of a three-member panel shall be based on the majority.

    Language- Unless otherwise agreed by the parties, the language of the proceedings shall be in English, and the panel may order the translation of any documentary evidence in other languages to be translated wholly or partly into the language of the proceedings.

    Settlement/Termination – The Panel shall terminate the proceedings where the parties before the conclusion of the proceedings come to a settlement or the Panel feels that the procedures have become unnecessary or impossible.

    • ANALYSIS OF CASES REFERRED TO WIPO ARBITRATION AND MEDIATION CENTRE

    CASE 1: Zalatimo Brothers for Sweets (Ahmed Zalatimo Company and partners) v. Jebril Hasan Abumarouf, Mix Zalatimo Sweets L.L.C, Case No. DAE2017-0008

    Facts:

    The Complainant (Zalatimo Brothers for Sweets) is a manufacturer of sweets in Jordan and has registered ZALATIMO BROTHERS FOR SWEETS as a trademark on October 8, 2000, with registration number 34331 in numerous parts of the world apart from Jordan, including UAE.

    The Complainant also has had a registered domain name <zalatimo.com> since June 8, 1998.

    The Respondent had registered a domain name <zalatimoh.ae>, which according to the Complainant, displayed a website logo similar to Complainant's logo to sell sweets.

    The Complainant, as a result, filed a complaint with the WIPO Arbitration and Mediation Center on December 11, 2017.

    • FINDINGS OF THE COURT:

    According to the Court, the Complainant satisfied the conditions of S.6 (a) (i), (ii) and (iii) of the Policy due to the following reasons:

  • Confusingly Similar or Identical
  • The Complainant had established its ownership of the trademark Zalatimo Brothers for Sweets. Though the trademark is covered for the whole of Zalatimo Brothers for Sweets and not "zaltimo" alone, the Panel was convinced the word "zaltimo" is the key and distinguishing component of the complainant's trademark. The mere presence of "h" added to the disputed domain, does not distinguish it from the original trademark or eliminate the confusion caused.  Besides the country code Top-Level Domain ("ccTLD") ".ae" is typically ignored when assessing the confusing similarity between two disputed domains as established in prior .ae decisions. Consequently, the Panel found the disputed domain name too similar, creating confusion with the domain name of the Complainant.

  • Rights or Legitimate Interest
  • The Complainant proved that:

  • the Respondent had no legitimate interest or right in the disputed domain; and
  • the Complainant hadn't authorised the Respondent to use its trademark as part of the disputed domain name.
  • Registered or being used in bad faith
  • Several pieces of evidence point out that the Respondent was fully aware of the Complainant and its trademark when it registered the disputed domain name and had been using the Complainant's trademark in bad faith. The facts indicating bad faith were:

    • That the trademark for Zaltimo Brothers for Sweets was a well-known trademark.
    • That the Respondent was using the trademark for the same purpose, that is sweets.
    • That the Respondent imitated the logo of the Complainant's trademark, thereby trying to create confusion in the mind of customers to steal the Complainant's clientele.

     

    ]]>
    Sat, 08 Jun 2019 11:25:00 GMT
    <![CDATA[Dubai Electronic Transactions Statute]]> Dubai Electronic Transactions Statute

    Introduction

    Dubai is a city that is globally known for its high living standard for those who reside therein, but also its flashy and highly impressive locations and attractions. It is a popular tourist destination which hosts millions of foreign visitors every year. The numbers have grown dramatically throughout the years, with there being around 14 million overnight visitors in 2017, and the first half of the year seeing over 8 million alone.

    With this level of visitation that occurs regularly, there is a considerable amount of money being spent in the country on all types of products from the ultimate luxuries to the most ordinary of goods and services.

    However, it is turning into an ever greater norm than ever around the world for transactions to be completed online. There are many ways in which this occurs, including through the use of credit and debit cards all the way to entirely online transactions which then get delivered to chosen locations.

    Times have changed, and while there was once universal distrust of performing online transactions, the changes that have arrived have made all processes far more secure. One of the reasons for the shift we see in confidence is the rise in regulations which provide people with confidence. There must be constant tracking and records made around all transactions so that a traceable path exists.

    Beyond this element, great strides have also arisen on the part of the consumers specifically surrounding payment methods and online security. With the world making ever greater shifts towards integrating technology, there have appeared numerous improvements. Online payment methods such as credit cards are far more trustworthy now than ever, and other methods such as PayPal are generally very secure. Up and coming concepts such as cryptocurrencies have the potential to propel this even further.

    This trend is expected to continue, and change may arrive even faster with the younger generations growing up with these technologies. The laws on the matter are of greater importance every day and already prominent in many jurisdictions globally, and this certainly includes the UAE.

    The UAE has had more reason than many to adapt and adopt the change quickly. They introduced their regulation, the Electronic Transactions and Commerce Law Number 2 of 2002 (Dubai Electronic Transaction Statute or DETS), which arrived during a booming time in the nation's growth. This regulation will receive further discussion and analysis here along with any other issues or related side topics.

    Electronic Transactions and Commerce Law

    There are a few highly notable aspects of this law which demand consideration. These are as follows:

  • Requirements for and the processes of electronic transactions;
  • Issues and conditions surrounding writings and signatures in electronic transactions;
  • The matter of communication in electronic transactions. Secure methods must exist, and their forgery requires prevention;
  • There must be rules in place to identify and authorise electronic transactions;
  • The evidence is a hugely important area to consider. Not only does it make any further processes easier to handle in the case something goes awry, but it also ensures that consumer confidence significantly improves;
  • There are also penalties in place for breaking these laws.
  • With these elements considered and put down as legislation, confidence rises. Now, these elements will undergo further analysis and the stance of the law for each shall be provided.

    Electronic Transaction and Communications Requirements

    This concept is covered under Chapter three of the DETS and sets out the basics of what is required for an electronic transaction to be legally binding. To begin with, some of the most basic and critical aspects of a contract are that of offer and acceptance. These are among the most critical areas that require fulfilment before a deal comes into existence.

    Article 13 (1) states that it is possible that the offer and acceptance stages of a contract may, in part or as a whole, occur through online means of communication. This confirmation is a crucial one, as the offer and acceptance stages are known across the majority of global jurisdictions to be of primary importance and are required to form legally binding agreements.

    Article 13 (2) continues by stating that a case shall not be dismissed on the sole basis that its completion occurred through electronic means of communication. These two points are present in almost every online or electronic transaction, and thus this law confirms that they are permitted.

    In terms of communication through electronic means, Chapter two, Article 7 states that electrical communications cannot be rejected merely because they are electrical in form. Beyond this, Article 7 (2) clarifies that information requires no specific mention within the communication. Instead, what is referred to should at the minimum be obtainable and clear in what it is regarding and relating to and should not be confusing on this front.

    On top of this, it is highly essential to keep a record of all present documents. Article 8 states that electronic records are to be retained in their initial format of production rather than any other form. Further to this, it should be kept in a place and manner that is accessible for future reference.

    Presentation of Electronic Evidence

    Federal Law Number 1/2006 concerning Electronic Commerce and Transactions

    While the matter of electronic evidence receives coverage within this regulation, it is not the main rule. Law Number 1 of 2006 covers electronic transactions and commerce, while taking a further dive into evidence and its admissibility in a court.

    This law also considers the overall UAE legal stance on the matter as the previously discussed law primarily concerns the Emirate of Dubai.

    An example of a court case relating to electronic evidence is the Dubai Court of Cassation, 277/2009, in which it was confirmed that emails have legal force, and other forms of electronic communications are also applicable. It is the obligation of those involved to ensure reliable records and communication standards are kept.

    All in all, the Federal law is very similar to the Dubai law that was released five years prior, though it covers a broader jurisdiction and goes into greater depth on the matters of electronic evidence and signatures. In the modern world, it is something of a requirement that electronic signatures and evidence be handled severely and get taken into consideration appropriately. Article 18 of the Federal Law Number 1 of 2006 concerns Electronic Signatures and Electronic Certificate Attestation. In both of these cases, they are acceptable in a court of law as evidence so long as (as stated under subsection 1) reliance upon them would be a reliable path to take. As such, if it is clear that the electronic signatures or attestation were a requirement and crucial aspect of an agreement, it would likely be accepted. However, on this matter, it is essential to clarify precisely what the reliable occasions of reliance would be. Article 18 (3) covers just this. Some of these crucial points are as follows:

  • The signature must have been initially intended to support the matter at hand;
  • The party relying on the signature must have taken the appropriate steps to ensure it meets the standards of reliability;
  • The matter of any (reasonably assumed on the part of the relying party) compromises or revocations of the signed documents;
  • Any other relevant factors that the court may find of importance.
  • On top of this, foreign certificates and signatures also require consideration, as the international business nature of the UAE would suggest that numerous electronic documents and signatures arise in the country regularly.

    Dubai Court of Cassation 35, 2008, is another case in which solidifies the idea. The idea is that electronic records and documents will hold the same legal probative as physical evidence of the like.

    Article 23 of the Federal Law discusses just this and states that these signatures and certificates are acceptable within the UAE jurisdiction. Section 23 (1) says that no consideration is required on the part of the jurisdiction and the only element to consider is the validity. Subsection 2 specifies this by stating that the most critical aspect to consider is the validity and reliability of certificates and signatures.

    Penalties

    Signatures and certificates are significant in whatever form they are available. They often hold important purposes and may carry weight in litigation, and therefore severe penalties are required to ensure compliance.

    Chapter 7 of the Dubai Law covers penalties, and Article 29, which concerns fraudulent certificates states that any production or publication of such a document is strictly prohibited. Further, the Article specifies that a penalty of imprisonment or up to AED 250,000 fine may apply.

    Article 32 states that anything that would be considered a crime under UAE law would also be considered a crime if committed electronically. Overall, the penalties are confinements of up to six months and AED 100,000 of fines, and if the offence has greater punishments as per different law, they may apply here.

    Any tools utilised in the production of these illegal electronic certificates will be confiscated as per Article 34 of the law.

     

    ]]>
    Tue, 21 May 2019 15:35:00 GMT
    <![CDATA[Joint Operational Area]]> Joint Operational Area

    Introduction

    The JOA is a primary legally binding system where multiple gatherings hold hands are intending to make a benefit. It includes high dangers and expenses; however once a triumph; high rewards are accomplished. This empowers JOAs in the O&G business. It is an agreement between parties, who are either operators or non-operators, consenting to endeavor a typical task of E&P, to get benefits like risk mitigation and sharing the cost engaged with creating and delivering. It isn't equivalent to an association because there is sharing of benefits emerging out of joint activities.

    Various Clauses

    Default Clauses

    This clause raises a condition when there is a failure of payment of the cash calls by either party to the JOA. It is held in instances of the non-defaulting parties reluctance in procuring 'the defaulter's interest, there is surrender and decommissioning of the activities, and the liabilities are shared on a star rata premise between the rest of the parties.

    In thought, a JOA must give security arrangement if the parties default in meeting the business commitments. The revision in the UK JOA has incited an expansion in the default loan fees; though relinquishment stays unsafe in association with indebtedness, default similarly prompts 'voting rights,' the rights to data and the privilege to pull back' being suspended.

    An inability to add to the money call prompts a default which can be ensured by the guiltless gatherings making up to 'the shortfall pro-rata.'

    Penalty Clauses

    Usually, JOA incorporates an installment provision for a break, in any case, on the off chance that it surpasses 'the expense of the termination, the court will run it as an unenforceable penalty proviso.

    Robertson v Driver's Trs held the exchanged default statements as enforceable yet the penalty provisos as unenforceable. Cavendish Square Holdings case was proclaimed as 'the landmark judgment on the standards against default,' and it gave the relevance of the standard and when would it be able to be pronounced correctional and thus unenforceable.

    Likewise, the Clydebank case built up the way that the type of the arrangement is to be considered 'in choosing whether it accommodated liquidated damages, in which case it would be enforceable, or a penalty, in which case it would not be enforceable.' The arrangement which is 'indulgent or unconscionable or extreme' is unenforceable. Neither the Scottish Law Commission nor the English Law Commission required the annulment of the standard; instead, it extended its degree.

    Penalty and Forfeiture Clauses

    For a long time, Jobson and Johnson asserted the use of penalty rule to forfeiture clauses, concluding that it was not enforceable to the extent there is an arrangement to repay the non-defaulting party for the misfortune.

    It was bantered about the association of the penalty and forfeiture clauses because, in a penalty, cash is recouped by the method for harms; and relinquishment comprises of relinquishing the assets tidying up the damages and debts.

    The innocent parties can guarantee relinquishment and can secure 'the interests of the defaulting parties' if the default proceeds for more than the time of 60 days. The standard for legally binding punishments gives that if the cure is finished up as a punishment, at that point, it is 'void and hence unenforceable.'

    Cavendish Square Holdings Case

    It was held that if the defaulting party loses his interest for the JOA, at that point, it very well may be contended that the statement was a punishment and along these lines unenforceable. Be that as it may, the Cavendish ruling was invited over Dunlop which separated punishment on the four-overlap test. Here, the dealer's break made him the defaulting investor. The vender contended that the statements were unenforceable punishment provisions. In any case, the Court was of the view that the retention and relinquishment conditions were enforceable and henceforth overruled the choice of the Appellate court.

    The intrigue in Cavendish was permitted, and the appeal in Parkingeye was rejected, however the Supreme Court overruled the Appellate court choice and held the punishment statement to be enforceable, putting aside the old test for the assurance of enforceability since it was unsuitable and was an ' artificial categorization and a straightjacket into which the law risked being placed by an over-rigorous emphasis on a dichotomy'.

    In Andrews v ANZ Banking Group Ltd the bank charges forced on clients were described as penalties and in this way unenforceable.

    The True Test

    The case expressed that the right and adaptable route in deciding a penalty proviso, pressure ought to be given to examining the commercial justification. The Court recognized that while convincing execution of commitments, it didn't 'make the forfeiture provision an unenforceable penalty.

    The new true test supplanted the old test in Jobson v Johnson. 'The true test is

    • 'whether the reprimanded arrangement is a secondary obligation;'
    • 'which forces a disadvantage on the agreement breaker; exorbitant;'
    • 'unconscionable - out of all extent to any legitimate interest of the other party in the requirement of'
    • 'the essential commitments.'

    This test relates just the assurance of the statements to be secondary obligations. The Court recognized auxiliary commitment as the 'one which characterizes the proportion of pay payable by a gathering on the off chance that it breaks an essential commitment… '. A straightforward case of a primary obligation would be delivering the goods and the payment of a predetermined amount as a penalty if goods being undelivered will be a secondary obligation. Presently, it was interpreted that if the condition managed secondary obligation, the following perspective to consider is its enforceability. The statement is unenforceable just if the arrangement is 'over the top,' 'excessive,' 'unconscionable' or an 'out-of-extent disadvantage' in examination 'to the innocent party's genuine intrigue.'

    The test is separated into three stages. Stage one is setting up the idea of commitment. Next, researching 'the legitimate interest of the blameless party… '. In conclusion, 'where the default remains un-helped, the defaulting contractual worker is required to allocate a few or all.'

    The law will remain in generally separate 'from the general standard of strict authorization by enabling punishments to be altered where they are high.

    Penalty Clauses in Oil and Gas Industry

    The guidelines administering the penalty clauses express that the application is restricted just to customer contracts. Numerous reasons have developed for being careful when the forfeiture clauses in a JOA are drafted or authorized. The O&G JOA directs 'the unincorporated relationship of gatherings holding interests in a basic permit or allows' however there is no definite proof of the relinquishment provisos being treated as enforceable in the O&G JOAs.

    The provisions are unenforceable where they give 'a fixed installment to be made rather than harms, yet don't put together this concerning any endeavor to pre-gauge misfortune.' The taking part interests are relinquished for a default by the gathering in satisfying the installment commitments.

    It was opined as time being a substance for the break and that the subject of a provision being corrective or not is to be settled on the conditions of each agreement when the deal was entered and not amid the rupture. Ruler Neuberger and Lord Sumption said 'the punitive outcomes of legally binding arrangement neglect to decide as at the season of the understanding.'

    The default can barely be found in the business, yet the RSM case which managed the enforceability of relinquishment statements is proof that default can happen.

    Numerous JOAs like the OGUK or AIPN requests giving a composed notice implying the idea of the default, to the non-defaulting gathering and provides elegance with time off for the most part 30-60 days to cure the disappointment, making the conditions less correctional since an open door is granted to the defaulting party for amendment. The English courts are given the expert to provide evenhanded alleviation from relinquishment if the gathering protects its case.

    The relinquishment conditions which accommodate necessary selling of hydrocarbons toward the begin, and relinquishing the taking an interest interests on its expansion, are considered as "excessive" and henceforth unenforceable.

    Conclusion

    The default provisions offer stability' to the operating agreement. No clear answer is given by the Supreme Court in the case of Cavendish for the enforceability of forfeiture provisions in the O&G industry.

    Makdessi is undoubtedly not an ultimate word on penalties since there will be developments which will study the limitations of the new test.

    However, there are still arguments about upright commercial reasons to think that forfeiture clauses in JOAs are, overall, doubtful to be unenforceable penalty clauses.

    The criterion is determining the secondary obligation imposing a detriment, on the defaulting party, over proportionate to the legitimate interest of the non-defaulting party, while the primary responsibilities are enforced.

    The default in the payment of cash calls is due to low oil prices and regulatory changes. As there are not many cases regarding default provisions in the industry, uncertainty remains high and sometime must pass for a common view in the UKCS.

     

    ]]>
    Tue, 21 May 2019 14:35:00 GMT
    <![CDATA[Cybersecurity in Corporate Governance]]> Cybersecurity in Corporate Governance- A Global Purview

    The historical backdrop of cybersecurity started with a research venture. A man named Bob Thomas understood that it was feasible for a computer program to move over a system, leaving a little trail wherever it went. He named the program Creeper, and structured it to travel through Tenex terminals on the ARPANET, and thus printing the message as "I am the Creeper, catch me if you can."

    A man named Ray Tomlinson (the same person who evolved email) saw this thought and liked it. He amended the program and made it self-recreating-the primary PC worm. At that point, he composed another program-Reaper, the first antivirus programming-which would pursue Creeper and erase it.

    It's funny to think again from where we are presently, in a time of ransomware, fileless malware, and country state assaults, and understand that the predecessors to this issue were less unsafe than today. And we have so evolved from there to here.

    The term Cybersecurity alludes to the innovations and procedures intended to guard computer frameworks, programming, systems and client information from unapproved access; also from dangers disseminated through the Internet by cybercriminals, hackers, and terrorist groups. Cybersecurity is nothing but shielding your gadgets and system from unapproved access or modification. The Internet is just not a source of information; however, it is likewise a medium through which individuals work together and do business.

    Today, individuals utilize the Internet to publicize and sell items in different structures, speak with their clients and retailers, and perform money related exchanges. Because of this, programmers and cybercriminals utilize the web as a device to spread malware and complete digital assaults.

    Cybersecurity means to ensure the computers, systems, and software programs from such cyberattacks. The majority of these cyberattacks are done to get access, or to change, or to erase sensitive information; to extort money from such victims of these attacks, or to purposely interrupt daily business activities.

    Types of Cybersecurity Risks and Threats

    Ransomware: It is a malware type where an attacker locks up the victim's computer and its system with files, mainly through encryption, and thus putting up a demand of money to decrypt the files and unlock the system.

    Malware: It is any such file or program that is used to harm a computer, such as computer viruses, worms, spyware and trojan horses.

    Social engineering is such an attack that depends on human conversations to trap users into breaking security strategies so as to have access to delicate data that is normally ensured.

    Phishing: It is a type of fraud where fraudulent emails are directed towards individuals making such email resemble of being from reputable sources; but in actual, the aim of such emails is to abstract sensitive data, for example, credit card details and login information.

    Corporate Governance concerning cybersecurity

    As there emerges any new and important issue, may it be of business losses, gains, or of a certain breach, it is directed to the board of directors for discussion labeling it to be extremely complex and sophisticated. Cyber risks have developed through a long span of time, and they are surely here to stay with more threats than ever before.

    Board of directors in the company do discuss cybersecurity into their meetings and agendas at several times in a year. But the speed and with the danger that cyber risk is growing, it will eventually become a standard practice to discuss and include cybersecurity as an ordinary item on the agenda.

    As the complexities of innovation and technology proceed to advance and threaten corporate occupations, the board of directors should build up their very own insight about technical issues and depend on technical experts as a feature of best practices for good corporate governance.

    Board directors in their individual capacity might not have the technical specialization to comprehend the complexities engaged with cybersecurity. Nonetheless, in their individual capacity, together with other board and with the help of other specialized technical experts, they should keep on looking for approaches to fortify the security efforts of their corporation.

    While the board of directors need not directly involve themselves with the cybersecurity concerns, they shall be aware of the various areas that they look into that has some level of cyber risk.

    Board directors are concerned and responsible directly for the risk management of the company, which also includes the management of cyber risk. Boards must look into the area of their internal controls that will alarm the board and keep updated with the potential cyberattacks.

    Board of directors likewise bear the obligation to ensure that their management is being considered responsible for constantly preparing and training the team that is concerned with the maintaining of corporation's security. Board likewise need to ensure that IT groups or other security groups are performing thorough testing all the time, ideally by outsiders. While the usage of the system for cybersecurity rests decisively with senior administration, board executives are in charge of supervising their endeavors and considering them responsible.

    Cyber breaches can lead a firm or the corporation for legal complexities. Board director's primary duty is to follow and be obedient to federal, state or local laws and thus secure the corporation from unwanted litigations. As a feature of good governance, it is the duty of the board to protect all its employees, stakeholders, shareholders against all the legal problems resulting out of such cyber risks.

    Cybersecurity is just like any other enterprise management-level risk. Thus, it is for the management and board to evaluate cybersecurity as they would assess any other risk. Board needs to look into the area of cybersecurity with the aspects of how to avoid the risk, how can the risk be mitigated, what are the possibilities of insuring against it, and take important decisions directly connected with such risks. Board has to minutely study their cyber insurance policy and confirm that the policy coverage is enough wide to cover all the risks that the corporation may be facing from time to time. It must be the task of the Cyber risk analysts to update the board with the information regarding reputational and financial costs that the corporate may have to incur in the event of a breach.

    It is important for the board to shift their focus on the concerns of cybersecurity, keep themselves updated with the same and take prompt actions in case of a breach as the risks in the cyber world are evading manifold due to the expertise that these hackers are trained and practiced.

    Many companies are hiring and creating a position for a Chief Security Officer (CSO) or a related corporate executive position. These executive personnel may be responsible for:

    • Development with the implementation of a plan that will protect the company from cyberattacks.
    • Training the workforce on cybersecurity risks.
    • Developing such systems that will prevent cybersecurity breaches.
    • Creating backup plans to overcome the contingency of a security breach and thus avoid an adverse impact on business.

    From a legal perspective, there are certain guidelines for some specific industries through various laws such as Sarbanes-Oxley, HIPPA, and Graham-Leach-Bliley. But for some private companies, the best practices to develop cybersecurity are yet to evolve and research to achieve the same is in the process. It is important for these private entities to partner with the government for developing cybersecurity through collective discussions and recommendations.

    Cybersecurity will turn into an inexorably imperative issue for organizations of all sizes. The legal principles will develop after some time and may take a very long time to be broadly embraced as best practices. Those organizations giving the most consideration to the danger of cybersecurity will be less affected and will be in a position to avoid and combat unexpected liabilities.

    ]]>
    Tue, 21 May 2019 14:08:00 GMT
    <![CDATA[Tenancy Law in the UAE]]> Tenancy Law in the United Arab Emirates

    Introduction

    Tenancy law is a fundamental regulatory framework that systemizes the relationship between tenants and owners. It defines the obligations, risks, and procedural requirements to deal with disputes. In the UAE the provisions regarding tenancy law are found under Federal Law No.5 of 1985 on Civil Transactions, while some of the emirates have extended regulations under local decrees.

    The articles set out different obligations on the parties while leaving room for variant agreements. For instance, the articles provide that unless otherwise agreed by the parties, the landlord shall be responsible for the maintenance of the leased item, and any defects or damages that come as a result of inadequate maintenance. While the tenant is responsible for the upkeep of the unit as an ordinary person would, in addition to abstaining from any alterations or substantial changes to the object of the lease without the consent of the landlord. Where one of the parties was found derelict or negligent the articles obligate the party at fault to indemnify the losses under the discretion of the court. However, all disputes arising as a matter of tenancy law could be heard exclusively by the Real Estate and Rental Dispute Settlement Committee.

    Real Estate and Rental Dispute Settlement Committee

    The committee was formed by order of Decree No. 2 of 1993 to create a committee specialised in resolving disputes arising between lessors and lessees. Following the formation of the committee, the courts would no longer hear disputes arising between the parties of a lease. There were numerous cases where the court dismissed a claim regarding a disputed lease agreement, even where a governmental entity nullified the validity of the contract. In a case where the Chamber of Commerce terminated the lease of a Hotel for commercial purposes, the court ruled that, "as per article 1 of Law No. 2 of 1993 (on the formation of a judiciary committee to resolve disputes arising between lessors and lessees of any nature), the Explanatory Decree No.1 of 1999, and the proceedings of this court, it is not permissible for any tribunal but the mentioned committee to hear disputes arising between lessors and lessees with regard to uncovered funds. The tribunal was offered jurisdictional competence relating to public order, and therefore, the jurisdiction to hear such disputes was stripped from the ordinary courts. The termination of the contract by the Chamber of Commerce does not affect this decision, so long as the disputed contract gave the plaintiff and the defendant the character of the lessor and a lessee".  However, since late 2013 and by order of Decree No. 26 of 2013, the establishment of the Real Estate and Rent Disputes Settlement committee was repealed and replaced by the Rent Dispute Settlement centre structure. Fundamentally, the replacement was to resolve issues and inefficiencies within the former committee. Significantly, the new centre has a higher degree of judicial involvement, in addition to a faster and simpler mechanism. The powers of the centre were also limited to exclude financial and long term leases.  Also, the centre has a reconciliation division for adjudicating before raising the matter to the First Instance Division. However, the centre is still responsible for all tenancy agreement and has exclusive jurisdiction to hear rental disputes.

    The Civil Transaction Law defines a lease as an ownership grant of a specified object for a specified period for a specified time. The articles do not differentiate between commercial and residential leases as far as the maintenance, and the upkeep of the unit is concerned. Therefore, the tribunal would apply those general rules to all lease agreements, while recognising the different measures of care required for each. Article 777of the Civil Transactions Law provides that where an item is leased a lease has the right of enjoyment as contracted, where the lessee exceeds this right he may be found liable. However, if the agreement does not state the extent of enjoyment available for the lessee, it should be reasonable according to the purpose of which the property is designed.

    General Obligations

    Lessor

    The lessor may not interfere or disrupt the lessee with his enjoyment of the leased property during the period of the lease. The lessor is also liable for the action of his servants that may prevent the lessee from enjoying the property as contracted. Unless the lessee had knowledge of a particular defect before the lease agreement, the lessor shall warrant the lessee of all defects in the property that may significantly affect his enjoyment.

    If the lessee is deprived enjoyment of the property for any of the above mentioned the reasons, then he is entitled to either recession or reduction of the rent. Additionally, the lessee is entitled to damages for the prejudice sustained against him

    Lessee

    On the other hand, the lessee may not exceed his power of enjoyment as stated by the agreement, or in accordance with the reasonable standards of the property. The lessee may not introduce any changes or alterations without the permission of the lessor. The lessee is bound to carry out frequent restoration and cleaning works that customarily are the responsibility of the lessee. Finally, the lessee may not prevent the lessor from carrying out his duties, such as maintenance work etc.

    Fit-out work

    As mentioned earlier and following article 778 of the civil transaction law, the lessor may not make any substantial alteration to the object of the lease without the consent of the lessor. The lessee may only make alterations necessitated for the repair of the premises, and no damage should be suffered as a result of such adjustments. The lessee is liable for any alterations and damages that may be caused by them. Essentially, the lease puts the lessee on trust for the object of the lease. This relationship is reflected in the ruling of the court where it expressed that "following articles 778, 784 and 792 of the Civil Transactions Law, it may be inferred that the position of the lessee on a lease is that of a trustee in a fiduciary relationship, where he stands responsible for any shortage, deterioration or losses suffered as a result of his negligence or intentional breach. Furthermore, it is not permissible for the lessee to introduce any substantial alterations to the object of the lease without the authorization of the lessor. Consequently, if the tenant infringes this obligation, they are liable to restore the object of the lease to its former condition. Moreover, the lessor is entitled to claim damages for any losses suffered as a result of the infringement."

    However, the lessee could avoid indemnification if they could provide sufficient evidence that the damages or losses suffered were not as a result of their perpetration or negligence. Here the burden of proof is on the lessee.

    Insurance Claims (subrogation)

     A question that may be raised at this point is where the lessor has insured the object of the lease, who bears the risk of the losses suffered and the burden of the legal claim? In a case where the insurance company raised a claim against a lessee for the reimbursements paid to the insured party, The Court of Cassation ruled that according to article 742 of the civil transaction law, the character of a lessor is attributable to one who leases a particular benefit for a specified period of time for a determinate value. If the lessor has insured the object of the lease, it is upon the insurer to comply with the insurance policy and compensate the lessor for the losses suffered.   It is also permissible for the insurance company to replace the lessor with regards to any claim regarding his property. Additionally, the insurer may claim for the reimbursements paid to the lessor as a result of the infringement. 

    Note that the Court of First Instance dismissed this case on the grounds that only the Real estate and Rental dispute committee have jurisdiction to hear lease agreement disputes. However, on appeal the Court expressed that the insurer derives this right from a statutory action and not from a transferred power of attorney, thus, the insurer does not base the claim on the damages caused on the object of the lease directly, but only on risk the insurer had to bear as a result of the lessee's infringement. Consequently, this claim may not be raised in the tribunals of the Real Estate and Rental Dispute Settlement Committee, but may only be raised within the ordinary courts of the land, as mandated by statute. Therefore, only after the insurance company reimburses the injured party, the insurance company may seek a claim against the lessee. The lessee might find themselves liable for additional damages after the insurance claim since the insurance would reinstate the lessor only for losses suffered as a result of the damages and not as a result of missed out profits.

    Conclusion

    The tenancy law provides for a common ground where the tenant may enjoy his unit without interference while protecting the benefit of the landlord in his property. Therefore, the enjoyment of the leased unit is limited by the desired beneficial interest of the owner. Alterations to the nature of the apartment may not be in favour of the landlord, if however, the owner gave the tenant consent to make certain fit-out works then it is only permissible to the extent of the agreement.  It is also advisable for tenants to insure the fit-out work they want to undertake to avoid the risk accompanied by any damages that might occur. It is highly likely that the fit-out work would revoke the landlord's insurance policy, and the agreement would put the tenant at liability for any losses suffered. The tenant may also be joined in the insurance policy with the landlord, this way the insurance is meant to cover the tenant as well as the landlord. Most importantly, the insurance company will not be able to practice their right to subrogation against an insured party. Finally, the tenant would also need to obtain a license from the competent authorities before initiating any heavy restoration work, such as that which would require digging or altering the structure of the building. These are authorities that are concerned with urban development and planning control. 

     

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    Tue, 21 May 2019 11:56:00 GMT
    <![CDATA[UK MERGERS REGIME]]> UK Mergers Regime –

    The UK is moving towards Reform of National Security and

    Infrastructure Investment Review in The UK

    Introduction

    Generally, countries introduce merger control regimes that are assessed based on competition criteria. However, most merger regimes also allow consideration of public interest criteria when scrutinizing mergers. The most common public interest criteria are those that allow governments to intervene on grounds of national security. National security threats may include acts of terrorism or actions of hostile states related to Cyber-warfare, supply chain disruption of certain goods or services,  sabotage of sensitive sites and lastly espionage or leverage. There are four aspects of the United Kingdom's economy that are particularly susceptible to national security risks. These are, firstly, the core national infrastructure sectors (the civil nuclear, communications, defense, energy and transport sectors). Secondly, certain advanced technologies including computing, networking and data communication and quantum technologies. Thirdly, critical direct suppliers to the government and emergency services sectors and lastly military or dual-use technologies.

    The UK government noted security gaps in the military and dual use sector, and parts of the advanced technology sector. The military and dual use sector refers to enterprises that design or manufacture military items or hold related software and technology subject to export controls. This sector is also comprised of enterprises that design, produce or have technical expertise in items that are primarily for civilian uses but could also have military applications.  The advanced technology sector includes activities relating to computing hardware and quantum technology. Computing hardware covers business that own, create or supply intellectual property relating to the way that computer processing units function and that provision or manage roots of trust in relation to processing units. Quantum technology refers to businesses that carry out research into, design, or manufacture quantum technology such as quantum computing or simulation and quantum communications. The UK faces new security challenges in these sectors because of the greater interconnectivity of the nations and greater flows of capital, as well as the increasingly complex economic and political landscape.

    Background

    Following a government consultation on 17 October 2017, The UK government published The Green Paper on National Security and Infrastructure Investment. Several transformative proposals were presented to ensure that national security is not undermined by inbound mergers or investments. The proposals are aimed at extending the scope of governmental authority to intervene in transactions for the preservation of national security, while simultaneously mitigating any negative effect these reforms may have on predictability and procedural transparency. These proposals were made in anticipation of the British exit from the European Union (Brexit). Moreover, the UK government recognized the need to protect the country from hostile actors when it was unable to block China from investing in the nuclear power plant Hinckley Point.  

    The UK Government suggested implementing the reforms through a two-stage process: short term reforms and long-term reforms. Two public consultations followed, the first focusing on the changes to the Enterprise Act of 2002 and the Competition Act of 1998 and the second on longer term options. On 11 June 2018, the new rules contained in the Green Paper came into force. In July 2018 the UK Department for Business, Energy and Industrial Strategy published its National security and investment: proposed legislative reforms (The White Paper).  

    The Old Regulatory Framework versus The Proposed Regime

    The UK relied on the Enterprise Act 2002 as amended by the Enterprise and Regulatory Reform Act 2013 (ERRA) to review mergers on national security and other public interest grounds alongside the competition regime. Under this legislation, the Competition and Markets Authority (CMA) can block a merger or takeover claiming it will lead to a substantial lessening of competition. The new regime removes the existing national security considerations from the realm of the Enterprise Act 2002. National security is now considered distinct from public interest issues which include, plurality of the media and ensuring financial stability which are dealt with in the Enterprise Act 2002 merger control regime.

    Previously, the UK government could only intervene on grounds of national security if the Competition and Markets Authority (CMA) or the European Commission's jurisdictional thresholds for merger control review were met. Under the proposed new regime, national security review of foreign investment would be separate from a competition assessment and would not involve the CMA. Decisions would instead be taken by a Cabinet-level minister such as a Secretary of State.

    The new regime introduces new jurisdictional thresholds relating to mergers, acquisitions and investments that involve military dual use technology and the advanced technology sector. Where the UK government could only intervene in mergers and acquisitions that involve companies with a UK turnover of more than £ 70 million, the proposed reforms allow the UK government to intervene in mergers where the companies have a UK turnover of over £ 1 million. Previously, the UK government could only intervene in a company where the share of UK supply increases to 25% or over, or one which does not meet that threshold but involved a party designated as a government contractor. Currently the UK government will be able to intervene in mergers or acquisitions that meets the current test of creating or enhancing a share of supply of at least 25% without the need for an increment to the share supply.

    Main Features of the Proposed UK Merger Control Regime

    Trigger Events

    There are several trigger events that may be reviewed by the UK government on national security grounds. Firstly, the acquisition of more than 25% of the voting rights, shares or equivalent ownership rights in an entity. Secondly, the acquisition of significant influence or control over an entity in the form of formal rights and/or a practical ability to influence or control. Thirdly, the acquisition of further influence or control over an entity above the thresholds such as the acquisition of 50% of 75% of shares or voting. Fourthly, the acquisition of more than 50% of an asset including acquisitions of land that may give rise to national security risks due to their proximity to sensitive locations. Fifthly the acquisition of significant influence or control over an asset which may include licenses or intellectual property rights is a trigger event. Finally, a loan may also constitute a trigger event at agreement, default or acquisition of collateral depending on the circumstances or if the lender obtains significant influence or control over sensitive collateral.

    Notification

    If a trigger event is either contemplated or in progress, the parties to the transaction may make a voluntary notification to the Government. There is also a mandatory notification regime in relation to foreign investment in certain areas of the economy. Where a trigger event is notified, the government will ask for detailed information about the trigger event including its purpose and expected date as well as details of the acquirer and the investments. The Government will undertake a preliminary screening review lasting 15 working days, which may be extended for an additional 15 days for complex cases. The Senior Minister would then decide whether to "call in" the trigger event or not.

    Calling-in of a Trigger Event

    According to Chapter 7 of the White Paper Completed transactions could be called in within six months. Following a call-in notice, the parties to the transaction must provide any information required by the Government and the trigger event must not occur until approved although preliminary or preparatory steps towards it make be taken. If the Government is assessing a trigger event that has already taken place, once it has been called in, parties must not take any further measures that increases the acquirer's control not take steps that would make it more difficult for the trigger event to be unwound. The Government may impose additional interim restrictions where relevant.

    Screening

    If a transaction raises a significant national security concern, then the Government will undertake full national security assessment. The screening process involves a clear and circumscribed legal test, and is subject to a clear and transparent process subject to appropriate judicial oversight. The Government has 15 working days to consider whether a notified deal will be subject to a full national security assessment. If it so decides it then has a period of up to 30 working days, potentially extendable by a further 45 working days to complete its assessment.

    Remedies

     As Chapter 8 of the White Paper describes the Government may block transactions, limit access to certain sites or divide the assets of a business. Conditions may only be imposed if the Government reasonably believes i) national security risk is posed ii) it is necessary to impose a condition iii) if the remedy is proportionate to the risk, iv) if there are no more adequate or proportionate powers available to the Government, and v) Government has considered representations from the parties. If the transaction has been put into effect, it will have the power to order for it to be unwound. Interim enforcement orders will likely be imposed where a transaction has been called in and has already been completed to mitigate the risk to national security pending the outcome of the investigation.

    Sanctions for Non-compliance

    Chapter 9 of the White Paper states that there are several criminal and civil sanctions for breaches of requirements to be introduced by the Government. Custodial sentences, for up to five years for most offences, and up to two years for less serious offences may be imposed. Civil Penalties are available for failure to provide information with a fine of £30 000 or maximum daily fine of up to £15 000. For all other breaches, a business may be fined up to 10% of a business' worldwide turnover or for an individual, up to 10% of the higher of their total income or £500 000. Another sanction director disqualification orders for up to 15 years.

    Judicial Review

    The White Paper, in Chapter 10, outlines the judicial review and appeal procedures. However, judicial scrutiny of substantive decisions by Senior Ministers would be limited to strict judicial review grounds because of the separation of powers, which makes it inappropriate for courts to supplant ministers' decisions.

    Implications of the Proposed Regime   

    Brexit

    The UK is due to leave the EU on 29 March 2019, either on terms set out in the withdrawal agreement provided that both the UK and the EU approve the agreement in time for it take effect on 29 March 2019, or without a deal.

    If a withdrawal agreement is reached, a transition period until the end of December 2020 or December 2022 will be provided for. During this period EU Merger Regulation (EUMR) will still be applied and maintained. The UK will no longer be a Member State of the EU but EU legislation will remain applicable to and in the UK. The EUMR and UK merger control will operate as if the UK were still a member of the EU. Mergers within the EU's jurisdiction will be dealt with by the European Commission.  This will lead to duplication of notification, as companies engaged in mergers or acquisitions will have to make parallel filings in Brussels and London.  Certainly, this will burden companies as the EUMR and the UK merger regime are structured differently.

    A no- deal Brexit will have significant implications for parties involved in mergers and acquisitions. Without a deal the EU Merger Regulation (EUMR) will immediately cease to apply in the UK.  However, the EU and UK merger control regimes will run in parallel and a transaction that qualifies under the EUMR may also be subject to UK merger control. This will inevitably lead to an increase in the number of UK merger investigations by up to 40%. Merger cases which have been referred to the Commission under the EUMR but which have not been finalized by exit day will come under the CMA's jurisdiction provided that the jurisdictional requirements are met. New transactions after Brexit may face parallel investigations under both the EUMR and the UK merger regime if they meet the jurisdiction thresholds of both regimes.

    Implications for Investors

    Regardless of the Brexit outcome, the proposed regime has significant implications for investors. Investors may be distrustful of using national security criteria to scrutinize mergers as the term "national security" can be interpreted widely, to mean foreign takeovers and broader Foreign Direct Investment (FDI) in sectors of strategic national interest. In addition, the return of ministerial decision-making under the proposed reforms could deter foreign direct investment (FDI) by creating perceptions of an assessment process based on subjective criteria. There is also a risk that, in case of parallel review, the Government may be tempted to put pressure on the CMA to take a decision on its competition assessment that is consistent with the Government's decision on national security.

    To investors, national security powers can and will be used to intervene for politically motivated reasons. For instance, the UK government extracted substantial commitments from Melrose in respect of its purchase of GKN, yet this takeover did not involve a foreign business or indicate a national security threat. This serves to further deter investors from the UK.

    Restricting foreign takeovers may lead to suspicions of protectionism which may reduce the incentives of prospective foreign investors to seek ventures in a country. The country then becomes an unattractive destination for FDI.

    The UK government expects 200 transactions to be caught by the regime per year with over 50 of those deals subject to conditions or even blocked. Undoubtedly, this will increase the CMA's workload and put a strain on its resources. For inward investors it will provide additional complexity to the merger clearance process, especially if they are in one of the high-risk categories of the economy highlighted by the White Paper.

    There are several economic consequences because of these reforms. There will be direct costs to the companies whose investments are called in and challenged and indirect costs in terms of delay and uncertainty. There are also additional costs for all firms contemplating investments and takeovers in terms of the unpredictability of the outcome. Many companies may not invest in the first place due to uncertainty about the outcome.  In situations where timing is of the essence, for example, this may in practice serve to exclude many foreign bidders. Moreover, tighter scrutiny of foreign direct investment (FDI) is likely to reduce value of UK assets. There may also be a harm to competition. Foreign direct investment increases competition because a foreign owner may have deeper pockets, better technology, or an expansion strategy that increases competition in domestic markets.

    Recommendations

    The Commission and the CMA can create a framework for cooperation in merger cases. The framework would, for example, outline the information to included in a complete notification, and include identical questionnaires and cooperation in interviews. Furthermore, pre-notification and formal review periods could be aligned. Surely this would lessen the burden in both the CMA and businesses.

    Conclusion

    Globalization has led to new and complex national security threats for the United Kingdom. Both The Green Paper and the White Paper were published to amend the Enterprise Act 2002 and the Competition Act 1998, to make legislation suitable in a no deal Brexit scenario. The Reforms introduce new jurisdictional thresholds and trigger events, as well as notification, screening, calling in procedures. Remedies, sanctions for non - compliance and judicial review are also included in the propose UK merger regime. Despite the Brexit outcome, the reforms make the UK an unattractive Foreign Direct Investment destination. However, this can be mitigated through cooperation between the European Commission and the Competition and Markets Authority of the UK.

     

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    Thu, 16 May 2019 07:51:00 GMT
    <![CDATA[ New Draft ICSID Rules]]> 10 Things to know about the New Draft ICSID Rules

    As the world's driving establishment committed to universal venture debate settlement, it isn't astonishing that the International Center for Settlement of Investment Disputes (ICSID) is again at the cutting edge of endeavors to modernize rules for settling question between remote financial specialists and states.

    As the office of decision for investor-state dispute resolutions – having directed over 70% of all known disputes – ICSID has seen first-hand the expansion sought after for the Centre's administrations, with ICSID having enrolled 57 new cases in FY2018, the highest number in its history.

    What's more, inferable from the straightforwardness inalienable in ICSID discretions, it is choices and awards rendered by ICSID councils as of late that have educated and persuaded talks among partners about the utilization of intervention finance.

    Twelve years after its last significant amendment, ICSID proposed broad amendments to its guidelines on August 3, 2018. The complete arrangement of proposed changes to modernize its tenets for settling question between foreign investors and states including new arrangements on straightforwardness, referee exposure, security for expenses, and outsider subsidizing.

    This has not gone unnoticed. As the world's most prominent legal dispute resolutionist by a reasonable separation – with more than US$3 billion as of now put resources into the suit and mediation money resources.

    There are a few objectives for this round of revisions. To start with, the progressions are expected to modernize the guidelines dependent on case understanding.

    Given ICSID's organization of more than 650 cases, various exercises can be learned and they ought to be fused into the instructions occasionally.

    Second, the revisions will make the procedure progressively time and practical while keeping up fair treatment and harmony among financial specialists and States.

    Third, ICSID trusts that the standard corrections will make the technique less paper-serious, with more noteworthy utilization of innovation for transmission of records and case methodology.

    What should one take from the New Draft Rules of ICSID?

  • Rule 4-Electronic Filing
  • Parties will profit by lower printing costs and a speedier, less complicated procedure. All documentation will be done electronically, except if there are unique motivations to keep up paper documenting. This makes forms quicker, more well-disposed and more affordable. New time limits have additionally been proposed to speed up cases.

  • Rule 13- Third Party Funding Disclosures
  • Sources of the Third-Party funding must be given at the start of procedures, or accurately when an agreement has been entered amid an arbitration. The proposed guidelines present a commitment by the parties to reveal whether they have third-party funding, and assuming this is the case, its source. This commitment applies all through the procedure.

    The names of involved funder will be given to potential mediators before arrangement to maintain a strategic distance from unintentional irreconcilable circumstances.

    The amendments would accomplish the opposite situations that may emerge from parties' recourse to third-party funding by requiring the revelation of any such subsidizing and the personality of the funder.

    This Rule holds back before ordering or approving the creation of the funding agreement itself or arrangements of that understanding, a detail essential to security for costs application, yet not to irreconcilable situations.

  • Rule 44-Publishing an Award
  • For publishing an arbitral award, ICSID still requires the assent of the parties to the dispute however separate provision regards approval given if no complaint is raised inside 60 days of the publishing being distributed. Be that as it may, ICSID will, in any case, distribute legal extracts where a party object.

  • Rule 51-Costs Security
  • Another independent guideline would enable a Tribunal to arrange security for expenses. The standard expresses that the Tribunal must consider the party's capacity to conform to an unfavorable choice on costs and some other applicable conditions.

    A few critics have guaranteed that ICSID makes an asymmetry between states, which are regularly powerless to gather on a publish for expenses, and financial specialists, who may bring a case with no genuine unfavorable risk.

    Previous courts tended security for costs as another temporary measure and connected the legal standard material to such actions. Rule 51 would concede a council to arrange protection for damages, which means courts would not be obliged to apply the legal standard relevant to temporary measures.

    While councils will currently have the capacity to apply an independent standard to applications for security for costs, the Proposals don't determine the legal material measure. In that capacity, there might be some dissimilarity between councils that apply a standard better prepared for the agreement and others that put incredible accentuation on confirmation of the dissolvability of the parties and the presence of any outsider financing course of action.

    In any occasion, Rule 51 speaks to the most continuous adjustment in the Proposals since it enables a council to "request" security for expenses, as opposed to "prescribe" such security, just like the case for temporary measures.

    Additionally, Rule 51 enables a council to suspend, and at last end, the assertion if the request isn't confirmed to. In this manner, it embraces the approach of the RSM v. Santa Clause Lucia court, the central council to have requested security for expenses under the ICSID Arbitration Rules.

    Despite a conclusion communicated by the RSM tribunal, be that as it may, the Proposals don't set up a hard-line guideline for requesting security for costs where the non-moving parties get outsider subsidizing.

  • Rule 37-Bifurcation
  • A specific guideline permitting bifurcation is proposed. An ask for bifurcation of preliminary objections should be made within 30 days of the remembrance on the benefits or subordinate case. Preliminary objections would be recorded as quickly as time permits, at the most recent on the date for documenting the counter-commemoration if the complaint identifies with the first guarantee. The Proposals would expect parties to record any preliminary protest to purview or resistance that the case is plain without lawful legitimacy at the earliest opportunity

  • Rule 14-Challenging Arbitrators
  • The procedure for challenging the arbitrators has been modified, including the presentation of an expedited schedule for parties filing the challenge. An upgraded affirmation of autonomy and fairness is additionally proposed for judges. A demand to preclude an arbitrator would not naturally suspend the arbitration procedures except if the two parties so concur.

    Under Article 58, arbitrators must choose a test to their co-arbitrator aside from where such arbitrators are "equally divided," in which case the issue is alluded to the Secretary-General Critics, in any case, guarantee that co-arbitrators might be spoiled with a view of inclination because of their working association with the vested authority.

    Getting rid of this procedure would require an alteration to the Convention and is impossible through a standard change by the Secretariat. Regardless, the amendments give co-arbitrators unique opportunity to concede choices on exclusion to the ICSID Secretary-General by receiving an expansive comprehension of the expression "equally divided."

    Rule 30(2) states that this term not just alludes to conditions where the arbitrators are of various personalities, yet additionally where they can't choose the test "under any circumstances."

  • Rule 59-Timelines for issuing Awards
  • New timelines are proposed for granting arbitral awards. Awards must be rendered within 60-days after the last submission of an application for manifesting absence of legal, 180 days after the previous presentation on a fundamental protest, and 240 days after the final brief on every other issue.

  • Rule 69-Fast Track Process
  • Parties can consent to another facilitated method yet should do as such inside 20 days from the notice of enrolment. Parties may select to utilize recently drafted principles for assisted procedures highlighting additional and abbreviated courses of events.

    The Proposals would decrease the time restrictions in the Rules and energize consistency with those time-limits. The Proposals would require courts and parties to lead the procedure in a quick and financially savvy way and drive tribunals to utilize their earnest attempts to fulfil the deadlines.

    The Proposals would likewise endorse a party's inability to comply with a time constraint. Further, it would require the tribunal to dismiss any means taken after the expiry of the time-limit except if the council infers that unique conditions exist. Additionally, a committee could broaden a deadline upon a party's contemplated application made before the expiry of as far as possible.

    Reacting to concerns and issues about the length and cost of ICSID procedures, the amendments would enable the parties to pick into a sped-up arbitration proceeding. The changes leave the relevance of such method to the parties-regardless of whether they agree to such system is given ad hocor in a treaty or investment law that indicates that such technique applies to specific classes of debate and investors.

  • ICSID tuned into demands from the states and investors and have presented new arrangements of guidelines overseeing conciliation and mediation. ICSID is working with UNCITRAL on a code of conduct for arbitrators, yet until such a system is prepared ICSID has extended the exposure commitments for judges (Rule 36) and regarding a third party (Rule 21).
  • Gender Neutral
  • At last, ICSID has re-drafted the principles to be gender neutral and settled the irregularities between the French, Spanish and English adaptations.

  • Increased transparency:
  • Importantly, the ICSID Convention requires the assent of the two parties to publish an Award. Since the ICSID Convention isn't being altered as of now, this standard remains set up. In any case, secondary provision esteems that a party has offered to publish awards, orders, and decisions except if its questions recorded as a hard copy within 60 days.

    If a party objects, the proposed tenets grant ICSID to distribute legitimate passages of the publish, with a setup procedure and timetable to do as such. Awards, orders, and decisions under the Additional Facility Arbitration Rules will be released with the redaction of classified data.

    The Proposals would make it less demanding for ICSID to distribute grants, requests, choices, and other assertion archives by regarding the parties agree to production following sixty days. Besides, except if a party objects, the Proposals would enable councils to concede eyewitnesses to hearings and even license ICSID to publish hearing chronicles and transcripts.

    The Proposals additionally clear up when a non-debating party may offer entries in an intervention. Albeit no standard is given, Rule 48 states out elements that a council should consider when choosing whether to permit such investment.

    Moreover, Rule 49 would provide involved with a bargain that isn't involved with the debate the privilege to make composed entries on the application or understanding of a settlement at issue in the dispute. The Proposals, in any case, don't accommodate a privilege of access to archives on the document. Such access won't take place one of the party's objects.

    Conclusion

    Since the ICSID has propelled its fourth amendment process on the ICSID Rules and Regulations, huge reconstructions are to be made on the guidelines focusing on modernization, time and cost-effectiveness, the increment inconsistency, and accessibility of choices.

    As of now, the alteration recommendations of the contracting states and the parties area under the thought of the ICSID, which will give foundation papers itemizing solicitations and structure. Following the corrections, the standards will be one bit nearer to adjusting to the present needs of the cutting-edge world speculation debate. The Proposals are not a predetermined conclusion.

    They will be liable to another round of remarks before ICSID's overseeing body, and the ICSID Administrative Council will settle on their appropriation in 2019 or 2020. Among every so often, the Proposals may develop in manners that are hard to predict. What is clear is that the Rules will incorporate huge adjustments to some key arrangements. Nonetheless, the Proposals hold back before a total upgrade of the ICSID framework.

    The Secretariat has unmistakably dismissed some of the more extreme proposals-the incorporation of a crisis judge arrangement, an outline strategy, or a through and through restriction on mass cases-and has declined to offer illuminations on the legitimate benchmarks appropriate to various key choices, leaving those to the attentiveness of courts.

    While the Proposals won't fulfill the most stalwart of ISDS faultfinders, they may conciliate the more mindful worries of certain pundits.

     

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    Tue, 14 May 2019 12:04:00 GMT
    <![CDATA[Debt to Equity Conversions]]> Debt to Equity Conversions

    In these investment scenarios, there are times when an organization needs more money than is as of now being produced by its activities; it has two different ways to get it. It can get the cash it needs, known as debt financing. Alternatively, on the other hand, it can sell a share of possession or ownership, alluded to as equity financing. One preferred standpoint of equity financing is that, not at all like acquired cash, the money raised doesn't need to be paid back. That is a noteworthy motivation behind why organizations convert debt to equity.

    Debt-Equity Swaps

    A debt to equity swap is a straightforward and since a long time ago utilized strategy for changing over debt to equity. In exchange, an organization concurs with a lender to disregard a few or most of its debt in return for a proprietorship stake in an organization. State an open organization with a present stock cost of $20 owes a bank $1 million. If the organization comes up short on the money to make its debt payments - or that it would merely like to utilize the funds for different things - it could offer the bank 50,000 shares in its stock. The bank surrenders its entitlement to gather the $1 million. However, it is currently a section proprietor of the organization with a stake worth $1 million.

    If the company wants a restructuring of the debts and equity mixture for success on a long-term basis, they go for the option of converting the debts to equity or equity to debts as and when the situation demands. The shareholders are given a chance or an opportunity to exchange or transfer the stock or shares that they hold for an anticipated amount of debt in the same company.

    Debt to equity swaps is commonly carried out transactions in the financial sector. They empower a borrower to change loans in shares of stock or equity. Most ordinarily, a commercial organization, for example, a bank will hold the new shares after the first debt is changed into equity shares. The lender converts the amount of the loan which is represented by bonds which are outstanding to equity shares when the process of debt to equity takes place. Actual cash is not meant to be exchanged during the process.

    To take an example, Let's take a company 'A' who owes the lender 'X' close to 20 million Dollars. Now, as an alternative to continuing to make payments for the debts, 'A' makes an agreement with 'X' to give him 2 Million Dollars that is the 10% ownership in 'A' as a company in place of rectifying the debt.

     In an equity-for-debt swap, an organization's lenders for the most part consent to drop a few or most of the debt in return for equity in the organization.

    Debt for equity bargains frequently happens when expansive organizations keep running into money-related inconveniences and regularly result in these organizations being taken over by their key loan bosses. This is for the reason that both the debt and the rest of the benefits in these organizations are significant to the point that there is no favourable position for the lenders to drive the organization into insolvency. Instead, the lenders want to assume responsibility for the business as a going concern. As a result, the first investors' stake in the organization is commonly altogether weakened in these deals and might be wholly disposed of.

    Debt for equity swaps are one method for managing home loans. A householder not in a situation to support his debt on a $180,000, contract for instance, may by concurrence with his bank have the estimation of the home loan diminished (state to $135,000 or 75% of the house's present esteem), as an end-result of which the bank will get half of the sum by which any resale esteem, when the house is exchanged, surpasses $135,000.

    Debt to Equity Swap is a method of restructuring the financial system from the area of debt restructuring. It usually is applying in situations when an organization is looked with economic issues, when over-indebted, can't reimburse existing advances on time, has diminished liquidity and when there is no plausibility for additional indebtedness. The critical point is to trade the current debt for proprietorship share, by what the past lenders turn out to be new co-proprietors of the organization.

    Previously, this methodology was connected just to large organizations, however starting late, it has been available as a choice of finance restructuring for medium-sized and small organizations as well. Debt to equity swap frequently happens when the organization is stuck in an unfortunate situation and is generally powerless to reimburse the creditor's anything without going bankrupt. The quantity of shares granted is controlled by the measure of outstanding obligation and the stock's esteem. The estimation of the swap is resolved often at current market rates, yet the board may offer higher trade esteems to lure offer and obligation holders into taking an interest in the swap.

    This can likewise help organizations to support their bond evaluations or change their capital structure to exploit current stock valuation.

    Bonds which are convertible

    Organizations can conduct equity to debt conversions early by issuing convertible bonds. Investors who purchase securities are loaning cash to the guarantor. They recover their money when the bond develops; meanwhile, they gain a premium. The Investors who claim convertible bonds, be that as it may, likewise have the choice of reclaiming those bonds for a specific number of offers of organization stock - state, two shares for each $100 worth of bonds. On the off chance that the convertible bond is "callable," the issuing organization can drive bondholders to change over their bonds into offers.

    Convertible bonds by and large pay a lower loan interest than nonconvertible bonds, as investors who get them, are additionally "purchasing" the likelihood that they'll end up with the stock more critical than the bonds. On the off chance that the stock value ascends past the earn back the original investment point, speculators will recover the offers. Of course, the organization may bring in the bonds as the cost goes up, constraining recovery before the value of the share ascends excessively high.

    Also, it's continuously conceivable that the stock cost will remain beneath the make back the initial investment point, so financial specialists never recover the bonds and are screwed over, thanks to the low return.

    Debt-to-equity swaps options

  • Stand-alone Debt to Equity swap
  • New Money/Funded Plan
  • Sale of part of Assets
  • Why opt for swaps?

    There are several constructive reasons for the option of swapping debts to equities. We will look at some of the following:

  • Meeting contractual obligations
  • A company is entrusted with the burden of maintaining a target of a debt-equity ratio where they must meet certain contractual necessities and responsibilities. These obligations come with the results of financing discretions that can be imposed by the lender or may be imposed by the company itself.

  • Coupon and Face value
  • Generally, the swap takes place with the intention of the company to avoid the issuance of coupon and face value payments imposed on the debt. Alternatively, the company makes an offer to the debtors an option of stock in its place.

  • Bankruptcy
  • The possibility of debt to equity swap is an effective and useful tool in cases of bankruptcy where a company is in a situation where it files for insolvency or is on its way to turn bankrupt.

    Advantages and disadvantages of Debt to Equity conversions

    The process of swaps has its own set of pros and cons. Swapping equities for debts helps a company to get out from the obligation to not only pay back the money it initially borrowed but together with interest. This helps maintain the cash flows.

    The company may sometimes have to surrender a significant amount of control which is not independent of considering the fact of the amount it owed and what is demanded in return of the transactions.

    On the other hand, the right of getting repaid is given up by the lender for the promise of getting a share in the stock of the company. Cash flows always remain the problems which can be difficult in the insolvency process. For the conversion to benefit the lender, the corporation must collect a fraction of the amount owed.

    The conversions are required to maintain a balance in the hopes for the company to achieve its desired long-term goals for success.

    Can this process be a potential solution?

    Keeping in mind that the local companies face severe liquidity problems and bankruptcy, financial restructuring is the need of the hour. Before undergoing the process of debt to equity swaps, there are some other restructuring alternatives like rescheduling of liabilities, freezing repayment, an extension of payment dates, new negotiations of the rates of interest, etc.

    Debt to equity swap does not potentially decrease the assets of the company. Instead, it is a method where the performance of the corporation is strengthened by way of elimination of liabilities.

    The success of the conversion process primarily depends on the question the swap at any time leads to acquiring the support of all the owners and creditors. USA companies which deal with restructuring have a high degree of efficiency where debt-to-equity swaps are a popular method.

    These swaps bear a different nature, and they change from situation to situation given the time and the conditions attributed towards it. Considering all that is mentioned, a corporation or a company is dived in a severe financial problem and is on the road to insolvency and liquidation. Here it is the success of recovery and restoration is required via the openness and honesty among the managers, the company and the owners along with the public in general.

     

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    Tue, 07 May 2019 15:25:00 GMT
    <![CDATA[Should Robots Granted Citizenship]]> Should Robots be Granted Citizenship?

    It's 2019 and with the world progressively stepping towards technological advancement, active presence of machines is no surprise. Within considerable amount of time, Artificial Intelligence has taken over the world with its ideas and promises. Human beings are doing everything possible to ease out their work and life, and creation of robots is one such example. This article talks about the initiation of robotics, the acknowledgment of their existence, the curses and boons associated, and deeply analyses whether robots should be granted citizenship or not. With UAE granting citizenship to Sophia, being the talk of the hour, it is impeditive that the constitutionality of the same be discussed. The article initiates by providing the reader with a brief discussion upon what constitutes a robot; the requirements for acquiring a citizenship; followed by a brief discussion on worldwide view of the same, making a comparative analysis with the present case in the UAE. It further helps the reader understand the advantages and disadvantages of granting a citizenship to a robot and finally concludes by providing a critical opinion of the same.

    Robot and Citizenship – An understanding.

    A robot is a machine, programmable by a computer capable of carrying out a complex series of actions automatically. They can be guided by an external control device or the control may be embedded within. They may be autonomous or semi-autonomous; humanoid, medical operating robots, nano robots, etc. Since they are programmed by computers and display a lifelike appearance or movement, they may convey by a sense of their own thought, or a sense of intelligence installed within.

    In a nation governed by rule of law, citizenship has a clearly defined meaning with rights and responsibilities relatively straightforwardly derivable from written legal documents using modern analytical logic.

    For example in India, Article 5-8 conferred citizenship on each person who met the criteria below at the commencement of the Constitution :

    • Domiciled in India and born in India
    • domiciled not born in India but either of whose parents was born in India
    • domiciled, not born in India but ordinarily resident for more than five years
    • resident in India but migrated to Pakistan after 1 March 1947 and later returned to India on resettlement permit
    • resident in Pakistan but who migrated to India after 19 July 1948 or who came after that date but had resided for more than six months and got registered in prescribed manner
    • resident outside India but who or either of whose parents or grand parents were born in India.

    Furthermore, in Saudi Arabia, citizenship having a real meaning, is yet different from the sort of meaning that is derivable from various historical Islamic writings (the Quran, the hadiths, etc.) based on deep contextual interpretation by modern and historical Islamic figures. Claiming a UAE citizenship depends on every individuals' personal situation whereby the authorities have discretionary powers to offer citizenship to foreigners who have made an exceptional contribution to the region. The clear way of acquiring citizenship in UAE remains by way of birth, on marrying an Emirati or by way of residence. However, the wait time for this means you must live and work in the UAE continuously for up to 30 years before your application will be considered.

    The hurdles in between.

    From the abovementioned discussion, it can be said that for a robot to acquire citizenship, it must have an identity that can be considered as a citizen. Humans constitute all the ingredients of being a citizens, whereby they differentiate among themselves by way of their identity, which is derived by their face, voice, brainwaves, fingerprints, etc. which is entirely theirs. A robot is not born, it is created by way of science and technology. Even though a robot can derive its identity in similar ways, by their barcode number or unique skin mark, but this can not conclude their identity being solely restricted to one robot, since it would be an identity of a hardware and not a robot. And a hardware can at anytime be shifted from one robot to another. Henceforth creating a havoc and confusion while defining or describing the identity of the said robot.

    Having regard with the abovementioned observation, no jurisdiction in the world has ever granted citizenship to a robot, except for UAE. But this is not the only reason that restricts robots acquiring citizenship in the rest of the world. Those are legal issues, political issues and/or human rights issues.

    In the case of United Arab Emirates, the robot that has been granted citizenship is named as Sophia, and she has taken over the news all over the world like a fire. The last World Government Summit in Dubai in 2017, made it very clear that a close attention was to be paid to the Artificial Intelligence and its working, and Sophia was without any doubt under the spotlight. For the sake of this article, the details about Sophia and its accordance with the laws in UAE are not discussed in detail.

    Sophia, a Hanson Robotics creation, who is the first robot being granted citizenship of a country, was created in November 2017, celebrating its birthday on the Valentine's day, Sophia becomes the first robot to have acquired citizenship. This grant of status is highly questionable, following three major issues- legal identification, legal rights and social rights.

    The issue of identity has been discussed above and should be noted accordingly.

    Legal Perspective

    Another point of objection raised is regarding the identification and justification of the legal rights and liabilities that a robot would acquire and intake. A citizen, under every jurisdiction, generally, acquires certain legal rights and liabilities – constitutional, private, or property rights. For example, a right to vote, payment of taxes, criminal acts, or a right to sign an agreement, marry and so on. In the case of a robot it shall be very difficult to underline the rights and liabilities it incurs, since it has a created form and not born one. The questions that shall arise on deciding the legal liability or right of the robot, for example, for the purpose of this article, assuming that Sophia is a citizen robot able to vote, who shall make the decision of whom to vote – Sophia, or the manufacturer.

    Similarly, if a criminal or a corporate liability is alleged on Sophia, for instance for breach on contract, resulting in fraud and cheating, invites such liabilities on Sophia. Here who shall be considered liable –  Sophia or the manufacturer.

    Again, assuming, for the sake of this article, that Sophia is held liable for a criminal act and is punishable under the same, who shall decide the punishment or what kinds of punishments be given. Further, on being given the punishment, it doesn't assure the fact that the said crime shall not happen again, as it is the hardware created by the mind of manufacturer, who can create another bot with the same hardware. If the manufacturer is also held liable for the offences committed by the bot, the manufacturer can objectify the same by lifting the veil and arguing upon the bot being a totally different citizen. Question may also arise regarding the priority among the human in danger with that of a bot in danger.

    Currently, the artificial intelligence (AI) community is still debating what principles should govern the design and use of AI, let alone what the laws should be. Therefore, it is highly arguable as to how the liabilities of a bot can be justified and what shall be the extent or the scope o the same, considering the current status of the legislature governing the Artificial Intelligence laws. The most recent list proposes 23 principles known as the Asilomar AI Principles. But a lot of work is yet to undertaken regarding the same and cannot be done by way of simple announcement.

    Humans or Sophia(s)? – A societal concern.

    Considering another issue, how would it be defined as to what the moral and social rights of a bot are. For instance, speaking about relationships and reproduction, as a citizen, will Sophia, the humanoid emotional robot, be allowed to "marry" or "breed" if Sophia chooses to? If more robots join Sophia as citizens of the world, perhaps they too could claim their rights to self-replicate into other robots. These robots would also become citizens. With no resource constraints on how many children each of these robots could have, they could easily exceed the human population of a nation.

    This leads to another concern, and a particularly major one, which is whether such advancement and growing technological innovations would lead to a situation which might lead to the robot super-suppressing the presence of humans, thus affecting the human rights and questions the need of humans in this world.  Students from North Dacota State University have taken steps to create a robot that self-replicates using 3D printing technologies. If allowed, shall there be any harm to the humans – of course.

    Robots in trend. But Why?

    It's very simple!

    Such advancement ease ups the working of industries and factories, whereby already the machinery is replacing human beings, causing an increase in unemployment of humans. On being asked about this, Sophia stated rather very impressively, that they intend to team up with the world, rather than taking it over. But how can one assure this statement, if they are given equal status with that of humans, but not similar accountability.

    The fact that it eases up the work and fundamentally helps reducing the crime rate, is not exhaustive. It also helps worldwide advancement and connection, and brings up the goodwill of the concerned association. It also helps in promotion, marketing and can be updated time to time which again helps in easing up the work of humans at an entirely different level.

    But these reasons may not be conclusively accepted towards granting citizenship rights and creating an entirely new league of species for the competition against human beings. Yes, there lies requirement of legalising and protecting the artificial intelligence and the creator of the same, but citizenship can not be the answer to the same. There also lies other alternatives that can be undertaken, such as legalising the robots, or enacting new legislations for their accountability and understanding.

    Author's perspective and Conclusion

    In my opinion, citizenship is a right that is of a very high stature and should be granted to those who can access such rights and dispose off such duties with a reasonable care thereupon. A robot is expected to perform activities equivalent to human beings, but one can not be certain that there lies complete accuracy and efficiency without any default. And for the reasons stated above, it can further be opined that such grant would lead to robots overtaking the human population and would also cause a gross disadvantage to the human race, which at this stage may not be welcomed.

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    Tue, 07 May 2019 10:56:00 GMT
    <![CDATA[United Kingdom: Capital Gains Tax on Real Estate]]> Non-Resident Capital Gains Tax on United Kingdom Real Estate: A New Regime

     

    Introduction

    The legislation encompassing the new regime for taxing non-residents' gains on the United Kingdom (the UK) commercial real estate came into effect on 6th April 2019. Her Majesty's Revenue and Customs (the HMRC) has additionally published draft guidance on this recently introduced regime. This article briefly summarizes the new rules.

    Capital Gains Tax

    Capital Gains Tax (the CGT) is such tax which is due as a result of financial gain, which is often referred to as profit which is received once an asset is disposed or sold off. When the sale value is subtracted from the original purchase value, the remainder is the total gain.

    For more clarity, if you are selling an asset, the sale value will generally be the sale price of that asset, or in certain cases, the current market value which the asset could be reasonably projected to sell for in an open market. The market value is used in instances where a property is given away, sold at subsidized cost or when the property is passed to a connected person, like a family member. Additionally, market value is used while calculating the original cost of the property in instances where such property was inherited or was owned prior to 31 March 1982. Costs of improvements made to such property during ownership, excluding maintenance and decorations, may be deducted.

    Upon the calculation of total gain, one may apply for any allowances and/or tax relief before calculating the CGT using appropriate rate.

    Background

    Historically, United Kingdom Capital Gains Tax had a territorial limit, and with a few recent exceptions (relevant to residential property) non-United Kingdom residents have remained outside the scope of UK CGT on their investments. Consequently, the UK made an attractive jurisdiction for inward investment, giving foreign investors an incentive to choose the UK over other jurisdictions that have long taxed foreigners on their gains. A great degree of flexibility was brought due to CGT's territorial limit in creating tax neutral fund structures and co-investment. The absence of Capital Gains Tax allowed investors with such exemptions which include charities, sovereign wealth funds and pension funds to co-invest in the real estate market along with those without such exemptions without tax leakage, and it is this flexibility which was vital to facilitating joint ventures between those with cash-rich institutions and management expertise.

    Basic Rules

    The non-UK residents are subject to tax on all gains realized on their assets in the UK real estate with effect from 6th April 2019. The new regime taxes both indirect and direct disposal of commercial as well as residential real estate by non-UK residents. The sale of interests in "property rich" vehicles are indirect disposals.

    A vehicle is considered property rich when it derives a minimum of 75 per cent of its value from real estate in the UK. Those investors who holder less than 25 per cent of the vehicle, in limited circumstances, will be considered outside the purview of the charge. Interests held with related parties are aggregated, and the above threshold of 25 per cent does not apply in cases where the vehicle is a type fund including real estate investment trusts. However, the 25 per cent threshold would apply to such investors who are marketed on the bases that not exceeding 40 per cent of their total investments are projected to be in real estate in the UK. This safeguards that investors with small stakes who were not marketed as real estate funds in the UK, but are property rich at the time when the investor disposes of such interests, will not be subject to CGT on their gain.

    For commercial properties, an option of rebasing was available till the 5th of April 2019, which meant that investors would only be subject to CGT on the gains that arise from the 6th of April 2019 onwards.

    Trading Exemption, Qualifying Institutional Investors and Substantial Shareholdings Exemption

    There is a trading exemption in the new rules which apply to the sale of companies with heavy trades in real estate. The above exemption is specifically valuable to private equity funds investing in restaurants, retail and hotel chains. The disposal of such company that some of its land used for non-trading purposes may benefit from this exemption on a condition that such company's non-trading land accounts for less than 10 per cent of the value of its total property.

    The already existing SSE, short of 'substantial shareholdings exemption', which is available for trading companies, continues to be available for them. It can be more plentiful on the basis that activities that non-trading in nature uses 20 per cent threshold to determine if the trading requirement is met or not.

    Where a property rich company is owned by qualifying institutional investors (sovereign wealth funds, charities and pension funds) with an appropriate proportion of 80 per cent, for SSE purposes, the trading requirement is dropped.

    The essential benefit of this trading exemption is its availability to non-corporate shareholders like unit trusts and individuals, which is unlike substantial shareholdings exemption. Where the trading exemption or the SSE is claimed on property rich company's sale, the target does not benefit from the similar rebasing of its real estate assets as entities sold by funds under the new regime.

    Double Tax Treaties

    A non-resident investor can only be taxed by the UK if the terms of a double tax treaty between the United Kingdom and jurisdiction of a non-residents permits it. Amongst the double tax treaties that the UK is a party to, most of them allow the UK to tax non-residents on disposals of vehicles that are UK property rich as well as the direct disposal of real estate in the UK.

    The Luxembourg/UK treat is an exemption to the above. This treaty prevents the UK from taxing on gains which are disposals by Luxembourg residents of interests in property-rich vehicles in the UK.  Several joint ventures and real estate funds use Luxembourg vehicles, and this protection under the treaty will effectually preserve the current capital gains tax treatment of such vehicles.

    The process of renegotiation by the UK concerning this provision in the Luxembourg Treaty is on, so it is fair to presume that such protection may not last long. But it is also important to note that renegotiating double tax treaties can take a lot of years. The new regime includes rules that prevent the establishment of new structures in Luxembourg to take advantage of the UK/Luxembourg Treaty protection from capital gains tax.

    Application of Funds

    When the new regime was announced, one of the main concern that arose was regarding the treatment of funds including other collective investment vehicles which commonly use non-UK holding vehicles for their investments in real estate. The pension funds in the UK and the other institutional investors hold a huge proportion of the real estate investments vide these structures, and additionally, without special rules these vehicles would be subject to tax, resulting in the investors suffering tax at the fund level, where they would not if they held these assets directly. They would have also faced from their sale prices being discounted by the buyers for "latent" gains in the structure. Also, funds with master holding vehicle could have been liable to multiple charges on a single gain.

    This issue has been largely addressed in the engagement between the industry and HMRC. Joint venture vehicles and funds can enter into elections, which will have the effect of shifting gains in the holding structure up to the investor's level. This would allow pension funds along with other exempt entities to benefit from such status of exemption, and receive their profit free of tax.

    It is important for these elections to ensure that tax leakage is prevented at the fund level and that exempt investors continue to be attracted to investing in real estate in the UK via joint ventures and funds without facing additional tax that they would as against their direct investments. The downside of such funds electing is that they will subject to more reporting obligations. The introduction of new rules is being considered by the government that would allow for returns to be filed for funds as well as pay taxes on behalf of their investors, which would indubitably alleviate this. However, any of these rules look unlikely to be introduced for a while. Blocked vehicles could be used in the meanwhile to shift the burden of compliance from investors to the fund, in cases where investors are not willing to file UK returns.

    The Transparency Election

    A collective investment vehicle that is transparent for income tax can elect to be so for CGT purposes as well. Where such an election is made, it will be considered as if the investor held the property directly or technically in partnership with another investor(s). When the property is sold, it is treated underlying property being sold by the investor.

    For clarity, it means that investors that are exempt, would not be taxed on disposals by the vehicle. Additionally, the taxable investor is subject to tax only once. Since the vehicle is transparent in nature, there is no latent gain in the vehicle due to which the buyer may discount the price. In light of the above advantages, it is likely that the investors will opt for transparency.

    It is pertinent to note that this election is irrevocable and it must be made within a year of such vehicle acquiring United Kingdom property. For transparency elections, the consent of all unitholders is required.

    The Exemption Election

    Joint ventures and real estate funds with non-UK vehicles that meet certain conditions may elect to be exempt from capital gains tax. The rules are complicated. In broad terms, a fund must either be non-close and have less than 25 per cent protected investors, or it must meet an extensively marketed test. Structures that are controlled by five or less than five participants are closed, though certain qualifying investors such as real estate investments trust, sovereign wealth funds, pension funds to name a new, are disregarded for these purposes. Several joint ventures where such investors are involved should be able to profit from this exemption election even though they have not been marketed.

    The fund vehicle in his entirety is tax exempt when this election is made. Additionally, all of its subsidiary vehicles will be exempt from tax as well.  Gains realized by joint ventures that hold a minimum of 40 per cent in the exempt fund will also profit from the proportionate exemption. Essentially, these exemptions apply to both non-Uk and UK subsidiaries. Real estate assets of the property holding vehicle are rebased when such vehicle leaves an exempt fund. This ensures that a buyer does not assume latent gains which result in price discounting.

    These funds must provide up to date and correct information related to the fund disposals and investors for each accounting year if they wish for such exemption to apply. HMRC realizes that certain fund managers would not hold relevant information that is required under the new rules, and in some cases, will not be permitted by their fund constitution to reveal details of their investors. The provisions may cause problems for groups with minority investors, and restructuring would be required in such cases, as to enable the vehicles to profit from the exemption.

    Conclusion

    The new regime reflects the government's intention of levelling the playing fields between overseas and domestic investors in UK real estate. CGT's net extension may have made an indirect investment in real estate rather prohibitively inefficient for investors that are exempt, though the exemption and transparency election options for co-investment vehicles should bridge the result of the changes that this new regime would bring to the investors.

     

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    Mon, 06 May 2019 16:28:00 GMT
    <![CDATA[Singapore International Arbitration Centre]]> Singapore International Arbitration Centre

    Singapore has been growing in popularity for international arbitration with the support of the government's policy to facilitate the best arbitration Centre in the region. The tremendous growth of the Chinese and Indian economy in the last few decades drives Asian markets to the next level. Even though Singapore is a tiny city, The Singapore International Arbitration Centre (SIAC) manage to bring most of the commercial disputes from all over the world to the country for dispute resolutions. Among the other countries, the most members are from India amounting to 176 and China 77 in 2017. The Singapore parliament enacted the Arbitration Act supporting the growing objective of the institution. Similarly, the judicial body minimized its intervention with arbitration procedures in order to provide a smooth and independent process of the tribunals. At present SIAC compete with major arbitration institutions like AAA, LICA, and ICC in terms of procedural laws and facilities. The institution handled more than 450 new cases and administered 400 plus cases in 2017. Which is a tremendous growth from the last few years. Some parties choose SIAC as their dispute resolution Centre over other leading arbitration institutions for its unique setup and supportive institutional rules.

    The primary object of the institution to provide a neutral and independent arbitration system for companies around the world. Specifically, the companies based in the region where the parties and lawyers can quickly travel to Singapore for their tribunals. The amended rules introduced in 2016 will apply for the disputes registered on or after 1st August 2016. The previous law was amended in 2013. The new amendments took place as the regulators decided to set up a new standard for the existing rules and to introduce new regulations. Comparing to the court systems where the procedural laws are not amended regularly, the introduction of new laws and changes in the existing procedural laws from the arbitration institutions help system to move forward. The changes in the rules demanded by the business community and the quickly changing nature of international arbitration institutions around the world. The leading institutions produce new rules which supplied the needs of the businesses. Hence, SIAC was forced to introduce amendments in order to facilitate a complete institutional law. The changes include but not limited to early dismissal of claims, expedited arbitration procedure, multi contracts, and joinder consolidations.

    The corporates demand a faster and easier procedure with enforcement system from the legal system for a very long time. The foundation of the Alternative Dispute Resolution system itself is also a result of finding the easiest way to resolve commercial disputes. In that way, SIAC institutional rules on expedited arbitration procedure is a major change of new amendments. The procedure laid down a solution for the business disputes which require a quick solution. The parties can apply for the expedited procedure in pursuant to article 5 of the 2016 laws. The disputed amount must not exceed $ 6,000,000 and the parties must agree to conduct tribunal under the Expedited procedure. This amount is an increase of 1 million from the last amendment. Also, the parties can apply for disputes with exceptional urgency. All the leading arbitration institutions have recently introduced this procedure for the parties and the number of cases referred to expedited procedure increase day by day. The institution has conducted 150 plus disputes under this procedural law from its introduction in 2010.  However, the procedure yet to be tested completely for different types of cases and practical implementation will require many amendments down the line. The early entry of the SIAC to this procedure is a good sign for the institution in relation to establishing a solid foundation for a quicker solution to commercial disputes. It is expected that regulators in Singapore will support the procedure after reviewing the practical implementation of the new system. Among the other institutions in the Asian region, the changed rules of SIAC provide a quick solution with fewer fees which attracts many businesses to enter SIAC as arbitration Center during the initial agreements.

    According to article 34 of the SIAC rules, the fees of the tribunals are based on the amount in dispute. The leading institutions including the ICC and AAA also fix their fees depend on the amount in dispute. According to the Queens Marry research, the SIAC fees are on average among the other institutional fees. Comparing to the SIAC, LCIA charge far less from their parties as their method of fees is on an hourly basis. The recent amendments from the leading arbitration institutions can be effective where the institution charge on hourly basis. For example, a case referred to a sole arbitrator will be less charged for the parties than a one referred to three arbitrators. One of the leading reason for the parties to SIAC is the fees comparing to other institutions. The administrative fees of the SIAC are reasonable and average. However, the tribunal's fees charge according to the amount in disputes which method is criticized by scholars and legal experts among the parties. They point out that sometimes the arbitration institutions are more expensive than courts in overall. Attacking the fundamentals of arbitration that arbitration is cheaper than courts system. Hence, the SIAC may consider changing the fees structure of the institution to attract more parties in the coming amendments.

    Article 28 stipulates the laws related to The Competence principle. The arbitration tribunal has the power to decide its own jurisdiction of the institution in relation to the matter in dispute. This extends in relation to validity, existence, or scope of the arbitration agreement. For example, if a party raise an issue mentioning the tribunal has the power to solve issue A and B in the contract but not X and Y. Accordingly, the tribunal does not have jurisdiction to conduct the arbitration on matters X and Y. In such circumstances, the tribunal can study and understand the matter X and Y in order to determine if the tribunal has jurisdiction to decide on matters X and Y. However, the tribunal must be very careful in choosing the jurisdiction over the issue as the parties can later challenge during the enforcement level using Article 5 of the New York Convention. The registrar of the institution also granted the power to refer the matter of jurisdiction to the courts for its discretion. Article 21 of Chapter 6 of the Singapore Arbitration Act stipulate a similar law as well. Nevertheless, the courts in Singapore are supportive of the arbitration process and therefore they minimize their intervention. The minimum intervention also can give confidence to the common man that arbitration is independent. If the matter goes to courts and bounces back to arbitration in every stage, the trust towards arbitration among the parties will be eliminated as they will start thinking arbitration is controlled by the local courts of that jurisdiction. If one party to the arbitration is from outside Singapore and if they had to go through a stage passing court of Singapore for every stage, their trust in the system of arbitration will be reduced. The London arbitration Centre is a good example with a strong legal system which only intervenes in the required stage of arbitration. SIAC also follow the same strategy and courts interventions are minimal.

    Application for early dismissal for claim or defense is another procedural development from the recent amendments. This is a new regulation introduced from article 29 of the institution law. The step is to ease the procedure of claim where the party can prove the claims question of merit or jurisdiction is not valid. The claims must be backed by legal arguments and facts of the matter. The application also provides room for the arbitrator to understand any possible loophole in the matter for a latter dismissal. If the parties had to go through an entire tribunal process and the case dismissed, that will be a waste of time and money for the party. Also, the trust of the arbitration procedure will be questioned. Therefore, the early application for claim or defense is set up for a strong foundation to move forward after this stage with a strong belief that there will be no further changes or claims in the tribunal.

    The tribunal requires all the parties to the arbitration including the administrative and arbitrator to comply with the confidentiality of the matter. Confidentiality considered to be the main reason for some parties to choose arbitration over litigation. A court system may publish all the cases against a company and it puts a company into a vulnerable position during investment strategies. An arbitration process can keep all the information related to the matters confidential and only parties can be available for the information. The institutional rule also gives power to the tribunal to take action against any breach of confidential matters. The institution also provides the facility of possible mediation before the arbitration. Mediation also protects the confidentiality of the parties and things shared with a mediator will not be brought up in a court of law against the same parties. Also, during the mediation process, the mediator separately discuss with both the parties about their matter and parties can request the mediator to protect the confidentiality of some of the matters they discussed during the process. Mediation under SIAC is conducted in a professional manner and the institution supports meditation. However, generally, a dispute starts in a commercial context with a disagreement on a matter and continued with disagreements during the negotiations. Therefore, the parties seek legal supports to make a decision on behalf of them. However, during the negotiation, the parties may don't share their confidentiality information's like financial positions. Therefore, a mediator can help find a better solution understanding the matters in detail as well as keeping confidentiality of shared details from the parties. The mediation process is encouraged by the UNCITRAL model law as well. 

    The Singapore arbitration felt behind in relation to multi-contract and multi-party disputes. According to the Singapore annual report, the disputes related to construction and engineering take up to 25% in total. However, leading institutions like ICC introduced provisions in their 2012 rules itself and attracted parties with multiparty disputes mainly construction-related companies around the world. Therefore, some of the construction-related disputes did not come to the SIAC arbitration Institution. Not only the multi-parties in the constructions but also some of the leading tech companies also subcontract their assignments and involve multi parties to their works. Therefore, a new big market has opened for the arbitration institutions. These tech companies and entrepreneur startups not happy to go to the courts and waste their time and money. The reason includes their future can be dependent on the judgement of the dispute in place. For example, an innovative product found using multiparty cannot come to the market for sale unless the dispute between these parties is sorted out. The regulators of the SIAC understood these demands of the companies and cater the regulations to fulfil their needs.

    The emergency arbitrator is appointed for the matters where parties seek emergency relief from the tribunal. The procedure requires the parties to submit in detail regarding the nature of relief they seek and the reason for the same. The discretion of accepting the emergency arbitrator application is with the President of the tribunal considering all the relevant factors. This step from the SIAC can also be considered making arbitration available for diverse situations and minimizing courts intervention during the process. Prior to this rule the parties who required an emergency relief had to file an application in the relevant courts. The parties must notice in prior if the institutional rules allow the emergency arbitrator to give an "award" or "order". Similarly, whether the award from the emergency arbitrator can be enforced using the New York Convention. The SIAC institutional rules in this regard stipulate as "The Tribunal may, at the request of a party, issue an order or an Award granting an injunction or any other interim relief it deems appropriate. The Tribunal may order the party requesting interim relief to provide appropriate security in connection with the relief sought". Accordingly, it is in the discretion of the arbitrator to give an award or an order under the SIAC institutional rules.

    Further, the final award and enforcement of an award using the New York Convention complete the arbitration process under the SIAC. The institutional rules require the arbitrators to finalize the submission of all evidence and documents of the procedure before granting an award. The distinguish difference between arbitration and the other ADR system is the ability of enforcement of awards using the New York Convention. A party can enforce their award in any member countries to the statute. More than 100 countries are party to the New York convention including Singapore. Therefore, the investors of one country can file an arbitration with a party from another country keeping in mind that they can enforce the award later on. The Singapore arbitration act also promotes this procedure in article 46 by recognizing an arbitration award as local courts award. The article mentions as "An award made by the arbitral tribunal pursuant to an arbitration agreement may, with leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect". UNCITRAL and other arbitration mechanisms require the member states to provide full enforcement mechanism under their country law. The Singapore act caters full protection for the enforcement mechanism.

    Finally, unlike a court system, the arbitrations are generally designed to avoid appeal systems. The appeal in a court system has both upside and downside. The downside is it takes a lot of time for the parties to get a final decision. Generally, the investors and consider about the timeframe of starting of a trial till the end. They make their business decisions and strategies according to that final judgements. Should the opponent make an appeal, the business will have to wait longer than expected timeframe. Considering all these problems, the Singapore Arbitration Act has limited the option of appeal. The same can be noted with Article 5 of the New York Convention which gives only a few limited objections for an arbitration award. SIAC is appreciated by the legal community for following international rules and guidelines on enforcement of an award.

    The SIAC arbitration institution always tries to perfect their regulations from starting of a tribunal till the end. They are carefully designed to uphold the fundamentals of international arbitration. The foundation principles of International Arbitration like party autonomy, competence principle, limited procedural steps, reasonable fees structure, use of technology, and enforcement of an award can be noticed under the SIAC arbitration as well. The leading institutions including the SIAC complete with each other on shaping and changing their rules to provide best arbitration tribunal for the parties. The focus is more on providing a better and faster dispute resolution system to the businesses around the world. Which is one of the reasons for the amendments of SIAC rules within a very short period of time. They study the way institution applied its expertise on matters presented to them. Changes of the procedural laws are based on these studies and understanding of international arbitration. The legal experts appeal for amendments in procedures related to the court systems court for decades. On the other hand, arbitration institutions make changes in their procedural laws within few years of time frame. Hence, arbitration under the SIAC rules may suit the most for the developing Indian and Chinese companies in the region. Similarly, for the companies around the world looking for the best arbitration mechanism in the Asian region.

     

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    Mon, 06 May 2019 12:42:00 GMT
    <![CDATA[Personal Injury Lawsuit]]> Personal Injury Lawsuit in the UAE

    Ubi jus ibi remedium –legal maxim meaning, "where there is a right, there is a remedy", is the basis of the principle of personal injury liability or so famously called tortious liability. One among the many accepted and acclaimed definitions of "tort", as postulated by Sir John William Salmond, a very proven common law jurist is as follows: "A tort is a civil wrong which attracts the remedy as a common law action for unliquidated damages and which does not exclusively constitute the breach of a contract or a trust or other merely equitable obligation".

    Liability under tort can erupt from the breach of a duty that is primarily fixed by law, and such a breach of this duty is remedied through an action for unliquidated damages. The law of tort focuses on dissuading and stopping persons from infringing the rights of others and also compensates those whose rights are infringed and have suffered a civil wrong as a consequence of the wrong-doers acts or omissions.

    In one sense, torts can be treated as what could be compared as civil correspondent of a crime since each would require a specific standard to be watched, and a break of the 'code' would prompt results. Tortious conduct may entitle the person who has been wronged or whose rights are infringed to compensation or some other cure, while criminal conduct would commonly prompt punitive measures. The difference between a civil wrong and a crime is basically one of degree. In tort, while the 'person in question' is allowed to choose if a private action or remedy is to be sought after or not, a crime is viewed by the general public as bad behaviour of an outrageous nature requiring punishment.

    The Civil Code states that individual commitments or rights will emerge out of person's temperament, legal events and law, and the eruption of such obligations will be out contracts and acts causing hurt (torts). Any damage done to another will render the wrong-doer, however incapable he may be of discretion, obligated to make the wrong good. The Civil Code predominantly aims to guard reputation, personal security, property, and economic, monetary interests of people.

    In the UAE, the principle guiding the cases of personal injury is mainly accommodated in Federal Law No. (05) of 1985 (the "Civil Code"), under Articles 124, and 282 through 298. Below mentioned are some of these Articles worth giving a look.

    Article 124 of the Federal Law No. (05) of 1985 states that the obligations or personal rights erupt out of legal acts and commissions and the sources of such obligations are as follows:

  • Contract
  • Unilateral disposition
  • Harmful act
  • Beneficial act
  • Law
  • Article 282 of Federal Law No 5 of 1985, Civil Code (the "Civil Code") states:

    "Any harm done to another shall render the doer thereof, even though not a person of discretion, liable to make good the harm."

    The expression "harm" is utilised as a general term, and means numerous activities, for example, an "unlawful activity", an "act in contradiction to the law", a "harmful act" or such an act "that is prohibited by law". Determining whether an activity amounts to "hurt" falls totally to the interpretation of the judge. The obligation that no person causes harm to another gives rise to the principle that that every prudent man has to take care of his action- this is the set standard of care.

    Article 282 of the Civil Code implies that there must be an act, though positive or negative which must also cause some harm, and there should exist a causal relationship between the two. All and each of these components must be proven by the person claiming so to be perceived as a harmful act by the Dubai Courts.

    Even if stated that the Claimant shall prove the said "harmful act", it is totally at the will and interpretation of the judge to decide if certain acts amount to "harm" or not.

    Article 292 of Federal Law No.5 of 1985 (Civil Code) states:

    "In all cases, the indemnity shall be assessed according to the amount of harm suffered by the victim, together with the loss of profit, provided that it is a natural result of the harmful act."

    Any evaluation of "hurt" by the Dubai Courts will be based on the measure of damage endured by a Claimant. Article 292 of the Civil Code clarifies that a Claimant can file for damages suffered and profits lost if the loss so suffered is accrued out of the harmful act.

    Regarding the actual evaluation of harms, Article 292 of the Civil Code does not give a particular direction to the Courts to consider in deciding the sum (if any) of the harms to be granted. This is also being reaffirmed by the Court of Cassation: "since the law does not give any criteria to evaluate the compensation, such evaluation fully depends upon the will of the Court". It has likewise been built up that "the Court isn't required to pursue a mathematical mechanism to evaluate the quantum of damages."

    Article (298) of the Federal Law No. (05) of 1985 states:

  •  An action for damages arising from an unlawful act is prescribed after three years from the date upon which the victim knew of the injury and the identity of the person who was responsible.
  •  Where a claim arises out of a criminal offence and the hearing of the penal action is still pending after the lapse of the periods above-mentioned in the preceding clause, the action for damages may still be heard.
  •  An action for damages is prescribed in any case after fifteen years from the date on which the prejudicial act was committed.
  • It would be equally important to indicate the heads of damages that the aggrieved party can claim compensation under. Even if it is mentioned that it is totally to the discretion of the Dubai courts to decide and evaluate the quantum of damages, previous cases indicate Dubai courts follow some categories of losses and award damages accordingly. These can be as follows:

    Physical and Material Damages

    Physical harms with regards to medical injuries are interpreted under UAE law as "bodily injury". Bodily injury is defined to be all those activities that affect the health of a human being in any manner.

    And thus, such harms that are accrued due to such bodily injuries are termed to be Material Harms.

    Both material and physical harms can possibly be granted by the Dubai Courts.

    Even though physical and material harms are firmly connected, they are viewed as different in regard to compensation. When physical harm is proved, it very well may be compensated for regardless of whether a Claimant has or has not suffered any material harm because of the physical damage. The reasoning behind this gets from the privilege of an individual to their bodily safety and integrity. This is perceived by numerous countries including the UAE, similar to a right which is fundamental and non-transferable which must be secured without any excuse.

    Moral Damages

    The Dubai Court of Cassation has reliably affirmed that moral harms can add up to any harm which disturbs the dignity, the feeling of respect and the mental agony of a Claimant, which could incorporate loss of monetary standing, despite the fact that this specific perspective has not yet been accounted for regardless so far as we know.

    Loss of Earnings

    Article 292 of the Civil Code clarifies that loss of benefit or profit will be considered by the Courts in evaluating and calculating damages, given that such a loss of income is due to the harm suffered. Loss of income is thus regarded as a head of damage suffered under the UAE law and can be thus compensated by the Dubai courts.

    No doubt the Dubai Courts don't adopt a scientific strategy to loss of income (notwithstanding when given the figures) similarly that a UK or USA Court may, utilising current profit and considering the loss of potential future income.

    The evaluation of the loss of potential future income falls upon the full will of the UAE Court. The Dubai Courts might be somewhat progressively liberal and grant compensation for loss of income while thinking about the situation of a sole provider in a family.

    If one has to claim the loss of earnings, then one must give acceptable justifications for such a loss.

    Loss of Opportunity

    Loss of opportunity is closely related to loss of income, as when one loses his/her money in a particular transaction, for example in a residential unit when its not handed over to the purchaser on the due date, then the purchaser also loses the opportunity to live in the such a resident that he/she paid for. The same approach is taken by the Dubai courts while calculating the loss of opportunity as to that of loss of income, that it shall be reasonably justified and be related to the harm suffered.

    Potential Future Damages

    Under Article 292, the Dubai courts don't generally consider the losses that the person may incur in future until and unless it is so proven that such damages are definitely bound to be suffered by the aggrieved party. However, if the party proves that it is going to suffer medical expenses in future, then the court may grant suitable damages.

    It is to be noticed that there is no scientific technique for estimation which the Dubai Courts are required to pursue while evaluating future damages. The Dubai Courts are just required to demonstrate that all heads of claims have been taken into consideration while calculating the damages; the Courts are not obliged to give any explanation or the reasoning behind its calculation or to bifurcate the damages into separate heads of claims.

    Under the UAE law, the compensation for the loss of human life is much more reasonable as compared to the West and its exaggerated compensations, and is termed Diya or blood money and is decided to be Dh200,000.

    The compensation for the loss of any body part or organ or its functionality is termed as Arsh. Compensation is predetermined, and the loss of any bodily functionality or severity of the disability is investigated by medical experts.

    On the component of limitation, it must be noticed that no case for compensation under tortious obligation will be heard by the UAE courts after the lapse of three years from the day on which the claimant came to the fact of the occurrence of the wrong and identified the tort-feasor. In any case, if such case emerges out of a crime and the criminal procedures are pending after the termination of three years, the limitation will keep running as long as fifteen years from the date of the event of the tortious activity.

    It can be thus concluded that most relevant provisions with regards to the personal injury law in the UAE are found in the Civil Code of the UAE. It is very common that the courts appoint experts on the matters and cases of personal injury and the so appointed experts submit their reports on the basis of law and fact, and the courts do take their report and opinion into consideration. The UAE personal injury laws are more stringent but also more reasonable when it comes to compensation as compared to the laws of the West.

     

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    Mon, 06 May 2019 12:13:00 GMT
    <![CDATA[A Guide Information Security ]]> A Guide to Information Security and Data Protection Laws in GCC Countries

    New challenges have arisen with the technological development along with the social and economic globalization.  It can be said that our entire personal data is being stored in the gadgets we use. Internet today has brought millions of unsecured computer networks into continuous communications with other networks. With the advent of information being stored electronically, more and more people use online banking and shopping services, social media, location-based services, mobile services for their everyday activities. This results in the collection of an enormous amount of digital trail of personal data of these users which are left all over the internet. The security of each computer's information depends upon the level of security of other computers connected to it.

    In the recent years, with the realization of the importance of Information Security to both national security and the corporate world, awareness of the necessity to improve Information Security has grown and is ever increasing.

    In this guide, we will address the following questions regarding Information Security:

  • What is Information Security?
  • Is there a need for Information Security?
  • What is the relevant legislation for information security in UAE and other GCC countries?
  • What are information security agreements/ clauses and what needs to be added to these clauses/agreements?
  • What is Information Security?

     In the earlier stages, information security was a simple process composed of predominantly physical security of documents and its classification.  The primary threat faced by companies were theft of equipment, product espionage of the systems and sabotage. One of the earlier documented cases of security problems occurred in early 1960, where the systems administrator was working on the Message of the Day and another administrator was editing the password file, when a software glitch mixed the two files, causing the entire password file to be printed in every output file.

    With the growing concern about States engaged information warfare and the possibility that business and personal information systems being threatened if left unprotected has made Information Security (InfoSec) emerge as a method to ensure the confidentiality of the available data and also the availability of technology enabling the delivery and processing of that data. In simple terms, it can be explained as the protection of information and systems from unauthorized access, disclosure, alteration, destruction or disruption.

    It can be said that the main objectives of information security are:

    • Confidentiality

    Which refers to the preventing unauthorized access or disclosure of information and providing its protection. Confidentiality means ensuring that the individuals authorized are able to access the information and those who are not authorized are prevented.

    • Integrity

    It is the protection of information from unauthorized alteration or destruction and ensuring that the information and its systems are uncorrupted, accurate, and complete.

    • Availability

    Means to ensure that the information is available in a timely manner and there is reliable access to and use of the information and the information systems, at the same time, protect the information and information systems from unauthorized disruption

    Why do we need information security?

    A fundamental aspect for the success of our economy and society is data, and the protection of the same from cybercriminals has become the need of the hour in today's cyber world.

    Advanced Persistent Threat (ADT) is a well-resourced systematic attack perpetrated by competing states and cyber criminals who aim at state secrets, corporate espionage, and theft of sensitive data.  ADT has added to the breaches of millions of the individual personal, health and financial information, making it essential for institutions that collect and use personal data to develop and sustain a comprehensive security system in order to protect itself against such attacks.

    For the security of individuals and the survival of enterprises, it is paramount to secure information resources and protect personal information from being exposed to groups or individuals with malicious intentions. While businesses struggle to survive amidst these critical issues surrounding information security and the increased risk of serious data breaches, governments are also changing their data protection laws so as to adapt and secure itself against these new risks that arise every day.

    When companies entrust business partners and vendors with the company's confidential information, the company is also entrusting them with all control of the security measures for the company's data. Such a trust cannot be blind.

    Examples of InfoSec Breaches:

    • British Airway's Customer Data Hack 2018

    The British Airways recently announced that over 380,000 payment card details and personal data of customers were compromised following a 15-day hack attack from 21st of August 2018 to 5th September 2018 and warning the customers to contact their banks immediately in order to secure the same.

    • The Bank Heist of 2013

    In 2013, the world witnessed one of the biggest bank heists of the century. A team of cybercriminals stole $45 Million (AED 165 Million) from RAKBANK and Bank of Muscat by accessing the computers of their credit card processors. Once they gained access, they increased the available balance and withdrawal limits on prepaid MasterCards issued by the banks. They then distributed these counterfeit cards to "cashers" around the world enabling them to siphon millions of dollars from ATMs. This included over 36,000 transactions which were committed in a matter of 10 hours. 

    • Cryptowall Ransomeware Case

    Cryptowall is a file-encrypting ransomware program which was used by its creators to make over $1 million by infecting over 600,000 computer systems in 2014. Once gaining access into the computers, they encrypted the sensitive information files which were only decrypted when the owners paid the ransom. Even though Cryptowall had been spreading since 2013, it had been overshadowed by Cryptolocker, which is another ransomware program. When the threat of Cryptolocker was mitigated, the makers of Cryptowall stole the data by accessing computers through various tactics including spam emails with malicious links and attachments, drive-by-download attack for infected sites with exploit kits and through installation through other malware programs already installed and running on compromised computers.

     

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    Thu, 11 Apr 2019 13:37:00 GMT
    <![CDATA[Kuwait Company Formation]]> Kuwait Company Formation

    The business environment in Kuwait is complex, and it requires flexibility, persistence, and patience. Many traders are it importers or exporters have been challenged by inconsistent and at times policies that are contradictory due to which there is a lack of transparency when vital decisions have to be made. Together with this, the Government of Kuwait is not implementing the anti-corruption laws as effective as they should be.

    Kuwait is changing and undergoing a massive expansion in the construction industry, and the new law on companies is providing a more realistic and practical perspective than the previous companies law. The Commercial laws in Kuwait are taking a drastic leap since a couple of years, and it is evident that it is continuing to change.

    The economic conditions in Kuwait are robust with the currency ranked as the highest valued globally. Oil and Gas sector, Agro, financial and the real estate sectors are few who contribute heavily towards the growth of the economy. The Government of Kuwait wants to diversify the economy by the creation of non-oil economic growth and better platforms for foreign investors to be able to thrive in the Kuwaiti commercial market.

    Kuwait stands in between being an oil-rich company and its tax efficiency for international businesses throughout the Middle East and the GCC. Additionally, company formation in Kuwait is highly attractive since the income tax rate is as low as 15% for foreign-owned businesses.

    Company Formation

    Under the rules and norms, both foreign individuals and corporate entities can form companies in Kuwait where it is necessary that a Kuwaiti must own it for at least 51% of the shares. The Law of 2003 on Foreign Direct Investment paves the way for 100% foreign ownership in certain sectors. In Kuwait, the popular entities that are formed are the LLC which is owned 51% by a local shareholder unless it is set up in a free zone, or the Kuwaiti Investment Agency approves it is known as the WLL.

    The other types of companies that can be formed are as follows:

  • Shareholding Company
  • Branch Company
  • Partnership Company
  • Joint Venture Companies
  • Agent/Distributor
  • It is to be noted that in the process of for a business set up in Kuwait, the approvals of the government a specifically the Kuwait Direct Investment Promotion Authority should be obtained. For Company formation in Kuwait, the firm needs to make an application for a business license with the Ministry of Commerce and Industry.

    Considering all this, the best option is to partner up with a local Kuwaiti entity or an individual for the business set up in Kuwait.

    Business Setup Option for Investors in Kuwait

    1. Limited Liability Company (With Limited Liability in Kuwait)

    The most basic form of company formation in Kuwait is the setting up a private company which is easiest to form with a tab on foreign shareholding be at 49%. The only restriction called upon them is that they are limited in conducting banking and insurance businesses or to act as a pure investment fund. These companies have counterparts like the SARLs in France, the German GmbHs or the British private companies. A With Liability Limited Company is easily formed by making an application for an MOA which has to enter. The minimum Capital requirement is 1,000 KD.

     

    Company setup Type

    Limited Liability Company (WLL)

    Under Kuwait law, foreigners can own

    49%

    Share Capital

    KD 1,000

    Shareholders

    Minimum Two

    Directors

    Minimum Two

    Memorandum and Articles of Association

    Yes

    Classes of Shares

    Registered 

    Can the entity hire expatriate staff in Kuwait

    Yes

    Tax Registration Certificate Required

    Yes

    Statutory audit required

    Yes

    How long to open Corporate Bank Account

    1 Day

    Timeframe for Incorporation:

    3 Months

    Annual Return

    Must be filed

    Annual Tax

    Must be filed

    Access to Kuwait double tax treaties

    Yes

    2. Shareholding Company

    The Joint Stock Company permits easy transfer of shares withholding the same shareholding structure of 49% with the foreign entity. A Kuwaiti Shareholding Company is one of a good option if the foreign entity intends to go in for an initial public offering or in case, they are looking for third parties interested in investments due to easy transferability of shares. One thing to keep in mind is that one has to obtain an Amiri Decree for launch opening a shareholding company in Kuwait. An Amiri Decree is a decree of an Emir or one of his representatives which is generally in Bahrain, Kuwait, Qatar, and UAE.

    3. Branch Company

    Foreign entities can set up business as a branch company once they receive permission from the Kuwait Direct Investment Promotion Authority. Under Kuwaiti Companies Law, only nationals of GCC members are allowed to fill in this role.

    4. Joint Venture Companies

    A JV company set up in Kuwait is formed by a venture of two or more natural or legal persons. This kind of venture has no legal existence and does not need to be entered on the record of the register of the Ministry of Commerce and Industry. The objects aims and terms of the JV are explicitly defined in the contract. These kinds of businesses are generally used to carry out construction projects like power plants, etc. The business under the JV can be conducted under the trade license of the Kuwaiti national in case it involves a foreign partner.

    5. Agent/Distributor

    The Law No. 36 of 1964 regulates the commercial agents engaged in the business of promoting products and the distributors who are involved in the promotion, import and distribution of the products as well as the service agents which are appointed by foreign entities who intend to engage in government contract works.

    Now let's take a look at the set up of the WLL company in Kuwait

    Application:

    The potential company has to make an application detailing all the company's shareholding and the information required by the Ministry of Commerce's along with the business owner's identity card and a certificate from the Social Security Authority to act as an evidence that the local partner if not a civil servant and a copy of the lease agreement.

    Documents required:

    The following documents will be notarized by a public notary to complete the incorporation:

  • Copy of your articles of association;
  • Copy of your commercial license;
  • Copy of your commercial register;
  • Copy of Shareholders' resolution stating the Company's director/authorized signatory.
  • During the incorporation process, there will be a one-time Ministerial and Chamber of Commerce fees of KD 300. It has to be kept in mind that the manager(s) shall be the first Director would have to be a Kuwaiti national and the office space (commercial address), which is a requirement during the incorporation process.

    Approvals:

    After the online application and the support of the same, the background check will be followed by the Ministry asking to reserve a name for the Company. After which the department will ask for approvals for the deposit of the company's paid-up capital at the bank. These funds are held frozen until the incorporation is completed.

    Submission of the MOA:

    Then the memorandum of association has to be submitted to the department of companies, where after the finalization of the draft, a letter will be issued which will authenticate the incorporation of the company.

    Membership at the Chambers of Commerce:

    Once the approval is obtained, the company has to apply for membership at the Kuwait Chambers of Commerce and Industry and Public Authority for Civil Information. Once all the steps have been followed, and the relevant certificates have been obtained, the company is officially set up in Kuwait.

     

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    Wed, 03 Apr 2019 16:50:00 GMT
    <![CDATA[Company Formation in Saudi Arabia]]> Company Formation in Saudi Arabia

    Introduction

    The Saudi Arabia company law recognized four types of business entities: the joint stock company, the limited liability company (LLC), the partnership as well as the branch of a foreign company. To procure the status of a shareholder, the foreign individual or entity must obtain a foreign capital investment license granted by the Saudi Arabia General Investment Authority (SAGIA), which in practice is infrequently granted by this authority. Hence, practically, it is usually recommended that the foreign entity either register a branch of a company incorporated in any of the Gulf Co-operation Council (GCC) since they are exempt from licensing requirements, or for the foreign entity to sign an agency agreement with a local partner.

    Market Condition

    As the largest Arab state and the world's second largest oil producer and exporter, the Kingdom of Saudi Arabia's regional economic power is unparalleled, and it is one of the only Arab countries to be a member of the G20. Approximately, 80 percent of the private sector employees are non-Saudi nationals. The decision on the form of business presence in Saudi Arabia necessitates deliberation of a number of factors including the type of business to be conducted, taxation implications, etc.

    There are different types of business development forms in Saudi Arabia which are identified, that individually have distinct advantages and disadvantages which need to be considered, as well as have different scopes of business activities, minimum capital requirements, and registration requisites, of which LLC is the most common form of investment for foreign businesses entering Saudi Arabia.

    In particular, an LLC may engage in an array of activities which fall under the approved objects of the company and undertakes both private and public sector projects.

    Regulation of Foreign Investment

    At present, the Saudi Arabian investment landscape is experiencing a phase of change, and to an extent, relaxation of regulatory constraints as a result of Saudi Vision 2030. The regulatory in Saudi Arabia for foreign investment is governed by Foreign Investment Law which was issued in 2000. Launched in the same year, Saudi Arabian General Investment Authority (SAGIA) was established by the government to monitor the business development in Saudi Arabia and its legal implications.

    It was established to assist in providing a suave and speedy investment application, company registration and business set up in Saudi Arabia. The incentive was two-fold:

    1.       Regulatory Incentive: The government introduced significant regulatory incentives along with the new Foreign Investment Law which includes transferring and allocation of companies' shares among the shareholders, direct property ownership for the company registered along with the allocation of residence and employees, accelerated business development in Saudi Arabia, etc.

    2.       Financial Incentive: The financial incentives of the government includes benefits from collateral agreements regarding taxation and investment with other countries, utility rates on a competitive level for industries including water, land, and power, losses transfer for forthcoming years in relation to taxes, etc.

    It is pertinent to note that serious criminal and administrative penalties may apply if activities undertaken are in contravention of the Foreign Investment Law, and such breaches jeopardize the chance of future investment and company formation in Saudi Arabia.

    Setting up a Limited Liability Company in Saudi Arabia

    The form of company formation in Saudi Arabia which is most sought by foreign investors is an LLC. As mentioned above, foreign entities wishing to set up business in Saudi Arabia are essentially required to obtain a foreign investment license from SAGIA. The process of application varies depending on the type of business the enterprise wishes to engage in, and collaterally, it also depends on the time taken by the applicant in order to put together the documentation for the same.

    Once the requisites are met and the application is made in accordance with the requirements of SAGIA, it typically takes up to four weeks for the license to be issued in favor of the legal entity wish to set up business in Saudi Arabia. There are times, depending on the nature of the activity, that certain approvals are required from other Saudi Arabian authorities, and for the same reason, the timeframe could stretch longer. The company also needs to demonstrate a minimum of a year's worth of audited accounts, hence, this possibility of using a special purpose vehicle when in process of company formation in Saudi Arabia is fairly limited.

    While talking about the activities carried out by the company, there is a Negative List which encompasses a list of activities are completely closed to foreign investment. These include but are not limited to:

  • Manufacturing of military equipment, uniforms or devices
  • Investigation and security services
  • Madinah and Makkah real estate investment
  • Real estate brokerage
  • Drilling, production, and exploration of oil
  • Fisheries
  • Printing and publishing (with a few exceptions)
  • Employment and recruitment services, etc.
  • In relation to the activities not included in the Negative List, a 100 percent ownership of the capital may be allowed to foreign investors who wish to develop business in Saudi Arabia, and the same depends on its compliance with SAGIA's requirements at the time.  Activities like banking and insurance have prescribed minimum ownership requirements by a Saudi Arabia national.

    Essentially, a LLC's business limited to the foreign investment license granted by SAGIA and the objects as mentioned in its articles of association. A limited liability company may act in its own name during the business transactions and it can also sponsor foreign employees for residency (an important characteristic for entities that seek expansion of their own employee base in Saudi Arabia).

    While the license is in the process, Ministry of Commerce and Investment along with SAGIA decides what the minimum capital requirement should be for the company formation in Saudi Arabia. The decision of the abovementioned authorities may be influenced by the proposed business activities and the projected expenditure for the initial five years of operation from its inception.

    Coming to the liability of the shareholders, generally speaking, it is limited to the shareholder's contribution to the proposed LLC's projected share capital. Shareholders could incur personal liability prior to the Companies Law 2016 in certain situations. An example of this situation is when the LLC's losses that amount to 50 percent or more of its share capital and said LLC continues to trade without complying with the prescribed procedures. Undoubtedly, with the introduction of Companies Law 2016, the same no longer happens.

    The limited liability company may have either a board of directors or a general manager. But in the case where there are more than 20 shareholders, the LLC must have a supervisory board to monitor and regulate advise management. As long as the LLC is complying with the requirements which are related to employing foreign national (with residency, iqama, in Saudi Arabia), there is no strict restriction or limitation on the appointment of a foreigner as the general manager of the SAGIA licensed LLC.

    Taxation

    It is compulsory that a Saudi Company or a branch of a foreign company be registered with the General Authority for Income Tax and Zakat. For clarity, GCC and Saudi nationals who are part of different corporate structures in the country are subject to Zakat which is a religious levy at the rate of 2.5 percent. Where foreign shareholders or partners are concerned, as well as non-residents that do business in Saudi Arabia through the setup of a permanent establishment, the rate of income tax is 20 percent which is on the net profits (with certain exceptions to sectors like the hydrocarbon).

    Certain Specific Provision related to Company Formation in Saudi Arabia

  • The minimum capital investment requirement for the establishment of an LLC is SAR 500,000 which the equivalent of approximately USD 130,000.
  • The minimum capital investment requirement for a limited liability company with foreign participation is SAR 100,000 which equivalent to USD 26,000 approximately
  • For industrial ventures, the required capital amount increases to SAR 5,000,000 which is equivalent to USD 1,333,000 approximately.
  • For agricultural projects, the minimum requirement is SAR 25,000,000 which is equivalent to USD 6,666,000.
  • The LLC must appoint at one Director.
  • It is essential that the LLC Company must have a minimum of two shareholders and not more than 50 shareholders in total, and the same must be managed by at least one manager. It is not necessary that the General Manager needs to be a Saudi Arabia national.
  • An auditor in the LLC is necessary and where there are more than 20 shareholders, it is essential that a Board of Controllers be established. The annual accounts must be audited the same must be submitted per annum (annually).
  • To give an approximate timeline, it could take up to six months for the company formation in Saudi Arabia. (The same could take longer depending on the nature of the activity to be carried out by the proposed legal entity)
  • It is not necessary that a Saudi Arabia national with 51% shareholding be required for the setup of every LLC.
  • Foreign national investors may own a company in Saudi Arabia limited to a few industries without the requirement of a Saudi National in the same.
  • It is pertinent to note that both natural persons and corporate entities can be named as shareholders of the proposed LLC.
  • The LLC is required to hold at least one annual meeting within 4 months of the closing date of that particular financial year.
  • The renewal of the foreign investment license which is granted by SAGIA and commercial registration certificate issued by the Ministry of Commerce and Investment upon its expiry is necessary and compulsory.
  • If the LLC decides to have more than fifty shareholders, which is not allowed, the same will have to be incorporated into a Joint-stock company.
  •  For dissolution, it must be done mentioned in the memorandum and articles of association; in the absence of such details, a liquidator must be appointed from either the shareholders or any other third party.
  • The LLC must lease an office locally and must have a local address. A virtual office in the LLC in Saudi Arabia is not allowed.
  • Memorandum of Association

    To avoid delay and rejection of the Memorandum of Articles by the government, the same along with the LLC's governing legal documents must be in compliance with the requirements of SAGIA and Ministry of Commerce for appropriate application, speedy approval, acceptance, and registration thereafter.

     

    ]]>
    Wed, 03 Apr 2019 16:17:00 GMT
    <![CDATA[Regulatory Insight of Crowdfunding]]> Regulatory Insight of Crowdfunding in the UAE

    Concept and Its Evolvement

    The Kickstarter community was given the opportunity to get behind a coloring book called, "Why Is Daddy Sad on Sunday: A Coloring Book Depicting the Most Disappointing Moments in Cleveland Sports." The project's creator, Scott O'Brien, set a goal of raising $2,000. He raised almost $24,000. The idea came to Scott when he was stuck in the traffic in Los Angeles. To explain it better, he could so do by simply using the Crowdfunding platform which was in the form of a donation.

    Crowdfunding platforms are used for generating funds from a large group of people. It also has different names like crown financing, crowd investing and is defined as the collective co-operation by people who pool their funds, usually by means of the internet, to support initiatives by different organizations and people. It is used for different purposes, from raising funds for smaller projects to larger projects and essentially beneficial for SMEs to obtain financing. In the western world, it has taken shape in the last three decades however Google suggests that "Crowdfunding may seem like a new idea, but it actually has a long and rich history with roots going back to the 1700's".

    UAE has always shown its eagerness to adopt new technological concepts and with the advent and enormous success of financial free zones in the UAE, it has become a fascinating destination for investors.  Recently, the Emirates have taken a step to regulate the Crowdfunding, and crowned themselves as a trendsetter, becoming the first country for such regulations amongst the Gulf countries. The Dubai Financial Services Authority (DFSA) issued regulations on Crowdfunding in 2017. It may be a vital need for this market because it houses several small and medium enterprises.

    The UAE Banks in recent times have shown reluctance to extend financial support, especially to the small and medium enterprises (SMEs), unlike before. Half a decade before, it was easier to obtain funds from the UAE banks, however, this has not been the case for a while. This can, in particular, hamper the financial and economic growth of the country and may prevent investors from entering the market. SMEs are significant contributors to the UAE economy which comprises around 85% of businesses in the UAE, contributes to nearly 60% to the UAE GDP, and employs 60-65% of the UAE workforce. It is estimated that by 2020, the Global loan-based crowdfunding will reach more than USD 300 billion and global equity-based crowdfunding more than USD 93 billion.

    Regulatory Framework in the DIFC (DFSA):

    The Crowdfunding is not specifically regulated in the UAE as yet, however, it has been regulated through different models and other legislation. For instance, without obtaining any license (from the designated authority of the respective Emirate where the funds are to be raised), the individuals and corporations cannot carry out any fundraising activities. In Dubai, pursuant to Decree 9 of 2015 Organization of Fundraising in the Emirate of Dubai, any fundraising activities without obtaining the prior consent of Islamic Affairs and Charitable Activities Department are prohibited and any violation would lead to hefty penalties including fine OR imprisonment, or both.

    Further, the Central Bank of the UAE regulates the banking activities (granting of loans by the banks) and the Securities Commodities Authority (SCA) regulates the financial activities in the UAE. Whereas in the financial free zones, the activities are regulated by the Dubai Financial Services Authority in Dubai International Financial Centre and the Financial Services Regulatory Authority (FSRA) in Abu Dhabi Global Markets.

    In late 2017, the DFSA launched its regulatory framework for loan and investment based crowdfunding platform, with the objective of protecting the rights and obligations of the parties involved in specific crowdfunding activities, and its licensing and organization. It is imperative to highlight that it does not regulate any charity/donation based platforms as yet. These platforms are not to be used for investing in funds, managing assets, issuance of any securities, or any such activities. The Committee has, therefore, proposed set of rules to establish a new Financial Service "Operating a Crowdfunding Platform" which shall regulate both the Loan based Crowdfunding and Investment based Crowdfunding.

    Investment-based crowdfunding activities could fit into some of the DFSA's existing Financial Services and shall involve: (a). the operation of an electronic platform that facilitates the bringing together of persons who wish to obtain funding for a business or venture (Issuers) and persons who are willing to provide funding (investors), and results in the investor making an investment with the Issuers; and (b). the operator performing administrative functions in relation to any investment that results from operating the electronic platform.

    As Investment-based Crowdfunding will (unlike a crowdfunding lending platform) involve the issue of security (normally shares), an Investment-based Crowdfunding Platform may result in an Issuer making an Offer of Securities to the Public as defined in Article 12 of the Markets Law. As a result, an Issuer would have to consider the Prospectus regime in the Markets Law and Rules. For start-ups and small and medium-sized companies, complying with the prospectus requirements for a small fundraising exercise may not be viable given the costs and resources involved in preparing a Prospectus. They have also proposed some exempt categories.

    Prudential Requirements: The DFSA currently allows firms to set up a start-up, subsidiary of a non-DIFC firm or a branch of a non-DIFC firm. If an authorized firm is a branch, it is not normally required to hold capital in the DIFC.

    The current status of the regulation of Crowdfunding requires that all those operating a loan-based crowdfunding platform in the DIFC, including those establishing a Branch, must hold capital according to the Category 4 Capital Requirements. The same is applicable for operating an investment-based crowdfunding platform in the DIFC.  

    Risk Disclosures: Under the regime, the operator is required to disclose the risk that a lender and borrower may be exposed to in the transaction. The regulations have also set out the language/statements to be included on the operator's website for any such risks. It also requires the operators to specify the default rates of loans and failure rates that may be required, in the event of a default in payments or insolvency.

    Due Diligence: The proposal on an investment-based crowdfunding platform, provides for the following minimum checks which the operators are required to comply with: a) the details of its incorporation and business registration, as well as the identity and place of domicile of each director, officer, and controller of the Issuer, b) the fitness and propriety of those referenced in a), for example checking if there have been any director disqualifications or convictions for fraud/dishonesty, c) the financial strength and past performance of the Issuer, and if the company is a start-up, its financial projections; d) the valuation of the Issuer's business, its current borrowing levels, and the source of any existing borrowing (if applicable), e) the Issuer's business proposal, f) the commitment of the Issuer to its business, for example, looking at the initial share capital and any flight risk exposure, g) details of any funds raised via the platform or elsewhere, and h) that the Issuer is complying with applicable laws in the jurisdiction in which it is incorporated.

    The regulation also includes provisions relating to issuer restrictions, risk warnings and other disclosure requirements, fair treatment of investors, technological resources, business cessation plan, transfer facility, a cooling-off period, and restrictions of retail clients. This suggests that DFSA regulations protect the interest of the lenders, as well as, borrowers who are generating funds through these platforms and operators will have to abide by the strict compliance obligations, in order to safeguard and segregate the client assets. In the light of the above, it can be said that Crowdfunding platforms give the entrepreneur, a single platform to build, showcase, and share pitch resources, and this approach dramatically streamlines the traditional model.

    ]]>
    Mon, 01 Apr 2019 15:05:00 GMT
    <![CDATA[Investment Treaty Arbitration]]> Investment Treaty Arbitration

    The foreign direct investment (FDI) is skyrocketing with the globalizing world and hundreds of millions worth cross-border investments are initiated across the world every day. This article intends to discuss the legal protection for these foreign investments. National laws of some states intend to protect foreign investments as it can help to develop the local economy but the primary problem is the process of arbitration for recovering losses. With the establishment of the International Centre for Settlement of Investment Disputes (ICSID) arbitration, the companies and international business lawyers can address this issue efficiently. For example, Company X starts the business in the USA and over time decides to expand overseas. Accordingly, they decide to start an operation in a completely new jurisdiction with its own laws and regulations. Their investments are poured into this new company and their operation was very successful. Nevertheless, the usual problem for Company X will be getting into a dispute with another company in the same territory. Hence, if the company X has a dispute with company Y, there will be an arbitration Tribunal conducted in order to solve the dispute. However, if company X got into a dispute with a government agency or government entity, the matter cannot be referred to an arbitration Centre as there is no arbitration agreement or direct contract between that country government and the company X. To address this issue, Investment Treaty arbitration was implemented by international lawmakers.

    In a commercial arbitration, there should be a dispute and an agreement to initiate the Tribunal under an international arbitration Centre. In contrast, investment Treaty arbitration has the foundation of an international investment Treaty signed by multi-nations or a bilateral Treaty signed between two agreed countries to protect foreign investments. Historically, there are many bilateral treaties (BIT) signed between two states within customized treaties to protect their special interests. These treaties are basically intended to provide protection to foreign investments. Specifically, these treaties aim to establish a strong procedure for recovery of financial values and properties, protect assets of the foreigners, to establish most favored nation treatment policy, and national treatment protection for the foreign investments. The reluctance of the investors on investing in a foreign nation has reduced significantly, with the addition of a double layer of protection from international law.

    World Bank led the implementation of a multilateral Treaty to succeed their core objective of promoting international investments. Unlike the international arbitration institutions, the establishment of the ICSID Centre was carefully designed to separate political influence from the procedural laws, for the reason of the many nations, which will be a participant to the disputes. Also, the scope of work of the ICSID extent to state-state disputes as well. The involvement of the monetary value in these disputes are very high and therefore it was essential to establish perfectly designed procedural laws to address these disputes. Similarly, the enforcement mechanism of an award was the second stage, since countries might play the role of defense. Simply put, the procedures must be designed more carefully since states have the full power over the executive, parliamentary, and judiciary institutions to prevent the execution of an award within their own territory. On the other hand, the difference between the two parties is that the reputation of the states are very high and they value their diplomatic relationship with the involved nation. Therefore, the Tribunal must defend the interest of the states involved, to the best of its efforts. So to protect the reputation of the parties, the ICSID has designed to form a special arbitral Tribunal or committee to consider each matter with special care. Later, an experienced ICSID team will provide guidance and assistance to settle the matter amicably. There are hundreds of pending cases involving different states, which might not have been addressed if not for this Convention. Some of the interesting pending disputes include a leading electronic company's dispute against a leading gulf nation. This case involved an electric power generation project registered in 2017. This example elaborates the high level of cases that are involved with the ICSID Tribunal.

    The governing body of the arbitration institution is the Administrative Council. It is composed of a representative from each state who has ratified the Treaty. Their preliminary powers include decision-making rights in relation to the budget, implementation of rules and regulations for the institution, and appointment of top-level administrative positions. This counsel gathers every year for discussions and each member holds one vote with regard to the decision-making process. 

    The seat of the office is the Principle of the International Bank for Reconstruction and Development (IBRD). If a party requires the seat to be moved to another place, they may do it by applying to the administrative council. The four main pillars of the center include the panel of arbitrators, administrative counsel, secretariat office, and a panel of consolidators. The administrative counsel formed by members from each contracting country.

    The jurisdiction of the Centre extends to any disputes in relation to foreign investment between a contracting state and a national of another state. The state, in this regard, is not only limited to the state government but also considers any subdivision or agency under the relevant government. Chapter 3 Article 25 of the regulation stipulates on this and legal experts appreciate this careful drafting of the concerned article since participating nations has all the powers to find a solution and escape from the awards. Similarly, the states are also empowered to question the link between the jurisdiction of the matters or prove that there is no link between different government-owned agencies and entities within the government itself. For example, if a taxi company invests their money in a different state and if that state's municipality imposed a high tax or a different set of regulations for only this taxi company, this can be considered as the breach of investment protection under the international law and the same may be submitted to the Tribunal. Any government agencies or government entity involved in this regard will be considered as the state for this matter.

    The ICSID Convention provides a format to conduct arbitration procedures. All the disputes under this Tribunal must follow the procedural steps mentioned under Chapter 4 and 7 of the Convention. The details of some of the procedures are mentioned in the cross-reference chapters to provide clear guidance and regulations. Followings are the number of procedural steps under the ICSID Convention to conduct an arbitration Tribunal:

  • Parties requesting for arbitration from the Tribunal.
  • Registration and review of the request for arbitration.
  • Establishment of fundamentals like the number of arbitrators and their appointment method.
  • Beginning of the proceedings.
  • The first session starts followed by the written and oral procedure.
  • Deliberations.
  • Interim decisions (if any)
  • Awards.
  • Enforcement of the award.
  • Article 42(1) of the Convention provides the parties with a broader discretion to decide the laws applicable to the dispute. Flexibility in procedural rules is a fundamental nature of international arbitration. Usually, the parties to the process select the seat, applicable laws, procedural laws, arbitrators, and many more in a general arbitration Tribunal. Following that, the ICSID Convention also has implemented a broad article under 42(1) of the Convention, to select an applicable law as well as exclude some provisions of the same. Thus, the Convention effectively provides the parties with the complete authority to design their own arbitral Tribunal. However, selecting the national law is a difficult task for the parties as it is a selection between host state law and investor's state law. According to the ICSID Convention, if the parties had failed to mention the applicable law in the agreement, the state's (party to the arbitration) law shall be applied to the Tribunal. This will include the country's dispute resolution along with international laws.

    One of the fundamental reason to establish international arbitration is to reduce fees and time. However, the purpose of establishing ICSID arbitration was to protect foreign investments. The nations or big investors participating in these Tribunals may not hesitate to pay a fee to solve their million dollar problems. Chapter 3 Regulation 14 of the institutional law provides guidance in relation to the direct cost of the individual proceedings. Which stipulates that the parties must bear the cost of the participants, like the arbitrators, to the process. Each day's fees including eight hours of working plus any additional hours of work must be paid accordingly. The amount is determined by the secretary, with the approval of the chairman. This is to keep a check and balance, with regard to, the payments received by the participants. The secretary is also vested with the duty to make an estimation of the Tribunal's expenses for a period of three to six months and present the same to the parties for an advance payment. Another important duty is vested with the Secretary-General, which is the maintenance of a list of contracting states. Under Regulation 20, the office has to keep all the updates related to this matter, including the states in which the Convention has entered into force, list of excluded territories, regulations related to enforcement of the award, etc.

    The enforcement of an arbitral award from the ICSID arbitration can be enforced using the ICSID Convention (1965). As discussed, this Treaty has been founded to encourage enforcement of the foreign arbitral awards. However, there are instances where the judgments are proceeded through a correction process, especially concerning the correction of the facts or the law. The parties can request for a revision process if new facts concerning the case are found and which parties had no knowledge of when the final award was granted. However, the Tribunal requires such an application to be made within 3 months from the discovery of such facts. 

    The practical implementation of Tribunal's awards in a state is secured through Article 54 of the ICSID provisions. By agreeing to this provision, parties have agreed that they will recognize and enforce the Tribunal's awards as if it is a final judgment of the concerned state courts. The importance of ratification of this clause is because the enforcement must be done by the local state entity. They will have no option but to enforce the complete award since the award must be considered similar to local judgment. This gives the investors the utmost trust about the system of arbitration under this institution. They can rely on this institution for the safety of their investment, as well as, the enforcement of a judgment against a state.

    Under the ICSID Convention, there is no system of appeals, however, a revision or similar process may be granted under limited circumstances. Under article 52(1) of the Convention, the parties have the right to apply for revision, annulment, or interpretation of a given award under the following circumstances:

    • That the Tribunal was not constituted properly.
    • The Tribunal has manifestly exceeded its powers.
    • That there was corruption on the part of a member of the Tribunal.
    • That there has been a serious departure from a fundamental procedure.
    • That the award has failed to state the reasons on which it is based.

    These are the valid reasons a losing party can apply for a revision or any other similar procedure. These points are almost similar to Article 5 of the New York Convention for the enforcement of an award. First reason under the ICSID Convention primarily questions the Tribunal's constitution. For example, the governing law of the Tribunal must be according to the agreed governing law. A Tribunal or arbitrators must not exceed its powers. For example, if the Tribunal was constituted to address the investment dispute between a state and investors, that Tribunal only possesses the power to resolve the concerned dispute. Thirdly, if an arbitrator gets involved in the act bribery or has acted in a way that favors one country or party, then the Tribunal's award can be questioned using article 52 (1) of the Convention. Finally, the arbitrators have the duty to inform the parties about the reason for the award. It is mandatory unless otherwise agreed by the parties. Therefore, these objections are very fundamental and within the boundary of international arbitration principles on the objection of an award. On the other hand, it is carefully designed, thus, not providing much room for the participant state to delay the enforcement of an award. For example, if there was an appeal system, the country states might have always used that and appeal the dispute in order to drag the matter for several months or years, and the investors' investment in the market will be dead by the time final enforcement enforced. Therefore, considering the nature of disputes and the background, the Convention has limited the objection to only the fundamental level.

    The usual method of dispute resolution for the disputes between states to state is the International Court of Justice. The Convention has supported this method, by referring the disputes to the International Court of Justice if they cannot be settled under this system. This only applies with regard to state-to-state disputes and the parties may choose an alternative method if they wish to do so. Overall, the Treaty and arbitration Centre protect the interests of investors with a procedure, as well as, an enforcement mechanism. The Treaty and the Tribunal encourage foreign direct investments and help the global economy.  

    ]]>
    Mon, 01 Apr 2019 13:18:00 GMT
    <![CDATA[Personal Injury Claims]]> PERSONAL INJURY CLAIMS UNDER DUBAI LAWS

    What is a Personal Injury?

    Personal Injury, a broad term, involves an injury that is sustained physically, emotionally or mentally by a person as a result of the negligent or intentional actions of another person, including a business entity. The victim is entitled to claim damages where he/she has suffered a personal injury due to the other party's conduct which is negligent, careless or intentional misconduct. For instance, the driver of a taxi runs a stop sign and collides with another car; the driver will be legally responsible to pay compensation for any injuries that arise from the accident. A claim for psychological harm can also be made, even if it is not associated with any physical injury, though there are a strict set of rules which define the circumstances under which such claim can be succeeded.

    • Personal injury can arise from:
    • Vehicle accidents
    • Medical malpractice
    • Wrongful deaths
    • Product liability
    • Workplace accidents
    • Dangerous drugs
    • Defamation, libel or slander
    • Airplane Accidents
    • Wrongful deaths
    • Personal Injury Claims

    The underlying principle behind personal injury claims is that where the damage is caused to you by the misconduct, negligence or carelessness of another, you are entitled to receive compensation from the person responsible for the loss suffered by you.

    Depending upon the type of accident and the extent of injuries suffered, many types of personal injury cases can be brought to a Court. It is a civil action, where if the party is found to be legally at fault for causing the injury, he or the entity is responsible to pay damages as a remedy. In the case of criminal liability, the party liable will be subject to sanctions like fines, imprisonment, and community service when prosecuted and found guilty in the criminal court.

    Personal injury is related to tortious liability and in most cases are governed by the law of negligence, which dictates a reasonable standard of care owed between parties and liability when the breach of the reasonable care by one party results in the injury of the other. It also involves cases where a person is, for example, injured by a defective product. In such situations, it is not necessary to establish carelessness or negligence, since in cases of product defect, the legal concept of strict liability applies. 

    Compensation for Personal Injury

    The amount of compensation that can be recovered will depend upon the nature of the injury and the consequent costs and losses. The damage must be a recognizable one and must entail a clear chain of action leading to the pain and suffering of the claimant. This is not always a simple task since there can be pre-existing medical conditions or multiple potential causes to the injury. As a result, expert medical evidence is often called in to address these issues.

    The Curious Case of McDonald's Coffee (Liebeck V. McDonald's)

    The late Stella Liebeck, then 79 years old, had purchased a cup of McDonald's coffee which she accidentally spilled, pouring scalding hot coffee on her. As a result, she suffered third-degree burns on over 16 percent of her body, which led to 8 days of hospitalization, whirlpool treatments for the debridement of her wounds, skin grafting, disability, and scarring for more than two years. When McDonald's shut down her attempts for an out of court settlement, she decided to sue them for gross negligence. The jury found 20% of fault on Liebeck and the remaining 80% on McDonald's. Liebeck was awarded compensatory damages of $160,000, and $2.7 million as punitive damages for McDonald's misconduct. The punitive damages were further reduced to $480,000 by the trial judge. However, the parties subsequently agreed to enter in a post-verdict settlement, where Liebeck received a total of $600,000 as damages.

    As seen above, most of Liebeck's award composed of punitive damages rather than compensatory. This represents a class of lawsuits where a compensation culture has developed in many developed countries. However, this clogs their legal systems and can drastically damage private companies and their insurers.

    Personal Injury Under the Dubai Courts

    Along with the example seen above, there is also another scenario where a person grievously injured is unable to prove the other party's negligence in the court, and as a result, receives nothing from the legal process.

    This is the reason why Dubai adopted a different approach to personal injury cases and its compensations:

    The injured party has recourse to take legal action and sue the negligent party, but the scale for such compensation shall be set by the courts to avoid huge awards similar to the McDonald's case.

    Compensation for injury, physical or psychological, is usually limited to an amount equal to two years' pay but can also include the cost of future case and loss of earnings.

    The UAE also contains a no-fault scheme of compensation for those who, though injured, is unable to prove negligence of the other party. This ensures that the party will get some compensation (a maximum amount of AED 35,000) for significant injuries, even if no one is at fault.

    Relevant Legislation and Provisions guiding Personal Injury Claims in Dubai

    Provisions of the Civil Code (Federal Law No 5 of 1985)

    I. Article 282

    It lays down the basis of responsibility for personal injury claims. In the words of the provision, if any person comes to harm, the doer, even one who lacks discretion, is liable to make good the harm.

    The term "harm" is a general term and connotes several actions like the unlawful act, harmful act, act contrary to the law, or an act prohibited under the law. It is the discretion of the judge to decide where the action amounts to harm or not; however, the standard of care dictates that there is an obligation to not cause harm, requiring the party to exercise reasonable care of a prudent man.

    Though the judge has a wide discretion to determine whether certain actions amount to harm, the burden of proof falls on the claimant. To be more specific, under Article 282, for the court to recognize an act as harmful, the following elements are to be proven by the claimant:

  • The act of the other person, whether positive or negative;
  • The harm caused to the claimant; and
  • The causal relationship between the two.
  • II. Article 292

    Article 292 specifies the method of calculating the indemnity (damages), which shall be assessed in accordance to the amount of harm the claimant suffered along with the loss of profit, provided the loss of profit forms a natural result of the act.

    The provision, however, fails to provide actual guidance for the Courts in determining the number of damages to be awarded, entailing considerable discretion upon the judge to decide the quantum of damages. This has been reaffirmed by the Court of Cassation who also stated that the Court is not necessitated to follow a mathematical mechanism in assessing the quantum of damages.

    Further, under Article 389, it is provided that if the amount of compensation is not fixed under a provision of law or contract, the judge shall compute the damages in an amount which equals the harm suffered at the time of the occurrence. It can be concluded that with regard to the quantum of damages, the court has an effective unfettered discretion in deciding the amount to be awarded to the claimant.

    III. Article 293

    Under Article 293, moral harm is included within the ambit of harm and the subsequent right to indemnity. Article 293 is important in regard to the claim for compensations for personal injury. The Article also extends the right to claim damages for moral harm caused to the family by reason of the death of the victim.

    The Article also places a limitation on transferring the right to receive compensation for moral harm to a third party, until such amount has been computed by an agreement or a final judicial order.

    The provisions under this Article can be utilized by the claimant to argue that he/she ought to receive compensation for his/her injuries, the consequent loss of profit, as well as for the moral harm suffered by the claimant (including any infringement on the claimant's dignity or honor).

    Classes of Damages that can be claimed under Personal Injury Claims in Dubai

    I.  Physical and Material Damages

    A claim for both Physical and Material Damages can be awarded by the Dubai Courts. In the context of medical injuries, physical damages are expressed as "bodily injury" under the UAE laws. It is broadly defined as anything which affects the health of a human being. Material damages, on the other hand, is the loss suffered by the claimant resulting from bodily injury. Although physical and material damages are connected, they are regarded as separate in matters of compensation. If the claimant is able to prove physical damage, he can be compensated even if he is unable to provide sufficient evidence for material damages sustained. The right to protect one's bodily integrity has been accepted and protected per se by many jurisdictions under the UAE law as a fundamental and inalienable right.

    II. Moral Damages

    As seen above, under Article 293 of the Civil Code, moral harm is also included within the ambit of personal injury. Moral harm includes infringement of liberty, honor, dignity, reputation, financial credit, or social standing of an another. Moral damages can be awarded for any harm causing psychological pain or affecting the dignity or honor including loss of financial standing.

    III. Damages for Loss of Earnings

    Article 292, as stated above, recognizes the loss of profit as a part of damages. However, it also provides that for the court to compute loss of profit as part of the damages, it needs to follow as a natural result of the harm suffered and is justified.

    IV. Damages for Loss of Opportunity

    Damages for loss of earnings and opportunity are closely linked classes of damages. However, loss of earnings primarily involves monetary loss, while loss of opportunity entails both monetary loss as well as moral opportunity. in both cases, the Court uses the same approach and needs to be satisfied that the claim is justified.

    V. Potential Damages in Future

    There are no legal provisions granting compensation for future damages, and it cannot be awarded unless the claimant proves that these are definite expenses which will be incurred, that is, it won't be awarded on a mere probability. It can be claimed in situations where the claimant can prove that he has to undergo certain medical treatment in the future as a result of the injuries. However, the claimant can institute a new cause of action for a loss which occurs at a point in the future.

    Method of Assessment of Quantum of Damages

    The damages are calculated on the basis of the direct or indirect connection between the act complained of and the injury caused to the claimant. As already seen above, Article 292 and 289 offers wide discretion to the Dubai Courts in computing the quantum of damages. Unlike the courts within the UK or USA, Dubai Courts do not undertake a forensic approach in calculating damages. The Courts only need to show that all heads of the claim have been addressed while calculating the damages and are not required to follow any particular method of calculation or provide a breakdown of the award.

    While calculating the damages, the Court generally takes the following factors and the like into consideration:

  • ­   Age of the victim;
  • ­   Income of the victim and his family's dependency on his earnings;
  • ­   The damage caused to the victim;
  • ­   Medical expenses of the victim on treatment and reports; and
  • ­   Moral sufferings the victim faced.
  • ]]>
    Mon, 01 Apr 2019 10:55:00 GMT
    <![CDATA[Law of Certificate of Origin]]>  

    Law of Certificate of Origin: A Global Purview

    When participating in international trade as an exporter, a Certificate of Origin (CO) is often required by the importing country. A CO certifies and declares the countries involved in the production or manufacturing process of the products included in an export delivery. Importing countries rely on Certificates of Origin to determine appropriate imposable duties, as well as, to evaluate the legality of the goods. Globalization has resulted in an exponential surge of interconnectivity between nations, and many states depend on chambers of commerce to administer and enforce Certificates of Origin.  The 1923 Geneva Convention marked the emergence of the delegation of COs to state chambers. It was at the Convention that chambers were established to be knowledgeable, independent, and answerable third-parties that could delegate the future needs of Certificates of Origin.

    According to the International Chambers of Commerce, two types of Certificates of Origin can be supplied by state chambers (or ministries and customs authorities where power is delegated); these include:

    • Non-Preferential Certificates of Origin: Also known as an ordinary CO, this is the most common form of the certificate. Non-Preferential CO's are issued to export goods that are not subject to duty exceptions (or preferential treatment) by the importing county.
    • Preferential Certificates of Origin: These CO's offer the export goods preferential treatment via tariff exemption or reduction, depending on agreements formed between the export-import countries. Preferential certificate qualification often requires compliance with customs and documentary credit.

    Various international councils and guidelines were established to govern the authorization of Certificates of Origin.  The World Chambers Federation's International Certificate of Origin Council, the Certificate of Origins Accreditation Chain, and ICC WCF Certificate of Origin Guidelines detail CO procedures and protocols for member trans-national chambers.

    ICC WCF International Certificate of Origin Council (ICO)

    The ICO was constructed with the intent of supporting and assisting state chambers assigned with the duty of allocating trade-related documents. Governments synchronized with the International Chamber of Commerce abide by established CO issuance procedures, including the CO Accreditation Chain, and the International Certificate of Origins Guidelines. The Council provides various functions to state chambers, such as: educational schemes targeted at enhancing CO competency, advancing technology aiding the expediency and convenience of CO delivery, and serving a strategic role in ensuring the acceptance and continued expansion of Preferential CO's. There are currently 70 member countries, including The United Kingdom, the United States, and the United Arab Emirates.

    ICC CO Accreditation Chain

    State chambers can voluntarily join the Accreditation Chain. Through membership, chambers agree to acknowledge a mutual obligation to assure CO issuance is performed under satisfactory international practices. This responsibility examines the roles of businesses, financial institutions, customs administrations, and traders perform in the granting of COs. Upon agreeing to the Accreditation Chain, members are called to adopt the ICC WCF International Certificate of Origin Guidelines.

    ICC WCF Certificates of Origin Guidelines

    The Guidelines are aimed at promoting pellucidity into the issuance of CO procedures, encouraging accountability in CO authorization processes, and legitimizing state chambers' CO duties. The Certificate of Origin Guidelines specifies:

  • The intent of COs.
  • The roles of state chambers in issuing COs.
  • How to verify the origin of exportable products.
  • Products prohibited from CO authorization.
  • Sample CO forms available for the adoption by chambers.
  • The United Kingdom and the European Union

    The European Union (EU) strictly regulates the Certificate of Origin for goods imported or exported from Member States' jurisdictions. Under EU law, all goods imported from states external to the EU are subject to a common customs duty. The EU coins this duty as the Common Customs Tariff (CCT). The EU's CCT is not governed by a  single codified law, but rather, an assortment of laws and theories. Principally, the tariff has been created to allow producers within the EU States the capability to compete alongside the international market. Products imported from other EU countries do not require a CCT. Although each Member States' CCT comprises similarities due to EU mandated minimal standards, State duty rates vary by importable good and the location of original export. Generally, the rate will be determined based on a variety of economic factors, including demand and necessity of the product for economic stability.

    A CCT's rate is partially dependent on the country the goods are being exported from and imported to. When determining the origin of the goods, the EU requires two considerations: 1) was the good produced within a single country, or 2) did the production of the good require the importing of materials from more than one country. The second deliberation also assesses whether other countries were involved in the assembly of the export product (i.e. physical labor).   

    If the exporting country qualifies for "preferential origin," the CCT is often reduced or non-dismissed. The Cotonou Agreement established trade preferences for 77 African, Caribbean, and Pacific (ACP) States. Similarly, the European Commission offers preference to the Overseas Countries and Territories (OCT) of Denmark, France, the Netherlands, and the United Kingdom.

    For exporting countries outside of the EU (a "third country") importing into a Member State, beyond paying applicable taxes, established origin rules must be followed. As a third country exporter, evidence of the product's origin is required. In the UK, the Chamber of Commerce issues Certificates of Origin. Depending on a product's final destination, the UK offers two types of certificates (the European Community Certificates of Origin and the Arab-British Certificates of Origin). The Arab-British Certificate of Origin is mandatory for products destined for Arab League Countries. The European Community Certificates of Origin is utilized for the export of goods into all other countries not included in the Arab League (except Mexico).

    The United States and the North American Free Trade Agreement (NAFTA)

    Under NAFTA (now USMCA), the United States developed a coordinated CO process with Canada and Mexico. This system established that goods exchanged between the three countries would be entitled to a preferential tariff if the importer holds a credible CO. Chapter Six of the NAFTA Agreement defines what constitutes a valid Certificate of Origin. Five conditions must be met:

  • Language: A Certificate of Origin must be written in English, French, or Spanish depending on the predominant language spoken within the export or import country. If requested by a customs administration facility, the exporter must supply a written translation.
  • Scope: A single Certificate of Origin may be issued to "cover a single importation of goods or multiple importations of identical goods [called blanket certificates]" (NAFTA Chapter Six). A CO is valid for a 12-month period unless the Certificate is preferential. If the CO is eligible for a preferential tariff, it will remain legitimate for four years.
  • Completion of Certificate: A CO is only valid if the exporting party authorizes it. A Certificate may be approved by an exporter that is not the producer if that person can verify where the product originated from or has "a completed and signed Certificate of Origin for the good voluntarily provided to the exporter by the producer."
  • Importers' Obligations: "Importers claiming NAFTA preferential tariff treatment shall make a declaration, based on a valid Certificate of Origin in their possession, on the import documentation." When the importer customs administration seeks the CO, the importing party must provide all relevant documents. In the case of Certificate error, the importing party is responsible for correcting all erroneous information. Should a breach in customs procedure occur, the importing country maintains the right to deny preferential tariffs? Additionally, "importers must maintain records pertaining to the importation for five years or such longer period as may be specified by their country."
  • Exporters' and Producers' Obligations: An exporter must be able to supply proof of CO to a customs administration if requested to do so, "maintain records pertaining to the exportation for five years or such longer period as may be specified by their countries," and advise any affectable parties of any changes made to the CO.                               
  • Dubai's Rules of Origin and the GCC Common Customs Law

    Created by Dubai Customs with assistance from the Tariff Department, the Rules of Origin outline the primary principles surrounding the regulatory procedures of custom's rules of origin. Dubai's Rules were fashioned in light of and in adherence to the GCC's Common Customs Law. For example, Dubai's proof of the origin of goods was taken from Article 25 of the GCC law. Under this Article, "Imported goods are subject to the proof of origin according to the rules of origin adopted within the framework of the international and regional economic agreements in force." Succinctly stated, Dubai has agreed to bypass the general rules of origin in instances where an international agreement dictates specific rules of origin protocol.

    Similar to the other organizations and countries previously listed in this article, the Government of Dubai also adheres to a two type rule of origin system (preferential and non-preferential). Within Dubai, entities that commonly depend upon rules of origin include customs administrations, the Ministry of Economy, Ministry of Finance and Industry, chambers of commerce, chambers of industry, and manufacturers.

    According to Dubai Customs, there are four significant reasons why determining a product's origin is critical.

    • Confirming a good's origin will aid in deciphering whether the import shipment qualifies for preferential treatment.
    • Gathering trade statistics will help in the creation and reformation of future trade policy.
    • Understanding origin will ensure cohesion with relevant trademark laws.
    • Knowledge of origin benefits government procurement.

    The Dubai Rules of Origin also provide an explanation as to what qualifies as a wholly obtained product. Deciding whether or not a good is "wholly obtained" is essential in determining a shipment's tariff value. For a good to be "wholly obtained," the harvest, production, and manufacturing processes must have been completed in a single country. Under this definition, imported materials from other countries used to construct the final product are not allowed. Examples of wholly obtained products are minerals extracted from either the soil or territorial waters, livestock raised within the respective nation's jurisdiction, and "products obtained aboard a factory ship of that country solely from products obtained by maritime fishing and other products taken from the sea…."

    ]]>
    Sun, 31 Mar 2019 18:10:00 GMT
    <![CDATA[Syndicate Loan Agreement]]> Syndicate Loan Agreement and Select Clauses

    Almost every day, we witness the birth of several new innovative projects, worth billions of dollars of investment. Many often ponder the origins of such investment. Banks play a crucial role in lending these funds to clients, ranging from corporations to large projects, and even governments. However, there are cases where the required amount of funding is highly excessive, and in such cases, two or more lenders may combine resources to cover the total loan.

    Syndicated Loan

    Syndicate loans, also referred to as Syndicated Bank Facilities, are debts issued by a group of lenders to a single borrower. Succinctly stated, it is the practice of providing a loan by a group of lenders- known as the syndicate- to fund an individual borrower. The investment can be for a fixed amount, a credit line or a combination of both. Under a syndicated loan, lenders are typically big banks, though financial institutions such as mutual funds and insurance companies sometimes also fill these roles. There shall be a single lender appointed as the lead, and they will be responsible for arranging the syndicate group. They shall also have further duties beyond funding a substantial portion of the loan, as the lead agency shall also be responsible for the facilitation and allocation of the cash flows to the other lenders.

    Objectives

    The primary objective of a syndicated loan is to spread the risk that would ordinarily be present for a single borrower. Since the value of these types of investments far exceeds regular loans, the risk is that default by the borrower could have a catastrophically crippling effect on a single lender.

    Types of Syndicated Loans

    • Underwritten Deal

    This type of loan is a common variation used in Europe. In this arrangement, the lead agent or underwriter guarantees or syndicates the entire amount.

    • Club Deal

    These are syndicate loans involving smaller amounts, typically ranging from between $50 to $150 million. The unique feature of a Club Deal is that the lead agent along with the other members of a Club Deal consortium shares equal or nearly equal parts of the fees earned from the loan facility.

    • Best-Efforts Syndication Deal

    Most commonly used in the United States, this deal doesn't commit the lead agency or guarantee the entire loan. Any unsubscribed portion will become completed by taking advantage of the conditions of the market, and if any part remains unsubscribed, the borrower will be forced to accept a loan of a lower amount or cancel the loan agreement in its entirety.

    Main Features

    Syndicate loans help in meeting the customer's demand for large long-term loans. They are generally used to fund new projects, the leasing of large equipment, mergers and acquisitions in petrochemicals, transportation, telecommunications, power, and other industries.

    Once the recipient and arranger have negotiated and agreed upon the loan term, it is generally the responsibility of the arranger to do the preparation work of creating the syndicate or cluster; this saves time and energy in financing.

    The same syndicates will embrace different kinds of loans, such as fixed-term loans, revolving loans, and a standby L/C line according to the need of the purchasers. The receiver, meanwhile, may select the currency portfolio required to meet their needs.

    Borrowing money from a syndicate implies the participant members of the Syndicate fully recognize the borrower's financial and operational performance which will help in building the name and goodwill of the borrower.

    The syndicates can use a wide variety of currencies in their loans, depending on the needs of the clients. The advantage of syndicated loans is that multiple currencies can be used in the group if the borrower demands it.

    The usual duration of syndicated loans for a short-term is three to five years; seven to ten for medium length loans, while long-term funding usually extends for ten to twenty years.

    Interest Rate: The profit of the lender is calculated based on interest and fees. The setting of the interest rate shall take place according to the different borrowers, in line with the lending rate policies, regulations, and provisions of the loan contract.

    Syndicate Agreement

    Before entering into a syndicate arrangement, the parties, that is the lenders and the borrower, agree to a contract which designates the structure, rules, and time period of the syndicated loan; this contract forms the underwriting agreement and is similar to a subscription agreement.

    Clauses in a Syndicate Agreement

    The syndicate agreement may be provided in different forms, and could contain numerous provisions depending upon the circumstances. However, they typically involve enormous amounts of money and a credit relationship between multiple parties. Subsequently, it is necessary to take utmost precaution by carefully wording the agreement. This involves negotiating and examining the clauses added so that it maintains a sufficient balance between protecting the interests of the lenders and the freedom of the borrower. Some of the select elements which are essential to a syndicate agreement include:

    Covenants

    There are usually two types of covenants contained in a syndicate agreement:

    • Financial Covenants

    These are covenants inserted into syndicate agreements to ensure borrowers meet the necessary standards, and their primary purpose is to safeguard the interest of the borrower. This ensures the borrower possesses the ability to service the loan at all points of time. The business will be capable of repayment only if it maintains a certain amount of equity, cash flow, or profit which correlates to its expenses or loans. If these expenses or investments were disproportionate, it would adversely affect the ability of the business to meet its obligations.

    These covenants are, simply put, financial or accounting ratios which enable the lenders to specify the metrics. Borrowers are required to ensure that the business remains within the specified limits at all times for the duration of the loan. Failure to do so can lead to an "event of default," invoking the lender's right to claim the entire loan with interest repaid. This right of the lender is known as "acceleration". The covenants may also include a system of periodic reporting by the borrower to the lenders to keep the latter informed about the compliance status of the business with these covenants.

    Depending on circumstances such as the financial condition of the borrower and the nature and value of the transaction, the components of these covenants will vary from one agreement to another. However, some of the most common types are:

    Debt to Equity Ratio: this ensures that the borrower does not exceed a certain multiple of its equity represented by its share capital, accumulated profits, and reserves. It is inserted to prevent the borrower from borrowing more than its stake.

    Minimum Net Worth: this requires that the borrower ensure, excluding its outstanding liabilities, that the value of all its tangible assets is no less than a specified limit, ensuring the security of the revenue-generating assets.

    Current Ratio: to ensure that the borrower has sufficient liquid assets to make payments, the enforcement of a specified ratio is established to maintain a balance between its current liabilities and assets.

    Minimum Working Capital: the syndicate specifies the minimum level of liquid assets to be more than its current liabilities to guarantee the payment of interest by the borrower.

    Debt Service Ratio- to ensure that the profits of the business exceed the obligations for repayment of the loan, a proportion of the annual profits, interest, and credit repayments will find themselves inserted into the agreement.

    • Negative Covenants

    Negative covenants are similar to those stipulations in the investment agreement, where on particular issues, affirmative voting rights are giving to the financial investors. In simple terms, for those actions specified in the contract, the company will have to obtain the permission of the lenders. Failure to do so triggers an "event of default" obligating the company to make repayments to the lenders.

    • Mandatory payment clause

    Though generally the prepayment of the loan is left to the option of the borrower, the lenders tend to discourage this since they lose out on interest payments as the principal reduces affecting their predicted cash flows. The syndicate agreement enforces with it additional fees where prepayment is allowed, or even prohibits advance payment for particular periods. However, there may be situations where there is compulsory prepayment such as when the holding company has taken the loan, or sells out its subsidiaries or assets; further, a change in the law which renders the transaction illegal, or a downgrade in the creditworthiness of the borrower, may also trigger this clause.

    • Negative Pledge Clause

    Typically, a lender agrees to provide the loan after an assessment of the borrower's creditworthiness, which is their ability to repay; this includes the total assets of the borrower. In case of a default by the borrower, the lender can proceed against the borrower to liquidate his assets and recover his dues. However, to protect these assets from being alienated, the lender places restrictions on the borrower's powers to create security, transfer, or sell assets.

    • Change of Control Clause

    If there is a change in control of the company after the execution of the loan agreement, the lenders can cancel the loan facilities and initiate prepayment of the principal and the interest of the amount already disbursed. Since the actual control of the company lies with the shareholders, the clause usually identifies that if a particular person or group of individuals ceases to have control over the company, the provisions will come into effect. This clause, like the Material Adverse Effect Clause, can be negotiated by the borrowers on points such as: the cancellation and repayment of the loan only to the lenders who wish to exit the loan arrangement, or a more extended notice period to arrange new lenders. Carve-outs and exceptions can also be included, for example: cancellation and repayment will only be triggered via control change resulting in a downgrade of the credit value of the business.

    • Material Adverse Effect Clause

    If the business operations, property, financial, or other conditions of the borrower or company group undergoes any significant change, the Material Adverse Clause enables for the discharge of the lender(s) to prevent the dispersal of any further loan amounts. This clause is generally negotiated by the borrowers to avoid ambiguity and prevent it from being used as a safety net by the lender to circumvent its lending obligations.

    • Event of Default Clause

    In the case of defaults in syndicated loans, this clause is to be triggered. Situations where this will be the case, include: the non-payment of the amount due, breach of the financial covenants, representations or warranties, insolvency or initiation of liquidation, and insolvency proceedings and others. Should this clause be triggered, there are potentially graver implications for the borrower as their creditworthiness may be negatively impacted, which could cause trouble for the obtainment of potential future loans. In such an event, the lenders have the right to accelerate the repayment, terminate the agreement, and permit further disbursement of the loan, amongst other remedies.

    • Right to Accelerate

    This clause, along with the cross-default, can be said to be the ancillary rights of the lenders (should the borrower default). In the event of default, the lenders have the right to accelerate or altogether cancel further loans, and demand repayment of the outstanding loan.  The lenders usually try to restructure the investment in the event of defaults, and the right to accelerate is used more as leverage for the negotiation of the restructuring deal.

    • Cross-Default

    The Cross-Default is present to protect the interests of lenders under other loan agreements. If the borrower defaults in a loan agreement, it will subsequently trigger a default in all other loan agreements. This ensures that all lenders will get their dues from the borrower. In reality though, as we have already stated, the default clause and the cross-default is used as more of a negotiation tool for the restructuring arrangement, rather than to push the borrower into bankruptcy.

    ]]>
    Sun, 31 Mar 2019 17:07:00 GMT
    <![CDATA[ICO regulations in Malta]]> ICOs and ICO regulations in Malta

    Introduction

    Initial Coin Offering (ICO) is a relatively new player in the financial sector which has paved its way to becoming a principal subject of discussion in the Blockchain community. In essence, ICO stands out amongst the most developed strategies for raising funds from the public and continues to gain popularity exponentially.

    While every other jurisdiction is hesitating from regulating this niche industry, Malta has taken the lead and presented a specific regulatory and administrative framework for ICO's. Malta is the first jurisdiction to take the initiative to regulate ICOs and Blockchain Technology. This article seeks to give an outline of the laws and guidelines related to ICOs.

    The title of "Blockchain Island" was unequivocally earned by Malta in July 2018 for instituting the first ever cohesive framework for ICO regulation. While this sector universally continues to function in a legal vacuum, Malta is the crypto haven for an unambiguous legal framework for ICO regulation.

    Malta comprehended that regulatory clarity is the cornerstone from which this effervescent economy would grow, it set up dedicated government units absorbed exclusively on researching these technologies and ideas to establish Malta as a world's ringleader for transparent and affluent ICO regulation.

    Malta culminated with final Parliamentary approval the following three bills:

  • Malta Digital Innovation Authority Act
  • Virtual Financial Asset Act
  • Innovative Technological Arrangement and Services Act
  • 1. Malta Digital Innovation Authority Act (MDIA Act)

    The MDIA Act provided for the formation of MDI Authority and projected at outlining the Authority's mission to endorse the growth of the blockchain technology sector in Malta. Its aim was to regulate internal governance. The Authority certifies a Distributed Ledger Technology (DLT) platform software, which provides technical, legal and economic certainty to users of these platforms in Malta.

    For clarity, the DLT platform is a digital system that records transactions of assets, through which details of these transactions are recorded at several places at the same time. The motif behind DLT system is to keep transparency amid asset exchanges.

    2. Virtual Financial Assets Act (VFAA)

    The FCAA institutes a supervisory framework to administer entities that work indirectly or directly with VFAs which includes ICOs, nominee service providers, portfolio managers, token exchanges, investment advisors and token exchanges. The VFA Act also establishes a set of necessities and rules for Security Token Offering (STO) and ICO whitepapers to be delivered to the Malta Financial Services Authority. This Act specifies that the token issuer must assign a VFA agent who is approved by the MFSA as the proficient authority who screens and reports on the token offering.

    3. Innovative Technology Arrangements and Services Act (ITAS Act)

    The Act promulgates a regulatory structure for ITAS and also institutes definitional criteria and registration prerequisites for innovative technology arrangements, persons providing innovative technology services and the innovative technology services itself. The Act further provides for auditing and authorization of software and architectures used in conniving and delivering smart contracts, DLT, decentralized autonomous organizations, and also similar innovative technologies as may be nominated by the Minister on the recommendation of the Authority. The language of the Act construes that it is future-adaptive.

    To Whom Does the New Law Apply?

    These rules and regulations apply to anyone who will provide VFA(s) (short for Virtual Financial Asset). VFA is defined in the new legislation, hence, an asset which is not a VFA will not come within the ambit of the legislation.

    The pre-requisites for a person to issue a VFA is as follows:

  • A Whitepaper must be drafted, which must also be registered and approved at the Malta Financial Services Authority (MFSA);
  • To have consistently a VFA Agent who is duly certified by the MFSA.
  • The new legislation applies to anyone who will offer to the public Virtual Financial Asset(s) (VFA) as these are defined in the new legislation. Hence, if the asset that is offered to the public is not a VFA, the new legislation does not apply.

    'Technology First' Approach by Malta

    The blockchain and cryptocurrency Acts abridged above are premeditated to work seamlessly as a triumvirate to provide this niche industry with a comprehensive framework that verifies the veracity of DLT software and consolidates protections for token buyers.

    While other jurisdictions look to merely attest a whitepaper based on the forte of its economic assumptions, Malta looks at the software and knowledge behind the whitepaper, and at the prospective for efficacious execution of the regulations therein. Malta is the only country who has delved into minute detail on the regulation of unsettling blockchain technologies.

    Silvio Schembri, who is the Parliamentary Secretary for Financial Services in Malta, is of the view that flawed technology would deliver blemished results, contrasting what is mentioned in the whitepaper. Hence, he is of the opinion that 'technology first' approach means prudently assessing the technology elucidated in the white papers of those interested in setting up shop in Malta. Hence, Malta's financial ombudsman (the MFSA) concluded a new and mechanically competent body should review and license crypto businesses, which is the MDIA. MDIA decides whether a crypto business is qualified for a license, based on the superiority of the computer code in the white paper.

    The outlook of most countries towards cryptocurrencies is that of an investment asset instead of a legal tender. VFA Act outlines the Maltese Financial Instruments Test which determines the category under which a DLT asset falls. Companies that wish to issue DLT assets abroad but carry out connected activity from Malta, or set up an ICO within the country, as well as other domestically based entities in the field must take the Maltese Financial Instruments Test, which defines all tokens and cryptocurrencies as DLT assets.

    Furthermore, Silvio Schembri added that when he has contemplated the elements that would boost the development and expansion of the blockchain industry, he fathomed early that operators in the digital realm needed legal certainty. Presently, these operators functioning in the jurisdiction of constitutional vagueness fear that a day will come when the government would deem such activity illegal. Malta encompassed the protection and regulation of digital transactions within the three abovementioned Acts, thus creating legal certainty.

    Delving in Technicalities of the Acts

    I. Definition of Virtual Financial Asset

    As defined in the Act, VFA is any form of digital medium recordation that is exploited as a unit of account, digital medium of exchange or store of value, excluding:

    • Financial Instrument: It includes securities which are transferable, like bonds and shares. It also includes market instruments like certificates of deposit and treasury bills. Additionally, it includes instruments which confer property rights, foreign exchange held for investment reasons, derivative instruments for siphoning credit risk, amongst other types of financial instruments.
    • Virtual Token: These are token with no utility, application or value beyond the DLT platform on which it was issued, and also
    • Electronic money: Electronic money refers to the magnetically, including electronically, stored monetary value, which is putative by a legal or natural person other than the financial institutions that issued such money. 

    II. Contents of Whitepaper

    Whitepaper contains the information which is essential to allow the investors to make an informed assessment and valuation of the prospects of the issuer, the proposed project and of the characteristics of the VFA. The whitepaper requires such information to be presented in an easily analyzable manner. The language of the draft in English. Following should be contained in the Whitepaper:

    • Date.
    • Declaration mentioning that the whitepaper complies with the prerequisites of Maltese Law.
    • Summary: It should be brief, and it must provide all the vital information related to the offering, indispensable elements of the VFA, etc. A warning must also be inculcated in the Whitepaper which includes a warning like 'VFA does not comprise an offer to sell financial instruments', 'Any decision to invest must be based on the consideration of the document as a whole' etc.
    • Specific matters like name, declarations, and functions of the persons responsible.
    • The reason behind the VFA offering.

    The whitepaper includes several more information that must be provided to ensure approval from the MFSA and not a penalty of rejection.

    Benefits of Malta as an ICO Jurisdiction

    Below are some of the benefits that ICOs receive for launching in Malta:

    • Incentives: There are several incentives which are associated with the launching of an ICO in Malta, like:
  • Gaining help from staff salaries.
  • Gaining capital contributions equivalent to capital investment.
  • Getting an office space.
  • Being eligible for tax credits.
    • Taxes: Indubitably, taxes is one of the most imperative deliberations to make when selecting a jurisdiction for an ICO. Malta is known for its competitive tax regime that provides favorable conditions to ICOs. According to Malta's corporate tax system, any increment in one's salary is not taxable and one ends up paying only 15% tax on personal earnings.
    • Reputation: Malta is undeniably a renowned investment destination with efficient economic infrastructure. Establishing an ICO in Malta gives offerors better credibility. Consequently, the banks and financial institutions comparatively tend to look more promisingly upon ICOs.

    Conclusion

    The Maltese government, through the conduit of the three bills, has drafted a set of edicts to guide the operations of cryptocurrency companies which is based on the principles of consumer and industry protection, and more importantly, on the values of market integrity. Being the first country to have rules and regulations which comprehensively cover cryptocurrency transactions, Malta now also the most robust outline for monitoring and standardising a country's burgeoning cryptocurrency industry in a way that invigorates innovation.

    Other jurisdictions like Isle of Man, Bermuda, Hong Kong, Switzerland which branded as a crypto valley, Liechtenstein and Estonia are far behind Malta, which has created regulatory certainty by way of the Acts mentioned above. The other jurisdictions lack behind because they view ICO and ICO regulation from a vantage point of old monetary paradigms.

     

    ]]>
    Sun, 31 Mar 2019 12:24:00 GMT
    <![CDATA[Space Law An International Purview]]> Space Law: An International Purview

    Space law, a form of international law, took flight following the 1967 ratification of the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies. Innovative in many regards, space law attempts to place regulations upon bodies which have not yet been nationally appropriated. Unlike laws governing the terrestrial or aquatic landscape of Earth, space law is restricted to ensure only peaceful activities transpire. Space law has challenged the expeditious nature of technological developments, securing a legal platform which supports and encourages the evolution of both scientific and economic activities alike. Since 1967, tremendous leaps have been made on the international scale to secure multi-party agreements which enable the optimization of exploration and utilization of outer space. This surge of interest triggered international organizations such as the United Nations to create the UN Committee on the Peaceful Uses of Outer Space and enact treaties which dually maintain international peace while encouraging the development of international space law. This article examines a variety of international and national space laws with enactment dates spanning from 1967 to 2018, including the recent efforts announced by the UAE Space Agency.

    International Treaties on Space Law

    There are currently five United Nations treaties on outer space. Of these treaties, the UAE is a signatory of the Outer Space Treaty 1967, Liability Convention 1972, and the Registration Convention 1975.

    • The Outer Space Treaty 1967

    Entered into force on 10 October 1967, the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies has 107 parties, and provides the guiding framework on international space law. The Treaty details that

  • Outer space exploration is to be performed with the intention of benefitting humankind and all countries.
  • The investigation of outer space is free for all States to use.
  • Outer space cannot be claimed by state sovereignty or by means of use.
  • Weapons of mass destruction are not to be placed in outer space (this includes in orbit or in a celestial body).
  • Usage of Celestial bodies and the Moon are to be for peaceful purposes only.
  • Astronauts are to be considered envoys.
  • National space activities are the responsibility of the States.
  • States may be held liable for any harm or damage which transpires as a result of their space objects.   
  • The contamination of celestial bodies should be avoided.
    • The Rescue Agreement 1968

    Providing greater guidance surrounding Article 5 and Article 8 of the Outer Space Treaty, the Rescue Agreement requires States to

    • Immediately notify a launching authority of spacecraft personnel's injury, accident, or condition of distress.
    • Take steps to rescue spacecraft personnel and render necessary assistance. All assistance provided must be reported to the Secretary-General of the United Nations.
    • Inform the relevant launching authority and Secretary-General of the United Nations when a space object or its parts have returned to earth.
    • Liability Convention 1972

    Entered into force in 1972, The Liability Convention served as an extension of and elaboration on Article 7 of the Outer Space Treaty. Under the Convention, any launching State is "absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or the aircraft in flight" (Article 2). Similarly, as per Article 3, if damage occurs to a space object of a launching State that is not on earth's surface, a State will "…be liable only if the damage is due to its fault or the fault of persons for whom it is responsible." The Convention also includes the settlement procedure for damage claims.

    • Registration Convention 1975

    Entered into force in 1976, the Registration Convention serves as a mechanism to assist States in classifying and identifying space objects. The Convention acknowledged the importance of maintaining a register that permitted open access to State and international organization provided information. Under Article 4 of the Convention, States are to register the following information regarding a space object to the Secretary-General of the United Nations:

  • The launching State(s) name(s).
  • A designator of the registration number or the space object.
  • The location of launch and the date.
  • The fundamental orbital parameters.
    • The Moon Agreement 1979

    The Agreement Governing the Activities of States on the Moon and Other Celestial Bodies was enacted in 1984. Similar to the Liability Convention of 1972, the Moon Agreement elaborates upon several articles found within the Outer Space Treaty. The Agreement establishes the Moon's resources as a common heritage of humankind. Therefore, it is essential to oversee and safeguard against the exploitation of the resources found on the Moon and within celestial bodies. Article 3 of the Moon Agreement emphasizes the exclusivity of the Moon's uses by States. The Article provides that "any threat or use of force or any other hostile act or threat of hostile act on the moon is prohibited. It is likewise prohibited to use the moon to commit any such act or to engage in any such threat concerning the earth, the moon, spacecraft, the personnel of spacecraft or man-made space objects." Article 7 provides insight into the criticality of preventing activities which degrade or contaminate the Moon's environment. According to the Article, "State Parties shall take measures to prevent the disruption of the existing balance of its environment, whether by introducing adverse changes in that environment, by its harmful contamination through the introduction of extra-environmental matter or otherwise."

    The International Space Station and International Cooperation

    Considered one of the most politically involved space exploration programs ever initiated, the International Space Station is coordinated and operated through international partnership. The International Space Station assembles globally distributed launches, training, engineering, launch vehicles, communication networks, scientific research, and international flight crews. Launched in 1988, the International Space Station involves the collaboration of the European Space Agency member states, the United States, Canada, Japan, and Russia.

    The International Space Station's legal framework is built off of the International Space Station Intergovernmental Agreement 1998, four Memoranda of Understanding, and several bilateral implementing arrangements. According to Article 5 of the Intergovernmental Agreement, "each Partner [State] shall retain jurisdiction and control over the elements it registers and over personnel in or on the Space Station who are its nationals'." This extension of national jurisdiction recognizes the Partner States' respective laws and courts. Should a conflict occur between multiple Partner States, disputes may be resolved by employing national and/or international rules and procedures. The Intergovernmental Agreement prohibits the Partners from filing claims against one another resulting from activities within or related to the International Space Station.

    The objective of the Intergovernmental Agreement is to found "a long-term international cooperative framework among the Partners, on the basis of genuine partnership, for the detailed design, development, operation, and utilization of the permanently inhabited civil international Space Station for peaceful purposes, in accordance with international law" (Article 1). The following provisions are examples of Partner duties under the Agreement:

    • Article 2: The International Space Station's legal framework is to be governed by international law (such as the Outer Space Treaty and the Rescue Agreement).
    • Article 11: Qualified personnel may be designated by a Partner to serve as a Space Station crew member. "Selections and decisions regarding the flight assignments of a Partner's crew members shall be made in accordance with procedures provided in the MOUs and implementing arrangements."
    • Article 12: Partners are permitted to access the Space Station via private sector space transportation system, so long as the Space Station approves the transportation system. "Each Partner shall respect the proprietary rights in and the confidentiality of appropriately marked data and goods to be transported on its space transportation system."
    • Article 15: The costs associated with fulfilling the Agreement responsibilities must be undertaken by each Partner. The Partners are to attempt to minimize both the operating costs and the exchange of funds of the Space Station.
    • Article 18: "Each Partner State shall facilitate the movement of persons and goods necessary to implement this Agreement into and out of its territory, subject to its laws and regulations."
    • Article 22: Partners hold criminal jurisdiction over personnel who qualify as a respective national.

    National Aeronautics and Space Administration (NASA)

    Established in 1958, NASA is an independent agency of the United States Federal Government. The administration is tasked with the U.S.' civilian space program and aerospace research and development. Thus far, NASA has been responsible for the launch of 166 manned space missions. The most famous and publicized of their missions was the 1969 Apollo Mission, during which, Neil Armstrong became the first man to stand on the Moon. Numerous NASA directives have been passed, the most recent being Space Policy Directive 1. The Directive, approved by President Donald J. Trump, aims to provide for a U.S. guided mission permitting humans to return to the Moon, then Mars, and beyond. As per Section 1 of the Directive, the U.S. space policy intends to "lead an innovative an sustainable program of exploration with commercial and international partners to enable human expansion across the solar system and to bring back to Earth new knowledge and opportunities." The United States has currently ratified 4 out of the 5 international treaties aforementioned and has formed a variety of active international agreements with countries such as Australia, Canada, Saudi Arabia, and the United Kingdom.

    In 2008, NASA and the Indian Space Research Organization (ISRO) enacted the Framework Agreement for Cooperation in the Exploration and Use of Outer Space for Peaceful Purposes. The Framework Agreement aimed to form a cooperative pact between the U.S. and India with the intent of exploring and using outer space peacefully, "…in areas of common interest and on the basis of equality and mutual benefit" (Article 1). The Agreement consented to support in the areas of earth science, space science, exploration systems, space operations, and other areas of mutual interest. Since the enactment of the Framework Agreement, the two parties have announced the NASA-ISRO SAR Mission (NISAR). The mission is designed to assess and measure ecosystem disturbances, natural hazards, and ice-sheet collapse. As a result, the mission is anticipated to aid in better understanding the planet's climate change process.

    Japan Aerospace Exploration Agency (JAXA)

    JAXA is the product of the merger between the Institute of Space and Astronautical Science (ISAS), the National Aerospace Laboratory of Japan (NAL), and the National Space Development Agency of Japan (NASDA). As the primary agency guiding Japan's aerospace development, JAXA performs a variety of operations, extending from utilization to research. JAXA's projects have been predominately conducted through international collaboration. In 1969, Japan and the United States commenced the Japan-U.S. Joint Communique. This cooperation has resulted in JAXA's participation in international projects alongside NASA. Japan is a Partner of the International Space Station. Beyond forming space development relations with the U.S., JAXA is also partnered with the Canadian Space Agency, the European Space Agency, and the Russian Space Agency.

    In 2008, Japan enacted the Basic Space Law (Law No. 43 of 2008) to "clarify the responsibilities of the State as well as to formulate the Basic Space Plan…thereby contributing to the improvement of the lives of the citizenry and the development of the economy and society as well as contributing to the improvement of international peace and the welfare of humankind…" (Article 1). Although the provisions within the Basic Space Law are broad, they provide a foundation for Japan's space development and use. Within the Law,

    • Article 14: The State is required to "take necessary measures to promote Space Development and Use to ensure international peace and security as well as to contribute to the national security of Japan."
    • Article 19: The State is to take the necessary steps to encourage international cooperation and coordination to bolster research and development.
    • Article 22: The State is to make efforts to develop, education, learning, and public relations in respect to space development and use.

    Article 24 of the Basic Space Law required the Strategic Headquarters for Space Development to create a Basic Plan for Space Policy. This Plan was enacted in 2009 and represents Japan's first policy relating to space activity. Together, the Law and Plan are founded on six fundamental principles: the improvement of livelihoods, peaceful use of space, industry advancement, human society progression, protecting the environment, and international activity contribution.

    Recent Developments in the UAE's Space Sector

    The UAE has recently made monumental steps toward developing its national space sector. Setting regional precedence, the UAE Cabinet approved a new space law in September 2019. Although novel, this law remains in accordance with federal policy and UAE sanctioned international conventions. Providing legislative standards for regulating the operation of future projects committed to international space exploration, the new law stresses the importance of innovative engineering through supporting and unifying academic and research initiatives. The law is anticipated to stimulate investment, research development, and provide competition at an international level.

    The UAE Space Agency, which is tasked with overseeing the nation's space sector development, has highlighted five fundamental regulations which are necessary to regulate the nation's space sector. These include regulations on registration, accident and incident investigation, authorizations, auditing framework, and activities relating to human space flight. The UAE has signed an implementing arrangement with NASA. This cooperation will enable the UAE Space Agency and NASA to evolve its capabilities on earth, in low-earth orbit, and beyond. The arrangement outlines the collaboration between the two entities across a range of areas relating to space exploration and human space flight. The arrangement will permit UAE astronauts to receive training from NASA and utilize the International Space Station.

    Beyond NASA, the UAE Space Agency has also signed agreements with a variety of international space organizations, including:

    • Japan Aerospace Exploration Agency (JAXA)
    • Russian Space Agency Roskosmos
    • Indian Space Agency
    • US Strategic Command (USSTRATCOM)
    • German Aerospace Center
    • United Kingdom Space Agency
    • Italian Space Agency
    • Canadian Space Agency
    • Algerian Space Agency
    • Swedish National Space Board
    • United States Department of Defense

    Currently, the UAE has announced two substantial space missions. These missions are anticipated to enable the UAE to become a solid contender in the international space race. The projects comprise:

    • Hope Probe

    This project will send the first Arab and Islamic probe to Mars. The mission will commence in 2020. Hope Probe has been overseen and funded by the UAE Space Agency.

    • MeznSat

     MeznSat is a satellite which has been constructed to detect the atmospheric concentration of Greenhouse Gases. The satellite will launch in 2019 from Japan and will be monitored and analyzed by UAE students.

     

     

     

     

     

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    Sun, 31 Mar 2019 11:40:00 GMT
    <![CDATA[Deportability in the UAE]]> Deportability in the UAE and related aspects

    In the event that you've at any point heard that somebody was deported - ousted from a nation - at that point you can likely guess that deportation is the act of that incident. Deportation can include an occupant of a nation who is hurled out in view of wrongdoing.

    Deportation alluded to as "expulsion" in lawful terms, happens when the government arranges that a non-native be expelled from the country. This can occur for various reasons; however, it normally happens after the immigrant disregards migration laws or serious criminal laws.

    Deportation is the evacuation of an outsider out of the nation, basically on the grounds that his quality is esteemed conflicting with the open welfare and with no punishment being forced or mulled over either under the laws of the nation out of which he is sent or of those of the nation to which he is taken.

    There is a pool of legislation in the UAE that governs every aspect of citizens living in the country to ensure peace and harmony. Due to the existence of various laws, people, especially foreign nationals, must stay aware of each law so as to be qualified to remain in the nation. Be that as it may, it might appear to be taxing to interpret all these legal concepts and their idea set down under these laws. One such term called 'Deportation' is one reason for affray among expatriates.

    Deportation is an authority to the legislature and of the government to oust a foreign national from the country immediately. A decree for deportation can emerge in a few conditions, and the most widely recognised is the absence of a legal right of a person to remain in the nation and another when a person carries a criminal offense of serious nature in the region. The deportation order is most likely considered to be the punishment for the individuals who neglect to stick to the laws of the nation in which they are living. Generally, all over the world, such an order of deportation is passed only against foreign expatriates and every local citizen of the country is exempted from such an order. So as to safeguard the quiet and verified status of UAE among different countries, the UAE government endeavors to keep up such status by proclaiming techniques which can keep up high security and law-abiding belief among citizens. Deportation decree will be issued against any person who will attempt to endanger the wellbeing and welfare of citizens in the UAE.

    There are two kinds of deportation, first is legal deportation and the other is administrative deportation. Legal deportation is issued through a court order, while administrative deportation is issued by the Federal Identity and Citizenship Authority and lifted under an application to General Directorate of Residency and Foreigners' Affairs in the related emirate.

    Legal Deportation

    Any deportation order that is issued against any foreign expatriate by a competent court when such foreign national or expatriate is charged with a crime that involves a custodial punishment.

    Under No.3 of 1987 with regards to the UAE Penal Code which is amended by the Federal Law No.34 of 2005 and hereafter amended by Federal Decree No.7 of 2016, it is stated that any judge of any relevant court is entitled to pass a decree involving an order of deportation.

    Article 121 of the UAE Penal Code states that every foreign national and expatriate who is accused under any felony that is punishable with custodial punishment or who is accused with any such crime that involves sexual assault through him shall be deported from the country. Also, in any offense of a crime, the court is entitled to expel such expatriate from the nation, and such expulsion is to be treated as an alternative to his/her punishment for imprisonment.

    Besides, according to Article 325 of the Penal Code, any person who abuses the standards of religious statements of faith and customs can likewise be charged for deportation, post abiding the requisite penalty.

    Administrative Deportation

    Administrative deportation is issued by the Federal Identity and Citizenship Authority against expatriate for maintaining public security, public interest and public morals. As per the Ministerial Decision No. 360 of 1997, declaring the official guideline of Law No. 6 of 1973 on Entry and Residence of Foreigners, altered by Decree Law No. 17 of 2017, the government lawyer or his representative and administrator of Federal Authority for Identity and Citizenship or his delegate may issue an deportation order against an expatriate, regardless of whether he/she holds valid entry visa or residency visa, if that deportation decree is required for public security, public interest and public morals, or if that expatriate does not have an evident means for living. Any such deportation order issued against an expatriate may incorporate the individuals from his family, who rely upon him for their living.

    If any foreign national against whom a deportation order has been issued has any interests in the UAE that are needed to be settled, he shall be granted with a grace period after he provides a bail. The duration of such a grace period shall be defined and determined by the Federal Authority for Identity and Citizenship. Such a grace period shall not exceed three months.

    Lifting of ban

    One thing is certain, and there is no doubt to it, that when a deportation order is made against a foreign national, that is final. It means that such person against whom this order is passed cannot return to the country and is blacklisted.

    In any case, when an individual has been ousted on account of reasons that don't really fall under-representing a danger to the nation, they are permitted to make an appeal. They can do this from outside the nation.

    They can go to the Ministry of Interior site and apply for an exception.

    Article 28 of the Federal Law Number 6 for 1973 Concerned with Immigration and Residence further amended as per law no.7 of 1985, Law No.13 of 1996 And Federal Decree- Law No. 17 of 2017 states that:

    "A foreigner who is deported may not return to the country except with special permission from the Minister of Interior."

     Another method for doing it is by naming a legal counselor. They can contact a legal advisor situated in the UAE to speak to them for their appeal. Such applications of appeal are assessed by the experts in the UAE, seeing to it if the so deported expatriate stands any chance to return to the country.

    There are no specific documents that need to be attached while applying for appeal. The authorities make a decision based on various factors. Checking if the individual represents a risk to the security and wellbeing of citizens is likewise vital. The applicants must note that they stand a minimal chance of lifting the ban if they've previously committed any major crime.

    Black Lists and Administrative Lists

    The Black List

    As per the Executive Regulation of Law No. 6 of 1973 on Entry and Residence of Foreigners, the blacklist incorporates the names of people restricted to enter or leave the UAE due to the commitment of a crime, their obligation to respect others' civil rights or for being unsafe to the public security. Entering names in such a blacklist or dropping names from the same will be based on a letter issued by the concerned authorities for the following matters:

    People banned from entering:

  • People who have previously committed any crime and were subsequently ordered by a competent court to deport from the country.
  • People deported as per the administrative order of Ministry of Interior as indicated by Article 23 of Law No. 6 of 1973 on Entry and Residence of Foreigners
  • Such people whose activities are reported by International Criminal Cooperation Department.
  • People who were turned out to be experiencing AIDS or different infections that the Ministry of Health and Prevention regards unsafe to the general public.
  • People deported from the GCC nations for criminal reasons.
  • People prohibited from leaving:

  • Every such person who has got an order issued against him by a public prosecutor or its representative, with regards to a case that is being investigated.
  • Every such person against whom a competent court has issued an order, with respect to a case being considered.
  • Every such person who is under a liability to pay certain government funds, with regards to which such a leaving ban is ordered against him by a concerned minister or by any of his representative.
  • Administrative List

    The administrative list incorporates names of people prohibited from entering the UAE because their residence visas have been canceled and people restricted from leaving on account their they have escaped from their sponsors.

    Following is included in an Administrative List:

  • Home maids or other related persons who before the expiry of their works contracts canceled their residence visas.
  • People who fled from their sponsors and were so reported to the police
  • Every such person against whom such an administrative order was issued.
  • Authorities that organize, maintain and update lists.

    • Preparing, maintaining and updating of the Blacklist - The Federal Department of Criminal Police in the Ministry of Interior
    • Preparing, maintaining and updating of the Administrative list - The General Directorate of Residency and Foreigners' Affairs

    The lifting of names from the Blacklists

    The names in the blacklist can be lifted according to the following conditions:

    A. Persons who are banned from entrance:

  • Every person against whom there is a decision by a competent court shall be dealt with according to the rules and procedures included in Article 102, Article 103, and Article 104 of the Ministerial Resolution No. 360 of 1997.
  • The same manner of lifting shall apply to persons against whom a decision is given Minister of Interior or any authorized representative of the same as per Article 23 of Federal Law No.6 of 1973 on Entry and Residence of Foreigners.
  • Every person against whom an order is passed by an International Criminal Department will also be lifted in the same way.
  • B.  Persons that are banned from leaving:

  • Names of persons who are banned from leaving can be lifted out of the list through a written order of a Public Prosecutor or any of the representatives authorized by him/her after written notice is received from the entity that had issued the ban order.
  • Names of people who are banned as per the decision of a competent court will be lifted when the same court orders a decision to this effect.
  •  Names of people who are liable to pay government funds can be lifted from the blacklist on when a concerned authority gives a written order to this effect by stating necessary justifications and reasons. In such a case the ban lifting order shall be by Minister of Interior or a representative authorized by it.
  • The lifting of names from the Administrative Lists

    The names of people falling under following categories of the administrative list can be lifted after the expiry of one year from the time they left or were deported from the UAE:

  • Home maids or other related persons who before the expiry of their works contracts canceled their residence visas.
  • Persons deported as per Article29 of the Foreigner Entry and Residency Law from the UAE.
  • Persons who are banned entry in the UAE as per fines reduction regulations given in the Ministerial Resolution No.360 of 1997.
  • The practice of deportation is one of the many techniques that the courts use to safeguard the country. While lakhs of new residents arriving in the UAE to works, live, educate their children and further make life here are mainly law abiding, those who commit dangerous crimes are bound to face ejection.

    Thus, deportation frees society from social danger.

     

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    Sun, 31 Mar 2019 10:50:00 GMT
    <![CDATA[Tokyo Convention Amendment]]> Tokyo Convention Amendment

    Introduction

    The Tokyo Convention initially completed on September 14 of 1963, and it entered into force on December 4, 1969, has the full name 'The Convention on Offences and Certain Other Acts Committed on Board Aircraft'.

    Being an international treaty, nations must ratify it for it to have any power over them or within their borders, and as of 2015, this convention has the approval of 186 countries. The basic concepts and goal behind the Convention were to enforce punishments on individuals who caused disruptions aboard aircraft. It came at around the time when commercial flights were growing considerably in popularity. In many ways, a law of this kind was bound to rise at around this time for just that reason.

    This convention, for the first time in aviation, recognized that there should be immunity for certain individuals (specifically the flight commander at first) to handle situations that could turn out to be dangerous. This handling involved restraining anyone who is causing is believed to be a risk a potential risk. Over the years, this has been expanded upon to make it clearer.

    The Tokyo Convention Amendment was passed by the Singapore Parliament on 9 July 2018 and was intended to initiate in multiple stages. The first of these was on September 15 of the same year, and this introduced Section 2 to 5, 8 and 9.

    The Changes Introduced

    Nine updates are introduced, and from these, there are three primary areas which the convention has looked to update. These are as follows:

  • To allow Singapore to exercise the state of landing jurisdiction and operator jurisdiction as per the protocol;
  • To redefine specifically when an aircraft is in flight;
  • To protect certain individuals from liability in the case that a situation does arise during the journey. This protection applies to the likes of the cabin crew, commander and air marshals to name a few.
  • While these are the primary aims of the amendment, there are others which will be shown later in this article.

    Article 2 of the amendment starts by repealing and altering the long title. It has now changed to the following:

    "An Act to give effect to the Convention on Offences and Certain Other Acts Committed on Board Aircraft, signed at Tokyo on 14 September 1963, and the Protocol to Amend the Convention on Offences and Certain Other Acts Committed on Board Aircraft, signed at Montreal on 4 April 2014, and for purposes connected with the Convention or Protocol."

    Section 2 of the convention contains definitions, and Article Number 3 makes certain additions and amendments to these. There are four changes here to be exact, and these are as follows:

  • The addition of a definition for the 'Montreal Protocol'; "meaning the Protocol to Amend the Convention on Offences and Certain Other Acts Committed on Board Aircraft, signed in Montreal on 4 April 2014";
  • The addition of the definition for 'Protocol Country', which "means a country which has been declared by the Minister, by notification in the Gazette, to have ratified or acceded to the Montreal Protocol, and has not been so declared to have denounced the Montreal Protocol";
  • Replacement of paragraph (b) subsection one which defines 'Singapore-controlled Aircraft'. The new substitution is "which is leased without crew to a lessee whose principal place of business, or (if the lessee has no such place of business) whose permanent residence, is in Singapore";
  • Replacing Subsection 2 with a new definition for when an aircraft is in flight (the time during which the Tokyo Convention is applicable). An aircraft is considered to be in flight from the time when all external doors are closed up until the time when the doors reopen for disembarkation. Further, in the case of an emergency landing, the aircraft shall be in flight until the point when the country's competent authority takes over control of it. If the forced landing occurs in Singapore, it shall be until a police officer arrives at the aircraft landing site.
  • There is one final caveat added, which states that an aircraft will still be in flight if it is found on the sea, or on land, though not within the territorial limits of any country.

    Article 4 of the amendment adds in a clause which states that any act or omission (committed on a non-Singapore controlled aircraft) that would ordinarily constitute an offense shall be treated as such when the aircraft touches down in Singapore. If the law of the country specifically or implicitly allows for the action or omission though, it shall not be considered an offense.

    Article 5 states that the jurisdiction under which offenses falls is dependent on the licensing and registration territory of the craft. In the amendment, this is referred to as the Convention Country (the same as the Protocol Country). If the aircraft lands in a different jurisdiction, their laws may be applied.

    Following this, Article 6 provides another few substitutions. It covers Section 5 of the Principal Act, and paragraph b (2) is altered to now allow for the commander to decide what is considered a severe offense for the duration of the flight. On top of this, subsection 3 also provides that the flight commander may authorize others to among the crew or even passengers to assist in restraining of the offending individuals. Beyond this, the convention has expanded to allow for these individuals (crew, marshals, and passengers) to restrain any potential troublesome individuals without the permission of the flight commander. There must be reasonable grounds to believe that there is an immediate threat to the aircraft or any of the individuals aboard.

    Provided herein is a list of activities that would be deemed unlawful and interfering, and some of these conditions are attempts to take control of the aircraft, causes it damage or put the safety of the craft or its passengers at risk.

    Article 7 introduces a new Section 6 (A) and 6 (B) to the Principle act, and 6 (A) expressly states which parties the convention will protect. The parties are as follows:

  • Aircraft Commander;
  • Crew Members;
  • Flight Passengers;
  • Air Marshals;
  • Aircraft Owner or Operator;
  • A person on whose behalf the flight was performed.
  • 6 (B) does provide exceptions, though these are quite obvious. This Article states that there will be no protection from liability in the case that action is taken against an individual solely based on their gender, race, religion or political stance. Mentioning this is somewhat of a formality though, as it would be apparent to most reasonable individuals, though the law must state even these most trivial of facts.

    Amendments to Related Acts

    The Air Navigation Act:

    Within this act, the previously mentioned definitions for when an aircraft is in flight from the Tokyo convention is also added into this act.

    On top of this, there is also an addition, which confirms that these acts also apply to any individuals on flights not operated by Singapore or flying within Singaporean airspace that subsequently lands in Singapore.

    The Police Force Act:

    This act, much like the case of the Air Navigation Act, also adds in the same new definitions for what is considered to be 'in flight' for an aircraft.

    The reasons for these minor alterations are to bring all regulations that concern or relate to the Tokyo Convention in line with it. The system will only work if these regulations work in tandem with each other. Conclusion

    Aviation is an ever-growing sector and is one which requires strict regulations. While air travel is generally very safe, it is continually improving and adapting, and with the potential risks that could arise from in-flight incidents, it is too dangerous to leave anything to chance. These amendments, through clarification of the initial 1963 regulation further this goal.

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    Sat, 23 Mar 2019 15:09:00 GMT
    <![CDATA[EPC and Design-Build delivery]]> Differences between EPC and Design-Build delivery- English Law compared with GCC

    Any manufacturing company primarily delves on the basics of production efficiency, innovation, cost management and time to market which are the critical factors for achieving a competitive advantage. The company needs to achieve its business strategy, and thus a brief mode of delivery is required for delivering capital projects. When a strategically best method of delivery is chosen for capital construction projects, the companies can guarantee successful business goals anticipated for the project.

    The economy sustains on various project delivery methods that are available on hand for them, but the problematic part arises about choosing the appropriate and strategized method for the same. It must be dependent on various factors ranging from budgets, schedule, cash flows, complexity in the projects, risk mitigation and hedging, the team composition and the goals designated for the project.

    The generational and traditional way of doing it is by retaining the already available engineering and project management resources. Nevertheless, owing to the specific market-based issues related to monetary and competition, several units tend to decrease their in-house capacities and in turn, go for a selection of specific project delivery method.

    Primarily, a project delivery method is a configuration of roles, relationships, responsibilities, and sequences on a project. It is a strategy utilized by an agent or the proprietor which helps in the corporation and financing design, construction, activities and support administrations for a structure or office by entering into agreements with at least one substances or gatherings. It is essential to choose a delivery method that best meets the unique needs of each owner and their project.

    The fundamental decisions that an owner must take into account are that what kind sort of task conveyance strategy to utilize, what will be the obtainment technique and what will the contract be like. The Project delivery process generally involves an owner, designer and a builder.

    The conveyance strategy might be a combination or hybrid of numerous conveyance techniques. Each delivery techniques builds up various connections among the parties included and, in this way, extraordinary dimensions of hazard.

    Project Delivery Methods:

    The Engineer-Procure-Construct (EPC)

    It is a project delivery method that has risen as a favored choice for some industrial entities and is beginning to pick up support in the manufacturing business. With an EPC contract, the proprietor has a solitary purpose of contact for the venture. Under the model, the EPC firm handles the design plan, obtains all hardware and development materials, and construction services for turnkey conveyance of the office, for the most part at a single amount cost.

    The EPC procedure begins with a reconstruction effort that includes some first-hand planning and designing to characterize the scope, timeline, and expenses of the venture. Approval is regularly overseen specifically by the customer or through a different validation firm to guarantee this basic action is conveyed effectively.

    The EPC firm develops project scope and estimates. The timeline for the project and the budgeting are known before the task enters detail structure or development stages. All plan and development degree and spending dangers are passed to the contractual worker.

    The EPC model adjusts colleagues for ideal venture execution. The EPC display decreases venture dangers for the proprietor, conveys unsurprising outcomes, and augments the adequacy of capital arranging.

    Design-Build

    As of years, design-build has been gaining momentum as a favored method. As an increasingly clear conveyance strategy for proprietors, it additionally limits risks. A conceptual plan for a project is developed by an owner who then solicits bids from a joint venture of architects and engineers and builders for the design and construction of the project.

    The DB project delivery model is appropriate for assembling customers that require quick tract venture conveyance and need a single point of contact. The temporary worker and originators are enlisted by the proprietor to convey a total task.

    The owner selects a design-build firm from pre-qualified companies that have submitted designs and prices based on the project requirements. The DB firms retain their architects, engineers, and other consultants. The owner provides the user requirement specifications, materials of construction, and the specifications for the manufacturing equipment. The Design-build contracts are typically lump sum and based on the design that accurately meets the owner's specifications.

    It is employed to decrease the project delivery schedule. DB is typically practiced for architecturally-driven designs. This concept typically occurs in improved communication among the design team and a larger degree of responsibility. While this is a complicated delivery method, the compressed schedule and value engineering approach often result in cost savings for the owner.

    Design-Bid-Build

    Design-bid-build relates to the subsequent phases of this project delivery method, which sometimes is called "traditional." The contract documents are developed by the owner with an architect or an engineer which comprises of a various set of blueprints and a detailed specification.

    Construction Management at Risk

    At the point when proprietors need a characterized culmination date and value, the development the executives in danger may be the favored task conveyance technique. Amid the venture plan, a development administrator goes about as an expert to the proprietor.

    Multi-Prime

    In multi-prime, the undertaking is separated into three phases– design, engineering, and construction. While actualizing MP, the proprietor frames separate contracts with the experts heading the different phases of the undertaking. Every one of these classes of contractual workers may direct crafted by subcontractors, for example, a general contractor who manages carpenters and framers.

    Integrated Project Delivery

    Coordinated venture conveyance is the best in class conveyance strategy in development with an accentuation on cooperation and joint effort. While actualizing IPD, the essential objective of the incorporated strategy is to spread obligation, duty, and hazard (and rewards) among the partners in a construction job.

    Comparing English Law with GCC

    The International Federation for Consulting Engineers (Fédération Internationale des Ingénieurs-Conseils) (FIDIC) is commonly employed in the UK as well as in the GCC. FIDIC is commonly used on UK projects, particularly the EPC/Turnkey Contract (The Silver Book) and is often used in process plant/complex engineering projects in the United Kingdom.

    The International Federation of Consulting Engineers (FIDIC), Joint Contracts Tribunal (JCT) and New Engineering Contract (NEC) contract suites have specific design and build options that can be modified to support the type of procurement entirely or by way of partial design liability being passed to contractors. The construction industry in the GCC adopts and follows international best practices for construction contracts governed by GCC law or implemented in the GCC. These contracts are heavily modeled after FIDIC forms of contracts.

    Also, the lump-sum turnkey contract is the dominant procurement model in the GCC market. Whether upstream or downstream, the vast majority of the GCC's oil and gas sector projects are delivered through engineering, procurement, and construction (EPC) contracts.

    Petrofac was recently awarded the $580m EPC contract for a GCC project. Petrofac's Middle East portfolio includes the Upper Zakum oil field project in the UAE, the Sohar refinery improvement project in Oman, and the Petro Rabigh Phase II project in Saudi Arabia.

    Design-and-build is touted as the contracting technique for the future, killing debate and hurrying the plan and development process. It is relatively new in the Middle East, but as we see more of this method, the roles and responsibility of the contractor will become more evident. The client needs to ensure the right contractor is used, with enough experience and resources to enable them to complete the project to the quality required. The building criteria must be very clearly laid out ahead of appointing the contractor, as the client may lose design control once a fee has been agreed upon.

    Design and build contracts have been utilized effectively for quite a few years outside of the Middle East yet were not ordinarily drilled in the Middle East until 2012.  whereas, 2013 and 2014 have seen employers from different projects adopting this procurement route. Realizing the advantages of this procurement route, more and more employers are adopting Design and Build for their projects.

    Already predominant in Europe and many parts of Asia, it eliminates the separate responsibilities for the designer and the contractor, since the designer is a partner, a subcontractor or an employee of the contractor.

    With the designer getting imposed with the risk, more complex projects soon became attractive in the UK, and the companies were looking for a one-stop shop approach. The Company may have avoided the design development risk, but still retains the risk of delay for the other reasons, so the potential disputes remain.

    In the case of Midland Expressway vs. Carillion Construction, the M6 toll road construction was based on a design-build contract, where the entire responsibility for the design was given to the contractor. Disputes regarding claims for payments and share of the discounts to be received were ascended followed by adjudication and then litigations.

    This judgment started with an intrigued tone, and the courts held that there was no doubt at considerable expense to the parties involved, thereby design and build does not prevent claims arising. It does not prevent contractors from making claims for extra time and money where there is a lag.

    The company may think that he is setting all the design jeopardy on the contractor but, if significant modifications are notified during construction (which is the case for many projects), this risk stays with the organization.

    Differences between EPC and Design-Build Delivery

    EPC and Design-Build Delivery have both existed as mainstream delivery methods for decades. In both cases, the partner has a point of contact. In both cases, the company is responsible for the design, and the contractor takes on more risk than a traditional design-bid-build delivery. However, several essential differences differentiate the two:

    Active Participant:

    An EPC project results in a turnkey facility. The EPC contractor heads the working of the project facility.

    A design-build contract finishes off comparatively to configuration offer form contracts, with the proprietor and its development director or fashioner playing a functioning job in punching out the office.

    The design-builder is held by the proprietor from the get-go in the life of the undertaking and, now and again, before the structure has been created by any means.

    Design-build is used to limit dangers for the venture proprietor and to decrease the conveyance plan by covering the structure stage and development period of an undertaking."DB with its single point duty conveys the clearest legally binding solutions for the customers in light of the fact that the DB contractual worker will be in charge of the majority of the work on the undertaking, paying little heed to the idea of the blame."

    It answers the client's wishes for a single point of responsibility in an attempt to reduce risks and overall costs.

    These contractors are usually handed little more than performance requirements varying, whereas most design-build configuration assemble contracts give probably some plan detail in the connecting reports.

    EPC equivalent of the "structure help" or "quick track" plan construct forms is not available.By and by, this mirrors the proprietor's increasingly negligible contribution in the EPC configuration process.

    There is no EPC likeness the "structure help" or "quick track" plan construct forms. By and by, this mirrors the proprietor's progressively negligible association in the EPC configuration process.

    Risk-taking:

    Most contracts transfer far more risk to the contractor in EPC. The risk is not shared between the owner and the design-builder, but just the contractor has to face the responsibilities and the liabilities.

    Design-build contracts will, in general, take either a customary plan offer form way to deal with questions like obscure site conditions or to share that chance between the proprietor and the structure manufacturer. In contrast, it is not uncommon for EPC contracts to shift these risks entirely to the EPC contractor.

    Project Delivery Processes:

    The delivery of the project via Design-build is in two phases with:

  • Phase I including budgeting and development and pre-construction services and the negotiation of the contract price for Phase II; and
  • Phase II including final design, construction, and commissioning.
  • The EPC project process involves

  • Initiating the Project
  • Preparations like setting up of the project organization and Procurement procedure
  • Phase I Project Development
  • Phase II Project Implementation
  • Phase III Project Follow up and (f) Decision Making.
  • Understanding the differences between these two seem quite similar design processes is a crucial step when assessing which delivery system is right for the project.

    ]]>
    Sat, 23 Mar 2019 14:00:00 GMT
    <![CDATA[Special Purpose Vehicles ADGM]]> Abu Dhabi Global Market (ADGM) – Special Purpose Vehicles (SPV) and Foundations

    As a company within the Middle East, there are many seemingly insurmountable risks, such as financing, asset transfers or high-risk opportunities, which risks previously held no viable risk mitigation alternatives. However, the ADGM now supplies a competitive entity for which mitigates such risks. The risks as abovementioned could include, for example, should a company wish to engage in a project that is considered to be high-risk – such as the purchasing of an aircraft – such company may utilize the creation of an SPV to isolate this project risk from the parent company. In what follows will be a comprehensive breakdown of the many advantages of SPV's as well as their practicality and ease of company formation in ADGM.

    At the outset, it is pertinent to thoroughly examine what an SPV is and why a company would utilize such an entity. An SPV is a legal establishment which is formed to fulfil a limited, specific or temporary purpose. They are entities distinctively used by companies to isolate the parent company from a particular financial unpredictability. The official definition of an SPV is "a fenced organisation having limited predefined purposes and a legal personality."

    The ADGM has stepped into the forefront in respect of their SPV regime, offering a dynamic and extensive scheme which caters to numerous industry sectors and a range of uses.

    In the below table is a depiction of the typical uses of SPVs

    Use

    Why

    Securitisation

    The utilisation of an SPV can be as an entity through which a company can securitise a loan. In this respect, the SPV will purchase these assets by issuing debt. A debt, the security of which, is on such an underlying asset. This provides a priority right to those persons who are holders of the asset-backed security to receive payments in respect of the debt while curbing the recourse they might have to the originator of the assets.  

    Risk-sharing

    As has been eluded to above, an SPV can be formed by a company to shield the company from high-risk projects and to provide a possibility to other investors for risk-sharing. This entity is especially useful in joint venture projects for isolating partners from risks inherent in certain joint ventures.

    Finance

    An SPV can be used in this capacity for ring-fence investments, this can be utilized to gain financing without increasing debt levels of the parent company.

    Asset Transfer

    In respect of asset transfer, many permits and requirements may be needed for the operation of certain assets, for instance, a mine or a power plant. The attainment of such permits may be arduous, and such permits are often non-transferable. The way in which an SPV will relinquish the burden of the abovementioned can be that the SPV owns the asset along with all permits and authorisation and should the parent company wish to transfer the assets, they can do so through the sale of the SPV, thereby transferring the assets and permits in unison.

    To Maintain Secrecy of Intellectual Property

    This use for an SPV holds many applications and advantages, one being the protection of intellectual property rights of companies from pre-existing licensing deals the company may have with competitors. Additionally, it can be used to separate valuable Intellectual Property into an entity with minimal liabilities and provides it with the opportunity to raise funds and enter into agreements with third parties separate from that of the parent company.

    Financial Engineering

    An SPV has the capability of being utilised as a method of tax avoidance or a way of manipulating financial statements.

    Regulatory Reasons

    An SPV can be set up with an orphan structure to circumvent statutory restrictions, such as regulations relating to the nationality of ownership of specific assets.

    Property Investing

    An SPV can be utilised in the process of acquisition of real property, and this respect will afford limitation of recourse of mortgage lenders – this is dependent on the location of the asset. As was seen above in respect of the transfer of assets and the certain permit transfers, the same is true for the property transfer. An SPV that owns a property can be sold to a person interested in acquiring the property, and in this respect, persons can circumvent high taxes and fees that go hand-in-hand with the transfer of property. 

     

    A famous example of utilisation of an SPV as securitisation of intellectual property is that done by David Bowie (Musician). In order to enhance cash flow, the formation of an SPV for which Bowie sold his assets to, such assets include the right to certain future royalty payments from certain albums. This SPV then issued what was known as Bowie Bonds, for which the record distributor provided specific credit enhancements. The underlying copyrights secured the bonds, and if the SPV defaulted on its payment obligations to bondholders, the copyrights are permanently transferred to bondholders.

    ADGM SPVs are "exempt" structures, and this consideration is brought about due to the fact that they do not fall under the immediate supervision of the Financial Services Regulator. Such SPVs offer sophisticated ownership structures and propose a particularly innovative and flexible mechanism. They combine dematerialised SPVs into substantiated holding companies.

    To surmise: -

     

     

    The breakdown

     

    It's Suitability

  • Proprietary investment;
  • Securitisation;
  • Holding;
  • Capital raising;
  • Advantages

    • Dependability;
    • Adaptable;
    • Different share classes;
    • Applicability of the common law;
    • Acceptance of trusts, funds as holder, and foundations;
    • Capable of morphing;
    • No foreign ownership restrictions;
    • Tax Residency – all ADGM registered companies are eligible to apply a Tax Residency Certificate from the UAE Ministry of Finance to benefit from the UAE's Double Tax Treaty network.
    • Migration or continuance of existing corporate entities

    Legislative backdrop

    Common law

    Competency

    ADGM Courts

    Corporate Mitigation

    Allowed

    Protected cell companies

    Available

    Compatibility with sophisticated holding structure

    Yes

    Ownership

    Capable of being 100% foreign owned

    Registered office

     

    Minimum shareholding

    1 Shareholder

    Minimum director requirement

    1 Director and at least one of the directors has to be a natural person

    Corporate Directors

    Allowed provided there is one natural person as a director

    Minimum share capital requirement

    No minimum share capital requirement

    Evidence of capital pay-up

    Not required

    Set-up timeline

    5-7 working days

    Company name

    Prior approval required

     

    In addition to the numerous abovementioned advantages, the ADGM also offers a type of SPV which affords information disclosure protection to registered SPVs – this is through the Restricted Scope Company. This is an entity unique to ADGM which offers limited information disclosure on the public register but full disclosure to the ADGM Registrar.

    ADGM Foundations

    The concept of ADGM foundations has only recently been brought about and implemented by the financial free zone and affords individuals, and entities access to a product for which they previously had no access to. In this respect, the ADGM Foundations regime offer an alternative to trusts for the purposes of wealth management and preservation, family succession planning, tax planning, asset protection, corporate structuring, and for public interest purposes (with the exclusion of charities).

    To delve a somewhat further into what a foundation is, we can begin by noting its similarity with that of a trust, the use of a foundation as described above depicts its vast similarity – the main difference here is that trusts find their basis in the common law, while foundations are derived from the civil law.

    A notable difference between foundations and trusts is that foundations are incorporated as a legal entity and carry their distinct attributes and legal personality. It is in this characteristic that foundations are comparable to a company; however, they lack the company component of shareholding. The foundation will hold the title of assets in its own name on behalf of beneficiaries, and the establishment of such must carry a particular and specific objective. The foundation may not engage in any commercial activities which fall outside of the scope of activities necessary for the attainment of the purposes of the foundation.

    The person who is responsible for the creation of the foundation will be the "founder", and such a person will transfer assets to the foundation which will subsequently become the property of the foundation. A further differentiation between a foundation and a trust is seen in that, and unlike a trust, a foundation safeguards the founder's ability to exercise control over a foundation. Should the founder die, this will have no effect on the foundation, and it will exist perpetually after the death of the founder. 

    ADGM is a market leader within the United Arab Emirates in respect of Foundation regulation and offers a variety of attractive provisions. The regime provides the domiciliation of foundations into and out of ADGM along with marginal set-up costs. The regulation too provides considerable flexibility in the amendment of governance and the utilisation of a registered agent is voluntary. The commitment requirement of primary assets is as little as USD 100, and it requires no physical office space. The regime also provides limited public disclosure with no individuals' names on the public register.

    The ADGM continues to put forward regulation and evidence which place it at the forefront of International Financial Free Zones – providing innovative and effective corporate structures to suit every commercial and financial need. The two abovementioned entity types are just basic examples of the multitude of ADGM entities. Feel free to get in touch with our team of lawyers in Abu Dhabi to learn more on setting up SPV in ADGM and setting up ADGM Foundation entity.

     

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    Thu, 21 Mar 2019 18:20:00 GMT
    <![CDATA[Payment Protection Insurance]]> Payment Protection Insurance

    Introduction

    Falling behind on mortgage, loan, or credit card payments can have serious repercussions such as penalty charges, damage to one's credit score, and even loss of property. Payment Protection Insurance (PPI) is designed to help avoid these repercussions by paying the insured's mortgage, loan, and credit card repayments if the insured is unable to pay due to unemployment or illness. However, it is essential to note that the terms and conditions of this class of insurance are often complex, strict, and riddled with exclusions.

    Banks and insurers have also been criticized for mis-selling policies to individuals who weren't aware of the optional coverage or that they would never be able to file a claim. Over the recent years, a number of lenders have been levied penalties for poor PPI sales practices, including the payment of compensation to all mis-sold policies. This article will primarily focus on loan PPI policies. 

    Meaning

    Payment Protection Insurance (PPI), also known as credit insurancecredit protection insurance, or loan repayment insurance can be defined as an insurance that will provide a sum of money to assist the insured in repayments on mortgages, credit/store cards, loans, or catalogues payments, in the event the insured is unable to work, as a result of accident, illness, unemployment or death. In simple terms, depending upon the type of protections selected, PPI pays or contributes to loan repayments in the event of involuntarily unemployed. In the event of death, life cover will repay an individual's loan balance.

    Payment Protection Policies are usually sold as part of the deal when consumers obtain a loan, mortgage, or credit card. However, it is also possible to receive a 'stand-alone' PPI policy.  PPI policies that covers mortgage payments are termed as Mortgage Payment Protection Insurance (MPPI), which is taken out solely for ensuring the timely repayment of the mortgages. MPPI helps ease the minds of homeowners who fears missing mortgage payments due to unemployment, sickness or accident; which can ultimately lead to the repossession of their homes. Like other PPI policies, MPPI policies are of three types: unemployment only; accident and sickness only;  unemployment, accident, and sickness. The exclusions applicable to MPPI are similar to that applicable to other PPI policies.

    Need for PPI

    PPI payouts could be a financial lifeline for those who are unable to keep up with their debt repayments. Whether an individual requires this sort of protection depends upon one's financial circumstances and the amount of debt owed. For instance, if an individual has a sufficient amount of savings that could be utilized for repayments in the event of a drop-in income, he would not find it necessary to obtain PPI coverage.

    Having a PPI policy can assist in paying-off debt, provided the insured conducts thorough research into the available policies and selects a policy that is inexpensive while providing suitable coverage. With regard to credit score, a loan PPI policy can assist in maintaining the insured's current credit score since the policy enables the insured to be up-to-date in loan payments. PPI is especially beneficial during periods of financial crisis since it will enable the insured to continue paying off loans.

    With regard to loan interest rates, obtaining a PPI policy doesn't necessarily lower these rates. In many cases, when taking out a policy, the loan provider may try to make it seem like the loan interest will decrease if the insured also buys a payment protection insurance policy from the provider. However, in reality, the loan interest rate difference from the new 'lower' rate is latched onto the loan protection policy, which gives off the illusion that the loan interest rate has decreased; rather, the costs were merely transferred to the loan protection policy.

    Products Sold with PPI

    An individual may have had PPI, if he/she has taken out or used loan or credit product, such as:

    • Credit card
    • Loan – including personal loans, student loans, and business loans
    • Store- usually from a high-street store
    • Mortgage (including second charge mortgages)
    • Loan secured on residences (in addition to mortgage)
    • Car finance or anything bought on credit, including a sofa - could have been termed as 'finance agreement' or 'hire purchase'
    • Overdraft
    • Home improvement loan
    • Home shopping account

    Types of PPI Coverages

    There three primary levels of PPI coverages:

    • Unemployment-only,
    • Accident and Sickness-only (AS), and
    • Accident, sickness, and unemployment (ASU).

    Unemployment-only- covers the insured if they are made redundant.

    Accident and sickness- protects the insured against accident and long-term illness (provided it is certified by a doctor).

    Accident, sickness, and unemployment- provides an all-inclusive protection.

    How are the PPI Payments Made?

    The cost of PPI policies depends upon where the insured lives, the type of policy selected, whether it is standard or age-related, and the amount of desired coverage. For loan PPIs, the premiums can be expensive, especially for individuals with poor credit history who may end up paying a substantial premium for coverage.  For some loans, the entire cost of the PPI premium is added upfront to the borrowed amount. The borrower would then pay it off over the term of the loan, by paying interest on the premium; this is similar to the rest of the loan. However, this type of coverage is highly unpopular and is not permitted in many countries. On other loans (including mortgages), borrowers mostly pay for PPI policies by a monthly premium.

    The PPI policies sold with credit cards are also paid for by a monthly premium, however, these are added to what is owed on the card at the end of every month. The cost of the premium is calculated at a certain percentage of the total balance that is owed for a particular month. Once the claim is paid out, the monthly benefit is most often somewhere between three to ten percent of the amount owed.

     

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    Tue, 19 Mar 2019 12:06:00 GMT
    <![CDATA[International Perspective on Juvenile Justice]]> 'Doli Incapax' – An International Perspective on Juvenile Justice

    'No civilised society regards children as accountable for their actions to the same extent as adults ... The wisdom of protecting young children against the full rigour of the law is beyond argument. The difficulty lies in determining when and under what circumstances should it be removed.' – Professor Colin Howard

    The Law relating to juvenile protection is a highly controversial topic and should be treated with utmost respect. Until recently, the law relating to the commission of crimes by the juveniles was under a dilemma, and now with the evolvement of jurisprudence, the legal system is more explicit concerning juvenile delinquency.

    Juvenile justice is a sensitive area of law dealing with the rights and protection of children. Therefore numerous amounts of legislation have been adopted at all levels, be it national or international. Juvenile justice is a realm which deals with various issues including the liberty and behavioral aspects of a juvenile.

    In this article, we will analyze the concept of juvenile justice and the position of juveniles from an international perspective.

    Meaning

    The term 'Juvenile' refers to any person, who has not attained the age of majority. In other words, a young person or a child who is not old enough to be regarded as an adult may be termed as a juvenile. Therefore under the law, the criteria for determining a juvenile may vary from jurisdiction to jurisdiction. For example, generally the age of 18 is considered as the age of majority, however, in countries like Japan and Taiwan, it is 20 years.

    The United Nations Standard Minimum Rules for the Administration of Juvenile Justice, also known as the Beijing Rules, defines a juvenile as:

    "A juvenile is a child or young person who, under the respective legal systems, may be dealt with for an offence in a manner which is different from an adult."

    As discussed earlier, Juvenile Justice is within the domain of criminal law which deals with the offences committed by juveniles, and it also provides for their behavioral aspects, liberty, rehabilitation, and penal implications.

    Article 5 of the Beijing rules lay down the aims of juvenile justice as:

    "The juvenile justice system shall emphasize the well-being of the juvenile and shall ensure that any reaction to juvenile offenders shall always be in proportion to the circumstances of both the offenders and the offence."

    History

    Prior to the evolution of the juvenile justice system, the criminal courts tried and punished youths for the offences committed by them. Until the late 18 century, under the law, children were considered and treated with the same as that of adults. However, with the evolution of jurisprudence and the legal system, a thin line was drawn between the offences committed by adults and juveniles. Subsequently, the first juvenile court was established in the United States of America (Illinois) in 1899. The early juvenile institutions operated and were adopted under the doctrine of 'Parens patriae', which meant that a state could act as a parent of the nation.

    Juvenile Delinquency

    Juvenile Delinquency is the commission of an offence by a Juvenile. With the development of law concerning Juveniles, the method in which a juvenile is treated is different from that of an adult.

    James Burfeind and Dawn Bartusch in their Juvenile Justice: An Integrated approach defines juvenile delinquency as:

    "Actions that violate the law, committed by a person under the legal age of majority."

    The reason for the differential treatment that exists between juveniles and adults is because of the Minimum Age of Criminal Responsibility (MACR) and the doctrine of Doli Incapax.

    The Minimum Age of Criminal Responsibility (MACR) is the minimum age of a child that is deemed not to have committed a crime. Article 4 of the Beijing rules deals with the minimum age of criminal responsibility, and it reads as:

    "In those legal systems recognizing the concept of the age of criminal responsibility for juveniles, the beginning of that age shall not be fixed at too low an age level, bearing in mind the facts of emotional, mental and intellectual maturity."

    The age of criminal responsibility differs from country to country, and the Beijing rules provide for taking adequate measures to make it reasonable.

    The most critical element for constituting a crime is 'mens rea' or the criminal intention to commit an offence. A juvenile and an adult are subjected to different judicial procedures primarily due to this notion. The notion that a child is incapable of having the intention to commit a crime is called as 'doli incapax.' Under the English law, the doctrine of 'doli incapax' was the defense of infancy unless such a presumption was rebutted. Some of the states follow this doctrine, and therefore juveniles below a particular age are excluded from the liability for the commission of an offence. However, the age may vary from jurisdiction to jurisdiction. For example, the age of criminal responsibility is twelve in Canada and the Netherlands, whereas it is 7 in the UAE and India. This does not call for a necessity to maintain a specific age for criminal prosecution, and therefore in some countries, it is up to the prosecution to prove the existence of criminal intent.

    In T v. DPP [1997] Criminal LR 127, T an eleven-year-old child stole sandwiches from a shop. At the instance of getting caught, T tossed the sandwiches down and fled the scene. When interviewed, the child admitted the act of stealing because of having no money. In this case, the court opined that the combination of admission and running away from the scene was sufficient for rebuttal.

    International Position

    Though the concept of juvenile justice was not given much importance until the late 19 century, now it has become an area of law which contains the most number of legislation and International treaties. The international juvenile justice system focuses on the offences committed by the juveniles and has provided for the measures to protect the interests of the juveniles from the abuse of law. With the increase in concerns relating to child protection and their rights, many countries have adopted measures within their legal framework to safeguard the interest of the juveniles.

    In Roper v. Simmons 543 U.S. 551, Christopher Simmons, age 17, arranged to burglarize a lady's home and murder her. He, along with two of his friends, planned for the crime. However, before the evening of the murder, one of his companions quit the arrangement. Simmons and his friend broke into the victim's home, bound her hands and tossed her over the bridge. In this case, the jury found him guilty and recommended for the death penalty.

    However, in 2015, the Supreme Court of the United States ruled it unconstitutional for a person under the age of 18 years to be subject to capital punishment sentence, and thus overruled the 1989 Stanford v. Kentucky decision, which permitted capital punishment for offenders who were above the age of 16 years.

    The following are some of the International covenants dealing with the International juvenile system:

    International Covenant on Civil and Political Rights, 1966  states -"5. Sentence of death shall not be imposed for crimes committed by persons below eighteen years of age and shall not be carried out on pregnant women."

    The United Nations Standard Minimum Rules for the Administration of Juvenile Justice, 1985 also known as the Beijing rules, was adopted on 29 November 1985 for protecting the well being of children.

    The United Nations Rules for the Protection of Juveniles Deprived of their Liberty, 1990 also known as the Havana rules, lays down the standard for the management of the juvenile justice system.

    The United Nations Convention on the Rights of the Child (CRC), 1989 provides for the protection of children by ensuring the rights available to them.

    The United Nations Guidelines for the Prevention of Juvenile Delinquency, 1990 also known as the Riyadh guidelines, provides for the prevention of juvenile delinquency.

    The United Nations Guidelines for Action on Children in the Criminal Justice System, 1997 also known as the Vienna guidelines, were adopted for the protection of children and it was addressed not only to the states, but also NGO's and media.

    The International Juvenile Justice Observatory was formed in Brussels in 2002, to encourage global juvenile justice and to tackle the issues relating to juvenile delinquency and justice issues.

    Therefore the above mentioned International instruments have taken adequate measures for the protection, and well-being of juveniles, and make it an obligation on the states to enact legislation conforming to such recommendations and policies.

    The position of Juvenile Justice in the UAE

    The UAE has taken adequate measures for the protection of Juveniles, and further has enacted and implemented provisions associated with juvenile delinquency. The United Nations Convention on the Rights of the Child was adopted and ratified by the UAE on 3 January 1987, and it was one of the first countries to do so within the Middle East.

    Article (1) of the UAE Federal Law Number 9 of 1976 concerning juvenile delinquents and runaways defines a juvenile as:

    "Juvenile is a person who is not older than eighteen years of age at the time of committing the act subject for questioning or being in a state of homeless."

    Article (7) states:

    "If a juvenile who completed seven years but is below sixteen years of age committed a crime punishable by the penal code or any other law the judge shall give its ruling as it may find fit."

    The Article (10) of Federal Law Number 9 of 1976 provides for the replacement of capital punishment or life imprisonment in the case of a juvenile to detention punishment for up to 10 years. It provides for reducing the term so that it does not exceed one half of the maximum limit originally determined. Further, Article (10) also provides the juvenile delinquent with social care and educational facilities.

    According to the Article (12), where a juvenile has committed more than one offence, he shall be punishable for both the crimes as one, provided that he receives punishment for the worst crime.

    Article (23) provides for placing juveniles in suitable institutions or correction and educational homes for rehabilitation.

    Therefore, the Federal Law Number 9 of 1976 provides for the law relating to juvenile delinquency and protection of juvenile offenders.       

    The UAE Federal Law Number 43 of 1992 deals with the organization of punitive institutions and it contains provisions relating to juvenile rehabilitation. Chapter 7 of the Federal Law Number 43 of 1992 provides for rehabilitating the Juveniles.

    Article (49) reads as:

    "A committee for rehabilitating the juveniles shall be formed upon a resolution from the minister of interior, in agreement with the minister of justice and Labour and social affairs, headed by one of the presidents of the federal public prosecution, including the following in its membership:

  • The establishment officer.
  • One of the specialists in psychology.
  • A representative of the ministry of education.
  • A representative of the social affairs.
  • The committee shall be entitled to ask the aid of whom it deemed necessary from the concerned."    

    The Article (51) of the Federal Law Number 43 of 1992 contains provisions for allowing the juvenile to leave the establishment to visit relatives in the official feasts, during exceptional conditions or in any other occasion. It also provides for exceptional vocation, provided that such a resolution is from the minister of interior based on the committee's recommendation.

    Therefore, from above it is obvious that the concerned laws offer considerable protection to the juveniles within the region and adequate steps have been taken by the government for protection of juvenile justice.

    Conclusion

    The fine line between the commission of offences between an adult and a juvenile is now well accepted and recognized. Almost all the countries have provided for separate laws relating to the acts committed by juveniles, and it is necessary for the better administration of the State. Therefore, juvenile justice covers all the spheres of a juvenile's life and is not restricted to a particular set of regulations.  

    ]]>
    Mon, 18 Mar 2019 17:56:00 GMT
    <![CDATA[Global View on Workers Rights ]]> A Global View on Workers Rights with Special Emphasis on the UAE Laws

    "Workers' rights should be a central focus of development" – Joseph Stiglitz

     

    It is often said that workers rights are human rights. The statement expresses the importance of the protection of workers or labours in the society. Workers are members of the society without which there wouldn't be any progress in the community. They are the backbone of a society, which helps in the advancement of a nation.  Therefore it is pertinent that the Governments of all the countries must take adequate steps for the protection of workers.

    In this article, we will analyze the concept of workers' rights with particular emphasis on UAE laws.

    Before we deal with the concept of workers or labour rights, it is necessary to understand the meaning of the term 'Labour.'

    The renowned Economist Dr. Alfred Marshall in his famous Principles of Economics has quoted the definition of labour as provided by Jevons, and it defines the term labour as the following:

    "Labour is any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work."

    In simple terms, the 'Labour' refers to the practical effort put in by an individual whether physical or mental. Therefore it is the factor affecting the production of a nation put in by an individual.

    Workers/Labour Rights

    Workers or Labour rights are a set of rules and regulations which govern the relationship between the workers and their employers under concerned labour law or employment law. They deal with the grant of benefits to the workers, their safety, wages, protection and measures adopted for safeguarding their interest.

    The right of the workers varies from jurisdiction to jurisdiction. However, the International Labour Organization (ILO), which is a part of the United Nations, was established in 1919 for the protection of workers. Workers rights and legislation are necessary for the better functioning of society since it has a significant influence on the growth of a nation.

    History of Workers Rights

    Workers have always been suppressed throughout history. The working class was not given any protection in the early days. Use of physical work was looked upon as inferior and hence the fundamental human rights were denied to the workforce during the early period. In the middle ages, the workforce of England revolted against the government, for better wages and working conditions and that was one of the first instances of rebellion by the workforce.

    The concept of workers' rights was relatively a new concept under human rights until the age of industrialization. The renowned economist and philosopher Karl Marx was one of the most prominent thinkers to advocate the concept of workers' rights. The social movements also paved the way for the rise of workers' rights around the globe.

    Need for Workers Rights

    Protection of the workers is necessary to safeguard their interest and to comply with provisions of human rights. The employers have an unfair advantage of determining the mode of work of the labours as long as it does not violate any laws. The employers may use their position to impose actions which may be unsafe and unfair for the workers. Therefore, regulation is necessary to ensure that the workers work under safe conditions and are not subject to any form of ill-treatment.

    International Position of Workers Rights

    As discussed earlier, each state has its own set of rules and regulations for the protection of workers or labours. However, as a part of the League of Nations, the International Labour Organization (ILO) was established in 1919 for the protection of workers' rights. Subsequently, ILO was brought within the scope of the United Nations. Eight conventions have been identified as fundamental for the protection of workers under the International Labour Organization.

    The ILO Declaration on 'Fundamental Principles and Rights at Work' was adopted in June 1998, and it covered the following main areas:

    • Right to collective bargaining and freedom of association
    • To end all forms of forced or compulsory labour
    • Abolition of child labour
    • Elimination of discrimination in the occupation

    The Declaration on Fundamental Principles and Rights considers the conventions as core labour standards and they are given utmost importance. The core labour standards are universally applicable to all members of the International Labour Organization whether they have been ratified or not.

    The following are the Core Labour Standards as identified by the ILO:

    • Freedom of Association and Protection of the Right to Organise Convention, 1948 (Number 87)

    As per this convention, all the workers have the right to form associations and organize conventions for support and advancement of occupation.

    • Right to Organise and Collective Bargaining Convention, 1949 (Number 98)

    The convention provides the employers to bargain collectively, as opposed to individually.

    • Forced Labour Convention, 1930 (Number 29)

    This convention prohibits all forms of forced labour. Forced labour is stated in the convention as the following:

    "Forced labour occurs where work or service is exacted by the State or by individuals who have the will and power to threaten workers with severe deprivations, such as withholding food or land or wages, physical violence or sexual abuse, restricting peoples' movements or locking them up."

    • Abolition of Forced Labour Convention, 1957 (Number 105)

    This convention also provides for the elimination of forms of labour convention.

    • Minimum Age Convention, 1973 (Number 138)

    The convention provides for the abolition of child labour by increasing the minimum age for admission to work.

    • Worst Forms of Child Labour Convention, 1999 (Number 182)

    The convention was adopted for the prohibition and elimination of the worst forms of child labour and for assisting the Minimum Age Convention, 1973.   

    • Equal Remuneration Convention, 1951 (Number 100)

    The convention was adopted for implementing the principle of equal remuneration, i.e., equal pay for equal work for both men and women.

    • Discrimination (Employment and Occupation) Convention, 1958 (Number 111)

    The convention was adopted to prevent discrimination in the field of occupation and employment.

    Workers Rights in the UAE

    The UAE, being a member of the International Labour Organization and other multilateral organizations, protects the rights of workers in the region, and considers the protection of workers as a moral, cultural and economic necessity.

    The report, "The Protection of the Rights of the Workers in the United Arab Emirates" published by the UAE Ministry of Labour exhibits that, UAE recognizes the importance given to the right of workers. The region aims to expand protection to the workers thereby granting respect and dignity to the workers.

    Since 1982, the UAE has ratified nine International conventions under the ILO related to workers rights, and they are:

  • Forced Labour Convention, 1930
  • Abolition of Forced Labour Convention, 1957
  • Minimum Age Convention, 1973
  •  Worst Forms of Child Labour Convention, 1999
  • Equal Remuneration Convention, 1951
  • Discrimination (Employment and Occupation) Convention, 1958
  • Labour Inspection Convention, 1947
  • Hours of Work (Industry) Convention, 1919
  • Night Work (Women) Convention, 1948
  • Apart from the ratification of the conventions mentioned above, the UAE Labour law provides for the safety and protection of the workers in the region.

    The UAE Federal Law Number 10 of 2017 and Federal Law by Decree Number 11 of 2008 deal with the protection of workers in the UAE.

    The Council of Ministers Resolution Number 15 of 2013 on Human Resources Regulation for the Independent Federal Entities contains provisions for complaints against an employer. Article (127) of the Resolution states the following:

    "The employee may submit to the complaints committee a written complaint from the administrative penalties decided by the violations committee to be imposed on him within period doesn't exceed two weeks as of the date of notifying the employee with the resolution of the penalty."

    The Article (130) of the law, provides for objection to the committee's resolution

    "The employee may object to the resolution of the complaints committee issued on other than both penalties of written notice and warning by submitting a written objection signed by him to the complaints committee formed at the authority within period doesn't exceed three weeks as of notifying him of the penalty resolution; otherwise, the resolution of the complaints committee shall be decisive."

    As per the Domestic labor law (Federal Law Number 10 of 2017), the following are some of the benefits to which a worker is entitled-

    • Payment of Wages as provided in the contract within ten days from the date of due.
    • One day of paid rest per week
    • 12 hours rest, and 8 hours consecutive rest at least.
    • Paid vacation of 30 days per year
    • Medical Insurance
    • A medical leave of 30 days
    • Payment of worker's airfare.
    • Appropriate accommodation for the worker
    • Providing worker's needs including meal and suitable attire
    • Secure personal identification documents

    Conclusion

    Workers protection is necessary for the development of a country, and the UAE has taken adequate measures for the protection of workers. Without laws on the protection of the workforce, the state would be under a crisis concerning occupation. Legislation on workers protection not only benefits the workers but also displays that the country's growth in law and economy.    

    ]]>
    Sun, 17 Mar 2019 12:28:00 GMT
    <![CDATA[Wrongful Conviction]]> Wrongful Conviction

     

    When someone is wrongly convicted, that means that a person has been punished and sentenced for a crime that he has not committed. In devastating cases like these, the faith of the masses on the judicial system is lost when an innocent is convicted and made to suffer imprisonment for an offense he has not done. The fundamental legal value by which the criminal justice system is based upon, states that an accused is presumed to be innocent until proved guilty.

    There are various reasons and causes due to which the innocent is subjected towards the brutality of wrongful conviction, like the incompetency and flaws in the investigation that is carried out by the investigatory machinery, deficiencies in the procedure, as well as, erroneous appellate stages of the criminal justice system.

    However, various other factors contribute to the increasing rate of wrongful conviction.  Such as false allegations, mislead police investigation, misperceptions of prosecutors about their role, pressure of community towards conviction, inadequate evidence for identification, perjury, false statements and confessions, inadequate and failed forensic evidence, judicial bias, poor presentation of the appellants case, and difficulty faced towards admitting fresh evidence during the appellant stage. Every instance of wrongful conviction brings forth the various failures in the criminal justice system and has prevented the system from functioning reasonably and with effectiveness.

    Mentioned below are the various causes of wrongful conviction. However, these are not the only reasons that are responsible for the same: -

  • Eyewitness Misidentification: This is one of the most significant causes of wrongful conviction in the entire world. It is a matter to be considered that the human brain does not function like a tape recorder and hence, the human being over a period cannot recollect the entire event precisely in the same manner. Thus, the same is like any other evidence that is found at the crime scene.
  • Junk Science:  There have been various scientific methods that have been applied, but without proper assessment and hence, in some instances, forensic analysts testify without appropriate scientific bases. There are also cases wherein at times forensic analyst indulge in misconduct.
  • False Confessions: There have been multiple cases wherein innocent defendants being unaware, make incriminating statements, deliver shocking confessions, or at time plead guilty. Every confessor has one thing in common, and that is his decision to confess as, at some point of time in the process of interrogation, the said confessing will be of more benefit to the confessor then continuing to maintain innocence.
  • Government Misconduct: In various cases, it is the government officials that take specific steps and make sure that the defendant is convicted and this is done despite weak evidence.
  • Snitches: There are cases wherein snitches are paid to testify in return for testimony, and this is the reason why people are wrongly convicted. 
  • Bad Lawyering: Overworked lawyers who fail to carry out an investigation, call witnesses, and also prepare for trial is also another reason for wrongful conviction.
  • Specific reformatory measures should be adopted to fight the increasing brutality of wrongful conviction. The same are mentioned below:-

    Tunnel Vision

    There should be emphasis put on the quasi-judicial role of the prosecution, and there shall be the consideration of the dangers of adopting the views of others. The policies implemented should also stress upon being open to considering alternative theories, that are put forward by defense counsels and other parties. There should be different considerations that should be applied to different mega-cases. In jurisdictions that lack pre-charge screening, the charges should be scrutinized, as soon as, possible. The provision and facility for the second opinion, as well as, case review should be made available in all areas. There should be internal checking and supervision carried out by senior staff to lead the court to an identified case. The judicial team should encourage a culture at the workplace, wherein answering questions and consulting is encouraged. The judicial system, as well as, the police authorities, should depose their duties in a way to achieve the final goal of rendering justice. There should be the regular training of the judicial authorities and the police machinery. The training of the judicial machinery should include knowledge regarding police procedures, whereas the training of the police should include knowledge regarding the legal system.

    Eyewitness Identification and Testimony Specific standards and practices should be implemented and adopted by all police authorities. There should be an independent officer who is not part of the investigation to be given charge of lining up or photo spread. This will help maintain fairness in the investigation and trial procedure. The following are reasonable standards and practices that should be implemented and integrated by all police agencies:

    • If possible, an officer who is independent of the investigation should be in charge of the line-up or photo spread. This officer should be unaware of the suspect– avoiding the possibility of inadvertent hints or reactions that could lead the witness before the identification takes place, or increase the witness's degree of confidence afterward.
    • The witness should be advised that the actual perpetrator may not be in the line-up or photo spread, and therefore, the witness should not feel that they must identify.
    • The suspect should not stand out in the line-up or photospread as being different from the rest,  based on the eyewitness' previous description of the suspect, or based on other factors that would draw extra attention to the suspect.
    • All of the witness's comments and statements made during the line-up or photospread viewing should be recorded verbatim, either in writing or if feasible and practical, by audio or videotaping.
    • If the identification process occurs in police premises, reasonable steps should be taken to remove the witness on completion of the line-up to avoid any tutoring by other officers involved in the investigation by contact with other witnesses.
    • Show-ups should be used only in selected circumstances, such as, when the suspect is apprehended near the crime scene shortly after the event.
    • A photo spread should be provided sequentially, and not as a package, thus preventing 'relative judgments.'

    Conclusion

    It is the duty of the Courts to make use of all relevant procedures, evidence, and resources to provide the accused with a fair trial. Forensic science has been the key to serve justice and free the innocent but not in all cases. There are still various cases wherein the innocent is behind the bars whereas the real culprit is in the open. Hence there need to be steps adopted to safeguard the environment from the clutches of wrongful conviction to make justice prevail.

    ]]>
    Tue, 12 Mar 2019 13:34:00 GMT
    <![CDATA[German Arbitration Institution Rules]]> German Arbitration Institution Rules 2018

    March 1, 2018 the German Institution for Arbitration (DIS) enacted a new set of arbitration rules to revise and replace Germany's 1998 regulations. The predominant changes (made by a panel of 300 DIS members) resulted in an enhancement in procedural efficiency. Under the 2018 Rules, deadlines were consolidated, and former procedural standards were amended. The DIS recognized a need to revise their 20-year-old procedures after Austria, Switzerland, and the International Chamber of Commerce recently adopted new arbitration proceedings in Paris. Through overhauling the DIS's 1998 provisions, three primary benefits are anticipated: expedited arbitral procedure time-frame, curtailed arbitral-related expenses, and consistent application of transparent practices.

    Primary Changes and their Impacts on Germany's Courts:

    Considering the 2018 Regulation's underlying objectives of attaining resource efficiency and transparency, the following alterations have been provisioned:

    • The deadline for the appointment of a chairperson (determined by both party-assigned arbitrators) is now 21 calendar days. This period was previously, under the 1998 Regulations, 30 days.
    • Should the appointment deadline pass, the DIS Appointing Committee is now authorized to personally select a chairperson (approval of assignment is not required by the parties).
    • Once a request for an arbitral hearing has been sent, the respective authority has 45 days to reply. The 45-day limit commences upon service of an application. This alteration alone should expedite the arbitration process by several months.
    • The 2018 Rules allow for tribunals to oversee case management conferences. These conferences must occur within a 21-day window and can discuss topics such as the arbitration proceeding agenda, and measures that can be taken to optimize resource efficiency (such as expenditure and time).
    • If the DIS designates a chairperson, and the two parties in the proceeding are of different nationalities, then the chairperson (or arbitrator) is required to be of a different nationality than those represented by the parties.
    • Previously, arbitral tribunals were tasked with handling objections filed against an arbitrator. Under the new 2018 Regulations, the decision is left to the Arbitration Council. This transfer of power will help ensure transparency and decrease the involvement of state courts in the process.  The independent counsel also is authorized to terminate arbitrators, regulate arbitral tribunal fees, appraise the disputable value, and when appropriate, discount arbitrator fees.  
    • The new 2018 Regulations acknowledge and provide stipulations for multi-party arbitration proceedings.
    • Arbitral tribunals are advised to redirect parties to other dispute resolution techniques, should an alternative be more appropriate to reach an amicable decision.
    • Although the 2018 Rules are aimed at cost-efficiency, the procedures have amplified administration charges.

    While significant alterations have been made to Germany's arbitration laws, judicial authorities are skeptical as to whether or not these changes will impact ordinary court caseload. Statistically, DIS hearings have increased within the last decade while regular court proceedings have plummeted. Therefore, should this trend continue, one will not be able to assert the 2018 Rules are the sole cause provoking such fluctuation. Nonetheless, the President of Germany's Court of Appeals has suggested that it is very likely that an even higher number of complex disputes which would have been previously heard by ordinary courts, will shift to arbitration. The 2018 Rules have enabled the DIS to adopt measures which will permit greater competition between state courts and arbitral institutions.

    2018 DIS Arbitration Rules

    Concerned with ensuring that integrity, efficiency, and fairness was implemented into all arbitral proceedings, the 2018 DIS Arbitration Rules were designed in consideration of national and international developments in arbitration. The DIS is internationally renowned for its specialized proficiency in arbitration resolution. The 2018 Rules are focused on maintaining this standard and creating provisions that can be applied both within and outside of Germany's jurisdiction. To gain greater clarity into Germany's new arbitration rules, the 2018 requirements surrounding the arbitration request, tribunal structure, multi-contract arbitration processes, pre-proceeding regulations, and award termination will be evaluated.

    Request for Arbitration

    If a party desires to proceed with arbitration, a Request for Arbitration must be filed through the DIS. A Request must include "a statement of the specific relief sought; the amount of any qualified claims and an estimate of the monetary value of any unqualified claims; [and] a description of the facts and circumstances on which the claims are based" (Article 5.2). The respondent is responsible for nominating an arbitrator within 21 days of the Request's conveyance, answering the Request within a 45-day window preceding the conveyance, and incorporating "a description of the facts and circumstances on which the Answer is based" (Article 7.4) in the answer.

    The Arbitral Tribunal

    Per Article 9, all arbitrators are called to exercise impartiality to both parties. Upon appointment by the parties, an arbitrator must "sign a declaration in which they shall state that they are impartial and independent of the parties, that they have all the qualifications…that have been agreed upon by the parties…" (Article 9.4). Parties may upon consensus appoint one or any odd number of arbitrators to their proceeding. If no consensus is reached, or no attempt to appoint arbitrators have been made, the Arbitration Council will appoint three arbitrators to the parties. When three arbitrators are appointed, "the co-arbitrators shall jointly nominate the president of the arbitral tribunal within 21 days after being requested to do so by the DIS" (Article 12.2). Three-member tribunal decisions will be made by either unanimous or majority vote.

    Article 15 establishes a party's right to challenge an arbitrator if bias or prejudice occurs. When a party submits a Challenge, "the facts and circumstances on which it is based" must be included. The submittal must be completed within 14 days of a party becoming knowledgeable of the partiality. The DIS will then relay the Challenge to the challenged arbitrator. The Arbitration Council is tasked with resolving the Challenge.  If the Challenge is accepted, the arbitrator's mandate will be terminated. Additionally, an arbitrator may be removed by the Arbitration Council if the arbitrator fails to satisfy his duties under the Rules.

    Multi-Contract Arbitration, Multi-Party Arbitration, Joinder

    According to the Rules, a Multi-Contract Arbitration emerges when claims arise in assembly with numerous agreements. Even if a Multi-Contract is established, the proceeding may be handled as a single arbitration so long that "there is a single arbitration agreement that binds all the parties to have their claims decided in a single arbitration or if all of the parties have so agreed in a different manner" (Article 18). A "Request against an Additional Party" must be submitted through the DIS if multiple parties wish to cooperate. Per Article 19.2, the Request must contain a written "statement of the specific relief sought against the additional party; the amount of any quantified claims and an estimate of the monetary value of any unquantified claims against the additional party."

    When a three-member arbitral tribunal is involved in a multi-party arbitration, it is the responsibility of the claimant(s) to assign a co-arbitrator. Similarly, it is the duty of the respondent(s) to select a co-arbitrator. If either party fails to perform this obligation, the Appointing Committee will provide the allocation. 

    The Proceedings before the Arbitral Tribunal

    Article 21 "Rules of Procedure" asserts the importance of treating parties equally. Equality is further defined to include the right to an adversarial proceeding. Parties are permitted to self-select the "rules of law to be applied to the merits of the dispute" (Article 24). If parties fail to do so, the tribunal has delegated the power to choose the rule of law they deem applicable. Upon party request or within an exceptional situation, a tribunal may administer, amend, or revoke a measure of interim relief (such as procedures ensuring security). Article 27 requires "the arbitral tribunal and the parties to conduct the proceedings in a time and cost-efficient manner, taking into account the complexity and economic importance of the dispute." Any expert appointed to aid time and cost efficiency measures must be neutral to either party.

    Termination of the Arbitration by Award

    After an arbitral tribunal has decided the value of an award, that value must be inspected within three months of the final hearing by the DIS. Should the arbitral tribunal not proceed expeditiously upon allocating the award, the Arbitration Council is authorized to reduce arbitrator related fees. Per Article 38, an award is binding and final. An award issued by an arbitrator must be in writing and must contain the rationale that was used to produce the verdict. The DIS must receive a draft of the award and are granted the right to demand modifications be made to the statement. Should a claim made within a proceeding be omitted from the final award, a supplemental award can be offered upon request by a party. Any request made by either party to correct an arbitral award must be submitted to the DIS within 30 days of the award's conveyance. If an arbitral tribunal decides to amend an award via their initiative, all corrects must be made within 60 days of the award's transmission (Article 40.5). 

    Under Article 42, an arbitration may be terminated before reaching a final award. Termination may transpire "if all of the parties agree to terminate the arbitration; if one of the parties requests a termination order and none of the other parties objects…; if the parties fail to pursue the arbitration even after being requested to do so by the arbitral tribunal; if the arbitral tribunal considers that, for any other reason, the arbitration cannot be continued." If the arbitration process is ended, the parties still retain the right to resubmit a claim and begin another proceeding. The Arbitration Council may also terminate an arbitration if the parties involved decline to provide payment of deposits or administrative fees within the agreed-upon timeframe. 

    ]]>
    Tue, 12 Mar 2019 12:59:00 GMT
    <![CDATA[Saudi Arabia’s new Commercial Mortgage Law]]> The Kingdom of Saudi Arabia's new Commercial Mortgage Law of 2018

    The Kingdom of Saudi Arabia declared a new commercial mortgages law (the "New Law") by the Royal Decree Number M/86 dated 08/08/1439H (which corresponds to April 24, 2018) and by the Council of Ministers Resolution Number 426 of the same date. The New Law came into force on April 24, 2018, and the implementing regulations to the New Law, pursuant to resolution number 43902 of the Minister of Commerce and Investment, were issued and came into force on May 2, 2018.

    The New Law replaces the earlier commercial mortgages law (the "Previous law")  issued under the Royal Decree Number M/75 dated 21/11/1424H (which corresponds to January 14, 2015 ). The New Law is much more extensive than the Previous law and introduces several new concepts such as floating charges, the codification of the order of priority for security, which was absent in the Previous law. Further, the New Law also overturns certain provisions under the Previous law such as permitting security to be taken over the future property.

    Parties affected by the New Law have until September 24, 2018, to ensure the concerned security instruments to which they are a party to, are amended to be in compliance with the provisions of the New Law. The priority of security executed before April 24, 2018, shall remain unaffected by the New Law until September 24, 2018, after which the provisions of the New Law shall govern the priority of the concerned security.

    • What type of assets can be secured?

    An asset to be secured must be :

    • Must be in existence;
    • In the possession of the debtor;
    • Must be owned by the debtor who must also possess the rights of disposal;
    • Must be identifiable without any ambiguity.

     

    • What are the key features of the New Law?

    The key features of the New Law can be summarized under the following points:

    • The New Law permits the creation of security over future assets
    • Compulsory registration with the Unified Centre for Lien Registration for the mortgage to be valid against third parties;
    • Possessory mortgages are permitted, provided the mortgage does not take the form of a floating pledge, which requires to be registered;
    • It is possible to grant security over bank accounts including present and future balances, provided it is registered;
    • It is possible to create more than one pledge over a particular asset;
    • The New Law introduces the concept of security over a Commercial Business; and
    • The New Law also sets out summary proceedings for the enforcement of security.

    In the following heads, we will examine these key features of the New Law in comparison with the Previous Law:

    • Securing Future Debt

    Under Previous law, only known, quantifiable, or crystallized debts could be secured. The New Law explicitly permits the securing of debts which arises in the future, including contingent debts. Also, additional drawing of debt (such as a loan facility) or the rescheduling of the same will not affect the effectiveness of the underlying security anymore. This provides clarification regarding the extent to which a security instrument executed on a particular date would legally cover all the future drawdowns under the related financing.

    The New Law further requires that the property over which security is granted be either capable of being sold or being valued. In order for security to be granted over future rights, the following two elements need to be specified in the relevant security document :

    • the value of the aforesaid future rights; as well as
    • the dates on which they become vested in the person providing the security.

     

    • Security Valuation

    The New Law further requires that the property concerning which the security is provided must be valued according to the methodology agreed between the party granting the security and the party in whose favor such security is granted, whether in the concerned security document or in a document that is entered into after the date of the security document.

    Where the valuation methodology has not been previously agreed upon, the parties are required to appoint a certified valuer each, with the final valuation being the average of the two valuations computed by each of the two values.

    • Security over fluctuating amounts

    The Previous Law explicitly did not apply to security being taken over amounts that arise in the future. The New Law, however, reverses this position and permits such security to be taken, provided the secured amounts are expected to arise before the repayment date of the secured debt. This suggests that taking security over future proceeds such as receivables are legally enforceable in the Kingdom of Saudi Arabia.

    • Extent of Security

    The provisions of the New Law explicitly permits the taking of security over a portion of an indivisible movable asset, where the security right would generally apply over the relevant portion of the concerned asset, as covered by the security instrument. Further, a person may also grant multiple interests over the same asset.

    • Perfection of Security

    Under the Previous Law, for the security to be perfected, the secured party or his authorized agent had to have the constructive possession of the concerned secured property. Under the New Law, however, security is perfected by way of registering it with the Unified Centre for Lien Registration (UCLR); or by granting constructive possession of the secured property to the secured party or his authorized agent.

    This provision helps clarify the position surrounding certain forms of security (such as assignments) taken in Saudi Arabia and its enforceability.  Further, in respect of commercial goods, registration cannot perfect the security since the possession of such goods are necessary to perfect the security unless they are subject to floating charges.

    Floating Charges

    The New Law introduces the concept of floating charges, which is defined as those charges created over a movable property without the determination of the precise elements of such movable property. Floating charges may be taken in its entirety or as part of movable goods of a going concern, notwithstanding that the assets which are subject to such floating charges are expected to fluctuate from time to time. It appears as if that floating charges do not cover fixed assets. However, it is necessary to note that, the New Law does provide for a variation on the floating charge where, in the case of an incorporated entity, the float charge is understood to include the concern's entity's place of business as well.

    In the event of a default,  floating. Until the crystallization of the floating charges, the concerned assets may be dealt with in the ordinary course of date-to-day business. As an exception to the flexibility over floating charges, the New Law imposes more requirements in respect of floating charges over commercial goods such as periodic reports specifying details including the location of such goods, their quantity, and value.

    • Order of Priority of Security

    The Previous Law failed to clarify the order of priority of security. This limitation was cleared by the New Law, which clarifies that a security instrument has priority upon its registration at the UCLR; or upon the receipt of constructive possession of the secured property by the secured party or its agent. It also lays down the following order of priority:

    • With regard to registered and unregistered security instruments, a security instrument registered at the UCLR will have priority over the unregistered security instrument.
    • In the case of unregistered security instruments, the party that has possession of the secured property will have priority over the party that doesn't.
    •  Between security instruments registered at the UCLR, the priority shall be determined on the basis of the date of registration of the concerned instruments. If these instruments are registered on the same date, then the instrument registered earlier in time shall have priority.
    •  A fixed charge over an asset shall have priority over a floating charge over the same asset unless otherwise agreed upon by the parties.
    • Security over Accounts

    The New Law permits the taking of security over accounts, which had been absent under the Previous Law. Such security needs to perfect by its registration at the UCLR or any other relevant register. Further, the bank holding the account needs to be notified about the security over the relevant account and should have agreed to comply with the provisions of the relevant security instrument with regard to the usage of the secured account.

    Security over an account includes the balance that stands to the credit of the account as on the date of execution of the relevant security instrument, as well as, any amount deposited after the date of the security instrument.

    Unless otherwise agreed upon, the person granting the security over the account balance may not transfer or withdraw the amounts from the account.

    • Security Over Shares

    The New Law permits the taking of security over a specified share of an indivisible asset. A security may be taken over a shareholder's ownership interest in the share capital of a limited liability company. Pursuant to the Saudi company regulations, the recourse of the security holder will, however, be limited to the dividends that accrue to such shares and will be able to sell the shares only by way of court auction.

    • Enforcement

    Under the Previous Law, there was a Board of Grievances as the judicial body through whom the security over commercial property was to be enforced. In the New Law, a differed approach has been conceived, where security may be enforced either directly by the secured party by presenting a security instrument issued by the UCLR, by providing it for immediate enforcement to the relevant authorities, or by providing an instrument issued by the UCLR which provides for the enforcement of the security to the Enforcement Court.

     

    ]]>
    Thu, 07 Mar 2019 18:47:00 GMT
    <![CDATA[The International Seed Treaty]]>  

    Liberating Farmers' Rights While Ensuring Food Security: The International Seed Treaty

    Three intricately related concepts: climate change, biodiversity, and food security have become a central discussion amongst international political bodies over the last three decades. Analyzed from a unidimensional perspective in respect to Earth's exponential population growth and carbon-emitting practices, this triad predicts the rapid degradation and extinction of biotic entities as well as an ever-growing threat to the future security of food. Despite living in an era which boasts high concern for the optimization of the human condition, enforcement of human rights protocol, and the implementation of legislation geared toward conservation policy, more than a billion people remain undernourished. Unfortunately, legislative attempts at ensuring adequate food supply can only be as effective as available natural resources allow. As the environmental matrix continues to decay, national and international political bodies attempting to alleviate food shortage will remain subservient to Earth's biological capacity. Recognizing the potential of this calamitous peril, in 2001, the United Nations Food and Agriculture Organization (FAO) settled the International Treaty on Plant Genetic Resources for Food and Agriculture. Although critical for ensuring the future of food security and biodiversity protection, this treaty, also referred to as the International Seed Treaty, was not formed blindly. The genesis of the International Seed Treaty was molded in light of developing international intellectual property regulations.

    An Unanticipated Tie: TRIPS and Ecology

    In 1995, due to an international upsurge in innovation, trade, technological development, and need for trans-globally protected exclusivity rights, the World Trade Organization (WTO) and their Member Parties enacted the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Through this agreement, minimum standards of intellectual protection for copyright, patents, and trademarks were established for 151 WTO Members. The scope of intellectual property rules allocated through TRIPS extended beyond the conventional application of exclusivity into the agricultural sector. Under TRIPS, if a Member State so chooses, micro-organisms and specific plant forms may be patented (Article 27). Unintentionally, this authorization has resulted in both profound ramifications and optimism for the future of food security. While TRIPS has fashioned prodigious incentive to innovate the industrialization of agricultural production, it has disincentivized agrarian advancement in sustainable conservation unforeseeably. It can be argued that while innovative incentivization of sustainable farming practices is stagnant, intellectual property rights hold the substantial potential to provide food security in the short-run (and long-run if ecological conditions permit). Such advantage can be illustrated through the development of seeds which produce higher yields, the improvement of nutritional value through the advancement of agrobiotechnology, and the enhanced "capacity of the plant to absorb more photosynthetic energy….[and] varieties that have the capacity to combat fertilizers, pesticides, and water." From a global agricultural purview, these advancements, though indispensable to ensuring food access in the future, are detrimental to small-scale farmers. Intellectual property regulations "tend to facilitate control over seeds and related knowledge by agri-businesses…this is linked in part to the royalties that farmers must pay to acquire protected seeds." The optimization of the future of food security as it relates to intellectual property rights is, therefore, linked to crafting affordable access to agricultural developments for small-scale and subsistence farmers.

    The International Treaty on Plant Genetic Resources for Food and Agriculture 

    Recognizing the risks of not addressing further ecological degeneration, obstacles surrounding sustainable agricultural innovation, and plant access inequity for marginalized farmers, the International Seed Treaty in accordance with the Convention on Biological Diversity was established. The underlying purpose of the treaty, as defined in Article 1, is to ensure "the conservation and sustainable use of plant genetic resources for food and agriculture and the fair and equitable sharing of the benefits arising out of their use…for sustainable agriculture and food security." The Treaty is based on four pivotal understandings;

  • The world's diverse supply of crops is not possible without the labor provided by farmers in both developed and developing countries. Therefore, preserving farmers' rights is vital.
  • Globally, plant genetic resources used for agricultural purposes must be sustainably utilized.
  • There is a substantial need for a global scheme which provides access for farmers to plant genetic material.
  • Advancements made through access to genetic material should be shared amongst other countries, farmers, plant breeders, and scientists, regardless of economic stature.
  • The International Seed Treaty is divided into seven parts; all parts retain the Treaty's scope of food and agriculture as they relate to plant genetic resources. The Treaty is built upon a multilateral system which ensures benefit-sharing through providing access to plant genetics to Member Parties. Farmers may use these genetics for research and development purposes, breeding, and agriculture. However, any profits gained from Treaty access must be placed in a designated conservation fund.  Below is a concise overview of the Treaty.  

    • Part Two: General Obligations

    Under Article 5, when permitted by national legislation, Contracting Parties are to encourage techniques fostering the development of plant genetic conservation and sustainability. Promotional efforts can include: supporting small-scale agriculture conservation efforts, the preservation of wild crop relatives, and the "survey and inventory [of] plant genetic resources for food and agriculture." Additionally, Article 5.2 advises Contracting Parties to employ proactive measures which will mitigate the likelihood of threat to plant genetic materials. A major factor attributing to Party support lies in the creation and enforcement of conservation policy. Article 6 details the recommended factors which a state may consider implementing within their plant genetic regulations. According to the multilateral treaty, fair agricultural practices (advocating the diversification of farming systems), agriculturally focused biodiversity research, crop diversity obtainability, and plant breeding should be included within corresponding state provisions.  As a member of the Treaty, Article 7 requires the cooperation between Parties through international organizations. Collaboration is intended to serve two chief purposes. First, access and sharing of plant genetic resources will allow the economies of developing countries to strengthen. Second, these measures will augment "international activities to promote conservation, evaluation, documentation, genetic enhancement, plant breeding, seed manipulation; and sharing, providing access to, and exchanging…plant genetic resources for food and agriculture and appropriate information and technology" (Article 7.2).

    • Part Three: Farmers' Rights

    As previously mentioned, safeguarding Farmers' Rights was a principle mission upon enacting the International Seed Treaty. Article 9 specifically addresses the obligation of Contracting Parties to observe Farmers' Rights as they relate to plant genetic resources. According to the provision, national legislation should be enacted to protect traditional knowledge, allow for equitable participation in benefit sharing of plant genetic resources, and create a platform enabling farmers to participate in the conservation and sustainability decision-making process (pertaining to agriculture). Article 9 was designed to liberate farmer voice and opportunity, not to limit rights to exchange propagating material.

    • Part Four: The Multilateral System of Access and Benefit-Sharing

    Although the International Seed Treaty relies on trans-global participation, Article 10 discloses a sovereign states' privilege to control the usage of their plant genetic resources. This right incorporates the idea "that the authority to determine access to those resources rests with national governments and is subject to national legislation." Article 11.3 advises Parties to encourage individuals within their national jurisdiction holding plant genetic resources for food and agriculture to participate within the Multilateral System. Under the Treaty, access to plant genetic resources is curtailed by specific conditions. These restrictions state (Article 12.3):

    • Provisioning may be granted for "research, breeding, and training for food and agriculture" (so long as utilization is not aimed at chemical or pharmaceutical purposes).
    • Access shall be prompt and costs should not exceed than those minimally involved.
    • Individuals relying on the Treaty may not establish intellectual property claims restricting plant genetic resource availability.
    • All outstanding plant genetic material currently protected by intellectual property rights must be compatible with respective international and domestic laws.
    • Plant genetic resources secured under the multilateral treaty must remain open to recipients of the Multilateral System.

    Under the International Seed Treaty (Article 12.5), it is the responsibility of the Contracting Parties to "ensure that an opportunity to seek recourse is available, consistent with applicable jurisdictional requirements, under their legal systems, in case of contractual disputes…."

    Article 13 defines Contracting Parties' agreement to exchange of information, access to and transfer of technology, capacity building, and sharing of monetary and other benefits of commercialization. Below are the Treaty's requirements for each requisite:

  • Exchange of Information: Information governed by the Treaty must be freely available to Members. Therefore, Contracting Parties must transparently publicize material encompassing "catalogs and inventories, information on technologies, results of technical, scientific and socio-economic research, including characterization, evaluation, and utilization, regarding those plant genetic resources for food and agriculture under the Multilateral System" (Article 13.2).
  • Access to and transfer of technology: Contracting Parties are required to provide and facilitate access to technology "for the conservation, characterization, evaluation, and use of plant genetic resources for food and agriculture which are under the Multilateral System" (Article 13.2). This transfer includes technology which is protected by intellectual property rights and the dissemination of information to developing countries participating in the Treaty.
  • Capacity-building: The Treaty (and therefore it is Contracting Parties) prioritizes the formation of scientific and technical programmatic learning "in conservation and sustainable use of plant genetic resources for food and agriculture…developing and strengthening facilities for conservation and sustainable use…and carrying out scientific research…in developing countries and countries with economies in transition" (Article 13.2).
  • Sharing of monetary and other benefits of commercialization: Benefit-sharing opportunities are to involve both private and public sector endeavors. If a plant genetic resource arising from this treaty is commercialized, the recipient commercializing must "pay to the mechanism…and equitable share of the benefits arising from the commercialization of the product, except whenever such a product is available without restriction to others for further research and breeding…" (Article 13.2). The payment mechanism referred to is revealed in Article 19f as the "Trust Account." This account was formed with the intent of "receiving and utilizing financial resources that will accrue to its for purposes of implementing this Treaty."
    • Part Five: Supporting Components

    Per Article 17.1, Contracting Party participation is expected to aid in facilitating the advancement of information transfer. This exchange is founded on developing pre-existing information systems and knowledge encapsulating scientific, technical, and environmental studies.

    • Part Six: Financial Provisions

    Becoming a signatory to the Treaty establishes a Party's agreement that a funding strategy will be proposed. According to Article 18, the motives of creating a funding strategy are to "enhance the availability, transparency, efficiency, and effectiveness of the provision of financial resources to implement activities under this treaty." Funding is critical to the participation of countries with economies currently experiencing a transitory period. For developed Contracting Parties, they hold a financial obligation to provide resources to developing countries so that the latter can enforce the International Seed Treaty (Article 18.4).

    Part Seven: Institutional Provisions

    Should a dispute arise between Contracting Parties, reconciliation will be achieved through negotiation or (as a last resort) third-party mediation (Article 22).

     

     

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    Thu, 07 Mar 2019 18:20:00 GMT
    <![CDATA[Consumer Protection in the UAE]]> Consumer Protection and the Laws Relating to Consumer Protection in the UAE

    "A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so."  - Mahatma Gandhi

    Technology and Innovation have created new platforms within which the consumers are benefited in many ways. However, the main concern for the growth and development of business, and the service sector is the protection of the consumers.

    This article will analyze the concept of consumer protection and the laws relating to consumer protection in the UAE.

    Before we delve into the concept of consumer protection, let us examine the meaning of the term consumer:

    The term 'consumer' denotes a person who purchases a product or service for a personal purpose. The consumers are the backbone of a market, and they play a vital role in the economic development of a nation.

    The European Union Law defines the term 'consumer' as the following:

    "A consumer is a natural person, who is acting outside the scope of economic activity (trade, business, craft, liberal profession)."

    The definition of the term exhibits that the term refers to individuals who consume the product or service for their personal use and not for the engagement of any particular trade or business. Therefore, consumers are the end users of the product or service obtained. Although the terms 'purchaser,' customer and prosumer may seem similar, there lies a line of demarcation between them.

    Difference between Customer and Consumer

    We often use the term consumer and customer interchangeably without understanding the minimal difference between them.

    A customer is a person who purchases a product or service. He may or may not use the product for his consumption, and may also use the product as a raw material for the production of the finished material. Whereas on the other hand, a consumer is the one who consumes or uses the product or service.

    Now the self-help movements have led to the formation of a new word 'prosumer,' which is a combination of both consumer and producer. American writer Alvin Toffler coined the term 'prosumer' in 1980. The term 'prosumer' refers to an individual who produces as well as consumes a product.

    Consumer Protection

    The consumer is an essential part of an economy without which there won't be any growth in trade and business sector. Now the protection of consumers has become an integral part of the law. Consumer protection laws have been enacted to protect consumers against unsafe and unfair practices. The enactment and implementation of consumer protection laws serve as a watchdog on the producers thereby safeguarding the interest of the consumers.

    Since all the activities relating to business are run primarily based on the consumers, it is necessary that every country implement legislation to protect the consumers. Such legislation ensures that business is run without any fraud or unfair practices.

    For example, in many countries, the consumers purchase vegetables from the local market or store without being aware of the quantity or quality is given by the shopkeeper. They believe the measure to be accurate and may make payment without any query even if such product is adulterated. In such instances, the consumer protection laws protect the consumers against such unfair practices and grant them the right against the violation.

    Need for Consumer Protection

    "The consumer is the supreme mover of economic order... for whom all goods are made and towards whom all economic activity is directed" - Kenneth Boulding

    The consumption by the consumers has a significant influence on the market of a nation and, since consumers are considered to be frail compared to their counterparts (producers), there is a high chance that the consumers are exploited to meet the interest of the producers.

    Apart from the above mentioned, a consumer protection law is required for the following:

    • Fair market- The implementation of consumer protection laws provide for the promotion of a fair and accessible market.
    • Increased standards- consumer protection laws provide for improving the standard of goods and services.
    • Economic Growth- The laws protecting consumers help in the growth of the economy by preventing unfair practices.
    • Effective transaction system- It helps in the promotion of an active transaction system.
    • Unity- Promotes unity among the consumers for fighting against the producers who violate the law.
    • Ethical Standpoint- Satisfies the moral obligations of a business.
    • Redressal of Complaints- The consumers can approach the concerned authorities for assurance of justice.

    International position of Consumer Protection

    Consumer protection is achieved by setting the minimum quality standards of protection. Most of the nations have adopted adequate measures for establishing mechanisms to protect the consumers.

    The protection of consumers at an international level was brought into force for the first time in the United Nations Guidelines for Consumer Protection (UNGCP) in 1985. The guidelines provide the basis of consumer protection in numerous countries. Therefore, the members of the convention are to adhere to the guidelines.

    Part II of the UN Guidelines for Consumer Protection lays down the general principles, and it states:

    "2.Governments should develop or maintain a strong consumer protection policy, taking into account the guidelines set out below and relevant international agreements. In so doing, each Government should set its own priorities for the protection of consumers in accordance with the economic, social, and environmental circumstances of the country and the needs of its population, bearing in mind the costs and benefits of proposed measures."

    Consumer Protection in the UAE

    The UAE, being the focal point of business in the Middle East, various steps have been taken by the government for the protection of consumers. These measures have been adopted by the government to increase the confidence of the consumers and to maintain fair practices in the market.

    The Federal Law Number 24 of 2006 deals with Consumer Protection in the UAE, and for implementation of the provisions, the Department of Consumer Protection has been established under the Ministry of Economy.

    According to the Federal Law Number 24 of 2006, a consumer is defined as the following:

    "An individual who acquires Goods or Services, with or without consideration, for personal use or the use of others"

    The Article (2) of the Federal Law Number 24 of 2006 provides for the set up of a committee regulating the protection of the consumers called as 'Higher Committee for Consumer Protection.'

    Article (4) of the Federal Law Number 24 of 2006 lays down the responsibilities of the Consumer Protection Department, and it states as:

  • "There shall be set up at the Ministry a Department called the "Consumer Protection Department." The Department shall have the following responsibilities:
  • Oversee the implementation of the general policy for Consumer protection in cooperation with the relevant authorities in the UAE.
  • Coordinate with the relevant authorities in the UAE to combat illegal trade practices which harm Consumers.
  • Coordinate and cooperate with the relevant authorities in raising Consumer awareness of Goods or Services in the UAE and acquainting Consumers with their legal rights and the means to assert them.
  • Monitor the movement of Prices and currencies in order to control inflation.
  • Promote fair competition and eradicate monopoly.
  • Receive Consumer complaints about processing or referral to the relevant authorities. Complaints may be filed either directly by the Consumer or on his behalf by the Consumer Protection Association.
  • Publish decisions and recommendations that promote Consumer awareness."    
  • Chapter Five of the Federal Law Number 24 of 2006 deals with the rights of the consumers and it provides for the right to recover compensation for personal injuries and damages as per the law in force.

    Under the UAE laws, the following rights of the consumers are protected:

    • Right to Choose
    • Right to Representation
    • Right to Safety
    • Right to be Informed

    Therefore, the UAE has granted adequate protection to consumers against unfair practices, monopoly, and fraudulent actions.

    Conclusion

    Consumers not only occupy a larger sphere in the economy but are also at the base of all activities concerning trade and commerce. They not only consume a wide variety of products but also make a difference in the standard of living in a society. Without consumers, there would be no demand in an economic system. Growth and development of a country increase the level of consumption and, therefore, consumer protection are necessary to safeguard the interest of the consumers.

       

     

     

     

                            

                      

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    Thu, 07 Mar 2019 17:52:00 GMT
    <![CDATA[Enforcement of Arbitral Awards in Saudi Arabia ]]> Enforcement of Arbitral Awards in Saudi Arabia 

    "Finally thought the stone, paper and scissor – Can't we all just get along?"

    Over the recent few years, the Kingdom of Saudi Arabia has seen sweeping changes within the society and its economy. One particular way in which these changes took place was through the enactment of Royal Decree Number M/34 of 2012 (the Arbitration Law), concerning arbitration within the Kingdom. Until that point, Saudi Arabia's arbitration was centred around the 1983 Arbitration Law and the 1989 Rules of Civil Procedure, when it came to enforcement of judgements and arbitral awards.

    The Arbitration Law, supplemented by Royal Decree Number M/53 of 2012, known as the Enforcement Law, concerning the execution of court judgements and arbitral awards (including foreign judgements and arbitral awards), brought forth a variety of changes in the arbitration framework in the Kingdom. This led to a rise in the number of applications for foreign enforcement, from 69 in 2014 to 257 in 2018, with the collective total value of applications exceeding USD 3 billion, as per the Ministry of Justice.

    The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the Convention), enacted by the United Nations, was historic as it required the courts of the contracting nations to recognize and enforce arbitral awards that were issued by other contracting nations. Saudi Arabia became a signatory to this convention in 1994. Apart from this, the Kingdom was already a signatory to the Riyadh Arab Agreement for Judicial Cooperation of 1983, known as the Riyadh Convention, which was signed between several Arab nations for enhancing judicial cooperation between them, which included execution of foreign judgements and arbitral awards between them.

    Even though Saudi Arabia had these guidelines to follow, the actual process of enforcement was arduous and tricky. Enforcement of any award or judgement required the Board of Grievances to review the merits of each and every single award, upon an application made by the parties, to ensure that it complied with the Sharia Law. The Board of Grievances was tasked not only with the enforcement of such judgements and awards but various other responsibilities as well, which led to severe delays on a regular basis. Some cases even required re-trials before the board, which would cause even further delays.

    An instance where multiple legal personalities questioned the functioning of the Board was in the case of Jadawel International (Saudi Arabia) v. Emaar Property PJSC (UAE). In this case, Jadawel International initiated arbitration proceedings in Saudi Arabia against Emaar Property PJSC in 2006, for breach of contract in relation to a construction project, and claimed damages of USD 1.2 billion. After a lengthy arbitration process, the claim was dismissed and Jadawel International was ordered to pay legal costs. When Emaar Property PJSC tried to enforce this award by submitting it to the Board of Grievances, the board conducted a review of the merits of the award, wherein the board declined to enforce the award, reversed the earlier decision and ordered Emaar to pay damages in excess of USD 250 million towards Jadawel International.

    The New Arbitration and Enforcement Law:

    The Arbitration Law of 2012 was enacted based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and would apply to arbitration both within the Kingdom and abroad, wherein the parties have submitted to the provisions. It further established the following rules: 

    • The number of members in an arbitral tribunal must be odd in number at all times. In the event that it is not, the arbitration proceedings will be considered to be void;
    • The arbitrators must be legally competent, of good behaviour, and must hold at least a university degree in the principles of Sharia or law;
    • The tribunal will have the power to determine its own jurisdiction, on the basis of the merits of the case;
    • Any agreement for arbitration must be in writing. Further, the Law provides for the separability of the arbitration clause thereby preventing any termination/nullification/revocation of the underlying agreement affecting the arbitration clause.
    • The parties to arbitration can choose the rules for arbitration, between Rules of Arbitration of the International Chamber of Commerce, the London Court of International Arbitration Rules and the UNCITRAL rules.
    • The parties can also choose the language for the arbitration proceedings, which will be followed for written arguments, oral arguments and any award made by the tribunal.
    • The Law requires that the arbitral award must be rendered within the time period agreed by the parties and in the absence of any such time period, the award must be rendered within 12 months from the date of commencement of proceedings.

    Once the proceedings are finished, prior to the issue of the order of enforcement of the award, the court must be satisfied that the award being issued is:

    • Not in conflict with any prior judgement or decision of the court;
    • Not in violation of any principles of Sharia Law or the public policy of the Kingdom;
    • Notified to the party against whom it will be enforced.

    One of the highlights of the Law was the fact that any arbitration proceeding, enforcement of any award, or application of any foreign law must be in conformity with the principles of Sharia Law. On the backdrop of this new legislation, the Saudi Centre for Commercial Arbitration was established, the nation's first formal arbitration institute.

    The Arbitration Law of 2012 was supplemented by the Enforcement Law, which was enacted in 2012 and came into force on 27th February 2013. One of the highlights of the Enforcement Law was the establishment of specialised enforcement courts within the Kingdom. These specialised enforcement courts had exclusive jurisdiction in dealing with both domestic and foreign judgements and arbitral awards and the judge responsible for the enforcement was tasked hearing any re-trials if needed. According to Article 6 of the Royal Decree No. M/53 with regards to the Execution Law, it was established that the authority of the enforcement judge would be supreme and final, without the scope or provision of any appeal.

    Article 11 of the Enforcement Law further sets out the requirements for enforcing any foreign judgement or arbitral awards. According to the Article, the judge in-charge of enforcement cannot enforce a judgement or award unless a basis of reciprocity has been established and after verifying that: 

    • The courts of the Kingdom are incompetent to hear the case and that the foreign court or arbitral tribunal that passed the judgement or award is competent in accordance with its conflict of law rules;
    • The parties of the case were legally represented properly and were duly summoned;
    • The judgement or award is final in accordance with the court or tribunal that issued it;
    • The judgement or award is not inconsistent with any previous rulings of the Saudi courts;
    • The judgement or award does not violate Saudi public policy and Sharia law.

    In the event that the debtor of the award fails to pay the amount that is due or disclose any property in order to fulfil the conditions of the award within 5 days from the notification of the execution order, Article 46 and Article 47 of the Enforcement Law gives the enforcement judge to issue sanctions such as:

    • Impose travel bans on the debtor;
    • Suspend the debtor's ability to issue powers of attorney;
    • Freeze the debtor's bank accounts and any other financial activity;
    • Order for the disclosure of the debtor's assets;
    • Order for the disclosure of records concerning the commercial and professional activities of the debtor.

     Conclusion:

    The Arbitration Law of 2012 and the Enforcement Law of 2012 paved the way for arbitration proceedings in the Kingdom of Saudi Arabia, ensuring that the process is as expeditious and effective as possible. In fact, in most cases, an execution order will be issued by the enforcement judge within a month of the application, showcasing the Kingdom's commitment towards swift proceedings. With Saudi Arabia's increased diversification of the economy and sweeping societal changes, an expeditious and just judicial mechanism is essential in carrying the nation forward towards achieving their goals and the Kingdom has ensured that by virtue of these new laws, cases like Jadawel do not repeat themselves.

     

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    Thu, 28 Feb 2019 00:00:00 GMT
    <![CDATA[Nuclear Liability Insurance]]> Guide to Global Nuclear Liability Insurance and Claims

     

    Contents:

    1. Introduction

    2. How is nuclear energy liability insurance structured?

    3. Principles or fundaments governing Nuclear Liability Insurance

    4. International Conventions

  • Paris Convention 1960
  • Brussels Convention 1963
  • Vienna Convention 1963
  • Convention of Supplementary Compensation 1997
  • 2004 Paris/Brussels Protocol
  • 5. Global Legislative Overview on Nuclear Liability Insurance

  • The United Kingdom
  • United Arab Emirates
  • The United States of America
  • Japan
  • India
  • China
  • 6. Conclusion

    1. Introduction

    Power and energy supply is the backbone of every economy of this world. Despite the leaps made in technological advancement to cater to the ever-growing demand of power with the exponential increase of human population, we are falling short of the power supply. To provide an adequate amount of power, man has employed various resources from non-renewable to renewable, yet an equilibrium between demand and supply seems far-fetched.  Most of the power today is derived from thermal plants which use coal as a primary resource. The recent years have witnessed a shift to clean energy for power generation, i.e. nuclear energy as an alternative to the conventional sources.  However, power generation from nuclear reactors poses a more substantial threat of causing major mishaps and accidents which could potentially damage property, cause personal injury, and damage the environment on a magnanimous scale. The potential underlying risk has thrown a significantly challenging question before the political heads of the world – who will be liable for the damage caused by such a nuclear incident? Several nations have addressed the concept of nuclear liability insurance and compensatory claims made by the injured parties through legally binding international conventions or/and national laws which have been analyzed in great length in this paper.

    2. How is nuclear energy liability insurance structured?

    The insurers found it challenging to resolve the problem of figuring out how to provide cover for the nuclear industry. To them the apparent catastrophic risk posed a high level of uncertainty, in addition to the multiple individual claims, should the nuclear accident occur, resulting in an objectionable accumulation and an undesirable exposure to insurers' solvency margins. On one hand, in essence, it was  clear that no individual insurer could cover the risk alone; and on the other hand it was obvious  that since nuclear power is required to meet the world's energy demands and that in order for it to continue doing so, individual operator liability had to be curtailed or capped to an absolute upper limit beyond which the risk needed to have consorted. The state would have to step in and accept responsibility as insurer of last resort, as with everything else in industrial societies.

    While structuring insurance for nuclear reactors, the only factor which ought to be considered is the high potential perils associated with installation and operations of nuclear fission and fusion; this drastically differs from the risk associated to that of other industries of global sectors. The fundamentals of any nuclear liability insurance are:

    A. Channeling of liability on the operators: The nuclear operators are liable for all damages caused by a nuclear incident notwithstanding fault liability. 

    B. Trans-border nationality: A nuclear energy disaster affects not only the country in which it is located but the surrounding states as well. Hence, national laws are augmented with international conventions which are needed to defend the cross-border inflictions of such disasters.

    C. Limited liability: Limited civil liability concept has been incorporated by the international conventions on the basis which the national laws have been formulated, putting a maximum cap limit on the nuclear operators, beyond which the state will take up the liability.

    (Detailed explanation is provided in the latter part of this article) 

    Due to such high-risk and strict liability, the nuclear operators opt for third-party civil liability insurance which finds its root in either of the two forms:

    A. National Insurance Pool:

    To cover the potential liability of the nuclear industry, many insurers agreed to pool in their resources for the associated high-potential risks. A pool is where a group of insurance companies jointly participate to a fixed percentage in the insurance of a particular risk or class of business. These are created in the circumstances involving risks which, in practicality, cannot be provided by any individual insurer on a stand-alone basis. In most countries, national insurance pools have been formed based on the requirements laid down by the federal laws (based on international conventions), pooling together insurance for the domestic nuclear operators.

    B. Mutual Insurance Associations:  USA (the Nuclear Electric Insurance Limited) and Europe (the European Mutual Insurance for Nuclear Installations) have insurance associations which deal with the physical damage and liability in the event of a nuclear accident which is set up by the nuclear industry itself.

    Principles or fundamentals governing Nuclear Liability Insurance:

    In recognition of this exposure caused by nuclear accidents, international conventions and nuclear liability insurance were formulated in the light of the seven fundamental principles:

    A. Strict Liability:

    The operator is directly and strictly liable for the damage caused by the nuclear incident. The aggrieved need not prove that the operator was negligent or at fault.  Only the link between the damage caused and the nuclear incident needs to be demonstrated. The operator is liable for any damage resulting from a nuclear event at his installation, in principle irrespective of its cause.

    B. Channeling liability to the operator (Exclusive liability):

    All liability arising from the damage caused by a nuclear accident is channeled to the operator, thereby protecting the rights of the public. The operator is exclusively liable for damage resulting from a nuclear incident. He is held liable to the exclusion of any other person and regardless of who caused the damage. Hence, the damage is charged to the operator himself and not the suppliers. The channeling of liability might seem unfair as it means that the operator could be liable even if a third party were negligent or at fault. The victim of a nuclear incident can only present his claim to the operator of the installation causing damage or his insurer. Furthermore, such exclusive liability brings certainty in insurance claims as the compensation settlements would be quick and avoid costly and time-consuming claim procedures. Had the situation been otherwise, then insurers would have to hold separate pools or covers for every party involved in the nuclear reactor chain.

    C. Limitation of liability in Time:

    This is an important concept because the injury caused by a nuclear incident may not manifest for several years. Ergo, a limitation period is intended to help the claimant where the consequences may not reveal for several years; thereby not divulging them of their right to seek damage, and at the same time it protects the rights of the operators and insurers by not exposing them of liability for an indefinite period.  For example, in the UK, the Nuclear Installations Act 1965 states that any claim made after 10 years (from the date of occurrence of the nuclear incident) but less than 30 years, will be made directly to the Government instead of the insurer or the operator.

    D. Limitation of Liability in Time:

    The amount of liability charged to an operator under the principle of strict and exclusive liability is capped to a limit to shelter them from the full risk amount. This concept is introduced to bring a balance or quid pro quo status against strict and exclusive liability. Beyond the limit, the state covers the liability amount.

    E. Insurance or other financial security:

    Operators are obligated to carry financial security to cover their potential liability amount in the event of a nuclear incident. Usually, insurance pools tend to third-party claims. However, in certain situations, operators take the liability on themselves and cover the same by providing financial security in the form of government guarantees, bank guarantees, letters of credit, mutual fund, operators' pooling etc.

    F. Jurisdiction:

    Jurisdiction over claim actions lies exclusively with the courts of the country where the nuclear incident occurred. The courts of other contracting states will not be competent to hear the claims. Judgments made by the competent court will be recognized and enforced in other contracting countries. This principle is only useful when many states have ratified either the same convention or a bridging convention. Victims may, on first impressions, see it as an advantage to be entitled to sue all possible parties in different courts for nuclear damage. However, it is pertinent in the victims' best interest to disburse compensation equitably.

    G. Applicable Law:

    The applicable law is the national law of the competent court that has jurisdiction. The federal law must also be applied without discrimination on the grounds of nationality, domicile, and residence. The applicable law principle helps prevent costly and lengthy arguments about which law applies, especially with regard to the complexities of the national and international rules surrounding the conflict of laws.

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    Sat, 09 Feb 2019 12:13:00 GMT
    <![CDATA[Drug laws in Singapore]]>  "Wasted? So is your life"- Drug laws in Singapore

    Singapore by far has the toughest drug laws in the world. The country's strong and determined hold on the Misuse of Drugs Act has implemented a penalty for even possessing a small amount of illegal narcotic substance. In fact, the country advocates for execution if one is found in possession of a large quantity of drugs.

    As per the Misuse of Drugs Act, if an individual is found to have been in possession of an illegal narcotic substance or a large amount of drugs, then the individual will be presumed to be trafficking the said drug. As per the drug laws in Singapore, the burden of proof would lie on the defendant to prove his innocence, not on the government.

    There have been various instances where an illegal narcotic substance has been found in the car or in the house of a person, and that person is presumed under the law to have possession of the same. In such a case, the burden of proof will be placed on the defendant to prove his innocence. The law on drugs has always been an inconsistency with the authoritarian law enforcement culture of Singapore; for many years Singapore has followed a strict punishment system, maintaining the same to work best at controlling evils in society, such as the use of drugs.

    The country has been successful in keeping a strict check on the use of illegal narcotic substances. This is evidenced upon comparing the consumption rates of illegal drugs in Singapore to that of counties. For example, in the UK, 8.2% of its population is found to be cannabis users, whereas, Singapore's usage rate is found to be at 0.0003%. For drugs such as heroin, opium, and morphine, the equation of comparison stands at 0.9% for the UK and 0.0005% for Singapore.

    What is the Penalty for the possession of illegal drugs?

    According to the guidelines stipulated under the Misuse of Drugs Act, the penalty for the possession of a small amount of illegal drugs ranges from $20,000 to the extent of ten years in prison. The Central Narcotic Bureau has a list of controlled narcotic substances that one should not bring into the country.

    As per Section 17 of the Misuse of Drugs Act, a person is automatically presumed to be trafficking drugs if he is found in possession of illegal drugs ranging within the following amounts:

    Drug

    Quantity

    Heroin

    2 grams or more

    Morphine

    3 grams or more

    Opium

    10 grams or more

    Hashish

    10 grams or more

    Cocaine

    3 grams or more

    MDMA

    10 grams or more

    Methamphetamine

    25 grams or more

    As per Section 17 of the Misuse of Drugs Act, a death penalty can be given if the convict has been proven to be in possession of an illegal drug beyond the mentioned quantities:

    Drug

    Quantity

    Heroin

     15 grams or more

    Morphine

    250 grams or more

    Opium

    1,200 grams or more

    Hashish

    200 grams or more

    Cocaine

    30 grams or more

    Methamphetamine

    250 grams or more

    It was only since the amendments in January 2013 that judges could abandon issuing the death penalty for drug smugglers, and rather, impose life sentences. But for the same to be applicable, the accused should have made a case that he was only a drug courier, that he suffers from a particular mental disorder, or that he/she has turned out to be beneficial in helping the Narcotic Bureau.

    Authorities don't need a warrant to drug test you!

    A person can be taken into custody to conduct a drug test, and there is no requirement of a warrant for the same. For first time offenders arrested for the consumption of an illegal drug, the punishment could be one year incarceration. However, second-time offenders who have committed the same crime can be imprisoned for three years. Should the unlucky individual get caught a third time, the defendant would be sentenced to five-years of punishment with three strokes of a cane. Consumption of an illegal substance means that the urine of an individual has been tested positive for a substance. In the case you have consumed a drug before entering the borders of Singapore, and have been detected to have a drug in your system, even then though you have not consumed the drug in Singapore, you will be charged for the same.

    A few tips to avoid even the barest possibility of getting arrested with charges of Drugs in Singapore:

    • Remember, the laws of Singapore will presume that you are in possession of the illegal drug substance and will prosecute you for the same if your luggage or belongings are found to have any amount of illegal narcotic substance in the same. Hence, avoid carrying things for friends or acquaintances without being sure of what it is.
    • There is no doubt that Singapore has a zero tolerance towards possession of illegal drugs. Travelers visiting Singapore are advised to contact the relevant department and be sure if the medicine they are carrying along with them is on the controlled list and if it needs prior permission from the authorities before carrying into Singapore. A traveler arriving with prohibited medication without prior approval or documentation may be denied entry or even prosecuted for the same.
    • You can be sued, fined and also imprisoned if you are detected to be under the influence of illegal drug substances in Singapore. Detection of illegal drug substances in your blood or urine will also hold you responsible for being in possession of the same, and hence you can be prosecuted. Therefore, it is advised to detox your body before entering the borders of Singapore in case an illegal drug has been consumed.

    A few cases wherein drug offenders in Singapore have been severely dealt with.

    • Johannes Van Damme: A Dutch national was caught in possession of 9.5 pounds of heroin in his suitcase while in transit at the Changi Airport in Singapore. The arrest took place in 1991, and he was executed for the same in 1994. He put up a case that he was unaware of what was in the briefcase and he was only carrying the same for a Nigerian friend. Despite appeals from the Dutch Foreign Ministry and Queen Beatrix of the Netherlands, he was still executed for the offense on 23 September 1994.
    • Nguyen Tuong Van: The arrest took place after he was detected via a metal detector at the Changi Airport for a packet of heroin strapped to his body. Upon investigation, he was found to be in possession of 396.02g of heroin from Cambodia. The quantity was more than 25 times then that required to be granted the death penalty under the Misuse of Drugs Act. He was convicted for the same and was sentenced to death on 20 March 2004.
    • Iwuchukwu Amara Tochi: Arrested at the Chandi Airport, authorities grew suspicious when he spent over 24 hours in transit. Upon further investigation, he was found to be in possession of over a pound and a half of diamorphine capsules which was estimated to be valued at US$970,000. He was proved guilty and was executed on 26 January 2007.

    Conclusion

    By now it is a well-understood fact that Singapore holds zero-tolerance for illegal drugs and narcotic substances. The country advocates death penalty to persons found in possession of a large quantity of illegal drugs. Singapore adheres to a system of severe punishment which has helped them keep a strong check on the possession and consumption of illegal drugs in the country.

    ]]>
    Tue, 05 Feb 2019 12:27:00 GMT
    <![CDATA[Anti-Counterfeiting Trade Agreement]]> Anti-Counterfeiting Trade Agreement of 2010

    Signed in 2011 (although not yet implemented), the Anti-Counterfeiting Trade Agreement (ACTA) represents the combined efforts made by the US, Canada, the EU, Switzerland, Australia, New Zealand, Japan, and South Korea to reform global Intellectual Property (IP) enforcement standards. The Agreement was established to redirect international intellectual property laws away from multilateral forums and towards regional conferences. Under the ACTA, national enforcement bodies are allocated greater powers to criminalize IP violations (specifically pertaining to trademark counterfeiting and copyright piracy). If implemented, the ACTA will modify digital liberties on a trans-global level.

    According to its founding parties, the ACTA serves as an extension to the World Trade Organization's Trade-Related Aspects of Intellectual Property Agreement (TRIPS). This development encompasses implementing heightened enforcement of IP on the online platform. The Agreement has yet to be enacted as three predominant issues arguably threaten consumer privacy. Currently, the negotiated document is controversial because

  • The ACTA negotiation process was completed without democratic consultation. Representatives from respective parliaments and citizens were omitted from the meetings. Upon its release in 2010, the ACTA had been through eight restricted negotiations.
  • The ACTA holds the potential to considerably delimit consumer privacy, innovative capacity, and rights of due process.
  • The proposed ACTA Committee will seat non-elected officials. Committee meetings are also not required to abide by internationally favored transparency standards.
  • ACTA Provisions

    ACTA "General Obligations"

    As previously stated, the ACTA was designed to act as a supplement to TRIPS. Therefore, Article 1 of the 2010 Agreement stresses that no provision of ACTA is to contradict a Member States' obligations under TRIPS. The Anti-Counterfeiting Trade Agreement consists of six chapters. Under the Agreement, minimum IP enforcement standards for copyright piracy and trademark counterfeiting are set. Member States will have the choice to carry out greater levels of enforcement than those provided in the Agreement. Per Article 2 of ACTA, Part 1 of the TRIPS Agreement (purpose and objectives) is applicable. According to Article 7 of TRIPS, the aim is to protect and enforce intellectual property rights so that Members can "contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare…."

    Although the ACTA creates IP enforcement standards for countering piracy and counterfeiting, Member States are not obligated to apply Agreement regulations, when doing so, would force states to establish intellectual property rights not protected under domestic legislation. A Party is also not mandated to disclose confidential information that would negate the duties of law enforcement or distort public or private commercial interests. The general obligations of a Member Party under ACTA include:

    • Article 6 (1): Enforcement procedures must be adopted by Party Members to ensure legal recourse against breaches to Agreement protected intellectual property rights. The legal enforcement strategy must be efficient, expeditious, and act as a deterrent against future infringement.  Legislation implementing enforcement measures should not unnecessarily impede on international trade.
    • Article 6 (3): While requiring legal enforcement and punitive response to intellectual property breach, Parties are called to exercise reasonability when creating penalties for respective offenses. Therefore, the infringement and punishment must be proportionate.

    ACTA "Civil Enforcement"

    Concerned with ensuring justice and fairness, every ratifying state must permit intellectual property holders the right to pursue a civil judicial proceeding. Article 8 (2) allows a Member State to "limit the remedies available against use by governments…without authorization of the right holder…." This condition is only authorized as long as Part Two of the TRIPS Agreement is observed (concerning the availability, scope, and use of IP).

    Article 9 of ACTA allows state judicial institutions to hold an offender liable to "damages adequate to compensate for the injury the right holder has suffered as a result of the infringement." Such damages could include lost profit and the sum of encroached services. Regarding copyright infringement, Parties are required to provide a scheme for "pre-established damages, or presumptions for determining the amount of damages sufficient to compensate the right holder or the harm caused by the infringement, or additional damages" (Article 9 (3)). Post-verdict, judicial entities may authorize the destruction of infringed IP products or services. The expense required to complete this order may be issued to the infringer. Further, members of a judiciary are sanctioned to grant precautionary measures to prevent further IP violations (which may resort in irreparable loss to the right holder) and retain evidence supporting a purported breach.

    ACTA "Border Measures"

    Beyond regulating IP in a traditional sense, ACTA obliges Parties to implement measures concerning the import and export of shipments. Article 16 of the Agreement permits customs authorities to "act upon their own initiative to suspend the release of suspect goods, and where appropriate, a right holder may request its competent authorities to suspend the release of suspect goods." The same provision applies to goods-in-transit. Although the notion of permitting the confiscation of goods under the customs authority's discretion may appear problematic, a suspension may only occur if there is sufficient reason to expect a holder's rights have been infringed. Should a State have a reasonable expectation of an IP breach, an application (created by the rights holder) may be ordered to detain the suspect goods at national points of entry and exit. If apprehended goods are declared illicit, the counterfeited or pirated items must be "disposed of outside the channels of commerce in such a manner as to avoid any harm to the right holder" (Article 20 (1)). In other words, the act of confiscation alone is not a sufficient remedy.   

    When there is sufficient reason to believe a holder's IP rights have been infringed, Member Parties are authorized to supply disclosure of information to the right holder. Under Article 22,

    • A right holder may be provided with "information about specific shipments of goods, including the description and quantity of the goods, to assist in the detection of infringing goods."
    • In determining whether an infringement has occurred, authorities may "provide the right holder with information about goods, including, but not limited to, the description and quantity of the goods, the name and address of the consigner, importer, exporter or consignee, and, if known, the country of the origin of goods, and the name and address of the manufacturer of the goods…."

    ACTA "Criminal Enforcement"

    Criminal procedures will ensue for infringements surrounding trademark counterfeiting or piracy of a commercial scale (including deliberate importation of such products). Further, the "unauthorized copying of cinematographic works from a motion performance" will be criminally punishable by the Member States. All violations considered criminal offenses will be subject to imprisonment and monetary fine (per Member State adoption).

    ACTA "Enforcement Practices"

    Despite a lack of transparency is a predominant reason why negotiating states have not ratified the Agreement, Article 30 discusses the promotion of transparency. Each State is to enhance public awareness by publishing information regarding:

    • Legislative provisions and respective governmental agencies backing the enforcement of intellectual property rights.
    • Judicial holdings relating to intellectual property rights application.
    • Any endeavors took to safeguard a proficient system of intellectual property rights protection.

    ACTA "International Cooperation"

    For ACTA to fulfill its principal objective, international cooperation between Member Parties is critical. Therefore, no prejudice should be attributed to the origin of the goods nor the right holder's nationality. Collaboration is called to be "consistent with relevant international agreements, and subject to the laws, policies, resource allocation, and law enforcement priorities of each Party" (Article 33 (3)). Member States are required to exchange information regarding reinforcement practices and legislative measures to enforce protection. If Members are asked by another party to provide aid in capacity building or technical assistance, the Party served with the request should offer support.

    ACTA Backlash

    As previously asserted, ACTA has yet to be enacted due to apprehension encompassing the infringement of individual freedoms. Historically, there have been few instances where a proposed international agreement has received this magnitude of disapproval. The projected opposition has not stemmed from a disagreement that trademark counterfeiting and copyright piracy should not be strictly penalized, nor that an international agreement would not bolster protection of intellectual property rights. Instead, declining signatory countries have condemned the treaty's content because of procedural measures. It has been argued that the negotiations, which abandoned the democratic process, fashioned an agreement afflicted by elusiveness. The European Commission, European Court of Justice, and European Union have all expressed grave concern surrounding the vagueness of ACTA enforcement policy. Lack of precision can result in legal uncertainty as to how provisions are to be interpreted, which can, in turn, threaten digital freedom and internet neutrality, and grant an unjustifiable degree of power to IP rights holders. The projected ACTA committee has also triggered resistance. This committee, which is tasked with ensuring signatory parties adhere to ACTA standards, is authorized to find working groups to aid in the fulfillment of its duties. Opponents of ACTA fear that special interest groups and IP lobbies will have significant and detrimental influence over the delegated committees. Protest against ACTA has not been limited to governing bodies, but has also included the public petition. February 11, 2012, millions of individuals around the globe assembled to take part in ACTA international protest day. Despite overwhelming dissension by major European authorities, ACTA still can be enacted if five of its signatory countries ratify the agreement. 

    ]]>
    Tue, 05 Feb 2019 10:49:00 GMT
    <![CDATA[anti discrimination laws]]> International Perspective on Anti Discrimination and Laws relating to Anti Discrimination in the UAE

    "I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character." ― Martin Luther King Jr.

     

    The Universal Declaration of Human Rights came into existence 70 years ago, but the fundamental provision of the historic document is very much relevant today. Article 1 of the Declaration states:

    "All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood."

    The Declaration is fundamental and it exhibits an egalitarian character, without which the achievement of a welfare society is not possible. Therefore, anti-discrimination legislation is necessary for the protection of employees, and their importance cannot be de-emphasized.

    This article will explain the international framework on anti-discrimination and the laws against discrimination in the United Arab Emirates.

    Meaning of Discrimination

    Discrimination is the act of treating an individual less fairly than others. It is an unfair behavior towards a person on the grounds of gender, race, or age. The term 'discrimination' is derived from the Latin term 'discriminat' which means distinguished.

    In the book 'Social Psychology,' Diane M. Mackie and Eliot R. Smith defines discrimination as-

    "The terminology of discrimination refers to the positive or negative behavior towards a social group and its members. Naturally, people think generally of negative behavior –, however discrimination against one certain group means positive discrimination for others."

    Sociological Encyclopaedia defines discrimination as the following:

    "Discrimination in social life is an act of distinction that happens by offending the social norms and the principle of equality in the eye of law against certain groups of people, which is considered unacceptable by the majority and is approved by some sub-groups of the population."

    Therefore, discrimination takes place when a person is treated unfairly in comparison to others. An individual need not have undergone harm to be discriminated, as it is sufficient if a person has been treated differently than others. Since it is caused by reason of differential treatment, there are various reasons for an individual to be treated differently.

    Kinds of Discrimination

    Discrimination is of two kinds namely, direct discrimination and indirect discrimination.

  • Direct discrimination- In this form of discrimination, a person is treated differently on account of a particular characteristic such as race, gender, sexual orientation, etc.
  • Indirect discrimination- In this form of discrimination, a person is treated differently on account of a protected characteristic, Example- setting an age qualification for a  particular task.
  • Therefore, discrimination need not be expressed directly; it may also be exhibited by an individual or an organization, such as a company, by setting preferences over a particular aspect of a person.
  • Types of Discrimination

    According to the definition of discrimination as mentioned above, it is against international law to discriminate against a person on account of a particular characteristic; consequently, the following are the different forms of discrimination:

    • Age discrimination-Direct age discrimination takes place when an individual is treated adversely because of their age, whereas indirect discrimination happens when a condition concerning age is imposed upon a person.
    • Sex discrimination- This form of discrimination takes place when an individual is discriminated because of their gender.
    • Disability discrimination- Disability discrimination occurs when an individual is treated differently because of any physical or mental impairment of a person.
    • Carer and Parental status- This type of discrimination takes place due to a substantial difference in responsibility between both parents for the ongoing care of the children.
    • Gender Identity and Sexual Orientation discrimination- This occurs when a person is discriminated due to their sexual identity or orientation.
    • Employment Activity- It is against the law to discriminate against a person for raising their voice for employment entitlements.
    • Discrimination by religious or political beliefs- This type of discrimination takes place when a person is mistreated because of their religious or political beliefs.
    • Marital Status discrimination- It is unlawful to discriminate against an individual because of their marital status.
    • Race discrimination- Race discrimination takes place when an individual is treated unfavorably because of their race, such as color, descent, nationality, ethnic background, or any other aspect related to race.

    Article 1 of the International Convention on the Elimination of All Forms of Racial Discrimination defines racial discrimination as:

    "Any distinction, exclusion, restriction or preference based on race, colour, descent or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment, or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural, or any other field of public life."

    International Position against Discrimination

    The laws dealing with anti-discrimination varies from state to state. However, various international conventions have undertaken and adopted measures for the protection of individuals or groups against discrimination. The following are some of the provisions international treaties have provided, for the protection against discrimination.

    Article 2 of the Universal Declaration of Human Rights, 1948 states the following:

    "Everyone is entitled to all the rights and freedoms set forth in this Declaration without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status. Furthermore, no distinction shall be made on the basis of the political, jurisdictional or international status of the country or territory to which a person belongs, whether it be independent, trust, non-self-governing or under any other limitation of sovereignty."

    The International Covenant on Civil and Political Rights, 1966 adopted by the United Nations contains provisions against discrimination. Article 26 of the Covenant reads as:

    "All persons are equal before the law and are entitled without any discrimination to the equal protection of the law. In this respect, the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinions, national or social origin, property, birth or other status."

    Case Law- In K Ahmad v. Denmark, the International Convention on the Elimination of All Forms of Racial Discrimination found Denmark to have violated Article 6 of the Convention.

    In K Ahmad, the petitioner, a Danish citizen of Pakistani origin along with his brother was taking a video of his friend taking an exam. Upon seeing this, one of the teachers had asked them to leave. However, they refused, and the headmaster was called in. The headmaster called them a 'bunch of monkeys' in public, and accordingly, the petitioner filed a complaint. However, the police discontinued the case and concluded that the act was out of the scope s.266 (b) of the Danish Penal Code. Subsequently, the matter was taken up by the Committee on the Elimination of Racial Discrimination, it was held that there was a violation of the Convention.     

    Therefore, the act of discrimination is well protected within the sphere of international law, and several conventions have been adopted under the guidance of the United Nations to ensure equal opportunities to secure a career, or to lead a decent life.

    Anti-Discrimination Laws in the UAE

    The UAE is a country with vast cultural diversity and plurality; therefore, the State of Affairs calls for adequate measures to protect against discrimination. Generally, the anti-discriminatory laws of a nation are fixed. Keeping this in mind, in 2015, the UAE adopted the Federal Decree Law Number 2 of 2015, which deals with discrimination and hatred.

    Article 1 of the Federal Decree Law Number 2 of 2015 defines discrimination and hatred as the following:

    "Discrimination: any distinction, limitation, exception or preference among individuals or communities on the basis of religion, belief, sect, faith, creed, race, color or ethnic origin."

    "Hatred speech: any saying or act that may arouse sedition, dissent or discrimination among individuals or communities."

    Under Article 6 of Federal Decree Law, Number 2 of 2015, Discrimination in any form by any means of expression is a criminal offense and the person committing such a crime shall be liable to punishment.

    The provisions under the laws provide for the punishments for the commission of offenses, stating the following:

    Article 11-

    "A person shall be punished by imprisonment for at least seven years and/ or a fine of at least AED 500,000 (five hundred thousand), but not over AED 2,000,000 (two million) if such person produces, manufactures, promotes, sells, or offers for sale or trading any products, goods, printings, recordings, films, tapes, CDs, software, smart applications, data in the electronic field or any industrial materials or other things including any ways of expression, involving religion contempt, discrimination, or hatred speech." 

    Article 12-

    "A person shall be punished by imprisonment for at least one year and/ or a fine of at least AED 50,000 (fifty thousand), but not over AED 200,000 (two hundred thousand) if such person keeps or holds any products, printings, recordings, films, tapes, CDs, software, smart applications, data in the electronic field, or any industrial materials or other things including any ways of expression if they are prepared for distribution or display to others, involving religion contempt, discrimination or hatred speech."

    As per Article 13, a person responsible for the setting-up of a group or organization for discriminatory purposes, hate speech, or religious contempt is subject to punishment by imprisonment for no less than 10 years. Further, it is also illegal to hold meetings or conferences with the aim of religious contempt, hate speech, or discrimination.

    Article 17 of the Federal Law Number 2 of 2015 states that a representative, manager, or an agent of a company shall be punished for any offense committed by any personnel of the corporation, provided that such a person is aware of the commission of such an offense. In such a case, an individual may also be fined.

    Therefore, the law stipulates that companies encourage awareness amongst employees for the prevention of such offenses.

    Conclusion

    Anti-discrimination laws are necessary to protect employees and communities against oppression, thereby making way for the betterment of state and society. Without anti-discrimination laws, anyone may be discriminated against for any reason; therefore, the importance of such laws cannot be deemphasized.

    ]]>
    Tue, 05 Feb 2019 00:00:00 GMT
    <![CDATA[Drone Laws and Regulations]]> Drone Laws and Regulations in UAE

    With new innovations and big investments, drone technology continues to evolve almost every day, bringing more advanced drones to the market every few months. Almost every week we see press releases and research papers on the use of drones in new areas and industries.  The popularity of drones has grown over the years, and new models release every day with the addition of newer and more complex technology.  Drones or Unmanned Aerial Vehicles (UAV) include everything from the drone's aerodynamics, materials used in the manufacture of the UAV, the chipset, circuit boards and software used in the drone.

    What are Drones?

    Drones or an Unmanned Aerial Vehicle is an aircraft that can be navigated via control from the ground using a GPS tracking system, that is without a human pilot on board the aerial vehicle.  In simple terms, they are aerial vehicles that do not require a human to pilot it from within. Drones can range from those tailored for beginners to those for skilled projects. Some drones come with a memory card that allows the user to record footage and upload it to their computer. The navigation of the drones is via their channel control and transmitter; the user can better navigate the drone at a higher speed with higher channels of control.

    • Types of Drones

    Drones can be classified on different bases- such as on the basis of size, or on the basis of use like drones for photography, aerial mapping, surveillance, etc. However, the most significant classification of drones that is on the basis of aerial platforms, there are 4 types of drones:

    • Multi Rotor Drones

    These are the most common types of drones used, both by professionals and hobbyists alike. Used for most common applications like aerial video surveillance and aerial photography, it also offers wide variants for the purposes of leisure like amateur drone racing. This type of drone is the easiest to manufacture, the cheapest one available in the market, and has 4 variants depending on the number of rotors:  Tricopter (3 rotors), Quadcopter (4 rotors), Hexacopter (6 rotors) and Octocopter (8 rotors).

    • Fixed-Wing Drones

    These drones use a wing similar to normal airplanes and unlike the non-fixed-wing type models, does not utilize energy to stay afloat on air. These drones cost more and require more skill-set for operation.

    • Single Rotor Helicopter

    They look very similar in design and structure to helicopters and unlike a multi-rotor drone, only have one big-sized rotor with a small-sized one on its tail to control its heading.  They are much more efficient than the multi-rotor drones and have higher flying times but also require a higher skill-set and training to operate.

    • Fixed Wing Hybrid VTOL

    Being a hybrid, these drones combine the benefits of higher-flying time of fixed-wing models with the hover function of the rotor-based models. Though there wasn't much success in its testing since the 1960s, with the development of new generation sensors like gyros and accelerometers, the concept received a new life.

    • Use of Drones

    Many sectors where the usage of drones have been introduced to, previously used helicopters and airplanes to achieve the tasks. This was not a viable option since helicopters and airplanes are expensive to hire and are sometimes not available when most required.

    There are so many uses of drones in all specters of life today including drone light concerts synchronized to the music, however, for reference, some of them are listed below:

    • Search and Rescue- Drones are used more in mission-critical sectors. Departments like fire departments, lifeguards, first responders, mountain rescue teams have become big users of drones since it assists in finding and rescuing people as fast as possible.
    • Marketing- marketing and advertisement form an essential component of businesses nowadays. Drones such as DJI inspire 1 are useful in producing professional quality aerial films and still photos cost effectively, helping the creation of professional marketing material.
    • Site Surveying- the use of drones in surveying has saved a lot of time by avoiding the need to build scaffolding to survey a building or structure. More importantly, it also saves the employees from taking on the responsibility of doing dangerous work.
    • Parcel Deliveries- Constantly in the news, drones are increasingly being used to deliver parcels including pizzas. Amazon even initiated a Prime Air Delivery Project to deliver the orders. Many big postal companies across Europe and Asia are testing out package delivery using drones.   SF Express, China's largest package carrier was granted the first of its kind license in China on April 2018 to use drones to deliver packages by the Civil Aviation Administration of China (CAAC).
    • Use in Agriculture and Environment Conservation- Farmers use drones on farms, from livestock to crops and vines, providing data like soil fertility, detect deficiencies, identify pests, diseases and weeds. Researchers in Japan have created small insect-sized drones to pollinate plants which will help with indoor pollination, mimicking the duty of honeybees.

    UAE Regulations and Laws on the use of Drones

    Like any other flying objects, UAVs are also prone to accidents, causing damages to external properties, attached cameras, instruments, as well as to the body. Like any new technology, misuse or accidents can result in huge damages and liabilities to third parties for property damage, bodily injuries or interruptions.

    There have also been incidents where UAVs have flown into restricted or unauthorized areas causing serious security concerns to the authorities. For instance, a drone caused disruption at the Dubai Airport on October 29, 2016, by entering its airspace. The Dubai Airport as a result had to be closed for more than an hour which subsequently caused 22 flights to be diverted. Drones are thus prohibited within a 5km radius of all UAE airports.

    To ensure that the increased use of drones does not negatively impact airspace/cyber safety or security or privacy, the use of drones in the UAE are subject to strict regulations by the UAE government.

    The foundation for the present legal framework was laid by the Federal Resolution No 2 of 2015-Regarding Light Air Sports Practice Regulations which set out requirements relating to the use of drones.

    •  UAE General Civil Aviation Authority (GCCA)

    The UAE General Civil Aviation Authority (the GCAA) is the regulatory authority for the use of drones in the UAE, building on the foundations already laid down by the Federal Resolution No 2 of 2015. The GCAA published the GCAA Civil Aviation Regulations (the Regulations) which establishes the rules and guidelines for the use of drones in the UAE.

    Drones fall within the purview of the definition of an Unmanned Aerial System (a UAS) by the Regulations, which states, a UAS is "an aircraft and its associated elements which are operated with no pilot on board".

    • No Fly Zone- the GCAA has an app "UAE Drone Fly Zone Map" which allows drone users to ascertain the designated areas in UAE for the operation of drones in UAE.
    • Classification

    The Regulations also separate UAE into six categories based on physical and operational parameters:

    • Category 1- drones weighing less than 5 kgs
    • Category 2- drones weighing between 5kgs and 25kgs
    • Category 3- drones weighing more than 25 kgs
    • Each category has subcategories for commercial and private use.

    Private and Commercial Users:

    Users of UAS for private leisure and sport are termed as private users, while commercial users use drones for purposes such as media, surveying, surveillance, inspection, air delivery amongst others.

    • Regulation Requirements

    There are minimum operational requirements and restrictions for each category. For example, private users in Category 1, 2 and 3 are prohibited from using drones with video or image capturing devices, while commercial drones in these categories may use drones with cameras or similar devices but require prior approval from the GCAA.

    • For an Organization/Operator (Commercial or Non-Commercial)

    All drones in excess of 250 grams need to be registered using the registration platform hosted on the Emirates Standards and Metrology Authority (ESMA) website. A registered drone will be provided with an ESMA certificate, which will also carry a unique serial number and geo-fencing microchip to allow the drone to be tracked by the authorities.

    Regulations require that any drones used for commercial or non-commercial uses, other than for recreational purposes, are required to obtain a UAE Operator Authorization (UOA) which is issued for a period of 1 year. It involves the following documentation and processes:

    • Obtain security clearance for the organization through the GCCA website.
    • An application letter (in company letterhead) signed by an authorized representative is to be submitted to drones@gcaa.gov.ae with the following details:
    • List of the unmanned aircraft type with serial number, color and mass in KG
    • Management Commitment Statement
    • Description of the proposed operation
    • Subscription to GCAA E-publication through GCAA website.
    • Compulsory Insurance:  The UAE in 2017, announced compulsory minimum insurance requirements for drones in commercial use and imposed a minimum liability of AED 3.67 million. In October 2017, the UAE announced mandatory minimum insurance requirements for commercially operated drones. These requirements impose minimum liability coverage of AED3.67 million.  It has also been announced that mandatory insurance will be required for privately operated drones in 2018.
    • For an Individual/Private User (Recreational)
    • User and drone should be registered with the GCCA before flying
    • Only drones weighing 5kgs or less shall be allowed to fly in the approved zones for flying, that is the green zone.
    • The drone shall not use any video or image capturing devices; be equipped with the drop or release devices.
    • Shall fly only during day-time in good weather and its flying range should always be within the line-of-sight. It shall not fly more than 400 feet above ground level.
    • The drone cannot be used for commercial activities
    • The responsibility is on the user to ensure that the drone is used in accordance with the manufacturer's instructions and is inspected before use.
    • No user shall fly the drone:
    • The minimum age of 21 years is required for a user to fly a drone weighing more than 25 kgs.
    • The drones weighing above 5kgs or those equipped with a gas engine shall only operate within GCAA approved flying clubs.
    • The user shall immediately report any accidents/incidents to the GCAA and responsible to inform the GCAA about his intentions to sell the drone.
    • The user shall avoid collisions with people, objects, other manned and unmanned aircraft as well as not harass or endanger people or threaten to damage property.
    • There shall be a direct radio control link between the user and the drones and shall maintain the Frequency Band Restrictions, considering the effects on radio communication, interference of the frequency used;
    • Within 5km of the UAE airports' outer fence, heliports, helicopter landing sites, and airfields, or in controlled zones.
    • Near the public or private property
    • Sanctions
    • Article 69 prescribes imprisonment of 1year and/or a fine not exceeding fifty-thousand Dirhams if:

    The owner or operators cause the drone to be flown without an authorization or permit from the competent authority or after the expiry or revocation of such certificates; or pilots it when drunk enough to impair his capacity to pilot; caused damage to aeronautical communication facilities or navigation aids or not maintained such facilities in good condition; or does not enter the required information in the documents or records of the aircraft or altered the information.

    • Article 70

    A term of imprisonment not exceeding three years and/or fine not exceeding one-hundred thousand Dirhams to any person who uses a drone without registration marks or displays a wrong one; flew the drone in a prohibited area; not complied with the order to land the drone along with similar other offences.

    • Rules Regarding Drone Photography

    Article 378 of the UAE Penal Code clarifies that taking pictures of someone without their consent or in legally permitted circumstances shall be an invasion into the privacy or family life of an individual which will lead to the confiscation and destruction of the recordings and the photographer or videographer may be fined or imprisoned. Anyone who publishes such a picture or video shall be liable to the same punishment.

    Article 43 of the UAE Copyright Law grants certain exceptions to Article 378- if the photographer or videographer captures a picture of another they shall not have the right to keep, show, sell, exhibit, publish, communicate, distribute the pictures without the prior consent of the person concerned. The punishment for the offence under this article is detention for a period not exceeding 6 months and a payment of a fine.

     

     

     

     

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    Tue, 05 Feb 2019 00:00:00 GMT
    <![CDATA[Commercial Mediation UAE]]> Commercial Mediation in the UAE and the Laws Concerning Mediation

    "Mediation is one of the most effective tools of non-violence. It can turn parties away from conflict, towards compromise" - Miroslav Lajčák

    Meaning

    Mediation is a form of Alternative Dispute Resolution system (ADR) wherein the matter at issue is solved with the help of a mediator without recourse to the court of law. It is a voluntary process where a decision relating to the dispute is not imposed upon the concerned parties. Hence, a settlement shall be binding on the parties only as long as they agree to it. There may be instances when mediation is referred to by the court of law; however, even under such circumstances, it is always up to the decision of the parties to conclude. Therefore, the control over the mediation always lies between the parties to the dispute.

    It is a party centered negotiation process, wherein, a neutral third party is involved who assists in solving the dispute amicably by using special techniques in negotiation. Since the party's concern is primary in this form of dispute resolution, they may withdraw from the proceeding at any stage until the settlement has come to an end. Mediation as a method of dispute resolution has an edge over the other forms, due to its degree of flexibility.

    David Spencer and Michael C Brogan in their 'Mediation Law and Practice' explain the history of mediation as the following:

    "Mediation, as a form of dispute resolution involving more than the parties, has been around since the beginning of basic human society. While the first humans would have negotiated in a rudimentary way regarding their basic needs and desires, it is submitted that there needed to be a sense of community, or belonging, to convince a third party to want to assist in the resolution of a dispute between others."

    The adoption of mediation as a mode of dispute resolution is not only applicable to a personal matter. It may also be used to reconcile a dispute amicably which arises in the course of a business or a transaction.

    The European Judicial System defines mediation as the following:

    "Mediation is a voluntary non-binding private dispute resolution process in which a neutral and independent person assists the parties in facilitating the discussion between the parties in order to help them to resolve their difficulties and reach an agreement."

    Therefore, from the above explanation, it is clear that mediation as a method of dispute resolution may apply to various forms of law such as civil, personal or labour. However, this article will analyze the concept of commercial mediation in the UAE and the issues concerning it.

    Commercial Mediation

    Commercial mediation is a type of negotiation where a dispute relating to commerce is settled between parties with the assistance of a neutral third-party. The party providing assistance should be unbiased and shall facilitate the negotiation process to arrive at a unanimous decision.

    Such a method of dispute resolution is adopted by the parties engaged in commercial industries since it helps in the reduction of both the wastage of time and money which may occur on the recourse to litigation.

    Advantages of Mediation

    The following are the advantages of mediation over other forms of dispute resolution:

    Active Participation of the Parties- Since mediation is a mode of ADR which is primarily concerned with the terms of the parties, they are actively involved.

    Unbiased- Since it is a form of mediation wherein the parties have complete control over the decision, it is fair.

    Easier- The procedures relating to mediation is much more flexible than the other forms of dispute resolution, and hence, it is simple.

    Voluntary- The parties to the dispute have complete control over the matter in issue, and therefore, it is voluntary.

    Economical- The mediation process is much more efficient and more inexpensive as compared to litigation.

    Confidential- Utmost confidentiality shall be maintained while conducting mediation.

    Commercial Mediation in the UAE

    In the UAE, the concept and applicability of mediation have increased. Mediation is widely recognized in the UAE, and it is an area of law which has been extensively examined within the country.

    In mediation, it is a prerequisite that unless the parties have unanimously come to a settlement, the decision shall not be finalized. In a mediation process, the interest of all parties is taken into consideration so that none of them face any complications as a result of the decision.

    Mediation Process:

    The mediation process involves the following stages, though it may vary:

    • Introduction/Opening Statement- Here the mediator shall introduce himself and the parties to the dispute followed by the statement of objective.
    • Opening statement by the disputant- Here the parties to the dispute shall describe the facts relating to the conflict and how they have been affected.
    • Joint Discussion- Here an opportunity is given to the parties to hear their opponents and to discuss the concerned matters.
    • Private/Separate Session- Here the parties to the dispute are given an opportunity to have a private conversation with the mediator followed by a joint negotiation.
    • Closure- At this stage, the parties shall come to a conclusion thereby settling the dispute amicably.

    Dubai International Financial Centre (DIFC) and Mediation

     The Dubai International Financial Centre (DIFC), has adopted mediation by formulating their own rules called the Rules of Dubai International Financial Centre Courts (RDC). Part 27 of the RDC deals with alternative dispute resolution, and it states the following:

    "27.1 While emphasizing its primary role as a forum for deciding civil and commercial cases, the Court encourages parties to consider the use of alternative dispute resolution (such as, but not confined to, mediation and conciliation) as an alternative means of resolving disputes or particular issues."

    Further, the RDC 27.2 lays down the benefits of alternative dispute resolution. RDC 27.3 states that the judges shall, in appropriate cases, invite the parties to the dispute and may consider whether such dispute could be reconciled through alternate dispute resolution. The DIFC-LCIA also provides for mediation as per the provisions of law.    

    Part 53 of the DIFC Rules deals with the Small Claims Tribunal and lays down provisions for settling disputes between the parties.

    Mediation under the UAE Federal Laws

    No specific law has been laid down governing the mediation process in the UAE; however, the Centre for Amicable Settlement of Disputes has been established under the Federal Law Number 16 of 2009.

    As per Article 3 of the Law, the Centre was established with the aim to settle the disputes which arise between the parties.

    The following are some of the essential provisions of the above legislation-

    Article (4) of the Federal Law Number 16 of 2009 states:

    "The Centre shall be responsible for considering the disputes for which a settlement order is made by the Chief regardless of their value or nature (excluding the urgent and timely orders and cases, cases to which the Government is a party, cases that do not fall within the jurisdiction of Courts, and the cases that are recorded with the Courts before the effective date of this law)."   

    Article (12)-

    "If reconciliation is achieved between the parties of the dispute, the same shall be recorded by reconciliation agreement to be signed by both parties of the dispute and approved by the Competent Judge and this agreement shall have the power of an executive instrument."

    Therefore, apart from the DIFC rules and regulations, the UAE also provides for the settlement of disputes through the legislation mentioned above. However, If an amicable agreement isn't conceivable, the disputing party can apply for a 'no complaint' letter from the committee, and in such case, the matter will be seen by the judge in the Court of First Instance.

    RICS UAE Mediation Panel

    The Royal Institution of Chartered Surveyors along with the Dubai Land Department held a conference on October 1, 2012, with an aim to promote mediation in the region and as a result, the RICS UAE President's Panel of Mediators was initiated.

    Contractual Liability:

    Nowadays, apart from conducting mediation under the instruction of judicial authority, the parties while entering into contracts may also include a clause which provides explicitly an alternative dispute resolution system. The clause may either specify mediation, arbitration, or any other form of negotiation. Therefore, although strict legislation may not guide such mechanisms, the parties are bound by it.

    International Treaty

    The United Nations Commissions on International Trade Law (UNCITRAL) introduced a convention on mediation settlements, and the final draft was instituted on 25 June 2018. Though the convention has not yet come into force, it has been referred to the commission for adoption. The enactment of the convention will be a massive step in accepting mediation as an alternative dispute mechanism at the international level. The convention is to be named the 'Singapore Media Convention,' following the signing of the treaty in Singapore.

    Conclusion

    The concept of mediation is undergoing a change and has been widely accepted in the UAE, as well as throughout the world. Though UAE legislation does not exist governing mediation as a mode of alternative dispute resolution, it is advised that the parties recourse to this form of dispute settlement, since it is highly cost-effective and at the control of the parties.

     

                   

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    Sun, 03 Feb 2019 17:36:00 GMT
    <![CDATA[NLRB’s rule to Joint-Employers]]> NLRB's New Proposed Rule with Regard to Joint-Employers

    The National Labor Relations Board (NLRB), on September 14, 2018, issued a Notice of Proposed Rulemaking setting the standard for determining the existence of joint-employer relationships. According to the NLRB, the said proposed rule would provide predictability, stability, and consistency in the determination of the status of joint-employers.

    The definition of Joint Employers is important and became an issue for franchise companies, businesses with subcontractors, staffing firms, and the like which have businesses involving interconnecting operations or supplying employees to another business.

    The proposed rule will be final after the receipt of public comments on the same, the deadline for which ends on November 13, 2018.

    Before we look into the proposed rule, to fully understand the definition, it is necessary to examine the following:

    • The meaning of Joint Employer and its significance
    • A background of NLRB
    • Brief background to the proposed rule namely examines the rule laid down in the two cases of Browning-Ferris and Hy-Brand.

    Joint-Employer

    Joint Employer is the legal term used to refer to the co-employment relationship among two or more organizations that exercise a certain level of control over the same employee or group of employees. Joint Employers usually share some degree of liability over the shared employees.

    There are two types of Joint-Employment:

    Horizontal Joint-Employment- under this type, the employee has multiple employers. For instance, a doctor who distributes his practice between two separate corporate entities.

    Vertical Joint-Employment- This is focused on economic realities of employment, where one entity is in service to another. A suitable example of this type is where an employee is hired into a firm through a staffing agency or a temp agency.

    The Significance of defining Joint-Employer

    Joint-Employment of either type involves increase liability and compliance problems. For instance, in the case of Horizontal Joint-Employment, since the employee distributes his time between two or more practices, common legal issues that arise between the employers are with regard to overtime pay, travel time, eligibility for benefits (where the employee may be entitled to full-time benefits), and the complexity surrounding the Workers' Compensation.

    However, in Vertical Joint-Employment, the employee typically works for only one service, without distributing their time. This involves a different set of complications. For instance, when an employee is obtained through a temp agency or staff agency, the hiring company can be held responsible for the Agency's improper employment practices. Say the Agency has been failing to pay overtime to the employees, the penalties could be leveled against both the Agency as well as the hiring company.

    The National Labor Relations Board (NLRB)

    The NLRB, founded in 1935, is an independent federal agency protecting the rights of the employees in the private sector to join together to improve their working conditions and wages.

    The Board has a five-member panel, elected by the President for a five-year term and acts a quasi-judicial body in deciding disputes under administrative proceedings.

    The Board carries out the following activities:

    • The NLRB takes actions to safeguard the rights of employees to organize and to decide whether they need unions to serve as the bargaining representative with the employer.
    • The Boards helps prevent unfair labor practices and offer remedies to the violations committed by the private sector employers and unions.
    • It fosters settlements rather than resort to litigation when the Board finds merit on the accusations of unfair labor practices.
    • The Board also seeks enforcement of its orders, and where the concerned company or union fails to do so, the General Counsel will seek enforcement by filing a suit with the U.S Court of Appeals. The parties subject to the order also has recourse to request the federal courts to review the order passed by the Board.

    Brief Background to the Proposed Rule

    To provide clarity to the Board's proposed definition of Joint-Employers, it is necessary to examine the Board's decisions in two cases, namely:

    Case 1- Browning-Ferris Industries of California, Inc., 362 NLRB 186; and

    Case 2- Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 

    CASE 1- Browning-Ferris Industries of California, Inc., 362 NLRB 186 (2015)

    Issue: whether Browning-Ferris Industries (BFI) and Leadpoint Business Services (Leadpoint) are joint-employers of the screen cleaners, housekeepers, and sorters.

    The Facts of the Case:

    BFI owned and operated a recycling facility, which essentially sorted the materials received into separate commodities and after recycling, sold them to other businesses. BFI solely employed approximately 60 employers, who were part of an existing separate bargaining unit represented by the Union. Workers were provided by Leadpoint to BFI to work on the platforms and sort the materials as they passed through the conveyor belts.

    The relationship between BFI and Leadpoint was governed by a temporary service agreement which stated that the Leadpoint is the sole employer of the workers supplied by it and contains a disclosure that nothing in the said Agreement can construe the existence of an employment relationship between BFI and the works supplied by Leadpoint.

    Examination of the relationship between BFI, Leadpoint, and its workers:

    • Management Structure: Both companies employed separate supervisors and lead workers at the facilities; they also had separate human resource departments.
    • Hiring Process: The Agreement provided Leadpoint with authority to recruit, interview, test select, and hire the workers for BFI, in accordance with the required qualifications, applicable laws, and instructions from BFI.
    • Termination and Disciplinary actions: Though the Agreement assigned Leadpoint with the sole responsibility to discipline, counsel, evaluate, review and terminate any employee assigned to BFI, authority was also granted to BFI to reject any worker or discontinue the service of such worker for any or no reason.
    • Scheduling: BFI decided the working hours schedule of the facility while Leadpoint, who had no input on shift schedules, only determined the shifts in which the employees will work. However, if BFI decided to run overtime to complete a particular task, it conveyed the decision to the Leadpoint Shift manager who then decided which workers shall stay overtime to complete the task.
    • Pay Rates:  The Agreement included a rate schedule which required BFI to compensate Leadpoint for the wages of the workers along with a specified percentage markup. Although the Agreement recognized Leadpoint as the sole entity to determine the pay rates of its workers, it couldn't, however, pay in excess of the pay rate without the prior approval of the BFI.
    • Work Processes: BFI determined which material streams ran each day, provided Leadpoint with a target headcount of workers required, and also dictated the number of workers assigned to each stream. However, Leadpoint assigned the posts for each individual worker.

    Ruling by the National Labor Relations Board

    The NLRB reversed the Regional Director's decision that Leadpoint is the sole employer of the concerned employees and held that both BFI and Leadpoint to be Joint-Employers of the said employees. The NLRB also laid down a standard for determining joint-employment.

    The new standard dictated that the Board may find two or more employers to be joint-employers of the same employees if they share the responsibility of determining the essential terms and conditions of the employment. The initial inquiry with this regard is where there is common-law employment, which when confirmed, then shifts to whether the putative employer has any sufficient control over the terms and conditions of the employees' employment. The deciding factor in both these questions was the existence, extent, an object of control exercised by the putative joint-employer. This includes the power of decisions in matters relating to hiring, firing, supervision, discipline, and direction.

    The Board reversed the requirement that the putative employer must not only possess the authority, but must also exercise the same direction, immediately, and not in a limited manner. The Board held that what is essential is the actual exercise of the authority whether direct or indirect.

    To summarize, the Board established the standard that for an employer to be considered as a joint-employer, it is essential that such an employer is conferred with the authority and control to determine the terms and conditions of the employment; this is regardless of whether such power is exercised at all, or exercised directly or indirectly.

    CASE 2- Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017)

    Issue: whether Hy-Brand Industrial Ltd (Hy-Brand) and Brandt Construction Co. (Brandt) are collectively joint-employers or single employers for the purposes of the National Labor Relations Act (NLRA)?

    The Facts of the Case

    Charles Brandt and his three sons owned two seemingly separate construction businesses- Hy-Brand and Brandt. The former carried out work on steel warehouses and other structures with employment of about 10 workers, while, the latter largely undertook public works and other construction projects, employing over 140 employees.

    All four principals had the same ownership interest and played the same management role in both the entities. They maintained identical workplace rules, shared a single payroll and benefits administrator, and provided the same benefits to its employees.

    There was even evidence of interrelated operations between the entities, where the employees worked together, shared equipment, and performed construction services for the other entity.

    In 2015, five Hy-Brand employees and two Brandt employees undertook a strike to protest against the unsafe working conditions, substandard wages, and benefits provided to the workers. This protest consequently led to them being fired.

    There was no dispute over the commission of the said unlawful act or regarding the legal status of the two entities and the principals, that is, the Brandt family.

    All the facts pointed towards the two entities being considered as a single employer since they shared common ownership, management, control of labor relations, and even carried out interrelated operations.

    The NLRB agreed with the decision of the Administrative Law Judge in its decision that HY-Brand and Brandt are joint-employers but disagreed on the legal standard (Browning-Ferris standard) that was applied by the judge in deciding the same.

    The NLRB, in this case, rejected the standard set in the Browning-Ferris case for the following reasons:

  • The definition provided exceeded the definitions of "employee" and "employer" under the National Labor Relations Act and the common law limits that the Supreme Court and Congress have established as necessary to comply with.
  • The said decision incorrectly relied upon the notion that the conditions present were unique to the modern economy when in fact the practice of subcontracting, temporary or contingent employment, and outsourcing subsisted before the passing of the NLRA,
  • The decision created a standard that was vague and ill-standard, which has the possibility of imposing bargaining obligations on multiple entities under various business relationships. The decision also failed to provide guidance as to when and how the parties may contract for the performance of work, without being considered as joint-employers.
  • Board's Decision

    The NLRB, in the above case, decided to overrule the Browning-Ferris standard and returned to the standard that existed prior to such decision. The said standard stated that to establish a Joint-Employer relationship, there must be evidence of actual exercised control by the alleged joint-employer entities over the essential employment terms and not merely have a reserved right to exercise the control. The control must be immediate and direct, rather than indirect as under the Browning-Ferris standard, which implies that a joint-employer status will not prevail from the control that is limited and routine.

    NLRB's Proposed New Definition 

    The Board's proposed rule defines the standard for determining a joint-employer relationship. Under S 2 (2) of the NLRA, an employer may be considered a joint-employer of a separate employer's employees only if the two employers share and determine together the employee's essential terms and conditions of employment. The employer must possess and actually exercise a substantial degree of direct and immediate control over the essential terms and conditions of the employee's service in a matter that is not limited or routine.

    This definition as we can see would narrow the standard for establishing a joint-employer relationship to what was followed from 1984 to 2015, prior to the standard laid down in the Browning-Ferris decision. Also, on 26 February 2018, the NLRB issued a notice vacating the standard set under the Hy-Brand decision.

    Conclusion

    The NLRB's new proposed rule if passed, would narrow the standard of determining the existence of a joint-employer relationship. The new rule primarily requires that the concerned employer must have had not just theoretical or reserved right to exercise the control (directly or indirectly), but should have actually exercised such authority in a substantial, direct, and immediate manner over the concerned employees.

    This new definition could offer wider protection to franchise companies, businesses using subcontractors, staff or temp agencies, and any other entity that has or is perceived to carry out interconnected operations.

    ]]>
    Sun, 03 Feb 2019 12:35:00 GMT
    <![CDATA[The Montreal Convention]]> The Montreal Convention: Establishing unity and predictability for international carriage regulations

    Every day, around the world, approximately 93,000 flights ascend from 9,000 airports. Having become a regular mode of travel and statistically recognized as exponentially safer than driving, most aircraft passengers would not think to question the liability responsibilities of a carrier. Unfortunately, accidents (whether that be injury, death, damage, or delay) are inevitable. Aware of such risk, the international community began enacting international carriage protocol safeguarding compensation for victims of aircraft calamities in 1929. Eighty-nine years later, and regularly reviewed by modern-day courts, multilateral treaties establishing compensation rights have evolved to suffice the developing needs of the international landscape.

    Overview: 1999 Montreal Convention on International Carriage

    Critical Multilateral Carriage Agreements Preceding the Montreal Convention 

    Entered into effect on 4 November 2003, the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention) served to replace the previous international air carriage liabilities governed by the 1929 Warsaw Convention. The purpose of the Warsaw Convention was to outline the regulated obligations of international carriages of people, luggage, or goods. Within the articles of the 1929 Convention, responsibilities of the carrier by air comprised: death or injury of a passenger, bodily harm caused by another passenger (Article 17), and destruction of or damage to registered luggage or goods (Article 18). Additionally, the multilateral treaty structured guidance for carriers around the allocation and detailing of passenger tickets (Article 3), luggage tickets (Article 4), and air consignment notes. The Warsaw Convention was transformative in its unification of claims regulations stemming from international air transportation. Through fashioning a thorough and restrictive system of liabilities, air carriers were legally shielded from enduring potentially calamitous responsibility. Through the Warsaw Convention, all Member States agreed to a compulsory and uniform law surrounding international carriage by air.

    In 1955, the Hague Protocol (Warsaw-Hague) was signed. This protocol amended the Warsaw Convention. During this era, modernization and bouts of an economic recession caused an international abandonment of the Gold Standard. With countries now relying upon currency, the price of gold could not be converted freely. As a result, Warsaw's liability limits began to plummet in value. Regarding carrier liability of passenger death or injury, only a small population of passengers were insured or aware of the liability limit. Each of these issues listed above served a critical role in passing the Hague Protocol. The treaty doubled passenger liability limits. For countries such as the United States, this alteration was still not sufficient.

    In 1965, the United States condemned the Warsaw Convention, requiring flights in and out of U.S. territory to abide by the U.S. drafted Montreal Intercarrier Agreement. Under this agreement, all international carriers were to waive Article 20(1) of the Warsaw Convention. Under Article 20(1), a carrier was exempted from liability "if he proves that he and his agents have taken all necessary measures to avoid damage or that it was impossible for him or them to take such measures." In effect, the United States required carriers to adopt absolute liability within specific circumstances. Members of the Warsaw Convention did not respond well to the U.S.' demands. As a result, a compromise was negotiated.

    The 1971 Guatemala City Protocol attempted to resolve tensions between the Warsaw States and the U.S. While the Protocol did not come into force, it was imperative to the development of the 1999 Montreal Convention as attributes of the Protocol were fashioned into the Convention text. The Guatemala City Protocol was concerned only with the carriage of passengers and baggage. Therefore, Articles 3 and 4 of the Warsaw Convention, which provides structure for passenger and luggage tickets, were rewritten in favor of the carrier. Essentially, penalties for non-compliance were eliminated, and Article 17(1) was modified to place absolute liability on the carrier for serious injury or death of a passenger (unless the condition arose from a state of health). Similarly, the carrier was to assume absolute liability for damage or loss (unless resulting from baggage default). To appeal to U.S. demands, "the limit of Warsaw-Hague for passenger death and injury…[was] increased six-fold to roughly US $100,000 (Article 22 (1)(a))." Article 25 (pertaining to carrier misconduct) was removed; through this omittance, passengers were no longer allowed to exceed claim limits related to wilful carrier misconduct. To permit potential for the further increase of limits resulting from passenger death, Article 45(a) allowed States to establish (within their own territory) a "…system to supplement the compensation payable to claimants under the Convention in respect of death, or personal injury, of passengers."

    Following the Guatemala City Protocol, in 1975, Montreal Additional Protocols Nos 1, 2, 3, and 4 were drafted. These protocols were developed to "…alter the currency united used in Warsaw, Warsaw-Hague and…Warsaw-Hague-Guatemala City Convention from gold francs to IMF Special Drawing Rights…." No 4 of the Additional Protocol amended and modernized carriage of cargo requirements previously set forth in Warsaw-Hague.

    1974 onwards, many members (predominantly from industrialized countries) of the Warsaw-Hague agreement continued to remain deeply displeased with the Hague limit surrounding carrier liability limit for passenger death and sustained injury. These countries became known as the Malta Group, banding together to persuade carriers to raise their liability limit. Their Malta agreement provided greater benefit to passengers than the Montreal Protocols. As a result, the Montreal Protocols began to receive strong backlash from the international community, and airlines and governments foresaw an unquestionable need to reform the previous agreement. It was during this time that the "a radical solution was thought necessary and gradually the idea of absolute, unlimited, and assured liability emerged."

    The Montreal Convention

    Considering the extensive history prefacing the 1999 Convention, the agreement's guiding principle is set out to protect "…the interests of consumers in the international carriage by air, and even more specifically the need for equitable compensation based on the principle of restitution." The Montreal Convention was created using elements of the previous carriage conventions and protocols. Three important and noticeable differences within the 1999 Convention include:

    • Modernization:

    Under the 1999 Convention, various articles such as 3(1) and 4(1) demonstrate carriage laws' evolution into a digitalized era. Differing from previous agreements, Chapter II of the provisions: "Documentation and Duties," allows for documents of carriage and records of cargo to be "delivered." Further, requirements for individual or collective documents of carriage have been trimmed. Article 3(1) breaks down the carriage requirements by stating documents of carriage should contain "(a) an indication of the places of departure and destination…(b) if the places of departure and destination are within the territory of a single State Party, one or more agreed stopping places being within the territory of another State, an indication of at least one such stopping place." Additionally, previous provisions in the Warsaw and Warsaw-Hague articles establishing non-compliance documentation regulations are eliminated.

    • Updated Provisions Surrounding Carrier Liability:

    Recognizing "the low limits of the Warsaw System on compensation for passenger death or injury were what had been ailing it for some 50 years," a new two-tier carrier liability system was developed. The first-tier, under Article 21(1), forces a carrier to adopts absolute liability in the case of death or injury. The corresponding Act (21(1)) states, "For damage arising under paragraph 1 of Article 17 not exceeding 100,000 Special Drawing Rights for each passenger, the carrier shall not be able to exclude or limit its liability." Notably, Article 21 confronts the previous low limits of the Warsaw System, setting a new limit at SDR 100,000. The second-tier, detailed in Article 21(2), places the burden of proof upon the carrier. For a carrier to not be held liable for damages under Article 17(1), the carrier must prove: "(a) such damage was not due to the negligence or other wrongful act or omission of the carrier or its servants or agents…[or] (b) such damage was solely due to the negligence or other wrongful act or omission of a third party."

    Additionally, the Montreal Convention created greater clarity surrounding carrier liability for baggage and cargo delay. Article 22(1) specifies carrier liability per person (for a delay) is "limited to 4,150 Special Drawing Rights." This liability is broken down to include a limit of 1,000 SDR for baggage (destruction, loss, or damage), and a limit of 17 SDR per kilogram for cargo (destruction, loss, damage). Should a carrier have taken reasonable measures to have avoided damage (Article 22(5)), the carrier is not considered liable.

    • Jurisdiction:

    Article 33(2) allows an action to be brought before "the territory of a State Party in which at the time of the accident the passenger has his or her principal or permanent residence and to or from which the carrier operates services for the carriage of passengers by air, either on its own aircraft, or on another carrier's aircraft pursuant to a commercial agreement…." Previously, the Warsaw Convention restricted its jurisdiction (Article 28) to "the territory of either one of the High Contracting Parties, either before the Court having jurisdiction where the carrier is ordinarily resident or has his principal place of business…."

    The UAE, The Montreal Convention, and Death or Bodily Injury on an Aircraft

    The UAE is a signatory to the 1999 Montreal Convention. In 2000, Federal Decree No. 13 was enacted with the purpose of complimenting the Convention's requirements. Over the last 15 years, the Abu Dhabi Courts have seen a sharp influx in the number of cases involving claims attributed to the Montreal Convention. Recently, a discussion has surrounded the parameter of the definition "accident" detailed in Article 17.

    March 2016, the Abu Dhabi Court of First Instance examined whether, under UAE Federal Law No. 17 (1991), UAE Federal Law No.9 (2005), and Article 17 of the Montreal Convention, an airline is considered liable for the unintentional death of a passenger.  In the incident, the Abu Dhabi Court had to consider whether the term 'accident' in Article 17 of the Montreal Convention was applicable for a passenger who had experienced a fatal heart attack aboard an in-flight aircraft. The Plaintiffs claimed the airline was liable under several laws, including Article 17 of the Montreal Convention, UAE Civil Law, and Sharia Law. The Court's discussion referred to relevant Convention cases, local Sharia law, and local UAE Court procedure. Acknowledging previous U.S. holdings such as Air France v Saks (which concluded Article 17 is only applicable if death or injury transpires out of an uncommon event), Ford v Malaysian Airlines Systems Berhard (concluding unsuccessful attempts at medical assistance do not classify as an accident), Singh v Caribbean Airlines Limited (determining heightened illness following administration of in-flight medical procedure does not constitute an accident), and Kyrs v Lufthansa (asserting the inability of an aircraft to emergency land while a passenger experiences a heart attack does not find an accident).  In court, an aviation expert successfully argued the international carrier was not accountable for the passenger's fatality. The specialist expressed that an emergency landing was not an option as the aircraft was flying overseas (and not on the ground medical guidance was given to do so), and the airline offered adequate medical assistance in an attempt to halt the heart attack. Relying on this opinion and considering previous international verdicts, the UAE Court determined the airline held no liability. According to the Court, the carrier could not be held responsible for death resulting from an act of God.

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    Sun, 03 Feb 2019 11:49:00 GMT
    <![CDATA[Anti-Bribery Legislation UAE]]> Anti-Bribery Legislation in the UAE

    Subsequent to the economic stagnation of 2008, the UAE assumed proactive measures to indict individuals who violated the Federal Penal Code's anti-bribery legislation. Despite the surfacing of several prominent cases, the regulations, which were enacted in the 1980s, still remain wholly foreign to many businesses operating in the Emirates. This unfamiliarity likely stems in part from the association of corruption with government institutions, not individual companies. This overwhelming lack of awareness has continued even through numerous legislative texts beyond the Federal Penal code, such as the Dubai Penal Code, Human Resources Law, Commercial Companies Law, and Federal Money Laundering Law which have been established to curtail bribery within both private and public sectors. Collectively, these governmental efforts have aided the UAE in maintaining a commendable corruption perception rank of 23 by Transparency International. This article will provide an overview to UAE anti-bribery legislation, assessing federal, state, and international standards.

    The UAE's Federal Penal Code

    Articles 234 through Article 239 of the Federal Penal Code (the "Code") comprises rules prohibiting bribery for employees working in either private or public sectors. These provisions, which are located under Part Two- Crimes Pertaining to Public Office (Bribery), can be interpreted as the following:

    I. Article 234:

    Any individual who is a public service employee will be incarcerated if they accept a "gift or privilege of any kind or any promise thereof" for a function transpired during their duty.

    II. Article 235:

    Branching off the previous act, Article 235 specifies that in an instance where a breach of Article 234 does occur, the public service offender will be imprisoned for a maximum of no more than ten years. It is important to note that an individual can violate Article 234 if they are accepting gestures on behalf of another person. Should an offense be committed in regard to an act of duty, the offender will be punished through detention.

    III. Article 236:

    If a public official or individual involved with a public service accepts (for himself or another) the advantages listed in Article 234 for an act "not included in his duties" (this condition is what sets Article 236 apart from Article 235), then that person will be subjected to imprisonment for no more than five years. This Article has been amended to include private sector employees and managers in the legal liability scope.

    IV. Article 237:

    Article 237 details the punishment for individuals who are responsible for extending such gifts or advantages. If an individual is caught presenting an advantage, promise, or gift to an individual "entrusted with a public service" for their duties, the offeror will be confined. The same penalty will apply to any person "who intercedes to influence the briber or the bribed."

    V. Article 238:

    Any individual convicted for bribery will be issued a fine comparable in value to that which they have either accepted or requested. This fine shall be no "less than one thousand Dirhams." Additionally, all accepted gifts will be seized.

    VI. Article 239:

    Any individual who confesses before a case reaches court that they have either bribed or acted as an intermediary for a bribe will be excused from discipline. The same individual will not be exonerated if the disclosure occurs after judicial proceedings are arranged.

    As the acts above demonstrate, the UAE Penal Code bears the capacity to penalize all dimensions fueling a bribery act. Although both GAN Integrity and Transparency International have estimated the UAE's corruption status to be minute, corruption cases are not unfamiliar to Emirates' courts. In 2014, a former Deyaar chief executive was sentenced by the Court of Appeal to 10 years imprisonment for a misuse of power that resulted in the defendant earning Dh20 million. The Court held the executive had taken a bribe and in return knowingly accepted bids which were inflated. As a result of this act, the bribe adversely impacted Deyaar between 2004 and 2007. 

    UAE Bribery Legislation: Beyond the Federal Penal Code

    While the Federal Penal Code provides a backbone to UAE anti-bribery legislation, it is not the only legal text forbidding the act. Emirates such as Dubai and various other Federal decrees have established strict mandates banning bribery practices:

    • Federal Decree Law Number 11 of 2008

    This legislation as amended by Federal Decree Law Number 9 of 2011 and Federal Decree Law Number 17 of 2016, outlines the UAE's Human Resources Law. Establishing a variety of responsibilities for federal entities, employees, and regulations for workplace health and safety, the Human Resources Law also provides policies surrounding "Gifts & Bribes." Under Article 70 of the Decree, five stipulations are presented for employees. These comprise:

    Article 70(1): The acceptance by an employee of "any gifts except for those of a symbolic or promotional nature that bear the logo and name of the presenting party" is forbidden. Concerning a Federal entity, gifts may be accepted under the condition that a recognized and designated "unit" has handled the collection and distribution of gifts. Further, a process for managing the dispersal of the gifts must be founded and enforced by the entity's "unit."

    Article 70(2): All gifts presented are required to be distributed under the respective Federal entity's name, and must pass through the entity's assigned "unit."

    Article 70(3): Employees are "strictly forbidden to offer, give, request or accept any bribe."

    Article 70(4): In respect to Article 70(3), requesting or accepting a bribe includes administering payment, a service, or offering "commercial or moral value" with the intent of debasing the business of a public employee. The Article then defines a list of prohibited intents comprising the corruption of a business: "a) speed up a process that employees are required to perform as part of their work, b) prevent employees from performing their assignments, c) ask an employee to improperly persuade another employee to complete a transaction or take actions in violation of applicable regulations."

    Article 70(5): Should a violation to any of the previous sections under Article 70 occur, the suspected act of bribery will be investigated. If the investigation reveals that an employee "…has paid, received or asked for a bribe," that individual will be turned over to judicial authorities.

    • Federal Laws Number 8 of 1984:

     

    Federal Law Number 8 of 1984 (the Commercial Companies Law) prohibits acts of bribery in context to financial statements and external UAE company auditors. Article 197 of the Federal law outlines restrictions for public and private joint-stock companies. This article "restricts a company from offering [or guaranteeing] any type of cash loan to the chairman of the company or a member of the board of directors." Further, in Article 198, public and private joint-stock companies are forbidden to create "any loans or donations within two years of incorporation of the company unless these donations are made by way of customary gifts from the profits of the company."

    • Federal Law Number 4 of 2002:

    Federal Law Number 4 of 2002, referred to as the Federal Money Laundering Law denotes in Article 2(1) that participation in any of the following property related acts will constitute an offense of money laundering: "a. The conversion, transfer or deposit of Proceeds, with intent to conceal or disguise the illicit origin of such Proceeds, b. The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership or Proceeds, c. The acquisition, possession or use of such Proceeds." The Federal Money Laundering Law constitutes Property as a means which can be derived from an act of bribery (Article 2(2))

    • The Dubai Penal Code 1970:

    Similar to the UAE Federal Penal Code, the Dubai Penal Code comprises provisions on the illegalization of bribery and misuse of public office. Per the 1970 Code, an individual caught either receiving or offering a bribe will be reprimanded. Within the Dubai Penal Code, Article 118 prohibits "the taking of a gratification by a public servant in respect of an official act," Article 119 forbids "taking a gratification in order, by corrupt or illegal means, to influence a public servant in respect of an official act," and Article 121 outlaws "the obtaining of any valuable thing by a public servant, without consideration, from a person concerned in any proceeding or business transacted by such public servants." According to the Penal Code, should an individual violate any of the three articles cited above, punishment via incarceration or fine will ensue. Breach of Articles 118 or 119 will result in either maximum imprisonment for no more than three years or a maximum fine of 5,000 riyals. Violation of Article 121 will result in either maximum one-year imprisonment, or a fine not exceeding 1,000 riyals.

    The UAE and the United Nations Convention Against Corruption (UNCAC)

    Establishing status as a signatory to the United Nations Convention Against Corruption in 2005, the UAE declared alignment with the United Nation's (UN) concern surrounding the "seriousness of problems and threats posed by corruption to the stability and security of societies" (Preamble). Upon becoming a Member Party, the UAE agreed to a series of provisions combatting the corrosive effects of corruption. Specifically, pertaining to bribery, Member Parties agree to the importance of focusing on the criminalization of bribery for both the public and private sectors. The Convention contains four articles which articulate regulations on acts of bribery; these include:

    Article 12:

    Article 12 of the UN Convention Against Corruption addresses measures a state should employ to prevent corruptive practices within their private sector. Article 12.4 calls upon Members such as the UAE, to prohibit "tax deductibility of expenses that constitute bribes" or any other various costs sustained from corrupt behavior.

    Article 15:

    Article 15 of the Convention outlines the criminalization of bribery for national public officials. Under this provision, the UAE has agreed to establish legislative standards to penalize intentional "…promise[s], offering[s] or giving[s], to a public official, directly or indirectly…for the official himself…or another person or entity." Article 15(a) stipulates these gestures must be committed with the intent to interject the official's duties. Similarly, Article 15(b) forbids the act of receiving or accepting the bribes delineated in 15(a). Article 15 concerns itself with both direct and indirect acceptance of a bribe.

    Article 16:

    In contrast to the jurisdiction of Article 15, Article 16 strongly encourages the UAE to generate legislative doctrine criminalizing "the promise, offering or giving to a foreign public official or an official of a public international organization…in order that the official act or refrain from acting in the exercise of his or her official duties…." The scope of prohibited acts of bribery under Article 16(1) is targeted at offerings which will influence the handling of international business. The act of acquiring international handouts (either directly for the foreign public official's use or for another individual) is criminalized in Article 16(2).

    Article 21:

    While Articles 15 and 16 of the Convention addressed the construction of anti-bribery domestic law for public officials, Article 21 provides suggestions for punishing bribery in the private sector. State Parties are advised to enact laws criminalizing the intentional "…promise, offering or giving, directly or indirectly, of an undue advantage to any person who directs or works, in any capacity, for a private sector entity…." The article highlights private sector bribery relevant to financial, economic, and commercial enterprises. Just as the two previous articles mentioned, the act of "solicitation or acceptance" of the contribution is prescribed as well (Article 21(b)).

    For the purpose of this article, the UN Convention Against Corruption was evaluated to illustrate the congruity existing between the UAE Penal Code and binding multilateral treaties. Upon close inspection, one perceives the notable similarity between the 2005 Convention and the UAE's anti-bribery legislation.

     

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    Sun, 03 Feb 2019 11:31:00 GMT
    <![CDATA[protection of Geographical Indication]]> Intellectual Property Rights - Requirement of protection of 'Geographical Indication' and its obligations on the UAE

    "There is certainly no kind of property, in the nature of things, so much his own, as the works which a person originates from his own creative imagination: And when he has spent great part of his life in study, wasted his time, his fortune & perhaps his health in improving his knowledge & correcting his taste, it is a principle of natural justice that he should be entitled to the profits arising from the sale of his works as a compensation for his labor in producing them, & his risk of reputation in offering them to the public." – Joel Barlow

           Intellectual Property Rights are a set of proprietary rights that are granted to the Individuals over their creation. The holder or owners of these set of rights are entitled to various exclusive privileges and immunities. An example of intellectual property rights includes the right which is available to a musician or an author of a publication from his work being infringed or violated. These set of rights differ and vary from country to country. Intellectual property applies to the various creations of an individual such as inventions, artistic works, literary works, designs, etc.

    However, in the case of a copyright, the idea must be expressed in a material form, in order, to be entitled to the benefits of protection. Intellectual property as a right, was recognized for the first time in the Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886). Similar to patent and trademark, 'Geographical Indication' is also an essential type of intellectual property right.

    This article will analyse the need for the protection of 'Geographical Indication', as well as, its National and International obligations within the UAE:

    Defining 'Geographical Indication'

    'Geographical indication', being a type of intellectual property right, is an important aspect of the intellectual property. The term 'Geographical Indication' refers to a sign which has a specific geographical origin. Such a sign, when used on the goods, indicate that the goods possess a certain quality, reputation, and such other characteristic attributes which belongs to their place of origin.

    In order for a 'GI' to be applicable to a particular product, the sign affixed to the product must indicate its place of origin thereby indicating its unique quality. 'Geographical Indication' as a right is covered under the Paris Convention for the Protection of Industrial Property (1883), which is administered by the WIPO and it is also covered under the TRIPS agreement. Under the WIPO, the Standing Committee (SCT) on the Law of Trademarks, Industrial Designs, and Geographical Indications is a forum which discusses and develops policies and laws relating to Geographical Indications. 

    The TRIPS Agreement defines geographical indication as "indications which identify a good as originating in the territory of a Member, or a region, or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin."

    The concept of Geographical Indication:

    Earlier the concept of "Geographical Indication" was mainly used to denote agricultural products belonging to a particular region, since various factors such as soil and climate of the region would make an impact on the quality of the product. However, with globalization and development, now these indications are used on a wide range of products, whether manufactured or natural; and they convey assurance of being unique and having a particular quality which is attributable to a geographical locality, region, or a particular country. The indication of the origin may relate to a town, as well as, for example, Swiss Chocolates, Pinggu Peaches, etc.

    The philosophy behind Geographical Indication:

    The 'Geographical Indication' protection is recognized as an intellectual property right, which is accessible to the consumer to use such intellectual property and to restrict others from making any similar use of such property. Since 'Geographical Indication' is a sign which certifies that the product possesses certain qualities and it is necessary to protect them. The core idea behind the development of this concept was to protect an individual from the violation of his privacy and the form of his expression.    Therefore, if the concept of 'Geographical Indication' is not protected, it would definitely violate the principles of natural justice.     

    Need for protection of Geographical Indication:

    Geographical Indications denote the quality, value, and peculiarity which a particular product possesses and therefore, they have a certain amount of reputation affixed to it. This kind of reputation is based or dependent upon the place of the product's origin and the value attached to it; therefore, if ample protection is not provided, the product maybe misrepresented which may cause confusion to the general public or to the consumer who violates the principles of protection of Intellectual property rights.  Use of indications by persons who are not authorized to use it deceives the consumers, and moreover, it affects the reputation of the genuine product. 

    Example: As we all know 'Darjeeling Tea' is world renowned and has a certain characteristic attribute attached to it. It possesses such reputation owing to its geographical origin. Therefore, if a person produces a product in the name of 'Darjeeling Tea' without it being produced in the Darjeeling gardens, it would have a deleterious effect on its consumers, since it is purchased with a genuine trust and confidence. Thus the 'GI' right grants a monopoly right to the owner from his product being infringed. Another example is that of the Comté Cheese, for the production of which, it is necessary that the milk should be from the French Simmental breeds.

    Some of the benefits of the grant of 'Geographical Indication' are the following:

  • Entitled to take action against violation or infringement of the commodity or goods and services.
  • Increase in brand value.
  • Promotes economic prosperity.
  • Since the application of 'Geographical Indication' has been widely recognized throughout the world, they stand on an equal footing with other intellectual property rights such as trademark and copyrights. The growth of technological advancement has also resulted in an increase in the manufacturing process and new methods of production. Therefore, the need for the protection of geographical indication is of utmost importance.

    Hindrance for the protection of Geographical Indication:

  • If the Commodity/product to be protected is generic in character, in such cases, the protection may not be granted. In other words, if the sign affixed to the product is a common name for the same kind of products then 'GI' may not be granted.
  • If the 'GI' which is to be granted is already in existence, in such cases protection may not be granted.       
  • Article 22 of the TRIPs Agreement lays down the rule that, all the member states must provide their own set of national laws for the protection of Geographical Indication. Further, the Articles 23 and 24 of the TRIPs Agreement also deals with the protection of 'Geographical Indication.' Broadly speaking, though several international conventions have laid down the rules relating to the protection of Geographical Indication, it is the concerned Nation's responsibility to provide for and implement its own set of rules and regulations for the protection of Geographical Indication.  The UAE, being a member of the TRIPS Agreement, WTO, and WIPO since April 10, 1996, is devoted to complying with the provisions which regulate the geographical indications and various other aspects of the Intellectual Property Laws. As a result, apart from being a member and conforming to several International Conventions, the UAE has also adopted various national legislation to enforce intellectual property laws in the UAE, such as the following:

    Main Legislations-

  • Federal Law Number 17 of 2009 on the Protection of New Plant Varieties(2010)
  • Federal Law Number 31 of 2006 pertaining to the Industrial Regulation and Protection of Patents, Industrial Drawings, and Designs (2002).
  • Federal Law Number 7 of 2002 concerning Copyrights and Neighboring Rights (2002).
  • Federal Law Number 37 of 1992 on Trademarks (as amended by Law No.19 of 2000 and Law Number 8 of 2002). 
  • Laws relating to Intellectual Property-

  • Federal Decree Law Number 5 of 2012 on Combating Cybercrimes (2012).
  • Federal Law Number 7 of 2008 on the National Center for Documentation and Research (2008).
  • Federal Law Number 6 of 2008 on Establishing a National Council for Tourism and Antiquities (2008).
  • Federal Law by Decree Number 3 of 2003 regarding the Organization of Telecommunications Sector (as amended) (2008).
  • Federal Decree Number 85 of 2007 on the Common Customs Law for the Arab States of the Gulf (2007).
  • Federal Law Number 24 of 2006 concerning Consumer Protection (2006).
  • Federal Law Number 1 of 2006 on Electronic Commerce and Transactions (2006).
  • Common Customs Law of the Gulf Cooperation Council (GCC) of 2003, with its Rules of Implementation and Explanatory Notes (2003).
  • Federal Law by Decree Number 3 of 2003 on Telecom Law (2003).
  • Law Number 18 of 1993 on Commercial Transactions (1993).
  • Law Number 1 of 1992 of the Emirate of Sharjah on Antiquities (1992).
  • Law Number 8 of 1984 on Commercial Companies, as amended (1984).
  • Federal Judicial Authority Law Number 3 of 1983 (1983).
  • Federal Law Number 15 of 1980 on the Press and Publication (1980).
  • Federal Law Number 8 of 1980 on Regulation of Labour Relation (1980).
  • Law Number 5 of 1973 on Commercial Register (1973).
  • The Federal Law Number 8 of 2002, as mentioned above, provides provisions for the protection of Geographical Indication and it states as the following:

    Article (3) - The following shall not be registered as trademarks or as component elements thereof-

    (6) "Geographical names and data when they would create uncertainty as to the origin or source of the goods, the products or the services."

    (8) "Marks which are likely to deceive the public or which contain false indications as to the origin or source of the products or the services or as to its characteristics, as well as Marks containing an indication of a fictitious, falsified or counterfeit trade name."

    Therefore, it evident from the above set of legislation that the UAE not only grants protection to patents, copyrights, plant varieties, and industrial designs but also advances protection to 'Geographical Indications' as well. The ambit of the Federal Law No.8 of 2002 is wide, and it gives protection not only to a particular commodity but also includes a wide range of goods and services. Further, Geographical Indications are not only protected through National legislation and International agreements but also through concepts which prevent unfair competitions.

    Conclusion

    Therefore, the concept of 'Geographical Indication' is an instrument for linking the quality of a commodity and its geographical origin. It is pertinent to note that with the current globalization and trade liberalization, Geographical Indication has become a subject matter of great significance. Further, the UAE is able to fully reap the advantages of geographical indications and can grant adequate protection to various goods and commodities from infringement. 

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    Sun, 03 Feb 2019 10:34:00 GMT
    <![CDATA[Crime of Aggression]]> A Global Perspective on the Crime of Aggression

    A crime of aggression is committed when a political or military leader of a State causes the respective State to use force illegally against another State, provided that the force used constitutes a violation of the United Nations Charter in its character, gravity, and scale. The crime of aggression forms one of the four crimes over which the International Criminal Court's (ICC) jurisdiction falls upon.

    The offense set out in Article 5 of the Rome Statute was suspended until the State Parties agreed upon a definition and its terms of application. This was successfully completed at the 2010 Kampala Review Conference and was formally adopted in the Assembly of State Parties in December 2017 to activate the Court's jurisdiction over the crime of aggression in July 2018. Thus, marking its 20th anniversary, the ICC's prosecutorial remit was extended, with effect on July 17, 2018, to include the crime of aggression.

    In this article we examine the following:

    What constitutes a crime of aggression?

    What is the historical background to the persecution of the crime of aggression?

    What is the Jurisdiction and Procedure of the ICC?

     

    CRIMES OF AGGRESSION

    An act of aggression, as defined under Article 8(2), means the use of armed force by a State against the sovereignty, political independence, or territorial integrity of another State, or in any other manner inconsistent with the United Nations Charter.

    Article 8(1) of the Rome Statute defines a crime of aggression as where a person who is in a position of power to exercise effective control or direct the political or military action of a State and such person plans, prepares, initiates or executes an act of aggression which because of its character, gravity, and scale constitutes a violation of the United Nations Charter.

    Regardless of a declaration of war, the following acts shall, in accordance with the UN General Assembly Resolution 3314 of December 1974, qualify as an act of aggression:

    (a)    Using the armed forces of a State to

                               i.Invade or attack the territory of another State; or resulting military occupation, however temporary; or any annexation with the use of force on the territory of another State or part thereof;

                             ii.Bombard or use of weapons against the territory of another State;

                           iii.Blockade the ports or coasts of another State;

                           iv.Attack the land, sea or air forces including the air and marine fleets of another State;

                                v.Where the armed forces of a State within the territory of another State on the agreement, and using such force in contravention of such agreement or an extension beyond its period of termination;

    (b)    The action of a State allowing the armed forces of another State to occupy its territory, in order to commit an act of aggression against a Third State;

    (c)     Where State sends armed bands, irregulars, groups, or mercenaries to carry out acts of armed violence against another State to such extent that it amounts to the acts listed above or substantial involvement in it.

     

    HISTORICAL BACKGROUND

    Prior to World War I, Carl von Clausewitz described a mere continuation of state politics. This depicted the concept of war which was seen as an inherited right of the State. This concept was changed with the Peace Treaty of Versailles of 1919 which condemned war, an act of aggression, as a supreme offense which is against international morality and the sanctity of treaties. The Kellogg-Briand in 1928, condemned recourse to war for resolving international controversies and renounced it as an instrument of national policy for State interrelations.

    Soon after World War II, the Nuremberg Tribunals, established by the London Charter, criminalized the act of waging a war of aggression. The General Assembly of the United Nations (UNGA) recognized the principles laid down in Nuremberg as international law. The Nuremberg principles were also used as a model for the Tokyo judgment in 1948.

    The UNGA, through recognizing the London Charter as international law, discarded the notion that war-making was an inherent right of a State, rather, under certain circumstances the act constituted an international crime.

    Despite this development, and the worldwide recognition that war needs to be condemned as an international crime, the crime of aggression is intertwined with other historical debates that remained unresolved within the field of international law, which proved to be impossible to define.

    Therefore, the definition of the crime of aggression was adopted by the UNGA in 1974 which, however, was riddled with anachronistic concepts established during the Cold War and undermined its normative significance. This was primarily because the definition was used as a strategic asset by the State who sought to control it in order to mobilize it to their benefit against their geopolitical opponents. As a result, the legacy of the Nuremberg Tribunal was left a dream unfulfilled with no other alleged preparators of the said crime being prosecuted since 1947. Despite this, the crime of aggression received recognition from scholars and participants in the Rome Conference in 1989, and was made a significant addition to the International Criminal Court's jurisdiction ratione materiae

    The crime was recognized as one of the most serious crimes of concern to the international community under the Statute of Rome. However, this jurisdiction was precluded from being exercised by the ICC since the crime still remained undefined. A Special Working Group was established during the First Session of the Assembly of State Parties in 2002, with the duty to prepare a draft to address the main problems arising with the definition of the crime of aggression.  The Special Working Group's proposals on the crime of aggression were finalized in 2009 and eventually became the definition adopted at the Kampala Review Conference in 2010.

     

    INTERNATIONAL CRIMINAL COURT'S JURISDICTION OVER CRIMES OF AGGRESSION

    The International Criminal Court was created in 2002, with the aim to put an end to the immunity enjoyed by the preparators of the most severe crimes that plagued the international community as well as prevent the commission of such crimes in the future. The ICC has the jurisdiction to prosecute any individual anywhere in the world but to indict criminals who belong to a State which has not ratified the ICC Statute, a resolution from the United Nations Security Council is required.

     

    Ø  EXTENT OF THE COURT'S JURISDICTION

    Under Article 12 of the Rome Statute, and in accordance with the principle of jurisdiction ratione temporis (that is the temporal jurisdiction), the ICC can only investigate crimes committed after July 1, 2002, which is when the ICC Statute came into force.

    The ICC has jurisdiction over a particular range of crimes such as genocide, war crimes, crimes against humanity and from 2018, the crime of aggression. The Preamble of the ICC Statute declares these crimes as serious crimes that threaten the security, peace, and well-being of the international community. However, the terms 'peace' and 'justice' have not been defined within the Preamble, which leads to different interpretations.

    Article 15 provided the process to activate the Court's jurisdiction as well as the procedure regarding the State Party's referral, the ICC's proprio moto authority (an action taken without a formal request), and referral by the UN Security Council.

     

    Ø  CONDITIONS FOR THE EXERCISE OF THE JURISDICTION

    The Rome Statute amendments enter into force for a State one year after the ratification or acceptance of such amendments by that State. However, the following two conditions must be met, to enable the Court to exercise its jurisdiction:

    à  The Court can only exercise its jurisdiction after a period of one year from the amendments being ratified by at least 20 RS State Parties; and

    à  After January 1, 2017, the Assembly of State Parties must take a decision by consensus or of at least 2/3 majority, to permit the Court to begin exercising the said jurisdiction.

    Note: As of October 1, 2017, the State parties have ratified the amendments to the crime of aggression, and on July 17, 2018, the Court's jurisdiction has been officially extended to include the crime of aggression. Thereby, upon fulfilling both conditions, the Court may exercise its jurisdiction subject to the following further requirements that need to be fulfilled.

     

     

    Ø  SITUATIONS PERMITTING ICC TO EXERCISE ITS JURISDICTION:

     

    à  Prosecutor's proprio motu investigations and State referrals under Article 15

    In the case of State Party Referral, the Court will be able to exercise its jurisdiction only if the amendments have entered into force for at least one of the States involved with either the victim or the aggressor. If the Prosecutor determines that there is a reasonable basis to proceed with an investigation, then he shall notify the UN Secretary-General of the situation. The UNSC itself possesses the authority to determine the commission of an act of aggression as provided under Article 39 of the UN Charter. The Prosecutor shall allow the UNSC a period of six months to make the determination, and where the UNSC has made the determination that an act of aggression has been committed, the Prosecutor may proceed with the investigation. If the determination is not made in a period of six months, the Prosecutor may, with the authorization of the Pre-Trial Chamber, still proceed with the investigation. Similar conditions apply in the case of an investigation initiated by the Prosecutor on his own motion (proprio motu).

    à  UNSC referrals under Article 15

    If the Security Council refers a situation to the ICC under the powers provided under Chapter VII of the UN Charter, the Prosecutor has the power to investigate any of the four core crimes (under Article 5) committed in any territory by any state's national.

    Under such a situation, the Court is able to extend its jurisdiction over crimes of aggression involving non-State parties and State Parties, irrespective of their individual ratification or opt-out status.

     

    Ø  EXCLUSIONS FROM ICC'S JURISDICTION

     

    à  State Parties have the option to opt-out of the jurisdiction of the Court over crimes of aggression when exercised through state referral or proprio motu powers of the Prosecutor, by submitting a declaration to that end with the Registrar of the Court. Such declaration must be submitted before the commission of the act of aggression.

     

    à  Nationals of non-state parties to the Rome Statute are excluded from the jurisdiction of the ICC over the crime of aggression when it is initiated by the use of proprio motu powers or by state referral, even if the victim state has accepted the jurisdiction.

    However, if the referrals are made by the UNSC, then the Court is able to exercise the jurisdiction over nationals of State and non-state parties over the crimes of aggression committed within its territories or by its nationals.

     

    DRAWBACKS OF THE DEFINITION

    The current definition seems focused only on old wars, where state sovereignty and action played a decisive role in the act of aggression. State actors are continuously becoming of less importance for the use of force since the weakening of the capacity of the state to make unilateral use of force on other states has been greatly weakened by the growing destructiveness of the military technology and the interconnectedness of the state.

    Another drawback is that the definition fails to capture weapons and aggressors beyond the states that increasingly commit the act of aggression nowadays.

    Furthermore, the list of actions classified as an act of aggression seems to be outdated since new modes of warfare which do not necessarily involve the state armed forces is a characteristic of modern warfare. Hence, the current definition cannot be applied to the present reality of armed conflicts, enabling the non-state actors to carry out the aggressive use of force without the fear of any international judicial consequence.

    While inter-state wars are diminishing, there is a growing amount of 'new wars' which differ from the old wars in three aspects: their goals, source of finance and modes of warfare. New wars are based on identity politics which are focused on the claim to power on the basis of a particular identity. Further, combat units find their own funding through hostage-taking, plunder, black-market trading, or through external assistance. This raises a new aspect of the crime of aggression, where force is used for the purpose of individual gain. Finally, new wars unlike old wars, whose strategic goals are to mobilize extremist politics grounded in fear and hatred, attempt to control the population of the society by cleansing everyone of a different identity or by instilling the fear or terror.

    Considering all the above points, the current exclusive focus of the definition of the crime of aggression would not only obstruct the objective of the State Parties to prevent suffering caused by armed conflict but also thwarts the ability of the ICC to achieve it objectives to prevent the commission of a crime and promote peace.

    CONCLUSION

    The primary aim of the International Criminal Court is to promote not only justice but also peace. There has been extensive criticism on the ICC for doing neither; however, the ICC also struggles with some severe political and structural difficulties. On the one hand, it has limited resources and faces institutional restrictions, and on the other, it is manipulated by the states. The ICC is also criticized for alleged selectivity in dispensing justice. Despite all this, the ICC could be a beacon to promote international justice and peace, preventing the commission of a crime since its prosecutions present a clear threat to those individuals who commit serious crimes. It is argued that the contribution of the ICC, in the broader international context, to international peace and justice depends on the institutional power and support it receives from the states and in its own impartial work.

     

    ]]>
    Sat, 02 Feb 2019 14:26:00 GMT
    <![CDATA[Analysis of ADR Methods]]> Comparative Analysis of ADR Methods with focus on their Advantages and Disadvantages

    "The courts of this country should not be the places where the resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried." -Sandra Day O'Connor

    Courts are an essential institution without which society would end up in chaos. Their importance cannot be emphasized enough, though many of the disputes which arise between individuals or organizations are such that, they are solvable without the interference of the judicial authorities. Such conflicts, which do not require the juridical system, instead, need a specific set of formal regulations to achieve their end. Dispute resolution resolves the conflicts that occur amongst individuals or organization. In turn, the judicial burden is reduced.

    In this article, we will analyze the types of ADR methods while focusing on their advantages, disadvantages, and differences.

    Alternative Dispute Resolution often referred to as ADR, is a set of methods or techniques that allow parties to a dispute to reach an amicable settlement. It consists of ways in which parties can settle their differences without recourse to litigation. Alternative Dispute Resolution (ADR) methods are now widely accepted and have been gaining recognition at the national as well as international level. Modes of ADR have been in existence from a long time and were used long before the sophistication of civilization.

    ADR involves continuous efforts made by a third party, who is neutral and assists the disputing parties to come to a settlement. The qualification and the skill of the neutral third party vary, concerning the modes of dispute resolution.  

    ADR is a vast topic and includes a broad range of activities. Legal luminaries Nancy Atlas, Stephen Huber, and Wendy Trachte in their 'Alternative Dispute Resolution: The Litigator's Handbook,' has defined ADR as being:

    "Anything except a bench or jury trial under the auspices of some judicial body."

    In simple words, ADR, as the name suggests, is nothing but an alternative method to litigation to resolve disputes that exist between individuals or organizations.

    Nowadays, due to the vast resources required for litigation, people prefer alternative dispute resolution methods to settle matters which do not require the intervention of judicial authority.

    METHODS OF ALTERNATIVE DISPUTE RESOLUTION SYSTEM

    The techniques or modes of ADR, though widely accepted all over the world, may vary from region to region. This fluctuation depends on the legal framework of a country. The following are the methods of settlement that are widely accepted:

    • Arbitration
    • Mediation
    • Conciliation
    • Negotiation

    Arbitration

    Arbitration is a mode of ADR wherein the dispute between the parties goes through a process to achieve an amicable resolution by an impartial third party known as an 'arbitrator,' without recourse to litigation.  In the case of arbitration, the arbitrator, after reviewing the dispute between the parties comes to a settlement. Such a decision taken by an arbitrator shall be binding on both parties. Unlike other methods of dispute resolution, once the parties have submitted a matter to arbitration, neither can withdraw from the procedure.

    Arbitration can either be voluntary or mandatory. In the case of compulsory arbitration, the parties to the dispute enter into Arbitration either under a statute, an order of the court, or through a specific clause included in the contractual agreement between the parties. Whereas on the other hand, in the case of voluntary arbitration, it is up to the discretion of parties to enter into arbitration. The decision that results from the proceeding is known as an 'arbitral award.'

    Advantages of arbitration:

    • Flexibility- Arbitration proceedings are flexible and more economically feasible compared to litigation.
    • Time-Consuming- Arbitration proceedings occur at an expeditious rate as compared to Litigation; therefore, it saves time for both parties.
    • Confidentiality- The disputes which are subject to arbitration are treated with privacy, and are not released to the public.
    • Arbitrator- The parties have the liberty to choose an arbitrator to handle their dispute.
    • Enforceability- Arbitration awards are generally easier to enforce as compared to court verdicts.

    Disadvantages of arbitration:

    • If arbitration is mandatory as per the contract between the parties, then their right to approach the court is waived.
    • There is a very limited avenue for appeals.
    • Arbitration does not provide for the grant of interlocutory applications.
    • Arbitration awards are not directly enforceable; they are executable subject to judicial sanction.

    Mediation

    ·         Mediation is a mode of dispute resolution, where an amicable decision arises with the help of a third party known as a 'mediator,' without recourse to the court of law. It is a voluntary process, and unlike arbitration, it is more flexible; therefore, the parties to the dispute are under no obligation to agree to the settlement. Thus, an agreement taken via mediation shall be binding upon the parties, only as long as they agree to it. There may be instances where parties are advised to adhere to Mediation, however, under such circumstances, the result is up to the parties. Therefore, Mediation is a process where the parties are in total control over their final settlement. Here, the mediator only acts as a facilitator and does not interfere in the decision of the dispute. Therefore, it is a win-win pact.

    Advantages of mediation:

    • Parties have complete control over the settlement.
    • Less stress as compared to litigation and arbitration.
    • The relationship between the parties isn't overly damaged.
    • Mediation proceedings are confidential.
    • The process resolves the dispute quickly.

    Disadvantages of mediation:

    • Since the decision is at the discretion of the parties, there is the possibility that a settlement between the parties may not arise.
    • It lacks the support of any judicial authority in its conduct.
    • The absence of formality- Mediation proceedings are lacking in any procedural formality since they are not based on any legal principle.
    • The truth of an issue may not be revealed.

    Conciliation

    Conciliation is a method of dispute resolution wherein the parties to a dispute come to a settlement with the help of a conciliator. The conciliator meets with the parties both together and separately to enter into an amicable agreement. Here, the final decision may be taken by reducing tensions, improving communications, and adopting other methods. It is a flexible process, therefore allowing the parties to define the content and purpose of the proceeding. It is risk-free and is not binding upon the parties unless they sign it.

    Advantages of conciliation:

    • Flexibility: Since the conciliation process is informal, it is flexible.
    • The conciliator is often an expert in the disputed field.
    • Conciliation proceedings, like any other form of ADR, is economical as compared to litigation.
    • The parties to the dispute have the liberty to approach the court of law, if unsatisfied with the proceeding.

    Disadvantages of conciliation:

    • The process is not binding upon the parties to the dispute.
    • There is no avenue for appeal.
    • The parties may not achieve a settlement to their conflict.

    Negotiation

    Negotiation is a method of dispute resolution whereby a dispute between two individuals or groups is settled amicably by an impartial third person called as a negotiator, using different techniques. The negotiator, in this form of resolution, uses various communication methods to bring the parties of the dispute to a settlement. The primary aim of this type of dispute resolution is to reach an agreement that is fair and acceptable by the parties. The parties engage in the dispute with each other until they reach a desirable outcome for all involved.

    Advantages of Negotiation:

    • Flexibility: since negotiation is an informal process, it is relatively flexible.
    • Quick resolutions as compared to litigation.
    • It facilitates in maintaining a healthy relationship between the disputing parties.
    • Takes place in a private environment

    Disadvantages of Negotiation:

    • The parties to the dispute may not come to a settlement.
    • Lack of legal protection of the parties to the conflict.
    • Imbalance of power between the parties is possible in negotiation.

    Difference between different types of Alternative Dispute Resolution (ADR) systems:

    ADR Methods-

    Arbitration

    Mediation

    Conciliation

    Negotiation

     

    Neutral Third Party-

     

    Adjudicator

    Facilitator

    Facilitator, Evaluator

    Facilitator

    Nature of the Proceeding-

    Legally Binding

    Not legally binding

     

    Not legally binding

    Not legally binding

    Level of Formality-

     

    Formal

    Informal

    Informal

    Informal

    Level of Confidentiality-

    Confidentiality as

    determined by law

    Confidentiality

    based on trust

    Confidentiality as

    determined by law

    Confidentiality

    based on trust

     

    Conclusion

    The various modes of Alternative Dispute Resolution (ADR) systems as discussed above, hold many similarities as well as differences. These methods provide diverse techniques, which help a party to a dispute to amicably settle their dispute. These modes of dispute resolution are now widely accepted and applied in numerous areas of dispute.

    ]]>
    Tue, 08 Jan 2019 11:06:00 GMT
    <![CDATA[UAE Visa ban]]> Understanding and Avoiding Immigration and Labour Bans in the UAE

    In the United Arab Emirates, two significant categories of visa bans exist a labor ban and an immigration ban. Although these injunctions have been employed by the Ministry of Labour (and now Ministry of Human Resources and Emiratisation) for decades, many employees and employers find the issuance and implementation of visa ban nebulous and arbitrary.

    What is a Labour Ban?

     According to the UAE Government, a labor ban "means that the employee is not legally allowed to work in another company in the UAE for a period of one year. This restriction is imposed on an individual when they have either failed to adhere to UAE Labour Law provisions or have breached their terms and conditions agreement with their employer. The labor ban applies to all members of the employed demographic. Labor ban eligibility extends beyond individuals registered with an employment residence visa to include holders of labor permits, labor contracts, or labor cards. An issued labor ban can be effective for one-year or indefinitely. After the designated time-frame, the bar will be automatically dismissed, and individuals are eligible for rehire.

    Labor bans can be assigned by the Ministry of Human Resources and Emiratisation (MoHRE), the Directorate of Residency and Foreigners Affairs, or the Ministry of Interior. The offense committed by the employee will determine which entity handles the labor ban. Typically, violations of security or criminal law are delegated to the Ministry of Interior. The MoHRE manages issues of employment; individuals reasonably suspected of breaching employment conditions or the UAE Labour Law are investigated by the MoHRE. This consideration includes weighing testimonials from both the suspect as well as the suspect's employer.

    Upon conclusion of their investigation, the MoHRE has jurisdiction to issue a labor ban if:

  • An employee "terminated the employment contract or did not observe the provisions of the UAE Labour Law.
  • Article 120 of the UAE Labour Law was neglected.
  • The employee retained multiple jobs without MoHRE approval.
  • Following employment termination, the individual remained in the UAE (without legal authorization) for a period greater than two months.
  • The individual (non-skilled laborer) terminated their contract prior to six months from the start date.
  • Should a UAE visa holder receive a labor ban, that individual's work permit will cease? After the work permit is terminated, it is left to the employer to file a withdrawal of the individual's residency visa. If the employee served a labor ban is "on the sponsorship of his parents/family he may maintain his residency visa but cannot work or be issued another work permit for the duration of the ban."

    Requesting an Appeal of a Labour Ban

    Issued labor bans can be challenged through the MoHRE. Should an individual disagree with the grounds of issuance, objections can be received by a Tas'heel center. All requests of appeal are decided by a committee "chaired by the undersecretary and certain directors of departments to study these requests and decide whether to lift or maintain the ban. The UAE government stresses that monetary settlement offers will not waive a labor ban.  

    Legislation Legitimizing UAE Labour Bans

    Article 120 of UAE Federal Labour Law No. 8 of 1980 (as amended) is the most frequently cited legislative text supporting the implementation of labor bans. If an employee commits any of the actions listed in Article 120, that individual can be automatically discharged and susceptible to the issuance of a labor ban. Dismissible conduct includes: 

  • Falsifying their identity or forging certificates.
  • Executing a mistake which causes "substantial material loss" for the company. For this to be a terminable offense, the employer must notify the Ministry of Labour within a 48-hour period of becoming aware of the loss.
  • Defying accessible (written and posted) safety in the workplace standards.
  • Failing to accomplish contractually outlined duties. One is only dismissible under this condition if disciplinary warnings have been previously issued to the worker.
  • Revealing confidential information about the employer.
  • Committing and being judicially charged with an "offense involving honor, honesty or public morals."
  • Drinking or under the influence of drugs or alcohol while in the workplace.
  • Assaulting another employee.
  • Missing "more than 20 non-consecutive days, or more than seven consecutive days, in any one year" (without compelling reasoning).
  • Beyond Article 120 of the UAE Labour Law, the Ministerial Resolution No. 721 for 2006, Ministerial Resolution No. 724 for 2006, Ministerial Resolutions No. 707 for 2006, and Resolution No. 765 for 2015 govern the UAE labor ban. The most recent of the four resolutions, Minister of Labour's decree (765) of 2015 on Rules and Conditions for the Termination of Employment Regulations declares:

    • Article 1: An employee's (fixed-term) contract may be terminated if the contract is not renewed, both an employee and employer reach a mutual consensus that termination should occur, legal provisions are taken to end the original or renewed contract unilaterally, unilateral action is taken (without legal compliance) to end the contract knowing the "terminating party bears any legal consequences of early termination," or provisions under Article 120 of the Federal Labour Law are breached. Article 1(1) describes appropriate legal steps as party notification of termination intent, the continual upholding of an active contract during "duration of the notice period," and compensation not to "exceed the equivalent of three months of gross wages…."

    In the case of unlimited contracts, a contract may be terminated if the parties consent, notification of termination is matched with "continuing to honor contractual obligations," in cases of non-legal compliance, when the terminating party assumes legal penalties for early termination, or when Article 120 of the Federal Labour Law is violated.

    • Article 2: Principally, an employment relationship is dissolved if one of three instances transpire. First, termination will occur if an employer fails to satisfy their contractual obligations to the employee. The second condition results from failure "to secure the employment of the worker" as a result of business closure. In instances such as the latter, for termination to remain de facto, the worker must have submitted a court claim against the employer. Finally, discontinuation of an employment relationship can occur if "a labor complaint is referred to the court by the Ministry and a final ruling is obtained in favor of the worker" which includes worker privileges.

    Before UAE Cabinet Resolution No. 25 of 2010, employers were capable of restricting the ability of their employees to start new positions at other companies for a timeframe of six months. Employers were able to do this by obstructing the creation of new Ministry of Labour visa applications. With the passing of Cabinet Resolution No. 25 of 2010, bans are abolished for workers who have been employed for at least two years. Following this positive development, in 2015 the Ministry of Emiratization and Human Resources enacted three decrees further broadening the previously restrictive scope of employment bans. These decrees provided advantages for individuals employed for more than six months and those holding educational certificates. Currently, due to the legislative reformations, labor bans are generally non-applicable to the free zone hiring process.

    Assessing Labour Ban Risk of Issuance

    As one may note from the legislation above, understanding whether or not an individual circumstance permits an employer to apply for a labor ban is at best, complicated. In order to access whether or not an employee is at risk of a ban, three elements must be considered: 1) does the worker possess an educational certificate, 2) is the contract limited or unlimited, and 3) is the contract still within its first six months of activity? If these three questions can be answered, the jeopardy of ban issuance can be assessed. Below is a tool to aid in appraising the possibility of obtaining a labor ban.

    • Risk of labor ban issuance is present if:
  • Termination occurs without reason
  • Termination ensues before completion of a limited-term contract
  • The employer does not provide the agreement to the resignation
  • The employee breaches the Labour Law or the contract
    • No risk of labor ban issuance is present for:
  • UAE nationals
  • Expatriate employees transferring into a governmental role
  • Expatriate employees shifting jobs within a free zone
  • Expatriate employees who have resigned in legal accordance and have finished their fixed-term contract
  • Expatriates who have an unlimited contract and have been employed for more than three years
  • If an employee has or does not have an educational certificate, an unlimited-term contract, and has been employed beyond six months.
  • Expatriates providing a No Objections Certificate from their current employer and who have been working under an unlimited contract for at least a year
  • Advice for Lifting a Six Month Labour Ban

    Let's say you have been issued a six-month labor ban in Dubai for terminating your contract before its expiration date (two years fixed-term). Under this circumstance, if you have an education certificate and have been appointed a sufficient salary by your new employer, the Ministry of Labour may dismiss the ban.  For the ban to be lifted, a minimum wage of AED 5,000 should be offered to high school graduates and AED 12,000 for individuals carrying a bachelor's degree. Additionally, if you can receive a No Objection Certificate from your current employer or gain employment in a free zone, the ban will likely be repealed.

    What is an Immigration Ban?

    Unlike the labor ban, an immigration ban is ordered by the Immigration and Naturalization Department (Ministry of Interior). While as of 2016, labor bans are not applicable within free zones, immigration bans do not possess such exceptions. Immigration bans are activated through employer submittal of a claim that a worker has severely harmed the employer or has committed a criminal offense. Actionable offenses include common defilements such as driving under the influence and substantial debt, severe crimes like rape and murder, and immigration violations.  If an individual is issued an immigration ban, they are required to vacate the UAE. Similar to the labor ban, an immigration ban typically is accompanied by a designated term. While it is possible for an individual to be barred from reentry into the UAE for life, generally immigration bans are allocated for a span of six months to a year. Unless considered an exceptional circumstance, once issued an immigration ban, the order is irreversible. If an immigration ban is issued in the UAE, the offender is also prohibited from the entry of any of the GCC countries.

    Advice for Lifting an Immigration Ban

    The vast majority of immigration bans are irrevocable. In cases where bans have been issued for offenses such as drug trafficking, bounced checks, or attempted murder, immigration bans are issued on guilt, and therefore will not be lifted. However, UAE immigration lawyers have seen instances where immigration bans have been imposed on the wrong individual through mistaken identity. If you believe an immigration ban has been incorrectly issued to your name, an immigration lawyer may be able to resolve the oversight by providing the immigration department with relevant supportive documents (such as a certified copy of your passport or proof of no liability).

     

    How do I know if a ban has been issued to me?

     

                If you suspect you have either been issued a labor or immigration ban but are not certain, the Ministry of Labour or Immigration Department respectively will be able to verify. 

     

    ]]>
    Mon, 07 Jan 2019 11:30:00 GMT
    <![CDATA[Amendments to Singapore’s Penal Code]]> Prospective Amendments to Singapore's Penal Code

    In July 2016, Singapore established a Penal Code review committee intended to perform a comprehensive assessment of the legal provisions currently protecting marginalized communities and members of the adolescent demographic. As of September 2018, the Committee has requested heightened legislative care for topics encircling sexual and violent crimes outlined under the Penal Code. Specifically, authorities have demanded the immunization of rape under marriage and criminalization of attempted suicide be repealed. Additionally, the anticipated Penal Code revisions will include increased repercussions for sexual predators preying on minors, offenses executed against mentally or physically debilitated individuals, and create explicit punishment for acts of voyeurism and consuming pornographic material. The Penal Code review committee has currently tendered 169 recommendations, a significant proposed alteration since its last review in 2007. Although the previous substantial modifications to the Penal Code commenced just over a decade ago, Singapore's Minister for Home Affairs and Law denoted that novel changes are necessary to ensure the 150 - year old Code remains up-to-date with societal interests and development. Although Singapore's proposed amendments are still subject to public feedback, the Ministry for Home Affairs and Minister for Law has released an extensive report on the proposed changes. This article is directed at evaluating these alterations.

    Published on August 2018, the Penal Code Review Report was issued with the objective of performing a thorough evaluation of Singapore's Penal Code and fashioning suggestions to resolve insufficiencies hindering public welfare and criminal liability stemming from moral culpability. According to the Report, the Committee is tasked with reforming the Penal Code so that outdated offenses are omitted, offenses entailing greater specificity are included, crimes already punishable by other legislative regulations are eliminated, and to ensure that the punishment-offense proportionality remains appropriate. The 2018 Report consists of seven chapters, comprising efforts to match advancements in technology and crime trends, to augment the protection of vulnerable persons, modernize the 150-year-old Penal Code, unify preceding Penal Code provisions, and revise incarceration sentencing standards.

    Recommended Changes to Modernizing Technology

    The Committee has suggested two predominant amendments to the Penal Code in relevance to crimes committed within a virtual platform. These recommendations consist of altering sections 22 and 378 of the Penal Code. The Committee has advised creating an extensive "definition of property which will cover intangible and incorporeal property" (s 3.1). Additionally, section 378 is called to be revised "to account for the possibility of theft of incorporeal property" (s 3.1). Under the current Penal Code, the term "property" is broadly defined, to include both immovable and movable assets. While the Penal Code's description of movable property can extend to include virtual assets, the Committee has foreseen necessity to amend the definition to specifically highlight protection over intangible goods such as virtual currency or air miles. When initially enacted, due to the technological restrictions of the era, the Penal Code could not consider misappropriation of incorporeal property. The committee notes that "the narrow historical conception of theft and dishonest misappropriation fails to protect the intangible property which is now part of ordinary life" (s 3.1.6). The Committee has proposed the new Penal Code which redefines "property" to incorporate both movable and immovable, including incorporeal property.

    The Committee has also requested an amendment to be made to section 30 of the Penal Code. This revision will broaden the legal parameters of "valuable security" to comprise electronic archives. Without revision, the technological extent of the word "document" under section 29 of the Penal Code only covers devices containing data (such as a disc), not an electronic form (such as a PDF). Section 3.4 of the Review advises applying new offenses associated with computer programs. The Committee adamantly expresses the necessity of developing "a suitable framework to address the issue of criminal liability for harm caused by computer programs." While the original Penal Code acknowledged the need to reprimand acts of omittances which caused injury through machinery use (s 287), the respective section does not target the eminent dangers computer programs pose to humans. The Committee emphasized an amendment to the Penal Code is needed which criminalizes the deceptive and psychological distress autonomous computer programming can cause. The Report suggests if "mismanaged, computer programs have the same or even greater potential for harm than machinery" (section 3.4.8). Although up to now no legislation worldwide has been passed to criminalize artificial intelligence systems, the Report indicates the Singaporean government must commit to research and pave the way to address such political concerns. According to the Committee, Penal Code reformation criminalizing negligence and risk-creation concerning computer programming could "impose potential criminal liability on (i) those who make and alter computer programs and (ii) those who use them…this offense covers acts and omission which may be merely negligent" (s 3.4.13). Under the revised Penal Code, it is likely a duty of care will be established to mitigate harms which may arise from computer programming.

    Recommended Changes to Addressing Developing Crime Trends

    The Committee also aims to expand the offenses constituting a criminal act of fraudulence. Under the new proposed recommendation, any individual who "fraudulently or dishonestly, (a) makes a representation, (b) fails to disclose information which he is under a legal duty to disclose, or (c) abuses, whether by act or omission, a position he occupies in which he is expected to safeguard, or not to act against, the financial interests of another person" (s 7.6) can be held legally culpable for an act of fraud. This suggestion is intended to parallel the UK Fraud Act 2006. The new fraud provisions will include identical sentencing practices as those currently stipulated for cheating (ss 415-420 of the Penal Code).  Two categories will exist for the new fraud offense. In the event an act of fraudulence causes injury, the offender will be subject to arrest. If fraud does not result in loss or damage, no arrest will occur. These two variants are fashioned with public policy in mind, attempting to curtail the number of fileable police reports.

                    Also relating to fraudulence, the Committee has recommended adding a provision under the Penal Code which criminalizes the obtainment of services fraudulently and deceptively. This offense will entail penalizing acts where

    • Services are obtained without full or partial payment
    • There is no intent on fully or partially pay for a product which is knowingly available on the basis that payment is expected

    The Committee has suggested that the crime of obtaining services fraudulently will be punishable with a fine and or maximum sentencing of 10 years.

    Section 12 of the Report discusses the need for creating detailed offenses for "the observation of a person in circumstances where the person could reasonably expect privacy…[and the] making, distribution, possession and accessing voyeuristic recordings." The current Penal Code does not provide specific provisions criminalizing the act of observing or recording individuals undressing or performing acts of intimacy. With this said, the Penal Code includes provisions such as "Insulting the modesty of a woman" and "Possession of obscene films" which have historically been used to punish voyeurism.  It has been argued that while voyeurism can be chargeable under various Penal Code sections, the existing provisions are ill-suited for handling issues arising from technological advancements. For example, the current law is unable to address content such as "upskirting" videos. The Penal Code recommendation branches beyond criminalizing the physical act of recording or photographing intimate situations, to deem it an offense to observe an individual in a situation where they could expect privacy. The Committee has outlined circumstances where someone could reasonably demand privacy, to include: if an individual is exposed, interacting in sexual activities, or undressing. The new proposed voyeurism rule will punish intentional acts of observation or recording without the other party's consent. Additionally, an offense will be created for the distribution and possession of voyeuristic material. Sentencing will vary via voyeuristic offense, but offenders can be sentenced to a maximum of five years imprisonment.

    Beyond voyeurism, a new offense concerning sexual exposure will be adopted. According to the Report, sexual exposure "refers to situations where an offender displays his genitals intending or knowing it likely that such display would humiliate or cause distress of fear to the observer" (s 14). The current Penal Code contains three provisions (appearing in public nude, obscene songs, and gestures insulting a woman's modesty) which relate to exposure. However, it has been argued such provisions do not fully capture sexual or malicious intent, the prescribed penalties are too little, and the exposure of genitals in a private location is not criminalized. The limitations of the Penal Code in respect to the wrongdoing of sexual motives can be illustrated through PP v Budiman Shah Mohd Noreel Azman. In this case, the defendant had molested a woman on a train and exposed himself in public on seven counts (which included sexual exposure to young adolescents). Upon his sentencing, he was only charged with committing an obscene act and faced nine months incarceration. Under the new sexual exposure provision, any offense committed against an adolescent below the age of 14 will be subject to a maximum prison sentence of two years, a fine, or caning. If the victim is 14 years or older, the offender will be issued a punishment of no more than one year (and/or the other penalties listed previously).

    Recommended Changes to Enhance Victim Protection

    One of the most critical alterations to Singapore's Penal Code involves repealing ss 375(4) and 376A (5) which establish immunity for marital rape. Efforts in 2007 were taken to withdraw marital immunity, but instead, attunement was assumed. As a result, a balance was met which dually preserved "the conjugal rights and expression of intimacy in marriage…[while] protecting women who had signaled a withdrawal of their implicit consent to conjugal relations" (s 15.7 of the Report). The Committee has asserted despite attempting to achieve an equilibrium, women's rights and protections against sexual abuse are still not protected adequately. As a result, the repeal of marital immunity for rape will be repealed in entirety. This outlawing will align Singapore with the UN General Assembly's pronouncement that marital rape is a heinous violation of human rights.

    Reviewing the Penal Code's active sexual offenses against minors, the Committee has suggested three primary recommendations: the age of consent is to remain at 16, the age of 14 will be retained as the cut-off for statutory aggression, legal protection in cases of sexual exploitation for minors from 16 to 18 should be heightened. The Committee's rationale for increased protection for this specific age demographic is as follows: the propagation of smart technology has enabled minors to be subject to higher levels of manipulation by predators. This potential for victimization provides justification to increase the minimum age for all sexual offenses involving exploitation.

    Section 17 of the Report specifies an enhancement of the maximum penalties "for offenses committed against children, vulnerable persons, and domestic maids, by up to two times the maximum punishment the offender would otherwise have been liable to." (141) While courts in Singapore typically consider the vulnerability of a victim when issuing their verdicts, current sentencing ranges debatably do not include sufficient maximum penalties for offenders. Therefore, the Committee has advised altering penalties for offenses "deliberately target[ing] vulnerable persons, on account of their vulnerabilities" (s 17.2). One amendment suggestion has encompassed expanding the spectrum of offenses under the Penal Code which relate to child vulnerability (such as crimes causing physical injury). The Committee has declared children under the age of 14 must be provided greater protection as "such young children are generally physically smaller, more naïve and easily exploited" (s 17.7).

    Penal Code s 84 currently outlines the defense of unsoundness of the mind. If an individual qualifies as being mentally unsound, their charges may be acquitted, and the individual sent to a psychiatric institution.  The Committee has acknowledged the value of retaining the provision relating to unsoundness of the mind but has requested the term be modernized. The recommended revision includes incorporating volitional disorders into the defense. The amendment is proposed as the Committee is "of the view that there is no good reason why the criminal law should not account for the fundamental principle that a person is not to be held criminally responsible for involuntary conduct" (s 24.11).

    In total, the Penal Code Review Committee's Report provides 169 amendment recommendations. Through updating and removing outdated offenses, modernizing general principles and substantive crimes, and ensuring proportionality between an offense and its respective punishment, Singapore's Penal Code will be better equipped to protect those most vulnerable and provide greater deterrence for potential offenders.  

    ]]>
    Sun, 06 Jan 2019 10:55:00 GMT
    <![CDATA[Protection of Plant Varieties]]> International Overview on the Protection of Plant Varieties

    "Trees and plants always look like the people they live with"- Zora Neale Hurston

    Protection of plant variety is vital for the development of a nation since it provides for sustainability and the growth of the region. The effective and efficient system for plant protection leads to economic development and promotes the growth of the agricultural industry. However, protection of plant varieties is not an easy task, since it involves a wide range of elements and is an activity based on knowledge. Plant breeding has been rising owing to the advancement of production methods. 

    The development in the agro-sector calls for an efficient legal system to maintain and regulate the activities concerning plant protection.

    This article lays down an International overview on the protection of plant variety, with particular emphasis on the law relating to plant protection in the UAE.

    Meaning

    Plant variety may be defined as a group of plants that are of common origin but differs with respect to its inherent characteristics. Plant varieties are formed through refinement methods, and it may be done, either with genetic engineering or traditional methods. The variety obtained should be distinguished from its original plant to be termed as a variant variety. The plant variety is protected within the sphere of Intellectual property rights.

    Article 1 of the International Convention for the Protection of New Varieties of Plants, 1961 defines the term variety as the following:

    " variety means a plant grouping within a single botanical taxon of the lowest known rank, which grouping, irrespective of whether the conditions for the grant of a breeder's right are fully met, can be  

    • defined by the expression of the characteristics resulting from a given genotype or combination of genotypes,
    • distinguished from any other plant grouping by the expression of at least one of the said characteristics and
    • considered as a unit with regard to its suitability for being propagated unchanged; "

    Therefore, under the concept of Intellectual property, a plant variety is well protected, and the plant breeder is granted with numerous exclusive rights.

    Need for protection

    The reason behind the protection of a plant variety is that new plant varieties result in higher yield and better quality, thereby increasing the productivity of the agricultural industry. Production of a new variety is a long process, and it involves various complex steps. Once a new plant variety is created, it may be replicated by any person, therefore to prevent unauthorized use of a new variety, the breeder of a variety should be protected. The progress in the agricultural sector in different parts of the world is due to the advancement in plant breeding and plant protection.

    International Scenario

    Various International conventions provide for the establishment of an effective system for the protection of plant variety.

    The Paris Convention for the Protection of Industrial Property 1883 was the first International convention regarding Intellectual property, and most of the countries have ratified the agreement. The agricultural sector is also well covered by the convention.

    Article 1 (3) of the convention deals with the scope of the Industrial property as provided in the convention:

    "(3) Industrial property shall be understood in the broadest sense and shall apply not only to industry and commerce proper, but likewise to agricultural and extractive industries and to all manufactured or natural products, for example, wines, grain, tobacco leaf, fruit, cattle, minerals, mineral waters, beer, flowers, and flour."

    Under the TRIPS Agreement, Article 27 (3) (b) provides for the protection of plant variety,

    "3. Members may also exclude from patentability:

    (b) Plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof."

    Therefore, from the above, it is clear that the member countries of the WTO have to provide for an effective mechanism for the protection of plant variety either under their patent regulations or by a sui generis system.

    A sui generis system is a system, in which protection is granted in its own kind. Therefore as opposed to granting protection through a central set of law, a separate enactment may be adopted for protection.

    The International Union for the Protection of New Varieties of Plants (UPOV) was adopted in Paris in 1961 for the protection of plant varieties through an intellectual property right. The objective of UPOV is to promote the development of plant varieties, for the betterment of the society.

    Under the convention, for the grant of plant breeders' rights, the variety has to be met with the following conditions:

    • Novelty(Article 6)
    • Distinctness(Article 7)
    • Uniformity(Article 8)
    • Stability(Article 9)

    However, the convention does not grant protection to the breeder for following:

    • Private acts, done by the breeder.
    • Where the breeding is for experimental purpose
    • Breeding of other varieties

    The Convention also provides for other important aspects governing plant protection and breeder's rights. The member nations of the UPOV are also entitled to national treatment (Article 4).

    Protection of Plant Varieties in the UAE    

    The UAE, being a member of the WTO, the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement was ratified by the country in 1994. Accordingly, the UAE has protected the plant varieties via the sui generis system. The Director of Health and Agricultural Development is the registrar of the protection of plant variety and breeders' rights.  

    The Federal Law Number 17 of 2009 deals with the protection of new plant species

    Under the Federal Law Number 17 of 2009, the following definitions are provided for the term 'species' and 'plant breeder.'

    Species:

    "A group of plants belonging to a Species, that is distinct from other in terms of its external characteristics, physiological, biochemical, genetic or any other characteristic which has an agricultural significance (or whose characteristics manifest upon propagation or reproduction). It excludes wild Species which did not undergo any development."

    Plant Breeder:

    "A natural person or legal entity that breeds, or discovers and develops a new plant Species, or its legal successor."

    Under Article 2 of the Federal Law, Number 17 of 2009, the objective of the enactment is for the regulation of rights and obligations that arise from the development of new plant species.

    Article 3 of the law provides for the establishment of a register for the protection of plant species and rights of the plant breeder.

    The conditions for granting plant breeders' rights are provided under Article 5 of the Federal Law Number 17 of 2009; accordingly, the following conditions are to be fulfilled for the grant of plant breeders' rights:

    • The plant species must be new
    • The species must be distinctive
    • The species must be uniform
    • The species must be fixed
    • The species must not be harmful to health or environment
    • The species must not be opposed to Islamic law

    The explanations to the conditions are provided under Article 6, 7, 8 and 9 of the Federal Law Number 17 of 2009.

    Article 6 deals with New Species:

    "A plant Species is considered new if the Propagation and Reproduction Material harvested was not previously offered for sale, sold or assigned to others in any way by a Plant Breeder or after the consent thereof, with a view to its commercial exploitation prior to making the application."

    Article 7 deals with distinctiveness:

    "A plant Species is to be considered distinct if it is clearly distinguishable from any other Species that is known publicly at the date of filing the application, whether inside or outside the State."

    Article 8 explains uniformity:

    "A plant Species is considered uniform if its basic characteristics are uniform, taking into account what might be expected as a result of the variation in characteristics due to sexual or vegetative reproduction." 

     Article 9 deals with fixed species:

    The plant Species is considered constant if the basic genetic characteristics do not change after successive reproductions or breeding, or at the end of each cycle, especially for propagation or breeding.

    Persons Entitled to Protection:

    According to Article 10 of the Law, the following persons are entitled to register the species:

    • The person to whom the rights devolve or the plant breeder.
    • The persons involved in the development of the species in the case of a joint effort, provided they agree to such term.
    • In the case of two separate applicants, the early applicant will get priority over the latter.
    • The employer, in the case of a contract for employment.

    The Scope of the plant breeders' right is provided under Article 15 of the Federal Law Number 17 of 2009, and it reads as the following:

    "Subject to the provisions of Articles (16) and (17) of this Law, it is a pre-requisite to obtaining authorization from the Right Holder when planning to do any of the following acts:

  •  - Production, propagation, or reproduction.
  •  - Preparation for the purposes of propagation or reproduction.
  •  - Offering for sale.
  • - Sale or other acts of marketing.
  •  - Exportation.
  •  - Importation.
  •  - Storage for any of the purposes referred to in the items set forth in this Article, of the propagation or reproduction Material of the relevant Species or the Material harvested including plants, which was obtained through the unauthorized use."
  • Term of Protection

    Protection is granted for twenty years in the case of agricultural products, and twenty-five years for vines and trees (Article 19).

    Conclusion

    The United Arab Emirates has taken adequate steps to conserve and protect its plant species. Though UAE is not a member of the International Convention for the Protection of New Varieties of Plants (UPOV), effectual measures have been adopted by the country. The sui generis system approved by the UAE with the enactment of Federal Law Number 17 of 2009, provides for preserving and protecting the plant varieties as well as the rights' of the breeders of such varieties.

      

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    Sat, 05 Jan 2019 15:45:00 GMT
    <![CDATA[Artificial Intelligence in healthcare]]>  

    Abu Dhabi's New Policy on the use of Artificial Intelligence in the Healthcare Sector

    Scientists throughout history have delivered many inventions that have continuously made human life much easier. The most recent technology that has changed all our lives is Artificial Intelligence. Artificial Intelligence (AI) would be termed by many as the "greatest thing since sliced bread". Despite the difference in opinions, no one can deny the effect AI has had on our daily lives. We have several examples of Artificial Intelligence in our daily lives such as Virtual Personal Assistance (like Siri, Alexa, Cortana), video games like the 2014 "Middle Earth: Shadow of Mordor", smart cars, the automated customer support on websites, fraud warning software used by emails and banks, and even a robotic chef! The development of AI has been said to have ushered the fourth industrial revolution, on a scale as we have never seen before. In fact, the World Economic Forum commented that "AI is disrupting almost every industry in every country."

    What is Artificial Intelligence?

    It is a term used for simulated intelligence in machines. Simply explained, it is an area of computer science where machines are programmed to think like and mimics humans. It emphasizes the creation of machines that work and react like a human with the ability to rationalize and take actions with the best possibility for the success of a particular goal. Machines with artificial intelligence are designed to perform activities like speech recognition, planning, learning, analyzing and problem-solving.

    Benefits And Risks Involved

    Benefits

    • Error Reduction - AI facilitates the reduction of error and the chance of being more accurate with a greater degree of precision.
    • Difficult Explorations- AI combined with the science of robotics can overcome human limitations and be put to use in difficult explorations such mining and for exploring the ocean floor.
    • Every day Use- machines with AI continuously make lives easy for us. With Siri or Cortana in offering personal assistance, self-driving cars for long journeys, the smart chef to make our meals.
    • Digital Assistance- Since robots do not possess emotional capabilities, they are capable of thinking logically and making the right program decisions, making highly advanced organizations to use "avatars" which are digital assistants to interact with the users.
    • Machine intelligence can be employed to perform dangerous or monotonous tasks.
    •  In the medical field, AI assists doctors in the diagnosis of their patients' health and the side effects of certain medications. A popular AI application is the use of Radiosurgery in operating tumors and can actually help in the surgery by protecting the surrounding tissues from damage.

    Risks

    • Unlike human beings, AI machines cannot improve with experience, that changes their responses in accordance with the changing environments. The way AI machines process data cannot be said to be the same as human intelligence.
    • There is also an ethical argument against replicating human intelligence. Advocates of this argument state that since AI machines do not possess emotions, they also lack the moral compass to make a judgment of the right or wrong. They cannot perform in situations unfamiliar to their programming.
    • The development of Artificial Intelligence can lead to the replacement of humans, causing large-scale unemployment. In the current economy, the demand for jobs is already in excess of the available employment opportunities.
    • A common fear is the machines will be so highly developed, so as to surpass humans and take off on their own, redesigning themselves at an exponential rate.

    Need For Legislation Of Artificial Intelligence

    Research by Pricewaterhouse Coopers (PwC) predicted that by 2030, AI could boost global GDP by 14%, which is equivalent to $15.7tn. The fields of finance and healthcare are the most benefitted from AI. In the finance sector, the detection of frauds, algorithm trading, portfolio management, loan or insurance underwriting has significantly contributed to the growth of the industry. In healthcare, the data gathering, and analysis capabilities of AI enables faster diagnosis; earlier and better treatments; risk analysis of medications and treatment methods, has helped to save and improve many lives.

    The development of AI has given rise to a new field of law, requiring governments of countries to develop a legal framework to address legal concerns over this technology, such as:

    Liability

    Companies making and selling AI software need to be accountable for damages caused by unreasonable practices. However, the question of liability in Artificial Intelligence is very complicated. In a dispute regarding a building, it is relatively straightforward in pinpointing the accountability. In the scenario of Artificial Intelligence, however, the supply chain is longer with multiple participants involved in its creation. To avoid these complications and a long drawn out litigation process, it is necessary to define the parameters of liabilities of the market players in case of machine failure.

    Human control

    Another significant component is ensuring that humans have control over and can override the decisions made by the Artificial Intelligence.

    Automated Weapons

    A huge factor of concern is the use of Artificial Intelligence to develop automated weapons, which in the wrong hands can cause mass causalities. Moreover, this could also lead to an AI arms race, with the machines being designed in such a way as to make it impossible for a human to turn it off.

    AI IN THE UNITED ARAB EMIRATES

    In October 2017, UAE appointed His Excellency Omar Bin Sultan Al Olama as the first Minister of State for Artificial Intelligence, making UAE the first country in the world have a designated Minister for AI. This was done expressing UAE's ambition and resolve to be at the forefront of the global technological revolution. The Ministry aims to improve government performance and create a highly productive and innovative environment for the investment of AI in UAE.

    In a recent report by the Ministry for AI, UAE is predicted to have a boost of $182 billion added to its economy by 2035. The UAE economy continues to witness an increasing use of AI in the following sectors:

    Education institutions in UAE use AI and machine learning to assist in the prediction of students at the risk of dropping out, employability of graduates along with other patterns.

    Banks and financial organizations in UAE increasingly use AI technology for advanced customer services, fraud detections and management, risk assessments.

    In the healthcare sector, new technologies are being slowly introduced to test its effectiveness. For example, the Government of UAE is currently testing and introducing the following new innovations into healthcare:

    • The Body of health analysis pods to be rolled out in government buildings to assist the staff to monitor health and detect early any signs of illnesses.
    • An application by Babylon, which uses AI to provide 24/7 video consultancy to patients from all around the world will be soon available in UAE.
    • Health Care and Innovative New Technology (HINT) neuro band helps detect strokes; and
    • The flow cell sensors by Admetsys to alert doctors to sudden drops in the vitals of ICU patients.

    New Policy on use of Artificial Intelligence in Healthcare in the Emirate of Abu Dhabi

    On May 28, 2018, Abu Dhabi's health sector regulator, the Department of Health (DOH) introduced a new policy to govern Artificial Intelligence, its use and implementation in the healthcare. The Department is in full support for the development, adoption, and use of AI technologies to enhance the healthcare quality in Abu Dhabi.

    Analysis Of The Provisions Of The Policy

    •  Definition of AI and AI Technologies:

    The policy defines

    Artificial Intelligence as "the mimicking of human thought and cognitive processes to solve complex problems automatically."

    Artificial Intelligence Technologies such as "machine learning, distributed intelligent systems, expert systems."

    • Scope

    It applies to all

  • Government Licensed Healthcare Providers
  • Licensed healthcare researcher involved in human research
  • Healthcare insurers; and
  • Every local, national and locally based international end-user directly or indirectly utilizing or wishes to utilize clinical and non-clinical data of patients or population of Abu Dhabi in its AI endeavors.
    • Minimum Acceptable Requirements for AI and Tools

    The department of health requires all kinds of artificial intelligence and its tools introduced in Abu Dhabi for the purpose of health care delivery, public health, pharmaceutical production or medical research to

  • Obtain certification of the AI software being robust and responsive and for each upgrade major versions of the software from recognized international agencies;
  • Compliance with the regulations by Abu Dhabi Smart Solutions and Services Authority (ADSSSA);
  • Possess validation statements which are auditable;
  • Equip the AI used in healthcare with "Graceful Degradation" mechanisms by integrating automatic alerts and with the ability to cease gradual operation in the event of any hardware or software malfunctioning;
  • Be exposed to continuous cycles of improvements and updates based on the feedback of accuracy from the end-users. The feedback should be sent to the Drug and medical Products Regulation Department, Department of Health and to the manufacturing company;
  • Subject the AI System to be audited and examined by the technology provider and set up by relevant methods; and
  • Comply with all the policies by the DOH Health Information Exchange Policy especially with regard to the terms of the privacy and transparency.
    • Responsibilities of Healthcare End Users

    The policy places the following duties on the Healthcare End-Users other than patients:

    • Develop clear governance on the use of AI.
    • Provide clarity on
  • the entry point of AI for any of the healthcare uses mentioned in the policy;
  • the role of the physician or other practitioners according to the scope of AI use;
  • the role of AI; and
  • the boundaries between the practitioner and the AI.
    • For the protection of the confidentiality and ownership of patient information, provide clear guidelines and boundaries on access to and sharing of any such information.
    • To educate all those involved including the patients and end-users on the AI and its effective use.
    • Conduct regular audits by the owning entities on the functionality of the AI and report the same to the DOH as required.
    • Comply with all the necessary certification of the AI software and its major upgraded versions from recognized international agencies
    • Comply with all National and DOH regulatory requirements (both old and new) governing E-Health, data protection, HIE, information security or AI.9.
    • Submit end-user feedback to the DOH, Drug & Medical Products Regulation Department, and to the manufacturing company.
    • Insurers' Responsibilities

    The insurers shall:

  • Comply with all the DOH requirements for robust and responsive AI
  • Ensure clear governance in the use of AI in their service
  • Maintain clarity on the point of entry of AI in its intended use and the role of the insurer, AI and the boundaries between them.
    • Enforcement and Monitoring of the Provisions

    Enforcement: All those specified to be within the scope of this policy must comply with the terms and requirements of this Policy. In the event of failure by any such party, the DOH can impose sanctions in relation to the breach in accordance with the Chapter XI of the healthcare Regulator Manual.

    Monitoring: the DOH shall develop a framework to monitor and evaluate the Policy, involving all the entities within the purview of this policy and adopt changes wherever necessary to ensure continuous improvement within the healthcare system

    DOH shall through audit, inspection, and reports received from healthcare end-users, monitor the compliance of the Policy. A framework shall be adopted to evaluate the effectiveness of the AI in healthcare including the inputs, activities, outputs, and outcomes. End-users other than patients and insurers shall report to the DOH or other regulatory bodies of all known or suspected incidents or deficiencies related to AI use in their respective domains or any issues arising from the implementation of AI in the healthcare that could threaten the patient safety.

     

     

    ]]>
    Sat, 05 Jan 2019 12:05:00 GMT
    <![CDATA[International Labor Standards]]> International Labor Standards

    An inevitable consequence of globalization is the increasing attention to international labor standards, especially the core labor standards as under international treaties. An essential element of the current economic undertaking is the creation of new production processes and work arrangements, the cultivation of complex supply chains, and the rapid movement of capital and production units, which most often result in the suffering of the working class from quantum leaps and the decline in the global economy.

    The concept of labor standards, just like democracy, is controversial and most often misunderstood. The efforts to implement these standards within national laws are sometimes seen as an 'investment disincentive', 'anti-business', and a 'hindrance to competitiveness.' However, such attitudes have begun to change. Though the debate still continues on labor standards, corporate social responsibilities and codes of conduct with regard to human rights, workers' rights, and environmental protection have emerged.

    This article answers the following questions:

    •  Who is the ILO?
    • What are the core and other international labor standards?
    • What are the advantages of observing these standards?

    The  International Labor-Organization

    Established in 1919, the International Labor Organization (ILO) is the only tripartite U.N agency which brings together the workers, employers, and governments of over the 187-member States. The ILO works to set labor standards, devise programs and develop policies that will promote decent work for all women and men. The ILO, is devoted to promoting social justice and internationally recognized human and labor rights. It pursues its founding mission that social justice is an essential element to secure lasting universal peace.

    The working of ILO where workers and employers together have an equal voice with the governments in its deliberations depicts social dialogue in action. This ensures that the views of all the parties are closely reflected within the ILO standards, programs and policies.

    The ILO believes in encouraging the tripartism between its constituents by promoting social dialogue between employers, trade unions, and where necessary, implementing national policy on social, economic, and other issues.

     

    The International  Labor Standards

    Labor standards simply put, are those rules that govern how workers are treated in a working environment. They originate at the international, national, and local levels and come in a variety of forms. The spirit of labor standards does not require the application of complex legal formulae and is as simple as ensuring basic rules of good sense and governance have been considered.

    Labor standards cover a wide variety of topics which mainly concern the basic human rights of workers at work, respect for safety and health, ensuring that the workers are paid in time for their work and also covers labor inspection and basic labor administration. In the context of the economy, these standards are necessary to increase productivity and competitiveness over the long term. Labor standards, at the national level, are usually set in laws and regulations and can sometimes be found in collective agreements which normally bind the contracting parties- employers and trade unions. At the international level, these standards are usually found in international conventions and recommendations. There are two reasons as to why international labor standards are important:

  • They represent an international consensus on the minimum best practices on human rights, more specifically on labor matters; and
  • When the member countries have ratified such standards, they constitute binding legal obligations in both national and international law, which may even be incorporated in the national law.
  • The Core Labor Standards contain a set of four basic rights and principles at work, which are internationally recognized. These include:

    • Freedom of association and effectively recognizing the rights to collective bargaining;
    • Elimination of forced or compulsory labor and all its forms;
    • Abolition of child labor; and
    • Elimination of all forms of discrimination in employment and occupation.

    Though there are many types of labor standards, the above listed four have achieved international consensus as for the "core" labor standards. The international support for these standards reflects an understanding of its application in all countries. The standards, however, do not establish a particular standard of working conditions, health and safety standards, or wages to be applied in each country and are not intended to alter the comparative advantage of any country.

    These core standards have been articulated repeatedly in international human rights instruments and declarations, such as the Universal Declaration of Human Rights in 1948, the Convention on the Rights of the Child of 1989, and the most recent Declaration of 1995 Copenhagen Summit on Social Development. These core standards were further substantiated by the ILO in 1998 by the Declaration on the Fundamental Principles and Rights at Work which requires the member states, regardless of their status of ratification, to comply with the above-stated four principles. The promotion of these standards has also been adopted into the role of international organizations such as the World Bank and ADB.

    There are also other additional standards that assist in developing the aspects of the core standards such as those on workers with family responsibilities, working hours for young workers, protection of migrant workers, and industrial relations. For instance, other labor standards cover topics such as:

    • Occupational health and safety;
    • Minimum wages and payment of wages;
    • Employment promotion, including mechanisms and employment exchanges;
    • Labor administration which includes labor inspection;
    • Social security; and
    •  Specific economic sectors and occupations such as the seafarers, homeworkers, plantation workers, etc.)

    Importance of the Labor Standards

    • Economic Advantages of Labor Standards

    Putting labor standards into practice helps improve the economies of the Developing Member Countries (DMCs). Though many developing countries raise the argument that keeping their labor costs low in manufacturing and services is the only advantage they have in comparison to the developed countries, they fail to consider the productivity-increasing effect of these labor standards. Lack of respect for the workers' rights negatively impacts the development of the economy and the people concerned. Labor standards are the tools, instruments or indicators that assist in development as well as measure the progress towards development.

    • Good Governance

    Respecting people's rights with regard to work and action by the government to safeguard these rights, is in itself support for the concept of governance. Respecting the labor standards provide a number of positive governance benefits, such as:

    • Assists in the reduction of poverty and increase the living standards.
    • Improves dialogue between the social partners; and
    • Improves prospects of exports since importing countries increasingly demand observance of these core standards;
    • Promotes decent work;
    • Builds respect for law and for human rights;
    • Human Rights and Labor Standards

    Most of the labor standards are internationally recognized human rights which are contained in international conventions that have received almost universal ratification, including most developing countries. There has been a growing international consensus that human rights are indivisible and have to be applied to everyone.

    Core Labor Standards

    • Abolition of Child Labor

    There are two child labor conventions adopted by the ILO and one by the United Nations:

    • The Minimum Age Convention

    The Convention and its accompanying Recommendation No 146 was adopted by the ILO in 1973. It sets its goal as the effective elimination of child labor and sets the basic minimum age for employment or work as follows:

  • Until the end of compulsory schooling or 14 years of age for developing countries and 15 for developed countries, whichever is higher;
  • Minimum age of 12 and 13 years respectively for 'light work'; and
  • Minimum age of 18 and sometimes 16 for hazardous or dangerous work.
    • Worst Forms of Child Labor Convention

    The ILO in 1999, adopted the Worst Forms of Child Labor Convention (No.182) and Recommendation No. 190, which targets the worst forms of child labor. The said convention, regardless of the level of economic development of the ratifying country, applies to all branches of economic activity that requires immediate action. The Convention recognizes the following as the worst forms of child labor:

  • All forms of slavery and similar practices such as sale and trafficking of children, serfdom, and forced or compulsory labor;
  • Use, procurement, or offering a child for prostitution, production or performance of pornography;
  • Use, offering, or procurement of a child for illicit activities such as for the production and trafficking of drugs;
  • Work, by its nature or circumstance, is likely to harm the health, morals, or safety of the child.
    •  In addition, the United Nations also adopted the Convention on the Rights of the Child in 1989, which has been ratified by almost every country in the world and also applies to child labor.
    • Elimination of Discrimination in Employment and Occupation
    • Equal Remuneration Convention of 1951

    The very first binding international instrument with the purpose of promoting gender equality and eliminating discrimination was the ILO Equal Remuneration Convention of 1951 (No.100), along with its accompanying Recommendation No.90. The Convention addresses the following main issues:

    • Basic, ordinary, minimum wage or salary and additional emoluments arising out of the workers' employment and which payable in cash or in kind, whether directly or indirectly, by the employer to work;
    • Rates of remuneration established without any discrimination on the basis of gender, directly or indirectly;

    Where differential rates of remuneration are applied, without regard to gender, to the workers depending upon the differences in the work performed, which is determined by an objective appraisal, must not be contrary to the principle of equal remuneration.

    • The Discrimination (Employment and Occupation) Convention

    Following this, the ILO adopted the Discrimination (Employment and Occupation) Convention No. 111 and Recommendation No. 111, which addressed all types of discrimination with regard to employment and occupation. The Convention tackles the following main issues:

    • Each ratifying State has to declare and pursue a national policy that is designed to promote equality in both opportunity and treatment with a view to eliminating any discrimination in respect of:
    • Any discrimination, distinction, preference or exclusion made on the basis of color, race, political opinion, religion, social origin, national extraction, or other such grounds as specified by the States which nullifies or prejudice the equality of opportunity or treatment in employment or occupation;
  • Access to vocational training;
  • Access to employment and particular occupations;
  • Terms and conditions of the employment
    • The ratifying states have to seek the cooperation of the workers' and employers' organizations and other bodies in the promotion of the acceptance and observance of its policy; repeal statutes and other provisions inconsistent with the policy; enact legislation and promote educational programs to secure its acceptance; observance of the policy in employment and other such actions which needs to be indicated in its annual reports on the application of provisions of the Convention.
    • Elimination of Forced or Compulsory Labor

    The definition of forced labor by the ILO comprises two basic elements: that the work or service was exacted under the menace of a penalty; and it was undertaken involuntarily.

    • Forced Labour Convention of 1930

    The Forced Labour Convention No.29 of 1930, defines forced labor as the work or service for which the person has not offered himself voluntarily and was exacted from such person under the menace of penalty. The Convention excludes the following types of labor from its scope:

    • Work of a purely military character;
    • Work that is the consequence of a conviction by a court of law provided such work is carried out under a public authority's control and supervision, and such person is not placed at the disposal of other private individuals, companies or associations;
    • Work that forms part of the normal civic duties of the citizens;
    • Minor communal services; and
    • Work in the event of an emergency such as war, calamity and other circumstances that would endanger the existence of the well-being of the population.
    • The Abolition of Forced Labour of 1957 (No.105) which specifies that forced labor cannot be used for the purposes of economic development or as a means of political education, labor discipline, discrimination, or punishment for participation in strikes.
    •  Freedom of Association and the Effective Recognition of the Right to Collective Bargaining

    One of the most basic principles that form the foundation of the work of ILO is the freedom of association. In addition to the recognition of the principle in the ILO Constitution and the Declaration of Philadelphia that was incorporated into the Constitution in 1944, the ILO has also adopted the following two conventions:

    • Freedom of Association and Protection of the Right to Organize Convention No.87

    This Convention adopted in 1948 establishes the right of all workers and employers to form and join organizations of their choosing without any prior authorization, and also guarantees for the free functioning of these organizations without interference by the public authorities. The essence of the Convention is the following:

    Employers and workers, without any prior authorization, possess the right to establish and to join organizations of their choice for the purpose of furthering or defending their interests;

    The public authorities have to refrain from any interference that could restrict this right or its lawful exercise;

    The workers and employers, in the exercise of this right, have to respect the laws of the land. However, the law of the land must not be applied in such a way so as to impede the guarantees provided in the convention.

    • Right to Organize and Collective Bargaining Convention No. 98, 1949

    The Convention provides measures to promote collective bargaining and protection against anti-union discrimination for the protection of employers' and workers' organizations against interference from each other. The Convention addresses the following issues:

    • Protection to the workers from acts of anti-union discrimination such as subjecting their employment to the condition that they shall not join a union or relinquish such membership, dismissing or prejudicing a worker by reason of membership in a union and such;
    • Measures to promote and encourage the full development and utilization of machinery for voluntary negotiations regarding employment contracts and collective agreements;
    • The Convention entrusts the national laws and regulations to determine the extent to which the provisions of the Convention shall apply to the armed forces, the police and the public servants engaged in the administration of the State.

    International Labor Standards in the UAE

    Amongst UAE's estimated 9.1 million population, the UAE nationals are estimated to be around 12 percent, while the remaining 8 million are composed of foreigners, which are mostly temporary contract workers. In 2014, foreign workers in the UAE contributed more than 29 billion US Dollars to their home countries, making the UAE the third largest source of remittances in the world.

    As a result of the dynamics in the labor market and the mounting complexity of the labor mobility, the UAE Government represented by the Ministry of Human Resources and Emiratization (MoHR), has focused on strengthening the governance of the labor market. An example would be the most recent reforms to the Kafal or the sponsorship system, which has been introduced for temporary foreign workers who obtain their work permit through the MOHR. This includes several rights such as the possibility for these workers to unilaterally terminate their contract. The UAE also has instituted a Wage Protection System and issued several ministerial decrees to ensure timely payment of the wages to the workers.

    Though UAE still does not possess any independent trade unions, the Government has granted certain professional association's limited freedom to raise their work-related concerns, lobby the same to Government for redress, and file grievances.
                                  

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    Thu, 03 Jan 2019 15:45:00 GMT
    <![CDATA[Counter-Terrorism Efforts]]> A Global Purview of Counter-Terrorism Efforts

    With nearly 41% of all terrorist attacks resulting in casualty, and a dramatic increase in public targeted incidents, governing bodies representing both domestic and international interests alike have invested countless resources into better understanding why terrorism occurs, and how legislatively, it can be stopped. The result has led to an intriguing conceptualization of terrorism commencement theory, international convention prohibitions, and domestic statute adoptions.

    Understanding Terrorism: Scope, Scale, and Premeditative Factors Guiding Legislative Enactment

    Statistically, post-1990, approximately 100 to 200 international terrorist attacks have occurred each year. Of this number, 40% of offenses were directly targeted against U.S. interests. Heinous acts of terrorism such as the U.S. 9/11 Twin Towers attack and 2007 London Bombing have demonstrated that atrocities stemming from terrorism extend beyond the loss of life or injury. Rather, both domestic and international acts of terrorism hold the significant capacity to adversely impact socio-political and economic sectors. Empirical evidence has suggested that terrorism, directly and indirectly, results in: infrastructural damage, unemployment, weakened commerce, an elevated need for security, counterterrorism budgeting, and escalated insurance premiums. Globally, the vast majority of attacks have occurred within the Middle East and Europe, however, the highest rates of mortality have occurred within Africa, Asia, and the Middle East.

    To fully comprehend why terrorism has become an increasingly widespread phenomenon within the last half-century, one must first grasp what constitutes terrorism, and how domestic and international acts of terrorism differentiate. For an atrocity to be classified as an act of "terrorism," intentions must target "…premeditated political violence against civilians with the objective of maximizing media exposure to the act and, ultimately, to the terror group and/or to its cause. Political violence is achieved when either an individual (independent of the state) or the state itself commits assault with the purpose of obtaining a political goal. For the scope of this article, two primary forms of terrorism will be discussed: domestic and international incidents.

    • Domestic: Domestic terrorist attacks occur when a perpetrator commits an act of political violence within their own nation's jurisdiction. Consequences of a domestic attack are intended only to impact the venue country (whether that be its structural institutions, citizens, or policies). Within a domestic attack, the offenders, their victims, and the overarching goal exist within one territorial jurisdiction.
    • International: Transnational terrorist attacks engage offenders, victims, and targets of multiple nations. 

    There is significant debate existing between international governing bodies as to why acts of terrorism are committed. Despite a dramatic surge in research funding, the enactment of fifteen international counter-terrorism conventions, and enforcement of domestic counter-terrorism legislation worldwide (such as the UK Counter-terrorism and Security Act 2015), conclusions have remained predominately elusive. Lacking unanimous agreement, three theories have been generally accepted by members of the international community. At the legislative level, understanding these hypotheses has been absolutely essential for constructing laws aimed at curtailing terrorism. Succinctly, research has suggested:

    • Domestic political instability and international terrorism are intrinsically connected.  This perspective, coined the Escalation Effect, proposes: "…domestic political instability drives international terrorism…[in that] politically unstable countries offer propitious conditions" for civil war outbreak, guerrilla warfare, sophisticated "terror" training, and the accumulation of terrorist human capital.
    • Terrorism is most likely to arise out of territories with meager political development and a deteriorated economy.
    • International terrorism commences as the result of a "weak" state. This concept is referred to as the "failed state hypothesis." Weakness is determined by evaluating the social, economic, and political welfare of a nation.  

    Together, these speculations have helped guide the evolution of national and international conventions, resolutions, acts, and codes governing anti-terrorism legislation.

    Evaluating the Aims of Anti-Terrorism Legislation

    There are two central focal points specific to preventative counter-terrorism legislative efforts internationally: collective security and human rights. On the international scale, the United Nations Security Council has enacted a variety of resolutions since 21 January 1992 to combat and condemn global acts of terrorism. According to Article 24 of the UN Charter, the function of the Security Council is to maintain international peace and security amongst member states. In regards to counter-terrorism, the Council is predominantly concerned with managing collective security. The UN assessment of terrorist insurgency began in the mid-1960s through the formation of several multilateral treaties, which included the Tokyo Convention of 1963 and the Montreal Convention of 1971. These conventions "…categorized the main forms of terrorist acts as criminal…[defining] crimes and obligated state parties to prosecute or extradite suspected offenders.] Although UN treaties such as these serve punitive and deterrent roles, their effectiveness at mitigating incidents of terrorism is highly controversial. As tragedies resulting from terrorist acts have demonstrated, a discrepancy often exists between a state's claim of procedural duty follow-through and reality.  The 1988 Lockerbie tragedy demonstrates just this. Although the trial of the two Lockerbie bombing suspects was "achieved partly through the intercession of the [UN] Security Council, utilizing its collective security powers to deal with a past act of terrorism…[it was] an indication of future behavior by Libya in supporting terrorism." Following this realization, and upon criticism of targeted sanctions, the UN Security Council declared that states not only have a duty to satisfy collective security obligations but also, adhere to their duties of protecting human rights.  The General Assembly's Global Counter-Terrorism Strategy adopted by UN Member states in 2006 affirmed this declaration. The Strategy made clear that "…states must ensure that any measures taken to combat terrorism complies with their obligations under international law, particularly human rights law and international humanitarian law.

    International Anti-Terrorism Conventions

    From an international purview, all counter-terrorism conventions are enacted under the UN. Conventions worth analyzing in this article include:

    • 1997 International Convention for the Suppression of Terrorist Bombings (Ratified by 169 states)

    Through this convention, the UN confronts the increasingly widespread prevalence of explosives and other lethal devices used in terrorist attacks. Noting foregoing provisions did not directly prohibit such incidents, Article 2 is designed to outline committable offenses under this topic. The article states, "Any person commits an offense within the meaning of this Convention if that person unlawfully and intentionally delivers, places, discharges or detonates an explosive or other lethal device in, into or against a place of public use, a State or government facility, a public transportation system or an infrastructure facility...." Under the 1997 Convention, explosive and lethal devices were defined as weaponry or equipment holding the capacity to induce severe material/economic damage, kill, or cause bodily harm. Article 2 also asserts guilt if an individual acts as an accomplice in or directs others to commit the act of terrorism. The Convention, in Article 4 requires State Parties to implement measures "to establish criminal offenses under its domestic law the offenses set forth in article 2…[and] To make those offenses punishable by appropriate penalties which take into account the grave nature of those offenses." As with all of the anti-terrorism conventions set forth by the UN, the jurisdiction of an offense is dependent on three conditions. A State may claim authority over a terrorist attack if: it takes place in the Member states' territory, a flying vessel is registered under the States' laws, or the offender is a State national. It is also worth noting that the Convention excludes (in Article 19) "…activities of armed forces during an armed conflict…" from governance as international humanitarian law supervises activities executed by armed force.

    • 1999 International Convention for the Suppression of the Financing of Terrorism (Ratified by 187 states)

    Noting that financial terrorism had evolved into a grave matter of concern for the international community and that a vast majority of international terrorism acts were committed due to financial backing assistance, the 1999 Convention stressed the need to devise preventative measures to eradicate the financing of terrorism. Similar in design to the previous convention, Article 2 outlines committable offenses. The Article specifies an offense is committed under the Convention if an individual "…directly or indirectly, unlawfully and wilfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used... [to] cause death or serious bodily injury to a civilian…." The Convention is non-applicable (under Article 3) to offenses performed by nationals of the State in which the act occurred, or when an offense occurs "within a single State."  The Convention also prescribes ratifying states to adopt measures of enforcement/deferral. A State Party is strongly advised (where necessary) to institute criminal offenses and proportionate penalties for the actions prohibited in Article 2. 

    • 2010 Protocol Supplementary to the Convention for the Suppression of Unlawful Seizure of Aircraft (Ratified by 22 states)

    Created as a supplement to the 1970 Convention for the Suppression of Unlawful Seizure of Aircraft, the 2010 Protocol amended many previous articles of the Convention. Discussed in the Protocol's preamble, the international community was "deeply concerned" with the intensification of civil aviation offenses. The intended aim of creating this Protocol was to subdue future "seizure or exercise of control of aircraft." Article 2 of the Protocol replaced Article 1 of the Convention. Under the amendment, "Any person commits an offense if that person unlawfully and intentionally seizes or exercises control of an aircraft in service by force…or by coercion…." Additionally, the threat of aircraft seizure, the attempt of the offense, serving as an accomplice, or directing others to commit the offense is all punishable acts under the Protocol. Article 3 (replacing Article 2 of the Convention) classifies offenses as "punishable by severe penalties."

    • The 16th Proposed Comprehensive Convention on International Terrorism (Not yet ratified)

    Currently, the UN is in the negotiation phase of their 16th counter-terrorism convention. The Comprehensive Convention on International Terrorism is intended to ban all types of international terrorism, revoke terrorism fund access, ban terrorist access to arms, and deny terrorists refuge.  The proposal is undergoing a negotiation deadlock, as unclarity surrounds whether or not a state's armed forces or self-determination could classify as an act of terrorism.

    State Anti-Terrorism Legislation:

    From a national jurisdiction enforcement perspective, the United States and the United Kingdom have both enacted comprehensive legislative doctrine condemning acts of terrorism. Listed below are two of the countries' most all-embracive legislative attempts at counter-terrorism:

    UK Counter-Terrorism and Security Act (2015)

    Receiving Royal Assent 12 February 2015, the UK Counter-Terrorism and Security Act was passed by Parliament with the intent of: inhibiting terrorist activity resulting from entry to or exit from the United Kingdom, enhancing the monitoring of potential wrongdoers, fighting theory backing terrorism, granting law enforcement investigative authority to seize passports upon entry to the country, producing a Temporary Exclusion Order, modernizing aviation/maritime/rail border security, and guaranteeing the financing of terrorism is eradicated.

    18 U.S. Code Chapter 113-B

    U.S. Chapter 113-B provides numerous sections defining punishable crimes and penalties under the act of terrorism.

     Section 2332a. "Use of weapons of mass destruction," states that in the case of an offense committed in the United States against a U.S. national: any person (without lawful consent) who threatens to use or does use a weapon of mass destruction against a U.S. national, individual or property within U.S. territory, or property under ownership by the United States, "shall be imprisoned for any term of years or for life, and if death results, shall be punished by death…."

    Section 2332b. "Acts of terrorism transcending national boundaries," prohibits the following acts: killing, maiming, kidnapping, committing assault with a dangerous weapon, and causing (or conspiring to create) bodily injury through inflicting structural damage. Punishment ranges from 10 years to life in prison.

    Section 2332d. "Financial transactions," asserts any U.S. person with knowledge that another nation is supporting international terrorism, and "engages in a financial transaction with the government of that country, shall be fined under this title, imprisoned for not more than 10 years, or both."

    Section 2332f. "Bombings of places of public use, government facilities, public transportation systems, and infrastructure facilities," classifies chargeable actions as the delivery or detonation of an explosive in a public place, government facility, transportation system, or infrastructural structure. The detonation must be done with an intention of causing bodily harm, death, or damage. Additionally, individuals who conspire to commit an offense previously listed in this section will be charged. Penalties for such charges under this section are the same as the penalties under Section 2332a.

    ]]>
    Thu, 03 Jan 2019 13:46:00 GMT
    <![CDATA[lease or to license]]> In the United Arab Emirates, there are stringent requirements for leasing… if only there was another way.

    There are two concepts which many jurisdictions recognize, a lease and a license. One of these concepts is formal in nature, while the other offers flexibility and an alternate solution to being tied into a lease agreement. It is an informal agreement purported to be beneficial for all parties involved.

     In its simplest form, the difference between a lease and a license is as follows; a lease is the granting of a legal interest in land which gives exclusive possession for a fixed period of time. A lease arises when a landlord grants a tenant such a legal right in return for the payment of a rental amount. A license arises when a licensor grants a licensee a contractual right to occupy premises in return for the payment of a license fee. In law, a licensee is not entitled to exclusive possession of the premises.

    Although there the variances can sometimes seem vague, there are unequivocal repercussions for following one route as opposed to the other. The fundamental differences between a lease and a license will be highlighted below. The essential element of both forms of legal relationship is the granting of a right to use premises in a certain manner. One of the key legal differences worth mentioning here is that a lease grants an interest in land which gives a tenant exclusive possession and security of tenure while a license is a more adaptable agreement and is not capable of affording to the licensee the same security of tenure as a lease.

    There are certain foundational principles inherent in a lease agreement which distinguish it from that of a license, namely:

    • In a lease agreement, the lessee has the right to exclude any other person from the leased premises, rather than a mere contractual right to enter and use the premises for a particular purpose;
    • A lease agreement creates an interest in land, rather than a personal contractual right; and
    • A lease will run with the land. If cases where the ownership of the land changes, the new owner will have to acquire the land subject to the lease. However, this is not true in the case of a license – should the ownership change, the licensee will have no rights against the new owner of the land unless the license is transferred by agreement between the old owner, the new owner and the licensee.
    • When considering the statutory rights of the licensee and the lessee – a lessee has certain statutory rights to request the court to grant specific performance such as the reinstatement of the lease even when terminated by the landlord due to the tenant's default. These such remedies are not available to a licensee of premises.

    The debate of whether a person is a licensee or a tenant has been around for many years, in 1960, the Ontario Court of Appeal in Canada, in Re Br. American Oil set down a summary of the debate in writing. The essence of this can be summarized as follows; when there is a relationship of landlord and tenant, there must be a reversion in the landlord, the creation of an estate in the tenant, and a transfer of possession and control of the premises to the tenant. Ultimately, the transmission of an estate to the tenant is an essential characteristic of the relationship – there is no transfer of an estate in land to a licensee, and this, on the authorities, is the principal distinguishing trait between the two relationships.

    United Kingdom:

    In Camelot Property Management Limited v Roynon [2017], the case concerned property guardians in regards to a licensee or a tenant. Camelot was a property guardian company, their scope of work was to arrange guardians to live in an empty commercial property.  The company had arranged for certain persons to occupy portions of a disused elderly person's care home in Bristol, one such person was Mr. Roynon.

    There was a written agreement between the two parties which stated that such an agreement would be a 'license', which would allow Mr. Roynon to have a shared right to occupy the property. The agreement, however, did not provide any express reservations in favor of the Company – such as a right of entry. Mr. Roynon was in the possession of two specific room keys which other guardians were not in the possession of and were not allowed access as such.

    Following this, the Company served notice to quit on Mr. Roynon however, he refused to vacate. The company instigated possession proceedings and the court had to decide whether Mr. Roynon was a licensee or a tenant.

    The court held that Mr. Roynon did, in fact, have exclusive possession, this was in particular relation to the two rooms of the property for which he kept locked. Even though Camelot was able to conduct visual inspections, these did you equate to Camelot retaining the right of access and therefore Mr. Roynon did have exclusive possession of these areas. The restrictions placed on Mr. Roynon in the written 'license' agreement restricted only the way in which he used the rooms and were not sufficient to defeat his exclusive possession.

    The drafting of a license must be completed with utmost caution. As is seen in the abovementioned case, should a license be construed as a lease (especially in cases where the license is granted for a period of 6 months or longer), such licensee could be capable of claiming as a tenant for the protection provided for under the Landlord and Tenant Act 1954.

    The court held that although the intention was to grant a license only, this was not the case and Mr. Roynon ended up with an assured shorthold tenancy under which he was the tenant.

    In another 2017 case, namely that of Watts v Stewart [2017], Ashtead United Charity gave Mrs. Watts residential accommodation in one of its properties, namely alms-house. Mrs. Watts was provided with a letter of appointment which stated that she was a beneficiary of the charity. The letter referred to the 'tenancy' agreement under which she was required to pay a monthly rental. However, later in that same letter, it provided that no resident would be a tenant of the Charity or have any legal interest in the alms-house.

    The Charity later served notice on Mrs. Watts to quite due to her anti-social behavior which was in contradiction of the regulations as per her letter of appointment. The Charity instigated possession proceedings where the court at first instance decided that Mrs. Watts did occupy under a license and not a lease. Mrs. Watts appealed this decision.

    The appellant court upheld the decision of the court of the first instance and did not accept that Mrs. Watts had exclusive possession of the flat. Legal exclusive possession allows the occupier to exclude all others, including the owner, from the property and Mrs. Watts did not have this right. She merely had a personal license to occupy the flat subject to various rules and regulations.

    One must remember when initiating a lease or license relationship that the intentions of the parties are clearly outlined and that the legal drafting in watertight to ensure that an occupier is not inadvertently given exclusive possession of the whole or part of a property.

    South Africa

    The law of lease in South Africa is all-encompassing, there is no distinction between a lease and a license and rather the law of lease caters for all aspects of the utilization of property. The South African law of lease can be broadly defined as a reciprocal agreement between two parties, the lessor and the lessee, in terms of which one, the lessor, binds himself to give the other, the lessee, the temporary use and enjoyment of a thing, in whole or in part, or of his services or those of another person, the lessee, meanwhile, binds himself to pay a sum of money as compensation, or rent, for that use and enjoyment. This law, as is with its Roman counterpart, recognises three forms of the contract of lease:

  • Locatio conductio rei – the renting or hiring of a thing, movable or immovable;
  • Locatio conductio operarum – a contract of employment between an employer and an employee; and
  • Locatio conductio operis – the contract for the supply of services, like the construction of a building, between an employer and an independent contractor.
  • Under the location conduction rei, the instances where a person is entitled with a legal interest in a property is covered as well as instances where a person is entitled only to use of such property.

    Under South African law, should the lessee not have the exclusive possession of the premises, this will be agreed upon in the written lease agreement (as per the new law, any lease agreements not made in writing will not be valid under the law). Unless they are created as per the common law as considered alternative common-law land-use rights.

    Partiarian lease – this is a special lease provided for by the common law which applied to the use of agricultural land where the owner and the lessee agree that the lessee shall farm the land against payment in the form of a certain percentage of the crop or produce.

    Under South African law, as per the Roman-Dutch law, there is the concept of servitude. A servitude is a qualified beneficial interested severed or fragmented from the ownership of an inferior property (servient estate) and attached to a superior property (dominant estate) or to some person (personal beneficiary) other than the owner. This concept is used specifically when there is a landlocked property in terms of which there needs to be the utilization of other personal property to enable the owner of the landlocked property to gain access to his land.

    In the court case Van Rhyn and Others v Fleurbaix Farm, a company had subdivided its land into two portions. One such portion was completely surrounded by the properties of others. This portion was transferred to Fleurbaix and the other portion, to which was accessible by public road was transferred to Van Rhyn. In this instance, Fleurbaix had an automatic servitude over the property of Van Rhyn to access the public road. After some time, Van Rhyn made alterations to his property which ultimately closed off Fleaurbaix's access to the road. The judge in the matter stated that the rule of servitude entitled Fleurbaix to the right of way over the adjoining subdivision but the caveat to this is that Van Rhyn could alter the access, provided that such alteration was reasonably in nature. The court determined that the alteration was unreasonable as it completely cut off Fleurbaix's access to the public road.

    Canada

    In the case of Baker v Gee, Justice Macdonald wrote the following for the determination between a lease and a license:

    "Under the general law, and apart from the rental regulations, the relationship of landlord and tenant implies, as one of its essential features, the transmission of an estate or interest from the landlord to the tenant."

    "A license does not create any estate or interest in the property to which it relates. It merely conveys a privilege in the use of the property and makes an act lawful which without it would be unlawful."

    The provision of license here, as well as in the United Kingdom, is governed by the common law, and can be summarised as follows:

  • A license provides the licensee with the legal authority to use the licensor's asset without which such use would be unlawful (for example, trespassing);
  • A license may be implied by certain actions;
  • A license may be granted by an agent on behalf of the owner;
  • Simple licenses, without more, are revocable at the will of the licensor upon reasonable notice;
  • Licenses ought to be in writing if possible.
  • However, when a license is used in a commercial purpose, licensees, individuals using the real property of others under a license, are often called occupants or guests; not tenants. Due to a noticeable precedent of owners and prospective occupants trying to avoid the rigid and often pro-tenant provisions of the residential or commercial tenancy statutes, there has been a movement towards statutes that are all-encompassing. An example of this is the British Columbia Residential Tenancy Act which provides for the following as a definition of a tenancy agreement:

    "…an agreement, whether written or oral, express or implied, between a landlord and a tenant respecting possession of a rental unit, use of common areas and services and facilities, and includes a license to occupy a rental unit."

    The attempt by the statute to include licenses into its ambit was however defeated due to its reference to a rental unit which is defined in the statute to mean living accommodation rented or intended to be rented to a tent.

    India

    A lease under Indian Law is a grant of property, for a time, by one person who is in possession of a greater interest in the property, the consideration being usually the payment of rent. Whereas a license, on the other hand, is permission to do something on someone else's property which, without such permission, would be unlawful. The license is governed by the Indian Easements Act. There are many similarities between a lease and license agreement under Indian Law, however, there too are many discernible differences between such. In what follows, will be a composition of the main differences provided for by the law:

  • Transferability – where a lease under the law is transferable, there is no transfer of interest with a license. A way of differentiating between these two, would be the transferability of exclusive possession; (however, pursuant to Section 56 of the Indian Easement Act, a license to attend a place of public entertainment can be transferred unless a specific intention is evident);
  • Accretions – where the tenant has added to the property or developed the property, such accretions are deemed to be comprised in the lease, however, in terms of a license, there is no property in the land and thus the licensee will not acquire any interest in the accretions;
  • A lease is heritable, however, due to a license being a personal privilege, it is not heritable;
  • Forfeiture – a lease can be terminated as such, a license cannot;
  • Termination – there are eight ways in which a lease can be terminated as per Section 111 of the Transfer of Property Act. A license may be revoked as per the wishes of the parties unless such license is together with a transfer of property and such transfer is in force; or the licensee, acting upon the license, has executed a work of a permanent character and incurred expenses in the execution. Therefore, unlike a lessee, a licensee is not entitled to a notice to quit before eviction;
  • Transfer of the property – there is no impact on the lessee's interest in the property should the property but transferred, however, under a license a subsequent transfer of the transfer will terminate the license.
  • A lessee is entitled to maintain a suit in his own name against trespassers and strangers. A license does not create an interest in property in favor of a licensee and, therefore, he is not entitled to maintain suits in his own name;
  • Death of either party does not affect a lease, whereas a license is terminated in such circumstances.
  • The courts were called upon to make a determination of whether an agreement was a lease or a license. In Natesa v. Tungarelu (38 Mad. 83), a person granted another a lease for a period of two years to tap toddy from the trees in his garden, but the person in whose favor the lease was, was not allowed to cut the leaves. This agreement created no interest in the movable property whatsoever, and should rightly be classified as a license.

    The question before the Delhi High Court was whether an agreement amounted to a lease or a license. It was provided that the licensee would be entitled to use the premises, but would have no right, title or interest to possess the premises. A license fee per day was to be paid to the owner. Under these circumstances, the Court held that it was a license and not a lease. (Hind Trading & Mfg. Co. v. Didi Modes Pvt. Ltd., A.I.R. 1993 Del.301)

    United Arab Emirates

    The concept of granting licenses is not recognized in the United Arab Emirates, although it is utilized avidly in business practice. The concepts of granting licenses to occupy premises or concession agreements are not recognised under the UAE law. However, alternative arrangements should be made to ensure that all legal eventualities are covered.

    If business utilized license to occupy or concession agreements, they will encounter the following issues:

  • Breach of lease terms – as per Article 787 of the UAE Civil Code, a tenant must receive the prior consent of the landlord to sublease. If a business is a tenant and such business grants to a third party a license or a concession agreement, such agreements are not recognized under UAE law, and will more than likely be regarded as a sublease. Without prior consent under these circumstances, a business may be found to have contravened the Civil Code.
  • Labour law issues – under the UAE labor law, it is a requirement that the employees work at the registered premises of their employer. Should the employer have entered into a license agreement, instead of a formal lease, then the employer's right to use the premises as a place of employment may not be recognized. This may be fraught with difficulties when applying for the visa for the employees. Another issue which may arise is when there is an inspection by the authorities and should they find employees of the license holder at the premises, there could be severe repercussions for both the tenant and the license/concession agreement holder;
  • Licensing issues – businesses in the UAE must provide evidence to the authorities that they either own or have a valid lease of premises when applying for new commercial licenses and when renewing existing commercial licenses. A license to occupy will not be recognized for this purpose;
  •  

     

    ]]>
    Wed, 02 Jan 2019 00:00:00 GMT
    <![CDATA[saudi employment law]]>A Guide to Saudi Employment Law 2018-2019   Contents 1. The Legislative framework 2. Contracts 2.1. Work contracts 2.2. Qualification and Training Contract 3. Probation period 4. Working hours, Leaves and Wages 4.1. Working hours 4.2. Wages 4.3. Leave 5. Disciplinary matters 6. Rights of an employee when an Undertaking is Transferred 7. Termination of employment 7.1. General 7.2. The notice period of the Labor Law 7.3. The employers right to terminate without any notice period 7.4. The employees right to terminate without any notice period 7.5. Compensation for wrongful termination 8. End-of-service benet 9. Non-compete clauses 10. Social insurance 10.1. Work injury 10.2. Old-age pension 10.3. Disputes 11. Saudization 12. Joint Stock Companies 13. Conclusions   1. The Legislative framework

    The basis of Saudi Arabia's employment legislative framework is on two pillars. The first pillar is the Royal Decree number M/51 23 Sha'ban 1426/27 September 2005, with amendments announced in Royal Decree number M/46 of 05/05/1436H (The Labor Law).

    The second pillar is the "Implementing Regulations" of the Labor Law. The Labor Law contains detailed provisions that address matters such as, recruitment, employment of non-Saudi personnel, employment contracts, termination of employment, and working conditions. The Labor Law also regulates dispute resolution and provides for fines and a punishment regime for specific offenses. Who is this Labor Law applicable to?

    As per Article 5 of the Labor Law, the Law shall apply to:

  • Any contract whereby a person commits himself to work for an employer and under such employers management or supervision for a wage/remuneration;
  • Workers of  public organizations and the government and institutions including those who work in pasture or agriculture;
  • Charitable institutions workers;
  • Workers of agricultural and patrol firms that employ ten or more workers;
  •  Workers of agriculture firms that process their products;
  • Workers who on a permanent basis repair and operate agricultural types of machinery;
  • Qualification and training contracts with workers other than those working for the employer within the limits of the specified provisions provided for in this law;
  • Part-time workers in connection with safety, occupational health, and work injuries, as well as what is decided by the Ministry of Labor.
  • Article 12 of the Labor law sets out that every employer who employs ten or more workers must prepare internal regulations that the firm will be bound by. The basis of the internal regulations must be on the draft regulations provided by the Ministry of Labor, following this the approval by the Ministry of Labor of the regulations is required. The regulations shall include the work organization rules and all related provisions including the provisions relating to privileges, violations, and disciplinary penalties and procedures. The regulations shall not contradict to the provisions of the Labor Law.

    The Labor Law applies to both Saudi-national workers as well as foreign workers. Of vital importance to that foreign workers is that, before they can participate in any work, they need to obtain from the Ministry of Labor a work permit, according to Article 33 of the Labor Law. For the granting a permit, the fulfillment of some conditions must take place. Such provisions include that, the foreign worker needs to have lawfully entered Saudi Arabia and must be authorized to work. The foreign worker also needs to possess the professional and academic qualifications which the country needs or which are not possessed by the citizens. The foreign worker must have a contract with the employer and must be under the employers' responsibility. Article 33 of the Labor Law also states that the definition of work in this specific article is any industrial, commercial, agricultural, financial or other work, and any service including domestic service.

    The domestic workers' rights and duties are regulated by Ministerial Decision number 310 of 1434 regulating the employment of domestic workers and Ministerial Decision number 605 of 1434 permitting domestic workers to transfer between employers in certain circumstances (together with the Law of Domestic Workers).

    Saudi Arabia has a select group of free zones which can be divided into industrial cities and Economic cities. The authority for the industrial cities is the Saudi Industrial Property Authority, and it is the Saudi Arabian General Investment Authority (SAGIA) who has authority over the Economic cities. SAGIA offers a fast track government immigration center for the cities to deal with, for example, visas, labor law requirements, renewal of visas and work permits. The economic cities are private projects and therefore, they must adjust to the Saudization, but a more liberal regime will apply to employment issues than in the rest of Saudi Arabia.

    2.      Contracts

    2.1. Work contracts

    The contract concluded between an employer and an employee, is a contract whereby the employee undertakes to provide services under the management, control or supervision of the former for remuneration is in pursuance of Article 50 of the Labor Law.

    Generally, this contract shall be in writing, and each party should have one copy. This provision for a written contract can be an optional provision since the law still validates an unwritten work contract. In the case of an unwritten work contract, the interpretation of the terms will be in favor of the employee. At any time one can demand that the contract shall be in writing, no matter if such person is the employer or employee, according to Article 51 of the Labor Law. There are some exceptions to this general rule about the work contract. The work contract for foreign workers needs to be in writing and of a specific period according to Article 37 of the Labor Law. Workers of the government and public corporations do not need a written contract of work. Instead, the appointment decision or order by the competent authority serves as the contract.

    A person under 15 years may not be employed. In exceptional cases and for light works, the Ministry of Labor may allow persons between 13-15 years old to work, according to article 162 of the Labor Law.

    According to Article 52 of the Labor Law, a work contract shall primarily include, the name of the employer and employee; venue; nationality; identification number; agreed remuneration; type and location of work; date of employment and duration of the contract (if it is a fixed contract).

    There are two types of work contracts:

    1)      Term contracts, which consist of fixed-term contracts and indefinite term contract.

    2)      Project-based contracts

    Article 55 of the Labor Law states that a fixed term contract terminates upon the expiration of its term. If the parties wish to continue the employment, the contract shall be deemed to be renewed for an indefinite period and thereby becomes an indefinite contract. This extension of the contract does not need to be in writing. The fixed-term contract may also become an indefinite contract when renewal takes place for three consecutive times or the total period of the fixed-term contract and renewal is equal to 4 years or more. A project-based contract shall terminate with the completion of the work agreed upon according to Article 57 of the Labor Law.

    Foreign workers can only get a fixed term contract. If there is no specification of the term in the employment contract, it automatically ends when the expatriates' work permit expires.  A point worth noting is that according to Article 40 of the Labor Law, the employer shall incur the fees of recruitment of non-Saudi workers. The employer shall also incur the fees of the residence permit and employment permit in conjunction with their renewal and the penalties resulting from their delay. The employer is also obliged to pay the exit and re-entry visa and at the end of the work contract, pay return tickets to the foreign employee's home country.

    Article 39 of the Labor Law provides that the employer may not employ the foreign worker in an occupation other than the one specified in his work permit.  There is a prohibition against the foreign worker from engaging in a profession other than the one in the work permit before the correct procedures take place for the changing of a profession. Until such time, the employer may not allow his foreign worker to work for other persons or other employers according to Article 39 of the Labor Law.

    2.2. Qualification and Training Contract

    Article 45 of the Labor Law states that a qualification and training contract is a contract which binds the employer to qualify and train a person for a specific profession. The contract shall be writing and shall include the profession for which training is contracted, the duration of the training and successive stages and the allowance to be paid to the trainee in each stage, provided that the basis of such allowance is on a piecemeal or productivity basis as per Article 46 of the Labor Law. The qualification and training contracts are subject to the Labor Laws provisions on official holidays, annual vacations, daily and weekly rest periods, maximum working hours, work injuries and their conditions, occupational health and safety rules, as well as whatever is decided by the Minister of Labor in accordance with Article 49 of the Labor Law.

    ]]>
    Wed, 05 Dec 2018 16:11:00 GMT
    <![CDATA[mersin free trade zone]]>Mersin Free Trade Zone   At the beginning of 1987, Turkey set up various Free Zones. The First Free Trade Zone was built up in Mersin and Antalya in 1985. The building of the Mersin Free zone is on a geopolitically significant area in the Eastern Mediterranean shores. It lays contiguously with the Mersin port, the most significant port in the region and a standout amongst the essential export ports in Turkey. Mersin has become in the last few years the most alluring investment destination in Turkey for foreign and local investors and stands out amongst the most alluring in the region. Some identify Turkey by the name of "Pearl of the Mediterranean." Mersin Free zone is a center for foreign speculators with proximity to major global markets – Middle-East, North African countries, East and West Europe and the Russian Federation.  Free zones are well-defined as fenced-in zones in which special regulatory treatment exists for the operating clients, keeping in mind that the end goal is to promote exports of goods and services.  These zones are considered as an exception of customs areas and are primarily designed to increase export opportunities. Around 70% of more than 400 companies working in the free zone are Turkish, with the rest being either remote or worked as a joint venture amongst local and foreign capital. The free zones offer remarkably competitive tariffs and incorporation in a matter of weeks when space is made accessible. It is also well equipped with financial services, as five banks work in the Mersin free zone. They serve the free zone's organizations directly be accrediting, offering credit and providing money transfer. Free zones have been set up in Turkey with the Free Zones Law No. 3218 (FZL) which has been in force in the Turkish System since 1985. As of now, there are 19 Free Zones in Turkey. They are liable under the same regulation. Therefore, the characterization of all the opportunities and conditions which are underneath have similar circumstances.  Free zone types:
    • Semi-private free zones
    • The land Is owned by the state, and the leading company can rent places and operate in the zone private free zones
    • The land is under the ownership of the operator company, and along with the operation of the zone, Operator company can rent/sell places to its investors
    The Objectives of free zones are:
    • To incentivize the local companies to export;
    • To expand foreign trade volume;
    • Ease the import and export activities;
    • To Expedite technology transfers into the nation.
    • To encourage export-oriented investment and production
    • To encourage FDI and joint ventures
    • To provide uncomplicated access to stocks of raw materials and equipment on favorable terms
    • To encourage international finance and trade possibilities
    • To speed up the integration with the world economy
    • To create a favorable environment for research and development.
    Advantages of Free Zones:
    • 100% exemption from customs duties and other assorted duties.
    • 100% exemption from corporate income tax for manufacturing companies.
    • 100% exemption from value-added tax (VAT) and special consumption tax.
    • 100% exemption from stamp duty for relevant documents.
    • 100% exemption from income tax on employees' wages for certain companies
    • Goods can remain in free zones for an unlimited period.
    • Companies are free to transfer profits from free zones to abroad as well as to Turkey, without restrictions.
    The companies which are set up in a free zone cannot carry out their commercial activities out of the free zone as it is a Turkish Company. FZ directorate websites state that the acceptable field of activities in the Mersin Free Trade Zone is:
    • Production of varying types of light industries – Electronics, optics, machinery, spare parts, textiles, and clothing.
    • Wholesale trades
    • Packing and repacking
    • Workplace Rental
    • Assembling
    • Warehousing
    • Repair and maintenance
    • Banking – Insurance
    • Installation / Dismounting
    The advantage of Free Zone is: 1. Availability to Benefit from Tax Advantages for Manufacturer Users
    • Until the end of the tax assessment year including the date, Turkey turns into a full member of the European Union, the proceeds of the manufacturer users, produced through the sales of the goods. The production of which took place in the free zones are exempted from the income or corporate expenses or taxes.
    • The wages of the laborer's employed by the users that export at least 85 percent of the FOB value of the products they produce in the free zones will be exempt from income tax. The Council of Ministers can diminish this rate to 50 percent.
    • There is an exclusion for the transactions and arranged documents related to the activities carried out in the zones by the manufacturer users from stamp duties and fees.

    The free zone users that acquired "operating license" other than "production" before 06/02/2004, the wage or corporate tax exemption continues during the validity period of the Operating License.

    The free zone users that got operating license other than production after 06/02/2004 do not enjoy income or corporate tax exemption. 

    2.    The opportunity of Medium and Long-Term Planning  The validity period of an operating license: 
    • 15 years for tenant users. 
    • 20 years for manufacturer tenant users. 
    • 30 years for users who build their working premises (investor users).
    • 45 years for manufacturer-investor users. 
    Constructing plots and buildings on Treasury owned land can be leased or permitted easement until 49 years for the investor users.  3.    Opportunity to Transfer Profits  The proceeds and earnings from free zone activities can be freely transferred to Turkey or abroad without any permission.  4.    Facilitation of Foreign Trade  Since the goods sold from Turkey to free zones are liable to export regime, free zone users can acquire goods and services from Turkey without paying VAT (value added tax). On the other hand, the exchange between free zones and third countries is not liable to the foreign trade regime. 5.    Trade Facility Free from Customs Duty Procedure  The goods in free flow can be sent to Turkey or the EU nations from the free zones without any customs duty payment. Additionally, there is no application of customs duty to the goods of third country origin at the entrance into the free zones and exit to the third nations. Also, goods can remain in FTZs without any time limit. 6.    Easy Access to EU Countries  Due to the fact that the Turkish free zones are part of the Turkey-EU Customs Territory, the goods in free flow can be sent to the EU nations by an A.TR certificate. Customs duties for the goods of third country origin are likewise not paid at the entry into the free zones. In any case, the goods of third country origin that are not in free circulation can be sent to the EU nations by an A.TR certificate, only after the payment of customs duties over the rates determined in the Common Customs Tariff. 7.    Equal Treatment  The rewards and benefits provided in the free zones are available to all firms regardless of their origin. 8.    No limitation  as to time frames 9.    Managing Trade Activities According to Market Demands and Conditions  In the stated Free Zones, except the manufacturer's request, any authority regarding prices, quality, and standards granted to public institutions and agencies bylaws or by other legislation is not valid. Also, legislative provisions relating to customs and foreign exchange obligations are not applicable to the zones. 10.    Inflation Accounting Opportunity  The making of every payment in the Turkish Free Zones is with Convertible Currencies. 11.    Able to access Domestic and Foreign Markets Contrary to the regulatory framework of most of the free zones in the world, there is permission of sales to the local market except for consumer and risky products. 12.    Reduced Bureaucratic Procedures and Dynamic Management  During operation and application process bureaucracy is curtailed. Professional private sector companies manage free zones. 13.    Strategic Location  Turkish Free Zones are positioned close to the European Union, and Middle East Markets, adjacent to the significant Turkish Ports on the Mediterranean, Aegean and the Black Sea and have easy access to international airports and highways. 14.    Competitive Infrastructure Standards  The infrastructure of the Turkish Free Zones is competitive with international standards.  15.    Supply Chain Management  Turkish Free Zones, principally for the companies which manufacture for export, offer supply chain management opportunities in providing intermediate and raw materials.  16.    The zone is a hub for foreign investors.       ]]>
    Wed, 05 Dec 2018 14:38:00 GMT
    <![CDATA[Decentralized Autonomous Organisation]]> Decentralized Autonomous Organisation

    The promising era of Economic Freedom

    A decentralized autonomous organization (the DAO) is a computer program which is a form of an investor directed venture capital fund.

    The primary objective of the DAO was to provide a new decentralized business model which could help in the operations of both commercials as well as non- profit making organizations. In the year 2016, the crowdfunding of DAO further went on to create history as the most massive crowdfunded campaign. The main plan behind this concept was to put more control in the hands of the investors and to strike off the idea of having a centralized authority, which proved itself to be a more economical method. The DAO further came to be known for establishing itself as the most successful and dynamic concept to be implemented through the Blockchain technology. A blockchain is a decentralized,  digital ledger accessible by the public through which various transactions taking place through multiple computers can be recorded. It ensures that the said record cannot be altered with and also allows its participants to check and audit the transactions taking place in a very transparent, cost-effective and straightforward manner.

    It took birth at the beginning of May 2016, when a few members of the Ethereum community disclosed their creation of the DAO. The DAO during its creation period allowed anyone to send Ether to a unique wallet address in exchange for DAO tokens on a 1–100 scale. Ether is a cryptocurrency which has its blockchain generated by the Ethereum platform.  This period of its creation turned out to be of great success, and it gathered 12.7M Ether (worth around $150M at the time), which now made it the biggest crowdfund ever. There came a point when Ether was trading at $20, the total Ether from The DAO was worth over $250 million.

    It opened the doors and gave the opportunity to anyone who has a project and wanted to display their idea before the community, and in return receive funding towards the same from the DAO. It enabled anyone with a DAO token to cast their vote towards a plan and make a profit if the said plan turned out to be a success. The DAO was proving to be a platform that issued funds in Ether to projects, whereas the investors received voting right with the possession of a digital voting token. It was a successful platform wherein contractors with the project could submit their ideas and plans, which would further be verified and checked by a team of volunteers called the curators. Post scrutinising the details such as identity of the people putting forward their ideas and projects and post having a check on the legality of the said project and idea, the said project was put forward for the investors to vote post which on the success of the project the profits from the investment was then reverted to the shareholders.

    The DAO at no point of time was in possession of the money of their investors, but in fact, it was only through the digital voting tokens that the investors could cast their votes towards a project.

    The fact cannot be ruled out that the concept of the DAO was unique and is the need of the hour in shaping a modern-day organizational structure. This concept gives an opportunity for every individual to display their ideas and also provides the power to the investors to take productive decisions with regards to the same overruling the concept of a monotonous Hierarchy system.

    Furthermore as putting up ideas as well as investing in them requires the investor to spend a certain amount of money, the same now helps in taking a faster decision and in overlooking unproductive ideas at a quicker speed. Further, all the rules to the said concept are laid down to everyone taking part, and everyone herein decides how to spend their money at the same time have easy access towards tracking their finances and also keep a check on how it is spent.

    The Attack that changed it all

    The DAO was proving itself to be a major success until the 17th of June 2016, the day it was attacked by a hacker which resulted in the discovery of a combination of vulnerabilities which included the feature of recursive calls( when a routine dials itself both, directly and indirectly, it is said to be making a recursive call). Soon it was discovered that the hacker had taken control of 3.6 million Either, which was about one-third of the total Either that was committed to the DAO. The Ethereum blockchain was not found to be the cause of the said hack but was an intelligent hacker who had discovered a vulnerability in the said system, which would not have been the case if the coding of the DAO was done rightly.

    The hack of the DAO was a major eye-opener. Having touched the numbers, the DAO had accomplished, despite its failure, it still holds a mark for the accomplishment it had reached. It wouldn't be wrong to say that in an industry with young procedures and developing tools, this was a project which had an early launch for a concept of its magnitude.

    Further having various security checks or test would not make a difference as even though the team, as well as the community, was well acquainted with the resolution of problems about areas such as the Call Stack Depth attack, unbound loops, and various specific vectors. The re-entry attack was something that left everyone unaware during the time the writing of the DAO framework.

    It is still not known whether the said attacker belonged to a particular group or was a single individual, who cleverly made us of the inbuilt split to transfer money into another wallet. The original function of the said split was to allow the investor to withdraw the Either and further to return the token if anyone desired to leave from the DAO. It was, in fact, this function that proved to be a setback for the DAO as it was through this function that the hacker had discovered a vulnerability which was, in fact, an error, and now started repeatedly calling the said split function and each time called a new request before the end of the previous one. It was because of this error that the system could not read the fact that the transaction had already been completed during the last split function. The hacker severely abused the said error and in no time was found to have withdrawn Either running to a sum of US $ 50mn. It caused a significant setback and had created a state of paralysis for the Ethereum community and had brought a massive breakdown in the value of the digital currency. 

    Finding the plan to recovery

    At this time of crises, there were various ideas which were now discussed by the members of the community towards damage control, out of which one was to freeze the money before the hacker could withdraw the said stolen money. The execution of this action would have now enabled the community to take control of the stolen Ether and further direct the same towards the accounts of their rightful owners.  The said idea did receive massive support but was not implemented as the same was found to be associated with having a risk towards market securities.

    The optional ideas that were proposed to take control of the said situation were to conduct a hard fork. By using this method, all the finances would be transferred into a new contract post which the original holders would be able to access the said contract and exchange their DAO token for Ether at a rate which was decided before the announced plan.  After a series of discussion and after taking into consideration various options, it was the Hard Fork method which came to be determined as a weapon to resist the damage that had been incurred due to the said act. The said plan was now implemented before the hacker could withdraw all the ETH from the " DarkDAO." As a result of this, all the funds were soon transferred to the withdrawal contract, and the original owners were now accessing the same to withdraw their Ether.

    Lesson Learnt?

    The said attack was devastating, but it surely taught a lesson that even though the system is stable, the human being remains its most significant challenge and weakness.  Even though the said contract was programmed with precision, it still contained certain loopholes which enabled a hacker to enter into the said system and create a heist. It is a matter of great appreciation that in the situation of crises the community proved their ability to handle the said situation and take control of the same. In spite of the said crises and panicked situation, the community remained calm and analyzed the pros and cons of all the situations, and damage control techniques within a very short period, and further went on to succeed in the step chosen and taking control of the situation.

    Further in an environment where the code is the basis of all functionality, the same needs to be of good quality, reviewed and also developed. Further, the responsibility of code quality in a blockchain should be taken by the entire community. Especially in the case of DAOs, it is the view of many stakeholders in the community that like a contract is read before investing money, in the same manner, all investors should also review the code, and its risk should be assessed. In the short term, it will be interesting to see how the community will be able to adjust to this situation by motivating users who have not yet triggered the exchange of their DAO tokens to do so.

     

    ]]>
    Tue, 04 Dec 2018 15:22:00 GMT
    <![CDATA[Development in Auh Healthcare]]> Recent Development in Abu Dhabi Healthcare Sector

    "It is health that is real wealth"- Mahatma Gandhi

    Introduction

    Over the past decades, the UAE health sector has witnessed a dramatic change along with impressive growth. UAE has a federal government which oversees the entire country's health sector. The government also finances almost all the non-private healthcare organizations and institutions. One of the highest level strategic plans of UAE Government is Vision 2021 which mainly plans to achieve the "world-class healthcare". The government is planning to do it by accrediting all the government and non-governmental hospitals, clinics and other healthcare organizations following the various international standards. The main focus of the UAE government and the other Emirati states to develop the modern healthcare infrastructure to ensure that adequate services and facilities are made available in the Emirates.

    In UAE healthcare is regulated at both the federal and emirates level. At the Emirates level, there are multiple health regulatory authority to administer the various health service in the Emirates level.

    It is possible to divide the entire health care sector of the UAE into the following segments:

  • The Ministry of Health of UAE
  • Department of Health which (DHO) was previously known as Health Authority Abu Dhabi (HAAD).
  • Dubai Health Authority. (DHA)
  • Dubai Health Care City Free Zone. (DHCC)
  • In keeping with a new vision of healthcare development, the Emirati state of Abu Dhabi has also developed its Emirate level strategic health care plans for the people and residents of Abu Dhabi. In the year 2014, a broad strategy and initiative were taken by Sheikh Mohammed bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the Armed Forces to improve the healthcare facilities in the Emirati state of Abu Dhabi. This strategy included 85 initiatives that mainly aims to promote the various facilities and quality of the healthcare system in Abu Dhabi.

    Department of Health (DOH)

    Each entity within the healthcare sector has their own set of policies, principles, and responsibilities like taking care of essential health care services, licensing the doctors and the nurses etc. The DOH is the regulatory body of the healthcare sector in the Emirate of Abu Dhabi. This regulatory body shapes the regulatory framework in the healthcare sector in Abu Dhabi.

    DOH which was previously known as HAAD (Health Authority Abu Dhabi) first arose through the Law Number 1 of (2007). As mentioned in the Article 1 (Clause 1 and 2) of the Law Number 1 (2007), the main purposes of DOH are to achieve the highest standards in health and medicinal services and health insurance and to follow-up and monitor the operations of the health sector to deliver an exemplary standard in provision of health and curative services and health insurance. To achieve its purpose, the establishing Law Number 1 of 2007 empowers the DOH in the following ways:

  • DOH is authorized to apply the various laws, rules, regulations, and policies with a vision of developing the health sector in Abu Dhabi. (Article 5 Clause 2)
  • DOH approves the various rulings and procedures regarded as being necessary for operating health and curative establishments in Abu Dhabi.
  • DOH develops and applies the integrated systems to control the public and private health sector in the Emirates level. (Article 8 clause 12).
  • Polices and key Principles of DOH

    DOH's policies refer to decisions, plans, and activities which are undertaken to achieve various healthcare goals. DOH policies mainly focus on to outline the priorities and the expected roles of different groups related to health.

    Some of the critical principles of DOH are:

  • DOH regulations have their bases in evidence. It is mentioned in Law Number 1 of (2007), that the DOH regulatory controls will be evidence-based as far as possible.
  • DOH follows a seamless, coherent and transparent regulatory framework.
  • DOH seeks to optimize resources and reduce administrative burdens.
  • Role of DOH

    DOH has the prime responsibility of licensing and setting various standards of the healthcare professionals.

  • DOH has to determine the Healthcare professionals who require a license.
  • To establish the criteria for the practice within the law.
  • DOH has the responsibility to take regulatory actions concerning healthcare service providers.
  • DOH also sets out a framework for disciplinary action.
  • As per the Law Number 1 of (2007) the Healthcare service providers who obtain licenses will be the responsible party and ensure that they are competent to and how they act in the best interest of patients.

    Roles of Healthcare Service Providers as per Law No.1 of (2007)

    The roles are as follows:

  • Healthcare professionals have to ensure that the  Healthcare Professionals employed by them hold a license issued by DOH,
  • Healthcare professionals have to develop job descriptions for all staff employed at Healthcare Facilities operated by them,
  • The healthcare professionals have to provide medical liability insurance and professional hazard insurance for Healthcare Professionals employed by them,
  • Healthcare professionals have to co-operate with any audit carried out by DOH.
  • Licensing of Healthcare professionals in Emirates of Abu Dhabi

    The DOH establishing law requires all that all the health care professionals to be licensed by DOH to practice in Abu Dhabi. To obtain a license, health professionals must meet the PQR requirements, the language requirements, the current national or similar foreign license requirement etc. Again there is the examination requirement that applies to all Healthcare Professionals other than those who are determined by DOH to be exempt from this. As such all the healthcare professionals have to pass the examination. DOH may reject an application for a license of a healthcare professional that has not to meet all the requirements. DOH also has the power to suspend and revoke the permissions of the healthcare professionals.

    As per the DOH law, it requires that all the healthcare professionals have the duty to comply with the various policies and standards that apply to them. In general, healthcare professionals must respect the integrity of the patient. They should carry due regard for every patient and should not discriminate against any patient based on gender, race, religion, customs, economic status etc.

    Other Health Sector Entities

    As mentioned in the Law Number 1 of (2007), the government health sector entities include Abu Dhabi Health Services Company (SEHA) incorporate under the Emiri Decree Number (10) of 2007 and the National Health Insurance Company (DAMAN) consolidated through the Emiri Decree Number (39) 0f 2005.

    SEHA: (Abu Dhabi Health Service Company)

    SEHA, an independent and public joint stock company that mainly operates in all the public hospitals and health organizations in Abu Dhabi. Emiri Decree Number 10 of 2007 established the company. SEHA is a leading participant in Abu Dhabi's health sector. The company seeks various kinds of reforms to upgrade and improve the healthcare service of Abu Dhabi. For the last two decades, SEHA is promoting different types of healthcare excellence for the people of Abu Dhabi, and it is achieving goals with a competitive advantage. SEHA assume the responsibility for public health care centers and hospitals. SEHA has entered into many partnerships with the international healthcare institutions with a view of identifying the best global practices.

    Abu Dhabi Occupational Safety and Health System Framework

    This code applies to all the employers within the Emirates of Abu Dhabi for the provisions of medical emergency and first aid treatment to employees, workers and the other persons. As per this framework, any medical professionals providing services beyond the first aid should have a license to practice medicine as required by the Department of Health of Abu Dhabi. The framework mentions various kinds of training requirements for the first aiders in Abu Dhabi; for instance, all the trainers should have the valid training certificate from the recognized training providers.

    Conclusion

    In today's world more and more innovations are put into practice in the healthcare system. People are witnessing more and more transformation in healthcare. Because of this enormous transformation, we need a balanced regulatory system which can provide us with a quality health service. The regulations should be flexible and protective against risky practices.

    ]]>
    Tue, 04 Dec 2018 14:04:00 GMT
    <![CDATA[Pay When Paid Pay if Paid]]> "Pay When Paid and Pay if Paid"- UAE Perspective

    Introduction

    The subcontractors play a vital role in the construction industry as the sub-contracting work represents a significant portion of the construction projects. It is the natural concern for the subcontractors to be getting paid on time for the work performed on a construction. The construction contracts often contain the provisions that determine when a general contractor will pay a sub-contractor. The payment issues are considered to be one of the leading causes for the delay of the construction projects. The procedure of construction contract payments from the owner to the general contractor and finally to the sub-contractor is an inherent part of any plan. Sometimes the main contractors may expose to make payments to their subcontractors when they have not received the corresponding payments from the employer. As a result, the main contractor often includes the contingent payments in subcontracts and passes the payment related risks to the subcontractors. The conditional clauses "Pay when paid and Pay if paid" can be broadly divided into categories, namely 'pay when paid' and 'pay if paid 'clauses. These clauses are very infamous in the field of the construction industry, especially at the subcontracting level. The jurisdiction of various countries considers contractual clause pay when paid types arrangements either void or regarded as doubtful. This conditional payment mechanism put various benefits and profits to the contractor but on the other hand this lead to a serious hindrance in the sub-contractor's cash flow.

    Pay when Paid

    A pay-when-paid generally refers to timing by which a general contractor will pay a sub-contractor after receiving the payment from the owner. In order to enforce these types of clauses, there must be a guarantee of the amount within a reasonable time, regardless of whether the owner pays the general contractor. Without this guarantee, the clause will be unenforceable and would be equivalent to Pay-if-Pay.  The primary purpose of pay when paid provision is to defer payment to the point of time that is determined by a specific event, namely the payment by the employer to the contractor. Under the English Law, the first case recognized 'Pay when paid' was in 1974 in Modern Engineering Limited v Gilbert-Ash Limited. The objective of this clause was to protect the main contractor's cash flow. In the case it was decided that instead, the main contractor bears alone the risk of insolvency of an employer, it makes all sub-contractors in addition to the main contractor liable as well. In Singapore, in the case Brightside Mechanical and Electrical Services Group v Hyundai Engineering and Construction Co Ltd., the court also upheld pay when paid clause.

    Paid if Paid

    A paid-if-paid is the provision in a sub-contract usually means that the contractor no more required to pay the sub-contractor unless and until the contractor receives the payment from the owner. When the owner fails to pay the contractor, the contractor is not required to pay the sub-contractor.  The payment process is considered to be the most significant risk in the construction process. The payment for the subcontractor shall depend on the method of payment from the employer to the main contractor, eventually the main contractor to the subcontractor. Upon the completion of the work, a contractor and a subcontractor and the suppliers all require payment on a timely basis. The general contractors frequently face claims for delay exudes from sub-contractor. In such cases, the subcontractor becomes an innocent victim of non-payment for reasons which are not attributable to their works.

    Application of Back to Back Clause under UAE Law

    The unfair payment terms are generally known as back to back payment terms in which interpretation may vary in different circumstances concerning either 'Paid if Paid' or 'Paid when Paid'. The clause 'back to back payments' is generally being encountered in most of the Gulf countries. Over the past two decades, in UAE the payment issues are regarded as one of the leading causes for the delay of the construction projects. In UAE only a value of 10% of the contract value is paid as in advance to the main contractor. As such the main contractor have to rely on their financial resources or also to depend on the sub-contractors to carry out their work.

    As per the UAE Civil Transaction Code and many other judgments, they provide that the main contractor will be in a position of responsibility for the actions of their sub-contractor. This responsibility will be present whether domestic or nominated, and the sub-contractor shall be paid by the main contractor as soon as he finishes his work irrespective whether the main contractor has completed his job or not or received his payment from the employer or not. In UAE in most of the cases, the employers are reluctant to pay the payments to the main-contractors. Sometimes the employer also faces some financial problems for which the employer cannot make the due payments to the primary constructor. As such the main contractor passes the risk to the subcontractor engaged in the contract by incorporating back to back clause such as 'paid when paid' and 'paid if paid'.

    Provisions Made Under Article 890 of Civil Code UAE

    Article no. 890 (2) has made the stipulation that the main contractor as the responsible party to the employer, though the subcontractor has performed the entire work or part of the work. Thus it is the primary contractor who shall be liable for any act or default made by any Subcontractor unless otherwise stated in the Particular Conditions.

    However, because of the provisions provided for the sub-contractors in the UAE Federal Law (Law Number 5 of 1985), Article No. 89, it defines that "A sub-contractor shall have no claim against an employer for any matter due to him from the first contractor; this shall be the case unless he had made an assignment to him against the employer".

    Thus the sub-contractor has no option for payment besides relying on the main contractor.

    Further exploring the UAE Federal Law No.05 of 1985, there are multiple legalization clauses which have made available for the leading contractors in relevant to due payments as mentioned below:

    Article No. 879 (1) of UAE Federal Law No. 05 of 1985, grants the contractor permission to retain the property until the full payment has been received in the event the jobs carried out by the main contractor on the project. The subject legal provision is located under Article 1572 (1) of the UAE Federal Law No. 05 of 1985, in which the following is stated. "Amounts due to contractors and architects who are in the process of constructing buildings or performing work relating to the reconstruction, repair or maintenance shall have the status of a priority right over such constructions, but to the extent to which it exceeds the value of the land at the time of sale, by reason of such works".

    Judicial Decisions made by UAE court

  • In Dubai Case no 18/2000, the court of cassation in Dubai held that: ' the sub-contractor will only be entitled to a proportional payment during the performance period from any payment received by the main contractor from its client, the same does not apply when a sub-contractor has completed all his work and delivered the project to the main contractor. A sub-contractor has no obligation to wait for payment until such time as the main-contractor has been paid.'
  • Dubai Court of Cassation Case No. 83/2009 upheld that Main contractor does not have to pay to the subcontractor.
  • In Abu Dhabi Court of Cassation 573/2008, it was decided that the UAE Supreme Court pursuant to the provision of Article 887 of UAE Civil Transaction Code, it was upheld that, in lump sum contracts, the main contractor has to execute the agreed plan and the contract will not be subject to variation by increase or decrease.
  • An Overview of Back to Back Payment Clause in Different Countries

    United States of America

    Some of the states in the USA such as Alabama, Alaska, Arizona etc. have legally permitted the main contractors to use back to back payment terms, while some other states such as California and New York considers the  "Back to Back" payment clauses as illegal clauses.

    New York

    It has been held by New York's highest court that "Pay if Paid" clauses are not enforceable because it is against New York's law and is deemed to be against public policy. In the USA only the states of New York and California have voided the "Pay if Paid" provisions. The legislature of these two states accepts this clause as void.

    In New York, these types of clauses have been unenforceable since 1995, when New York's one of the highest courts decided the landmark case of West-Fair Elect. Contr. v. Aetna Cas. & Sur. Co. In that case, the New York Court of Appeals decided that pay if paid clauses violate New York's public policy that subcontractors cannot waive their mechanic's lien rights unless they previously received a waiver to do so.

    Again in New York and some other states of USA "pay when paid" clause is enforceable only if it sets a reasonable time for payment and it does not make the payment to the contractor in a condition precedent.

    United Kingdom

    The use of these clauses created unprecedented havoc in the construction sector in the late 1980s and early 1990s in the UK. In the UK under Section 113 of the Housing Grants, Construction and Regeneration(HGCR) Act 1996 an effective prohibition was made for the pay when pay clauses.

    Conclusion

    Any default made by the employer by not paying on time or not paying the parties appropriately affects the parties in the construction project. Therefore, it is essential for the parties to be clear concerning the contract about the payment. Also, the legislator should adopt various payment mechanisms to bring the certainty in the construction industry.

    ]]>
    Tue, 04 Dec 2018 13:13:00 GMT
    <![CDATA[B2B dispute resolution procedure]]> Dispute Resolution Procedure in UAE – B2B Procedure

    Introduction

    The United Arab Emirates has overcome many years of strong monetary development and has risen as a major territorial business center, attracting vast and various cross-border exchanges; this has led financial specialists and parties into contracts in the UAE while choosing foreign jurisdiction laws to govern those contracts. One of the primary legal systems used is the English law, and it is used to oversee the contractual relationship and select a foreign jurisdiction or for arbitration as another option to litigation. With numerous international investors attracted to business openings in the Middle East, particularly with the political steadiness and economically buoyant nations of the Gulf including the UAE, Kuwait, and Bahrain, the efficacy of dispute resolution services in the region is an immediate consideration. The Gulf, and predominantly the UAE, has a scope of strong and stable organizations that can provide justice when disputes occur, and there are numerous formal and alternative dispute resolution process accessible to foreign and domestic investors. Taking a glimpse at the legitimate system of the UAE, a civil law jurisdiction with a robust jurisdiction of money related free zones displayed on the common law is of enormous significance. What follows is a straightforward yet comprehensive manual to help with understanding the critical highlights of the decision of law, prosecuting and parleying in the UAE, i.e. procedure of dispute resolution in UAE.

    Disputes and issues frequently emerge between individual and parties and settling them is essentially called dispute resolution. Dispute attorneys and prosecution lawyers are the primary people who handle problems that develop between parties or business-related issues that as a rule require dispute resolution procedures. Dispute resolution is a multistep process that can start with negotiation, move on to mediation, and if necessary end in arbitration and litigation.

    Types of Dispute Resolution Process

    There are many types of dispute resolution that people can decide to choose but mainly are given below:

            I.  Mediation

    Mediation is a kind of process wherein the parties seek a mediator to avail in achieving a settlement. The third- party individual helps parties to settle to an agreement. The objective of mediation is for an unbiased third party to enable disputants to agree all alone. Instead of forcing an answer, an expert mediator works with the conflicting sides to investigate the underlying positions and to figure out what honestly is going on behind the narratives. Mediation is a suitable method to resolve issues since it is not akin to bringing disputes to legal proceedings, which is more expensive and lengthier. Therefore, it is advisable to fix things through alternative resolution (ADR) methods such as mediation.

          II.  Arbitration

    The UAE issued a new arbitration law, Federal Arbitration Law No. 6 of 2018 ("the Arbitration Law"), thus annulling the provisions of the Arbitration Chapter in the UAE Civil Federal Law No. 11 of 1992; this is a process wherein an arbitrator settles a dispute. A settlement and decision wouldn't be considered as binding unless the two parties concurred. There is additionally a third-party person who is known as an authority and will serve as a judge. Much the same as mediation, an arbitrator listens to each party and yet everyone contends and presents their evidence for their rights.

        III.  Litigation

    Litigation is a type of process wherein the dispute arises before the proper courts, and a judge (and jury if relevant) will decide given the proof that has been displayed and delivering a verdict concerning the case. The two parties engaged with this, and they shield their rights utilizing a dispute lawyer as they experience procedures; this is thought to be a definitive method for settling a difference between two sides.

    Customers wishing to resolve claims with or potentially to recover the debts from Dubai based companies, which have unmistakably defaulted on their payments, can now take the help from the Department of Economic Development (DED) which has enabled a dispute resolution mechanism for disputes between companies. The Commercial Control and Consumer Protection Department (CCCP) at the Department of Economic Development have built up the Business Protection Department (BPD). This department provides local business dispute settlement service in Dubai, regardless of whether by intermediation or by other amicable settlements strategy stipulated by laws. The department also can provide business to business (B2B) commercial dispute settlement services in the Emirate of Dubai and to educate traders about the regulations and procedures required to create a safe trading environment.

    Traders who submit their complaints to the department of economic development (DED) in Dubai are presently having them settled within an average of 10 working days.

    According to the business protection section of the DED, this time limit should not be taken as being official and final, as the BPD Board has the discretion to make more time if cases require it or vice versa should it be seen as relevant.

    B2B complaint procedure

    Traders who submit complaints to the DED in Dubai will commence the proceeding by reaching the CCCP to complain. If there is a legitimate grievance, the complainant may charge for conducting a contextual analysis and allude the matter to mediation within ten days. The intervention will take the form of a meeting of parties convened by the Business Protection Division which expects to settle the complaint amicably. B2B has officially resolved over 1000 disputes internationally, and this is why the UAE has begun to implement it. Even though there is no exhaustive list that B2B will address as far as disputes, in any case, it attempts to resolve conflicts that predominantly relate to business transactions. Such transactions would principally involve either contractual terms or invoices against a provision of goods and services.

    Criteria for filing the complaint

  • Disputes shall be commercial.
  • The defendant shall be trading establishment /Company registered in DED.
  • Determination of the dispute cannot occur during the process of being heard before any other judicial/legal/administrative authority.
  • Requirements for Filing Complaints

  • Providing a copy of the documents which validate their claim.
  • A non-refundable complaint examination fee will require payment.
  • Disputes cannot be resolved by the B2B process are:

  • Bounced Cheques/Returned Cheques
  • Electronic Crimes or Construction/Real Estate
  • Technical Service issues.
  • Foreign Traders or consumers

    Use of the B2B process in undertaking mediation for foreign traders or entities which are not licensed by the DED is impermissible because they won't have any relatable power or authority to hold sway over the other party to settle before heading to the courts or have the capacity to apply sanctions.

    Disputes involving individuals or consumers who lack licensing under the DED are also beyond its jurisdiction. Parties cannot appeal a B2B final decision. The B2B mechanism concerning formalities, requirements, and procedures are less demanding than those of the courts and customary disputes settlement forums. Expenses for all things considered are substantially less when raising disputes with the B2B. Furthermore, unlike other UAE authorities, the B2B will acknowledge considering reviewing documents, which are in English. The BPD can settle disputes by telephone, or conference calls if both parties agree.

    For plaintiffs based outside the UAE and wishing to choose local representatives, the B2B will acknowledge signed merely authorization or representation letters from the offended parties or plaintiffs for that purpose. These additional facilities with the B2B constitute another cost saving advantage to plaintiffs as far as sectioning and interpretation charges. The B2B administrations give affirmation to working together in Dubai and further empowers organizations everywhere throughout the world to benefit from a cost-effective and time managed dispute resolution mechanism.

    ]]>
    Tue, 04 Dec 2018 11:58:00 GMT
    <![CDATA[good samaritan law]]> Good Samaritan Law

    Introduction

    What does it mean and imply when one is called a Good Samaritan? The term is regularly used in the news and by people when relating to stories of do-gooders in action. The name originates from a biblical story in which an individual helped another in need, though many at the time would have considered the act as unexpected. This act of non-profit driven kindness was the original inspiration for what a Good Samaritan is. In more recent times, the world has become more profit-driven with people regularly putting themselves before others. Of course, doing so, especially in times of danger is mostly considered normal, and frankly, the natural response; this is why the performance of such selfless acts is deemed to be exemplary and exceptional.

    The world around us is also in a constant shift. Since the time of the original tale of the Good Samaritan, laws have become a critical deciding factor in the actions of people. Generally speaking, we always think before committing to an act, for the iron grip the law holds over us can rarely be evaded. Actions deemed illegal, questionable or even unfamiliar will rarely be committed for fear of repercussions. In some ways, the world around us is deeply invasive, with nothing hidden from the authorities. As such, even when it seems we are alone and clear of prying eyes, there is still caution.

    Due to the changes, we also now have a different definition of a Good Samaritan. The description generally describes the same type of person, but in a more legally acceptable way. The current definition is more along the lines of an individual who voluntarily provides aid in an emergency to a sick or injured individual. This act would be outside of their range of work and entirely optional for them.

    Around the world, there are 'Good Samaritan Laws' whose jobs it is to place limitations on actions of this kind. This idea may sound bizarre; a law that dictates just how helpful and selfless you can be. Indeed, there will likely never be a politician who would outwardly express this view. However, the primary purpose of the laws that are in place is to help decide where liabilities lie.

    When you help someone, in the case that things are made worse, there will lie a liability upon you for the damage caused, and this is what the laws look to establish. There have been cases arising in which this is the very issue. People have been seemingly incorrectly blamed for actions derived through innocent concern for others, and this can and does produce somewhat of a deterrent.

    In this article, we shall take a narrower look at the Good Samaritan laws of the UAE, and what the stance is within the country on matters such as these. The rules look to protect those who act in a manner describable as Good Samaritan.

    The UAE's Position

    The UAE is considered to be at the forefront of Good Samaritan protection laws within the Middle Eastern region. Generally, across many of the other neighboring countries, there are either minimal regulations on the matter or none at all; this is a significant disadvantage, as it gives rise to uncertainty. Should cases of this manner arise, what laws are to be followed to reach verdicts? How would one even begin to tackle this topic?

    The UAE is therefore at the forefront in this regard. While the nation does not have its own stand-alone Good Samaritan law, there have been talks of one coming soon. The negotiations began in late 2017, and the code is currently in the draft stage.

    While the law is currently yet to finalize, there have been other attempts to convey the information to the public by the government and authorities. There was advice given relatively recently by the authorities in which they stated that, while it is within human nature to help those in need, in the case of accidents, it would just be best to call the police or ambulance (or appropriate authority) to deal with the issue. Doing this would allow one to bypass any liability for damages caused.

    Perhaps the biggest worry on the topic is of a death resulting from the attempted help; this could potentially lead to a murder charge or similarly severe ends.

    A recent UAE incident which demonstrates this unsureness concerned an 18-year-old Emirati individual who rescued six girls from a car accident. The individual was in fear, however, that they would receive reprimands due to the current nature of the legal landscape.

    A case which dealt with this matter, though not occurring in the UAE, took place in the USA. In this case, the defendant was sued by the state after she had attempted to rescue her friend following a car crash. The primary defense utilized was the Emergency Medical Service Act of 1980. However, the California court's verdict, in the end, was that the Good Samaritan would not receive protection under this law as it only applied to medical professionals performing acts of an emergency nature.

    Mens Rea

    The Mens Rea or mental element of a crime is a vastly important point. The UAE Penal Code (Federal Law Number 3 of 1987) itself is what is currently used to dictate damages caused, including in a case of Good Samaritan action. It issuing was by the Abu Dhabi Judicial Department, and alongside it, they have also provided a UAE Criminal Law Overview. The Penal Code itself does not consider the concept of Mens Rea, though the overview does. Within it, is stated in Chapter 2 that a Mens Rea is one of the two necessary aspects to any action. The other element is the physical process of performing the act, and then there is the intent. If either of these is missing, liability is not possible.

    This concept adds an extra element to the mix. One acting as a Good Samaritan will not have the intention to cause harm, even if that is the eventual outcome. Therefore, the possibility of murder is minimal.

    The next possible level of accusation to this is that of manslaughter or some similar crime; this will be a regrettable outcome for both of the parties involved, and the official federal legislation would look to protect the well-meaning party in here.

    A rather complicated case arose in Ohio, USA. The Case of Carter v. Reese in which a truck in an accident pinned the plaintiff. The defendant then proceeded to act and provide what assistance they could. However, the plaintiff (the individual assisted) believed the defendant acted negligently and sued. The court though, held that the Defendant worked as a Good Samaritan and so they were innocent of any crime or negligence.

    Sharia Law

    The UAE and its surrounding Middle Eastern Muslim countries mainly follow Islamic Sharia principles in areas where there are no official laws and regulations; this is also the case within the UAE at this time, and it is more than likely that the future law will at least in part, incorporate Sharia Principles.

    The question that then arises is of what the Islamic verdict is regarding this topic. It is straightforward. In the case where an emergency is occurring, it is permissible to intervene to attempt to assist where possible and try to save a life. This verdict is the case regardless of either of the parties' genders or religions. As such, going off of Islamic Sharia Law, a 'Good Samaritan' would be protected.

    The New Law

    The upcoming Good Samaritan law would look to draw from numerous inspirations. Being a UAE law, it will undoubtedly bring from Sharia Law. Sharia Law as previously covered would be highly essential and also similar such regulations from international jurisdictions would also receive consideration. It helps that the Sharia principles are very much in line with these international laws which will mean that little to no compromise will have to occur in the law.

    Conclusion

    It is essential to bear in one's mind that one should always try to act reasonably and logically. While it may be seen to be human nature to help those in need, it is the responsibility of every person to think before acting; this is not to say that one should not perform, though instead, actions should take place within the limitations of an individual. If they are untrained to do anything, they should not do it, and caution and clear thoughts still hold value before making any move.

    The current levels of protection for Good Samaritans in the UAE are decent and undoubtedly superior to anything else in the region, though the uncertainty of not having a stand-alone law to dictate and layout rights and duties still looms. The future law, while even in its early phases, will put many of these burning questions and concerns to rest, and can only lead to a more favorable environment.

    It is essential to remember and bear in mind that while some of these laws may seem harsh and even morally wrong, they are not necessarily so. Instead, as with many rules, they look to maintain the balance within society and ensure social order prevails. People have roles to fill through their professions and jobs, and so a medical professional or police officer should be the only ones to perform those said duties. Of course, the unpredictability of humans and the world we live in is do not allow for stone-set attitudes, and this is recognized. The reason for the newly discussed Good Samaritan Law in the UAE is due to this very base nature of the world around us.

    ]]>
    Tue, 04 Dec 2018 11:27:00 GMT
    <![CDATA[legalities of using vpn]]> Legalities of using Virtual Private Network –

    Considering the recent ban on skype and other applications in U.A.E.

    Introduction :

    In recent years, an enormous change has undergone in the field of technology which raises a necessary question about human's ability to continue in protecting and promoting the right over the internet. Over the past twenty years, the governments of various countries have dramatically increased their efforts to control and restrict information on social media. The online content manipulation has contributed to the overall decline in the internet freedom of people. Nowadays, the use of fake news, online hacking, and online theft have gained vast popularity and particular attention. For this reason, some countries have put new restrictions on the use of VPN(Virtual Private Network).

    What is VPN?

    A VPN (Virtual Private Network) is a network which is private and which is used to add security and privacy to the public and private, for instance, Wi-Fi Hotspot and the Internet. It is an encrypted connection over the internet from a device to a network wherein it conceals one's real IP (Internet Protocol) address. VPN provides a different IP address through which one can quickly gain access to the websites that are blocked by a government by using an advanced encryption protocol via secured online data transfers. A VPN can be set up by entering a username and a complex password. There are various advantages of using a VPN, for instance, if someone is working remotely, a VPN can allow logging on one's company website and accessing the other internal resources. It also protects data while using the WiFi Hotspots in various public areas like airports, metro stations, restaurants, cafes, etc. But there are numerous negative implications of using a VPN, for instance, it can hide various malicious activities which are done intentionally by a diverse group of people. These activities include stealing one's personal information, hacking one's account, etc.

    Can using VPN lead to copyright infringement?

    The answer to this question, however, differs from country to country. In some states using a V.P.N. is legal and in some other countries using V.P.N. is illegal. For instance in the countries like China, Iran, Oman, Russia, Turkey and U.A.E. have only government approved V.P.N. Again the countries for example Iraq, North Korea has entirely banned the use of V.P.N. On the other hand in U.S.A., Europe and most of the countries of Asia, the use of V.P.N. is legal.

    V.P.N. was initially being used to provide a secured network and connection for the big business and organizations. But on the other hand V.P.N. can also be used maliciously for various illegal and unwanted activities like hacking one's account, online theft, making internet fraud while online shopping, etc. when someone is doing illegal activities over a V.P.N., then there is the possibility that such person will be prosecuted under the laws of that country. Therefore, in some jurisdictions it is against the law when someone uses V.P.N. in concealing his identity to hack another person's account, selling drugs or such other illegal activities. Because of this ban on using V.P.N. in some countries, for instance, Iraq, Belarus, North Korea, and Turkmenistan, some people think that the utilizing of a V.P.N. is not allowed. However, there are various legitimate uses of a V.P.N. which below:

  • Protecting one's data and providing a secured network: A public WiFi is not a secured connection, and it can be easily hacked, and it can contaminate one's connection with harmful computer programme which is known as Malware. Using a V.P.N. can make a secure connection and protect data from unsecured Wi-Fi set up.
  • Use of a V.P.N. by corporations and governmental organizations for security: The Governmental organizations and Corporations related to Defence, Finance, Economic Development, Human Resource, Trade, Municipality, legal affairs, etc. need extra protection while using the internet to protect their sensitive data. As the use of V.P.N. makes a network more secured, some Government organizations and corporations mostly rely on V.P.N. services.
  • People who are more concerned about a secured connection or those who wish to have a secured connection using a V.P.N.  The Use of a V.P.N. disguises one's I.P. address, and the other search engines cannot identify the identity behind the V.P.N. Thus a V.P.N service enables those who are much more conscious about their network security against various types of harmful online activities. 
  • Cybercrime Law in UAE:

    In the United Arab Emirates (U.A.E.) there is a recent ban on Skype, Whatsapp audio call and video call, Viber and some other streaming devices. The residents of the U.A.E. are facing several restrictions on internet usage which forbids them to use various websites.

    This problem is also met by the people who come from abroad for business purposes and pleasure. The Telecom Regulatory Authority of the U.A.E. had imposed a strict restriction and control of what can be accessed and viewed on the internet across the country which is called internet censorship. Recently, laws of U.A.E. only allow the use of V.P.N. services which are considered to be legal by the government to access the blocked websites or else the U.A.E. laws put imprisonment or fines based on the severity of the crime. (Article 1 of Federal Law No. 12 of 2016)

    Cybercrime Legislation in UAE:

    The U.A.E. legislature passed a cybercrime law in 2012 which banned the use of various websites which are considered illegal in the country. Such restricted websites include pornography sites, gambling pages, and various sacrilegious sites, etc. The U.A.E. Cybercrime Law Number 5 of 2012, contains multiple stern punishments to combat a plethora of information technology crimes. 

    Federal Law Numbers 5 of 2012:

    The Federal Law No. 5 of  U.E 2012 is a comprehensive piece of legislation which contains various provisions to combat cyber crimes. As per the law, it is unlawful to make illegal use of the many contents of internet, websites and V.P.N. services to commit cybercrime and other fraudulent activities.

    As per Article 9 of Federal Law No. 5 of 2012 , "Any person that circumvents the protocol address of the internet by using a delusive address or an address belonging to others or by any other means for the purpose of committing a crime or preventing its discovery shall be punished by imprisonment and a fine not less than (AED 150.000) and not exceeding (AED 500.000) or by any of these punishments."

    The article mentioned above was later replaced and amended by Article 1 of Federal Law No. 12 of 2016.

    UAE Amended Cyber Law Relating to V.P.N. (Federal Law No.12 of 2016)

    Article 1 of the Federal Law Number 12 of 2016 has introduced some amendments and changes to the Cyber Crime Law (Article 9 of the Federal Law No.5 of 2012). The amended law states that:

    "Whoever uses a fraudulent computer network protocol address (I.P. address) by using a false address or a third-party address by any other means for the purpose of committing a crime or preventing its discovery, shall be punished by temporary imprisonment and a fine of no less than Dirhams 500,000 (U.S.D. $136,128.51) and not exceeding Dhs 2,000,000 (USD $544,514.04), or either of these two penalties."

    Thus the above mentioned amending provision of cyber law in U.A.E. criminalized the use of illegal V.P.N. services in U.A.E.

    Following the announcement of the amended cyber law of 2016, the T.R.A. has issued a statement clarifying that the companies, institutions, and banks are free to use V.P.N. to gain access to internal networks lawfully. The T.R.A.'s report also emphasized that business users can be held accountable if the V.P.N. is misused.

    Again the newly amended law has made it clear that it is unlawful when a private individual uses V.P.N. services to commit a crime. The recently revised law mainly targets those who misuse the facility of V.P.N. and uses it for some illegal purposes.

    What makes VPN illegal under the UAE Law:

    U.A.E. Government restricts various content and websites which relates to Fraud, Theft,  Deception. Etc. This category includes the following material:

  • The internet content that uses the practices of online fraud, deception, theft, etc.
  • The internet content that impersonates and claim the status of others for fraudulent purposes.
  • The internet content that allows others to access others' bank statements and accounts, data, credit or other electronic card numbers or any electronic payments.
  • The U.A.E. Government restricts various types of internet content and websites which violate and invades the privacy of others. This category includes the following:

  • Internet content and sites that consists of the tools for phone tapping, theft or publication of private information.
  • The internet content that contains the information from the public or private organizations.
  • Various VPN Services in UAE:

    There are some specific sorts of criteria while using the various V.P.N. services. Some of these criteria are good encryption, D.N.S. leak protection, no traffic logs, etc.

    In the U.A.E., V.P.N. services are primarily used by private individuals to access V.O.I.P. (Voice Over Internet Protocol) and to access some websites that are officially blocked by the government. Now when the Skype and Whatsapp calls are banned, the use of V.P.N. had become a necessity for all the people to call at home. The following are some of the legal ways to do it:

    Du and Etisalat have various types of V.P.N. packages that allow users to use mobile data and other service provider Wi-Fi to connect and make video and voice calls internationally. Some of the packages start at Dh 50 per month. People can make a good choice by utilizing all these V.P.N. packages provided by various telecommunication services.

    Conclusion

    The Government of the U.A.E. is not against V.P.N., but they want to combat the illegal use of V.P.N. such as hacking, online theft, Piracy, Pornography, etc. The Law of the U.A.E. has allowed the legal use of V.P.N. in certain specific circumstances. As such, accessing a V.P.N. by an individual in U.A.E. is permissible, depending on specified terms and conditions.

    ]]>
    Tue, 04 Dec 2018 10:58:00 GMT
    <![CDATA[Customs Duty in India Part II]]> Panorama of Customs Duty in India Part II

    Import for Re-Export

    Re-exports out from U.A.E. Free Trade Zones to a third market goal beyond the GCC Customs Zones are additionally exempted from any obligation.

    However, such goods when imported with the intention of re-exporting them as a whole or part to another country, a Deposit or Guarantee equivalent to the applicable tariff amount on the goods shall be secured instead of Customs Duty.

    For this methodology, the Declaration Type "Import for Re-Export to Local from ROW (Rest of the World)" should be cleared. As of now, this is a restricted revelation to those with esteem higher than AED 20,000 aside from if there should arise an occurrence of vehicles. The value of the foreign goods that are to be re-exported, for which customs taxes/duties will receive refunds, shall not be less than five thousand US dollars.

     The period of import for re-exportation may not exceed six months (180 days). The customs office will make null all or part of the cash deposits and securities, as customs taxes duties, in the case, that the goods placed are partly or wholly, for local consumption, or similarly disposed of, or upon expiry of the designated period (180 days). The claim for the refund of the customs taxes or duties shall be filed within 180 days from the date re-exported.

    Goods may be re-exported in the following situations:

  • Imported products that have not left from the customs warehouses.
  • Goods brought into the country under a Temporary Admission procedure
  • Products deposited with the customs warehouses as one of the cases of suspension of customs taxes/duties.
  • Foreign goods for which customs taxes and duties have received payment.
  • Foreign goods from local markets
  • Products that have been rejected by the competent authority. g. Goods imported for re-exportation.
  • For goods destined directly for Mainland Customs Zones or to a Free Trade Zone for sale in the U.A.E. and re-exports to GCC Countries are subject to customs import tariff as per GCC Common Customs Law that sets the framework for the UAE's Import Regulations. The exception concerns those under the Act of GCC Common Customs Law or the effective GCC Economic Agreement or similar such international agreements within the GCC Regulation. Accordingly, products can be moved intra-GCC Customs Offices permitting entry of the remote resources starting with the one-party state then onto the next. Be that as it may, a Statistical Export Declaration more likely than not been cleared from the trading GCC nation for internal developments of such merchandise and a duplicate of the same must require submission to the Customs Office. It must require submission for bringing into the country conveying the "Makasa Stamp" (set-off component) on the Declaration with a specific end goal to maintain a strategic distance from the rehashed instalment of Customs Duty at the goal Country. The Declaration write "Import to Local from GCC" should be cleared for such exchange.

    Documents required for Customs Declaration are:

  • Delivery order (for air or sea importation)
  • Bill of Lading used for air or sea import
  • Manifest (for introduction by land or by wooden vessels or the like)
  • Packing List for multiple/several good
  • (The HS code, as well as the International law for chemicals or hazardous goods,  are be indicated).
  • The customs office may request translation of the foreign documentation into Arabic.

    Powers of investigation and enforcement by the Authority under Common customs law for GCC states;

    According to Article 122 of the common customs law for GCC states the Customs officers are authorised to inspect the goods to combat smuggling and the means of transport and to search individuals under the provisions herein and the other applicable regulations (laws). The searching of the body of a woman, the search shall be done only by a female officer.

    If there are adequate pieces of evidence found, and after obtaining permission from the competent authority, customs officers are entitled to inspect any house, store or shop according to the applicable regulations.

    Customs officers are also entitled to as stated in article 128, detain any individuals suspected to have performed or attempted to commit an offence or involved in playing a part in any of the following crimes:

  • Smuggling
  • Transporting or acquisition of contraband
  • An Arrest for customs officers to make is authorised only in the following cases (As stated in article 137:

  • Smuggling offences in the act.
  • Resistance to officers or security officers that impedes an investigation of smuggling cases or customs offences or the persons involved therein.
  • When the persons are acting to escape to avoid the fines, penalties or compensations that might arise.
  • The customs officers authorised to shall issue the arrest order and produce the arrested person to the competent authority within 24 from the time of arrest.
  •  

    Case law in India referring to the Customs duty Jurisdiction

    In "Amba Expo Fab V. Authority of Customs (Import)", Nhava Sheva' – 2012 (12) TMI 395 - CESTAT MUMBAI the show caused notice was issued by one Commissioner of Customs (Adj), notwithstanding he didn't pass any decree. The impugned law passed by Commissioner of Customs (Import), Nhava Sheva who recorded that he can pick the challenged show cause notice to vide Notification No. 112/2005-Cus. In the Notification no place it is exhibited that the impugned show cause notice has received allotment to Commissioner of Customs (Import), Nhava Sheva for intercession. The Tribunal held that the challenged decree passed without jurisdiction requires putting aside.

    In "Bengal Ruby Mica Supplies Co. vs. Union of India (UOI) And Ors. On 2 March 1994, In the present case, customs authority had no jurisdiction to levy any export duty on "cess" treating the same to be a part of the assessable value within the interpreted meaning of Section 14 of the Act. When cess was and is not a part of the assessable value, any duty realised by said value shall receive clearance without authority of law and more than the jurisdiction conferred on the authority. It would not be an instance of a simple mistake of law or actuality under the arrangements of the Customs Act, 1962 to levy the export obligation on "cess" not approved under the Act. A similar upcoming act will consider the scope and purview of the Customs Act, 1962 and the jurisdiction, authorities, and capability of the officers under the Act. The Customs Act is comprehensive code just if the Customs specialists act inside the extent of the arrangements of the Act, however, if traditions expert acts past the scope of the Act, at that point the request of the Customs specialists can't be dealt with as last.

    In the case of "Industrial Cables v. Union of India", supra, a Single Judge of the Punjab and Haryana High Court held that the removal of the products by the actual officer under Section 47 of the Customs Act must be attempted after due adjudication, right off the detail element as to the reality regardless of whether the Act precludes the import of the merchandise. Further, the best possible officer was "Adjudicating Authority" inside the importance of Sub-section (1) thereof, and this way, the request goes under Section 47 of the Customs Act is official on the specialists under the Import (Control) Order.

     

     "Adjudication Procedure"

    Segment 122A furnish the methodology for adjudication. The Section gives that the Adjudicating Authority might, in any procedures

    -    Under Chapter 14 of the Act; or

    -    Some other arrangements of the Act

    provide an opportunity of being heard at a party in any proceeding, if the party so desires.

    The Adjudicating Authority is enabled to supremacy time to the gatherings to the proceedings occasionally if the adequate reason has appeared for this reason. The hearing might be suspended for motivations to be recorded in composing. Such delay is limited to just over three times.

     "Beneficial owner" implies an individual for whose sake the goods are being foreign made or sent out or who practices successful control over the products being transported in or traded.

    The Supreme Court passed judgment on account of "Saint Gobain Glass India Ltd. Vs Union of India" 2017 (349) E.L.T. A214 (SC) - Interpretation of statute - the importance of the term 'domestic industry.'

    Rule 2(b) of the Anti-Dumping Rules. The verdict on account of NIRMA LIMITED Vs SAINT GOBAIN GLASS INDIA LTD. [2012 (10) TMI 832 - MADRAS HIGH COURT] challenged - Held the following. "We don't think of it as important to go into the issue(s) emerging in the present Special Leave Petitions, to be specific, the exact significance of the term 'domestic industry' in Rule 2(b) of the Anti-Dumping Rules which issue is left open for arbitration in a proper case - SLP discarded being not viable".

    Extra-territorial jurisdiction.

    The reply to this inquiry is clarified with the assistance of a judgment go by the Customs, Excise and Gold Tribunal on account of "Hi Lingos Co. Ltd. Versus Collector of Customs" For this situation, the appeal was documented against the first order passed by authority of Customs, Bombay. In this law, the Collector has requested reallocation of six holders comprising of aggregate 5100 packs proclaimed to be Sodium Tripoly Phosphate (from now on alluded to as S.T.P.P.). All things considered observed to be Poly Vinyl Alcohol, under Section 111(d), (f) and (g) of the Customs Act, however permitting reclamation for re-export to the appellants (who have transported the shipment from Keelung, Taiwan) on the instalment of a fine of Rs.one crore. The Collector has likewise forced a punishment of Rs.50 lakhs on the appellants.

    The appellants are reported to a trading concern in Taiwan. They have dispatched six containers of S.T.P.P from Keelung. The notified party in India according to the B/L is proclaimed to be M/s U.K. Paint Industries, Delhi. The products are professed to be of Taiwanese source. The destination port according to B/L is Bombay. The individual packs containing the material likewise bore the names of S.T.P.P. The operators of the vessel arranged the Import General Manifest and conveyed to Customs. In the said manifest, the load of questions was figuring at thing no. 79 yet discovered erased, however, the total of the elements continued as before for release at Bombay, and this thing was likewise not figuring in the list of items as same bottom cargo.

    It, subsequently, appeared to the Department that however the freight according to the B/L and the manifest prepared was implied for release at Bombay and stayed on board the vessel touched base at Bombay, the erasure of this thing was made to influence it to create the impression that the payload was not implied for release at Bombay.

    The appellants sent a letter to the Collector of Customs, Bombay looking for consent to permit reshipment of this consignment of 6 containers. Be that as it may, no reasons looking for reshipment were given in the letter. The appellants in the second letter kept in touch with the Collector of Customs expressing that they have authorised one Shri N.H. Shah, Advocate speaking to their case regarding reshipment of the six containers. M.s U.K. Paint Industries, New Delhi were also asked to furnish details about this import consigned in the same. One more transfer of 15 containers which had touched base by another vessel relegated to M/s. U.K. Paint Industries, New Delhi was likewise detained, and consequently, the Customs asked M/s. U.K. Paint Industries to document the B/E for leeway of the products as per appropriate system, falling flat which, the Customs would analyse the said goods and continue with issue according to law. M/s. U.K. Paint Ind., New Delhi returned expressing in their letter that cargo for this situation did not have a place with them and they didn't have any right, title or responsibility for load and consequently asked for the Customs to manage freight as esteemed fit. The advocate authorised by the appellants penned in a letter asserting that the appellants are general dealers and merchants in Taiwan and by right blue mix-up and pass on their part, they have dispatched Poly Vinyl Alcohol rather than proclaimed depiction, S.T.P.P. As both the things are as white powder, this oversight has happened. S.T.P.P. was planned for M/s. U.K. Paint Industries, New Delhi and after shipment of the merchandise, the appellants understood that omission and in like manner taught their shippers not to empty the said products at Bombay. Anybody in India and them does not guarantee the merchandise, being an exporter of the products, and furthermore, the proprietor, ought to be reestablished the goods by permitting reshipment. From there on, the promoter, for the appellants showed up and demonstrated that the appellants would outfit answers to the questions raised before by the Department as to the products.

    The appellants sent a fax in answer to the inquiry posed, in which they conceded that there are no written purchase orders (since it is bought in the open market), no correspondences separately put or traded by/with M/s. U.K. Paint Industries concerning the dispatch and they have no particulars about import permit or the points of interest of the Bank through which instalment for the products was to be made on receipt of records by the shippers. Since the representative declined to acknowledge P.V.A., in the wake of being educated and they made some endeavour to look alternate purchasers for P.V.A. in India and, consequently, investigated the likelihood of redirecting the products from Bombay to Kandla or reshipping the merchandise back. Since the products have sent wrongly, they would look for reshipment. They additionally submitted duplicates of different wire messages and letters to steamer specialists.

    In the wake of hearing the advocate and considering the evidence, the Collector dismissed the conflict of the appellants that it is an instance of a valid blue mistaken shipment. However, a piece of their plan to encourage the import of highly esteemed and great obligation chemicals in the appearance of S.T.P.P. for dodging obligation and the appellants were conscious of this plan and passed the impugned order.

     

    ]]>
    Sat, 01 Dec 2018 13:16:00 GMT
    <![CDATA[Cross border crowdfunding]]> DFSA REGULATIONS ON CROSS-BORDER CROWDFUNDING

     

    In the wake of the 2008 financial crisis, when access to capital became difficult, the concept of Crowdfunding emerged. Crowdfunding, an outcome of the modern sharing economy, is a loaded term where old and new meanings have come up to describe similarly or the same activities. Simply explained, crowdfunding is a way in which people, organizations and businesses can obtain funding for their projects by raising money from a large number of people (the crowd) through the medium of licensed online platforms. It thus involves three parties:

    • The operator of the platform
    • The party receiving the funds
    • The Party providing for the funds

    Kinds of Crowdfunding

    There are different types of crowdfunding:

    •  Donation

    Non-profit organizations use crowdfunding platforms such as Classy, Razoo, Fundly, Crowdrise to gather donations for charitable purposes. Platforms such as GoFundMe and YouCaring cater to individuals who wish to raise money for resolving personal problems.

    •  Reward/Royalty
    • Loan Crowdfunding - Where the person providing the funds enter into a loan agreement with the person to whom the funding is provided; and
    • Investment Crowdfunding (Such as equity-based) - Where the person funding, purchases an interest in the company in the form of shares, debentures or sukuk from the person who receives the funding.

    A global consensus has emerged on the regulation of only loan and investment crowdfunding since the other types do not typically involve any activity that can be termed as financial services.

    Why is Regulation a necessity?

    Crowdfunding, though advantageous for the modern economy, carries with it several risks including the risk to:

    •  Money laundering, which may result in the confiscation of assets
    • Failure or default by either the platform or the project owner, resulting in potential loss of the investment
    • Fraud and embezzlement of funds invested
    • Legal risks
    • Credit and investment risk in loss of investment
    • Lack of transparency or irregular, incomplete, inaccurate, misleading information regarding the hazard or return.

    CROWDFUNDING IN DUBAI

    Small and Medium-sized Enterprises (SMEs) comprise about 50% of the UAE GDP; however, these businesses rarely receive credit facilities from conventional banks. This is because conventional banks are often apprehensive of the SMEs' limited asset pool or the short record of proven company operations, leaving them unwilling or unable to extend loan facilities to SMEs. In such a situation, crowdfunding has emerged as the most used route for these enterprises to receive funding. This is why in recent years, UAE has witnessed the rapid growth of crowdfunding platforms based in or focusing on UAE and other GCC countries. Aflamnah, launched in Dubai in 2012, focuses on locally produced films and Eureeca launched in the following years, was the first Equity Crowdfunding to be licensed by DFSA to operate with a representative office in DIFC. Humming Crowd Realty was the first real estate platform focused in UAE.

    With this rapid growth of crowdfunding through a plethora of platforms in Dubai, the need to regulate risks and protect the rights of the parties became a necessity.

    The Dubai Financial Securities Authority recognizing the significance of SMEs for UAE economy predicted the growth of importance of crowdfunding and came up with a regulatory framework in 2017, for loan and investment crowdfunding, making UAE the first GCC country to take the initiative of regulating the crowdfunding arrangements. This regulation by DIFC was also the means to facilitate the growth and development of the FinTech industry in UAE as well as the MEASA regions.

    DFSA REGULATIONS

    The Regulations form a part of DFSA Conduct of Business Module under S.11 and governs both Loan Crowdfunding and Investment Crowdfunding platforms. The primary aim of these regulations is to encourage the growth of the Financial Technology (FinTech) Industry by ensuring clear governance and necessary protection for the parties. They also formalize the DFSA's approach towards regulating crowdfunding platforms which had operated through interim arrangements from 2016.

    Though the regulations apply to both Investment and Lending Crowdfunding, a certain type of regulations has also been placed.

    The following are the essential aspects of the regulatory framework that needs to be complied with by the operators of crowdfunding platforms:

  • Regulated and Unregulated Crowdfunding
  • Certain crowdfunding services such as donation or reward crowdfunding need not be authorized. To avoid the risk of confusion amongst Clients of Authorized services, the operator should not provide regulated and unregulated crowdfunding services from the same legal entity and should use separate legal entities if it wishes to carry out both services.

  • Advertisement of Proposals
  • The operator is prohibited from advertising specific lending or investment proposals to those who are existing clients. In such an event, the offer shall be considered as an "offer of securities to the public" which shall require a prospectus to be issued as under DFSA laws.

    However, there is no restriction on the operator from generally advertising crowdfunding services to potential clients.

  • Use of other platforms
  • It is the responsibility of the operator to restrict a borrower or issuer from obtaining funds from another crowdfunding platform during the period of commitment. This restriction is intended to prevent Borrowers/ Issuers from making different terms of the offer in different platform, causing confusion for the Lenders/Investors and potential arbitrage by the Borrower/Issuer.

  • Information and Disclosures
  • To reduce the risk of investors/lenders and to promote transparency in the operation of crowdfunding platforms, the DFSA requires the operator to provide the following disclosures and information on its website regarding its services:

    ❖         Disclosure of Risk

    As already seen above, crowdfunding carries with it several risks to the potential clients who lend/invest their money.  In order to inform these clients about the potential risk, the DFSA requires the operator to disclose the risks the lenders/investors may be exposed to and laid down the following four express statements which have to be necessarily included in the operator's website:

    ●        Lender/investor may lose all/any part of their money or experience delays in payment.

    ●        Borrowers/issuers on the platform also include new businesses which carry with it the risk of failure; as a result, a loan/investment with such a venture may involve high risks

    ●        The lender may not be able to transfer their loan, or the investor may not be able to sell their investment when they wish to or at all

    ●        If the operator, for any reason, ceases to carry on its business the lender/investor may lose their money, incur costs, experience delays in getting paid.

    Furthermore, in order to facilitate the assessment of risk by Lenders/investors, with regard to lending and investing on the platform, the operators are required to disclose the default rates of loans by borrowers and the failure rates in relation to issuers where they default on payments, becomes insolvent, wound up or cease to carry business.

    ❖         Service Disclosures

    To provide an understanding to the Lenders/Investors and Borrowers/Issuers regarding the terms of how the platform operates, the operator is required to disclose information about its operating module such as:

    • Details of
  •  How the platform functions
  • Regarding the remuneration of the operator for the services provided
    • Financial interest of operators or Related Party that may create a conflict of interest.
    • Eligibility criteria for Borrowers/Issuers or Investors/Lenders to avail the services.
    • Minimum and the maximum amount
  • of loans/investment that may be sought for
  • amounts that may be lent/ invested including individual loans or investment and limits that apply over a period of 12 months
    • Type of security sought from borrowers/issuers and when it might be exercised and any limitations on its use
    • When and how the lender/investor may withdraw commitment
    • Consequence when loan/fund sought for fails or exceed the target level
    • Steps taken by the operator concerning any material change in borrower/issuer's circumstances and the rights of Lender/Investor in such a situation
    • Operator's method of dealing with overdue payments or default by Issuers or Borrowers.
    • Applicant laws and jurisdiction
    • Arrangement and safeguards for Client Assets held or controlled by the operator
    • Facility of transfer of loans or sale of investments and the conditions and risks involved
    • Contingency arrangements for the orderly administration of loans and investments if it ceases to carry on business
    • Steps taken by the operator for
  •        the security of information technology systems and data protection
  •        preventing illegal activities such as money laundering
  • Due Diligence
  • The Regulations restrict the Operator to permit only body corporates to use its services as Borrowers/Issuers. Along with this to ensure that the business carried out by the Borrower/Issuers are in accordance to the laws in its jurisdiction, the DFSA  requires the Operator to take at least the minimum steps of due diligence on borrower/issuer including disclosing the identity and details of its incorporation with its credentials, details including domicile of  its directors, officers and controllers; the financial strength and past performances including credit history; valuation of the business and current borrowing or funding levels with its sources.

    The Operator is also required to disclose in its website information regarding the Borrower/ Issuers including the name of the body corporate, its directors, officers, and controllers; place of incorporation and domicile of its representatives; description of the business carried out; most recent financial statements; valuation of the business and its current borrowings with sources and liquidity. A detailed description of the business proposal along with the target level of funds required should also be provided. In case of loans or debentures, the interest rates, duration, and other rights need to be specified and with regard to shares the rights such as voting, dividend and such need to be specified. The Operator shall also disclose whether any security is provided and the circumstances and limitations of its use. The results of the due diligence carried out by the operator as well as the limits, and the grading method needs to be specified on the website for the information of the Lender/Investor.

  • Type Specific Requirements
  • Loan Crowdfunding: with regard to loan crowdfunding, the operator must ensure that when a loan is advanced using its service, a written loan agreement in accordance with the provisions of the law must be made between the parties setting out the terms of the loan including terms of interest, repayment, rights, and obligations of the parties.

    Along with this, lending limits of $ 5,000 for any single borrower and $50,000 in any calendar year has been placed on the Retail Client.

    Investment Crowdfunding: the Operator must require the Investor to sign a risk acknowledgment form for every investment made using the operator's platform confirming the knowledge of the risk. The operator should also provide a cooling off period of at least 48 hours for the Investor where he may withdraw his commitment without any penalty or explanation.

    IMPACT ON FINANCIAL TECHNOLOGY (FinTech)

    The emergence of Financial Technology or more commonly known as FinTech has rapidly changed the financial services industry. DIFC, in this regard, has chosen to update itself and occupy a pioneering role in both the regional and global market. The Government of Dubai is not only the founding member of the Global Blockchain Council but is continuously looking for new opportunities in the financial industry to implement the Blockchain technology. Though being a conventional financial and professional services community, DIFC has been actively evolving itself to accommodate the FinTech.

    The recent regulatory framework of crowdfunding by DFSA discussed in this article has helped tremendously in the development of FinTech ecosystem in the Middle East and South Asia (MESA) region. Along with this, DIFC also introduced the first fintech accelerator in the region FinTech Hive as its innovative strategy to make Dubai the hub and beacon for international businesses. On its Investor's Day, over 300 stakeholders formed the audience where 11 start-ups from the accelerator's initial programme presented their ideas and products. DIFC recognizing the importance of innovation has focused on tackling emerging markets such as artificial intelligence, the blockchain, and robotics.

    CONCLUSION

    The Dubai Financial Services Authority has undoubtedly taken a leap forward through its regulatory measures by ensuring transparency in crowdfunding platforms and protecting the rights of the "crowd" who invest or lend their money in such platforms. As a result, Dubai has not only catered to the financial needs of the SMEs but also opened up to investment in new innovations in the Financial Technology. Thus, by choosing not to follow the developed markets but paving its own path, Dubai has set itself apart and as a pioneer globally for Financial Technology, proving that it indeed a leader with a bright future.

     

     

     

    ]]>
    Sat, 01 Dec 2018 12:23:00 GMT
    <![CDATA[Cf-TwoFour54 Free Zone ]]> Abu Dhabi Company Formation in TwoFour54 Free Zone

    Introduction

    TwoFour54 free zone is located in the Emirate of Abu Dhabi. Being the capital of the UAE, Abu Dhabi is highly relevant and a significant business hub within the nation. However, when one thinks of the UAE, Abu Dhabi is often not the first place to come to mind. Instead, Dubai is often viewed as the business center not only within the region, though beyond that, it is a global landmark. However, within the country, Abu Dhabi holds vast importance as it is the wealthiest of the Emirates.

    Abu Dhabi, being the capital, also houses numerous government entities and essential offices within the city. In fact, all federal government offices are there. The World Bank, as of 2018, voted Abu Dhabi the No. 1 in the Arab world for ease of doing business. On top of this, the infrastructure of the city is highly advanced, and this compliments many companies and their activities.

    Beyond the business advantages of setting up a company within Abu Dhabi, the city itself allows for high living standards and has been voted the safest city in the world and also one of the happiest of cities in the world.

    Dubai may be the face of the country, though this creates a highly competitive environment which certainly won't help newly arising entities. Abu Dhabi on the other hand, while by no means empty or uncompetitive will have the advantage of being so large, making up 87% of the country's total land area. The population, however, is not equivalent to this land mass size, as fewer people are living in Abu Dhabi than in Dubai.

    Of course, any location within the UAE would be useful from a global standpoint due to the country's geographical location. Being optimally placed at something of a crossroad between the east and west, access to the worldwide market, especially when one looks at the airports and other such infrastructure is a significant draw.

    There are a few free zones within Abu Dhabi, and one of the most popular is TwoFour54. This free zone prides itself on its low set up costs and optimal central location. Company formation is relatively simple and is as follows.

    TwoFour54 Free Zone

    The free zone location is quite central in the Emirate, with good access to critical official offices and sites. With the free zone having arisen in 2008, it is highly technologically in tune, and from an infrastructural point of view, it provides the best that money can buy.

    All free zones have some form of specialization and TwoFour54 is no different. They cater to media entities, and this makes TwoFour54 the most significant media free zone authority in Abu Dhabi. Some of the biggest names found in the industry call TwoFour54 their home, and this should stand as a great testament to the quality of their infrastructure and work ethic.

    The Media Zone Authority – Abu Dhabi, regulates the more official matters of the free zone such as the licensing processes and regulatory development. It is their responsibility to ensure the 2030 economic vision of Abu Dhabi becomes a reality, at least as far as they can help to achieve it from their end.

    The first thing that requires consideration when setting up a company within the free zone is just what type of company the individual wishes to form. There are a few types that are available and mentioned, and these are as follows:

    • Free Zone Limited Liability Company (FZ-LLC): This involves the incorporation of a legal entity in the media zone;
    • Branch: This could either be a branch of an Abu Dhabi mainland entity or an object incorporated in another jurisdiction (foreign or UAE);
    • Sole Proprietor (Freelancer): This allows for an individual to work in their capacity as a media professional.

    There are many incentives and draws to set up within TwoFour54. Some of these include:

    • 100% foreign ownership of the company;
    • 0% import tariffs;
    • 100% exemption from corporate and personal income tax;
    • Access to Abu Dhabi Film Commission's 30% cash rebate on production spend.

    The process is time efficient and also cost efficient with no minimum required for visas, and office spaces available at better rates than can be found anywhere else and provide media entities with all of the facilities that they could desire.

    The Requirements

    During the process of setting up within the free zone, there are certain things requiring consideration. The table following shows some of the most critical factors:

    Types of Setup

    Number of Activities

    Number of Employee Visa

    License Fees (AED)

    Registration Fee (one time) (AED)

    Office Space (AED)

    FZ-LLC

    Up to 5 (up for approval)

    N/A

       

    Starting from 50,000 per annum

    Branch

    Up to 5 (up for approval)

    N/A

       

    Starting from 50,000 per annum

    Serviced Desk

    2

    2

       

    30,000 per annum plus 2,500 security deposit

    Hot Desk

    1

    2

       

    25,000 per annum

    Emirati Entrepreneur & Khalifa Fund

    1

    2

       

    Virtual

    Freelancer

    Up to 3 (up for approval)

    1

    6 months: 2,250                                 12 months: 4,500

    N/A

    Virtual (Free access to hot desk)

     

    Is this the Right Free Zone for you?

    TwoFour54 has now been around for ten years, and as such, it has plenty of experience; this should provide comfort to any who may wish to open a new company or branch of a company there. At the same time, the costs of setting up such as requirements and office space are very reasonable, and the facilities provided are top of the range.

    The location of the free zone is optimal within Abu Dhabi, and there is also the matter of personal life outside of work. If the allure of Dubai is what draws one to the UAE, TwoFour54 may not be able to appease you. However, Abu Dhabi is still a bustling location and provides an excellent opportunity to set up a company.

    ]]>
    Mon, 05 Nov 2018 00:00:00 GMT
    <![CDATA[Emergency Arbitration]]> Emergency Arbitration and Expedited Proceedings

    Introduction

    There never really seems to be ample time available to get the problematic and wary things done. At the same time, when there is nothing to be done, time cannot seem to move fast enough; this can seem frustrating to one when deadlines approach more quickly than they can are achievable, and there is seemingly no more straightforward route about it.

    It can be much the same for court proceedings. Issues brought before the court are often complex, as would be expected since a resolution was not possible beyond the court. However, complex problems require in-depth analysis from external parties, and therefore, there are often large amounts of evidence to be pored over. Still, even considering all of this, a case can go on for months or even longer. A further reason for this may be court processes that require observation. There will be numerous cases occurring at the same time, and with limited time in the day, days turn to weeks and so on.

    There are cases, however, that require the utmost attention from the get-go, and would suffer as a result of lengthy processes and a lengthy or delayed judgment. The age-old adage of 'Justice delayed is justice denied' comes to mind. Should a delay result in a party not receiving a just verdict due to the duration of time that has passed, justice may not be deemed wholly served; this is an issue that is well known, and governmental bodies and authorities around the world are aware of this. To bring about change though, the administrative regulations of countries will require changing to accommodate for cases that need haste. However, for a legal system to be the best it can be, this change is one which is necessary.

    Court attention is precious, and their time is one of the most significant value. Wasted court time is an equivalent to lost money. As such, there have been various implementations in different nations which attempt to streamline the processes, or 'trim the fat'.

    The UAE (the Emirate of Dubai to be more specific) has recently implemented the likes of the Penal Order Law Number 1 of 2017 which has put in place 24 hours long, 2 step verdicts; this will allow for the dealing of the more straightforward cases to be swift from start to finish, and leave more time for the more significant matters.

    Expediting Court Proceedings

    The above mentioned Penal Order Law has been one of the steps taken to help facilitate the court processes. One of the new implementations is that of a one-day court. Cases that are deemed to fall into specific categories (those simple enough or small enough) can then go through and conclude within 24 hours.

    The court will specifically cover small misdemeanor cases. Often these are brought before a court, which could be spending their time on complex and challenging situations. Now, they will be able to do so. The amount of money that can saveable as a result of this is predicted to be around AED 40 million per year, and it will have the added benefit of clearing up the ordinary courts' schedule.

    This specific one day court is currently only in effect in Dubai for the time being and is already dealing with large quantities of cases. Following the introduction, the judges began to settle thousands of cases per month, with varying types of situations handled. The most common form of cases is those relating to bounced checks, with one judge stating that around 80% of the cases he seemed to deal with related to just this topic. They also deal with matters regarding alcohol (illegal consumption and possession), begging, illicit vendors and sex outside of marriage to name the primary culprits. There are a total of close to 20 types of situations and cases that this court is equipped to deal with and matters such as these have clear regulations which prevent them, and the repercussions are generally quite simple to arrive to, and issue from the judges' end. For example, any claim concerning a bounced check of which the value is over AED 150,000 will result in a jail sentence, and anything less will carry a monetary fine relative to the total.

    The cases are brought to this new court by the police stations in the city. As of March 8, 2018, it has been their responsibility to bring any misdemeanor cases they come into contact with before the one-day court. There are numerous advantages to this, including the fact that, since the police and the court will be working together, they can bypass the standard court procedures entirely. The police officers catch the act of misdemeanor, or it is brought to their attention as one would expect, and then it is their responsibility to commence the necessary procedures; this forms an entirely separate system, and it is this disconnect that is partially the cause of the forecasted savings.

    Of course, the court deals merely with the individual involved in the misdemeanor. However, they can often be cases in which the activities impact further individuals. If this is the case, those individuals will still be able to proceed through the regular Civil courts in seeking compensation.

    Of course, another major point to consider here is that time-saving occurs on all fronts. Wastage of Court time will not happen as well as the time of the people involved. From the time of their initial apprehension at the hands of the police to the time their sentence is passed will take a few days at most. It has been further stated that the general waiting times for cases to be heard will also fall by approximately 60%, thus streamlining the entire system.

    What steps are being taken for emergency Arbitration?

    In cases where the issue is not one that is criminal, but instead, Civil, the one day court will not be of much help though; this is compounded further when looking towards commercial agreements. Businesses often will choose to take the route of arbitration at least as a first resort. The reason for this is as it may allow for mutual agreements and favorable outcomes for all parties involved; this could mean that in the future, the entities can continue to work together peacefully, with no hostility held between them.

    The Dubai International Arbitration Centre (DIAC) is the body that manages all aspects of arbitration from the cases to the regulations that cover the area. Established in 1994, and until relatively recently, utilizing the Federal Law Number 11 of 1992. There have been further regulations introduced throughout the years though, and the most recent addition has been the Federal Decree Number 6 of 2018 added earlier in the year. This law is now the governing regulation on the topic of arbitration in the UAE.

    A further reason for the introduction of this law is that Arbitration is an international issue. In order to stand upon the global stage with the rest of the developed world, a country requires the most up to date and complementary regulation on a topic.

    In the cases which demand instant results from arbitration, there are options available. For example, under the new regulations, there is the section on interim measures. Article 21 covers the scope of when and why interim steps should arise, and within it is stated that upon agreement between the parties involved, the tribunal covering the case may:

  • Place an order for the preservation or protection of evidence that could hold weight during the remainder of the case;
  • Further, goods that require protection may also, through interim measures, relocate to a place where they will receive the necessary protection;
  • Resorting issues to their normal states for the remaining duration of the case; and
  • Take specific action that could prevent harm to any individuals.
  • These last two points could have some interesting implications for future cases. Generally, all of the points as mentioned above will mean that should there be anything which requires immediate attention, it is up to one or both of the parties to bring it to the attention of the tribunal in charge of their case and more immediate action can be taken to protect assets etc.

    What will all of this achieve?

    The critical thing to be taken away from all of this is that the UAE is attempting to streamline its legal processes whether that be the court or the arbitration system. The court changes will allow for greater saving of court money and the time of general individuals and the courts.

    Arbitration regulations will affect the international standing of the country due to the global nature of the processes and rules. The new 2018 regulations have refreshed the system and will allow for greater pushes to make arbitration the norm in most situations in which it may be applicable.

    As a whole, these steps are indeed required within the country; especially the Arbitration Law update due to its international nature. The improved standing it will provide the state internationally is invaluable. The one day court concept, while currently specific to Dubai does have similar counterparts within the rest of the country. The single-day idea may not be the same or the issues the court deals with may vary, though rapid case verdicts on more straightforward cases are essential. Ras al Khaimah's one-day Civil court deals with minor Civil and generally attempts to have them completed within a day.

    This changing landscape is indeed a good trend and one that could save the country tens or even hundreds of millions of dirhams annually once entirely nationally implemented as well as save court time and the time of other individuals on wait within the court system.

    ]]>
    Mon, 05 Nov 2018 00:00:00 GMT
    <![CDATA[Medical Negligence Claims]]> Medical Negligence Claims and Liability in Gulf Countries: a Critical Analysis

    WILLES.J opines, "Negligence is a negative word. It is the absence of such care, skill, and diligence as it was the duty of the person to bring to the performance of work, which he is said not to have performed".

    Introduction

    The medical profession is known to be one of the prestigious jobs which deserve appreciation and respect. The relationship between a patient and doctor is based on trust and faith. George Bernard Shaw said, "We have not lost faith, but we have transferred it from god to the medical profession". There are two essential things that we value namely life and health. It is the doctors and medical professionals who possess the knowledge and skill that is put into a position which improves our health and vitality. Over a previous couple of decades, we have begun witnessed a new phase of globalization, commercialization and technological advancement in various aspects of our life and the medical profession is no exception to this phenomenon. As such nowadays, the medical profession is becoming more money oriented and because of this reason the claims regarding medical negligence has become a severe issue in today's era. In the earlier civilizations, medical negligence was considered more of a crime rather than as a tort. The early tribal and communal law depend on the legal practice and customs for controlling the various activities of the medical professionals. In Yajnavalakya Smriti mentions 100 Pana as the highest penalty for medical negligence.

    Medical negligence occurs following a medical practitioner fails to provide proper care and attention and exercise those skills which a prudent, qualified person would do under similar circumstances. The liability of medical negligence gives rise to both civil as well as criminal liability. In the civil process, the aggrieved person can go civilly by filing a suit or by lodging a complaint to claim his compensation. On the other hand, in criminal procedure, the victim needs to bring a criminal action against the doctor before the police.

    Contents

  • Introduction
  • Medical Negligence as Tort
  • Medical Negligence as an Occupational Crime
  • When Medical Error Occurs?
  • An Overview of Medical Negligence Legislation, and Various Regulatory Authorities in the United Arab Emirates
  • The criminalization of Medical Negligence in Saudi Arabia
  • The criminalization of Medical Negligence in Bahrain
  • The criminalization of Medical Negligence in Oman
  • The criminalization of Medical Negligence in Kuwait
  • Conclusion
  • Medical Negligence as Tort:

    Tort is in simple words means a civil wrong. Winfield has defined Tort in the following words:

    "Negligence as a tort which is the breach of a legal duty to take care which results in damage, undesired by the  defendant to the plaintiff."

     It is an act or an omission of one that gives rise to injury and harm to the victim for which the court imposes liability. Negligence as a tort is the breach of the duty caused by the omission to do something which a reasonable person, under a given set of circumstances, would or doing some which a prudent and wise man would not do. The doctors have the legal obligation to the patients to adhere to a standard of reasonable care.

    The medical negligence is provided with the following conditions:

  • When there is a breach of the duty of care on the part of the doctors to the patients.
  • When he has committed a violation that duty
  • The patient is suffering consequential damage as a result.
  • Medical Negligence as an Occupational Crime:

    The term "Occupational Crime" refers to those crimes which are committed mainly within the context of a legitimate occupation. Occupational crimes primarily include those crimes that are related to the various occupation, for instance, medical, academy, religion, law etc. Professional crimes are generally less visible than any other conventional forms of adverse actions, and as such in such cases the offenders often go undetected. Medical Negligence is considered to be a severe form of occupational crime which undermines the integrity and nobility of the profession. Some of the Medical Negligence crime includes fee-splitting, taking and offering kickbacks, price fixing, fraudulent billing, performing unnecessary surgery, upcoding, misrepresenting services etc. Nowadays most of the health care professionals are primarily motivated by profit and benefit which involves an intentional deception. The doctors and medical professionals engage in various illegal activities to obtain some benefit. It might be tough for the patient to believe that they could be a victim of medical crime and that the doctors whom they trust with their health are criminal.

    When Medical Error occurs?

    Medicine is considered to be an inexact science, and as such sometimes a responsible doctor may not give an assurance to achieve a particular result. A medical error occurs when a doctor provides an inaccurate and incomplete diagnosis and treatment of a disease, injury, infection or any other such ailment. There may be multiple factors in the errors in medical treatment. It is very common that even after adopting all the possible medical procedures, a qualified doctor may be subject to medical error. As per the various legislations in UAE and the other Gulf countries, it is established that a doctor and a medical professional may not be liable for medical negligence or any medical deficiency although some errors are committed in his/her treatment if he/ she is proved to be acted as per as the procedures of the practicing profession. As per as Article 6 of Federal Law Number 4 of 2016 of UAE, a medical error is an error committed by a practitioner due to the following reasons:

  • If there is any ignorance of the technical matters that are supposed to be known by any practitioner of the same degree and specialization.
  • If there is any non-compliance with the recognized professional and medical principles.
  • When the practitioner is not exercising due diligence.
  • When there is negligence on the part of the physician, and he/she is not paying attention to the treatment.
  • The new UAE medical law (Federal Law Number 4 of 2016) provides numerous cases in which excepts medical liability. Some of these cases are:

  • If any of the reasons do not cause the harm, set out in Article 6 of this legislation.
  • If the damage is caused by the patient's action or his refusal of the treatment or his failure to follow the medical instructions given to him by those responsible for his treatment.
  • If the physician uses a particular therapeutic method in the treatment contrary to those of the other physician in the same specialization so long as such way confirms to generally accepted medical principles.
  • If known or unseen therapeutic effects and complications in the field of medical practice take place but are attributable to the medical error.
  • An Overview of Medical Negligence Legislation and Various Regulatory Authorities in UAE

    Over the prior two decades, we have seen an enormous expansion in the healthcare sector in UAE. The medical liability law in UAE now specially provides that the medical professionals will be liable in the event if they commit any medical error with an intention and motive of any profit-making activity or any other benefit. In the UAE Civil Code, there is a general theory of tort that a person who commits harm to others will be responsible for the loss or injury to the claimant.

    Article 389 of the Civil Code states:

    "The criterion for an aggravated party to be entitled to compensation is that the damage should have been suffered directly as a result of the default and that it has already happened or will happen in the future. The potential damage that is not ascertained will happen in the future is not the subject of mandatory compensation unless it has happened."Click here to read more.

     

     

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    Mon, 05 Nov 2018 00:00:00 GMT
    <![CDATA[Cyber Liability Insurance]]> Cyber Liability Insurance

     

    The Cyberspace

    The world is in a continually developing state, with new and exciting inventions and technologies arising on a regular basis. It would take some form of expert, or perhaps your average teenager, to entirely keep up to date with all that is new. However, while the new technologies are often hard to keep up with, this does not mean the world is becoming more difficult or complicated.

    These new technologies have made life more comfortable and accessible than ever before. With mobile phones and computers now widely available to almost any who wish to obtain one. Through these devices, it is possible to live a great deal of one's life online.

    A significant proportion of jobs, especially office jobs, take place through a computer, and this has led to a most significant change in the in the ways jobs are performed. Often, duties are performable from more than just an office desk, and due to mobile communications, workers are always reachable. Beyond work, most things that one could need can now are accessible and found online, from grocery shopping to recreational items or services.

    So much is now present or available online, and this also includes information. With security generally increasing online, and peoples trust increasing overtime in the tech security measures that are in place, more and more people are open to providing their details and confidential information to many online sources.

    Beyond this, the ability of people to access information is far higher than in the past. Whereas in years gone by, one would have to go to the library for general information, or official organizations to obtain more confidential information. Now, we have seemingly all the information we could ever need on the web. Further to this while, there are usually many security measures in place to protect information; this does not make it inaccessible to those who can dig deeper.

    There are laws in place which aim to prevent and punish those would seek to steal information not rightfully their own. The fundamental regulation on this matter is the Federal Decree-Law Number 5 of 2012 on combatting cybercrimes.

    Losses Resulting from Cybercrimes

    Crimes of the technological variety are the new frontier. Much of the world's information has moved online, a lot of which is highly confidential. Therefore, some find the temptation to hack and steal too much to bear. Some of the most common forms of cybercrimes are as follows:

  • To ensure security within the country, even obtaining access to websites and other areas within the cyberspace that one is not authorized to can result in a prison sentence and a fine between AED 100,000 to 300,000 as per Article 2 (1)
  • Beyond personal information, there are also many documents present online that are either stored thereof transferred between individuals or entities. Article 2 of the law also covers this type of cybercrime. Subsection 2 states that a prison sentence of at least six months of imprisonment and a fine of between AED 150,000 to 750,000 for the deletion, destruction, alteration, copying or re-publishing of any data or information.
  • One of the most common forms of cybercrimes is the theft of details; this would allow the perpetrator to access accounts, documents, and assets of another individual that could lead to said individual's losses. Article 2 (3) of the Decree Number 5 of 2012 states some of the repercussions for the theft of personal information, which includes at least one year of imprisonment and a fine of between AED 250,000 to 1 million.
  • There are many further Articles which discuss different penalties for even more crimes, though the dominant issues that arise.

    To an extent, these might be seen by some as quite severe punishments. However, when one considers the potential damage that is possible through the cyberspace. The fact that peoples not only personal information but also highly confidential documents of businesses and the government can be found means that the utmost protection is required.

    The reason for the flexibility provided in the penalty is due to this very previously mentioned point. While some crimes may be severe for individuals, the repercussions will be limited compared to the most sensitive of information.

    As of late, a rising trend among businesses involves taking out insurance for protection against such forms of hacking or illegal theft of their Intellectual property and. For businesses, intellectual properties and trade secrets are of utmost importance, as they are what provide the companies with their USPs. Therefore, they would do well to protect them.

    The Dubai Police are also involved in attempting to limit and catch those who attempt to commit cybercrimes. One such instance in which this occurred was in 2016 when AED 800,000 was found to have been transferred illegally from the account of a UAE resident to a European country through a hack. The police managed to restore the AED 800,000. Beyond this, the police are responsible for thwarting hundreds if not thousands of cyber and hacking related crimes every year.

    Insurance against Cybercrimes

    Before the implementation of the regulations, there was a lot less certainty and security for the digitally held elements of a business. An entity would have to have excellent security measures in place should they have information requiring protection, and this could come at a tremendous financial cost. Furthermore, it would rarely if ever be able to guarantee stability, as where there is a will, there is a way.

    Relying on different regulations for cyber protection is not a hopeless cause though. An example of this was in a DIFC case (DIFC and some further free zones will have different regulations on the topic of cybercrimes) under the Judicial Authority of the Dubai International Financial Centre: Court of First Instance, 13/2015. In this case, the claimant's IT system was sabotaged by the defending party when they were wrongfully interfering with the claimant's property. The claimant successfully sued the defending party and was awarded USD 690,533. The total, which is far above the previously mentioned UAE mainland limit, was meant to cover for the damages that the Claimant endured as a result of the breach.

    With the regulations now in place, there is some greater deal of trust in the system, but as with the ever-growing complexity and depth of the digital world, there are new potential methods of further assurance and security. Theft or hacking can occur at any point, and there is no real way to predict it. One of the ways a company can feel more financially safe is to get insurance that covers them at all time, and so if something terrible does come to pass, assurance will be available straight away. In 2017, there was around AED 4 billion lost due to cybercrimes; this should show just how serious the issue is to businesses.

    Any regulation does not explicitly cover insurance of this kind. Instead, there is the general Federal Law Number 6 of 2007 which relates to Insurance for businesses. The number of policies being given out is regularly growing as the issue is severe and the potential risks and losses are genuinely an issue.

    However, the topic is one shrouded in complications. Perhaps the biggest question is of how calculations of losses and cover will occur. With things being online and intangible, damages can be quite complex, and disagreements may arise regarding them. Though it must be said, the process is becoming much more comfortable to manage, and this is somewhat of an inevitability. Some businesses nowadays are entirely online and being unable to ensure them due to this, would be a grave mistake and business loss for insurance companies. As we move forward, all must get with the times at the risk of being left behind is a bygone era.

    The Future of Cybercrime Insurance

    The cybercrime insurance market is one which is growing fairly quickly. The driving force behind this growth is that it is necessary. The future is online, and there is every advantage to moving into the cyberspace. The change has arrived in a short period, and so the laws and regulations, as well as the companies that offer insurance, have yet to catch up fully.

    Some significant steps are being taken though. Companies such as HSBC now offer cyber insurance and see it very much as a necessity. The fact that large entities are starting to expand into this new market is a good sign, and the hope is that many more will follow suit.

    Currently, due to the complex nature of cyber insurance and the time and effort that goes into ensuring calculations are correct and appropriate, the costs for these insurance policies are high. In time as the certainty levels rise, this will become far less of an issue and accessibility will be on a higher level.

    The issue present is a global one with many billions of dollars in losses occurring annually. There is a great deal of awareness on the matter, and some of the most prominent insurance entities in the world are working towards a smooth and natural system.

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    Sun, 04 Nov 2018 12:17:00 GMT
    <![CDATA[Substantial Acquisition of Shares and Take-Over (SEBI) Regulations 2011 Overview]]> Substantial Acquisition of Shares and Take-Over (SEBI) Regulations 2011 Overview

     

    Introduction

    The Indian economy has been marked by many critical structural initiatives which intend to build the strength and substantial growth over the past two decades.  In the last t 25 years, India has gained a lot in the economic sector. India has in recent times been considered as one of the fastest growing economies in the world now. Concerning international regard, the view is that the country is a giant in today's emerging world. In the wake of India's most rapid growth, Mergers and Acquisition have become one of the most influential types of restructuring. In India, SEBI (Securities Exchange Board of India) is the nodal authority which regulates various entities listed on the stock exchange in India. These multiple initiatives are taken by SEBI to protect the interest of the shareholders.

    In September 2011, SEBI declared an overhaul SEBI (Substantial Acquisitions of Shares and Takeover) Regulations 1997 by introducing the 2011 regulations. The Regulation was mainly added to regulate the acquisition of shares and voting rights in Public Listed Companies in India. The various changes made in the new regulations is traceable to the recommendations of a committee which was mainly set up to evaluate the many provisions mentioned in the 1997 rules.

    The regulation applies to direct or indirect acquisition of shares or voting rights or control over Target Company.

    As per the new Regulation Article2(1)(a) An Acquirer means any person who, directly or indirectly, acquires or agrees to purchase whether by himself or with persons acting in cohort with him, shares voting rights in control over a target company;

    Article 2 (1) (b) "acquisition" means, directly or indirectly, agreeing to acquire (or acquiring) shares or voting rights in, or further control over, a target company;

    Article 2 (1)(e) "control". What this includes is the right to appoint a majority of the directors or beyond this to control the management and policy outcomes exercisable by a person or in concert, provided that a director or officer of said target company shall not be considered in control over the target company, merely by holding such position.

    The term "Control" has numerous definitions. As per the Black's Law Dictionary, "Control is the power to direct the management and policies of an entity, whether this arises through ownership of voting securities, contract, or beyond; the power and authority to manage, direct or oversee."

    The definition of control is a comprehensive definition, and the ordinary meaning of "control" is 'the power of exercising restraint on direction over something'.

    As per the Regulation 4 of the SEBI Takeover Regulations 2011, "any acquirer acquiring, directly or indirectly, control over a target company must make a public announcement of an open offer for acquiring shares of such target company."

    Key Changes made in SEBI Takeover Regulation

    Critical Changes made in SEBI Takeover Regulation

    SEBI Takeover Regulation contains various changes and elements such as those mentioned below.

    Modification made in the definition of "Control":

    The definition used for 'Control' has been modified in SEBI Takeover Regulations 2011 as per the recommendations of the Regulations Advisory Committee ('TRAC'). In the 2011 Regulations, an officer or director of a company targeted will not be considered in control over that target company, simply by holding such a position. [Regulation 2(1) (e)].

    As per Article 2 (1) (p) under the SEBI Takeover Regulations 2011, "offer period" means the period between the date of agreement to acquire shares, voting rights or control over the company requiring a public announcement.

    As per Article 2 (1) (q) under SEBI, persons acting in concert means, persons who while having a common objective or purpose to acquisition shares or voting rights or control over a company, according to an agreement or understanding, directly or indirectly co-operate for the acquiring of voting rights or shares in, or exercise of control over the target company.

    Trigger Point

    As per Regulation 3, the initial threshold limit provided for open offer obligations which were 15% of the voting rights within a company has increased to 25%. In addition to this, if a party already holds at least a quarter of the target's voting rights, a mandatory open offer will be triggered if that party acquires more than 5% of the target's voting rights in any financial year.

    Modification made on Open Offer Exemptions

    SEBI Takeover Regulations, 2011 provides for certain trigger events wherein the Acquirer is required to give an offer to the shareholders of the Company being targeted to provide them with the exit opportunity.

    Mandatory Open Offer

    The SEBI Takeover Regulations, 2011 provides a threshold for a binding open offer. The Regulations make the provision that whenever an acquirer acquires the shares more than the limit as mentioned in Regulation 3 and 4 of the SEBI Regulations, 2011, then the acquirer id is required for a public announcement of the offer to the shareholders of the target company.

    Regulation 3 of the SEBI Takeover Regulations, 2011 provides the following. Shares or voting rights shall not be acquired by a target company which, when taking together shares or voting rights held by them and by persons acting in concert with him in such target company, entitling them to exercise twenty-five percent or more of the voting rights in such target company. The single exception to this is if the acquirer makes a public announcement of an open offer for acquiring shares of such target company following these regulations.

    Delisting Offer

    Regulation 5A of SEBI Takeover Regulations, 2011 deals with delisting offer in case of some instances arising out of open proposal as discussed below:

    In the event the acquirer makes a public announcement of a free offer on shares of a target company concerning regulations 3, 4 or 5, he may delist the company under provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009. However, the acquirer shall have declared upfront his intention to so delisting at the time of making the detailed public statement.

    Modifications Made on the Voluntary and Open Offers

    Voluntary Open Offer refers to an offer which is given by the acquirer voluntarily without triggering the mandatory open offer obligations. In case of a voluntary open offer, an acquirer along with the persons acting in concert can hold at least 25% or more shares in the target company. The acquirer along with the persons working with them cannot acquire any shares from the target company in the 52 weeks preceding without attracting the obligation to make a public announcement.

    Modification on the increase in the Offer size from 20% to 26%

    One of the most clear-cut elements of the 2011 regulation is that the minimum size of an open offer regarded as mandatory is 26% of the target's voting rights. As such if a party who already holds minimum 25% of the target's voting rights, that party are in a position to make a "voluntary" open offer for 10% or more of the target's voting rights, with the condition that certain other provisions meet fulfillment.

    Public Announcement

    SEBI Regulation 2011 mentions that whenever the acquirer acquires the shares and the voting rights of the target company in the exercise of the limit is required to make a public announcement of an Open Offer. The Regulation has mentioned the separate timelines for Public Announcement and the Detailed Public Statement.

    Short Public Announcement

    A quick public announcement can on the same day the offer finalizes should follow. Sending a copy of the general statement to SEBI and the Target Company within one working day of the date of the short public announcement should also be performed.

    Detailed Public Announcement (Regulation 14 (3) and (4))

    The Acquirer can make a complete public announcement within the five working days from the date of the short public statement. The detailed public notification is required to be announced to publish in all the editions of anyone English national daily, anyone Hindi national daily and any one regional language daily at the place where the registered office of the targeted company is situated.

    Judicial Decisions made on "Control"

    K. Sreenivasa Rao v. SEBI (2002 112 Comp Case 327 AP.):

    In this case, it the decision was that when an acquirer acquires the control over a target company, there is the obligation to make a public announcement on the acquirer who agrees to buy.

    In M/s. Clearwater Capital Partners Ltd. v. SEBI, (Appeal No. 21 of 2013, (CCI) dated Feb. 12, 2014): 

    In the case mentioned previously, the granting of voting rights to Clearwater was the ultimate holding, which amounts to hand over the control over the target company.

    In Re: Jet Airways Ltd Order No. WTM/RKA/CFD-DCR/17/2014 dated May 8, 2014:

    In this case, the preferential allotment of 24% shares of Jet to Etihad was to occur. There was the issue of whether 24% shares allotted to Etihad would amount to control over management and policy decisions of Jet. SEBI upheld that the rights which are acquired by Etihad do not result in a change in control and do not attract Reg. 2(1) (e) read with Reg. 4 of the Code.

    Conclusion

    In today's corporate world, shareholding in companies and ownership in business has created a significant impact. Ensuring smooth corporate governance in a progressive nation is essential. Again, nowadays, the concept of control has become a complicated issue; as such SEBI has adopted various measures and established the regulations which can suit with the investors and can bring a smooth functionality in the corporate governance of a country.

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    Sun, 04 Nov 2018 10:13:00 GMT
    <![CDATA[Panorama of Customs Duty in India Part I]]> Panorama of Customs Duty in India Part I

    We all have read in our childhood or seen in movies that how centuries ago, to enter a kingdom, a merchant with his merchandise had to give some gift to the king. In due course, this tradition has formalized and now given the name of customs duty on goods exported from the country and imported into it. The flow of goods across borders demands a monitoring and controlling system, to protect the domestic industry and to prevent any illegal activities or products from entering the country.

    Every country has its own set of customs laws.  Customs Act, 1962 describes the significance of customs duties that form a source of revenue for India. Custom obligations in India go back to the eighteenth century when the British East India Company came to political power in India. The organization of this obligation commenced through various laws during the British period.

    The three presidencies to be specific Bengal, Mumbai and Chennai had their own particular traditions controls. Until 1859, there was a regular tax; be that as it may, the tariff underwent necessary amendments in 1867, 1870, 1894, 1932, 1934 and 1939. After autonomy of India, a noteworthy change was affected in 1975 when Customs Tariff was lined up with the Customs Cooperation Council Nomenclature (CCCN), which is the globally acknowledged order.

    Customs Act 1962

    Under the customs Act 1962, Customs Duty is an indirect tax. The Article 265 of India's Constitution provides that "no tax shall be levied or collected except by authority of law". The customs Act 1962 and the Customs Tariff Act, 1975 are the two primary statutes that govern the entry and exit of goods into or from the country.

    The object of customs Act 1962, which extends to the whole if India is:

    i.    To levy and collect Duties

    ii.    Regulation of Import and Export

    iii.   Prevention of illegal activities such as smuggling

    iv.    Protection of Domestic Trades

    v.    To Encourage and conserve Foreign exchange

    Taxable Event

    For goods to be liable to customs duty, there has to be an import of products into or export of products from India

    As per the Act, import is bringing goods into India from a place, which is outside of India, and Export is taking assets out of India to a site, which is outside India.

    Even products belonging to Government are subject to levy, though they may receive exemptions by notification(s) under Section 25 of the act.

    Indian Customs Waters'

    -    Section2 (28) reiterates that 'Indian Customs Waters' means the water extending into the sea up to the limit of the contiguous zone of India.

    -    Territorial waters stretch out up to 12 nautical miles from the standard on the shoreline of India. Indian Customs waters stretch out up to the contiguous zone of India which 24 nautical miles from the closest purpose of the rule. In this manner, Indian Customs waters reach out up to 12 nautical miles past territorial waters.

    "Adjudicating Authority" which means any authority competent to pass an order or decision under this Act, but is not inclusive of the Board, Commissioner (Appeals) or Appellate Tribunal.

    The Central Government is the rulemaking Authority, and the Central Board of Excise and Customs (CBEC) has the delegated power of making regulations.

    In the past expense administration, laws of customs duty, Excise and Service Tax and VAT set out the duty treatment of imports and fares. In the present Goods and Service Tax (GST) organization, Excise, Service Tax, and VAT will require submission into GST, and custom obligation will continue its imposition independently.

    The GST is a general destination-based tax leviable on the manufacture, sale, and utilization of goods and services at what would be considered a national level which subsumed other circuitous duty, in this way keeping up a vital separation from different layers of tax evaluation that by and by existing in India. It has made a solitary, brought together Indian market to make the economy more grounded. The embodiment of GST is that the falling impacts of both CENVAT and administration charge are anticipated that would be evacuated with set-off, and a logical chain of set-off from original producer's point and service provider's point up to the retailer's level will be established.

    Duties imposed at the time of Import

    BCD (Basic Customs Duty), Anti – Dumping Duty, Safeguard Duty will continue to be applicable.

    BCD

    Section 12 under the Customs Act, 1962 imposes a primary customs duty and Section 2 of the Customs Tariff Act, 1975 lays down the specification. The general primary obligation is 10%, but there are different rates for different type of goods. Price specification is in the Customs Tariff Act, 1975.

    "Anti-dumping duty(ADD)"

    Where any article is traded by an exporter or maker from any nation or domain to India at not as much as its typical esteem, at that point, upon the importation of such article into India, the following will be possible. The Central Government may, by notice in the Official Gazette, force a hostile to the anti-dumping obligation not surpassing the edge of dumping in connection to such an article. The counter dumping obligation is dumping edge or damage edge whichever is lower. Dumping implies sending out merchandise to India, at costs littler than the ones in the household market of the trading nation, subject to specific changes. To forestall spill, the Central Government may collect ADD up to the edge of dumping (MOD). MOD is the distinction between the normal esteem and the cost charged for fares to India. A typical sum implies the practically identical value in the conventional course of exchange, in the sending out nation, in the wake of making changes under the degree of states of the offer, tax assessment, and so on. Damage edge implied the distinction between the reasonable offering cost of local industry and landed cost of the foreign-made item.

     Additional duties of Customs, which are, in parlance referred to as CVD (Countervailing Duty) and Special Additional Duty of Customs (SAD), would be replaced with the levy of Integrated Goods and Service Tax (IGST).

    IGST

     IGST is chargeable on goods imported into India. CVD is still payable, wherever applicable on the imported goods for which GST Laws are not relevant.

    Any article which is foreign made into India might, likewise, be obligated to integrated duty at such rate, not surpassing 40% as is leviable under area 5 of the Integrated Goods and Services Tax Act, 2017 on a similar article on its supply in India, on the value of the imported material.

    UAE – Custom Regulation

    The UAE is a federacy of seven states. Each state has its ruler, and the rulers together frame the preeminent advice representing the body of the UAE, with the leader of Abu Dhabi as the leader of the nation and incomparable administrator of the armed force. Every Emirate is liable to its particular local laws and regulations governing internal affairs. Matters identified with the UAE in general legitimate body would require a federal law or pronouncement affirmed by the president of the UAE.

    Customs has existed in the UAE for more than one hundred years and looking back at the evolution customs took institutional shape in the age of the late Sheikhs Zayed bin Sultan Al Nahyan and Rashid bin Saeed Al Maktoum, Ruler of Dubai.

    The merger of the customs regulations and mechanism in the Gulf Cooperation Council (GCC) Member States is one of the most profoundly significant achievements by the customs administrations of the GCC Member States. Including the adoption of a "Common Customs Law" that integrates the customs procedures in all the customs management of the GCC Member States and contributes significantly to the enhancement of the economy and also to the cooperation among the Member States.

    The supreme council in Riyadh on its 20th session (27-29 November 1999) adopted The Common Customs Law of the GCC Member states. Initially, the intention of passing the act was as a reference law for one year from the date of approval. The supreme council demanded comments from the Secretariat General of each member states on the rule to implement it as a necessary act for all the Customs Authority of the GCC Member States to adopt. The UAE being a member of GCC applies the "Common Customs Law of the GCC (Gulf Co-operation Council) States" which is pertinent in all GCC states, in which any commodities are crossing the customs line, at importation or exportation, are liable to the provisions of this law. This law is approved by federal proclaim number 85 for the year 2007. The products imported into the nation are responding to the customs levy determined in the Customs Tariff issued as per the Common Customs law

    The Federal Customs Authority (FCA) draws the customs policies, regulates the execution of customs-related statutes and enactment and speaks to the UAE inside and outside the state. Nearby customs offices do the official work and draw the customs policies for every emirate inconsistency with the Common Customs Law.

    Import

    Depending on where merchandise is predetermined, the U.A.E. can delegate Mainland Customs Zones or Free Trade Zones with the recognizing factors illustrated beneath.

    In general, goods destined for the U.A.E.'s Customs Zones are subject to duty under the Gulf Co-operation Council (GCC's) Common Customs Law while goods destined for Free Trade Zones are exempt from tax. Generally, a levied 5% customs duty on all products imported into the UAE exists. Higher obligations of 50% to 70% apply to imports of luxury goods such as tobacco. Certain assets are exempt from customs duties for public benefit reasons, including pharmaceuticals and agricultural products

    The UAE has also promulgated Federal Law No 13 of 2007 on commodities that are subject to import and export controls. Under the Law, the Ministry of Economy and Commerce can impose bans on imports, exports, and re-exports for reasons related to safety, public health, the environment, natural resources or public policy.

    The list of prohibited goods includes:

  • Drugs,
  • Radiation-polluted substances,
  • Paintings and drawings contrary to Islamic teachings.
  • Imports of goods manufactured in Israel are prohibited.
  • Imports of pornographic literature are also prohibited
  • The following products have banned from entering the free zones and duty-free

    Shops:

  • Flammable goods (other than fuel)
  • Radioactive materials
  • Weapons, ammunition, and explosives, of any type.
  • Products violating commercial, industrial, literary and art regulations.
  • Drugs (narcotics), of all kinds and derivatives thereof.
  • Goods originating in an economically boycotted country.
  • Products prohibited from entering the GCC Customs Union or the state of final destination or transit.

    The following have exemption:

  • Diplomatic Exemption
  • Military Exemptions
  • Industrial Exemptions
  • Personal Exemptions (of a personal nature, in non-commercial quantities)
  • Exemption of own gifts accompanying passengers
  • Exclusion of the Import of the Foundations/Charities
  • Import for Re-Export
  • ]]>
    Sat, 03 Nov 2018 12:59:00 GMT
    <![CDATA[Consolidation of Economic Status]]> Consolidation of Economic Status

    Introduction

    With the changes and developments in the world, especially in the Middle Eastern region, we face numerous challenges from an economic standpoint. In general, most of the Middle Eastern countries are developing countries, looking to consolidate their financial position in the region and also in the world.

    This race for economic growth is an endless one, for every country looks to emerge as a strong economic power. The winner in this race often does not retreat from its economic position; rather it is an endless race for in which there are no breaks or slower moments. Since the winner will have large amounts of contracts and agreements with investors that must be honored, they need to prove that the country is the ideal investment location so that the investors are not at risk. For example, the United States of America has long assumed its position as the most powerful economic entity in the world, and since then, the place has not been obtained by other major countries. For example, China is a large country and is a permanent member of the Security Council. Though its industries have overshadowed many Countries of the world, China still fears US economic sanctions, which would hurt the Chinese economy.

    Neighboring Countries (GCC) of the United Arab Emirates

    The geographical scope of the GCC countries is full of oil wealth, which constitutes a substantial return on the income of the GCC countries. Some GCC countries also make up the oil revenues, which are the primary source of revenue for GDP.

    Non-oil revenues in some of these countries are almost non-existent or very few, and even if non-oil revenues are found, most of these revenues are taxes, customs duties and state fund investments in projects that are mostly in foreign countries (such as the real estate market). For example, the volume of Saudi Arabia's investments in the United States has exceeded $ 1 trillion. This came on CNN International. In contrast, US investments have recently reached 10 billion dollars, to improve the Saudi economy and attract more foreign investment. We can imagine the big difference between the investments of both countries. The support of an investor and their investment in a country increases the state revenues and results in the rise in GDP thereby promoting various fields such as manufacturing, real estate market, tourism, technology and many more.

    The trend now for the Gulf Cooperation Council countries to channel the income earned from oil to non-oil revenues, and build strong infrastructure, and stimulate investment in these countries expanded recently, with the sharp decline in oil prices in the world. This has resulted in a large deficit for countries whose economy depends on most of the sale of oil and now steps are being taken to avoid these difficulties in the world energy markets.

    In 2016, the oil industry faced a sharp decline, which led to a reduction of the rate of a barrel to less than 40 US dollars. This resulted in a decrease of more than 60 percentage; therefore one can imagine the situation of countries whose oil income accounts for more than 70% of the total revenue of this country. The fall of oil prices caused a large deficit to some countries that primarily rely on oil such as Kuwait and Saudi Arabia.

    These countries must work on economic reforms to face these dangerous conditions, for example:

  • Saudi Arabia has come up with a system of major reforms via the Saudi economy Vision 2030;
  • The State of Kuwait has introduced a major reform of the Kuwaiti economy;
  • The imposition of the value-added tax in all GCC countries; and many others
  • Hence we emphasize that most of these reforms focus on increasing investment in these countries, and to bring capital and incentive with infrastructure development and the enactment of laws to stimulate investment in various areas of industrial, tourism, service and real estate sector.

    The role of the United Arab Emirates in supporting investment

    Being one of the leading countries in the GCC system in terms of motivating the investors, the United Arab Emirates has enacted laws suitable for foreign arrival and investment. This has led to a great harvest in the state budget and the income statement. In the 1970s, oil was more than 90% of the total government revenues of the United Arab Emirates. However, in the year 2016, the contribution of non-oil sectors reached more than 70% of total government revenues.

    Since its inception, the UAE government has been diversifying the country's revenues and not just relying on a single source of income, and this has helped in avoiding dangers that are faced by the collapse of the oil prices.

    One of the most prominent areas achieved in the United Arab Emirates is the remarkable development of the value of foreign investment in the country.

    UAE legislates a law allowing foreigners to own the entire share of the company or its affiliates:

    Article 10

    The rate of National Contribution

    1 -With the exception of Joint Liability Companies and Simple Commandite

    Companies, where all the joint partners of any of such companies shall be UAE nationals and such a company established in the state, shall have one or more UAE partners holding at least 51 percent of the share capital of the company.

    2 –Notwithstanding the provisions of Clause 1 of this Article, the Cabinet may be based on the proposal made by the Minister in coordination with the competent authorities, issue a Decision setting the class of activities to be exclusively exercised by UAE nationals.

    3-Any transfer of the title to any share of a partner that may affect the percentage as set out in Clauses 1 and 2 of this Article shall be invalid.

    By the end of 2018, foreign investors will be allowed to own all or part of the company's shares in the UAE. Currently, there should be a local investor who owns most of the company's shares, i.e., at least 51 percent of the company's shares.  This requires all foreign investors to give up the largest proportion for the benefit of the local investor, making it difficult for the foreign investor to invest and abandon most of the company's share even if he does not need a real partner. One example that shows us the reluctance of some foreigners to invest in the UAE, but they have a desire to invest in it is the success of the free zones in the UAE.

    Free zones in the UAE attract a lot of foreign investors, and some international companies have set up their companies inside the UAE but within the borders of the free zone and there are more than 30 free zones in the UAE. The ones located in Dubai are examples of these free zones: Jebel Ali Free Zone, Dubai Silicon Oasis Free Zone, Dubai Airport Free Zone, and Dubai Healthcare City.

    These free zones impose some conditions and some advantages for companies operating in them.
    One of the most critical features is foreign ownership of the entire share of the company (does not require any UAE national as a partner). One of the essential conditions applied to these companies is that they cannot practice outside the free zone and are strictly prohibited from dealing with state and government institutions.

    The new law will allow foreign investors to own the entire share or about 90 percent of the company's share in the UAE and can operate anywhere within the UAE borders and can make contracts with all government agencies and institutions, which will bring investors willing to work in the country. It also allows the investor to take all decisions in the company without the participation or interference of its management.

    However, there will be some conditions for the foreign ownership of the entire share or annex:

    1.  This law will apply to the areas such as energy and technology, which the state requires. For example Apple, Samsung, and Google. These companies will add a lot to the country's economy and develop its infrastructure.

    2.  There must be approval from the Council of Ministers for several things:

    • Company: the target here of the application of this law is global giants.
    • Investor: Investors in their personal capacity must be investigated; they are not persons who are prohibited from trading or terrorists or nationals of unfriendly countries and carry enmity.

    3. There will be support for UAE nationals in these companies. These companies will provide many job opportunities for the youth of the UAE through which they will raise their competencies and learn many of the experiences of international companies that have achieved great success in their fields.

    This decision will stimulate the investment sector by a large percentage of the state budget and will exceed one trillion UAE dirham. With this decision, one can imagine the proportion of investors and international companies. The UAE has become a global center for the region and the increase in the economy of the UAE has played an active role in stimulating many vital sectors such as technology, energy, electricity many more.

    ]]>
    Sat, 03 Nov 2018 12:25:00 GMT
    <![CDATA[Oman Consumer Protection Law]]> Oman Consumer Protection Law

    "Competition is not only the basis of protection to the consumer but is the incentive to progress" – Herbert Hoover

    Introduction

    Consumer protection is a vital part of a healthy economy. Every country has its regulations in place to ensure the consumers are treated fairly and receive the protection that they deserve and require. The relationships between consumers and the companies they interact with and make purchases from is a complex one. On the one hand, it may appear as though the business entities have a higher level of power over their target audience as they are often large and highly profitable organizations. However, we can also consider this from the opposite angle. The consumers and the choices they make are what give the entity any power it may have, and so in a way, they may be the more important and influential.

    The key here is that while both sides are undoubtedly essential and hold sway in this argument, it is generally clear and evident that the strength of the consumers come from their freedom of choice and vast numbers. Individually, one person cannot hope to sway a company, and this could potentially lead to abuse of power. However, this has been noted and is the very reason behind the consumer protection legislation.

    Consumer protection law generally covers a few essential areas and rights. These include:

  • The consumer's right to correct information for what they are looking to purchase;
  • The right to be free to choose where they wish to make their purchases from;
  • The right to receive products of an appropriate quality to what one would expect and to what the advertisements showed or demonstrated;
  • The guarantee of a product that is of the proper health and safety standard;
  • Fair compensation when and where it is necessary for the event of damages suffered; and
  • The right to not receive discrimination based on their religious values, customs, and beliefs.
  • While these are the rights of the consumer, it is also the obligation of the producers, advertisers and other bodies that are involved in the process to ensure violations of these rights do not occur

    Oman's national consumer protection legislation is the Royal Decree Number 66 of 2014 (the Consumer Protection Law)

    Royal Decree Number 66 of 2014

    Decree Number 66 is the Sultanate of Oman's central regulation on the matter of consumer protection. It came into effect upon its publication in the national gazette on November 30, 2014. It covers all of the basics relating to both the rights and protections of the consumer and also the responsibilities and duties placed upon the producers to ensure the realization of those rights.

    Chapter 1 of the regulation covers the definitions and overarching provisions of the law and is the basis for the remainder of the Legislation.

    Beyond the basic concepts of rights and duties that are specified, the matter of regulatory violations and penalties also receive attention within the law.

    Chapter 3 relates to the duties and requirements upon the provider and Article 20 states that:

    -        The provider and advertiser shall be under an obligation for transparency and credibly and shall refrain from any acts of misleading publicity and advertisement upon the promotion of the commodity or the services offered to the consumer.

    A case which relates to this occurred around November of 2016, in which a consumer purchased a motorcycle. However, they realized once they received the bike that is was not to the specifications as advertised and promised. The engine size and power of the motorcycle acquired were below what the producer promised, and so the consumer sued them. The court ruled in the consumer's favor, with the defense party receiving a fine of OMR 100, and the court fees were to be paid by them. Further, the contract between the parties was then also terminated. The court finally ordered that the original agreement should then be satisfied by the producer.

    Article 23 of the regulation states that:

    -        Optimally providing services to the consumers is critical, and a deadline should be provided for when the service will fully complete, and this deadline should also further be realistic. Failure to ensure this shall result in the producer being liable to refund the consumer the value of the good or service or a similar such repercussion.

    A case in which this regulation came into play was also in 2016. Here, the consumer hired a tailoring company to produce for them custom curtains and couch designs, and also to design their bedroom. The producer failed to do so within the set time, and so the consumer filed a claim against them. Similar to the case mentioned above, the court ruled in favor of the claimant, and the producer received a sentence of 10 days in prison as well as an OMR 100 fine.

    Chapter 2 Article 14 of the regulation stipulates all of the rights of the consumer, and they are very much in line with and include all of the points stated in the introduction to this piece.

    While this is the critical regulation in place for the area of consumer protection, there is also the Public Authority for Consumer Protection within the country.

    Public Authority for Consumer Protection (PACP)

    The PACP first arose through the Royal Decree Number 26/2011. The formation of this body aimed to ensure that an establishment existed within the country that could be relied on by consumers to cover them and ensure they do not experience unfair treatment or are not taken advantage of by large organizations; this was published in the official gazette and commenced on February 28, 2011

    Further to Royal Decree Number 26/2011, there is also the Royal Decree Number 53/2011 which promulgated the law; this was also published in the official gazette at a later time and commenced on April 6, 2011.

    Both of these regulations came into effect upon their publications in their corresponding gazettes.

    The general duties of the PACP are generally all consumer protection related, and some of their key responsibilities are as follows:

  • Ensure the implementation of the Sultanates general policies relating to consumer protection in coordination with the other government bodies;
  • They should ensure through the use of questionnaires and surveys that consumers are in a good position, and just how this can be improved;
  • They should ensure that consumers are aware of their rights through the laws; achieving this could occur through the distribution of magazines and pamphlets;
  • Encourage fair and plentiful competition across all industries to provide the people with a wide variety and prevent the formation of monopolies; this will help more mainly with the growth and well-being of the country's economy as a whole; and
  • Look to promote international cooperation in the field of consumer protection.
  • These are the general aims, and so it is clear that the PACP plays a significant part in ensuring the healthy economic growth of the Sultanate. Competition is key to any economy as it provides that companies profit based on their products and services as well as their treatment of consumers. Further, it will push businesses of all types to improve continuously to attract clients through their hard work and commitment.

    International cooperation in this area will allow for Oman to make a name for itself and become known around the globe as a place of fair trading and protection of its people's rights, which could further help to boost its economy. It would do this by attracting more international business into the nation, which would have a ripple effect of furthering the levels of competition even more significantly.

    Another role of the PACP is that of being somewhat of an available figure by the consumers. Should they have a matter in violation of their consumer protection rights, they can approach the PACP and begin proceedings against the company in violation.

    An example of this is that of a case that occurred in the year 2016 in which a consumer approached them with a situation in which they did not receive the appropriate change from a commercial center. The PACP visited the center to confirm this, and following their investigation, they found this to be the case. The case then proceeded to a court, and the accused received a sentence of three months of imprisonment.

    While the PACP themselves cannot act as the judging party in the cases brought before them, they do function as somewhat of an available official body that can look into these issues. Should they investigate and find something to violate the consumer protection regulations, they can escalate the case to the courts for a final verdict and the delivery of the appropriate penalty.

    The General State of Consumer Protection in the Sultanate of Oman

    The consumer protection rights as they are at this time established within Oman, are relatively new, with the regulatory body arising in only 2011 and the Consumer Protection Law being created and implemented in 2014.

    However, the idea is right and appropriate, and more so than merely protecting consumers once damage has already occurred, there is a larger goal to be achieved. With the overarching aim of increasing competition and preventing the rise of monopolies, the area is receiving opposition from the roots. The regulations are concise and straightforward leaving no room for misunderstanding.

    Finally, the international exposure that is part of the PACP's goals may have a significant effect on exposing the country's markets and standards to the world, and this could have great profound long-term outcomes.

    ]]>
    Sat, 03 Nov 2018 12:00:00 GMT
    <![CDATA[Payable on Death]]> Payable on Death or Transferable on Death – Global Views

    Introduction

    Death is always a profoundly emotional occurrence and the time following it can be complicated and involve many laws and regulations. A person lives and works through their entire lives and will build up possessions and valuables, and they could potentially also have agreements and contracts with certain entities. The most likely one of these would be a bank, where they would hold an account. Upon their death though, possessions and arrangements will no longer be of use to them. The question arises then regarding what is required with these possessions and more specifically to this article, accounts. In the end, they were still the belonging of the individual, and no one has a right to them except those who they have been assigned to through wills (or in the case of absence of a will, there will be other means to split an estate) or perhaps their creditors to some extent.

    The concepts of Payable on Death and Transferable on Death is found primarily in the US though there may be some developed nations of the world with similar ideas. They relate to the bank accounts of individuals and what is to happen with them in the case of their death. Both of these concepts have similarities to one another, though at the same time there are differences.

    Within this article, the regulations utilized in the different countries around the world on both of these topics shall receive consideration, and the similarities and differences internationally will also be looked into in detail.

    Payable on Death (POD)

    The concept of Payable on Death is first up. One can opt to make their bank account a POD account. The process is often free of charge, and once finalized, a beneficiary will exist, chosen by the account holder. Upon the death of the account owner, it will pass over in its totality to that individual; this includes all savings and checking accounts, savings bonds, security deposits, and other forms of deposit certificates.

    One of the primary reasons the POD route is becoming so popular is so that people can avoid the entire ordeal of having to deal with the probate court, which would apply to an ordinary will; this would take further time and add unwanted complexity to the situation.

    PODs are often referred to as a 'poor man's will', firstly, due to being able to avoid probate court and any costs that may arise through there, and also it will allow for the bypassing of hiring expensive lawyers to write up a large living or testamentary trust. Now it must be kept in mind that a POD will only cover the bank account of the individual and trusts are still a necessity for the remainder of one's valuables.

    There are certain advantages to a POD bank account, and they are as follows:

  • The whole process is relatively quick and easy to set up, and there are also generally no fees involved, which many find considerably attractive a prospect;
  • Multiple beneficiaries are often possible, and the way this is dealt with is straightforward. The value of the bank account merely is equally split between all the recipients;
  • Following the account owners death, it is simple to claim the money. The documents required to do so are a valid ID as well as the death certificate;
  • There are very few if any limitations in place regarding the maximum of a POD.
  • There are, however, a couple of disadvantages, which are as follows:

  • There is no way to select an alternate beneficiary, which would cause something of an issue in the event of the death of original beneficiary
  • That is the primary con of PODs. However, there is also one point which can cause further complications, though it is not necessarily a disadvantage; this would be the whole concept behind a POD. During the life of the owner, they will be able to make use of their assets within the account to whatever they wish. If they wanted to, they could clean out the bank account before their death and leave nothing to their beneficiary.

    On top of this, the beneficiary is changeable at any point by the account owner. This point along with the previous may not seem like a disadvantage, though they may lead to personal issues arising.

    Beneficiaries do not necessarily have to be natural persons. They could also be organizations, as was demonstrated in a case that arose against the charitable organization, the Salvation Army. A POD mentioned them as a beneficiary, and a case was brought up against them, stating that they weren't liable to receive from a POD due to not being a natural person. However, the court ended up dismissing the case as requested by the organization. With the country utilizing a common law system, this case will be significant due to the concept of judicial precedence.

    Transferable on Death (TOD)

    Transferable on Death is a concept that is quite similar to a POD. The primary difference is the type of account that is in use. For a POD, it would be a standard bank account, while in the case of TODs, it would be a brokerage account.

    Once the individual passes away, a new account may be formed for them (this is generally the case) and the assets transferred over.

    Beyond this though, the account owner will be able to form a TOD, and they will be able to split the assets by percentage between the beneficiaries they state. The advantages are for the most part are identical as are the disadvantages.

    The USA

    The USA allows for both POD as well as TOD plans. However, TODs are the more regulated of matters. The reason for this is because they are more complicated, though the outcomes and processes to go through are generally the same.

    The regulation that governs TOD is the Uniform TOD Security Registration Act (1989/1998). One important thing to be ensured just the vast scale of the USA. The country covers a considerable land area, and the population is the third highest in the world. As such, the states have a large amount of their independence to decide on regulations within their state boundaries. However, this act has been enacted or introduced by every state.

    As mentioned before, there may be complications that arise in these types of cases. There is money involved, and lousy intention may follow. A case in the US which demonstrated the burden of proof that should be required for a POD to be valid was one an appeal court was looking at relating to the Estate of Weiland, 2003 Ill. App. Lexis 529. Within this case, complications arose with the bank accounts held by Weiland within a bank. Weiland was in no state of mind to set things straight to advanced age and mental condition. In the end, though, it was found by the court that the Burden of proof would have been a written and signed document from the account holder at any point stating their wish to form a POD and the details that would accompany that. Should such a record not be available, it would require demonstration of the account holder intent to establish a Totten Trust with convincing evidence to back this up.

    The UK

    Within the UK, the concept of POD and TOD is one which does not occur. Generally, trusts are a far more common practice. Inheritance tax is also a significant part of the UK system, while there are only around six states in America which do so. There is a Federal Tax, though this is only applicable on estates valued close to $5.5 million, and so many cases do not fall under this

    The amount of tax placed on one's inheritance in the UK depends on the total value of the estate in question. There is a certain amount of which is tax-free (£325,000 or £450,000 in the case of spouse, children or grandchildren) though anything above this heavily taxed at a 40% rate. Note that the tax is only applicable to any value over the aforementioned tax-free values. There will always be a tax fee quantity. Due to this taxing process on all of an individual's estate, there is no regulation for the concept of a POD or TOD.

    The UAE

    The UAE, unlike the UK, is known for its low tax nature. However, with the country consisting mainly (90%) of expats, complications can potentially arise with matters of inheritance, especially in the case that the beneficiaries are out of the country. Generally speaking though, the UAE has one of two stances which it can take with regards to inheritance law:

  • In the case of Muslim nationals, Sharia law will be what is used to dictate the inheritance splitting. Muslin residents may also be able to choose this path.
  • Non-Muslim residents, on the other hand, may opt to use the inheritance laws of their own countries.
  • An essential difference between the UAE laws and the laws around much of the rest of the world is that there is no concept of the right of survivorship, this being the concept of heirs inheriting in the case of no will being present.

    This result is not so much an issue for Muslims as the Sharia law of inheritance will be applied, and the assets split through this means. However, if a non-Muslim fails to leave a will, the Sharia principles will be implemented, and there are set values for what all parties will receive. Therefore, the presence of a will is imperative to ensure their desired outcome.

    Beyond this, it is also of vital importance that there are some means of proving one's rights as a beneficiary. The UAE courts will not accept word of mouth, and a certificate of entitlement will be required.

    Conclusion

    The concept of PODs and TODs primarily arises from the US. They have regulations in place that all states have enacted and approved of across the entire country, and the system is one which is quite simple to understand. Complications may arise, though more often than not, those are due to human error and mistakes rather than a flaw in the system.

    There are further countries around the world where similar concepts are available, though these are often not regulated through legislation, and are more of an agreement between the bank and their clients. The UK would likely not approve of PODs and TODs as they could be used to bypass large amounts of taxation, though, in the case of the UAE, it may be possible depending on the bank. Also, if a foreigner somehow attempts to use the US Uniform TOD Security Registration Act (1989/1998), they may be able to form a Payable on Death or Transferable on Death agreement of some kind.

    ]]>
    Sat, 03 Nov 2018 00:00:00 GMT
    <![CDATA[Self Defence-Criminal Action]]> Self Defence or Criminal Action - Where Does the Line Lie?

    Introduction

    The topic of self-defence is one which can be quite complicated. One of the most basic and critical drivers of a human is that of self-preservation and protection. At the most personal level, this would mean the protection against physical bodily harm, and it can then extend further to include the protection of one's property and possessions. It is somewhat of an instinctual matter, at least concerning physical self-defence. Humans innately protect themselves, and this is evident in the fact that we have an uncontrollable fight or flight response when we enter into a situation which demands it. How we react can vary greatly, and the extent to which we go is therefore highly varying.

    We are also emotional beings, in these such circumstances, protecting ourselves and what is ours can lead to responses which may accentuate our reactions. The essential point to realize here is that there are a significant number of facts to consider that may play a part in the act of self-defence.

    However, in a society that is governed by laws and regulations, we have clear guidelines to which we must abide. While in a person's mind, actions may be acceptable under the circumstances, the laws may not align with this. However, around the world, it is widely recognized that acting in self-defence is certainly allowed. Crime is very much a real issue and can be harmful and even life-threatening. There is no denying its existence, and so it would make no sense to prevent people from acting in their self-interest of protection if the need should arise.

    There must be clear lines drawn though, with regards to how one can react and how far they can go. The regulations must place clear limitations to ensure that people do not unknowingly go too far while also setting out the potential repercussions for doing so. In this way, maximum control can be exerted merely by stating and making the laws known.

    The UAE is, of course, no different from the general international norm on this front. The Penal Code (UAE Law Number 3 of 1987) covers the area of self-defence, and it was further added to and fleshed out through the Abu Dhabi Judicial Department (ADJD) Criminal Law regulations.

    When is Self-Defence Permissible, and what are its Limits?

    In the Penal Code, Articles 56 to 58 cover the area of self-defence. However, within the ADJD Criminal regulations, all of the same points are included as well as many new or explanatory expansion points. As such, this article will primarily concentrate on the latest and more in-depth regulation.

    Initially published in 2014 the ADJA law, Chapter 3 covers the topic of justifications. These regard justifications for actions performed by parties, and so it would make sense that the matter of self-defence would make up a significant portion of this Chapter.

    Articles 56 to 59 govern the lawful use and extent of self-defence, though following this, there is an entire section of the legislation dedicated to the further expansion of the topic.

    Top begin with Article 56 commences by stating that there shall be no criminal offense for a case where an action performed is done so in self-defence. This clarification is the very initial point which is used to commence the Article, and it sends a powerful message that effort to protect one's self or their property or an act that can be justified, are allowed and will not result in a criminal offense occurring. While this is a generalization and there will be exceptions stated, it is a positive thing to know that this is the first element mentioned. Article 56 then proceeds to dictate the situations and conditions that would are considered self-defence. There are four conditions which are as follows:

  • "If the defender faces an immediate danger from a crime on his person, his property, or another person or property of another or if he believed in the existence of such danger and this belief is based on reasonable grounds";
  • "The defender cannot resort to public authorities to avoid the danger in due course";
  • "The defender has no other means to repel such danger"; and finally
  • "The defence is necessary to repel the danger and commensurate with it".
  • From this, a simple deduction would point to the fact that if there is no other option, self-defence should occur as a last resort only. There should be a real threat or potential of a situation turning sour, and there should also be no official and regulatory means to diffuse the matter, such as a police officer nearby.

    An example case which demonstrates this is one in which a 44 year old Asian ended up killing a co-worker. The co-worker attempted to harm the man with a knife and indeed succeeded to injure them. However, acting in self-defence, the man managed to get hold of another knife, and the result was that the attacker received mortal injury and died. However, any charges of murder did not stand and were dropped as this was seen as a legitimate act of self-defence following the points previously stated.

    Following this, Article 57 concerns a grave matter. It covers the potential of murder and how it relates to self-defence. Murder, one of the most heinous of crimes, is shunned by potentially ever civilization in the modern world. However, in the case that there is murder as a result of someone acting in self-defence and murdering their attacker, multiple issues of relating to not only the legal implications arise, but also the ethical dilemmas that proceed.

    Article 57 states that self-defence does not allow for the act of pre-meditated murder. What this potentially means is that if one intends to defend themselves through the use of killing, this will be impermissible. A result of a death will only be considered as self-defence and not be counted as a criminal offense if one of the following cases:

  • "An act which it is feared will cause death or serious wounds if such fear has a base in reasonable grounds."
  • "Forced sexual intercourse with a female or indecent assault on any person."
  • "Kidnapping of a human being."
  • "Felony of arson, destruction or theft."
  • "Breaking by night into an inhabited dwelling or any of its appurtenances."
  • The crimes as mentioned above are among the worst that can be committed, and one of the primary elements they share in common is that they have the potential to result in serious bodily harm or even death. Therefore, it would make sense that someone could respond very seriously in defence and so there will be a level of justification for murder. However, due to the seriousness of the action, a death on one's hands may still carry repercussions.

    An example of a case in which just this occurred was during a 2008 trial in which an Emirati individual shot dead another individual. In this case, the party K.B suspected that the Emirati M.H.M had a woman with him in his vehicle and so proceeded to chase him. M.H.M soon stopped their automobile and produced a handgun which he fired Multiple times. The result of this was that K.B received fatal injury and died. M.H.M claimed that they acted in self-defence, though when considering the entire situation, he was still found guilty of murder and received the death sentence.

    Here it can be shown that other courses could have been taken to resolve the matter which would not have resulted in a death, and yet the death still occurred.

    Article 58 states a critical exception to the area of self-defence. One may not use it as an excuse to resist or fight against authorities that are going about their work. These 'authorities' would include the likes of the police. The simple reason for this is because police in the line of duty have a right to apprehend those that have committed or a reasonably likely to commit a crime or act of harm. It is their job to do so, and as previously mentioned in Article 56 (2), an individual is in the position to act in self-defence if there are no authorities available to do so. Therefore, it is deducible that authority figures will be in a place to take action where necessary.

    Article 59 brings thing around full circle. It is short but simple and states that the limits that are typically in place shall be up for acquittal in the case that the judge of the case deems the measures taken to be appropriate to the situation. What this Article allows for is some room in which the law can breathe through the judge presiding over the case. It provides for additional leniency or harshness where it would appear fair to implement and allows for a more human perspective on the issue to, while still working within the law, analyze a situation more deeply.

    Conclusion

    As has been shown, the concept of self-defence raises many questions, and the legalities surrounding it can be complicated. However, it is very much permissible to act in self-defence with force, so long as only the necessary steps occur. Who is to decide where that blurry line lies, and how far is too far as an act of personal defence? It is here where Article 59 of the law allows for judges to empathize with a case to a certain degree, and arrive at a more genuine understanding of the situation before them. What this will further allow for is for a more in-depth system that is not beset by the rigidity usually present within laws as written.

    ]]>
    Sat, 03 Nov 2018 00:00:00 GMT
    <![CDATA[A Guide to Non-compete Clauses in the Middle East]]> A Guide to Non-compete Clauses in the Middle East

    Introduction

    Non-compete clauses are sometimes incorporated into the contracts of employees to ensure the security and protection of the employer if an employee decides to move to another company. When working for an entity, individuals will likely pick up on and be privy to highly confidential information and practices of their employers. In the modern and extremely competitive business environment, companies look to obtain every advantage they possibly can. A company's unique selling points are what allow them to rise above their competitors, and these unique characteristics can include everything from trade secrets to working practices and even knowledge of specific customers and interacting with them. These are all things that an entity would seek to protect.

    Placing a non-compete clause in a contract restricts an individual's future employment in specific ways. That employee will be unable to obtain jobs at similar competing establishments, though the duration and specifics of how this will work will vary based on the country. The clause will have the effect of preventing one from obtaining employment under certain circumstances to ensure one company will not lose business to a competitor due to the profession of the ex-employee.

    It is no small matter, and so there are regulations in place within all of the GCC countries to ensure employers do not take advantage of employees. An individual working for a company in a particular field and at a specific position, when looking for a new job, will most probably be seeking in a similar sector. Realistically, this related sector will also be the one they would be most likely to find work in, and so this gives rise to something of a problem. If a non-compete clause is present, how will an employee find further employment?

    There are solutions to this, such as time limits, though more often than not, these limitations have to be reasonably specific. Non-compete clauses are not intended to give any single party an advantage over the other, and they are indeed not intended as oppression to the employee. Preferably it is merely a preventative measure used by the employer to secure their business.

    Contents

    1.   Non-Compete Clauses in the UAE

           1.1     Federal Law Number 8 of 1980

           1.2      In the Case of Litigation

           1.3      Ministerial Resolution Number 297 of 2016

    2.      Non-compete Clauses in the DIFC

            2.1    DIFC Law Number 6 of 2004

    3.      Non-compete Clauses in the ADGM

            3.1    The Employment Regulations 2015

            3.2    The UK Common Law and Equity

    4.      Non-compete Clauses in Kuwait

             4.1   Law Number 10 of 2007 (Competition Law)

             4.2   Damages for a Breach of Contract

    5.      Non-compete Clauses in Bahrain

             5.1   Law Number 36 of 2012

    6.      Non-compete Clauses in Oman

             6.1    Royal Decree Number 50/90

             6.2   Sultan's Decree Number 35/2003

    7.      Non-compete Clauses in Saudi Arabia

            7. 1   Royal Decree Number M/21 of 1969

            8.1    Royal Decree Number M/51 of 2005

    8.     Conclusion

     

    1.   Non-compete Clauses in the UAE

     

    The UAE is a highly competitive business market, being the most famous and popular in the Middle Eastern region; this is made clear when looking at its population, which consist of around 90% being expatriates. Non-compete clauses are quite well regulated although the matter can often be complicated. On top of this, the ADGM and DIFC free zones have differing regulations.

    The principal regulations on this matter are:

    • Federal Law Number 8 of 1980 (Labour Law)
    • Ministerial Resolution Number 297 2016

          1.2  Federal Law Number 8 of 1980

  • Federal Law number 8 of 1980 is the general labor law of the UAE. It does not explicitly mention non-compete clauses, though Article 127 does concern the matter
  • Within Article 127, it says that in the case that an employee's work allows them to become familiar with the clients of their employer, or if that work exposes them to the trade secrets of the company, the employer will be in a position to oblige a non-compete restriction upon the employee.
  • These are the conditions under which a non-compete clause may be allowed as per the law, though the Article also states conditions.
  • Article 127 States that for this restriction to be applicable, the employee must be over the age of 21 from the time of the contracts initial formation.
  • On top of this, the clause must be limited regarding the time and place. Further, it should also be limited to similar forms of work that would directly allow for competition with the original employer and will not be permitted unless it is necessary for them to protect and safeguard their lawful interests.
  • From this, a point that can be noted is that the law is stated in such a way to ensure a fair system. A non-compete clause cannot be used to take advantage of the helpless. The age restriction is present to provide that those who are very young do not have the early and crucial stage of their careers unnecessarily restricted, as this could have more considerable repercussions on them.
  • On top of this, the time and place restrictions are just a matter of fairness. For time limitations, markets change and so there must be an absolute time limit after which the employment of that employee will not have a noticeable or competitive impact. Further to this, employees employed within the UAE will be less likely to interact with clients in competitors in other jurisdictions, and with the international market and competition on such a scale being far more unpredictable, a limitation will have to exist.
  • Of course, the non-compete clause must prevent work in a similar business that would be in direct competition with the employer. They should be able to demonstrate that in the ex-employee working in the new company, they will suffer losses directly as a result.
  • Due to Article 127, it is more often than not, more senior employees who receive these clauses in their contracts. Those at a decision-making level who would potentially be able to impact the interests of a company and their competitivity with their knowledge may genuinely require a non-compete clause; there will be little to no positivity to arise from applying non-compete clauses to lower level employees or those privy to less insider knowledge.
  •       1.2   In the Case of Litigation

    Escalating a case to litigation is a serious matter, and so there must be a certainty of a breach. However, the UAE's outlook and handling of these cases can be quite a complicated procedure. 

    ]]>
    Mon, 08 Oct 2018 13:04:00 GMT
    <![CDATA[company formation soharport]]> Company Formation in Sohar Port and Free Zone

    The Port and the Free Zone

    Located on the northern coast of Oman, Sohar is a city with quite a colorful past. It is quite an old and famous city, steeped in history. The city is the largest within the northern areas of the country. It has a population of over 220,000 which is the fifth highest in Oman. The town has a history of acting as a port for the country, and the reason for this is due to its optimal location. It serves as a modern day gateway between east and west. Today, it is home to a deep sea port, which allows for it accommodate the largest of ships possible, and this has pushed it forward as one of the fastest growing free zones in the world.

    Beyond the top of the range port that is present within the free zone, there are a few further draws to this free zone, and some examples of these include:

  • 100% foreign ownership;
  •  Exemption from corporate tax for at least ten years. This period can be extended to a maximum of 25 years or the duration of the lease should the company meet specific Omanisation targets;
  • The 'one stop shop'. It is easily accessible for any party who wishes to obtain licenses, approvals, permits etc. to do so from a single entity, rather than having to interact with multiple different government bodies;
  • The capital requirements are reasonably low and encourage business start-ups;
  •  Omanisation works as following concerning the corporate tax exemptions. There is an escalation system in place as follows:
    • The minimum level of Omanisation is 15%;
    • 25% Omanisation after ten years;
    • 35% after 15 years; and finally;
    • 50% after 20 years and this is up until the final potential tax-free year (year 25);

    The port was initially established in 2002, while the free zone arose after this in 2010. Subsequently, the free zone has rich experience for any who may be unsure of whether it is an optimal location in which to grow a business.

    The Possibilities within Sohar Port and Free Zone

    The free zone is located in Liwa and is of course on the coast. Its location is surprisingly close to some significant places. It is within around 3 hours of Muscat, but more interestingly, it is quite near and well connected to the UAE and cities such as Dubai. Being located as such is a significant advantage, as while the port and location are well known, the UAE is still more notable as a business location. Also, there are direct highway connections to Saudi Arabia, which is a considerable economy in the region; this will give confidence to those who are considering Sohar port and free zone.

    There are a few different license types that are obtainable within this free zone. To be specific, these are the four types available:

  •  Industrial License
  • Light Manufacturing and Assembly License
  •  Logistics License
  • General Trade License
  • These licenses allow for the performances of these activities and must are renewable annually. Third party service providers can also obtain a Service Provider license, though the services that they can provide are specified. On top of this, the registration of these service providers is free of charge.

    Further to this, there are also permits which are obtainable, and the process is one which is transparent and relatively simple. The permits are as follows:

  • Plot Work permit: allowing the Working Company to execute civil works inside their plot. All relevant regulations on plot development and the application process for the Plot Work permit are in the Development Control Regulations;
  • Common Area Work permit: allowing the Working Company to execute works outside the plot, inside the common areas (for example laying a pipeline or cable);
  • Special Transport permit: All businesses will require an Environmental Permit. The type of permit that they will need to get will depend on type, scale, and complexity of their projects or work. The permits are as follows:
    • No environmental impact – In this case, no application will require filling out, and approval should occur within three working days.
    • Limited environmental impact – Required to submit environmental review form. Approval may take up to 30 days.
    • Environmental Impact – Must submit environmental impact assessment. The approval time may take up to 90 days.

    The level of environmental impact will is provided to the company during the assessment period, and so entities should be prepared to provide the required review or assessment to ensure the process is as smooth and concise as possible.

    The free zone has its own rules and regulations (Sohar Free Zone Rules and Regulations), which are distinguishable from the mainland laws. The free zone is located in Liwa and is of course on the coast. Its location is surprisingly close to some significant places. It is within around 3 hours of Muscat, but more interestingly, it is quite near and well connected to the UAE and cities such as Dubai. Being located as such is a significant advantage, as while the port and location are well known, the UAE is still more notable as a business location. Also, there are direct highway connections to Saudi Arabia, which is a considerable economy in the region; this will give confidence to those who are considering Sohar port and free zone.

    A Unique and Promising Prospect

    In general, Sohar Port and Free Zone is a highly well-developed free zone which is growing at a rapid rate, with large amounts of fixed investment. With the highly beneficial advantages of a world-class deep sea port, relatively close proximity to business centers such as Saudi Arabia and the UAE as well as the easy to use free zone facilities including the one stop shop and more, this free zone presents prime opportunities for businesses to establish themselves on a regional or global scale.

    ]]>
    Wed, 03 Oct 2018 10:10:00 GMT
    <![CDATA[ Energy Efficiency ]]> UK Energy Efficiency Regulations

    Time to Save the World

    Looking at the world around us, we can realize just how small we all are. Tiny specs upon the surface of the comparatively large planet, it would seem highly unlikely that we could ever indeed make a substantial impact on the earth. Sure, we can build on it, and we can traverse across it, and we have even got to the point where we can leave the surface and take to the skies and space beyond. However, our potential impact would still seem minimal. The perfect example to demonstrate this is the fact that the deepest humans have dug into the earth's surface is around 12km deep. 12km is around half of the distance through the planets outer crust. We have barely scratched the outer surface, which then lies on top of the 2,900km thick mantel. However, while our impact may seem tiny, there is a particular very well researched and well-known effect which will have result in massive repercussions if no action concerning them occurs; this is indeed referring to the matter of global warming.

    The planet is a giant ball of rock, metal, and magma, with other bits and elements strewn around its surface and below its outer crust. It is not exactly a living thing, though upon it are all of the plants and animals we can see. The life that is present is highly dependent on the world and its finely balanced environments and natural conditions. There are indeed fluctuation and changes that occur over millions of years, with it being a known fact that as time passes, there are times of increased temperatures followed by certain ice ages. However, with all the evidence that has been collected by the world's leading researchers and scientists, it has become apparent that the process is speeding up. All of the research is pointing to us humans as being the cause, and so we are slowly but surely making things worse for ourselves and life in general. However, over the last few decades and since we have realized the issue is arising and researched into, we have been making strides to 'save the world'.

    The UK's Push

    The UK introduced the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (No. 962 2015) on the 26th of March 2015. These regulations aimed to place responsibility on landlords within England and Wales with regards to the energy efficiency of the properties they were putting up for rent. The provisions came into effect on April 1st 2018, though-Parts 1 and 2 of the law came into force as of April 1st, 2016, and Section 3 came into effect on October 1st, 2016, as mentioned in Article 1, subsection 2 of the legislation. However, the remainder of the law would go into effect this year.

    The primary aim of the new legislation is to ensure that Private Rented Properties meet the minimum required energy efficiency standards. If these properties fail to meet the criteria, as of April 1, 2018, they will be considered sub-standard, and will no longer be eligible to be let. Part 3, Chapter 2, Paragraph 23 states this very clearly that in the case of Domestic Private Property, and 23 (2) (a) and (b) further elaborates on this. They stated that as of April 1, 2018, letting the property means to 'grant a new tenancy which falls within section 42 (1) (a) of the Act, or let the property on such a tenancy as a result of a renewal or extension of an existing tenancy'. It further states that from 1 April 2020, any property that does not meet the standard requirements shall not be eligible to be let.

    Chapter 3, Paragraph 27 (2) (a) and (b) concerns the eligibility of letting a Non-domestic Private Property, and the situation is similar for the 1 April 2018. However, the property will still be eligible for lease under the specific circumstances beyond 2020. In fact, there will not be a complete ban until the 1 April 2023.

    The simple purpose of restricting the letting of properties until they fall in line with the regulations is to ensure that a maximum number of landlords comply with the changes rather than ignore them, while the law is also not wholly forcing them to make the changes. This evolution is not something that is usually looked upon nicely, though the government has seen it to be necessary that the changes occur on a large scale as soon as possible.

    Section 30 is rather brief, though it regards the leasing of sub-standard properties. If this so happens to be the case, then the tenancy contract between the landlord and the tenant is no less valid or enforceable. What this ensures is protection for tenants in the situation that the landlord comes under trouble for not attaining the appropriate EPC rating.

    One thing to note about the upcoming section (Section 31 (1) and (2)) is that Section 36 (2) states that for any cases of exception, they must register the information set out in the Schedule on the PRS Exemptions Register. That said, Section 31 (1) and (2) relates to specific exemptions and can be brought down to the following.

    Section 31 discusses some examples of when exemptions may occur. If during the first five years:

    • The tenant refuses or doesn't consent to the landlord making the changes at present. However, in the end, the landlord does have to make the changes within that period.
    • The tenant refuses to give necessary confirmation which is a must, before any green deal plan with which the landlord proposed to fund the making of the relevant energy efficiency improvement could commence.
    • The tenant refuses or gives the landlord unreasonable demands for them to achieve the requirements.

    Another case in which you can register for the exemption is when the devaluation of the property may occur. According to Article 32, if the landlord were to produce a report stating that if the changes were to be made to bring the property in line with the energy efficiency regulations, this would result in a value depreciation of 5% or more.

    In the end, only in the case that these properties are entered on to the register can the landlord rely on the exemption.

    Chapter 6 of the legislation discusses the penalties. There is stated to be an enforcement authority, and it would be the responsibility of this authority to do the following. Firstly, there are compliance notices. An enforcement authority, should they find that an individual breaches Sections 23 and 27, must serve a compliance notice to them. Within a compliance notice, the enforcement authority must specify:

  • The address and name of the person whose documents or other information is required;
  • The date by which they must submit said papers which must be no less than one month from the time they receive the compliance notice.
  • Following this, the landlord must respond in the following ways:

  • They must comply with the compliance notice; and
  • Allow the enforcement authority to take copies of any original document produced.
  • What will the Impacts of this Law be?

    One of the impacts of this new legislation is that all properties must be at least a level E on the EPC scale for it to be eligible to be put up for lease. However, if a landlord is unable to have the changes ready for April 1, 2018, they may have a further six months to get their affairs in order. However, this is not the case under all circumstances; instead, it applies to landlords whose circumstances dictate that they have no other option.

    It is vital that landlords begin to make changes and plan for the soonest completion of the alterations to their properties. Any delays may lead to unseen issues arising for property owners which could come back to hurt them in the longer term. While there are exceptions in short to medium term and ways to delay, the changes will be required across the board eventually, and the potential penalties and losses that may rack up as a result of highly unnecessary delays. In the end, the changes are less a move to make money from the government, and instead, they are a more long-term plan in the face of the climate change crisis.

    Collaboration with tenants may also be a required move, and this will demand good communication and consent on both parts. The requirement of this collaboration is especially the case when tenancy contracts are lengthier, and the landlord has less flexibility and says on the matter. This collaboration can work both ways, with the landlord or the tenants bringing up the issue though, once again, both parties will require the approval of the other before any work may commence.

    The Big Picture

    In the end, the changes that the UK government has demanded of the people are for a grander issue. Climate change is occurring, and the human impact on this change is evident. In the past, it was not seen by many governments and authorities around the world as a critical issue due to there being minimal economic gain, though it is now seen by many as a crucial issue which requires attention. The bigger picture can be seen, and this has caused a re-evaluation of sorts. Many would have seen this as inevitable, and while there may be economic demands of the people of the UK, there is potential for future financial returns and the relationships between tenets and landlord could potentially solidify, and the all-around property leasing experience may become more accessible and more satisfying

    ]]>
    Tue, 02 Oct 2018 15:17:00 GMT
    <![CDATA[Non Conventional Trademarks]]> Non Conventional Trademarks

    Introduction

    Have a break, have a…

    Every chocolate lover knows the end of that saying. This chocolate is known for its' four fingers, chocolate-wrapped wafer goodness, and its' iconic tagline, but is it well-known enough to be considered "well-known?" Are well-known trademarks as viable an option as was once thought? In a gobsmacking judgment made by the European Court of Justice, the Court Ruled that KitKat's chocolate bar not merit trademark protection status in the EU. The Court decision was that the chocolate could not be considered to be adequately well-known across all European countries. This legal battle lasted 11 years and resulted in the chocolate not being afforded the protection supplied to branded products.

    Well-known trademarks:

    The protection of Well-known trademarks is from anything which could be considered a reproduction, translation or imitation of that mark, provided that they are likely to cause confusion in the relevant sector of the public. Well-known trademarks are often protected, irrespective of whether they are registered or not, in respect of services or goods which are the same as, or close to being the same, those for which they have gained their reputation. In some countries, such well-known trademarks may, under certain conditions, also be protected from different goods and services. The WIPO provided the Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks which provides for a definition of what is considered a well-known trademark.

    In Article 2 of the Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks provides for factors in the determination of whether a mark is a well-known mark in a member state. It provides for the factors for consideration – the competent authority shall take into consideration any circumstances under which it may be assumed that the mark is well-known. The competent authority will, in particular, consider information submitted to it with respect to factors from which it may be deduced that the mark is, or is not, well-known, including, but not limited to, information concerning the following:

  • The amount of knowledge or identification of the mark in the applicable sector of the public;
  • The period, extent and geographical area of any use of the mark;
  • The period, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods or services to which the mark applies;
  • The period and geographical area of any registrations, or any processes for registration, of the mark, to the scope that they reflect use or identification of the mark;
  • The record of success of the implementation of rights in the mark, precisely, the scope to which the mark was identified as well-known by competent authorities; and
  • The value associated with the mark.
  • These factors are merely guidelines to assist the competent authority to determine whether the mark is a well-known mark, they are not a pre-condition for obtaining that determination. Instead, the determination in each case will depend on the circumstances and facts of that case

    This Article goes further in that it also provides regulation of the relevant sector of the Public to which the determination will be focused, such sector will include, but will not necessarily be limited to:

  • Actual or potential buyers of the type of good or service to which the mark applies;
  • Persons associated with channels of distribution of the type of goods or services to which the mark applies;
  • Business circles working with the type of goods or services to which the mark applies;
  • Where a mark is determined to be well known in at least one relevant sector of the public in a Member State, the mark shall be considered by the Member State to be a well-known mark;
  • Where a mark is known in at least one necessary sector of the public in a Member State, the mark may be considered by the Member State to be a well-known mark;
  • A Member State may decide that a mark is a well-known mark, although the mark is not well known or, if the Member State applies subparagraph (iv), known, in any closely related sector of the public of the participating State.
  • Non-Conventional Trademarks:

    A non-conventional trademark is any new type of trademark which does not belong to a pre-existing, conventional category of trademark, and which is increasingly troublesome to register, but which may, however, fulfil the necessary trademark function of uniquely identifying the commercial origin or products or services.  These trademarks are incapable of falling within the conventional set of trademarks and are inclusive of trademarks which based on shape, smell, texture, appearance, sound, and taste. There is one common similarity and defining feature between conventional and non-conventional trademarks and that is the mark is distinguishable.

    Non-conventional trademarks include motion trademarks, shape trademarks (3D trademarks), single color trademarks, hologram trademarks, and sound trademarks (aural trademarks). The inclusion globally of these non-traditional trademarks was a result of agreements such as the Agreement on Trade-Related Aspects of Intellectual Property Rights, and it is within such Agreements that there is a providing of a standardized inclusive legal definition. The inclusion of such new non-conventional trademarks is due to the increasing commercial competition and a growing consumer society – owners need to outshine their competitors and ultimately must provide newer and innovative methods. 

    Smell Marks

    In an internationally famous case concerning registration of non-traditional trademarks, namely Sieckmann v German Patent Office (case 372/00) a trademark for the smell was the issue of focus. 

    In this case, the description of the smell mark was as "balsamically fruity with a slight hint of cinnamon," the application mentioned that it was for the purposes of registering the olfactory mark (smell mark) of a chemical product. In its application, the applicant submitted the chemical formula, a sample of the smell as well as a graphical description of the smell.

    In this case, the applicant was refused the trademark on the grounds that there was doubt as to whether the trademark was capable of being registered and of being represented graphically. The European Court of Justice ruled that the requirement of graphical representation not be satisfied by the mentioned measures:

  • Scientific formula;
  • Description in written words;
  • Depositing a sample or odor; or
  • A combination of these methods.
  • This case provided the famous Siekmann criteria, and these criteria include granting trademarks to those marks which can be represented graphically utilizing images, lines or characters, where the representation must be clear, precise, self-contained, easily accessible, intelligible, durable and objective. With these criteria in place, it was challenging, if not impossible, to register smells as trademarks.

    Sound Marks:

    Alternate procedures for the graphical representation of sounds have come about, and these include depictions by:

  • Oscillograms;
  • Spectrum;
  • Spectrogram; and
  • Sonogram.
  • Sound marks are frequently registered marks in different countries around the world. Examples of these could be the Nokia ringtone, the roar of a lion, and the chime used by CNN. All of these sounds have a distinctive character and assist in the identification of products, thus definition their commercial origin. 

    The European Court of Justice had excluded from the ambit of non-conventional trademark applications written explanations like the sign of the notes which make up the musical work, or the cry on an animal, onomatopoeia; or merely a sequence of musical notes.

    However, the World Intellectual Property Organisation, to which the United Arab Emirates is a part of, has agreed that "offices may require that the representation of sound marks consist of a musical notation on a stave, a description of the sound constituting the mark, or an analog or digital recording of that sound – or any combination thereof.

    It was held that the criteria laid down by the Sieckmann requirements would be satisfied by a musical notation if represented by a stave divided into measures and showing, in particular, a clef, musical notes and rests whose form indicates the relative values and, where necessary, accidentals.

    Taste Marks:

    The establishment has taken place that the graphic representation requirement for the registration on non-conventional trademarks will be satisfied by the utilization of a written description of the taste and an indication that it concerns a taste mark. The problem areas arise in consideration of distinctiveness and functionality.

    Colour Marks:

    In the United Kingdom, colors have been granted trademark protection when used in specific, limited contexts such as packaging or marketing. An example of this is the particular shade of turquoise used on cans of Heinz baked beans which can only be used by the H.J. Heinz Company for that product. 

    ]]>
    Tue, 02 Oct 2018 14:45:00 GMT
    <![CDATA[territorial applicability ]]> The territorial applicability of criminal law in the UAE

    Introduction

    In may sound odd, but there is a difference between international criminal law and criminal international law. What's more is that the differentiation between these two seemingly similar sounding things is of essential importance.

    The international criminal law is a law which is laid down by the international community through international conventions held between several States. Therefore, it relates to international law subjects rather than municipal law.

    The criminal international law is the law which concerns the rules of the crimes committed under the municipal criminal law, involving a foreign element, such as the venue of the offense, or the nationality of the victim or the offender. In such cases, the criminal law comes into focus to deal with the problems of legal jurisdiction and to solve the conflict of laws that may arise between domestic and foreign criminal rules.

    The United Arab Emirates – territorial applicability

    Federal Law Number 3 of 1987 (also known as the Penal Code) states within Article 16 that the Penal Code will apply to any person who commits a crime inside the territory of the State. The State shall consist of the lands and any place under its sovereignty, including territorial waters and airspace there above. 

    A crime shall is considered to have been committed in the territory of the State if any of its constituent acts occurs therein, or if the result has been, or is intended to be, realized therein.

    Article 17 provides for situations in which crimes are committed on-board warships and military aircraft which bear the flag of the State wherever they may be, such offense will fall within the ambit of the penal code. The applicability of the law will also apply to non-military governmental vessels owned or operated by the State for non-commercial purposes and as such commercial aircraft and ships bearing the flag of the state also fall within the purview of the law.

    Where there has been an incident on a foreign ship which is in any of the ports of the State or its territorial waters, Article 18 of the Law states that the penal code will not apply unless the following circumstances are present:

  • In cases where the effects of the crime extend to the State;
  • If the crime by nature disturbs the peace or violates public morals or good order in its ports or territorial waters;
  • If the shipmaster or consul of the State hoists their flag in an attempt to seek assistance from the local authorities;
  • Should the offender or victim be a citizen of the State;
  • If the vessel carriers materials or objects internationally banned from negotiation, possession or commercialization.
  • Although this provision does not extend to foreign aircraft in the airspace of the UAE Provisions will reach if the aircraft physically touches down in any of the airports after the perpetration of the crime. Also, if the crime by nature disturbs the peace in the State or violates its public policy, or if the offense violates the State navigation rules and regulations, or if the aircraft pilot seeks the assistance of the local authorities, or if the offender or victim is a State citizen.

    There too are cases in which the merchant ships become submitted under the local State jurisdiction. This submission is following the International Seas Convention of 1982. These cases are as follows:

  • The fact that the crime has been perpetrated by or against a person that is not a member of the crew;
  • The case where the offense committed breaches the peace and security of the receiving state, such as in the case of smuggling of drugs; and
  • The case where the ship has asked for intervention or assistance from the local authorities.
  • Where a person has committed a crime outside the State, according to Article 20 of this law, such person will fall within the ambit of the law and will be considered a principal or an accessory when the following crimes have been committed:

  • An offense that violates the internal or external security of the state, its constitutional system or its legally issued financial securities or stamps or that involves forgery or counterfeiting of state instruments or official seals;
  • Copy, falsification or copying of the states' currency, circulating or possessing the same for circulation, whether such acts are carried out within or outside the country;
  • Forgery, falsification or counterfeiting of paper notes or minted coins for the distribution in the state, promoting such currencies and coins therein, or possession the same for circulation.
  • A citizen of the United Arab Emirate, while traveling abroad will not be able to escape liability under the law of the UAE. In accordance with Article 22 if a citizen becomes involved in an act which constitutes a crime as per this law, such person will be sanctioned in accordance with this law when he comes back to the country, provided that such a commission or omission is punishable in accordance with the law of the state within which the perpetration occurs.

    Exceptions

    The provisions of the criminal law are only applied within the States' territory. The internationally accepted definition of territory includes the following:

  • The land – which consists of the earth, whether it is joined or separated (e.g., in the case of islands);
  • Water areas – which comprise of internal areas such as rivers, lakes, and canals, as well as external water areas which include the territorial sea (i.e., 12 miles from the shoreline); and
  • Air and space – which covers up the abovementioned areas of land and water.
  • However, there are two exceptions to the territorial applicability of the criminal law. There is a contrary exception in the form of criminal immunity and a real limitation in the way of the transnational effect.

    Concerning the contrary exception, the following persons will qualify as such:

  • Foreign heads of states – the law provides that the culpable acts committed by the foreign Head of State or by one of his/her family members during their visit to a State, such actions will be covered by criminal immunity, and those persons shall not be accountable for their culpable acts before the national courts of the receiving State. The reason for this is due to the perfect equality and absolute independence of the sovereign state that the municipal courts are incapable of conferring extra-territorial power;
  • Diplomates – this criminal immunity is confined only to the procedural rules of criminal law and not to the substantive provisions as such;
  • Foreign public and military ships and aircraft - the criminal law of the receiving state is not applicable to such persons as these ships or aircraft represent the sovereignty of the guest State in the host state;
  • Foreign armed forces.
  • Definite Exceptions to the Territorial Applicability of the Criminal Law

    In this situation, a state will take it upon themselves to punish persons who have committed a crime abroad. Pronouncement of the punishment must occur in the State whose law has been broken and can only require execution if the offenders come within its territory. The UAE Law on this follows upon French principles, with jurisdiction over offenses committed abroad claimed within broad limits.

     

    ]]>
    Tue, 02 Oct 2018 13:20:00 GMT
    <![CDATA[Project Financing]]> Examining Project Financing issues and Regulations

    Introduction

    Driving through Dubai one is inundated with the view of cranes and construction sites, however, if a closer look is taken it becomes increasingly more evident that many, if not most of these sites are inactive and the buildings are left skeletons of the creations that they were meant to be. Project financing in the GCC region has seen a rapid dive in recent times, and the feeling of the effects is throughout the GCC.

    Due to a concerted drop in the oil prices, there was a resultant shortfall in government revenues and budget deficits across the region. The GCC region is suffering a reported two hundred and seventy billion dollars (USD) project finance gap. However, the region has announced a slew of infrastructure programmes, and this can be attributed to external sources keeping the funding tap open to infrastructure projects. With governments taking a cautious approach and only focusing on critical projects.

    The value of UAE projects awarded rose by 15.1. Percent, quarter-on-quarter in the first half of 2016. Bahrain and Kuwait reported increases of 77.1 percent and 242.2 percent in projects awarded during the first quarter, on a quarter-on-quarter basis, while Oman and Bahrain saw yearly increases in projects. Saudi Arabia and Oman saw the sharpest quarterly falls of 42.9 percent, 45.7 percent, and 48.2 percent respectively, in value terms, while for GCC as a whole the value of project awards contracted by 14.8 percent quarter-on-quarter and 45.6 percent on a year-on-year basis.

    Lower oil prices have been a significant constraint on the amount of funding available to GCC governments to finance capital and infrastructure projects, forcing them to look at alternate solutions.

    Asian and European export credit agencies are increasingly providing funding or finance guarantees to help their contractors secure projects. An example of this was the USD 2.9 Billion LNG import and regasification terminal in Kuwait awarded to a consortium led by South Korea's Hyundai Engineering and Construction.

    The project finance market in the GCC region conceals several challenges. These challenges include the drop in oil prices, the tightening fiscal positions across the region causing delays to protect, rationalization or even cancellations of projects.

    It is against this backdrop, increasing capital requirements stemming from Basel III implementation are affecting regional banks' ability to support projects with longer tenors. Also, liquidity pressures linked to lower oil prices persist in some markets while in others they arise intermittently. "Banks in the GCC region traditionally operate with high levels of capital, but we expect Basel III to make a significantly less amount of capital available for project finance," says Micheal Wilkins, managing director of infrastructure ratings at S&P Global.

    Filling the funding gap

    In order to bridge the gap in the funding, there has been an evident trend emerging throughout the region. The first trend is the increasing presence of large international banks, specifically from Asia. This increase is having a significant positive effect on the market. These international banks have many years of experience engaging in global project finance deals and come with large balance sheets, and they are adding an extra dimension to the regional funding landscape. 

    The contribution of non-regional lenders has been elevated to new heights due to various 'push' and 'pull' factors. Negative interest rates in Japan, for example, have contributed to a large-scale push by the country's banks to seek better returns overseas. Three Japanese banks topped a Thomson Reuters global league table for bookrunners on principal underwriters for project financing by value in 2016.

    The bank that came out on top was Mitsubishi UFJ Financial Group (MUFG), such a bank has had a stable presence in the region for over the past few decades. The bank provides that project finance is an asset class that the bank has extensive knowledge in, this knowledge is inclusive of all risks associated with project finance. In the GCC mainly, the expertise of this bank has seen it lead on some of the regions' most significant project and infrastructure deals of recent years. An example of this is the financing of Abu Dhabi's largest solar plant, a 1.17-gigawatt facility located in Sweihan, which included $650m raised from local and international banks, MUFG was the lead arranger for the loan.

    Another trend is the innovative new financing methods, which include a growing role for regional capital markets by opening up new funding options for project finance participants.

    Regional project finance market

    There have been many delays and re-tender of projects in the GCC region in recent times, and this has meant that some bigger project finance markets have offered less stability than they did in the past. 

    The proposal is that local bank funding across the region will become more expensive. This proposal reflects slow growth in deposits in some markets as well as higher capital requirements, which will force many institutions to be more selective when it comes to their balance sheet allocations. As a result of this, space is opening up for capital market financing for project and infrastructure finance.

    Mr. Jennings from S&P Global stated that "we are seeing more avenues open up for other investors coming into the market who are comfortable taking on longer terms asset risk. Indeed, there is much interest, particularly in the GCC, for debt capital market and institutional investors and we have seen different pockets of liquidity open up in that regard.

    Market bonds' bounce

    There are much-needed work and procedures to be implemented before alternative financing mechanisms reach a meaningful scale. Across the GCC region, local currency debt markets are mostly undeveloped. Also, research shows that bank loans accounted for about 90% of total corporate and infrastructure financing over the first eight months of 2016, up from about 74% in 2013.

    In order to address some of the challenges, regional banks are turning to samurai or kangaroo bonds to raise debt at a lower rate and to diversify their liabilities. These funds were lent back to corporates involved in project finance deals.

    Although the immediate financing gap may be severe, the new trends cumulatively bode well for the region's project finance aspirations. GCC markets are currently adapting to the environment in which they find themselves. If over time, a more extensive range of banking institutions, coupled with a more diverse array of funding sources, begins to address the project finance gap, the outcome can only be positive for all concerned.

    Mr. Jennings went on further to state that, "a project finance market of the size and scale of the Middle East does not work with just one or two big lenders. You need a good number of primary banks and also secondary interested parties, including debt and institutional investors."

    The Basel III Accord

    The Basel iii Accord was formed to strengthen the regulation, supervision, and risk of the banking sector. The Basel Committee is the regulatory body responsible for the Basel iii Accord and is the primal global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters.

    GCC Banks position for Basel III

    The Basel III aims to absorb financial shocks, enhance risk management and improve banks' transparency. The banks in the GCC region already mostly conform to the Basel II. The new framework requires increased and better-quality capital, liquidity standards, a new leverage ratio, and capital buffers to be absorbed in tumultuous periods. Other drives include:

  • A greater focus on stress testing;
  • The analysis of risks related to capital market activities; and
  • More rigid requirements for systemically important banks.
  • For regional banks, the higher capital requirements provided for by the Basel III Accord will leave many regional lenders with less room to support project finance deals.

    Chiradeep Ghosh from Bahrain's Security and Investment Company stated, "in terms of Basel III implementation, Saudi Arabia is doing quite well. We estimate that the average core Tier 1 capital ratio for Saudi banks in 17.5%. So Saudi lenders are well placed to continue engaging with finance deals. Global standards well capitalize Even UAE banks; we estimate that their average core Tier 1 capital ratio is about 14%."

    Reasons why projects fail

    Generally, construction projects fail due to lack of proper planning. However, there are other reasons for such failure, the dividing of which can be into causes related to owners and causes related to contractors.

    Causes related to owners:

  • Scope issues;
  • Communication issues;
  • Determining load lead items;
  • An inexperienced or under-qualified project team;
  • Poor estimates;
  • The relationship between project budgets and plan;
  • Incomplete designs;
  • Lack of risk management;
  • Unrealistic schedules.
  • Causes related to contractors:

  • Scope creep and gold plating;
  • Poor estimates;
  • Turnover;
  • Resource shortages and an inexperienced or unqualified project team;
  • Unfavorable contracts;
  • Lack of support from senior management;
  • Design issues;
  • Coordination issues;
  • An overly aggressive schedule; and
  • Lack of risk management to address unplanned conditions.
  • ]]>
    Tue, 02 Oct 2018 12:59:00 GMT
    <![CDATA[ISIC Regulations KSA]]> Implementation of ISIC Regulations in Saudi Arabia

     

    Saudi Arabia. A Time of Change

    Saudi Arabia is going through a lengthy and extremely wide-reaching change in its regulations and general overall economic standing. These plans often referred to as the National Transformation Plan and Vision, is set to reach fruition by the year 2030. Up until relatively recently, the Kingdom has been in a position where it could rely mainly on its vast oil reserves, and regular influx of tourists of the Muslim faith and also the yearly pilgrimage. The oil present beneath the nation's sand is said to account for 20% of the global total, which is the second largest reserve in the world at this moment. However, while being the second largest regarding sheer quantity, the county is the largest producer and exporter in the world.

    With this considered, the Kingdom has not had too much of a reason to diversify, though it has done so in a limited manner. However, for as little as we know of the world around us concerning its resources, we do realise that everything within it is finite. In time, all oil will be used up, and with our current use which ranges in the tens of millions of barrels per year, an end is inevitable. We do not know the exact timeline, though theories are predicting a total depletion within the upcoming decades. When the oil runs out is not precisely known, and estimates do not look great.

    When the oil reserves can no longer sustain them, Saudi will have to have other areas of their economy they can depend on, though this will only work in the case that there is already something set up. That is what the country is looking to work towards now with the diversification of their economy.

    The country has numerous advantages already present that should be able to help them achieve the goals. Being the largest economy in the region, it has the potential to attract large amounts of FDI. It is also geographically in an ideal location, positioned between the east and west. It generally has a high level and quality of infrastructure and the highest population within the GCC.

    There are many significant changes already occurring such as the ability for women to now obtain licenses and drive, and the allowance for cinemas following a 35-year ban.

    As part of these grander 2030 goals, the Saudi Arabia General Investment Authority (SAGIA) will play a significant role. Foreign investment and further opening up business opportunities within the country may play a key role in achieving this target.

    The Implementation of ISIC

    For the economy to come on par with the biggest around the world (in diverse industries), it is critical to modernize the systems in place to allow for ease of setting up businesses and also, to provide higher levels of control and regulation.

    The International Standard Industrial Classification (ISIC) has been implemented recently in its fourth iteration, with the goal of achieving just this. The regulation was formed initially by the United Nations during the late 1940's with its first adoptions being in 1948, and in the time since its initial inception, it has been through multiple revisions and is currently on the ISIC revision 4; this is the state in which Saudi Arabia will be implementing the regulation into their system.

    The revision four was initially completed and achieved its form in 2008 with all of the guidelines and regulation specified, though it didn't receive implementation in Saudi until January 1 of 2018. However, with this regulations wide-reaching nature and lengthy history, this will have no real overall adverse effect.

    The regulation itself has received work over the past few years from the top experts within the United Nations themselves and around the world, and they use of it is already quite broad around the globe; this will cement Saudi Arabia's place alongside world leaders when it comes to attracting FDI. The reason for this fourth revision was because the UN wanted to add in a few new classifications as they felt there were enough that had been missed out on or required new definitions. It also allowed them to tighten up what was already present.

    This new implementation will ensure a more transparent business environment which is attractive to all parties within and outside of the Kingdom. It will ensure that the governing bodies and regulatory entities are aware of all of the activities performed by a company and also, the potential groups that wish to set up within the country will have confidence in the system. The competition will be far more fair and predictable.

    Further to this, the fact that all businesses will have to go through this same process of licensing and regulation means that the nation will be able to collect data from all around the country and will have a record on all international entities within. This fact will allow for information gathering to become far more natural and figures can then be collected and made public. This more significant level of transparency of the system will also likely lead to a higher degree of trust and confidence from potential foreign investors.

    On the international front, the amendments and changes have also looked to ensure the highest standards of global cohesion. Countries that haven't adopted ISIC as it stands now or in any of its previous formats should not prove to hinder those who have or vice versa. The highest level of integration on all fronts is of the most significant importance of the ISIC.

    What are the goals in relation to ISIC revision 4?

    Of course, the most obvious goal of Saudi Arabia in introducing ISIC 4 is to boost the level of FDI that are coming into the country. However, beyond this, specific further benefits would arise. Some of the key aims are as follows:

  • Bringing SAGIA on the international stage, thus opening up the country to the world on a scale like never before
  • Allowing for more significant levels of and easier monitoring of business activities and growth, this will also provide a good idea of how overall markets are performing
  • Offering a more significant number (and types) of business licenses to choose from as well as making them easier to identify
  • Providing a system that is well developed and implementable between the countries official regulatory and governmental bodies
  • The aim is that these results will follow after the ISIC 4 comes into action for all foreign investors that are obtaining licenses. There are already many foreign entities that are already present and active within the country. A large number of these organizations have performed business in Saudi Arabia for many years, and the sudden change may come as quite jarring. Also, with ISIC being more a system for new companies entering the market for the first time, has led the Kingdom to impose this only upon new companies rather than those already in place.

    There is also a document available which contains all the possible license types and classifications of activities that are now available under the ISIC revision. The list is highly extensive with 21 different basic types of economic activities and hundreds of sub-categories further categories from which to choose. There is a subcategory for every business out there, and so the monitoring ability of the government and regulatory entities can be, not only highly accurate but also very specific. For example, there are four different licenses available for businesses that deal with water boiler and steam generators, and nine different licenses for the processing and painting of metals.

    The Future of International Investment in Saudi Arabia

    The adoption of this regulation is a significant step forward for the Kingdom and will propel them into the international arena on par with other major nations.

    The hope is that this will help them to end their oil dependency before it is too late. Having an established system in place as soon as possible that is designed explicitly around international entities and investors will provide them with comfortability and confidence which may have been lacking previously. At the least, it will allow them to have a licensing system on par with the rest of the developed world.

    Finally, the ability of the regulatory and government entities to closely monitor the economy and various markets within it will be a welcome addition. The depth of ISIC revision four will allow for the more in-depth analysis which will have the twofold effect of allowing for close monitoring and also allowing for the facts and figures to become more widely known, which could potentially help foreign entities to choose to come to Saudi Arabia.

    ]]>
    Tue, 02 Oct 2018 12:08:00 GMT
    <![CDATA[Criminal Accountability]]> Criminal Accountability – Intention VS. Negligence in Criminal Law

    Introduction

    "Mens Rea" or criminal intent refers to an individual's state of mind at the time he committed a crime. People who have criminal intent are fully aware of the act or omission they are about to commit and they are aware of the consequences their actions may have. Should a person think up a plan of action to kill his neighbor, and then fatally stabs his neighbor, that person is operating with criminal intent because he knows and understands that murder is wrong, yet he plans the act and ultimately commits the murder regardless.

    In crimes of intention, the accused in blameworthy because he knew or foresaw that his act or omission was forbidden and that it was unlawful, but he nevertheless proceeded to engage in that conduct. On the other hand, in crimes of negligence, the accused is reprehensible because he did not foresee or know something or did not do something, although according to the standards of the law and the reasonable person he should have known or foreseen something or should have performed an act.

    Therefore, the characteristic of intention is positive – namely that the accused will or knew or foresaw something. While the characteristic of negligence is negative, the accused did not will or know or foresee something even though it is reasonable to believe that the accused should have.

    Types of criminal accountability:

    Where a person has intent, there is no challenging the fact that someone deliberately set out to cause harm to someone else or to engage in some illegal activity. The foundation of Criminal intent is in a deliberate act towards another person, with the intent to cause harm to that person or to purposefully take someone's property, with the intention to deny them of it or to convert it to one's use.

    In the case of 478/2016 in the UAE Federal Supreme Court, the court had to determine whether an individual should be considered to have escaped from custody. The critical factor in the courts' determination was the accused's intent to escape and not their distance from the place of incarceration. The court stated that the foundation of the judgments should be on clear grounds based on precedent, the merits of the case, the circumstances and the evidence.

    The moral element for the crime of desertion, which is the criminal intent, is deemed as being fulfilled in the crime as the offender had the intention to escape from the officer assigned to guard him. This fulfillment does not require them to be at a distance from the place of arrest, detention, or imprisonment, as long as the offender's behavior has proved they tried to escape.

    A different type of men's rea is recklessness, and here the perpetrator is aware of the consequences that could result from the commission or omission of an act but does not care. An example of this could be where a woman is upset that her husband is cheating on her, she decides to plant a bomb in his car. The woman is fully aware that her husband may be driving his mistress around in the car, and that the bomb may kill both the husband and the mistress when it goes off. The woman is aware that this is the most likely situation but does not care that the mistress may die too.

    The bomb ultimately does explode and kills the husband and the mistress. The woman will be charged with the intent of killing the husband, and she will more than likely be charged with the knowledge that her actions would also kill the mistress.

    Another form of reckless conduct is a defendant's simultaneous understanding and disregards of a substantial risk of harm. A defendant who has had previous DUI convictions and understanding that driving drunk can harm or kill people, but regardless, getting behind the wheel while intoxicated and causing a fatal accident is reckless conduct.

    Negligence is the mildest form of criminality, it applied when someone is unsuccessful in living up to his duties, and someone else was injured as a result. For example, if a child gets hurt on a babysitter's watch, then the babysitter can be charged with negligence. Another few examples of criminal negligence are as follows:

  • Leaving children and animals in an unattended vehicle in hot weather;
  • Leaving a loaded firearm close to young children;
  • Have illegal or toxic substances where young children will be able to access them;
  • Serving alcohol to a heavily intoxicated person without regard being had to the threat that they may pose to themselves or others;
  • Prescribing medications that, when taken together are known to be toxic.
  • In a United States case, People v. Valdez, 27 Cal. 4th 778 (2002) a mother was convicted of felony child endangerment, a crime in California that can be committed through criminal negligence.

    In this case, a woman has an eight-month-old baby named Sarah. Mark, the woman's partner moves in with the woman's family. One day Mark offers to look after Sarah while the woman goes to work. When she returns from work, the baby is screaming and is severely burned. Mark states that he tried to bath her, but the water was too hot.

    A few months further into their cohabitation, when Mark tried to pull the baby from the woman's arms, the child's' arm is broken. Following this, Sarah receives a black eye while in Mark's care, and a few additional instances took place. The woman confides in a third party that she is afraid of Mark and that she is considering leaving him, and the third party advises her not to leave the baby in his care.

    The baby eventually dies from severe beating and injuries suffered while in Mark's care. Medical examinations show that the child has pre-existing injuries from other incidents of abuse. The Court charged Mark with the death of the child. The court additionally charged the woman with felony child endangerment.

    The court held that although the woman never directly injured the baby, it can be reasonably determined that the woman satisfies the criminal negligence standard. A reasonable person in the woman's situation would have acted in a manner contrary to that in which she acted.

    The court described that criminal negligence occurs where a reasonable person in the accused's position would have had the knowledge of the relevant risk and that a jury could have considered the risk to the child to be noticeable. 

    Malice aforethought/premeditation is another type of mens rea, it is a specialized form of criminal intent, and it applies only to murder. The definition of malice aforethought is that it is someone's premeditated "intention to kill." A crime committed with malice aforethought/premeditation is considered the most severe crime that anyone can commit.

    Specific intent is, therefore, the most severe criminal intent that can apply to any crime other than murder, specific intent generally means that the accused acted with a significant level of understanding of the consequences that could be caused by his actions. The grouping of crimes committed with specific intent can usually be into one of the following categories:

  • The defendant had the intention to create a negative result;
  • The defendant intends to do something even more severe than conducting the criminal act;
  • The defendant acts in an illegal manner knowingly.
  • The Status Quo of United Arab Emirates

    The Federal Law Number 3 of 1987 UAE Penal Code (Penal Code) provides for the regulation of the moral element of the criminal law. Article 38 of the Regulation states that the moral element of a crime consists of intent or mistake. The intent is present when the direction of the will of the perpetrator is towards the perpetration of the act or forbearance thereof. Whenever this perpetration or forbearance is considered by law to be a crime, with the intent to produce a direct result or any other result, the penalization of such action will be by law and which the perpetrator expected.

    There is a mistake whenever there is an achievement of the criminal result because of a mistake of the doer. Whether the mistake was due to negligence, carelessness, non-precaution, recklessness, imprudence or non-observance of the law, regulations or orders.

    In the case of UAE 730/2005, the Federal Supreme Court held that the crime of embezzlement by a public servant requires a moral element or the intention to waste money. Evidence of this is required, there cannot only be that there is a deficit in the accounts. The embezzled amount is significant, and the embezzlement cannot be without the knowledge and participation of the Defendant. Moreover, the defendant had the relevant intention to constitute the crime of embezzlement.

    Article 39 goes further to provide that if an act is committed under the influence of mistake of fact, the determination of the liability of the perpetrator shall be on the basis of the facts he misconceived. If the presence of these facts denies or extenuate his liability, provided that the basis of his belief be on reasonable grounds and the basis of research and investigation, they will also be a determining factor.

    In the case of the mistake that made the perpetrator believe that he is not responsible is due to negligence or non-precaution, such perpetrator shall be answerable for a non-premeditated crime should to law penalize the act as being such.

    Article 43 provides that the perpetrator will be answerable for a crime whether the crime was committed deliberately or by mistake unless the law expressly provides for premeditation.

    In UAE 274/2016 the Federal Supreme Court had to assess the importance of the accused being aware that the substances they possessed were narcotics. The trial court, in this case, has to right to conclude elements of a crime attributed to the accused from all the elements presented to it including the element of possession or acquisition which shall be deemed fulfilled if the offender has direct or indirect relation to the drug as long as it is under his control.

    The decision here that criminal intent shall be deemed to exist if the offender is aware that the substance possessed or acquired is a narcotic substance. The inference to prove the occurrence of a crime and the accused's relation to that crime is deemed to be the right of the court as it may adopt, in proving the crime, any evidence or presumption that convinces evidence supports the court.

    The contested judgment was deemed valid as it had insightfully looked into the merits and evidence of the case and had concluded that it was proven that the Appellant had imported and possessed narcotics.  He had expressly confessed that he brought them from Pakistan to the UAE and he has been accommodated by the second accused at his place of residence, holding a bag while aware of the substances contained within it.

    ]]>
    Tue, 02 Oct 2018 11:44:00 GMT
    <![CDATA[ADGM Regulations Corporate]]> ADGM Regulations of Corporate Beneficial Ownership and Control

    People do not have to look any harder than turning on a news channel to see that corruption and crime are always in the news as central points for most news stories. However, what is less known by the public reading the stories but is the focal point to investigators is that the most monotonous details of a case are often the ones that matter the most. One such mundane detail is the role of beneficial ownership and its ability to aid in the commission of corruption and crime. Thus the proper regulation of such beneficial ownership is essential. 

    The Abu Dhabi Global Market (ADGM) is a financial free zone in the capital, it has its own civil and commercial laws and offers market participants a legal system and regulatory regime. The establishment of ADGM was under Abu Dhabi Law Number 4 of 2013. Amongst the many regulatory frameworks provided for by ADGM, the beneficial ownership and control regulations of 2018 are of particular importance for this article. The regulation purports to make provision for beneficial ownership and control systems for legal entities registered in the Abu Dhabi Global Market.

    A beneficial owner is an entity or person that reaps the benefits of the possession and ownership (such as receipt of income) of a piece of property even though the title is under another entity's name (called a 'nominee' or 'registered owner'). There is a desire for regulation of such ownership as many criminals will use the opacity of corporate vehicles to hide their identity, to conceal the actual purpose of the account.

    The Regulation defines an ADGM Person as:

  • "a company incorporated under the Companies Regulations;
  • An L.L.P incorporated under the L.L.P Regulations;
  • A foundation formed under the Foundations Regulations; or
  • A trustee of a trust governed by the law of Abu Dhabi Global Market."
  • The Regulation provides the definitions for a beneficial owner in respect of a Company, LLP or partnership. In relation to an LLP or company, a beneficial owner will be a person who owns or controls (in each case whether directly or indirectly), included through bearer share holdings more than 25% of the shares of voting rights in the company or LLP. Also, it can be any person who controls the company or LLP; or any person who exercises control over the management of the company or LLP.

    Regarding a partnership, a beneficial owner will be any person who ultimately is entitled to or controls more than 25% share of the capital or profits of the partnership or more than 25% of the voting rights in the partnership.

    The meaning of a beneficial owner in the case of trusts as provided by the Regulation is that "an ADGM Person who is a trustee, means each of the following but only in respect of the trust governed by the law of the Abu Dhabi Global Market for which the ADGM Person is a trustee:

  • The settlor of the trust;
  • Any other trustee aside from the ADGM Person;
  • Each beneficiary of the trust;
  • Where there is no determination of the persons (or some of the persons) benefitting from the trust, the class of persons in whose primary interest, in the opinion of the Registrar, the trust have been established or operates; and
  • Any additional person who has control over the trust.
  • Information duties of ADGM persons

    The Regulations under Article 1 regulate the information duties that are upon ADGM persons concerning their beneficial owners. The ADGM Person must know the real, accurate and complete identity of the beneficial owner. This information is required by Article 2 to be kept in the record of beneficial owners. The required information to be kept in the record is as follows:

  • In respect of a natural person:
  • Country of residence;
  • Full name, including any former names;
  • Nationality;
  • Date of birth;
  • The date on which a person becomes a beneficial owner;
  • Occupation; and
  • The grounds on which that person is considered to be a beneficial owner; and
  • In respect of an ADGM Person who is not a natural person:
  • Registered address;
  • Registered name;
  • Registration number (or equivalent);
  • Country of registration; and
  • The date that that person became a beneficial owner.
  • If the required person has reason to believe that there has been a change to the relevant information, the ADGM Person must request in writing details of the relevant change from each person whose required particulars are recorded in its record of beneficial owners. A relevant change concerning a person occurs if:

  • "the person is no longer a beneficial owner concerning an ADGM Person; or
  • Any other change occurs, as a result of which the required particulars states for the person on the record or beneficial owners are incorrect or incomplete."
  • An ADGM Person must take all reasonable procedures to make sure the security and confidentiality of data disclosed to him under the Regulations, and must not disclose such information other than in compliance with a duty imposed, or in exercise of a power conferred, under the Regulations or any additional regulation applicable in the Abu Dhabi Global Market.

    Register of beneficial owners of legal persons:

    As per the Regulation, there must be a Register kept that holds all the relevant information about the beneficial owners. It goes further to state that such information must be kept by the Registrar and may be in electronic form.

    This data will be kept confidential and secure in the Register, and the Registrar is under an obligation not to reveal to any additional persons the Register or any portion of it, or documents or knowledge obtained by him or disclosed to him, other than disclosures permitted as per the Regulation. The Registrar may disclose information when such disclosure will be in pursuance of section 967 of the Companies Regulations.

    The Registrar may reject applications where there has not been compliance with the provisions of the Regulations or any other enactment. He may also reject any submission on such terms and conditions as he thinks fit if it appears to him that there is non-compliance with provisions of these Regulations or any other enactment in respect of that submission or other matter.

    Offenses, fines, and enforcement:

    The Regulation provides the offenses, fine and their enforcement for contravening provisions of the Regulation.

    False or misleading information – a contravention here will be where persons intentionally or negligently provide the registrar with a document or information or make any such statement to the registrar that is deceptive, misleading or incorrect in a material manner. Such a person will be liable to a prescribed fine.

    Fines – the board of the ADGM may make any rules concerning the procedures relating to the imposition and recovery of fines. However, the Registrar can send a written notice (a "monetary penalty notice") to the person and impose a monetary fine for a contravention. A monetary penalty notice is a written notice requiring the person to pay the Registrar a find of an amount determined by the Registrar as the Registrar may consider appropriate. The fine may not exceed a level 7 fine (as provided for under the Commercial Licensing Regulations 2015 (Fines) Rules 2015), or such other amount as the Registration Authority may prescribe from time to time.

    Fees payable to the Registrar:

    The Board as per the Regulation can require payment to the Registrar of any fees in connection with the Registrar's administration of the Regulation. The amount of the fees will be determined depending on the different levels of fees for each ADGM Person. When submitting information or documentation to the Registrar, he/she has been provided with the power to reject such submittal until the making of the payment.

    In wider UAE

    In cases of ownership of a company, the beneficiary is the actual owner of the company, which receives income and other benefits due to his ownership in the company. An individual may be deemed beneficiary if he is directly or indirectly engaged in the company's business in the UAE and is, in fact, the owner of the company. In practice, the beneficiary enjoys the status of the owner of the company, whereas formally ownership may belong to other persons.

    Ways in which a beneficial owner can be detrimental to others:

    When persons get divorced, one spouse may wish to conceal his/her ownership of community property by titling: bank accounts, property, vehicles, in the name of an intermediary (i.e., a nominee). The divorcing spouse discretely and without being known controls these assets while the nominee seems to own them. This person acts as a protective layer which hides the divorcing spouse's beneficial ownership of the assets.

    A beneficial owner of a shell company can engage in the crime of money laundering and due to the anonymity of a shell company such owner will not be required to disclose the fact that they own the company. In many countries, the legislature requires the name of an agent, the number of shares that make up the company or an address. Therefore, by just omitting the name of the real owner, companies can be formed with no record of who indeed controls and benefits from that company. 

    In the case of 159/2009 on 29/03/2010, the court had to determine whether a legal owner or beneficial owner of a business would be liable for a claim filed against the company. The claimant had requested the issuance of a court order having them jointly pay the claimant the amount of AED 234,631.31. The first respondent was the person to whom the business license belonged, the second respondent controlled to business in his capacity as the authorized signatory of the business.

    The Court of First Instance rejected to claim against the first respondent and order the second respondent to pay the amount claimed to the claimant. This judgment was appealed, and the court of appeal annulled the court of first instance's decision concerning its decision to reject the claim against the first respondent and decided that they two respondents shall jointly and severally pay an amount to the claimant. In an appeal in cassation, the court decided to uphold the judgment of the appeal court.

    ]]>
    Tue, 02 Oct 2018 11:39:00 GMT
    <![CDATA[The Curious Case of Accomplice]]> The Curious Case of Accomplice

    "A good friend will help you move, but a true friend will help you move a body."

                                                                                                                ~Steven J. Daniels

    The Jigsaw of Accomplice Liability

    Towards the end of 2017, the UAE public was made aware that there had been a massive syndicate organizing trading scams in the region which were reported to have removed nearly one billion dirhams from the market. Three main perpetrators organized the syndicate, which supposedly spanned over numerous year. However, the business implicated many people who had helped in the commission of the various offenses. In one of the crimes, these main perpetrators had flown in 35 people whom they sent into the market as purchase officers. These people brought products of every type and description against post-paid cheques which eventually bounced. The goods were then sold at unreasonably low prices to third parties for cash. The people are then flown out of the country before their perpetration comes to light.

    In the view of this article, the question we are going to look at is what the criminal accountability of the people is who merely aided in the commission of the crime but were not the masterminds behind it. These people known as criminal accomplices can play many different roles; these roles also vary in criminal accountability as well as criminal intent. Those involved in the commission of a crime can divide into the following categories. The actual perpetrator of a crime; a party who helps the real perpetrator in the committing of a crime and who is there at the time and place that the offense is committed. Also, a party who assists or encourages the actual perpetrator to commit a crime, but who is not present at the time and place that the offense is engaged, and a party who has the knowledge that a crime has been committed and who, nevertheless, helps the offender to escape detection, capture or punishment.

    The Dilemma under UAE Law

    An accomplice is a person who qualifies to have the required mens rea and assists or aids the principal in committing the crime. Nevertheless, he/she is the one who accosts the offense by commanding the principal to perpetuate the crime; provides an incentive for committing the felony; encourages or instigates the principal to execute the offense; aids in arranging the instruments for the commencement of the crime; watch the happening of an event where he/she has the legal duty to make an effort or prevent such crime.

    Federal Law Number 3 of 1987 concerning the promulgation of UAE Penal Code hereinafter referred to as the Law or the Penal Code, specifically provides the regulation of criminal conspiracy under chapter three. Article 44 of the Penal Code provides that where a person performs a crime or acts as a direct accomplice such person will be considered to be the perpetrator of the crime. In the determination of whether an accomplice is a direct one, this Article provides the following clarifications:

    A person will be a direct accomplice if:

  • He perpetrates the crime with another person;
  • He participates in the perpetration when such perpetration consists of several acts, and he deliberately commits one of its constituent acts; or
  • He sub-serves another person by any means to execute the criminal action, and the latter is not criminally responsible for this act for any reason whatsoever.
  • The law goes further to provide the requirements for a person to be considered an accomplice by causation in Article 45 of the Penal Code. This Article provides that a person will be an accomplice by causation should a crime that they instigated, be perpetrated as a result of their instigation. If he conspires with others to commit a crime that occurred as a result of this conspiracy, or if he gives the doer a weapon, tool or anything else used in the perpetration of the crime of which he knows. Finally, if he wilfully assists the perpetrator, by any other means, in the preparatory acts or those facilitating or completing the perpetration of the crime.

    Holding such an accomplice liable in equal proportions whether he was in direct contact with the perpetrator or through an intermediary shall occur.

    The law differentiates between persons found at the scene of the crime and whether the person accused was there with the necessary intention. In accordance with Article 46 of the Penal Code, an accomplice by causation who, located at the scene of the crime and who has the required plan to commit such offense is a direct accomplice for the trial in case any other person does not determine the assault besides him.

    The law does not provide for a difference in penalty between a director causative accomplice, and it states that where a person perpetrates a crime in either role, he/she will be sanctioned per the sanction as provided for by the law. However, not all accomplices will receive a penalty as per the law; Article 48 provides for an exception to this provision. This Article provides that where there shall be no penalty in the cases that there are causes of legitimacy or if there is a lack of criminal intention an accomplice will not receive to the same sentence as the other perpetrators. It goes further to state that where such accomplice lacks such plan or where there are causes of legitimacy, this does not have any bearing on the accountability of any other perpetrators of the crime at hand.

    In My Defence

    Chapter 4 of the Penal Code provides for the causes of legitimacy, those relevant here can be the right of legitimacy in the performance of duty and lawful self-defense. The law states that there is no crime in the case that the action occurs as per a commitment by the Shari'a or the law should the person acting be legally authorized to do it.

    It goes further to states that there is no crime if the act is committed by a public employee or a person entrusted with public service in the following circumstances:

  • If the action is perpetrated in the execution of an order where such order has been issued to the perpetrator by a superior legally authorized to issue such order and who the perpetrator had to obey;
  • Should the performance of the activities occur in good faith and the execution of a lawful order.
  • Concerning the right of self-defense, there is no crime where the act performed is in the exercise of self-defense, under the following circumstances:

  • If the defender faces an immediate danger from an offense on his person, his property, or the person or property of another or if he believed in the existence of such threat and his fear of such danger is based on reasonable grounds;
  • The defender cannot resort to public authorities to avoid the adverse outcome in due course;
  • The defender has no other means to repel the threat; and
  • The defense is necessary to resist the threat.
  • In the commission of a crime, the acts of any of the perpetrators can encompass all of the persons committing such crime, whether they are the direct, or causative accomplices. Where the material circumstances which are inherent to a crime or are constituent of one of its acts, and such circumstances will aggravate or mitigate the penalty. The effects of such aggravation or extenuation of punishment will apply to anyone directly or causatively participating in the perpetration of the crime regardless of whether such a perpetrator had the knowledge or the aggravating or extenuating circumstances; this is in pursuance of Article 49 of the Law. However, where the aggravating or mitigating circumstances are personal circumstances of only one of the accused, such events will not apply to any of the other persons unless the other person knew such. This concept applies also concerning sentencing, and any personal excuses exempting from, or mitigating the sentence of any one of the accomplices, whether direct or by causation, will affect only that accomplice. 

    Where a person had the intention to commit a particular crime but ultimately become an accomplice either directly or by causation, in the commission of another crime, such person will receive sanction by the penalty appertaining to the crime committed as long as the committed crime is a probable consequence of the occurring complicity.

    The International Law of Accomplice Liability for Human Rights Crimes

    Consideration as to the role and accountability of an accomplice on an international scale is required. William Schabas, utilizing authorities from the Nuremberg Trials to the present-day statute of the International Criminal Court, provides the following elements for the successful establishment of the guilt of an accomplice:

  • In the case a war crime or crime against humanity has been committed;
  • The individual charged as an accomplice contributed in "a material way to the crime"; and
  • The individual accused as an accomplice intended that the crime is committed or have been reckless as to its commission.
  • Schabas draw an example in terms of the Mauthausen Concentration Camp, here it was held that every official (government, military and civil) including every employee of the camp (whether S.S. member, guard or civilian) was criminally accountable as an accomplice to the murder of inmates at the concentration camp through the use of gas chambers. When the question of the liability of the individuals, the reason given was the impossibility that any of the individuals abovementioned could not have "acquired a definite knowledge" about activities at the camp.

     

    ]]>
    Mon, 01 Oct 2018 16:59:00 GMT
    <![CDATA[The Importance of Hiring Property Lawyers for Commercial Development in Dubai]]> Dubai, as well as other cities within the United Arab Emirates, continues to experience a top growth rate. This is partially due to the increase in businesses from around the world moving into the free zone areas in Dubai and the other emirates. According to a 2018 report by IMD World Competitiveness Centre and the Dubai DED (Department of Economic Development), the emirate is the fastest growing region in the Arab world. It is first in the world for employment growth as well as gross domestic savings as a percentage of Gross Domestic Product or GDP.

    With this increased growth in the free zones as well as within the cities in the UAE, there is an ongoing need for commercial and residential construction. These types of developments are complex, usually involving multiple parties as investors, owners, and developers.

    Choosing an international law firm with the ability to provide specialized property lawyers familiar with UAE property purchases and development law is essential. These lawyers and their law firms can work with international investors and buyers as well as with national and local developers, investors, contractors, and subcontractors to manage the development process from purchase through to project completion.

    Why Legal Assistance is Essential

    Foreign buyers and investors in commercial property in Dubai or the rest of the UAE need to work with experienced law firms within the area. Buying property in the UAE can be more complicated and complex than buying property in other areas of the world, and having an experienced lawyer to represent your interests in both the negotiation as well as the development process is essential to avoid making common mistakes and potentially creating legal liability issues.

    There are several important aspects of commercial property purchases that buyers should know in advance. For foreign investors, understanding the specific areas in the city or the emirate they can own property is an important first step. A lawyer can pre-select these areas, narrowing down the search and streamlining the process for a foreign buyer.

    Documentation is critical for both the buying and rental of commercial property in free zones as well as for mainland properties. A lawyer familiar with the required documentation, including the business license and structure type, can be very helpful in completing an analysis of the benefits of buying or renting in the desired location.

    Location is Important

    For a business owner with a need to purchase property for development for the business, or for an investor interested in developing a commercial property for sale or lease, being in the right location is an important aspect to consider.

    Property lawyers familiar with the trends in the industry throughout the free zones as well as in the mainland business areas are a benefit for a foreign buyer or investor. The lawyer knows the free zones and mainland areas that are booming and those seeing a slower growth rate. Depending on the short and long-term goals for the commercial property, property lawyers can guide the buyer to the best locations.

    For example, the faster growth areas, include the free zones such the Dubai Investments Park and JAFZA (Jebel Ali Free Zone) are considered two of the areas with sustained growth that continues to trend upward. While these are areas of rapid growth, they are also areas where commercial property is priced hired due to the demand. Balancing the ideal location with the budget for the purchase can be difficult from a distance, but a property lawyer can represent your interests in narrowing down the property selection.

    Understanding the Development Opportunities

    Through the services of property lawyers in Dubai with experience in commercial property development, additional factors will also be considered when representing foreign or national clients. This includes understanding the area, including the types of businesses currently surrounding the property and the anticipated changes in the area.

    While return on investment or ROI is always an important consideration, zoning, development limitations, and other factors are typically just as critical to consider, and require extensive research and analysis.

    Working closely with developers of commercial properties also provides clients with insight into the cost of the rest of the project. After all, the purchase of the property is just the first step. There is also the need to find the best developer, to potentially attract investors to the property and then to coordinate the development process.

    The best commercial property law firms can provide the legal support and assistance their clients require. This includes the all-important role of vetting and researching the developers, contractors, and subcontractors as well as negotiating agreements and developing contracts for the project.

    Even relatively basic commercial property development, such as warehouses or shell facilities where the leaseholder has the responsibility to develop the interior of the structure need to be coordinated and carefully managed.

    Proactive Legal Services

    Throughout the development part of any commercial or residential type of construction, the property lawyer and construction and real estate law team are essential in preventing issues before they arise.

    Having expertise and experience in this specialised area of law allows the lawyers to anticipate areas of concern. For example, if multiple suppliers are used, including international companies, contacts need to be used that are recognised by the legal system within Dubai as well as the foreign country. These contracts are universally accepted by courts around the world, but they have to be customised to meet the specific requirements of the particular project.

    When lawyers representing the buyer or investor are familiar with these international contracts, the best interests of their clients are always included in the terms of the agreement. Having these contracts in place and having the peace of mind they can be enforced in any country necessary is essential in projects where there are multiple parties involved and significant monetary amounts.

    Proactive legal services also include risk analysis for the job and ensuring all liability for the investors and developers is clearly outlined. This includes having the correct insurance in place to protect the client from lawsuits in the event of an accident or injury.

    Management of Conflicts

    It is not uncommon for large commercial projects to have conflicts arise between contractors and subcontractors, contractors and developers, and even the investor group and the developer.

    Representation by an experienced property, development and construction lawyer means that the investor has legal representation in Dubai to address these conflicts as they occur. In many cases, the lawyer can anticipate potential issues and address these potential issues of conflict very early in the discussions, eliminating the risk of issues suddenly derailing a project or resulting in delays.

    Often, conflicts can be easily resolved early in the disagreement through direct negotiations. With a Dubai-based law firm available to negotiate on behalf of a foreign investor, time, money and frustration for all parties can be avoided. Additionally, with a top reputation in the commercial development industry, these law firms are seen as trusted representatives with the ability to negotiate even complex, multi-party types of agreements to the satisfaction of all involved.

    The best law firms also work with the buyer or investor in the ongoing management of the developed property as well. They can create the ideal contacts and lease agreements, manage any legal issues involving the property and even assist the investor should he or she decide to sell. Contact STA Law Firm for more information.

    ]]>
    Mon, 24 Sep 2018 16:41:04 GMT
    <![CDATA[A Guide on Patent Laws in the GCC]]> A Guide on Patent Laws in the GCC

    "The Patent Office is the Mother-In-Law of Invention."

    Introduction

    Senior MIT lecturer Joe Hadzima defines a patent as follows, "A patent is an exclusive right issued by a country to an inventor, allowing him to exclude others from manufacturing, using or selling his/her invention in that country during the life of the patent."

    The exclusive right provided for by the patent allows the holder to recoup development costs and to obtain a return of investment in the development of the patented technology. Patent protection is capable of reducing company costs and increasing company value and as such can play an essential aspect in the increase of any company or business. Not only are patents valuable in that they provide freedom of movement for companies who are competing within a crowded field, but that can also generate revenue with the licensing of such patents to companies insides and outside of the patent holders field. Patents increase overall corporate value and add mainly to the company's intellectual assets. The World Intellectual Property Organisation provides the following reasons for patenting your inventions:

  • Exclusive rights – patents give the owner exclusive rights which allow you to use and exploit the licensed product for 20 years from the date of filing of the application;
  • Strong market position – due to the exclusive rights, the holder will be entitled to prevent others from commercially utilizing the patented invention – thus reducing the competition and establishing the holder in the market as the pre-eminent player;
  • Higher returns on investments – under the exclusive rights provided for by the patent, the holder could commercialize the invention which would enable him/her to obtain higher returns on investments;
  • The opportunity to license or sell the device – a patent holder, may choose not to exploit the patent but rather to sell the patent or license the rights to commercialize it to another enterprise which will constitute a source of income for the holder;
  • Increase in negotiating power – having an extensive patent portfolio will enhance the bargaining power of a patent holder who wishes to acquire the right to use the patents of another enterprise;
  • Positive look for your enterprise – interested parties may consider patent portfolios as proof of the high level of expertise, specialization and technological capacity within your company.
  • 1.      What is an invention?

    Bahrain

    A design shall be considered new and applicable for patent registration in the following circumstances as per Law Number 14 of 2006 in respect of Patents and Utility Models:

  • When such an invention is not in any previous industrial technology state;
  • When such invention of inventive step would not have been known/ evident to a person holding ordinary skills in the relevant practice;
  • A design shall be considered to be industrially applicable if it is possible to apply it in agriculture, fishing, services, handicrafts or any industry in the broadest sense of the word;
  • The patent application would not be successful if the Invention subject were discussed to the public in Bahrain or abroad orally or in writing or by use or by any additional method of utilizing contents of the invention before the date of applying to grant a patent or time or priority on request.
  • For the above, the following shall not be a Disclosure:
  • Disclosure of the invention to the public shall be inconsiderable if it took place at official international exhibitions or officially recognized displays, according to Article 34 of the law, subject to disclosure in the patent request of all details related to said disclosure.
  • Disclosure of an invention shall also be inconsiderable if it was disclosed by the applicant or by his permission or through him of which the declaration was conducted within the 12 months preceding submitting a patent application or date of priority upon request.
  • Oman

    In terms of Article 2 of the Royal Decree Number 82/2000 Promulgating the Patent Law an invention will be eligible for a patent if it is new, includes an innovating concept, and is industrially applicable, be it for new industrial products, used industrial methods and means or by a new application for known industrial ways and means, and is not in contravention of the public order and morals, conflicting the principles of the Islamic Sharia or affecting national security.

    United Arab Emirates

    As per Federal Law Number 7 of 2002 as amended by Law Number 32 of 2006 regarding Copyright and Related Rights, the following works are capable of being protected by a patent:

  • Books, booklets, articles and other  literature;
  • Computer software and applications, databases and similar products defined in a decision to be issued by the Minister;
  • Lectures, speeches, sermons and other works of a similar nature;
  • Plays, musicals, and pantomimes;
  • Musicals accompanied by dialogue and musicals which are not accompanied by discussion;
  • Audio and video work or audio-visual work;
  • Architectural work and architectural plans and drawings;
  • Work involving drawing, painting, sculpturing, etching, lithography, screen printing, relief an intaglio prints and other similar works of fine art;
  • Photographic work and the like;
  • Work of applied art and plastic art;
  • Charts, maps, plans, 3-D modeling for geographical and topographical applications and architectural designs;
  • Derivative works, under the protection afforded to the work upon which they are based. The security shall extend to the title of the work is created as well as the creative concept devised for broadcast material.
  • The granting of patent protection for inventions that are novel, inventive and useful. The terms of protection for patents is 20 years from the date of filing.

    To know more about A Guide on Patent Laws in the GCC click here

    ]]>
    Sun, 09 Sep 2018 12:04:00 GMT
    <![CDATA[Company Formation in Ras Al Khaimah Economic Zone]]> Company Formation in Ras Al Khaimah Economic Zone

    The Northern Emirate

    Ras al Khaimah (RAK) is the most northerly of the Emirates within the UAE, and while it is not as recognizable as the bigger glittering cities located within a couple of hours of it. It does have many natural wonders including its pristine beaches and Jebal Jais Mountain, which is the tallest and arguably most impressive natural formation within the country.

    Ras al Khaimah is often overlooked from a business perspective though, especially when compared to the other larger Emirates such as Dubai and Abu Dhabi. However, the Emirate has much to offer for businesses and is surprisingly well versed in the processes with there already being multiple free zones already present and operational.

    Within the UAE in general, there are numerous free zones, with over 40 being present across the countries entirety. The vast majority of these are in Dubai, which has over 20 at this stage. The draw of the free zones and the main reason people choose to set up within them is often similar between all free zones.

    The Ras al Khaimah RAKEZ free zone draws people to it with the following incentives:

  • The allowance of 100% foreign business ownership.
  • Free zone and non-free zone company formation.
  • Wide-ranging business and industrial facilities and value-added services.
  • Provision to build on-site staff and labor accommodation.
  • One-stop shop facility for services.
  • Self-service customer portal.
  • Nearest connections to major logistical hubs and multilane superhighways.
  • Accessibility via an international spread of regional offices.
  • Easy access to markets across Europe, the Middle East, North Africa, and Asia regions.
  • RAKEZ is the culmination of 17 years of Ras al Khaimah Free zone activity, and so it has rich experience and is a secure and reliable location within the beautiful emirate of Ras al Khaimah in which to set up a business.

    The History of RAKEZ

    Ras al Khaimah Economic Zone or RAKEZ as it is known as one of the key free zones within the city. RAKEZ is a relatively new entity introduced in 2017. Its primary duty was to act as an overseer and consolidator for the clients of both Ras al Khaimah Free Trade Zone (RAK FZ formed in 2000) and Ras al Khaimah Investment Authority (RAKIA initially introduced in 2005). This matter may be a little confusing, and so to clarify, both RAKFTZ and RAKIA were individual free zones established before RAKEZ and RAKEZ were set up to merge the two.

    Due to RAKEZ consisting of two free zones, the locations within various parts of the city and so setting up within the free zone depends on the business type. The different geographical locations allow for the following activities:

  • RAKEZ Business Zone: Trading, service and consultancy business
  • Al Hamra Industrial Zone/Al Ghail Industrial Zone/Al Hulaila Industrial Zone: All three of these locations allow for manufacturing, industrial projects, trading, assembly and logistics
  • RAKEZ Academic Zone: Schools, universities, institutes, academic consultancy, and services
  • Media Zone: Radio, TV, magazines, broadcast, film production, events management, etc.
  • RAKEZ also has regulations and a regulatory body separate from the mainland. The RAKEZ Companies Regulations of 2017. Within the regulation guide, is contained the information relating to the business set up within the zone, the company structuring and senior employee requirements, and also the permitted activities. On top of this, the accounts and audits of the company are stated and will have to be kept up to date. It is also indicated and specified the manner in which the free zone may inspect the businesses activities, and also what remedies are available in the case that they may be required.

    There are a variety of license types offered as well as numerous forms of business entities which can be set up. The types of licenses have briefly appeared in the list above under the different areas of set up. These are:

  • Commercial License: These entities are involved in the importing, exporting, distributing and storing of goods;
  • Consultancy/Service License for entities conducting said activities in any industry;
  • Industrial License for those importing raw materials, manufacturing, processing, packaging and exporting final products;
  • Educational License which allows for the opening of any form of an educational institute or related consultancy; or finally
  • Media License for the operating of media (TV, broadcasting, etc.) business.
  • The following types of companies can be formed:

    Free Zone Company

    Branches

    Non-Free Zone Company

    Free Zone Establishment (FZE)

    Free Zone Company (FZC)

    Branch of a Local Company

    Branch of a Foreign Company

    Establishment (E) for a non-free zone company

    Limited Liability Company

    A business entity with a sole owner

    Between 2-5 shareholders

    Branch of a domestic company. Should be established for over one year

    Branch of a foreign company. Should be developed for above one year

    Non-Free Zone company with a sole owner

    Non-Free Zone company with a minimum of two shareholders

     

    With the non-free zone companies, while they may run within RAKEZ, they will be subject to the UAE Federal Laws rather than the free zone specific regulations, and will not be able to have 100% foreign ownership.

    RAKEZ provides a wealth of opportunity to those setting up within it. Consisting of two more experienced free zones allows for it to possess a healthy knowledge of how a free zone should work, while at the same time, it will have its more modern twists (such as 2017 regulations). What this will allow for is a best of both worlds situation with both modern touches and experience.

    The application process in itself is highly versatile and customizable, and the entire process is fast, with help provided to all. Firstly, a package will have to be selected. What can be chosen from is customizable, and so prices will vary. Following this, the documents and application form will need to be submitted, and the RAKEZ business development professionals will assist in this stage. Finally, the business entity will receive their license and will be able to commence activity in the RAKEZ free zone.

    ]]>
    Thu, 06 Sep 2018 11:47:00 GMT
    <![CDATA[Exclusion Clauses in the UAE]]> Exclusion Clauses in the UAE

     

    The Importance of Contracts and Exclusion Clauses

    Contracts are vital documents at all levels of society. Whether in business or everyday life, contracts are formed all the time from the simplest dealings between individuals to the most complex business deals. There may be occasions wherein one of these is formed orally only, though this primarily occurs between ordinary individuals.

    Now in the case of more substantial contracts, negotiations can be a lengthy and intense process, with all parties involved looking to place themselves in the optimal positions. These negotiations are vitally important to them as they may stand for the duration of the deal and so clauses will be in place for every foreseeable eventuality.

    There can be many types of clauses possible within a contract including the power of scale clauses, acceleration clauses, integration clauses and more. One of the most vital and prevalent forms is the exclusion clause.

    Exclusion clauses, or exemption clauses as they are also known, exist to exempt a specific party from specific responsibilities should particular criteria be met. There are a few different forms of this clause which have different consequences, and they are as follows:

  • True exclusion – This clause considers a potential breach of the contract that may occur, and excludes the party that may be negatively impacted by liability;
  • Limitation – Limits the amount that can be claimed by a party for a breach of contract. This limitation is regardless of the loss;
  • Time Limitation – Places a time limit in which a claim is required to come forward. Should this time limit be elapsed, the request will then be void.
  • Of course, exclusion clauses must be agreed upon by both parties as they can potentially lead to highly beneficial exemptions for a party. Often the decided upon exclusions favor one part more than the other, likely the party writing the contract, and so the matter can be one of high complexity and generally requires both parties to be willing and fully informed. Following are the UAE regulations regarding Exclusion clauses.

    UAE Civil Code

    The UAE Civil Code governs all issues concerned with contracts within the UAE. It is a substantial piece of legislation, though exemption or exclusion clauses receive little explicit mention within it. Generally, though, the one area which widely uses exclusion clauses is in insurance. Federal Law Number 6 of 2007 (amended by Federal Law Number 3 of 2018) is the insurance law of the UAE, and Article 28 (2) states that any exemptions stated in an insurance policy require writing in bold and a different color to the rest of the text. The entity obtaining the insurance must also acknowledge the clause for it to take effect.

    Should these conditions be met in an insurance contract, then Article 1028 of the Civil Code must be taken into account. This Article is under Chapter 3 of the Code, which concerns contracts of insurance. Here are mentioned the five conditions that will result in elements of the agreement being void:

  • The situation providing for the forfeiture of the right to insurance on account of a breach of the laws unless such violation constitutes a deliberate felony or misdemeanor;
  • The condition providing for the forfeiture of the insured's right due to his delay in notifying the authorities that have to be informed, or in producing documents, if it appears that the delay was for an acceptable excuse;
  • Any printed condition relating to cases involving nullity of the contract, or forfeiture of the insured's right not shown in a precise manner;
  • The arbitration condition included in the printed general terms of the policy and not as an exclusive agreement distinct from there;
  • Any arbitrary state, the breach thereof appears that it has no bearing on the occurrence against the insurance of the event.
  • Should all of the conditions of the insurance regulations be met and avoidance of the voiding conditions stated within the Civil Code occur, then any exclusion clauses will hold weight.

    The Dubai Court of Cassation dealt with a case (27, 2009) on this very matter, and within it, they confirmed therein that the condition of having the exemption stand out was a requirement, and this was to avoid 'confusion or obscurity'. The policy must also contain a statement referring to it, and as long as this occurs, requirements for a signature on the specific clause of the contract won't be needed. Instead, the overall name for the policy will be sufficient.

    However, beyond insurance, there is little explicitly mentioned for any other sectors. Therefore, to understand the general principles, areas of the Civil Code that are not expressly related to exclusion clauses must be looked to get something of an idea of what to expect.

    In general, within the UAE, almost any contract clauses are permitted unless expressly prohibited by the law; this is so long as all the involved parties agree to the provisions. As such, if the parties agree to an exclusion clause, it will likely stand up in court. There would probably be a limit to this though as if the advantage provided to one party is too significant, and perhaps there was an element of coercion in the signing of the contract, the court may restrict them.

    The Civil Code specifies what is considered to be a void or valid contract. A valid contract as defined in Article 209 states:

  • A deal is valid if legal in its essence and characterization, issued by a qualified person, having an object that can be governed by the contract and a current, correct and licit cause, validly specified and not subject to avoid the condition.
  • As seen here, there is nothing specifically against exclusion clauses. Article 210 mentions the elements of a contract that would cause it to become void. These are:

  • A void contract is the illicit one, whether by origin or description; this may be because of a defect in one of its constitutive elements, its object, purpose or the form imposed by law for its valid formation. This contract shall not affect, and ratification cannot occur;
  • Every interested party is entitled to invoke the invalidity, and the judge to decide it ex officio;
  • Hearing an action in nullity may not occur after the lapse of fifteen years as of the conclusion of the contract, but every interested person may, at any time, raise a plea in avoidance of the deal.
  • Similar to the valid contract point, there is nothing here that outright restricts or disallows for exemption clauses.

    A specified area in which the clauses and conditionality are stated to be allowed in Article 219. In this section, it says that contracts that are liable to be canceled may have conditions that shall exist for the duration of the agreement.

    The Current State of Exclusion Clauses in the UAE

    There is no legislation specifically in place that covers these types of clauses, and even the mention is relatively minimal. The UAE Civil Code covers all areas of contracts and is an in-depth item of regulation. However, as previously mentioned, it is stated within the law that almost any clauses within a contract are acceptable, so long as both parties are willing and in the appropriate legal capacity to sign the contract.

    In time, regulations on this may become more solidified specific. For the time being though, so long as the exclusion clauses used do not violate any laws they are acceptable.

    In this way, the law allows for great freedom between the parties and has helped to build the many business deals and contracts within the UAE. It could, however, make any potential court cases more complicated and difficult than they need to be.

    ]]>
    Thu, 06 Sep 2018 11:13:00 GMT
    <![CDATA[Embryonic Stem Cell Research and Its Relation to the Destruction of Foetus Introduction]]> Embryonic Stem Cell Research and Its Relation to the Destruction of Foetus

    Introduction

    Embryonic stem cell research is a cause of great contention globally, and the regulation and stigma around such research is and will continue to be a heated topic. In the governance of every country, the murder of another human being is a crime punishable by law, and the removal of embryonic stem cells is the act of causing such stem cells for not developing into a human being. Where is the line is drawn in the sand, at what point is the destruction of an embryo for science murder and when is it not? At what point of conception does a fetus being a human being in the eyes of the law and is granted protection as such.

    Common law jurisdictions such as South Africa provide a fiction regarding which the law can grant unborn fetus protection; this is the nasciturus fiction which was derived from the Roman law. Regarding this legal principle whenever there is a situation which would have been to the advantage of the fetus if she/he was already born, all rights that are conferred on persons that are already born alive, are also consulted on the embryo. The fetus then becomes a legal persona and carries legal capacity from the date of conception.

    Embryonic stem cell research in China

    In the past, China was without a comprehensive regulatory framework to govern embryonic stem cell research. It has led to a large number of unproven treatments derived from embryonic stem cell research used on the open market. It has created an environment which was not only detrimental to those patients participating in such unproven treatments but also cast doubt on the research of those scientists who were breaking new ground in the stem cell research field.

    In 2003, the People's Republic of China's Ministry of Science and Technology and the Ministry of Health released official ethical guidelines for human embryonic stem cell research. The guidelines formally forbid any research targeted at human reproductive cloning and necessitate that the embryos that are utilized for stem cell research come only from:

  • Spared gamete or blastocyst after in-vitro fertilization procedures;
  • Fetal cells from accidental, spontaneous or voluntary selected abortions;
  • A blastocyst or parthenogenetic split blastocysts obtained by somatic nuclear transfer technology; or
  • Germ cells voluntarily donated.
  • In January 2012, the Chinese government implemented a ban on unapproved stem-cell therapies and a temporary moratorium on new clinical trials. With this ban, the government promised to establish a much-needed regulatory framework for future research.

    However, regardless of the regulations put in place by the government, rogue research facilities continued to operate. The only impact that was evident was a restraint on stem-cell scientists with valid research agendas.

    In 2015, the Chinese government brought into effect more stringent regulations on embryonic stem cell research, which they believed would curb the use of unproven treatments. These regulations include:

    •  'obtaining patients' informed consent;
    • Using clinical-grade stem cells that have been authorized by an independent body;
    • Stem cell clinical studies will only be carried out at authorized hospitals; and
    • No costs will be involved for recipients of stem cell research-based treatment."

    Presently, the Chinese Ministry of Science and Technology's aim for China is to become one of the leading countries in the field of embryonic stem cell research. The nation is supplying institutes conducting such research with funds from multiple sources.

    Guidelines on Chinese Embryo Stem Cell Research

    The director of the Chinese Society of Medical Ethics, Professor Benfu Li laid down the following principles to be abided by when conducting embryonic stem cell research in China:

  • The Principle of Respect – an embryo must be considered as human biological life and as such demands a specific value – this requires that a fetus cannot be damaged or controlled without enough reason. The medical potential of human embryonic stem cell research is so vast that such research should undoubtedly be permitted and supported.
  • The Principle of Informed Consent – donors, must be informed of all aspects of the research before such a donation. They must consent to all procedures to be undertaken during the investigation, and such consent must be kept a secret. 
  • The Principle of Safety and Utility – this principle determines that before any research may be conducted with human embryonic stem cells, it must have been tested on animals to avoid bringing damage to patients and donors alike. The study will not be used in clinical medicine until it has been proved that experiments on animals are safe and useful.
  • The Principle of Non-commercialisation – this principle prohibits the buying and selling of gametes, embryos and fetal tissue. If such buying and selling were not banned, it could lead to the exploitation of donors.
  • As was discussed above, the ethical concerns regarding embryonic stem cell research spark much debate around the world. The use and destruction of the embryo for research purposes is a controversial part of the research process. However, in China, this is not the case. In fact, most Chinese citizens view the embryo as not containing any inherent moral value.

    The Chinese citizens have followed a Confucian way of life for two millennia. According to a Confucian view, "a person being with birth; a person is an entity that has a body or shape and psyche, and has a rational, emotional and social-relational capacity for a lifetime of learning and innovation."

    This way of thinking, therefore, results in the Chinese population viewing a human embryo as not having the characteristics of a human being and thus cannot be equated morally to a person requiring the protection of the law.

    Regulation in the UAE

    In the majority of the countries in the Middle East, there is no regulation for stem cell research and the scientists, and research institutes mostly rely on religious decrees. The UAE does not have any national legal framework or rules governing Embryonic Stem Cell research. However, as per the Sharia law, an individual will be required to pay 10% of the blood money even for accidentally killing a fetus. This principle of Sharia law was applied by The Dubai Traffic Court of First Instance where it fined a Lebanese woman for accidentally killing a nine-month embryo in a traffic accident.[1] In another incident, a man was convicted for killing his wife who was two months pregnant and unborn child. The Abu Dhabi Criminal Court of First Instance's judgment was also upheld by the Appellate Court too upheld the decision.[2] Moreover, in 2012, the Dubai Health Authority ordered a stem-cell company to stop operations after it discovered to be promoting a treatment which is linked with the death of two children.[3]

    [1] https://gulfnews.com/news/uae/transport/mother-convicted-of-killing-foetus-in-traffic-accident-1.67532

    [2] https://www.thenational.ae/uae/courts/death-sentence-upheld-in-pregnant-woman-s-murder-1.494069

    [3] https://www.thenational.ae/uae/embryo-research-a-moral-and-ethical-minefield-1.362764

     

    ]]>
    Thu, 06 Sep 2018 10:36:00 GMT
    <![CDATA[The Enforcement of Mortgages in Abu Dhabi]]> The Enforcement of Mortgages in Abu Dhabi

    Mortgages- The Basics

    Mortgages are a type of loan banks provide for those looking to purchase a property. The purchasing of a property is a highly important part of the modern world, with everyone potentially being under that umbrella, from the most prominent businesses purchasing for new projects to the average individual buying a first time house. The mortgage itself is a long-term source of finance, and can often be for significant amounts of money. As such, high levels of regulation are usually in place in most jurisdictions.

    Dubai currently has the Law Number 13 of 2008- The Real-Estate Law, though there are plans to introduce new legislation on the matter. However, this law was specifically only for the Emirate of Dubai, and in some ways, this is understandable. Dubai is the business heart of the country, and the real estate market there is valued in the tens of billions of Dirhams. Dubai also has the highest population in the country by some margin, and so the real estate sector would require the most monitoring and regulation. However, this does not mean that States such as Abu Dhabi can ignore or rely on laws that explicitly implemented for different purposes. As if in response to this very idea, it was in 2015 that Abu Dhabi enacted a new law to cover mortgages and similar such issues.

    Real Estate Law- AUH

    The Abu Dhabi Law Number 3 of 2015, the Real Estate Regulatory Law (AUH Real Estate Law) came into existence three years ago with the aim of providing regulations and legislation on various matters. These include escrow law, interim register, mortgage process and more. The law covers a wide variety of areas, though the sectors most affected by it would likely be the real estate market.

    In the case of Abu Dhabi real estate, the law was notably first used in a lawsuit in 2017 which related to a mortgage payment, though this will be brought up slightly later.

    One of the critical areas that will make those in the real estate sector happy will be the changes to the mortgage regulations, or rather the introduction of rules specific to the matter. Before this laws introduction, the issue relied on the Abu Dhabi Municipality practices and the Federal Law Number 5 of 1985 concerning the UAE Civil Code (the Civil Code). While these laws have, until recently been used in Abu Dhabi, and have gotten the job done, they are still not specific enough to mortgages due to them not being produced with mortgages in mind as one of the critical elements, and so there will likely be questionable decisions made.

    The introduction of the Civil Code would theoretically lead to a more consistent and dependable system. As is the case with anything involving money, consistency and dependability are a crucial factor and are often sought after as they provide comfort to those who will be depending on them. Consumer confidence would likely correlate directly with these key points, and so it may be seen that the simple change of introducing an express law can impact the entire sector as a whole. The bill is relatively new at this stage though, and so more time will be required before the true extent of people's opinions will become clear, though it is looking promising.

    The Impact

    In many ways, the changes are an overhaul of the previously used methods, and there are new regulations and requirements which require observation. A briefly mentioned yet potentially impactful section of the law is the fact that there are now definitions for many phrases. Descriptions are supplied in most legislation and allow for clarity not only when reading through it, but also it gives parties with details of the law even when they are not going through any legal disputes, and can help to avoid any conflicts from arising.

    One of the significant changes concerned licensing of entities that partake in real estate related practices. Before the laws arrival, a license was not a necessity, though it is now a requirement, with specific repercussions in place for those found to be in violation. Article 5 (1) states that it shall not be permissible for any developer, realtor, realtor's employee, auctioneer or director of Owners Union, evaluator or surveyor or one who identifies in such a capacity, to practice these professions without first obtaining a license. Article 5 (5) also states that these permits will require renewal annually.

    A register will also arise as stated in Article 4. The record aims to gather all of the information, data, and documents related to:

  • The Licensees;
  •  Account trustees and agreements of project's guarantee account;
  • Permissions of real estate development project marketing; and
  • Any other data or documents deemed necessary by the Department shall also become a requirement.
  • There are many further points discussed throughout the legislation. However, a significant point which brought up later and which shall now be looked at more closely is the matter of mortgage insurance.

    Abu Dhabi Summary Court Decision Number 288 of 2017

    Mortgage insurance is also defined and mentioned in Article 1, and the definition is as follows:

    "A contract by which the creditor acquires a real right or contractual utility on the mortgaged property allocated for the repayment of the debt and by such right or utility such creditor may have precedence over ordinary creditors or other creditors following him in rank."

    The Abu Dhabi Summary Court Decision Number 288 of 2017 was the first case in which the Civil Code was brought up. In this case, the claimant was a bank, and they filed the claim against two clients. These clients had taken mortgages and purchased properties, though they were unable to make a payment, and as such, the bank was requesting from the court to be able to sell the properties to reclaim the money lost by them.

    The simple legal point that was used to back up this claim was Articles 53 (1) and (2) which states the following:

  • The mortgagee of mortgage insurance or his designated or non-designated successor may proceed with the execution procedures on the mortgaged property and sell said property by auction if the debt is unpaid upon maturity or any conditions requiring the expiry of the term before maturity materialized;
  • Before commencement of the execution procedures on the mortgaged property and applying to the judge of summary justice for the seizure on mortgaged property and sale thereof by auction, the mortgagee shall send a written warning to the mortgagor and the guarantor, if any, by registered mail. Within this should be contained the acknowledgment of receipt informing him of the prejudice and requiring him to pay the debt and other entitlements within no less than 30 days as of the date of warning.
  • Section 1 of this Article states when cases may arise, and it would seem a highly logical approach. However, Section 2 ensures that the mortgagee's treatment is fair. Property purchase is a big deal, and there can be a lot riding on it, and so an opportunity is given to the party to attempt to get their situation in check or provide an explanation of what the issue is.

    What this allows for is a fair system and fair judgments and case outcomes to be the norm in failure to pay situations, as there are often two sides to every story.

    Article 54 of the law concerns resolving cases concerning failing mortgage payments. This Article states that:

    "Subject to the provisions of Clause 2 of the preceding Article of this Law (Article 53), if the mortgagor or the guarantor thereof or their designated or non-designated successor defaulted in payment of debt. The judge of summary justice should issue, upon the request of the mortgagee, a resolution on the sale of the property in mortgage by auction by the procedures applicable to the competent court".

    What this Article shows is that there is a level of variance that may be possible within the law, and this is up to the discretion of the Judge in the case. One of the ways a Judge may change Article 53 (2) is by allowing for 60 days rather than 30 to let the mortgagee make the payments.

    Is this Law Bettering the System?

    The changes the law has made and the regulations it has now set in stone are mostly positive. They will allow for not only professionals in the real estate sector but also regular people looking to obtain mortgages, to have confidence in the legal implications of this activity.

    ]]>
    Wed, 05 Sep 2018 10:54:00 GMT
    <![CDATA[UAE Domain Name Governance and Dispute Resolution]]> UAE Domain Name Governance and Dispute Resolution

    What is in the name, asked a layman.

    Everything, if it is a domain name, replied the lawyer!

     

    Introduction

    Almost every kind of business, whether a startup or a fully-grown company need an online presence through an official website. A website is utilized as a handy marketing tool with very little investment, and it can be beneficial for the consumer to know what kind of business services are provided by that company. A website doesn't have visit timing which means that customers can assess it during any hour of the day within the year. The existence of an active and fully functional website also increases the credibility and sales of the business as both are interrelated. The higher the reliability, the more will be sales. In today's hyper internet-connected world, whenever a prospective customer hears about a business, they immediately Google (or Yahoo?) it. If they do not find the official website connected with that business then not only they will have limited information about the product or service, but they also might end up thinking that the company is not credible enough.

    Therefore, it is imperative for almost all kind of businesses to have a website. If you own a business, irrespective of its size, nature and consumer geographic you can afford not to have a site!

    But it doesn't mean that all is well with websites. The websites provide credibility and goodwill to the business, and therefore it is essential to protect them from any misuse. In March 2018, the World Intellectual Property Organization (WIPO) (the United Nations agency responsible for promoting and protecting intellectual property around the world) released a report on domain name disputes.  The report stated that there had been a significant increase in arguments about domain names filed in 2017. The description provided that more than three thousand cases registered explicitly by the trademark owners concerning misuse of websites.

    What is a Domain Name?

    Before we begin with legal issues related to the domain name and dispute resolution, it will be better we first try to understand what a website is, domain name and types of the domain name.

    Domain names are a set of characters/letters, which are used to communicate on Domain Name System (DNS) servers. So what is DNS then? As explained in one of the articles published in Forbes;

    "The Domain Name System (DNS) is one of the most critical parts of the internet's infrastructure … DNS underpins all important services that run over the internet, including the World Wide Web, email, messaging and more. … the domain names are indexes into DNS's database. You retrieve information from DNS's database by mentioning a domain name and a kind of data in which you are interested. Web browsers typically lookup for the IP address or address corresponding to the domain name in a URL."[1]

    One can asses a website over the internet either through the domain name or its unique IP Address. However, domain names are easy to remember compared to IP Addresses. However, it is more difficult to remember a string of random numbers then a domain name.

    There are two types of domain names, the generic top-level domain name (the gTLD) and country code top-level domain names (ccTLDs). In the https://stalawfirm.com the red part is the Top-Level Domain, and the green part is the website name, and it is known as a midlevel domain name. In http://www.dubaided.ae the red part is Country Code Top Level Domain (the ccTLD). The other examples of gTLD are .net, .org, .biz, .info etc. And few examples of ccTLDs are .ae (for United Arab Emirates), .in (for India), .eu (for European Union) and .pk (for Pakistan).

    The gTLDs are generally available for everyone to register, in any part of the world but some countries put some restrictions on the registrants for registering ccTLDs. Like European Union requires the registrant of the .eu ccTLDs to be resident or located in one of the countries of the European Union group.

    The UAE Domain Name Dispute Resolution Policy

    The Telecom Regulatory Authority (the TRA) of UAE issued the UAE Domain Name Dispute Resolution Policy (the Policy) on 22nd September 2010 which became effective from the same day. The Policy covers disputes arising out of registration and renewals related to UAE ccTLD. As per the Section 5 of the Policy, the Registrar can cancel, transfer or make changes in the Domain Name Registration on receipt of n order from a competent court or arbitral tribunal or on the arrival of a request from the Administrative Panel requiring the same.

    Section 6 of the Policy provides the list of disputes, which needs submission for a mandatory administrative proceeding and the same, shall take place before the WIPO Arbitration and Mediation Centre. The record of compulsory administration proceedings includes the following cases;

  • Domain name is similar to a trademark or a service mark;
  • No right or legitimate interest in the concerned Domain Name;
  • If the Domain name is registered or used in the bad faith
  • The Section 6 (b) of the Policy provides the evidence required for proving the registration or use in bad faith. The Section 6 (c) of the Policy provides the ways to show or demonstrate an individual's right to a legitimate interest in the Domain Name in responding to a Complaint. The Policy provides further details regarding consolidation of disputes, fee, remedies, availability of court proceedings, etc.

    World Intellectual Property Organization's (WIPO) Uniform Domain Name Dispute Resolution Policy (UDRP Policy)

    The Arbitration and Mediation Centre of the WIPO has a specific domain name dispute resolution policy for generic top-level domains (gTLD) and country code top-level domains (ccTLD). This UDRP Policy of WIPO as also been adopted by the Internet Corporation for Assigned Names and Number (ICANN), the private non-profit corporation responsible for allocation of IP Address and domain name system management.

    Moreover, the WIPO Arbitration and Mediation Centre are responsible for resolution of domain name disputes under the Section 6 of the UAE Domain Name Dispute Resolution Policy 2010.

    Although the WIPO UDRP Policy and the UAE Domain Name Dispute Resolution Policy are almost identical, however, there is one specific difference in the both. In UAE Policy it is sufficient for the complainant to prove that either registration or subsequent use of the domain name with mala fide intention, whereas the UDRP requires the complainant to establish both elements.

    In Bayer AG v Lin Shen (Case No. DAE2012-0004), the WIPO's Administrative Panel decided a dispute related to the domain name <bayer.ae> (the "Domain Name") which has a unique registration with AE Domain Administration (.aeDA). In this case, the Respondent got the registration of the domain name bayer.ae which evolved to a portal site ("Respondent's Website") that provided a number of links to third-party sites that purported to offer, amongst other things "Bayer Aspirin" and "Bayer HealthCare" as well as links to unrelated sites, including adult sites. The Complainant is a well-known German pharmaceutical company name Bayer, and it contended that;

  • that the DN is identical to the Complainant's BAYER Mark;
  • That the Respondent has no legal interests in the Domain Name; and
  • that the Domain Name is being registered with bad intentions.  
  • The Administrative Panel agreed with the contentions and reasoning offered by the Complainant and ordered that the domain name should be given to the Complainant.

    Conclusion

    The domain names have become part of all sorts of business and therefore to have it or do not have it is any longer a question. The real problem is how to protect your website and domain name from any illegal use as your business's reputation and goodwill now depend on it. It is advisable that companies that don't have a website should create one before someone else take advantage of their goodwill and stay vigilant over the internet to spot and illegal use of their domain name or trademark through cybersquatting or other forms of cybercrimes. It is highly advisable to take help of experienced cyber and trademark layers to ensure proper registration and protection of your domain name.

     

    [1] Forbes, What is the Domain Name System and Why Does it Matter? Available at: https://www.forbes.com/sites/forbestechcouncil/2017/09/07/what-is-the-domain-name-system-and-why-does-it-matter/#499427923796

     

    ]]>
    Mon, 03 Sep 2018 12:51:00 GMT
    <![CDATA[Civil and Criminal Effects of Non-Competition Condition in UAE Labor Law]]> Civil and Criminal Effects of Non-Competition Condition in UAE Labor Law

    Introduction

    The Federal Law Number 8 of 1980 regarding UAE Labor law (the Labor Law) contains a provision under Article 127 which allows the employer to require the worker not to compete or to participate in a competing project after the end of the contract, where the article includes several conditions and guarantees for the protection of the parties.

    Although the labor law usually regulates the working relationship to protect the worker from the employer, in this text it protects the interests of the employer rather than the worker and restricts the freedom of the worker to move from his work to another work.

    Perhaps the wisdom of this was contained in the text of the same article since the document had been provided for the protection of the employer from the worker, where the wording of Article 127 of the Labor Code states as follows

    If work assigned to the employee allows to an acquaintance with the employer's clients or have access to the secrets of his work, the employer may oblige the employee that after termination of the contract he may not compete with him or take part in any business interest competitive to the employer's. Such agreement will be valid only if the employee has reached the age of 21 years at the time of its being executed and if the deal is limited concerning the place, time and nature of work to the extent as is necessary to safeguard the lawful interest of business.

    It is also clear from the context of the text that this requirement is not compulsory but is due to the employer's desire to add it or not to the contract of employment, but the question here is when the employer may add this condition whether before the start of work and when signing the contract or at any time during work or after the end of the employment relationship. I think that the best time to sign this condition is when signing the work offer before signing the contract of work and then the worker is free to accept this condition or not.

    In the case of signing this condition after that and during the employment relationship, the worker will be obliged to continue in the labor relationship, which makes the contract flawed by a defect of satisfaction.

    Post Termination

    After termination of the employment relationship, the worker's services may be terminated, and before the end of service, payments are paid. The employer is required to sign such a condition, and we believe that such a situation may not be approved because the purpose is terminated and the employment relationship is terminated, and labor benefits may not be used as a means of pressure on the worker to sign such a condition. In general, a worker may not compete with the company in which he works because the worker is committed not to compete with the employer during the validity of the contract. The source of this obligation is the law, in that he is engaged in performing the work for the employer, not for himself.

    The agreement requires that the worker be twenty-one full calendar years at the time of signing the contract and that the deal is limited in terms of time, place and type of work to the extent necessary to protect legitimate business interests and that there is a serious interest for the employer in the requirement of non-competition on the worker after the expiry of the contract. This form the interest in the fact that the work entrusted to the worker allows him to know the business associates of the employer or to see the secrets of his work, and that the legislator relatively restricts the prevention of competition in time, place and type of work and to the extent that it achieves the employer's legitimate interest so that the prevention of absolute competition is a complete waste of the worker's freedom.

    The validity of this condition shall require the worker to be compensated in case of breach of the non-competition clause provided for in the contract, and its responsibility in this regard is a contractual responsibility and is required to prove the breach of this obligation and damage and the causal relationship between them.

    This is the civil responsibility that the courts have settled on their order, although it is hard to prove the pillars of that responsibility of error, damage and causal relationship, where many cases were rejected because of the invalidity of the requirement of non-competition, where the Court of Cassation Dubai in Appeal Number 2013/219 Labor Appeal and 2014/6 Labor Appeal stated that:

     "what is meant by the secrets that the worker is prohibited from disclosing to others in accordance with the provisions of Article 127 of the Labor Relations Regulation No. 8/1980, as amended by Law No. 12 of 1986 and what this court went to the work assigned to the worker shall allow him to know the customers of the employer or to view the secrets of the work in this case, the employer may require the worker not to perform the competition after the end of the contract competition or to participate in any competing project and requires the validity of this agreement. As well as reaching the worker twenty-one calendar years at the time of signing this agreement - the condition of non-competition shall be limited in terms of time, place and type of work to the extent necessary to protect the legitimate interests of the employer - as for other agreements between the worker and the employer as an agreement to settle their rights after the termination of the employment relationship, the worker's disclosure of this agreement to others - on the assumption that it occurs - is not a disclosure of the secrets as set out in article 127 of that law."

    Penalty Provisions

    The question further arises as to the penalty to be imposed on the worker who has resigned under the conditions of competition. Is he prevented from working with the competition companies or depriving him of working in the state for the duration of the situation or what? To answer this question, we distinguish between several cases as follows:

    The first case: - Before joining the company and before the signing of the contract of work. In this case, the employer may submit a complaint or request to the Labor Department to prevent the issuing of a new work permit for the worker to the competing company. The decision shall be made here by the Ministry of Labor.

    The second case: - After the employee joined the competition company. In this case, it is impossible to be exposed to a contract of employment with the competition company, and the penalty is limited to compensation only on its terms, and the arrangement of work cannot be subjected to the impossibility of implementing the competition clause.

     In this regard, the Court of Cassation in - Dubai on 04-06-2013 in appeal number 2013/37 Labor Appeal mentioned that:

    "The worker's liability for breach of the non-competition clause is the contractual responsibility underlying the agreement in the contract of employment and this liability does not affect the second employment contract that may be concluded by the worker. After the end of the first employment contract _ with the new employer, the competitor, where this contract is valid and the first employer may not seek the decision to invalidate the second employment contract or to prevent the worker from working with the new employer as long as the employee's commitment to non-competition was impossible to implement in kind by the worker Have another employer"

    It also raises the question of professionals such as doctors, engineers, consultants and others whether the condition of competition applies to all jobs, businesses, and professions or whether it is limited only to commercial and industrial.

    The Court of Cassation in Abu Dhabi responded to this question by issuing its judgments. The Court of Cassation ruled that a preliminary ruling in favor of appeal should be rescinded, allowing a doctor to work in the Emirate of Abu Dhabi after his employment with the employer, despite his consent to the condition of not competing in the contract. Working in Abu Dhabi for two years, arguing that the competition clause contained in the Labor Law is limited to unfair competition in business or industry, not on professional work. The Court of Cassation established that it had been developed from the papers that the contestants had signed the undertaking referred to at the beginning of his employment and that the project was intended to safeguard interests of the appellant under the law, in article 127 of the Labor Relations Regulation Act.

    This article did not limit the type of work in business or industry, but the text never includes all areas of work, as well as that undertaking has banned the practice of the challenged in a specific geographical area for a particular period of two years, which does not contradict the constitutional right to work in any The court has not intervened to amend it for alleged illegality or conflict with the text of the article on which the case was based. In the judgment contested by the rejection of the opposite claim, the reasons for the appealed decision were found to be defective in violation of the law Corruption in inference and limited in its causes, which requires revocation.

    But whether there is a penal liability for the worker in case of breach of the non-competition clause?

    The civil liability resulting from the signing of the non-competition clause and the penal liability is subject to the Penal Code and the particular laws such as the Internet Crimes Law if the employee discloses the secrets of the company in which he works. Article 279 of the Penal Code stipulates that: (Shall be sentenced to detention for a term not exceeding six months and/or to a fine not in excess of five thousand Dirham, whoever was entrusted with the conservation of seals put pursuant to a judgment or court or administrative order and caused, through his negligence, the perpetration of any of the crimes provided for in the two preceding articles.)

    The Court of Cassation has applied this provision to several conditions in Dubai on 22-09-2014 in appeal Number 2014/551 penalty ruled that:

    "The crime of disclosing the secrets provided for in Article 379 requires the existence of four conditions. First, its material purpose is the disclosure and disclosure of the secret and if the perpetrator uses it for his benefit or the benefit of another person. Secondly, the secret must be disclosed secretly, by its nature or by the circumstances surrounding it, in secret, even if the victim did not request his secrecy, and it is sufficient that the offender knew this secret by virtue of his profession, profession, status or profession, and thirdly the status of the secretary of the secret that the secret was deposited by virtue of his profession or craft."

    It is clear to us that the condition of non-competition is an exceptional condition and restricts the freedom of the worker and the freedom of movement in work, so the judiciary explains it narrowly and tightens the terms of its application. The Ministry of Labor was directed towards the bench and went to cancel the conditions of the employer's consent to transfer. This approval is considered from 2010.

    ]]>
    Mon, 03 Sep 2018 12:23:00 GMT
    <![CDATA[New Trade Secrets Regulations in the UK]]> New Trade Secrets Regulations in the UK

    What are trade secrets, and why are they so important to a business?

    Trade secrets are a considerable part of the business world. Businesses will guard and protect their trade secrets zealously, as it is what gives each company their unique selling points. In the modern world of business, the key to becoming the biggest and best and attracting the highest number of clients is to stand out from the crowd. The need and want for money has meant that businesses are popping up every day in vast amounts, and this continually reduces the chances of other enterprises making it big.

    There are famous cases of businesses and their trade secrets that still to this day are unknown to the vast majority, including many who work within those businesses. Examples of this include the Coca-Cola recipe which is an age-old trade secret, beginning with the founder of the company at around the year 1891, and there are very few anonymous selected employees who know of the recipe. Coca-Cola is currently the most popular soft drink in the world, and in the US, it has a market share of 17%. This figure does not even include diet coke, which is the second most popular drink in the country, followed by the nearest competitor, Pepsi. Coca-Cola is currently among the most valuable brands in the world. Similar to this is the fast food giant, KFC, whose famous blend of 11 herbs and spices have propelled the company to the top of its respective field.

    A question that then arises is whether these types of businesses would be as popular as they currently are if they did not have their trade secret ways. The likely and straightforward answer to this is no, and this is because if trade secrets were known, and they were genuinely beneficial, everyone would be doing it, and thus everyone would be on an even playing field.

    Beyond the USP advantage it provides, Trade Secrets are unlimited in the ways patents or trademarks are. There aren't any time limitations, and the secrets do not require ousting as they would for other forms of IP protection. However, without any laws to back them up, trade secrets would be far less secure, and the system, in general, would not work. As such the UK has its regulations in place to regulate the matter, and there are also EU regulations and Global regulations governing the system.

    The New UK Regulations

    The UK has recently implemented the Trade Secrets (Enforcement, etc.) Regulations 2018 which amend the prior rules. They came into effect on June 9, 2018, and brought various changes into the fray. Firstly, one significant difference was the official definition of 'Trade Secret' was set out. Among the simplest ways in which this improves over the previous system is that a more set in stone definition could remove uncertainty in a case. The new definition is split into three parts and are mentioned under Section 2 of the law, and are as follows:

  • A Trade Secret is secret in such a way that it is not, as a whole or in part, generally known, or readily accessible to individuals within the circles that normally deal with the kind of information in question;
  • 'It has commercial value because it is secret, and';
  • 'It has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.'
  • A key point to note here is that before this legislation, trade secrets were undefined under the UK law, which could lead to much confusion in a case; this legislation should change that.

    An example of a case which demonstrates the importance of the inclusion of a definition is the Keystone Healthcare Limited, Keystone Healthcare Holdings Limited v Colin Robert Parr, Mark Reynard, Medipro Recruitment Limited. Now the case in itself does not necessarily relate to trade secrets, and it occurred before the new law came into power. However, this case refers to a breach of confidence, and one of the points stated is that this case is distinct from one which would relate to a trade secret, though "the distinction is somewhat difficult to apply in practice". This case clearly shows that before the implementation of the new legislation and without a solid definition, confusion was very much a potential outcome.

    Another change this law brings forth is that of time limits. These are mentioned and specified in Sections 4 to 8. In general, as of 9 June 2018, a case relating to trade secrets may not be brought before the courts if a specific period has passed. Section 5 states that, in England, Wales and Northern Ireland, there is a limitation period of six years, while in Scotland, there is a prescriptive period of 5 years. The period would begin when an individual is first made aware of the trade secret.

    Section 7 and 8 discuss a couple of exceptions. An exception to the limitation period would be in the case that the trade secret holder happens to be in a state of disability (disability here is as defined under Section 38 (2) of the Limitations act of 1980). It states that a person shall be treated as under a disability while they are an infant, or lack capacity (within the meaning of the Mental Capacity Act 2005) to conduct legal proceedings. If one falls under this category, then the limitation period begins from the time when they no longer fall under said category (come of age etc.) or from the point of their death.

    Section 8 is concerned with the prescriptive period in Scotland and states that when under disability, the period should not be considered.

    Sections 7 and 8 are present to protect those who either, may not know better or perhaps may be more easily taken advantage of even if only for a specific period.

    There is also the matter of interim measures that a trade secret holder can take to ensure their secrets go unspoiled. Section 11 covers this, and within it is stated that trade secrets holders are within their rights to consider the following measures to against infringers:

  • Prevent them from being able to discuss or spread the trade secret information that they hold.
  • Inhibit them from being able to produce, obtain (with the intention to pass on or sell) or market the goods to prevent them from being able to compete with the trade secret holder's products in the market.
  • Seize any infringing goods, once again to prevent them from being introduced into the market.
  • A recent case in which this matter of interim injunctions was brought up was Berry Recruitment Ltd v Donovan. In this case, the recruitment company (the claimant) was suing for an order against Donovan as she had within her contract certain types of restricted clients she would be unable to interact within the case of her termination or resignation. However, following her resignation from Berry Recruitment, it was discovered that she has joined another recruitment company and had dealings with individuals that fell under the restricted category. The outcome of the case, in summary, was that the Berry Recruitment company was granted an interim injunction against the former employee, as they had demonstrated that through her breaches, she had caused significant financial damage to her former employers.

    Beyond the new requirements, there are also penalties for those who leak trade secrets within the restricted period. Should a business wish to sue an individual for revealing trade secrets, the business entity will have to prove that the leak will or has led to a loss of profits. Section 17 (1) states that the one who leaks trade secrets will be liable to pay the trade secret holder damages to the appropriate level of the prejudice suffered.

    The whole idea of looking at a case based on its merits is nothing new. In the case of TQ Delta LLC v Zyxel Communications UK Limited, Zyxel Communication A/S. Within this case, it is stated: (concerning trade secrets) "What is necessary or unnecessary would depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered."

    The EU

    The UK trade secret law was implemented following the EU legislation on the same matter. The Directive (EU), 2016/943 of the European Parliament and the Council, was introduced by the EU on 8 June of 2016. As is the case with EU legislation, just because it has been formed and enacted, does not mean that it is enforceable across the EU. The EU consists of sovereign entities, and so each of the bodies within must then form their national legislation following and to the end that the EU has envisioned. The UK's Trade Secrets (Enforcement, etc.) Regulations 2018 do just this.

    The EU legislation begins by mentioning what the law shall not effect. Article 1 states that:

  • There shall be no effect which limits the ability to exercise the right to freedom and information, which includes the respect for openness and pluralism of the media.
  • It shall not affect other Union or national rules requiring holders of trade secrets to disclose information for reasons of public interest, including trade secrets, to the public or to administrative or judicial authorities to allow for those authorities to perform their duties.
  • It shall not affect the autonomy of social partners and their right to enter into collective agreements, following Union law and national laws and practices.
  • Beyond this, it is also the case that this legislation shall not limit or restrict the mobility of employees. What this means in the case for employees is that they should be able to use what information they wish to so long as it doesn't fall under the legal definition of a trade secret. Employees should also be able to use whatever skills they have acquired in further employment, so long as it follows the ordinary course of their job, and no other union or national laws are restricting it.

    Following this Article 2 defines the term, trade secret. The definition is the same as what is in the UK legislation. Article 8 concerns the time limitations within which the cases can go before a court. There is the aforementioned 6-year time limit, though the Article also states that it is upon the individual nations to produce the restrictions and penalties of their own with their national legislation. Further, Article 12 covers injunctions and how they work. Finally, Article 14 concerns damages. Similar to most things within the bill, it is primarily left up to the countries themselves to come up with the specifics.

    According to the EU, nations were required to ratify and implement the new regulation as of 9 June 2018.

    The UK has now implemented these regulations as a UK statutory instrument, and this is a highly positive move as it provides more solidarity and allows for more confidence within companies in ensuring their trade secrets are kept safe, and that they can reliably protect them with the support of the law.

     

    ]]>
    Mon, 03 Sep 2018 11:48:00 GMT
    <![CDATA[Mediation And Conciliation in UAE]]> MEDIATION AND CONCILIATION IN UAE

    "There are two sides to Every Story."

     

    Mediate over Litigate

    Mediation is a non-judicial means of dispute resolution mechanism, and it has become very prevalent because of the disadvantages or limitations faced in litigation. Mediation or conciliation has been for centuries in UAE as it has helped to resolve the disputes cheaply, efficiently and expediently. Sulh or amicable settlement has a long history within Arab and Islamic societies and have their roots in pre-Islamic Arabia. Sulh is the preferred result and process in any form of dispute resolution.

    As per the voting results of the Global Pound Conference (Dubai) 2017, 67% of the voters feel that financial and time constraints are the main obstacles or challenges that parties face when seeking to resolve commercial disputes and other significant problems voted were uncertainty and emotional and cultural constraints. We are all aware that the litigation is a very costly and time-consuming mechanism for resolution of disputes and it destroys the commercial or personal relationship between the parties. In past few decades, UAE has experienced an exponential amount of industrial growth and investment, but this has also increased commercial and labor disputes – effective and timely settlement of which is extremely important of UAE to maintain itself as a stable and attractive business and commercial hub.

    In this article, we track the legal and regulatory framework surrounding mediation and conciliation in federal UAE and Dubai.

    The 'How' of Mediation

            I.            UAE Federal Law

    UAE does not have a dedicated law to cover all necessary aspects of commercial, family or labor reconciliation. The mediation can categorize into two forms as below:

    a.       compulsory mediation;

    b.        voluntary mediation.

    Compulsory or mandatory mediation is an amicable dispute resolution process in which the parties are required, under the applicable law, to compulsorily go through the mediation process before they can move to a court. Voluntary mediation is, as the name suggests, an amicable dispute resolution process where parties opt to go through conciliation voluntarily as opposed to being forced by any law to do so.

    The UAE Federal Law Number 17 of 2016 (the Mediation Centre Law) provides for the establishment of mediation and conciliation centers for civil and commercial disputes. The Article 2 of the Mediation Centre Law provides that the minister or head of the local judicial authority can establish one or more mediation and conciliation center within the jurisdiction of the Court of First Instance. Article 3 of the Mediation Centre Law provides that parties can refer following kinds of the dispute to such established centers;

    1.       A civil or commercial debate not exceeding AED 500,000.

    2.       A civil or commercial dispute of un-known or non-estimated value.

    The Article 4 of the Mediation Centre Law provides below-mentioned disputes cannot be referred to a mediation and conciliation center established under this law;

    1.       Urgent and temporary orders and lawsuits.

    2.       Cases where the government is a party.

    3.       Rent lawsuits settled by committees specialized in rental disputes.

    4.       Labor lawsuits.

    5.       Personal status lawsuits.

    6.       Any other lawsuits which decide for settlement another Centre, committee or entity of similar competence.

    The Mediation Centre Law further provides the duties and obligations of conciliators, work procedures, termination of mediation and conciliation proceedings, etc. It is pertinent to mention that Article 15 of the Mediation Centre Law provides that the settlement reached in a mediation and conciliation proceeding is final and the judge overseeing the center shall have the power of a writ of execution, and the agreement does not entail the right to appeal in any way.

    The UAE Federal Law Number 26 of 1999 (the Conciliation Committee Law) provides for the establishment of conciliation and reconciliation committees at the Federal Court. Article 1 of the Conciliation Committee Law provides that one or more Conciliation and Reconciliation Committee can be set up at the seat of every Civil of Sharia Federal Court of First Instance and Article 2 provides that such committee shall be competent to settle civil, commercial and labor disputes of whatever value. The Article 3 of the Conciliation Committee Law further provides that the Federal Court of First Instance establishes such committee, cannot register any case unless the concerned parties submit a no objection certificate issued by the concerned Conciliation and Reconciliation Committee. Furthermore, the Article 7 of the Conciliation Committee Law provides that, if the parties reach to an agreement, then it shall be final, and the competent court shall have the force of the writ of execution, and it cannot be subject to any further review or appeal.

    The UAE Federal Law Number 8 of 1980 (the UAE Labour Law) provides provisions related to UAE labor law. The Article 6 of the UAE Labour Law provides that in case of a dispute the employer, the worker or any beneficiary thereof shall file an application to the competent Labour Department that shall then summon both the parties and aim to resolve the dispute amicably.

    The Federal Law Number 28 of 2005 (the Personal Status Law) governs the legal issues related to disputes arising out of personal status. Article 16 of the Personal Status Law provides that discussions about personal status matters should first come before the Family Orientation Committee which shall be responsible for conciliation between the parties. If the parties reach to a settlement, then it should be recorded in minutes and upon sanctioned by the competent judge, it shall be enforced as an executory deed and shall not include the right to appeal unless there is a violation of the provision of the UAE Labour Law.

          II.            Dubai Laws

    The Law Number 16 of 2009 (the Amicable Centre Law) provides for the establishment of the Center for the Amicable Settlement of Disputes in Dubai. The Article 4 of the Amicable Centre Law provides for the jurisdiction of the Centre. It states that the Centre shall have jurisdiction over all disputes, except following;

    1.       Summary and interim orders and actions,

    2.       Actions to which the Government is a party,

    3.       The steps beyond the authority of the Courts,

    4.       Works registered before the Courts before the coming into force of the provisions hereof.

    The Article 12 of the Amicable Centre Law provides that if the parties settle then, their settlement should be mentioned in the form of a reconciliation agreement as approved by the competent judge and shall have the force of an executive bond.

    Furthermore, as per the Article 1 of the Dubai Administration Decision Number 1 of 2017 the Centre shall have jurisdiction in the following matters;

    1.       Division of joint ownership;

    2.       If the value of the debt principal in a dispute does not exceed AED 100,000;

    3.       At the request of disputing party or both parties upon registration;

    4.       At the request of both parties in the cases raised before the courts of the first instance, or commercial, civil, or real estate courts regardless of the values involved following the approval of the competent chief judge of the circuit;

    5.       Request for the appointment of an expert.

     

        III.            Dubai International Financial Center (DIFC)

    The Rules of DIFC Court 2014 (the RDC 2014) apply to all DIFC Court proceedings in the Court of First Instance and Court of Appeal.

    The Rule 27.1 of the RDC 2014 provides that the Court can encourage parties to consider the use of alternative dispute resolution as an alternative means of resolving disputes or particular issues. The Rule 27.2 further provides that the DIFC Court believes the settlement of disputes by use of alternative dispute settlement mechanisms helps parties to save the cost, time, commercial relationship and offers a border range of solutions than litigation. The Rule 27.2 provides that the Judges will, in appropriate cases, invite the parties to consider whether their dispute or particular issues in it, could be resolved through alternative dispute resolution.

    Contractual Mediation

    Parties are also free to agree to resolve their disputes through private mediation by agreeing to an intervention or conciliation clause in their agreements. Several mediation centers offer mediation services to the parties in UAE life DMCC Mediation Centre, DIFC-LCIA Arbitration Centre, Abu Dhabi Commercial Conciliation and Arbitration Centre.

    Conclusion

    Although UAE or any of its emirates does not have dedicated legislation for enforcement settlement agreements arising out of private mediation, however, the above analysis of highlight the emphasis given to amicable dispute resolution process by this Arab nation. It is referred that parties take help of experienced mediators and mediation counsels to ensure that they understand the process and mechanism to negotiate effectively for their rights.

     

    ]]>
    Mon, 03 Sep 2018 11:20:00 GMT
    <![CDATA[The Steps in Patent Registration in the UAE]]> Inventing something new, including a new process or a novel item is often the first step in developing a company and launching a brand-new opportunity for an individual or a group.

    Each country is responsible for patent registration within its area. In the United Arab Emirates, patent registration is managed by the UAE Ministry of Economy, also known as MOE. Specifically, patents are managed by the Intellectual Property Protection Department, which is also the ministry and department which approves patents.

    In the UAE, patents have to meet specific standards to be registered. They must meet the criteria of novelty, non-obviousness, and industrial applicability. In other words, the patent must be for something that is unique, inventive and also has an actual application within a specific industry or across more than one industry.

    Patent Rejections

    To meet these three requirements is essential for acceptance of the application. The last criteria, or the requirement for industrial applicability, is very important and often overlooked. This limits the granting of patents to inventions that can be produced and used within an industry. Without this requirement, any type of abstract ideal could be patented and held, preventing actual development at a later point in time when technology and manufacturing capabilities catch up to the intellectual concept of the invention.

    There are many patent applications that are rejected in the UAE as well as in other registries in international countries. The role of MOE and the specific Intellectual Property Protection Department is to review the application, determine if it meets the criteria and if it can be patented.

    In some cases, the specific type of patent may not be in keeping with specific restrictions in the Patent Law. For example, it is not possible to patent a living organism such as a plant or an animal. However, specific scientific processes used in the development of microorganisms and microbiological applications can be patented.

    Medical treatment methods, including surgical procedures, mathematical or scientific principles or business methods cannot be patented. Additionally, any invention that is seen to have the potential to violate morals or public order may not be patented in the UAE.

    To avoid issues with having a patent application rejected, working with a patent lawyer is highly recommended. Choosing an international law firm is ideal if the invention may be patented in other countries or if there are international considerations in the manufacturing and marketing of the product, item or invention.

    Patent lawyers can also be instrumental in determining if patent rights already exist in the UAE for a similar invention. Unlike some countries, it is not possible to complete a search of currently registered patents through an official request or a specific department or website.

    Law offices can complete searches through journals of intellectual property which list patents as they are approved and granted. As this can be a time-consuming process without legal support, it is an important resource to use before going through the application process and paying the fees.

    The Steps Involved

    To file a patent in the UAE, there are multiple steps involved in the process. There is also the need for specific types of documentation which must accompany the original submission of the application.

    Each patent application requires the applicable forms to request a grant for a patent. This must be accompanied by information on the applicants for the patent as well as for any details of the authors. This can become complex if the patent is applied for by a company or a business entity. In these situations, the application must include the Articles of Incorporation or the Articles of Association, which need to be certified and legalized through the UAE Embassy. If the applicant is not the inventor, a Deed of Assignment must also be presented with the application. This also needs to be legalized at the UAE Embassy.

    In some cases, the application is a priority filing. This requires a priority document that is signed and notarised by a Notary Public in the UAE. When there is a priority document the term for filing the patent application is twelve months from the date on the priority documentation.

    In addition to this documentation, all drawings of the invention or concept need to accompany the application. An abstract must also be provided, detailing the specifics of the invention, including its application in industry. All documents must be submitted in both English as well as Arabic within 90 days of the filing of the application.

    For foreign companies or inventors, a Power of Attorney can be granted for a UAE law firm or other recognised entity to complete the application process. This power of attorney, which also has to be approved and legalized by the UAE Embassy, will accompany the application documentation.

    Upon review and acceptance of the application, the patent is then sent for examination. This process requires additional fees and can take up to two years to complete. During this process, the patent is closely examined for the three criteria, and it is possible that more information and documentation may be requested during this examination period.

    Should the patent be rejected, the applicant has sixty days to submit a request to have the application re-examined. Working closely with a patent lawyer to develop a comprehensive argument to address the reason for the rejection is the most effective way to overturn the rejection.

    If the patent application is accepted, the Ministry of Economy publishes the patent application information in the Official Gazette of the UAE. There is a window of sixty days for comments. During this time, anyone opposing the granting of the patent can present, in writing, any objections. This must include information as to why the patent should not be granted.

    This argument will be heard and considered, with the patent either being granted or rejected based on the argument and objection.

    The Time to Obtain a Patent

    As can be seen, the journey to obtaining a patent in the UAE can be challenging. With legal representation throughout the process, many of the common delays can be avoided, particularly when it comes to incomplete documentation and incomplete applications.

    For most new applications, from initial filing to obtaining the patent, the time frame is about eight years. Companies or individuals with patents for the same item in other countries can use that patent as a basis for filing an application in the UAE, which can speed up the process.

    Once a patent has been granted for the UAE, it is in place for twenty years and cannot be renewed. Each year of the term, there is a required patent fee which must be paid to keep the patent valid and prevent it from lapsing. Additionally, and this is a very important consideration, if the company or individual granted the patent does not use it in three years from the date it is granted, a third party must be granted favour or license to produce the item.

    With a valid patent in place in the UAE, no other company may produce or copy the invention. This provides the opportunity for the inventory or the company assigned the rights to the invention to fully develop the invention and create a market for their product or service. Visit the website Stalawfirm.com for more information.

    ]]>
    Fri, 31 Aug 2018 00:00:00 GMT
    <![CDATA[When to Hire Criminal Lawyers in Abu Dhabi: Advice for Visitors]]> Abu Dhabi is the capital of the UAE as well as the emirate of the same name. It is a beautiful city with amazing modern and traditional architecture from the various mosques in the city through to the very modern Louvre in Abu Dhabi and the striking and easily identified Etihad Towers.

    While Dubai may be the most well-known city in the United Arab Emirates, Abu Dhabi is quickly becoming equally as popular. This includes an increasing amount of tourism to the city and the emirate, as well as the movement of international businesses into the Abu Dhabi free zones.

    In addition, since 2004 and the new vision of Sheikh Khalifa for a more modern city, several large projects have been undertaken to increase tourism. This includes the development of Yas Island, which is a racing facility that includes a Formula 1 track and a Ferrari theme park.

    In addition, Saadiyat Island has been developed into a cultural area, including a Guggenheim museum, the Zayed National Museum, the Louvre Abu Dhabi, a maritime museum and a maritime museum and marina district. These attractions, as well as the traditional and iconic attractions in the city, are bringing in greater numbers of tourists every year.

    To increase international tourism, the leadership in Abu Dhabi has made some changes to this traditional city. While seen as much more conservative and more strict in following Islamic law, there have been changes in the laws to accommodate tourism, including a loosening of alcohol laws in specific areas of the city.

    While there have been changes in the law, it is still common for tourists to assume that they do not have to follow local laws, which can result in violations of the law. Other crimes that may be relatively minor in some western countries may be significant legal issues in Abu Dhabi, and hiring a criminal lawyer for representation is highly recommended to avoid any misunderstanding of the options and the significance of the alleged offense.

    Court Appointed Lawyers

    There are now court-appointed lawyers available to individuals in the UAE charged with specific types of crimes. These are the crimes that include the possibility of the death sentence or life imprisonment, which means they are serious felony types of crimes. Crimes included in this category are murder and attempted murder, drug convictions, arson with death so well as inciting suicide. These are also common death penalty crimes in many other countries.

    However, in the UAE, there are a variety of other crimes which also fall under the capital punishment category of crimes. Although the death sentence is rarely carried out in these crimes, long prison sentences are possible with a conviction. These types of crimes include rape, blasphemy, adultery, apostasy (renunciation of the Muslim faith or adoption of other religions), perjury, homosexuality, and aggravated robbery.

    For all other crimes, a court-appointed lawyer is not an option. This means the individual accused of the crime is responsible for hiring his or her attorney. Choosing an international lawyer at a top international law firm provides the resources, legal expertise and the experience in the UAE court system to provide the legal representation required in both significant as well as lesser types of crimes.

    While most tourists will not face capital punishment types of cases, there are other legal issues that can result in jail time or significant fines. Working with an experienced criminal lawyer familiar with the courts and working with prosecutors can be instrumental in getting these cases reduced or even dismissed without the need for jail time or significant fines.

    Alcohol Consumption

    In Abu Dhabi, most hotels and their restaurants, nightclubs, and bars serve alcohol. However, it is important to avoid being intoxicated in public, which means staying inside the hotel and off public streets and areas when consuming alcohol. Drinking in public, even if not intoxicated, is also forbidden. Visitors should always check with the hotel staff before assuming it is acceptable to drink outside of the venue.

    Visitors to the area cannot buy alcohol legally from stores, but it is possible for residents with a license to make these purchases. Visitors attempting to buy alcohol or making a purchase illegally can be fined and even jailed for this offense. For those staying in the area for work or business as residents, obtaining a license is possible. This license stipulates the amount of alcohol you can purchase.

    Drinking and driving in Abu Dhabi is a serious offense, as it is in most countries around the world. It is highly recommended for any alcohol-related offense to contact a criminal lawyer to help reduce the fine or even to have the charge dismissed. Often other charges, such as disorderly conduct or similar charges may also be included, which can make the potential of longer jail time or more significant fines a reality without legal representation.

    Public Displays of Affection

    In Abu Dhabi, as well as the rest of the UAE, tourist areas are typically not monitored for public displays of affection. If there is a complaint, however, this can become an issue that tourists have to face. It is also not allowed in the country to have a sexual relationship out of marriage, which means common-law relationships and partners are not recognised as such in Abu Dhabi. Having these relationships, including sharing a hotel room if not married, can result in deportation, fines or going to jail.

    In any public location, including parks, beaches, and cultural settings, couples should be aware that anything more than holding hands can be considered a crime. For same-sex couples, there should be absolutely no public displays of affection of any sort. As homosexuality is a significant charge under Sharia Law, same-sex couples need to be extremely careful in their presentation of their relationship throughout the country, even in tourist areas.

    Behaviours That Offend

    Swearing or using offensive terms or gestures in public, or even online, can result in a criminal charge. Individuals need to be careful to avoid using derogatory terms, religious themes or words or in making any type of gesture that may be interpreted as offensive.

    While these may seem like typical daily events in many Western countries, in the UAE they can result in jail time or even deportation. A criminal lawyer can often intervene in these cases and have the case dismissed or a fine rather than jail time or deportation considered.

    Taking Photos

    Most tourists to Abu Dhabi want to have photos of their visit. However, it is a crime to take photos of government buildings, military facilities or to take pictures of other individuals without their permission. Taking pictures in mosques and other important buildings and areas of the city can also be illegal, so always ask and confirm before taking any pictures to avoid possible legal consequences.

    Unfortunately, this is a common occurrence and, if posted online and in any way determined to be critical or derogatory, this can include significant prosecution. Some types of photography equipment, binoculars and other types of electronics may also require special licenses to be considered legal.

    Reading in advance and respecting cultural rules is a simple way to avoid these types of legal issues. If there is a charge, working with a criminal lawyer to address the issue is the best option for anyone holidaying or visiting the emirate. Click here for more information.

    ]]>
    Thu, 30 Aug 2018 00:00:00 GMT
    <![CDATA[A Guide on the Mining Industry in UAE]]>The Mining Industry in the United Arab Emirates

    The mining industry has for centuries been the driving force behind economies. Whether it is the mining of minerals or metals or precious stones, each mining industry plays a crucial role in the economic activities of many states globally. This principle is no different from the United Arab Emirates, and although the region's economic uprising was mostly dependent on the finding of oil, the mining industry in the region is fast growing and becoming a highly profitable contributor to the country's GDP. In the United Arab Emirates, the list of minerals mined in the area is lengthy and ranges from copper and gypsum mines to the extraction of metals and precious stones. With the boom in the technological advancements in the UAE, the establishment took place, of the fact that the country applies the most advanced technologies and the best scientific methods in the mining industry. These methods have ultimately confirmed the variety and abundance of minerals available in many of the different Emirates.

    The industry in the country is attracting many international companies who are successfully investing in this economic sector. This industry not only includes the process of mining the minerals but as it states that in the UAE the exports of products of mining as both raw materials and as finished goods is steadily increasing. The infrastructure within the UAE is a haven for the mining industry with port facilities and land transport facilities functioning optimally.  For this Article and under the UAE legislation, the utilization of the acts of quarrying and mining will be interchangeable. 

    Mining/Quarrying Law

    There are limited laws specific to any of the Emirates regulating mining in the United Arab Emirates;  the Federal Laws governing all mining and quarrying activities in the region as a whole. These regulations include:

    -    Federal Environment Law;

    -    Federal Cabinet Resolution Number 20 of 2008 (Quarries and Crushers Regulations);

    -    Federal Ministerial Resolution Number 492 of 2008 (Quarries and Crushers Environmental Guidelines);

    -    Federal Ministerial Resolution Number 110 of 2010 (Quarries and Crushers Regulations).

    When an entity within the UAE wishes to carry out mining activities within the region, such an object must obtain an environmental license from the relevant local authority. Concerning this license, there are specific guidelines to which these entities must comply. In addition to the instructions, the regulation also provides for the application of penalties in the event of any breach. The obligations provided for by the guidelines and the determination by specific circumstances and facts of each case, but some of these include:

    -    Article 15 of Federal Cabinet Resolution Number 20 of 2008, this piece of legislation states that any person or entity, by act or omission, causes damage to the environment; as a result of violating the provisions of this resolution shall have the responsibility to pay all necessary costs for the repairing or eliminating the damages and any consequential indemnities.

    -    Article 16 of Federal Cabinet Resolution Number 20 of 2008, this piece of legislation further clarifies the indemnification of the environmental damage as per Article 15 to include, injuries that affect the environment itself and prevent or reduce the lawful use thereof, temporarily or permanently, or impair its economic or aesthetic value;

    -    Federal Ministerial Resolution Number 110 of 2010, this piece of legislation provides for the quarry rehabilitation or restoration process. Article 13 of this Law provides that quarry operators must perform progressive improvement as they extract their sites. This provision entails that reconstruction shall be done sequentially within a reasonable time after extraction of quarry resources is complete. As the removal of one area of the pit or quarry, completion of rehabilitation must be in the areas where the quarry reserves have been stopped or exhausted. It further provides how such reconstruction is beneficial:

    ·         It reduces the open spaces within a pit/quarry;

    ·          It reduces potential soil erosion; and

    ·          It reduces double-handling or soil/waste materials. 

    ]]>
    Mon, 27 Aug 2018 10:07:00 GMT
    <![CDATA[Immigration Law of The UAE]]> Immigration Law of The UAE

    There are several laws and regulations put in place to control the flow of foreigners entering and exiting the country's territory. Federal Law Number 6 of 1973 as amended by Federal Law Number 13 of 1996 [the Immigration Law] contains the laws governing immigration regarding the entry, and residency of expatriates in the UAE. Additionally, UAE government passes several regulations about immigration under various ministerial decrees and orders, the most relevant of which, regarding the procedure, is Ministerial Decree Number 360 of 1997 [The Decree] to Issue the Executive Bylaw of the Immigration Law.

    To legally enter the country, an individual would require a valid visa as defined in the Decree as "...Permission to be posted on the passport or on the travel permit of a foreigner which will allow him to enter the country. It should accompany by all persons included in passport unless the visa specifies the names of beneficiaries of the visa."

    A visa allows entry into the UAE for short or temporary periods although some of these periods are renewable. Below are the types of visas one can attain before entering the country and depending on their purpose of entry as established in Article 8 of the Immigration Law which states that "Any entry permit or visa shall state the purpose of entry into the country."

    Types of Visas:

  • Tourist Visa.
  • Transit Visa.
  • 3.       Visit Visa

  • Multiple Entry Visa.
  • Residence Visa.
  • 96-hour Transit Visa.
  • 14-Transit Visa.
  • 8.       60-day renewable Visa.

     

     

    The rule regarding foreign visitors to enter the UAE is that all visitors require visas except citizens of GCC countries (Kuwait, Saudi Arabia, Bahrain, Oman and the UAE) and the government exempt the following citizens:

  • Andorra
  • Australia
  • Brunei
  • Canada
  • Hong Kong
  • Ireland
  • Japan
  • Malaysia
  • Monaco
  • New Zealand
  • People's Republic of China
  • Russia
  • San Marino
  • South Korea
  • United Kingdom
  • United States of America
  • Vatican City
  •  

     

    Citizens of the countries mentioned above do not need to acquire a visa to enter the UAE. Such visitors can obtain permits at the airport, for a fee of AED 100. It allows the visitor to stay in the country for up to 60 days and have the option to extend the trip for another 30 days. Extensions may be applicable for at the Naturalization & Residency department. The fee for extension is AED 500, and the party should submit it within 60 days of the trip.

    Importantly, for applying for any visa or permit, it is necessary to attain the sponsorship of either a UAE resident or other legal entities such as corporations (employers) or hotels. If a hotel or a resident of UAE is sponsoring the visa or permit, they would usually deposit the visa at the airport for collecting the permission upon arrival.

    The UAE bodies, which are responsible for issuing visas and permits to foreigners wishing to enter the UAE, are the Naturalization and Immigration Administration, the International Airport Authority of any member emirate and any other institute selected for this purpose by the Ministry of Interior.

    Entry permits are different from visas, and one can obtain it only within the UAE from the Headquarters of Immigration and Residence. Below are the types of grants available to foreigners to stay legally in the UAE.

  • Employment Permit.
  • Residence Permit.
  • Residence for Employees Permit
  • Residence with Work Permit
  •  

    96-hour Transit Visa

    Article (7) of the Immigration Law describes that the "the Immigration authorities in the international airports of any member emirate in the UAE may act by rules set by the Ministry of Interior grant aliens entry the country visas for ninety-six (96) hours as per the following conditions:

    a. The foreigner should have a passport or a travel permit, valid for entry in the Country and the country of destination.

    b. He should have a ticket to continue his trip.

    c. He should leave the country within ninety-six (96) hours from the time of obtaining the visa.

    Visit Visa

    Article (12) of the Immigration Law defines that "Any outsider entering the Country with visit visa or authorization should need to leave the Country on the expiry date of such visa or consent either through cancelation expiry period thereof - unless he has gotten a habitation permit." An outsider can get visit visa for various purposes. In spite of the fact that systems are pretty much similar for everyone, conditions differ contingent upon who the guest is and who the guest's support is. The lawfully allowed purposes for which one may enter the UAE on a visit visa are the following:

    • To visit family or friends that are residents of the UAE

    • To attend a juridical person

    • For tourism purposes

    If the tourist remains in the country beyond the legalized period, he is fined AED 100 a day with an additional AED 100 for airport documentation processing fees. Once an individual attains a visit visa, he must travel within 60 days of its date of issue. Otherwise, there should be a renewal of the permission, and a fee of AED 150 is applicable.

    Article (11) of the Immigration Law prohibits visitors to work when on visit visa as stated "The outsider who gets a visit visa may not work anyplace in the nation with or without pay or for his own. If the visa is for work purposes for an individual or a foundation, the holder may not work for another individual or foundation without the composed permission of that individual or foundation and the endorsement of the Directorate of Nationality and Immigration".

    Multiple Entry Visa

    Residents of the accompanying nations can get a 90-days various section visit visa substantial for a half year from the date of issue for a stay of 90 days.

  • Austria
  • 2.      Belgium

    3.      Bulgaria

    4.      Croatia

    5.      Cyprus

    6.      Czech Republic

    7.      Denmark

    8.      Estonia

    9.      Finland

    10.  France

    11.  Germany

    12.  Greece

    13.  Hungary

    14.  Iceland

    15.  Italy

    16.  Latvia

    17.  Liechtenstein

    18.  Lithuania

    19.  Luxembourg

    20.  Malta

    21.  Netherlands

    22.  Norway

    23.  Poland

    24.  Portugal

    25.  Romania

    26.  Seychelles

    27.  Slovakia

    28.  Slovenia

    29.  Spain

    30.  Sweden

    31.  Switzerland

     

     

    Penalty and Punishments

    Article 30 of the Immigration Law expresses that If a guest goes to the UAE by any methods for transportation by rupturing the arrangements of Article (2) where no guest ought to enter the nation in any capacity without a legitimate international ID or a movement archive. Also, the provisions of Article (7) as mentioned above of the Immigration Law, the Directorate of Nationality and Immigration may order deportation and order the owner of the transportation to take the illegal visitor out of the country, and the owner shall bear transportation expenses. Any captain of any transportation means who refuses to carry out an order issued to him by the preceding article may be punished by a fine not exceeding AED 2000. If a visitor enters the country and refuses to obey the deportation order, he shall face imprisonment for a period not more than four months and a fine not exceeding AED 2000 as mentioned in Article (31). Article (32) explicitly indicates that if the owner of any means of transport or the responsible person attempts to bring any person inside the country by violating the provision of Immigration Law shall be imprisoned for a period not more than one year and fine not exceeding AED 5000. Article (33) mentions that any person, who gives misleading statements to avoid the provisions of this law, will face imprisonment for a period not more than four months and a fine not exceeding AED 2,000, and the court may order his deportation from the country. Article (34) Any person who falsifies a visa or entry permit for entering the country or residing therein, or any document to avoid the provisions of this law, or uses knowingly any forged document. The defaulter will face punishment by way of imprisonment for a period not exceeding three years and a fine not exceeding AED 10,000, and the court may order his deportation from the country. Article (36) states that "any person attempts to commit a crime punishable under this law or participates in that crime or assists or induces or urges others to commit such crime, shall face punishment with the prescribed punishment for that who commits the crime itself."

    The Court of Cassation (Case number 268 of 2010) decided on 30 November 2010 and referring to Article 22 and 28 of Federal Law Number 6 of 1973 read with Article 184 of Law of Civil Procedures as held as under:

    "the Ministry of the Interior is not obliged to accept the amendments made by a resident foreigner to the particulars of his residence permit under which permission to reside has been granted, including the full name, unless there is a legislative provision requiring the Ministry to do so, because a residence permit is not an absolute right that a foreigner has, and the grant of a residence permit is an act of national sovereignty. Likewise, the Department is not obliged to state the reasons for not accepting any amendments, and the grant of a residence permit to a foreign male who is married to a UAE woman is a permissive matter for it pursuant to article 28 of the Implementing Regulations to Federal Law No. 6 of 1973 relating to immigration and residence of foreigners, and the amendments thereto. The Department may cancel the residence permit of a foreigner at any time for reasons connected with the public interest, pursuant to article 22 of the aforesaid law."

    In case 323 (Judicial Year 26) decided on 25 April 2005, the Court of Cassation discussing the effects of illegal employment held that:

    The mere fact that the employment of an employee by the employer is illegal under UAE law does not disentitle the employee to monies contractually due to him from the employer.  That is a principle of Islamic law that must be applied under the Constitution of the UAE.  That applies even notwithstanding that both the employer and the employee may be liable to penalties under civil law for breaching immigration and employment rules.  A further reason that the employee is entitled to his dues irrespective of the legality of the contract under UAE law is the Islamic principle against unjust enrichment.  The employer would be unjustly enriched if he had the benefit of the work of the employee without paying the contractual dues.

    ]]>
    Wed, 15 Aug 2018 13:33:00 GMT
    <![CDATA[Seychelles Offshore Company formation]]> Seychelles Offshore Company formation

     

    Established in the warm cerulean waters of the Indian Ocean safely outside the cyclone belt, Seychelles is a standout amongst the perfect environment. With 115 islands scattered in more than 1.4 million square kilometers of warm clear waters, Seychelles offers a consistently extending kaleidoscope of encounters to the guest looking for quality and variety. From sculptures to untouched forests and private resorts, tourists get spoiled due to the easy availability of island benefits. The islands of Seychelles have more to offers apart from its extraordinary beauty, that is to establish an International Business offshore company (IBC or Offshore Company).

    Seychelles IBC is the most famous and flexible kind of offshore company available to foreign investors in the country. Similar to other offshore companies, IBC of Seychelles has the objective to encourage foreign investment and to enhance the commercial market. Being an IBC, it has the minimum formalities of documentation and procedures.

    Seychelles IBC is as similar as other International business company around the world. The introduction of the Seychelles International Business Companies Act, 2016 (IBC Act) which replaced the previous Seychelles International Business Companies Act of 1994 has invited numerous foreign investors to incorporate their businesses in Seychelles. According to IBC registers, around 150,000 (one hundred and fifty thousand) companies have registered their business in IBC, with an average of 600 (six hundred) companies establishing business every month.

    Advantages of Seychelles IBC

              I.            Tax Exemptions

     According to the IBC Act, Article 361, Seychelles IBC is free from paying any tax on income and profits of the company. Apart from this, Offshore Companies does not have to submit stamp duties on any business transaction, especially in property transfers or any transfers concerning shares, debts or any securities. Although the companies registered in Seychelles IBC are free from paying tax, however, the companies should oblige with minimal requirements as follows:

    ·         Companies are restricted to pursue business outside the territory of IBC;

    ·         Companies cannot own properties in Seychelles;

    ·         Companies willing to undertake banking and insurance activities must obtain a relevant license;

    ·         Companies cannot conduct operations in regards to securities;

    ·         Companies are strictly not allowed from carrying out gambling activities;

    Regardless of the restrictions mentioned above, Offshore Companies can still engage themselves in the following activities:

    ·         Companies can have Seychelles local bank accounts and can accept deposits;

    ·         Companies are allowed to maintain book-keeping;

    ·         Companies can hold shares and securities in another IBC company in Seychelles;

    ·         Companies can register vessel and aircraft in their name;

    ·         Seychelles residents can also open an IBC company.

            II.            Timelines for incorporation

    Compared to schedules for incorporating a company of other countries, Seychelles has the best services by providing license within 24 hours, subject to the relevant documents submitted on time.

          III.            Government licensing

    Seychelles IBC's seek a minimum fee of USD 100 for government registration, irrespective of the paid-up capital amount, which is in comparison with IBCs in other countries is the cheapest.

          IV.            Confiscation provisions

    Another essential advantage of establishing an Offshore Company is special confiscation provisions. The requirements for the confiscation of any shares or others interest in IBC by any foreign governmental authority states that the company can file an application with Seychelles court and can obtain a decision ordering the company to release the rights of shareholders. 

            V.            Personal Information

    Seychelles IBC authority does not share any personal details or identities of the shareholders, directors or any beneficial owners of the company to safeguard the particular interest of the members. Also, new IBC companies are not required to submit any data with regards to identities of the shareholder. Companies have to offer MOA (Memorandum of Association) and AOA (Articles of Association) with no disclosure of shareholders information.

    The government authorities, however, in insufficient circumstances can ask for personal information of the shareholders. Authorities can only request specific information if the disclosure is a part of an ongoing investigation of the Offshore Company.

          VI.            Paid-up capital requirements

    Offshore Companies are not mandated to have a minimum paid-up capital for registering their business. Also, companies are free to mention any amount about the wealth in relevant company's documents. Additionally, owners can provide details about the money at the time of registration. Also, there are no timelines as to when

    Corporate Structure

    Offshore Companies in Seychelles has a flexible organizational structure with exclusive features as follows:

             i.            The IBC companies will have a legal personality and will have powers as a natural person;

           ii.            Entities must satisfy the requirement of a minimum number of shareholders and directors: in this case one shareholder and 1 director who can be the same person;

         iii.            There is no interference of the local director is required. Thus, foreign shareholders can hold 100% shareholding in the company;

         iv.            Companies can have corporate or individual shareholders;

           v.            There is a requirement for regular Annual General Meeting;

         vi.            Directors of the company have the right to vote through proxy;

        vii.            Companies can at their discretion make amendments to their corporate structure.

    Compliance Requisites

             i.            IBCs in Seychelles are obliged to maintain registers for shares, directors, owners;

           ii.            The company must keep the records of the complete information of the company at the registered office of the company;

         iii.            If the company's documents are not present at the registered office, the board of directors must pass a resolution stating the place where the company retains the registers;

         iv.            The company must keep accounting records which should indicate the assets and liabilities of the company;

           v.            There is no mandate for an organization to submit accounting records to the registrar or any other government authority;

         vi.            The company is not required to maintain an auditor.

     

     

    ]]>
    Wed, 15 Aug 2018 12:56:00 GMT
    <![CDATA[Reliance on Oral Promises and the concept Statute of Frauds and Promissory Estoppel]]> Reliance on Oral Promises and the concept Statute of Frauds and Promissory Estoppel

    Reliance on oral promises is a significant aspect of real-world litigation. In what follows is a hypothetical example of the application of dependence on verbal agreements; A woman moved from London to Dubai to work for a company based in Dubai. This woman signed a lease for a villa in Dubai. After three months of employment as a manager at the company, such company fired her from her position. The woman went on to sue to company alleging a breach of an alleged oral agreement that she would be under the employment of the company for two years. It is understandable that a Court might question her claim that the company had promised her two years of work. In circumstances where a promise occurred, it is acceptable for a court to examine whether her reliance on such promise was reasonable and whether the termination of her employment before the expiration of the period of two years was reasonably foreseeable. One can speculate whether the Court will find in favor of the reliance on the promise or not. However, a Court will probably dismiss her claim and base such dismissal on the contractual law concepts of promissory estoppel and statute of frauds. The use of this concept is to prevent Courts from considering claims-based on reliance on oral agreements. However, this does raise questions. 

    The doctrine of estoppel applied to the statute of frauds

    This law is a concept concerning which specific types of contracts regarding which the execution of such must be in writing. The exact form of the enactment of frauds differs between jurisdictions. However, generally accepted arrangements to be completed in writing according to the statue include:

             I.            Those contracts for the sales of land;

           II.            Those contracts for the purchase of goods above a specific monetary value;

         III.            Those contracts concerning which the completion will not take place in under one year;

        IV.            Those contracts in which one party is to pay the debt of another party.

    On the other hand, promissory estoppel is a concept of law that a promise is enforceable by law, regardless of whether it was made with or without formal consideration – if a person promises something to another person who then relies on such promise to his subsequent detriment, that promise may be considered enforceable by law.

    Concerning the execution in writing of the abovementioned contracts, the following provisions may apply. Should there be a partial performance by a party to an agreement for goods or real estate, the court may be compelled to enforce an oral real estate contract since the court cannot efficiently or fairly place the parties in the position they were in before the commencement of the agreement.

    Another way in which a party can be exempt from the restrictions placed on such party by the statute of fraud is through admission. In such case, if one of the parties to a contract admits that that contract binds them, either by a statement or action, they then cannot claim that the statute of frauds relives them from their obligations.

    Promissory estoppel is one of the reasons that the statute of frauds ceases to apply to a contract. Promissory estoppel can end up in the enforcement of agreements that the Statute of Frauds would otherwise disallow if either of the parties made a justifiable reliance of the other party's promises. Promissory estoppel will apply if such reliance by a party resulted in harm to the party that was relying upon it, and that the party that put forward such promise could have reasonably foreseen the reliance of the other party. In this instance, the only way to avoid committing and injustice would be to enforce the contract.

    Promissory estoppel can arise in contracts of sale of real estate, contracts regarding which the completion cannot happen in a year and agreements for the satisfaction of another party's debt, those abovementioned. There is an exception awarded to arrangements in which one party assumes the liabilities of another. If the sole reason for the assuring party to agree is selfish, or that the proprietary reason is to ensure that the responsible party also pays the debt owed to the assuring contractor, then the contract may not be required to be in written format.

     If the agreement is between two parties, a memorandum can work to invalidate a defense by a party stating that the Statute of Frauds makes the contract void ab initio. A memo can take on many forms, but it is a note exchanged by two parties that defines the subjects discussed in a meeting. These memorandums do not have to take a particular format to invalidate a defense reliant upon the Statute of Frauds to escape liability

    Use of promissory estoppel to circumvent the statute of frauds

    According to precedent, many courts refuse to use promissory estoppel to avoid the statute of frauds. This refusal is due to the fear that oral evidence, if not excluded by the law, will cause prejudice. It is also apparent, however, that in many jurisdictions, the authority is willing to protect promises which, rely on an agreement to their detriment and have incurred unconscionable injury.

    An example of such use would be a mother and stepfather told their son that should stay at his residence and work on the farm His stepfather would convey such farm to him upon the death of the last survivor between the mother and father. In reliance upon such promise, the son gave up all of his business and educational opportunities to work and stay on the far. Upon the death of his stepfather, it was apparent that the stepfather had reneged on the agreement by leaving his share of the property to his grandson. In such a case the grandson would be estopped from asserting the testament.

    The doctrine of estoppel to profess the statute of frauds has been applied consistently by the courts to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may occur in an unconscionable injury that would inhere from refusing the enforcement of the agreement. This fraud would happen after one contracting party has been induced by another to change such contractors position in reliance on the contract seriously or in the case of unjust enrichment that would result if a party who has gained the benefits of the another's performance were allowed to rely upon the statute.

    Both unconscionable injury and unjustified enrichment were found to exist in the context of promissory estoppel. Most cases apply unconscionable injury as the threshold criteria for the determination of the proprietary application of promissory estoppel. The future intention of the promisor is the critical element of promissory estoppel; it differentiates an action from that of part performance in that partial performance does not constitute an unconscionable injury. 

    Legality promises in employment in the UAE

    Should either the employer or the employee in a contract of employment wish to terminate such contract, they may do so. However, such agreement to end must be in writing and consented to by the employer.

    Concerning an agreement to employ and on what salary, the next example will depict a situation of such occurrence in the UAE. A recruitment agent orally promised an engineer from India that there was a position in the UAE as an engineer with a salary of AED10,000. When the engineer arrived the job he was placed in was that of a supervisor and was only provided with remuneration of AED6,000.

    In this case, because the party which offered the former package to the engineer was a recruitment agent and that the engineer did not receive any written confirmation from the employer regarding the terms of his employment. He will not have a claim against his employer for violating an oral promise.

    Oral promises regarding leasing property in the UAE

    In the below-mentioned example will be a depiction of the standing of a verbal commitment concerning leasing in the UAE. A woman moved into an apartment as was aware of the fact that she would only be residing in such apartment for six months. However, she paid the full years rental on the oral assertion of the rental agent that if she should give one month's notice in her fifth month of rental that she would receive five months rental in return. On the approach of the fifth month, the women notified the agent of her intention to move from the apartment. On the confirmation from the agent, the woman vacated the residence, and the rental agent informed her that the rental amount already paid would be paid to her in a week. The money ultimately was not paid back to her.

    In the eyes of the law according to this matter, the fact that the woman took out an agreement for an entire year will take priority over the verbal agreement. The verbal agreement that allowed the woman to vacate early with a promise of the return of some of the rental monies will not withstand in court. The court can only be terminated early if there is a specific clause in such contract that allows for such early termination or if the landlord agreed to it in writing. Without proof of the oral agreement, the written agreement will take precedence.

    Jungquist v. Nahyan, 940 F.

    This case involves a terrible boat accident that took place in Abu Dhabi in the year of 1993. The plaintiff was a minor American female living with her parents in Abu Dhabi. The allegation is that such accident occurred on the return trip to the docks in which the defendant drove the boat recklessly through a dangerous channel after intaking alcoholic beverages. The defendant's speed-boat collided with the that in which the young girl was in, causing her to be thrown from the vessel and struck by the propeller of the defendant's boat. The young girl now suffers from brain damage due to the accident.

    The plaintiff in the abovementioned case alleged that the defendant approached them after the accident and offered to pay all costs and damages in exchange for the plaintiff not to involve the authorities or embassy. The motive behind such proposition was alleged to protect the defendant from any resulting personal or political repercussions that would derive from the accident. The plaintiff stated that the performance of the contract was in part in the District of Columbia, where the young girl was receiving medical treatment for eight months at the defendant's expense. The defendant paid such costs from his United Arab Emirates Bank account. Upon the establishment that the girl's condition was permanent and that she would need indefinite medical care, the payments ceased. 

    The plaintiff then sued the defendant for a multitude of claims including breach of contract and promissory estoppel

    Concerning this case, the court allowed limited jurisdictional discovery, to make sure that the allegations against the defendant and others named in the claimant were not baseless. The defendant denies any involvement in the accident but has admitted to being at the scene, as well as following the ambulance to the hospital and visiting the young girl in the hospital in Germany. These statements are consistent with the version of the events and also corroborate the plaintiff's detailed allegations. For such reasons, the court denied the defendants' motion to dismiss and the court is going to issue an order.

     

    Conclusion

    The concept of promissory estoppel to defeat the statute of frauds has been widely utilized and occurs under a multitude of guises. The understanding is that under such theory a third party can seek such support against a promisor, by just establishing the elements of the principle.

    In our world today, everything happens at such a high velocity, especially business. Deals are being made at the dinner table or in the hallway, and although the execution of all agreements should follow the strict conditions that they are in writing, this is not the way our world works. The reliance on an oral agreement or promise must be reasonably foreseeable by the promisor to qualify under the doctrine of promissory estoppel. However, the reasonability of such is judged on a case by case basis. The Statute of Frauds is a concept in which all agreements and promises are to be in written form. However, the doctrine provided a layer of protection for transactions which are not in writing. One should, however, err on the side of caution as the legal standing of such promises or agreements is not a guarantee.

     

    ]]>
    Wed, 15 Aug 2018 12:23:00 GMT
    <![CDATA[Trade Dress Protection]]> Trade Dress Protection

    The expansion of international trade and increase in foreign direct investment is likely to have contributed to the conflict of trademark laws between foreign countries. More recently a fundamental issue arising out of the application of trademark is law the subject matter which it can protect. This article will be on trademark dress protection focusing on trademark protection of a single color or design with or without secondary meaning. The bulk of it will comprise a comparative analysis of Trademark Law in both the USA and the UAE, following this will be a critical analysis of the academic debate. It will delve into both US and UAE legislation along with reviewing the most important literature such as Mires (2013), Kellner (2011), and Bell (1997).  Furthermore, it will discuss the limitation of the concept of aesthetic functionality since it is non- functional while, on the other hand, debating the veracity of aesthetic feature as a defense mechanism for trade dress protection of single color since it will increase the sale ability of the product. Finally, this article debates over whether copyright or trademark laws are more advantageous for the stability of the computer user interface.

    As per the Trademark Law

    As per Article 2 of the Trademark law of 1992 of UAE states. "Trademark protection stretches to anything that takes a distinctive form, including names, terms, signs, letters, numbers, drawings, symbols, locations, hallmarks, stamps, pictures, vignettes, notices, packages or any other mark or combination of marks with a distinctive form and in use."   Sound can also form part of the trademark. But there are certain restrictions on the registration of the signature such as it cannot be registered if it violates public morality, without any distinctive character, identical to a symbol, etc.  On the other hand, according to the United States Trademark and Patent Office (USTPO). "Any word, name, logo, or device or any combination thereof, other than a trade name in its entirely, adopted and used by a person to identify their goods and distinguish them from a comparable good made or sold by others."  

    Trade Dress Protection- Aesthetic or Utilitarian Functionality

    Trade Dress is a legal construct referring to the physical appearance of a particular product such as its color, design, structure, texture, etc. The definition of trade dress protection under the United States Trademark law recognizes trademark on dress and color may be registered once it has secondary meaning. Justice Breyer discovered this concept in the case of Qualitex v Jacobson Products where he held that the color could be constituted as a descriptive trademark if it has secondary meaning as per the Lanham Act, 15 U.S.C. USTPO which has broadened the horizon of the subject matter protected under trademark.  In Qualitex the U.S Supreme Court recognizes trademark protection of single color as long as there is proof that it contains secondary meaning. In another U.S Supreme Court case, Wal-Mart v Samara Brothers the court analyses the doctrine of aesthetic functionality for protection of trademark design without proof of secondary meaning. Later on, as per the U.S district court findings in the Qualitex, it concludes that trade dress or trademark protection of product design is better served with secondary meaning so that users can identify the source of the product. 

    Academic literature and courts debate that if trade dress has a characteristic of inherent distinctiveness than secondary meaning to be shown. Inc. v Taco Cabana Inc illustrates that both competing restaurants had similar interior décor as well as exterior painted in vivid color with neon stripes. Taco Cabana charged Two Pesos for infringing its trade dress. The Supreme Court held that trade dress could be inherently distinctive and for that secondary meaning is hidden. Henceforth, till today the intentions of the Supreme Court is not clear regarding inherently unique characteristics under trade dress is for packaging or product design.

    Furthermore, in the case of Christian Louboutin v, Yves Saint Laurent (YSL) in 2008 Louboutin applied for trademark registration for protection of single red color in the sole of women's footwear contrasting the upper layer of the shoe. The United States trademark registration awarded Louboutin with the "Red Sole Mark" to protect the lacquered red sole on footwear. But in 2011, Christian Louboutin sued the fashion designer Yves Saint Laurent for infringing his trademark of monochromatic red shoes which Louboutin's virtual identity upon the shoes. The District Court for the Southern District of New York held that trademark protection of single red color sole is ineligible since unique colors in the realm of fashion are per se aesthetically functional. Judge Marrero appreciated the concept of trademark protection of the single color in the fashion industry, but at the same time, he proves that it could harm competition in the fashion industry. Hence, he defined the red sole mark to be aesthetically functional and thus cannot be eligible for trademark protection.

    Similarly, the US district court in Deere & Co. v Farmhand Inc. held that the protection of color of John Deere Green as per Lanham Act, 15 U.S.C does not fall under the doctrine of aesthetic functionality.  Furthermore, even the defendant in the above case contends that if the court gave protection to the color. John Deere green, under section 43(a) of the Lanham Act, then it violates Section 2 of the Sherman Act, 15 U.S.C 2 and violates section 3 of the Clayton Act, 15 U.S.C. 14. 

    Furthermore, the issue of aesthetic functionality and useful functionality has been debated over the years by prominent scholars and US Supreme Court. Aesthetically function means when the product consists of non- functional element, and hence such product is not eligible for trade dress or trademark protection. The aesthetic function identifies by the use, purpose, cost, and quality of the product. Academic scholars like Michael Mireles raises an issue that generally utilitarian functionality attempts to prohibit trademark law from protecting symbols and devices with some utility and aesthetic functionality directs at symbols and methods which do not have service but have good reason to prevent trademark law from defending them against the interest of the competitors.  Henceforth professor Mireles thinks that it is relevant to apply aesthetic functionality test in trademark protection of single color as it is non-functional.  Therefore, aesthetic functionality compresses and limits the scope of trademark protection of single color since the subject matter which is non-functional cannot be protected under the trademark law as per the United States legal system.

    It is critically argued by academic scholars like Mireles (2013), whether aesthetic functionality restricts the cumulative scope of trademark protection of single color or it uses as a defensive mechanism to have a negative impact upon trademark protection or trade dress protection on the competition. Aesthetic functionality widens the scope of trade dress protection as it is applied to design, shape, color, letters, stamps, and things which are virtually existing. As per Mireles (2013), functionality doctrine is a mess but the concept of aesthetic functionality provides necessary space required for the public domain, innovation and competition are certain. Increase in trade dress protection has increased product's sale ability. On the contrary, it also limits the scope of the trade dress protection as under aesthetic functionality owner cannot claim rights under a particular mark. Furthermore, features do not identify the source and there is no chance to establish secondary meaning.

    Additionally, the UAE federal trademark laws (hence referred to as 'UAE trademark laws' are similar to the federal laws of the US trademarks laws. The UAE trademark office incorporated registration of single color trademark into its legal system in 2007 after the case of Uncle Ben's range of rice production.  The color used for Uncle Ben's packaging was a particular shade of orange (Pantone 021C) which is a distinctive key feature for the consumer to identify the course of the product. As per Article 2 of trademark law UAE Mars secured the trademark for Uncle Ben's orange color packaging. UAE trademark office accepted and registered the single-color mark as per class 30 of the classification mentioned in the World Intellectual Property Organisation (WIPO). It illustrates that UAE trademark office allows protection of less well-known trademarks too.

    From the above comparative analyses between U.S trademark laws and UAE trademark laws, it concludes that the UAE trademark laws have more flexible approach than the U.S. trademark laws even though federal and state laws regulate it. The protection of single color trademark was adopted earlier in the UAE legal system than in the U.S legal system.

    Trade Dress Protection for computer user interface

    The concept of trade dress protection for a computer has been argued by many academic scholars on the issue of whether to apply for trademark or copyright for safety and security of the product. The identity of the computer is through its software. For example, MacBook or any apple product is identified through its IOS software whereas any other laptop has a different operating system such as Macintosh or Windows. It shows that Apple has acquired unique identification for its computer user interface which makes it easier for the consumer to identify Apple products. The screen and developing a program of the computer is the selling point in the eyes of the customer.  Copyright plays a vital role here to protect the outer structure and design of the product but not the whole product. On the other hand, trademark protects composite of the entire product along with its graphics and packaging. Under copyright, neither the manufacturer of the operating system nor the manufacturer of the application program can claim authorship since the whole product is not secured.

    Both the academic literature and litigants have expressed that copyright is just for the security of looks and feel of the product and trademark is a better source of protection as it protects overall product which is appealing to the purchasing public.

    Kellnar's (2011), opinion is supported by another scholar Bell (1997), who states that virtual trade dress has a broader horizon about the protection of the product than either copyright or patent would offer.  Even the consumers trust the quality of the product purely on the aesthetic experience that it provides. Virtual trade dress reflects elements of the trademark. It has been criticizing that virtual trade dress could become a real problem if the current legal and technological trend continues. Therefore, consumers value real trade dress primarily over virtual trade dress as under actual trade dress even the hidden qualities of goods and services are displayed. It is essential to implement uniform standard rules and regulations for the protecting party's trademark rights to adopt international intellectual property law.

    This article concludes that trade dress protection of single color or design results in aesthetic functionality, but it broadens the horizon of the subject matter which protects under trademark. It would increase the scalability of the product since the consumer would be able to distinguish and identify the product with a single color. As critically argued by academic scholars whether the color or design should be trademark protected even if it does not have proof of secondary meaning. As discussed above it would be convenient for the consumer to identify the source of the product if it is with evidence of secondary meaning. Lastly, this article debated whether copyright or trademark protection offers better security for computer user interface. As per the discussion above it can be observed that it is better to trademark the computer product since it will secure the whole composite of the product as opposed to just defending the outlining of the product by copyright.

     

     

     

    ]]>
    Mon, 13 Aug 2018 11:56:00 GMT
    <![CDATA[Cryprocurrency– A Magical Bubble or The Future of Currency?]]> Cryprocurrency– A Magical Bubble or The Future of Currency?

     

    The noise and media surrounding the notion of cryptocurrency have been increasing the curiosity rapidly. Before curiosity kills the cat, let's walk through the story of cryptocurrency.

    Cryptocurrency is an innovative and a virtual currency that utilizes cryptography for security and this matter it is difficult to fake it. A characterizing highlight of a cryptocurrency is its organic nature; it is not issued by any government authority, rendering it hypothetically resistant to government obstruction or control. The mastermind behind cryptocurrency is the blockchain. A blockchain is digitized and decentralized of all cryptographic transactions. It is the process of converting readable data into a relatively uncrackable code, to track purchases and exchanges. Over the years, blockchain and cryptocurrencies have grown exponentially that uses as a financial service tool to improve transparency and efficiency.

    Not many know that digital currencies rose as a side result of another innovation. Satoshi Nakamoto, the obscure innovator of Bitcoin, the first and still most critical cryptocurrency, never proposed to invent a currency in the first place. In his declaration of Bitcoin in late 2008, Satoshi said he built up "A Peer-to-Peer Electronic Cash System." The primary cryptographic currency was bitcoin, and since then there are currently more than 1,000 different types of cryptocurrency accessible on the web with over 200 Bitcoin ATM's installed around the world.

    The creation of Bitcoin is via a mining process where miners receive compensation for newly issues bitcoins. There is a limitation on the production of the number of bitcoins which is limited to 21 Million. Once the limit has surpassed, the miners will receive transaction fees instead of bitcoin. Individuals contend to "mine" bitcoins utilizing a computer to settle complicated math confounds. There is no curtailment on who can become a miner, all you need is a computer and accessible internet. Bitcoin transactions are not confidential as it is published to the public network to be verified by the system on miners. Therefore, it is possible to trace bitcoin between bitcoin wallets. The storage of Bitcoins is in a 'digital wallet' that exists either in the cloud or on the user's computer that acts as a virtual bank account that allows users to exchange, trade or make transactions. FDIC does not insure bitcoin wallets like bank accounts. The operations are public, the owners of the portfolios can be anonymous. It is the most attractive feature of bitcoin as miners effectually vote on the legitimacy of each transaction as part of the mining process.

    In this modern era of economics, where societies no longer have to rely on banks and other centralized institutions to keep track of their payments and guarantee the financial system. Blockchain technology frees people from this centralized trust. Cryptocurrency makes it less demanding to exchange finances between two parties in a transaction; these exchanges are encouraged using public and private keys for security purposes. These operations are done with minimal fees, enabling clients to maintain a strategic distance from the high expenses charged by most banks and financial organizations for wire transfers.  Cryptocurrency is digital and doesn't have a local repository since its digital it can be wiped out by a computer crash if a backup of the possessions does not exist. Since costs depend on free market activity, the trade rates of cryptocurrency can vary broadly.

    The support of cryptocurrency is only by the trust of users rather than the authority of the state. Money is based on confidence and trust regardless of a nation's currency; whether it is dollars or dirhams, people accept it because it is recognizable as trade.

    Paper vs. Electronic vs. Crypto?

    Individuals have a variety of options when making a transaction from cash, debit, credit, crypto, etc. The massive multinational tech company, Microsoft recently added Bitcoin as a payment option on its online portal to purchase games, movies, and apps in the Windows and Xbox stores. Regardless of whether it is Pound, Dollar or Euros; All necessary cash monetary forms have lost enormously over the last year against the central five cryptocurrencies. Meanwhile, more than the US $ 90 billion has been put worldwide in crypto, and the pattern keeps on rising. The most striking contrast between cryptocurrency and paper money is that crypto is accessible virtually, while paper money exists in tangible form. Paper money accounts in the banking system via account numbers; digital currencies use addresses and cryptography that encrypt private data and mathematically verifies identities. European Central Bank defines virtual currency as an unregulated, digital fund which is issued and controlled by developer and utilized and acknowledged among the individuals from a particular virtual group. Through the use of cryptography, digital currencies are usually safer and more challenging to manipulate compared to the paper money. The transparency on the blockchain minimizes the risk of corruption. Therefore, some states are now considering the use of blockchain in the public sector.

    Credit card transactions are the dominant payment method used across the web. If you have ever bought anything with your credit card from an online seller, you know the drill. Online seller takes the credit card details, and then sends it to a financial system with processors, banks, credit card companies, and other mediators. If you use PayPal or Venmo to carry out your online transactions, a third party takes your bank account details and approves the purchase and notifies the seller. Approaching the third-party system, you can keep the privacy and make a payment through a secure network, but you lose the simplicity of directly dealing with the online seller.  However, cash minimizes the possibility of buyer defaulting his debt. Money has some advantages as it has better anonymity whereas purchasing with credit card requires you to disclose your account details and it is easily traceable. Consequently, cash is not identifiable.

    On the other hand, bitcoin doesn't protect the status of anonymity as much as cash. Bitcoin doesn't require you to reveal your real identity, but there is a connection with a public ledger of transactions and where the invasion can happen in the worst case scenario. It doesn't require a central server but relies on peer to peer network. The disadvantage is that if the Internet fails or the user does not have access to the internet, one cannot execute the transactions. Another drawback is that if the crypto owner loses his key or accidentally wipes his wallet than that's a threat to security. Cryptography is more suitable for tech-savvy users, the acceptance in the traditional trade is still low.

    Crypto Theft

    The murkiness around the subject of cryptocurrency often makes it seem dodgy or a scheme to sucker fools out of their money. Crypto users can be inclined to theft, fraud, and cons, which some contend is made less demanding on account of Bitcoin's structure and absence of control. The very idea of Bitcoin makes prevention of theft difficult, one of the most significant components being there is no real way to recover Bitcoin that has been stolen or conned, and no real way to return the transaction. Cryptocurrencies are not insusceptible to hacking. In Bitcoin's history, we have acknowledged so far at least 40 thefts that exceed US Dollars one (1) million.  The recent breaking news in the crypto world is featuring One of Asia's most significant advanced money trades – Coin check that is known as the 'world's biggest ever cryptocurrency hack.'  Hackers have stolen £380m worth of cryptographic money from one of Japan's biggest advanced trades. Coin check, situated in Tokyo, said that there was a wrongful transfer of around 523 million of the trade's NEM coins to another record. The trade has suspended stores and withdrawals for all digital forms of money except for Bitcoin. In 2014, known to be the single greatest hack ever. At the time of the hack, Mt. Gox (Magic the Gathering Online Exchange) was the biggest Bitcoin trade in the world and took care of 70% of the world's Bitcoin trades. The trade was under a cyber-attack, and the programmer exchanged a large number of Bitcoin from the business to his record prompting the theft of $473 million in Bitcoin.

    Cryptocurrency for Illicit Activities

    Bitcoin is anonymous and flexible, which means its popular among criminals. The record of Bitcoin exchange is in an open log, names of purchasers and sellers that are out in public – just their wallet IDs. There is no bank or central authority, like a government or a state to control this information. It keeps bitcoin users' transaction private and additionally gives them a chance to purchase or offer anything without effortlessly being traceable. That is the reason it's a favorite choice for individuals to purchase drugs or other unlawful exercises on the web. It enables law requirement to track exchanges and have the capacity to make it less demanding to follow Bitcoin back to its proprietor, as was done in 2013 to capture one of the most prominent medication advertises that utilized Bitcoin. Bitcoin also became a conventional method for making payments when a computer system is taken over by ransomware. It has helped ransomware assaults. However, the degree of reprimanding Bitcoin is far from being naturally correct. Web security is considerably fragile, while programmers have been getting substantially more modern, so it would bode well that assaults would rise.

    Despite the fact that Bitcoin can make it simpler for criminals and scammers to play out their devious deeds, regardless it is impeccably respectable and great speculation to invest. Any money has unlawful users; Bitcoin is the same in such a manner. By far most of the clients do utilize it legitimately, similarly as most utilize US dollars or any other currency lawfully. That doesn't mean one shouldn't be observant when using Bitcoin, likewise as you ought to be cautious on the web or to make any other transaction.

    Cryptos Future

    Cryptocurrency gives billions of people access to financial services that otherwise have no bank account. In developing countries, in particular, almost 60% of adults are excluded from the banking system because they do not meet the minimum requirements to open a bank account.  In countries where the currency is not stable like Zimbabwe or Venezuela etc. it serves as means of exchange and conservation. 

    On the other hand, Crypto-related issues are also on the upsurge in companies and banks. At IBM, an estimate that by the end of 2017, around 15% of banks will use blockchain techniques, as these financial transactions are more efficient and less expensive.

    However, no one knows what the future holds for Bitcoin. It is unregulated. A few nations like Japan, China, and Australia have started measuring controls. Governments are worried about tax collection and their absence of control over the money. Be that as it may, you cannot pay the rent utilizing Bitcoin or purchase insurance. There is yet to see what the future holds for cryptocurrencies.  

    ]]>
    Tue, 07 Aug 2018 12:10:00 GMT
    <![CDATA[Contract law and the position of third parties]]> Contractual relations are relations we enter into every day of our lives, whether express or implied, whether formally or informally. When people go to the grocery store, at the check-out counter, they enter into a contractual relationship with the store. They accept the obligation to pay the relevant amount to the store in exchange for the store agreeing to provide quality produce. This transaction is what we consider an informal contractual relationship. On the other hand, we have formal contractual relations; it is here that written contracts with expressed terms and provisions are necessary. However, contractual requirements and obligations of two parties are seldom affecting only those parties. If one considers the instance of a motor vehicle accident, prior to such an accident, the individual drivers have both acquired motor vehicle insurance, in particular third-party insurance, this contractual relationship between the insurance company and the insured person has no bearing on the third party involved in the accident until such time as an accident takes place. Thus, such third party then becomes a beneficiary of the contractual relationship between two other persons.

    In the instance of this concept, the United Arab Emirates Civil Code Article 125, defines a contract as follows; the making of an offer by one of the contracting parties with the acknowledgment and acceptance of the other. This agreement is together with the recognition of them both in a manner that determines the effect of the subject matter of the contract and from which results in the creation of obligations upon each of them concerning that which each party is bound to do for the other. Within the UAE, there also exists the doctrine of privity of contracts, this principle entails that the rights and obligations associated with an agreement arise only between the parties to the contract and are only enforceable between those such parties, and no third party may exercise such rights or obligations.

    According to Article 129 of the Civil Code the elements that need to be present for the bringing about of a contract are: -

  • That the two parties to the agreement should agree upon the essential contractual elements;
  • The reason and subject of the agreement must be something which is capable of being dealt in and possible and defined and allowed; and
  • There needs to be a lawful purpose for the obligations arising out of the contract.
  • The abovementioned goes hand-in-hand with the doctrine of privity, the basis of this principle is on the premise that only the parties who contracted have accepted the terms, conditions, and responsibilities stipulated in the contract. According to the Doctrine of Privity, an agreement cannot confer rights or impose obligations arising in connection with it to any person who is not a party to the deal. According to Article 141 of the Civil Code, a contract may only come into existence when there is an agreement between the two parties to the contract concerning the essential elements of the obligation. Article 151 of the Civil Codes also states that if a person makes a commitment on his own and for his account, then he shall be bound by the provisions of it to the exclusion of other persons.

    An example of the doctrine of privity would be, the case of Dunlop Pneumatic Tyre Company Ltd v Selfridge, [1915] UKHL 1 (26 April 1915), [1915] AC 847 Dunlop sued Selfridge on the premise that the imposition of the promise between Dew and Selfridge was possible as Dew were acting as Dunlop's agent. The action failed because Dunlop had provided no consideration for the promise of Selfridge, for the presentation of the payment by Dew. These two abovementioned cases are both consistent with the view that the claimants could not sue because they had not provided any consideration for the defendant's promise.

    Contracts to which the doctrine applies

    Subcontractors

    In the United Arab Emirates, in pursuance of Article 891 of the UAE Civil Code, "a sub-contractor shall not have a claim concerning the employer for an amount due to him from the main contractor unless he has made an assignment to him against the employer."

    The Court of Cassation (457 Judicial Year 24) in a decision dated 20 April 2005 held as under:

    "The result of articles 891 and 892 of the Civil Code is that the liability of the main contractor remains in place as against the employer, and there is no direct contractual relationship between the employer and the sub-contractor. Thus, the contract between the main contractor and the sub-contractor defines the rights and responsibilities of each of them towards the other, and the employer may not rely on it unless the original contract provides to the contrary."

    Sub-contracting has become an essential aspect of the construction industry in the UAE, with more complex and specialized projects, it is incomprehensible for one company to have the capabilities to complete the entire task. In this instance one could consider the incompatibility of a situation where the main contractor of a project, being the sole contractor would need to maintain and pay an enormous workforce, with an extensive range of capabilities and specializations to work on such project, this is ultimately economically unsustainable.

    The use of sub-contractors has aided the reduction of project costs in the industry dramatically, such use of sub-contractors also has the advantage of sharing the project risks between the contractor and sub-contractor. The UAE recognizes the benefits and need of such sub-contracting, the law goes as far as allowing the main contractor to sub-contract the whole of the works. This sub-contracting of the whole of the works is possible, unless: -

  •  The construction contract contains a provision to the contrary; or
  • Where the selection of the contractor is due to his specific personal qualities.
  • In the context of subcontracts, which is ultimately a contract between the main contractor and a subcontractor, this means that the employer of the main contractor will be a third party to this subcontract and will thus have no rights or obligations concerning this subcontract.

    This concept brings with it questions for its applicability in the construction industry. The nature of such projects coupled with an employers' desire to be in control of certain aspects of the project has created a need for new regulation in which the employer does retain some rights in respect of the subcontract. Such reasons include the requirement for the subcontractor to provide the employer with certain warranties in connection with the work that is carried out directly to the employer, or the employer retains to the right to assign to him of the subcontractors should the main contract be terminated.

    The Court of Cassation (Case 499 of 2002 decided on 25 September 2002) has in its judgment outlined the following:

    "The work of a subcontractor - the contractor is obligated to execute his/her works in compliance with the conditions and specifications that are stated in the contract, i.e. his/her responsibility for fixing any defects caused in violation to the professional ethics. In return, the original contractor is obligated to pay the outstanding allowances of the work. Each of them has the right to retain part of the work or allowances until they get their outstanding payment. They may agree in advance that the original contractor may retain a certain amount of the allowances until the subcontractor fulfills his/her commitments. This is considered an application of the right of retention (Articles (414 - 419) of the Civil Transactions Law). The original contractor is the one who delays delivery, not the subcontractor, which deprives the original contractor of the right of retention."

    Heirs

    There is a legislative provision found in Section 3(2) of the Civil Code which provides that the heirs, beneficiaries, and successors of the contracting parties of that specific contract are included in the ambit of the contract. Article 250 of this Section states that the effects of the agreement shall extend to the contracting parties and their general successors without prejudice to the rules relating to inheritance, unless it appears from the contract or the nature of the transaction or from the provisions of the law that the effects were not to extend to a general successor. 

    Article 254(1) of the Civil Code states that it shall be allowed for a contracting party to contract in his name imposing a condition that rights in the contract are to create a benefit to a third party if he has a personal interest, whether moral or material, in the performance stated in the agreement. Article 254(2) goes further in that it provides for a direct right afforded to the third party against the Undertaker for the performance of that contractual provision, enabling him to demand the execution thereof, unless there is an agreement to the contrary. Article 254(3) then provides for the enforcement of such condition in that either the contracting party providing the provision may demand the performance thereof, unless there is a contractual provision which states that the beneficiary alone has such right.

    Article 256 of the Civil Code provides the following in respect of beneficiaries to contracts by providing for a condition in favor of a third party. It states that it shall be permissible for the recipient to be a future person or future body, and the beneficiary may also be a person or entity not specified at the making of the contract if such beneficiary is ascertainable at the time the agreement is to be given effect to following the condition.

    Agreements to which a third party has a claim

    According to Article 252 of the Civil Code, there are some exceptions to the general rule provided by the doctrine of privity, following this law, a contract may confer a right on a third party. However, such an agreement may not impose an obligation upon a third party.

    Bank guarantee

    Another instance in which a third party may become involved in the contractual obligations of another is in the specific form of a bank guarantee. Concerning Article 411 of the Commercial Transaction Law Number 18 of 1993, "a bank guarantee is a commitment issued by a bank to settle the customer's debt to a third party following the conditions agreed and included in the guarantee, which may be for a definite or indefinite term."

    Article 414 of the Commercial Transaction Law Number 18 of 1993 provides that a letter of guarantee is an undertaking issued by a bank (the guarantor) at the request of its customer (the person making the order) to pay unconditionally and without restrictions, a certain specified or determinable sum to another person (the beneficiary). In this regard, the recipient is a third party to the contract between the bank and its customer.

    Dubai Court of Cassation (Case number 284 of 2007 decided on 12 February 2008) relying on Articles 411, Article 412, Article 413, and 414 of Commercial Transactions Law discussed the role of the bank when dealing with bank guarantees, it reads:

    "The bank will not be regarded, in respect of its obligation under the bank guarantee, as being the proxy of its customer.  Rather, it will have an obligation as a principal.  The obligation of the bank that issues the letter of guarantee is separate from the obligation of the guaranteed debtor, in the sense that it is separate from any other relationship apart from the relationship between the bank and the beneficiary, as is the case in respect of a documentary credit.  That is to say, the obligation of the bank that issues the guarantee does not follow the obligation of the debtor with regard to its validity or nullity, because the bank is always bound by the letter whatever be the status of the guaranteed account holder, and whatever may happen to the relationship between the guaranteed account holder and the beneficiary under the letter."

    Documentary credit

    Under Chapter 4 of the Commercial Transaction Law, Number 18 of 1993, documentary credit involves the rights of third parties into the contracts of another. Article 428 of this Law provides that this agreement is a contract according to which a bank opens a credit at the request of its customer (the person ordering the opening of the loan) within the limits of a specified amount and for a definite term in favor of another person (the beneficiary). This agreement is against the security of documents represented goods transported or intended for carriage. This chapter states further that a documentary credit contract is deemed to be independent of the contract which caused the opening of the credit, and the bank shall remain a stranger to such an agreement.

    Discharging the debt of another

    Article 333 of the Civil Code provides for another exception in that another person takes care of the liability of another person concerning a previous agreement. This Article states that should a person discharge the obligations of a third party upon such third parties directions, such person shall have a right of recourse against the person s directing him for what he has performed on his behalf, this person will take the position of the original oblige in his right to claim against the obligor. 

    However, this Article does provide a limitation to such position in Article 334, such Article states that should the person discharge the relevant obligations of the third party, without the necessary directions, there will be no right of recourse concerning the obligor for the discharge, unless the following circumstances are present, namely those found in Article 325. This Article states that if pledger dischargers the debt of a third party to release his property pledged by way of security for such debt, he shall have a right of recourse against the debtor for the money he has paid.

    Dubai Court of Cassation (Case 163 of 2007 decided on 11 September 2007) held as under:

    "It is settled law in the precedents of this court under the provisions of Articles 325 and 334 of the Civil Code. Whoever pays the debt of another without being ordered by him to do so is not entitled to have recourse against the debtor for what he has paid, unless he has been compelled by necessity to discharge the debt.  In that latter event, the payer will be regarded as the proxy of the debtor in payment of the debt.  The assessment of the circumstance of necessity is a matter of fact within the independent jurisdiction of the trial court, provided that its assessment is sound and based on matters proved in the papers."

    Third party insurance law

    The provisions for third party insurance, which provides a beneficial right to third parties concerning an agreement between the insurer and the insuree is another exception to the application of the doctrine. In the United Arab Emirates, such authority is the Unified Motor Vehicle Insurance Policy Against Third Party Liability issued according to the Regulation of Unifying Motor Vehicle Insurance Policies according to Insurance Authority Board of Directors' Decision Number (25) of 2016. This provision provides that the entering into of any policy as per the law was to cover liability towards a third party. Thus, the entering into of this policy or agreement was for the benefit of an unspecified third, additional party.

    Criticism of the Doctrine of Privity

    Objections that have developed at the doctrine of privity are that it failed to give effect to the expressed wishes of the parties and could lead to results regarded as fundamentally unjust and parties that should have benefited according to the contract did not receive what was intended. Due to a large number of exceptions to this rule, the law has mainly become complicated, and ultimately the doctrine has become commercially inconvenient.

    ]]>
    Tue, 07 Aug 2018 11:29:00 GMT
    <![CDATA[Guide on Initail Public Offerings in the GCC 2018-2019]]> Introduction

    The Initial Public Offering (IPO) is the first occasion on which a company will have shares put up on a stock market. An investment bank will underwrite the IPO and will arrange for the listing of the shares on one or more stock exchanges.

    An IPO is often a significant step towards rapid growth for a company, and having shares be available on a stock exchange allows for quick raising of funds

    The UAE Securities and Commodities Authority (SCA) governs and produces legislation by which the Dubai Financial Market (DFA) must abide. The DFA reinforces economic growth within the country, and it does so by encouraging IPO's with attractive benefits such as ongoing access to capital required to further fund growth, succession planning and fair valuation of shares to name a few of the incentives.

    Additionally, there are two Financial Free Zones in the country. The Dubai International Financial Centre (DIFC) receives regulations through the Dubai Financial Service Authority (DFSA). The Abu Dhabi Global Market (ADGM) which was established through Federal Law Number 8 of 2004, Federal Decree Number 15 of 2013, Cabinet Decision Number 4 of 2013 and Abu Dhabi Law Number 4 of 2013 is governed by its three authorities which are the Registration Authority, Financial Services Regulatory Authority (FSRA) and the ADGM Courts.

  • Initial Public Offering in the UAE
  • Securities and Commodities Authorities
  • Dubai Financial Market (DFM)
  • Introduction
  • Critical benefits for companies listing on DFM
  • Key IPO stages
  • Initial Public Offering on Nasdaq Dubai
  • Introduction
  • Procedure
  • Timeline for admission to trading for debt
  • Admission fees
  • Flexibility
  • Global and regional branding
  • Liquidity
  • Regulation and law
  • Listing criteria on Nasdaq Dubai
  • Incorporation
  • Financials
  • Management
  • General suitability
  • Working capital
  • Abu Dhabi Global Market (ADGM)
  • 51. Introduction

    5.2 Key benefits of the IPO

  • Initial Public Offering in the Kingdom of Saudi Arabia
  • Introduction
  • Initial Public Offering in the Sultanate of Oman
  • Introduction
  • IPO process in the Sultanate of Oman
  • Disclosures in the prospectus
  • Initial Public Offering in the state of Kuwait
  • Introduction
  • Listing approval
  • Additional requirements
  • Initial Public Offering in the Kingdom of Bahrain
  • Introduction
  • Listing requirements and process on Bahrain Bourse
  • Public scrutiny post IPO
  • Conclusion
  • References
  • INITIAL PUBLIC OFFERING LISTING IN UAE
  • The future of IPO looks good both on the global front and also from a national perspective. The outlook for 2018 is very promising, and if IPOs in the country achieve their targets, 2018 could be a substantially successful year. Listed in 2017 were two IPOs, and these were Orient UNB Takaful Insurance raising $16.3 million and Emaar Development listing was for $1.3 billion. On Real Estate Investment Trust (REIT) listing it was Nasdaq Dubai for Emirates NBD Asset Management at $105 million and on Abu Dhabi listing, Adnoc raised $851 million. Q2 of 2017 saw somewhat of a decline as market volatility weighs on investor's sentiments.  The only IPO which floated a total of 36 million shares by raising proceeds of $96 million was of Jadwa REIT Alharamin Fund. The Reason IPOs are pushed for so strongly and are so successful is often due to the open nature of the business they bring, and also the support they receive. High anticipation of main IPOs is from Abu Dhabi Ports, Sanaat, Gems Education and Emirate Global Aluminium ahead of Aramco sale. The estimation is around 5 IPOs will be able to raise close to $8 billion.

  • SECURITIES AND COMMODITIES AUTHORITIES (SCA)
  • In this section, the SCA shall illustrate the function to authorize the companies to commence the IPO. Companies willing to conduct IPOs shall enter into a contract with a Financial Advisor as per Board Resolution Number 11/R.M of 2016 on the regulations of issuing IPOs for public joint stock companies. Said Financial Advisor shall:

  • Allow for qualified speculators to gather and present a report of the organization's business and exercises.
  • Analyse the conclusion the specialists reach on their underlying impression of the estimation of the offers for membership by the Issuing organization.
  • Coordinate with the Issuing organization in examining the opinions of the speculators to settle on a choice on the points of interest of the planned offering and the value scope of the offers subject of the advertising.
  • Work with the issuing organization for setting up the preliminary plan in which the value scope of offers, and this will then be presented to the SCA for endorsement as a preparatory advance toward a declaration of the offering, though not for the declaration time frames indicated in statement (1) of Article (12) in this regard.
  • Submit offers to financial specialists as for the offers to be provided by the Issuing organization.
  • Lead informative and instructive workshops for financial specialists to clarify the Book Building procedure to them.
  •  

    ]]>
    Sat, 21 Jul 2018 13:32:00 GMT
    <![CDATA[Dubai Airport Free Zone ]]> Dubai Airport Free Zone

     

    1.  What was the establishing law of this free zone, and what are the main internal regulations governing it? 

    Dubai Airport Free (DAF) Zone was established by His Highness Sheikh Mohammad bin Rashid Al Maktoum, ruler of Dubai by Dubai Law No. 2/1996 and received the amendment of Dubai Law No. 2/2000 regarding the formation of legal establishments in Dubai Airport Free Zone. 

    Dubai Law No. 25/2009 is the main internal regulations which govern DAF zone, which was established by Dubai Airport Free Zone Authority (DAF Authority). 

    2.  Are there any complementary agreements between this free zone and others?

    Free zones are generally designated to a specific commercial sector. As such, the licenses they provide only allow for the specific activities and so while they allow for up to 100% foreign ownership and are subject to reduced or different trade barriers, tariffs and quotas, there are generally no agreements between free zones. If a business entity chooses to operate outside of these boundaries, it will have to adhere to the UAE Commercial Companies Law and observe the appropriate licensing procedure required in the Emirate it operates in.

    3.  Are there any areas of UAE legislation that the free zone entities are still required to comply with? How does this impact business operations within the free zone?

    In general, free zone companies have their own civil regulations and procedures, through the criminal laws of UAE are still applicable on UAQFTZ. Thus, the following are the laws which companies operating in UAQFTZ must adhere to: 

    A.      Federal Law No. 4/2002 regarding Criminalization of Money Laundering; 

    B.      Federal Law No. 7/2014 concerning Combatting Terrorism offenses;

    C.      Federal Law No. 3/1987 the Penal Code and its amendments; 

    D.      Federal Law No. 1/2004 on combatting Criminal Offences; 

    E.       Federal Decree-Law No. 5/2012 on Combatting Cybercrimes. 

    Also, companies established in the DAF zone or any other free zone are only allowed to operate within the free zone and are restricted to perform activities outlined in the trade license. However, if a free zone wishes to trade or provide service outside the free zone, he must adhere to the requirements of Federal Law No. 2/2015 concerning UAE Companies Law. 

    4.  Are there any onshore entities a DAF zone company will need to register and comply within the UAE?

    Registration to the UAE General Directorate of Resident and Foreign Affairs is required in order to seek residential permits for employees. There are several other federal ministries which companies may encounter in relation to notarization of legal documents, resident visas, visit visas for investors and more. However, the DAF Authority assists the companies in obtaining service from these Federal Ministries. 

    5.  What is the process of setting up a company within the DAF zone?

    There are 4 steps that an investor must follow in order to set up their companies within the free zone: 

    Step I 

    Select a company type: The first step for the investor is to select the type of company he wishes to establish among the several options available and the following are a couple of examples:

  •  A Free Zone Company, which can have 50 or fewer shareholders (individual or corporate); 
  •  Branch Setup, 100% owned by the parent company with no minimum share capital requirement; 
  • Step II 

    Select the Business License: The next step involves the type of license the investor is seeking. DAF Zone offers four types of license. These are:

  •     Trade license;
  •     Service license;
  •     Industrial license;
  •     General trade license. 
  • Step III 

    Select the Facility: Once the legal structure and license are obtained, the office space or the property for lease must be selected. DAF offers a wide range premium office and light industrial units suitable for the type of legal structure. 

    Step IV 

    Submit the Application: the last step for the investor is to submit the application along with the required documents for the initial approval and wait for the DAF company formation assistant to approach you. 

    7.      What will the features of a company set up in this free zone be?

    There are several features which a company will have incorporation in DAF Zone such as the following: 

    • 100% ownership; 
    •  Easy access to several banks; 
    • No interference of UAE National; 

    8.      What are the approved activities that can be performed in the DAF zone? 

    The companies incorporated in DAF Zone will be able to perform activities as set out in the trade or commercial license. In general, companies can import, export, distribute, store, trade and manufactured goods. The companies can provide consultancy services, post seeking consultancy license which offers expert and professional advice. Companies are also allowed to carry out light manufacturing activities, packaging, and assembling. 

    9.      What can companies set up in this free zone not do?

    The answer being checked on this point.

    10.  What types of business are allowed to operate in this free zone?

    The answer being checked on this point.

    11.  Are there any laws regarding inheritance in this free zone?

    There is no specific inheritance law which applies to the DAF zone, though the rights of shareholders are transferable and inheritable, subject to rules and regulations of DAF zone. 

    12.  What are the regulations on taxes within the free zone? 

    There is no corporate and income tax applied to companies established in DAF zone. 

    13.  What are the accounting and auditing regulations?

    DAF authority does not mention any specific rules with regards to accounting and auditing, however, it is suggested that companies should prepare proper books of accounts. 

    14.  Are there any specifics or regulations regarding opening a corporate bank account? 

    There is no specific requirement as to opening a bank account for companies incorporated in this free zone. Companies are free to open their bank account anywhere in UAE. 

    15.  Are there any specific rules governing when the movable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?

    The answer being checked on this point.

    16.  *Are any specific licenses required to operate as a specific type of company in this free zone?

    The remuneration and minimum benefits, the working time and leave of staff working in this free zone are all regulated by the Freezones Rules and Regulations respectively. However, the terms of remuneration and other additional benefits of employment will depend on the Employer.

    17.  Is there any specific ongoing regulation or monitoring of firms operating as particular types of the company by this free zone authority?

    The answer being checked on this point.

    18.  How are disputes settled with companies in this free zone?

    The answer being checked on this point.

    19.  How are disputes between onshore companies and companies in this free zone settled?

    The answer being checked on this point.

    20.  What are the main rights and duties of an employer and employee working in this free zone?

    The answer being checked on this point.

    21.  In the case of employer-employee disputes, how are these handled in the free zone?

    The disputes between the employer and employee are settled by the DAF zone Authority and are governed by the employment contract signed between the parties. 

    22.  What requirements are there for employees who work in the free zone?

    Registering with UAE General Directorate of Resident and Financial Affairs is a requirement and corporations must obtain an online work permit and residency permits for their employees. The registration authority in the free zone offers a one-stop-shop clearance for processing such permits. 

    Generally, the companies must submit the mandatory application form along with the attested degree of the employee. Once the permit is generated, a medical test and should be completed and the procedure to obtain Emirates ID will commence. Following this, the visa status is updated and stamped on the passport. 

    23.  How are staff working within this free zone registered with the authorities?

    The answer being checked on this point.

    24.  What are the governing rules and regulations on the remuneration and minimum benefits of staff working in this free zone?

    The DAF zone rules and regulations, which are the Dubai Law No. 2/1996 and Dubai Law No. 25/2009 govern remuneration, minimum benefits and working time and leave of employees working in DAF zone are governed by. Whereas, the terms of additional benefits will depend upon the employer. 

    25.  What rules govern the working time and leave of staff working in this free zone?

    The answer being checked on this point.

    26.  What must be borne in mind when considers property leases in this free zone?

    The main features of property lease in DAF Zone is the facilities provided by the DAF Authority such as ready-to-move-in spaces, state-of-art business park, rent on annual basis, P.O. Box number and more depending upon the type of facility. 

    27.  Is it possible to apply for a building permit in this free zone? How is this done and what steps are required?

    The answer being checked on this point.

    28.  What environmental requirements must construction companies building in this free zone consider, an e.g. form of building, landscaping or building height?

    The answer being checked on this point.

    29.  What are the key restrictions when leasing a property in this free zone?

    The answer being checked on this point.

    30.  What are the rules governing the use of utilities in this free zone?

    The answer being checked on this point.

    31.  How do retail premises establish themselves in this free zone?

    The answer being checked on this point.

    32.  Is it possible for hotels for hotels to be operated in this free zine, and how do they establish themselves?

    There are no specific restrictions prohibiting hotels from operating in this free zone. The same process would apply as for any other type of business. 

    ]]>
    Thu, 12 Jul 2018 10:25:00 GMT
    <![CDATA[Company Formation in Kuwait Free Trade Zone]]> COMPANY FORMATION IN KUWAIT FREE TRADE ZONE

     

    Kuwait, also known as the Fruitful Land of the Gulf is considered to be a land of opportunities. The country's richness lies in the natural resources like oil and gas but also the real wealth of the nation lies in its human capital as people are highly educated and dynamic. Its presences are in the northwestern corner of the Persian Gulf. Kuwait is a modern city with mingling skyscrapers, apartment buildings, and mosques. In all of the GCC countries, Kuwait is one of the most urbanized countries. Kuwait is recently appreciated due to its extended foreign investment in the free trade zones specific focus on the free zone Shuwaikh.

    The first ever free zone in Kuwait, Kuwait Free Trade Zone (KFTZ) came into existence in 1999 in Shuwaikh port, which is the country's central shipping business facility, on a 1.5 million square meters area. KFTZ came into existence under the Law number 26 of 1995 allowing Kuwait's Ministry of Commerce and Industry to incorporate free trade zones in Kuwait (KFTZ Law).

    The Background Check

    The Kuwaiti Government signed an agreement with a privately-owned establishment, National Real-estate company (NERC) to manage KFTZ, since its establishment until 2006. Where the NREC has the authority to retain 20% of the net operating profits of the free zone and rest will be offered to the government. NERC made several advancements in KFTZ such as rehabilitating the port to ensure foreign investment, unlimited supply of electricity and water to free zone companies, easy road access, and state-of-art infrastructure.

    However, due to several disputes and allegations that NERC failed in managing the free zone, the Kuwaiti cabinet council passed a resolution number 507 of 2006 whereby terminating NREC from the management of the open area subsequently suspending all their activities. After that, in  2007, the Kuwaiti government passed on the responsibility of managing the free region to Public Authority for Industry (PAI) which is yet in-charge of the management of the open area.

    Why KFTZ?

    The primary objective of KFTZ was to resuscitate Kuwait's economy by enlarging investment opportunities and to ensuring Kuwait's healthy business environment by making it a business center in the whole region. The free zone provides several benefits including but not limited to warehouses, open lands, exhibition halls, insurance agencies, courier companies, hotels and more. It further offers the following advantages:

  • Complete hundred percent ownership;
  • Free from corporate and income tax;
  • Exemptions from customs duties on imports and exports of goods from the KFTZ;
  • No restrictions on capital;
  • No limitations from the foreign exchange Department;
  • Easy access to international airports;
  • Free zone authority cannot confiscate foreign assets otherwise will grant compensation worth market value;
  • Adequate reward offered to foreign investors in case of violation of any rights and privileges;
  • Tools and equipment utilized within the free zone are free from taxes and customs duties;
  • An option to refer contractual disputes to international arbitration centers.
  • An establishment may seek different types of licenses from the free zone, considering the activities of the company such as following:

  • Commercial/ Trade License;
  • Industrial License;
  • Investment license;
  • Service License.
  • In the licenses above, the company can hold a hundred percent (100%) ownership without any interference from the local sponsor. The free zone does not restrict companies on the currency or any export and import activities with the open region. However, there is a minimal limitation on the attachment or seizure of the capital so invested by the foreign companies.

    The companies wish to establish their presence in the free zone must obtain a license to carry out one or more of the permitted activities mentioned in the KFTZ law. Importantly, companies can only conduct those activities outlined explicitly in the trade, commercial or service license. Below table will assist the investors planning to establish their presence in KFTZ:

     

    Particulars

    Free Zone Establishment/LLC

       Application form

       Required

       Famous Activities

       Manufacturing and Exports

       Timeline for obtaining a license

       Five months

       Timeline for a Lease agreement

       1 Week

       Corporate Tax Rate

       0%

       Limited Liability Entity

       Yes

       a Government Grants

       Available

       The requirement of Government Approvals

       Yes

       The requirement for GCC director or Manager

       No

       Minimum Share Capital

       USD 3,300

       Right to bid for government contracts

       Yes

       Right to secure trade finance

       Yes

       Average Costs for setting up

       USD 48,000

       Minimum Number of Partners

       2

     

     

     

     

     

     

    Future Goals of KFTZ

    With a clear view to support and increase the investment in the free zone, the Ministry and Commerce Industry promulgated a proposal to transfer the management of the free trade zone from Public Authority Industry (PAI) Kuwait Direct Investment Promotion Authority (KDIPA). The new KDIPA also has the authority to manage new free zones such as Abdali and Nuwaiseeb to However; the transfer is not yet the final stage.

    The Kuwaiti government, considering the increased investment in the KFTZ has announced to further establish new free zones on five of its islands. As recently quoted by Ministry of Social Affairs and Labor and Ministry of State Department and Planning Affairs that the project will support the Gulf state to expand the industry from the oil sector to international investment. It further aims at offering varied job opportunities to Kuwaiti's citizens and limit the dependency of government funds.

    The project is now in under control of Supreme Council for Planning and Development and to the cabinet as a matter of urgency. The government is already in progress of creating a harbor on the Boubyan island which is a multibillion-dollar project with an objective of inviting national and international private companies for financing and executing the free zone operations. The government is under planning to complete the project in 2030 with plans to introduce various incentives to attract foreign investors.

     

    ]]>
    Wed, 11 Jul 2018 17:20:00 GMT
    <![CDATA[Bankrupting Financial Stress: New Bankruptcy Law of Saudi Arabia]]> Bankrupting Financial Stress: New Bankruptcy Law of Saudi Arabia

    Introduction

    Prominent American Essayist Ralph Waldo Emerson once said that money often costs too much. Time and again, we have all heard that one needs money to make money; and if this money in itself is expensive, the business may well run into a volatile bankruptcy. But terminology can be deceptive. Regular and habitual use of any specific term can obscure the ability of the reader and limits the concept that the word represents. For example, numerous courts in different jurisdictions have faced this dilemma due to the dynamicity of the subject and the difficulty in ascertaining the underlying reasons and factors that lead to a company's insolvency. Historically, bankruptcy has been a difficult subject with uncertain guarantees and unidentifiable elements. But the global corporate revolution posts the aftermath of the Economic Crisis of 2008 has made legislators warier of the issue and insisted on elevating the role of quasi-judicial committees in bankruptcy-related matters. The Kingdom of Saudi Arabia (the KSA) has taken one such effort in the recent times such as re-modeling its economic endeavors to achieve an investment-friendly atmosphere.

    Every step undertaken by KSA government is as per the National Transformation Plan 2020 (the NTP) and Vision 2030 with a coherent way to establish an investment environment for facilitating operations of national and international businesses in KSA. Therefore, Ministry of Commerce and Investment (the MOCI) in KSA, in line with NTP 2020 and Vision 2030 has published numerous draft laws for public review including the Royal Decree Number M/05 dated 28/05/1439H on Bankruptcy (the new Bankruptcy Law). The new Bankruptcy Law is expected to substitute the following existing laws that serve the purpose but is finding difficult to meet the growing requirements of this decade: -

  • Royal Decree Number M/16 dated 04/09/1416H regarding Law of Settlement against Bankruptcy;
  • Chapter 10 of Royal Decree Number 32 dated 15/01/1350H on Commercial Courts Law; and
  • all other provisions related to bankruptcy.
  • Detailed Insight of the Law

    The new Bankruptcy Law contains 17 (seventeen) with 231 articles which cover three main topics including preventive settlement, financial restructuring, and procedures for liquidation. Importantly, the law mandates the establishment of a specialized and expert committee known as bankruptcy (the Committee). Under the new Bankruptcy Law, the Committee will oversee all the matters on bankruptcy including maintenance of a bankruptcy register, granting licenses to bankruptcy experts and trustees, promulgating regulations for licensed trustees and, inspecting bankruptcy procedures. It is pertinent to highlight that the Committee is an independent legal body which will directly report to MOCI.

    I. Preventive Settlement

    A major overhaul of the new Bankruptcy Law is that only the bankrupt beneficiaries can request for conducting the preliminary procedures of the preventive settlement process as per the settlement request. This piece of legislation revolves around the term bankrupt beneficiaries, as defined below: -

  • the company is expecting financial issues or financial distress which may hamper future operations;
  • companies who are already bankrupt.
  • Upon receiving the settlement request, the court authorities within forty (40) days will order a hearing date, and a notification will be sent to the company accordingly. After that, the company may also be asked to submit the report drafted by bankruptcy licensed trustee post obtaining the approval of a majority of creditors. However, the maximum suspension period will not exceed one hundred eighty (180) days. Subsequently, the court upon reviewing the relevant documents will certify the report and, the company has to finalize the settlement procedures.

    II. Financial Restructuring

    As the name suggests, bankruptcy beneficiaries (as defined above) may submit an application to the court for restructuring its financial position of the company in question. Importantly, not only debtors but also creditors and any competent government authority has the authority to request for fiscal restructuring, subject to the notification given to the debtors within five days from the date of submitting the request. In such cases, the company may object to the report only if: -

  • the application does not meet the preliminary requirement of financial restructuring;
  • there is a prevailing dispute over the concerned debt;
  • the creditor is misusing the opportunity.
  • Nevertheless, companies will be exempted to submit any further applications, once the request for financial restructuring is filed until the court rejects or accepts the same. After that, the court will appoint a licensed trustee and will notify the creditors to allow the restricting procedures following which, they will be obliged to submit claim requests within ninety (90) days from the date of notification.

    The bankruptcy licensed trustee appointed by the court will be authorized to review all the agreements signed by the company, and accordingly, will have the power to terminate them if they failed to meet several requirements instead of safeguarding the interest of creditors.

    III. Procedures for Liquidation

    The debtor, creditor or any governmental authority can submit an application to the court for liquidation if case the debtor is under actual financial distress under the provisions of the new Bankruptcy Law. In such cases, the creditors' claims will be subject to strict conditions outlined as below:

  • there is an outstanding debt;
  • The value of the debt is equal to the deficit so determined by the committee;
  • The creditor has notified the debtor to settle the debt within twenty-eight (28) days before submitting liquidation request.
  • Once the court is satisfied with the provisions above, a licensed trustee will be appointed to undertake the liquidation procedures, and all other operations of the company will come to a standstill.

    Ranking Criteria

    The new Bankruptcy Law also lays down a new criterion known as debt ranking criteria under which expenses incurred for appointing the licensed trustee and cost of selling the assets of the company will be compared over any other debts of the company.  Whereas, the liability to pay off creditors will be under the Ranking Criteria of Debt which is ranked by priority as follows:

  • Secured debts mentioned in article 184 of the law;
  • Debtor's family alimony under the law;
  • Operational expenses during liquidation;
  • Employee's outstanding wages;
  • Unsecured debts; and
  • Government and official fees.
  • Penal Provisions

    The new Bankruptcy Law also provides an unconventional (in the Middle East) penalty system which includes the prohibition in ownership of shares, handling the operation of any profitable business in the country and the like. Articles 200, 201 and 202 of the new Bankruptcy Law provides for several penalties for violators such as imprisonment not more than 5 (five) years and fined not more than SAR 5 million.

    Innuendo

    The new Bankruptcy Law has introduced numerous alternatives, and it is anticipated that the introduction of this law will increase regional and international investments in the country. This law would also empower the financially distressed investors with the freedom to restructure or evaluate their financial position. The government of KSA aims to support all small, medium and large companies for boosting their annual growth and minimize the possibility of liquidation.

     

     

     

    ]]>
    Wed, 11 Jul 2018 16:46:00 GMT
    <![CDATA[Law of Sports - Dispute Resolution]]> Law of Sports - Dispute Resolution

    The legal community argues on pros and cons of arbitration. That said, we cannot undermine its benefits. It has become an accessible medium for resolving disputes in the sports sector. One can corroborate it by the fact that a specialized quasi-judicial body known as Court of Arbitration for the sport as has been established for the sole purpose of settling disputes. It came into effect in 1984 and had its headquarters in Switzerland with temporary courts organized across all Olympic host cities.

    Court of Arbitration for Sport (CAS)

    CAS derived its authority from the Code of Sports-related Arbitration and based on its primary functions; it has the following divisions:

    • Ordinary Arbitration Division
    • Appeals Arbitration Division
    • Advisory opinion
    • Mediation

    According to the Code, CAS is required to constitute independent panels to investigate into sports-related disputes at hand. Though, these panels have the authority to interfere only if the disputing parties mutually agree to settle their conflict with the help of arbitration and enter into a binding arbitration agreement for the same. The parties have the right to choose the law they wish to apply to the facts of their case, however in case they fail to make this decision the Swiss law applies.[1]

    Procedure

    The Code lays down an exhaustive process to be followed by the parties as well as the arbitrators avoiding any confusion.

    Stage 1: Written phase which revolves around the right of the parties to send a statement of claim to each party to the dispute and to reply to the same.[2]

    Stage 2: Post is exchanging the written submissions, the parties have to present their evidence (including expert witnesses) before the arbitration panel. Once the second stage begins, no additional claims to be put forward by way of written submissions.

    Stage 3: The third stage has its basis on oral arguments. This stage is discretionary. As per the Code, if the Panel decides they have sufficient information to take a fair decision, they can waive off the third stage.[3]

    Keeping in mind the ever-evolving nature of sports, the Code also lays down specific provisions for an expedited procedure. The parties have the final say in deciding whether they want to try their case through this procedure. Even though the general method remains the same, the deadlines of every stage are within shorter timeframes.

    Arbitration Award

    The award of the arbitration panel is considered binding only if it made with majority consent. However, if the arbitrators fail to achieve a majority decision, the final decision lies in the hands of the President of the panel. The award has to be:

    • Written;
    • Dated;
    • briefly set out the reason(s)for the decision;
    • Shall be signed by the entire committee.

    In a recent case, Real Madrid Club de Fútbol v. FIFA,[4] the famous football club Real Madrid filed a lawsuit before CAS to overturn the FIFA sanctions imposed on it for violating the FIFA regulations regarding transfer of minors. The plaintiff club contended that the sanctions imposed on the club,i.e., a fine, deduction of points from the group table, relegation to a lower division and ban from playing on a specific stadium was harsh in comparison to the fault committed. On the other hand, the defendant submits an argument that the sanctions are according to the behavior of the representatives of Real Madrid who tried avoiding entire responsibility. The case was first under the review of a sole arbitrator of the CAS. Upon looking at the merits of the case, the court was of the opinion that the imposed sanctions were appropriate and protection of the minors was the primary responsibility of each club.

    The International Council of Arbitration for Sport (ICAS)

    With the changing dynamics of the sports industry, the dispute resolution procedure has also undergone various changes. One of such reforms was the establishment of the International Council of Arbitration for sport in 1994. The primary aim of establishing a separate international council was to promote transparency. ICAS performs the vital function of funding CAS and looking after its smooth functioning.

    According to the Code, the President of ICAS would also hold the office of the President of CAS. The reason behind delegating the same person with all the power is to bridge the gap between the functioning of the separate arbitration bodies. While CAS is responsible for settling disputes, ICAS manages the responsibility of funding the whole process of dispute resolution to keep the machine running.

    ICAS helps to maintain transparency by assisting in the selection of CAS arbitrators. In line with the Code, it is mandatory for all arbitrators to be well versed with all the laws related to sports and should have the capability to be fair arbitrators. The International Olympic Committee of various sports federations can suggest a potential candidate. However, the final say lies with the ICAS.

    The mechanism to settle disputes is crucial regardless of the industry in which it is operating. Institutions like CAS and ICAS not only help rapid settlement of conflicts but also aid in the strict enforcement of sports law.

    Conclusion

    In the first article related to Law of Sports, as a person not related to the sports background, the author was skeptical whether sports law as an independent field of law is just a matter of academic knowledge or does it, in reality, hold relevance in a regular person's day to day life. However, working on this paper has substantially changed the author's perspective towards sports law as an independent legal discipline. The law governing sports might be young, but it not only regulates a multi-billion-dollar industry influencing the lives of people across the world but also assists to keep the essence of games alive. The perception of the law of sports as practice majorly depend upon the opinions of people who regularly practice it. Fundamentally, in the past decade, sports law has received acknowledgment as worthy of importance in the present.

    The evolvement of the law of sports has conceivably broad ramifications for the improvement of national and international laws as well as international dispute resolution, which frequently are not perceived. Additionally, legal scholars should be aware of judicial decision for sports-related cases and may provide the seed that grows into statute with the more extensive application.


    [1]Article R45, The Code of Sports-related Arbitration

    [2]Article R44, The Code of Sports-related Arbitration

    [3]Article 44.2, The Code of Sports-related Arbitration

    [4]  CAS 2016/A/4785

     

     

    ]]>
    Tue, 10 Jul 2018 13:24:17 GMT
    <![CDATA[The Law, the iPhone and Facial Recognition - PartII]]> EYE-PHONE: LEGAL ISSUES ABOUT APPLE'S NEW FACIAL RECOGNITION FEATURE – PART II

    The ever-changing technology the law is always trying to keep up its pace as now the interaction of law and technology is more critical than ever. The ungoverned technology is a danger to the society if drones are flying over a city that is a problem unlike the cars on the streets in 1916. It is essential that we protect our community, privacy, money, and safety from the potential harm of new technologies and to achieve this we will need new laws that would protect us the way we are under the protection of nuclear bombs. Concerning the previous article, this article will look into the legalities surrounding facial recognition feature with supporting the legislation.

    The face detection technology by Apple is made with higher sophistication as it uses dual cameras and captures depth by an array of projected infrared dots. However, when Samsung released Galaxy S8 in March 2017 with a facial recognition system that was a major selling point. But the system failed when the scan got a spoof by holding an image of the person's face in front of their phone.

    Privacy Issues

    One primary user privacy concern attached to using Face ID on iPhone X is that during police detention will they be able to access your phone easily? By just holding the phone up to your face the police will have access to all your private information. However, Apple argues that it does not work with the user's eyes closed. But the speed of the process is so quick that as soon as the user opens their eyes, Face ID scans successfully despite the camera being off-axis to the user's face. Therefore, unwilling login access to iPhone X remains questionable until it releases in the market. But the good part is that similar to the Touch ID; you can also opt out of Face ID option to avoid privacy concerns.

    As with most technological advancements, there is a process of trial and error. However, Apple is only showing concern regarding one type of error that could happen concerning its Face ID algorithm, which is someone else gaining access to the device. But there remains another concern of your phone not recognizing you and therefore not granting you access.  We will know more about the issues with this technology once the customers start using the new iPhone X and provide with their feedback.

    With this new technology introduced in the iPhone, one must wonder about the possibility of an identical twin gaining access to his/her sibling's iPhone due to identical facial features genetically. Although this question is irrelevant for a vast majority as only four in one thousand births, result in identical twins according to scientific consensus. Apple's representative saw this as a loophole and advised similar twins to protect their sensitive data on the device with a passcode as the chances of an identical twin being able to bypass Face ID and break into the phone are more.

    Furthermore, to secure the phone correctly, two aspects of biometric security should be considered. One is the protection of the stored biometric data, and the other is having the ability to defend the authentication system of the device from fake users. For protecting the stored biometric data, it should be stored in the internal memory of the smartphone and not on an external computer server. As iPhone's representative claims that an individual's face data is protected in an enclave, as it is in the iPhone data and not in a central database system, which is easier to break into for hackers.

    Precedents

    A Virginia Beach Circuit Court ruled that an individual in a criminal proceeding couldn't be forced to disclose the passcode of his mobile phone, as that would have an impact of violating the self-incrimination clause of the Fifth Amendment. However, at that time, the Court was of the opinion that an individual could be forced to give up his fingerprint for unlocking the touch ID or any device protected with prints. The Court reasoned this approach with explaining that while a passcode requires a defendant to use actual knowledge, a copy is a form of physical evidence similar to a DNA sample that authorities are legally allowed to demand an investigation in certain circumstances.

    In a case in Minnesota appellate court ruled against a convicted burglar who was forced to unlock his phone by a lower state court by giving his fingerprints, which opened it. This case, the State of Minnesota v. Matthew Vaughn Diamond, is the latest episode in a series of unrelated cases throughout the USA that test the limits of digital privacy, modern smartphone-based fingerprint scanners, and constitutional law. Diamond went to trial in 2015 and was convicted of the burglary along with two other lesser charges and therefore, got imprisonment up to 51 months in prison. Later, Diamond appealed because by forcing him to unlock his phone his Fifth Amendment rights against incrimination were violated.

    Moreover, being forced to give out passcodes or fingerprint –enabled passcodes which are the modern unbreakable encryptions, frustrate the lawful authorities when dealing with criminals who refuse to cooperate and unlock their data.

    Under the Fifth Amendment, defendants cannot generally be compelled to provide self-incriminating testimony but giving a fingerprint is allowed for identification or matching to an unknown print found at a crime scene.

    In sum, because the order compelling Diamond to produce his fingerprint to unlock the cellphone did not require a testimonial communication, we hold that the law did not violate Diamond's Fifth Amendment privilege against compelled self-incrimination.

    The technology of using fingerprints to unlock a smartphone is relatively recent. In a right frame, this type of technology is not violating rights of an individual instead it is merely a forceful production, for example, being forced to hand over keys to a safe. However, if an individual is forced to disclose his passcode to the phone, the legal implications for such would be different.

    The FACE++ Technology

    An excellent example of widening extents of face detection technology is the Face++ (pronounced Face Plus Plus), a Chinese startup based in Beijing. The technique of face recognition is widely used in China to promote surveillance as well as convenience. This technology has transformed our daily lives regarding banking, retail, and transportation services. Face++is under usage for apps for example; a mobile payment app called Alipay with over 120 million users in China, uses your face as credentials to authorize payments. Another example is Didi, one of the most popular ride-hailing company in China uses Face++ to identify the legitimacy of the driver. Lastly, Baidu, a company that operates China's most popular search engine is now working on a system to allow people to collect rail tickets by showing their face.

    Moreover, this type of technology has progressed in China due to their policies towards privacy and surveillance. Governments to identify suspected criminals through surveillance cameras also use Face++. According to an assistant professor at Peking University, Shilang Zhang; "The face recognition market is huge. In China, security is paramount, and we also have lots of people, and lots of companies are working on it". The technology of facial recognition has existed for years, but with significant technological advancements in this area, it has improved its accuracy. Only now it has become so accurate and sophisticated that it is under usage for financial transactions.

    The Face ID technology introduced by Apple can potentially compromise user privacy especially in cases of authorities confiscating personal belonging like smartphones. As mentioned previously in the example above, compelling individuals to give their biometrics does not violate their Fifth Amendment rights whereas it is an argument that an individual producing their passcode by using their memory if demanded by the authorities does violate the Fifth Amendment rights, as it constitutes self-incrimination.

    In the future, what does this mean for the potential users of iPhone X? As millions of Apple users will switch to iPhone X as soon as it hits the market, will this require clarity in regards to an individual's constitutional rights?

     

    ]]>
    Mon, 09 Jul 2018 11:18:00 GMT
    <![CDATA[Licensing and Monitoring of Exchange Business – UAE]]> Licensing and Monitoring of Exchange Business – UAE

    "Money does buy satisfaction if you spend it the right way," while the creation and development of currency seem elusive, money is the way we get the things we need and want. Money is the medium of exchange that is used to facilitate transactions globally that allows people to trade goods, services, etc. The currency differs from country to country, and therefore the importance of currency exchange or money exchange companies are vital means in the enactment of trade tourism services that are practical, rapid, easy and efficient. To understand the importance of exchange business let us think about your local farmers market where you are shopping for your favorite organic coffee on a Sunday morning. The coffee is imported from Brazil, which means that the farmers in Columbia are paid in the Columbian peso, and someone between the farmer and the importer needs to convert the peso in UAE Dirhams to sell it in the local market in UAE. It is where the exchange businesses come into place. This article takes into consideration laws and regulations by UAE Central Bank and does not take into account regulations by ADGM, DIFC, Fintech, etc. concerning monitoring and licensing of exchange businesses.

    Central Bank issued Regulations regarding the Licensing and Monitoring of Exchange Business (the Exchange Business Regulations) in January 2014, with the aim of improving the regulation of exchange businesses, supporting the geographical development of exchange businesses and facilitating the provision of exchange services throughout the UAE. 

    The Exchange Business Regulations define exchange businesses as

  • dealing with sale and purchase of foreign currencies and travelers' cheques;
  • executing payment operations in local and foreign currencies;
  • paying employees' wages through an established link to the UAE Wages Protection System; and
  • Other businesses licensed by the Central Bank. Under the Exchange Business Regulations, no person or corporation may carry out an exchange business in the UAE without receiving a license from the Central Bank. Commercial banks, as defined in the Banking Law, are exempt from this requirement.
  • How to obtain a license under the Exchange Business Regulations?

    Personal reliability refers to the applicant or any of the founding members to be in ethical behavior and conduct and should not have a criminal record for any offense involving dishonesty or violence and should have a good background with banks and creditors.  One shall not be declared bankrupt or settled with his creditors nor has been ruled to attachment of his belongings or put under judicial receivership.

    Professional Qualifications: The candidate or the person who is or shall be the manager of the exchange business shall have the appropriate theoretical knowledge of exchange business and the necessary management experience. Central bank requires resumes for managers and controllers to review their professional qualification.

  • The candidate must meet the paid-up capital conditions specified in the Exchange Business Regulations. The paid-up capital requirements differ depending on the type of exchange business that the candidate intends to carry out.
  • In the case of individual candidates, the candidate must be a UAE national who is at least 21 years old with sufficient mental capacity on account of corporate candidates, UAE nationals should hold no less than 60% of the shares in the corporation.
  • To gain a license, an applicant must portray personal reliability and professional qualifications as required by the Central Bank.

    Personal reliability refers to the applicant or any of the founding members to be in ethical behavior and conduct and should not have a criminal record for any offense involving dishonesty or violence and should have a good background with banks and creditors.  One shall not be declared bankrupt or settled with his creditors nor has been ruled to attachment of his belongings or put under judicial receivership.

    Professional Qualifications: The candidate or the person who is or shall be the manager of the exchange business shall have the appropriate theoretical knowledge of exchange business and the necessary management experience. Central bank requires resumes for managers and controllers to review their professional qualification.

  • The paid-up capital requirements are as follows:

    •    The paid-up capital should be not less than AED 2,000,000 for purchasing, selling and exchanging of foreign currencies in the form of bank notes, coins and travelers' cheques.

    •    The paid-up capital should not be limited to AED 5,000,000 for bringing on exchange market within and outside the UAE in addition to selling and purchase of foreign currencies and travelers' cheques.

    •    The paid-up capital should not be less than AED 10,000,000 for carrying on payment of wages by involving the Central bank's system in addition to remittance business and buying and selling of foreign currencies.

    •    If the company is a Limited Liability Company (LLC) regardless of the activity, the paid-up capital should not be less than AED 50,000,000 and shall increase by 10% for opening each additional branch.

  • After getting the license, the authorized individual may not transfer the ownership of the permit, for profit or compensation to any third party. If such individual holds the post of Chief Executive Officer of the applicable exchange business, he or she should not be qualified to hold the given position at any another establishment. The authorized individual should likewise agree to the proceeding with obligations under Article 9 of the Exchange Business Regulations.

  • Scope of License

    Article (6) of the Exchange Business Regulation mentions the Scope of Licence where the license published by the Central Bank the following shall be observed:

    •  It is for one year and renewable
    •  It should contain such requirements as the Central Bank may deem appropriate.

    Terminating the License

    Article (7) of Exchange Business Regulation gives the right to the Central Bank by a resolution of its Board to revoke, vary, limit or withdraw any condition imposed on any license after receiving the comments of the licensed person on the reasons calling for such cancellation, variation, restriction or withdrawal at any time. The Central Bank by a decision of its Board shall have the right to revoke the license if:

    • The licensed person is in breach of the Exchange Business Regulations or Federal Law Number (10) of 1980 or any instructions or circulars issued by the Central Bank or if any of the conditions of the license is not fulfilled or is incapable of fulfillment;
    • The Central Bank has been given with dishonest, deceptive or incorrect data by or on behalf of the licensed person or any of its manager or controller.
    • The interests of customers or potential customers of the authorized person are threatened, whether by the manner in which the licensed person is conducting or intends to administer its business or for any other reason;
    • Any authorized person or any of its shareholders apply for the liquidation of the company by the competent judicial authority
    • A judicial receiver or manager or any similar officer of the licensed person's undertaking has been appointed;
    • The authorized person has a bankruptcy order or judgment against him
    • The authorized person did not commence its exchange business within six months from the date of the license.

    Application of Exchange Business Regulations

    Article 12 of the Exchange Business Regulation mentions that these provisions shall apply to all entities exercising exchange business in the UAE and licensed by these Regulations. Exchange companies permitted by Central Bank's Board of Directors Resolution No. 123/7/92 issued on 29/11/1992 shall be required to resolve their areas with the requirements of these Regulations, within two years from its issue date.

    ]]>
    Thu, 05 Jul 2018 14:30:00 GMT
    <![CDATA[Company Formation in Ajman Free Zone]]> COMPANY FORMATION IN AJMAN FREE ZONE

     

    Strategically constructed at the Arabian Gulf, Ajman Free Zone (AFZ or Free Zone) is the smallest yet the most famous free zone in the country and is capable of serving both eastern as well as the western market. AFZwas recognized in 1988 under an Amiri Decree Number 6 of 1966 by His Highness Sheikh Hamad Bin Rashid Al Nuaimi. The free zone's proximity to Dubai and Sharjah offers easyaccess to ports and airport terminals.

    The free zone is one of the iconic destinations for establishing the business. However, the industrial activities offered by AFZ steals the show. AFZ has significantly contributed to enhancing UAE'S economy in past several years by attracting investors to undertake varied activities under one license. UAE has acknowledged great development in AFZ companies. Additionally, there is constant development in the area of the free zone which will soon accommodate 9,000 companies.

    Advantages of AFZ

    In comparison with other free zones in UAE, foreign investment in AFZ has raised continuously without any disruption. The only reason for such tremendous growth is unlimited benefits offered to the establishment that make them distinct. Below are some primary advantages of setting up a company in this free zone:

             i.            100% foreign ownership and no requirement of a local sponsor;

           ii.            Free from corporate and personal income tax;

          iii.            Ease of transferring capital and profits;

         iv.            Cost-effective;

           v.            Free from import and export duties;

         vi.            State-of-art infrastructure;

        vii.            Comparatively low prices for leasing;

      viii.            Unlimited supply of water and electricity at a lower cost;

         ix.            Easy access to two international airports;

           x.            One-stop-shop for all procedures.

    Types of Licenses

    The first and the foremost stage for a company willing to establish their presence in AFZ must opt for the kind of license they require, considering the activity they wish to undertake. As for options, AFZ offers four types of business licenses as follows:

             i.            Trading License: Companies willing to conduct trading activities can apply for this license;

           ii.            Industrial License: Companies wish to undertake industrial and manufacturing operations must opt for the exclusive industrial permit;

          iii.            Professional Service License: For companies performing professional services;

         iv.            National Industrial License: This license is specifically for the companies whichmeet the below criteria: -

    ·         Companies must be an LLC (Limited Liability Company) having a local partner holding 51% shares in any GCC countries;

    ·         The company should undertake a minimum of 40% manufacturing within the free zone.

    Another quill in the cap of Ajman's business structure especially when it comes to the company formation in AFZ is the plethora of opportunities regarding ownership as follows:

             i.            Free zone establishment;

           ii.            Free zone company;

          iii.            Branch of a foreign company;

         iv.            Branch of a local company.

    Companies willing to incorporate their business in Ajman Free Zone, the company has to undergo several steps starting from submitting the application form and obtaining the license. The companies can opt from the list of activities provided by the Ajman Free Zone Authority (AFZA) depending upon the types of business one wish to conduct. Importantly, the procedure of obtaining a trade or commercial license in AFZ will take around 4-5 weeks, subject that the company submitsnecessary documents on time.

    Below table imparts a comprehensive list of documents required by the free zone authority to obtain the license:

    Document Title

    Free Zone Establishment

    Free Zone Company (Corporate Shareholder)

    Branch of Local Company

    Branch of Foreign Company

    Application form

    Proof of Trade Name Reservation

     

     

    Letter of Intent

    Audited Financial report

     

    Company Profile

     

    Bank statement of past six months

     

     

     

    Letter of reference from a bank

     

     

     

    Passport copies of shareholders

    Power of attorney, specimen signature, passport copy and resume of manager

    Personal Information sheet of manager and shareholder

    Lease Agreement

    Register certificate from parent company

     

    MOU and AOA of parent company

     

    Board Resolution of Parent Company

     

    Appointment letter, power of attorney, specimen signature and passport copy of legal representative

    Power of attorney, specimen signature, and passport copy of director

    Power of attorney, specimen signature and passport copy of secretary

     

    ]]>
    Sun, 24 Jun 2018 00:00:00 GMT
    <![CDATA[Agency Laws in the GCC Countries ]]> AGENCY LAWS IN THE GCC COUNTRIES

    Introduction

    The extension of the multinational partnership is either setting up its subsidiary in remote purview or to tie up with the local organization in a foreign jurisdiction. United Arab Emirates (UAE) is one of the distant locals where international organizations are going into office concurrences with the Emirate nationals keeping in mind the end goal to grow their business in the UAE since the UAE being a well networked international port. A global entity wishing to set up a company offshore with cost-effective investment UAE is a standout amongst the most advantageous alternative where the foreign companies either enters into distribution agreement or makes an arrangement with the commercial agencies to expand their business with the locals. The UAE Agency Law manages these commercial agencies and distribution agreement in the UAE according to amended Federal Law 18 of 1981usually known as Agency laws. Federal Law 13 of 2006concerning agency law was revised and revoked in 2010. However, the Federal law 18 of 1981 was a reestablishment.

     

    The Emirate of Abu Dhabi established Federal Law Number 11 of 1973which centers around the task and control of business office exercises. This arrangement of Federal Law Number 11 of 1973had constrained the foreign business in Abu Dhabi and had created various challenges for the government about essential regulation carried out for commercial activities additionally talked about in this guide.

     

    These agency agreements have a positive effect on UAE's economy since there is an increment in Foreign Direct Investment (FDI). Indeed, even the previous Ministry of Economy SheikhaLubna Al Qasimi states that "The new revisions will certainly boost the financial market in the UAE. This law declared out of the longing to improve and keep up steadiness in costs and guarantee that organizations are not controlled to expand costs." Furthermore, the administration of UAE His Highness Sheik Khalifa bin Zayed Al Nahyan, President of the UAE and His Highness Sheik Mohammed receptacle Rashid Al Maktoum, Vice President and Prime Minister of Dubai, they all are resolved to offer help for the development of the economy in the UAE.

    STA Law Firm house one of the leading corporate attorneys in the entire of UAE. We believe that commercial agency laws for the protection of local agents from the termination of agency agreements by the foreign entity without any legitimate reasoning. Besides, the comparative study of agency laws has been done between UAE, Oman, Kuwait, Bahrain and Saudi Arabia.

    CONTENTS

    1.Agency Laws in United Arab Emirates

    1.1Definition 

    1.2Types of Agencies

    1.3Sham Agency Registration

    1.4Termination of Sham Agency Agreement

    1.5Termination of Agency Agreement

    1.6UAE Court's jurisdiction in Commercial Agency Agreement

    1.7Commercial Agency Committee

    1.8Arbitration in the UAE

    1.9Penalties

    1.10Agency Laws in Abu Dhabi

    2.Commercial Agency Laws in Oman

    2.1Introduction

    2.2Definition

    2.3Registration of Agency Agreement

    2.4Kinds of Agency Agreement

    2.5Ownership

    2.6Termination of Agency Agreement

    3.Commercial Agency Laws in Kuwait

    4.Commercial Agency Laws in Bahrain

    4.1Introduction

    4.2Definition

    4.3Ownership

    4.4Exclusivity

    4.5Termination of Agency Agreement

    4.6Penalties

    5.Commercial Agency Laws in Saudi Arabia

    5.1Introduction

    5.2Definition

    5.3Features of Agency Law

    5.4Ownership

    5.5Commission

    5.6Choice of law and Jurisdiction

    5.7Termination of Agency Agreement

    6.Conclusion

    7.References

    Overview

    The definition of commercial agency law as per Federal Law Number 18 of 1981(the UAE Agency Law) 'any disposition whereby an international company is represented by an agent to allocate, vend, tender goods or services within the UAE for a charge or profit.'  The rights of the Emirate agents are only protected under Federal law 18 of 1981(UAE Agency Law)if the registration of agency agreement with the UAE Ministry of Economy. Unregistered agreements do not render the rights of Emirate agents or protect them from the termination of agency agreement by the foreign principal under UAE Agency Law. Additionally, UAE commercial agent should hold a valid and appropriate license in each Emirate along with enrolment with the Chamber of Commerce in each relevant Emirate.  Article 4of the UAE Agency law (Federal law 18 of 1981as amended) states that there should be a straight connection between a UAE commercial agent and the foreign principal without any interference by the regional or multi-country sales agent. On the other hand, Article 5of the UAE Agency Law (Federal Law 18 of 1981as amended) states that ' A qualified commercial agent will be regarded selective in its domain, however, enables an international organization to delegate a different commercial agent for every emirate.' The Federal Act, 1981defines Commercial Agency as 'the representation of the principal by an agent for distribution, sale, display or provision of any commodity or service within the state (the UAE) in consideration of any commission or profit.' Here the word principal includes the manufacturer, whether based in the UAE or overseas. A common phenomenon observed in all the GCC countries is that if there is no registration of commercial agency agreement, then it will not be recognized by the courts or an agent will not have solid ground to defend himself from the termination of an agency agreement.  Therefore, commonly tan here are two types of agency agreements such as:

    I.    Registered agency agreements-  an agent can register commercial agency agreement before the Commercial Agency Registrar to protect themselves from an illegal termination of an agency agreement.

    II.    Unregistered agency agreements-  an agent enters into an agency agreement with the foreign private entity without registering the agreement with Commercial Agency Registrar then it is recognized as unrecorded agency agreement. Most of the courts in the GCC countries do not recognize or can protect a local agent from an invalid termination of an agency agreement. 

    AGENCY LAWS IN ABU DHABI

    The Emirate of Abu Dhabi enacted Abu Dhabi Law Number 17of 1969which states that "no person is permitted to conduct any commercial activity before obtaining a license by the commercial License Law of 1969." This provision of law had created commotion in the commercial market which limited the Foreign Direct Investment in Abu Dhabi. Therefore, Abu Dhabi Law Number 11 of 1973repeals Abu Dhabi Law Number 17 of 1969 which encourages Foreign Direct Investment as it focuses on operation and regulation of commercial agency activities. In Abu Dhabi, a business agent does not have exclusive rights over the products of the foreign entity once they enter commercial agency agreement as an agent is a mediator. An agent is a mediator for foreign companies to set up their business in Abu Dhabi because without an agent a foreign corporation cannot expand their business in the UAE.

    According to Abu Dhabi Law Number 11 of 1973it is not explicitly mentioned that registered or qualified agent would be protected under a specific provision if the foreign entity terminates agency agreement without any valid reasoning.

    Furthermore, in other jurisdictions of the GCC countries, qualified agents are protected under their specific agency laws if the registration is agency agreement is carried out before the Commercial Agency Registrar. This guide entails in detail about agency laws in the GCC. Click here to read more.

    ]]>
    Thu, 14 Jun 2018 15:28:00 GMT
    <![CDATA[eye(PHONE)]]> EYE-PHONE: LEGAL ISSUES ABOUT APPLE'S NEW FACIAL RECOGNITION FEATURE – PART I

     

    Mahatma Gandhi said an eye for an eye only ends up making the whole world blind. Talking about eyes, we have heard that every closed eye is not sleepinga nd every open sight is not seeing. From eyeglasses to contact lens and from augmented reality to google glass, disruptive technologies continue to emerge and change the way we see things. Even an iPhone for that matter. Why iPhone? You may ask. Recently at the announcement of iPhone X, Apple announced its new Face-ID feature which would allow users to lock and also unlock their phones using the TrueDepth camera. In that sense 'every open eye is not seeing' may lose its significance. Trying to keep my eyes open as I continue to focus.

     

    Part I of this two series paper seeks to explore the legalities surrounding new disruptive technologies. In particular, this part aims to discuss whether legal developments can keep pace with technological advancements. Uber may have launched their App and raised millions through crowdfunding,but the company has (and; continues to) face legal obstacles. Tesla, bitcoins, Airbnb – the list is endless. You may think why government authorities all across the World are rattling with these firms. Laws and regulations are not just the manifestations of civilized society norms of integrity and justice and a need to safeguard and preserve the common good. Zachary Karabell commented that 'Regulations used to protect and steer the common good are essential, but laws used to stifle innovation are deadly.' Are all laws used to stifle innovation inherently deadly?

     

    If you have managed to keep your eyes open as yet, then continue reading further. This article does not intend to speak about the new iPhone or its benefits. Nor has the author ordered one (as yet!).

     

    They used a phrase 'eye for an eye' and these days we say 'eye for an iPhone.'The importance of an iPhone in this society and most importantly to Apple is not understated. Indeed, the iPhone is the proverbial apple to the consumer's eye. With iPhone being the most successful consumer product of all time, it has generated high revenues for Apple and has made it more of an 'iPhone company.'Technology has a high demand in today's world and has advanced immensely, and the change in the society and the development stage that we have arrived would not have been possible without the help of technology. However, the human society has experienced a considerable extent of development by now that can pose potential threats to our future, and its sustainability remains questionable for many around the world today. It is a result of the wrong use of technology. Nonetheless, advancements in technology have not only helped bring about economic development but also radical changes in cultural and social aspects of society. Therefore, the role of technology has caused a great deal of confusion and flux amongst human society.

     

    It will be unfair to claim that technological advancement has only brought a negative impact on the society with potentially jeopardizing the future. If it were not for this change and improvement in technology through science and innovation, we probably would have still been living in the Stone Age leading a comfort-less life. It is safe to say that technology has changed the way this world works by any means. From a simple home appliance like an air conditioner or a washing machine to discovering life on other planets to being able to reach anywhere in the world in the reasonable span of time in the most comfortable and luxurious airplanes to be able to do anything on a click of a button. Life has indeed become magical in many ways, and it keeps getting better!

     

    What is the Apple Face ID technology?

    These days technology keeps evolving, and with this Steve Jobs, a name every person recognizes and Steve Wozniak co-founded a company called Apple in 1976, which introduced the first hugely successful and mass-produced personal computer; both the Steves are known as pioneers of the microcomputer revolution. Recently, Apple launched a new feature of Face ID feature to replace the existing Touch ID feature in their upcoming mobile phone model: iPhone X.

    For introducing the baseline technology, metrics related to human characteristics are known as biometrics. They are automated methods of recognition based on an individual's physiological and behavioral characteristics. The usage of Biometrics authentication is in computer science for identification and access control.  Although this technology has been available for several years, with modern advancements in this emerging technology along with a reduction in costs has made it widely available to the people. Some claim that using a unique physical attribute of an individual's body like a fingerprint to prove your identity is considered the most comfortable and safest way in the current world. Secure method of authentication is a desirable feature because your phone is valuable not only due to its cost but also because of the data it contains including photos, contacts, payment details and so on.

    The explanation of the technology used in the new feature of the iPhone is that the TrueDepth camera enables the Face ID feature on iPhones and it projects more than 30,000 dark dots that form a precise depth map of your face. The Face ID feature can only be used with iPhone X and unlocks the iPhone only when you're looking at it. Secure Enclave assists in the encryption and protection of the facial map. The verification and authentication take place on the device, not in the cloud.

    The Face ID feature is so advanced that it can recognize any changes in your appearances. Any changes like wearing glasses, growing a beard, wearing a hat or wearing wild makeup will not affect the accuracy of the Face ID feature.

    Trustworthy or not?

    Timothy Revel in his article describes iPhone X face recognition feature as the quickest and easiest way to unlock your phone. So before one puts their finger for touch identity or entering the passcode, the camera processes your face and grants access. He further states that the technology has not proven itself as yet and that Apples keeps its algorithms under a lock, which means that we don't have a clue as to how well they work.

    Currently, the best type of face-recognition algorithm uses deep learning as their artificial intelligence. Companies use the web to gather billions of images to train an algorithm that is inspired by neurons in the brain that is known as a deep neural network. With time the algorithm learns how to recognize the features and relevant images. It learns with practice, so the more variety of modelsits views, the more accurately it identifies.

    The deep neural network kicks in every time the face appears in front of a camera. There is another trick by which the iPhone X can identify the face accurately,and that is the 3D camera, which helps the algorithm to determine the face regardless of the face alignment. It successfully verifies the face if enough features match. "The chance that a normal person in the population can unlock your iPhone X with their face is one in a million," by Apple's Philip Schiller during a press conference.

    From a legal perspective

    As the technology advances, different interpretations of the law established come forward. From a global perspective, the laws of the United States grant each the right against self-incrimination. This Fifth Amendment clauses outline fundamental constitutional limits on police procedure.

    The Fifth Amendment to the U.S. Constitution provides, "No man or woman shall be held to answer for a capital, or other crime unless presented by a grand jury.Except in cases arising in the land or naval, or in the militia, when in actual service in the time of war.Also, nor shall a person be subject to same offense twice; now shall he be compelled to a witness in the criminal case against himself. At last, there should be no deprivation of life, liberty, and property without proper law."

    What Future has for us?

    The facial recognition tool introduced by Apple will now be used as a security feature to unlock iPhone, but the interesting question is there a real limit on the usage of this tool in the future? At the moment, the data of Face ID is in the phones but that can change in the future,and this will expand the use of Face ID to worrying extents. For example, privacy advocates on Twitter have voiced their concerns about the data of Face ID and its usage for retail surveillance or attention tracking in ads.

    However, in the past, Apple has always strengthened its commitment to privacy. Unlike its competitors, Apple has shown no interest in data collection and mass targeting that remains a vital focus of most web companies. Therefore, as the most advanced and ambitious tech company has introduced a 'powerful new toy,' and it would only be considered wise to think about what to expect in the future.

    Conclusion

    To conclude, it is evident that technology has its pros and cons and the technology is advancing at a breakneck pace with the law finding it challenging to catch the speed. Therefore, to fully benefit from ever-advancing technology societies should be well aware of the legal implication of such.

     

     

    ]]>
    Thu, 14 Jun 2018 13:56:00 GMT
    <![CDATA[Testamentary Vs. Living Trust]]> Testamentary Vs. Living Trust

     

    Time is an unchanging constant throughout our world. Forever moving in one direction, pushing us all into the hazy future. There is little exact certainty in what we plan for in the longer term, and nowhere is this more apparent in law than in living trusts and testamentary trusts. These laws exist precisely to assure individuals in this uncertain world. No one is aware of when their time will come, and once they are gone, there is very little they can do to impact the world and carry out their final wishes. However, Living Trusts and Testamentary trusts are two such things that will stand beyond an individual's passing.

    Overview of living and testamentary trusts

    In the case of living trusts, these allow for individuals to plan for their futures, and also the prospects of those who remain when they are gone, while testamentary trusts do not concern themselves with the individuals' future, but rather where and how their estates will be divided when the time and need arises. Living trusts bring to fruition during an individual's life. Their estate is defined, and they can make use of what they wish from their estate. It is in opposition to testamentary trusts which only deal with the issue of the splitting of an estate after death. In general, both of these allow for some level of certainty and assurance in this one aspect of our lives. It can be quite a comforting idea when one thinks about it.

    Testamentary trusts are applicable when an individual wish to leave others certain assets, though the time they wish to transfer assets has not yet arrived. Instead, it is often after the individuals' death when their estate will undergo division among the successors. Testamentary trusts are irrevocable, which means that one cannot alter them without the permission of the testator. It also implies that after the death of the testator, there can be no alteration of the testamentary trust. The testator begins the process by first producing their last will. In this document, they will include the fact that upon their death, they would want the trust to be set up. There are three parties involved in a testamentary trust. These are as follows:

    • The grantor/trustor (an individual is also known as the testator in the case of a testamentary trust)
    • The trustee
    • The beneficiary

    In this arrangement, the testator is the producer of the trust. As previously mentioned, they begin by producing their last will, which would therein outline the beneficiary party. The trustee is the individual appointed by the testator to proceed with the processes required to set up the trust, and the beneficiary is the individual or individuals who will be receiving benefits from the trust. Itself consists of the estate of the testator, and the trustee, who may or may not have its name in the testators will, shall be responsible for managing that trust up until a time when they are no longer required (when the beneficiary can take over the trust). The trustee can choose to execute the will in what manner they deem to be appropriate, though some jurisdictions allow for more specific instructions from the testator to be issued. However, the general idea is that the trustee must watch over the trust and the last will of the testator. While specific countries will have their requirements for a will to be produced and different laws that dictate testamentary trusts, (such as the UK Trustee law of 1925. It dictates what a trustee can and cannot do) the original basis for the idea of testamentary trusts comes from the English common law system and the concept of equity.

    Equity involves the holding of goods for another until both the products and the benefactor are ready to be united. Due to the concept being one that originates from the universal law system, it is one which has not found its way to civil law jurisdictions. Of late some European countries have adopted the concept of trusts and these including the likes of Italy, Malta, and Luxemburg to name a few.

    The Hague Trust Convention

    An essential piece of legislation about trusts is the Hague Trust Convention. There is a total of 14 signatories of this convention, including the US, Canada, UK, the aforementioned European countries, Australia and more. This convention provides power to a trust produced within a nation that approves of the practice and ensured that the nation interprets it as it was initially meant to be construed in its country of origin by both signatories and non-signatories of the convention. Coincidentally to this point, the agreement also pushed to the forefront, the idea of trusts, to a significant number of (particularly civil law) countries to whom the concept would have been a foreign one. The introduction of The Hague Trust Convention has meant that civil law countries will now at the very least, be able to recognize the concept when they see it in action. A straight rejection will be very unlikely, and with the idea now being more widespread, the plan may stick and be adopted by some of those countries themselves, as was seen with the case of Italy and Malta.

    The convention does specify certain aspects of a trust, such as the fact that for it to receive recognition, it must be produced voluntarily and must present in writing, as per Article 3 of the convention. Beyond this, according to Section 4, the agreement does not encapsulate validity of wills and their production, as this is seen as a preliminary issue to trust itself, and also the matter of intentions themselves are a separate topic, governed by their different laws and conventions.

    Chapter three of the convention relates entirely to the recognition of trusts. Article 12 confirms that a trustee may do with trust as he is entitled to do so under the laws of the state the trust started under, and Section 11 is a general overview of the idea that trusts should receive recognition as under the jurisdictions.

    Chapter 4 concerns general clauses of the convention and Article 15 lays out a few exceptions to the issues and matters at hand. The limitations involve other laws which may impact the validity of what is mentioned in a trust. It includes, as indicated in the article, trust issues regarding minors, who may not be capable of receiving what is for them in a trust, issues regarding succession and marriages, and more.

    Beyond this, Chapter 5 discusses some of the final clauses of the convention. Among these clauses are Articles 26-29 explain that it will be possible for any member of the Hague Conference regarding Private International Law, to become signatories of the convention if they should so, please. It is under discussion that the processes required should a party decide to denounce the meeting. However, the agreement is not one which concerns itself with an overly complicated or controversial matter, and as such, the clause is likely only present for the sake of it being present as it would likely be in any convention. It provides freedom to states that agree, should they then find flaws or disagreements with the matters and the way we deal with these conventions.

    Once again and most importantly though, the beneficiary, as the individual who is to receive from the trust, will be the end goal for the trustee. There may be occasions when the recipient is very young or is not in a state to be able to receive from the trust. If this is ever the case, it is the responsibility of the trustee to ensure the trust is secure, and in time, when it is possible, to pass on the trust to the beneficiary.

    Comparing the trusts

    A living trust is also famous as Inter vivos trusts. These are trusts that are made during an individual life and allow for assets to be built up in the individual's estate. The individual can access this trust throughout their life and use what they want to or need to. However, upon the individuals' death, the trust will be split between those mentioned. This form of trust is similar to testamentary trusts in that they take full effect upon the end of an individual. Generally, the same laws and legislation apply to living trusts that apply to testamentary trusts, as they are both defined as trusts. The Hague Trust Convention and the idea of recognition being given to these trusts as they would be within their original country of origin still applies to living trusts, and the more specific legislation regarding wills and trusts are within their country of origin. However, there are most definitely differences between the two types of trusts in the way the trust built and split. Some of those differences will now discuss in more depth.

    One difference is that a living trust can be revocable, unlike a testamentary trust. As such, it can change the testator sees fit during their lives. However, it is important to note that whether a living trust is revocable or not depends on what the testator wishes for it to be. However, the flexibility that this offer is something that a testamentary trust cannot provide.

    One stage that a testamentary trust passes through during the process of an estate division is known as the probate. The probate stage occurs after the individuals' death when the will must go through the probate court proceeding. This court proceeding is one which can be quite lengthy and can take between six to nine months to complete the operations. The process is intended to ensure the validity of the will before the estate is divided.  A living trust is not needed to go through the probate stage for the estate. It saves time for all of the parties involved and can look upon as a significant advantage to forming a living trust. However, some may see it as making a living trust less secure than a testamentary one, though this will more often than not be false.

    One interesting point that one may consider the matter of trusts is the privacy of the case. A testamentary trust is, of course, based on the last will of the testator. Once the individual has passed away, the intention is to be made public and the assets split. There is no privacy in this form of trust, as the law stipulates that it will be made public. It is both a good thing and a bad thing. On the one hand, once a will is open and has been through probate, there can be no denying the facts of the will. However, with it going public, other issues may arise, since all those who will be receiving assets will know what all others will be obtaining.

    Now while this may be irrelevant from a legal standpoint and may seem like something more fitting of a TV drama show, it is still a factor which we should consider. It is because the privacy issue is only an issue for testamentary trusts. Living trusts though are not made public, and this can and will be seen by many as the ideal path to take. It is important to realize that when a will goes public, it will be a public document that any will be able to view. It includes both those included within the will, and also the general public. Here is where the more significant issue will likely arise for most, as the will produced by a recently deceased may not be a document that one would want to share.

    Conclusion

    As a whole though, the primary international rules regarding trusts, both testamentary and living, are the same for both cases. The Hague trust convention is this legislation, and it pushes primarily for the recognition of trusts by a more substantial number of nations, as it is an English common law and equity law principle which will be entirely foreign to civil law countries. Beyond this law, trusts under the governance of rules of the nations of the creation of trusts. For example, the aforementioned, UK Trustee Law of 1925 is UK specific, and no international laws are covering the matter. Testamentary and living trusts, while similar, have their apparent differences. They both have their benefits and disadvantages, but in the end, they share the same goal of distributing the assets of a departed individual. Both achieve this, though their means may vary slightly.

     

     

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    Thu, 14 Jun 2018 13:56:00 GMT
    <![CDATA[WOMEN AND DIVORCE - Think Financially! ]]> SPOUSAL SUPPORT IN BROKEN MARRIAGES

    A professional women's working hours might be from 9 to 6, but a housewife's job doesn't end there. A housewife has a 24-hour tireless position much more than anyone who works outside the house. On any given day they are required to be nurses, psychologists, drivers, chefs, party planners, finance managers, handyman and many other professions all in one. Being a housewife is a multi-profession role with having problem-solving, multi-tasking and creative attributes to keep the things running in the house and keeping their audience content and happy which is a difficult task as any housewife would testify.The role of women in the family and the office has been of great debate throughout recent history. The criticism on homemakers questioning them being at home and relaxing has been a mere perception and an area of the critical discussion with the changing social construction and rising feminism ideologies.

    In a recent judgment in India, Karnataka High Courtrecognizes "housewife as busy as a professional." A couple got married in Meerut in Uttar Pradesh, and due to their domestic disputes, the husband filed for divorce at a family court in Bengaluru, while the wife was residing in Muzaffargarh, Uttar Pradesh. The wife filed for a transfer application before the Supreme Court; it declined on the basis that the wife is eligible to claim for 'requisite expenditure'when the need for traveling arises to attend the hearings. The family court ordered the husband to pay towards the wife's traveling needs, who had traveled to attend hearings. The husband argued that because the wife is a homemaker, she is not eligible for 'requisite expenditure' and also contended that because she does not work, she has the available time to travel by train rather than taking a flight. The High Court acknowledged that homemakers are as busy as working professionals as she is the one responsible for running the house and looking after family members and this perception in the society raises flags for gender injustice. Justice Raghvendra S Chauhanobserved that the contention that the wife should travel by train is because she is 'free' and a housewife shows lack of understanding of the hard work and dedication carried out by the homemaker. He stressed that a housewife is as busy as a professional person with all the house and family responsibilities.

    The alimony or the divorce spouse maintenance is a requirement by law in almost all the countries around the world. Alimony is a monetary compensation granted for the spouse support during and after the divorce proceedings. It expects that both the spouses regardless of their gender must bear the maintenance through and after the marriage. The awareness of support came in fashion because of the increasing issues in the union. Once the knot is tied, the commitments and obligations of marriage are to be carried out for the rest of the life even if there is mental disparity or physical separation between the husband and the wife. As time changed, the laws and education empowered woman and divorce came as one natural solution for an unsuccessful marriage.

    Divorce and UAE

    The United Arab Emirates is a Muslim country but being one of the most diverse lands there is a significant population of expats residing practicing their cultures, traditions, and religions. The study according to the Dubai Statistics Centre in 2016 revealed that there are six cases of divorce for every one thousand couples in Dubai, a number that is measured higher than the global divorce rate. Separation is a reliably rising marvel in the UAE, and expat couples are in perplexity over how to deal with the assets and benefits that they mutually attempted to obtain during their marriage. The Sharia law governs Islamic marriages. Shariah and the UAE law shall apply to couples who are both Muslims and likely if the husband is Muslim and the wife is not.  However, Non-Muslims expats residing in the UAE can file for divorce in their home country or register for divorce in the state of residence, UAE.  If the couple wishes to have their home country's law applied in the UAE courts, they have the option to appeal for it. Article 1 of the Federal Law Number 28 of Personal Affairsestablished that the "provisions of this Law should apply on citizens of the United Arab Emirates State unless non-Muslims among them have special provisions applicable to their community or confession. They shall equally apply to non-citizens unless one of them asks for the application of his law". The law describes that the relevant parties may ask to apply their rules to personal status matters. It also provides that the law of the state of which the husband is a national at the time of when the marriage contract shall apply to the effects on personal status and the effects with regards to property and assets resulting from contracting of the union. If the law fails to cover an aspect of the divorce procedures from the parties' home country laws, then the courts hold the decision to apply the UAE law. The UAE law gives the wife the entitlement for alimony and maintenance for the wife and the children by the Personal Status Lawof the UAE. Article 63 of the Federal Law Number 28 of 2005concerning the personal status states:

    1.    Alimony includes food, accommodation, medical care, clothing, servicing charges if she has served in her family's house and all that claims in a marital relationship.

    2.    Alimony is a grant according to the financial ability of the maintainer and the conditions of the dependent and the economic situations regarding place and time. However, support shall not be less than the satisfactory limit.

    3.    The eyewitness shall be sufficient for deciding the kinds of support, the amount of custody, the house and the conditions on which any determined thing depends.

    Further, a wife is entitled to alimony once her husband stops providing her basic needs by Article 67of the Personal Status Law, "The wife's maintenance shall begin from the date the husband refrains from supporting her. It shall be considered a debt due, without the government or an agreement's dependence, but payment or absolution shall extinguish it. Also, A claim for alimony which exceeds three years from the date of introducing the action in court, shall not be heard unless agreement imposes it.

    Sharia Law's take on Divorce

    The Islamic Shariah law governs divorce cases with Muslim couples' in the UAE. Shariah principles make it more complicated for the estranged couple to divorce, except the judge is fully satisfied that the marriage will not work further. The first step in the divorce process is to register a case at the Moral and Family Guidance Section at Dubai Courts. A counselor will then interact with the couple and discuss their issues. If the couple, or either of them, still claims for divorce, then the application will be forwarded to the court. Shariah Law lies on the Islamic principles governed by the holy book Quran; it provides support for the wife after the separation. The maintenance is defined and limited to the period of iddah, that is three months after filing for divorce or duration of a pending pregnancy. During the iddah, a husband must support his wife according to his income, which includes residency in the family residence. However, in a case in Bangladesh, in Muhammad Hefzur Rahman v. Shamsun Nahar Begumxiv, the Supreme Court, relying on the Quran, ruled that a Muslim husband's responsibility to maintain his divorced wife does not end with the expiration of the iddah. The court stated that the husband is bound to provide his divorced wife with maintenance on a reasonable scale for an unspecified period until she gets married again.  In Egypt, the Decree-Law Number 25 of 1929provides for two types of alimony: Iddah and enjoyment alimony. The law limits iddah alimony to one year, even if the court orders a longer time. However, if the marriage has concluded and the wife divorces without her consent or fault, she is entitled to two years of enjoyment alimony, at the rate of iddah alimony. In ordering the additional support, the court must consider husband's financial situation, the reason for divorce, and the length of the marriage.

    India and Alimony

    The presence of many religious beliefs in India, the Indian Judiciary has executed laws independently for couples associated with different religious convictions. The following are the laws related to different religious communities. Numerous acts have been passed by the government to make the present-day divorce practices in India more progressive to match the ever-changing societal norms and customs. The Muslim Women Act 1986was enacted to protect the rights of Muslim women on divorce. For inter caste and inter- religion marriages the divorce laws approved under The Special Marriage Act, 1956. All Hindus, as well as Buddhists, Sikhs, and Jains can pursue divorce under the Hindu Marriage Act 1955. The Muslim, Christian, and Parsi communities have their laws governing marriage and divorce in respect to their customs and religions. Spouses belonging to different castes and religions can seek divorce under the Special Marriage Act, 1956. Alternatively, if either partner belongs to another nationality, they can file under Foreign Marriage Act 1969.

    Maintenance Order in the United Kingdom

    In the UK, a couple is to be married for at least a year to file a divorce petition. The legal ground for divorce is that the couple should be forever separated. The party who files for divorce should prove that the marriage is broken irretrievably by establishing one of the following facts:

    1)    Adultery

    2)    Unreasonable behavior

    3)    Desertion

    4)    2 years separation with consent

    5)    5 years separation (no approval required)

    In the UK, the court can sometimes order the person with higher income to make maintenance payments to support the living cost of their ex-partner which is called a 'maintenance order.' The maintenance payment can be set for a limited period or until one of the partners dies or enters into a new civil partnership. The payment can alter if one of the partners loses the job or gets better paid. A recent case which showed new dimensions in family law in the UK is the case of Mills v Mills [2017] where the couple divorced in 2002 and agreed to the maintenance order and the court order to provide financial support and provide periodical payments to the wife of £1,199 per month. In 2014, Mr. Mills applied to revoke his maintenance payments or to reduce the payment amount. Mrs. Mills made a counter application to increase her payments as she was unable to meet her necessities. Court decided that the original order should continue and the couple appealed. The Court of Appeal agreed wife's appeal on the ground that the provision has already decided for the respondent's accommodation costs in the capital settlement. This judgment for increasing the wife's maintenance payment stunned the family lawyers as recently the trend seemed that the parties in divorce should become financially independent as maintenance orders have become quite uncommon.

    In a nutshell

    While divorce may end a marriage, it doesn't end commitments of one partner of another. In numerous relationships, one companion is more fiscally well off than the other. In a divorce, this procuring inconsistency implies that the less fortunate accomplice is qualified to get spousal support, or alimony, to support the other post the separation.  Different countries have different laws and rules towards awarding spousal support based on factors such as duration of the marriage, financial stability, income and health of the recipient.

     

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    Thu, 14 Jun 2018 10:25:00 GMT
    <![CDATA[Drugs - A Social Menace 2018-2019]]> Illegal drugs are a popular craze among the youth today. This may sound odd, seeing as the drugs are 'illegal' and yet the practice is so prevalent. Trying to picture a party today, and what would instantly come to mind would be the loud tunes of Tomorrowland, Ultra Music Festival and Electric Zoo along with bright flashing lights and finally copious amounts of illegal substance use. A party of this kind is known as a rave. The drugs are often a way for party goers to be able to keep goinguntil the dawn, and experience heightened feelings of social connectedness. With effects such as that, these drugs would appear to play a vital role in keeping the parties going. A rise has started to occur in the knowledge and use of what is popularly termed as club drugs, also known as designer drugs. The reason for such a name is due to the fact that these types of drugs are often synthesized, (e.g. Ecstasy and Ketamine) rather than being found in nature (such as marijuana).

    Drugs are known to be harmful, and yet the rate at which they are used tells us that there are a variety of reasons people consume them. Some experiment with recreational drugs with the intention of having as good a time as possible, while other succumb to peer pressure and are drawn into use. Furthermore, there are those whose drug use stems from inner turmoil such as depression or stress. One of the biggest concerns relating to drug use is the ability for almost all to become addicted to these substances, and the addiction isn't only related to the illicit drugs. Commonly used and very much legal drugs including sleeping pill, painkillers and sedatives can also cause innocent individuals to become addicted and this is a huge issue. This is a very sad matter when it is considered. Individuals with no wish to abuse drugs may end up addicted to what they would consider harmless, or rather, helpful drugs. The movie 'Requiem for a Dream' shows just how addictive and negatively impacting drug abuse can be on everyone from illegal drug abusers to those abusing prescription drugs due and having become addicted to them. It end well for nobody. The total number of substance abuse related deaths is a hard total to pin down, though the 2014 estimate of 207,400 can give some idea of just how extensive it is. The effects of the drugs can be devastating on its users, with major health and life issues liable to arise. While addiction to drugs is all too common in the world, many cannot quite comprehend the hows and whys behind its use to such an extent. The UAE is of course, looking to avoid an issue of this kind within the country. Such a scourge would have only negative impacts, and as such, the countries security authorities are making great efforts to prosecute drug addicts and drug traffickers. Of particular emphasis within the laws are the pursuit of those who may be tempted into using or entering into the drug trade. One such implementation was the recent amendments to the Anti-Narcotics Act, which had contributions towards the treatment of addicts, and the rehabilitation process which would allow them to reintegrate with society and their families. The aim is to redeem them before their cases become irredeemable.

    The stated purpose of these amendments has been in the interest of society and the individuals, as treatment required for an addict is different from the treatment required simply as a patient. With the appropriate methods of treatment, a more positive outcome will be possible, and this would be a preferred outcome. The UAE legislator also imposed more appropriate penalties for drug related crimes, with the aim of deterrence. The hope here is to stem the spread of this scourge.

    The Possession and Obtainment:

    These are two of the primary forms of narcotics handling, and are the primary aspect in the matter of drug crimes. Every deal in these materials is either possession or obtainment, and both of these elements are offences under the law. Possession or obtainment is the offence of having illegal drugs in one's possession or smuggling them into the country from abroad. These are the material facts that are considered to be a basic presumption of criminalization in narcotics and are subsequently achieved.

    I.                    The possession of the Drugs:

    The concept of possession can be split into two separate areas. These are the civil concept, and the Penal concept

    The civil concept of possession

    Federal Law Number 5 of 1985 concerns the Civil Transaction Law (the Civil Code) within the UAE. Article 1307 (1) provides that "possession is effective to control of an individual over a thing or right which may be negotiated". It is explicable that the act of possession in itself is a physical form that expresses an actual authority.

    The penal concept of the possession

    The criminal law concept of possession does not correspond to the civil transaction law. In criminal terms, it can be defined as: "a power or physical control based on certain acts and actions of a person on anything transportable of any kind in order to act for himself".

    The penal concept of possession takes three different forms, which are as follows:

             i.            Full possession: An effective control over said substances and the authority of the owner with the intention to hold onto the substance as its own. This type of possession has both the elements of being moral and material

           ii.            Temporary or incomplete possession: this form of possession does not include the moral element. It would be a collection of material acts carried out on the substance without the one carrying out the acts being the owner.

          iii.            Physical possession: Another way to think of this can be as the possession of the interlocutory hand. This form of possession is the material presence of the drug on an individual without them having the right. An easy way to picture this would be if an individual were to hold the narcotic substance on their person with the purpose of purchasing, examining, experimenting or watching it.

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    Mon, 21 May 2018 15:14:06 GMT
    <![CDATA[Do Lord Woolf's Reforms Need Reforming?]]> DO LORD WOOLF'S REFORMS NEED REFORMING?

    Part 1: The Lord Woolf Reform and the Current UK Civil Justice System

    Law may seem an unchanging presence that looms over all. It indeed dictates our everyday lives. Every action that an individual performs must take into account what the law may say about it. May may feel that that law dictates every waking moment of our lives, but if one were to consider that statement carefully, they would find it to be an understatement, as the law even dictates where we may and may not sleep. While the law may seem a highly controlling element of our lives, it is something so intrinsically connected to modern civilization that we barely give it a thought. Theidea of the extent of the laws reachbegs the question to just how free weindeed are. However, this is not the time for that discussion.

    As constant and set in stone as the legal world may seem, it isone which is continually going through change and reform.Even countries in which the legal system has developed over hundreds of years, update to the system stilloccur on a regular basis. The changeis especially the case in the UK, as the country's civil justice system has in recent decades,been going through exceedingly extensive legal reforms which continue to this day. The UK in itself has seen some of the most important legal reforms through history. Being the founding country ofone of the two primary law systemshas meant that much change has arisen over time. Introductions of concepts such as equity law emerged within the country hundreds of years after the opening of the primarystandard law system, and courts such as the court of chancery were introduced by the 14th century, almost 400 years after the standard law became the staple. Significant changes, such as the Magna Carta of the early 13th century, have also risen to shape the modern law of the land.

    A more recent reform was the Lord Woolf reform, which occurred in the late 1990's and has shaped the current system of the country.Lord Woolf proposed this reform when he published the report in the year of 1997. Following this report, and directly as a result of it, parliament introduced the Civil Procedure Rules of 1998. These are the extensive rules that are now used by the courts in England and Wales when dealing with civil matters and procedures.

    Lord Woolf's reforms were initially intended to help reduce the cost and time courts spent on civil proceedings. He identified in his original report that the three critical issues facing the civil justice system at the time were costs, delays,and complexity. To combat the problems that he saw as being prevalent with the system, Lord Woolf proposed changes to the ways of the common procedure landscape such as:

             i.            Litigation to be as often as is possible

           ii.            There should be an increase in the usage of ADR and similar such alternate methods of dispute resolution

          iii.            The costs of litigation should be more affordable for the general public which would make it so that those of lower financial ability would be able to pursue a lawsuit on an equal or similar level to those with higher means.

         iv.            Litigation as a process would become less complex

           v.            The methods of litigation would become less time consuming, and would, therefore, lead to swifter justice

    The entire idea behind the proposed reforms was to make the system more approachable and user-friendly. It was recommended to have the added caveat of also cutting tax spending on the court system, which would benefit both the government and the people of England and Wales

    One of the most revolutionary of the introductions that were brought in by Lord Woolf was the idea of pre-action protocols. What this pre-action protocols meant was that there would be a more significant amount of cooperation between parties before any legal action would occur, including the sharing of the necessary documentation and information. This sharing of information would give both parties the required information with which they could make more informed decisions. Also, ADR was to be pushed for in almost all cases before they could go forward to litigation. The idea behind this was that if a problem could be sorted out outside of a court, it would be, and this would save the court'stime and money.At the very least, an attempt would be made to reach an agreement. Even if the ADR were to be unsuccessful in achieving a solution for both parties, it would still play a significant role in the litigation that may follow. The courts would take into account all discussions that took place during ADR, and one thing that this helps to do is that it allows for bypassing of many of the lengthy processes that usually accompany litigation.

    On top of this, Lord Woolf's reforms introduced the current concept of case management into the UK civil justice system. Case management is the concept of allowing the judiciary to manage cases in court and the aim here is toallow for faster judgments, as with the courts in control, they are better able to maintain the pace and direction of the case. What this wouldensure is that there is a great deal of clarity in matters, and that unnecessary delays don't occur whether intentional or not. With the higher level of cooperation and transparency between the parties, the entire process should be smoother and the outcome of the case should be more readily understandable, and thus easier to accept.

    On top of this, all civil cases must go through individual tracks depending on their complexity and value when they reach the court of the first instance, which in the UK is generally the country court. The cases would be divided between the tracks as follows:

             i.            Small Claims: Small claims cases are those case with values of under £5000, and generally are quite simple. In these cases, parties still have to pay for lawyers, and since this will likely be costly, many choose not to use lawyers.

           ii.            Fast Track: These are cases that have a value of £5000 - £15,000 and maybe more too complicated to be considered for small claims.

          iii.            Multi-Track: Cases that are of higher value or that are too complex to for the previous tracks places under the multi-track.

    The tracks are under the 1998 Civil Procedure Rules:

             i.            Article 26.6 covers the basic outlines and limitations of each track;

           ii.            Section 27 includes small claims in greater detail;

          iii.            Article 28 refers fast record in greater detail;

         iv.            Part 29 coversmultitrack in greater information;

           v.            These three articles (27, 28 and 29) are the same as those proposed by Lord Woolf.

    There were around 500,000 civil cases during the first half of 2017 (January to June). Considering that it is highly advised to first go through ADR before even considering litigation, there was likely an even higher number of cases,to begin with, and this number represents the fraction of circumstances that made it through. The facts that do make it through are then fed into the system and distributed among the different tracks.

    In this way, Lord Woolf's reforms are seen to have made positive impacts on the UK's civil justice system through the streamlining process and the fact that the new system is continuously reducing the number of cases that make it through to court than initially arise. The proposed reforms led to the creation of the previously mentioned Civil Procedure Rules of 1998. Under these rules courts had to ensure the following:

    ·         Under Article 1.4, they must provide the furthering of the overriding objective of the case, by actively managing affairs and thisis achievedby:

    1.4. a. Encouraging party cooperation

    1.4. b. Identifying issues at an early stage

    1.4. d. Deciding the order in which the case will proceed

    1.4. f. Aiding parties in the settling of affairs

    On the matter of case management, Article 3.1 of this law covers the powers of the court. They include:

    3.1. a. Extend or reduce the time for a parties compliance

    3.1. b. Adjourn or bring forward a case hearing

    3.1. d. Placea conference on hold to await evidence

    3.1. j. Deciding the order of the issues in the trial

    However, there have been questions raised as to the effectiveness of the reforms. The goals of the change have been realized and have been around for close to 20 years now;problems have been arising regarding the actual effects and effectiveness of the reforms. While the points above are indeedvalid and have had a plethora of positive impacts on the overall system, problems have also risen.

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    Thu, 17 May 2018 15:43:31 GMT
    <![CDATA[Base Erosion and Profit Sharing (BEPS)- Tax Evasion of Multinational Corporations]]> BASE EROSION AND PROFIT SHARING (BEPS)- TAX EVASION OF MULTINATIONAL CORPORATIONS

    OLD WINE IN A NEW BOTTLE

    Before 1961, there was a minimal focus on national tax laws upon the multinational corporation's tax and digital economy because during that time no country taxed the foreign source. During that time the nations were under the illusion that they lacked both the origin and residence of the foreign corporation. Lack of taxation imposed on multinational corporation has left the path opened for the multinational corporation to evade the global corporate tax. Furthermore, in 2008, the vast recession resulted in inequalities between the overseas nations and inter-city in the developed and developing countries.  Politically influenced by the US and the UK were peeking into massive profits of multinational organizations such as Google, Apple, and Starbucks paying less than the fair share of taxes. For resolution of the global taxation chaos, the league of nations in the 1920s designed the "Draft Model Treaty on Double Taxation and Tax Evasion[i]" is as a reference by the United Nations and the Organisation for Economic Co-operation and Development (the OECD) in establishing model tax treaties. Furthermore, through model tax treaties, the government and the Multinational Enterprises (the MNE) were focusing on eradication of double taxation rather than interpreting the danger of double non-taxation.  In response to the abovementioned scenario, in 2013 finance ministers of the world formed a group known as G20 and the OECD initiated the extension of the reevaluation of the global tax system known as "Base Erosion and Profit Sharing" (the BEPS). The OECD tax experts developed a set of principles for BEPS projects. BEPS project states that "economic activities generating the profits and creation of value, must ensure taxation on profits[ii]." BEPS project is formed to consider the issue of double non-taxation, and a stronger imposition of rules on Controlled Foreign Companies ( theCFC) which would allow taxing upon offshore subsidiaries[iii].  But the primary problem of BEPS is that it is not yet well redefined and structured. The aim of OECD in developing BEPS is to tax multinational corporations overseas to generate revenue for their citizens and to close the international tax loophole.

    A COMPARATIVE STUDY BETWEEN THE UNITED STATES AND THE UNITED KINGDOM

    The BEPS project was adopted by the Obama Administration in the United States (the U.S) in 2013. BEPS project was strongly endorsed by Treasury Secretary Jacob J who stated that "address the persistent issue of stateless income, which undermines confidence in our tax system[iv]." In 2016 budget, former president Barack Obama had imposed a new tax on corporate earnings held abroad which had resulted in additional revenue of $238 billion[v]. These political and economic factors have accelerated BEPS project in the US which have ultimately strengthened the US taxation which has to increase the inflow of the corporate tax revenue. Until now the US companies were paying lower tax rates by transferring their intellectual property to low tax countries like Luxembourg and United Kingdoms.  In 1980s cost-sharing concept was developed by the Internal Revenue Service (the IRS) Regulations which became more significant due to increase in the importance of intellectual property. The US MNE's like Apple Inc.took advantage of this cost-sharing concept and shared the cost of development of its project overseas such as in Ireland. For example, Apple Irelandcontributed 80% of the cost of developing the Iphone6 and the Apple Inc. would receive 80% of the profit earned from the sale of Iphon6 in Ireland.  Another gamble made by Apple Ireland was that it had issued a license to right to use Apple's brand and intellectual property to Apple Inc. that affiliates to other countries. Those affiliated with Apple Inc. brand in other countries were liable to pay massive royalties to Apple Ireland to shift its sales profit to Ireland. In 1997 Clinton administration adopted the rule called 'check the box'under which Apple Ireland treated all its MNE as a separate entity and the profit earned through it as its own sales income. In 2015 Obama administration repealed the concept of 'check the box,' and Apple Ireland revealed that it paid the tax rate of 12.5% rather than US tax rate of 35%, on recognition by an Irish company in the Senate hearing.

    Furthermore, Google saved billions in taxes worldwide. For example, in Australia Google just paid AUD$ 74,176 in 2013 despite making estimated revenue of AUD 1billion.  Google reduced its overseas tax rate by 5%. Apple Inc. uses the same concept where it paid a tax bill of merely AUD$ 40 million despite generating estimated revenue of AUD$6 billion.  In the United Kingdom, Starbucks a coffee shop just spent £8.5 million in tax between 1998 and 2008 despite generating revenue of £3 billion[vi].

    A Similar case of Caterpillar Inc. vs. Williamsreveals another scam where US government encourages international corporate tax avoidance. A brief outline of the Caterpillar Inc. is that it is the US MNE which is in the business of manufacturing of industrial equipment and engines. Caterpillar Inc. has its subsidiary company in Switzerland named Caterpillar SARL (the CSARL) as a principal in sales of replacement parts. US Senate hearing reveals that Caterpillar Inc. paid $55 million to Price Water-house Cooper (the PWC) for design and implementation of tax structure in 2012. Furthermore, after execution of tax structure designed by PWC, Caterpillar Inc. continued its business of sales of replacement parts in Switzerland and return it received service fee which was equal to its cost plus 5% from CSARL. CSARL also paid 5-6% royalties to Caterpillar Inc. outside the US. In the US Senate hearing, it reveals that the US government is promoting its MNE's in the avoidance of not only the foreign tax but also the US corporate tax. The issue of Caterpillar Inc. was highlighted not because of tax audit but because of the civil lawsuit between the company, and it's internal tax manager who alleged that Caterpillar Inc. reacted against him since he had expressed his concern about the lack of economic substance in the company's tax structure. This incident exposed the company's international tax avoidance.

    Additionally, in the case of Futuris Corporation Ltd. Vs. Federal Commissioner of Taxation(the FCT) where the taxpayer wanted to float some profit of the business, so to do that the taxpayer transferred some assets to other group companies through a tie-up with its shareholdings and capitalized some existing debts[vii]. The Commissioner argued the creation of tax benefits which were rejected by the Full Federal Court.

    But now as per the guidelines of the BEPS suggest that payment of corporate tax to the countries where there is a creation of the value such as in the case of the US, it is California which is the IT hub. Furthermore, this shows that US economy is driven by intangible assets rather than tangible assets. In the US, corporate income tax was estimated to be 1.9% of GDP in 2015 as per the reports of Office of Management and Budget (the OMB). As seen in the OMB report it can be interpreted that the corporate taxes in the US are higher than marginal corporate income tax rate in the UK. For example, as per the survey conducted by the KPMG, United States pay 35% federal marginal tax rate on their profits along with its state and local taxes taken into account comes about a total marginal rate of 40%. Whereas, in comparison to the UK the marginal corporate income tax is 20%. If it is compared to the overall unit of Europe, then the average is 20% marginal corporate income tax rate. These BEPS rules are not only increasing the corporate tax payments globally but causing a vast corporate revenue loss to the United States since the US pays 15% marginal corporate income tax more than the other countries. If the situation in the US remains the same, then there will be a brain drain in the US since most of the skilled and creative workers will migrate to other countries. Many academic scholars debate the fact that most of the nations are implementing BEPS project without government approval and uses OECD international tax guidelines as the basis for their procedure. Therefore, BEPS project has given strict instructions to the national tax authorities to contemplate the functioning of multinationals overseas carefully.

    Intellectual Property Tax Rate

    The erosion of another significant issue in the United States is that due to tax pressure on the US companies, other European countries are offering lower tax rate for profits gained from intellectual property such as patents. For example, the United Kingdom provides 10% rate on intellectual property compared to 20% overall corporate tax rate. This concept of the lower tax rate on intellectual property is trending as patent boxes. Chief Executive Andrew Witty of GlaxoSmithKline has recently quoted upon patent boxes saying "Since the patent box, we have invested in upgrading 15 or 16 of our sites in the UK. It has made Britain the go-to place for our industry"[viii]. So, to benefit 10% tax rate on the patent boxes most of the research and development workers in the US multinationals are migrating to the UK. Due to the enormous difference in the tax rates between the United States and Europe, most of the multinationals are aggressively using these tax strategies. Therefore, to mild the situation BEPS are eliminating these aggressive tax strategies.[ix] On the other hand, BEPS rules are encouraging the US companies to shift these high paying jobs such as research scientist and software developers to Europe to incur lower tax rates.

    It was proposed by trade partners in the US to modify the US Controlled Foreign Company (the CFC) which it states "base company sales income" which refers to foreign income tax.[x] They suggest that taxation on US MNE's would be as per the sales income acquired from its production. But the US government tax authorities have strictly formed the CFC rules that it would be applied upon the incorporation of the company and not upon its production income.  Taxation imposed on corporation allows qualifying many entities of MNE taxable in the US. It has been debated by many US government officials and tax authorities that more transparency is required in the BEPS project to make it easier for the tax authorities to investigate in regards to international tax avoidance cases.

    The adoption of the BEPS project in the UK in 2014, the former Exchequer Secretary expressed its UK's support for OECD's BEPS action plan to Treasury David Gauke. There is a debate on the ongoing issue of Brexit in the UK, whether it will affect the implementation of BEPS project in the UK for international tax avoidance or not. Anticipation by KPMG states that Brexit will not interrupt UK's implementation of BEPS action plan. 

    CONCLUSION

    This article concludes that from the above findings the study shows that most of the multinational corporations reallocate their profits globally to lower corporate tax. Notably, in the United States after the implementation of the BEPS project by Obama administration most of the prominent multinational companies are shifting their profits in the United Kingdom where the marginal corporate income tax is 20% which is 15% less than the US corporate income tax. Moving of prominent tech companies to the UK has incurred a massive loss of corporate revenue for the United States. BEPS rules have turn out to be a disadvantage for the US MNE's, due to competitive taxation system in the US most of its skilled and creative workers are shifting to the Europe where there is 10% tax rate on the patent. In the current scenario, it is debated by the US government officials and tax authorities to modify BEPS rules to make it more transparent so that it becomes more comfortable for the tax authorities to interpret it while investigating in regards to international tax avoidance cases.  On the contrary, there is a little success rate of BEPS in the UK since there is lower corporate income tax on multinational corporations and it will not be interrupted even after Brexit. The objectives of the BEPS projects are still vague and more defined rules are required to be structured by OECD to have a global impact of taxation on multinational firms.

    [i]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [ii]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

    [iii]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

    [iv]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [v]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [vi]Mandel, Michael, The BEPS Effect: New International Tax Rules Could Kill US Jobs (June 2015). Available at SSRN: https://ssrn.com/abstract=2872250 or http://dx.doi.org/10.2139/ssrn.2872250

    [vii]Mandel, Michael, The BEPS Effect: New International Tax Rules Could Kill US Jobs (June 2015). Available at SSRN: https://ssrn.com/abstract=2872250 or http://dx.doi.org/10.2139/ssrn.2872250

     

    [viii]Discussion Paper No. 13-078 Profit Shifting and "Aggressive" Tax Planning by Multinational Firms: Issues and Options for Reform Clemens Fuest, Christoph Spengel, Katharina Finke, Jost H. Heckemeyer, and Hannah Nusser.

     

    [ix]Discussion Paper No. 13-078 Profit Shifting and "Aggressive" Tax Planning by Multinational Firms: Issues and Options for Reform Clemens Fuest, Christoph Spengel, Katharina Finke, Jost H. Heckemeyer, and Hannah Nusser.

     

    [x]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

     

     

    ]]>
    Mon, 14 May 2018 11:24:33 GMT
    <![CDATA[Company Formation in Kuwait Free Trade Zone]]> COMPANY FORMATION IN KUWAIT FREE TRADE ZONE

     

    Kuwait, also known as the Fruitful Land of the Gulfis considered to be a land of opportunities.The country's richness lies in the natural resources like oil and gas but also the real wealth of the nation lies in its human capital as people are highly educated and dynamic. Its presences are in the northwestern corner of the Persian Gulf.Kuwait is a modern city with mingling skyscrapers, apartment buildings, and mosques. In all of the GCC countries, Kuwait is one of the most urbanized countries. Kuwait is recently appreciated due to its extended foreign investment in the free trade zones specific focus on the free zone Shuwaikh.

    The first ever free zone in Kuwait, Kuwait Free Trade Zone (KFTZ) came into existence in 1999 in Shuwaikh port, which is the country's central shipping business facility, on a 1.5 million square meters area. KFTZ came into existence under the Law number 26 of 1995 allowing Kuwait's Ministry of Commerce and Industry to incorporate free trade zones in Kuwait (KFTZ Law).

    The Background Check

    The Kuwaiti Government signed an agreement with a privately-owned establishment, National Real-estate company (NERC) to manage KFTZ, since its establishment until 2006. Where the NREC has the authority to retain 20% of the net operating profits of the free zone and rest will be offered to the government. NERC made several advancements in KFTZ such as rehabilitating the port to ensure foreign investment, unlimited supply of electricity and water to free zone companies, easy road access, and state-of-art infrastructure.

    However, due to several disputes and allegations that NERC failed in managing the free zone, the Kuwaiti cabinet council passed a resolution number 507 of 2006 whereby terminating NREC from the management of the open area subsequently suspending all their activities. After that, in  2007, the Kuwaiti government passed on the responsibility of managing the free region to Public Authority for Industry (PAI) which is yet in-charge of the management of the openarea.

    Why KFTZ?

    The primary objective of KFTZ was to resuscitate Kuwait's economy by enlarging investment opportunities and to ensuring Kuwait's healthy business environment by making it a business center in the whole region. The free zone provides several benefits including but not limited to warehouses, open lands, exhibition halls, insurance agencies, courier companies, hotels and more. It further offers following advantages:

             i.            Complete hundred percent ownership;

           ii.            Free from corporate and income tax;

          iii.            Exemptions from customs duties on imports and exports of goods from the KFTZ;

         iv.            No restrictions on capital;

           v.            No limitations from the foreign exchange Department;

         vi.            Easy access to international airports;

        vii.            Free zone authority cannot confiscate foreign assetsotherwise will grant compensation worth market value;

      viii.            Adequate rewardoffered to foreign investors in case of violation of any rights and privileges;

         ix.            Tools and equipmentutilized within the free zone are free from taxes and customs duties;

           x.            An option to refer contractual disputes to international arbitration centers.

    An establishment may seek different types of licenses from the free zone, considering the activities of the company such as following:

             i.            Commercial/ Trade License;

           ii.            Industrial License;

          iii.            Investment license;

         iv.            Service License.

    In the licenses above, the company can hold hundred percent (100%) ownership without any interference from the local sponsor. The free zone does not restrict companies on the currency or any export and import activities with the openregion. However, there isa minimal limitation on the attachment or seizure of the capital so invested by the foreign companies.

    The companies wish to establish their presence in the free zone must obtain a license to carry out one or more of the permitted activities mentioned in the KFTZ law. Importantly, companies can only conduct those activitiesoutlined explicitly in the trade, commercial or service license. Below table will assist the investors planning to establish their presence in KFTZ:

     

    Particulars

    Free Zone Establishment/LLC

    Application form

    Required

    Famous Activities

    Manufacturing and Exports

    Timeline for obtaining a license

    Five months

    Timeline for a Lease agreement

    1 Week

    Corporate Tax Rate

    0%

    Limited Liability Entity

    Yes

    a Government Grants

    Available

    The requirement of Government Approvals

    Yes

    Requirement for GCC director or Manager

    No

    Minimum Share Capital

    USD 3,300

    Right to bid for government contracts

    Yes

    Right to secure trade finance

    Yes

    Average Costs for setting up

    USD 48,000

    Minimum Number of Partners

    2

    Future Goals of KFTZ

     

     

     

     

    With a clear view to support and increase the investment in the free zone, the Ministry and Commerce Industry promulgated a proposal to transfer the management of the free trade zone from Public Authority Industry (PAI) Kuwait Direct Investment Promotion Authority (KDIPA). The new KDIPA also has the authority to manage new free zones such as Abdali and Nuwaiseeb to However; the transfer is not yet final stage.

    The Kuwaiti government, considering the increased investment in the KFTZ has announced to further establish new free zones on five of its islands. As recently quoted by Ministry of Social Affairs and Labor and Ministry of State Department and Planning Affairs that the project will support the Gulf state to expand the industry from the oil sector to international investment. It further aims in offering varied job opportunities to Kuwaiti's citizens and limit the dependency of government funds.

    The project is now in under control of Supreme Council for Planning and Developmentand to the cabinet as a matter of urgency. The government is already in progress of creating a harbor on the Boubyan island which is a multibillion-dollar project with an objective of inviting national and international private companies for financing and executing the free zone operations. The government is under planning to complete the project in 2030 with plans to introduce various incentives to attract foreign investors.

     

    ]]>
    Mon, 14 May 2018 10:43:16 GMT
    <![CDATA[Rules of Acquisition and Merging of Public Shareholding Companies]]> MERGERS AND ACQUISITIONS: PUBLIC SHAREHOLDING COMPANIES

    "How do you make money? Mergers, Acquisitions and Liquidations"

                                                                                                                ~Mario Gabelli

    Introduction

    Sultan Bin Saeed Al Mansouri, MOE (Minister of Economy), and Board Chairman of the securities and commodities authority (SCA) was responsible for the introduction of a set of regulations concerning mergers and acquisitions of the UAE-based public joint stock companies. This decision includes three chapters comprising 61 articles which focuses on the general rules and conditions of of procurement, various definitions relevant to mergers and takeover as well as control, penalties and inspection. To be investment-friendly and ensure a promising financial system, SCA has introduced, in recent times, a series of decisions launched new systems and modified some others with the aim of efficiently developing a legislative environment and organizational infrastructure. These measures have not only encouraged and helped capital markets ensure more flexibility and responsiveness but have also boosted competitiveness, thereby enhancing and improving services provided by them.

    The FGB and NBAD Merger

    In the United Arab Emirates, partial or complete control of a public company can be acquired by way of a statutory merger process under the Federal Law Number 2 of 2015 concerning UAE Commercial Companies law (the Federal Companies Law or new CCL) as amended. Under the provisions of this law, one or more companies can merge with another company when the following process is complete. Firstly, a merger agreement must be agreed upon and signed by both the companies. Secondly, the dissolving company must acquire the approval of its shareholders by way of special resolution to approve of the merger upon which the dissolve of the company becomes effective. Thirdly, the acquiring company must acquire the consent of its shareholders, in the same way thereby increasing its share capital and permitting the company to issue shares to the dissolving company. Lastly, and most importantly, the SCA must approve the merger.

    A recent example of a merger in compliance with the new governance rules is as follows: National Bank of Abu Dhabi PJSC(NBAD)and First Gulf Bank (FGB)entered into a merger. The merger of NBAD and FGB is being effected using this statutory process and will result in the assets and liabilities of FGB being assumed by NBAD in consideration for the issues of new shares in NBAD to the shareholders of FGB. Following completion of the merger, the FGB shareholders will own about 52% of the enlarged issued share capital of NBAD.

     

    Administrative Decisions Number (62/ R.T) of 2017 Concerning Technical Requirements for Acquisition and Merger Rules has its basis on five primary consideration. Where, the first and the foremost factor is of the Federal Law number (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market, and amendments thereof (the SCA Law).The SCA Law regulates the activities of securities and commodities markets in the UAE and including recent modifications of 2006 by Federal Law number (25) and Federal Law Number (6) of 2009. SCA Law provides a uniform definition of securities to be shares, bonds, and notes issued by joint stock companies, relationships, and notes issued by the federal government, local government, public authorities and institutions in the country, or any other locally or internationally acceptable financial instruments issued by SCA. It also gave legal recognition to an agent or a broker as an entity licensed and authorized under the provisions of the law to practice the concerned business in the securities and commodities market.

    The second consideration was the Federal Companies Law which was a replacement of Federal Law number 8 of 1984. This law states that all Limited Liability Companies (LLC) must review their articles to ensure that the same comply with the terms of the new CCL. Specific other conditions, although not mandatory, were encouraged to be examined within the scope of this article. A few of the changes introduced by this law were the fact that any part of the shareholder'sreports which referred to and complied with the law that was prevalent in the respective field must be changed and updated to ensure clarity. Also, the introduction of this law, shareholders now had the right to appointment of more than five managers or directors.Additionally, an explicit reference to the increase in positions of administration, the shareholders were required to amend their articles accordingly. With this arrangement, shareholders, to pass ordinary resolutions need a simple majority of the shareholders present at the general assembly as opposed to earlier where recommendations could be given only on the condition that 50% of the votes at that meeting must be secured.

    The third consideration has its basis on the Cabinet Resolution Number13 of 2000 regarding the Regulation for Functioning of Emirates Securities and Commodities Authority, and amendments thereof. This resolution sought to clarify and define specific terms about securities and commodities. It further aimed to explain the meaning the Securities and Commodities Authority Market and contributed about five articles for the clarity of this purpose. It alsopointed at categorizing and listing the authority's objectives and powers. It began with Article 7 of the resolution which involved the main aims and the purpose of the decision itself. Article 8 mentioned the skills which the authority possessed in the interest of working towards its target. This resolution further went on to define the organs of the body and its challenges. This part of the decision could be considered an extension of the previous section as it went on to state the functions of the authority. The last part of the decisionfocused on the administrative apparatus of the administration which primarily referred to its structural formation. This resolution consisted of thirty-six articles in all.

    Additionally, the fourthconsideration is based several decisions includingDecision of the Chairman of the Authority's Board of Directors Number (38/R) of 2015 concerning assigning H.E. Dr. Obaid Saif Al Zaabi as Acting Chief Executive Officer of the Securities and Commodities Authority. The Authority's Board of Directors' Decision Number (42) of 2015 concerning the Controls and Procedures for Reconciliation in Crimes related to Public Shareholding Companies. The decision of the Chairman of the Authority's Board of Directors Number (18 / R.M) of 2017 concerning the Rules of Acquisition and Merger of Public Shareholding Companies, and
Based on the requirements of the business interest.

    Annex number (1) of the decision is relevant to the technical requirements of the acquisition offer document. The first one is the financial and other information about the offer, the acquirer,and the target company. Further, the offer document and any amendments made to it after that must include a note in the introduction of the report concerned highlighting that the consultation of an independent financial consultant who is licensed by the authority is another requirement in case of any queries regarding such a document. Secondly, the parties must mention the publishing date as well as the name and address of the acquirer, and that of the person who submitted the report on behalf of the acquirer. Thirdly, details of the securities subject of the offer, indicating that the transfer should be with or without profits must be specified. The first three guidelines of Annex Number 1 are as follows:

    "The financial information and other information about the Offer, the Acquirer and the Target Company where the Offer Document and any amended offer Document must include the following:


              i.            A note in the introduction of the document indicating that consultation of an independent financial consultant licensed by the Authority, in case if there is any doubt about the Offer;

             ii.            The document publishing date, the name and address of the acquirer and the person who submitted the offer on behalf of the acquirer, if any;

           iii.            Details of the securities subject of the Offer, indicating that the transfer should be with or without the profits;

           iv.            The details about the total amount of the offershould also be submitted;

            v.            It must include the procedures that should be followed to accept the offer;

           vi.            The closing price of the securities to be acquired and the closing price of the offered securities (in case of acquisition through Swap) on the first day of every month of the six months immediately preceding the offerdocument's publishing date. And on the last day preceding the offerterm as well as on the previous day available before the offerdocument publishing date, provided that the parties obtain the prices of the listed securities from the market.In the event,the company has unregistered-securities, the information available on the number and value of the deals completed within the last six (6) months and disclosure ofthe source of such information,ornote shall be submitted to indicate that none of such information is available.

         vii.            The details of the first payment of the profits or fees in which shall be payable by the new securities (in case of acquisition through Swap). The classification of securities is profits, costs, the capital, and recovery, and a statement indicating the impact of accepting the offer on the money and the income earned for the shareholders of the Target Company. In case the new securities are not identical to the securities listed in the market, the offer Document shall contain all the details of the rights associated with the guards, and a statement indicating that an application was or will be submitted to the Authority to list them.

        viii.             Indicate the impact of accepting the entire offer on the Acquirer's assets, profits, and business which can be essential to conduct a valid appraisal of the Offer in case of an acquisition.

    The second subheading consists of a statement, the exact words of which must be included in the offer document and goes as follows:

    "The Securities and Commodities Authority and the Market shall not be liable for the content of this Offer Document and shall not submit any confirmation about the accuracy or completeness thereof, and at this moment expressly disclaim any responsibility for any loss arising from the content of this document or from relying on any part thereof."


    This decision also made specific, clear criteria if the payment of the offer value includes securities and in case the acquirer is a company not listed in the market. The following must be involved in the decision:

              i.            The sales, net profits or losses, before tax, if any, and after tax, the amount of paid fee, if any, and any exceptional items. Also, minority interests, and the total number of dividends, proceeds, and profits for each security, for the past three fiscal years.

             ii.            A list of the assets and liabilities based on the latest audited financial statements published.

           iii.            The cash flows, if they are available, based on the latest audited financial statements published.

           iv.            All the material changes to the Acquirer's financial or commercial position after the latest audited financial statements published, or a statement indicating that none of such changes took place.


            v.            The details relating to the items referred to in sub-clause Number (I/3/a) of this article regarding any initial announcement or initial financial statements issued since the publishing of the latest audited financial statements.

           vi.            Any information concerning any of the above that has been amended to take the impact of inflation into account.


         vii.            The significant accounting policies and any keynotes on the financial statements related to the adjustment of data, including any data that was amended to take the impact of inflation into account. If it is not possible to compare the data due to the change of the accounting policy, there should be disclosure of the estimated sum of the discrepancy arising from the difference shall be defined.

        viii.            The parties should mention names of the members of Acquirer's Board of Directors.


           ix.            The nature of the Acquirer's activity and the financial and commercial forecasts.

            x.            A summary of the main content of every material contract concluded by the Acquirer or any ofthe affiliates outside the ordinary course of its activity in the two years preceding the Offer Term. The summary shall include a note to the Related Parties, and the terms, date, and provisions of each contract, and any sums paid by the Acquirer (or any of its affiliates) or paid to it based on each deal. "

    The decision also sets out that all offer documents shall contain adequate information about the target company in compliance with the sub-clauses. The offer must also have information regarding the funding, the names of lenders and the source of funding. The decision highlights an essential part ofsection 8 where the decision points out towards the fact that all financial information regarding the disclosure of the offertransparently and efficiently. Importantly, the motive of the acquirer and an analysis of the profitability of the target company's share. 

    ]]>
    Mon, 14 May 2018 10:13:49 GMT
    <![CDATA[Intellectual Property and Food]]>  

    Introduction

    The definition of Food security is "the state of having reliable access to a sufficient quantity of affordable, nutritious food." Globally the insufficiency of food security of developing and least developed States is a concern not only of governments but also all individuals within the states. In many, if not all countries in the world, access to food, water and shelter constitutes a fundamental human right. There is a connection between the state of a countries food security and its agriculture policies, its trade policies, and its economic development. These aspects are at the forefront of how food security and intellectual property rights (IPR) coincide. The extension of IPR to the agriculture sector is due to a global drive towards sustainable agriculture and striving for the most efficient, profitable and manageable agricultural industry. The food security of a country is a direct reflection on its agrarian capabilities first and foremostly, followed by its trade abilities and economic development. Introducing ITP in agriculture ensures that states with the most advanced agricultural innovations and growth strategies will remain ahead not only insufficient food security but also in trade successes.

     

    It is understandable that the strengthening of IPR is the food sector has the possibility of being detrimental to developing and least-developed states. Ultimately, the introduction of IPR in agriculture has the aim of achieving economic benefits for agricultural cultivators helping to aid in ensuring sufficient food security globally. The World Trade Organization has, in the WTO Agreements, introduced IPRs into the agricultural sector of developing and least-developed member states to provide an added economic beneficial factor to agriculture. Globally poverty is a significant concern, which is evident from multinational institutions generating ways to eradicate it. What follows is a consideration of the problem of insufficient food security and how intellectual property has a bearing on such.

     

      Intellectual property and food security in developing countries

    Globally insufficient food security remains a significant concern, with specific emphasis on that of developing and least-developed countries. There are, however, some developing countries who have eradicated poverty, but this does not hold true for many other nations of the world. An astronomical reduction of starvation, according to statistics is apparent around the world; this does not mean to say that no one is starving. There are still a numerous of people in the world without any or adequate food. These people remain the most undernourished of the population. Statistical information states that 24% of the population of South Asia is malnourished and 33% in sub-Saharan Africa.[i]The calculation of a countries food security entails identifying a countries capability of accessing and distributing food and well as availability. The agricultural sector in many developing and least-developed States is the main, if not only source of food, where trade practices and economic development are at a minimal.

     

    Food Security

    With nearly one billion people suffering from chronic hunger, and the expected 70% rise in demand for food by 2050, increased and continued agrarian productivity and output will be a captious component of attaining global food security, which is an intrinsic part to political stability, particularly in developing countries. The question of food security comes into play where one considers the sufficiency of food security at a household level. Different parts of the world experience different food security capabilities, as well as various individuals. In many parts of the world access to water, shelter, and food which forms a fundamental human right is a significant concern. With the population growing at a fast rate in developing and least-developed countries, and the availability of land decreasing, it has become increasingly difficult for nations to maintain adequate food security. The availability of land suitable for agriculture is another concern for countries food security.

     

    The scope and definition of food security globally is a contentious issue. At the 1996 World Food Summer (WFS) it was assessed that achievement of sufficient food security is from the individual and household level up to the global level. The objectives of the WTO include the eradication of poverty and it incorporates special and differential trade policies for developing and least-developed countries. These objectives aim at increasing Member States food security.

     

    Not only is food security concern for the multinational organization, but it is also primary concern on a governmental level, is included as a fundamental human right in many constitutions. The fundamental human right to food does not only provide individuals with access to food, but it also places an obligation on a government to supply adequate food within its reasonable means. This right includes improvement of production processes, conservation methods as well as appropriate distribution. Within the fundamental human right to food, government obligations can branch as far too include land reform, ensuring access to credit, protecting and utilizing natural resources, investigation, and development of new technologies, aiding rural infrastructure and bringing into force of explicit farmers rights through legislation.

     

    Agricultural Research and global food security

    Agricultural research is a crucial driver for advancing agrarian productivity, and as such, it is an eloquent component of international efforts to improve global food security. Agricultural research, with specific reference to the participation of the international public sector, had far-reaching impacts on agrarian research, culminating in the Green Revolution which was responsible for the findings of the genetically improved crop. Studies have shown that the genetically enhanced yield has had a significant positive impact on poverty reduction, agricultural growth, and environmental protection.

     

    The Consultative Group on International Agriculture Research (CGIAR) is the primary purveyor of public sector agricultural research targeted to advance agriculture productivity and production among poor, subsistence farmers in the developing world. CGIAR manages intellectual property issues on an issue-by-issue basis and has adopted the CGIAR Principles on Management of Intellectual Assets – this is a policy which details the procedure to the management of intellectual assets produced or acquired by CGIAR centers. Further, the International Treaty on Plant Genetic Resources for Food and Agriculture and the Nagoya Protocol to the Convention on Biological Diversity govern the international standard of intellectual property in the agricultural sector.

     

    Intellectual property and food security

    Intellectual property takes on the form of the UPOV (International Union for the Protection of New Varieties of Plants) Treaty on the protection of plant varieties.

    There are many links between IPRs and food security. In general, IPRs such as patents or plant breeders' rights seek to give incentives, mainly to private sector actors, to develop seeds that either produce higher yields or have specific characteristics which will improve food security and agro-biodiversity management.

    IPRs are a new concept to the agricultural sector, and at first glance, they seem inconsistent with the idea of what IPRs. Previously agrarian management entailed the free exchange of germplasm and knowledge, aiding all in the agricultural sector to yield similar crops with the same growth potential, it is in this era that IPRs were not suitable to the agriculture sector. Previously agriculture was seen as a means to an end, namely, food production. Now, however, farming is seen as a commercial field attaining a sizeable gross profit index yearly. Technological advances have also steamrolled agriculture into a profit generating and competitive industry.

     

    IPRs in agriculture take on two forms, namely plant breeders' rights and patents for technological advances in genetic engineering. This introduction to the agricultural sector has seen a surge in the growth of agro-biotechnology. Concerning the above-mentioned developed countries are at the forefront of obtaining IPRs. The World Trade Organisation Agreement, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) provides the following provisions for the enforcement of protectability of agricultural IPR; it guarantees the patentability of microorganisms and that of plant varieties. Although there is not much uniformity on the patentability of lifeforms, just the existence of such possibility has seen a significant rise in the innovation of agro-biotechnology.

     

    The introduction of IPRs in the agricultural sector is not only for the benefit of developed countries. The ideas behind such introduction were also to aid sufficient food security in developing and least-developed nations by incentivizing private sector involvement in agro-biotechnology. In this instance, IPRs are at the essence of ensuring the participation of the private sector in the development of plant varieties. The development of plant varieties brings with it an opportunity for the creation of plant varieties able to withstand adverse and uninhabitable environments. Developmental improvements through agro-technology include plant varieties. Such plant varieties produce higher yields by enhancing the capacity of the plant to absorb more photosynthetic energy into grain rather than stem or leaf, types that can combat pests and varieties modified to grow faster through enhanced efficiency in the use of inputs such as fertilizers, pesticides, and water.[ii] The inclusion of IPRs now brings with it legal security for those private investors who, without such protection, would not have invested in the field. 

     

    The Importance of Intellectual Property Rights in the Agricultural Sector

    Intellectual property consequences are increasingly applicable to the public-sector international agricultural research landscape. The actual implications of the introduction of IPRs in the food sector in developing countries are unknown, given that legal frameworks are in many cases still in the process of being adopted and implemented. Potential benefits of agro-biotechnology include the development of plant varieties that help meet some of the challenges linked to existing food insecurity. Potential concerns include many socio-economic impacts as well as some environmental impacts, in particular concerning the loss of agro-biodiversity and biosafety.Overall, there are many reasons for the need to develop a legal framework that goes beyond traditionally recognized IPRs regimes. At an entry level, the introduction of IPRs in the agricultural sector can only be reasonable if IPRs cultivate food security, or in other words the realization of the fundamental human right to food. There are many ways to foster food security. One of them includes the appropriation of experience in regards to plant varieties through property rights. In this scheme which is endorsed today at a global level, the offering of control over knowledge is to state of the art inventions. In fact, the introduction of property rights in agriculture should benefit all actors involved in agricultural management. This area is the hole that developing and least developed countries must fill given that their agrarian systems are often exceptionally dependent on the beneficence of a significant number of small individual farmers, local farming communities and public-sector institutions rather than private actors.

     

    Food industry and Intellectual property in the Gulf Region

    Another aspect in need of consideration regarding intellectual property and the food and beverage industry is the patenting of food products.

    The understanding in the United Arab Emirates is that every consumer has the right to safety and freedom to food for consumption. The President of the UAE approved the law on protection of food in 2016. The emphasis of this law is on the necessary standards and regulations to be implemented to ensure the safety and quality of food. The control of the food industry instils confidence in the food and beverage products exported from the country, ultimately contributing to economic stability through growth.

     

    The UAE regulates the food industry through intellectual property, not in the agricultural sphere but commercial food production. For instance, the branded food we buy at the grocery store. Intellectual property here includes, but is not limited to ingredients used, manufacturing procedures, branding of products, etc. The regulation by the UAE of patents is Federal Law Number 31 of 2006, and this law states that any invention that may lead to devaluation of public morals or order violates the UAE patent law.  Ultimately, should your product infringe on the essence of identification of another product, it will break the patent of the latter.

     

    In Saudi Arabia, there was a Royal Decree issued, namely Royal Decree Number M/27 of 29/5/142H. This law by definition includes food products into its remit and ultimately has the effect of creating a penalty for those who violate patents in the food industry.

     

    Kuwait has also included a law regulating patents; this is Law Number 4 of the year 1962. This law, similar to the law of the UAE states that any invention which violates public morals will not be in line with such legislation and therefore subject to penalty. Food products which break this law are a copy of that which has already had a patent will be deemed to violate public morals.

     

    Conclusion

    Intellectual property rights in the agricultural sector have and will continue to become increasingly important. These rights will be critical in achieving security for investors in the agrarian sphere to ensure people will continue to invest. Investment in the field will help to combat global food security issues and the increasing role of public-private sector engagement. With the technological advances globally in the agricultural industry, the use of plant varieties and genetically modified food products has taken off, and it is an essential aspect of the regulatory framework that the products still maintain their nutritional value.

     

    Concerning Intellectual property rights in the commercial food market, the legislation has been promulgated to protect name brands of food and beverages from persons trying to enter into the food industry using their recipes, processes, branding, and manufacturing. 

     

    [i]The State of Food Insecurity in the World 2002

    [ii]Sachin Chaturvedi, 'Agricultural Biotechnology and New Trends in IPRs Regime–Challenges before Developing Countries'

     

    ]]>
    Mon, 14 May 2018 09:45:54 GMT
    <![CDATA[Legalities Surrounding Division of Assets Post Divorce]]> US Law: Legalities Surrounding Division of Assets Post Divorce

    What's mine is yours! During subsistence of the marriage, this phrase is often (willingly) quoted by either spouse to the other. However, the dynamics change once the marriage ends and the married couple goes through a divorce. The aspects and details of the division of assets, custody of children, payment of alimony have to be assessed and dealt. While in certain situations, these issues are amicably sorted and settled, in some, these uncertainties become the cause of grave mental and financial distress for the parties involved.

    This Article covers the scope and legalities involved in the division of assets and ancillary issues under a divorce in community property states in the United States of America.

    To briefly elucidate, the United States gets divided into common law and community property states. Majority of the states in the US are common law property states where the property acquired by one spouse during the marriage is solely owned by that person unless the title deed of the property states the name of both the spouses. In that case, it shall belong to both the spouses. However, common law property states deal with acquisition and division of the properties for married couples in a much different manner. In community property states, properties- both real and personal bought during the marriage are considered community property or marital property and is owned in equal ownership. Importantly, community property is not only limited to ownership of assets but also any debts accrued by a married couple during the marriage. The states of California, Arizona, Texas, Idaho, Nevada, New Mexico, Louisiana, Washington, and Wisconsin are community property states.

    For this article, we shall discuss the state laws of California to understand the classification under marital and separate property and legalities involved post-separation and divorce in such community property states in the US.

    Section 760 of the Californian Family Code[i](the Family Code) sets out that all property whether real or personal, wherever situated, acquired by a married man during the marriage while having his domicile in the state of California falls within the purview of community property. Importantly, any property which is not categorized as separate property is community property.

    The Family Code provides that a separate property of a married person includes among other things all property owned by the person before his marriage, all property acquired by the person after his marriage by way of gift, bequest, devise, or descent. The Family Code further provides that even if the community property gets transferred in trust, it remains community property during the marriage and any community property that is withdrawn from a trust by revocation or otherwise remains community property unless there is a valid transmutation of the property at the time of distribution or withdrawal.

    Importantly, the Californian laws provide for transmutations or amendments or alterations to a marital property into separate property.

    Under the Family Code transmutations of the property refers to a written agreement between married persons to transfer, with or without consideration, community property to separate property of either spouse. Importantly, the Family Code provides that for the division of property on dissolution of marriage or legal separation between the parties, property acquired by the parties during the marriage as community property or any reason whatsoever is presumed to be community property. This presumption may be rebutted only if:

  • A clear statement in the title deed or other documentary evidence of title through which the property gets acquired that the same is different and does not form part of any community property.
  • Proof that the married persons have made a written agreement that the property is separate property.[ii]
  • Pertinently, should a married couple decide to separate or divorce, either spouse may file a proceeding before the court for dissolution of marriage or separation. In such matter, the courts may either pass a judgment of divorce or decide on separation of parties. Alternatively, at a later time, the court may expressly reserve jurisdiction to make property division. In doing so, it may result in dividing the community estate (marital property) of the parties equally unless otherwise agreed in writing or orally by parties in the court.[iii]

    Let us now consider a case study to understand the dynamics of the community property state laws better. Consider the situation of Mr. X bought a property in California, US during his marriage to his wife in the year 2010. In the same year, Mr. X settled a trust with the said property and the wife as a beneficiary to it. After that, Mr. X revoked the trust, and the ownership was transferred back to his sole name in the year 2015.  After a few months, the client and the wife get divorced outside the US with the divorce decree not specifying anything about the Californian pr operty. Now, Mr. X desires to sell off the property which gives rise to some queries dealing with the aspect of this sale. Through the below FAQs, we discuss and provide clarifications to the dynamics of the proposed transaction.

  • Mr. X had amended the title of the property from the trust to his sole title, will such change not affect the right of the ex-wife on the marital/community property.

    For the ex-wife's claim on the property, it is essential to ascertain whether the Property falls under the purview of community property or separate property. A bare reading of the Californian Family Code categorically sets out conditions under which property gets defined as a separate property.  Transferring the title in the name of Mr. X, will not render the property as a separate property.

    Accordingly, in light of Californian Family Code, a property that is withdrawn from trust and transferred in the individual name of any person, will be constituted as community property unless the property gets legally transferred in writing as separate property by that individual.  However, without a written agreement to that effect, the Property shall be termed as community property.

  • Are there any options by which Mr. X can sell the property himself without any claims on the property by his ex-wife?

    To effect a smooth sale of the Property without any hindrances, Mr. X can approach his wife to obtain a Quit Claim Deed (the QCD) or an inter-spousal agreement.

    A quitclaim deed is a deed under which one spouse waives off his/her rights in the Property in favor of the other spouse and transfers the sole interest in the name of that spouse.

    Similarly, an inter-spousal agreement may be used between married parties to transfer a marital property to separate property of one spouse or alternately add the other spouse to the title of the property or assign a title to a property on according to a divorce settlement thereby recording the arrangement between the married couples.

  • What steps can be taken to obtain title insurance in theUS in sole favor of Mr. X?

    US insurance companies, in line with their internal compliances, before certifying the title in favor of Mr. X, needs to be confident that the ex-wife will not make any claim on the Property. Therefore, the insurance companies seek a written agreement or QCD for this purpose. Also, another mode of executing a sale is to obtain a deed of warranty by the owner of the property in favor of the purchaser. Typically, under such deed, the seller promises that the seller has not transferred the property to anyone else, and the same is free from encumbrances or any third-party claims. A deed warranty provides a high degree of protection (insurance and indemnity) to the purchaser of a property and therefore may be accepted by the insurance companies and purchaser to affect the sale. However, it is important to highlight that on the execution of the deed of warranty, Mr. X is open to risk on account of any proceedings that may be filed by the ex-wife towards her rights and interest in the Property, claiming to be her marital property. At that stage, depending on the outcome of the litigation, Mr. X may be liable to, and reimburse the purchaser against any losses incurred by the purchaser on account of the claim filed by the ex-wife.

  • In the event, Mr. X can sell the property, can he transfer sale proceeds to another country without any hindrances?

    The proceeds from the sale of the concerned property are taxable for long-term capital gains in the US in the event the person holds the same for over a year. The percentage of taxable income as per long-term tax depends on the tax bracket under which an assessed would fall.

    Additionally, Mr. X would have to comply with the reporting and tax regulations in the US to remit the proceed of the sale of the Property, and the degree of compliance shall be subject to the 'status' of Mr. X (whether Mr. X would qualify as a US person).

  • Enforcement of Foreign Orders on the division of assets

    Enforcement of Foreign orders on divorce and following rights between the parties are subject to the doctrine of comity. Further, to ascertain whether a foreign court has jurisdiction over subject matter, a divorce order is not treated as one court order. The divorce order is unique as it contains separate court orders for support, custody, children, and property, each having different jurisdictional requirements. This division of the divorce judgment into separate orders with different jurisdiction related conditions is called the doctrine of divisible divorce. For enforcement of a foreign judgment for the division of immovable property in California, either party may bring a suit for partition in the Civil Department of the Superior Court California. Accordingly, for courts to consider an order or enforce a judgment for divorce, it must have the required jurisdiction over the part of the decree that must be imposed.[iv]

    Conclusion

    The process towards separation or divorce if often very taxing for a married couple and it is prudent for the parties to amicably determine their rights and obligations towards the division of assets and liabilities, child custody and support and other ancillary aspects accompanying the separation or divorce for a smooth divorce and settlement. The parties may opt to either arrive at a solution through an inter-settlement/inter-spousal agreement or may seek a court order towards settling. In any event, in case of any confusion or doubts regarding the entitlements and obligations, the parties may seek the assistance of financial mediator and lawyers to safeguard their interest and offer some peace of mind.

    Till Death do us apart? Really?


    [i]Enacted in the year 1992. Operative January 1, 1994

    [ii]Section 2581 of the Family Code

    [iii]Section 2550 of the Family Code

    [iv]Peter M. Walzer, Esq.- Divorce.com

     

    ]]>
    Thu, 10 May 2018 15:23:21 GMT
    <![CDATA[GDPR Compilant or not]]> GDPR COMPLIANT OR NOT?

    Introduction

    On 25 May 2018, General Data Protection Regulation (the GDPR) will come into effect in European Union. It is the most significant transformation to the landscape of European data protection in the past twenty years. Upon the enactment of new GDPR law, all the personal data of EU and its residents will get regulated. This regulation is likely to impact on several organizations in EU and several other business units such as sales, marketing, IT, e-transactions and others. The GDPR will have a cascading effect on the EU National Data Protection Legislation. GDPR has been discussed a lot lately and its impact in EU and outside Europe. The following article will provide a complete summary of the new legislation, and essential companies must consider in their endeavors for adjusting with GDPR.

    WHAT IS GDPR?

    GDPR is a way of protecting personal information in the 21st century; wherein, people will grant permission to companies who can utilize their data for several reasons in exchange for free services. It gives absolute control to people over how companies can use their information and simultaneously introduce hefty penalties for the violators of the law and compensation for those who suffer a breach. It further ensures that data protection is indifferent to all the EU member states.

    GDPR law will cover various aspects including privacy notes, notice for seeking consent, information about the usage of data and how the data will get communicated to and through other organizations. Most of the guidelines don't add much to what we know and can get from the content of the GDPR, including its presentations, or from past articulations from the WP29. However, there are some valuable illuminations and recommendations to be found.

    IMPROVEMENTS TO BE CONSIDERED

    Comprehensively, the primary rules and principles are unaltered. The essential meanings of fundamental concepts, for example, 'processing' or 'individual information and sensitive information' is same as before.On the same note, definitions of some authorities are unchanged including 'data subject,' 'processor' and the 'Data Protection authorities (DPA).' The usage of information is as yet contingent and similar principles of 'reason' and 'security,'remain intact. Following are the notable changes in the new law which the organizations should consider:

             i.            The fines imposed under the GDPR law ranges up to 20 million Euros or 4% (four percent) of the company's annual turnover;

           ii.            the actions initiated against the violators and the compensation awarded to the victims of data breach;

          iii.            the control over personal data; and

         iv.            the expanded jurisdiction of the law even on the companies incorporated outside EU and doing business with companies inside EU.

    Importantly, the utmost control over the personal data is the essential subject which which legislators had in mindbefore implementing GDPR law. Thus, the consent to utilize personal information should be expressed and should be affirmative. Also, it must allow the public to withdraw their consent at any given point in time or update their information or to delete the data thoroughly. Companies upon obtaining the approval will have the right to process the data and to exchange it with other entities.

    The GDPR law imposes two new obligations on the companies that is 'piracy by design' and 'piracy by default.' The Piracy by design responsibility oblige the entities to take into account security measures when conceptualizing modern data collection frameworks and to constrain the information collection and to process the data only for authentic reasons. Thisaspect increments the responsibility of companies and affects them to act in line with the GDPR. Whereas, the latter stipulates that new collection and the tools utilized for processing data should record to highest data protection level and that any deviation from this rule will require the explicitconsent of the person. Thisrule implies for an occurrence that pre-filled fields are at best avoided.

    COMPLIANCE UNDER THE LAW

    The law has brought significant changes in the data protection laws in EU as it has imposed several obligations on the marketing companies, insurance companies and another related sector which requires additional compliance to follow. For instance, the data processors must include these other terms in the contracts and are obliged under the law to adhere to such conditions. However, if they failed to comply with the requirement of the law, they will be subject to direct surveillance and penalties by superior authorities. 

    On the contrary, for the controllers of data, the law requires them to illustrate as to how they comply with the provisions of the law. Thiscompliance requirement suggests that data controllers must prepare a record of how they will process data and should supply the documents to the supervisory committee. The law further, obliges the companies whose core activity is monitoring of information on large scale, to appoint a data protection officer. Some of the insurance companies must also be aware of pseudonymization and privacy statements. Pseudonymization is outlined to offer information subjects another level of assurance, while security affect appraisals will be utilized by endeavors to recognize and address non-compliance dangers. Further, in cases  where the processing of data posses a high risk to the privacy of data, issuance of privacy statement in such event will be mandatory.  Below are the other vital changes in the GDPR which companies should keep in mind:

            I.            Consent: silent acceptance or pre-ticked forms will not suffice the need the definition of consent under the law. Explicitaffirmative action will be required,and data subjects can pull back their approval at any time. Thisact will affect policyholders and changes to client confronting websites, promoting fabric and reports will be required.

          II.            Notice of Privacy: it is an additional requirement under the law, wherein the insurance companies should provide the top information which can ensure transparency to the policyholders. The data passing involves the basis for preparing the data and the period for which the company will hold the same.

        III.            Right over Information: regardless of the rights mentioned above offered to the data subject by the law, they also have the authority to rectify, erase, impose restriction or raise any objection with regards to the data held by the company. The GDPR is prepared to offer data subjects more control by giving information subjects the opportunity to question the handling based on the interest of the controller or processor.

        IV.            Access Requests of Data Subject: there is a change in subject access requests compared to the old law that is the data subject has right to receive additional information; the time-period for processing request is now 30 days instead of 40 days; companies cannot reject the application except if the same is repetitive.

    The new law explicitly outlines that insurance sector will face several responsibilities and obligations while adhering to the provisions of the law.

    EXEMPTIONS UNDER THE LAW

    There are several exemptions under the law such as exemption towards the obligation to generate a privacy note when the informationgets directly perceived from data subject contingent to the extent where the subject already is in possession of same. Thisexemption implies that a controller might only require providing additional information to the data subject. Whereas, if obtaining of data is through indirect means, a much more extensive exemption is accessible, in specific where the information includes unbalanced exertion. It is vital that interpretation of Exceptions must is clear, precise and definite.Moreover, the data controller should be able to legitimize dependence on any of them. Under Article 23 of the GDPR law provides further exceptionsfor inclusion in the national legislation in line with GDPR, but the rules make it clear that where depending on such exemptions information controllers ought to educate information subjects of this unless doing so would bias the reason of the exception.

    GDPR IMPACT OUTSIDE EUROPE

    The old EU Data Protection Law fundamentally regulates the entities established within Europe and its member states, whereas, GDPR will also affect the companies incorporated outside Europe. For instance, in a case of non-EU data controller using his tools inside Europe for processioning data, except for exchange purpose, will get regulated by the law.

    As European Union Court of justice out rightly mentioned in Google Spain Vs. Agencia Espanola de Protection de Datosthat the activities of data processing in Google Spanish search engine, althoughGoogle subsidiary did not undertake them, were adequately associated with a Spanish company. The court was of the opinion that the activities of US companyinterlinked with the sales generated by the Google Spain.

    As also, the Article 3 of the law provides a clear view of the territorial jurisdiction under the law, where non-EU data controllers can be regulated and be imposed hefty penalties for violation of GDPR. Article 3 of GDPR is as follows:

    Territorial Scope

             i.            The regulation (scope) applies to the processing of personal informationabout the activities of the entity of the controller in the EU, regardless of whether the processing takes place in the Union or not;

           ii.            The regulation applies to the processing of information of data subject who is in EU by a controller not present in Union, where the activities are as follows:

    ·         The sale of goods or services, irrespective of whether payment of data subjects required to such data subject in the Union;

    ·         Monitoring their behavior as their behavior within EU.

          iii.            The regulations apply to entities established outside EU, but in a place where its member states law applies by Public International Law.

    GDPR IN UAE

    The Abu Dhabi Global Market (ADGM), and international financial center in UAE allowing companies to undertake financial and non-financial activities under a different framework. Being an economic free zone, ADGM has its laws, rules,and regulations based on a Common law which regulates and governs the companies established in the freezone. Considering the enactment of new laws about data protection, ADGM was ahead in time as compared to other free zones in the country; it has already Data Protection Regulations of 2015 which covers a wide range of obligations, the protection of personal data and its exchange within or outside ADGM. Whereas, ADGM has recently amended the regulations in 2017 which imposes a mandatory requirement of breach notifications to be made without any unnecessary delay or within 72 hours after getting informed about the breach. The Amendment has increased the number of penalties imposed on the violators of the law.

    CONCLUSIONS

    While understanding and managing these cross-border rules and regulations, the data controller must importantly analyze the information he has and from where did he obtain the same. As we know the internet has no territorial boundaries,and one can easily exchange information. However, it is pertinent to highlight the laws applicable to the content received from the internet or other data controller. Companies should, at all times, be aware of the legal risk exposed of failing to adhere to GDPR rules. 

    ]]>
    Wed, 09 May 2018 16:43:23 GMT
    <![CDATA[Admissibility of electronic evidence in the UAE and KSA (Part 1 of 2)]]> Admissibility of electronic evidence in the UAE and KSA (Part 1 of 2)

    Technology has changed the world in its totality in such a short time. It has indeed become an integral part of the everyday lives of so many. Today we see it incorporated into nearly everything we do. Around 60 years ago, computers where more a sci-fi device than an actual conceivable product which general public will soon own. The following space of 60 years has given a computer or device to nearly every single individual in the more developed region's world, and most businesses rely heavily on electronic devices in the performing of their transactions and general trade. Computers are also now just the tip of the giant technological iceberg, and with more and more crazy innovations entering the market at rates only a teenager would be able to keep up with, the situation can quickly become quite complicated.

    In a world where so much is now getting digitalized, it was only a matter of time until crimes also entered the digital realm. More common than digital crimes themselves are the numerous forms of digital evidence that may be put forward in legal cases. Emails, chat conversations, photo and video evidence and more are a big part of so many lives that the potential evidence that may arise from them is vast. In the past, there has been skepticism of electronic evidence, though now, with the expertise into the technologies and their prevalence throughout society, there is no more room for uncertainty. Avoiding and ignoring electronic proofs can lead to grave and blatant injustices and would be an irresponsible path to take.

    There are a few elements to consider concerning electronic evidence. These include electronic contracts, electronic records, and electronic signatures. In the past, the internet and online documentation where looked upon skeptically, at least in part, because they were often thought of as being unreliable and easily forged. However, the use of these forms of electronic business practices have become widespread over the years, and as technology has improved and the processes have become more secure, people are more trusting of the technology. Now to a greater extent than ever before are there more secure and official online means to creating records and contracts and therefore it has become the norm. These practices are widely accepted and are backed up by the law.

    The UAE is a reasonably technologically savvy country. Its cities are known to the world due in large part to the technological marvels within them. The city of Dubai is something of a testament to this with its high-rise buildings and giant malls. It should not surprise then that the attitude towards electronic evidence, from a legal standpoint, is well supported.

    At a most basic level, it is backed up by the Federal Law Number 10 of 1992, which concerns evidence in civil and commercial transactions. The year 2006 introduced Article 17 of this law which entirely involves electronic evidence. Article 17 subsection 3 states that electronic signatures will have the same probative force as a regular hand-written signature as expressed in the law. On top of this, sub-clause 4 covers electronic writings, documents, correspondences, and registers also hold equivalent weight under the law as their hand-written or physical counterparts. This one piece of legislation provides instant, simple recognition and provides power to these electronic elements in business. It was a good base from which to allow electronic evidence to rise and prosper considering that the law was an introduction in 1992.

    In one of the cases heard before the Abu Dhabi Court of Cassation (Case 472 of 2014 (197) and decided on 22 July 2014, the Prosecution filed a claim against the accused on the premise that he failed to pay a sum along with interest. The appeal based on some settlement agreement of 2011 and the accused was to settle a difference between the original debt and the balance amount that was outstanding. The court of appeal had canceled the prosecutor's claim, and consequently, the prosecution filed a petition before Court of Cassation.

    The Petitioner's challenge arose from three causes of action. Firstly, he said that appeal court's judgment violated the law, improper reasoning and prejudiced the right to defense. The accused based his response to claim to maintain that Petitioner had failed to take in to account the requirements set out in decision passed by Ministry of Economy (Decision Number 74 of 1994) requiring computer-generated data. In the present case, the documents were purchase orders issued by accused and not accompanying invoices but not computer generated data. The supporting documents included an acknowledgment by respondent in electronic communication exchanged between the parties post the invoicing period.

    The Court of Cassation relied on Article 4 of Law Number 1 of 2006 concerning Electronic Transactions which provides that information set out in data message shall not lose its legal force, even if they are set out in brief. The only condition under Article 4is that such information should be accessible within the electronic system of the originator. The Court also relied on Article 10 which provides that a data message and electronic signature shall be admissible as evidence even if the same is not an original or in original format. The Court relying on Article 17 (2) said that reliance on the secure electronic signature is deemed reasonable and held that parties exchanged electronic communication as the accused sent purchase orders and the other party delivered goods to it and the accused signed to the effect that goods were received.

    Dubai Court of Cassation passed a similar decision (Matter 241 of 2007 and decided on 28 January 2008) where the Court was referring to Article 17 (2) of above held said that a preserved electronic signature might be relied on unless the contrary gets proven.

    Thus, the transactions between the parties were conducted using electronic communications, which is different from the regulation of business transactions using computers.

     One thing to note is that the UAE is a relatively young country being, at the time of writing only 46 years old. This young age means that the country would have been born and would have risen with technology and would, therefore, have it highly integrated within the nation.

    The UAE is known to have very close ties to Saudi Arabia. They share many of the same political beliefs and are in general, quite familiar with one another. Saudi's law with concerns to this issue is very similar. The Royal Decree Number M/18 of 2007 Article 5 states, very similarly to the UAE, that Electronic transactions, records, and signatures will have full effect and will not be contestable.

    The outcomes of the articles in both the UAE and Saudi laws achieve the same goal. They validate the electronic side of business dealings, and those business dealings will be as set in stone like any other form of signing, documentation or contract. Speaking of electronic evidence, are emails and email signatures acceptable as evidence, you may ask?

    The Dubai Court of Cassation (Matter Number 277 of 2009 and decided on 13 December 2009) held that according to Article 4 (2) of the above Law, transactions in the form of emails have legal force provided that the information is available in the electronic record. It further held that under Article 10 of the Law, an email or an electronic signature would be acceptable in evidence notwithstanding that communication or the electronic sign is not in its original form.

    The Abu Dhabi Court of Cassation (Matter Number 89 of 2014 (246) and decided on 20 October 2014) referring to some partnership dispute held that:

    "Whereas the partnership concerning one of the transactions of XYZ company between the Petitioner and Respondent is related to Respondent himself and does not violate the public morals and agreed to terms. Further that the appealed judgment ruled the need for an absolute oath of the Respondent on the premise that business relationship between the parties was over and understandable from electronic correspondence exchanged between the parties." The case involved a transaction between two parties where the petitioner did not have any evidence supporting his claim. In such cases, the petitioner may ask the defendant to swear or take an oath. The defendant may choose and accept to testify or deny the same. If he refuses to take the oath, the petitioner may swear by himself to support and validate his claim. There are two conditions governing oath – first, being it should not violate public order, and secondly, such act should not contradict existing evidence. The Court of Appeal in this matter noted the email exchanges between the parties and noticed that the parties had terminated their relationship. The Court relying on email correspondence held that oath was disallowed. Court of Cassation reversed the decision and held that either party could take an oath regardless of the underlying evidence. 

    Before extending this topic to Kingdom of Saudi Arabia, the author will discuss the admissibility of electronic evidence in the DIFC and its implications thereunder. Wait. That's happening in next issue. Stay tuned. Before extending this topic to Kingdom of Saudi Arabia, the author will discuss the admissibility of electronic evidence in the DIFC and its implications thereunder. Wait. That's happening in next issue. Stay tuned. 

    ]]>
    Wed, 09 May 2018 15:47:24 GMT
    <![CDATA[Digital platforms and their terms of use - Does it matter]]> Digital platforms and their terms of use: Does it matter?

    The many digital platforms are transforming almost every industry today; it is swiftly becoming apparent that the similar looking terms of use and privacy policies currently applicable may not provide new entrepreneurs or platform users with an adequate sense of security. This inadequacy, coupled with an ever-increasing demand for technology lawyers in Dubai, necessitates a need for such entrepreneurs and platform users to become more cautious in regards to covering themselves against risks and losses.

    A simple example of why new entrepreneurs are becoming progressively more cautious when covering themselves from risks and losses would be the knowledge that one of the crowdsourcing Apps recently invited users to undertake mystery shopping.

    This example depicts the necessity for privacy policies and terms of use which will reduce the risks and losses when engaging in transactions on the digital platform.

    The crowd-sourcing App in this particular case provided the Mystery Shoppers with a certain amount of store credit. The shopper could use such monetary value on the App for in-store purchases. However, for the shopper to use the store credit to partake in the mystery shopping, the App holders had to pay an activation fee. This activation fee paid by the App holders wanting to participate in mystery shopping enabled them to access the credit on the App. Once they had transferred this, the participants would go to the store only to find out that there is no credit available on the App. The theft of the activation fee is then known to them.

    The terms of use on a website, in the form of Terms and Conditions, and the Privacy Policy are the basis of the express or implied contract between the platform owner and its users. Their effect is to limit liability and offer protection to digital platform owners. However, the question here is; what protection do platform users have; and does the online acceptance of today stand as a valid agreement against the law.

    Terms and Conditions clause

    Regarding the abovementioned example, the user of the digital platform was the party to bear the losses and risks caused by the actions of the third party – the scamming company. Below will be an example from the Second Circuit Court of Appeals, of how the owner of a digital platform did not sufficiently cover itself against risks and losses in its Terms and Conditions. 

    In this case, the user signed up for a programme that provides discounts on products and services in consideration of monthly fees. Following the users' enrolment and use of the application, he received an email from the defendant. In the email, there were additional Terms and Conditions, inclusive of an arbitration provision of a mandatory nature. Such new Terms and Conditions were never expressly consented to by the user.  The user canceled his account and claimed a full refund, to which the defendant only provided a partial refund. The user then commenced a class action, to what end the defendant responded by seeking to enforce the arbitration provision in the additional terms and conditions. The court a quo concluded that the user had never agreed to the new terms and conditions, the Appellate court upheld the conclusion.

    With consideration of precedent regarding contract law and enforceability in the context of shrink-wrap and agreements of an electronic nature, the emailed Terms and Conditions would be binding if:

    a.    After receiving actual notice, or at a minimum, inquiry notice regarding the additional terms; and

    b.    The user then manifested his assent, expressly or implied.

    The law does not require Terms and Conditions on a website, however as can be noted above, having adequate Terms and Conditions, to which users must consent to, could limit the liability of the platform owner immensely. The efficacy of the site owners' terms and conditions clause is pertinent to whether they can be held liable for content on their website. The prior mentioned case held the following on what companies should do to limit their liability:

    a.    Indicate all the terms of notice;

    b.    Require visitors or users of the site to page through the terms. Only once this is completed should they be able to select the 'agree' option or expressly and actively provide their consent to the terms;

    c.    Restrain using the website or initiate using services on the site before express permission by the user; and

    d.    Periodically have users of the site reconfirm their agreement to the terms. 

    Numerous sites request users to create a profile and yet they do not require the users to agree to their terms before gaining access to their profile. Users on the site are expected to seek out, on their own accord, the terms and conditions. Users get faced with clauses such as the following:

    "By entering, executing using, downloading, commenting, saving, accessing or using the Digital Platform you will automatically be considered a user which requires the full acceptance of every provision included in these Terms, in the version published by, and at the time you access or use the Digital Platform. If you, as a user, do not agree to these Terms, you may not access or otherwise use the Digital Platform."

    If it is considered, that the user was unaware of the fact that the action of entering, executing using, downloading, commenting, saving, etc. constituted their acceptance of every provision included in the Terms, how could such user be held to have consented to the Terms?

    However, one should take cognizance of the fact that it is common practice for courts to rule in favor of the user who did not expressly consent to the terms and conditions. A court stated that acceptance need not be express, but where it is not, there must be evidence that the offeree knew or ought to have known of the terms and understood that the offeror would construe acceptance of the benefit as an agreement to be bound.

    The United Arab Emirates

    Regarding the law of the United Arab Emirates, a contract becomes legally binding upon the parties after the express or implied acceptance of the offer by the offeree. There are however a few exceptions to this rule which warrant that a contract is only legally binding if it is in writing.

    Of relevance to electronic contracting on digital platforms, is the Federal Law Number 36 of 2006 on the Evidence and Commercial Transaction. This piece of legislation governs that electronic evidence or electronic messages are not recognized. Due to this, Dubai has implemented the Dubai Law Number 2 of 2002 relating to Electronic Transaction and Commerce Law. Regarding this legislation should a person contract, offer to contract or accept to contract, either wholly or in part, using electronic messaging, such an agreement will see be considered valid in the eyes of the law. Federal Law No.1 of 2006 on Electronic Commerce and Transactions (the e-Commerce Law) was put in force to align the country's legislation with the needs of the online marketplace.

    The Privacy Policy

    The privacy policy is not only required by law but is considered one of the most critical inclusions on a digital platform. It is of significant priority and should be read and assented to by all users. However, this is seldom the case. The Privacy Policy relates to the website's policy as to what it will and will not do with the information a user provides on the site.

    There are multiple issues about the privacy of the data collected on digital platforms.  To illustrate one, would be the issue of how one can be exposed to far-reaching effects when unwarranted data is in the hands of marketers, financial institutions, employers and governmental institutions, For example, impact on relationships, employment, qualifying for a loan and even to get on a plane. While there is much concern around this, little has been done to improve privacy protection online.

    For the privacy risks that need reducing highlighted above, each person must make careful consideration of what data they are putting onto the web and what the implications of the Privacy Policy on the relevant page are.

    In a time when privacy infringement is rife, and more and more high-profile privacy breaches are being commonly publicised, it is imperative for all digital platform users to reconsider what personal data they provide to such platforms precisely.

    An example of a recent high-profile privacy breach is the Facebook breach, in which a political data firm with links to President Trump's 2016 campaign was able to harvest private information from more than 50 million Facebook profiles without the social networks alerting users.

    Data collection and privacy policies internationally

    There is a significant disparity globally in the governing of data collection and online privacy. Some countries display stringent legislation in this regard while others lack relevance and authority. Below are examples of how different states regulate this.

    European Union

    The European Union Data Protection Directive of 1998 states that anyone processing personal data must do so in a fair and lawful manner. For the data collection to be considered legal, the taking in of the data must be for specified, explicit and legitimate purposes, and users must give unambiguous and explicit consent after being informed that data collection and processing is taking place.

    Germany

    In Germany, the Federal Data Protection Act of 2001 states that any collection of any personal data (including computer IP addresses) is prohibited unless the collector gets the express consent of the subject. The data collector also has to get the data directly from the users (for example, it is illegal to buy email lists from third parties).

    The United Arab Emirates Law

    There is no Federal data protection law in the UAE; there is also no single national data protection regulator. Due to this fact, the protection from risks and losses is the sole responsibility of the individuals. Although, there are two rights afforded by the UAE Constitution of relevance here.  Article 30 of the UAE Constitution which provides for freedom of opinion and to express that opinion either in writing, verbally or by any other medium of communication. As well as, Article 31 which is a general right to privacy and it provides for a right to freedom of correspondence through various means of communication and the secrecy thereof.

    Sectoral laws

    Regarding Federal Decree Law No. 5 of 2012 on Combating Cybercrimes, Article 2 prohibits unauthorized access to websites or electronic information systems or networks. Article 2 further imposes more severe penalties when such actions result in, among other things, the disclosure, alteration, copying, publication, and replication of data. A penalty's severity will increase if such data is of a personal nature.

    Article 21 of the Federal Decree No. 5 of 2012 also prohibits the invasion of privacy of an individual through a computer network and electronic information system and information technology, without the individual's consent and unless authorized by law. Article 21 further prohibits disclosing confidential knowledge obtained in the course of, or because of, work, through any computer network, website or information technology

    It is of significance here that on 25 May 2018, UAE-based companies with relations and business dealings with European Union consumers will need to ensure that they comply with Regulation 679/2016. This Regulation concerns the protection of natural persons regarding data collection.

    In Dubai Court of Cassation case number 67/2010 (132), the court observed the contrast between Article 30 of the UAE Constitution, Article 47 of the Federal Law Number 15 of 1980 Concerning Press and Publication (the Press Law) and Clause 79 of the Press Law. In this case, the appellant initiated legal action on the basis that the defendant had published the details of the case regarding the appellant's wife. The defendant was a limited liability company in Dubai that was dealing in printing and publishing and had published the details of a case surrounding the extra-marital affair of the appellant's wife. The appellant contended that this had caused substantial harm to his family since the news spread instantly to his home country also. Let us analyze each of these Provisions carefully before proceeding. Article 30 of the UAE Constitution provides freedom of opinion and to express that opinion in writing, verbally, or by any other medium of communication. Provision 47 of the Press Law stipulates that newspapers are permitted to publish the details of cases before the courts unless the proceedings of the case are held in secret session. On the other hand, Article 79 of the Press Law has explicitly prohibited the publications of news, photos or investigations regarding the family or private life of individuals if it can cause harm. These laws mean that the legislators have provided the public with the freedom of expression and at the same time, has limited that freedom to protect the privacy of individuals. The Dubai Court of Cassation, in light of the above Provisions, held that the appellant failed to prove that the defendant had published untrue events and the Court had not decided on whether to rule the earlier proceedings as secret sessions. The Court of Cassation dismissed the appeal case and stated that the defendant was not liable for other newspapers that published the news.

    Advise to drafters of terms of use

    To draft terms of use for a website, that will afford adequate protection to both platform owners and users the following essential elements should be included:

    •    Limitation of liability – a necessary disclaimer removing the responsibility for errors in the web content. Should the site be interactive, and others able to post on the site – a disclaimer must be included, which states that the website and website owners do not endorse users and are not responsible for the statements made by third parties.

    •    Intellectual property – a clause to inform users that the contents, logo and other visual media created is the property of the website.

    •    Termination – a provision to notify users that use of the site in an abusive manner will result in termination at the sole discretion of the owner.

    •    Governing law – a clause that describes which legal jurisdiction will apply in cases of dispute – this should be the country in which the headquarters of the website is.

    •    Links to other sites – a clause should be included which warrants against liability for third party websites linked to the main website.

    •    Privacy policy – when collecting any information from users, a privacy policy must be present.

    The Abu Dhabi Court of Cassation had to decide on the validity of electronic signature to determine whether the appellant was eligible to get a commission in the case of 393/2010 (218). In this case, the court observed and decided on the validity of electronic signatures to qualify as evidence under Federal Law Number 10 of 1992 regarding Civil and Commercial Transactions (the Civil Transactions Law). Article 17 (3) of the Civil Transactions Law states that e-Signatures have the same effect and validity as provided in the e-Commerce Law. The e-Commerce Law offers electronic communication with an equal level of importance in the eyes of the law and considers it valid evidence in a commercial transaction. Further, Article 4 and Article 10 of the e-Commerce Law information communicated through emails shall not lose its validity merely on the basis that the mode of communication is electronic and electronic signature shall be accepted as evidence even where such email or e-Signature is not original or in its original form. The court dismissed the appeal in this case by ruling that the electronic communication in question was valid evidence of the transmission between the parties and the appeal was filed merely on the premise that the trial court had erred in its factual understanding of the law and the value of the evidence submitted thereon.

    VAT Liability

    Because a significant proportion of retailers and distributors in the UAE provide their services both physically and via the internet, it is imperative to fully grasp the relevant VAT implications which are now in force. VAT regulations take into consideration the location of supply (of a good) – the area in which it is made available to the consumer. This consideration could also include the place where freight of the goods ends.

    Regarding VAT for services, it is the customers' place of establishment that is considered the relevant location for tax purposes. Unless such person is a non-taxable entity; if this is the case, the site of the supplier is where the tax will incur.

    VAT liability applies to all transactions, including e-commerce transactions and online purchases.

    Conclusion

    Some countries are party to the Organisation for Economic Co-operation and Development (OECD) multilateral initiative dealing with online privacy and data protection issues. However, many countries, including the United Arab Emirates are not a party to such initiative and only bare rudimental legislation governing website terms of use. The world online is expanding at a paid rate, and lawyers are challenged to fill in the gaps in the law and guidance to adequately regulate the growing world of digital platforms.

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    Tue, 08 May 2018 11:30:01 GMT
    <![CDATA[The Unified Patent Court ]]> The Unitary Patent Court – caution ahead!

    The Unified Patent Court (Immunities and the Privileges) Order made on 8 February 2018 is recently making a lot of clatterin the European Union. The UK took a step towards the ratification by the Privy Council approving the Unified Patent Court (UPC) agreement which deliberates legal capacity and grants immunities and rights to the UPC and its representatives. The UPC is built up using a universal understanding and is an international treaty between 25 of the 28 Member States of the European Union (EU) excluding Spain, Poland, and Croatia creating the Unified Patent Court.

    A unitary patent system will offer additional rights to national and European patents, in contrast to the traditional patents which give domestic rights enforced by country to country basis. A Unitary Patent will enforce a unitary license that will be applicable in all the participating member state countries and will be prosecuted through the European Patent Office (EPO) and implemented by UPC. It will enable all the UP owners to enforce patents across Europe by bringing proceedings under one jurisdiction. The UPC will grant a better framework for all parties involved in patent litigation in Europe. In particular, costs will cut down as it will not be required for the parties to participate in parallel patent litigation in various member states. Presently, the national judicial system decides on the encroachment and legitimacy of European patents. However, this causes a hassle when a patent proprietor wishes to uphold a European patent in a few countries or when a third party pursues the renouncement of a European patent. The UPC Agreement addresses these inadequacies by creating a unitary patent court with particular jurisdiction for litigation relating to Unitary and European patents and harmonizing the scope and limitations of the rights conversed by a patent, and remedies available beyond EU Directive (2004) (48/EC) (Enforcement Directive).

    The transitional arrangements in the Agreement on the Unified Patent Court have stirred debates among prospective clients. There are numerous differentiating interpretations, and however various contend that the position is clear, it is a long way from specific what impact it will have when practically practiced. It is an issue of utter significance given that every European patent application as of the date of the UPC appearing will be liable to this agreement. This article will investigate these vulnerabilities, and their effect on patentees and prospective clients, and the post-Brexit consequences.

    Building Blocks of UPC – The UPC Agreement

    The aim of the Unified Patent Court Agreement (UPCA) is to decide in on one decision for the countries where European Patent is registered unless the patent has chosen not to be part the system by the patentee. The UPCA gives effect to a Unified Patent Court (UPC) with specific jurisdiction for litigation to unitary patents bound by the Union Law. Article 5 of UPCA confirms that contractual liability of UPC will be consistent with the law applicable to the agreement in question and per Regulation EC Number 5932 of 2008 (Rome I). The non-contractual liability of the Court for losses caused by the Court or its staff members as stated under the laws of the Member State where the damage occurred provided such damage is not a civil and commercial matter as per Regulation EC Number 864 of 2007. Article 6 sets out the Court's composition that includes the First Instance Court (composed of three judges), a Court of Appeal (five judges) and a Registry (one Registrar). The Court of First Instance will comprise of central, local and regional divisions. The central division to locate in Paris, with sections in London and Munich. Article 11-14 describe the various committees appointed from each Member State to ensure the effective implementation of the Agreement.  Article 15 and Article 16 deal with the eligibility criteria for appointment of judges and appointment procedure. Article 20 describes the primacy of Union Law where decisions of the CJEU are binding on the UPC, liability, and responsibility of the participating Member States. Article 24 states that the UPC will base its decisions on Union Law, UPCA, international agreements applicable to patents and binding national laws on contracting member states. Article 25 deals with direct infringement giving the right to the patentee to prevent the unauthorized third party from direct use of the invention. Article 26 gives the patentee the right to prevent unauthorized third parties with indirect infringement. Article 32 confirms exclusive competence of the Court and Article 32 (2) expressly grants power to national courts for actions relating to unitary patents and supplementary protection certificates. The UPC will have exclusive competence in regards to civil litigation with matters on European Patents. Articles 36-39 mentions the budget of the UPC that is financed by its revenues. Article 33 encompasses a detailed regulation on the competence of the divisions of the UPC's Court of First Instance. Article 33 (3) leaves it to the discretion of the regional division to decide whether to proceed with the infringement and the counterclaim for invalidity or to refer the counterclaim for the decision to the central division. Article 48 concerns the representation before UPC. The representation is mandatory, and parties can get representation from a lawyer authorized to practice before a court of contracting member state or a European Patent Attorney who has acquired appropriate qualifications. Article 49-50 refers to the language of proceedings before the Court. In the Court of First Instance, the official language will be of the Contracting Member State hosting the local division or the official language(s) chosen by the Contracting Member States sharing a regional division. Articles 56 – 72 lays down the power of the courts and concerns the remedies available to the parties involved. Decisions of Court of First Instance are appealable as mentioned in Article 73. As with the Court of First Instance, the events before the Court of Appeal comprise a written procedure, an interim procedure, and an oral procedure, followed by the decision of the Court. Article 76 describes the grounds for decisions and the right to be heard where the decision gets heard based only on case facts and evidence which were the question of the proceedings and on which the parties had a chance to retort. Article 83(3) stipulates that a patentee shall have the opportunity to opt out from the exclusive competence of the Court.  Once an opt-out notification gets issued and registered with the UPC, it does not have any jurisdiction anymore with regards to the European patent or the application for the European patent concerned. The patent or its application will only be subject to the jurisdiction of the specific national courts. The court fees will comprise of a fixed fee, shared with a value-based fee when the amount of a case is above the set maximum of € 500,000 (Euro Five hundred thousand). The UPC will be a part of the legal framework and a court common to the Contracting Member States of the EU. It will have competence in regards to European patents and European patents with unitary impact subject to exceptions during the transitional period. The UPC's decisions will have an effect in the domain of those Contracting Member States having approved the UPC Agreement at the given time. The main benefit of having a UPC is to establish an active forum for implementing and testing patents in EU. Creating a UPC will end the requirement of litigation in different countries and enhance legal certainty through orchestrated case law in the area of patent violation and legitimacy. It will give less demanding, faster and more proficient legal methodology to fit the substantive patent law.

    There is a considerable amount of work to be done for the agreement to come into effect. The Preparatory Committee is composed of signatory states to the UPC. The Preparatory Committee has divided the tasks into five areas; legal, financial, human resources, IT and infrastructure. The committee will exist until UPC gets established and operational.

    A shift to a new horizon

    This new approach to the intellectual property will serve as a new judicial execution framework to reinforce a new unitary patent system among the EU. It will create a golden circle for businesses and corporations as they will be able to apply to the EPO for unitary patents granting them patent protection for their invention referring to every member state recognizing the patent regime. UPC aims to provide an easier and a cost-effective way to protect and exploit patent rights in the EU. It will also offer a way for innovative businesses to enforce or challenge patents in up to 26 EU countries with a single court action that will be valuable and significant for patent-intensive industries. The majority of past cases in the UK litigated between the same parties in other European jurisdictions; a single unified patent court will make the process smooth.

    The debate and criticism surrounding the UPC agreement are rising considering the post Brexit announcement. Regardless of the fact that the UPC agreement is an international agreement, and the membership of the Agreement is open only to the EU Member States.  It isn't clear whether the UK could legitimately proceed as an individual member from the Agreement in the wake of leaving the EU regardless of whether it endorses the Agreement before Brexit Day. Another concern is whether the membership of a non-EU state would be compatible with the European treaties, even if the UK agrees to abide by relevant EU law and CJEU decisions of relevance to the UPC.

    Post-Brexit Consequences

    With Brexit casting its shadow over EU, it is making it difficult to understand how specific this decision of ratifying UPC will turn out for the UK. In spite of the fact that the UPC Agreement is (entirely) a global agreement as opposed to EU law, it remains an open analysis concerning whether the UK can lawfully continue as an individual from the UPC framework after Brexit, or significantly whether it will look to do as such. UK is in plans to leave the EU in March 2019 which would imply that a unitary patent framework without the UK would be less appealing which would apparently put the entire idea of the unitary patent court in peril. The UK government has clarified in its Brexit policy document that it will bring a termination of the implication of CJEU in the UK and EU agreements will no longer apply to the UK. This clarification creates a hazy subject around the whole idea of whether legally or politically, how the UK could remain included and possibly still be liable to the EU courts.

    London is one of the three expected locations for the establishment of UPC's Central Division. However, criticism surrounds the eventual fate of a London-based court. After Brexit, will the EU leave a lofty EU foundation sitting in a non-EU nation? If the UK figures out how to keep on participating in the UPC after Brexit, which is a long shot then conceivably the court will remain, and life sciences organizations would contest licenses that cover the whole EU in the London court.

    The fate of the UPC framework remains in the air and corporations need to plan for all projections, whether UPC with UK or UPC without the UK. Whatever the result, patenting and litigation strategies depend on careful formulation with all possibilities especially with the political instability.

    The German Question: Answer yet Awaited

    For UPC to establish in the EU; three member-states are required to ratify the agreement including UK, France, and Germany for it to officially commence. If all goes well with the UK approving the agreement, the constitutional issues that surround Germany is also a vital reason which has stalled the ratification of UPC Agreement. The matter will take a while before UPC takes its charge in the EU, regardless of UK's post-Brexit consequences.

    Businesses need a new game plan

    The effect on businesses that rely on patents, a significant number of whom will have put their UPC and UP arrangements on hold following the Brexit vote, will now need to tidy down their plans and start over the way towards considering their future European patenting tactic.

    One strategy could be to wait and watch how the post Brexit revolution unfolds; Patentees will then have the capacity to keep a watch out how the UPC creates, and whether the potential advantages of the framework are getting conveyed before focusing on it. They would then be able to decide when looked at evident infringement of a patent whether to withdraw from UPC or to continue in the national courts considering particular situations surrounding Brexit. Once the UPC becomes effective, businesses will choose whether to assign conceded applications before the UPC or as national patents. It is probably going to be a more of a difficult choice for patentees requiring a broad patent scope, given the advantage of the lessened cost and authoritative weight of UPC over national patents. In this specific circumstance, the mystery will unfold only with passing the time whether the threat that the UK will stop to be a member in the UPC post-Brexit and the vulnerability around how UK rights will get managed from there on implies the relative significance of the UK market to the patentees.  It stays to be seen whether the legal uncertainty around the future of UK cooperation will have results on the general framework.

    Conclusion

    In conclusion, the current debates may eventually result as the last fold that is to overcome before the Court opened its doors to EU patents, but they might also signal a more significant issue with the implementation of the Court and possibly, in a worst-case scenario, the beginning of the end. The UPC Agreement grants the UK to have one of the three branches of the vital Central Division of the UPC. If the UK leaves the UPC framework, that capacity of work will get transferred to another participating member state. However, the departure of one of Europe's biggest economies would make the UPC less appealing for businesses. Time is the medicine and time will tell what the decision holds for patents in the EU.

     

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    Tue, 08 May 2018 10:49:36 GMT
    <![CDATA[RAK Maritime Free zone Authority]]> COMPANY FORMATION IN RAK MARITIME CITY 

    The hidden gemof UAE, theemirate of Ras Al Khaimah (RAK) is a mesmeric stretch of golden beaches, terracotta desert, backed up by the fiercemountains of Hajar and an ocean of Bedouin Oasis is just out of the shadow of Dubai's extravagant skyscrapers. Thepearly-whiteand multi-domedSheikh Zayed Mosque overlooks the Al Qawasim Corniche, a paved boulevard with kiosks, benches,and restaurants fronting the creek.RAK is also the gateway to the glorious Musandam Peninsula, an enclave of Oman. This emirate has some of the most diverse landscapes in the country, from opulent date palm havens to slithering sand dunes and theunambiguous Rocky Mountains. Captivating Gulf waters not only bring adventures but also a sea of business opportunities to expats. The UAE's northernmost emirate RAK is not just limited to its diverse scenery ranging from sandy beaches to sprawling oases but the tranquil Gulf comes with numerous business opportunities.  In recent years, RAK has witnessed exponential growth, resulting from the free-trade zone established and other luxurious tourist spots.

    UAE's fast-rising economy and culturally diverse businesses and industries attract corporations from all around the world. Free Zones in the UAE are specific areas that have a distinct set of rules than the rest of the UAE and has aunique framework of rules for tax, import, and customs. The UAE has several free zones across Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Ras al Khaimah and Um Al Quwain and RAK Maritime city is one unique free zone amongst others. Free-trade zone exemptions are:

  • 100% foreign ownership of the corporation
  • 100% import and export tax exemptions
  • 100% repatriation of capital and profits
  • Corporate tax exemptions for up to 50 years
  • No personal income taxes
  • Support with labor recruitment, and supplementary support services, such as sponsorship and housing.
  • Each Free Zone has outlined around at least one business industry area and offered licenses to organizations inside those classifications. An autonomous Free Zone Authority (the FZA) represents each free zone and is in charge of issuing Free Zone working licenses and helping corporations with setting up their businesses in the Free Zone. Financial specialists can either enroll another corporation as a Free Zone Establishment (theFZE) or just set up a branch or agent office of their current or parent organization based inside the UAE or abroad. An FZE is a limited risk organization represented by the standards and directions of the Free Zone in which it is set up. With the exception of getting nationality in the UAE, the arrangements of the Federal Law Number 2 of 2015 concerning the Commercial Companies Law (the CCL) don't make a difference to FZEs, given that the Free Zones have exclusive arrangements directing such corporations.

    The History

    Ras Al Khaimah has five Ports which play a major commercial window to the rest of the World and are essential to the Emirate's economy which includeSaqr Port, the region's largest bulk handling terminal, Al Jazeera Port, focusing on dry docks and ship repair, Al Jeer Port, which houses livestock handling facilities and yachts, and RAK Khor Port, which provides warehousing and where plans are being developed for cruise terminals and RAK Maritime City. RAK Maritime City is a part of the Free Zone facility, which is one of the most emerging business hubs in the Middle East offering itsconveniently-located logistics gateway, excellent infrastructure, flexible company set-up agendas and technical support services.RAK Ports provides a wide range of high-quality marine services including pilotage, harbor towage, vessel mooring, vessel traffic control, hydrographic surveying, emergency response, aids-to-navigation and lay-up at anchorage for all the vessels. The team of trained and well-experienced pilots, tug-crew, technicians, surveyors, and a team of staff led by The Harbor Master support the foregoing services.

    RAK's location as the first port of call into the Gulf with5km of quay wall for dedicated berths and private jetties is unique and encourages industries to establish their businesses. RAK Maritime City Free Zone Authority inspires long-term partnerships with the industries connected with the maritime. Maritime City pursues to attract between 40 and 50 major tenants with plots starting from 25,000 square meters and lease agreements ranging from 25 to 99 years. RAK Maritime City FZA is not just for business owners but also aspires to create up to 5,000 jobs for Ras al Khaimah.

    What is different about RAKMC?

    RAK Maritime City is the second free zone in Ras al Khaimah, an emirate with scarce oil and gas holdings which was created by virtue of Emiri Decree in December 2009. The Decree has also mentioned that clear boundary of RAK maritime city.As a result, the emirate has long relied on other resources such as quarries to build up a cumulative trading business and cement factories. Maritime City will be a great economic booster for RAK as it encourages foreign expats to establish their corporations with Free Zone privileges. Maritime city seeks to attract businesses as a "one-stop shop" with the benefits of a free zone environment, a state of the art, 21st-centuryharbor infrastructure within a developed and established aport. It aims to provide a cost-efficient and highly safe environment for its tenants, as well as quality industrial and maritime facilities, superior logistics and high-qualityamenities.

    The construction of RAK Maritime City is a key component of the Emirate's economic roadmap to build an advanced ports' network in RAK. This will empower the emirateto be recognized as asignificant shipping and freightcenterthat will be able to compete on the global level as a major logistics and trans-shipment hub in the Gulf. RAK Maritime City is zoned into areas for specifieduse like retail, warehousing, general cargo handling,industrial production and manufacturing, tank storage and shipbuilding or repairs. RAK Ports, managed by Saqr Port Authority, has been given the responsibility to oversee the growth of the maritimeindustry in the region and drive the economic development of Ras AlKhaimah.

    RAK Maritime City Free Zone covers an area of several million square meters, distributed into zoned plots which can accommodate businesses of different sizes across multiple industrial sectors. It's strategic position as the nearest Free Zone the Strait of Hormuz has unique advantages in terms of fuel cost savings for tenants, and its port functionality and features in terms of entrance draft depth, deep-water berths, exclusive jetties and available quay wall. 

    RAK Maritime City Free Zone supports through every step of the process for the establishment of the corporation from the initial application, company registration, facility leasing, the securing of licenses, permits and residence and more to launch the business with ease and within the legal framework of FZA and the respected Emirate. Today each of the five ports in the Emirate has a defined role, specializing in a shipping or transport role, that matches the Emirate's ambitions to be recognized as a modern maritime hub. RAK Maritime City company connects all the businesses in the company to alarge area of million square meters. The free zone currently accommodates thousands of businesses with varied scales which belongs to different sectors.

    The following table is for the investors willing to establish the company in RAK Maritime City, the table provide the list of documents required for different types of company to be registered in the free zone:

    Document Title

    Free Zone Establishment

    Free Zone Company

    Branch

    Application form

    Business Plan

     

     

    Letter of Intent

    Audited Financial report

     

    Company Profile

     

    Bank statement of past six months

     

     

    Letter of reference from bank

     

     

    Passport copies of shareholders

     

     

    Power of attorney, specimen signature, passport copy and resume of manager

    NOC from sponsor

    Register certificate from parent company

     

    MOU and AOA of parent company

     

    Board Resolution of Parent Company

     

    Appointment letter, power of attorney, specimen signature and passport copy of legal representative

     

    Power of attorney, specimen signature, and passport copy of director

     

    Power of attorney, specimen signature and passport copy of secretary

     

     

    ]]>
    Tue, 24 Apr 2018 12:44:49 GMT
    <![CDATA[Trademark Scent]]> THE REGISTRATION OF SCENT TRADEMARK AND ITS ISSUES.

    Part II

    "Perfume is the most intense form of memory."              

    - Jean Paul Gaultier.

    In the previous Article concerning Registration of Smell, fragrance, olfactory marks and Aroma Trademarks – Global overview, we discussed a perspective of major countries in the world in regards to smell marks. However, the other aspects of the smell marks are discussed in the following article.

    Will the aroma of fresh mint or lavender in a particular kind of tea, would be more attractive to you because of its smell? Will the smell of the product lean you towards buying the product even more? Well, these are subtle ways where manufactures familiarize us with their products.The question here arises, as to how far can a trademark be stretched to protect a fragrance of a product?

    Can a scent be claimed?

    In today's marketplace, most of the companies are constantly attempting to produce the cream of the crop products and services. The services and products are just not limited to Its visual effects but industries go to create a greater strength and product loyalty be engaging other senses of the human body. The sheer number of competitors in any particular industry is making it more difficult than ever for companies to capture and preserve substantial market share. While eye-catching symbols and entertaining statement are still the top of the game in the types of trademarks. Nevertheless, non-conventional marks like color, scent,and taste are no longer a scarcity.

    However, Scent marks are more challenging than visual trademarks as they are defined subjective and are therefore open to interpretation. The difficulties that arise from human sensitivities whether the scent mark functions as a trademark. The smell makes the strongest impact on our mind and remains in our memory for a longer period of time. In relation to a successful registration,scent marks are considered as the most difficult marks to be represented graphically and objectively to the relevant authority. We all choose and distinguish between products based on their smell, even more, fragrance can tell us a lot about the product and sometimes you can even recognize some of the products based on its smell.

    In this consumerist oriented society, trademarks are a crucial part of this journey, we might as well certify that the smell of the product consumed is strong and durable enough to last in our memory and otherwise. Corporations are seeking to list their smell as away to differentiate their products from a sea of competitors. Recently, there has been a lot of attention given to the scent tramcar. Laws and regulation need to keep pace and follow up with the huge development that is happening in the field of science and technology to provide it with the required protection. It is known that the Intellectual property laws aim to do that, provide the technological innovations with protection. The question that arises, is smell covered under the protection of Intellectual property laws?

    In 1990, the United States patent and Trademark Office Trademark Trial and Appeal Board ( theTTAB) decided in Le Clarke and for the first time to order the trademark office(PTO), to issue a fragrance trademark registration, they predicted at that time that people would  use the Clarke decision as basis to claim fragrance trademark registration in the future, but the number of people who applied for Scent marks registration was surprisingly less, although it was expected to have a greater demand considering the number of products that use scents in a primary way.

    In recent years, we have already seen in part 1 of this article that was published previously about this matter is that it is subject to change depending on each legislation in different countries and that the UAE Law covers protection of sound and motion pictures under the UAE's intellectual property law. Australia and Canada's legislation currently include the scents under its protection. Other jurisdictions include New Zealand, Korea, Peru, Columbia,and France. The amendments published in the Royal declaration on April 29,2016, to Thailand's trademark Law included the addition of sound marks under Section (4)of the definition of themark but neglected the importance of the scents giving that there were conflicting opinions around it.

    Don't take away my fragrance…

    The registration of such fragrance in the legislation that acknowledges the trademark and copyright protection for these fragrances can raise complications generally in deciding the elements that need to be taken in mind to know if it's possible or not, some of these problems include but are not limited to:

    Generic Fragrance

    There are some smells that are regarded as a generic smell. For example, Pine oil is known to be a disinfectant and is included in many cleaning products. Therefore, the smell of pine oil comes generally with this product which means that it is nearly impossible to use the pine oil to differentiate between diverse cleaning products.

    Similarly, the scent of lemon is used in dishwashing cleaning liquids because of its anti-bacterial properties. It becomes a custom among people to consume lemon scented dishwasher cleaning liquids, and because it is a generic smell, it can't be registered as a trademark by an individual.

    Fragrance Functionality

     In the recent decision of TTAB, it was discussed that "a mark is deemed functional if it is a feature dictated solely by function", here it specifies that only the possession of a function does not make a mark necessarily functional.

    In the famousMorton-Norwich case, "the court considered the functionality of certain spray bottle design. It pointed out that the requirement of non-functionality is not mandated by statute, but is derived entirely from court concluded later that "the claimed spray bottle mark was not functional for, among other things, it was not shown to be the best design available, or one of a few superior designs, and the perceived effect upon competition of according trademark status to the design would be minimal at best". The court then turned I's heads to the issue of distinctiveness as it acknowledged that for the applicant's mark to be considered it must also appear to be originally distinctive, or at least show any sight of distinctiveness. Later the court found that the separate distinctiveness issue had not been considered by the TTAB, ergo, the case was again remanded for some good reasons.

    Fragrance Distinctiveness

    As observed, it appears that the scent trademark issue mainly focuses on providing rational "Competition", a point of view that gives the competitors a fair opportunity to use. For example, the same geographical designations for their product, or offer goods or services that share the same surname or apply the same descriptive terminology to their articles. Designating goods or services emanating from a particular source, that the mark becomes distinctive and the source is permitted to register the term as amark. In this case, a proof of distinctiveness is required. It may well be that some perfumes have a commanding and dominant natural smell that others should not be directly precluded from using displays the distinctiveness and excellence before the federal registration would take place. In some cases, such distinctiveness may be impossible to establish. For example, the smell of jasmine is popular in perfumes. because of that, any perfumes express a jasmine smell might well view as generic, which mostly leads to it being non-registrable.

    Another example can be applied to the natural smell of campfire, if inserted in a new men's cologne can it be registerable without proof of distinctiveness? On the one hand, if it is common, every day and natural smell, it should not be registrable without proof of distinctiveness.  On the smell of men's cologne.

    In a recent case Hasbro, Inc. filed an application to trademark the scent of PLAY-DOH under the Trademark Law.  ascent cannot be trademarked unless it is intrinsicallydistinguishing. The company described the smell as "a unique scent formed through the combination of a sweet, slightly musky, vanilla-like fragrance, with slight overtones of cherry, and the natural smell of a salted, wheat-based dough." While Hasbro did claim it as a distinctive smell, the registration of scent mark is still not widely recognized.

    Can ascent be graphically represented?

    Registering a sound mark require the sound then be graphically represented in the form of description of the sound and an electronic recording of the sound, the same concept applies to smells it should be graphically representable.

    While some people think smell can't graphically represent, studies show it is possible because each compound has its own chemical architecture, exactly as it is possible to represent a sound through time domain waveform, it is possible to represent the smell graphically. It will also react differently if it was subject to bombardment by astream of electrons as it will fragment in a particular pattern and leave behind a unique fingerprint of the compound. The scent is a chemical compound in its gaseous phase that our nostrils develop to detect, and the scientific field also developed many analytical techniques to detect and analyze the chemical compounds of the smell.

    If a picture is worth a thousand word than the ability to represent the scent in a graphical way is worth a lot more for the trademark world!

    Conclusion

    In conclusion, registering a fragrance depends on various elements and tests that are used to decide in comparison with the other items as well, meaning fragranceis to be evaluated for registration just like any other mark. As these examplesillustrate and publicizing advantages to registering scent marks, and the efforts are meaningful if it results in an exclusive source that may be more valuable and profoundly connects with consumers than a typical visual trademark.

     

    ]]>
    Tue, 24 Apr 2018 12:15:07 GMT
    <![CDATA[Copyright and Apps]]> Ping!You got a Notification*

    "Internet is a place where nothing ever dies."

    A touch is all you need to show the world your piece of art and to be liked by the viewers. Facebook posts, Instagram new filters improving your images, Snapchat 10 seconds stories to score social kudos. Endless forms and invisible impact.But the legal implication of copyright infringements on social media is more than what it was ever imagined. It's a tug of war between social media companies and the artists gaining new income by getting "Viral" or reaching millions of followers. In a continuous struggle of influencing the audience, the line of copyright infringement seems hazy and unclear. In this article, I will try to draw the line for our readers to make them understand the legal implications of stealing social media content.

    The variety of content that is shared online is strictly considered as an artistic work, to which intellectual property law applies. Copyright- the right of the author over his artistic or literary work and the right to allow others to use his copyrighted work. In terms of social media images, the copyright generates once the image is posted online. The statue of Anne is the first to receive copyright protection, since then a lot of significant changes have been made concerning the copyright protection and nowadays Berne International Convention protects copyrighted work since 1971. However, we can now witness the recent copyright protection given to digital content by World Intellectual Property Organization (WIPO). The WIPO treaty signed by almost all countries is the first treaty to address the issue of digital environment and its infringement.

    Social media websites stipulate terms of use that a user must strictly comply to in order to use the service, which we clearly don't read, therefore having anyinformation about what we have signed for and are bound by the terms which we didn't even read or understand.

    Thus, through this article, we will try to explore the unreconciled stress between the freedom to use and protection of copyright holders. The sole reason to write this article is to increase awareness among social media users and to provide a legal backdrop for discussion.

    My Image, My Right!

    New York Instagram Sensation Richard Prince reminded us that a normal picture you took at the beach, shared publicly on Instagram can be reused and sold for a price not less than USD 90,000. In New York Freeze Art Fair, Prince displayed giant screenshots of Instagram users without any prior permission and sold for a good price. So here is what he was doing, since, 1970 prince has been "re-photographing" images from magazines, books or advertisements. But, in 2008 Patrick Cariou filed a case against Richard prince[i]when he re-photographed Cariou's image. The court of thefirst instance passed the judgment in Carious' favor, however, when the case went for appeal, the court ruled out the lower's court judgment in part and held that Prince's artworks make fair use of defense and he has not infringed any copyright because his work was "transformative."

    It is important for all the users to know whether if a third person is using their content from their profile, the principle of "fair dealing" may protect their usage as what happened in Prince's case. The principle outlays numerous exceptions where the third party can utilize the copyrighted content without the author's permission such as:

  • for critic or review;
  • for research work;
  • for making parody;
  • for news;
  • For legal advice.
  • A careful look into Instagram terms of use, we understand that the photographer owns an exclusive right to use, sell the image and can enforce their copyright against anyone who infringes upon your rights.The terms of use come into effect the moment a picture is uploaded on Instagram. It provides a fully-paid, freely transferable social networking stage to utilize the content in the way the user desire. It further implies that Instagram permits pictures from the site to others- including other Instagram users who can report pictures without encroaching on other's copyright.

    Don't take a Screenshot

    The United Kingdom Digital and Economy Minister recently restricted people to take screenshots of Snapchat stories. He publicly mentioned that "under UK Copyright law, it is unlawful for Snapchat users to copy or take a screenshot of theimage and share it in the public domain without the sender's prior consent". Let's validate his statement by looking into UK Copyright law. TheArticle 96 of UK Copyright, Designs and Patent Act 1988, allows the copyright owner to file a suit against the third party and can seek all such relief by way of damages, injunctions, accounts or otherwise.

    Snapchat claims that they follow a strict privacy policy, where it states that it does not condone any type of copyright infringement and if users suspect that their rights are being infringed, they have the right to report the incident to the company. However, the policy isn't that strict due to several reasons, the policy does not mention anything about removing the users who they believe are infringing copyright laws, or they can delete the provision of screenshot altogether.

    Copyright V. Social Media- the Case studies

    The widespread of regular practice of sharing photographs and other content has led to uncertainty regarding the ownership of those images and the violation of copyright law. This back and forth exchange of social media content has created a world where content is freely posted and viewed without any costs or charges. Thus, the free online culture created material conflicts with regards to control over reproduction and distribution. The rapid reproduction of original content has prompted several copyright infringement legal issues in past years.

    In all of these cases, the third party contends the usage being a fair use as set out in laws of almost all the countries such as 17 U.S.C § 107.  A recent case of North Jersey Media Group, Inc. v. Pirro[ii], where Pirro publish a photograph which was copyrighted work of Thomas E. Franklin of North Jersey Media Group Inc. (NJMG) on Facebook. NJMG got that image registered with U.S. Copyright Office. However, on account of Pirro Fox news Pirro combined that image with another and posted the same on that account. NJMG filed a copyright infringement suit against Fox News and as usual Fox News soughed defense under fair use. The Southern District Court of New York rejected Fox's defense and held that merely adding a "Hashtag" and making small alterations to the image is not sufficient. In other words, the image failed to create a new insight and understanding for the audience and cannot claim warrant protection under fair use.

    The case was referred for appeal and Fox appealed to the court for "Context-Sensitive Test" and argued that social media platform is a community to share ideas and this environment is in itself a transformative expression. Also, denying social media users the right to fair use will curtail their right of expression. But, unfortunately, the thought stands still as the parties resolved the matter amicably before the court.

    A similar case was filed by a photographer Kai Eiselein, where he filed the case against BuzzFeed for infringement of his copyright for an image he posted on Flickr[iii]. BuzzFeed uses his image in an article without his permission and the issue regarding fair use principle remain unanswered in this case as well.

    These cases have the ability to highlight the potential difficulty when thelaw tries to balance the copyright owner's right and the freedom of expression of social media users.

    UAE is at par with other countries and imposes stricter punishments for copyright offenders of social media content, as recently a case has been filed against a teenage girl who posted a picture of her friend without taking her or her family's permission on one social media website. The parents of the girl filed a case against her for posting their daughters photograph. The defendant girl argued that she posted the picture with her friend's consent. However, upon discovering the truth the family tried to take down the case and court rejected for reconciliation considering theseriousness of electronic crimes in the country.

    The case went to thecourt of thefirst instance, where defendant girl failed to prove the consent given to her for posting such picture and was held liable for the crime and was sentenced under Article 378 of UAE Penal code for violating someone's privacy. The case is now presented in the court of appeal, and the judgment is still pending. However, any copyright infringement cases in this regard are yet to come in public domain. It is an established fact that UAE laws are stricter when it comes to assault to privacy or electronic crimes and law provides strict punishments for the offender irrespective of the age and nationality.

    #New Era New Needs

    Keeping in mind the pace of technological advancements around the globe and the social media content countries are either making amendments in the prevailing law or implementing new law for protecting the rights of copyright owners for content on social media websites.

    The Digital Millennium Copyright Act (DMCA) of United States provides a mechanism for owners of thecopyright to protect their social media content. Under the law, the copyright holder holds a right to notify the Internet Service Provider(ISP) or the Online Service Provider (OSP), once he becomes aware of the infringement. Also, the ISP allows the copyright holders to request for removal of the content, as under Section 512 of DMCA, ISP must remove the copyrighted work post receiving the notification from thecopyright holder.

    European countries were the first to sign the Berne Convention for protection of Literary and Artistic Works. Additionally, copyright law in Europe is implemented through directives- the legislative acts of European Union. Since the European Union follows common law and others civil law, there is no specific approach for all and the Intellectual Property directives provide the rules for regulating online content and their copyright issues.

    In 2010, United Kingdom passed Digital Economy Act (DEA) for protecting and regulating online content on social media websites. DEA provides exclusive power to the government to limit and/or terminate internet services to copyright infringers. Alike, U.S. the DEA requires holders of copyright to inform the potential infringement of their rights.

    UAE Cyber Crimes Law promulgated by Federal Law Number 5 of 2012 (the Cybercrime Law)penalizes the offenders of privacy on theinternet including the social media websites. UAE Penal Code implemented under Federal Law Number 3 of 1980 punishes the offender who transmits someone else's pictures without their prior consent and requires the defendant to prove beyond reasonable doubt the presence of consent. Also, the Federal Law Number 7 of 2012 concerning the Copyright Law prohibits the users to share any picture of thethird party without their consent. UAE government has also passed several guidelines for public as well as governmental authorities for social media usage such as, in 2011 UAE government passed certain Guidelines for Social Media Usage for UAE government entities, also Telecommunications Regulatory Authority (TRA) passed guidelines for public at large

    It's time for the international law to cross the international territorial boundaries like the international reach of this social media content. Country-specific laws protecting online content will no longer be able to protect the author's work. Due to rapid change in the technology, the need of the hour is international treaties and laws for protecting the digital content of a copyright holder sitting in different part of the world.

    Before I Sign out

    In this era of technology, the copyright and other laws are blurry and are insufficient to protect the online users completely. The law is required to adjust itself quickly to frame some guidelines accepted worldwide. Under any copyright law, ignorance is never an excuse. Therefore, a copyright infringement without actually knowing its original owner is an infringement. The only remedy available with the copyright holder is to get the content removed, especially in the cases where the contents are used commercially. So, clear your doubts and know your legal rights before sharing your personal life on social media.  


    [i]Patrick Cariou v. Richard Prince 714 F.3d 694 (2013)

    [ii]74 F. Supp. 3d 605 (S.D.N.Y 2015)

    [iii]Eiselein v. BuzzFeed, Inc No. 13-13910 (SDNY June 2013) 

     

    ]]>
    Tue, 24 Apr 2018 11:45:10 GMT
    <![CDATA[Securitization]]> SECURITIZATION: AN OVERVIEW

    Introduction

    Securitization is a powerful financial tool that renders possible the profitability of illiquid assets. We all agree that securitization contributed to the 2008 Financial Crisis, demonstrating how this powerful businessinstrument is a double-edged sword: it is capable of both boosting and devastating an economy. The United States also commonly known as an unchallenged leader in securitization markets. However, much of the current activity is happening in the Middle East, including the United Arab Emirates, where the new wave of securitization markets is emerging.

    Definition

    Through this financial process, several illiquid assets are packaged into pools and transformed into securities. The third-party investors in a secondary market then purchase these securities or their related cash flows. In other words, the security interests in the pool are sold to investors. The process enables the conversion of an asset or a group of assets into marketable security. In this article, I aim to offer a comprehensive explanation of the nature of the underlying holdings of securitization, the function of Special Purpose Vehicles, regulatory responses to securitization after the financial crisis, and the impact the economic process has had on different markets.

    An example of an illiquid asset is a debt instrument, which the originator (such as a bank) executes with numerous obligors (such as individuals who have a mortgage with the bank). These assets, which are into pools, can be various types of contractual debt (generally home equity mortgages) such as residential mortgages, commercial mortgages, auto loans, credit card debt obligations (or other non-debt assets which generate receivables). We combine these assets with other homogeneous assets, such as other mortgages issued on significantly similar terms, to form a pool. Then, they transfer it to trust or the Special purpose vehicle (SPV) which is the securitization vehicle. The company will sell the security interests to investors. They give the funds so raised to the Intermediary or Originator in consideration for the transfer of the assets.

    It is important to note that the vast array of asset varieties and the creation of liquidity for an illiquid asset makes securitization a powerful and practical financial tool. Furthermore, a pool of securities can be divided and sold to different investors based on the risk level these investors wish to adopt. If they are willing to take on the risk of mortgages that may or may not be paid off, then they will purchase the higher risk part of the pool. If they are not willing to take on such risk, they will buy the lower risk part of the lake.  Regarding value, mortgage-backed securities (MBS) dominate the global market, while asset-backed securities (ABS) feature steady growth rates.

    Benefits of Securitization

    The securitization process offers many essential benefits to participants. In this vein, it allows the originator to do the following things:

             i.            It will enable the transformation of an illiquid asset into a liquid financial instrument, thus setting up future revenue.

           ii.            It enables borrowing at a better rate given that the risk premium demanded by the investor is proportionate with the underlying pool of assets.

          iii.            It improves balance sheet management with reduced leverage and gearing ratios by removing risky assets from its balance. It permits the use of capital to support loan writing and investment.

         iv.            The prepayment risk of the underlying assets is after that on the investor.

           v.            It eliminates exposure to credit risk or theadministration of the asset.

         vi.            The originator gains access to a broader banking/investor base in the financial markets.

    Securitization will benefit the investor in the following ways:

             i.                        It enables the securities to obtain excellent credit ratings given that deals can entail credit enhancements.

           ii.                        The yields offered by securities exceed those on comparable corporate bonds.

          iii.                        The securities are liquid.

         iv.                        It is an investment in a diversified pool. Investors will prefer to hold a portion of a pool of risky assets than a single risky asset.

    I.                    Mortgage and Asset-Backed Securities (MBS)

    Categorically, the division of assets is in two categories being mortgage-backed securities and asset-backed securities. The form of asecuritization backed by mortgages is called mortgage-backed securities. It comprises three central types:

                            i.                     mortgage pass-through securities

                          ii.                     stripped MBS

                         iii.                     collateralized mortgage obligations (CMO)

    The fixes or floating rate mortgages sponsor these securities. An investor will purchase shares in a pool of mortgages, and receive a cash flow which basis on the features of the underlying mortgages such as principal amount, interest and payments made before the lease.

    Moreover, a stripped MBS is derivative mortgage security. The division of principal amount and interest is so segregated in such a way that the price of each investor is different from the other. There is a possibility of a stripped MBS which the companies structure in a way that there is an interest-only investor class and a principal-only investor class.

    Lastly, in a CMO, whole mortgages funded by debt issued in different tranches are purchased by the securitization vehicle. After that, there is a redistribution of Cash flows from the assets to different tranches. The principal and interest received by the securitization vehicle are used to pay attention to each branch. It creates different risk/yield relationships between investor classes by taking the mortgage (a single class instrument) and creating multi-class instruments. This type of mortgage-backed securities has developed immensely and has been the subject of considerable levels of financial re-engineering.

    II.                  Asset-backed Securitizations (ABS)

    Asset-backed securities are securitizations backed by non-mortgage assets. These include (but are not limited to) the following:

                                     i.            automobile loans and leases

                                   ii.            credit and department store charge card

                                  iii.            computer and other equipment leases

                                 iv.            accounts receivables

                                   v.            legal settlements

                                 vi.            small business loans

                                vii.            student loans

                              viii.            home equity loans and lines of credit

                                 ix.            boat loans


                                   x.            franchise loans

                                 xi.            timeshare property loans


                                xii.            real estate rentals

                              xiii.            whole business securitizations

    Another vital perspective to consider to understand the securitization structure is the idea of credit enhancement. It is the way or strategy to enhance the procedure for assessment of a securitization exchange, as recommended by a credit rating agency keeping in mind the end goal to draw in financial investors for investing in these assets.

    Special Purpose Vehicles (SPV)

    SPV are subsidiary companies of a parent company, who provide an alternative mode of financing transactions. Given that there is the complete protection of assets from the actions of their parent company, they curb the financial risk to the property of the SPC. These vehicles play an indispensable role in the operation of global financial markets. The allow investors and businesses to raise capital, securitize assets, share risk, reduce tax and carry out activities without any chance (or at least not as significant a threat as would usually be the case). SPCs provide limited liability for shareholders, they can choose to operate on separate balance sheets than their companies ("off-balance sheets"), and they serve on these free balance sheets instead of recording transactions in the name of their parent companies. Following are the commonly used SPVs for the operations:

    i.               Securing projects from financial, commercial or operational failures

    ii.             Securitizing Loans and Receivables. For instance, governments set up SPVs to fund their projects and the SPC entity enables the channeling of funds for projects in different areas.

    iii.            Transfer of Assets: upon the transfer of assets to SPC, they become unidentifiable. As a result, it protectsthe firms in the event of bankruptcy or liquidation. This invulnerability has led courts to rule that there is a link between SPC assets and funds with the originating company.

    iv.           Regulatory and Compliance: SPVs avoid regulation and compliance protocols since they can be set-up within orphan-like structures.

    v.             Financing and Raising Capital: They can be used to finance new projects without increasing costs or altering the shareholding structure. It makes them particularly useful for financing aircraft, power and infrastructure projects.

    Global Aspect of Securitization

    In UAE

    Securitization also allows a company to deconstruct itself by separating highly liquid assets from the risks in association with the transaction. These assets are then used to raise funds in the capital markets at a lower cost, and a lower risk than if the company had grown funds directly (by issuing more debt or equity). The company will then retain the savings generated by these lower costs.

    In the United Arab Emirates, the company establishes a system of Islamic Securitization. It is a legal structure which replicates the economic purpose of a traditional asset-backed securitization structure and satisfies the requirements of Islamic Finance. The terms Al-Task and Tawriq are the terms used for securitization under Islamic Law. Given that most Islamic financial principles basis its concept of asset-backing, securitization fits particularly well with Islamic Finance.

    Conventional securitization, which originated in non-Islamic economies, involves interest-bearing debt. BY holding contingent claims on the performance of securitized assets, investorsare entitled to pre-determines interest as well as the principal amount initially paid. However, Islamic finance principles prohibit profit from debt and speculation. Thus, the issuance of interest-bearing debt securities with a secured redemption conflicts with Islamic financing principles. Despite the fact that securitization under Islamic Law bars interest income, the company structure it in such a process thatit rewards investors for their direct exposure to business risk. Underlying securitization assets which do not comply with Sharia Law principles cannot securitize in the market.

    In the United Kingdom

    The UK is Europe's Largest Securitization Market, with issues worth approximately US Dollars 26 billion in 1999. The first asset class securitized in the UK are private mortgage loans. Subsequently, the market has expanded significantly to include credit card receivables, other consumer loans, lease receivables and whole business securitizations whereby the securitizations is on the entire future receivables of a company. In the UK, there is a continuous introduction of new asset types and structures.

    In Germany

    Germany market is not significant as the US. However, the ABS market in Germany has grown steadily since 1995. Housing loans, credit card receivables,and consumer loans are commonly the subjects of securitization processes in Germany. In mid of 1997, the German Bank Regulatory Office published a guideline allowing relief from capital adequacy requirements for banks if they meet the specific criteria. Since then, not only corporations but also banks have securitized many assets. In the past, traditional ABS transactions were based mainly on mortgage loans (residential and commercial), trade receivables, lease receivables and customer loans. Today, all kindsof assets can be securitized provided they are separable, transferable, pledgeable and free of objections.

    In Asian Region

    The Asian crisis has caused the securitization market in Asia to slow down. From properties to salaries, the market was continuously searching for new assets to securitize. The market was booming, as it was continually looking for innovative ways to overcome its legal, tax and accounting issues. But the market's collapse in 1997 drastically slowed down securitization's development process in the region. The market started to recover in 1998, and in total, four big deals were completed: in Hong Kong, Taiwan, Korea and an Asian Basket Deal (a CBO). 1999 saw a significant increase in activity focused on North Asia. Given that the central issue in the Asian market remained that of attracting investors, the focus in that region has been on credit enhancements and risk repackaging.

    Conclusion

    On the whole, securitization is a powerful financial tool that constitutes a significant part of today's global generation of profit. Given that securitization's abuses contributed to the global financial crisis, its regulation is critically important. US and European post-crisis regulation responses are insufficient. For achieving a more systematic regulatory framework, existing law will have to supplement.

    ]]>
    Tue, 24 Apr 2018 10:27:32 GMT
    <![CDATA[Tender and Procurement Law of Abu Dhabi]]> Tender and Procurement Law of Abu Dhabi

    What are Tender and Procurement processes?

    Tender and procurement are two processes that go hand in hand. You cannot have one without the other, and these processes are ones which occur in a multitude of countries and jurisdictions around the world. In a world with as many complexities as ours, it would be near impossible for a single business to perform at the top level in all different aspects due in large part to the vast number and extensive variety of elements of a company. There will almost always be another entity that can do a specific aspect of work of a business better than that business itself.

    Below mentioned is a rudimentary example of the tender and procurement process. In this instance, IT projects within a fashion company need to be completed. In terms of such work, they would have to call in specialists. Tender and procurement work on the fundamental principle that companies subcontract parts of their business to those who have superior capabilities in the relevant fields. This principle can be seen on a scale much more significant than the abovementioned.

    Tender is a process through which a party, known as the promoter, will first specify what service they are looking to obtain. They can then begin a bid, which is what is known as a tender. Interested parties will then be able to come up with proposals on how exactly they would go about meeting the specifics of the requirement. The promoter will have provided specific qualifications as to how they would want the service to be acquired or completed, and this would include a deadline, etc. The party would then select from the biding entities based on their proposals, and then the winning bidder would be contracted to perform the work.

    Procurement is the other side of this story. While the tendering party is looking to bid away work to the best potential entity, the procurement party engages in a bid in a tendering to procure a project from the promoter and obtain contracts in this way. There are entire businesses which rely on acquired work, and these types of companies often specialize in specific industries.

    One of the most common tenders is usually the government and public sector themselves, as they outsource activities to private businesses, and this can include immense scale and essential projects. However, any company can start a tendering. There are usually differences between a public tender and a private tender, with individual bids often being an integral part of the businesses operations and a required process. However, this is often not the case with public tenders.

    From a global perspective, public sector tendering is massive business, and not just anyone can win a bid. To give an idea of the scale of this, in European countries (or at least those that are part of the EU), the laws that dictate tender and procurement may originate from within that country, though there are general underlying EU rules on the matter. This inclusion shows that the issue is on a scale where the attention of the EU is upon it.

    The UAE's Approach

    The primary law governing tenders and procurement in the UAE is the Law Number 6 of 2008 and all issues relating to this matter including the legislation are under the wings of the Department of Finance (DOF). The DOF is in Abu Dhabi, and they provide public financial services to the Abu Dhabi Government. Since its creation in 2008, there has been an amendment of the law, and it is now available on the DOF website and acts as a manual which is intended for all government entities.

    As per the law, there should be a standard format that government contracts should look to follow and this general standard applies in most cases, except for the area of construction contracts according to Article 5 section 1 of Law Number 6. While this may be the case, there may indeed arise occasions where the standard contract doesn't contain certain elements that may be required. In this case, Article 5 section 2 states that any and all exceptions must be approved of by the Purchases section head and reviewed by the legal division at the specific government entity that is the promoter. This provision is the minimum requirement for any diversion from the standard.

    Under Article 7 of the guide introduces the concept of purchasing section. This section is the group that is responsible for securing the government entity throughout their deals with external parties. Some of their key responsibilities include:

  • Ensuring the best prices and facilities are obtained for the government entity
  • The outsourcing of work to suitable entities
  • Also ensuring that the work is completed and takes into account the appropriate locations, times and quantities
  • The purchasing section is also able to make purchases on materials and related items through bids of the value of between AED 25,000 and AED 250,000. Anything above this must be taken up with the Tenders and Auctions Committee via memorandum.

    On top of this, there are three primary responsibilities which the purchasing section must watch over. These are:

  • To collect information regarding materials and suppliers, and to maintain those records
  • To determine the standard specifications of the items and materials
  • To ensure quality assurance on the topic of purchases activities tender documents and evaluations and consider the standards of the sustainability, environmental protection and SME and local economy support.
  • Article 9 considers the ethical responsibilities of government entities while they are in the processes of tender and procurement. The work is to be completed with the utmost transparency and in a highly professional manner. The aim of government work, in the end, is to move the country progressively forward, in a respectable and dignified direction. This aim includes not taking on contracts with those whose intentions are only to progress their matters rather than thinking of the more significant concern of the nation as a whole. I order to achieve this more easily; the government entity should look to educate and instill these concepts into their employees, and thus creating a positive atmosphere and ensuring that the proceeding contracts and outcomes are only favorable.

    Article 12 introduces the requirement for government entities to set up a Tender and Auctions Committee. This job falls to the chairman of said entity, and there is a specific structure with is also mentioned in the Article. The committee must be composed of a minimum of 5 members and requires a chairperson and their alternate. This committee will meet to discuss and further all elements of the tender and Auction activities, and the voting system within the committee works on a simple majority basis with the casting vote going to the committee chairman. Their primary purpose is to govern the overall strategies and future of tenders and procurement for their respective government branch.

    The manual proceeds to discuss further committees within the entity and outlines procedure rules across all stages of tender and procurement.

    The Future and PPP

    Private Public Partnership (PPP) are very much as they sound. The PPP is a partnership formed between public government bodies and private external entities. Within this relationship, each party has its role to play, and of late, the matter has seen a rise of attention in the UAE. With the implementation of this concept within the country, the hope is that a culture of growth based on knowledge, expertise, and diversity will begin to flourish and help the economy to grow to new strengths. It will also expand business within the country, and the hope is that it may bring in foreigners and their innovations and investments.

    What has given hope and light to this is the recent introduction of the UAE Cabinet Resolution (1/1) of 2017. Similar to Law Number 6 of 2008, this piece of legislation behaves as something of a manual that is to be followed to attain the abovementioned and the location of such is on the Ministry of Finance website.

    Chapter two of the manual covers the contracts between private and public parties in an overview. 2.1 states that the agreements between these parties are for the good and growth of the country and the projects should look to improve the infrastructure of the nation. These contracts are to be long-term and should use to their advantage the resources, knowledge, and expertise of the private party. The projects and works provided are not intended for the maximization of profit of either of the parties to the contract. Preferably the primary focus should be on the growth and well-being of those sectors of the UAE.

    The announcement of the initial project under the new PPP law was in March of 2018, and the plan is to build a new fully automated carpark with over 1,200 spaces, and the structure would also house the Supreme Court. The project is purported to take around three years to complete, and cost around AED 290 million.

    Projects such as this demonstrate the goal of the PPP scheme. In this specific case, the construction is commencing of a car park that will provide and ease the lives of hundreds and thousands of individuals within the city, and this is just the first project of many more to come. It will allow for highly valuable and needed projects to rise and be run by private sector experts allowing for high quality and innovative expansion. The setting in motion has taken place for the achievement of the goal of growing the country's economy and expanding the infrastructure to achieve the UAE of the future.

    ]]>
    Wed, 18 Apr 2018 00:00:00 GMT
    <![CDATA[Final Law of Sea V.1]]> LAW OF SEA

     "It was the Law of the Sea, they said. Civilization ends at the waterline. Beyond that, we all enter the food chain, and not always right at the top."

    -Hunter S. Thompson

    As in the movie Life of Pi, where the adventures of the sea help the little boy reach his destination. Similarly, the vast ocean quests of the sea provide a pool of resources and opportunities. We are well aware of the fact that oceans hold 97% of the world's water supply and provide a sea of opportunities to corporations that facilitate growth in the world economy. They have always been perceived as an open free space; like a vast frontier.

    Dating back to the 17thcentury, when many countries formalized this viewpoint through the Freedom of the Seas doctrine. The doctrine limited any countries rights to the ocean to a narrow distance, around 4.8 kilometers, surrounding its coastline and declared the rest of the seas to be free to all countries and said that it belonged to no one. This concept had characterized views that the ocean was a vast resource and that all countries could use them however they required.

    There was an immense increase in the use of the high seas, which had challenged this dogma by the start of the 20th century. The ocean's resources were used for all kinds of economic uses, and the countries wished to increase their claims over their resources off the shore. Many activities were being relied on the high seas for their success. Concern started to grow over the impact of the use of the resources and as expected, tension increased between the nations over the rights to the resources.

    Therefore, there was a lot of devastation that took place due to the over-exploitation of water resources by all the countries. From the devastation that took place, the law of the sea was born. The Law of the Sea is the International Law body that governs the principles and rules by which nations, interact in maritime matters, which could include the navigational rights as well as coastal waters jurisdiction. The United Nations Convention on Law of the Sea or "UNCLOS" is generally said to be the codifier of international law of the sea.

    International Conventions

    Creating an effective governance and regulatory regime for the oceans continues to be a challenge for the international community. The United Nations Convention of the Law of the Sea defines the rights and responsibilities of nations concerning their use of the world's oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources.

    While the Secretary-General of the United Nations receives instruments of ratification and accession and the UN provides support for meetings of states party to the Convention, the UN has no direct operational part in the implementation of the Convention. There is, however, a role played by organizations such as the International Maritime Organization, the International Whaling Commission, and the International Seabed Authority (the latter being established by the UN Convention).

    Sea Beds- Seabeds are basically defined as the bottom of the Ocean. They may also be referred as Ocean Floor or Sea Floor. In these Sea Beds, a lot of minerals can be found that could be rare and may have immense value. If these minerals are found to be utilized to extreme measures, the minerals may eradicate for good. Therefore, the Conference has spoken about how one has to draft laws related to the seabed to make sure there is no overutilization of the minerals found in the seabed.

     [UNCLOS I, UNCLOS II, UNCLOS III]: The law of the sea developed from the struggle between coastal states, who wish to enlarge their control over marine areas adjacent to their coastlines. By the end of the 18th century, it was understood that states had sovereignty over their territorial sea. The maximum breadth of the territorial sea was generally considered to be three miles - the distance that a shore-based cannon could reach and that a coastal state could therefore control.

    It was posted the Second World War, that the international community requested that the United Nations International law Commission consider codifying the existing laws relating to the oceans. The commission began working towards this in 1949 and prepared four draft conventions, which were adopted at the first UN Conference on the Law of the Sea:

    UNCLOS I

    The First United Nations Conference on the Law of the Sea (UNCLOS I)lasted from 24 February until 29 April 1958. During this time, UNCLOS I adopted four conventions, which are commonly known as the 1958 Geneva Conventions:

  • The Convention on the Territorial Sea and Contiguous Zone of 1958 which is an international treaty which entered into force on 10 September 1964. The convention was ratified by 52 states.
  • The Convention on the Continental Shelf which was an international treaty created to codify the rules of international law relating to continental shelves. The treaty, after entering into force on 10th June 1964, established the rights of a sovereign state on the continental shelf which surrounds the sea, if there be any.
  • The Convention on the High Seas: is an international treaty which codifies the rules of international law relating to the high seas, otherwise known as international waters. The treaty was signed 29 April 1958 and entered into force on 30 September 1962 and as of 2013, the treaty had been ratified by 63 states. The treaty is divided into 37 Articles that help understand the definition as well as the threshold of High Seas.
  •  The Convention on Fishing and Conservation of Living Resources of the High Seas: which is an agreement that was made solely to resolve the matter through international cooperation, the problems regarding the preservation of living resources of the high seas, considering that because of the development of modern technology several resources are endangered due to overexploitation.
  • UNCLOS II

    The Second United Nations Conference on the Law of the Sea (UNCLOS II) lasted from 17 March until 26 April 1960. UNCLOS II failed to have any international agreements. During this time, the main topics that came into picture were the breadth of the territorial sea and fishery limits. The conference once again failed to fix a uniform breadth for the territories or establish consensus on sovereign fishing rights. Hence after 6 weeks, this Conference was called off.

    UNCLOS III

    The Third United Nations Conference on the Law of the Sea (UNCLOS III) lasted from 1973 to 1982. UNCLOS III addressed the issued bought up at the previous conferences. Over 160 nations participated in the 9- year convention, which finally came into force on 14 November 1994, 21 years post the first meeting of UNCLOS III and one year after ratification by the sixtieth state. One of the most significant features of the convention is the definition of maritime zones – the territorial sea, the contiguous zone, the specific economic zone, the continental shelf, the high sea, the international sea-bed area and archipelagic waters. The convention has set out specific clauses for the passage of ships, protection of marine environment, freedom of scientific research and exploitation of resources.        

    Territorial Waters

    The coastal state is free to set laws up to 12 nautical miles from the baseline. It may also regulate use, of any resource found in this area. This coastal area is known as Territorial Waters.Shipping vessels may pass through any territorial waters as they are given the right to innocent passage."Innocent passage" is defined as passing through waters in a continuous manner, which is not "prejudicial to the peace, good order or the security" of the coastal state. Fishing, polluting, weapons practice and spying are not considered "innocent", and underwater vehicles such as submarines are required to make sure that they are seen on the surface and to show a flag acknowledging their presence. Nations can although suspend innocent passage in specific areas of their territorial waters if doing so is essential for the protection of the territory.

    Contiguous Zone

    Ahead of the 12-nautical-mile limit, there are a further 12 nautical miles from the territorial sea baseline limit, which is known as the contiguous zone, in which a state may continue to enforce laws in four specific areas: customs, taxation, immigration, and pollution. This makes the contiguous zone a hot pursuit area.

    Exclusive Economic Zone

    The coastal lines that extend 200 nautical from the baseline are known as Exclusive Economic Zone. Within this area, the nation has sole exploitation rights over all natural resources. In other words, the term may include the territorial sea as well as the continental shelf. Foreign countries have the freedom of navigation and may fly over this area, provided they adhere to the regulation of the coastal states. Foreign states may also lay submarine pipes and cables.

    Continental Shelf

    A Continental shelf is defined as the natural prolongation of the land territory to the continental margins outer edge, or 200 nautical miles (370 km) from the coastal state's baseline, whichever is greater. The continental shelf of a state can exceed up to 200 nautical miles until the natural prolongation ends. However, it may never exceed more than 350 nautical miles from the baseline. Coastal states also have the authority to harvest mineral and non-living material in the subsoil of its continental shelf, to the exclusion of others. Coastal states have been giving an exclusive authority over the living resources "attached" to the continental shelf, however, not on the creatures residing in the water column beyond the exclusive economic zone.

    Parties to the Convention

    The UNCLOS has been ratified by 168 parties, which includes 167 states (164 United Nations member states plus the UN Observer state Palestine, as well as the Cook Islands and Niue) and the European Union. An additional 14 UN member states have signed, but they have not ratified the convention.

    Subsequently, Part XI of the UNCLOS was signed in 1994, amending the original Convention. The agreement has been ratified by almost 150 countries (all of which are parties to the Convention), which includes 149 states (146 United Nation member states plus the UN Observer state Palestine, as well as the Cook Islands and Niue) and the European Union. An additional three UN member states have signed, but not ratified the agreement.             Even though the USA had helped design the convention and is considered a pioneer in making UNCLOS what it is today, they are not a part of the UNCLOS. In 1994, when the Convention has begun, it had signed the Agreement on Implementation but it did not sign the convention since the United States did not agree with Part XI of the Convention.

    The country was indecisive since President Ronald Reagan claimed a 200-mile exclusive economic zone but later had extended from three nautical miles to twelve nautical miles. The members of United Nations had gone on record to say that the President alone does not have the right to change the distance of Maritime boundaries on his own. The decisions can be only revised after the members of Congress cast a vote deciding something as huge as changing the Maritime boundaries for the country.

    Conclusion

    In conclusion, UNCLOS has been the best kind of protection that the World has been able to offer to the nations worldwide. We have definitely progressed from the open access regime of the 17thcentury to the partial closing down of UNCLOS III, and now we are able to help the world and make it a better place through arbitration or court filled cases where any country has overstepped their jurisdiction regarding high seas. Whether UNCLOS provides an adequate answer to the challenge of protecting the high seas, I believe the answer is both yes and no. It provides the necessary state obligations and it is certain that no other international convention can create the broad responsibility for the protection of the high seas as well as provide judicial help for justice. However, what is absent are the fine details which could be provided by a new implementing agreement as well as the power that the Developed states hold over the Developing and Under-developed states.

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    Tue, 17 Apr 2018 15:27:20 GMT
    <![CDATA[CISG Part II]]> AN OVERVIEW OF THE UN CONVENTION ON CONTRACTS

    FOR THE INTERNATIONAL SALE OF GOODS

    Part II (Provision)

     

    CISG in Action

    With the original signatures of representatives from 62 countries,[i]CISG Convention entered into force in 1998-where, despite its number of signatories, it was only ratified by ten nations. Its original intent was to serve as a type of global statutory code for the sale and purchasing of goods in the international context. The Convention was attempting, initially, to eradicate and replace the laws of sale that are domestic within each government with regards to general international transactions.

    The Convention amounted to include 101 Articles in the text. All major areas and issues of trade have been, supposedly, covered in order to avoid misinterpretations of the text-including the issue of having a party possibly misinterpreting the text. The formation and the performance following sales contracts have also been covered by the Convention. The text include many parts and sub-parts that, overall, are devoted to entirely different areas, including (but not limited to) the requirements for an effective acceptance of an offer, or what constitutes a fundamental breach, or the remedies that follow a breach of a contract.

    Primarily, the goal was to unify international sales law.[ii]This was to overall enhance and improve security and certainty in international transactions while facilitating the growth and spread of international trade, adjusting for the different bargaining powers that exist amongst commercial actors.

    Is the Convention successful in attaining its goals? The answer to this question is uncertain. Its asserted uniqueness has often been referred to as an indication of its current or potential success.[iii]The Commentary to the Convention is, however, too positive to measure exactly the effectiveness of its provisions. There are many signs and past cases of the Convention failing to properly govern over states in trade, as opposed to other international trade agreements, such as the World Trade Organization.       

    Evaluation

    In order to assess the effectiveness of the dispute prevention and settlement provisions of the CISG Convention, it is important to compare them to that of other international agreements between states. While the CISG Convention is sufficient enough to prevent and resolve disputes, perhaps it is not as successful as other agreements may be.

    Prevention and Settlement Mechanisms within the CISG Convention

    It is perhaps due to the generality of the existing provisions that the CISG Convention often succeeds in preventing disputes occurring between the parties. The Articles are formulated in a way to accommodate the needs of both the "seller" state and the "buyer" state entering a transaction. Before any dispute arises, states have the ability to observe the other state's behavior and act in this regard. For example, as Article 72(1) states:

    'If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided.'

    In order to prevent conflict between states, parties to a contract have the option to revoke their obligations in the event of another state's behavior indicating an upcoming breach of contract. This flexibility permits states to avoid conflict in this regard.

    Still, it is understood that disputes may still arise, especially in the case of interpreting the obligations of the parties to the Convention. For example, in the Explanatory note of the CISG Convention, Part One includes a section regarding the "interpretation of the Convention":

    '13. […] Disputes will arise as to [the Convention's] meaning and application. When this occurs, all parties, including domestic courts and arbitral tribunals, are admonished to observe its international character and to promote uniformity in its application and the observance of good faith in international trade. In particular, when a question concerning a matter governed by this Convention is not expressly settled in it, the question is to be settled in conformity with the general principles on which the Convention is based. Only in the absence of such principles should the matter be settled in conformity with the law applicable by virtue of the rules of private international law.'[iv]

    The text of this section specifically details the necessary behavior of states in the case of conflict. Considerations of the law are to be applied only if there is no consensus between the parties on the interpretation of the Convention. However, it is important to note that this also applies to courts who are employed to resolve a dispute. The Convention sets forth international uniform substantive rules to be adopted by the signatory states and, in the event of a dispute, the Court must first establish whether those rules apply to the dispute before utilizing the rules of international law.[v]

    Prevention and Settlement Mechanisms Outside of the CISG Convention

    How do the aforementioned mechanisms of dispute prevention and resolution compare to other agreements of free international trade? Of course, the most famous organization aimed at easing the process of trade is the World Trade Organization (the WTO), which is the successor to the General Agreement on Tariffs and Trade (the GATT). With a total of 162-member states, the probability of disputes arising within the WTO is great. Therefore, to avoid the interference with problems, the Organization arranged for there to exist a separate body solely aimed at resolving potential disputes. The Dispute Settle Body (the DSB)-which is provided for in the Understanding on Rule and Procedures Governing the Settlement of Disputes (the Understanding)-is set and established with the intention to administer the rules and procedures of the Understanding in different scenarios.

    While the original aim of DSB to settle conflicts, there still exists provisions that are allowed to be enabled for the purpose of preventing the disputes before they even occur. The WTO, through the DSB, regularly affirms that each party is undertaking their obligations as per the Convention and the specific transaction they have entered:

    'One of the main characteristics of the previous GATT and now of the WTO is the constant follow-up of the implementation of obligations and the monitoring of compliance with them. The underlying belief is that unless there is a monitoring of compliance with international commitments, those commitments will be worthless.'[vi]

    As per the above, it is understood that if the interactions between two or more parties are not supervised, the dispute will erupt due to lack of liability. There over, to prevent this, regular check-ups are to be implemented.

    If a dispute is brewing or has just begun, the DSB can still manage to calm it down before it grows worse. In this stage, consultation is recommended:

    '[…]. The DSU provides rules and procedures for consultations and the settlement of disputes between Members concerning their rights and obligations under WTO agreements.'[vii]

    By putting the concerned parties of a dispute in consultation, the DSB facilitates for a healthy debate to happen and the needs of both parties will be communicated and negotiated in a civil manner. This procedure of a dispute settlement catches the seed of the problem before it grows. If the dispute is already past this stage, then there are two stages left as recommended by the DSB: "(ii) adjudication by panels and, if either party appeals a panel ruling, by the Appellate Body; and (iii) adoption of panel/appellate report(s) and implementation of the ruing which also includes the possibility of countermeasures in the event of failure by the losing party to implement the ruling."[viii]

    Unlike those party to the CISG Convention, parties of the WTO are ensured by the WTO's presence in any transaction. The idea of constant supervision relieves parties who are unsure or insecure about relations with a specific country. Because the WTO has the ability to employ the DSB body to regulate the occurrence of disputes, it is even more so successful than the CISG Convention. The Convention, on the other hand, relies first and mostly on good faith being exercised by the Member States. But without the constant supervision that the WTO offers, parties are more likely to fall into disputes. With drastic cases, the Convention only allows for Courts to interfere. The next article on this topic will explore all the practical aspects and all the cases in relation to CISG Convention.


    [i] John O Honnold, Uniform Law for International Sales under the 1980 United Nationals Conventions 54 (2d ed. 1991).

    [ii] C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention

    [iii] Michael P. van Alstine, Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law, 37 VA. J. Int'l L. 1, 3, 6-9 (1996)

    [iv] CISG Convention, Section II, Part one, C.

    [v] UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the International Sale of Goods, 2012 Edition, Part One, Ch I, p. 4

    [vi] MODULE VIII: Dispute Prevention and Settlement, WTO – B.

    [vii] Ibid, C.

    [viii] Ibid, D.

     

    ]]>
    Tue, 17 Apr 2018 11:38:36 GMT
    <![CDATA[Acquisitive Limitation Period]]> Acquisitive Limitation Period

    Introduction

    "The right is not going to be lost if someone behind is demanding it" which means that one will not lose his right as long as there is a request. Hence, the legislators derived the Statute of Limitation, which says that the parties must adhere to the time limit determined by the law and if not the effect of limitation period may lead to losing rights or may lead to gaining them. Period of limitation is of two particular types such as personal rights, which are the rights and obligations of an individual, and property rights, which are the rights to the specific property. However, the impact of limitation periods differs from personal powers which can only be the subject of losing limitation as you cannot gain private power with limitation prescription.

    The property rights may also be lost (except in ownership right) by limitation period, as one should obtain it with acquisitive limitation. While limitation period assumes a negative status, it is not requesting the right by the creditor or not using it; the acquisitive restriction requires a favorable situation which is possession. The two systems share the element of time passing.

    Additionally, the Federal Law Number of 1985 on UAE Civil Code (the Civil Code) imposes a limitation on criminal matters. The law states that the party cannot file a criminal complaint upon passage of limitation period and the public prosecutor has the authority to reject the case due to the expiry of the limitation period. The following article discusses the period of limitation in two types of cases that are in civil matters and criminal matters:

    In the Civil Code:

    Under the UAE Civil Code, the period of limitation is in two different sections as follows:

    Acquisitive limitation period

    According to Article 1317 of the Civil Code, "whoever possesses a movable or an unregistered property as his own or has a real right over the property (movable or immovable). Also, the possession is continuing without ceasing for 15 years shall not be actionable in property or rem by any person who has legitimate justification."

    Short-Term Limitation Period

    On the other hand, Article 1318of the UAE Civil Code states that

  • "If there was possession of unregistered real estate property and the ownership accompanies with good intentions with a valid reason, the limitation period will be for seven years;
  • The compelling reason is a document, or an incident proving the possession of the property. Following should be considered as the valid reason:
    •            Will or inheritance transferred the ownership rights;
    •            A gift between alive people for compensation in return or without;
    •            Selling and barter."

    It is evident from the provisions mentioned above that the acquisitive limitation period for property rights is two types, a long-term limitation period and a short-term limitation period. Where the long-term limitation period is for fifteen (15) years without any interruption. On the contrary, the basis of short Acquisitive Period is on good faith and reasons, such as buying a property from a person who does not have the ownership rights and the buyer was not aware before signing the contract. However, if the owner would have any information in a defect in ownership, then it shall not be deemed as a valid reason. Good faith is sufficient to be available at the start of the possession. 

    In the situations mentioned above, it is required for the possession to be on the property which is not registered. However, if the property undergoes registration under the name of the owner, then the ownership if not applied regardless of the duration of such possession.

    The court of Cassation in Dubai Court of Cassation dated 13-3-32011 Civil cassation number 222/2010, and 226/2010 passed a decision as per Article 1317 and 1318 of the Civil Code that:

    "Whenever a property subject to possession is under registration with Land Department registry by a person different than the possessor, the fact will not allow him to hold possession rights even if the person submits all the relevant documents. Mere registering the property does not offer a right of possession regardless of the duration of such ownership whether in long term or short term."

    It is clear from the above judgment that even if the acquisitive limitation period is 15 fifteen years in federal law, there are exceptions from such regulation and such period could be extended or reduced. Similarly, the limitation of three years in cases of annulment of the contract due to lack of eligibility or defect will restrict the party to file a lawsuit after three years, even though it is for compensation for unlawful activity. The civil law has made such golden rule but provided exceptions, and there are rights which limitation are five years such as rent of buildings, agricultural land, and rent, benefits, and income, wages, and Pensions. In addition to this, the limitation for the rights of doctors, pharmacists, lawyers, engineers, experts, bankruptcy agents, brokers and professors, teachers, is for five years provided that such reasons are due to them for their work and the expenses they incurred. The limitation for traders and manufacturers are two years for goods they supplied to people, also the rights of hotel owners and restaurants for accommodation and food on behalf of their customers, as well as the rights of workers and servants. Importantly, the claim for an award shall not be heard after three months from the date of violation by the award giver. Also, the limitation for cases of guarantee the defect is six months from the time of receiving the product unless the same is guaranteed for more duration however the seller cannot use this limitation if the party proves in the court that the defaulter hid the defects on purpose.

    Whereas, under Federal Law, Number 8 of 1980 on UAE Labour Law (Labour Law) states that the court will not entertain a matter post a year from the date of labor rights becomes due. It is evident from the Court of Cassation ruled in its judgment which highlights as follows:

    "According to the Article 6 of Labour Law, the party has to file the case within one year from the date the labor rights becomes due, and any process that is taken by labor ministry will not consider while calculating the limitation period."

    The rule for calculating the acquisitive limitation period is to figure per day, not an hour, and the first day shall be included in the calculation and shall be deemed complete on the last day. However, one can stop calculating, when the case is in the court and even if the court does not have jurisdiction. Also, one can prevent the calculation if the debtor acknowledges the right of the creditor.

    The Abu Dhabi Court of Cassation in Case 701 of 2014 decided on 30 October 2014 reversing the Court of Appeal Decision in a matter involving forgery held:

    "Under Article (487) of Law on Civil Transactions (1- A submission of limitation may not be waived before having established right to the same. Parties (to a claim) may not agree to a limitation period that is different from the statutory period – 2- A person with the capacity to dispose of their right may waive, even implicitly, a submission after having established right to the same. However, such a waiver is not effective against creditors where the same was with the intent to inflict harm on them). Article 488 of said law provides that (1- A judge may not rule, out of his own accord, that a claim may not be heard. Only a creditor or a party with interest may invoke the same. 2 – The submission may be made at any stage of the claim, unless the circumstances establish that the party with a right to submit has waived the same, explicitly or implicitly). The two articles mean that a creditor may waive the right to invoke the expiry of the limitation period after having established their right to the same. The article refers to waiving the right to invoke the expiry of the limitation period. Such waiver can be explicit or implicit. However, once waived, it becomes conclusive and may not be revoked. A submission that the claim may not be heard relies on non-satisfaction of the requirements to hear the same. The objective of such submission indicates that it has to do with merits. Accordingly, it may not be invoked for the first time before the Court of Cassation. As the Cassation Appellant did not invoke this submission before the trial court, with its two tiers, he is deemed to have waived it."

    In Criminal Law:

    Acquisitive limitation period in the Federal Law Number 3 of 1987 on UAE penal code (the Penal Code) is either subject to the criminal case or the punishment.

    Status of limitation for Criminal case:

    As per Article 20 of the UAE penal code, the party cannot file a criminal case under the following circumstances:

    • In the event of death;
    • Upon obtaining a final judgment;
    • If the court rejects the case;
    • If the court grants a relieve;
    • If the court cancel the punishment;

    Also, the limitation for criminal cases is twenty years for matters subject to a death sentence or a life sentence. As for other criminal cases, the restriction is for ten years,and misdemeanor is three years, and one year for violations. That is all from the date of committing the crime.  

    Status of limitation for Punishment:

    According to Article 315 of the Criminal Procedure Law or the Penal Code states that "Except for the crimes of Hudood, Qasa, Diyyat, and crimes in which court awards death or life imprisonment, the penalty in other acts will expire after thirty years."

    Whereas in cases of a misdemeanor the penalty will expire after seven years and after two years for violations. Unless the court passes judgment in the absence of the defaulter as then, the duration will start from the date of the decision. However, upon the detention of the criminal, the term will pause or if the criminal commits a crime of the same category and he receives a judgment.

    Below we discuss a judgment passed by the Abu Dhabi Court of Cassation (521 of 2014) (Civil), and decided on 25 September 2014.

    The matter relates to an accident which took place on 22 December 2009 and the Appellant (the injured) filed a criminal claim on the same day. A judgment on above criminal matter was decided on 30 December 2009 and Appellant did not register any appeal. Legally, the criminal decision would become final and effective on 14 January 2010, and the Appellant would have three (3) years time from the above date to file a civil claim.

    The Appellant, however, filed the civil action on 21 January 2013 and upon filling the same was presented before a committee and finally registered as a claim on 27 January 2013 against the insurance company (the Respondent). The Respondent argued that the claim was barred by the statute of limitation in line with Article 298 of the UAE Civil Code.

    Upon hearing both sides, the Court of First Instance in this matter rejected the Defendant's claim on the premise that Article 298 is acceptable if and only if there is no criminal claim (Note: for criminal claims, the limitation extends to fifteen (15) years).

    The Court of Cassation held that First Instance Court had misapplied the law. It held that the criminal claim in the present matter was decided upon and closed. Had it continued, the claim would be valid for fifteen years. The court also held that the First Instance Court had wrongly applied the limitation to commence or run from the date of medical report (16 June 2013). The Court decided that limitation will apply from the date of the accident or the date criminal claim was finally decided.

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Anti-Money Laundering V.1]]> A Combat Against Dirty Money

    Shorter distances, instant transfers, rapid connections are a movement towards the emerging globalization. As it is getting easier and faster to gain anything on a click of a mouse and enabling individuals and corporations to reach around the world farther, faster, deeper, and cheaper than ever before, it has also resulted in new risks. It has turned the international financial system into a money launder's dream. This inadvertent consequence of globalization offers a serious challenge to law enforcement agencies and financial regulators.Money-laundering is the process by which criminals cover the illegal origins of their means and safeguard their assets, to maintain a safe distance from suspicious law enforcement agencies and avert leaving a trail of incriminating evidence.The Wolf of Wall Street is a perfect movie that shows the glamour and the dark side of money laundering where the fun doesn't last for long!

    Money Laundering in UAE

    Money laundering is one of the most creative crimes of the 20th Century. To understand the concept of Anti- Money Laundering, one must first understand what Money Laundering is. Numerous businessmen around the world are known to make money through illegal means which could be frowned upon by the society as well as by the laws governing a state. Massive amounts of funds are generated from illicit activities such as drug trafficking, tax evasion, smuggling, theft, arms trafficking and corrupt practices. These dealings of funds are mostly in the form of cash. The criminals who generate these funds need to bring them into the legitimate financial system without raising doubt.

    The conversion of currency into other forms makes it more usable. It also puts a distance between the criminal activities and the funds. 'Money laundering' is the term given to the process by which illegally obtained funds are given the appearance of having been legitimately obtained. Money can be laundered in many ways if one has the crookedness and the willingness to take the risk. One may reduce the amount to small flows of cash and add it slowly into the business stating profits since if there is a lump sum amount of money flowing into the legitimate business at the same time, it could raise suspicion. Another cunning trick a launderer could play is by depositing illegally gained money into an off-shore bank that has a strict secrecy and would not disclose the details of the accounts to any government due to their rules and regulations. Over time, the involvement of trusts has also played a huge factor in money laundering as trust does not necessarily have to disclose the details of the trustees or their income. Hence, it is basically a system which helps the launderer disguise his money as a legal form of income by not disclosing the illegal source through which the money was actually obtained.

    To eliminate the illegal means of converting illegitimate funds into legal obtained, Anti Money Laundering was introduced. Anti-Money laundering is a set of rules and regulations that govern how Credit institutions that accept credit and payment are able to detect if the cash that has been deposited to said institutions are made through illegal procedures or not. There has been an argument stating that the Anti Money Laundering laws only cover a limited number of transactions and is not vastly expanded to all types of criminal activity, but it is to be noted that these laws help set up the basics for the institutions that accept credit from customers and it is up to the institutions and not up to the government or the launderers to be in touch with these rules and regulations and make sure that they follow it. The anti-money laundering laws are used to mainly target all sorts of suspicious activities which include tax evasion, funds of the public that could possibly be corrupted and primarily the trading of goods which are illegal in the country where the laws are set up.

    Implications of the Law

    The Federal Law Number 4 of 2002 concerning Anti-Money Laundering (the Anti-Money Laundering Law)discusses the importance of Money Laundering and the incriminating rules and regulations that are put forward to combat this illegal movement. The Federal law also states that the launderers who commit this crime shall be criminally liable for this offense. The Law that has come into place in the United Arab Emirates allows the Central Bank to possess the power of freezing the assets of any suspected accounts that are believed to be laundering money for a period of not more than a week. The Public Prosecution also has the power to order the seizure of such suspected property or proceeds.

    The Federal Law has given the Central Bank the authority in the United Arab Emirates. Under the Federal Law, the Bank has the authority to set the limitation for the amount that can be deposited into the account without any need of showing proof or declaration. If the limit is exceeded then the account holders have the obligation to show a certificate of declaration via the declaration system stating how the money had come into account. The Central bank has also set up a special Unit that aids with detecting any suspicious activity that takes place which could relate in any way to money laundering. Once the Unit detects any sort of suspicious activity, it is their duty to notify the Attorney General about said suspicion and the Attorney General should take the necessary action.

    The Committee

    The Anti-Money Laundering Law makes a provision for an Anti-Money Laundering Committee which is commonly known as national Anti- Money Laundering Committee' which is governed by the Governor and has representatives from all the Ministries established in the UAE. Their main scope is to compose anti- Money Laundering rules and regulations for UAE They are also given the responsibility to aid the exchange of information between the credit institutions, as well as represent UAE in cases related to International Money Laundering.

    The Anti Money Laundering Law also states the punishment that is faced by the offenders for the crime related to Money Laundering and since the United Arab Emirates take the crime very seriously, the punishment for such an offense is usually very vigorous. The punishment itself includes a jail term of up to seven (7) years or a fine of AED 300,000 (UAE Dirhams three hundred thousand) or both. This is one way of countering Money laundering by creating very serious punishments for such offenses. Even if a person has knowledge of money being laundered but fails to report it to the authorities, he could be in cold waters facing a term of imprisonment as well as/ or a fine ranging around AED 10, 000 (UAE Dirham ten thousand).

    Whistle Blowers

    Whistle Blowing is a process where a person who is working in an organization finds out that the organization is dealing with an activity that is deemed illegal and comes out to talk about it to the higher authorities within the organization or to the outside world by publicly speaking about it. People who come forward to discuss are hence called Whistle Blowers and they are said to be scrutinized for leaking the confidentiality of the organization. Since this happens, the whistleblowers are protected by certain laws and in some instances, a third party could also offer protection to the whistleblowers.

    In the United Arab Emirates, there has been no law regarding the Whistleblowers for a very long time until recently one was implemented in 2016. Generally, all over the world, whistleblowers would be protected by the law and they would have certain advantages to not lose their job due to the exposure of the unlawful activity. However, it is not the same in the United Arab Emirates, in this country, the whistleblower is said to be at risk and they are liable to have breached the Law even if they have informed the police or the authorities of the illegal activities.  This is due to the fact that the whistleblowers have breached the employment contract as when they had entered into an employment contract, they would have signed a confidentiality agreement stating that they would maintain the confidentiality of the company and cannot spill out company secrets which will lead to a breach of the privacy of the organization. In the UAE, for being a whistleblower, the punishment could range up to imprisonment for one (1) year or a fine of up to AED 10, 000 (UAE Dirham ten thousand).

    These rules have taken a change in the New Financial Crime Laws stating that protection can be given to the whistleblower depending on the crime that has been reported. This law, even though in place has not yet been well implemented so it is still a working progress and whistleblowers in U.A.E need to be cautious on how and who they share the trade secrets or the illegality of the organization with.

    Global Insight

    In India, laws that came into form at the beginning of the 21st century, the main objective was to reduce or eradicate money laundering and if an offender has been caught with money laundering, the government was instilled with the power of confiscating any property that the money launderer would have purchased from the profits that were derived by illegal means. Many people who have power and influence in India are able to get away with laundering money but sometimes they get caught due to the intensity of the amount as well as the power that the person has internationally. The best example for such a scenario is the case of Vijay Mallya, a billionaire at one point who has absconded and charged with offenses regarding Money Laundering. All the property that was in his name had been seized and were sold at auctions to the highest bidder. In summary, even though there could be many cases of people evading the government in India when they are caught for the offense, they are punished to the highest extent and the money is dissolved.

    In the United States of America, money laundering is settled by two ways. One is the preventive method, which means that the financial institutions have a certain amount to which the client is able to deposit the money into the institutions and if the amount exceeds that given a certain amount, the client will have to declare the method through which they have obtained the funds and the means through which they received it. This is to prevent any sort of money laundering at the early stages.

    The other way is the criminal route, where the offender has been caught with laundering money illegally and in this case, it would lead to criminal investigation and if guilty, offender is imprisoned. In the USA, there are strict punishments to combat money launderers.

    Heads Up!

    Money Laundering co-relates with Customer Due Diligence since it deals with the problem at its early stages. Most of these foreign banks knowingly as well as unknowingly are involved with the crime of money laundering because they wish to keep their client's information intact. It ends up attracting large customers and them in return deposit a considerable amount in these foreign banks since there are no questions asked, and no questions answered. Hence, there is a problem with the regulations in these types of institutions and even though the rules in Banks in the United Arab Emirates are strict. The businesses that take place here may also deposit the illegal money that has been made into offshore banks where the rules are more lenient, and the launderers do not face any problems.

    Conclusion

    The global threat of money laundering poses exceptional challenges to the law enforcement authorities.To contest the evidentiary path of a money launderer, law enforcement agencies must identify and use tools and techniques that can aid them when crossing international boundaries. The system of Anti Money Laundering in the United Arab Emirates is a very new concept and has a lot of room for enhancement but for a law that had come into place for just about ten years or so, the country is doing a solid job with reducing the offense of money laundering in the country. Due to the increased level of punishments and methods of cutting the offense at the early stages, the UAE is countering Money laundering in the best way possible.Legal authorities with financial institutions and regulators working together can combat this increasing problem of money laundering. 

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[CRISPR Gene Editing Technology]]> CRISPR Gene Editing Technology

    The Human Advancement

    Human often marvels at the things they create. From large structure to technologically mind-blowing machines, many impressive achievements warrant awe and amazement. A close look at these things will reveal their workings and both their strengths and their flaws. However, surrounded by all of this, one may forget from time to time to look, not only atones surroundings but also at one's self. Humans are vastly complex beings; perhaps more complicated than anything we will ever create. And yet for our entire history, we have concentrated on advancing the world around us while never genuinely having advanced ourselves.

    One of the latest things we will hear about in the news and from the top scientific professionals is the matter of gene editing technology, most notably CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats). To be more specific to human use, CRISPR-Cas9, as before it was ever considered to use on humans, it was used to alter the genetics of other organisms. This scientific technique, which came into existence in around 2012, allows for the editing of the very genetic structure of an individual. The implications are massive, though the topic is quite decisive. Gene editing is something even scientist are still learning about, and the idea and practice are very much in its infancy.

    One of the most significant areas of the whole practice is the idea and viability of using the CRISPR to edit the genes of embryos. Modifying the genes of embryos will allow for potential genetic mutations and genetic diseases to be removed from the child's genome before birth and could save a child from having to live with a potentially harmful or detrimental trait. The achievement can be by removing the specific set of coding in the embryos DNA that would be mutated and would cause the negative character, and to then use the CRISPR technology to implant the new genetic structure. It may sound all positive, though there are many implications and ethical dilemmas to consider.

    The UK at the Forefront

    The UK is making quite some progress in the matter of gene editing. They can see the potential benefits of the process when done correctly and are looking to move their knowledge of the topic forward. Around the start of 2016, UK scientists were given the go-ahead to begin testing and using CRISPR on human embryos for research purposes. It was approved of by the UK Human Fertilisation and Embryo Authority (HFEA) and was the first time something like this received approval outside China.

    One thing to note is that this is not the first type of human genetic editing that has occurred. There have previously been gene therapies available, but not in the same way that CRISPR looks to move things forward. Prior, there was the possibility to have the genetics of somatic cells within an adult human edited for medical purposes. This form of editing was managed in the UK by the Human Tissue Authority (HTA), which received acknowledgment under the Human Tissue act of 2004. Now, this is a little divergent from the CRISPER concept, though it does show how the UK has been highly progressive in the matter of human genetic engineering. Having been established in 2004, this occurred around 11 years before the first human trials of CRISPER, and may very well have paved the way for the UK's future as a world leader in the area of early gene editing technology.

    The hope is that the technology will, in time, be used for the curing of diseases and disabilities in embryos before they are born. The technology works by editing the DNA structure of the cells of an organism, by cutting away unwanted segments and adding in preferred portions. The research for the moment is concerned with fighting diseases that we have, up to this point, had no answer, and is mainly interested in the most negatively impacting diseases that there are. Since the science is not yet fully understood, it would more often than not, be seen as too high a risk to take for less problematic issues, though for the time, the research is being performed on spare IVF embryos usually only a few cells in size.

    It is because gene editing is still looked upon skeptically by quite a few due to what it could lead to as it advances. There are ethical issues concerning the topic. The biggest of these seems to be the fear some have that there may come a time when designer babies become a thing. It will allow for certain individuals to pay to have their children's genetics altered to have favorable traits, including the appearance of the individual, and though we have an insufficient understanding of it at the moment, we may be able even genetically to modify individuals for higher intelligence and certain personality traits. It is very much a distant prospect, as we are still in the early stages of using the technology for simple and vital issues, though with the research into the issue growing, we will inevitably start to look into controversial areas such as these when they become a more comfortable thing to achieve. 

    The Chinese have been attempting to use gene editing technology since around 2015, as far as we know, and have used the technique on approximately 86 or more people. Matters such as these in China are not as well known about regarding the details and results of tests. Further to this, the regulations regarding the issue are also different from much of the rest of the world, and so the Chinese may be more open to and freer regarding the matter and the research they perform. With this considered, it was in this year that a group of scientists did what no other individual or organization had done before. The concept had been extensively tested and was watertight. The biggest issue in testing for humans is that we are generally more complicated than the test analogs that we use. However, the Chinese researchers went ahead and performed the test as per their precise calculations on the previously mentioned 86 non-viable zygotes. In the end, the test was in many ways a failure though. Only 26 of the zygotes had their genomes successfully cleaved, and from a scientific standpoint, that is not a success rate. However, and more importantly, the research was underway

    Outside of China though, the UK is at the forefront. The first law regarding the issue of genetic manipulation was the Genetic Manipulation Regulations of 1989. However, this law does not extend to humans. Preferably it is more concerned with the genetic manipulation of animals for the research purposes, which is something that has been allowed by the law for quite some time now, though it was not at that time see that it would be an issue for a human. The next big step in the UK was the limited go-ahead to certain scientific organizations to begin using and researching the practice in 2016

    Regarding the human side of things, all matters to do with embryology are under the governance of the Human Fertilisation and Embryology Authority (HFEA). The HFEA has been given its powers through the Human Fertilisation and Embryos Act of 2008, though this was before the rise of CRISPR. As Crisper has come around, the HFEA has come up with their guidelines for researchers to abide. While the HFEA is most prominently known to cover the issues of fertility treatment etc. they now also deal with related matters including CRISPR.

    Now while some scientists have been given the go-ahead by the HFEA to perform research using gene editing technologies, this by no stretch means that it is legal on a larger scale. The individuals allowed to conduct this research are insufficient in number, and since the HFEA is the only body in the UK that is permitted to provide the license required to do this research. Individuals should submit an application to them on the matter, and their issuing of the permit would be insufficient and strict, though not impossible. As recently as early as 2018, grants are issued in small numbers of new individuals and organizations.

    The reason for the severe limitations to the number of groups that can use CRISPR to do research is because the issue is one that can be seen to be quite sensitive. There are many ethical dilemmas one must consider and not all will agree on the matters raised.

    It is apparent that the HFEA has a policy that no gene editing research may take place without first obtaining research ethics approval, even by the approved bodies. What this means is that to perform analysis in genetic engineering for humans, one would first have to be approved of by the HFEA to be eligible to do this type of research, and then for every potential project of research they would look to perform, they would have to receive a further approval.

    It ensures two things. Firstly, the research that scientists are doing is known to the regulatory bodies, and they are aware and up to date on what the licensed parties wish to do. Parties will get information about the research, and then the authorized bodies must wait until these proposals are accepted. Secondly, it allows people other than scientists to look into the issues that are for research and the methods that are being used to perform the investigation, and it provides for them to discuss them from an ethical standpoint. Once in-depth consideration is on the matter from multiple parties, it can then commence. As seen here, this is a highly regulated area, as it rightly should be, and it ensures we do not move forward into areas that can be dangerous.

    Where is the Rest of the World?

    While the UK is one of the countries at the forefront of gene editing research; other countries are also becoming more open to the prospect. While there are no laws that govern this field, too, there are generally no countries which allow for genetic engineering. It is often a banned practice except, as previously mentioned, for certain entities that have received the necessary approvals.

    Considering the US, they were first given a yellow light (much like the UK, only the approved and licensed bodies may research into the field) to perform research in the area of human genetic engineering towards the beginning of 2017. They showed their first CRISPR genetic engineering to embryos towards the latter stages of 2017. With the case of the US, this allowance was only for research at first, with no editing to perform viable embryos that would go on to later be born, and substantial research would be required before this technology would become available to a further degree.

    The issue was a scorching one during the year of 2016, with many on both sides of the table. Some were calling for a complete ban on the editing of human genetics in embryos, as they saw it leading to unethical practices and other who saw it as unnatural. In general within the country though, the method is still illegal, as none may perform practical research on the matter, and the only bodies that are allowed to, are highly official and highly regulated bodies. It would be near impossible for smaller organizations to obtain the license.

    The US's governing body for the matters concerning the issue is the FDA (Food and Drug Administration). The FDA is in charge of promoting and protecting public health, and they enforce laws covered under this area. The department was empowered by the United States Congress to enforce the Federal Food, Drug, and Cosmetic Act, and that is their general purpose. Much like the HFEA, they have also allowed and approved of certain organizations performing research on embryos under 14 days old.

    A case in the US that shows the earlier stages of the legal developments about genetics was the Association for Molecular Pathology v. Myriad Genetics. It was quite a lengthy case, beginning in 2010. Myriad Genetics Inc. was looking to patent genetic sequences. There was a considerable amount of back & forth in this case. Initially, two of Myriad's patents had been denied, though, upon appeal, the court reversed the decision. The legal battle between these parties continued, with arrangements being changed multiple times across a plethora of suits.  In the end, the case finally came to a close in 2013 with the conclusion that a genetic structure cannot receive a patent, as it is naturally occurring thing which does not meet the requirements for something to obtain a license. However, and this is where things become interesting, that manipulated genes, such as those created within a lab, were indeed eligible to be patented as they were not considered wholly natural and instead of a construct of human creativity. This entire issue occurred before CRISPR, though with the advancements that have occurred, the ruling is now more relevant than ever.

    Looking to the Horizon

    Regarding this issue, there may be those whose minds evoke images from horror movies, of genetic engineering going wrong. The scientist is performing illegal experiments and creating monsters that will be impossible to stop. However, in the real world, there are far too many guidelines, and far too many barriers to allow for any overly dramatic to occur. There is a reason the practice is still technically illegal, and only the bodies of the FDA and HFEA have, in their respective countries, empowered may progress. There is a reason that an ethics committee must approve of any of the planned activities. Also, this is to ensure a safe progression into the future, and a sequence which all can agree is acceptable and safe.

    Looking beyond this and to the future though, the practice is one which has the potential to save the lives and improve quality of life for so many. As our understanding towards this topic increases, the legislators will pass more guidelines and laws to safeguard everyone's interest. There will be a more significant number of organizations and groups permitted to perform research in the fields. Also, as our knowledge expands, the areas we will be allowed to research will also grow. We are stepping forward on all the fronts, and the future awaits and looks brighter than ever

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Joinder and Consolidation in UAE Arbitration]]> Joinder and Consolidation in UAE Arbitration

     

    Introduction

    The United Arab Emirates with USD 37,600 per capita GDP is considered one of the most suitable countries for investment. The UAE has an open economy, high per capita income, stable political environment and pro-investment legislations promoting confidence among the business community. To ensure the constituting confidence of investors, UAE has recently passed new standalone arbitration law (the Federal Arbitration Law Number 6 of 2018) which is on the lines of UNCITRAL Model Law on International Commercial Arbitration 1985.

    Arbitration is one of the most preferred mechanisms of dispute resolution among the business community because of its transnational nature and the ability to resolve complex disputes while staying away from country-specific politics. The international commercial arbitration helps to resolve disputes, with individual parties from different countries remaining free from local jurisdiction (compared to national courts). Arbitration is meant to serve the business community, and therefore it is required to develop and adopt the best ways to accommodate the growing demand of the business community.

    The contractual arrangements in the current commercial world are becoming complex due to multiple subsequent contracts between the same parties or unrelated parties or independent contracts between unconnected parties for the same projects. In such circumstances, it is crucial that when a dispute arises in such complex contracts, there is an arrangement to resolve it effectively even if there are more than two parties involved in that transaction.

    This article is divided into four (4) Parts. Part I provides a brief introduction about joinder and consolidation of arbitration proceedings for the resolution of disputes arising from complex commercial arrangements. Part II of this article will focus on UAE, DIFC and ADGM arbitration laws. Part III of the article will examine the arbitration rules of prominent UAE arbitration institutes to see to what extent these institutes permit joinder and consolidation in commercial arbitration in UAE. Finally, the Part IVwill provides specific guidelines for parties to avoid landing in undesirable situations.

    Part I: Understanding the Joinder and Consolidation

    As stated above, the commercial arrangements around the world are getting complicated day by day and therefore requiring more sophisticated legal mechanisms to resolve such complicated commercial arrangements. Many commercial arrangements, whether in UAE of around the world, need lengthy and complicated contracts where multiple national and international parties are involved in the completion of a single project. Especially, construction contracts are highly complicated due to the involvement of various parties like landowner, contractor …….. etc

  • Landowner
  • Contractor
  • Sub-contractor
  • Consultants (Designers, Architects
  • Financier/Funder
  • Civil Engineers
  • Suppliers
  • Client etc.
  • Moreover, all these parties might have one or more contract between each other containing its arbitration clause. Big construction contracts are just on example of many complicated commercial arrangements.

    Under such complicated commercial contract arrangements, an arbitral award passed under one contract might affect the right or interest of other parties engaged in the same project through a separate contract. This might also lead to the passing of conflicting and confusing arbitral awards increasing the cost and time of the entire dispute resolution mechanism. And this is where the joinder and consolidation of arbitration proceedings become useful.

    When a dispute arises under one interrelated contract, the parties might want some other party also to be joined in the arbitration proceeding which is working on the same project in a different capacity under a separate, but interrelated agreement.

    Joinder: The term joinder in arbitration means adding the non-signatory (third party) to an arbitration agreement.

    Consolidation: In consolidation, two or more arbitrations are combined or consolidated into a single arbitration proceeding.

    Part II: UAE Legislative Framework

    UAE Federal Law

    Article 22 of the new UAE Federal Arbitration Law Number 6 of 2018 covers the joinder of new parties into arbitration. It states that the arbitral tribunal has the discretion to authorize the joinder of a third party in arbitration if the original party of the arbitration or the joining party makes such request. The joining party has to be a party to the arbitration agreement. However, the UAE's new federal arbitration law is silent on consolidation of arbitration proceedings.

    DIFC Arbitration Law

    The DIFC Arbitration Law Number 1 of 2008 doesn't have any specific provision for consolidation and joinder of parties in arbitration. A limited reference has been provided in Article 17(3)(c) which states that if there are more than two parties to a dispute, then the DIFC Court of First Instance shall provide for the arbitration tribunal unless otherwise agreed by the parties.

    ADGM Arbitration Rules

    Rule 36 of the ADGM Arbitration Rules provides that the arbitration institute or the court (as the case may be) can permit the joinder if requested by a party if it considers that it is in the interest of justice.

    It further provides that, only a party to the same arbitration agreement or has consented to the joinder in writing can be joined. This stipulates that the joinder shall not be permitted without giving all the parties (including the party to be joined) an opportunity to be heard. The Rule 36 further states that a party cannot be joined after the confirmation or appointment of an arbitrator unless all parties (including the joined party) otherwise agree.

    Part III: Dissecting UAE's Institutional Arbitration Rules

    DIAC Arbitration Rules

    The DIAC arbitration rules do not refer to joinder or consolidation of arbitration proceedings. However, Rule 11.1 of the DIAC Arbitration Rules deals with the situation where there are multiple parties. It states that where there are numerous parties and the dispute is referred to a three-member tribunal the Claimants and Respondents shall together one arbitrator each for the constitution of the tribunal. The DIAC Arbitration Rules does not make any further reference to multi-party arbitration.

    Abu Dhabi Conciliation and Arbitration Centre

    The ADCAC does not have any specific provision for joinder or consolidation of arbitration proceedings.

    Sharjah International Commercial Arbitration Centre (SICAC)

    Article 7 of the Sharjah International Commercial Arbitration Centre provides for the joinder and intervention in arbitration proceedings.

    Consent: for joinder, all parties (including the joined party) has to agree for the joinder.

    The joined party as to be a party to the same arbitration agreement or another consistent arbitration agreement. The joinder request has to arise from the same legal relationship from which the dispute arises.The date of commencement of the arbitration proceeding for the joined party shall be the date on which the center receives a request for the joinder of the party.

    The request for the joinder has to be made before the constitution of the arbitration tribunal unless;

  • There is an acceptable excuse or
  • All the parties (including the joined party) agrees.
  • Article 9 of the SICAC Rules provides that, all the claims arising under the same contract can be settled in the same arbitration even if those claims are arising under different arbitration agreements.

    Article 10 of the SICAC Rules explicatively deals with the consolidation of arbitrations. It provides that the Executive Committee can consolidate two or more arbitration into single arbitration under the following circumstances:

  •  If all the parties consent to consolidation;
  • All claims are arising from the same arbitration agreement; or
  • If the allegations are arising from different arbitration agreements, however, all the arbitrations arise from the same legal relationship, and the Executive Committee finds that all the arbitration agreements are either compatible or can be reconciled.
  • Article 10 further states that, if the Executive Committee decides to consolidate the arbitrations then they should be consolidated in the first registered arbitration (will this affect rights of parties like date of commencement of arbitration etc.?) unless otherwise agreed by the parties.

    DIFC-LCIA Arbitration Centre:

    Article 1.5 and Article 2.5 of the DIFC-LCIA Arbitration Rules 2016 provide that there can be more than one claimant and respondent respectively. Furthermore, Article 22.1 (ix) provides that the arbitration tribunal (with the approval of LCIA Court) can consolidate one or more arbitration into single arbitration if all the parties to arbitration provide their consent in writing.

    As per the Article 22.1 (x) of the Rules, the arbitration tribunal (with the approval of LCIA Court) can order the consolidation of arbitrations into single arbitration if;

  • Arbitrations have commenced under the same arbitration agreement or
  • Commenced under any compatible arbitration agreement between the same disputing parties.
  • However, the following condition needs to be satisfied before any consolidation can be ordered under Article 22.1 (x) of the Rules;

  • No arbitration tribunal has been formed for such arbitrations or
  • If the tribunal is already formed, then such tribunal is composed of same arbitrators.
  • The International Islamic Centre for Reconciliation and Arbitration

    No provision for joinder or consolidation of arbitration proceedings.

    Part IV: Conclusion and Takeaways

    Arbitration is a creature of contract and therefore, to what extent the joinder and consolidation of arbitration are possible, will entirely depend on the language of the arbitration agreement entered between the parties, arbitration rules applicable and the law of that specific jurisdiction. However, below are some guidelines that can come handy for avoiding uncomfortable situations.

  • If parties wish to allow for joinder or consolidation, they should provide this in their arbitration agreement and also choose the arbitration institute and rules accordingly. However, it is difficult to contemplate the requirement of joinder and consolidation at the beginning of the commercial arrangement, and sometimes it might be undesirable to permit joinder and consolidation.
  • If parties wish for unhindered joinder and consolidation, then they should make sure that the arbitration clause in all contract is same or at let compatible.
  • Parties should aim to have an umbrella arbitration agreement for related contracts to avoid any confusion or inconsistency.
  • If the party wish to avoid being joined or have its arbitration consolidated to an arbitration proceeding, it should expressly withhold its consent to such joinder or consolidation attempts. Withholding the consent can help the party to avoid joinder or consolidation or to resist the enforcement of an arbitral award if its lack of consent is ignored.
  •  

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[LegalL Issues within the Ambit of Sports Law]]> LEGAL ISSUES WITHIN THE AMBIT OF SPORTS LAW

    With the increasing involvement of the number of people in the sports industry, the number of legal embroilment issues is also on an all-time high. The body of laws governing sports is stretched far and wide covering within its different ambit issues. The author attempts to elaborate on a few of such problems concerning sportspersons as well as people from a non-sports background.

    Commercialization of Sports

    Not many people rolled their eyes when Forbes announced that the sports industry of North America would be worth USD73.5 Billion by the time this decade ends. Most sports professionals are now able to lead successful lives of their earnings generated through their performance contracts, awards,and sponsorships. Technology, globalization,and media have changed the way the world views sports in every way possible. Playersare referred toas regular commodities bought and sold in the business of sports commerce. This decade marks a rare phase where it is not unusual to witness industrialists investing in sports teams rather than securities as it has been proven to have comparatively higher yields.

    Governmental and non-governmental sports federations realize the potential of the sports industry and have been making rigorous efforts to tap into these resources. The sports ministers of various countries have raised the sports facilities and funds available to amateur athletes during the past few years to promote their talent.

    There are opposing views about the growing impact of commercialization on sports. Some people profess that even though marketing isn't in evil itself, specific industries like sports should remain 'pure' and should only focus on the competitive spirit and beauty of the game. While, other adherents are of the belief that with the prevalent capitalistic economy, a commercialized sports industry is an undeniable phenomenon.

    Anna Kournikova is one of the most prominent faces of tennis. She has had a glorious career as a player however she failed to win a grand slam. Her earnings during and post her professional career owes more to her endorsements than her achievements. It's tragically uncanny that even now she earns more through her sponsorships than Justin Henin; ranked number one across the world has earned by winning tennis titles.

    Influence of Media

    Media has played a crucial role in the transformation of sports. The number of different sports existing in today's time is enormous,but the 'major' ones are just a few, reason – media coverage!

    As much as watching sports leads to its popularity, the way media presents it also shapes the mentality of the masses towards it. Media coverage not only helps in providing easy access to sports matches in every corner of the world, but it also has an added advantage for sponsors to advertise their products. Media thus has a direct relation to commercialization. Media companies venture to maximize the returns on their massive amounts of investments. Events like English rugby league can evidence it, originally a sport meant to be in the winters is now presented to the world as an all year sport.

    It is an undoubted fact that commercialization paths the way of popularity for any sport. It has helped not only in shaping sports as a lucrative profession but has also helped players to have supreme control over the negotiation of their rights. However, tweaking the essence and consequently, the format of a game to earn profits would not only taint the spirit on which sports havebeen basedfor centuries but also lead to its ultimate ruin.

    Involvement of Minors

    The term minor refers to an infant or person who is under the age of legal competence.The rising glory of the sports profession has influenced sports clubs to recruit young talent. These clubs sign minors that show potential as an investment. The success story of McLaren and Mercedes-Benz nurturing Lewis Hamilton right from the young age of 13 is idealistic however in reality entering into a contractual agreement with a minor requires elaborate management and can have its potential setbacks.

    Transfer of Minors

    Sports clubs not only court potential young stars but also transfer them from one country to another treating them at par with professionals in the hope that their investment would yield results. This authority of clubs has been under dispute for as long as it is a reason for causing harm to a child's education and well-being.

    "People must realize that we are talking about kids playing football. We are not talking about business or professional football…there is more to life than football, that a child's life and happiness is worth more than a handful of money."

    The above statement was of former President of FIFA Proregarding Article 19 of FIFA regulations concerning the transfer of players. According to this Article, international transfer of players would receive approval, if the player is above eighteen years of age. In other words, a transfer from one country to another cannot happen in minor football athletes. However, this restriction is subject to the following exceptions:

    ·         The parents of the player move to the state where the juvenilewas supposed to get transferred for independent reasons.

    ·         The transfer of the minor (in this case, aged between 16 and 18) is within the territory of the European Union.

    ·         The minor has its domicile within 50km from the national border of the country where the transfer is supposed to take place.

    This restriction helps tremendously in safeguarding minors from potential exploitation. However, even todate, other significant sports lack regulations in this regard. 

    Gender Discrimination

    Sports have been in constant discussion for ample reasons,but gender discrimination is rarely one of them. The essence of games not only exemplifies a competitive spirit but has been hugely associated with patriotism and yet women are underrepresented. In 1896, Baron Pierre de Coubertin, the man responsible for reshaping Olympics made a shocking statement stating "No matter how toughened a sportswoman may be, her organism is not cut out to sustain certain shocks." Even though the opinion of people has significantly changed regarding gender discrimination, it still overshadows the talent of women.

    From politicians to activists, everyone has time and again professed that men and women are on the same footing. However, this seems to be false when it comes to sports. Cricket is one of the major sports recognized across the world with an enormous fan following. The International Cricket Council (ICC) is the supreme body accountable for its international governance. However, the ICC decided to take the official responsibility of women's cricket only a few years ago. On similar lines, women's football has not been aired even half as much as the matches of their male counterparts.

    The issue of lacking gender equality has its roots even at the level of amateur sports. As per the Women's Sports Foundation, male competitors get USD179 million more in athletic scholarships as compared to women athletes. It can be evidenced by statistics that suggest that most university foundations spend just a quarter of their total sports budget on female athletes representing them.

    The landmark case Communities for Equity v. Michigan High School Athletic Ass'n[1] revolved around female student-athletes filing a class action suit against their high school. They argued that the defendant school provided girls with lower participation opportunities' than boys and only considered them for off-season tournaments. They presented evidence that this behavior of the school was in clear violation of the Equal Protection Clause of the Fourteenth Amendment to the Michigan Civil Rights Act.[2] The Court held that it was the primary responsibility of every educational institution to provide similar facilities to each student and as Michigan high school failed in fulfilling its obligation, it was liable to pay damages.

    Salary Gaps

    It's common knowledge that Cristiano Ronaldo is the highest paid athlete of this decade. His earnings accruing from his professional contract and lucrative sponsorships are reported to be over $88 million annually. On the contrary, Alex Morgan, the most generously compensated female football player earns just $2.8 million per year. 

    The vast gap between the salaries of male athletes and their female counterparts is uncanny. However, it is not surprising. Claire Braund, Executive Director of Women on Boards, Australia, raised the issue of the prevailing mentality in her statement. She pointed out that:

    "Women's sport is not that physical and is not pleasant to watch. Had our way of life been accustomed to seeing ladies, as opposed to men, play football and rugby for ages, we would consider the possibility of men playing these amusements somewhat novel. It's every one of the matters of the point of view."

    According to BBC Sports study, male athletes receive higher rewards on winning tournaments. This report reflects the ideology of the current society regarding the position of women. The masculinity of the multi-billion-dollar sports industry is encouraged in many ways. Sports provide an excellent platform for challenging current issues such as gender discrimination, provided an effort is made to bring about a revolutionary change.

    Doping

    Russian players outperformed everyone in the 2014 Winter Paralympics. Fast forward two years and Russia is facing a suspension from all Para Olympic events, reason – doping.

    Doping is the use of "any process or substance thatuplifts performance and damages on health or is in contradiction to the core values of the sport"It is common knowledge that doping or in layman words using drugs is illegal. With the rising glory of the sports industry, the risks associated with falling back on illicit means is also high,however, shockingly, the number of a player caught doping has substantially increased in the past few years.

    Mid-Nineties marked the phase when International Association of Athletics Federations (IAAF) went on to become the first international sports organization to impose a ban on doping. By late nineties, most international organizations had started following a similar path. But despite the increasing restrictions, drugs scandals became routine owing partially to the easy access to illegal substances.

    There are five categories of banned drugs, most common being anabolic steroids, stimulants and masking agents who have varied effects ranging from helping athletes' to 'gain' weight to faster muscle recovery. As per the UK Anti-Doping Agency, any substance or method would be considered as illegal if it fulfills at least two of the following criteria:

    ·         Enhancing performance

    ·         The potential threat to the user's health

    ·         Violates the essence of sports

    The recent news about tennis legend Maria Sharapova facing a yearlong ban after testing positive for meconium; an illegal drug is far from surprising. She was one of the many players who had to put their professional careers on hold on account of doping charges. Wayne Odesnik is perhaps known as the most notorious offender as he jeopardized his entire career due to a fifteen-year ban because of failed drug tests repeatedly.Furthermore, players like Ben Johnson were not only suspended but faced disgrace by being stripped of their medals.

    The field of sports is arguably one of the most competitive areas. Every sportsperson wants to leave behind a legacy and to take a few pills to help them achieve their goal seems convenient. However, there are no shortcuts to success. With every passing year, international sports federations are further evolving the methods to test player for drugs and have increased the number of tests every player has to undergo. Even so, athletes are willing to take risks.

    Gilles Goetghebuer, editor-in-chief of an acclaimed sports magazine correctly pointed out the reason for mounting popularity of drugs when he made the statement that:

    "Doping can make a difference even in professional sports. It's true that no drug can make a poor tennis player into a good one. But between two excellent tennis players, the one who is less tired is more likely to win a tense final set."[3]

    Invasion of Privacy

    While the majority of the population across the world supports the decision of international federations to suspend players who dope, few feel that regular drug testing is in violation of their privacy.

    In one such case, Vernonia School District v. Acton[4]a student-athlete and his parents filed a lawsuit against his school. The grounds for the matter was that regular drug testing of the players conducted by the school violated the right of privacy of every individual as promised under the Fourth Amendment of the U.S. Constitution and the State of Oregon's constitution[5]. The Court held that as a student-athlete, the greater emphasis is on drug-free sports in comparison to privacy rights. Thereby, the school was free of any wrongdoing.

    Sports are synonymous to pushing the human body to new heights. Its essence lies in achieving goals based on self-discipline and preservation. Doping not only corrupts the spirit of sports but also destroys the health of the players reducing their professional career by a lot of years. Temporary supplements may help a player to win a match,but in the long run, it's gloom-ridden.


    [1] 80 F. Supp. 2d 729 (W. D. Mich. 2000)

    [2]Ibid.

    [3]Khaleej Times

    [4] 515 U.S. 646 (1995)

    [5] 515 U.S. at664-65.

     

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Limitation Funds in UAE]]> Limitation Funds in UAE

    As with most of the world's trading countries, the United Arab Emirates (UAE)has embraced international conventions in its national laws which, in certain conditions, allow carriers such as shipowners to confine their liability for claims made against them. Archaeologically, the reason for letting shipowners limit their liability was for policy purposes, to be specific, to encourage the international trade by sea. The value of claims emerging from maritime occurrences, for instance, the loss of freight, could exceed the cost of the vessel and ruin a shipowner. International conventions obliging the limitation of liability, therefore, aims at looking for a balance between sufficiently paying a claimant for its loss and allowing owners to limit their potential liability to a sum that can safeguard the interest at a reasonable cost.

    In the UAE, Articles 138-142of the Federal Law Number 26 of 1981 of UAE Maritime Code entitles an owner, charterer or worker to restrain the liability given the size of the vessel.

    This article is meticulously in light of the 1957 International Convention relating to the Limitation of Liability of the Owners of Seagoing Ships (the 1957 convention). This agreement, be that as it may, was superseded in 1976 by the Convention on Limitation of Liability for Marine Claims (the 1976 Convention).

    It was, by and large, acknowledged that the 1957 convention required updating and the 1976conferencewas acquainted with widening the types of cases subject to limitation, increment the points of confinement of liability and reexamine the test for conduct barring a litigant from its prerogative to restriction. Under the 1976 convention, the privilege to limit liability expires only when an applicant can demonstrate willful intent or recklessness concerning the individual looking to constrain (Article 4 of the 1976 convention).

    The privilege to restrict liability under the 1976 convention, as far as anyone is concerned, was under efficient inspection in England just once since 1976.  In this case, the master (who was likewise the proprietor) of an angling vessel purposely and frequently crossed caught up with transportation paths before different ships in the English Channel. In explicit contravention of the movement division scheme keeping in mind the end goal to be the first to touch base at lucrative angling grounds. Amid one of those intersections, there was a collision. The master knew the hazards he was taking that is, the danger of an impact, however, all things considered purposely took them. It is evident that the expectation of the 1976 tradition, to be specific that it will break the privilege of limiting extraordinary conditions.

    Ships, by nature of their exchange, are involved in events that lead to claims. These claims may be for personal injury, damage to property such as other ships or fixed and floating objects such as drifting items, or cargo damage, to name a few. A shipowner may be exposed to extensive loss, even to the extent of insolvency, as a result of claims. In acknowledgment of the essential and necessary role played by ships in endorsing world trade, shipowners are permitted to restrict their risk for applications in individual countries, subject to certain conditions. Such constraint is allowed by international conventions such as the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC 76).

    Since 1957, as the values of consignments, containers, docks installations and the like vastly augmented, and claims arising from marine deaths similarly escalated, many claimants felt that the limits enforce by 1957 Convention were irrationally low. So, in cases where the limitation of liability was likely to be intricate, expensive and time-consuming lawsuits often resulted to "break the fund." Also, since 1957 as some of other Conventions have come into effect which has dealt with liability in specific fields, for instance, the Civil Liability Convention on oil pollution. Conventions such as these introduced monetary limits for their particular category of responsibility much superior to the overall limits administer in the 1957 Convention. To avoid, either in general or in specific circumstances, the Convention limits annul by the much lower worldwide limits of the 1957 Convention, modifications are always necessary. In addition to mollifying the desire of probable claimants for higher limits, the change was needed to make more confident prerogative to limit liability. The product of this need for modification is the 1976 Convention on the Limitation of Liability for Maritime Claims (the 1976 Convention).

    Would vicarious liability apply in case of ship employees' responsibility?

    There can be numerous parties as defendants in a suit for negligent behavior. The palpable defendant is the party that committed the act leading to the damage – usually an employee of a group or company. The superintendent or administrator who serves as the superior of the employee is also often named. And generally, the employer of the employee (usually the "deep pocket") is often designated based on the legal maxim of Respondeat superior (also called vicarious liability.)

    In the case Kadylak v. Royal Caribbean, the claimant got several wounds while motorcycling with a passenger on the seashore with an employee of the ship, during the spare time and for the personal pleasure of the employee. The court noticed that the employee was not on duty and was not wearing a ship uniform or name tag; it granted immediate judgment ruling that the employee was not acting within the extent of employment and that Royal Caribbean was not vicariously liable.

    What is Limitation of Funds?

    The term Limitation of Funds indicates a guarantee or deposit made by a shipowner to meet any damage claim and the shipowner has to calculate it on the irresponsible ship's weight or some tons. Limitation of Funds is a legislative amount to fix the constitutional limit of liability of shipowners for the negligence of their captains, officers or the operators. World nations have entered into an international agreement between the countries concerning the limitation fund. Many states permit a shipowner facing a pertinent negligence claim to deposit an amount with the court, on a non-bias basis until a decision has been affected, an economic value limited and calculated concerning the density of the ship.  Archeologically, the purpose of allowing shipowners to limit their liability was for policy purposes, specifically, to boost international trade by sea. The deposit constitutes sole source of the monetary limit of the shipowner's liability. In what follows will be a comprehension of how it is possible for a shipowner to set up a limitation fund in the UAE.

    What is meant by collision as per UAE courts?

    The Maritime Code of UAE defines "collision" as contact amongst vessels and ships, however notably exempts floating objects moored to a fixed anchor. As such, communication of boats with objects such as oil platforms has been held by the UAE courts not to be collisions.

    What is the Dubai World Tribunal (DWT)?

    The Dubai World Tribunal (DWT)was at first instituted in 2009 as a specialist court as an outcome of the international economic crisis to discharge the local judge's caseload. Also, in a situation where the Government of Dubai was under extreme monetary pressure and concerned that this might affect the solidarity of the government-owned Dubai World group of companies.

    Naturally, therefore, Decree (57) of 2009("the decree"), which offered life to the DWT, concentrated principally on building up and arrangement of bankruptcy guidelines and systems in light of those effectively pertinent in the Dubai International Financial Centre ("the DIFC"). These thus depended on US and UK law and hence quite different from those who would otherwise have applied in the UAE.  Unlike the DIFC, be that as it may, the DWT was instructed to apply UAE law to the disputes beforehand.  The decree (as subsequently modified) also provided that the DWT was to have legal authority over "all claims and demands by and against the Dubai World or any of its subsidiaries companies" to the segregation of the local "onshore" courts.

    As the Government of Dubai sought to reform its business interests, the DWT saw a noteworthy assignment in its early years, most remarkably resolving disputes relating to the real estate company, Nakheel, a former Dubai World subsidiary.  In any case, as the world financial outlook improved and the restructuring advanced, the tribunal's workload diminished to such a degree that in 2017 there were only two cases began before the DWT and the decision was that there had been deliberations about disbanding it. 

    The Court's decision in one of those two 2017 cases may be that as it may, lead to renewed interest in the DWT, mainly from the maritime sector. In a verdict, Claim No DWT 0001-2017, the DWT acknowledged the shipowner's quarrel that it had power to and should make an order permitting the constitution of a limitation fund by the 1976 Convention which the UAE had executed by Federal Decree Number (118) of 1997.

    The judgment would seem to prepare the DWT's exclusive jurisdiction to be invoked in maritime disputes that left UAE. For instance, if a shipping container (the largest of which may now carry not far short of 20,000 vessels) involves itself in an event in the Singapore seas. The very fact that there was a separate shipment of cargo on board belonging to a Dubai World company would legitimize the commencement of a limitation action before the DWT, regardless of whether that entity brought no case. It is because as a significant aspect of this decision, DWT found the meaning of Article 11 of the 1976 Convention. Further, UAE law follows the English Court of Appeal decision in The Western Regent and does not require any substantive case to be against the shipowner in the jurisdiction before the commencement of limitation proceedings.

    There is clear, unreliable evidence that the "onshore" courts in the UAE have been unwilling to allow limitation legal order or allow limitation funds to be constituted even in prominent cases. The DWT referred to this issue in its judgment but dismissed it as insignificant on the basis that no proof to support the proposition was in reference before it.  

     

     

     

     

     

     

     

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Litigation privilege as understood through cases ENRC v SFO; Bilta v RBS and R v Jukes]]> The definition of Litigation privilege is non-disclosure protection imposed on documents which come into existence after litigation commenced or in contemplation of such litigation, or where their creation was in the view or such prosecution. These documents are either for obtaining advice as to such dispute, or of gathering evidence to be used in such litigation, or of receiving information which might lead to the securing of such evidence.

    Litigation privilege explained

    The concept of litigation privilege exists to protect parties to the litigation. Litigation privilege provides for parties to assess the merits and prepare its case without having to concern itself with the disclosure of those details to its opponent. Litigation privilege consists in documents, including communications, which are confidential and the production of which happens in situations where litigation is either in progress or where there is a reasonable prospect that it will happen, provided that the dispute is the dominant purpose for which the document's creation. Litigation privilege does not only take the form of attorney-client communication. Such right exists outside of such relationship concerning the producing of any records of discussions for the primary purpose of obtaining advice about litigation, obtaining or collecting evidence for the dispute, or obtaining information which may assist in the achievement of receiving such indication.

    Confidentiality of privileged documents is essential for a material to be deemed exempt. However, secrecy alone will not confer any privilege – to use litigation privilege, litigation must be in happening, or there must be a reasonable prospect that it will happen.

    The litigation process must be in progress to consider a document protected under litigation privilege. Alternatively, during the creation of the record, there must have been a reasonable prospect of litigation. In this regard, one must take caution when deciding when the dispute is in "reasonable prospect." It is commonly accepted that "reasonable prospect" means more than a mere eventuality, but not necessarily higher than 50%, and would usually comply if litigation is reasonably likely or even may happen.

    The dominant purpose of the author at the time of creation of a document or communication must be to utilize it, or its contents to gain legal advice, or to conduct or assist in the conduct of litigation. It will not suffice that a document happens to be relevant to later dispute if it is apparent that, at the time of production, the material was commissioned for another reason, for example, a proposed business deal or a reflection of annual accounts.

    Instructions to and reports produced by expert advisers, to confidentially advise on the merits of the case, are protected by litigation privilege. However, the instructions to expert witnesses for litigation are not protected by right if they are to be utilized in court, as this makes them a document in the public domain, and therefore they do not satiate the confidential aspect of litigation privilege.

    The three-tier test to litigation privilege

    This test for litigation privilege requires that:

  • Litigation must be in progress or contemplation
  • The making of the communications must have the sole or dominant purpose of conducting that litigation
  • The dispute must be adversarial, not investigative or inquisitorial
  • Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd (ENRC) EWHC 1017 (QB)

    In this case, a company claimed that documents produced by lawyers and forensic accountants during an internal investigation were privileged. The conducting of the internal research was due to allegations of bribery and corruption. The SFO challenged such claims successfully, and with such ruling, the suggestion that litigation privilege is going to be very difficult to claim concerning most internal investigation materials came to fruition.

    Facts – ENRC received an email from an apparent whistleblower containing allegations of bribery and financial wrongdoing concerning one of its subsidies. This information led ENRC to instruct lawyers to carry out an internal fact-finding investigation. The SFO then became involved after it contacted ENRC, drew its attention to the SFO's self-reporting guidelines and suggested a meeting. This inquiry led to a lengthy period of dialog concerning which ENRC shared with the SFO the outcomes of such internal investigation, and the SFO announced that it was launching a criminal investigation sometime later. In pursuance of its investigation, the SFO sought the production of a range of documents, some of which the ENRC claimed to be under the protection of legal privilege. The SFO commenced proceedings, requesting the creation of the papers on the basis that they were not privileged.

    The ENRC argued that litigation privilege protection extended to the Interview Notes, Accountants' Reports and Factual Updates on the determination that their dominant purpose was to enable ENRC to obtain advice or evidence in connection with anticipated adversarial criminal litigation.

    In the courts' judgment, it held that there was no litigation privilege accorded to those documents. ENRC was unable to establish on the facts that it had any knowledge of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility.

    The court stated that an SFO investigation is a preliminary step taken, and generally contemplated before any decision to prosecute is taken. In practice, this means that utilizing a claim to privilege is possible only when made where prosecution is reasonably foreseeable. The judge held that ENRC did not contemplate a trial when producing the documents in question, ultimately those documents were not protected by litigation privilege.

    In SFO v ENRC it was held further that litigation privilege was not applicable to material and documentation prepared for the dominant purpose of: -

  •  A criminal investigation; or
  • Avoiding prosecution
  • The court also rules that, even if a prosecution had been reasonably thought to occur, none of the created documents in question were done so with the dominant purpose of being utilized in the conduct of such litigation. There was insufficient evidence to present to corroborate that the target of the internal investigation had involvement with the conduct of future criminal proceedings if proof of criminal behavior came about and attempted to convince the SFO to engage in a civil settlement failed. 

    Impact of ENRC privilege ruling

    This judgment does not mean that parties can no longer obtain legal advice in the context of an internal investigation – the protection of communications between a lawyer and a client for legal information continues. However, the combination of the judge's confirmation that fact-finding communications between a lawyer and anyone other than the actual client are not privileged. Along with her rulings on when litigation is stated to be in contemplation from a criminal perspective, this makes it difficult for parties or their lawyers to claim privilege over factual inquiries according to which the giving of advice is allowed.

    The judge's decision means the taking of particular care over communications involving "third-parties," including individuals within a client organization who are not authorized to seek or obtain legal advice, in circumstances where an investigation is done to establish the substantiation of allegations.

    The judge's observations about the difference between criminal proceedings and civil litigation suggest that this decision should not change the precedent of when the prosecution can be said to be in contemplation in ordinary civil actions. But it does signify that litigation privilege is going to be more tumultuous to claim in other criminal contexts. The judge's reasoning also appears to produce the somewhat incongruous result that a company threatened with civil proceedings concerning allegations of misconduct can investigate them protected by litigation privilege (provided that there is compliance with the dominant purpose test), but a company under criminal investigation for those same allegations cannot.

    Bilta (UK) Ltd v Royal Bank of Scotland

    In this case, the dispute was whether documents created in the course of an internal investigation conducted by the Royal Bank of Scotland could be considered protected under the scope of litigation privilege following allegations made by HMRC in correspondence of tax counsel fraud. In this case, unlike the case of SFO v ENRC, the court held that the Royal Bank of Scotland's claim to privilege was justified and that there was the protection of the documents under litigation privilege. This case has brought with it significant clarification of the law, especially in light of the confusion caused by the decision in SFO v ENRC.

    In this case, the claimant accepted the fact that compilation of the documents in question occurred at a time when litigation was a possibility, and that the dispute was adversarial. Therefore, the issue before the court was whether the creation of the documents was for the sole purpose of conducting that litigation.

    In this matter, the Royal Bank of Scotland was able to adduce proof of its lawyer's retainer letter from the beginning of the investigation. This letter referred to a "dispute" with HRMC together with internal emails and attendance notes; these noted the view of Royal Bank of Scotland's personnel that litigation was not in prospect and that there was a need for the investigation.

    The judge in Bilta (UK) Ltd v Royal Bank of Scotland found in his judgment several crucial factors which distinguished this case from the of SFO v ENRC, including:

  • In the present case, HMRC wrote a letter to the Royal Bank of Scotland, which formed a turning point in their relations. Concerning this letter, HMRC stated that they had sufficient grounds to deny the tax relief in dispute. The Court held that even though this exchange was an interaction with authority, the communication did not equal to the interactions with the Senior Fraud Office in ENRC. Instead, there should be a comparison between this letter and the letter before action in civil litigation.
  • The Royal Bank of Scotland, in their response to the letter, instructed external specialist tax litigation counsel. This instruction suggests that they had an idea that they might need to defend a claim in this regard;
  • The Court here cited Re Highgrade Traders [1984] BCLC 151 – in this case, the Court held that a document could be prepared under the pretenses of litigation even if the circumstances for such preparation were to enable a client to receive advice on whether or not to prosecute. 
  • This case provides several practical lessons for companies conducting an internal investigation:

  • Companies should consider the purpose of a document in the context of the specific facts of the case, even if that case involves a study by a competent authority.
  • Companies must determine the purpose of creating materials which might not be covered by litigation privilege. Companies should emphasize the consideration of whether or not the documents they are producing have the dominant purpose of litigation. If there is a chance that the records generated have insufficient protection under litigation privilege, companies should determine the advantages and disadvantages of creating potentially disclosable documents.
  • Consider at an early stage whether asserting the right of litigation privilege over the records in worthwhile;
  • R v Jukes

    The facts of this case are that the appellant, Paul Jukes, was a managerial employee at a waste and recycling company where another employee was fatally injured. During an investigation by the employer's lawyers, Mr. Jukes made and signed a statement in which he stated he had responsibility for health and safety on site.

    When the competent authority and the police interviewed him, he denied responsibility for health and safety. At trial, the prosecution relied on his earlier statement and ultimately, he was convicted and sentenced to a term of imprisonment. On appeal the question of whether his more previous statement constituted an account protected by litigation privilege arose.

    The Court applied the three-tier test for determining litigation privilege and followed the approached used in SFO v ENRC – to which the Court held that litigation privilege did not apply to the earlier statement made by Mr. Jukes.

    The Court considered the following factors relevant to its finding:

  • When making the initial statement, no member of the company knew that an investigation would ensue. The judge in this respect agreed with the judge in SFO v ENRC that there cannot be a reasonable contemplation of criminal proceedings. This assumption is unless the prospective defendant knew enough about what the investigation is likely to unearth, or has discovered, to understand that it is realistic to think that a prosecutor to be satisfied that it has sufficient material to be stood in good stead for securing a conviction.
  • The competent authority interviewed Mr. Jukes 16 months after his earlier statement, and at the time of such interview had not decided to prosecute. Furthermore, there was insufficient evidence to support that either Mr. Jukes of the Company had sufficient knowledge to understand that it was realistic to expect the HSE to be satisfied that it had enough material to secure appropriate convictions.
  • Criminal proceedings have a more significant cusp for the contemplation of legal proceedings than civil actions. To quote Judge Andrews in SFO v ENRC: A person might have reasonable grounds to think that they are going to be in a civil suit at the hands of a disgruntled neighbor. Or a civil suit at the hands of a commercial competitor, even where there is no apparent cause of action, or where the evidence is still undiscovered that would make a claim.  Criminal proceedings, in the alternative, cannot be initiated unless and until the prosecutor is satisfied that there is enough evidential basis for prosecution and that the evidence satisfies the public interest test.
  • Conclusion

    It is possible for documents created in an internal regulatory investigation to be covered by legal professional privilege if there is the establishment of the requirements of litigation privilege. In this regard, litigation must have commenced or is a reasonable prospect, the dominant purpose of the investigation is the litigation, and the said litigation is adversarial. In determining whether an investigation is protected by litigation privilege, the presiding officer will look at the circumstances at the outset of the dispute. In this instance, the court will consider what triggered the investigation and the events which lead to it. For example, in the Bilta case, the Royal Bank of Scotland was able to use the letter from HMRC as a turning point and that all that followed was a reaction to the pending litigation. Clients are instructed to take notice of the circumstances that bring about the investigation.

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[New Cinema Licensing Regime in Saudi Arabia]]> NEW CINEMA LICENSING REGIME IN SAUDI ARABIA

    "Cinema is not a slice of life; it is a piece of cake." 

          – Alfred Hitchcock

    Overview:

    In December 2017, the Saudi Ministry of Culture and Information (the MOCI) issued an official statement stating that commercial cinemas will be made legal starting from early 2018 (lifting a ban after more than three decades). After that, the Board of the General Commission for Audiovisual Media (the GCAM) passed a resolution, which allowed GCAM to issues licenses to cinemas. Saudi Arabia has made significant process in the recent past from social reform perspective. The opening of cinema camewhen Saudi Government passed the Royal Decree allowing Saudi women to drive.

    The opening of cinemas in Saudi Arabia will be helpful in economic growth, as it will create more job and training opportunities in the country. As per the estimates, there will be around 300 cinemas in Saudi Arabia by the end of 2030. The increased number of cinemas in the country will also help in the growth of media market and diversification, creating thousands of permanent and temporary jobs. The annual sale of tickets is expected to reach around $1 billion.

    Regulatory and Supervisory Bodies:

    There are two main bodies for regulating and supervising cinema industry in Saudi Arabia namely, the General Commission for Audiovisual Media (the GCAM) and the General Entertainment Authority (the GEA).

    The GCAM is the government organization, which is responsible for regulating the audiovisual industry of Saudi Arabia. The Government organization funded it in 2012, and it supervises and controls following;

    a.       Video production, distribution, and consumption

    b.      Audio production, distribution, and consumption

    c.       Animation & Video Games production, distribution, and consumption

    d.      Online and Digital content production, distribution, and consumption

    It also regulates the establishment of radio and television studios and content approval as well as age classification for movies and video games.

    The GEA was founded in 2016 by the Royal Decree to develop and organize the entertainment sector of Saudi Arabia. As per its official website, its role is, "to organize, develop, and lead the entertainment sector to provide exciting entertainment options, and tailored experiences to the needs of people from all walks of life around Saudi Arabia. Also, to contribute to improving and enriching the lifestyle and social cohesion among the community."

    The task of GCAM is to regulate the cinemas, licenses and media content whereas GEA's missionfocuseson licensing of events. GCAM is the main body for issuing permits for operation and establishment of cinemas.

     

    The Highlight of New Cinema Regime:

    Under the new cinema licensing regime issued in the Kingdom of Saudi Arabia, the cinemas are divided into two categories; temporary and permanent. The temporary cinemas can get a license for one year while permanent cinemas can get a license for three years; however, both types of permits are renewal upon expiration. The regulations further specify three kinds of grants:

             i.            Setting up a cinema hall;

           ii.            permission for operating cinemas; and

          iii.            consent for managing both types of mobile and fixed cinemas.

    During applying for cinema license, the applicant is required to hold a relevant commercial permit, should have experience in operating cinemas and provide a report on economic feasibility. The cinemas will be required to pay a fixed cinema operating fees to GCAM along with 25% of the values of the tickets sold.

    The operators of the cinemas are also required to respecting the existing legislation of Saudi Arabia like intellectual property rights and should not violate the nation's law on media content and age classification.

    The government officials have also stated that there will be censorship on the content as per the existing moral and cultural values of Saudi Arabia. Sex, nudity, and anything critical about the monarchy will be banned/censored. The new rules will categorize film content in six different categories depending on the age of the audiences. The entry in the cinema halls will be restricted for the children below the age of 12 years unless they accompany their guardians.

    Furthermore, as per the technical requirements issued by the Saudi Araba's Municipality and Rural Affairs Ministry, the cinemas should be established in the urban boundaries of the city allocated for the commercial use. It further states that the cinemas should be at a distance of at least 100 meters from petrol and gas selling points. They should also be 100 meters away from factories, wedding halls, malls, and schools. The customers should be provided with car parking facility with a ratio of one parking spot for every three seats and entrance and exits of cinemas attached to shopping malls should be same as that of shopping malls. The regulations further provide that the accommodation for theatre staff cannot be on the premises and basements cannot be utilized as parking or for commercial, recreational or warehouse purposes.

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[ Non-Retroactivity of the Law]]>   Non-Retroactivity of the Law

    "No Law shall be construed Retroactive unless manifestly intended by law."

    The Law and The Time

    Imagine a case where a person has committed a criminal offense, and now that person is standing trial for such offense. However, during the relevant proceedings, the legislature has decided that the penalty clause for the crime he/she committed is too severe and they have reduced it. How is the question answered as to which penalty clause applies? At the time of the undertaking of the offense, the guilty party committed the crime with the knowledge of the more severe punishment. Should such party be provided with the application of the more lenient sentence?

    In criminal law, the provisions of the law have substantial repercussions on all parties involved in criminal law proceedings. Mitigating and aggravating factors can only go so far as to harshen or lessen a sentence, but the provisions of the law ultimately control what the outcome of the proceedings will be. The question arising in this situation is whether or not the criminal law should apply retrospectively during the processes of criminal trials for crimes perpetrated before the commencement of the law.

    Non-retroactivity in Action

    A landmark case globally occurred here is the South African case of the S v Makwanyane and Another 1994 (3) SA 868 (A), the accused in this case had been convicted in a Divisional Supreme Court on four counts of murder, one count of attempted murder and one count of robbery with aggravating circumstances. When the crimes the convict supposedly committed had occurred, the death penalty was still in use in the country under Section 277(1)(a) of the Criminal Procedure Act Number 51 of 1977 (the Criminal Law) which stated that the death penalty is a competent sentence for murder. During the initial trial, the death penalty was still an appropriate sentence to be handed down. However, when the time came for the implementation of the verdict, the Republic of South Africa Constitution had been promulgated, regarding this law, section 9 and 11(2) brought into question the constitutionality of the death penalty. This case moved all the way up to the highest court in the country, the Constitutional Court, and ultimately the provisions of the Constitution applied retrospectively to declare the death penalty unconstitutional and in violation of their human rights provided in the Constitution.

    The application of the Rule of Non-Retroactivity of the penal code has prevalence in the applicability of criminal rule as to time.

    Constitution of the UAE

    Article (27) of the UAE Constitution rules that a person may not receive punishment for an act or omission of an act committed before the relevant law becomes promulgated. Regarding this provision, it provided that a person within the UAE cannot be charged retrospectively for an act or omission committed in the past that was not a crime previously but has now become a crime. Regarding this provision, the person who has performed the act or omission would not have had the criminal intent while committing such since, at the time, it was not yet a crime.

    UAE Penal Law:

    A crime shall be sanctioned according to the law in force at the time of its perpetration. Determining this law shall occur at the completion time of the execution regardless of the realization time of the result. This piece of legislation provides that the law in force when a crime has been committed is the law that will preside over that crime – this piece of legislation, in fact, made the retrospective application of new law impossible. However, as is to be discussed, the law has provided for exceptions to this rule to ensure fairness in all criminal proceedings. The next Article offers for such exceptions to the retrospective application of the law.

    "If a law that is more favorable to the accused is enacted after the perpetration of a crime and before rendering a final judgment, it shall exclusively be applied. If the law is enacted after rendering a final judgment, that makes an act or omission committed by a convict not punishable, the judgment shall not remain unimplemented, and its penal consequences shall no longer exist, unless the new law provides otherwise. Should the new law provide only for justification of the penalty, the court that rendered the last judgment may, at the request of the public prosecution of the convict, review the sentence under the scope of the new law."

    A case that demonstrated an exception was Dubai Court of Cassation, 284/2009. Within it is stated that, while generally using laws in retrospect is impermissible, there is one situation where it may. This condition would be in the case of time bars since a time bar for a situation occurring before a law change will still not have been reached after the turn of legislation, and so the new time bar will be applied to the agreement even in retrospect.

    Except for the provisions of the preceding section, if a law has been enacted making an act or omission a criminal offense or exacerbating the prescribed penalty to it and provided that such legislation has been passed temporarily for a short period or under fortuitous events, the following shall be the case. The expiration of the period specified for its effectiveness or the disappearance of the fortuitous circumstances shall neither debar the prosecution of crimes perpetrated during such a period nor shall it preclude the enforcement of a penalty imposed under such law.

    The new law shall apply to any continuous or successive crimes perpetrated before its coming into effect or crimes which repeatedly reoccur during the active period of this law.

    This concept was further solidified and confirmed in a custody case in which two separated parents reached a deal. They agreed that their child would remain in the custody of the mother until she reached the age of seven. However, when the time came about, she refused to pass the child on to the father. The reason she chose to do this was due to the simple fact that since they had first reached their agreement, new laws had come into place which stated that, the child should stay in the custody of the mother till the age of 11 for a boy and 13 for a girl. In the court of the first instance, the judge agreed with the mother and stated that the child would remain with her. However, the father appealed this and in both the court of appeal and court of cassation, the decision was reversed due to the laws being non-retrospective

    Where the new bill amends the provision concerning the tendency of a criminal offender to re-offend or a plurality of crimes or penalties, it shall apply to any offense that subjects the accused to requirements of a majority or according to which he becomes a recidivist even if the other crimes have occurred before its application.

    Retro-Scenario

    The UAE Constitution as well as provisions in the Penal Code not only provides that penal provisions are not retroactive but ensures that the only one exception to this rule is the retrospective application in situations in which the criminal requirements are more favorable to the accused. The exemption does not appear as objectionable as a rule. There are many reasons for the mitigation of penalties as it is not in line with justiciability to place a more severe sentence than is necessary or required by the law in the name of social defense. If therefore, a lighter penalty is thought sufficient for the future, to make it applicable to offenses committed in the past, but upon which sentence has not yet passed, is not unreasonable.

    There have been problems previously in deciding which law is more favorable to the accused. There are various criteria to use to determine which legislation is more desirable and which law should be applied. It is thought by some jurists that where there is doubt regarding which code to use, the difference in maximal should be the determining factor, but that in fact, a low minimum penalty is far more favorable to the accused than a small maximum. In the opinion of Professor Ramsis Behnam, "the solution depends upon the interest of each delinquent in each case, especially concerning the application of punishment."

    Conclusion

    Interpretation of the phrase "law in force" in the Penal Code must be concerning the provision of the constitution. Laws begin execution throughout the United Arab Emirates from the time when promulgation becomes known, and it must be taken to be known thirty days after publication.

    Article 13 of the Penal Code does, in fact, limit the exception contained in its provision to offenses which have not been subjected to final judgment before the new law came into force. However, this provision states that where there is a final judgment, and the new law is such that the act or omission no longer constitutes a criminal offense, then such decision shall not be implemented at all, and its penal effects shall cease to exist; this is only the case where the new law does not provide otherwise. Where a provision offers just for the explanation of a sentence, for the review of a final judgment given before such laws promulgation, the convicted person or the public prosecution must produce an application.

    In cases where the new law completely removes the criminal element of an act or omission, it would be unjustifiable for a judicial system to continue to punish persons who have previously committed such acts. However, one must take notice of the intention of the accused, those persons who already committed such acts, knowing they were committing an offense as per the law at the time of commission, will be of a guilty mind and thus will still have criminal intent. One needs to consider whether criminal intent is a factor in determining with retro-application of extenuating new criminal law. A person who had the mental capacity to commit an act or omission, knowing that such act or omission constituted a crime does not have the psychological ability revoked just because the crime previously committed is no longer a crime.

    An additional question that arises when applying alterations to laws would be alterations to the requirements of the procedure. It provides that the accused has no right save that of proving their innocence. Presumably, the new rules perform better for this purpose than the previous ones. In any case, they can have no acquired right against the manifestation of the truth. 

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Social Media Law Updates]]> We have entered into a time where people frequent on of social and electronic media as much as they breathe in and out. Our reliance on these platforms grows as quickly as the number of platforms available. This rapid growth of electronic media has seen many curveballs, including that of legality and morality. The growth of the electronic era has brought with it new careers, new experiences, and new criminal offenses. And with that, new legislation. The legislation of electronic media differs from country to country – some with extremely stringent laws while others are incredibly lax.

    Electronic media optimizes openness, as Mark Zuckerberg stated, "give everyone the power to share anything with anyone." This openness is how social media operates. At our fingertips, we can share any piece of information with any person across the globe. However, as it is said, with power comes great responsibility – and this is where the law plays a vital role in the electronic world. The United Arab Emirates have recently brought to fruition a new law regulating electronic media. This regulation was brought about by the National Media Council.

    The regulations released by the Council govern all activities online including publishing, selling of print e-commerce, and e-commerce, video and audio material as well as advertising. These guidelines apply to news websites, electronic publishing outlets, and on-demand printing, including commercial activities conducted through social media within the UAE. The purpose for these new regulations as provided by Mansour Al Mansouri is that the will help the UAE media sector to remain abreast of the significant developments in electronic media, in addition to enriching and organizing digital content while promoting freedom of expression and constructive dialogue. In addition to this, the regulations will ensure that media material respects the religious, cultural and social values of the UAE.

     

    The Electronic Media Regulation

    The new Regulation starts off providing definitions for relevant electronic media outlets. The scope of the regulations application includes all electronic media activities that are carried out inside the United Arab Emirates; this is inclusive of the free zones. The regulation covers any means of online expression, including but not limited to that of writing, painting, music, photography or other methods that are transferable between individuals in any form whether printed, audible or visual.

    Electronic Media Activities that should be Licensed

    The following forms of electronic media, for the abovementioned regulation, need to acquire a prior license following the provisions:

          I.        The sites used to trade, present and sell print, video and audio materials;

        II.        The electronic publishing activities and on-call printing;

       III.        The specialized websites such as the electronic advertisements, news sites, etc.;

      IV.        Any electronic action that the council deems appropriate;

    When UAE citizens, applying for this license, it is necessary that they meet the following requirements per the relevant regulation:

          I.        The applicant shall have the full legal capacity – however, this requirement may be exempt according to the circumstances of the case;

        II.        The applicant should have a good reputation and a history of decent conduct;

       III.        The applicant should not have been convicted of an offense involving a breach of honor or public trust unless such necessary rehabilitation of the applicant takes place or the issuance of a pardon has occurred in his favor by the competent authorities;

      IV.        The applicant shall qualify from a tertiary institution, namely from a college, institute or accredited university – however, this requirement may be exempt according to the circumstances of the case;

        V.        The applicant must meet the required activity requirements;

      VI.        The applicant should not have any company which has been shut down or closed, or the applicant should not have a company prevented from carrying out specific media activities; he should also not have any suspension or cancellation of license – unless such issue as abovementioned has been remedied or removed;

     VII.        The applicant should not have any financial obligations owing to the council;

    VIII.        The applicant must abide by all instructions and regulations set out for the carrying on of media activities;

      IX.        Any additional requirements as thought to be applicable by the committee.

    Responsible manager

    As per the new regulations, each website shall now have a manager who supervises the content of such site. In this regard, the manager will represent the license applicant before the council and government entities or any other third party. This responsible manager will also be responsible for all content published on the site whether the posting of the material was by him/herself or a third party. The regulations set out requirements for the accountable manager similar to those for obtaining a license. However, it is worth mentioning that if the applicant is a natural person, he may act as the manager responsible for the website or mode of electronic media if he/she meets the requirements.

    Media Activities on Social Media Platforms

    The regulation then goes further to provide for the obtaining of an additional license under this resolution, for commercial purposes using the social media. Applicants must meet the following requirements in this regard:

  • The applicant must have a recognized social media account;
  • The content posted on such account must meet all the applicable advertising standards or criteria adopted by the council at the time;
  •  The social media account holders providing paid commercials shall obtain a license from the National Media Council per the applicable regulations and those prescribed in this regulation;
  •  The account holder will be the person responsible for the content posted on such account.
  • License Validity Duration and Renewal

    Such obtaining of the license for such electronic media is not for an indefinite period. A permit according to the regulations shall be valid for a period of one-year renewable for the same period. The holder of the license or any representatives of such holder has the right to apply for renewal within 30 days from the expiration date or 30 days after such expiration date. The license will be null and void should the applicant or his/her representatives not apply for renewal within the 30-day grace period provided post expiration of the original permit. 

    The Licensee's obligations

    The new regulations provide an outline of the commitments the imposition of which will be upon any person who application is accepted. These obligations not only affect the licensee him/herself but will also be binding upon any person representing the licensee or working for him/her in their interest. The depiction of the obligations provided by the regulation are as follows:

  •  There is an obligation to abide by the type of the media activity and all requirements according to the license;
  • A responsibility to obtain the prior consent of the council on any license related modification;
  •  There is an obligation to provide any and all information and data as requested by the commission from time to time;
  •  The parties have to abide by the media activity practice related instructions and regulations set by the commission;
  • There is an obligation on the parties to always respect societal values and observe the public interest requirements;
  • A commitment to pay the financial dues and fees necessary per the relevant legislation.
  • Licensing Fees

    The below table outlines the licensing fees as provided by the New Electronic Media Council in its new regulations. The charges are the responsibility of the Minister's Council and such council will be responsible for any addition, deletion or amendment.

     

    Activity

    New Application

    Renewal of application

    Electronic or online accounts/websites

    AED 15,000

    AED 15,000

    Trading, selling and displaying audio materials websites and online accounts

    AED 4,000

    AED 2,000

    Trading, selling and displaying video materials websites and online accounts

    AED 6,000

    AED 3,000

    Online accounts and websites of electronic publishing and on-call printing-related activities

    AED 3,500

    AED 3,500

    Selling books

    AED 1,000

    AED 500

    Selling newspapers and magazines

    AED 1,000

    AED 500

    Selling electronic video games

    AED 8,000

    AED 4,000

     

    The implications of the new regulations on social media influencers

    The new provision does not apply to websites of a personal nature, as well as that of blogs. However, it does affect social media influencers. In this regard, social media influencers who run any online business activities, including those mentioned in the regulations, namely, e-commerce, publishing, and selling of print, video and audio material, as well as advertising or promoting brands. The effect of these regulations is that such persons engaged in the abovementioned activities must also obtain a license as per the rules.

    Violations of social media etiquette in the UAE

    In a recent case in Dubai, the Court considered the breach of privacy that occurs when a person posts pictures of another on social media without the permission of such other person. Concerning the matters, the court held that such cases could be neither waived off nor can there be a reconciliation between the parties involved.

    In this case, a teenage girl posted a picture of her friend on social media, allegedly without first obtaining the girl's permission. The family of the latter adolescent girl then filed a case of violation of privacy against the girl who posted the photograph. The family at a later stage tried to withdraw the case at a later stage. However, they were unable to do so, as the law had to run its course. The girl ultimately failed to prove that the photograph she took was with permission from the other girl and the Court of First Instance convicted and sentenced the girl. The case will now continue to be before the Supreme Court.

    Penalties for the violation of such privacy includes a jail term of six months and a fine of between AED150,000-500,00. The reason for such a high sentence is that the legislature needs to make it known to the public that the crime of the violation of privacy via social media is a serious offense.

    In another judgment, The Federal Appeal Court upheld a previous ruling by the Federal Court of First Instance, which convicted a man and sentenced him to a term of imprisonment of two years. The conviction was due to a poem that the defendant had written and published on social media. This poem violated public order and morality and was in contradiction to the cybercrime law. In this case,  the court sentenced the man to a three-month jail sentence and a fine of AED250,000.

    Conclusion

    The United Arab Emirates is clamping down on electronic media usage and has implemented such new regulations as it deemed necessary.Digital media is one of the most up and coming sectors in the Middle East, especially videos, games, and e-books. Regulating this sector will attract new global investments, which, in turn, will improve its development and competitiveness," Al Mansouri said. The aims achieved by the implementation of the regulations are the supporting of the relevant industries and the control of their activities. This support and management are to ensure that the sectors are capable and that they contribute to the support of the publishing industry. Another aim achieved it the keeping abreast of the rapid developments in the field, and this is to enrich digital content. In furtherance of the objectives, another objective of the regulation is to reinforce electronic media's respect for the cultural, religious and social values of the UAE.

     

     

     

     

     

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Territorial Jurisdiction Part-1]]>  

    THE REACH OF TERRITORIAL JURISDICTION

    PART I

    Introduction

    The UAE follows Civil Law in their legal system and the primary laws governing the jurisdiction of courts is regulated by Federal Law Number 11 of 1992 the Civil Procedural Law (the Civil Procedures Law) and Federal Law Number 35 of 1992 regarding the Criminal Procedural Law (the Criminal Procedure Law).

    The court's jurisdiction means that the courts' competency to consider any dispute may be submitted to it. Thus, the court that has no jurisdiction will not be competent to consider a specific dispute.  The jurisdiction of a court is divided into four (4) major parts as follows:

    The First Part

    The international jurisdiction of the courts, for which the law shows when the courts shall have jurisdiction to consider the lawsuits filed against the foreigner that has not any known domicile. Also, these courts shall have jurisdiction to consider that don't fall within their jurisdiction, but they are required as per the proper administration of justice. Also, these courts shall have jurisdiction to consider the summary and provisional actions that are connected with an execution inside the territories of the state even if these courts have no jurisdiction to consider the original lawsuit.

    The Second Part

    The qualitative jurisdiction in which the law shows distribution of jurisdiction among the partial departments and the plenary departments according to the type of the case submitted to the court, the distribution of the jurisdiction between the ordinary courts and summary courts, as well as the distribution of the jurisdiction on the different stages of litigation (Court of First Instance, Court of Appeal, and Court of Cassation)

    The Third Part

    The value jurisdiction in which the law determines the jurisdiction among the partial deportments and plenary departments according to the value of the case.

    The Fourth Part

    The local or territorial jurisdiction of the courts which is the subject matter of this article means the distribution of the jurisdiction on the state courts from the same type and degree within the limits of its jurisdiction area. And the territorial jurisdiction of the courts shall be determined according to the domicile of the defendant or the place of the disputed property or the choice of the plaintiff in some personal status cases.

    The Territorial Jurisdiction

    The general rule put by the federal law in connection with the territorial jurisdiction of the state courts, that the jurisdiction shall be for the court whose jurisdiction area includes the domicile of the defendant. The law also affirms the same as under Article 31 (1) of the Civil Procedure Law it is mentioned that "the jurisdiction shall be for the court whose jurisdiction area includes the domicile of the defendant unless the law decided otherwise. And if the defendant has no domicile inside the country, the jurisdiction shall be for the court whose jurisdiction includes his residence address or work address."

    Ergo, the territorial jurisdiction, according to the aforesaid Article, shall be granted to the courts whose jurisdiction area includes the domicile of the defendant, namely the permanent and continued residence of the defendant. And the word "domicile" means the home i.e. the notification shall be forwarded to the place in which he lives.

    In cases where the defendant does not have a domicile, the jurisdiction shall be granted to the court whose jurisdiction area includes his residence address contrary to the domicile. As the man may live in a palace for a limited period then he left it to be without a domicile. Also, it is allowed to file the lawsuit before the court whose jurisdiction area includes the work address of the defendant. And the plaintiff shall have the right to file the lawsuit to the court whose jurisdiction area includes the residence address or the work address of the defendant, as both of them shall be valid in case there was not any determined and known domicile of the defendant. 

    Exceptions to the General Rule

    The rule mentioned above includes several exceptions, and these exceptions shall be stemmed either from the conditions of the plaintiff or the type and subject matter of this case.

    Therefore the exceptions with regards to the conditions of the plaintiff are as follows:

  • The court which within its jurisdiction area the damage has occurred shall have territorial jurisdiction to consider the lawsuits relating to compensation either this damage occurred to the properties or the persons. Thus, the plaintiff in the lawsuits relating to compensation may file its lawsuit either before the court whose jurisdiction area includes the domicile of the defendant or the court which within its jurisdiction area the damage has occurred.
  • The law has permitted in the commercial disputes that the court which the parties have agreed on its jurisdiction area, shall have the territorial jurisdiction to consider these disputes or the court which this agreement was executed either in whole or in part within its jurisdiction area or the court which the agreement should be executed within its jurisdiction area. Thus, the plaintiff shall have the right to file its lawsuit either before the court whose jurisdiction area includes the domicile of the defendant or the court at which the agreement (subject of lawsuit) was concluded or it was executed in whole or in part or the court in which the agreement should be executed in the commercial disputes.
  • In case there was more than one defendant, the jurisdiction shall be for the court whose jurisdiction area includes the domicile of one of them, thus the plaintiff may choose the court whose jurisdiction area includes the domicile of one of the defendants to file its lawsuit before it.
  • The Civil or Criminal Procedures Law has also clarified the territorial jurisdiction of the courts according to the subject matter of the lawsuit, as it has made exceptions in the cases mentioned hereunder from the above-mentioned general rule as follows: 

  • In the in-kind real estate lawsuits and the possessory lawsuits, the territorial jurisdiction shall be for the courts whose jurisdiction area includes the property or any part thereof. It is meant by the in-kind real estate lawsuits, any lawsuit in which the dispute is raised over one of the in-kind real estate rights such as the right of ownership as in the lawsuits relating to confirmation of ownership or the request for expropriation or recovering possession of the property. The reason, in this case, is the proper administration of justice. As it's better than the court considering this dispute to be near the property (the subject of dispute or lawsuit).
  • In case of the personal real estate lawsuit, the plaintiff may file its lawsuit either before the court whose jurisdiction area includes the domicile of the defendant or the court whose jurisdiction area includes the disputed property. It is meant by the personal real estate lawsuit, any lawsuit in which the dispute is raised over personal rights related to the property like the lawsuits relating to terminating the sale contract of the property.
  • In the lawsuits relating to moral rights (in case of companies and establishments), as the territorial jurisdiction shall be granted to the court whose jurisdiction area includes the head office of the company, except for the lawsuit relating to one of the branches of this company, as the jurisdiction shall be granted to the court whose jurisdiction area includes this branch.
  • The Bankruptcy Cases

    In the lawsuits relating to bankruptcy, the jurisdiction shall be granted to the court whose jurisdiction area includes the shop (company or private establishment) of the bankrupt. In case the bankrupt owns several shops, the jurisdiction shall be granted to the court whose jurisdiction area includes the head office of the works of the bankrupt. The same shall be applied to the lawsuits relating to bankruptcy, as the jurisdiction shall be granted to the same court i.e. the court issued the judgment to declare the bankruptcy. But if the trader left trading, we shall return to the general rule relating to the territorial jurisdiction, as the court that will have the territorial jurisdiction is the court whose jurisdiction includes the domicile of the defendant.

  • In the lawsuit relating to legacies, the jurisdiction shall be granted to the court whose jurisdiction area includes the last domicile of the deceased, the same shall be applied in case of lawsuits relating to custodianship and determining heirs.
  • In the lawsuit relating to supply contracts or contracting agreements or wages of workers, craftsmen and employees, in this case, the plaintiff may file its lawsuit either before the court whose jurisdiction area includes the domicile of the defendant or the court which the agreement was made or executed within its jurisdiction area.
  • In the lawsuit relating to claim for the insurance amount, the plaintiff may file its lawsuit either before the court whose jurisdiction area includes the domicile of the beneficiary or the court whose jurisdiction area includes the insured property.\
  • In the summary lawsuits and temporary requests, the jurisdiction shall be granted to the court whose jurisdiction area includes the domicile of the defendant or the court which the action has been requested to be executed with its jurisdiction area. But if the matter is related to taking a summary action in connection with an execution of a foreign judgment, the jurisdiction shall be granted to the court which this judgment shall be executed within its jurisdiction area.\
  • Concerning the contracts and obligations which it has been agreed to be executed within a specific domicile, the court that has territorial jurisdiction to consider these lawsuits and obligations is the court whose jurisdiction area includes that domicile.
  • Exceptions to the Law

    The law has also made two more exceptions in the general rule which are not mentioned in the aforesaid circumstances, and these are as follows:

    First case:

    If the defendant has no domicile or residence address in the country or we were unable to determine the competent court according to the aforesaid cases, the jurisdiction shall be granted to the court whose jurisdiction area includes the domicile of the defendant or his residence address. And if the defendant has no domicile or residence address, the territorial jurisdiction in the lawsuit shall be granted to Abu Dhabi Court.

    Second case:

    In personal status cases (alimony, guardianship, seeing, dowry, trousseau, gifts, divorce, abdicative divorce, clearance, separation between spouses of any kinds), in this case the plaintiff may file its lawsuit either before the court whose jurisdiction area includes the domicile of the defendant of the defendant or the court includes his domicile.

    What if?

    A question is raised from the situations mentioned above is that whether the contracting parties entered into a contract or any transaction, agree to contradict with the rules of the territorial jurisdiction of the court according to the aforesaid regulation? The answer seems to be affirmative as the law has permitted the contracting parties netted into any contract to agree on the rules of the territorial jurisdiction of the state courts in special cases.

    As under Article 31 (5) of the law of Civil ProceduresLaw, "it is stated that except the cases set forth in articles 32 and from 34 to 39, it is allowed to agree on the jurisdiction of a specific court to consider the dispute. In this case, the jurisdiction shall be granted to this court or to the court whose jurisdiction area includes the domicile or the residence address or the work address of the defendant."

    According to the aforesaid provision, any contracting parties under any relation, over which a dispute could be raised, shall have the right to agree to determine the court that shall have the jurisdiction to consider the dispute that may be raised over this relation. For example, two parties may be entered into a sale contract in Dubai, as the execution and handover shall be done in Dubai, then the two parties shall agree that Abu Dhabi Courts of Fujairah Courts shall have the right to consider this dispute.

    Whereas the law has not excluded from that only some cases stated by it exclusively, which are the in-kind real estate lawsuits, the lawsuits relating to legacies, the lawsuits relating to bankruptcy, the lawsuits relating to claim for the insurance  amount, the summary lawsuits and taking summary actions, the lawsuits relating to supplies, contracting, houses rents, wages of workers, craftsmen and employees, interlocutory requests connected with the lawsuits considered before the court actually. Any party in these relations or those lawsuits shall have the right to not abide by the above-mentioned rules of the territorial jurisdiction of the courts. In the next article, we will discuss the practical aspect of the territorial jurisdiction of local courts and how the court has interpreted the laws in different cases.

     

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[The Ins and Outs of NGO - Guide]]> Agency Laws in the GCC Countries - An Extensive Guide

    Introduction

    The extension of the multinational partnership is either setting up its subsidiary in remote purview or to tie up with the local organization in a foreign jurisdiction. United Arab Emirates (UAE) is one of the distant locals where international organizations are going into office concurrences with the Emirate nationals keeping in mind the end goal to grow their business in the UAE since the UAE being a well networked international port. A global entity wishing to set up a company offshore with cost-effective investment UAE is a standout amongst the most advantageous alternative where the foreign companies either enters into distribution agreement or makes an arrangement with the commercial agencies to expand their business with the locals. The UAE Agency Law manages these commercial agencies and distribution agreement in the UAE according to amended Federal Law 18 of 1981usually known as Agency laws. Federal Law 13 of 2006 concerning agency law was revised and revoked in 2010. However, the Federal law 18 of 1981 was a reestablishment.

    The Emirate of Abu Dhabi established Federal Law Number 11 of 1973 which centers around the task and control of business office exercises. This arrangement of Federal Law Number 11 of 1973 had constrained the foreign business in Abu Dhabi and had created various challenges for the government about essential regulation carried out for commercial activities additionally talked about in this guide.

    These agency agreements have a positive effect on UAE's economy since there is an increment in Foreign Direct Investment (FDI). Indeed, even the previous Ministry of Economy SheikhaLubna Al Qasimi states that "The new revisions will certainly boost the financial market in the UAE. This law declared out of the longing to improve and keep up steadiness in costs and guarantee that organizations are not controlled to expand costs." Furthermore, the administration of UAE His Highness Sheik Khalifa bin Zayed Al Nahyan, President of the UAE and His Highness Sheik Mohammed receptacle Rashid Al Maktoum, Vice President and Prime Minister of Dubai, they all are resolved to offer help for the development of the economy in the UAE.

    STA Law Firm house one of the leading corporate attorneys in the entire of UAE. We believe that commercial agency laws for the protection of local agents from the termination of agency agreements by the foreign entity without any legitimate reasoning. Besides, the comparative study of agency laws covering the UAE, Oman, Kuwait, Bahrain and Saudi Arabia.

     

    CONTENTS

  • Agency Laws in the United Arab Emirates

    • 1.1 Definition 
    • 1.2 Types of Agencies
    • 1.3 Sham Agency Registration
    • 1.4 Termination of Sham Agency Agreement
    • 1.5 Termination of Agency Agreement
    • 1.6 UAE Court's jurisdiction in Commercial Agency Agreement
    • 1.7 Commercial Agency Committee
    • 1.8 Arbitration in the UAE
    • 1.9 Penalties
    • 1.10 Agency Laws in Abu Dhabi
  • Commercial Agency Laws in Oman

    • 2.1 Introduction
    • 2.2 Definition
    • 2.3 Registration of Agency Agreement
    • 2.4 Kinds of Agency Agreement
    • 2.5 Ownership
    • 2.6 Termination of Agency Agreement
  • Commercial Agency Laws in Kuwait

  • Commercial Agency Laws in Bahrain

    • 4.1 Introduction
    • 4.2 Definition
    • 4.3 Ownership
    • 4.4 Exclusivity
    • 4.5 Termination of Agency Agreement
    • 4.6 Penalties
  • Commercial Agency Laws in Saudi Arabia

    • 5.1 Introduction
    • 5.2 Definition
    • 5.3 Features of Agency Law
    • 5.4 Ownership
    • 5.5 Commission
    • 5.6 Choice of law and Jurisdiction
    • 5.7 Termination of Agency Agreement
  • Conclusion

  • References

  • 1. Agency Laws in the United Arab Emirates

    Overview

    The definition of commercial agency law as per Federal Law Number 18 of 1981(the UAE Agency Law) 'any disposition whereby an international company is represented by an agent to allocate, vend, tender goods or services within the UAE for a charge or profit.'  The rights of the Emirate agents are only protected under Federal law 18 of 1981 (UAE Agency Law)if the registration of agency agreement with the UAE Ministry of Economy. Unregistered agreements do not render the rights of Emirate agents or protect them from the termination of agency agreement by the foreign principal under UAE Agency Law. Additionally, UAE commercial agent should hold a valid and appropriate license in each Emirate along with enrolment with the Chamber of Commerce in each relevant Emirate.  Article 4of the UAE Agency law (Federal law 18 of 1981as amended) states that there should be a straight connection between a UAE commercial agent and the foreign principal without any interference by the regional or multi-country sales agent. On the other hand, Article 5of the UAE Agency Law (Federal Law 18 of 1981as amended) states that ' A qualified commercial agent will be regarded selective in its domain, however, enables an international organization to delegate a different commercial agent for every emirate.' The Federal Act, 1981defines Commercial Agency as 'the representation of the principal by an agent for distribution, sale, display or provision of any commodity or service within the state (the UAE) in consideration of any commission or profit.' Here the word principal includes the manufacturer, whether based in the UAE or overseas. A common phenomenon observed in all the GCC countries is that if there is no registration of commercial agency agreement, then it will not be recognized by the courts or an agent will not have solid ground to defend himself from the termination of an agency agreement.  Therefore, commonly tan here are two types of agency agreements such as:

  • Registered agency agreements-  an agent can register commercial agency agreement before the Commercial Agency Registrar to protect themselves from an illegal termination of an agency agreement.
  • Unregistered agency agreements-  an agent enters into an agency agreement with the foreign private entity without registering the agreement with Commercial Agency Registrar then it is recognized as unrecorded agency agreement. Most of the courts in the GCC countries do not recognize or can protect a local agent from an invalid termination of an agency agreement. 
  • AGENCY LAWS IN ABU DHABI

    The Emirate of Abu Dhabi enacted Abu Dhabi Law Number 17of 1969 which states that "no person is permitted to conduct any commercial activity before obtaining a license by the commercial License Law of 1969." This provision of law had created commotion in the commercial market which limited the Foreign Direct Investment in Abu Dhabi. Therefore, Abu Dhabi Law Number 11 of 1973 repeals Abu Dhabi Law Number 17 of 1969 which encourages Foreign Direct Investment as it focuses on operation and regulation of commercial agency activities. In Abu Dhabi, a business agent does not have exclusive rights over the products of the foreign entity once they enter commercial agency agreement as an agent is a mediator. An agent is a mediator for foreign companies to set up their business in Abu Dhabi because without an agent a foreign corporation cannot expand their business in the UAE.

    According to Abu Dhabi Law Number 11 of 1973 it is not explicitly mentioned that registered or qualified agent would be protected under a specific provision if the foreign entity terminates agency agreement without any valid reasoning.

    Furthermore, in other jurisdictions of the GCC countries, qualified agents are protected under their specific agency laws if the registration is agency agreement is carried out before the Commercial Agency Registrar. This guide entails in detail about agency laws in the GCC. Click here to read more.

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Trademark Registration in Asia II]]> Trademark Registration in Asian Countries

    Country and Applicable Legislation Length of Trademark (in years) Trademark Definition Eligible Applicants Documentation Requirement Language Requirement and Procedures Treaty/ Classification Treaty/Classification Benefits

    Afghanistan

    The Trademark Law Number effective from 1 September 2009 (as amended) repealing Trademark Regulations issued on 20 September 1960. 10 Article 2 of the Afghanistan Trademark Law defines 'Trademark' to include:   Trademarks consist of (one or more) names, words, signatures, letters, figures, drawings, symbols, titles, seals, pictures, inscriptions, advertisements or packs or any other mark or a combination  1. Person(s)  desiring to have the exclusive use of a trademark for distinguishing goods for their own production, manufacture, selection or in respect of which he issued a certificate (Article 4); 2. Goods in which applicant trades or intends to trade (Article 4); 3. The owners of a commercial, industrial, telecommunications, agricultural, professional or service organization in Afghanistan (whether domestic or foreign) provided that marks are registered in Afghanistan (Article 5); and 4. owners of well-known marks (Article 7). 1. The trademark application with relevant application date is to be presented before Afghanistan Intellectual Property office (Ministry of Commerce); 2. name, address, the occupation of the applicant 3. a copy of a legalized power of attorney for any representative 4. name, description, and nature of goods, products and/or services for which trademark registration is sought; 5. representation of mark with at least 10 copies along with explanation of symbols and expressions used in the trademark with the definition of the component; 6. The registration fees payable to IP office in Afghanistan; and 7. The particulars of earlier registration in the home country or country having reciprocal arrangements with Afghanistan, if any (Article 10 of the Afghanistan Trademark Law also sets out the trademark application process). Note: Alcoholic beverages are not 1. Application can be submitted in English or Persian. The Afghanistan Intellectual Property Office (Central Registration Office) is responsible for registration (including preliminary search) in the UAE. 2. In the event of rejection, the Central Registration Office is obligated to notify the applicant as to reasons for rejection. 3. Trademarks are transferable and the transfer shall be valid if recorded separately with the Central Registration Office (Trademarks Registration Section) 1. Economic Cooperation Organization Trade Agreement seeking the cooperation of intellectual property rights protection under article 19. Note: UAE is not a member of the Madrid Convention or the Madrid Protocol. Note: Nice Classification (9th Edition). 1. Paris Convention, WIPO or any other international treaty for the Protection of Industrial Property; are NOT signed by Afghanistan and hence an applicant cannot claim priority based on their home applications/ registrations. However reciprocal arrangements are considered.

    Bangladesh.

    - Trademarks Act, 2009 Act No. XIX of 2009 and - Trademarks (Amendment) Act, 2015 - Trade Marks Rules, 1963 and; - Tradem 10 Section 2 of Bangladesh Trademark Law defines mark as "mark" includes a device, brand, heading, label, ticket, name, signature, word, letter, symbol, numeral, figurative elements, the combination of colors or any combination thereof;" and Trademark is defined as "a registered trademark or a mark used in relation to goods for the purpose of indicating a connection in the course of trade between the goods and the person having the right as proprietor to use the mark;" or "a mark used in relation to a service so that it may be indicated that the person has the right as proprietor to use the mark in the course of trade". Section 15(1) of the 2009 Act states that if the proprietor of a trademark used or proposed to be used desires to register it shall apply in the prescribed manner to the Registrar. Accordingly, the following persons can apply for an application:- 1. Natural or juristic persons of Bangladeshi nationality; 2. persons regularly residing in Bangladesh and are permitted to engage in commercial or vocational activities; 3. foreigners who are nationals of countries that extend reciprocal treatment to Bangladesh; 4. Public agencies. and owners of well-known marks. 1. Application stating the name of the legal entity, individual, or firm, addresses, the nationality of applicant/s represented in a special or particular manner along with the signature of the applicant; 2. legalized Power of attorney in cases where the application is being submitted by a representative; 3. application along with mark representation must be submitted with supporting documents and should be lithographed or in the English language in large and legible characters with deep permanent ink on strong paper; 4. in relation to affidavits, prints should be on only one side of approximately 13 inches by 8 inches, and the left-hand part to a margin of not less than one inch a half; 5. every application for the registration of a trademark shall be in respect of goods in one class and the separate application for each class shall be made for the same trademark; and 6. statement of use, if used, the registrar may require the applicant to file an affidavit testifying 1. As per the rules of 1963 with amendments all applications, notices, statements or other except trademarks authorized or required by the Act or the rules submitted to the Trade Mark Registry or left with or sent to the Registrar or the Central Government shall be written, lithographed or in the English language. 2. In case of Mark containing characters other than Roman translation in English must be provided and in case of the mark containing words he The registrar may ask for an exact translation thereof together with the name of the language, and such translation and name, if he so requires, shall be enclosed and signed. 3. The application is made to the Trademark registry and as per section 15(2) separate applications must be made for each class of goods or services. The application shall be made on Form TM-1, if in respect of non-textile goods. Defensive trademark registration can be applied by TM-3 form. 4. The opposition can be made under section 18 of the act within two (2) months from the date of publication. The registrar shall serve the notice of opposition to the applicant within one (1) month. 1. Paris Convention for the Protection of Industrial Property; 2. Nice Classification; 3. Convention Establishing the World Intellectual Property Organisation (the WIPO); and 4. World Trade Organisation (the WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) (1994) (April 10, 1996) 1. Being signatory to Paris Convention, the priority claim can be made under the convention or by WTO members within 6(six) months after the date in which the application was made in Convention Country together with the complete particulars and the certified copy of the priority application, the trademark shall, if registered under section 120 of Act and be registered as of the date on which the application was made in the Convention Country and that the date shall be deemed to be the date of registration.

    Brunei Darussalam

    The law providing for trademark registration is The Trade Marks Act (Cap 98) and Trade Marks Rules of 2000 (R 1, 1984 Ed. S 27/2000). 10 Under Part I of Brunei Darussalam Trademark Law: (Refer, section 4) Trademark is defined as "any visually perceptible sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trademark may, in particular, consist of words (including personal names), designs, letters, numerals or the shape of goods or their packaging." As per section 33 of Brunei Trademark Law, the application can be made by "applicant" who has used the mark or has bona fide intention to use the mark. Accordingly following persons qualify as an applicant:- 1. Natural or juristic persons of Brunei nationality; 2. persons regularly residing in Brunei and are permitted to engage in commercial or vocational activities; 3. foreigners who are nationals of countries that extend reciprocal treatment to the Brunei; 4. public agencies; and 5. owners of well-known marks. 1. Request for registration of the trademark; 2. name and address of the applicant; 3. statement of goods and services in respect of which the trademark is sought to be registered; 4. representation of the mark; 5. statement in the application as to the use of Mark or Expression of bona fide intention to use the mark; 6. prescribed fee for each class of goods or services separately in respect of which registration is sought; and 7. Translations and/or transliterations if any required in English. 1. As stated under the rules a translation and /or transliteration, of each word in English to the satisfaction of the Registrar should be provided where a trademark contains or consists of a word/s in characters other than Roman or in a language other than English or Malay. 1. Paris Convention for the Protection of Industrial Property; 2. Nice Classification; 3. Convention Establishing the WIPO; 4. World Trade Organisation (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement); 5. ASEAN Framework Agreement on Intellectual Property Cooperation sought to explore the vision of ASEAN trademark system by establishing ASEAN Trademark office. (treaty not in force); 6. Agreement between Japan and Brunei Darussalam for an Economic Partnership; 7. Trans-Pacific Strategic Economic Partnership Agreement; and 8. Agreement establishing 1. Priority Claim can be made under Paris Convention or WTO by nationals and body corporate residing or having permanent place of business in member states within 6 months from the first filing date. 2. Agreement between Japan and Brunei Darussalam for an Economic Partnership sought proper enforcement of intellectual rights including trademark and prevent infringements by cooperation in customs for prohibiting importation and exportation of goods suspected of infringing intellectual property rights.

    Cambodia

    Law Concerning Marks, Trade Names, and Acts of Unfair Competition of the Kingdom of Cambodia 2002, (Royal Decree NS/RKM/0202/006). Sub-Decree on the Implementation of trademark law (Sub- Decree No. 46 dated July 12, 2006). Prakas on the Procedures for the Registration and Protection of Marks of Goods which include a Geographical Indication. 10 Article 2 (a) of the Cambodian Trademark Law defines Trademark as 'mark' means "any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise" and trademark under 2(c) means the "name or/ and designation identifying and distinguishing an enterprise." The application can be filed by any person or body resident in the Kindom of Cambodia can be the applicant. When the State of permanent residence of the applicant is outside the Kingdom of Cambodia, then a Power of Attorney appointing an agent should be filed within 2 months of the filing of the application. 1. Natives of the natural or legal entity, practicing any of the commercial, industrial, professional, or service business; 2. foreigners of the natural or legal entity, practicing any of the commercial, industrial, professional, business in Cambodia. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons; and 5. owners of well-known marks. 1. a request for registration; 2. name of applicant and address for communication bearing signatures of the applicant or representative; 3. reproduction of mark with 15 additional reproductions of the mark; 4. specification of goods or services based on Nice classification; 5. if priority is claimed the application a declaration claiming the priority of an earlier national or regional application filed by the applicant or his predecessor in title in any country member of the Paris Convention; and 6. Translations as per requirements, if any. 1. As per article 4 of the Rule, applications shall be in the Khmer or English language, and any document forming part of an application or submitted to the Registrar pursuant to the Law or this Sub-Decree and which is in a language other than Khmer or English shall be accompanied by a Khmer or English translation. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks; 2. ASEAN Framework Agreement on Intellectual Property Cooperation (Not in force); 3. Paris Convention for the Protection of Industrial Property (22 September 1998); 4. Convention Establishing the WIPO; 5. World Trade Organisation (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) (April 10, 1996) 6. Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area; 7. Agreement between the United States of America and the Kingdom of Cambodia on Trade Relations and Intellectual Property Rights Protection; and 8. Memorandum on IP Cooperation between Cambodia and Thailand. 1. Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs). 2. The applicant can claim right to priority by attaching a declaration claiming priority of prior national or regional application in any country member of the Paris Convention. 3. Agreement between the United States of America and the Kingdom of Cambodia on Trade Relations and Intellectual Property Rights Protection – the Article XVI commits to co-operate on registration and recognization by harmonizing the requirements stating the meaning of marks, use as necessary criteria for maintaining the registration validity and adoption of the international classification. 4. Madrid protocol aids international registration of marks.

    China

    Trademark Law of the People's Republic of China amended for the third time according to the "Decision on the Revision of the Trademark Law of the People's Republic of China" adopted at the 4th Session of the Standing Committee of the Twelfth National People's' Congress on August 30, 2013) 10 Article 8 of Republic of China Trademark Law provides "an application may be made to register as a trademark any mark, including any word, device, any letter of the alphabet, any number, three-dimensional symbol, color combination, and sound, or any combination thereof, that identifies and distinguishes the goods of a natural person, legal person, or other organization   Note: China allows registration of sound and color marks Article 4 of the Chinese Trademark law provides:- 1. Natives of the natural or legal entity, practicing any of the commercial, industrial, professional, or service business; 2. foreigners of the natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of the natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons; and 5. owners of well-known marks. 1. Under rule 9 of implementing rules, applicant must file one application in respect of each class of goods according to the Classification of Goods stating name and address. The application must be in the Chinese language; 2. ten copies of the reproductions of Clear trademark and one copy of the black and white design with the size between minimum 5cm*5cm and maximum 10cm*10cm (the Soft copy should also be provided); 3. any application for the registration of a trademark in respect of pharmaceutic products for human use shall be accompanied by a certificate issued by the health administrative department. Any application for the registration of a trademark in respect of cigarettes, cigars or cut tobacco with packages shall be accompanied by a certificate of authorized manufacture issued by the competent authority of the State for tobacco products. Any application for the registration of a trademark in respect of any such other goods as prescribed by the State that must use a registered the trademark shall be accompanied by a certificate of authorization issued by the competent department concerned; 4. details of goods and service; 5. power of attorney duly executed by the applicant in favor of the agent; 6. copy of ID card or Passport (for the natural person); and 7. any document in a foreign language shall be accompanied by a Chinese translation thereof. 1. Under rule 14 of Implementing Rules - where a foreigner or a foreign enterprise applies for the registration of a trademark or for any other matters concerning a trademark, the Chinese language shall be used. Foreign language documents must be have Chinese translation. 2. Once an opposition is filed against the application the Trademark Office shall hear the facts and grounds submitted by the opposing party as well as the opposed, shall make a decision on whether or not to approve the application for registration within the twelve months from the date of publication after investigation and verification, and shall notify the opposing party and the opposed of its decision, in writing. If an extension is needed, upon the approval of the department of industry and commerce administration under the State Council, the time limit can be extended a further three month 1. Paris Convention for the Protection of Industrial Property; 2. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 3. Convention Establishing the World Intellectual Property Organisation (the WIPO); 4. World Trade Organisation (the WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) (1994); 5. Trademark Law Treaty; 6. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks; 7. Free Trade Agreement between the Government of New Zealand and the Government of the People's Republic of China; 8. Agreement between Japan and China with Regards to Protection of Trademarks; 9. Singapore Treaty on the Law of Trademarks 1. Any foreign person or enterprise applying for the trademark in China has to file the application in accordance with the agreement between two countries, or international treaties or on the basis of principles reciprocity. Application with priority right should be filed within 6 months from the first filing date of application in another country, who is a member of Paris Convention; 2. Free Trade Agreement between the Government of New Zealand and the Government of the People's Republic of China under chapter 12 seeks to keep rights transparent by notifications and thereby protect the intellectual property rights including trademarks. 3. Agreement between Japan and China with Regards to Protection of Trademarks grants parties from contracting states protection of the well-known trademark as per their determination of well-known trademark. 4. Special provisions relating to the protection of trademarks through international registration under the Madrid protocol are laid down under Chapter IVA of 2010 Act for the international application under Madrid protocol. Before becoming the member of this protocol individual application was required to be made by the applicants seeking international trademark protection.

    Hong Kong

    Trade Marks Ordinance as amended by L.N. 254 of 2009;   Trade Marks Rules (E.R. 3 of 2015); Trade Marks Ordinance Regulation.   Trade Marks Ordinance (Amendment of Schedule 1) Regulation 2013 (HK190) 10 Under section 3 of the Hong Kong Trade Marks Ordinance (as amended by L.N. 254 of 2009) trademark is defined as: 1. "trademark" means any sign which is capable of distinguishing the goods or services of one undertaking from those of other undertakings and which is capable of being represented graphically; 2. Without affecting the generality of subsection (1), a trademark may consist of words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colors, sounds, smells, the shape of goods or their packaging and any combination of such signs. 3. A sign may constitute a trademark even though it is used in relation to a service ancillary to the trade or business of an undertaking and whether or not the service is provided for money or money's worth. (4) Unless the context otherwise requires, references in this Ordinance to a trademark shall be construed as including references to a certification mark, collective mark and defensive trademark..' The Hong Kong Trademark Law does not specifically set out this information within its Acts or Rules. However, a bare reading of HK's IP Law implies that following persons are eligible: 1. Natives of the natural or legal entity, practicing any of the commercial, industrial, professional, or service business; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of the natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons; and 5. owners of well-known marks. 1. Under section 38 of the Ordinance: An application for registration of a trade mark shall be filed with the Registrar in any of the official languages such as English and/or Chinese; 2. the application shall include (a) a request for registration of the trademark;(b) the name and address of the applicant; (c) a statement of the goods or services in relation to which it is sought to register the trademark; (d) a representation of the trademark; and (e) such other information, documents or matter as may be required by the rules; 3. classification of goods and services under Rule 5 of Rule 2015 and section 40 of the Ordinance is classified in accordance with the International - Nice Classification; 4. under rule 9 of 2015 rules the applicant wishes to claim a right to priority under section 41 of the Ordinance, shall include the following particulars- (a) the name of each country, territory or area in respect of which a right to priority is claimed; (b) the date of filing of the application filed in, or in respect of, each such country, territory or area; and (c) the application number assigned to that application, if it is known to the applicant; 5. translations, if any, of any word, letter or character in a language other than English or Chinese, the Registrar may require the applicant to file an exact translation of that word, letter or character into English or Chinese; and 6. Any other documents required to be verified by the Registrar. The application form is submitted in French language. Once the marks have been published in the Official Gazette, there is a set term of sixty (60) post publication date to file for opposition claims relating to domestic registrations. In case of international applications, the term is set for two (2) months from the date mark is published in Gazette. opposition term cannot be extended. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 4. Paris Convention for the Protection of Industrial Property ; 5. Trademark Law Treaty ; 6. Convention Establishing the World Intellectual Property Organization ; 7. Paris Convention for the Protection of Industrial Property ; 8. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) Morocco is a member of the Paris Convention. An applicant who has applied for a trade mark in another convention country is entitled to a priority right to be accorded the same date as the first filed application, provided the Moroccan application is filed within six months of such earlier filing date. Morocco is also a member of the Madrid Agreement and Protocol, so that registration of a trade mark may be obtained by way of an international application designating Morocco. Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

    India

    The Trademark Act, 1999 amended by The Trade Marks (Amendment) Act, 2010 and Trade Marks(Amendment) Rules, 2013 10 Per 1999 Act - section 2 (zb) "trademark" means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from choose of others and may include shape of goods, their packaging and combination of colours in relation to Chapter XII (other than section 107), a registered trademark or mark used in relation to goods or services for the purpose of indicating or so as to indicate a connection in the course of trade between the goods or services, as the case may be, and some person having the right as proprietor to use the mark, and in relation to other provisions of this Act, a mark used or proposed to be used in relation to goods or services for the purpose of indicating or so to indicate to a connection in the course of trade between the goods or services, as the case may be, and some person having the right, either as proprietor or by way of the permitted user, to use the mark whether with or without any indication of the identity of that person, and includes a certification trade mark or collective mark." Section 2 m defines mark as " "mark" includes a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colours or any combination thereof. section 18 (1) of India's Trademark Law authorizes following persons or entities to make the application: i. Any person claiming to be the proprietor of a trade mark used or proposed to be used by him, who is desirous of registering it, shall apply in writing to the Registrar in the prescribed manner for the registration of his trademark. ii. section 36B (a) under chapter IVA as added after 2010 amendment states special provisions relating to the protection of trademark through the international registration under the madrid protocol wherein the application can be made by a person who is a citizen of, or is domiciled in, or has a real and effective industrial or commercial establishment in, that Contracting State or a State which is a member of that Contracting Organisation, as the case may be. iii. A single application can be made by different classes of goods and services and fees in respect of each such class (application is examined by the Indian Trade Marks Office) 1. The application under form prescribed as per rules stated in the first schedule of the 1999 Act along with fee; 2. soft Copy of Mark; 3. date of first use of the mark; 4. name, address, and nationality of the applicant; 5. trademark class/classification based on international classification; 6. list and description of goods or services; 7. if the mark is a script not in English or Hindi, the English translation of the mark; 8. if the application is to claim priority from an earlier filed convention application, details stating number, date, country and goods/services of that application is required. A certified priority document or it's duly the notarized copy is to be submitted. If the certificate is not in English, a certified/notarized English translation is required; and 9. Power of attorney simply signed by the applicant in favor of the agent. For Collective Marks: 1. The application shall be accompanied by regulations governing the use of such collective mark; and 2. the Regulations shall specify the persons authorized to use the mark, conditions of membership of association and conditions of use of the mark and sanctions against misuse of the mark. For Certification Marks: 1. Application for Certification marks shall be accompanied by a draft of regulations. It shall include provisions regarding cases in which the proprietor is to certify goods or services and authorize the use of certification trademark; and 2. Any other provision which the registrar may require to be inserted. The application by applicant stated under section 18 shall be made in prescribed manner to the Trade Marks Registry within whose territorial limits the principal place of business in India of the applicant or in the case of joint applicants the principal place of business in India of the applicant whose name is first mentioned in the application as having a place of business in India is situated. Where the applicant or any of the joint applicants does not carry on business in India, the application shall be filed in the office of the Trade Marks Registry within whose territorial limits the place mentioned in the address for service in India as disclosed in the application is situated. 1. The application under section 18 must be in English Section 67 B of Trademark amendment 2013 Rules amending 2002 rules states "An International application or any communication relating there too for transmission to the international bureau or any advice by way of notification of extension of protection to India resulting from international registration shall be in English". 2. A translation of non-English words into English is required in case of script is in language other than English or Hindi. 3. Any opposition must be made within four months from the date of the advertisement or re-advertisement (as amended by 2010 Act) of an application for registration or within such further period, not exceeding one month in the aggregate on payment of the prescribed fee and give notice in writing in the prescribed manner to the Registrar, of opposition to the registration. 4. The Registrar shall serve a copy of opposition on the applicant within two months from the receipt by the applicant of such copy of the notice of opposition, the applicant shall send to the Registrar in the prescribed manner a counter-statement of the grounds on which he relies for his application. 5. If the applicant sends such counterstatement, the Registrar shall serve a copy thereof on the person giving notice of opposition. 6. The Registrar shall decide the matter based on the evidence produced after hearing the parties grant or reject the application or grant with any limitations. 7. Once accepted the Registrar issues a certificate, sealed with the seal of the Trademarks Registry. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks; 2. Paris Convention for the Protection of Industrial Property. 3. Nairobi Treaty on the Protection of the Olympic Symbol; 4. Comprehensive Economic Partnership Agreement between Japan and the Republic of India including inter alia protection of trademark under Article 106 of the Treaty. 5. Memorandum of Understanding between Switzerland and India for fostering protection and promotion of IP related rights including trademarks. 6. World Trade Organization (WTO) - Agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) 7. Agreement establishing the World Trade Organization (WTO) 1. Comprehensive Economic Partnership Agreement between Japan and the Republic of India grant parties from contracting states Article 106 protection of the well-known trademark as per their determination of well-known trademark. A request by the applicant for considering its application for registration of a trademark be examined in preference to other applications shall be considered. 2. Special provisions relating to the protection of trademarks through international registration under the Madrid protocol are laid down under Chapter IVA of 2010 Act for the international application under Madrid protocol. Before becoming the member of this protocol individual application were required to be made by the applicants seeking international trademark protection.

    Indonesia

    Trademark Law Number 15 of 2001   Indonesian Government Regulation No. 7 of 2005 on Organizational Structure, Duties and Functions Trademark Appeal Commission to implement Article 34 of Law No. 15 of 2001. 10 Article 1 of Indonesia's Trademark Act (15 of 2001) defines Mark under article 1.1 as "Mark shall mean a sign in the form of a picture, name, word, letters, figures, the composition of colors, or a combination of said elements, having distinguishing features and used in the activities of trade in goods or services. Trademark is defined under Article 1.2 as "Trade Mark shall mean a mark that is used on goods traded by a person or by several persons jointly or a legal the entity to distinguish the goods from other goods of the same kind. As per the definition of the applicant under article 1.6 applicant/s can be any party that files an application. Indonesia recognizes 'first-to–file' system. As also understood from article 3 anybody whether an owner/user or not if applies first for registration can become the registered owner of the mark which is finally accepted after completing due process. Under article 10 if an applicant resides or permanently domiciles outside the territory of the Republic of Indonesia the application must be filed through a proxy in Indonesia. A written and the signed application shall be filed in the Indonesian language under article 7 stating: 1. Date, month and year 2. Complete name, nationality, and address of the applicant 3. Complete name and address of proxy (if applicable) 4. Colors (if the mark uses color elements) 5. Country and filing date of original application (if the application is filed for priority right). 6. The application shall be signed by the applicant or his proxy. 7. Receipt of the payment. 8. If the application filed by more than one person who is jointly entitled to the mark the application shall be signed by one of the applicants entitled to the mark and be furnished with a written consent from them. 1. Applications have to be filed in the Indonesian language; 2. an application with priority right should be filed within 6 months from the first filing date of application in another country, who is a member of Paris Convention. 3. ASEAN Framework Agreement on Intellectual Property Cooperation sought to create co-operation on the protection of intellectual property rights and seeks to create ASEAN trademark registration system and is applicable to Indonesia. 4. Trademark law treaty aimed at harmonization of procedures which has been achieved to the certain extent. 1. Trademark Law Treaty 2. Convention Establishing the World Intellectual Property Organization 3. Agreement establishing the World Trade Organization (WTO) 4. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) 5. ASEAN Framework Agreement on Intellectual Property Cooperation. 1. An application with priority right should be filed within 6 months from the first filing date of application in another country, who is a member of Paris Convention. 2. ASEAN Framework Agreement on Intellectual Property Cooperation sought to create co-operation on the protection of intellectual property rights and seeks to create ASEAN trademark registration system. 3. Trademark law treaty aimed at harmonization of procedures which has been achieved to certain extent.

    Japan

    Trademark Act (Act No. 127 of April 13, 1959, as amended up to Act No. 36 of May 14, 2014) 10 Japanese Trademark Law defines "Trademark" (Article 2 of Law) to include among those recognizable by human perception, any character(s), figure(s), sign(s) or three - dimensional shape(s) or colors, or any combination thereof, sounds, etc. provided by Cabinet Order (hereinafter referred to as a "mark") which is: (i) used in connection with the goods of a person who produces certifies or assigns the goods as a business; or (ii) used in connection with the services of a person who provides or certifies the services as a business (except those provided for in article 4: unregistrable trademark) Any person or legal entity can register the trademark. Japan also adopts the first-to-file the system in which the registration is granted to a person who has first filed an application when an application for similar or identical trademark is filed, regardless of whether the trademark has been used previously. 1. Name and the domicile or residence of the applicant for trademark registration; 2. samples of trademark (between 8cm*8cm and 15cm*15cm); 3. the description of goods and services and class of goods or services provided by Cabinet Order as provided for in Article 6(2); 4. the application shall contain thereof a statement indicating a the trademark consists of the following as listed herein; a. any character(s), figure(s), sign(s) or three dimensional shape(s) or colors, or any combination thereof, where the said character(s), figure(s), sign(s) or three- dimensional shape(s) or colors in connection with the said trademark changed; b. consists of the three-dimensional shape(s) (including the combination with any character(s), figure(s), sign(s) or three-dimensional shape(s) or colors, or any combination thereof) (excluding those listed in the preceding item); c. consists solely  the of colors (excluding those listed in item (a); d. consists solely of sounds; or e. in addition to those listed in each of the preceding items, trademarks provided by Cabinet Order of the Ministry of Economy, Trade and Industry; 5. the indication of the trademark being "standard character trademark" after trademark is sought for registration with item be above. 6. Power of attorney duly made. 7. certified copy of priority claim to seek claim under article 8 within six months from the date of application filed in member country. 1. The application and the mark are preferred in Japanese language. In a case where transliteration translation of mark is described, the examiner can use it as a reference for examination. Since the popular naming or concept of said trademark must be determined by considering the degree of recognition by Japanese consumers, the use of such description will be left to the judgment of the examiner. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks 2. Trademark Law Treaty 3. Nice Agreement Concerning the InternationalClassification of Goods and Services for the Purposes of the Registration of Marks 4. Paris Convention for the Protection of Industrial Property 5. Convention Establishing the World Intellectual Property Organization 6. Agreement establishing the World Trade Organization (WTO) 7. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) 8. Agreement between Japan and China with Regards to Protection of Trademarks 9. Comprehensive Economic Partnership Agreement between Japan and the Republic of India including inter alia protection of trademark under Article 106 of the Treaty. 10. Agreement between the Government of Japan and the Government of Malaysia for an Economic Partnership. 11. Agreement between the Government of Japan and the Government of Malaysia for an Economic Partnership for streamlining and Harmonization of Procedural Matters in Intellectual property including trademark under article 121. 12. Agreement between Japan and the Kingdom of Thailand for an Economic Partnership for harmonizing and streamlining the procedure and mutual co-operation for trademark protections. 13. Agreement between Japan and the Socialist Republic of Viet Nam for an Economic Partnership 14. Agreement between Japan and Brunei Darussalam for an Economic Partnership 1. Japanese national or foreign national residing or domiciled in Japan (or juristic person) can file an application for international registration of trademark, by Madrid Protocol, where requirements provided by Ordinance of the Ministry of Economy, Trade and Industry are applicable. 2. Japanese Patent Office has released the 'International Classification of Goods and Services, 10th Edition, Version 2015 in Japanese translation with similar group code'. Hence uniform classification is applicable to all applications. 3. Comprehensive Economic Partnership Agreement between Japan and the Republic of India grant parties from contracting states Article 106 protection of the well-known trademark as per their determination of well-known trademark. A request by the applicant for considering its application for registration of a trademark is examined in preference to other applications shall be considered. 4. Agreement between the Government of Japan and the The government of Malaysia for an Economic Partnership for streamlining and Harmonization of Procedural Matters in Intellectual property including trademark under article 126 protection of trademarks to the registered owner under article 132. 5. Agreement between Japan and the Socialist Republic of VietNam for an Economic Partnership sought to abolish the requirement of the authentication of signatures or other means of self-identification on documents to be submitted to the competent authority of the Party, including applications, translations into a language accepted by such authority of any earlier application whose priority is claimed, powers of attorney, and certifications of assignment, in the course of application procedure. Further, protection of the trademark. 6. Agreement between Japan and Brunei Darussalam for an Economic Partnership sought proper enforcement of intellectual rights including trademark and prevent infringements by co-operation in customs for prohibiting importation and exportation of goods suspected of infringing intellectual property rights.

     

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    <![CDATA[Trademark Registration in Asian Countries]]> Trademark Registration in Asian Countries

    Country and Applicable Legislation Length of Trademark (in years) Trademark Definition Eligible Applicants Documentation Requirement Language Requirement and Procedures Treaty/ Classification Treaty/Classification Benefits

    Afghanistan

    The Trademark Law Number effective from 1 September 2009 (as amended) repealing Trademark Regulations issued on 20 September 1960. 10 Article 2 of the Afghanistan Trademark Law defines 'Trademark' to include:   Trademarks consist of (one or more) names, words, signatures, letters, figures, drawings, symbols, titles, seals, pictures, inscriptions, advertisements or packs or any other mark or a combination  1. Person(s)  desiring to have the exclusive use of a trademark for distinguishing goods for their own production, manufacture, selection or in respect of which he issued a certificate (Article 4); 2. Goods in which applicant trades or intends to trade (Article 4); 3. The owners of a commercial, industrial, telecommunications, agricultural, professional or service organization in Afghanistan (whether domestic or foreign) provided that marks are registered in Afhganistan (Article 5); and 4. owners of well-known marks (Article 7). 1. The trademark application with relevant application date is to be presented before Afghanistan Intellectual Property office (Ministry of Commerce); 2. name, address, the occupation of the applicant 3. a copy of a legalized power of attorney for any representative 4. name, description, and nature of goods, products and/or services for which trademark registration is sought; 5. representation of mark with at least 10 copies along with explanation of symbols and expressions used in the trademark with the definition of the component; 6. The registration fees payable to IP office in Afghanistan; and 7. The particulars of earlier registration in home country or country having reciprocal arrangements with Afghanistan, if any (Article 10 of the Afghanistan Trademark Law also sets out the trademark application process). Note: Alcoholic beverages are not 1. Trademark application , power of attorney, and supporting documents including trademark specimen must be submitted in Arabic language. 2. The Registrar of trademarks accepts applications that are in compliance with law and procedures. Once accepted, the grant of marks is printed and published in the official gazette of Iraq thrice. Opposition claims are open for a term of three (3) months. If the Registrar does not receive any claim as to opposition of trademarks, the trademark is deemed as final and trademark certificate is issued to the applicant . 1. Singapore Treaty on Law of Trademarks; 2. Paris Convention for the Protection of Industrial Property; 3. Convention establishing the WIPO; 4. World Trade Organisation - Observer Status ( refer , column one on left) The Singapore Treaty on Law of Trademarks dated 16 March 2009 is primarily aimed at harmonising procedures of contracting parties intending to file national or regional trademark or service mark applications. The treaty comprises of 32 articles and contracting parties have the discretion to receive applications (whether in hard copy formation, electronic copies or otherwise) as per their choice. The treaty currently (as of February 2015 - source: wipo.int) comprises of 42 contracting parties

    Yemen

    Law Number 23 of 2010 being Yemen Trademarks and geographical Indications Law

    10 Article 3 of the Yemen Trademark Law defines Trademark as 'a trademark is anything of distinctive form which is visible to the eye, including names, words, letters, numbers, signatures, drawings, symbols, seals, pictures or embossment , or a particular arrangement of colour or set of colours, or any group of these features, if used or intended to be used to distinguish the products or services of a commercial, industrial, agricultural , professional or service enterprise. There is a six month term commencing from the date of publication date up to the date of registration of a trademark Article 53 of Yemen Trademark Law sets out that following persons may apply for trademark(s):- 1. Every (natural or juridicial person who is) a Yemeni who chooses to base their effective activities in Yemen; 2. every (natural or juridicial person who is) a foreigner who chooses to base his effective activities in Yemen; 3. public sector bodies and institutions; and 4. States or entities that are linked to Yemen or where Yemen has relations of reciprocity and/or has the right to request for registration of trademark in accordance with the Trademark Law of Yemen. 1. Power of Attorney certified by a competent authority if the application is made through an agent or representative of applicant;. 2. A copy of a valid certificate of incorporation or commercial register (duly legalized), providing clearly - name of entity, name of managing director, registered place of business, and related; 3. Image matching the mark to be registered so that they are clear and free from any promotional or descriptive phrases (14 copies); 4. Passport copy and personal details of applicant; 5. copy of priority document if priority is being claimed; and 6. additional attachments, if an 1. Translation in Arabic issued by the Office of certified documents and data written in a foreign language. 2. In the event applicant is claiming priority, the applicant should attach the date and number of prior application along with the name of country and authority where such prior application was made. The Law also requires applicants to submit certified photo copy of prior application within three (3) months the date priority application has been filed. 1. Paris Convention for the Protection of Industrial Property ; 2. Convention Establishing the World Intellectual Property Organization ; 3. Paris Convention for the Protection of Industrial Property ; 4. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)  

    Jordan

    Law Number 34 of 1999 Issued Pursuant to official gazette number 4389 of 1999 dated 1 November 1999

    10 Article 2 of Jordanian Trademark Law defines Trademark as "any visually perceptible sign used or to be used by any person for distinguishing his goods or services from those of others." Opposition claims can be filed within a three month term from date of publication as per Article 14 of the Law. A notice of opposition must be given in writing in the prescribed manner and should inculde a statement of the grounds for the opposition. Article 11 of Jordan's Trademark Law sets out that "any person claiming to be the proprietor of a used or proposed to be used trademark who is desirous of registering such trademark shall apply in writing to the registrar in the prescribed manner." 1. power of attorney duly signed, notarised, and legalised before Consular of Jordan; 2. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 3. applicant's company details including trade name, nationality, address, business activity, name of managing director where applicant is a corporate entity; 4. itemised list of products forming part of trademark application; 5. meaning and/or origin of the mark being registered; and 6. priority documents in the event priority is being claimed and has been certified before the competent authority 1. The forms and other supporting documents to be submitted (including power of attorney) must be in Arabic . . 1. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks ; 2. Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks ; 3. Paris Convention for the Protection of Industrial Property ; 4. Convention Establishing the World Intellectual Property Organization ;and 5. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement ordan has been considering accession to Madrid Protocol for over an decade which (if acceded) would make Jordan compliant in trading with United States and European Union. In this regard, Jordan passed an amendments to its trademark law in the year 2007 (through Law number 29 of 2007) to access the Protocol. The Protocol has however not been implemented till date

    Algeria

    Order Number 3-6 dated 19 July 2003 dealing with Trademarks. Executive Decree Number 5 - 277 of 2005 laying down the Procedures for Filing and Issuance of Trademarks. Executive Decree Number 8-346 o f 2008 supplementing Decree 5-277 of 2005

    10 Article 2 of Algerian Trademark Law defines Trademark as "all symbols representable in writing, especially words including persons' names, letters and numbers , drawings , pictures, forms distinguishing goods or packages thereof, and colours or combination there of used to distinguish goods or services of a natural or nominal person from the goods and services of someone else." 1. Natives of natural or legal entity, practicing any of the commercial , industrial, professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney duly signed (in French language); 2. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 3. applicant's company details including trade name, nationality, address, business activity, name of managing director where applicant is a corporate entity; 4. itemised list of products forming part of trademark application (2 prints of trademark to be included); 5. meaning and/or origin of the mark being registered; and 6. priority documents (with verified French translation) in the event priority is being claimed and has been certified before the competent authority 1. The power of attorney, application form (3 print sets) and priority documents (if applicable) must be submitted in French language 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks ; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; and 4. Paris Convention for the Protection of Industrial Property The Madrid System makes it possible for an applicant to apply for a trademark in a large number of countries by filing a single international application at a national or regional IP office of a country/region that is party to the system. It simplifies the process of multinational trademark registration by reducing the requirement to file an application at the intellectual property office in each country in which protection is sought. The system also simplifies the subsequent management of the mark, since it is possible to record further changes or to renew the registration through a single procedural step.

    Egypt

    Law Number 82 of 2002 on the protection of Intellectual property Rights 10 Article 63 of the Egyptian Trademark Law defines trademark as "A trademark is any sign distinguishing goods, whether products or services, and include in particular names represented in a distinctive manner, signatures, words, letters, numerals, designs, symbols, signposts, stamps, seals , drawings , engravings , a combination of distinctly formed colours and any other combination of these elements if used, or meant to be used, to distinguish the products of a particular industry, agricultural, forest or mining venture or any goods, or to indicate the origin of products or goods, or their quality, category, guarantee, preparation process, or to indicate the provision of any service. In all cases, a trademark shall be a sign that is recognizable by sight. " Article 66 of the Law clarifies "Without prejudice to the provisions of international conventions in force in Egypt, any natural person or legal entity, Egyptian or foreign, belonging to or having the center of his or its effective activity in a country or entity member in the World Trade Organization or who applies reciprocity to Egypt, shall have the right to apply for the registration of a trademark with the Department of Trade Registry in Egypt, with all attendant rights in conformity with the provisions of this Law. 1. power of attorney (Arabic) duly signed, notarised, and legalised before Consular of Egypt; 2. twelve (12) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register legalised before the Egyptian Consulate (duly translated into Arabic), address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; 6. meaning and/or origin of the mark being registered; and 7. priority documents in the event priority is being claimed and has been certified before the competent authority all documents (including form , incorporation documents, power of attorney and other attachments) must be submitted in Arabic language. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 4. Paris Convention for the Protection of Industrial Property ; 5. Trademark Law Treaty ; 6. Convention Establishing the World Intellectual Property Organization ; 7. Paris Convention for the Protection of Industrial Property ; 8. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) International applicants can benefit under the Madrid System by filing a single application and getting protection in multiple countries (covered under Madrid System). Under the Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

    Morocco

    Law number 23-13 amending and supplementing Law No. 17-97 on the Protection of Industrial Property (21 November 2014) 10 Article 133 of Moroccan Trademark Law defines Trademark as "For the purposes of this Law, a trademark or a service mark means a sign capable of graphic representation which serves to distinguish the goods or services of a natural or legal person. The following, in particular, may constitute such a sign: a. Denominations in all forms, such as: words, combinations of words, surnames and geographical names, pseudonyms, letters, numerals, abbreviations; b. figurative signs such as: devices, labels, seals, selvedges, reliefs, holograms, logos, synthesized images; shapes, particularly those of a product or its packaging or those that identify a service; arrangements, combinations or shades of color. c. sound signs such as : sounds, musical pieces; d. olfactory marks. 1. Natives of natural or legal entity, practicing any of the commercial , industrial , professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney (Arabic) duly signed, notarised, and legalised before Consular of Morocco to be submitted through local agent; 2. fifteen (15) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register legalised before the Morocco Consulate (duly translated into Arabic), address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; 6. meaning and/or origin of the mark being registered; and 7. priority documents in the event priority is being claimed and has been certified before the competent authority Note: a. For sound marks - applicants must submit musical notations (musical notes); and b. For smell marks - applicants must submit explanatory legend as to essence. The application form is submitted in French language. Once the marks have been published in the Official Gazette, there is a set term of sixty (60) post publication date to file for opposition claims relating to domestic registrations. In case of international applications, the term is set for two (2) months from the date mark is published in Gazette. opposition term cannot be extended. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 4. Paris Convention for the Protection of Industrial Property ; 5. Trademark Law Treaty ; 6. Convention Establishing the World Intellectual Property Organization ; 7. Paris Convention for the Protection of Industrial Property ; 8. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) Morocco is a member of the Paris Convention. An applicant who has applied for a trade mark in another convention country is entitled to a priority right to be accorded the same date as the first filed application, provided the Moroccan application is filed within six months of such earlier filing date. Morocco is also a member of the Madrid Agreement and Protocol, so that registration of a trade mark may be obtained by way of an international application designating Morocco. Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

    Tunisia

    Law Number 36 of 2001

    10 A trademark or a service mark is an apparent sign, which makes it possible to distinguish the goods presented or the services provided by a natural or a juridical person. In particular this sign may consists of: a. All forms of designations such as: words , groups of words , surnames, geographical names, pseudonyms, letters, numbers and symbols. b. graphic signs such as: drawings, holograms and shapes in particular those related to the p r o d u c t , its method of presentation, or those which distinguish the services , the arrangements of colors, the mixings of colors or the separation of the grades ofcolors. c. Phonic signs such as musical tunes and sentences. 1. Natives of natural or legal entity, practicing any of the commercial , industrial, professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney duly signed; 2. six (6) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register, address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; and 6. meaning and/or origin of the mark being registered. The application form can be submitted in English or French. 1. Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks ; 2. Convention Establishing the World Intellectual Property Organization ; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks ; 4. Hague Agreement Concerning the International Registration of Industrial Design ; 5. Paris Convention for the Protection of Industrial Property ; 6. Agreement establishing the world trade Organization (WTO) ; 7. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) ; 8. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

     

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    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[Defamation V.1]]> ARE YOU OFFENDED OR IS IT FREEDOM OF SPEECH?

    "Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties."
    John Milton, Areopagitica

    We are always encouraged to voice our thoughts and to use the liberty of freedom of speech. However, can we actually say everything that we want to or the laws give us a boundary that if crossed can have consequences? How much can we communicate without restrictions? No matter how welcome we are in this world to express our feelings, the law is above all that confines us to defame another person.

    Defamation is the act of making and spreading false statements about a person that can harm his/her reputation. Defamation is a complex law as proving that the person's reputation is damaged is difficult because reputation is intangible. There are two kinds of defamation known to the law; Slander and Libel. Defamation was distributed into two categories before the advent of modern media. If a defamatory statement is spread in writing and published it is called libel. If the defamatory statement is spoken, it is called slander. What if the defamatory statement is made spontaneously on live media? Can a person sue another for defamation if the reputation is damaged? This article will analyze the traditional concepts of defamation in comparison to spontaneous defamation and its legal capacity.

    In almost all countries, defamation law has always been complex and intricate. On one hand, a person is given the freedom of speech and to about their experience in a truthful manner. On the other hand, a person should refrain from making any false statements that could damage someone's character or reputation. That's where defamation law comes into play, where it attempts to balance the personal right to protect one's reputation simultaneously with the public right to freedom of speech. Defamation law gives the right to a person to protect his/her reputation and sue those who say or publish malicious and false comments.

    Liable for Libel?

    Libel is the publication of defamatory accusations in a permanent form and slander is the publication of defamatory words in a temporary or momentary form (usually oral)[i]. There are three elements which a claimant must prove to sue the party for defamation. The matter of complaint must: be defamatory; referred to the claimant; and have been published to a third party. A libel is usually thought to occur in writing or print. Indeed, a defamatory statement contained in a book, magazine, newspaper, letter or poster can quite easily be categorized as a libel. However, it is wrong to assume that libel is limited in this way. Defamation occurring in signs, artworks, cartoons, tweets, photographs and even the display of a wax figure in Madame Tussauds could constitute a libel if proven as in one of the primary cases of Libel, Monson v Tussauds Ltd (1894)[ii], A major tourist attraction of wax statues was subject to defamation after a waxwork John Monson holding a gun was displayed close to the 'Chamber of Horrors' in the museum. Monson was subjected to a murder trial but was set free with the judgment of 'not proven'. It was established that a wax statue was capable of being libel by suggesting Monson be guilty of murder.  There are also many other forms of publication by electronic or digital means such as and Music, Films, TV and etc.

    What can be qualified as Slander?

    Slander is the statements, often made in malice or anger, which are untrue. Few statements that can qualify as slander are as following; Claiming a person is gay, lesbian, or bisexual, when it is untrue, in an attempt to harm his or her reputation, telling co-workers a made-up, or unproven story about a certain person stealing, claiming that a certain person has a sexually transmitted disease etc. Any statement made in public that can harm a person's reputation is considered as slander. Because slander involves spoken verbal abuse, proving slander can be a challenge. The false and malicious statements should be communicated intentionally, or in a negligent manner, to harm the other person's reputation and directed to the person being defamed[iii]. A famous Hollywood defamation lawsuit, Steve Wynn Vs. Joe Francis[iv].  Where Steve WynnaccusedJoe Francis of slander for saying that Wynn wanted to kill him and bury him in the desert. After Francis publicly accused Wynn of deceptive practices at his casinos, Wynn sued him for defamation. The judge ruled in favor of Wynn in February and ordered Francis to pay USD 7.5 million.

    Following are the few vital defenses to defamation: truth, honest comment, absolute privilege, and consent[v]The truth defense is an action for libel for the defendant to prove that the words complained of are true in substance and defamation will be void as defamation is only on the basis of false statements. Honest comment is a defense to a claim in defamation. It has been described as 'one of the fundamental rights of free speech and writing.' The underlying principle for the defense is that a person should be allowed to express his views freely on a matter of public interest. Another defense to defamation is the Absolute privilege, it is limited in scope but were established by a defendant to a claim in defamation, confers upon that defendant immunity from suit or immunity from liability, even in respect of a malicious and untrue publication which causes real damage. The Absolute privilege protects a person who makes defamatory comments based on his position, or on his relationship with the defamed party. Lastly, If the defendant can prove that the plaintiff consented to the publication of the defamatory statement to others, he has no basis for a defamation lawsuit.

    Above discussed are the defamation which is known to the law and has several case laws to support it. In an article name 'Defamation Live'; The Confusing Legal Landscape of Republication in Live Broadcasting and a Call for a 'Breaking News Doctrine'[vi], the authors discuss the live and spontaneous broadcast of defamation and describe it as the murky area of law. The author narrated a scenario where 'imagine that you are a broadcast journalist for a national television in a current situation of a building just burnt because of the bombing. Post reaching the scene with your cameraman, you started with your first question 'Who do you think committed this horrible act?' from a bystander Mr. X, who anticipated the will name a local man Mr. Y as the bomber because you overheard Mr. X, whom you have never met before but have no reason to trust, telling others in the crowd that he knows Mr. Y did it. Mr. X names Mr. Y, a person of no particular notoriety or power, live on the air. It turns out that Mr. Y had nothing to do with the bombing. Mr. Y sues you, your station, and Mr. X for defamation. This article analyzes if courts lawmakers create a 'breaking news doctrine' to protect broadcast journalists from liability in such spontaneous or live defamation cases. Defamation law holds everyone liable who republishes a defamatory statement. So, if a statement goes out live on the broadcaster's channel, then the broadcaster is considered a re-publisher and held liable.

    There are defenses that can be used to prevent the republication liability. Fair report privilege where the law gives unique privilege to publish fair and accurate reports of certain defined judicial and legislative proceedings. However, this privilege won't be justified with the above-mentioned scenario as it is not reporting judicial or legislative proceedings. Another defense is the wire service defense, it was originally developed for newspaper who served as channels for national wire service reports. It acknowledges the significant of publication before the news becomes old. It was ruled in the case of Layne c Tribune, Co. This defense would not apply to this scenario because, Doctrine only applies when the source of the information is a reputable news agency such as the associated press or a broadcast television network, not a man on the street bystander like Mr. X.The broadcast journalist in the hypothetical scenario is involved in the broadcast, he chooses who to interview and the questions to ask. The requirement of 'absolute non-involvement with the underlying broadcast is not satisfied. Another defense is the Neutral reportage privilege which is used to protect journalists when they make certain false statements about public figures. It was developed in the 1970s to protect unbiased reports of newsworthy defamatory statements. However, this would not apply to this situation because it is only applied to cases involving public figures. The defamed individual in this situation is a person of no particular notoriety or power. The privilege would not apply because the source of the defamatory statement must be a responsible person or organization. Also, Section 230of the Federal Communications Decency Act provides immunity from defamation liability for those who convey content supplied by third parties, the privilege is limited in application to an interactive computer service. Thus, it would not apply to the broadcast journalist described in this situation.

    You are Live On-Air

    There are several case laws regarding the live, on-air defamation. Adams v Frontier Broadcasting Co and New York Time v Sullivan are among the leading case laws. In the United States, various states have different approaches to the state law known as 'due care' statutes[vii]. South Dakota law provides that the complaining party must prove that the broadcaster failed to exercise due care to prevent the publication of such statement in the broadcast. Ohio removes liability for third-party statements and broadcasters 'if the owner licensee, or operator proves that the owner, licensee or operator exercised reasonable care to prevent the publication or utterance of the statement in such broadcast time. Texas's statute allows libel defendants to put into evidence all facts and circumstances under which the libelous publication was made in order to help determine the extent and source of actual damages and to mitigate exemplary damages. Most states need negligence for all parties to recover damages against public defendants, meaning that the due care statutes in many cases simply codify what the law would be in any event, regardless of the way by which the defamation was transferred. A defendant who is confronted by an emergency is not expected to exercise the same amount of care as is a defendant not facing exigent circumstances. Live Defamation scenarios are of a great risk for broadcasters, especially when the targets of spontaneous defamatory remarks are private individuals.

    Defamation in UAE

    Unlike other countries like the US and the UK where defamation is approached in a civil lawsuit, In the UAE defamation is a criminal offense. With the growing population of expatriates, the number of defamation cases has increased significantly. 

    There are two major offenses under defamation outlined in Articles 372 and 373 of UAE Federal Law No. 3 of 1987 (as amended) ("the Penal Code").  Article 372 handles a publicity which exposes the victim to public hatred or contempt and Article 373 set out the situation where the offender makes a false accusation that dishonors or discredits the victim in the public eye. For example, if the defamation includes publication of defamatory remarks in any newspaper or any other form of public media, it will be considered as the situation created intentionally and the offender will be punished by imprisonment of two years and a fine (Article 372, UAE Penal Code). Whereas, if a slander is made and spread over the telephonic conversation or in front of the victim which is witnessed by a third party. The punishment for the offender will be detention for a period not exceeding six months, or a fine, not more than AED 5,000 (UAE Dirham five thousand), shall apply (Article 374, UAE Penal Code). If any defamatory statement is published, it must be filed within three months from the date of its publication. Once the criminal complaint is filed and if police determine that there is an indication of defamation, it is referred to the Public Prosecutor. It is a crime in the UAE, to insult any religion using any means which includes the social media and is punishable by up to seven years imprisonment.

    The UAE courts are not obliged to provide injunctive relief which will prevent future publications of the defamatory".  If the offender is proved guilty, individuals can be punished for up to two (2) years in prison or a fine of up to AED 20,000 (UAE Dirham twenty thousand). The UAE relies on criminal courts to legalize written and spoken speech. In comparison, US and UK legal systems rely upon civil lawsuits to control defamatory statement.

    Technology and Defamation

    With the expansion of social media and the substantial source of the Internet, the opportunity for publishing defamatory statements has grown massively. With mediums such as Facebook and Twitter, people can instantly publish comments which will reach the public at large. For this reason, the defamations laws will be applicable to online defamatory statements, where it is visible to everyone. Defamation in social media and on the internet are generally easy to track as there is a proof of it being published.

    In conclusion, defamation is a murky subject as in today's world where freedom of speech is appreciated and welcomed on the other hand people do have very strong opinions about other people that they post on different channels.  It is a difficult area of law to tackle in today's world as private figures are becoming public. The live streaming is not only available to news channels now but to every individual who has access to social media. It will be more defamation cases than the legal system could handle if every malicious statement made were an area of defamation.

     

    [i]Bainton, Hicks Beach, A. (2016). Defamation: Libel. Westlaw.

    [ii]Lawteacher.net. (2017). Monson v Tussauds Ltd. [online] Available at: https://www.lawteacher.net/cases/monson-v-tussauds.php

    [iii]Bainton, Hicks Beach, A. (2016). Defamation: Slander. Westlaw.

    [iv]Gardner, E. (2012). Steve Wynn Vs. Joe Francis: Anatomy of a $40 Million Smackdown. [online] The Hollywood Reporter. Available at: https://www.hollywoodreporter.com/thr-esq/joe-francis-steve-wynn-girls-gone-wild-40-million-lawsuit-369714.

    [v]Bainton, Hicks Beach, Crossley, A. (2017). Defamation Defences. Westlaw.

    [vi]D. Bunker, M. and Calvert, C. (2017). "Defamation Live": The Confusing Legal Landscape of Republication in Live Broadcasting and a Call for a

     

    "Breaking News Doctrine." Hein, (39 Colum. J.L. & Arts 497 2015-2016

     

    [vii] Nytimes.com. (2014). Text of the Supreme Court's Opinion in Libel Case Against The New York Times. [online] Available at: http://www.nytimes.com/1964/03/10/text-of-the-supreme-courts-opinion-in-libel-case-against-the-new-york-times.html.

     

     

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    Mon, 16 Apr 2018 18:45:10 GMT
    <![CDATA[ADGM Civil Court Proceedings]]> ADGM Civil Court Proceedings

    Abu Dhabi Global Markets (ADGM) located in the capital of UAE in the city center of Abu Dhabi is an international financial center for local, regional and international organizations. ADGM is a channel that connects UAE with the world with its essential hub for global commerce. ADGM has three independent authorities; ADGM Courts, Registration Authority, and the Financial Services Regulatory Authority (FSRA) that ensure that businesses run within the framework of international practices that are recognized by major financial centers across the world.

    The ADGM, or Abu Dhabi Global Market, is a relatively new free zone, having been established in 2013, and is located on Al Maryah Island. This particular free zone was set up as an international financial centerand is fast becoming a vital element of the city's long-term plans, interacting and connecting with International Financial Centers around the globe. ADGM has given life through Federal Decree Number 15 of 2013, under which Article 1 states the establishment of a financial free zone in Abu Dhabi. Following three authorities are responsible for managing the openregion and all the companies within:

             i.            The Financial Service Regulatory Authority (FSRA)

           ii.            The Registration Authority

          iii.            And the ADGM Courts

    ADGM Law

    Having three independent authorities within the free zone allows for each to concentrate on the legislation under their area of expertise. The law here comes in three levels. At the highest level is the Federal Legislation of the UAE. These are laws from the federal level that act within the free zone and govern some aspects of the activities therein. These include:

            i.            The UAE Constitution

           ii.            Federal Law Number 8 of 2004, which allows for the setting up of a financial free zone anywhere within the country, and unbinds them from all commercial and civil laws, though it does not exempt them from the countries criminal law

          iii.            Decree Number 15 of 2013/Cabinet Resolution Number 4 of 2013, both of which are responsible for the establishment of the ADGM

         iv.            Cabinet Resolution Number 28 of 2007, which implemented regulations of Federal Law Number 8 of 2004 concerning financial free zones

    After the Federal Laws of the UAE, there is the Abu Dhabi Legislation, which is:

             i.            Law Number 4 of 2013, which sets out the governance, legislative and regulatory framework and activities to be carried out in ADGM

    Beyond these, the rest of the laws under the decision of internal authorities of the ADGM, and include:

    i.                     ADGM Courts Regulations and Rules, enacted on 11 December 2015

    ii.                   ADGM Courts Procedurespromulgated on 30 May 2016

    iii.                  Arbitration Regulations, passed on 17 December 2015

    iv.                 Commercial Regulations, adopted 3 March 2015

    v.                   FSRA Regulations and Rules

    Civil Proceedings within the ADGM

    To begin with, the ADGM has two courts. These are the courts of the first instance, and the court of appeal. There are many elements of similarity with this system and the one used in the UK as will be seen through the civil procedure rules. Some of these similarities include the way the claimant initiates the case, the way in which the defense accepts or denies allegations, and the concept of case management. These are not all of the similarities,and while the elements will not be the same, there are apparent similarities

    The ADGM court procedure rules, which were implemented in May of 2016 and amended in December of 2017, govern the issue of Civil Proceeding within the free zone, and also the matter of evidence and how the court handles. Their regulations are highly in depth, and the entire system within the ADGM adequately organized.

    Part 5 of the rules states that the proceeding begins on the date entered on the claim form, which is to the defense on the request of the claimant. The claimant files the application in the court, who then proceed to question the claim form. The claim form must contain within it what the claimant seeks and should include any particulars and practice directions of the case.

    Part 6 of the rules concern the response of the defense party. The party must come forward with defense within 28 days of the service of the initial claim.  Ifthe defendant fails to reach the deadline, the claimant party may move for a default judgment, which is touched on under Section 39 of the rules. Section 49 relates to the content of the defense response. Within this should be included what elements of the claim the defense chooses to admit, deny and which they cannot accept to or deny but would require the claimant to prove. If the argument fails to do the above mentioned for an activity, they shall be considered to be admitting to it.

    Section 50allows for the defense party to make counterclaims in regards to the case, though they must first mention this to the courts. This counterclaim needn't be directed at the claimant party, though it must be related to the overall issue at hand.

    The parties and individuals present in the litigation are under the rules of Part 7 of the manual. It is also feasible for the courts to provide Summary Judgements on cases brought before them if they feel:

    ·         The claimant has no real chances of success

    ·         The defense doesn't have a prospect of defending the claim

    ·         Or if they think there is no reason for the case to be disposed of at trial

    While the situation is going through the court system, there is an element of case management, which is underPart 12 of the civil procedure rules. Case management is when the court itself takes part in managing some aspects of the case, usually to ensure the trial runs smoothly and the appropriate directions are intoconsideration. The idea behind this is that the situation becomes more transparent in this way, and there is less wastage of the courts time and money.

    One of how the courts may manage a case is underSection 1 of part 12, which states that is a court decision to do so, they may issue a directions questionnaire to the parties on a specific area of the case. Placing time deadlines upon them to have to have those completed, and Section 4 states that should a party choose not to follow these instructions, the court may take what steps it deems necessary to deal with the issue.

    On top of this, the court sends out a pre-trial checklist to the parties and a date by which the parties should complete the list. It will allow the court to obtain the information they deem necessary before a trial, thus allowing them to make appropriate preparations and be up to date. With this information in hand, the court can accurately decide deadlines for the litigation.

    The Law of Evidence in the ADGM

    The law relating to evidence is the same as the court procedure law and is in Part 14 of the rules. According to the law, the courts have a reasonable degree of control over evidence. They will likely see all of the evidence of the trial before its start, and this is becausethe parties may request it as part of the pre-trial checklist. It provides the court with a great deal of control over the trial, as they can then choose when specific evidence is required, and they can also decide to exclude evidence from being presented, even if that evidence would have otherwise been admissible.

    About witnesses, the rules set out the basic principles. Once again, the court can decide which witnesses can stand to provide testimony. So long as the court approves a witness, they can be brought forward to prove any fact that requires evidence via oral testimony as mentioned under Section 93 of the Court Procedure Rules. On top of this, as per Section 93 Subsection 4, witness testimony may be given through video chats or other such similar services.

    Parties can use affidavits separately or alongside witness testimony. They are under Section 104of the rules, and in Section 105, it is clear that the only authorized bodies that may take affidavits are:

    ·         A notary public bySection 221of the regulations

    ·         A Judge of the court

    ·         The Registrar

    ·         A lawyer

    ·         A court officer appointed to perform the duty by a registrar

    The use of photographic evidence, models or plans is not allowed in the courts unless the court has been made aware of these, and has approved of them. This type of evidence under Section 116 of the manual, and Subsection 4 furthers this by mentioning that all parties must be allowed to view and inspect the evidence before it can be admissible in the case

    Another point of importance underSection 117 of the rules and concerns foreign law. The treatment is similar to that of photographic evidence, in that it must be approved of before it can move forward.

    Another matter which receives emphasis throughout Part 14 of the rules is that much of the evidence must get shared with the courts and other parties, and the practice directions must be made clear.

    The regulations are far more expansive than what we discuss presently. It is just the tip of the civil procedure and law of evidence iceberg. The system is highly regulated, with many notable similarities to the UK civil court procedure system, and the ADGM, in general, has big plans for its future, for which a good, well-developed system would be ideal

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    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[Liability of Aircraft Operators]]> LIABILITY OF AIRCRAFT OPERATORS

    On 15July 2009,New York city witnessed a 'Miracle on the Hudson River' when flight 1549 departed New York but shortly after the take-offdue to bird strike the plane lost its two turbines.The Senior Captain Chesley 'Sully'Sullenberger was told to return to the airport, but Sully, decided that the plane wouldn't reach to the airport and landed an Airbus A230 with 155 passengers on the Hudson River and saved every passenger including the crew members. Sully was heralded by public and media at large for his remarkable accomplishment but simultaneously, he was under serious investigation from National Transportation Safety Board (the NTSB) in theUnited States,who revealed that theaircraft could have made it to the airport. Sully maintained his position stating that if they would have tried to land at the airport, the plane would have crashed.

    But let's tweak the situation here a little bit or preferably the whole of it, what if while trying to land at the airport, the plane crashed in between and there was severe damage to the ground as well as the lives of the passengers. Now, who is to be held responsible for asituation like this? Is the operator of the airplane or the owner/ lessor/financier? Similarly, who will decide the liability and how much? Let us read the article further to find out who's liable for what?

    Piercing the Liability Ceiling

    The aviation industry has become an ordinary to an extraordinary industry since a decade and a half. Amid this timeinterval, it is an established fact that there are privileges and liabilities attached to the airplane. Also, there are several parties involved in an aircraft such as the owner, the lessor, the financier and the operator. However, our main question is who is liable for the damage so inflicted by the airplane he owned or he was operating. It generally depends upon the theory of liability adopted by the country where the damage was caused.

    Categorically, we can divide the liability theory into two broad categories; absolute liability and rules of torts and negligence. The idea of absolute liability of owner and operators of the aircraft for ground damage is an outcome from three bases which is applicable in common law countries. Primarily, absolute liability is imposed considering the innocent parties' exposure to such danger. Secondly, the benefit arising from such activity that the aircraft owner derives from and the sheer helplessness of the ground victim arises absolute liability. Thirdly, the absolute liability will be imposed if the enterprise has the potential to distribute the loses the way they distribute benefits.

    The countries who do not impose absolute liability through legislation or by way of precedents apply the rules of law of torts. The main principle applicable in cases of defining liability, the legal maxim Res Ipsa Loquitorplay a critical role. The rule places its basis on the theory that the defendant having the control over the situation which caused damage, has the best view of determining the reason for such injury and the other party has the right to prove his negligence. In modern times, the maxim is used in aircrafts accidents such as in Kadylak v. O' Brien[i]where an airplane whilst doing a forced landing killed a boy. The court established that the claimant has to prove accused's negligence prior to sorting any recovery for the death and since the aircraft operator had the control over instrumentality he has the burden of proving his freedom from fault. Additionally, there are cases where the legal maxim can be rejected in several cases such as:

  • Where party failed to prove that aircraft operator had exclusive control;
  • It is unusual occurrence for an airplane to crash without human intervention;
  • Failed to prove operator's negligence.
  • Considering the involvement of several parties in the aircraft such as the operator, owner/lessor or financier, the liability of each of them differs with their position and the control over the aircraft. The liability of each party is outlined as follows:

  • Liability of aircraft operator
  • Each treaty makes operators liable for death, substantial damage and mental damage (just compensable if credited explicitly to the harm via airplane and confirm by manifestations of an unmistakable mental disease), and in addition natural and property harm. No recuperation is taken into account correctional, model or non-compensatory harms. Operator obligation limits extend from 750,000 Special Drawing Rights (SDRs)(6) for an airplane measuring 500 kilograms (kg) to 700,000kg, to 7 billion SDRs for an airship weighing 500,000kg, per occasion. On the off chance that two unique operators caused the harm, they are together liable.  Also, under several cases such as Air Transport Associates Inc. V. United States[ii] and Northwest Airlines V. Alaska Airlines[iii], the court invalidated the use of agreement purporting to dissolve the liability of the aircraft operator for the aircraft accidents caused by the operator due to his negligence. The court further mentioned that such an agreement is against the public policy as it has the indemnity clause which can set aside the liability of the operator even if he was negligent in his duty.

  • Liability of owner, lessor,and financers
  • The liability for harm to property and for injuries caused via airplane contact with the earth's surface has been a matter of litigation. Regardless of whether the owner of the airplane has any obligation towards the occupants on the ground for the harms dispensed by a plane that he claims, relies on the hypothesis of risk that is embraced in the specific state where the plane causes the damage. Every country has the different set of rules for deciding the liability of the owner, lessor or financers for the damage caused to the third party.For example, in the U.S. a lessor, owner or financer is liable for the damage caused to the land and the innocent third party only in cases where the civil aircraft, the aircraft engine was completely in possession of the lessor or owner. Also, the damage was caused due to the aircraft or the engine. §44112 is applied to U.S. registered civil aircrafts of lease for more than 30 days.

    Lately, world occasions and financial conditions have constrained organizations that own, lease or finance the aircraft to inspect their risk if the owner of the aircraft is associated with a mischance or terrorist act, especially a calamitous one. Many loaning establishments, out of the blue, possess aircraft through repossessions or exercises that swapped obligation for value. These organizations end up worrying about the bona fides, capacity and general fortunes of the operators of the aircraft, also the litigation that takes after flight fiascos. While painstakingly drafted protection arrangements have been esteemed "satisfactory" to cover the obligation, the utilization of airplane as weapons of mass pulverization has caused a re-assessment of risk issues.

  • Liability for ground damage
  • In the Ground Damage Convention as far as possible are appropriate just if the operator can demonstrate that (I) it was not careless and did not act wrongfully, or (ii) the demonstration of someone else caused the harm. Regardless, the operator bears the weight of verification to demonstrate that it was not to blame. Under the Unlawful Interference Convention, if the aggregate harms for an occasion surpass the cutoff points put forward in that (counting extra pay from the reserve, as portrayed underneath), the weight of verification rests with the casualty, who must demonstrate that the operator added to the event of the occasion with the goal to cause harm, or acted heedlessly and with information that harm would most likely outcome. Regardless of whether it is resolved that the harm comes about because of the activities of a representative of the operator, the operator can in any case dodge extra obligation by demonstrating that it is possible that it had a fitting framework for choice and checking of workers set up, or that it acted in consistency with security prerequisites under the Chicago Convention.

    UAE and Aviation

    The UAE has signed the Montreal Convention 1999 (theConvention), which thus is authorized by UAE by virtue of Federal Decree No. 13 of 2000 Ratifying the Convention for the Unification of Certain Rules for International Carriage via Air (Montreal Convention 1999) (the Federal Decree). It has been in compelling in the UAE since 4 November 2003. The Convention applies to all instances of worldwide carriage of people, stuff or freight performed by an airplane for remunerating, with acarriage having its starting point and goal in two diverse contracting states or a solitary state with round trek carriage with a concurred halting spot in another state. On account of mishaps, real damage or demise on an aircraft, the pertinent arrangement which is to be taken into consideration under Article 17of theConvention which gives that 'the carrier is at liable for harm supported if there should arise an occurrence of death or substantial damage of a traveller upon condition just that the mischance which caused the passing or damage occurred on load up the airplane or over the span of any of the operations of leaving or landing.

    The General Civil Aviation Authority (the GCAA) in UAE is the authority concerned for the Aviation sector in the nation. Also, the Civil Aviation Regulation Part VI- Chapter 3 concerning Air Accidents and Incidents Investigations (the CAR part VI). Under CAR part VI Air Accident Investigation Sector (the AAIS) will be established as a unit of GCAA in order to perform the investigations in air accidents or selected incidents. However, any investigation made by AAIS will not be used for any judicial or administrative proceedings for imposing liability on the aircraft operator or owner.

    Defences

    The selection of similar normal standards of torts for damage caused via aircraft, as are pertinent ashore, furnishes the litigant aircraftowner with similar protections that are allowed in traditional tort circumstances. The defendant has a far more prominent capacity to keep up a resistance in these jurisdictions than he would have in ajurisdiction that authorizesliability, on the grounds that in these purviews the defendant has no protection with the exception of contributory negligence by the plaintiff. Negligence does not need to be appeared to make the defendant at risk for all harms.

  • Act of God
  • A demonstration of God is a legitimate protection to an air crash negligence where the common principles of land torts have been received. In Johnson v. Western Air Express Corp., it was held that the calamity happened due to the irregular powers of nature and that it couldn't have been sensibly foreseen, made preparations for, or stood up to. The defendant's airline enterprise was hence not dependable. This is rather than Prentiss v. National Airlineswhere the court in an outright risk state would not engage the safeguard of demonstration of God.

     

  • Bailment
  • In states where the ordinary rules relevant for torts represent the obligation of owners, lessees, or operators of airplane, the way that the proprietor of the flying machine leased or lent the airplane to another does not make the owner subject for damages if there should arise an occurrence of bailment where he has not been careless.Only if the owner was negligent himself or if there was an agency relationship can be held at risk for ground harm caused by the pilot. The essential case ofan aircraft bailment is Boyd v. White.For this situation, which emerged in an expression that applies similar guidelines of tort for the aircraft obligation with respect to customary tort activities, the owner leased the plane to a flying instructor knowing it would be flown by an understudy pilot. The student pilot and the teacher were held subject to the ground harm caused by the careless operation of theplane yet the court confirmed the nonsuit for the respondent plane owner.

     

    International status

    The Rome Convention, marked in 1952, addresses rights of thethird party which experienced harm and damages from anevent involving the aircraft. Similar to the treaties the addresses liability for traveler damage, the Rome Convention built up operator liability limits for harm caused on the ground. The size of the airplane decides the points of confinement founded. Nonetheless, the Rome Convention never got across the board acceptance. The Ground Damage Convention tries to modernize and supersede the Rome Convention. It accommodates strict obligation of operators to remunerate casualties of harm on the ground from aircraft going on aninternational route, other than because of a demonstration of unlawful obstruction, in a nation that has signed the Convention.

    Conclusion

    While no lease, or treaty, can completely assurethe owner/lessor/operator of an airplane that a claim won't be affirmed against it. The courts are yet to witness cases where the owner/lessor or operator will be solely held liable for their negligent act.


    [i]1941 U.S. Av. R. 8

    [ii] 221 F.2d 467 (9th Cir 1955)

    [iii] 351 F.2d 253 (9th Cir 1965)

     

    ]]>
    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[RATs, TRAPs and Trade Secrets]]> RATS, TRAPS AND TRADE SECRETS

    While we know more about the world now than ever before, in some ways, it can seem more mysterious and complicated than ever before. The pursuit of information has always driven humans and is what has got us to the modern state we find ourselves within. It is what has inspired humans to become the most advanced there is, and that goal still pushes to this day. However, in today's world, a world governed by rules and laws, information is more and more becoming a guarded secret. Knowledge is power, and in the modern age, power is everything. Those with lofty ambitions, such as businesses, require as much of an advantage as they can get to put themselves ahead of their competition. In the present day, these concepts are modernizing and growing with the technological advancements the world is seeing. From this arises the globe of RATsTRAPsand Trade Secrets.

    Trade secrets are inside knowledge within a business regarding its functionality and practices that the company chooses to keep secret, usually because the mystery gives them an element of advantage over their competition. It enables them to stay a step ahead in specific areas which could include processes, commercial methods, patterns, and designs. These trade secrets are often held close to the businesses for the simple reason that if competition were to gain access to this information, what makes one industry unique and allows it to excel would then be taken up by others and would become standard practice. From the businesses standpoint, they would have to look for a new way to differentiate themselves in the market. Trade secrets are often inventions that may or may not qualify to receive a patent. A patent is a form of exclusivity right that gives to a business that qualifies for it through an application. It provides that business the right to exclusivity for a set amount of time, usually 20 years.

    Can you keep a secret?

    The product must be new and creative for it to receive a patent. Something that is useful and yet something that no others have latched on. If a patent is not a possibility, perhaps due to the product not being outlandish enough in its idea, a business will have no choice but to go for a trade secret. If the invention does qualify, a company will have to weigh up the pros and cons of a trade secret and move forward from there. An example of a trade secret would be the recipe for coca cola. There is a large market of companies that make carbonated cola-flavored drinks, though the reason coke has been chief for so long is due to their trade secret of famously guarded recipe secretly stored in a vault.

    On the one hand, trade secrets seem a much more informal method of protecting a business's asset or invention. There are no registration costs, and the government doesn't have to be made aware of them. They also have the benefit of not being limited to 20 years in length, and they have an immediate effect.

    However, there are some glaring risks to a trade secret. For one thing, there is nothing to stop others from figuring out the mystery directly through an attempt to better their own business. For example, if a trade secret did merely a new evolution of a type of machinery and technology was already headed in the direction of the new invention.  On top of this, trade secrets are more difficult to enforce than patents. The laws for trade secrets vary from country to country, but most importantly they are not as strong as the laws covering patents. A small point I would like to add is that if one business were not to apply for a license, another company could obtain one through legal means even if they were second to use the method, and this would cause complexities for both businesses.

    Thankfully for businesses, countries usually have laws that protect trade secrets. A significant player in the global protection of Intellectual Property (IP) is the World Intellectual Property Organisation(WIPO). WIPO has 191 member-states and is one of the 17 specialized agencies of the United Nations. WIPO established in 1970, with the aim of promoting the protection of intellectual properties around the world. WIPO itself drives its member states' legislatures to produce legislation which would further the protection of IP's.

    UAE on Trade Secrets

    The UAE covers trade secrets under its Federal Law Number 31 of 2006. Section 6(The Knowhow) discusses, through Articles 39 to 42, the rights of businesses with the particular knowledge and also, the methods by which they can go about protecting them. Section 40does mention that if a company does acquire understanding through its legal means, it shall be allowed to use that knowledge even if another business or businesses have already learned that knowledge. It is something that would seem quite sensible, as the law protects the information is not a necessarily a new invention, ergo it is not being patented, and therefore, the law does not protect it. It would only cause certain businesses to be able to rise above others if they were able to learn new and more accessible methods of performing their business, which could lead to monopolies forming. It is of course not what desires for a healthy economy.

     UAE civil code covers provisions concerning trade secrets. Article 905mentions that one of the responsibilities of the employees is to keep the trade secrets of their employees a secret. Section 922furthers this by indicating that, while there shall be no claims heard after the end of one year from the date of the termination of an employee's contract, this doesn't apply to breaches about trade secrets.

     

    UK perspective

    The UK also looks to protect trade secrets of businesses, though its methods of doing so are different and far more flexible. It is part of equity law. There are no statutes which specifically protect trade secrets, and since there are no statutes, trade secrets cannot be 'stolen.' There are remedies available to businesses who have had their trade secrets inappropriately appropriated though, and some of these include getting injunctions preventing the use of the information. Another method would be to claim damages; this may be difficult to calculate though since the property is intellectual.

    United States of America

    The United States has, quite recently, implemented the Defend Trade Secrets Act of 2016. It is quite a new act, and it allows a business to bring forward a civil action against any who misappropriate their trade secrets. Section 2 subsection 2Aoutlines the requirements to bring up a case including the application itself which must include a verified complaint or affidavit. The form is only accepted when specific standards are satisfied. These include that the immediate action will cause no irreparable harm and that the case would be likely to succeed, to look at a couple of the points. The piece of legislation is relatively in-depth and covers many aspects of the issue from how the law enforcement should go about seizing the intellectual property, protection of the individual against whom the action is being brought up, the question of trade secret theft abroad, and also enforcement and the punishments for committing trade secret theft.

    The law here is very in depth and covers all elements of trade secret theft. It is beneficial and provides excellent clarity to businesses. The total transparency here is something that would allow companies to be confident in the system and many ways; it could give rise to a more innovative society.

    As a whole, the US system would seem to be the most well-regulated and consumer and business friendly. The UAE system is also backed up by legislation. However, UK has no laws covering the matter. There are specific remedies available in a case of trade secret misappropriation.

    Trade secrets are often as secure as those who know of them. Directly not speaking of the matter would have, at least in the past, meant that competitors would have been unable to access the confidential information. The world has been on a path of rapid change of late though. For the last 60 years, more and more has become digitalized. The computer is now the hub of large quantities of business information that holds many secrets. However, the online world is not necessarily one that is entirely secure. There are indeed ways to access confidential information online if one has the necessary knowledge and software.

     

    RAT technique

    One such technique is to use a Remote Access Tool (RAT). Remote access tools are not necessarily always used with evil intentions. However, when they are, they are then known as Remote Administration Trojans (RATs). They can be used to access computers and when used legally, are a tool that can significantly help IT departments within a business. When used illegally they can be used to gain administrative powers over computers and allow those who use them to access sensitive information.

    Once individuals have access to this sensitive information, especially in this digital age, the knowledge could spread like wildfire. It could lead to many issues. One thing to note, however, is that business itself would be unlikely to use RATs to get the upper hand over its competitors by stealing their trade secrets (not a company within the same country). It would more likely be individuals who perhaps have personal prejudices against a specific business or businesses or even more likely; it could be employees of the companies themselves. These individuals would likely know trade secrets of the stores simply due to them being parts of their jobs, and from here the secrets could be revealed through criminal acts from those employees, or even merely by mistake. A case that is currently continuing in the US is of the CEO of the drug giant Apotex. In this case, it has alleged that the president and CEO Jeremy Desai may have accepted leaked trade secrets from competitors. The lawsuit from Teva Pharmaceuticals claims Barinder Sandhu leaked trade secrets to Mr. Desai.

    If trade secrets leak online, it will be challenging to fix the matter, as it would be almost impossible to figure out who has seen the information, and removal of the information could be quite a useless procedure if too long a time has passed. It would also make it quite tough to judge damages to the business. Another added layer of complexity could be the fact that if an individual wished to do so, they could potentially steal trade secrets using RATs and keep the information to themselves. They could then do with the information what they please. In this way the business that has its trade secrets stolen maybe unaware and thus unable to pursue the matter.

     While businesses in the same country would be unlikely to steal trade secrets from each other, on the global scale, the story is entirely different. Some countries such as China had a cyber espionage unit which breached 115 American company websites over the course of a few years. On the international playing field, the same level of regulation isn't present nor can they be. Of course, many nations would likely agree not to steal IP from each other, though at the same time many consider enemies or at least not on friendly terms and those nations could undoubtedly take trade secrets. In past recent years, IP has acquired approximately $1 trillion.

    Is it a TRAP?

    So far this may look like a large and complicated situation. However, there is another side to it all. It would involve Technologically Responsive Active Protection (TRAPs). Every business must take the appropriate measures to protect their trade secrets. In some cases, courts will not even be willing to hear an example of stolen trade secrets if the business had extremely inadequate protection systems in place. TRAP reinforces the notion that companies must apply what measures are within their power to use to protect their secrets. While a RAT is capable of stealing vast quantities of sensitive materials from a system, it must first get into that system. It means that a firewall and antivirus, at the very least, will help to reduce the chances of a RAT entering the system. RATs are becoming more and more technologically advanced, and there are always new ways in which they can enter an order and beyond this, there is more than they can do once they are in the system.

    Businesses often lack the necessary levels of cybersecurity to handle these issues. However, they cannot be entirely to blame. With the technology changing so fast, incorporating an expensive security system is seen as being a waste of money as it would be obsolete within a year or even less. On top of this, there is very little a business can do if there is an internal leak in the industry. Employees unaware of the fact of revealing trade secrets are not feasible to be under control adequately.

    The entire idea of trade secrets has become a lot more complicated in the last few decades as more and more businesses have gone online. With technology improving at such a rapid rate, keeping people your secrets secure would be a massively expensive process that would require specialists to help ensure the maximum security. Constant testing and keeping up to date with the latest advancements would also be a necessity. The laws covering the issues also vary significantly on the international level with countries such as the UK having no specific requirements, while the US is recently adding to theirs. Also, the global plain does consist of a fair few enemies. There is far less than done when the cybersecurity issue is between nations. In the end, though, businesses must merely do what they can to best secure themselves. Remedies are available as a last resort if the trade secrets mismanaged, and the only other way to keep trade secrets from the hands of any outside the business would be to keep them offline.

    ]]>
    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[Real Estate Investment In Abu Dhabi]]> Real Estate Investment In Abu Dhabi

    ]]>
    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[The Anti-fraud Law]]> THE ANTI-FRAUD LAW

    The recently enacted Federal Law Number 19 of 2016concerning Combating Commercial Fraud (the Anti-Fraud Lawor theLaw) has replaced the erstwhile Federal Law Number 4 of 1979 dealing with the Concealment of Fraud and Deception in Transactions commercial in nature (the Old Anti-Fraud Law).

    The much-anticipated Anti-Fraud Law has been in the news since the draft of the aforesaid law was introduced and circulated in the year 2013. As the United Arab Emirates grew into a commercial hub for trade and business between different jurisdictions, therequirements of a stricter regime and policies became increasingly essential to safeguard and protect the market from fake and counterfeit goods. As a result, the Anti-Fraud Law purports to regulate the framework and robust more policies towards a legal regime necessary to curb and combat fraudulent commercial activitiesto provideeffective mechanism to counter infringement of intellectual property.

    The Definitions

    The Anti-Fraud Law sets out wider definitions, explicit penalties and broadens the scope to deal with commercial frauds, particularly dealing with intellectual property.

    The definition of Commercial Fraud states that 'Deception of one of the customers by any means whether by changing or altering the goods or their amount or nature or price or their material description or origin or source or fitness or any other matter related thereto, or presenting untrue or misleading trading information on the promoted products, which include fraud, limitation and cheating by doing service which does not conform with the applicable laws or may include false and misleading statement.'

    Importantly,the Anti-Fraud Law explicitly sets out the definition of Counterfeit Goodsas 'the goods which bear, without permission, a trademark which is identical or similar to a legally registered trademark.' The foregoing definition significantly extends the scope of the Law by ruling out any ambiguity relating to nature of goods falling under the ambit of this Law, in as much as, the Law shallcover unauthorized use of goods and products with identical as well as deceptively similar or lookalike trademarks.

    In addition, the Law also provides for more clarity by clearly defining and categorizing goods into Goods, Fraudulent Goods, Corrupt Goods,and Counterfeit Goods.

    Important Provisions

    A noteworthy feature is the applicability of this Law within UAE. Article 2 of the Law explicitly provides for the provisions of the Anti-Fraud Lawapplies to whosoever commits the very act of commercial fraud including the free zones in the UAE. In most scenarios, the discrepancy in the procedures and regulations between mainland and free zones has tolead to uncertainties in theenforcement of rights and entitlements. However, this Law addresses the concerns and extends its scope explicitly to the free zones.

    Pertinently, Article 2 further explains what falls under the purview of commercial fraud and includes Importation, export, re-exportation, manufacture, sale, offer for sale, possession with the intent to sell, storage, rent, marketing or circulation/trading of fraudulent, corrupt or counterfeit goods. Importantly, the expansive definition mentioned above regulates the manner in which possession, importation,and re-exportation are undertaken in the UAE including the free zones.

    Further, regarding the recourse towards the use and possession of corrupt and fraudulent good as also counterfeit goods, Article 3 of the Lawinter alia provides that regardless of the criminal liability on the offender, the relevant ministry will issue an order to import the corrupt of fraudulent goods to their source within a stipulated time period. However, if the importer failed to abide by the order passed and did not return the goods to the source, the relevant authority also has the right to destroy the goods or will give away the permission for usage of goods for any other relevant purpose. The law further mentions that the usage of counterfeit goods should be in accordance with the rules and regulations outlined in the law.

    In the manner, as provided aforesaid, the law makes a distinction in the manner in which corrupt/fraudulent goods and counterfeit goods may be dealt with.

    Another provision of the Law which is step up towards adequate safeguard mechanism is Article 4 of the Law which imposes an obligation upon the traders to provide all necessary and relevant information including trade books and commercial statements in relation to the goods owned and possessed including to any evidence towards details and documents to that effect.

    Articles 5 to 8 of the Anti-Fraud Law also provides for a regulatory framework to be developed for the purpose of this Law. In this regard, The Ministry of Economy shall form a Higher Committee which will inter alia be responsible for proposing strategies and policies, identify obstacles and advise on amechanism to tackles issues, to carry out necessary activities assigned by the Ministry of Economy. Having a federal committee in this manner shall ensure integrated policies and mechanism in place to safeguard the interest of bona fide traders and brand owners. Article 6 further provides for establishment of sub-committees at each Emirate level and shall be assigned with the task of issuing warnings to the traders and businesses violating the Law, close down traders and businesses in violation of the Law, for a maximum of 2 years, follow up on the destruction or returning to source of the fraudulent/corrupt or counterfeit goods and provide the Ministry with periodical reports regarding its day to day activates in relation to the Law.

    Role of the Committee

    Importantly, the Anti-Fraud Lawconfers the sub-committee with the responsibility of undertaking matters of conciliation and settlements with respect to violations under the Law. In this regard, Article 8 provides that upon a request for conciliation by the offender, the sub-committee may set an amount of fine payable in lieu of the conciliation which shall not be less than twice the minimum limit of fine prescribedunder the Law. In the event the offender rejects/refuses the conciliation, the offense shall be referred to the Public Prosecutor for further prosecution. The Law provides limited opportunities to appeal against the decision of the sub-committee, particularly in thecase where the conciliation is rejected by the sub-committee or against the decision of the sub-committee to close down a business.In both the situations as mentioned above, the businesses can object to the closing down an appeal against the rejection of conciliation before the Higher Committee.

    It is understood that theLaw provides that a set of implementing regulations shall prescribe relating to the manner and guidelines in which the said Law is to be implemented, for instance, setting out the process of the conciliation or determining the types of warnings that may be issued by the sub-committee. However, such implementing regulations are yet to be published.

    Penalties under the Law

    The essential provisions prescribed under the Law in relation to heavy penalties imposed on violators, which is a welcome change from the Old Anti-Fraud Law, is necessary to deter offenders and curb commercial frauds.The Old Anti-Fraud Law provided for a maximum penalty of jail term for two years andamaximum fine of AED10,000 (UAE Dirham ten thousand) for cheating a customer by delivering goods that are different to what was ordered. In contrast, Article 12 under the Law imposes a harsher penalty for the violators such as an imprisonment of almost two (2) years or some fine which rangesfrom AED 50,000 (UAE Dirham fifty thousand) to AED 250,000 (UAE Dirham two hundred fifty thousand) or both of the above. In addition, anyone who attempts to commit a commercial fraud under the Law shall face a punishment of imprisonment of up to 1 (one) year or a fine of an amount between AED10,000 (UAE Dirham ten thousand) to AED100,000 (UAE dirham one hundred thousand), or both of the above.

    As an exception, Article 14 imposes a higher penalty of imprisonment for a period of upto two years or a fine of AED 250,000 (UAE Dirham two hundred fifty thousand) to AED 1,000,000 (UAE Dirham one million) or both, where the fraud or offense is in relation to human foods, animal foods, medical drugs, agricultural crops or organic products. Additionally, in case of conviction in the offenses as listed in Article 14 above, the court shall order close down of the accusedofup to six months, in addition to the prescribed punishment. In addition, in the event of repeating violation for the aforesaid offenses, the court shall be at a liberty to order more severe punishment or cancellation of the license.

    It is pertinent to note that the Law imposes astringent obligation upon the offender/violator of the Law, in as much as, Article 16 provides that the trader shall not be exempted from any punishment prescribed under the Law, even where the buyer is aware that the goods are fraudulent, corrupt or counterfeit.

    Conclusion

    The newAnti-Fraud Law is anotherprogressive legislation, which is in tandem with the recently changing legal climate in UAE. This Law has made positive advancements towards formulating a robust legal framework to safeguard and protect the interest of registered brand owners and bona fide businesses. While the Anti-Fraud Law is indeed a welcome change, it still is at a nascent stage, where the success of the framework shall be heavily dependent upon the smooth operation of the Higher Committee and sub-committee and the manner in which the administrative processes assigned to them are carried out. Importantly, the regulatory framework and policies will be clearer once the implementing regulations are enacted. In any event, the heavy penalties provided for shall act as a deterrent against commercial frauds and crimes and shall bridge the lacuna created by the Old Anti-Fraud Law towards an effective measure to combat intellectual property crimes and other commercial frauds.

     

     

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    Thu, 29 Mar 2018 00:00:00 GMT
    <![CDATA[Bahrain Logistics Zone]]> THE HEART OF GULF – BAHRAIN

    "A 'start-up' is a company that is confused about – what is products, who its customers are and how to make money."

    Centrally located in the Gulf, stable economic climate, business-friendly atmosphere, state-of-art technology, and exceptional business opportunities are sufficient to convince an investor to invest in his Start-up. Bahrain is welcoming foreign investor since two decades now and has vast involvement in understanding the requirements of foreign investors. The unstoppable growth in the Middle-East economy, numerous companies look forward to investing in this proliferating trillion-dollar economy, specifically in an era when other developed economies are struggling for investment, Bahrain is the right choice for your profitable business.

    Considering the economic characteristic, Bahrain is popularly known as the freest economic market in the whole Middle East as is ahead of G7 economies such as Japan, France, India, China, and Germany. Whatever it takes to retain its position as the freest market in the Gulf is the sole objective of the nation. Bahraini government plays a crucial role in enabling the private sector to drive growth and increasing productivity via employing skilled labor. In comparison with other Gulf states, Bahrain was the fastest in diversifying its economy away from oil thereby maintaining the agenda of an astable economy. This was a right move in the achieving the tag of the most favorable business environment.

    Internationally, Bahrain is well-known due to its bilateral trade and economic agreements with more than 45 countries which include and is not limited to India, France, Germany, China, Singapore and the United Kingdom. One of the most trade-friendly agreement is with United States whereby under the agreement companies are allowed to charge 35% more for their products and services than in Bahrain and are subsequently allowed to a tariff-free trade in the U.S. market.  Trading companies can enjoy a worldwide exposure to Middle East markets with additional benefits of exporting worldwide just like a cherry on the top.

    Ongoing reforms are it economic or legal promises the success of both Bahraini and Foreign businesses. Following are the few notable points about Bahrain's economy capable enough to attract foreign investors to invest in Bahrain free zone:

  •  Lowest taxes in the Gulf, with no corporate, personal or withholding tax;
  •  Hundred percent foreign ownership;
  •  Restriction-free capital, profits or dividends;
  •  Ranked as the 16th freest economy in the world;
  •  The first country to have a free trade agreement with theU.S.
  • Gateway to Profit

    Free Zones in Bahrain is ranked as the best in the world as it is known to be an optimum business environment for international companies to do business from and in. Bahrain in many ways is one large Free Zone as it is i) Tax Exempt ii) allows for 100% foreign ownership in several industries iii) minimal customs duties. This is a key attraction for international businesses seeking to establish a presence in a region anticipating desirable levels of economic growth. Bahrain has three main Free Trade Zones (FTZ). These include Bahrain Logistics Zone (BLZ), Bahrain International Investment Park (BIIP) and Bahrain Airport Zone (BIA). In comparison with other countries in the Middle East, Bahrain does not require a Bahrain national shareholder for trading and commercial activities.

    BLZ is ideally located adjacent to Khalifa bin Salman Port, which offers state-of-the-art warehouses and is 13km from the Bahrain International Airport and only 40km from Al Khobar in Saudi Arabia. BLZ offers the base which is comparatively cheaper than other free zones in the country for doing business in the Northern Gulf. Ergo, following are the main benefits of opting BLZ over other free zones:

  • 100% foreign company ownership;
  • Multimodal access by land sea and air;
  • Flexible plot choices with a range of plot sizes starting from 4000 m² onwards;
  • Purpose-Built Infrastructure with a sufficient road network and plot entry allowances, specifically designed for lorry traffic needs;
  • 24-hour customs services;
  • Account managers to assist in setting-up and operating within the Bahrain Logistics Zone;
  • Basic services including facilities management and special waste management;
  • A to Z services.
  • The Bahrain Logistics Zone (the BLZ) is the region's first boutique logistics area that effectively meets company's tenancy requirements. Being the first logistics hub in the Middle East, BLZ focuses on value-added and re-export logistics activities. The goods can be imported or exported acquiring zero tax and zero customs duties. BLZ is operated by Ports and Maritime Affairs (the PMA) at the Ministry of Transportation and Telecommunications. It offers regional and international companies a platform to run and take advantage of Bahrain's highly beneficial location to cater to the Northern Gulf market and to access GCC markets quickly and economically.BLZ encourages logistics firm that performs component assembly, labeling, packaging and re-packaging and mixing, weighing and filling, kitting and palletizing, and testing and repair but also appreciates retailers and distributors. Due to its location near the port, the BLZ will play an integral part in supporting the major initiative to drive Bahrain as a transshipment hub for the region.

    BLZ offers customized services to complement and suit the operational needs of businesses. In addition to packaging, repackaging, logistics, export and re-export services, the BLZ have experienced account managers, who offer a custom-made, personalized service to provide end-to-end solutions. In coordination with related government and legal entities, these account managers can support with licensing, registration, visa processing, and other associated procedures to establish operations in Bahrain's Free Zones.

    What the future beholds

    BLZ also provides plots for leasing which starts from 4,000 square meters. Irrespective the choice of land size or usage, all plots are equipped with full utilities, security, and other management services.The BLZ authorities are planning to expand the size of the zone by 150 percent which currently at 475,000m2which has the ability to attract USDollars 600 million of direct investment.

    Companies incorporated in the free zone have already started pre-booking such as CEVA logistics from the Netherlands, which has earmarked a 10,000m2 warehouse. Danzas AEI Intercontinental, which is the Bahraini working arm of DHL Global Forwarding, has likewise affirmed intends to offer a scope of logistics administrations from Bahrain Logistics Zone. Being a setup business and improvement center in the Middle East, the dispatch ofBLZ will fortify the position of the Kingdom as the essential exchanging focus, while producing ventures of more than US Dollars 280mn. The present designs of further extending the site by 150 percent would additionally add to an immediate speculation of US Dollars 600mn. The primary period of Bahrain Logistics Zone is probably going to pull in more than 50 nearby, territorial and worldwide occupants, making around 2400 employment opportunities in logistics zone. Once completed, BLZ will offer leasable distribution center, retail and office space extending up to 475,000 sq. Mts., to its occupants. The General Organization of Sea Ports in Bahrain will work the traditions free logistics region of Bahrain.

    Awards and Appreciation

    BLZ is being advertised as the Middle East's first multi-demonstrate logistics center point, concentrating on re-export and value-adding exercises. BLZ was selected in the 'extraordinary accomplishment of the year' group last year's Supply Chain and Transport Awards (SCATA), in conjunction with Hala Supply Chain Services (HSCS), Gulf Agency Company (GAC), Gulftainer and the Dubai Department of Economic Development (DED).

    Bahrain holds the second position in the Middle East, in the World Bank's Logistics Performance Index, and would have liked to be the point of convergence for neighborhood, territorial and universal organizations meaning to extend their exchange a compelling way inside the locale. As indicated by the regulating body for the monetary improvement procedure of Bahrain, Bahrain now has the best logistics offices in theMiddle East. The zone is connected to significant ocean, land and air courses crosswise over developing Middle East economies of Qatar, Saudi Arabia, and UAE. It will help facilitate the obstacles which keep outside financial specialists from getting to the Middle East markets, and furthermore, the travel time for the conveyance of load to Kuwait, Iraq, Iran and other northern Gulf areas will be extensively decreased.

    It is imperative to note that the investor can establish three types of companies namely Free zone establishment, free zone company, and branch of a foreign or local company. Following are the documents required to be submitted to the aforementioned companies:

    Document Title

    FreeZone Establishment

    Free Zone Company

    Branch

    Application form

    Business Plan

    Letter of Intent

    Audited Financial report (past three years)

     

    Company Profile

     

    Bank statement of past six months

     

     

    Letter of reference from bank

     

     

    Passport copies of shareholders

     

     

    Power of attorney, specimen signature, passport copy and resume of manager

    NOC from sponsor

    Register certificate from parent company

     

    MOU and AOA of parent company

     

    Board Resolution of Parent Company

     

    Appointment letter, power of attorney, specimen signature and passport copy of legal representative

    Power of attorney, specimen signature, and passport copy of director

     

     

    ]]>
    Tue, 27 Mar 2018 10:15:34 GMT
    <![CDATA[Final- majority Minority V.1]]>                                 BALANCING THE UN-BALANCED

    "The Majority is always wrong and the minority is rarely right"

    -Henrick Ibsen

    Corporate law is the yardstick for the business sector which chaperons and molds the behavior of a Company. Corporate Law establishes the structure of the corporate form as well as formulates rules for the smooth flow of operations in the company.The other vital function of corporate law is to control the conflict of interests amongst the corporate constituencies such as the shareholders, directors, creditors etc. These conflicts are referred to as the 'Agency Problems where the wellbeing of one party, depends on the actions of another party. Title 8, Chapter 1 of the Delaware General Corporation Law (the Delaware Code) is the statute governing corporate law in the U.S. state of Delaware.The Delaware General Corporation Law has been a vital authority in the United States corporate law since the early 20th century. In the USA, every state has their own corporate governance law, however, since Delaware has a more developed and flexible approach to corporate law that provides greater guidance and transaction liability issues, most larger corporation choose Delaware General Corporation Law.

    The typical corporate governance framework views shareholders as the principal, and the objective of the management of a corporation is to maximize the interests of the shareholders. Even though shareholders delegate the board of directors to guide and monitor the management, they are given privileges and opportunities to participate directly in monitoring and operating their firms.

    Categorically, we can outlook four (4) main agency problems in a company on which the Law has paid utmost attention, as follows:

  • Shareholders v. Managers
  • Controlling Shareholders v. Minority Shareholders
  • Shareholders v. Non-Shareholder Constituencies
  • Shareholders v. Bondholders.
  • Tug of War between Majority-Minority

    A key agency problem that exists in any corporation is the struggle between the minority shareholders (the principal) and the majority shareholders (the agents). This is a high occurrence issue in jurisdictions where the concentrated shareholding dominates. It is an evident fact that the majority shareholders have more control over the governance of the company and therefore it holds an advantageous position for the minority shareholders.Protecting minority shareholders dates back to 1970s in the USA. The states rely on its underlying concept of democracy in every aspect, starting from the government to the corporate governance in companies. They believe that it is vital to protect the rights of all individuals. Therefore, it is important that majorities keep minorities in their mind when they make decisions that affect everyone in corporations. The nature of shareholders and their share structure in the USA in public holding companies differ from other jurisdictions. Investment institutions own most of the shares in public US companies. Therefore, each of the state laws, USA stock exchange regulations, and the federal law tend to protect public shareholders by regulating mandatory disclosure and establishing a relationship between minority shareholders and directors. All these issues get worse when the majority shareholding is concentrated among a limited number of shareholders. The senior management and even the Board of Directors of such companies are directly appointed or associates of major shareholders, so ultimately the decisions taken by the company are more favorable towards the major shareholder. This situation is deteriorated in large US public corporations which is mostly owned by a shareholder or group of shareholders who take all the possible benefits from the company.

    The main resources in the USA for minority protection includes Statutes, Common law, Company by-laws and the USA federal law securities. Each of the 50 states has its own corporate law. Most large incorporation chooses Delaware, where a minority shareholder in a company incorporated in Delaware state protects its minorities from the Delaware General Corporation law, company's bylaws, and common law. However, these developed in addition protection fail to fully provide the required balance between majority and minority shareholders. The corporate law has been developed in a manner to give additional protection to the minority shareholders to protect them as they do not have the contractual protection other parties like the employees or the third-party constituencies enjoy. The corporate law can either empower the minority or can limit the advantages enjoyed by the majority shareholders. The USA allowing public companies to cap vote, mandatory disclosure and shareholder-friendly accounting methodologies are some instances where the corporate law has protected the interest of the minority shareholders by constraining the activities of the major shareholders.

    Communal Issues

    Generally, there are three (3) common issues that arise between these two parties which are as follows:

  • Profit expropriation
  • Tunneling of assets
  • Improper dilution
  • In addressing agency problems, the law repeatedly turns to a basic set of strategies. There are two types of legal strategies used to address these agency problems, namely the Regulatory Strategies and the Governance Strategies. Under Regulatory Strategies, the law aims at constraining the behavior of the parties.

    Strategic Move

    Governance Strategies aims at facilitating the principal in controlling the Agent's behavior. To achieve these aims, the Corporate Law uses three toolsCompliance, Enforcement, and Disclosure that are designed for Corporate Law as a solution for this agency problem. The governing strategy has suggested several approaches to resolve these issues between the majority and minority shareholders. Appointing Non-Executive Directors for the main committee roles is one such way to protect the interest of the minority in a sense that it is strongly believed that the Non-Executive Directors shall act in an impartial manner for the best interest of the Company. Strong representation of independence shall constrain the controlling power of the majority shareholders as well as of the managers who bear allegiance to the controlling shareholders. The effectiveness of the practical appliance of these solutions bears a heavy question as we consider how independent are, these so-called "Non-Executive Directors" in a company. The selection of these independent directors is done by the Board of Directors of the Company who inadvertently bears fidelity towards the controlling shareholder. There are some instances where the controlling shareholders screen the proposed "Non-Executive Independent Directors" prior to their appointment. Therefore, even this method does have some positive effect to limit the activities of the controlling shareholders it cannot be distinguished as an immaculate method to protect the minority shareholders.

    There are other methods like derivative actions, mandatory disclosures, pre-emptive rights that are used to protect the minority. These methods do have a strong effect on a company to say that most of these methods are pertinent to the shareholders but also to the capital and labor markets in the broader picture.

    The minority shareholders can be empowered by awarding them excellent voting powers such as overweighing the votes carried by minority shareholders, reserving board seats, giving key committee roles, tag-along rights, vote capping, assigning veto powers etc. Countries like UK, USA, France, and Germany have the aforementioned methods in practice to safeguard the minority shareholders in such jurisdictions. Nevertheless, in general, these minority shareholders lack expertise and have fewer facts to decide on every matter of the corporation. Few wrong decisions can damage large corporations long aim of maximizing profit. However, despite this lack of intelligence in minority shareholders, US law and courts keep supporting and encouraging them with shaping and changing the law according to their requirement.One good example for that is the Delaware court of chancery supporting minorities in many circumstances.

    Case Laws

    The watermark case of Halpin v Riverstone National Inc[i]is one such example, in which, the company proceeded for a merger without the vote count of the minorities and they decided to file a class action against the majority shareholders decision.  Delaware court ruled in favor of minorities by setting an example. Therefore, the corporate law plays the role of finding the balance between different shareholders.

    Having some level of controlling power at the Board level or containing the power to screen and supervise the actions taken by the major shareholders which concern the profit expropriation, asset tunneling and improper dilution of shares, can assist the minor shareholders to protect their wellbeing at the company level, as a group. The protection from the above-mentioned regulation can help the minorities on the aforementioned then the bylaws of the companies as it is always written and it favors the majorities or the founder of the large companies in the USA. The right to bring a class action lawsuit against the company is another right given under Delaware General Corporation Law and New York to minority shareholders. They can bring the action in violation of their rights. For example, violations of disclosure obligations. Similarly, Delaware, New York, and many other states law give the rights to inspect corporate books and related books for a proper purpose. The mechanism will allow the group of minority shareholders in a corporation to investigate corporate mismanagements. Minority shareholders encourage the development of new laws protecting themselves and the other stakeholders of the company. They believe, it is important for the corporate law to provide protection to minorities. Nevertheless, they are minorities, they are a large number of shareholders when they are taken into the account in overall.

    However, the dictators of the US public companies believe that it is not inevitably necessary to empower minorities in public companies. They argue promoting minority can harm in the long run of the corporations.  According to one study, some of the largest public companies in the USA such as Walmart, Ford, and Berkshire have concentrated shareholder structure with empowered majority shareholders domination and success in long run. Finance scholars study the balance maintained between shareholders in large public companies such as Google, Fiat, Lego, and Facebook and how a small group of shareholders helped the corporation in long run. The framework of dual class structure and concentrated shareholding protects the major investors and entrepreneurs who risk most at the beginning of the corporations. They believe minority shareholders must rely on exit option rather than on their "voice". They are always given the option of leaving the company whenever they wanted to leave. In contrast, Majority shareholders are well known for the abuse of their power 'private benefits of control'at the expense of the minority shareholders. It includes entering into conflicts-of-interest transactions, misusing corporate resources for personal ends, expropriating corporate opportunities, and building a conglomerate empire.

    Conflicts and consequences

    The conflict between shareholders can lead to the expropriation of funds and assets that will affect the corporate overall.  For example, managers of corporations will steal and shirk from the corporation as well as promote the proposals that will support the majority shareholders to diverge the interest of the minority. Similarly, most of the time the majority shareholders interests are not aligned with the interest of other shareholders. Which can lead the majorities to promote self-dealing transactions, damaging the entire corporate interest?

    As Kraakman argues in his book called the Anatomy of Corporate Law, that to a greater extent, the regulations come to save the minority shareholders at the beginning or end. Which is a successful strategy for majority-minority shareholder agency problem as it can bring more minority shareholders to the public firms and benefit in overall?Current USA approach of balancing the majority-minority shareholders in public company considered to be successful. Active involvement of minority shareholders in large public firms improves the quality of the protection of investors which will improve the public trust in the stock market and develop the economy in total. Minority shareholders must feel secure and safe from all the powerful entities in the corporation. Delaware is the best-known state in theUS for identifying agency problems in advance and providing a solution for that. Delaware finds help from all the legal parties who can help to improve the regulations. The bar association guides and shape Delaware regulation in every step and therefore, the corporate matters advised by the best corporate lawyers in advance.

    Conclusion

    Companies can accomplish their corporate objectives and goals of advancing company growth and profitability by executing balance between shareholders right. It can increase the ability to raise funds through stock offerings, offer a feasible stock option program to court executives, and prevent hostile takeovers by other company can be done by mutual understanding between shareholders. The leaving of shareholders (majority or minority) can damage the reputation of a corporation and will not attract more shareholders to the company. Therefore, the companies require the help of regulatory framework to bring the regulations to govern the problem and also to develop strategies time and time according to the needs of the large corporations. 

    [i] C.A. No. 9796-VCG 

     

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    Mon, 26 Mar 2018 16:36:57 GMT
    <![CDATA[Witness testimony in UAE]]> WITNESS TESTIMONY IN UAE

    Part IWitness testimony is certainly the oldest form of evidence and is generally given the most credibility in the courts. The issue that arises here is that how reliable the statements of witnesses are in the court in civil or criminal matters. The civil or criminal laws of the country have provided the procedure related to the witness testimony in the court but have not mentioned the procedure to test the veracity of his or her statement. All legal systems ­­­­­­globally are consistent with different backgrounds and sources, that a lawsuit whether civil or criminal must have evidence in order to adjudicate the petitioner's pleas. National Emirati legislation is no different. There are several laws which lay down provisions concerning the witness testimony for example Article 1 (1)of the Federal Law Number 10 of 1992 concerning the Law of Evidence (the Evidence Law) stipulates that: "The plaintiff must prove his claim, and the defendant has the right to disavowal".

    Also, Article 113 of Federal Law Number 18 of 1993 concerning Civil Transactions Law (the Civil Transaction Law) also stipulates that: "The creditor must prove his right and the debtor has the right to disavowal." and Article 117 of the Civil Transaction Law also stipulates that: "The evidence is on the accuser and an oath is on he who denies."

    It is important to note that the cassation court judgments in the nation are considered as precedents and can be used in similar lawsuits, as it binds any lawsuit holder whatever his position in the lawsuit, whether a plaintiff or a defendant must submit evidence to support their claim. Court of cassation adjudicated in Dubai dated 26 December 2011 in appeal number 2011/ 111 Labor Appeal that: "it is determined that a claimer is obliged to provide evidence on their claims whether they were originally a plaintiff in the lawsuit or a defendant in it"

    Proof of Testimony

    Evidence can be proved and taken into consideration upon the testimony of the witness. Law has also referred to the testimony of the witness as one of way to prove the evidence presented in the court as Article 112 of Federal Law Number 11 of 1992 regarding the Civil Procedure (the Civil Procedure Law) mentions that "Proving the claim's evidence are: writing, testimony, indices, examination and experience, declaration and oath".

    The law has also given testimony full proof and evidence in proving a claim, should the competent judge accept it, and the other conditions were available. Article 114 of the civil transactions law outlines that: "writing, testimony, conclusive indices and examination and experience are transitive arguments."

    Considering the importance of the testimony of a witness proving the difference between the innocent and guilty party in a lawsuit, we consider few aspects such as "Who has the right to testify, what is the quorum of testimony" and "who is forbidden from testifying". Post obtaining the result from foregoing questions we seek answers for another two questions being "Is it permissible to withdraw a testimony after testifying" and"can others annul a witness's testimony?"

    Who can testify?

    Importantly, it is established that everyone has the authority to testify in the court of law as long as they were permitted by the competent court, and a request to hearing the witnesses was not declined by the court. However, the court may decline to hear the witnesses, should it find no benefit in their testimony to the case. That is in the case of a civil lawsuit.

    The court of cassation's civil department in Dubai dated 1 February 2011 in appeal number 122/2010 domestic relations adjudicates that: "The trial court is authorized to assess the seriousness of the opponent's request to transfer the case for investigation, admit it or decline it. That is according to the lawsuits circumstances and documents. It is also authorized to decline the request should it find in the suit's papers and documents enough clues to form a belief in order to adjudicate on the subject without the need to transfer the case for investigation and witness hearing".

    Age of the witness

    The law of Evidence does not include what could determine the age of the witness. However, referring to the Islamic Shariah Law, it is mentioned that at least two men should bear witness, where the men must be above the age of 21. Therefore, the witness must reach puberty, and this is how the juridical of cassation adjudicates.

    Therefore, a boy would be ineligible to testify, but it could be taken on a non-official basis. Imam Malik had approved that a boy would keep his statements and testify when he's of age. The court of cassation in the case of Dubai dated 08 April 2001 in appeal number 07/2001 domestic relations adjudicated that: "Malikiti school approves of a boy's testimony, he would testify when he's no longer considered a boy, for it is intended in their opinion to trust the witness at the time of the testimony, and that lineage is proved by heard testimony."

    Swearing an oath

    The witness must swear an oath whether on civil or criminal evidence. Article 41 (2)of the Law of Evidence stipulates that: "The witness swears the oath by saying (I swear by Allah Almighty to tell the truth and nothing but the truth). Swearing would depend on his religion's conditions if he asks for that."

    It's worth noting that not swearing the oath of criminal evidence has its impact, since not swearing the oath results in the invalidity of the testimony. The court of cassation in Dubai – dated 28 October 2007 in appeal number 131/2007 civil adjudicates on this matter that: "It is the witness's duty – according to Article 41 of the law of evidence in civil and commercial transactions – to swear an oath before testifying by saying (I swear in Allah Almighty, to tell the truth and nothing but the truth). Swearing would depend on his religion's conditions if he asks for that." And it's a ruling article in which the testimony, without it, becomes invalid as a standing evidence in the lawsuit in order to achieve the purpose of which the legislator had intended, that is to enlighten the witness of what swearing by God involves of committing to honesty and seeking the truth. But, if the witness appears before the court and refuses to swear the oath, or refuses to answer –after swearing- and with no legal justification, he will be sentenced the penalty appointed in the penal law, according to what article 43 (1) from the same law adjudicates."

    The quorum of testimony

    The Law of Evidence and the law of evidence have no articles to determine the quorum of testimony or witnesses in proving. Thus, in this case, the court is given the choice to adopt the honorable Islamic Shariah Law, the court of cassation in Dubai dated 12 December 2006 in appeal number 2005-81 domestic relations held that: -

    "Should each of the law of domestic relations, the law of evidence in civil and commercial matters and the law of civil procedures lack an article on whose testimony would be accepted on inheritance and the quorum of that testimony. And according to the third clause of the second article of the first law- it is reverted in clarifying that to what's known in the doctrine of Imam Malik which determines that the quorum of the testimony is two men."

    And what's decided on inheritance could apply on any other matter regarding the quorum of testimony, if there was no article to determine it.

    The whereas regarding the civil suit, the law of evidence had not required a specific quorum for the witness's testimony, therefore, it is authorized to prove with the testimony of one witness. The court of cassation adjudicates through Dubai dated 17 October 1998 in appeal number 147, 164/1998outlines that"The law of evidence does not require a specific quorum to prove what should be proven by the testimony of the witnesses, so it is authorized to prove with the testimony of one witness – for whatever it is and the appealed adjudicationwas deduced of the witness's statements that are written in the expert's official report  that the appealer used his right in taking his annual vacations for the last two years of his service and what the jurisdiction had deduced in that was admissible and has a fixed origin in the witness's statements and was sufficient  to carry the jurisdiction on this matter, deploring on it regarding this would be ungrounded."

    It is important to note that there is a difference in proving domestic relations matter and civil matter in witness quorum. Witness quorum in the civil suit had been explained earlier, but in the matters of domestic relations, it's different depending on the matter to be proved. In the case of proving damage in a divorce lawsuit, the law authorized proving by a man or a woman. Court of cassation adjudicated in Dubai dated 29 December 2009 in appeal number 73-2009 domestic relations that: "It is determined, in the jurisdiction of this court, that in the matter of proving damage that stipulates a divorce, it is approved to accept the witness's testimony, whether a male or a female. And the quorum to the testimony in proving the damage is two honest men or a man and two women".

    On the quorum of testimony in proving lineage or divorce, it must be two honest men. The court of cassation mentioned in Dubai dated 20 February 2006 in appeal number 2005/58 domestic relations appeal that: "It is determined that a divorce is an annulment the valid marriage in the form set by the Shari 'a, which would be verbal or written. And when unable to understand, by the comprehended sign. It falls upon the husband or his representative by a special power of attorney, on the wife if she had been given the rights of the marital bond by her husband, or a judge's jurisdiction. A divorce is either revocable, the marriage does not end until the waiting period is over, or irrevocable, ends the marriage when it occurs. The divorce is proven either by the husband declaring it verbally or in writing issued by him, Duly certified documentary evidence or a judge's jurisdiction. The quorum of testimony for a divorce is two men."

    The court of cassation also adjudicated in the case in Dubai dated 12 December 2005 domestic relations that "It is determined in Imam Malik's applicable doctrine that the quorum of testimony in proving lineage is two honest men".

    That, and the reason for the difference between a man's testimony and a women is that a woman tends to forget, and given the importance of the matter that is witnessed, the Islamic Shariah wanted to assure that the witness remembers all the details and not get things mixed up, which would occur to a woman. Let alone women's emotional nature which may affect her testimony.

    To approve or Disapprove?

    We have already discussed that everyone has the right to testify in the court of law and even a boy's testimony would be unofficially considered. Yet, it is worth noting that the witness himself, and his relation to both parties to the lawsuit may be taken into consideration.

     The law mention on some of these clauses and the judges have worked on coming with jurisprudence on some others. The law of evidence in Article 40 mentions that: "The testimony of employees hired staff and those who are assigned a public service won't be accepted even after leaving their work on whatever information, unauthorized to publish by the official authority, they might have had access to during their duty. Nonetheless, this authority may allow them to testify at the request of the court or one of the opponents."

    The rule of accepting or rejecting a testimony is up to the trial court. The Court of cassation had adjudicated in many of its official decisions that kinship, affinity, and dependency are factors that don't deter from accepting a testimony to the extent that dishonesty is not a factor that would prevent accepting the witness's testimony. It is evident from the judgment of Cassation court in Dubai dated 26 March 2000 in appeal number 445/1999 rights "kinship, affinity and dependency and dishonesty are, in the concept of this law, not prohibitive from testifying, which is left to the trial court whether to estimate or decline it".

    The court has also outlined that "declining an offspring's testimony to their ancestry, and the ancestor to their offspring" in Dubai dated 17 June 2001 in appeal number 19/2001 domestic relations.

    Conclusion

    The sanctity of witness testimony is different in civil and commercial matters. The rule in both the lawsuits is also different as we have studied in the case laws of Court of Cassation mentioned above. In the next article we will discuss the witness testimony in the criminal cases and what are the possible situations where the court can refrain the witness from giving his testimony. 

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    Sun, 25 Mar 2018 12:44:26 GMT
    <![CDATA[The Singapore companies act]]> The Singapore companies act

    Singapore is famous for three major things; finance, commerce, and transport. It is considered as "technology ready" nation. The country is also eminent for its laws and regulations, where amongst them are laws regulating the companies. The Companies Act 1967 was the primary piece of legislation which was governing the companies incorporated in the country. Ensuring the Act is kept reinvigorated with a specific end-goal to productively reflect the mirror of Singapore's quality as a worldwide business, while in the meantime fitting shields to partners, is a key concern for lawmakers. The lawful authority accessible to the board of directors are powers to follow up in the interest of their organization. The powers are not free of the organization and when in doubt, they may not do, for the sake of the organization, any action that the organization itself isn't qualified to perform.

    In Singapore, organizations are essentially represented by the Companies Act (Cap 50, 2006 Rev Ed) (theCompanies Act or the Act). It ought to be noted however that particular sorts of organizations may, notwithstanding the Companies Act, be directed by different statutes. The Companies Act does not just set up the scope of exercises that the organization may take part in however it likewise, perpetually, characterizes the forces that are assigned from the organization to its directors.

    The Companies Act formally appoints the directors with wide powers to deal with the business and undertakings of the organization. In addition, a general delegation of authority, it likewise sets out a progression of specific powers, for example, the ability to acquire up to a specific sum, the ability to decline to enlist share exchanges and to relinquish shares in specific conditions. The Companies Act additionally expresses that the directors of the organization should deal with the matter of the organization and exercise the greater part of its forces subject to the arrangements of the Companies Act. The executives are likewise in charge of the administration of the organization's business, for this reason, they may practice every one of the powers of the organization.

    Where the organization's constitution puts any limitations on the powers of the organization or on the powers of the board of director or directors, those confinements must be seen by the directors as a component of their obligations to the organization. Where an outsider manages an organization in compliance with common decency, the power of the directors is to tie the organization or to approve others to do as such, is regarded to be free of any confinement in the organization's constitution.

    Also, the Act that the outsider won't be viewed as acting in mala fide intention by reason just that he or she had prior knowledge that the activity is beyond the powers of the directors. The powers of individual directors to tie their organization are additionally influenced by the tenets rules and regulations of the law of agency. These standards apply to the assurance of whether an essential (for this situation the organization) is bound by the demonstrations embraced by people following up on its power (its operators) in their dealings with third-party.

    The Two Phases

    In 2013, the Ministry of Finance and the Accounting and Corporate Regulatory Authority of Singapore (the ACRA) counseled broadly on draft revisions to the Companies Act. On 8 October 2014, the revisions to the Companies Act were passed in Parliament and the Companies (Amendment) Bill No.25 of 2014 (the Bill)was established to actualize the proposals of the Steering Committee for the Review of the Companies Act. In April 2015, ACRA declared that the authoritative changes will be executed in two stages, the first being viable on 1 July 2015 ("Phase One") and the second being powerful Q1 2016 ("Phase Two").

    Why change?

    The Bill acquaints far-reaching revisions with the Companies Act, looking to:

    • diminish the administrative weight of organizations, making it simpler for them to work together in Singapore;
    • advance more prominent business adaptability, pleasing distinctive sorts of business and methods for raising capital; and
    • enhance the corporate administration scene, guaranteeing more noteworthy responsibility and straightforwardness.

    Different partner gatherings, for example, open organizations, privately owned businesses, Small-and-medium enterprises(SMEs) and retail speculators will profit by the progressions set out in the Bill.

    Forms of Company

    Limited Liability Partnership (LLP)

    Section 2 (1) of the Limited Partnerships Act, 2005 (the LLP Act)defines the Limited liability partnership as what is mentioned under Section 4 of the LLP Act. Section 4 defines the Limited liability partnership as:

    (1)    "A limited liability partnership is a body corporate which is formed by being registered under this Act and which has the legal personality separate from that of its partners;

    (2)    A limited liability partnership shall have perpetual succession;

    (3)    Any change in the partnerships of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership."

    The LLP Act under Section 22 mentions that there must be a minimum of two (2) partners in the company. Whereas, the liabilities of all the partners are expressly mentioned under Section 8(1), (2) and (3) of the LLP Act, which expresses that the partners are by and by not obligated for reimbursement, appraisal or something else. However, they are at risk in tort for the wrongful demonstration or exclusion for different partners of the LLP. Further, S.23(1) states that at least 1 director/ manager is required for an LLP in Singapore. Directors/managers are at risk for issues that are secured under S.24 of the Act, they are likewise at risk for punishments forced on the LLP under S.23(3)(b).

    Also, in accordance with sections 17 of the Companies Act, there are three forms of companies that can be incorporated in Singapore namely:

  • Company limited by Guarantee;
  • Company limited by shares;
  • Unlimited company
  • Corporate Governance under the new law

    I.            The detachment of Ownership and Management

    In accordance with Section 157Aof the Companies Act expresses that the matter of the organization might be overseen by or under the course of the chiefs. The executives may practice every one of the forces of an organization with the exception of any power that the Act or the organization's constitution of the organization requires the organization to practice when all is said in the done gathering. This reflects one of the highlights of organization law, to be specific, that it can encourage a partition of possession and administration. The individuals or investors who possess the organization require not really be associated with its administration as directors. While in a few organizations, the individuals from the organization may likewise be associated with its administration - either as director/manager or in some other official limit - in different organizations, the individuals are not engaged with the administration. Rather, such organizations are overseen by sheets of executives in which a significant number of the directors are not individuals from the organization.

    II.            Statutory Duties

    Subject to Section 157 of the Act - Directors owe trustee obligations to their organizations:

    Under the common law, directors are viewed as trustees and in this manner owe fiduciary obligations to their organizations. In the meantime, the Act likewise endorses certain obligations on directors which reflect their general obligations under the customary law. One vital arrangement is section 157(1) of the Act which endorses that an executive might constantly act sincerely and utilize sensible determination in the release of the obligations of his office. Section 157(2) of the Act goes ahead to express that an officer or operator of an organization should not make uncalled for utilization of any data obtained by righteousness of his position as an officer or specialist of the organization to pick up, specifically or by implication, preference for himself or for some other individual, or to make inconvenience the organization.

    Section 157 makes certain obligations compulsory and does not criticize existing rules:

    Section 157 of the Act does not indicate to be a thorough proclamation of the law identifying with the obligations that executives owe to their organizations. In such manner, Section 157(4) gives that the segment is notwithstanding and not in disparagement, of some other run of law identifying with the obligation or risk of executives or officers of an organization. The impact of  Section 157 is to render the statutory obligations obligatory while the obligations at custom-based law are equipped for prohibition by an understanding between the organization and its chiefs, expecting that the organization has settled on such a choice autonomously of the intrigued executives. Under section 157(3) of the Act, a rupture of Section 157(1) and 157(2) renders the officer or specialist at risk to the organization for any benefit made or any harm endured by the organization because of the break. In the meantime, a break of these areas is an offense, and the officer or specialist should be subject upon conviction to a fine not surpassing USD 5,000 (United States Dollar five thousand) or to detainment for a term, not more than one year.

    III.            The obligation under Common Law to Act to the greatest advantage of the Company:

    Courts won't substitute possess judgment for that of executives

    While practicing their obligations, directors (and the organization's senior administrators) must act real in what they consider is to the greatest advantage of the organization. At the point when the demonstrations of managers are tested, the courts don't substitute their own particular judgment for that of the directors as outrightly mentioned by the judges in these landmark cases,ECRC Land Pte Ltd v Wing On Ho Christopher [2004] 1 SLR 105 and Vita Health Laboratories Pte Ltd v Pang Seng Meng [2004] 4 SLR 162. All that the courts are worried about is whether the managers have acted sincerely in what they (and not the courts) thought to be in the organization's best advantages. Obviously, if the choice is one that no sensible board would have touched base at, this gives occasion to feel qualms about genuine the honesty of the directors.

    Directors are qualified for have regard to interests of individuals and members despite the organization's separate identity

    It ought to be noted however that, while the directors' abrogating obligation is to the organization, Section 159 of the Act gives that in practicing their powers, directors are qualified for have respect to the interests of the organization's workers for the most part, and additionally the interests of its individuals. That director may have respect to the interests of its individuals is likewise the position at customary law since the members collectively considered as a company despite the organization's different identity. The qualification to have respect for the interests of representatives is additionally a sensible one since propelling the interests of workers will frequently be to the greatest advantage of the organization.

    IV.            Impact of Breach of Fiduciary Duties

    In the event that a director places his own advantages over those of the organization, the executive will be obligated for any misfortune caused by the organization. On the off chance that the director has benefitted from his position without the informed assent of the organization, the director may need to represent the benefits of the organization. Where the director has contracted with the organization, for example, the director has sold an advantage for the organization, the organization might have the capacity to keep away from the agreement if the agreement with the organization was gone into in break of the executive's trustee commitments to the organization. Where an outsider has gone into an agreement with the organization realizing that the executives of the organization have acted shamefully, the organization may likewise have the capacity to keep away from the agreement opposite the outsider.

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    Sat, 24 Mar 2018 16:40:00 GMT
    <![CDATA[A Global analysis of franchise agreement]]> A Global analysis of franchise agreement

    "Isolation is not possible. Globalization is inevitable and beneficial."

    Introduction

    Do you wish to establish an attractive business model to distribute goods and services globally? Does your company have a brand image in the market and wishes to expand? Do you have a unique trend and wish to generate profits? If there is an affirmative answer to any of the question as mentioned earlier, then franchising is the best option you can avail to earn worldwide popularity with a handful of resources and a large number of profits. With a booming international economy and changes in cross-border corporate transactions, entrepreneurs around the world are looking to establish their brands in foreign countries. If you are one of those entrepreneurs, this article will prove to be much more than a legal aspect of franchise agreements.

    The business structure of major companies around the globe is rapidly transforming with a clear objective of expansion all over the world. The franchise is a unique method primarily used in service industries and a mechanism for transferring business structure via arm's length with a handful of resources. It turns out to be a manifestation for exploiting collaboration between the commitment of franchisee and management expertise of franchisor. For a franchise model to survive the country requires a legal environment providing an organized framework to benefit all stakeholders, however, there is no unanimity in all nations concerning the legitimate model. Having a glance of history, we can see a discernible trend of regulation in major jurisdictions post adaption of the franchise model, most of the countries are willing to change the legal environment for a franchise system to breathe. Whereas, some countries are still reluctant and rely merely on the underlying rules and regulations regulating the other business activities in general.

    The franchising model has benefitted from the trend towards the globalization of markets henceforth; the new global panorama post adaption of franchise model is seen as an icon of western-based globalization. Considering the international standards in mind, this article focuses on the elements of franchising, the legal framework and its enforcement in the major jurisdiction in the world.

    UAE

    UAE has the robust and dynamic markets in the world, and it is bursting with new foreign business arrangements, where franchises are bountiful. At present in UAE, franchises are operating in various sectors but mostly in fast foods, soft-drink bottling, beauty products, restaurants, and apparel. Franchise in UAE is regulated with a range of civil and commercial laws depending upon the terms of the contract, as there is no specific franchising law in the country. There are multifarious laws which apply to franchise arrangements such as Federal Law Number 13 of 1981(as amended) concerning Organization of Commercial Agencies, Federal Law Number 5 of 1985 on civil transactions, Federal Law Number 18 of 1993 on Commercial Transactions.

    Apart from the aforementioned, UAE intellectual property laws for trademark, copyright, and patents, Federal Law Number 8 of 1980 on labor laws(as amended). However, the major challenge faced by UAE courts while treating a franchise as an agency is the arbitrability of the franchise dispute, as a matter of fact. Further, there are two types of franchise agreements that exist in the country, registered and unregistered, where the former agreements are those registered with the UAE Ministry of Economy and the latter are not. A dispute arising out of a registered franchise agreement provides exclusive jurisdiction to local courts under Commercial Agency Law, on the contrary, a dispute arising out of unregistered arrangement are not entertained in the court. The Agency law favors franchisees over franchisors and therefore international brands prior to coming to UAE must consider the need for registering the agreement. Registration could provide ability for both franchisor and franchisee to prevent parallel trading of goods and has an evidentiary value in the issue of trademark infringement. Further, the court faces several types of a dispute between parties, either from the registered or unregistered agreement, where termination of registered agency agreement is usually difficult, rest others include, misrepresentation, breach of contract, the appointment of another agent post-termination of contract.

    Practically considerable amount of unregistered agreements exists and courts on many occasions have entertained cases whereby applying substantive provisions of Federal Law Number 18 of 1993concerning the Commercial Transactions. Under the registered agreements, the law provides higher protection to the franchisee, referring to Article 8 of the Commercial Agency law, where the Principal can only terminate the agreement on the Justifiable cause, whereas, under unregistered agreements, the agreement is treated as a contract.

    The United Kingdom

    In 1960, Dyno-rod was the first franchise network launched in the UK since then, franchising has framed its roots and flourished as a proven method for expanding business in the market. British Franchising Association (BFA) regulates franchise system in the country in accordance with its codes and ethics due to the absence of specific franchise laws. Subsequently, BFA code only applies to BFA members but UK High Court changed its opinion overtime in Re Drivetime Recruitment Ltd Re DST Ltd. [i], a case where winding up of a franchise whose franchisor was not a member of BFA, thecourt recognized the significance of BFA code while analyzing the behavior of franchisors in general. Further, BFA code imposes obligations on both parties and does not specifically favors one.

    Apart from the BFA code, the U.K. Competition Act of 1968 regulates all kinds of agreements in the country inclusive of franchise agreements. However, the major concern among the franchisors is the prohibition from entering into agreements imposed by the Competition Act itself. Primarily, franchisors are prohibited from entering into agreements with an objective of distortion and prevention of Competition Act, secondly, any agreement exempted under European Union (EU) law is also exempted under UK law. EU rules apply in the UK in accordance with Article 101 of the act, where European Commission has issued a block exemption for vertical agreements that have the effect of exempting certain rules and regulations if specific criteria are met.

    Although no specific franchise law exists in the country, there is certain other legislation which the courts refer whilst assessing the dispute between franchisors and franchise being, Trading Scheme Act, 1996, Data Protection Act of 1998, Unfair Contract Term Act 1977 and The Bribery Act 2010.Court entertain several kinds of issues between the parties which includes, enforcement of post-termination non-compete covenants, breach of contract, misrepresentation and more.

    The United States

    The Leader of Global Franchising Industry and the icon for most countries franchise system is still holding the same position in the global market. Franchising in U.S. is regulated either by federal laws or state laws, where the former is Federal Franchise Rule implemented by U.S. Federal Trade Commission(FTC) which applies all over the country, whereas the latter are various state laws apply only to specific events where sale of franchise was made in the state, business located in the state or franchisee resides in the state.

    Apart from the main law, there are 3 general categories of laws regulating franchise in the country being disclosure law, registration laws, and related laws. These three categories prevent the most common types of violations under franchise agreement such as offering and selling of unregistered franchise, failing to make required disclosures, making misrepresentations in the agreement and improper terminating of agreements. The federal Franchise rule does not provide a specific provision for registration of franchise; however, various states require that franchises must be registered before offered in the market. Subsequently, state laws also impose various other restrictions on franchise relations including, Good faith and reasonableness, marketing fees, non-waiver, encroachment etc.

    The eBay Inc. v. MercExchange LLC happens to be one of the important cases in the history of franchising in the U.S., the case addresses the post-termination enforcement of trademarks rights, court opined in the favor of franchisor's right for terminating the use of trademarks post-completion of agreement and court may pass preliminary injunctions for preventing the usage of the same.

    India

    Franchise sector in India is at an incentive stage and similar to most countries around the globe there are no specific regulations regulating the franchise law in the country and agreements are therefore contractual in nature, in the view thereof, franchise agreements are regulated by various other allied statues and legislations which determine the type of relationship between the franchisor and franchisee being, Indian Contract Act 1872, Monopolies and Restrictive Trade Practice Act 1969, Competition Act 2000, Transfer of Property Act 1882, Consumer Protection Act 1986, Intellectual Property Laws, Indian Taxation Act 1961 and Foreign Exchange Management Act 1999. Additionally, it is pertinent for the investor before entering the Indian market that any proposed investment must abide by the rules of FDI policy released semi-annually by Department of Industrial Policy and Promotion (the DIPP).

    The franchisors and franchisees intend to create a contractual relation, however, sometimes the relationship between the party could be considered anagency if the franchisee is allowed to enter into contracts with the third party. Further, issues relating to franchise agreements may include termination of contract, misrepresentation, breach of contract and more. However, the court does not address the issue of negative covenant post-termination, in accordance with section 27 of the Contract Act such post-termination negative covenant are void-ab-initio. Additionally, the court does not favor either party, as the relationship between franchisor and franchisee are generally contractual, however, in relation to the principal-agent relationship, the law is more favorable towards the agent.

    The Apex court has always tried its level best to resolve the dispute with utmost care. Subsequently, Supreme court of India in Gujarat Bottling Co. Ltd. v. Coca-Cola Co. Ltd.[ii]emphasized on an important aspect of a franchise agreement, the disclosure of know-how and trade secrets to the franchisee. The court was of the opinion that franchisee must take adequate steps to protect the franchisor's confidentiality from other businesses in the markets and franchisor has the right to impose a negative covenant for prevention of disclosure of trade secrets in the market.

    Saudi Arabia

    Kingdom of Saudi Arabia is open for franchise agreements with few legal restrictions. Saudi law does not create a distinction between foreign franchisor or franchisee and Saudi franchisor. The country does not have a specific franchise law, however, Ministerial Order Number 1012 of 17/09/1412 (corresponding to 22 March 1992), issued by Ministry of Commerce and Industry, brought franchising under the similar purview of commercial agency regulations. The commercial agency regulations set out the rules which govern the relationship between the principal (franchisor) and agent (franchisee). Further, like UAE there are two types of agreement exist in the country registered and unregistered, where the former is the one registered in the Commercial Agencies Register at MOCI(Ministry of Commerce and Industry) within 6 months, and latter is the one which is not. Additionally, entities failing to register the agreements can still enforce franchise agreements but, will not avail the protection under Agency law.

    Considering the mandatory provisions, the Sharia law will apply to all franchise agreements and parties are at autonomy to structure the contract. The law deals with issues like termination where contract will be terminated in accordance with the terms and there is no minimum term for franchise agreement, Restrictive covenants are lawfully enforceable in the Kingdom where franchisor has the right to restrict franchisee from competing with franchisor, dispute resolution, autonomy of party to stipulate the dispute resolution mechanism and where parties have not opted for arbitration the matter will be resolved by the court having jurisdiction.

    Conclusion

    With the wave of globalization having hit business structure of major companies around the globe, franchising seems to be an attractive and lucrative option for foreign brands to expand globally. The future of franchising is bright and clear; however, it is recommended to consult a lawyer before entering into franchise agreements due to dissimilarities of laws in countries.


    [i] [2004] ALL ER (D) 180 (Jul)

    [ii](1995) 5 SCC 545

     

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    Thu, 22 Mar 2018 12:50:18 GMT
    <![CDATA[Sports Law part 1]]> LAWS OF THE GAME- A GLOBAL OVERVIEW (PART 1)

    "Sports don't build character. They reveal it."

                                                                                                    -Heywood Broun

    When Oscar Pistoriuswon the 2004 Summer Paralympics in Athens, he became the first athlete to win a gold in a single below-knee amputee championship even though he medically qualifies as a double below knee amputee. Sports fans across the world rejoiced on his magnificent achievement and nicknamed him "fastest man on no legs". He has been one of the only few athletes to have participated in both Paralympics and Olympics. But, his success story was overshadowed by IAAF claims that Pistorius had an added advantage due to his artificial carbon fibre limbs over able-bodied athletes and ruled him ineligible for their competitions. However, Pistorius not only contested this decision but successfully overturned it at the Court for Arbitration for Sports with the help of the prevailing provisions of sports law.

    Introduction to Sports Law

    What is Sports Law? This question has repeatedly been raised by people regardless of their professional background. The answer to this question might seem deceivingly simple; nevertheless, the person on the other end fumbles while answering. The reason behind this hesitation perhaps has something to do with the dilemma as to what exactly is being sought from this prodigious legal discipline. The author will attempt to answer this question.

    A distinct Forbes list just for highest paid athletes evidences the rising popularity of the sports industry in the past few decades. The history of sports extends as far back as the existence of people as purposive and competitive. It simultaneously portrays as how the beliefs of the society have changed and what changes have been brought in the rules and regulations. The most eminent legal scholars have always unanimously held that law is important for a society because it serves as norms of thecode of conduct. It keeps the society running. Without law, there would be a state of bedlam where only the fittest will survive. Similarly, even though law and sports are often considered as "separate realms"; sports laws form the backbone of the sports industry regulating the myriad of interlinking legal issues ranging from anti-doping, gambling,andmatch-fixing to the choice of legal structure for sporting organizations. Sports without the governance of a body of law can be comparable to a football match without a referee; havoc.  These laws have an unusually well-developed pattern of globalized regulation and overlap substantially with multitude areas of other distinct laws.

    Progress of Sports Law over time

  • HISTORICAL POSITION: Not existing
  • Traditionally, it was believed that sports law is merely an amalgamation of various areas of law. As per this perspective, sports law lacked anidentifiable body of regulations and was co-dependent on the legal system in general. Embracing this opinion, the authors of a leading "sports law" textbook went ahead and published that "the term 'sports law' is somewhat misleading. In reality, sports law is nothing more or less than thelaw as applied to the sports industry."

  • INTERMEDIARY POSITION: Gradually developing
  • During the last few decades, sports enthusiasts and scholars started questioning the historical approach. They firmly believed that a rising industry like sports required a legal backbone to support its development. A change was felt in the stance legal industry through the peeking industry of law professionals to further understand and resolve legal issues revolving around sports and competitive events. Professor Burlette Carter was one of the many intellects who argued in favor of the development of sports law as a distinct area of law. She contended that "the transformative process of sports lawparallels the increased focus by law schools on sports, and the growing significance of sports regulation to participants, organizations,and communities." She maintained that these developments would shape sports law from "a course without a corpus" to a self-sufficient area of law. The establishment of various governmental and non-governmental organizations with an autonomous power to formulate their own regulations further fuelled this transformation.

  • PRESENT POSITION:A substantive field of law
  • After years of debates and opposing views, sports law has now been recognized as an independent field of law. Supporters of this view argue that sports are a specialized field of entertainment which ranges far and wide from regulating diverse sports to broadcasting competitions to every corner of the world. It thereby requires being administered by a substantive body of law. It is generally professed by individuals undermining the authority of sports law that it is merely an amalgamation of diverse legal disciplines and has no legal base of its own. However, in reality, this statement applies to most 'substantive' fields of law. Legal fields diverging from both civil and criminal law are co-dependent on each other. This can be perfectly exemplified by the law of torts, the primary aim of which is to punish wrongdoers similar to criminal law however it is categorized as general standards of community obligation. Overlap of legal doctrines and terminology is inevitable. Sports law is now universally recognized not only in law schools across various jurisdictions but as a preferred field of practice for legal professionals. The Sports industry is now a fully-fledged business warranting the circulation of billions of dollars. It is only deemed fair that the transformation of sports from a source of entertainment to a field of commerce is supported by a legal cornerstone.

    Global Dimension of Sports Law

    TheUnited States of America

    The sports law of US is divided into various categories as there is no single federal legislation for its regulation. Unlike most other nations, the United States does not have a sports ministry and most of the decisions are taken by independent committees charted under different legislation.

    The sports law theUS can be categorizedas Amateur Sports, Professional Sports,and International Sports.

    Amateur Sports

    The first category ranges widely from high school athletics to exhaustive inter-university competitions. The Amateur Sports Act of 1978led to the establishment of the Athletic Congress, a national governing body for amateur athletes, which administers a trust fund that allows amateur athletes to receive funds and sponsorship payments without losing their amateur status.

    Professional Sports 

    It is the contractual relationship between an individual player and the team owner. Most sports clubs in theUS now have a Standard Player's Contract which fills in as a model work contract amongst players and the proprietors. Be that as it may, this model contract can be altered to oblige the uncommon needs of individual players and is authorized likewise.

    International Sports

    The two noteworthy worldwide sports events acclaimed across the world are the Olympics, regulated and is funded by the committee of International Olympic, the FIFA worldcup.

    The United States established the US Olympic Committee in 1950in accordance with the provisions of the Ted StevensOlympic and Amateur Sports Act, which was initially enacted in 1978. It is a non-profit corporation which is federally chartered and does not receive financialsupport from federal authorities.

     

    The United Kingdom

    Established by Royal Charter in 1996, UK Sport, a government body, works in collaboration with thein-house sports councils and several other agencies in lieu of promoting sports I the nation. It is responsible for managing and distributing public investment and is a statutory distributor of funds raised by the National Lottery.

    UK Sport is funded by, and responsible for, the Department for Culture, Media and Sport. The enormous network of sports clubs throughout the UK is administered through their own National Governing Bodies (NGBs) of thesport. These NGBs frame the point of convergence for their game, giving the connection amongst diversion and advancement, preparing and rivalry and in addition office and arrangement improvement. By and large, the structure of the game in the UK, albeit complexand layered, caters for the needs of sport at every level - from grassroots development and recreational sport through to the best sportsmen and women representing the UK on the world stage.

     

    China

    China has a national legislation which is commonly known asthe law of the People's Republic of China on Physical Culture and Sports, 1995which aims at promotion and development of physical culture and sports in China. This Act regulates sports right from the school level by empowering the Department of Education Administration of China. The Act provides for application of the National Physical Training qualification standard for the beginners who are willing to take part in the sports activities in their school itself. There is also a dispute resolution body established under the law byestablishing arbitration institutions for resolving sports matter. This Act makes it mandatoryfor the State to include sports expenditure and funds for sports capital construction in financial budgets and plans for capital construction investment.

     

    The United Arab Emirates

    The UAE is a comparatively new jurisdiction but is maturing fast in the field of sports law and dispute resolution. The two cities of Dubai and Abu Dhabi alone play host to some of the sporting world's most prestigious events including the Horse racing world cup, the only sunset Formula One circuit in the world, PGA ranked golf tournaments, ATP tennis tournaments, international marathons and the recent Indian Premier League cricket tournament. Significant developments have taken place in the past decade and as a result, sports agency from amateur to the professional level now follow the rules of international sports governing bodies.

    One of the most renowned sports associations in the UAE is the UAE Football Association. It was established pursuant to Ministerial Resolution Number 17 of 1972. The legal authority of the Ministry of Youth and Sport is derived from two statutes: Law Number 1 of 1972concerning the ministries' authorities and LawNumber 12 of 1972regulating the clubs and associations working in the field of youth care. The UAE is also planning to establish itself as a globally respected center of dispute resolutions in the sports industry. As a result of an agreement between the Abu Dhabi Judicial Department and the International Council of Arbitration for Sport (ICAS), a UAE chapter of the Court of Arbitration for Sport (CAS) has been set up in the country. In addition to CAS, there is also a draft law in pipeline proposing the establishment of an Emirates Sports Arbitration Centre.

    India

    In India, sports over the past couple of decades have developed into a multi-billion-dollar industry with special emphasis laid on cricket. This has led to theestablishment of a distinct sports ministry known as Ministry of Youth Affairs and Sports.  In April 2008, two separate Departments, namely, Department of Youth Affairs and Department of Sports were constituted with each Department under the charge of a Secretary to the Government of India.

    In accordance with the Olympic Charter that restricts government influence of sports federations, the sports bodies in India are autonomous entities. The Indian Olympic Association is responsible for handling all the matters related to international representation and promotion of sports in the country.  In addition, there are federations for non-Olympic sports such as Board of Control for Cricket in India (BCCI) for cricket. These federations are directly affiliated to their respective international federations.

    All the sporting governing bodies are registered as societies under the Societies Registration Act XXI of 1860. They are recipients of government aid through various means ranging from direct financial assistance to indirect subsidies in the form of tax benefits. As a pre-requisite for receiving financial aid, every sports society is supposed to have a government-appointedan observer to overlook its internal process.

    The law governing sports is comparatively new and young but it not only regulates a multi-billion-dollar industry touching lives of people across the world but also helps to keep the essence of sports alive. The perception of sports law as a practice perhaps depends upon the opinion of those who practice it. In its most fundamental sense, this field of law has proven its self over the past decade as worthy of the importance it's receiving at present. This series of articles will guide you through detailed envision of sports law. The next article will discuss the laws relating to sports and controversies surrounding sports law.

     

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    Tue, 20 Mar 2018 09:20:14 GMT
    <![CDATA[Final GST 5.1]]>                                                    GST IS HERE! 

    GST (the Goods and Services Tax) is finally here just like winter in Game of Thrones.  The much-awaited indirect-tax regime was honored with the throne on 13 July 2017, solely to stimulate the growth in Indian economy. Established on the theory of'one nation, one tax regime' the biggest tax reform eliminated the multi-layered tax system earlier existent in the country. The comparison of GST with winter is for the readers to understand the similarity between both, which for me is survival of the fittest. Escaping from the liabilities of the new tax regime is as impossible as escaping the cold breeze in Winters, which makes India as world's 10th most complex nation for investment.

    The Reign has just begun

    GST is a multi-staged value-added tax reform on consumption of goods and services replaced with the multiple taxes imposed and collected by the Centre and the State. It aims at consolidating multiple taxes into one and intends to include many central taxes like service tax, central sales tax, excise duties and more into one-fold. However, the only tax outside the purview of GST is Union/ Custom duties which continue to be levied by the Union.

    India is a federal nation where both center and the state has the authority to levy and collect taxes to maintain the constitutional mandate of fiscal federalism, a dual GST will be levied. The tax levied and collected by the state for supply of goods and services will be referred to State GST (the SGST) whereas, on the large front tax levied by the center for theintra-state supply of goods and services will be termed as Central GST (the CGST). Further, an integrated GST (IGST) on theinter-state supply of goods and service will be under thedirect administration Centre.

    Ranging from 0 to 28% the tax managed to bring almost all the categories of products under its purview. The five-tier GST slabs of 0%, 5%, 12%, 18% and 28% are mentioned as lowest for daily use and essential items and highest slab for luxurious items. Furthermore, following are the categories of goods not taxed under GST:

  • Alcoholic Products: Alcoholic products are outside GST impact and will still be continued to be taxed in accordance with the previous regime.
  • Electricity: Electricity managed to remain non-GST product and taxation on electricity will still be levied through state-specific provisions.
  • Petroleum Products: Relaxation is awarded to a complete range of petroleum products including crude oil, natural gas, diesel, and fuel.
  • Apart from the aforementioned products several commodities like vegetables, cereals, meat, live animals with an exception of Horses, cotton, hand tools like spades and shovels, raw silk, printed books, newspapers, judicial and non-judicial stamp papers, hearing aids, wood charcoal,and every contraceptive product are not covered under the scope of GST. The era GST will bring harmony in the taxation system in the nation and will reduce the "Cascading Effects" of taxes.

    Sword in the darkness

    The GST regime is one of the most significant steps taken by the government in 'Make in India' Direction. The biggest reform tends to bring harmony to the taxation systems via eliminating the "cascading effects" of multiple taxes. Removal of cascading of taxes and costs aids in disclosing the hidden cost in the nation. Thus, reducing the cost of goods and services manufactured in the country, making them more competitive in theInternational market, and simultaneously increasing exports.

    Earlier, the overall tax burden on goods and services was estimated as 25-30%, whereas, under GST maximum products are under the tax slab of 18%. Let us take an example to understand the difference, a manufacturer overall in a year spends INR 100 on various raw materials, which is inclusive of tax of INR. 10. The manufacturer produced a product N and post N is manufactured there is a value addition of INR 40 thereby making theGross value of INR 140 and if the tax is 10% on product N amounting to INR 14.

    Now, under GST regime the manufacturer can set-off the Tax of INR 14 with the tax already paid while purchasing of raw materials INR 10 hence he only pays INR 4, however, under the earlier regime, there is no provision of setting off taxes, the goods are now sold to wholesaler at INR 154. Thus the new regime guarantees a continuous mechanism of thetax credit and a unified tax structure benefiting manufacturers, wholesalers, retailers and end consumers.

    If still, GST is not able to convince and influence you, I will like to give few more reasons to like and embrace GST:

  • Reducing Red tape: Reduction in unnecessary paperwork and accounting complexities in the business. The simplified taxation regime will save thegovernment as well as Taxpayer time and money.
  • Simplified structure: the simpler structure can bring greater compliance thereby increasing the taxpayers and tax revenue for the government.
  • Competitive price: GST will effectively reduce the amount of taxes paid by the final consumer. Lower prices will boost the consumption leading to pricing benefits to the business.
  • Export >Imports: when the cost of production is reduced in the domestic market, goods tend to be more price-competitive in international markets, which will work well for the exporters, competing with foreign manufacturers facing a lower cost structure.
  • Prepare for Winters

    The GST compliant companies must understand the framework of GST and prepare themselves for the strong winds coming their way and their likely impact on their operations. Thus, developing a structured and strategic approach is though crucial but necessary. The major challenge is theidentification of critical issues impacting the business during thetransition into GST.

    A careful understanding of the complexities and subsequently developing a roadmap to becoming an effective GST compliant is the need of an hour for the businessman. Therefore, in lieu of GST, following are few stages where corporate structures can become a hassle-free compliant of GST:

  • Update IT and Accounting: complying with GST may trigger reconfiguration in IT systems, alterations in customer master data, tax code accounts. If the company is dealing with large numbers of invoices, the invoices will be generated in acertain format as directed by GST council.
  • Review Contracts: Contracts will be revised for enduring GST compatibility. Further, Addition to new provisions will be required in long-term contracts.
  • Product pricing: Revaluation may need to be done at prices of the products. In situations where thecustomer is unable to recover tax charged, the tax burden will be borne by the supplier.
  • Human resources: The employee salary plane will be revised since, GST may be applied on gifts, allowance and expenses claimed.
  • Business processing: Almost all business units require electronic invoices and new reports to facilitate the GST returns. GST compliant company's processes should be strong enough to accommodate India's electronic filing system.
  • New Compliances: Under the GST there is a provision for monthly return and a separate provision for annual filing and audit, for which the companies must amend the tax standards and return filing methods.
  • Violators will be Punished

    For the violators of the new taxation regime, the night is dark and full of terrors as mentioned under Section 122 of Central Goods and services Tax Act, there are almost 21 offenses under the new law are as under:

  • Fake invoices: where a taxable person supplies goods/services without any invoice or false invoice or the invoice so issued is in violation of provisions of GST.
  • Tax Evasion: where the taxable person collects the taxes and does not submit it, obtain GST refund by fraud, suppresses sales tax to evade tax.
  • Fraud: where one submits false information whilst registering for GST or submits fake financial records or fake returns to evade taxes.
  • The law imposes civil as well as acriminal penalty on the wrongdoer as the offender has to pay the 100% penalty amount of tax evaded, subject to aminimum of INR 10,000. And in cases of fraud, imprisonment upto aminimum of 1 year and amaximum of 5 years and fine or both.

    GST fears

    The law has been published, however, it is imperative for the country to have a robust IT network and structure to make seamless implementation of the law, which is still under process. Another most important issue which the country is facing the loss of heavy revenue which will be incurred by states in order to have a full-fledged law in place.

    Specifically mentioning, there are several state-specific concerns such as the state of Maharastra, earns a revenue of more than INR 13,000 crore per annum from octroi, Gujarat, generates a revenue of INR 5,000 crore from CST. Other states like Punjab and Haryana earns almost INR 2,000 crore from purchase tax. However, the biggest fear of these states that they will end up losing income from these tax, upon the implementation of GST.

    Are you exempted?

    Well, not all the news is bad, there are certain exemptions to the implementation of GST as the supply of goods and services are exempted from GST as it will tend to reduce the burden of tax on the low-income society. As earlier, it is mandatory to provide anexemption to several government authorities which based on certain principles mentioned below:

  • All government services to the public such as education services provided by government schools and/or colleges, defense, military, police, civil administration, intelligence and other government departments, however, postal services, railways, banks, insurance, health, public sector enterprises are excluded from the foregoing purview;
  • Any or all service activity between the employer or employee as a service provider or otherwise will be exempted;
  • Underprocessed food covered under the scheme of public distribution shall be exempted;
  • Fees of non-governmental schools and college will be exempted;
  • Health services offered by non-governmental hospitals.
  • We go forward only forward

    India's GST reform faced multiple challenges during its implementation. The lack of consensus among the states was one of the reasons for the delay in implementation. Despite considerablehindrances, GST managed its way in Indian taxation system. The significant step towards economy's growth of dual GST comprising of central and state GST will be able to uphold the federalism spirit. However, there is a need for proper check and balance and a suitable constitutional amendment that will carve out a new Indian society.

     

     

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    Mon, 19 Mar 2018 18:55:15 GMT
    <![CDATA[Dubai Internet City]]> COMPANY FORMATION IN DUBAI INTERNET CITY

    Free economic zones have made the Emirate of Dubai, in the United Arab Emirates, a popular destination for investment. The particularity of free zones is that they allow foreign nationals to own 100% of the shares in a company, in contrast to the general ownership model in the United Arab Emirates where an Emirati national must possess at least 51% of the shares in a firm/business. If you're looking to set up a company that deals with information technology in the United Arab Emirates, there is no better option than the Dubai Internet City free trade zone.

    Dubai Internet City is the most significant technology business community in the region; it is an information technology park that offers extensive opportunities for investment and for targeting regional emerging markets.It is present next to other free zones such as Dubai Media City and Dubai Knowledge Village. Notorious information technology firms such as Microsoft, HP, Facebook, Google, LinkedIn, Dell, Samsung, Oracle Corporation and Nokia have established themselves in Dubai Internet City.The free zone offers excellent infrastructure and services, but it prohibits general trading activities. A minimum capital of UAE Dirhams fifty thousand (AED 50,000) is required to set up a company in Dubai Internet City.

    The Dubai Internet City, a member of the subsidiary TECOM Investments which is open to the public since October 2000, is the most extensive Internet and Communications Technology platform in the Middle East. At a time where e-commerce is becoming a more popular activity, many investors are establishing companies in Dubai Internet City. Other companies in the free trade zone work in sectors such as software development, business services, consultancy, and marketing.

    The Dubai Internet City allows the following activities:

    {C}        i.            Software (the development and installation of software products)

    {C}      ii.            Internet and Multimedia (activities related to development and distribution through the internet)

    {C}    iii.            Telecommunication and Network (services for the for the operation of network-based applications)

    {C}     iv.            IT Service

    {C}       v.            e-Commerce (the sale of products through an online platform)

    There is further division to the activities above into the following sub-categories: Consultancy, Developer, Solution Provider, Customer Service and Support Service Provider

    The procedure for setting up a company in Dubai Internet Cityis intwo stages:

    Stage 1 – Submit the following documents to the Dubai Internet City for approval:

    {C}        i.            Application for License;

    {C}      ii.            Business Plan (including information about the business, the market, competitors and the financial plan);

    {C}    iii.            Name of the activity;

    {C}     iv.            Passport Copies of Shareholders, Directors,and Managers;

    {C}       v.            CVs of Shareholders, Directors,and Managers;

    {C}     vi.            Contact details of Shareholders, Directors,and Managers;

    {C}   vii.            The company name cannot contain any of the words "co," "ltd" or "limited" and must be followed by "FZ-LLC," it is preferable to add a descriptive term after the name of the company. An example of an acceptable company name is Smith Investments FZ-LLC.

    It is important to note that Dubai Internet City provides template documents to facilitate the process of completing reports. Also, if a legal representative is making the application on behalf of a client, a power of attorney must be provided.

    Stage 2 – Upon obtaining the approval, a letter of undertaking must be signed by the shareholders. The second set of documents must be submitted:

    {C}        i.            Application for License;

    {C}      ii.            Resolution of Incorporation of FZ-LLC (must be attested);

    {C}    iii.            RIC (Registration Identification Code) Form for shareholders, directors,and managers. The submission of the form should be in original  notarized copy;

    {C}     iv.            Bank reference letter for Shareholders;

    {C}       v.            Proof of share capital from bank or Trust Account deposit receipt; and

    {C}     vi.            NOC for the Manager from the current UAE sponsor.

    The documents above apply to shareholders who are natural persons, in the case where the shareholders are corporate entities, further documentation is required:

    {C}        i.            Company Incorporation Certificate (original and notarized)

    {C}      ii.            Certificate of Continuity, Existence or Good Standing (original and notarized)

    {C}    iii.            MOA and AOA of Parent Company (original and notarized)

     

    Upon the submission of all the preceding documents and accepted by the authority,the authority will issue the license, the visas obtained and the company can open its bank account.

    Particulars

    Details

    Types of Ownership

    {C}  i.         {C}{C}FZ-LLC;

    {C} ii.         {C}{C}Branch of UAE Company;

    {C}iii.         {C}{C}UAE Company Establishment; and

    {C}iv.         {C}{C}Freelancer Permit.

    Types of Offices

    Office (Unfurnished), Executive Office, Exclusive Desk and Hot Desk (only for individual shareholding company)

    Renewal

    Business operations are limited to within the DIC. For selling goods and offering services, the appointment of a local service agent is necessary for the distribution of the products. However, most of the IT companies in UAE prefer this free zone since they have online platforms and do not deal with the traditional sales techniques.

     

     

    ]]>
    Wed, 28 Feb 2018 00:00:00 GMT
    <![CDATA[Understanding Tax Avoidance vs Tax Evasion]]> The Fine (and Hazy) Line between Tax Avoidance and Tax Evasion

    'The difference between tax avoidance and tax evasion is the thickness of a prison wall.'

                                                                           -       Denis Healey

    Keeping in mind the contradiction between the heading of this article and the quotation above, I wish to draw your attention to an illustration. In the 2001 movie 'Blow,' George Jung had argued in open court that the reason for his arrest was merelycarrying few plants over an imaginary line when the judge asked him about trafficking marijuana from Mexico to the United States. Now, the few plants he was referring to were marijuana plants and the imaginary line was the US - Mexico border. The man was carrying a few plants over an imaginary line. But according to the law, the plants he was carrying were Schedule I substances under the Controlled Substances Act, 1970. So, the unpleased judge sentenced Mr. Jung to two years of imprisonment for carrying illegal plants over substantially visible political boundaries. The purpose of this introduction was to enlighten the reader about how little the illusion of what is legal and illegal could be in today's world. And as the title suggests, our topic of discussion today is to analyze this difference between legality (tax avoidance) and illegality (tax evasion) in regards to unpaid taxes.

    Leaving all the technicalities out, the primary difference between tax evasion and tax avoidance is legality. Although, these terms came into existence to provide the taxpayers, governments, and courts with ease of defining the concept; that has not been the result. The Government and regulatory authorities prosecute any person or corporation that tries to reduce their tax liability by considering the latter's actions as tax evasion. Whereas, the latter contends that they have acted within the purview of the law and were merely trying to minimize their liability. It's for the courts to decide now. The taxpayer(s) will be acquitted if the courts decide the case by stating that he has merely avoided the tax and they will be convicted if the courts decide that the taxpayer was trying to evade the provisions of the tax law.

    Drawing the Line

    Tax avoidance is legally minimizing tax liability, including deductions (prescribed by the legislation), tax credits, tax deferral plans (like 401(k) plans) and so on. Concerning our above illustration of George Jung, tax avoidance is basically like carrying a few plants across an imaginary line – no illegality involved (as long as the facilities are plants and the imaginary line is not a political border). Whereas, tax evasion, on the other hand, is not a simple journey. Tax evasion is illegal as it is the failure of a taxpayer to pay actual taxes that they owe to the authorities by deceit, or by concealing the exact tax amount. Tax attorneys and accountants often try to reduce the tax liability of their clients by engaging numerous methods. But how will you know whether they are crossing this line and are moving over to do something illegal? Let's read more to find out.

    Tax Evasion

    Mens Rea (also known as ill-intention or fraudulent intention) is one of the primary factors considered when trying to determine the difference between tax evasion and tax avoidance. Tax evasion is an illegal act by which a taxpayer tries to portray to the authorities that he or she is liable to pay lesser tax (than their actual liability – if they would disclose their income in good faith). The illegality in tax evasions comes into existence only when the taxpayer fails to disclose the actual amount of the revenue that they have gained in a particular transaction. To begin with, we should first understand why tax evasion is considered illegal.

    Let us analyze this case to understand further: taxpayers in the US are liable to pay tax on their illegal income also. In the infamous case of James v. the United States, a reference made t the court on a question that whether taxpayers were responsible for payingtax on their illegal income. The appellant was one of the officials in a labor union and had embezzled approximately USD 750,000 from the union's funds – but believe it or not, that was not the crux and issue of the case. Mr. James was held and tried for his failure to disclose this amount to the Internal Revenue Service (IRS) – or in short, tax evasion. It was a landmark case on tax evasions in the US at the time. The appellant contended that the funds were an illegal source of income and therefore did not fall under the ambit of 'taxable income.' Therefore, the US Supreme Court had to determine whether the IRS could tax illegal sources of income. After studying the facts and analyzing the provisions, the Supreme Court held that the appellant had an obligation to disclose this illegal income under gross income.Subsequently to pay tax for it as per Section 22 (a) of the Internal Revenue Code of 1939 and Section 61 (1) of the Internal Revenue Code of 1954.It meant that the appellant was required to return the embezzled money to the rightful owners and also pay tax for it. 26 US Code § 7201 defines tax evasion and states that 'Any person who knowingly attempts in any manner to avoid or elude any tax imposed by this title or the payment thereof, shall, regardless of other penalties under the law, be guilty of a felony. Further, a fine of not more than US Dollars 100,000 (US Dollars 500,000 in the case of fraud), or imprisoned not more than five years, or both, together with the costs of prosecution'.

    The existence of fraudulent actions gives rise to the concept of tax evasion. Although tax evasion, as a whole, is considered a serious crime, there are different types of tax evasions. The negligence or omission in submitting the returns of income are considered less offensive than false or fake declarations. The latter may fall under tax fraud since it constitutes an explicit act with an ill-intent by the taxpayer to reduce or minimize his tax payables.

    Tax Avoidance

    In a legally discreet way, on the contrary, one can mitigate the burden of tax by exploiting the loopholes in the taxation regime, where spending the resources on 'constructive' activities rather than 'rent seeking' activities. Tax avoidance can be determined by the complexities in the taxation regime of the country as complexities tend to leave a vacuum for bickering about the intention of the lawmaker and for innovative attempts to find arrangements within the text of law if it is not in its spirit. Hence, unsurprisingly tax avoidance attracts considerable attention in gray areas such as taxation of multi-national companies, where the country's taxation system meets the foreign regime and complexity is imminent.

    Avoidance behavior is typically an indication of the substitution effect and of ability to utilize the tax code to your advantage. Early, in 2007 Bradley Birkenfeld, a UBS banker, informed United states about the usage of UBS accounts as tax shelters. This activity allowed many US citizens to camouflage their income from the IRS, which can typically be construed as an avoidance scheme but was later categorized as an aid to hide taxable assets by opening offshore accounts. After one year, Switzerland bank accounts accuse UBS of tax evasion. Post the infamous UBS incident IRS in late 2009, initiated a program namely, Voluntary Disclosure Program as an incentive for those who will disclose their foreign accounts for evading taxes. Currently, in the US, tax avoidance is a legal practice, but the restriction applies to tax evasion.

    The Disclosure of Tax Avoidance Scheme (DOTAS) in the UK is a recent development as far as tax avoidance is concerned. The legislative framework introduced by the HM Revenue and Customs (HMRC) which updates the customs department about new tax avoidance schemes currently in circulation. DOTAS rules are lengthy and complicated, and as soon as it is presumed that a person can obtain a tax advantage, thedisclosure regarding details of the arrangementreferred to HMRC. The HMRC's stringent tax avoidance rulesdesignedin such a way that not only the taxpayer but the accountants, consultants, and lawyers fall under the same purview as of the taxpayer. The prevalence of tax avoidance schemes and rules in almost all major countries has been successful in convincing governments that it is a difficult battle against tax evasion and tax avoidance.

    UAE battle against tax evasion

    The OECD (Overseas Economic Cooperation and Development), recently implemented Common Reporting Standard (CRS), a new reporting system to trace and monitor tax evading nationals overseas. CRS corresponds to FATCA (Foreign Account Tax Compliance Act) in the United States. CRS is a programme launched by OECD to which UAE, India, Canada, Turkey, Indonesia and other countries are signatories. Even though the UAE is relatively new to the taxation arena, the nation has already joined the battleground against the tax evaders to curb tax evasion.  The convention signed under OECD provides all possible assistance in tax-related matters such as tax examinations, tax collection, automatic exchange, and tax examinations abroad. CRS is a step ahead to defeat the tax evaders as the system enables the authority to keep a record of information exchanged between the countries regarding individuals and expat bank accounts, including all the details of interest and income earned outside the territory.

    The UAE government has not implemented technical provisions that distinguish between tax evasion and tax avoidance since the country was considered a tax haven for the many previous years. However, the implementation of value added tax in the state is expected to bring thorns in the corporate garden of the UAE. But only time can tell about the differences that VAT may bring about in the taxation regime in the country.

    Conclusion

    The amount of federal revenue at stake due to tax evasion every year is prominent enough to raise public concern. Government schemes for disclosing tax evasions is appreciable, whereas, it is far more critical for the country's integrity that the taxpayer contribute their 'fair share' in tax revenue instead of making arrangements for evading taxes.

    ]]>
    Mon, 19 Feb 2018 01:59:00 GMT
    <![CDATA[Contracts Law - Extension of Time]]> Preventive Principle and Extension of Time

    Time and again we have discussed the level of dynamicity in the sectors and industries such as construction, maritime, cryptocurrency and the like. Today, we are going to analyze why these areas in specific are comparatively more dynamic than others – mainly because projects and transactions in these sectors include numerous parties who operate on different stages. It is a mechanism for various individuals who perform their contractual obligations that are guided by internationally accepted norms. For instance, in the construction industry, engineering contracts usually are governed by the contract templates released by the Fédération Internationale Des Ingénieurs-Conseils (FIDIC), Engineering Advancement Association of Japan (or popularly known as the ENAA) among others. These templates or default contracts are in place to minimize the dynamicity that we had earlier discussed; however, they are not always viable because – every project is different from each other. No two plans or transactions are structured the same way since each project has its peculiarity in the number of parties involved, the financing structure in place, the estimated timeline for project completion and the like.

    Now, coming back to the topic I was initially assigned. In this article, we have elucidated the facts and issues of a landmark case that arose due to sector dynamicity between Adyard Abu Dhabi LLC (a company established in Abu Dhabi, United Arab Emirates) and SD Marine Services (a company incorporated in the United Kingdom). The case of Adyard Abu Dhabi (or Adyard or Claimant) v SD Marine Services (or SD or Defendant)[i] came before the High Court of Justice (Queen's Bench Division Commercial Court). Th court had to decide whether there a contractor can extend the time to complete to project when a delay that falls within the ambit of 'prevention principle' has taken place.

    Facts of the Case

    Adyard was an SME (small to medium size enterprise) that specialized in shipbuilding in Abu Dhabi, and SD provided commercial services in the maritime industry to the public sector in the United Kingdom. The Defendant had contracted with the Government of the United Kingdom to deliver sea-port services, navigational services and the like to the Royal Navy of the United Kingdom over a period of fifteen (15) years. SD appointed another company, SERCO, as the subcontractor and overlooked the project.

    The Defendant had engaged the Claimant to construct and assemble two (2) moorings and SOSVs (special operations support vessels) under a contract dated 14 December 2007 (the Contract). The Contract had stated that the Claimant had the liability to manufacture, assemble and ready the two (2) SOSVs by 30 September 2009 and 30 November 2009 for sea-trials. Article II of the Contract had also provided that the Defendant had the right to revoke the Contract in case the SOSVs were not ready for sea-trials by the dates agreed. Clause 3.3 of article II reads as follows:

    'If the Builder fails to complete either of the stages contained in Clause 3.1(c) or (e) by the dates specified therein, then the Buyer may, at its option, rescind this Contract. However, it should be by the provisions of Article X hereof, always provided that, to the extent that any delays were due to the Buyer's default or any Permissible Delay, that the increment in the period shall be to the same extent.'

    Clause 2.1 of article X of the Contract states that Adyard had the liability to refund all the amounts it had received from SD if they had not commenced the proceedings. However, the SOSVs were not ready for the decided dates, and SD subsequently exercised its right to rescind the Contract vide letters dated 7 October 2009 and 14 December 2009.[ii]

    Contentions

    Claimant's Contentions

    Adyard commenced proceedings by article X on 15 October 2009 and 14 December 2009[iii] claiming that the delay had occurred due to SD. They also contended in the circumstances that they were entitled to an extension and therefore, were not liable to refund the installments paid by SD. The primary contention of the Claimant was that SD and the Maritime Coastguard Agency had instructed them to make numerous changes in the designs of the vessels in June and July 2009. Adyard stated that the delay was not caused due to them as the variations arose from the changes in the safety standards of the Maritime Coastguard Agency.

    They also submitted that the 'preventive principle' would apply in their matter since their scope of work was amended to include the variations after the contract had commenced. It has also established in the Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board[iv] case that when the employer amends or increases the scope of work for the employee by asking the latter to do an additional job. In such cases, it would become impractical for the employee to complete the scope of work in the estimated or granted time. Therefore, the employer will not be liable for any liquidated damages due to the non-completion of the project on time. Adyard stated before the court that SD had asked them to undertake extra work (variations) and refused to negotiate on any adjustments or intention of time for completing the project.

    Defendant's Contentions

    SD, on the other hand, claimed that the design items ordered by them were not variations and also stated that there were no changes in the safety standards of the Maritime Coastguard Agency. They contended that the Maritime Coastguard Agency had merely reported that vessels would have to comply with the safety requirements of the SPS Code. They claimed that even if there were any variation in the scope of work (as Adyard had requested), it would not contribute to any additional delay. SD also emphasized on the Claimant's failure to furnish notice by Article VIII, clause two which mandated the latter to provide the cause of delay'.

    The Decision of the Court

    The court identified that there were contractual and factual issues in this case since the parties had raised their contentions on both grounds. The claimant successfully contended and established that there were variations in Article V, clause 2 of the Contract. However, Adyard's case ultimately depended on the applicability of the precautionary principle in this specific case. The learned court referred to the explanation of the preventive law in the judgment of Multiplex v Honeywell[v], in which Jackson J stated that one party could not insist the other side perform an obligation that the latter could not complete due to specific hindrances put forward by the former. In the construction sector, employers cannot hold the contractor liable if they could not meet the completion date due to variations (act or omission) of the employer. Instead, the contractor should be provided with reasonable time to complete the project considering the degree of difference. Extension of time clauses in construction contracts aims to protect and safeguard the rights and liabilities of both the parties. There are three (3) general propositions formulated by Jackson J that is still followed in the construction sector, being:

  • Legitimate actions by the employer could be termed as preventive if it causes delay beyond the date specified in the contract;
  • Preventive measures by the employer that does not set time at large (provided the agreement provides for EOT or extension of time clause for those specific issues);
  • When the parties have concluded that there is ambiguity regarding the expansion of time clause – such uncertainty should favor the contractor.
  • The court found that the Adyard failed to enforce the precautionary principle since they did not have any substantial claim for an extension of time. The court also observed that Article II, clause 3.3 and article VIII had laid down the circumstances when the contractor could claim for an extension of time to complete the project. However, Adyard failed to furnish notice by Article VIII, clause 2 to enforce these provisions. On the other hand, even if there were no requirements regarding the announcement, the actual reason for the delay should be analyzed to understand the extension of time. Once, they identify and analyze the right or cause of suspension; they must add the period of suspension to the initial contractual date. However, the Claimant continued to argue that the Defendant had not agreed to make any adjustments towards the completion date (date of sea-trials). Therefore, the court held that the Defendant had the right to rescind the Contract since Adyard failed to complete the work before the day of the sea-trials. The court also observed that this delay was not caused due to the Defendant and ruled the case in favor of SD.


    [i] Case Number 2009 Folio Number 1361 & 1622; [2011] EWHC 848 (Comm)

    [ii] 7 October, 2009 letter regarding the Hull 10 SOSV vessel; and 1 December, 2009 letter regarding the Hull 11 SOSV vessel.

    [iii] 15 October, 2009 proceedings regarding the Hull 10 SOSV vessel; and 14 December, 2009 proceedings regarding the Hull 11 SOSV vessel.

    [iv] [1973] 1 WLR 601, HL

    [v] [2007] Bus LR Digest D109

     

      ]]>
    Sun, 18 Feb 2018 00:00:00 GMT
    <![CDATA[Q&A: Pharmaceutical Laws and Regulations in UAE]]> Pharmaceutical Industry in the UAE

    1.     What are the primary laws and regulations governing pharmaceutical companies in the United Arab Emirates?

  • The primary piece of legislation governing pharmaceutical companies in the United Arab Emirates is Federal Law Number 4 of 1983 concerning the Pharmaceutical Profession and Pharmaceutical Institutions (the Pharmaceutical Law). This law applies to pharmacists, pharmaceutical establishments, and governs the import, manufacture, and distribution of pharmaceutical products. Articles 63 to 67 of the Pharmaceutical Law deals with the registration of pharmaceuticals. Article 47 of the Pharmaceutical Law states that a company must obtain a license to open a pharmaceutical company and Article 48, 55 and 56 lists the conditions that the entity should meet to get the permit. These include, among others, the requirement that the company is composed of different sections (production section, chemical section, disinfection section, and bacteriological laboratories) and that licensed pharmacists should supervise the factory. Article 49 mandates that the application for a license to open a pharmaceutical company should accompany the factory's contract of establishment/ articles of association and also the permit issued to the manager and the pharmacists, among other documents.
  • Federal Law Number 14 of 1995 regarding counter-measures against narcotic drugs and psychotropic substances regulate the import of (pharmaceutical products and) medicines into the United Arab Emirates.
  • Federal Law Number 5 of 1984 governs the licensing and registration requirements of physicians, pharmacists, and other professionals within the country's pharmaceutical industry.
  • Federal Laws Number 7 of 1975 and Number 2 of 1996 has laid down specific requirements for the establishment and licensing of public and private medical laboratories, clinic and hospitals in the country.
  • Federal Law Number 1 of 1979 on the Organization of Industry Affairs affect pharmaceutical companies located in the mainland as a local Emirati agent must be appointed, and their shares in the company's capital should not fall below a certain percentage.
  • Federal Law Number 2 of 2015 regarding Commercial Companies, provides further requirements applicable to companies on a general note, over matters such as licensing, the trade name, the Memorandum of Association (Articles 12 to 15).
  • The governmental regulators of each Emirate (such as the Dubai Health Authority or DHA and Health Authority - Abu Dhabi or HAAD) also issue regulations from time to time to regulate the pharmaceutical companies in their jurisdiction. The 'Dubai Community Pharmacy Licensure and Pharmaceutical Practices Guide' (February 2013) issued by the Health Regulation Department of the Dubai Health Authority focuses primarily on the licensing and protocol of institutions and professionals. This guide provides information on the administrative procedures required to set up a pharmaceutical company. It also offers instructions on purchasing, storing, dispensing, and prescribing medication and drugs. The Ministry of Health Code of Conduct also outlines the standards expected of professionals providing medical services.

    2.     Which governmental authorities regulate the licensing of pharmaceutical companies?

    The Ministry of Health and Prevention (MoH) is the primary body regulating the licensing of pharmaceutical companies in the United Arab Emirates. Article 65 of the Pharmaceutical Law specifies that imported pharmaceuticals should be registered with the MoH, regardless of whether or not they have been approved or registered in their country of origin. The MoH is also responsible for the regulation and implementation of health care policies in the country. Moreover, individual Emirates have also established their local health regulators to oversee the healthcare and pharmaceutical sector of their specific jurisdiction (Dubai Health Authority in Dubai, and the Health Authority - Abu Dhabi). These regulators monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for medications. The MoH formulates federal health policies and regulates the healthcare market in the Northern Emirates.

    3.     What is the registration process to set up a pharmaceutical company in the UAE?

    As mentioned earlier, under the Pharmaceutical Law, pharmaceutical products, and preparations must be registered with the MoH before being imported into the national market. The market authorization holder, along with its local representatives (such as licensed distributors) are mandated to submit a new drug application to the MoH before importing or manufacturing a pharmaceutical. The local agent is wholly liable for any complaints made by customers and non-compliance with the regulations set out by the Ministry.

    The Pharmaceutical Law prohibits anyone from preparing, composing, separating, manufacturing, packaging, selling or distributing any medicine without a valid license from the MoH (Article 1). This law also mandates that companies importing pharmaceutical products or medical devices must be locally established in the United Arab Emirates and have a pharmaceutical importation license. A sole natural person may also be importing these products if he is UAE national.

    4.     Are there any exceptions to the requirement that pharmaceutical products should undergo registration in the United Arab Emirates?

    The Pharmaceutical Law states that all pharmaceutical products imported into the United Arab Emirates must undergo registration with the Ministry of Health, with NO exceptions. However, the general practice has confirmed that the Ministry of Health has authorized the import of unregistered products in exceptional circumstances such as:

  • Emergency situation medicines
  • Drugs and medications required by government or semi-government health institutions
  • Registered and unregistered medication that is not available in the local market
  • Narcotic and psychotropic drugs (as per Federal Law Number 14 of 1995)
  • However, pharmaceuticals that are unregistered in the country of origin cannot be imported to the UAE even under the circumstances mentioned above.

    5.     How can a foreign manufacturers trade, distribute and advertise pharmaceutical products in the United Arab Emirates?

    Foreign manufacturers have two options to trade and distribution of pharmaceutical products in the United Arab Emirates. They can either establish a local presence (a company in the UAE) or appoint a local agent. Given that the MoH requires all pharmaceutical products be registered, a foreign manufacturer with no local presence will have to select a domestic partner to obtain the necessary approvals for trade, distribution, and advertisement of the product. This requirement allows foreign manufacturers to access the network and resources of the local agent, who may have nurtured their business relationships in the country over an extended period. The United Arab Emirates imposes restrictions on such foreign ownership and sponsoring arrangements.

    6.     Are local agents of pharmaceutical companies regulated? If so, how?

    The appointment of a local licensed agent by pharmaceutical companies is governed by Federal Law Number 18 of 1981 concerning organizing of trade agencies. Under this statute, the local agent will distribute the pharmaceutical companies' products in the United Arab Emirates vide an agency agreement registered with the Ministry of Economy. However, the local agent must comply with the following conditions:

  • the local agent should be a UAE national, or an entity fully owned by UAE nationals (i.e., hundred percent stake owned by UAE nationals);
  • the agent's appointment will be granted exclusively for one Emirate or several Emirates, and
  • the agreement must get notarized in Arabic, and the foreign manufacturer must provide a letter confirming they have no objection to the registration;
  • The local agent will have the right to trade, distribute and advertise the pharmaceutical products, exclusively and within the confines of the territory agreed on in the distribution agreement after meeting the above criterion. The agent's exclusivity to manage the registered products means that they can block third parties from dealing with them. Agents are also entitled to a commission on the sale of the registered products and will have the right to claim compensation upon the termination of the agreement.

    7.     Which license should a company obtain to open a medical store in the UAE?

    A person (legal or natural) that intends to set up a medical store or warehouse for medical products should obtain a medical store license to conduct their activities in the country. This requirement is not limited to companies that deal with pharmaceutical products but also applies to businesses that store medical equipment. To obtain this particular license, the company must employ at least two licensed pharmacists to regulate the medical store, and these pharmacists must be in charge of the regulation of medical devices and pharmaceutical products.

    8.     What are the responsibilities of a licensed pharmacist in the United Arab Emirates?

    A license issued to a pharmaceutical will bear the name of the 'licensed pharmacist,' and he or she would be responsible for the following:

  • Importing pharmaceutical products;
  • Storing pharmaceutical products;
  • Enter into contracts regarding pharmaceutical products and medical devices; and
  • Complying with the regulations of the MoH and local regulator and the provisions of the Pharmaceutical Law.
  • 9.     Are there any sanctions for submitting false documents to obtain a license to undertake the pharmaceutical profession?

    Articles 83 and 84 of Federal Law Number 4 of 1983 states that the offenders may face imprisonment of up to (1) one year along with a fine for anyone who submits false documents or information to obtain a license, and on anyone practicing as a pharmacist illegally. Article 86 of the law states that people who adulterate or imitate substances may face imprisonment of up to three (3) years and fines of up to AED 10,000.

    10.  Are there any restrictions on the ownership of pharmacies in the United Arab Emirates?

    In the United Arab Emirates, one can obtain a license for more than one medical facility. As for pharmacies, their ownership must vest either with the UAE Nationals or a UAE National must own at least 51% of the company's shares. Federal Law Number 2 of 2015 states that GCC nationals may hold one hundred percent shares in the pharmacies. One cannot obtain a license to open more than two stores except for pharmacies located in hospitals.

    11.  What happens when the licensed pharmacist gets terminated from the pharmaceutical company?

    When a licensed pharmacist resigns or gets terminated from their employment, the pharmaceutical company should submit a request through the Ministry of Health's online portal for the cancellation of the current pharmacist's license. Upon the revocation of the license, the company should then apply for a new license with another licensed pharmacist-in-charge. After this step, an application should be filed with the Department of Economic Development for the amendment of the trade license to replace the name of the licensed pharmacist with the new one.

    The Ministry of Health may take approximately 3-4 weeks to cancel a license and issue a new permit, and the Department of Economic Development would take nearly 2-3 weeks to replace the same.

    12.  Can a company's pharmacovigilance and regulatory affairs be handled and managed by the same person or is there a requirement for separate people to do the job?

    Pharmacovigilance is known popularly as drug safety and is the pharmacological science to collect, detect, assess, monitor and prevent adverse effects of the pharmaceutical products. The pharmaceutical companies assign the same licensed pharmacists to handle pharmacovigilance also; although, the MoH has not mandated that the same person should undertake both the assignments. A company is also entitled to appoint separate officials for each of these functions.

    13.  Can a company outsource the importation of medical goods or storage in the United Arab Emirates?

    Outsourcing the function of importation or warehousing to a third party is not authorized by the MoH. All medical equipment imported by a pharmaceutical company should get registered under the name of the same entity before the MoH. These medical devices and pharmaceutical products have to be stored in warehouses and medical stores which should also be under the license of that company.

     

    ]]>
    Thu, 15 Feb 2018 00:00:00 GMT
    <![CDATA[The UN Convention on Contracts for International Sale of Goods]]> An Overview of the UN Convention on Contracts
    for the International Sale of Goods

    If a company in the United Arab Emirates wanted to buy authentic leather abroad, most likely they would start looking for sellers in Italy. Considering that they find such an Italian company, the first step in this process would be to negotiate the contract of sales and to understand each other's requirements. However, if there are no prerequisite standards of international sales, the UAE company would expect an outcome from the contract that may be completely different from the expectation of the Italian company. If not addressed to adequately, these misunderstandings may lead to potential disputes arising and the two groups would find themselves in front of the Court over the sale of leather. While this obviously undesirable to the parties, it is also highly inefficient of their time.

    This topic divides itself into five articles. The first section will address the agreements by UNIDROIT that have paved the way for its creation-the ULF Convention and the ULIS Convention. The second article will examine the development process of the CISG Convention. The third section will address the mechanisms available to prevent disputes from arising; the basis of analysis is on the provisions of the Convention as well as other in several potential international contracts, including the World Trade Organization (the WTO). The fourth article will discuss relevant case laws to examine the flaws of the convention. The fifth section will assess the applicability of the CISG convention and the potential lack of its enforceability.

    On the global scale, there have been constant efforts to promote free trade in the international system. Since free business is understood to be beneficial in most cases, states have already begun adopting it by initiating bilateral or multilateral agreements with each other that facilitate and promote diverse types of trade interactions. However, these arrangements often exclude the necessary uniformity of these interactions. It is vital to consider unifying the understanding and expectations of the sale of goods in the international context. Without this consistency, parties to a transactional agreement are unable to trade as their expectations often contrast efficiently. Therefore, states have signed off to Conventions in the past with regards to this matter. One of the most recent ones, and arguably one of the most successful, is the UN Convention concerning Contracts for the International Sale of Goods (the CISG Convention).

    The CISG Convention is one of the most recent efforts to unify the overall components of and expectations for international trade law. As of right now, it has been the most successful attempt at achieving this goal. The CISG Convention is the most ratified convention concerning the international sales of goods, with more than 85 states adopting the Articles. Preceding it, and supporting its development, were two other agreements attempted by the international community regarding the matter of trade. These two conventions were put together by the International Institute for the Unification of Private Law (the UNIDROIT) to create an internationally recognized protocol for the sale of goods. UNIDROIT was able to compile and develop the ULF and ULIS Conventions in three decades-having it finalized by 1964 and enforced by 1972 amongst nine states. The CISG Convention, signed first in 1980, was the final product of the effort to unify standards of sales and prevent disputes from arising between states. It represents a compromise made following lengthy discussions between representatives of countries with different legal systems and backgrounds. These differences, though outside agreements and conventions may prevent their existence, are addressed further and more directly within the articles of the CISG Convention. Still, despite the available prevention mechanisms, past cases have arisen due to the inability of states to cooperate regardless of the provisions of the article. Their enforceability, as well as the applicability of case laws, is put under debate.

    Development of the Convention

    Since the year 1930, UNIDROIT has been engaging in efforts to establish a universal protocol for the process of trade.[i] These efforts lead to the establishment of two separate conventions for different aspects of the business: The Convention regarding a Uniform Law on the International Sale of Goods (the ULIS Convention) and the Convention concerning a Uniform Law on the Formation of Contracts for the International Sale of Goods (the ULF Convention). While the initiation of the ULIS Convention preceded that of the ULF Convention, the commencement of both of them was in April 1964 through a diplomatic conference held at The Hague. Since then, there has been a constant attempt to get all concerned States on board with the overall cooperation.

    ULIS Convention

    The ULIS Convention introduces the concept of establishing a single process of selling goods internationally. It proposes the fundamental responsibilities and obligations of states that are parties to sale contracts.  The Convention sets a protocol for delivering the products of sale, adapting the agreement, paying the determined price, and more. Further, the Convention includes a particular remedy in the case of a party breaching its provisions.

    As aforementioned, UNIDROIT began work on this Convention starting in 1930-during the time that the League of Nations (the League) still stood as the competent intergovernmental organization. The League organized for a committee of experts to begin preparing a draft of the Convention and simultaneously the communication to the member states of the League in the year 1935 was done. Based on the comments and critiques of the rules, the draft was revised in the next few years and was on the agenda at a diplomatic conference hosted by the League in 1951 at The Hague. Another revision was completed by 1956, recirculated to the governments, and led to the third overhaul in 1983. Eventually, the submission of the final draft of the ULIS Convention was in the year 1964 to the diplomatic conference at The Hague, where it was officially prepared to be signed by interested governments.

    ULF Convention

    Much similar to the ULIS Convention, the concept of the ULF Convention was under construction for an extended period before its final official preparation. The provisions of the Convention are related to more general rules of international trade. It discusses protocols for accepting offers of business, potentially revoking suggestions, and overall forming a standard contract for future transactions.

    The ULF Convention came into existence during the process of constructing the ULIS Convention. In the 1951 diplomatic conference at The Hague, where during the process of approving the first revised draft of the ULIS Convention, member states suggested the creation of a separate convention that deals more specifically with international sales contracts. The idea for this agreement was to shed light on the difficulties of contract formation that commonly occurs during international transactions. A separate draft from that of the UILS Convention was handed over to the League's member states in 1958, and revisions followed until the official finalization of the Convention in the 1964 conference as mentioned above at The Hague. The subsequent article on this topic will explore how the ULIS and ULF conventions have led to the development of the CISG convention.


    [i] United Nations, 2008, United Nations Convention on Contracts for the International Sale of Goods (United Nations Audiovisual Library of International Law)

    This article was initially authored by Sara Al Harfan with additional inputs from other attorneys.

    ]]>
    Thu, 15 Feb 2018 00:00:00 GMT
    <![CDATA[Franchising in UAE]]>    Liability of Franchisors

    You cannot bring the Canadian winters to the UAE, but you can enjoy the warm coffee of Tim Hortons in the UAE. UAE has the answer to most of your cravings from back home, whether you are missing the butter chicken or chicken and waffle. This multi-diverse country is a global hub of franchising. The franchising business in the United Arab Emirates (the UAE) has been developing consistently over the last couple of years. Abundant international companies have expanded their organizations in the Emirates over the recent years. Their diverse multi-social populace and their excellent business condition have transformed the UAE into a social and visitor focus positive for diversifying. The many open doors the Emirates give enable organizations for any industry to flourish. The UAE is the focal point of this dynamic franchising as it is a business gateway to the MENA region. The Emirates holds the second place in the UK about the global retail brands with Dubai as the most common choice to invest. From organic cafes and supermarkets, fancy eateries, to thrift shops and top of the line garments brands, most of the world-known names are available on the UAE marketplace.

    While the notion of franchising seems simple, several issues should be taken into consideration when dealing with this business segment. It is essential to understand the rights and obligations of the franchisor and the franchise and what are the issues and rules that one should consider before moving forward. As for the concept of franchising in the UAE, there is no specific law for the business and franchising is the subject of commercial and agency regulations, which does not differentiate, between franchise agency or distribution agreements or another form of sales agency relationship. There is no specific legislation for regulating the franchising business in the UAE, but there are numerous laws in the UAE, which governs the franchising businesses as follows:

  • Federal Law Number 18 of 1981 regarding Organization of Commercial Agencies (as amended by Law Number 14 of 1998) and as amended by Law Number 13 of 2006 (the Agency Law);
  • Federal Law Number 5 of 1985 Civil Transactions (the Civil Code);
  • Federal Law No 18 of 1993 on Commercial Transactions (the Commercial Transaction Law).
  • The Dispute Resolution

    The law in the UAE mandates that only UAE nationals or corporations wholly owned by UAE nationals or those with a UAE partner or sponsors are allowed to conduct business. However, there is an exception to the companies who have their presence in the free zones. The companies in the free zones are free to opt a foreign law to govern their agreement. On the other hand, UAE federal laws apply to commercial arrangements such as the Civil Code and the Commercial Transactions Law govern unregistered contracts or companies having their presence in UAE mainland.

    The UAE legal system differentiates between the two forms of agreements, registered agreements and unrecorded in the ministry of economics. In general terms, these laws recognize the right of parties in an unregistered deal to contract with each other on conditions as they may concur and are free to choose a foreign law to govern their agreement. And there are also some events where the local courts will not consider the parties choice of law and administer the contract under UAE law.

    Registered Agreements

    If a franchisee registers its agreement under the Agency Law, the franchise holds an extreme position regarding negotiating the termination of a contract making it very difficult for the franchisor to terminate a registered agreement. The franchisee will also be able to block imports of products covered by the franchise, which companies ship to other consignees. Thus, in practice, it is best for franchisors to take steps to ensure that no registration under the Agency Law occurs as the law favors the franchise more than the franchisor. The UAE Ministry of Economy recommends the company for applying Agency Law in UAE to register themselves and to meet the following requirements:

  • Agent must be a UAE national or a company wholly owned by UAE nationals;
  • The relationship must be exclusive; and
  • The relationship between the agent and principal should register with UAE Ministry of Economy.
  • Accountability of the Third Parties

    As in the event where the franchising agreement creates an agency, the franchisor (the principal) could be liable for acts performed by the franchise (the agent) in the ordinary course of business. It is a situation where someone is held responsible for the actions or omissions of another person.

    The rules regarding the vicarious liability of franchisors can be complicated and vary from state to state.

    In the USA

    Vicarious liability, reputedly the most common tort theory of recovery against franchisors arises from the principal-agent relationship or an employer-employee relationship between the parties to the contract. Vicarious Liability occurs because of the proven actual agency or proven apparent body and also because of direct liability, where the franchisors can Be Responsible for Its Negligence and acts or omissions.

    In the US it is the degree of control of the franchisor over the franchise in running the business that determines the liabilities that the franchisor is liable. The extent of the parent company's control and supervision over the employee and the involvement in running the business determines the actual authority of the franchisor.

    If the agent enters into a contract with a third party under his actual authority, the agreement came into will create contractual rights and liabilities between the principal and the third party.

    And the doctrine of apparent authority rests on the premise that one who causes a third person to believe someone is his agent should bear the loss associated with that third party's reasonable reliance on the presumed agent's supposed authority. For example, in Crinkley v. Holiday Inns, The Fourth Circuit Court of Appeals upheld a jury verdict against Holiday Inns. A gang of "Motel Bandits" who burst into the plaintiff's room at Holiday Inn had robbed the plaintiffs.

    The court noted that the defendant franchisor "engages in national advertising... without distinguishing between company-owned and franchised properties."  And The plaintiff's testified that they chose Holiday Inn because they thought it would be a "good place to stay" based on her previous visits to the chain

     As seen above, the franchisor's "holding out" of the franchise as being part of one business entity (using the trademark, advertising, or architecture), and the consumer's reasonable reliance on the franchisor's representations. The evident expert can likewise happen where a vital ends the specialist of an operator, however, does not advise outsiders of this end.

    Percentage of US ownership depends on the business activity and the purpose of the office the US company wishes to establish. US companies are allowed to open representative, branch or regional offices with 100% ownership, however, are limited to direct specific business exercises. If a US organization wishes to establish a business in the UAE, at that point, the law requires a joint venture with a UAE national owning at least 51% of the market.

    In the UAE

    The contract of the agency is considered a commercial deal and the agent acts according to his professional activity. Under this law, the agent carries out legal action on behalf of his client and at his request for a commission charged by the client. And any third party who contracts with the commission agent may not refer to the principal who remains a foreigner from the contract. And the agreement does not establish between the principal and any person who has contracted with the commission agent any legal relationship authorizing one of them to refer to the other under the pretext of gluttonous.[i]

    UAE Civil Code

    Article 282

    Any harm dome to another shall render the actor, even though not a person of discretion, liable to make good the harm.

    Article 313

    1.      No person shall be liable for the act of another person, but the judge may upon the application, of an injured party, and in the event. In his opinion there is justification for taking that course, render any of the following persons liable as the case may be to satisfy any amount awarded against a person who has caused the harm:

    a)      Any individual who by law or by assertion is obliged to administer a man who requires supervision by his being a newborn child or as a result of his psychological or physical condition. Unless it demonstrates that he did 'his obligation of control or that the harm would necessarily have happened regardless of whether that assignment had been, completed with the best possible care; or

    b)      any individual who has real control, by a method for supervision and heading, over a man who has caused the harm, despite that he might not have had a free decision if the demonstration causing hurt was conferred by a man subordinate to him in or because of the execution of his obligation.

    The UAE is an important market with the presence of a large number of businesses through franchising. There is no law or legislation regarding franchising in the UAE and franchising related operations are subject to civil and commercial requirements with principles of Shariah Law on business transactions. Based on the above, it becomes clear that unlike the USA, the UAE holds the view that a person shouldn't be liable for another person's act if he is not directly responsible for supervising his law and had no control over the code. Also, that the agent acts out of his capacity for running the business and the principle, i.e., the franchisor cannot be liable for the acts of the agent, i.e., the franchise.


    [i] (Ruling of the Court of Cassation - Dubai on 17-09-2007 in Appeal Number 2007/173 Commercial Appeal)

     

     

    ]]>
    Wed, 31 Jan 2018 11:28:00 GMT
    <![CDATA[Incorporating before Abu Dhabi Airport Business City]]> Company Formation in Abu Dhabi Airport Business City

    1. What law established this free zone?

    The following laws are the primary piece of legislation governing the Abu Dhabi Airport Business City (ADAB):

  • Abu Dhabi Executive Council Resolution Number 61 of 2010 gave Sky City the authority to grant free zone status for the properties possessed by the Abu Dhabi Airports Company;
  • Abu Dhabi Executive Council Resolution Number 62 of 2010 considering Al Ain International Airport as a Free Zone Area;
  • Abu Dhabi Executive Council Resolution Number 63 of 2010 considering Al Butain Airport as Free zone area.
  • 2. What are the principal internal regulations governing this free zone?

    The primary internal regulation is governing this free zone in Abu Dhabi Airport Free Zone Company Registration Regulation (the Regulation). The provisions of this Regulation cover matters which is not in the UAE Federal Law Number 2 of 2015 regarding Commercial Companies Law (the CCL). On the other hand, issues not included in the Regulation are handled by the CCL.

    3. Does this free zone have any reciprocal arrangements with other free zones? If so, what is their impact?

    The free zone is relatively a new free zone, and at present, it does not have any reciprocal arrangements with other free zones.

    4. What must critical areas of UAE and Emirate Legislation a business operating in this free zone still comply with? What are the most significant examples of how this effects operation?

     

    The critical areas of UAE Legislation businesses operating in this free zone must comply with are:

  • Federal Law Number 2 of 2015 for Commercial Companies (e.g., banks should be within the country);
  • Federal Law Number 8 of 1980 regarding the regulation of labor relations and its amendments;
  • Federal Law Number 4 of 2002 regarding the criminalization of money laundering (e.g., the disclosure of currencies, penalties for money laundering).
  • Importantly, the areas where the internal rules and regulations of the free zone are not applicable or are not sufficient the UAE laws will apply to govern the dispute.

     

    5. What essential UAE and Emirate onshore agencies do businesses operating in this free zone need to register with or be aware of?

    The essential UAE and Emirate onshore agencies a business would need to register with will depend upon the activity undertaken by the company. Some general coastal organizations under which the company must disclose themselves are as follows:

  • Abu Dhabi Airports Company;
  • Abu Dhabi Municipality;
  • UAE General Directorate of Resident and Foreign Affairs;
  • Department of Municipal Affairs;
  • Public Notaries;
  • Other Governmental Departments.
  • 6. How does a company incorporate in this free zone?

     

    The foreign investor looking to establish a company in this free zone have to follow three simple step procedures as below:

     

    Step 1: Submission of Documents

    Application Form

    Business Plan

    Passport Copy of the Manager

    Passport-sized photo of the Manager

    No Objection Letter from the Current Sponsor (in cases where the applicant is a resident of the UAE)

     

    Step 2: Submission of Fees

    The company should complete the payments such as  registration Fees, Licensing Fees

    Documents concerning company's formation, ownership and management must be provided

     

    Step 3: The Final Stage

    The company should sign the lease agreement;

    Licensing and Visa processes can begin.

     

    7. What advantages can companies expect from setting up in the free zone?

    ADAB, like other free zones, allows hundred (100) percent foreign company ownership and hundred (100) percent repatriation of capital and profits. The free zone also provides a hundred (100) percent exemption for corporate tax, import and export tax, and personal income tax. Also, the ADAB offers the following advantages:

  • Unified administrative services
  • Cargo clearance service
  • Online customer service
  • Proximity to the Airport
  • On-site customs inspection
  • International freight forwarders and logistics services
  • 8. What are the business activities companies established in this free zone allowed to engage in?

    Companies incorporated in ADAB are authorized to do following activities:

  • Aerospace and Aviation
  • Maintenance, Repair, and Overhaul (MRO)
  • Airport Services
  • Airline Services
  • Aircraft Interiors
  • Cargo Freight and Logistics
  • Consultancy
  • Technology and ICT
  • Transportation
  • Warehousing and Distribution
  • Marketing and Events
  • Regional Headquarters
  • Knowledge and Development
  •  There is an expectation that businesses set themselves up in this free zone will be operating in an activity relating to the business of aviation.

     

    9. What types of businesses are allowed to operate in this free zone?

    As mentioned above companies can set up trade, industrial, aviation, consultancy, transportation businesses.

    10. What inheritance laws apply in this free zone?

     

    As for all areas of law that are not in the ADAB's regulations, the general rules of the UAE are applicable (Islamic Sharia Law). A non-Muslim expatriate can request that the rules of their home country apply, as per the Personal Affairs Law Number 28 of 2005.

     11. What taxation applies?

     

    The Abu Dhabi Airport Free Zone allows for 100% foreign ownership, free of all types of taxes (including corporate, import and export, and personal)

    12. What accounting and auditing rules do businesses operating in this free zone need to adhere to?

     

    Businesses operating in this free zone must keep accounting records, and they must submit auditing reports at least once a year as per the provisions of Part 11 of the Abu Dhabi Airport Freezone Companies Registration regulation.

    13. Where do businesses operating in this free zone locate their bank accounts?

     

    Businesses operating in this free zone must select a bank in the Emirate in which they are running to open their bank accounts, as per the provisions set out in the Commercial Companies Law.

    14. Are there any specific rules governing when the movable property is removed from the free zone area or transferred into the free zone area from another jurisdiction?

    Businesses set up in the ADAB must limit their activities to within the free zone that this they can only operate within the territory of the open area and not in the UAE mainland. However, to work outside the free zone, they must appoint a local agent or distributor to distribute their products in the region.

    15. Are any specific licenses required to operate as one particular type of company in this free zone?

    In ADAB the companies can obtain the following types of licenses:

  • Trading Licenses
  • Light Industrial Licenses
  • Service Licenses
  • National Industrial Licenses
  •  Also, importantly under the licenses mentioned above, the companies can form the following types of businesses:

  • Freezone  Limited Liability Company (Corporate)
  • Freezone Limited Liability Company (Natural)
  • Branch of local or foreign companies.
  • 16. Is there any specific on-going regulation or monitoring of businesses operating as particular types of company in this free zone?

     

    As per Part 15 of the Abu Dhabi Airport Free Zone Companies Registration Regulation, the free zone authority may appoint an inspector to investigate a company's business dynamics. The company's directors must produce records at an investigator' request.

    17. How are disputes settled in this free zone?

     

    Within this free zone, disputes are settled through the traditional UAE courts, unless another platform for the settlement of disputes has been agreed on in the contact. If any party or a company files a case against a company set up in ADAB, it will be directly filed in the courts of the Abu Dhabi such as Court of First Instance or Court of Appeal.

    18. How are disputes between onshore companies and companies in this free zone settled?

     

    Unless another platform for the settlement of disputes has been agreed on in the contract, the parties should file such cases with the courts of the Emirate of Abu Dhabi.

    19. What are the primary rights and duties of an employer and employee working in this free zone?

     

    The provisions of Federal Law Number 8 of 1980 and its amendments (the UAE Labour Law) apply to employers and employees in this free zone such as:

     

    Article 91: Employer must provide the employee with protective equipment, clothing, instructions on all other means of protection to protect him from hazards of injuries, dangers of fire and vocational diseases

    Article 92: Employer must display at an important point detailed instructions, in Arabic and in a language understood by employees, concerning methods to prevent fire and protect employees from dangers.

    Article 93: Employer must provide every 100 employees with one medical aid box.

    Article 94, 96: Employer must provide proper cleanliness, ventilation, adequate illumination, potable water and toilets, clean atmosphere and precautionary measures against fire and electric current.

    Article 95: Employer must appoint one physician to do full medical checkups at least once every six months for employees exposed to infection risk. The employer must record the results.

    Article 96: Employer must provide employees with means of medical care.

    Section 97-98: Employer (or his representative) must regularly inform employees of dangers related to their profession and provide written preventative measures.

    Section 99: Employer must forbid alcoholic drinks and intoxicated persons in the workplace.

     20. How are the disputes between employers and employees working in this free zone settled?

     

    Federal Law Number 8 of 1980 concerning the Labour Law (the Labour Law) is the primary piece of legislation which governs the disputes between the employer and employee. The Labour Law states that either party can apply with Ministry of Labour Abu Dhabi if they have an employment dispute. However, if they fail to settle the matter in the Ministry, the case will be transferred to the Labour Court.

    21. What entry qualifications and permits are required for staff working in this free zone and how are employees registered with the authorities?

    Qualifications will depend on the employee's position and their company's license. An employee requires a visa/entry permit for which the company should submit the personal sponsorship agreement. After that, the company should obtain the residence permit for the employee; this requires getting an Emirates ID card and the performance of a medical check-up.

    22. What are the primary attributes of a property lease in this free zone and what are the key restrictions when leasing a property?

     

    The primary attributes of the property leasing in ADAB are as follows:

  • Availability of land plots for long-term contracts
  • Availability of warehouse facilities (360 m2 to 2880 m2)
  • Availability of ready offices and workstations.
  • It is important to note that a company should complete its registration to lease a property in ADAB.

     

    23. Is it possible to apply for a building permit in this free zone? How is this done and what steps are required?

    It is possible to apply for a building permit in this free zone, namely by making an application to the Abu Dhabi Municipality. The following documents must be submitted:

  • Approved site plan
  • Urban planning council approval
  • Commissioned letter signed by the owner
  • Liability free certificate
  • 24. What environmental requirements must construction companies building in this free zone consider, e.g. form of building, landscaping or building height?

     

    The company having registration in ADAB should comply with standards set out by the Abu Dhabi Environment, Health, and Safety Management System Policy, and the Abu Dhabi International Building Code.

     25. What are the regulations governing the use of utilities in this free zone?

     

    The use of utilities is determined based on actual usage in this free zone.

    26. Is it possible for hotels and retail establishments to operate in this free zone - how do they establish themselves?

     

    It is possible for hotels to operate in this free zone. They establish themselves the same way other businesses would in ADAB.

    ]]>
    Wed, 31 Jan 2018 00:00:00 GMT
    <![CDATA[Cloud Computing and the Arm's Length]]> Cloud Computing and Transfer Pricing

    In these times life without Netflix or Google Drive is hard to imagine, right? Accessing your all-time favorite movies from wherever you are to whenever you need without the hassle of carrying a bunch of discs and tapes wherever you go. Be it your slumber parties or a coffee shop where your client is late for a meeting; direct access to your devices and the cloud has never been so easy. But do you ever wonder how? Its Video-sharing cloud services, like Netflix that stream data across the Internet to a player application on the viewing equipment rather than sending the purchaser a DVD or physical discs. Even the services (such as Gmail and AppStore) which you use every minute of the day is a fantastic example of how much cloud computing has contributed to the technology industry over the past few years. Data routing, transmission and sharing at its best.

    Cloud computing is what allows a company to practice using a network of remote servers hosted on the internet to operates and process data, share materials, and storage space to store rather than to store on a local server or a personal computer. A cloud computing system keeps its crucial data on Internet servers rather than distributing copies of data files to a particular client's devices; it is the delivery of on-demand computing materials over the internet.

    Today everyone is talking about cloud computing as it has brought numerous advantages for the businesses, whether, large or small. The services provided by a cloud is easily accessible from anywhere on the globe and from any device, complete access to your resources, is no cost for infrastructure, having minimum management cost and the same time saving a lot of time and effort

    Companies worldwide have adapted themselves by rapidly moving forward and have started operating their business from the cloud because of the temporary changes in the business sector brought about by the digital industry.

    The most common actions today, like listening to the music, playing video games, using the social networks, storing photos and documents are, in most of the cases, done using the Cloud computing.

    Transfer Pricing Challenges in The Cloud

    Although service providers create cloud-computing systems to serve and benefit everyday business or research needs, it provides a time of unpredictability for international tax laws to follow this track of virtual cloud which makes it an obstacle to the companies and the tax administration.

    The primary issue that arises out of this situation is the transfer pricing. Transfer pricing is the pricing for which, goods and services are sold and bought by related companies internationally within an enterprise. The price imposed by one group to a related entity for services provided.

    For example, if a subsidiary company in Australia sells goods or services to a parent company in the USA, the cost of those goods paid by the parent company to the subsidiary company is the transfer price.

    Every business that transacts internationally (or; virtually) with related entities, the transfer pricing rules and the principles of arm's length and permanent establishment are of great significance in such transactions.

    For income tax regulation, multinational corporations must keep in account the transfer pricing rules and allocate their global profits among the various countries in which they function. The ideal allocation would permit each state to tax an appropriate portion of the taxpayer's total gain while avoiding taxation of the same income by more than one state.

    The transfer pricing rules affect profits and losses among related entities of an enterprise that is in separate jurisdictions; thus, every business that transacts internationally with associated entities of industry must take into account the transfer pricing rules.

     However, the governments worldwide are losing substantial tax revenue as companies allocate the profits to an establishment in a low-tax or a zero-tax jurisdiction.

    Tax Manipulation

     A straightforward illustration of transfer pricing and artificially allocating profits is as follows:

    ·        USco, a fictional U.S. based Bottle Company, manufactures bottle in the U.S. at the cost of 10 cents per pen.

    ·        USco's Canadian subsidiary, Subco, sells the bottle to Canadian customers for $1 (or 100 cents) per bottle and spends 10 cents per bottle in marketing and distribution costs.

    ·        The enterprise's total profit on the sale of each bottle is 80 cents (income of 100 cents, subtracting the value of 20 cents).

    ·        Transfer price is the price charged by USco to Subco and is likely to be somewhere between 20 cents (which will leave all of the profit in Canada) and 80 cents (which will allocate all the earnings in the US).

    In this instance, the US tax rate is higher than the Canadian tax rate. Therefore, the multinational is likely to allocate the lowest possible transfer price to the sale of bottles from USco to Subco.

    Such a way of artificially shifting profits had become the most significant concern of many governments, giving rise to the 'BEPS' (base erosion and profit sharing) project.

    Organization for Economic Co-operation and Development (OECD)

    In most jurisdictions, transfer pricing and solutions to such concerns of tax erosion, as stated above, are regulated by the OECD transfer pricing guidelines.

    The Organization for Economic Co-operation and Development is an intergovernmental economic organization with thirty-five (35) member countries to spur economic progress and global trade and commerce. And it was in 2013 that at the request of the G20, the OECD launched an action plan to implement the BEPS project.

    The transfer pricing law applies an arms-length model to reduce to the smallest possible inter-company price manipulation, which requires the transactions between related taxpayers to be constant with the results that would have been if independent, unrelated entities had engaged in a similar operation under similar circumstances. It ensures that business transactions where the buyer and seller are different legal entities but from the same enterprise, act independently and with no interest in the other's benefit.

    In 2015, the OECD issued guidance and discussed new chapters to reduce the risk of transfers of intangible assets. An intangible asset for transfer pricing purposes is defined as 'something which is not a (physical) or financial asset, that can be owned or controlled for use in commercial activities and includes compensation of the use or transfer, had it occurred in a transaction between independent parties in comparable circumstances.'

    The Challenge Today

    However, there are several problems today in transfer pricing rules about the business of cloud computing. The first critical issue regarding the tax treatment of Cloud computing services is the characterization of the income deriving from services since it is not always possible to characterize the functions of cloud computing as the transfer of intangible assets. By moving to the cloud business, there is no longer a transfer of a physical or an electronic copy of the transaction like in intangible assets.

    Another issue is the mobility of the cloud business which gives rise to complex challenges connected to the identification of the place where the business activity is sufficient. Leading to a shift in the taxation of the services from one jurisdiction to another and potential issues for the concerned governments since it gives rise to a problem of no taxation or double taxation.

    Accordingly, the OECD needs to address issues on old tax guidelines that no longer match the current practice of doing business across jurisdictions. Considering that there are many obstacles and disputes that the taxpayer and the tax administrators are encountering owing to the updated technologies, such as cloud computing.

    There are no updated guidelines of the transfer pricing rule that can apply to the technology of cloud computing, exposing the tax administrator to a problem of, non-payment of tax and stripping of charge by the companies seeing that. Corporations can quickly move their cloud service provider to a low or zero tax jurisdiction or even allocate the profits to a firm located in a low-tax or zero tax jurisdiction.

    And as for the taxpayers, having no specific guidelines exposes them to a problem of double taxation and rise of a dispute with tax administrators as to the confusion on how to apply the transfer pricing rules to the business of cloud computing which leads to a different range of conclusions.

    The virtual and borderless nature of cloud computing, together with the unpredictability created by the traditional transfer pricing rules has given rise to significant and complex issues.

    And considering the importance and rapid growth of the Cloud computing business today and shortly, a novel solution as to depart from these disputes is required soon.

    ]]>
    Sun, 28 Jan 2018 11:00:00 GMT
    <![CDATA[Infringement of Copyright Law]]> Plagiarising Copyright

    'Give credit where credit is due.'

     -        Author Unknown

    The origins of this proverb are unknown, but they are relevant in varied contexts. One can say that the concept of plagiarism efficiently sits on this axiom. But there's another saying too; "If you steal ideas from one source that's plagiarism, but ideas stolen from more than one source makes the output a 'research.'" So, which one of these two proverbs should we apply when talking about plagiarism? Will it be literary theft? Or will it be fair to use? No doubt, the rules of plagiarism are vague. Although the subject falls under the umbrella of Intellectual Property (the IP), IP law does not directly prohibit the same.

    The two main branches of IP law deal with copyright and industrial property. Patents and trademarks fall under the later, and copyrights deal with the right of authorship. Strictly speaking, plagiarism cannot fall under the two types of IP. While plagiarism protects ideas, copyright law does not protect intangible expressions or idea. There are many ways of defining plagiarism.

    Defining Plagiarism

    Imagine coming up with a plan, a story or a poem. After putting your heart and soul into it, and perfecting it, you put it online or maybe write it down on a notepad. A friend then comes along to steal your ideas, or someone on the internet copies your work, and they get praised for it. How would that make you feel? After all your hard work and dedication, you do not get credit for your creativity and originality, and someone else gets praised for the fruits of your labor. This aspect is the reason why norms on plagiarism are essential, namely to make sure the rightful author gets attribution and credit for their work.

    The Miriam Webster Online Dictionary defines plagiarism as literary theft and the stealing and presenting of another's ideas as your own, without crediting the source. The use of someone else's expressions, work or even ideas without accrediting the source is plagiarism.  The rules of plagiarism do not apply to information that is available in the public domain; they can be distributed freely and without any consequences. Some critics claim that plagiarising is all about attribution. Copying another's work without attribution is plagiarism, even if the work gets specifically cited. The rules of plagiarism protect ideas, no matter how generic or trivial they may be.

    A Few Cases of Plagiarism

    While plagiarism cases are common in schools and academia, there are plenty other instances where plagiarism is abundantly prevalent. No one is unaware of Madonna, the pop singer, and songwriter. She has gained huge success and has won several awards due to her edgy and catchy songs. But did you know that even the renowned singer and performer Madonna sparked controversy when media accused her of plagiarism? Salvatore Acquaviva, a songwriter from Belgium, accused Madonna of plagiarising part of his song "Ma Vie Fout L'camp" and using it in her hit song Frozen in 1998. The Belgian court upheld his claim, and Madonna was asked to withdraw her song for sale from the country.

    Another plagiarism case that came to the spotlight was that of a Harvard sophomore student Kavya Viswanathan. Miss Viswanathan was on a high when she got a book deal for her novel "How Opal Mehta got kissed, Got Wild, and got a life." It wasn't until a reader noticed striking similarities between her book and the novels "Sloppy Firsts" and "Second Helpings" by author Megan F. McCafferty. The reader notified Miss McCafferty of the plagiarism and Viswanathan was exposed. Although not expelled from Harvard, her book deal which was worth half a million eventually was withdrawn.

    Cases of plagiarism are not rare. In fact, traces of plagiarism can be found in almost every industry, from music to film to writing. A handbook stating the policy regarding plagiarism and its consequences by the University of Oregon was alleged and subsequently proved as directly copied from the Stanford University student handbook. Although defined as literary theft, people are still prone to take the risk, much unlike if it was thieving in the more traditional sense. Many famous artists have been known to plagiarise for their self-benefit by not crediting the source and gaining profit. The phenomenon is not a recent one and has occurred on numerous occasions.

    How to Avoid Plagiarism?

    One cannot emphasize enough that the basis to avoid plagiarism is attribution. Even making small changes while leaving the underlying content intact is counted as plagiarism. Within academic circles, the ethical policy prohibits copying even the 'intangible' ideas. Plagiarism comprehensively protects Illustrations, facts, and concepts produced by an author. 

    Crediting or attribution is the most comfortable and straightforward way to avoid plagiarism and its consequences. Acknowledging the source from which the information obtained and collected must happen carefully and precisely. It is also important to state the origin or place from where the text came through. Putting quotation marks when taking direct words and speech provides the suitable suggestion that the words belong to someone else and are not the source of the writing.

    Justifications

    Plagiarism is despised because it allows the wrong party to benefit and sometimes gain profit that they have not earned. But some critics suggest that if the concept of fair use is applied, plagiarism can get overlooked. They argue that when accused of plagiarism, even before being found guilty, the person can suffer from huge loss. Their reputation suffers. Students accused of plagiarism are more often than not suspended or expelled from their school. Critics feel that the punishment is not fit for the crime. In essence, it cannot be considered as a crime, especially when the information obtained is in the public domain.

    Information available in the public domain is free to be used and published. But many people are unclear about this concept. When do they know if the data is genuinely in the public domain? These vague and ambiguous instructions make following plagiarism norms hard, especially for students. Furthermore, the intention of the plagiarist is a topic of debate. What happens when the plagiarism is unintentional, and the accused did not intend to deceive anyone or gain unearned profit?

    Conclusion

    The essence of plagiarism is crediting or citing the source of the origin. It is all about acknowledgment. Although vague and unclear, it has become a norm in our society and one must follow the rules or face the consequences. Stealing someone else's creativity and originality and presenting it as your own is off limits and should be treated sternly. However, in some instances, the rules must not be as severe. Always give credit to the real source. Regardless of their triviality or generic nature, plagiarism protects all ideas and expressions.

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    Sat, 27 Jan 2018 00:00:00 GMT
    <![CDATA[Drug]]> PHARMACEUTICAL INDUSTRY IN THE UAE

     What are the main laws and regulations governing pharmaceutical companies in the United Arab Emirates?

  • The primary piece of legislation governing pharmaceutical companies in the United Arab Emirates is Federal Law Number 4 of 1983 concerning the Pharmaceutical Profession and Pharmaceutical Institutions (the Pharmaceutical Law). This law applies to pharmacists, pharmaceutical establishments, and governs the import, manufacture, and distribution of pharmaceutical products. Articles 63 to 67 of the Pharmaceutical Law deals with the registration of pharmaceuticals. Article 47 of the Pharmaceutical Law states that a company must obtain a license to open a pharmaceutical company and Article 48, 55 and 56 lists the conditions that the company should meet to obtain the license. These include, among others, the requirement that the company is composed of different sections (production section, chemical section, disinfection section, and bacteriological laboratories) and that licensed pharmacists should supervise the factory. Article 49 mandates that the application for a license to open a pharmaceutical company should be accompanied by the factory's contract of establishment/ articles of association and also the permit issued to the manager and the pharmacists, among other documents.
  • Federal Law Number 14 of 1995 regarding counter-measures against narcotic drugs and psychotropic substances regulate the import of (pharmaceutical products and) medicines into the United Arab Emirates.
  • Federal Law Number 5 of 1984 governs the licensing and registration requirements of physicians, pharmacists, and other professionals within the country's pharmaceutical industry.
  • Federal Laws Number 7 of 1975 and Number 2 of 1996 has laid down specific requirements for the establishment and licensing of public and private medical laboratories, clinic and hospitals in the country.
  • Federal Law Number 1 of 1979 on the Organization of Industry Affairs affect pharmaceutical companies located in the mainland as a local Emirati agent must be appointed, and their shares in the company's capital should not fall below a certain percentage.
  • Federal Law Number 2 of 2015 regarding Commercial Companies, provides further requirements applicable to companies on a general note, over matters such as licensing, the trade name, the Memorandum of Association (Articles 12 to 15).
  • The governmental regulators of each Emirate (such as the Dubai Health Authority or DHA and Health Authority - Abu Dhabi or HAAD) also issue regulations from time to time to regulate the pharmaceutical companies in their jurisdiction. The 'Dubai Community Pharmacy Licensure and Pharmaceutical Practices Guide' (February 2013) issued by the Health Regulation Department of the Dubai Health Authority focuses primarily on the licensing and protocol of institutions and professionals. This guide provides information on the administrative procedures required to set up a pharmaceutical company. It also offers instructions on purchasing, storing, dispensing, and prescribing medication and drugs. The Ministry of Health Code of Conduct also outlines the standards expected of professionals providing medical services.
  • Which governmental authorities regulate the licensing of pharmaceutical companies?

    The Ministry of Health and Prevention (MoH) is the primary body regulating the licensing of pharmaceutical companies in the United Arab Emirates. Article 65 of the Pharmaceutical Law specifies that imported pharmaceuticals should be registered with the MoH, regardless of whether or not they have been approved or registered in their country of origin. The MoH is also responsible for the regulation and implementation of health care policies in the country. Moreover, individual Emirates have also established their local health regulators to oversee the healthcare and pharmaceutical sector of their specific jurisdiction (Dubai Health Authority in Dubai, and the Health Authority - Abu Dhabi). These regulators monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for medications. The MoH formulates federal health policies and regulates the healthcare market in the Northern Emirates.

    What is the registration process to set up a pharmaceutical company in the UAE?

    As mentioned earlier, under the Pharmaceutical Law, pharmaceutical products, and preparations must be registered with the MoH before being imported into the national market. The market authorization holder, along with its local representatives (such as licensed distributors) are mandated to submit a new drug application to the MoH before importing or manufacturing a pharmaceutical. The local agent is wholly liable for any complaints made by customers and non-compliance with the regulations set out by the Ministry.

    The Pharmaceutical Law prohibits anyone from preparing, composing, separating, manufacturing, packaging, selling or distributing any medicine without a valid license from the MoH (Article 1). This law also mandates that companies importing pharmaceutical products or medical devices must be locally established in the United Arab Emirates and have a pharmaceutical importation license. A sole natural person may also import these products if he is UAE national.

    Are there any exceptions to the requirement that pharmaceutical products to be registered in the United Arab Emirates?

    The Pharmaceutical Law states that all pharmaceutical products imported into the United Arab Emirates must be registered with the Ministry of Health, with NO exceptions. However, the general practice has confirmed that the Ministry of Health has authorized the import of unregistered products in exceptional circumstances such as:

  • Emergency situation medicines
  • Drugs and medications required by government or semi-government health institutions
  • Registered and unregistered medication that is not available in the local market
  • Narcotic and psychotropic drugs (as per Federal Law Number 14 of 1995)
  • However, pharmaceuticals that are not registered in the country of origin cannot be imported to the UAE even under the above-mentioned circumstances.

    How can a foreign manufacturers trade, distribute and advertise pharmaceutical products in the United Arab Emirates?

    Foreign manufacturers have two options to trade and distribution of pharmaceutical products in the United Arab Emirates. They can either establish a local presence (a company in the UAE) or appoint a local agent. Given that the MoH requires all pharmaceutical products be registered, a foreign manufacturer with no local presence will have to appoint a domestic partner to obtain the necessary approvals for trade, distribution, and advertisement of the product. This allows foreign manufacturers to access the network and resources of the local agent, who may have nurtured their business relationships in the country over an extended period. The United Arab Emirates imposes restrictions on such foreign ownership and sponsoring arrangements.

    Are local agents of pharmaceutical companies regulated? If so, how?

    The appointment of a local licensed agent by pharmaceutical companies is governed by Federal Law Number 18 of 1981 concerning organizing of trade agencies. Under this statute, the local agent will distribute the pharmaceutical companies' products in the United Arab Emirates vide an agency agreement registered with the Ministry of Economy. However, the following conditions must be met by the local agent:

  • the local agent should be a UAE national, or an entity fully owned by UAE nationals (i.e., hundred percent stake owned by UAE nationals);
  • the agent's appointment will be granted exclusively for one Emirate or several Emirates; and
  • the agreement must be notarized in Arabic, and the foreign manufacturer must provide a letter confirming they have no objection to the registration;
  • The local agent will have the right to trade, distribute and advertise the pharmaceutical products, exclusively and within the confines of the territory agreed on in the distribution agreement after meeting the above criterion. The agent's exclusivity to manage the registered products means that they can block third parties from dealing with them. Agents are also entitled to a commission on the sale of the registered products and will have the right to claim compensation upon the termination of the agreement.

    Which license should a company obtain to open a medical store in the UAE?

    A person (legal or natural) that intends to set up a medical store or warehouse for medical products should obtain a medical store license to conduct their activities in the country. This is not limited to companies that deal with pharmaceutical products but also applies to businesses that store medical equipment. To obtain this license, the company must employ at least two licensed pharmacists to regulate the medical store, and these pharmacists must be in charge of the regulation of medical devices and pharmaceutical products.

    What are the responsibilities of a licensed pharmacist in the United Arab Emirates?

    A license issued to a pharmaceutical will bear the name of the 'licensed pharmacist' and he or she would be responsible for the following:

  • Importing pharmaceutical products;
  • Storing pharmaceutical products;
  • Enter into contracts regarding pharmaceutical products and/ or medical devices; and
  • Complying with the regulations of the MoH and local regulator and the provisions of the Pharmaceutical Law.
  • Are there any sanctions for submitting false documents to obtain a license to undertake the pharmaceutical profession?

    Articles 83 and 84 of Federal Law Number 4 of 1983 states that the offenders may face imprisonment of up to (1) one year along with a fine for anyone who submits false documents or information to obtain a license, and on anyone practicing as a pharmacist illegally. Article 86 of the law states that people who adulterate or imitate substances may face imprisonment of up to three (3) years and fines of up to AED 10,000.

    Are there any restrictions on the ownership of pharmacies in the United Arab Emirates?

    In the United Arab Emirates, one can obtain a license for more than one medical facility. As for pharmacies, they must either be owned by UAE Nationals or a UAE National must own at least 51% of the company's shares. Federal Law Number 2 of 2015 states that pharmacies may also be wholly owned by GCC nationals. One cannot obtain a license to open more than two stores except for pharmacies that are located in hospitals.

    What happens when the licensed pharmacist is terminated from the pharmaceutical company?

    When a licensed pharmacist resigns or is terminated from their employment, the pharmaceutical company should submit a request through the Ministry of Health's online portal for the cancellation of the current pharmacist's license. Upon the revocation of the license, the company should then apply for a new license with another licensed pharmacist-in-charge. After this step, an application should be filed with the Department of Economic Development for the amendment of the trade license to replace the name of the licensed pharmacist with the new one.

    The Ministry of Health may take approximately 3-4 weeks to cancel a license and issue a new license and the Department of Economic Development would take approximately 2-3 weeks to replace the license.

    Can a company's pharmacovigilance and regulatory affairs be handled and managed by the same person or is there a requirement for separate people to do the job?

    Pharmacovigilance is known popularly as drug safety and is the pharmacological science to collect, detect, assess, monitor and prevent adverse effects of the pharmaceutical products. Generally, the pharmaceutical companies assign the same licensed pharmacists to handle pharmacovigilance also; although, the MoH has not mandated that the same person should undertake both the assignments. A company is also entitled to appoint separate officials for each of these functions.

    Can a company outsource the importation of medical goods or storage in the United Arab Emirates?

    Outsourcing the function of importation or warehousing to a third party is not authorized by the MoH. All medical equipment imported by a pharmaceutical company should be registered under the name of the same entity before the MoH. These medical devices and pharmaceutical products have to be stored in warehouses and/ or medical stores which should also be under the license of that company.

     

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    Thu, 25 Jan 2018 00:00:00 GMT
    <![CDATA[Arbitration - Criminal Liability of Arbitrators]]> CRIMINAL LIABILITY OF ARBITRATORS IN UAE

    Are arbitrators above the law? Have you thought about arbitrators and the importance of their role in international arbitration tribunals? Well, arbitrators are the most crucial element of the modern alternative dispute resolution system. Their position is similar to that of judges who have been given unlimited powers and are immune from liabilities in the courtroom. Arbitrators awards are binding on parties, and they are final, subject to some limited grounds. They have an obligation to consider all the factual and legal aspects of a matter and to decide accordingly. However, one school of thought holds that arbitrators have unlimited powers in a tribunal and that they have been provided with unlimited powers to act both within and outside their jurisdictions without any restriction. For this reason, a modern law has introduced regulations and liabilities for arbitrators in some countries to restrict their powers and to sentence them if they are found guilty of a breach. Accordingly, UAE Decree Law Number 7 of 2016 (the New Law) introduced the laws relating to this matter in 2016. In this article, we will discuss the criminal liability of arbitrators under the New Law and its impact on arbitration in the UAE.

    Salient Features of the New Law

    The New Law concerns arbitrators in the UAE as it is a new law introduced in any significant arbitration jurisdiction. Many jurisdictions provide immunity for the arbitrators to have a proper arbitration tribunal. They are immune from the civil liability arising from their role as an arbitrator. This freedom has extensive support in almost all international jurisdictions'. In a recent Australian supreme court case, the court held that arbitrators are only liable to the parties if a court overturns the award and if a party establishes that an arbitrator was grossly negligent. Similarly, countries such as UK and Canada also provide full immunity for arbitrators from civil liability unless proved that they are guilty of fraud or bad faith in a tribunal.

    There are three basic types of duties imposed by an arbitrator. These are the duties imposed by the parties, the responsibilities imposed by law, and ethical obligation. These include but are not limited to:

  • settling the dispute and giving an award that is not subject to challenge at the enforcement level,
  • to act independently and impartially during the tribunal, to follow the deadline and avoid delays,
  • to operate in good faith and maintain confidentiality, and to provide the opportunity for each party to represent their case.
  • Failing to do any of the above duties or the duties imposed by the law will result in a challenge of the award, in civil liability or even in criminal liability for arbitrators in many jurisdictions.
  • Article 257 of the New Law states that "Whoever issues a decision, makes an opinion, files a report, presents a case or asserts a fact in favor of or against someone, contrary to the required duties of impartiality and honesty, in their capacity as arbitrators, experts, interpreters (translators) or fact-finder appointed by the administrative or judicial authority or nominated by the parties shall be punished by temporary imprisonment. The above said categories should be prohibited from taking up any new assignments and shall be subject to the provisions of Article (255) hereof."

    Before this amendment, article 257 imposed criminal liability only on experts appointed by the courts. Regarding this change, the criminal liability is extended to experts as well as to the arbitrators selected by an arbitration institution. Those appointed under the ad hoc system by the parties or by the judicial authority will be criminally liable if they breach the provisions of the article mentioned above. 

    The broad language and the risk of being imposed of criminal liability raised much attention in the UAE. The concern emerges from the fact that, unlike the court systems, the decision in arbitration procedures cannot be appealed. Limited grounds to appeal an award exist at the enforcement level. These do not include the wrongful application of laws, and only cover major issues such as matters relating to bribery. Therefore, these specific amended laws intend to improve the strength of arbitration procedures by imposing criminal liability not only on arbitrators but also on experts and translators who issue opinions contrary to the duties of impartiality and naturality. Scholars and the parties to the arbitration appreciate the new regulations of imposing some limitations on arbitrators.

    On the other hand, arbitrators argue that the consequences of these amendments may extend the timeline of the arbitration procedure as well as damage the reputation of the arbitrators overall. Article 257 does not require evidence of the positive intention of wrongdoing by the arbitrator. The breach of the duties of fairness and impartiality is not defined and constitutes a broad meaning in the UAE law which leaves a big question mark for arbitrators.  It is a question raised by the legal community on this particular aspect by comparing article 22 of DIFC's arbitration law, which states that:

    "No arbitrator, employee or agent of an arbitrator, arbitral institution, an officer of an arbitral institution or appointing authority shall be liable to any person for any act or omission in connection with an arbitration unless they are shown to have caused damage by conscious and deliberate wrongdoing."  

    Further, when comparing the broad language of Article 257 with other jurisdictions where the criminal liability of arbitrators applies, those laws are more specific and easy to apply in practice. Criminal liability of arbitrators emanates from the exercise of their quasi-judicial functions. Under Spanish regime, the crimes get defined as specific crimes, and the definitions are more precise, such as the definitions of bribery in articles 385 and 388 of the Criminal Code and illegal negotiations in Articles 297-298 of the Criminal Code. Misconduct is considered a criminal liability in Argentina and the law is specific on the matter. (art. 269 Criminal Procedure Code). China also imposes criminal liability on arbitrators in certain circumstances.    

    Accordingly, there are no guidelines provided regarding what will surface as evidence of a contravention of duty. Hence, the arbitrators as practitioners of the law understand the chance of defending themselves in such situations is very narrow. Nevertheless, in general, practice, proving an arbitrator acted dishonestly and in a partial manner is a difficult task. Despite the easiest or difficulty in proof, the losing party of arbitration will try to use article 257 when they are dissatisfied with the outcome of the arbitration award. With the limited number of grounds to challenge in enforcement level, the parties will use this article most of the time, and it will delay the process and damage the arbitrator's reputation undoubtedly.

    Effect of the New Law 

    The damage towards the arbitrators' reputation cannot be revised as the consequences of criminal liability under the UAE laws are serious. It will lead to an investigation and the person charged must handover their passport, sometimes authorities may decide to restrict to travel outside the UAE, and the changes of imprisonment are very high. As a consequence, arbitrators don't risk undertaking tribunals as sole arbitrators due to the fear of later consequences. Therefore, the parties in some tribunals are forced to appoint three arbitrators regardless of the number of arbitrators agreed on in the contract's arbitration clause. This process has an impact on the underlying concept of arbitration namely party autonomy where parties have all the freedom to choose the procedure of the arbitration.    

    Another effect is the due diligence, with respective arbitrators and experts looking closely at the background of the parties, their counsel and their conduct in the past. On the other hand, arbitrators look carefully on their fellow tribunal members and their past behavior.

    Now the tribunals require parties to provide in a statement that they are treated fairly in the tribunal regardless of whether this is true. So, the arbitrators can use this later to defend themselves. The arbitrators are also liable to pay compensation to the parties under S. 207(2) if they resign from an ongoing tribunal without giving a proper reason. Considering all these reasons, some scholars argue that this is a form of attack on arbitrators.

    Moreover, there are there are reduced sentences in certain circumstances as well. Article 255, referred to in Article 257 is set out below:

     "Shall be exempted from penalty:

  • The witness who, if he tells the truth, shall be subject to a severe prejudice in his freedom, honor or shall expose to such severe prejudice his spouse, even if divorced, one of his ascendants, descendants, brothers, sisters or in-laws of the same degrees.
  • The witness who reveals before the court his name, surname, and nickname and who had not to be heard as a witness or if he has to be told that he has the right, if he wishes, to abstain from testifying.
  • In the two above instances, if such perjury exposes another person to legal prosecution or to a judgment, the author shall be sentenced to detention for a minimum term of six months".
  • Arbitrators must act justly, with responsibility, and comply with their professional standards, and not be subject to bias when they conduct the trial. They are the driving seats of arbitration, and therefore their behavior impacts on the tribunal and a small increase in the power of arbitrators or a slight restriction in their powers will bring a significant impact on the overall matter. It is clear that imposing criminal liability on arbitrators not only impacts the arbitrators, it also impacts the entire arbitration procedure. Although the legislative writers provided some clarifications and justifications, there is not much change concerning the matter.

    Also, Article 257 leads to a position where the UAE is no longer considered as a suitable place as the number of arbitrators signing in the UAE tribunals is reduced. There are some reported incidents where international arbitrators were found reluctant to undertake arbitration cases in the UAE, and the consequences of this are a delay in arbitration and more frustration for the parties. Without a viable and effective arbitration system, companies and practitioners will not choose the UAE as their seat of arbitration. It is understandable that all the leading institutions around the world shape and improve their regulations for a better arbitration experience to the parties. For example, the introduction of Expedited arbitration procedure in the ICC, LCIA and other institutions allowing modern means of communication in a tribunal, and approving a default "documents only" tribunal under the HIAC arbitration institution. In that way, the UAE must also take measures and changes to attract international arbitration. However, it can be pointed out that the drafting of article 257 with full intention missed the later consequences and the severe effect it may have on the reputation of UAE arbitration.

    Considering all the later consequences, UAE practitioners and arbitrators association with the support of International Arbitration institutions made a plea to the UAE cabinet of ministry to reconsider the serious criminal liability imposed on arbitrators. However, some scholars argue that the intention of legislative drafting is unlikely to be changed as the UAE has a history of imposing strict regulations in many fields. Nevertheless, the UAE courts may choose to apply a narrow definition of article 257 considering all the facts and ongoing circumstances. On the whole, the new legislation has proved to be a significant blow to the UAE's reputation as a major international arbitration Centre in the Middle East.    

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    Tue, 23 Jan 2018 00:00:00 GMT
    <![CDATA[UAE Bankruptcy Law]]> NEW BANKRUPTCY LAW IN THE UAE

    Since the time of its promulgation in the year 2016, the Bankruptcy Law has been widely discussed and deliberated on. The enactment of Federal Law Number 9 of 2016 (the New Law) has been critical in light of the volatile oil market across the UAE and the GCC and its impact on the distressed businesses and the financial market in general. Even at the draft stage, the New Law created a lot of interest with commercial businesses and lenders expressing their interest in understanding the effects the New Law will have on securing the interests of local investors, thereby regulating the credit market.

    Erstwhile Legal Regime

    Before the enactment of the New Law, the provisions regarding the bankruptcy of traders were contained in Chapter V of the UAE Federal Law Number 18 of 1993 (Commercial Transactions Law). In addition, corresponding bankruptcy related penalizing provisions were set out in the UAE Federal Law Number 3 of 1987 (UAE Penal Code). Upon the enactment of the New Law, Chapter V of the Commercial Transactions Law, as well as provisions on crimes related to bankruptcy under the UAE Penal Code, have been repealed. The offenses and crimes have been combined and set out in Section 6 of the New Law.

    Another notable change from the old bankruptcy regime is that a debtor's failure to declare bankruptcy on his inability to pay their debts within 30 days is no longer a criminal offense.  Under the earlier regime, due to the risk of a possible imprisonment or a hefty fine, the management of distressed businesses would prefer to opt for absconding from UAE.  This change is pivotal in providing breathing space to a business which is facing a financial crunch, but which has had the potential to revive its business with the assistance of its creditors.

    Salient Features

    This Article purports to enumerate in brief the salient features of the New Law which shall assist the interested parties in understanding the manner in which the bankruptcy regime shall be initiated and undertaken. 

    A notable feature of the New Law is its wider applicability over the commercial entities. Article 2 of the New Law sets out that the New Law apply to: -

  • Companies under UAE Commercial Companies Law[i];
  • Companies and establishments in the Free Zones, which are not governed by any special provisions in relation to restructuring and bankruptcy and excludes the financial Free Zones of DIFC[ii] and ADGM[iii];
  • Sole establishments/ traders;
  • Civil companies undertaking professional activities;
  • Companies owned wholly or partially by a federal or local government (who expressly submit to the provisions of this law).
  • Importantly, the New Law provides for the introduction of a Financial Restructuring Committee (FRC) which shall be established by the Cabinet of Ministers to oversee the management of restructuring process by financial institutions licensed to facilitate an out-of-court mutual and consensual restructuring arrangement between the debtor and its creditor. Such FRC shall also maintain a list of experts in the matters of restructuring and bankruptcy, and also, maintain a register of persons against whom judgments are delivered under the New Law.  While the New Law is silent on the manner of the workings of such FRC, it is anticipated that further regulations shall be released which shall regulate and detail out on the procedures, duties, and roles of the FRC.

    It is pertinent to note that the New Law enumerates the following procedures for debtors in financial difficulty:

  • Preventive Composition[i]: This is solely a debtor-led initiative introduced for the purpose to facilitate a consensual settlement between the debtor and its creditors and restructuring its debts as opposed to filing for bankruptcy. Such debtors, shall not be in default on their debts for more than 30 days. Therefore, any debtor initiating the preventive composition scheme could be in financial distress but yet solvent. Upon receipt of the application for preventive composition from the debtor, the Court may appoint an expert to determine if the debtor can meet the condition for preventive composition. If the request for preventive composition is accepted, a trustee will be appointed by the court who, inter alia, will be instrumental in undertaking the preventive composition process including but not limited to taking inventory of the properties of the Debtor, recording all the creditors and their claim amount, preparing the Preventive Composition Scheme.  The scheme shall include terms and conditions of settlement of liability, suspension/termination of the activities of debtors, any moratorium period and payment deduction. Any scheme of composition must be approved by the majority of creditors representing two-thirds of unsecured debts, and must be approved by the court. The scheme must be implemented within three years of court approval; this can be extended for an additional three years by obtaining the approval of the majority of creditors.
  • Restructuring and Bankruptcy[ii]: In cases where the debtor is financially insolvent but the business of such debtor can still be salvaged, the court may assist such a debtor by approving a restructuring plan for the business. A debtor may make a request for restructuring process where the debtor ceases to make payment of debts for over 30 days due to financial instability, or any creditor can make a request where the debtor has failed to repay the debt of creditors or the group of creditors holding debt of at least AED 100,000/-, within 30 days from date of notice of discharge of debt by the creditor. The application and manner of execution of the restructuring scheme are similar to those of the prevention scheme, in as much as, it requires the trustee to prepare the restructuring scheme which will require the same 2/3rd creditor approval. The distinction, however, is for the implementation of the restructuring scheme, where implementation is authorized for a longer period of five to eight years (five years that can be extended by three more years).
  • It is pertinent to note that where a protective composition or restructuring scheme is not appropriate, not approved, is terminated, or where a debtor is acting in bad faith to evade their financial obligations, the court will pass a judgment declaring bankruptcy and liquidation of the assets of the debtor.
  • Obtaining New Finance

    Article 181 of the New Law provides comfort to debtors dealing with financial hardship. Pursuant to this provision, Debtors can request Court, at the time of a preventive composition scheme or restructuring process, to obtain new finance upon the terms laid down under the New Law. Importantly, such new finance, if permitted by the Court, will have priority over any other unsecured debt owed by the debtor.

    Suspension of Criminal Proceedings for Dishonored Cheques

    Upon initiation of a preventive composition scheme or restructuring process, any criminal proceedings filed against the debtor for the issue of a dishonored cheque shall be suspended. As a result of such a suspension, the recipient creditor of the cheque shall be included in the list of creditors.

    Interested Parties

    If you are a debtor:

    As set out herein, the New Law is a mechanism which awards opportunity to distressed businesses and debtors, who need certain breathing opportunity reach settlement with its creditors and continue with the operation of its business.

    If you are a creditor:

    While the New Law primarily provides a safety net and secured approach to debtors for their businesses, the success of a preventive scheme or a restructuring scheme shall be dependent on the approval of the creditors. Therefore, it is essential that the creditors review the preventive composition scheme or the restructuring scheme cautiously and prudently. Although, the right to vote on a scheme is with unsecured creditors, secured creditors have more far-reaching entitlements, in as much as, such secured creditors are entitled to enforce their security interest when the debts fall due even during the pendency of the preventive scheme or restructuring scheme. Further, the secured creditors are also entitled to take action first upon bankruptcy judgment passed by the Court.

    Liability of the Directors

    The legislators have purported to stress the importance of governance of companies and the manner in which the management undertakes its activities. This is evident from the duties and obligations imposed by the management under the terms of the Companies Law, and it is taken further under the terms of the New Law. Regarding article 144 of the New Law, directors/managers who are responsible for the losses to the Company shall be jointly liable for the debts of the company, in the event of bankruptcy, if such assets of the company are insufficient to cover 20% (twenty percent) of its debts. Therefore, it is essential that the management of the company familiarizes itself with its duties and responsibilities under the Commercial Companies Law and also have a thorough understanding of the financial position of the company and monitor any actions taken by shareholders and creditors of the company.

    Effect and Impact

    There has been a lot of speculation and conjecture on whether the Bankruptcy Law will assist in facilitating a conducive financial market for the investors. While the mechanism has been set in place, much will depend on how the courts implement it. The law is at an early stage, and on account of largely being a court-driven process, it will hinge on the expertise of the experts, trustees, and courts. Moreover, effective implementation of the law will also hinge on the infrastructure.

    Having said that, the New Law has a more far-reaching impact than the erstwhile regime in terms of providing more flexibility and comfort to distressed businesses. In effect, the New Law gives them an option to rely on it and reach a settlement with its creditors, which in turn will have a more positive impact on the UAE as a conducive financial market for international investors.

    [i] Articles 5-66 of Section 3 of the New Law

    [ii] Articles 67-151 of Section 4 of the New Law

    [i] Federal Law Number 2 of 2015

    [ii] Dubai International Financial Centre

    [iii] Abu Dhabi Global Markets

     

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    Mon, 22 Jan 2018 00:00:00 GMT
    <![CDATA[Sale by Description]]> SALE BY DESCRIPTION - INTERPRETATION AND AMBIGUITIES

    "A picture will never compare to the real thing"

     -        Author Unknown

    A red bike described by the seller is up for sale online, the buyer then receives an orange-colored motorcycle: deception by description or merely a deal by description, which is built wholly on one person's observation and interpretation of color? UK legislation governs the Sale of Goods Act 1979 (the Act), providing statutory protection for consumers and non-consumers. Minor changes to the Act have caused ambiguity in areas that need further interpretation.

    The sale of goods involves a simple procedure through which a seller transfers ownership of the products to the buyer in consideration for payment. The Act deals with issues that may arise from a 'sale by description' in the absence of a prior agreement between the parties of the contract. A promise in contract law holds great significance. Based on the sellers promise to the buyer that the goods will be of a specific description, failing to abide by a guarantee concerning the item explanations, results in a breach of contract, allowing repudiation and possible compensation. The Act provides a balance of bargaining power between the seller and the buyer, guaranteeing the buyer will receive goods replicating the information provided by the seller, and the seller will receive payment for performing the implied term stipulated within the contract. The concept of a sale by description is set out in section thirteen (13) of the Act. Subsection one (1) imposes an implied condition on the seller that the goods will correspond with the description. The Act will only apply in circumstances where the buyer has not seen the products they have purchased, and have proceeded with the sale based on the reasonable contemplation of the parties about how they portray the item to look.

    As abovementioned under section thirteen (13) the buyer is dependent upon the goods being of the exact description given by the seller. Sale by description is perceived as including refusing the buyer from inspecting the item before buying as they would not be wholly reliant on the seller's description. A sale by description interpretation creates uncertainty as to whether all language used by the seller to offer this interpreted buyer with a virtual picture of the goods can be put against them to succeed with a claim under section thirteen (13).

    The case of Beale v Taylor, however, contradicts the above, permitting a buyer who has seen the item before purchasing, successfully relying upon a claim of sale by description. The Court of Appeal confirmed that irrespective of the buyer viewing goods in advance to buying, the description by the buyer did not resemble the one which has been provided in the advertisement.

    The case facts are that a description provided by the seller about a specific model of car that the buyer relied upon when they visited the seller and physically observed it. The buyer purchased the item based on the description, but, later found that the car was a combination of two different models. Arguably it seems that the buyer ought to have formed their description of the item, and unable to depend upon the explanation provided by the seller.

    Jurisprudence

    In his judgment, LJ Seller specified there is a sale by description even though the buyer saw the car before purchasing it. He stated that "Goods sold by description as long as it is not sold merely as a specific thing but as something corresponding to a particular description is accepted under a sale by description claim." The buyer had relied upon the description given by the seller and not anything they had seen when they viewed the car and entered into the contract.

    The difficulty, therefore, arises in regards to reliance upon the goods description if the seller doesn't hold satisfactory expertise. An analysis of the Court of Appeal case of Harlington v Christopher Hull[i] suggests that the buyer will not succeed with a claim based upon goods not being that as described if they do not exclusively rely on the items' attributes given by the seller.

    The case concerned an art dealer who specified they had little experience and knowledge of the art for sale. At auction, the painting was described by the seller as 'the work of a German impressionist Gabriele Munter.' The buyer was a fellow art dealer, and an expert on this artists work, hence why they sent their specialized experts to view the painting before proceeding with the transaction. It was later discovered once the buyer purchased the painting that it was a fake and worth a mere £100 at market value.

    The issue of this case, and the matter that causes uncertainty about reliance upon sale by description is that in this instance, it is not that the buyer had visibly shown interest and purchased the painting based on the seller's description of the 'Gabriele Munter painting.' The Court held that the buyer had not relied upon the seller's account.

    Stuart-Smith LJ in his dissenting judgment specified that if it is established that the parties shared a common intention that the description would be a term of the contract, this will suffice to make it a sale by description. Sale by description is an implied term; therefore although it is not visible in the agreement, both parties impliedly accept the goods to be a certain way.

    In his judgment, Nourse LJ stated that if the buyer relies entirely on his judgment and ignores the description provided by the seller, this would not be enough to call for the sale by description definition given under section thirteen (13) of the Act. The buyer had purchased the painting based on his own expert's judgment of the description and not what was given by the seller who ensured that his information on the art was known. A broad interpretation of sale by description demonstrated the purpose of the act in protecting buyers from purchasing items that do not mirror the explanation provided. Nevertheless, from the perspective of a seller, a vague description of the goods would place a minimal duty upon them to make sure some criteria are satisfied, yet on the contrary, a precise description would show a greater duty. It appears that there is no medium for the seller or the buyer to understand the true interpretation of a sale by description. The decision in Harlington v Christopher Hull creates ambiguity as to the distinction between sale by description and misrepresentation in the Misrepresentation Act 1967.

    Understanding Misrepresentation

    A misrepresentation, however, is the opposite of a sale by description. Misrepresentation is legally defined as a false statement of fact which induces a party to agree to their detriment. The Misrepresentation Act, under section two (2), subsection two (2), in circumstances where a party has agreed due to misrepresentation and as a result have suffered loss, they may claim damages. If the misrepresentation has not been made fraudulently, and the person has reasonable grounds when the contract concluded, that the facts represented were true, this will be taken into account when assessing a misrepresentation claim.

    The court has at its disposal the option to allow a purchaser the right to reject the goods and claim damages from loss under the Act, or only allow them to continue with a damaged claim by misrepresentation. Contrasting a sale by description with misrepresentation, it would seem logical that a claim under section thirteen (13) of the Act would prevail. The Act targets the root of the contract, enabling the buyer to rescind the contract and claim damages for loss as a result of the seller being in breach. On the other hand, misrepresentation considers a specific part of the contract that may have been false. At the House of Lords, Lord Diplock provided a further interpretation of a sale by description, stating that identification is what constitutes description. It must be considered whether it is fair and just for the buyer reject the goods they have received based on them not corresponding with what was described, consequentially resulting in the item being dissimilar from those confirmed through the contract. In a time where the internet and e-commerce are growing at a considerable rate, buyers place a prodigious reliance upon sale by description.

    Under subsection two (2) of the Act, the goods will match the sample received by the buyer, but excluding the condition whereby the seller notifies the buyer of any difference in the goods from the sample before a contract is complete between the parties. Recent law, Consumers Rights Act 2015 works with section thirteen (13) subsection two (2) to support the seller. This states that the buyer will be unable to discard the goods if the seller can demonstrate that possible breach of sale by description is unreasonable to call for rejection. Where there is a sale by description, it is not sufficient for the bulk of the goods to match the sample if the sample does not match the description provided.

    The law states that if a difference in description is so remote, the buyer will no longer benefit from a condition, allowing them the option to reject the goods and claim damages from a loss to only suing for possible compensation by warranty. Reasonableness is paramount when considering how a sale by description is interpreted. The practical importance of sale by description is that it places a condition into the contract allowing consumers to reject what they have received if it doesn't match a description. UK Law enforces more responsibility on the seller to protect the buyer. Albeit it would be unjust to prohibit a buyer receiving the goods they have purchased based on a description they have relied upon, to the receive something they wouldn't have construed to look a certain way, the Act works as a shield.

    Sale by description is flawed for its misconceptions. However, without having the Act readily available for buyers to rely upon, the buyer's protection would suffer a harmful effect.

    Is it fair to say sale by description offers support and protection to buyers in the sale of goods contracts or is seeing really the only way of believing?


     Harlingdon And Leinster Enterprises Ltd V Christopher Hull Fine Art LTD | CA 15 DEC 1989

     

     

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    Sun, 21 Jan 2018 12:02:00 GMT
    <![CDATA[Brexit’s Impact on Commercial Transactions]]> Brexit's Impact on Commercial Transactions

    Is it a bit too late to write about Brexit?

    Economic instability, privacy concerns, dispute resolution framework, currency fluctuation and immigration issues – we have heard about each of these predicaments due to the political shift of one of the oldest economies from one of the most stable confederations. In this article, our lawyers in Sharjah will explain the impact on commercial transactions due to the United Kingdom's severance from the European Union (EU) when Theresa May triggered the Article 50 of the Treaty of Lisbon on March 29, 2017. The Article 50 of the Lisbon treaty states that: -

  • "Any Member State may decide to withdraw from the Union according to the outlying requirements in the constitution.
  • Any member state before its withdrawal from the treaty should notify the European Council about its decision. Concerning the guidelines provided by the European Council, the Union shall negotiate and agree with the country, outline its arrangements for its removal, and also consider its future relations with the Union. The negotiations of the agreement are according to Article 218(3) of the Treaty on the Functioning of the European Union(TFEU). The Union of the Council, who is acting as a qualified majority, should conclude post seeking European Parliament's consent."
  • So, the two-year countdown to Britain's official departure from the EU is already in action. No later than April 2019, Britain should leave the EU, and whenever negotiation talks are coming forward from Lanchester house, it touches the nerve of many stakeholders. Why? It is because your commercial transaction regarding your contractual rights, obligations, performance will be immensely affected by the negotiation between Brussels and Lanchester officials. But what is going on in this consultation? It is a re-defining process of EU's core principles- free movement of goods, capital, services, and labor – the four freedoms comprising the internal market of European Union. The definition of the domestic market of European Union is in Article 26(3) of the preceding Treaty regarding the Functioning of the European Union (the TFEU).

    The internal market should involve a territory without inward wildernesses in which the free development of merchandise, people, administrations, and the arrangement of the treaties will guarantee the capital.  

    It is essential to go over each principle and understand the changes in those four laws following the Brexit. It will allow us to have a big and detailed picture of Brexit's impact on the commercial transaction. Then we will provide you the solutions for your business, to protect your contractual rights, obligations, and performance.

    Free Movement of Goods

    Free movement of goods is the success story because approximately 75 % of EU trade regards products. Free movement of goods is the economic freedom defined in the Articles 110 of Treaty of Functioning of the European Union (the TFEU) and Article 28 to 30 of the Treaty Establishing the European Community (the TEC).

    The Article 110 of TFEU; 

    "No Member State should force, straightforwardly or by implication, on the products of other Member States any internal tax assessment of any sort more than that forced specifically on similar local items. Besides, no Member State should force on the goods of other Member States any local tax collection of such a nature as to manage the cost of indirect assurance to different products."

    The Article 110 of TFEU means that member states have cleared away custom barriers amongst themselves and preceded with a common customs policy towards other countries. After Brexit, UK companies wishing to trade with EU/EEA member states will face the customs duty that they have not paid over 40 years since the joining of EEC in 1973. The customs duties that UK face, of course, are likely to be higher and this will weaken the competitiveness of UK products within European internal market.  Furthermore, customs check of UK products is under an obligation for entering and leaving the EU. It could burden UK business entities with additional costs and delays. Most importantly, UK companies will have to comply with EU regulations over which they have no control in negotiation.  

    On the other hand, it is pertinent to note the sterling exchange rates in commercial transactions after Brexit. It will significantly affect the way import and export transactions works. A fall in the value of Sterling is excellent news for offshore businesses making imports from the UK, but not for foreign companies exporting to the UK. For international firms taking up investment in the UK, the fall in the value of Sterling may produce significant business opportunities to acquire UK firms cheaply.

    Free Movement of Services

    Tariffs apply to goods as well as services provided to and from the EU following Brexit. It could increase the cost of the service supplied by UK companies and weaken the price competitiveness of UK service providers. Meanwhile, the number of service firms present in the UK could reduce due to Brexit. Presently, thirty-seven (37) percent of financial services companies said they are likely to relocate their office if the UK left the EU. Potentially it can affect the entire service industry in the UK as many large international companies based in the UK are purposely to serve the EU as a whole market benefiting the process of single European regulatory standards. This benefit no longer exists after Brexit and will likely to reduce the entire volume of commercial services provided in the UK.

    The most significant impact could be observed in Mergers and Acquisition industry in the UK after Brexit. Currently, merger and acquisition transactions to which EU Merger Regulation is in the notification are not under an obligation to make a filing to the UK authorities. After Brexit, the information of the operations under EUMR will be sufficient; it would be a mandate to report such transactions to the UK Competition and Markets Authority (CMA) as well. This duplication of notification requirements will increase the already significant volume of works for companies wishing to engage in mergers or acquisitions. They will have to make parallel and the duplicate filings in Brussels and London. The burden of duplicate merger notifications will be particularly significant in transactions such as the agricultural sector, such as Bayer and Monsanto, ChemChina and Syngenta, and Dow and DuPont. All these companies are engaged in multiple markets and have complex vertical and joint venture relationships.

    Free Movement of Labor and Capital

    Curtailment of the freedom of employees or on their action could lead to labor shortages. It could also drive up the costs of energy in the UK. It may affect businesses in specific sectors in the UK, such as construction and care that are heavily dependent on workers from the rest of the EU. Furthermore, UK capital market may suffer from the reduced investment after BREXIT. The UK has been attractive to direct foreign investment thanks to easy access to a vast European market. It is debatable, but almost 1/3 of foreign investment came from overseas banks and other financial services institutions to benefit the single regulatory service of the European system. Without EU market, UK capital market will no longer be so much attractive.

    Conclusion

    Commercial transaction and its obligation after BREXIT

    As discussed above, the business can identify the impact of Brexit in the four areas- goods, service, capital and labor which lay down the foundation of the industrial transaction. Most importantly, the business effect of Brexit could freeze the performance and make your contract becoming more and more difficult to perform. Nonetheless, it is improbable that the English court will grant consequential damage to the parties as the consequences of Brexit. 

    Some may argue Brexit makes performance impossible and consider invoking force majeure clause. Force Majeure is used to describe events possibly affecting the contract that is entirely outside the parties' control. However, the counter-argument will be that the following consequences from Brexit were reasonably foreseeable considering that the two-year negotiation talk provided parties enough time to adjust their contractual rights or performance and equip express provisions.

    In any case, under English law, the damages granted from force majeure is very much limited and is not positively applied. It has to be pointed out regarding the contract. Therefore, the best way to protect contractual obligations against Brexit is to furnish express provisions to accommodate for these changes. For instance, an express provision that protects right to not terminate upon Brexit or vice versa. Furthermore, parties could agree on an express provision that secures the movements of exchange rates following Brexit. In this way, your commercial transaction will survive in the stormy weather of Brexit.

        ]]>
    Wed, 17 Jan 2018 19:11:00 GMT
    <![CDATA[Product Liability and Safety in UAE - Part 1 of 2]]> Product Liability and Safety in the United Arab Emirates: Detailed Insight

    1. Principle areas of law and regulation relating to product liability?                                                                                          

    The main areas of law and regulation relating to product liability are:   Federal Law Number 24 of 2006 on Consumer Protection (the Law), as amended by Federal Law Number 7 of 2011, is the main piece of legislation relating to product liability in the United Arab Emirates. The law sets up the "Consumer Protection Department" which is charged with the supervision of the execution of policies relating to consumer protection, the regulation of competition and the management of consumer complaints (Article 4). Part four of the law lists the obligations suppliers must abide by and the standards of safety and quality expected of products. The law defines consumer as "any person obtaining a commodity or service for or without a price to satisfy his own or another person's needs".    In addition, the Cabinet of Ministers' Resolution number 12 of 2007 and the Cabinet of Ministers' Resolution number (207/16) of 2006 provide further guidance on consumer rights such as their right to be provided with the facts necessary to conduct proper purchases and the right to select from a number of alternative goods at competitive prices. Resolution number 12 of 2007 defines a "consumer" as "any natural or juridical person receiving any goods or service, with or without consideration, to satisfy his personal needs or the needs of others". This definition of a "consumer" is similar to that of Federal Law Number 24 of 2006. These laws will hereby be referred to as the Consumer Protection Laws. Moreover, Article 282 of Federal Law Number 8 of 1985 on Civil Transactions states that a provider who provides a defective or damaged product shall be "liable to make good the harm". Each Emirate has a Consumer Protection Department, and the Supreme Committee for Consumer Protection regulates matters relating to consumer complaints.  

    2.  How is Liability established in most common causes of action? What constitutes a product as defective? Are there strict product liability norms for any specific circumstances?  

    In order to establish liability in the United Arab Emirates, the consumer can bring the case before the courts on the grounds of tortious liability, contractual liability and breach of the Consumer Protection Laws. Under tortious liability, the following must be proved: 
  • a duty of care from the supplier or the manufacturer to the consumer,
  • a breach of that duty of care due to defective design, defective manufacture or defective warnings or instructions (failure to instruct the consumer how to properly use the product)
  • causation must be established between the defect in the product and the individual's harm, the defendant's responsibility in the matter must be determined
  • Class actions are not recognized in the UAE.   Under regulation number 12 of 2007, "defective" is defined as any fault in the designing, processing, or manufacturing of any goods, its non-suitability, deformation, or damage emerging before, during, or as a result of use, or due to non-conformity or non-compliance sufficiently with the Approved Standard Specifications, the warranty, or specifications declared or to be declared by the provider; or any acknowledgement or advertisement relating to or posted on the goods". In the United Arab Emirates, product liability claims are generally based on strict liability whereby manufacturers will be held liable regardless of whether they were negligent or not.   3.  Who is potentially liable for a defective product? What potential obligations or duties do they owe and to whom?     Manufacturers and Suppliers are potentially liable for defective products. Under the UAE Consumer Protection Laws, providers can be held liable for defective products. Providers are defined in a broad sense as including local agents, distributors, manufacturers and anyone involved in the circulation of the product or service. According to Article 6 of Federal Law Number 24 of 2006, the supplier must not display or offer goods that are defective. The supplier will be liable if a defective product is sold. A supplier will also be liable for not respecting labeling requirements, and for matters relating to warranties and after-sales services. Article 9 of the law states that producers (or manufacturers) will also be liable for providing defective products.    4.  What are the potential defenses to the product liability claim(s)? Is there a time limit within which the proceedings can be bought?    In the United Arab Emirates, a seller may rely on exclusions or limitations of liability except in cases of personal harm (Article 296 of Federal Law Number 8 of 1985 on Civil Transactions states that provisions attempting to exempt liability for a harmful product will be void), in cases of criminal liability, in cases where providers have a guilty intention, and in cases where the standards met by the Federal Consumer Protection Department are not met. There are time limitations in which product liability proceedings can be brought.   5.   Can a supplier limit its liability for defective products and are there statutory restrictions on a supplier doing this? Do consumer protection laws apply? Are guarantees or warranties as to quality implied by law? Is there a mandatory or minimum warranty period for consumer products?    A supplier can attempt to limit its liability for defective products by inserting pertinent warnings but this will not necessarily protect them. The Consumer Protection Departments and the Courts are rather pro-consumer when it comes to consumer complaints. The United Arab Emirates' laws do not extensively discuss the quality or safety standards expected of the product. Article 12 of Resolution 12 of 2007 states that in the case of a recall of goods the provider of a defective product shall replace the product regardless of the warranty period. In the case of repair, Article 25 declares that a warranty for electronic and electric goods cannot be less than 3 months; an in durable goods not less than 6 months from the date of delivery of repair. In this case, improper use of goods is not covered by the warranty. As for service providers, Article 32 provides that they must provide warranties for a specific period in accordance with the nature of the service.    6. In which cases are product liability cases brought? Are product liability disputes generally decided by a judge or panel of judges? Are juries used in certain circumstances?                Product Liability cases are brought before the Consumer Protection Departments of the relevant Emirate, which have been set up in the Ministry of Economy and the Economic Departments of each Emirate. The consumer does not require the help of a lawyer, nor do they need to pay any fees. The Consumer Protection Department has the authority to take the decision in relation to the complaint. Decisions are generally made by judges and not juries.   7. How are proceedings before Courts in Dubai, Courts in Abu Dhabi and rest of the UAE initiated?   Complaints against defective products are received by the Consumer Protection Department. The Department has the power to investigate all matters relating to the case. Despite this, consumers have the option of filing their cases directly with the courts of the United Arab Emirates. In this case, hearings are public and should have the effect of pressurizing the provider into meeting the consumer's demands. For criminal law matters and matters involving the breach of intellectual property, the claimant or their lawyers in Dubai or UAE may also institute criminal action by filing a complaint before Police. Matters involving forgery, counterfeit, violation of commercial agency, a complaint can be filed before the Ministry of Economy.   8. What is the burden of proof and to what standard?    The onus lies on the claimant, and he/she must prove that they were harmed by the defendant's breach, and indeed that the defendant did breach his duty of care, to begin with. In product liability matters, defendants are strictly liable. The defendant's intention is of no importance to the outcome of the case.    9. How is evidence given in the proceedings and how are the witnesses cross-examined?   The Abu Dhabi Quality and Conformity Council and the Dubai Municipality have the power to take samples of products and have them checked by the Emirates Authority for Standardization and Metrology. If the product is found to be defective, the supplier is notified and may conduct their own checks. Hearing witnesses is not a general procedure in UAE courts, although the courts can request to call and hear a witness if they consider it necessary (usually if the case is referred to an investigator or expert). A party can also request to have a witness called and heard.   10. Are parties able to rely on any expert opinion evidence and are there any special rules, provisions or procedures governing the same?   Parties are able to rely on expert opinion evidence. To this effect, the normal practice is to appoint technical court experts who have the knowledge, experience, and expertise in handling such claims.   11. Is pre-trial disclosure/discovery required? If yes, what rules apply? If not, are there any other means or ways to obtain evidence from a third party?    There is no disclosure and inspection process for documents or pre-trial exchange of evidence in the United Arab Emirates. Parties are not obligated to file documents that go against their case. However, according to Article 18 of Federal Law 10 of 1992, a party to the litigation may request the court to compel his opponent to submit useful documents. The documents a party wishes to rely on are submitted to the courts in writing.    12. Is liability for spoliation of evidence/ a remedy for the destruction of or failure to preserve evidence (in particular, the product)?   Article 22 of Federal Law Number 10 of 1992 concerning evidence states that "the Court shall appraise the consequences of scratching off, erasure, insertion and other material defects in the document which forfeit or depreciate its value as evidence". This applies to product liability, if evidence of a defective product in a complaint is not preserved well, the courts will evaluate the consequences of not preserving it well. The law does not specify any penalties or remedies in relation to this.   13. What type of interim relief is available before a full trial under UAE Law and in what circumstances?   The Consumer Protection Department will immediately apply the remedies and penalties listed in the Consumer Protection Laws when these laws have been breached by a supplier.    14.  Can the successful party recover its costs associated with the litigation, such as legal fees and experts costs and to what extent?   The successful party can recover its costs associated with the litigation such as attorney's fees. The appointment of an expert must be funded by the consumer bringing the complaint although they are generally minimal.   15.  Please clarify the Appeal process, if any within the legal system of the United Arab Emirates   The parties have a right to appeal the Consumer Protection Department's decision before the Ministry of Economy. The second decision can also be appealed to the Courts of the UAE.         ]]>
    Sun, 07 Jan 2018 00:00:00 GMT
    <![CDATA[Oil and Gas Guide: Bahrain]]> Oil and Gas Country Guide: Bahrain 1. What department/agency regulates oil and gas extraction? What are the primary laws which apply? Several government agencies regulate the oil and gas sector in the Kingdom of Bahrain.
  • The National Oil & Gas Authority (the NOGA) regulates and develops Bahrain's hydrocarbons sector. NOGA also controls exploration and production and is responsible for issuing licenses, permits, and approvals to third parties.
  • The Ministry of Labour is in charge of matters relating to the health and safety of employees in the industrial sector.
  • The Ministry of Industry, Commerce, and Tourism manages Bahrain's industrial sector. 
  • The Supreme Council for the Environment is responsible for the development of environmental policies across all sectors, including oil and gas. The Supreme Council, along with the National Oil & Gas Authority, regulate the conduct of stakeholders in the hydrocarbon industry concerning pollution control.
  • Bahrain Petroleum Company (the BAPCO) has the exclusive right to produce and distribute oil and gas on the government's behalf. BAPCO is the retailer of oil and gas products both in Bahrain and internationally. 
  • Tatweer Petroleum supports the government in its goal to increase oil production and the availability of gas.
  • The following laws apply to the regulation of oil and gas extraction in Bahrain:
  • A. Decree Number 19 of 2015 restructuring National Oil and Gas Authority Board of Directors 
  • Law Number 36 of 2004 concerning the criminalization and combat of the smuggling of subsidized oil products. 
  • Laws Number 2 of 2008, Number 24 of 2009, and Number 6 of 2009 ratify development and production sharing agreements between the Government of the Kingdom of Bahrain and private oil and gas companies.
  • Decree Number 77 for the year 2007 incorporating oil and gas holding companies.
  • Law Number 10 of 2006 concerning specifying the functions and powers of NOGA, established under Decree Number 63 of 2005.
  • Ministerial Order Number 11 of the Year 2006 which deals with banning the export of subsidized petroleum products
  • Royal Decree Number 63 of 2005 in respect of the incorporation of the National Oil & Gas Authority
  • 2. Are there international laws those working in this jurisdiction need to consider? Those working in this jurisdiction need to consider the national laws governing the oil and gas sector in Bahrain which comply with international oil and gas standards, for example on health and safety practices. Contractors' systems for health, safety and the environment (HSE systems) must be compliant with international measures, such as those provided by the International Association of Oil and Gas Production, the International Association of Drilling Contractors, and the International Association of Geophysical Contractors.   3. What are the licensing procedures for carrying out different oil and gas extraction processes? For Development and Production Sharing Agreements (the DPSA), which are production-sharing licenses, the National Oil & Gas Authority (NOGA) will invite contractors to tender. NOGA and the Tender board will make a final decision. The body with the power to grant licenses in Bahrain is the National Oil & Gas Authority (the NOGA). The management of goods and services are governed by Bahrain's Legislative Decree Number 36 of 2002 concerning regulating government tenders and purchases. The law aims to protect public property by limiting the impact of private interests on tender processes, to promote transparency, to ensure government purchases so obtained are at competitive and equitable prices, and to attract the involvement of suppliers and contractors.   4. Is there any appeal process for denial of licenses? There is an appeal process for denied licenses; the appeal must be made 30 days from the date the decision gets delivered, as per Bahrain's Civil Court Procedure rules.   5. Is a national partner or government body required to be involved? All hydrocarbons located within Bahrain's territories are state property. Government bodies and national partners are required to be involved in any project relating to this sector, namely such as Nogaholding, which manages investments owned by the National Oil and Gas Authority.    6. What checks/monitoring is carried out on extraction equipment?   The government monitors extraction equipment through state bodies such as the National Oil & Gas Authority.    7. What checks/monitoring is carried out on extracted oil and gas?   NOGA acts as the principal regulator of the oil and gas sector which includes oil and gas extractions; it has enforcement powers such as the right to revoke an operator's license. The NOGA has previously conducted evaluations of the feasibility of projects. In this vein, the Supreme Council and the Ministry of Labour can inspect projects and force an operator to adopt measures that comply with health, safety, and environmental regulations.    8. Who holds title on oil and gas reservoirs?   All hydrocarbons located within Bahrain's territories are state property. The Bahrain Petroleum Company, which is a state-owned company, will receive crude oil and non-associated gas produced by companies.   9. Is the position different for offshore, surface or subsurface extraction?   The position is the same for offshore, surface and subsurface extraction; they are state property, although this is subject to negotiation.    10. Are there any specific rules governing the ownership of pipelines?   No specific rules govern the construction and operation of pipelines. Authorization must be obtained to conduct this activity.   11. Are there any restricted areas where extraction is not allowed?   There are restricted areas where extraction is not allowed in Bahrain; the National Oil & Gas Authority decides which areas are restricted.   12. Are there any restricted extraction practices, e.g., fracking?   There are restricted extraction practices; the National Oil & Gas Authority decides which extraction practices are limited.   13. Are there any specific environmental laws for industry participants operating in the oil and gas sectors?   The Supreme Council for the environment has the power to regulate activities that may cause pollution. Those operating in the oil and gas sector must consider Bahrain's Environment Act which sets out specific environmental laws for the protection of the environment, as per Legislative Decree Number 21 of 1996. The decree aims to protect the environment from polluting sources, to control pollution, to protect human health and the well-being of marine and land animals and to identify problems caused by environmental pollution. Also, the National Oil and Gas Authority and the Bahrain Petroleum Company have established regulations on environmental practices. Order Number 10 of 1999 on environmental standards (air and water) imposes limitations on the emission of polluting substances from industrial activities into the air and water, such as those that result from petroleum operations. In 2002, the General Authority for the Protection of Marines Resources, Environment, and Wildlife came into existence to developing sustainable development practices.   14. How are oil/gas firms regulated? Do they need to have specific capital, professional status, ownership credentials?   The National Oil and Gas Authority and the Ministry of Industry, Commerce & Tourism issue oil and gas regulations for oil and gas firms. The Ministry of Industry, Commerce & Tourism can place restrictions on trading, fiscal and ownership activities. Oil and gas firms must have specific capital, professional status, and ownership credentials. Authorizations are granted only to businesses that meet this particular capital requirement, occupational status and ownership credentials.   15. Is there any specific regulation over accreditation firms involved as sub-contractors in oil/gas business?   There are specific regulations over accreditation firms involved as sub-contractors in oil and gas businesses. The appointment of sub-contractors must be approved by the National Oil & Gas Authority (NOGA), with the help of Bahrain Petroleum Company (BAPCO) and even sometimes bodies like Tatweer Petroleum.    16. Are royalties paid to the Government?   There are no obligations to pay royalties to the Government, although NOGA is entitled to a percentage of the profit resulting from oil and gas operations.   17. How does the royalty process work for oil and gas?   Development and Production Sharing Agreements (the DPSA) do not include any process for paying royalties to the Government. However, the National Oil & Gas Authority (NOGA) has the authority to impose royalty requirements.    18. What are other taxes levied on the production and sale of oil and gas products?   There are no taxes on income, sales and capital gains in Bahrain unless operations relate to the oil and gas sector. The Bahrain Income Tax Law (Legislative Decree Number 22 of 1979) governs the tax system of the hydrocarbons sector. Companies involved in oil and gas operations are subject to a forty-six percent [46%] tax rate on net income.    19. Are any environmental taxes levied on the production of oil and gas products?   There are no environmental taxes on the production of oil and gas products in Bahrain.   20. How long are the licenses/concessions? Can they be renewed if so how?   The duration of a license/concession gets determined by the type of license/ grant in question. Development and Production Sharing Agreements (the DPSA) provides a twenty-year term, but the duration can reach to a maximum of thirty (30) years but this at the sole discretion of the National Oil & Gas Authority.   21.  For the offshore production of oil and gas in Bahrain, how far does the seaward regime operate?   There are no specific regulations per se that deal with the operation of seaward regimes. The National Oil and Gas Authority is however capable of introducing such regulations.   22. How is transportation regulated onshore and offshore are permits required?   There are no specific regulations about onshore and offshore transportation. Although, the National Oil and Gas Authority may enforce such regulations if they seem fit.   23. How do you obtain rights to construct pipeline or storage facilities for oil and gas?   Although there are no specific regulations concerning the construction and operation of pipelines, to obtain rights to construct pipelines or storage facilities for oil and gas, a license must first be received by the National Oil & Gas Authority.   24. Can pipeline or storage facility owners be required to allow other producers to use their facilities?   There are no specific regulations that pipeline or storage facility owners be required to allow other producers to use their facilities.   25. What specific health and safety rules apply to the industries and how actively are they monitored/violations prosecuted?   The Ministry of Labour's health and safety regulations apply to oil and gas operations. Orders Number  38 of 2014 provides that operators must regulate the use of dangerous equipment. The Industrial Safety Order sets out occupational safety regulations in Order Number 8 of 2013. The aim is to protect workers from hazardous health effects and to ensure they enjoy proper physical, mental and social health. The regulations demand that occupational safety managers be appointed and that employees get educated about the hazards of their jobs and further that proper health facilities are maintained efficiently.    26. Is certification required for specific areas of production?   Certification requirement applies for specific areas of production.    27. How does Emiratisation and preference for local workers work in the oil/gas industry?   Emiratisation is an initiative taken by the government of the United Arab Emirates to assimilate the UAE national workforce into the labor market. The concept of Emiratisation is not applicable in Bahrain, but there is a policy of giving prioritizing Bahrain nationals called Bahrainisation. The Labour Market Regulatory Authority has released a Bahrainisation table on the percentage of Bahraini citizens required to work in a company depending on the company's registered activity.   28. Do foreign workers need specific qualifications/accreditation?   Foreign workers do need specific qualifications and accreditations set out by the National Oil & Gas Authority, the Ministry of Labour and the Ministry of Industry, Commerce and Tourism. These will vary based on the activity concerned.   29.Are there specific rules governing the sale and marketing of oil and gas products produced in this jurisdiction?   Specific rules govern the sale and marketing of oil and gas products produced in the jurisdiction of Bahrain; sale and marketing licenses are granted by the National Oil and Gas Authority.    30. How does price setting operate for oil/gas sales and oil/gas distribution -­‐   are there mandatory requirements?   Prices for oil/gas sales and oil/gas distribution are regulated by the National Oil & Gas Authority.   31. Are there any specific competition rules which apply in the oil and gas sectors?   There are no specific competition rules that apply to the oil and gas sectors in Bahrain.   32. Are there any specific rules on the ownership structure of oil and gas companies?   In Bahrain, hundred percent (100%) foreign ownership is permitted for commercial activities, but the Ministry of Industry, Commerce and Tourism has imposed restrictions on foreign ownership in the oil and gas sector.   33. Does oil and gas regulation differ inside free zones?   There are no separate statutes or regulation to govern the oil and gas sector in Bahrain' free zones.   ]]>
    Thu, 04 Jan 2018 11:41:00 GMT
    <![CDATA[Healing from a Distance]]> Healing From a Distance:

    A Robot Today Can Keep the Doctors Away

    "In a few years, the idea of receiving medical treatment exclusively at a doctor's office or hospital will seem quaint."

    - Harvard Business Review

    In a time where technological advancement has revolutionized the spread of information and the way in which we communicate, the progress and impact of these technologies did not go unnoticed to the Healthcare sector. Telecommunication technologies are now being used to support the provision of healthcare services, namely through the delivery of virtual medical services. This new method has been coined telemedicine and was initially used to contact patients located in remote places. While telemedicine refers exclusively to clinical services, telehealth can also refer to non-clinical services such as administrative and educational activities. The World Health Organization found that telemedicine could be traced back to the mid-1800s with the military and space industries and that its modern form was adopted in the late 1960s and the early 1970s. The word "telemedicine" means "healing from a distance" and has allowed humans to deliver medical services even where distance is a critical factor, thus demonstrating the significant progress made by the healthcare sector.

    Immediate Access to Specialized Consultation

    The United Arab Emirates is not one to let innovative technologies slip past it, and has launched a wide range of telemedicine and telehealth projects. In July 2015, the Dubai Health Authority (DHA) initiated a "Robo Doc" trial at Hatta Hospital. The trial involved the use of a technology called "Robo Doc" that can examine patients from afar. In effect, use of this technology significantly reduces consultation costs for patients, namely from $90 to $30. Also, the "RoboDoc" technology proved to be extremely beneficial in emergency cases. The "RoboDoc" robot, a medical machine that can be controlled by a smartphone, on which a screen displays a doctor, was used to evaluate a patient severely injured as the result of a road traffic accident. The robot drastically sped up the patient's treatment by generating the patient's lab results, vital signs, and x-rays.

    The groundbreaking method of diagnosing patients with "RoboDoc", both prior to and after the occurrence of the harm, has allowed trauma teams to directly give information about a patient's condition to the emergency room doctors, instead of requiring a specialist to visit the hospital to make these tests. Dr. Moin Fikree, head of the Dubai Health Authority's Telemedicine initiative and Director of Trauma Centre, has explained that "through the robot, doctors can consult with two or more specialists in different health facilities at the same time to get immediate specialized consultation". Healthcare professionals are now able to be in two places at once, thus reaching a larger segment of patients. By accelerating the treatment process, telemedicine technology can not only save a patient's money but also time and therefore their lives. The trials proved to be a huge success and encouraged governmental authorities in the United Arab Emirates to invest in further telehealth technologies.  The Dubai Health Authority announced that it would endeavor to extend telemedicine and telehealth projects across all of its medical facilities and that it is the first government health organization in the region to implement telehealth technologies. 

    The Regulation of Innovation

    Initially, only limited regulations concerning telehealth were available in the United Arab Emirates. Healthcare professionals were unsure about whether or not they could engage in telehealth projects, which has had the effect of slowing down the development of these projects. The problem with regulating innovative technologies is that policymaking is a slow and rigid process that generally lags behind the rapid nature of these advancements. Previously in Dubai, the Dubai Health Authority Regulations only allowed the performance of teleradiology services and prohibited the licensing of other telemedicine services. The new DHA regulations issued on 21 February 2017 now authorize the licensing of telehealth services. Administrative Decision Number 30 of 2017 (the Decision) concerning the regulation of telehealth services has recently been issued by the Dubai Health Authority. Article 3 of the Decision states that its aim is to provide clarity on the requirements for conducting telehealth services and to provide the highest standards of safety and accessibility to its customers. Article 4 of the Decision states that a license must be obtained by anyone who wishes to provide telehealth services.

    The Health Authority of Abu Dhabi (the HAAD) has had a regulatory framework for telehealth services since 2013, under which the Abu Dhabi Telemedicine Centre was issued a telemedicine license. HAAD authorizes a wide range of telemedicine services and a specific telemedicine facility license. Nevertheless, one limitation in the development of telemedicine services is that providers cannot prescribe medication to the patients they have examined. If a treatment plan requires medication to be prescribed, the patient will have to attend an in-person consultation at the hospital in order to receive their medication.

    Standards for Tele-consultation in Abu Dhabi

    In regard to teleconsultation services in Abu Dhabi, the HAAD has issued the Standards for Tele-Consultation in the Emirate of Abu Dhabi ("the Standards") which came into effect in March 2014. As per article 8.1.1., healthcare facilities wishing to provide teleconsultation services must either be licensed by HAAD specifically with a license to provide teleconsultation or be authorized by HAAD to provide teleconsultation services. Tele-consultation allows the provision of the following services:

  • Triage (prioritizing patients based on the urgency of their needs)
  • Diagnosis
  • Video sighting of body symptoms
  • Recommendation for self-care, excluding prescription medicines
  • Request pathology, point of care testing, radiology investigation
  • Tele-Referral, in accordance with the HAAD Patient Referral Policy
  • Follow-up care and case management
  • Home monitoring of patient health status and vitals
  • Other medical services such as the provision of patient education, counseling and services associated with disease management programmes.
  • Article 2.3 of the Standards states that consultations can be done through a range of telecommunications media such as telephones, internet-based videos, emails and similar electronic-based communications. Article 3 of the Standards lists the duties teleconsultation healthcare service providers must abide by, such as the obligation to assure professionalism and confidentiality (3.1.3), and the obligation to ensure the services are accessible to all patients (3.1.2). In addition to these responsibilities which are similar to the responsibilities of healthcare professionals in general, some of the obligations more specific to tele-consultation services are the following: the obligation to assure the quality and safety of the tele-consultation services (3.1.4), the obligation to have Information and Communication Technology (ICT) policies (3.1.7), and the obligation to ensure that ICT technologies are offered and that they meet Abu Dhabi Systems and Information Centre and HAAD technical specifications and regulatory requirements. In addition, article 7.1.3.1. requires the establishment of a quality committee for quality assurance in the case where facilities are staffed with ten or more professionals. As for facilities staffed with less than 10 professionals, a responsible physician for quality must be assigned. There exist other standards that offer guidance on telehealth services such as the HAAD Service Standards for Tele-Consultation in the Emirate of Abu Dhabi.

    The United Arab Emirates has taken several measures to regulate the dynamics of telehealth services but there are still areas in need of regulation. The government has shown a clear interest in using these innovative services to improve the health system's efficiency. In emergency cases, where distance stands in the way of a person surviving, telemedicine has offered an affordable, efficient and revolutionary way of providing medical assistance to those in need.

    ]]>
    Sat, 30 Dec 2017 15:24:00 GMT
    <![CDATA[The Emerging Role of NEC Form of Contracts]]> GOOD FOURTUNE- NEC4

    "It's not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change."

    - Charles Darwin

    Introduction

    Biological evolution has been "creating" lives on this earth for almost three billion years, constantly adapting everything to an ever-changing environment. It is refreshing to see how evolution works and the trick is to change a complex system by using what's already there, and namely to adapt to the change. A similar evolution took place in the engineering and construction industry recently in June 2017, when the New Engineering Contract (the NEC) 4 was released. The "out with the old and in with the new" approach in the engineering and construction industry played a vital role in how to do things differently in these sectors. An evolutionary step was taken by the NEC contract board from its predecessors "NEC3". Regarding its designers, the new generation NEC4 is a  positive development for existing users of NEC3 having a similar base. It will be considered, all over the world as an evolution in the engineering and construction industry. Based on direct feedback from industries, to support methods and provide solutions to client demands, NEC4 reflects changes in law and market practices by introducing new forms of contracts and by emphasizing on collaborative work. Through this article, you will experience the ride of evolution in the NEC world and what significant features the new NEC has to offer.

    Started From the Bottom; Now, We Are Here

    In 1993, the first NEC contract came into existence, written in simple language with the sole aim of stimulating good management. However, two years later the second edition named NEC engineering and construction contract was published with new forms of contract including professional services contracts and adjudicator's contracts along with some short forms and sub-contracts. The 20th century for NEC contracts was a great experience and a decade of extensive international application. Later in 2005, the NEC contract board launched the NEC3 contract suite. NEC3 flooded the market with term service contract, framework contract and later in 2010 with supply contracts. By the end of 2013, NEC3 was updated to 39 documents along with an enhanced set of guiding principles. It was a great success for 12 long years and was endorsed worldwide by several public and private sector undertakings with a track record of delivering timely projects within stipulated budgets.

    With the new era, new demands, new technology and with everything else that's new, it is the time for a new NEC. NEC4 arrived on 22 June 2017 in plain English and in the present tense which can be effortlessly translated and understood by people not speaking English as a first language. It simultaneously recognizes the necessity for contract administration, risk management, and terminology which will enable a flexible industry to manage, procure and deliver collaborative projects.

    What's new?

    NEC4 is an enhanced version of NEC3 or simply an upgrade with some new features and some new forms of contracts. The two most important contracts that have been added to the suite are NEC4 Design, Build and Operate (DBO) Contract and NEC4 Alliance Contract (the ALC). Targeting clients who seek construction, design, operation, and maintenance from a single contractor, DBO is the most suitable form of the contract offering a wide range of services, such as pre and post construction works which include the operation of the asset to achieve the required performance levels or more straightforward facility management. The DBO contract gives the opportunity to the client to procure a more integrated whole-life delivery system.

    On the other hand, ALC, a multi-party contract having a reliance on integrated risks and reward models, is only suitable for clients who are looking for a single collaborative contract by a fully integrated delivery team for large industrial and complex projects. The contract places its basis on achieving client objectives by working together and sharing risks and benefits. The benefit of using ALC is to form a stronger collaboration between all project participants, bound by a common interest and reducing grounds for disputes.

    Dispute Resolution Mechanism

    A new and advanced system of dispute resolution has been introduced by the NEC4, which provides a "Dispute Avoidance Board (the DAB)." It offers an alternative to two-tiered negotiation initially by senior representation followed by adjudication. DAB is most suitable for international projects and where the United Kingdom's Construction Act does not apply. The new option offered by NEC4 stipulates the appointment of DAB before the commencement of the project where the dispute will be referred to DAB before being transferred to adjudication. The procedure is similar to the FIDIC (Fédération Internationale Des Ingénieurs-Conseils)  contract, where either party under the contract can refer the dispute to DAB, whose decision is binding on both the parties. The DAB, however, under NEC4 will itself take the initiative to resolve potential disputes between the parties. The DAB will practically carry out periodic inspections throughout the life of the project to identifying potential disputes. Fostering a collaborative environment which will prevent the crystallization of disputes, is the intention of the makers which is transparent and outright from the wording of the contract.

    Evolution, Not Revolution

    Leaving behind traditional methods of procurement and limited forms of contract, NEC4's suite of contracts is described as an evolution and not a revolution in the engineering and construction industry. Following new features of next generation, NEC4 identifies and adapts to the constantly changing technology and environment:

           i.          Scope of improvement

    The new NEC4 contract contains a special feature for either party to identify the opportunities and to simultaneously improve the outcome of the project. The project manager has the right to accept, reject or request a quotation before making any decision. The contract can instruct for acceleration in works to complete the project prior to the completion date. NEC4 provides a new option allowing the contractor to alter the scope by reducing the cost of an asset over its whole life.

          ii.          Cost

    Cost for professional services, term service, and supply contracts is now defined in the same way as an engineering construction contract (the ECC), providing a common approach to all contracts for a closer integration of participants and in the supply chain.

         iii.          Harmonious system for resolving dispute

    NEC4 has introduced a mandatory requirement for consensual dispute resolution by appointing a senior representative by each party to negotiate the dispute and reach a temporary solution. The Engineering contract offer two options W1 and W2 where option W1 is for projects where UK's Construction Act does not apply, and option W2 where the act applies. The consensual dispute resolution under NEC4 is compulsory under Option W1 whereas, under option W2 only where UK's Housing, Grants, Construction, and Regeneration Act 1996 apply.

        iv.       Payment Mechanism

    The contractor is obliged under the new contract to file an application for periodic assessments and a contractor failing to submit such an application will not receive any payment. If the the payment is due to the client, the project manager will make the necessary assessment and will certify the payment. This approach used to be applicable to short forms of contracts only.

        v.        Building Information Modelling (BIM)

    This is a new option available under the ECC especially used for supporting the use of BIM. The contractor is required to provide an information execution plan either in the contract or within the client's defined time-period. The plan submitted by the contractor must have the ability to satisfy the BIM requirements set out by the client.

        vi.          Confidentiality Clause

    Most of the NEC4 contracts, except for the short ones, include core clauses restricting the disclosure of confidential project information. This clause meets the client's requirements for avoiding the need for additional amendments at a later stage.

    GCC welcoming NEC4

    In 2007, during the construction boom in the UAE's economy, the leading developer Aldar Properties was the first to adopt NEC3 at Al Raha Beach in Abu Dhabi. The Middle East's first experience of NEC contracts is still considered one of the largest contracts ever acknowledged by the Emirates. Similarly, NEC4 will likely to be appreciated worldwide considering the success of its predecessors. Given the predominance of the FIDIC contract worldwide, it will be challenging for NEC contracts to mark their grounds, especially in GCC countries.

    The NEC suite of contracts, unlike FIDIC, is based on principles of good faith, a well-recognized concept under Shariah Law and which enshrines in most of the Gulf countries' legal systems. Adapting takes time, transferring to NEC contracts would be time-consuming but fruitful. Away from all historical adversities, and undertaking projects and works programmes for large groups, NEC4 provides an opportunity for successful outcomes.

      ]]>
    Sat, 30 Dec 2017 15:00:00 GMT
    <![CDATA[Contracts with Agents under UAE Agency Law]]> Commercial Agency Contracts in the UAE - Behind the Scenes

    Do you represent a popular foreign brand that is planning to make a mark in the UAE? Are you confused about how to establish your international brand in the UAE market?

    Well, you're reading the right piece of work! Every corporate lawyer in UAE should have written about commercial agencies at least once considering the number of foreign companies and brands that rush to the country. But what most lawyers fail to understand is the technicalities of these arrangements that permit foreign enterprises to sell their prized and popular products in the UAE – so here we are. A commercial agency agreement is an agreement which is entered into between the principal (who is the manufacturer of the product inside or outside the country), and the commercial agent (the appointed distributor or agent of the product). In this agreement, the principal appoints the commercial agent as his agent to distribute and sell the products in the agreed territory in return for an agreed commission paid to the commercial agent. Whereas, to regulate the relationship between the principal and the commercial agent, the UAE commercial agency law has witnessed changes in the past few years. That change is reflected in the Commercial Agency Law Number 18 of 1981 as amended by Federal Law Number 14 of 1988, Federal Law number 13 of 2006 and Federal Law Number 2 of 2010 (the Agency Law).

    It should be noted that the Law Number 18 of 1981 (the Old Agency Law) was not fair to the principal as it favored the commercial agent and established severe consequences to the principal in case of termination. No foreign individual or company may be registered as a commercial agent in the UAE, and only Emirati nationals or companies owned by Emirati(s) are allowed to be registered as commercial agents in the UAE. Further, a commercial agent must be registered at the Ministry of Economy in a registrar, and any commercial agency agreement which has been signed and not registered shall not be deemed valid, and the Courts will not hear any claim based on such unregistered agency agreements. Few but effective changes were made to the old agency law which indeed altered the relationship between the principal and the commercial agent and brought stability and fairness to it.

    Termination of a Commercial Agency Agreement

    Article (8) of the Old Agency Law was intolerable to the principal, and it favored the commercial agent as it did not allow any room for termination of the commercial agency agreement. It stipulated that the principal is not permitted to terminate the commercial agency agreement unless there is a valid reason for termination which does not include expiry of its term! Further, the said article prohibited registering another commercial agent in replacement of the previous commercial agent unless the agreement is mutually terminated between the parties or a Court verdict has been issued to cancel the agency agreement. Should the principal wish to terminate the commercial agency agreement, then such decision must be issued by a committee. Also, there has to be a valid reason for the request for termination, and the principal must present substantial evidence that the appointed commercial agent is breaching the commercial agency agreement and that the violation is incurring losses on the products. In the case in which the principal (without the acceptance of the commercial agent) were to terminate the agreement, the principal would be subject to claims of heavy compensation from the commercial agent. However, this article was replaced by the agency law which is now stating that the principal cannot terminate the commercial agency agreement unless there is a valid reason for termination. Also, the commercial agency agreement cannot be registered under a new commercial agent unless the term has expired without renewal between the parties, or if it has been mutual terminated, or if a Court verdict has been issued with its termination.  A commercial agency agreement shall expire upon the expiry of its term unless renewed mutually between the parties within a year before its expiry. This means that the agency agreement shall automatically expire upon expiry of its term unless it has been mutually renewed. This is unlike before, where the principal was forced to continue with the commercial agency agreement unless it was mutually terminated, so unless the agent agreed with the termination. Such change to the Old Agency Law adds more fairness to the relationship between the commercial agent and the principal.

    Demand for Compensation

    Article (9) of the Old Agency Law states that if the principal terminates the agency agreement at an inconvenient time, the commercial agent has the right to demand compensation. In the case where the principal refuses to renew the commercial agency agreement, the commercial agent can demand compensation especially if they can prove that the principal has generated profits from the distribution of the products and non-renewal would make the agent incur losses and damages! In other words, according to the old agency law the principal cannot terminate the agency agreement and cannot even refuse to renew the term of the agreement. Whereas, according to the new agency law, any party may claim compensation due to damages incurred by terminating the commercial agency contract whether such termination is made by the principal or the commercial agent. This shows that the new agency law completely shifted to become in favor of both parties and to protect their interest. This is the reason behind issuing the agency law which is in alignment with agency laws in other countries. The goal is to bring balance in the relationship between the principal and the commercial agent, to allow fair competition in the UAE economy, to assure transparency in dispute resolutions and most importantly to create stability in the market and prevent any increase in cost from the commercial agents. When a dispute arises between the parties, the matters listed above have to be presented to the committee to decide.

    Prohibitions and Violations

    It should be noted that article (23) of the Old Agency Law states that it is prohibited to bring items or products which are registered under the name of a commercial agent in an attempt to trade under a different name to the country. In such situations, the commercial agent can request the competent authority to place an order of attachment on the items in the storages or ports until the Court issues its verdict. As per the new agency law, the same article was amended. It now states that no items or products are allowed to enter the country to be traded under a different name other than that of its registered commercial agent. In the event where such violation occurs then the customs must not release such items or products without the approval of the commercial agent or the Ministry. Upon the request of the commercial agent through the ministry, both competent authorities and customs must order attachment on such products and place them in storages until a Court verdict is issued. Unless the Council of Ministers issued a decision for these items to be released and traded in the country, then the commercial agencies for these products shall be canceled.

    It is clear that this amendment is still protecting the commercial agent and puts the responsibility to protect the agent's interest in the customs and the competent authorities. According to the new agency law, the commercial agent can through the Ministry of Economy request the Customs Department not to allow the entrance of such items and place attachment on them until a Court judgment is issued. However, such items can be released if allowed by the council of ministers and in this event, these items will no longer be registered under the name of the commercial agent. This article shows that the final decision is for the council of ministers to make and it gives a chance for approval by the commercial agent or ministry. This is unlike before, where it was solely up to the commercial agent to determine the fate of the products and the relationship with the principal.

    It is important to note that the agency law does not allow any cheat or violation of the commercial agency contract. Many principles though that by changing the product name or design it will allow them to bring such products to the country to trade under a different name other than the registered commercial agent. Such act is a violation as per article (23) of the commercial agency law and cases were filed by the commercial agents against the principals demanding the attachment on such items through the ministry of economy and compensation. Changing a product name, color or design does not make the product different as this is "an upgrade" which is accepted especially if the product is old and requires certain upgrade and additions. It shall still be deemed as the same product as mentioned in the commercial agency agreement. Cases of such violation will be referred to an expert who will check the product and confirm to the court whether such goods are the same product mention in the agency agreement or not.

    Be sure to always consult one of the law firms in Dubai or UAE that specializes in agency law before importing your goods or trying to establish your brand in the UAE. It is pertinent for foreign investors to understand the different risks that they may face and options that are available to them prior to distributing their foreign products in the UAE mainland.

    ]]>
    Sat, 23 Dec 2017 13:25:00 GMT
    <![CDATA[Misusing Market Power]]> MISUSING MARKET POWER - WHO CAN TELL?

     

    "Europe has achieved peaceful political union for the first time ever: They're using this unprecedented state of affairs to harmonize the curvature of bananas."

     -         Charles Stross, Accelerando

    If you're managing a business in a member state of the European Union and are looking to pursue this activity in another member state, you might be surprised as to how similar the regulations governing your business activity are across state boundaries. In recent years, many situations concerning the trade of goods, workers, services, capital, taxation, agriculture and transport have been investigated by the European Commission under competition laws. Although, it is argued that the European Union has been adopting trivial policies for instance by regulating the curvature of bananas, many jurists believe that the harmonization of laws in European Union member states is part of a larger project of establishing common standards throughout the Union, so as to ensure the proper functioning of its single market.

    The way in which a business is conducted can have an adverse impact on trade dynamics in the European Union. European Union regulatory bodies have strived to regulate the movement of goods, services, and establishment to protect the principles of free passage on which the intergovernmental organization is built. In this vein, Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits anti-competitive agreements and Article 102 of the TFEU prevents the abuse by undertakings of a dominant position, within the internal market, that may affect trade between member states. What procedure must be followed to establish that a company is in breach of Article 102 of the TFEU?

    This article will be split into three parts, each dedicated to an analysis of one of the terms in italics that make up Article 102 of the TFEU.

    When Does a Company have Dominant Position in the Market?

    The case of United Brands v Commission[i] defines dominance as "a position of economic strength (market power), which allows the undertaking to prevent effective competition in the relevant market." The undertaking's capacity to prevent effective competition can be determined by its ability to conduct operations independently of both customers and consumers. If the undertaking has a market share so significant that it can significantly alter its prices and engage in other risky business practices without thinking twice about the effect this would have on its consumers and competitors, then it is more likely to be in a dominant position. The undertaking's market share must be ascertained to correctly determine its position, namely by considering the relevant product market (RPM), and the relevant geographic market (RGM).

    The European Commission Notice defines the RPM as a market in which products and services are considered to be interchangeable or substitutable by the consumer; this is evaluated through the application of two economic tests: demand and supply substitutability. As per United Brands v Commission, if the increase in the price of an undertaking's product would cause a customer to switch to buying another product then we are likely to be dealing with a position that is not dominant (test of demand substitutability). If competitors can start producing the same product as the undertaking without incurring significant costs, then the undertaking's position is likely not to be dominant (test of supply substitutability).

    As for the RGM, the European Commission Notice defines it as a territory of the common market in which competition conditions are similar and homogenous for all undertakings. In order to determine whether we are dealing with an RGM, the case of Hilti AG v Commission of the European Communities[ii] has indicated that we must start by assuming that the RGM is the whole of the European Union, we must then work inwards if any of the following factors apply: transportation costs, product characteristics, shipment patterns, and location of plants. Although the RGM must constitute a substantial economic part of the standard market, it may be minimal geographically (Sea Containers/Stena Sealink[iii].

    The case of Hoffman-La Roche v Commission[iv] has established that a large market share can in itself be evidence of a dominant position, although this will only be the case in rare circumstances. Shares of 50% or more in a market raise a rebuttable presumption of dominance, as stated in AKZO Chemie v Commission[v]. Shares below 35% will rarely be dominant. Besides, factors other than market shares can help us determine whether an undertaking is dominant. There is more likely to be dominance if barriers to entry exist (such as high start-up costs and intellectual property rights), if the undertaking has been in a strong position for a long period (United Brands) and if the undertaking has significant financial and technical resources, which may allow it to overpower competitors. There is less likely to be dominance if the customers enjoy buyer power. Moreover, in Italian Flat Glass[vi], the Court of First Instance confirmed that several companies could hold a dominant position together if several links unite them.

    When has a Company Abused their Dominant Position?

    Although it is necessary to establish dominance to prove that an undertaking has breached Article 102 of the TFEU, dominance on its own is not sufficient to do so. Evidence that the company has abused its dominant position must be provided. Abuse is said to have happened when a dominant firm in a market engages in conduct that is intended to exploit its dominant position or where its presence has weakened the degree of competition in a particular market (Hoffman-La Roche v Commission). According to article 102 of the TFEU, there are two main categories of abusive practices: there are exploitative practices which exploit people dependent on the decisions of an undertaking and there are anti-competitive practices which exclude competitors from offering their goods or services in a specific market. Practices such as excessively increasing or decreasing the price of a product (United Brands v Commission; AKZO Chemie v Commission), refusal to supply goods to a business that has helped a contending brand (United Brands v Commission; Hugin), changing the price of a same product based on who the purchaser is (United Brands v Commission), requiring the purchaser to buy a second product when buying a first (this is called tying and was prohibited in Hilti AG v Commission of the European Communities), and abusive discount policies (Hoffman-La Roche v Commission) constitute abuse of a dominant position.

    Might the Abuse of the Dominant Position Affect Trade between the Member States?

    In Commercial Solvents v Commission, abuse was deemed to affect trade between member states whenever "the conduct brought about an alteration in the structure of competition in the common market." Article 102 of the TFEU specifies that abuse need only be capable of affecting trade between member states for the undertaking to breach the provisions of the section; the deal does not need to have been affected. In the case where the abuse of a dominant position has changed trade between member states, undertakings cannot qualify for exemptions, and the European Commission may impose a fine on the company. Injured parties will not obtain any compensation for the harm that has been caused to them, and the Commission for European Union activities will retain the money from the fine. The undertaking does have a right to appeal the decision to impose a fine on it to the General Court, and it may appeal against the new ruling in turn to the European Court of Justice on the point of law. Given that Article 102 of the TFEU has both vertical and horizontal direct effect (BRT v Sabam), a claim can be brought in the national courts of the member state. In this case, penalties for undertakings can be damages to compensate the claimant, a mandatory injunction to stop the undertaking's abusive conduct or both. On the whole, the European Union has adopted measures that regulate the competitive behavior of companies in its jurisdiction, with the aim of establishing a form of economic harmony throughout its internal market.

    This article was submitted by Jad Doudar.

    [i] (27/76) [1978] ECR 207

    [ii] (30/89) [1991] II-1439

    [iii] (94/19) [1994] 4 CMLR 513, OJ 1994 L15/8])

    [iv] (85/76) [1979] ECR 461

    [v]  (C-62/86) [1991] ECR I-3359

    [vi]  (T-68/89) [1992] 5 CMLR

     

    ]]>
    Wed, 20 Dec 2017 11:59:00 GMT
    <![CDATA[Arbitration Award Vs Public Order]]> Arbitration Award Vs Public Order

    "Public order is a fragile thing, and if you don't fix the first broken window soon all windows will be broken"

            James O Wilson

     Many of us flinch at the thought of court proceedings, given its costly and lengthy nature. But luckily for us, alternative methods of settling disputes exist such as arbitration. Arbitration in the modern world has become the most favorable option for many investors and is today welcomed by developed countries that are eager to attract international investments in their region. It is not difficult to see why arbitration is the most appropriate resolution when it comes to handling disputes between parties and their delicate issues. When you as a litigant, choose arbitration, you can rest assured that your case will be handled diligently by an expert who understands the technicality of the subject. This is in contrast to giving the case to a judge and crossing fingers that he will hand it to the right expert! Not to mention that arbitration proceedings are faster than court procedures and that one can rely on arbitration especially when the deal is between parties from different territories and jurisdictions and they do not trust litigation in any of each country.

    Domestic Matters

    Each side can appoint the arbitrator(s) or the selected arbitration center. When the appointed arbitrator(s) receives the claims and responses of the parties, he issues an award, which according to UAE law is binding and final. It is true that the UAE Federal Law Number (11) of 1992 concerning Civil Procedures (the Civil Procedures Code) has given the power to arbitration awards to be final, binding and ready for execution in courts. This means that no party after receiving the Arbitration award can seek an appeal as it cannot be modified, which leaves the defeated party with one card left which is the annulment of the award. In contrast, the civil procedures code has given an exception in certain cases mentioned in article 216 where the court can annul an arbitration award. One of the reasons why the courts decided to annul arbitration awards was based on the violation of public order. This was clearly mentioned in the civil procedures code which states that "the litigant parties may request the nullity of the arbitrators' decision when the court examines its authentication, and that shall be in the following circumstances: If a nullity in the decision or a nullity in the procedures which has affected the decision has occurred". As per this article and according to the courts, violation of public policy leads to the nullity of the judgment.

    What's Said is Said

    Unlike the UAE, the French took a further step, they did not want to give arbitrators' awards power over court judgments and allowed arbitration awards to be appealed, although only for internal arbitration awards. As for international arbitration awards, they are final and binding according to the French law. 

    Moreover, as per Article 203 of the UAE Civil Procedure Code which states that "Arbitration is not permitted for matters which cannot be settled" and a matter which cannot be settled becomes a matter of public policy. This means that if an Arbitration award was found to be in violation of public order, then it will be annulled. One might think that a violation of federal policy is a rare and non-applicable case; however, this subject matter has appeared in courts many times, especially in real-estate and constructions cases, and has raised eyebrows as it seems that it can apply to anybody!

    It is essential to understand what public policy is according to the UAE laws. As defined, Public Policy is a group of fundamental interests which society stands for be it political, economic or social and it is found to protect the interests of the public and must be respected and followed by all members of the society even when it is unfavorable to some. The term public policy is broad and could differ from one community to another and what is considered a violation of public policy in the UAE could be deemed acceptable outside UAE. One should also bear in mind that any agreement or award which is in violation of public policy shall be deemed null and void by the higher courts of the UAE. Federal Law Number (5) of 1985 concerning Civil Transactions defined the term public policy in Article (3) by stating that "Shall be considered of public policy, provisions relating to personal status, such as marriage, inheritance, lineage, provisions relating to systems of governance, freedom of trade, circulation of wealth, private ownership and other rules and foundations on which the society is based, provided that these provisions are not inconsistent with the imperative provisions and fundamental principles of the Islamic Sharia" . Given this, one might wonder how an arbitration award could violate public policy?

    In a compelling real estate case raised before the Dubai Court of Cassation under the number 190/2011, the Court decided to annul an arbitration award. The award was rescinded since the contract signed between the purchaser and the developer for the sale of an off-plan unit was not registered in the Interim Real Estate Register "the Register" thus making it a contract in violation of public policy.  The purchaser sought relief to the arbitrator to annul two purchase contracts entered into with the developer because the purchase contracts were not registered in the Register as required by Article 3 of Federal Law Number 13 of 2008 on the Interim Real Estate Register in Dubai which states as follows:

    'The Interim Real Estate Register is used to record all disposals of Real Estate Units off plan. Any sale or other disposition that transfers or restricts title or any ancillary rights shall be void if not recorded on that Register'.

    In its judgment, the court stated that since the arbitrator who handled this case knew during the proceedings that the contracts were not registered, the Arbitrator was aware of the violation of public order and did not have jurisdiction over the case. Accordingly, this made his arbitration award null and void. The Dubai Court of Cassation also took a similar position in case number 14 of 2012. It follows that investors and developers must be aware that off-plan units which are not registered in the real estate registry will eliminate the jurisdiction of arbitration due to the lack of registration of the unit and will become a matter of public policy which will be within the sole jurisdiction of the courts. Any agreement relieving the courts from their jurisdiction in such cases will also be annulled.

    This shows how strong public policy is against an arbitrator's final awards. It is clear that the UAE laws have set the position that nothing will supersede the UAE public policy and that no arbitration award violating public policy shall be executed whether such award was issued inside or outside the UAE. Also, a judge can look into the matter of public policy and annul the arbitration award without restrictions to litigant's request. Such annulment cannot be rectified, canceled, and a litigant can claim annulment under public policy even at the cassation stage.

    What Should the Arbitrator Do in Event of Violation of Public Policy?

    Generally, in such matters, the arbitrator states that he does not have jurisdiction over the matter. Nevertheless, some experts believe that the arbitrator should dismiss the case and others think that the arbitrator should issue his award for the annulment of the contract. Regardless of arbitrators' opinions, investors should be careful when filing their case due to non-registration of their units by developers. One must first check with a real-estate lawyer to understand the correct process of filing a real estate case to assure no time and effort are wasted. The bottom line is that in the event where the developer sells you a non-registered unit you go to the court to annul the arbitration jurisdiction in your contract and to demand the termination of the signed agreement. Usually, developers in such cases will not say anything during the process of arbitration until you receive the arbitration award in your favor and go to the Court. Once the Court executes the award, the developer will have the right to request the annulment based on the violation of public policy. Therefore, it is recommended to go to Court directly in such cases.

    Eventually, there has to be a balance between protecting the public order, which preserves the values of the community, and arbitration which supports investors from around the globe to invest in the country, and which is a gate to international investments and economic development in the region. The UAE has indeed taken a significant step in terms of creating platforms for arbitration through global arbitration centers. However, we need to set clear standards on what is to be deemed as part of the public order rather than just giving examples in the law and leaving it up to the Court to decide, and most importantly the public must be educated on what is considered a public policy and a violation.

    ]]>
    Sat, 16 Dec 2017 11:29:00 GMT
    <![CDATA[Copyrighting Cakes]]> Copyrighting Cakes

    Cake! Just the word makes our mouths water. Which one are you craving? Chocolate? Victorian sponge cake? Red velvet? Devil's food cake? Or maybe a slice of cheesecake? There are so many options that all sound wonderful. Be it a birthday, a wedding, or any other special occasion, having some cake makes it better. It is a representation of happiness and comfort and can be said to make events more enjoyable. Has it, however, ever occurred to you that a piece of cake you had at a birthday party was copyright infringed?

    Not many people are aware of the Intellectual Property (IP) laws applicable to cake designs. There are two main branches of Intellectual Property, namely copyright and industrial property. While industrial property deals with patents and trademarks, copyright law deals with artistic and literary creations or inventions. It gives ownership and rights to the author, provided that the creation is original and in a tangible form. Ideas that have not yet been written or drawn out in any physical form do not come under copyright protection. Copyright law applied to cakes has become the subject of heated debate in the cake and baking industry, with both sides presenting valid arguments and reasons.

    Can Designs over Cake be Copyright Protected?

    It's not wrong to say that cake designs nowadays are a work of art. The Baker takes time and energy and uses his skills to the best of his abilities to design a cake. One can say bakers have now become cake designer artists in a sense. But this also means that the specific cake designs the artist creates and puts in a physical form is vulnerable to being copyright infringed. Anything from a cake mold, to the shapes and decorations, to the frosting design and even to the method used to create a particular design can be copied.

    There are several ways in which IP laws can protect businesses such as bakeries or even large corporations. Trademark law is used to protect any marks associated with the company or its products. For the protection of confidential business information, the trade secret law is used. Patent law protects new and original inventions and creations. And lastly, copyright law is used when one wants to protect expressive art including cake designs.

    There are many reasons for which copyright law can protect cake designs. Cake designs are a work of authorship. They are the tangible and original works of the author and possess the degree of creativity required by a copyright law, clearly showing signs of creativity and originality. As the law on cake designs is unclear, many are not sure if recipes would come under the protection of copyright law. The mere listing of ingredients is not protected by copyright as it cannot be considered to be original. Cake designs fit under the graphical, pictorial and sculptural works category of copyright law. Although copyright laws require no form of fixation, some argue that because a cake is usually consumed after the presentation, the design is not fixed and hence should not be protected by copyright. Today, with creativity flowing in every direction of every sector, cakes are considered more as a work of art rather than a chore of baking. The taste does matter – but it is not all that matters now. The weight, the look, the design, the color, the shape – basically everything. The generic marble white cake on weddings to the symbolic cake in the shape and color of a football field – increases the trend and more possibly, the demand of designer bakers.

    Critics

    Critics have disputed that using IP protection for cake designs is unnecessary given that imitation is a common practice in chef culture and follows the idea that "Imitation is the best form of flattery." Instead, to prevent others from benefitting from their hard work, they should be encouraged to attach the copyright symbol to picture of their cakes and designs on display which may deter consumers from printing the designs and lead other chefs not to copy. Half of the trade would vanish for bakers and cake businesses if they did not offer cakes that represented children's favorite cartoon characters.

    Some argue that the law concerning cake designs is unclear and ambiguous. Cake designs can be protected under IP by four different kinds of laws: copyright, trademark, trade secret law and patents. Trade secret law applies to cake designs only when it is private and not disclosed to the public. Even though the design may look simple, it can have non-obvious concepts that the chef doesn't want to make available to the public. The baker should have the right to protect the design under trade secret law until disclosed.

    Design patents are a form of patent law that protects cake designs. However, for an invention to be protected under patent law, it has to be an article of manufacture. The issue is debatable as many don't consider cake design to be articles of manufacture and hence are not covered under the law. Just as books, music or art cannot be patented as they are only the author's words applied to paper and not articles of manufacture, cake designers can claim for creative expression, but there is no article of manufacture to be claimed. While IP protection by patent law on cake designs is debatable, one thing is certain, bakers work hard on their creations, and copyright laws provide protection to creative expressions of ideas, which makes them better suited for these types of works.

    But not just generic cakes; cup-cakes too! In the United States, US Patent Number D616,260 filed on 31 July 2009 is a design patent granted to a cupcake mold – but, please don't be surprised. There are a number of cupcake molds that have been granted intellectual property protection. Moreover, in the United States, copyrighting in the baking industry has been extended to concern the animated characters that appear on cakes and cookies. In theory, using designs of animated characters on pastries without the owner's permission is not authorized given that it would impede on their copyrights, their trademark rights, and their personality rights. In practice, most people wouldn't think twice about getting a "Mikey Mouse" design on their children's birthday cakes. But if you want to stay on the safe side, it's better to avoid the images of any cartoons without obtaining the authorization of their owner. Cake designers can be guilty of appropriating another person or entity's work. The Copyright Act prohibits the production of "derivative works", that is, works that take the copyrighted work as a starting point and change an aspect of it, but where the work can clearly be confused with the owner's copyrighted work. For instance, if your cake has a picture of Mickey Mouse with shoes that are green instead of being yellow, you would still be held accountable for copying that picture on a birthday cake.

    Conclusion

    The famous proverb 'ignorance is bliss' does not apply in court when a baker is accused of copyright infringement. However, copyright laws on cake designs only apply when the cake is intended to be sold for profit or an advertisement, baking cakes at home for friends and family does not count as an infringement of the law. Cake design is an expression of a chef's creative idea and is, therefore, protectable under copyright law. Copyright law promotes originality and creativity, both concepts found in cake designing.

    ]]>
    Mon, 11 Dec 2017 15:54:00 GMT
    <![CDATA[Does Buy Now Really Mean Deliver Now?]]> Does BUY NOW = DELIVER NOW?

    When I opened my Microsoft Word application on my personal computer this morning to write this article, it read that – 'Your subscription as expired; choose one of the following options to reactivate.' This confused me for two reasons: (i) I was under the perception that I had 'purchased' this product a year ago and (ii) one of the options in the reactivation category today was termed 'Buy' – the exact button that I had clicked last year. This concept of makes me wonder about my right over all my possessions – would I have to 'Buy' all my possessions every year to retain them? I suggest you read this theatrical article so that you do not face the same dilemma.

    Before going into detail, I request your attention to a simple question to help you frame a perception about the topic before reading this article: do you reserve the right to resell a movie or a song that you purchased from an online store? Or would you be able to include them in your will so that your kids can enjoy them in case anything happened to you? Or is that an irrational idea? Well, if you think that it an irrational idea, I suggest you grab your gloves and speak it out with Bruce Willis. On a sunny morning of 2 September 2012, the Sunday Times reported that the Die-Hard hero wanted to give his digital playlist to his daughters if anything ought to happen to him.[i] The story of John McClain being said, I begin to write about this non-theatrical legal episode with the hope that you find the right answers to the above question within the next half an hour.

    Did you know that an approximate seventy-nine (79%) of the customers in the United States shop (or prefer shopping) online? That is more than three times the average number of online shoppers in 2000.[ii]  Today, the internet provides consumers with the ability to shop from the comfort of their homes. But then 'laziness' is not the primary reason for the upsurge in the online shopping trend.

    Well, then what has led to the rapid increase in the proportion of consumers using e-commerce to purchase products that are available in their locality? To understand this, I am forced to draw your attention to the evolution of the globalization and industrialization in the past century. But to keep it simple and illustrative, I have divided the different stages of global commerce into (what I call) the global tri-state. In the first phase of the global tri-state, consumers had restricted means since they did not have direct or cost-effective access to commercial markets outside their geographic and political borders. Then came, globalization (and therefore, the second stage of the global tri-state). This furthered the reach of the customers and provided them with a broader range of choices while they were purchasing a product: for instance, they now had the option of buying a product that was locally produced; or imported from another part of the world. In this stage, individuals had access to the products that a country would export to another country. However, this phase was restricted due to financial, regulatory and other forms of trade-barriers that were prevalent in different jurisdictions. Some economists considered this stage to the highest extent to which globalization could affect both, the global and domestic trade and commerce. However, the internet proved them wrong. The final stage of the worldwide tri-stage ends with (what we call today) online shopping and e-commerce. In this stage, consumers sitting on a farm in a rural part of the Indian sub-continent could order the latest gadget from a multi-national company in the other corner of the world – with the simple click of a button – that says, 'BUY NOW.' Keeping this in mind, our Lawyers in Dubai recognized the need to educate the consumers of their rights while clicking this button.

    Now, getting back to our initial question, what is the extent of which you own a subscription product that you have purchased online? The digital world has disrupted the pivotal reason for shopping – ownership, and possession for life. Typical end-user license agreements – the page that most of us do not notice due to our lack of patience – restricts users to transfer their online products to another party and to bequeath them through a will. This means that the purchaser cannot give away goods as gifts and certainly cannot resell them negating the basic idea of ownership. However, it is not the same with the physical products that are copyrighted. For instance, the physical copies of your Harry Potter movie collection or the books of Dan Brown's fiction series do not fall under this category – all thanks to the first-sale doctrine (of copyright) that permits the owner to lend, sell or give away your fiction series to a third person. In contrast, if the same is purchased on Kindle e-book from Amazon or on iBook from Apple store, you are confined to resell or transfer any of that file to someone else since the owner falls a licensee, not an owner. This theory can be substantiated the next time you 'purchase' (not precisely purchase; considering my explanation above) a song online. The standard end user agreement would state that the content that you pay for is only licensed to you and not sold by the website or the owner of that particular piece.[iii]

    Although this theory existed for a long time, it was established in the case of Capitol Records, LLC v. ReDigi Inc.[iv], wherein the court held that first sale doctrine does not apply to digital music files purchased online and further narrowed the scope of the doctrine by prohibiting online purchasers to resell, transfer or lend any digital file to others.

    The Legalities Surrounding Licensed Products

    In simple terms, an owner is a person who owns a physical good having the right under first sale doctrine to resell, lend or transfer. Whereas, licensees, who have fewer rights as compared to the owner often consider themselves as an owner because of the misleading 'Buy Now' option that does not specifically indicate the transaction as a license. The digital world today is completely different from what it was two decades ago, and we strongly believe that today's technology can facilitate digital transfers while preserving the right of online copyright holders or digital owners.

    The primary differentiation between online copies of digital goods and physical copies have been mentioned under end-note (iii) of this article. Moving on, suppose you transfer a song from your song to your colleague's mobile. This does not remove the song from your phone since the transfer merely creates a copy of the product onto another device. Whereas, when you give your copy of the Dan Brown series to another person, your copy of the products ceases to exist – because the only copy of the book is now in possession of your mate. This is the second reason for this differentiation – title. The digital copy of a product purchased online also cannot be transferred since this transfer would create another copy of the product you have paid towards. And the person to whom this product has been transferred to does not purchase this product and merely receives a copy of the same. Further, it is the human psychology to expect that the end user agreement page contains more clauses that would ultimately favor them – simply because they are paying for a product. Although, they are not aware whether they are paying to purchase the product or simply rent it. As the digital world's growth is at pace, there is a concurrent rise in the methods allowing the user to acquire digital file specifically music and currently the most popular among them are subscription streaming and vinyl records. The adoption of any one technique highlights the choice of the consumer, some prefer economical temporary access, and others prefer permanent access irrespective of the cost. Access to digital media is more conditional as the seller reserves the right to affect the transaction post-purchase.

    This leads us to our next question on whether there any restriction of using a digital file on more than one device? Most of us believe that we can use the digital media that we pay for on any and more than one device and we are even right to an extent. But what are those other cases, which restricts us to use our digital file on one specific device, let's find out. Some retailers allow a wide range of devices, for example, Amazon allows its users to choose their device which ranges from Windows to Apple to Android; on the contrary, Apple has a much stricter approach that restricts Apple iBooks readers to read only on Apple devices and similarly for music and movies. Ergo, the compatibility of devices depends upon their choice of the product rather than their legal rights.

    As earlier discussed, there is no scope of bequeathing your online purchases or digital file to our next-gen since you have ultimately paid for a license to use the product and have not purchased the copyright of the product. However, few retailers or digital copyright holders appreciate the idea of lending their products in their restricted sense. For instance, Kindle or NOOK stores allow the users to lend their e-book for one time for fourteen (14) days. Similarly, Apple has its traditional way of sharing digital files that can be shared up to 6 accounts having same credit card information. The concept of lending or transferring goods to another person gives us the right to exploit our digital files or products in the way we want. However, the preference is strongly dependent on consumer's frequency of shopping online since these rights directly influence the price of digital goods and a regular user will be willing to pay more for additional rights.

    In the United States, the Federal Trade Commission is the main regulator of trade and commerce and has the duty to prevent the use of unfair trade practices in the country. And the deceptive 'Buy Now' issue falls under the ambit of the Policy Statement of Deception by the FTC which has laid down the following factors in a deception case:

  • representation, omission or act to mislead a consumer;
  • Interpretation of (i) by a reasonable consumer could mislead him or her;
  • There should be a subject matter or 'material' that is misrepresented or omitted.
  • In the decision and order of Apple Incorporation (Number C-4444 – FTC 25 March, 2014), the FTC concluded that the BUY NOW option and its substitutes[i] fall under the term 'representations'. Plaintiffs have to prove the following to establish a case:

  • The unfair consumer injury should be substantial;
  • It does not outweigh countervailing benefits to competition; and
  • It should be reasonably unavoidable.
  • This test has been employed by the FTC over time to determine whether the consumer injury is unfair or not.

    On the other hand, the European Union has accepted the idea of digital first sale doctrine. In the same year of the Bruce Willis episode, the Court of Justice of the European Union (ECJ) in Usedsoft Gmbh v. Oracle International Corp.[ii] stated that the applicability of first sale doctrine is not only over the physical sale of goods but on used copies of software purchased online and sold in the market. It is therefore clear that the ECJ considered that the term 'sale' covers a wide ambit since it confers ownership rights over copyrighted online products also. Although, the ECJ has not distinctly ruled on the applicability of the digital first sale doctrine on e-books.

    Consumers should be well-aware of their rights while purchasing a copyrighted product online. Many-a-times, the use of the Buy Now button is used by online dealers to mislead the consumers to ultimately believing that they own the product. But the above studies show the contrary. Consumers are also advised to review and understand the terms and conditions while purchasing products online.


    [i] Such as the 'FREE' option

    [ii]{C} Case C-128/11,2012 E.C.R, I-1-0000

    [i] Its iHard as Willis Fights Apple, SUNDAY TIMES (Sept. 2, 2012).

    [ii] TechCrunch | 2016

    [iii] The first reason why the purchaser of the online product is ultimately a licensee and not an owner.

    [iv] 934 F. supp. 2d640, 655

     

    ]]>
    Sat, 09 Dec 2017 11:59:00 GMT
    <![CDATA[Contradictory Statements : Understanding the Legal Implications]]> Contradictory Statements

    In a bundle of truths, a lie will always be found within.

    Pinocchio told lies, and his nose grew. Unfortunately, liars in the courtroom may only be caught out by the inconsistent statements they make throughout a case. The challenge is for the jury and prosecution to find out the truth, the whole truth and nothing but the truth. The prospect of success in a court case is dependent upon the judge and jury believing the story put forward by the prosecution, beyond a reasonable doubt. To reach this decision, the jury must not doubt that the accused is guilty or not guilty. A combination of the defendant's explanation of events along with any witnesses available to testify is then put forward in front of the court for them to reach a conclusive decision as to whether the defendant is accountable.

    Legality of Contradictory Statements

    In legal terms, a contradictory statement is an incompatibility and clear opposition to two ideas which are the subject of the same proposition. Whether it be the defendant on the stand accused of a crime, providing insufficient information to what has been previously provided or if one or more witnesses reenact the chain of events that occurred, but do not portray a mirrored story, contradictory statements lead to much confusion for the judge and jury.  When a statement made has been contradicted by another in court, the jury is led to believe that all accounts made from that point onwards are false. Any evidence that would seem credible is now unreliable. A contradictory statement made in court signifies that the person making such statement has been untruthful at some point during their account.

    It is a public perception that perjury is a hard crime to prove. In most US jurisdictions, the two-witness rule is used to discover whether the accused has committed such a crime. Under the two-witness rule, it must be proven that the defendant's statements made would be contradicted by at least two witnesses. As above mentioned, the difficulty of proving a defendant has committed perjury amounts from the fact that at common law the accused cannot be convicted of perjury based only on a contradictory statement made unless it is then established by the prosecution that either of the statements made which contradict one another is false. With evidence and witness statements, once the above is proven, a successful prosecution of perjury can be brought against a person.

    The laws in place among global jurisdictions highlight the importance of witnesses, and the accused told the truth under oath in court. It is understandable for a witness that attending court is a daunting experience. The directions given by the court is to make sure that the process for a witness is as comfortable and safe as possible.

    Within court proceedings, it has not been unknown for witnesses to contradict what was originally recorded in their witness statements. As time has elapsed since the statement was written, witnesses have had the opportunity to recollect on the events they saw and question whether what they noted shown the accurate picture. The process of a witness providing the court with their account of the facts first starts with the witness documenting and signing the statement of truth to confirm what they have recorded are to their knowledge the true, accurate events that took place. If a witness is called to the stand and contradicts a statement previously made by themselves or another witness with a similar account, the testimony given is weak, leading the jury to discredit all that they have heard up to this point which may have damaging effects for the defense or prosecution.

    A contradictory statement can result in the accused being convicted of a crime they may not have committed. In the case of E v Joyce, several witnesses had identified the defendant through detailed statements and confirmed they had the correct identity of the person they saw. At the trial, the witnesses stated that they were now not certain whether their identification was correct. The trial judge admitted the earlier statements as evidence of the first identification being the accused. With this, the jury convicted the accused.

    Witness Testimony

    The strength of a witness's statement is paramount to win the case. A contradictory comment, regardless of the effect it may have on proving the defendant's guilt, will be noted.  The single purpose of cross-examination is not only to get the truth from the accused or witnesses but to decipher statements that align, against those that appear suspicious and do not match up with other evidence available to that case.  It cannot be concluded that in every instance of a contradictory statement that the witnesses or the accused is lying. Taking into consideration the complexity of each case, certain questions put forward by the defense and prosecution during cross-examination will be heard or construed differently by the person on the stand under oath.

    A witness is at a greater disadvantage to the lawyer as they approach the stand. The witnesses are not aware of documents they cross-examiner may have which directly impacts on the statement they presented. There is no preparation given to a witness. A statement is made and signed and read out again by the witness in front of the court. It is necessary that witnesses are given recognition for their ability to show their account, regardless of whether they contradict a certain event happening. In these situations, however, the opposing side take it upon themselves to highlight any contradictory statement made regardless of the sincerity behind it, to induce the jury to see that a witness is lying, therefore, their story so far is imperfect.

    The defendant enters the court followed by the misconception by the jury that they are guilty of the crime before they are given the opportunity to defend themselves. Straight contradiction implies to the court that when the accused speaks falsely about a certain point, they are speaking falsely about all points they have raised. Implications arise here as it could be perceived by the jury that the accused is self-incriminating themselves by contradicting earlier statements. Irrespective of whether the story matches other evidence presented and highlights to the jury that the defendant is innocent, a contradictory statement prompts negative reviews from the jury about that person's ability to tell the truth, the whole truth and nothing but the truth.

    Self-contradiction can be brought out by the skills used in cross-examination or from the accused's statements previously made. Statements and evidence used against the defendant create panic and can result in them then self-contradicting points they have made to explain or justify why whatever has been presented does match. As abovementioned throughout the article, contradictory statements signify to the jury who is possibly telling the truth and who is lying allowing them to reach a valid conclusion based on what they have heard on whether the accused is guilty or not.

    It seems that a contradictory statement can easily be made in court and will damage the credibility of the information put forward by the accused or the witnesses. Unfortunately, the jury does not take these statements lightly which may result in serious impacts to the case. As abovementioned in the legal definition of a contradictory statement, the information provided by the defendant or witnesses must be inconsistent with previous. The wording of inconsistent rather the use of different provides uncertainty as a mere mistake made of such an exact time something happened or the exact coloring of clothing the defendant was wearing may only be a slightly variable to what evidence or other statements display.

    ]]>
    Thu, 07 Dec 2017 18:37:00 GMT
    <![CDATA[Aviation Country Guide: UAE - Q & A]]> Part 1 - General

    1.1  Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction.

    The UAE's principal legislation governing aviation law is as follows:

    • Federal Law Number 20 of 1991 regarding the civil aviation (the Civil Aviation Law);
    • Federal Law Number 4 of 1996 concerning the Aviation Authority (the Aviation Authority Law); 
    • Federal Law Number 20 of 2001 concerning the amendments in the Aviation Authority Law; and
    • Federal Law Number 8 of 1983 issuing Commercial Transaction Law, providing rules for Air Carriage.  
    • Federal Act Number 22 of 1972 concerning the participation by the UAE in the project for the establishment of an Arab Testing Unit for Air Navigation Equipment.
    Regulations include:
    • Civil Aviation Regulation – Licensing Regulation of July 2011;
    • Civil Aviation Regulation – General Regulation of March 2013;
    • Civil Aviation Regulation – Operations Regulation of July 2011;
    • Civil Aviation Regulation – Airworthiness Regulations of July 2011;
    • Civil Aviation Regulation – Aviation Safety Regulations of February 2011;
    • Civil Aviation Regulations – Aviation Security Regulations of May 2016;
    • Civil Aviation Regulation – Air Navigation Regulations of September 2011;
    • Civil Aviation Regulation – Aerodromes Emergency Services of February 2017;
    • Civil Aviation Regulation – Safety Management System of June 2016;
    • Civil Aviation Regulation – Concerning Unmanned Aircraft System (CAR UAS) in February 2017;
    • Civil Aviation Regulation – Transport of Dangerous Goods by Air of May 2015;
    • Civil Aviation Regulation – Foreign Operators Regulation of October 2016; and
    • Civil Aviation Regulation – Light Sports Aircraft of March 2013.
    The Civil Aviation Law applies to all aircraft registered in the UAE, air traffic control, communications and civil airports, whereas the Aviation Authority Law has established the General Civil Aviation Authority (the GCAA). The GCAA is the regulatory authority which is designated to ensure proper compliance with the Civil Aviation Law in the UAE, whilst emphasizing the concept of security and safety. Having exclusive authority over the aviation industry in the UAE, the GCAA is responsible for en-route air navigation services and all aspects of air safety.   Subsequently, each Emirate has its own aviation authority which regulates all matters related to aviation in its respective Emirate, such as the Dubai Aviation Authority established under Law Number 21 of 2007, Department of Abu Dhabi Civil Aviation, Department of Civil Aviation of Ras Al Khaimah, Sharjah Department of Civil Aviation, Department of Civil Aviation Fujairah.  

    1.2  What are the steps which air carriers need to take in order to obtain an operating license?

    There are several steps involved in obtaining an operating license for air carriers which are as follows:   Pre-application Stage: Prior to submitting an online application, the applicant is required to meet with the GCAA and should discuss his initial plan during his pre-application meetings. During this stage, the applicant submits a pre-application statement of intent and the documents required by the GCAA. On the basis of information provided by the applicant, the GCAA will provide the formal application to be submitted by the applicant.   Formal Application Stage: This stage commences when the applicant submits a formal application for an Air Operator Certificate (the AOC) along with several documents and manuals describing its operations as directed by the GCAA. The application should begin at least 90 days prior to the actual revenue operations.   Document Evaluation Stage: This stage involves a detailed evaluation of documents and manuals for their content and compliance. During this stage, the GCAA will ascertain the technical fitness of the operations proposed by the operator. The documents and manuals submitted for consideration should not be at least 60 days prior to the commencement of proposed operations in order to avoid undue delay.   Inspection Stage: During this stage, the GCAA will inspect whether or not the physical facilities and equipment proposed by the applicant are suitable for the type and size of the operations. The applicant must demonstrate his ability to comply with all requirements and operating practices prior to the beginning of actual revenue operations.   Certification Stage: The stage begins when the GCAA is satisfied from the applications and proposed operations of the applicant and takes a necessary step to issue AOC. However, if the GCAA is unsatisfied during the Inspection Stage, the Certification Stage will not take place until the safety and security requirements are complied with.  

    1.3   What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?

    The principal piece of legislation which governs air safety is the Civil Aviation Law; however, there is Aviation Safety Regulations (the Safety Regulation) of February 2011 which governs the air safety. The Safety Regulation consists of three chapters which include passenger cabin safety, transport of dangerous goods by air, aviation accident and incident investigation.   The Aviation security affairs sector administer and provide safety to the aviation industry, and the sector consists of several departments as follows:
    • Air Navigation and Aerodrome (the ANA);
    • Airworthiness (the AW);
    • Flight Operations (the FOP);
    • Licensing (the LIC); and
    • Policy, Regulations, and Planning (the PRP).

    1.4   Is air safety regulated separately for commercial, cargo, and private carriers? Are air charters regulated separately for commercial, cargo and private carriers?

    Commercial aircrafts, as well as private aircrafts, e regulated pursuant to the Civil Aviation Regulations on Air Safety of February 2011, and the Civil Aviation Regulations on Transport of Dangerous Goods by Air of May 2015 regulates cargos.   Air charters for commercial, cargo, and private carriers are regulated under the Air Safety Regulation of February 2011.  

    1.5 Are airports state-owned or privately owned?

    All the major airports in each Emirate are owned by the government of the respective Emirate or the Department of Civil Aviation in that Emirate. However, there are several privately-owned airports in Abu Dhabi, such as: Al Futaysi Airport, owned by Hamad bin Hamdan Al Nahyan; Al Jazeirah Airport, owned by Al Jazeirah Aviation Club; Arzanan Airport, owned by the Zakum Development Company; and Buhasa Airport, owned by the Abu Dhabi Company for Onshore Oil Operations.  

    1.6   Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

    UAE airports impose several charges on outbound and inbound airlines, as follows:
    • Passenger Service Charges (the PSC), which is to be paid by the outbound airline. Infants, aircraft operating crew and transit/ transfer passengers continuing travel within 24 hours are exempted from PSC.
    • Passenger Security and Safety Fee (the PSSF), payable on outbound airlines. Infants, aircraft operating crew and transit/transfer passengers continuing travel within 24 hours are exempted from PSSF.
    • Advance Passenger Information Fee (the API) for arriving passengers on inbound airlines. Infants, aircraft operating crew and transit passengers continuing travel within 12 hours are exempted from API.
    • Passenger Facility Charge (the PFC), which has recently been implemented and is payable by outbound airlines for departing passengers. Infants, operating crew and transit passengers with two flights on the same journey are exempted; however, transfer passengers are obliged to pay this charge.

    1.7    What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

    Civil Aviation Regulation Part VI-Chapter 3 (the Air Accident Regulation) applies to air accident and incident  investigation(s).  The Air Accident Regulation governs commercial, private, leased and chartered aircraft. It further includes, but is not limited to, the procedure for investigation, objectives of the investigation,  powers of investigators, responsibilities of the GCAA, the roles of the investigating committee, investigations conducted by foreign states, besides other key provisions.   Procedure:
  • Any person having knowledge of an aircraft accident or incident should immediately notify the GCAA, and such notification should include all the details including, but not limited to: the manufacturer, model, nationality, registration mark and serial number of the aircraft; complete details of the owner; the date and time of the accident; complete details of the flight commander and cabin crew; the last point of departure; and the landing destination;
  • Upon the receipt of the information, the GCAA will request that the state of the operator, the state of the manufacturer and the state of design provide the complete details regarding the aircraft.
  • Thereafter, the GCAA will establish an Accident Investigation Committee to investigate the cause of such accident.  

    1.8   Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?

    The Dubai Government is planning to increase the number of flights, and it is anticipated that it will handle 100 million passengers on a daily basis.

    Part 2 Aircraft Trading, Financing, and Leasing

     

    2.1    Does registration of ownership in the aircraft register constitute proof of ownership?

    The GCAA, after having approved the application, will register the aircraft, including complete details of the aircraft in the Certificate of Registration (COR), and will hand over the COR to the owner of the aircraft or his representative, which will constitute proof of ownership.

    2.2    Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?   There is no mortgage register in the UAE; however, the creditors financing the foreign aircraft must have the existence of any foreign- registered mortgage noted by the GCAA in its files.   The GCAA also has the authority to acknowledge irrevocable de-registration and export request authorization, registered under the Cape Town Convention in an international registry.   All the aircraft mortgages in the UAE are required to be registered in the Aircraft Register, along with the prior approval of the GCAA. Post the mortgage, the GCAA will issue a new Certificate of Registration, upon submission of following documents:
    • A certified copy of the certificate of a true commercial name of the entity, issued by the Commercial Registry of the state in which it was registered;
    • a certified copy of the Board Resolution;
    • a notarized confirmation letter signed by the entity's legal representative; and
    • the changed registration plate.

    2.3    Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

    In accordance with Article 28 and 29 of the Civil Aviation Law, the GCAA has the authority to register the aircraft in the name of lessor, if he is a qualified person. The aircraft will remain registered for the duration of the lease agreement period, subject to provisions of the Civil Aviation Law.

    2.4    As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed 'on-wing' on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

    The Civil Aviation Law is silent on the concept of title annexation wherein the ownership or security interests in a single engine are  at risk due to automatic transfer upon installation 'on-wing' on an aircraft.

    2.5    What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

    Federal Decree Number 8 of 2017 concerning Value Added Tax (the VAT Law) is applicable to companies incorporated in the UAE. Therefore, companies are obliged to pay five (5) percent VAT on all goods and services; however, there are several exemptions for certain goods and services, within which a zero-tax rate will apply, such as the supply of means of transport by air used to transport passengers and goods, or the supply of aircraft specifically for assistance in rescue by air.

    2.6    Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

    The following are the international Conventions signed by the UAE:
    • The Cape Town Convention on International Interests in Mobile Equipment signed on 2 April 2008.
    • The Convention for the Suppression of Unlawful Acts Against Safety of Civil Aviation (the Montreal Convention), signed on 23 September 1971.
    • The Chicago Convention.
    • The Convention on Offences and Certain Other Acts Committed on Board Aircraft (the Tokyo Convention), signed on 14 September 1963.
    • The Warsaw Convention for Unification of Certain Rules Relating to International Carriage by Air, signed in 1929.
    • The Convention on Suppression of Unlawful Seizure of Aircraft (the Hague Convention), signed on 16 December 1970.

    2.7    How are the Conventions applied in your jurisdiction?

    The UAE has ratified numerous international Conventions in relation to civil aviation, and have simultaneously given them legal status through the following statutes:
    • Federal Decree 95 of 1980 approving the state's Accession to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, signed at Montreal on 23 September 1971.
    • Federal Decree Number 8 of 1981 approving the state's accession to the Convention for the Suppression of Unlawful Seizure of Aircraft, signed at The Hague on 16 December 1970.
    • Federal Decree Number 9 of 1981 approving the state's accession to the Convention on Offences and Certain Other Acts Committed On Board Aircraft, signed at Tokyo on 14 September 1963.
    • Federal Decree Number 13 of 1986 concerning the state's accession to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air (1929).
    • Federal Decree Number 85 of 1986 concerning the state's membership of the World Meteorological Organization.
    • Federal Decree Number 79 of 1988 ratifying the state's accession to the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for Suppression of Unlawful Acts against the Safety of Civil Aviation.
    The GCAA ensures compliance with the aforementioned international treaties and Conventions to which the UAE is a party  

    Part 3 Litigation and Dispute Resolution

    3.1    What rights of detention are available in relation to aircraft and unpaid debts?

    There are no detention rights that exist with respect to unpaid fees or any air navigation fees. However, the GCAA can recover the amount by filing a civil action in a civil court against the owner, operator or lessee of the aircraft.

    3.2    Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

    The UAE does not recognize the self-help regime; however, pursuant to the Civil Aviation Regulations and Civil Aviation Advisory Publication Number 58, the GCAA has framed a procedure for irrevocable De-Registration and Export Request Authorization (IDERA), under which an approval from the UAE courts is not required. An IDERA entered into by a lessor and financier allows them to initiate self-help proceedings.   However, with regard to leases of aircraft, there are, primarily, three types of leases available, as follows:
    • Wet Lease: Under a Wet Lease agreement, the company which is leasing out the aircraft is required to provide Aircraft, Crew, Maintenance, and Insurance (ACMI) to the lessee. The Wet Lease is for a short time span, and during that span, the lessor holds the AOC, whereas the lessee is obliged to pay other charges or fees such as airport fees, charges, and other duties. The lessee even has financial control over the aircraft operations.
    • Damp Lease:  In a Damp Lease, the lessor provides the aircraft, maintenance, and insurance, except the crew. Thus, it is the responsibility of the lessee to hire the crew.
    • Dry Lease: Under this arrangement, the lessor is only obliged to provide the aircraft; the rest is maintained by the lessee.
    This lease is for more than a year and can be extended up  to half the life of the aircraft. The lessee in this lease has to obtain its own AOC.   Civil Aviation Regulation Part I, including Definitions, also defines Dry Lease and Wet Lease as mentioned above.  

    3.3    Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For example, is there a distinction in your country regarding the courts in which civil and criminal cases are brought?

    There are no specific courts assigned for resolving aviation disputes; UAE courts adjudicate aviation disputes in the country, depending upon the value of the dispute and the Emirate in which the aircraft is situated.   The UAE has signed and acceded to the Cape Town Protocol, which outlines that parties to an agreement, contract of sale, guarantee, and agreement may decide the law governing their disputes.  

    3.4   What service requirements apply to the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

    Court proceedings in the UAE initiate by filing a claim in the relevant court along with the court fees. The claim is served on each defendant in the proceedings personally; however, if the court is unable to locate the defendant, investigations are carried out by several government authorities in the respective Emirate, and if this investigation is unsuccessful, the court orders that the service takes place by way of publication in the newspapers in both languages (Arabic and English). However, for parties residing outside the jurisdiction of the court or outside UAE territory, the court will permit the service of court proceedings directly to the other party residing outside the country.  

    3.5   What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on: i) an interim basis, and ii) a final basis?

    The remedies available to the claimant generally depend on the nature and size of the dispute in addition to type of forum (arbitration (domestic or international), the DIFC., the ADGM by way of example) The remedies may be awarded as follows:   Interim basis
  • the preliminary injunction, to prevent the other party from doing something until the final judgment is passed; and
  • damages.
  • Final basis
  • damages;
  • orders to hold possession of the aircraft;
  • de-registration of an aircraft;
  • sale of an aircraft; and
  • final injunctions requiring one party to do something and
  • simultaneously prevent the other party from a certain act.
  • 3.6   Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

    Yes, parties to the dispute have the right to file an appeal in the relevant court against the decision of a lower court or of an arbitral tribunal.   Parties can file appeals in the Court of Appeal against the final decision passed by the Court of First Instance in relation to issues of law. However, the law imposes a time limitation on such appeals, which is of thirty (30) days, within which the appellant should file an appeal in the court.   The Decision passed by Arbitral Tribunal is binding upon the parties; however, there are certain cases in which the decision passed by the arbitral tribunal can be set aside by the Court of Appeal or other relevant courts, which are as follows:
    • invalidity of the arbitration agreement;
    • failure to adhere to the rules and regulations of arbitration proceedings;
    • the award passed by the tribunal is beyond the scope of
    • submission to arbitration;
    • the arbitral tribunal was not composed within the rules and procedures agreed between the parties; and
    • the dispute between the parties is not arbitrable in nature.

    Part 4 Commercial and Regulatory

    4.1    How does Dubai and the UAE approach and regulate joint ventures between airline competitors?

    Joint ventures between airlines are regulated by Federal Law Number 2 of 2015 concerning Commercial Companies. There are several types of joint ventures, such as a Limited Liability Company, Public Joint Stock Company, Private Joint Stock Company and Limited Partnership Company. The LLC is considered the most suitable option, due to its flexible management system. The main consideration in choosing a joint venture on the UAE mainland is the shareholding ratio, which is restricted to 49 percent for a foreign company.

    The company also has an option to opt for a free zone for establishing a joint venture. A free zone offers several advantages, such as the availability of 100 percent ownership in the venture.

    4.2    How do the competition authorities in your jurisdiction determine the 'relevant market' for the purposes of mergers and acquisitions?

    The competition authorities do not provide any clear guidance in order to explain what constitutes a "relevant market". However, Federal Law Number 4 of 2012 on Regulation of Competition (the Competition Law) defines a relevant market as a commodity, service, or a group or products or services which may be substituted, on the basis of its price, characteristics and uses, or whose alternatives may be chosen to meet customers' needs in any specific geographical area.

    However, the definition of the relevant market may vary according to the establishment's position in the market, economic consideration captured by the company, or any restrictive agreement signed by the parties.

    4.3   Does Dubai or UAE have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

    Yes, parties entering into a merger or capturing a significant economic consideration in the market are obliged to notify the Ministry of Economy (MOE) of the relevant Emirate. The notification must take place thirty (30) days prior to the signing of the merger agreement

    4.4  How do Dubai or UAE approach mergers, acquisition mergers, and full-function joint ventures?

    The Competition Law regulates mergers,  acquisition mergers, and full-function joint ventures. The Competition Law includes restrictions on anti-competitive practices and simultaneously imposes merger control measures. The Competition Law provides that the acquirer of a proposed economic concentration which has the potential to affect the relevant market is required to inform the Ministry of Economy thirty (30) days prior to the commercial transaction. Also, it is obligatory for the companies to inform the MOE if the market share of the parties exceeds forty (40) percent of the total transactions undertaken in the relevant market.

    4.5  Please provide details of the procedure, including time frames for clearance and any costs of notifications 

    The Competition Law provides that, in a proposed economic concentration which will have a severe impact on competition in the relevant market or will create a dominant position of the acquirer, the procedure through which the acquirer can seek clearance from the MOE is as follows:

    The acquirer should submit an application in order to seek pre-approval from the Competition Authority of the MOE thirty (30) days prior to the contract.

    Post receiving the application, the competition authority will undergo a substantive test.

    Through the substantive test, the competition authority will ascertain the effects of the merger in the relevant market and whether or not the merger will create a dominant position in the market. However, it is still unclear whether or not parties can proceed with signing the agreement without actually obtaining approval from the authority. There is no specific cost for notifying the authority regarding a merger.

     

    4.6  Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

    The GCAA does not specifically provide rules governing financial support for air operators and airports.

    However, the Dubai Government recently planned for an initial $3 billion financial deal in order to support Dubai International Airport and Al Maktoum International Airports. Financial support will be provided by a consortium of Dubai entities, including the State- owned Investment Corporation of Dubai, the Dubai Department of Finance, and the Dubai Aviation Corporation.

     

    4.7 & 4.8  Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? What are the main regulatory instruments governing the acquisition, retentio and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines?

    The UAE government does not provide any subsidies to aircraft with respect to particular routes.

    Federal Law Number 5 of 2012 on Combatting Cybercrimes (the Cybercrime Law) is the primary piece of legislation which governs the acquisition, retention, and use of passenger data.

    Passengers have the right to limit the information held by airlines or to make any changes to such information. The Cybercrime Law imposes severe penalties on the accused when actions result in the disclosure of personal information to the public.

    4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

    The Cybercrime Law does not specifically lay down obligations on the airlines in the event of loss of personal data; however, there is an obligation on the data controller to ensure that the data is processed properly and to take preventive measures against the unauthorized use or disclosure of personal data.

    4.10   What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

    The protection of intellectual property covers protection of trademarks, patents, copyright, geographical indications and industrial designs. The laws regulating intellectual property are:

  • Federal Law Number 31 of 2006 pertaining to Industrial Regulation
  • and Protection of Patents, Industrial Designs, and Drawings; 
  • Federal Law Number 7 of 2002 concerning Copyrights and Neighbouring Rights; and 
  • Federal Law Number 37 of 1992 on Trademarks as amended by Law Number 8 of 2002.
  • The aforementioned types of intellectual property can be protected by filing an application with the MOE, which undertakes a substantive test. Thereafter, upon satisfying itself of the validity of the documents submitted, the MOE issues the registration certificate to the owner of the intellectual property.

    4.11 to 4.13   Is there any legislation governing the denial of boarding rights? What powers do the relevant authorities have in relation to the late arrival and departure of flights? Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

    4.11 The GCAA does not have any specific regulations governing the denial of boarding rights; however, each major carrier in the UAE, such as Emirates, Etihad and Flydubai, has its own conditions for carriage and its own rules by which it may deny passengers their boarding rights.

    On a similar note, passengers denied boarding rights involuntarily are entitled to claim compensation.

    4.12 Under the Air Transport Regulations of 2007, the Department of Transport obliges the aircraft operators to establish minimum service quality standards, which include compensation for delayed flights.

    4.13 The authorities managing airports  in the  respective  Emirates are regulated by Federal Law Number 2 of 2015 on Commercial Companies (the Companies Law). For example, the Dubai Airports Company in the Emirate of Dubai is the airport authority regulating Dubai International Airport and Al Maktoum International Airport, under the Companies Law.

    4.14 to 4.17  To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? What global distribution suppliers (GDSs) operate in your jurisdiction? Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

    4.14  Federal Law Number 24 of 2006 on Consumer Protection does not specifically govern the relationship between the air operator and the passenger.

    4.15 The Major Global Distribution Suppliers in the UAE are Rakha Al- Khaleej International LLC and Global Distribution FZE.

    4.16  GDSs operating in the UAE can be in the form of Limited Liability Company, wherein fifty-one (51) percent of the shares are held by a UAE national.

    4.17 Yes, air operators or airports can enter into joint ventures or mergers, as mentioned in question 4.1.

     

    Part 5 In Future

    4.1    In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

    In order to improve the safety of helicopters operating in the UAE, the GCAA issued Information Bulletin of 2017, on 8 February, which provides the guidance applicable to the Civil Aviation Advisory Publication (CAAP). The guidelines must be complied with from 1 January 2018 by the following operators:
    • CAAP 70 operators must ensure that they adhere to the physical specifications and register themselves with the GCAA, and should obtain a landing area certificate.
    • CAAP 71 operators are required to obtain a primary accountable organization approval from the GCAA.

     

     

    STA is an international law firm headquartered in the Emirate of Dubai, UAE with a multijurisdictional presence. STA offers a multifaceted and well-rounded approach to addressing the legal needs of corporate clients, banking institutions, national and multinational corporations. STA's team of lawyers in Dubai and across UAE, Middle East, Asia and Europe work alongside several groups of companies within the Oil and Gas, Maritime, Real Estate, Construction, Hospitality, Aviation and Healthcare sectors regionally and internationally.

     

    Originally Published in ICLG to Aviation Law 2018

     

     

    Aviation Law Guide: United Arab Emirates

    Part 1 - General

    1.1  Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction.

    The UAE's principal legislation governing aviation law is as follows:

    • Federal Law Number 20 of 1991 regarding the civil aviation (the Civil Aviation Law);
    • Federal Law Number 4 of 1996 concerning the Aviation Authority (the Aviation Authority Law); 
    • Federal Law Number 20 of 2001 concerning the amendments in the Aviation Authority Law; and
    • Federal Law Number 8 of 1983 issuing Commercial Transaction Law, providing rules for Air Carriage.  
    • Federal Act Number 22 of 1972 concerning the participation by the UAE in the project for the establishment of an Arab Testing Unit for Air Navigation Equipment.
    Regulations include:
    • Civil Aviation Regulation – Licensing Regulation of July 2011;
    • Civil Aviation Regulation – General Regulation of March 2013;
    • Civil Aviation Regulation – Operations Regulation of July 2011;
    • Civil Aviation Regulation – Airworthiness Regulations of July 2011;
    • Civil Aviation Regulation – Aviation Safety Regulations of February 2011;
    • Civil Aviation Regulations – Aviation Security Regulations of May 2016;
    • Civil Aviation Regulation – Air Navigation Regulations of September 2011;
    • Civil Aviation Regulation – Aerodromes Emergency Services of February 2017;
    • Civil Aviation Regulation – Safety Management System of June 2016;
    • Civil Aviation Regulation – Concerning Unmanned Aircraft System (CAR UAS) in February 2017;
    • Civil Aviation Regulation – Transport of Dangerous Goods by Air of May 2015;
    • Civil Aviation Regulation – Foreign Operators Regulation of October 2016; and
    • Civil Aviation Regulation – Light Sports Aircraft of March 2013.
    The Civil Aviation Law applies to all aircraft registered in the UAE, air traffic control, communications and civil airports, whereas the Aviation Authority Law has established the General Civil Aviation Authority (the GCAA). The GCAA is the regulatory authority which is designated to ensure proper compliance with the Civil Aviation Law in the UAE, whilst emphasizing the concept of security and safety. Having exclusive authority over the aviation industry in the UAE, the GCAA is responsible for en-route air navigation services and all aspects of air safety.   Subsequently, each Emirate has its own aviation authority which regulates all matters related to aviation in its respective Emirate, such as the Dubai Aviation Authority established under Law Number 21 of 2007, Department of Abu Dhabi Civil Aviation, Department of Civil Aviation of Ras Al Khaimah, Sharjah Department of Civil Aviation, Department of Civil Aviation Fujairah.  

    1.2  What are the steps which air carriers need to take in order to obtain an operating license?

    There are several steps involved in obtaining an operating license for air carriers which are as follows:   Pre-application Stage: Prior to submitting an online application, the applicant is required to meet with the GCAA and should discuss his initial plan during his pre-application meetings. During this stage, the applicant submits a pre-application statement of intent and the documents required by the GCAA. On the basis of information provided by the applicant, the GCAA will provide the formal application to be submitted by the applicant.   Formal Application Stage: This stage commences when the applicant submits a formal application for an Air Operator Certificate (the AOC) along with several documents and manuals describing its operations as directed by the GCAA. The application should begin at least 90 days prior to the actual revenue operations.   Document Evaluation Stage: This stage involves a detailed evaluation of documents and manuals for their content and compliance. During this stage, the GCAA will ascertain the technical fitness of the operations proposed by the operator. The documents and manuals submitted for consideration should not be at least 60 days prior to the commencement of proposed operations in order to avoid undue delay.   Inspection Stage: During this stage, the GCAA will inspect whether or not the physical facilities and equipment proposed by the applicant are suitable for the type and size of the operations. The applicant must demonstrate his ability to comply with all requirements and operating practices prior to the beginning of actual revenue operations.   Certification Stage: The stage begins when the GCAA is satisfied from the applications and proposed operations of the applicant and takes a necessary step to issue AOC. However, if the GCAA is unsatisfied during the Inspection Stage, the Certification Stage will not take place until the safety and security requirements are complied with.  

    1.3   What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?

    The principal piece of legislation which governs air safety is the Civil Aviation Law; however, there is Aviation Safety Regulations (the Safety Regulation) of February 2011 which governs the air safety. The Safety Regulation consists of three chapters which include passenger cabin safety, transport of dangerous goods by air, aviation accident and incident investigation.   The Aviation security affairs sector administer and provide safety to the aviation industry, and the sector consists of several departments as follows:
    • Air Navigation and Aerodrome (the ANA);
    • Airworthiness (the AW);
    • Flight Operations (the FOP);
    • Licensing (the LIC); and
    • Policy, Regulations, and Planning (the PRP).

    1.4   Is air safety regulated separately for commercial, cargo, and private carriers? Are air charters regulated separately for commercial, cargo and private carriers?

    Commercial aircrafts, as well as private aircrafts, e regulated pursuant to the Civil Aviation Regulations on Air Safety of February 2011, and the Civil Aviation Regulations on Transport of Dangerous Goods by Air of May 2015 regulates cargos.   Air charters for commercial, cargo, and private carriers are regulated under the Air Safety Regulation of February 2011.  

    1.5 Are airports state-owned or privately owned?

    All the major airports in each Emirate are owned by the government of the respective Emirate or the Department of Civil Aviation in that Emirate. However, there are several privately-owned airports in Abu Dhabi, such as: Al Futaysi Airport, owned by Hamad bin Hamdan Al Nahyan; Al Jazeirah Airport, owned by Al Jazeirah Aviation Club; Arzanan Airport, owned by the Zakum Development Company; and Buhasa Airport, owned by the Abu Dhabi Company for Onshore Oil Operations.  

    1.6   Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

    UAE airports impose several charges on outbound and inbound airlines, as follows:
    • Passenger Service Charges (the PSC), which is to be paid by the outbound airline. Infants, aircraft operating crew and transit/ transfer passengers continuing travel within 24 hours are exempted from PSC.
    • Passenger Security and Safety Fee (the PSSF), payable on outbound airlines. Infants, aircraft operating crew and transit/transfer passengers continuing travel within 24 hours are exempted from PSSF.
    • Advance Passenger Information Fee (the API) for arriving passengers on inbound airlines. Infants, aircraft operating crew and transit passengers continuing travel within 12 hours are exempted from API.
    • Passenger Facility Charge (the PFC), which has recently been implemented and is payable by outbound airlines for departing passengers. Infants, operating crew and transit passengers with two flights on the same journey are exempted; however, transfer passengers are obliged to pay this charge.

    1.7    What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

    Civil Aviation Regulation Part VI-Chapter 3 (the Air Accident Regulation) applies to air accident and incident  investigation(s).  The Air Accident Regulation governs commercial, private, leased and chartered aircraft. It further includes, but is not limited to, the procedure for investigation, objectives of the investigation,  powers of investigators, responsibilities of the GCAA, the roles of the investigating committee, investigations conducted by foreign states, besides other key provisions.   Procedure:
  • Any person having knowledge of an aircraft accident or incident should immediately notify the GCAA, and such notification should include all the details including, but not limited to: the manufacturer, model, nationality, registration mark and serial number of the aircraft; complete details of the owner; the date and time of the accident; complete details of the flight commander and cabin crew; the last point of departure; and the landing destination;
  • Upon the receipt of the information, the GCAA will request that the state of the operator, the state of the manufacturer and the state of design provide the complete details regarding the aircraft.
  • Thereafter, the GCAA will establish an Accident Investigation Committee to investigate the cause of such accident.  

    1.8   Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?

    The Dubai Government is planning to increase the number of flights, and it is anticipated that it will handle 100 million passengers on a daily basis.

    Part 2 Aircraft Trading, Financing, and Leasing

     

    2.1    Does registration of ownership in the aircraft register constitute proof of ownership?

    The GCAA, after having approved the application, will register the aircraft, including complete details of the aircraft in the Certificate of Registration (COR), and will hand over the COR to the owner of the aircraft or his representative, which will constitute proof of ownership.

    2.2    Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?   There is no mortgage register in the UAE; however, the creditors financing the foreign aircraft must have the existence of any foreign- registered mortgage noted by the GCAA in its files.   The GCAA also has the authority to acknowledge irrevocable de-registration and export request authorization, registered under the Cape Town Convention in an international registry.   All the aircraft mortgages in the UAE are required to be registered in the Aircraft Register, along with the prior approval of the GCAA. Post the mortgage, the GCAA will issue a new Certificate of Registration, upon submission of following documents:
    • A certified copy of the certificate of a true commercial name of the entity, issued by the Commercial Registry of the state in which it was registered;
    • a certified copy of the Board Resolution;
    • a notarized confirmation letter signed by the entity's legal representative; and
    • the changed registration plate.

    2.3    Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

    In accordance with Article 28 and 29 of the Civil Aviation Law, the GCAA has the authority to register the aircraft in the name of lessor, if he is a qualified person. The aircraft will remain registered for the duration of the lease agreement period, subject to provisions of the Civil Aviation Law.

    2.4    As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed 'on-wing' on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

    The Civil Aviation Law is silent on the concept of title annexation wherein the ownership or security interests in a single engine are  at risk due to automatic transfer upon installation 'on-wing' on an aircraft.

    2.5    What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

    Federal Decree Number 8 of 2017 concerning Value Added Tax (the VAT Law) is applicable to companies incorporated in the UAE. Therefore, companies are obliged to pay five (5) percent VAT on all goods and services; however, there are several exemptions for certain goods and services, within which a zero-tax rate will apply, such as the supply of means of transport by air used to transport passengers and goods, or the supply of aircraft specifically for assistance in rescue by air.

    2.6    Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

    The following are the international Conventions signed by the UAE:
    • The Cape Town Convention on International Interests in Mobile Equipment signed on 2 April 2008.
    • The Convention for the Suppression of Unlawful Acts Against Safety of Civil Aviation (the Montreal Convention), signed on 23 September 1971.
    • The Chicago Convention.
    • The Convention on Offences and Certain Other Acts Committed on Board Aircraft (the Tokyo Convention), signed on 14 September 1963.
    • The Warsaw Convention for Unification of Certain Rules Relating to International Carriage by Air, signed in 1929.
    • The Convention on Suppression of Unlawful Seizure of Aircraft (the Hague Convention), signed on 16 December 1970.

    2.7    How are the Conventions applied in your jurisdiction?

    The UAE has ratified numerous international Conventions in relation to civil aviation, and have simultaneously given them legal status through the following statutes:
    • Federal Decree 95 of 1980 approving the state's Accession to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, signed at Montreal on 23 September 1971.
    • Federal Decree Number 8 of 1981 approving the state's accession to the Convention for the Suppression of Unlawful Seizure of Aircraft, signed at The Hague on 16 December 1970.
    • Federal Decree Number 9 of 1981 approving the state's accession to the Convention on Offences and Certain Other Acts Committed On Board Aircraft, signed at Tokyo on 14 September 1963.
    • Federal Decree Number 13 of 1986 concerning the state's accession to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air (1929).
    • Federal Decree Number 85 of 1986 concerning the state's membership of the World Meteorological Organization.
    • Federal Decree Number 79 of 1988 ratifying the state's accession to the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for Suppression of Unlawful Acts against the Safety of Civil Aviation.
    The GCAA ensures compliance with the aforementioned international treaties and Conventions to which the UAE is a party  

    Part 3 Litigation and Dispute Resolution

    3.1    What rights of detention are available in relation to aircraft and unpaid debts?

    There are no detention rights that exist with respect to unpaid fees or any air navigation fees. However, the GCAA can recover the amount by filing a civil action in a civil court against the owner, operator or lessee of the aircraft.

    3.2    Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

    The UAE does not recognize the self-help regime; however, pursuant to the Civil Aviation Regulations and Civil Aviation Advisory Publication Number 58, the GCAA has framed a procedure for irrevocable De-Registration and Export Request Authorization (IDERA), under which an approval from the UAE courts is not required. An IDERA entered into by a lessor and financier allows them to initiate self-help proceedings.   However, with regard to leases of aircraft, there are, primarily, three types of leases available, as follows:
    • Wet Lease: Under a Wet Lease agreement, the company which is leasing out the aircraft is required to provide Aircraft, Crew, Maintenance, and Insurance (ACMI) to the lessee. The Wet Lease is for a short time span, and during that span, the lessor holds the AOC, whereas the lessee is obliged to pay other charges or fees such as airport fees, charges, and other duties. The lessee even has financial control over the aircraft operations.
    • Damp Lease:  In a Damp Lease, the lessor provides the aircraft, maintenance, and insurance, except the crew. Thus, it is the responsibility of the lessee to hire the crew.
    • Dry Lease: Under this arrangement, the lessor is only obliged to provide the aircraft; the rest is maintained by the lessee.
    This lease is for more than a year and can be extended up  to half the life of the aircraft. The lessee in this lease has to obtain its own AOC.   Civil Aviation Regulation Part I, including Definitions, also defines Dry Lease and Wet Lease as mentioned above.  

    3.3    Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For example, is there a distinction in your country regarding the courts in which civil and criminal cases are brought?

    There are no specific courts assigned for resolving aviation disputes; UAE courts adjudicate aviation disputes in the country, depending upon the value of the dispute and the Emirate in which the aircraft is situated.   The UAE has signed and acceded to the Cape Town Protocol, which outlines that parties to an agreement, contract of sale, guarantee, and agreement may decide the law governing their disputes.  

    3.4   What service requirements apply to the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

    Court proceedings in the UAE initiate by filing a claim in the relevant court along with the court fees. The claim is served on each defendant in the proceedings personally; however, if the court is unable to locate the defendant, investigations are carried out by several government authorities in the respective Emirate, and if this investigation is unsuccessful, the court orders that the service takes place by way of publication in the newspapers in both languages (Arabic and English). However, for parties residing outside the jurisdiction of the court or outside UAE territory, the court will permit the service of court proceedings directly to the other party residing outside the country.  

    3.5   What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on: i) an interim basis, and ii) a final basis?

    The remedies available to the claimant generally depend on the nature and size of the dispute in addition to type of forum (arbitration (domestic or international), the DIFC., the ADGM by way of example) The remedies may be awarded as follows:   Interim basis
  • the preliminary injunction, to prevent the other party from doing something until the final judgment is passed; and
  • damages.
  • Final basis
  • damages;
  • orders to hold possession of the aircraft;
  • de-registration of an aircraft;
  • sale of an aircraft; and
  • final injunctions requiring one party to do something and
  • simultaneously prevent the other party from a certain act.
  • 3.6   Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

    Yes, parties to the dispute have the right to file an appeal in the relevant court against the decision of a lower court or of an arbitral tribunal.   Parties can file appeals in the Court of Appeal against the final decision passed by the Court of First Instance in relation to issues of law. However, the law imposes a time limitation on such appeals, which is of thirty (30) days, within which the appellant should file an appeal in the court.   The Decision passed by Arbitral Tribunal is binding upon the parties; however, there are certain cases in which the decision passed by the arbitral tribunal can be set aside by the Court of Appeal or other relevant courts, which are as follows:
    • invalidity of the arbitration agreement;
    • failure to adhere to the rules and regulations of arbitration proceedings;
    • the award passed by the tribunal is beyond the scope of
    • submission to arbitration;
    • the arbitral tribunal was not composed within the rules and procedures agreed between the parties; and
    • the dispute between the parties is not arbitrable in nature.

    Part 4 Commercial and Regulatory

    4.1    How does Dubai and the UAE approach and regulate joint ventures between airline competitors?

    Joint ventures between airlines are regulated by Federal Law Number 2 of 2015 concerning Commercial Companies. There are several types of joint ventures, such as a Limited Liability Company, Public Joint Stock Company, Private Joint Stock Company and Limited Partnership Company. The LLC is considered the most suitable option, due to its flexible management system. The main consideration in choosing a joint venture on the UAE mainland is the shareholding ratio, which is restricted to 49 percent for a foreign company.

    The company also has an option to opt for a free zone for establishing a joint venture. A free zone offers several advantages, such as the availability of 100 percent ownership in the venture.

    4.2    How do the competition authorities in your jurisdiction determine the 'relevant market' for the purposes of mergers and acquisitions?

    The competition authorities do not provide any clear guidance in order to explain what constitutes a "relevant market". However, Federal Law Number 4 of 2012 on Regulation of Competition (the Competition Law) defines a relevant market as a commodity, service, or a group or products or services which may be substituted, on the basis of its price, characteristics and uses, or whose alternatives may be chosen to meet customers' needs in any specific geographical area.

    However, the definition of the relevant market may vary according to the establishment's position in the market, economic consideration captured by the company, or any restrictive agreement signed by the parties.

    4.3   Does Dubai or UAE have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

    Yes, parties entering into a merger or capturing a significant economic consideration in the market are obliged to notify the Ministry of Economy (MOE) of the relevant Emirate. The notification must take place thirty (30) days prior to the signing of the merger agreement

     

    4.4  How do Dubai or UAE approach mergers, acquisition mergers, and full-function joint ventures?

     

     

    The Competition Law regulates mergers,  acquisition mergers, and full-function joint ventures. The Competition Law includes restrictions on anti-competitive practices and simultaneously imposes merger control measures. The Competition Law provides that the acquirer of a proposed economic concentration which has the potential to affect the relevant market is required to inform the Ministry of Economy thirty (30) days prior to the commercial transaction. Also, it is obligatory for the companies to inform the MOE if the market share of the parties exceeds forty (40) percent of the total transactions undertaken in the relevant market.

     

    4.5  Please provide details of the procedure, including time frames for clearance and any costs of notifications 

     

     

    The Competition Law provides that, in a proposed economic concentration which will have a severe impact on competition in the relevant market or will create a dominant position of the acquirer, the procedure through which the acquirer can seek clearance from the MOE is as follows:

    The acquirer should submit an application in order to seek pre-approval from the Competition Authority of the MOE thirty (30) days prior to the contract.

    Post receiving the application, the competition authority will undergo a substantive test.

    Through the substantive test, the competition authority will ascertain the effects of the merger in the relevant market and whether or not the merger will create a dominant position in the market. However, it is still unclear whether or not parties can proceed with signing the agreement without actually obtaining approval from the authority. There is no specific cost for notifying the authority regarding a merger.

     

    4.6  Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

    The GCAA does not specifically provide rules governing financial support for air operators and airports.

    However, the Dubai Government recently planned for an initial $3 billion financial deal in order to support Dubai International Airport and Al Maktoum International Airports. Financial support will be provided by a consortium of Dubai entities, including the State- owned Investment Corporation of Dubai, the Dubai Department of Finance, and the Dubai Aviation Corporation.

     

    4.7 & 4.8  Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? What are the main regulatory instruments governing the acquisition, retentio and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines?

    The UAE government does not provide any subsidies to aircraft with respect to particular routes.

    Federal Law Number 5 of 2012 on Combatting Cybercrimes (the Cybercrime Law) is the primary piece of legislation which governs the acquisition, retention, and use of passenger data.

    Passengers have the right to limit the information held by airlines or to make any changes to such information. The Cybercrime Law imposes severe penalties on the accused when actions result in the disclosure of personal information to the public.

    4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

    The Cybercrime Law does not specifically lay down obligations on the airlines in the event of loss of personal data; however, there is an obligation on the data controller to ensure that the data is processed properly and to take preventive measures against the unauthorized use or disclosure of personal data.

    4.10   What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

    The protection of intellectual property covers protection of trademarks, patents, copyright, geographical indications and industrial designs. The laws regulating intellectual property are:

  • Federal Law Number 31 of 2006 pertaining to Industrial Regulation
  • and Protection of Patents, Industrial Designs, and Drawings; 
  • Federal Law Number 7 of 2002 concerning Copyrights and Neighbouring Rights; and 
  • Federal Law Number 37 of 1992 on Trademarks as amended by Law Number 8 of 2002.
  • The aforementioned types of intellectual property can be protected by filing an application with the MOE, which undertakes a substantive test. Thereafter, upon satisfying itself of the validity of the documents submitted, the MOE issues the registration certificate to the owner of the intellectual property.

    4.11 to 4.13   Is there any legislation governing the denial of boarding rights? What powers do the relevant authorities have in relation to the late arrival and departure of flights? Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

    4.11 The GCAA does not have any specific regulations governing the denial of boarding rights; however, each major carrier in the UAE, such as Emirates, Etihad and Flydubai, has its own conditions for carriage and its own rules by which it may deny passengers their boarding rights.

    On a similar note, passengers denied boarding rights involuntarily are entitled to claim compensation.

    4.12 Under the Air Transport Regulations of 2007, the Department of Transport obliges the aircraft operators to establish minimum service quality standards, which include compensation for delayed flights.

    4.13 The authorities managing airports  in the  respective  Emirates are regulated by Federal Law Number 2 of 2015 on Commercial Companies (the Companies Law). For example, the Dubai Airports Company in the Emirate of Dubai is the airport authority regulating Dubai International Airport and Al Maktoum International Airport, under the Companies Law.

    4.14 to 4.17  To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? What global distribution suppliers (GDSs) operate in your jurisdiction? Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

    4.14  Federal Law Number 24 of 2006 on Consumer Protection does not specifically govern the relationship between the air operator and the passenger.

    4.15 The Major Global Distribution Suppliers in the UAE are Rakha Al- Khaleej International LLC and Global Distribution FZE.

    4.16  GDSs operating in the UAE can be in the form of Limited Liability Company, wherein fifty-one (51) percent of the shares are held by a UAE national.

    4.17 Yes, air operators or airports can enter into joint ventures or mergers, as mentioned in question 4.1.

     

    Part 5 In Future

    4.1    In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

    In order to improve the safety of helicopters operating in the UAE, the GCAA issued Information Bulletin of 2017, on 8 February, which provides the guidance applicable to the Civil Aviation Advisory Publication (CAAP). The guidelines must be complied with from 1 January 2018 by the following operators:
    • CAAP 70 operators must ensure that they adhere to the physical specifications and register themselves with the GCAA, and should obtain a landing area certificate.
    • CAAP 71 operators are required to obtain a primary accountable organization approval from the GCAA.

     

     

    STA is an international law firm headquartered in the Emirate of Dubai, UAE with a multijurisdictional presence. STA offers a multifaceted and well-rounded approach to addressing the legal needs of corporate clients, banking institutions, national and multinational corporations. STA's team of lawyers in Dubai and across UAE, Middle East, Asia and Europe work alongside several groups of companies within the Oil and Gas, Maritime, Real Estate, Construction, Hospitality, Aviation and Healthcare sectors regionally and internationally.

     

    Originally Published in ICLG to Aviation Law 2018

     ]]>
    Sat, 02 Dec 2017 17:00:00 GMT
    <![CDATA[Legal Update: The New Executive Regulations on VAT Law]]> LEGAL UPDATE: UAE CABINET DECISION 52 OF 2017 CONCERNING EXECUTIVE REGULATIONS ON VAT LAW

    The UAE Cabinet Decision 52 of 2017 on the executive regulations (the Executive Regulations) of the Federal Decree Law Number 8 of 2017 on Value Added Tax (the VAT Law) has shed light on the details regarding the registration and deregistration procedure and conditions, tax group provisions, zero-rated supplies, designated zones and tax exemptions, much of which was not in the public domain a while earlier.

    Tax Group Provisions

    Article 9 of the Executive Regulations has laid down the definitions of related parties for interpretation of the provisions concerning tax group in the VAT Law. Related Parties shall be: (i) one or more persons acting in partnership and having at least 50% voting rights in each entity or a minimum market value interest of 50% in each entity or control the entities by any other means; or (ii) each entity is a related party with a third party. Two (2) or more entities shall be considered as a tax group if they have an association in economic, financial and regulatory practices. The companies in a tax group should select one of its registered members to act as its representative member, and this member shall request for registration on behalf of the Group in accordance to Article 10 of the Regulations. In case a company expands to add or remove a branch, then the representative member shall apply to the Federal Tax Authority (the Authority) to make such changes within the group. Tax groups are also permitted to change the respective nominee if and when there have been any amendments in the corporate structure of the group of companies. However, a tax group may be deregistered if the group has to be no longer considered as a tax group by the VAT Law or the association based on economic, financial and regulatory practices ceases to exist anymore.

    The Executive Regulations have laid down various grounds for refusing a tax group request such as if there is an undeniable risk of tax evasion or if one of the persons is not a legal person could be reasons for the to refuse a tax group request or any other grounds enumerated within the Article 10(5) of the Regulations.

    The Executive Regulations also state that any supply made by a member of the tax group to another member of the tax group may be disregarded for the purposes of calculating VAT (article 12).

    Zero (0) Rate Tax

    Zero-rating of the VAT applies to the goods directly exported to outside the GCC States that are implementing a tax law under an issued legislation or if an official and commercial evidence that the exporter retains the exports or customs suspension. The zero rate applies to indirect exports as well concerning several conditions per Article 30 (2) of the Executive Regulations. Export of services (article 31) and telecommunications services are also subject to zero (0) rate tax if a telecommunication service provider with residence in the UAE supplies to another telecommunication service provider or person with residence outside the UAE by article 32.

    International transportation services for passengers and goods are subject to the zero-rate only if the transportation is a place in the State and a place outside the State, or if it is a place in the State to another place in the State by sea or air or land as part of a supply of an international transport and if the first place of departure or the final place of destination is outside the State. Certain means of transport, as well as goods and services supplied in connection with means of transport, are subject to the zero-rating, according to Articles 34 and 35 of the Executive Regulations. A means of transport would be subject to the zero rate if it is a supply of an aircraft that will be used for commercial transportation of passengers or goods (and not for pleasure and sports), a supply of a ship, boat or floating structure for commercial purposes or a supply of a bus or train designed to be used for a public transportation.

    Besides, residential buildings (excluding hotels, motels, and hospitals) and buildings specifically designed to be used by charities shall be subject to zero rates, as well as the supply of precious metals (gold, silver, platinum of a purity of 99 percent or more). Finally, education and healthcare services are also subject to the zero-rating of the VAT, provided these service providers meet all the conditions mentioned in Articles 40 and 41 of the Executive Regulations.

    Designated zones

    A designated zone is any specific fenced geographic area that has been specified by a decision of the Authority and would be treated as being outside the State and the implementing States. The area has to meet certain requirements regarding its security measures and customs controls, internal procedures regarding the storing of goods and that the operator of the designated zone complies with the procedures set by the UAE Authority. If the designated zone does not meet these requirements anymore, it would be considered as being inside the UAE, and the provisions of the designated zone in the VAT Law will not apply.

    Also, the transfer of goods between designated zones is not subject to VAT if (i) the good(s) are not released, altered or used during the transfer and (ii) the transfer is undertaken in accordance with the rules for customs suspension according to GCC Common Customs Law (Article 51 (3)).

    Exemptions

    Financial services connected to dealings in money or its equivalent and the provision of credit as stated in article 42(2) of the Executive Regulations should be exempted provided the following conditions are met (i) they are not conducted in return for an explicit fee, discount, commission, rebate or similar, or (ii) it is an issue, allotment or transfer of ownership of an equity security or a debt security, or (iii) if the financial service includes the transfer of ownership of a life insurance contract or re-insurance. Under Articles 43, 44 and 45, the exemption would also apply in case of the residential buildings not subject to the zero-rate and where the lease is more than six months or if the tenant of the property holds an ID card issued by Federal Authority for Identity and Citizenship. Also, open lands and local passenger transport services are exempted according to the Executive Regulations. Article 45 defined a 'qualifying means of transport' as (a) a motor vehicle (for example, taxis, buses, metro, trams, etc.); (b) vessels including ferry boats; and (c) aviation vehicles (such as helicopters and aircrafts) in accordance with Federal Law Number 20 of 1991 on Civil Aviation.

    New Deregistration Conditions

    Article 14 of the Executive Regulations has laid down that the registrant should cease from any further supplies once they make an application for deregistration and should not make any supplies over the next twelve (12) months following its deregistration. As it has already been stated in the VAT Law, the second condition is that the value of supplies or taxable expenses incurred by the registrant over the twelve (12) previous months has to be less than the voluntary registration threshold. Further, companies cannot deregister until the registrant has paid all tax and administrative penalties due and filled for tax returns.

    ]]>
    Fri, 01 Dec 2017 18:00:00 GMT
    <![CDATA[The Best of Both the Worlds]]> The Best of Both Worlds

    Balancing Low Costs and High Investments

    Although the title of this article sounds like the lyrics of a boy-band, we are not discussing about shores,

    Among the pool of Free Trade Zones in the United Arab Emirates, the Ras Al Khaimah Free Trade Zone (RAK FTZ) offers an unparalleled bargain for the incorporation of companies: low-priced fees which render it a cost-effective gateway to the global markets of the region. The Free Zone has had a mesmerizing access to over two billion consumers and has been awarded the 'Best Emerging Free Zone' title for the second year running.

    Established in 2000, RAK FTZ furnishes its clients with full foreign ownership, tax-incentives, fast visa processing, permission to source labor and goods globally, and open-ended business support services. The competitive area is one of the fastest-growing free zones in the UAE; it is the investment destination of choice for more than 8,000 companies from over 100 countries, representing more than 50 industry sectors.

    Why RAK FTZ?

    The dynamic corporate facilities and tax incentives offered by RAK FTZ render it a haven for all types of investors, ranging from international corporate giants to domestic investors. RAK FTZ's business friendly corporate environment is deeply-rooted in international trade practices and corporate governance structures. Given its flexible rules and regulations, there is no question as to why the free zone is successful at attracting businesses and at contributing largely to the U.A.E.'s economic growth. The regional base has allowed investors to exploit the commercial and industrial market of the Middle Eastern and North African region.

    To some extent, the Ras Al Khaimah Free Trade Zone is located in a strategic position for international commercial relations. The proximity of Port Saqr places the RAK FTZ as the first port of call for the northern Emirates. The Port is close to the main shipping lane, the Strait of Hormuz, and Ras Al Khaimah is the closest Emirate to major northern markets, i.e. Pakistan, India, China and the Far East. Access to countries throughout the world via shipping is facilitated by the administrative procedures put in place.

    Despite the many advantages the RAK FTZ has to offer, its distance from the economic heart of the United Arab Emirates (roughly 1 hour and a half from Dubai) is not as strategic as that of other free zones. Bearing this in mind, investors tend to establish their manufacturing and industrial units in the free zone rather than their corporate office. The low establishment costs and the industrial nature of the free zone make it a sanctuary for a particular category of clients. As for businesses that qualify as service-providers, settling in a more central area would be advised because greater contact between the company and the customer is advised. Nevertheless, given the exponential increase in the city of Ras Al Khaimah's economy in recent years, the development of a new regional capital is in sight. In this vein, the issue posed by the free zone's distance from the economic capital is bound to dissipate in due course.

    Ras Al Khaimah Free Trade Zone Authority (RAKFTZA) has recently created an innovative system of four different Free Zone Parks designed to serve each investor according to their specialized requirements. The four dedicated free zone parks tailored to individual company needs include a state-of-the-art business park for clients, an industrial park to facilitate heavy manufacturing activities, a technology park for trading and light manufacturing, and the RAK academic zone which is home to various educational institutions and service providers.

    The business park is located in a well-developed business center which offers sophisticated offices. This facility gives investors an ideal opportunity to start a business, given its furnished, fully-functional and ready-to-use-offices, flexi offices (shared offices) and flexi-desks in multiple locations. Moreover, facilities required by international businesses are offered as well: Superior telecommunications offered by Etisalat, modern airport connections to 25 countries, port facilities at Port Saqr (only 25km from Ras Al Khaimah).

    The industrial park is developed for construction of Heavy Industries and Warehousing, it incorporates abundant energy supplies. Plot sizes are fully serviced to include water, electricity and telecommunications. The facilities include on-site employee accommodation, custom office, operation supportive services center, and other administrative and service support centers located within the Park.

    RAK technology park is in South of Ras Al Khaimah. It is close to RAK airport as well as close proximity via emirates road to Dubai. It is located opposite 5-star resorts with the famous Al Hamra Village and resort Golf course. The location of the park helps the companies in abounding ways as possible.  

    The table below will provide readers with specific information in setting up a company in the free zone:

    Ras Al Khaimah is well recognized among industrial-related companies given that it provides greater facilities for these industrial companies by allowing companies to import raw materials, manufacture, process, assemble, package and export finished products. Similarly, the RAK authorities and legal codes provide a soft requirement to facilitate the above areas in an efficient manner, attracting more industrial companies to RAK FRZ. However, clearance from RAKFZ and environmental impact studies are required. In addition, commercial licenses allow the following activities: import, export, distribution, consolidation, storage, or warehousing of items specified on the license. The maximum limit is seven similar product lines. A general trading license can be obtained under a commercial license, which allows for more than seven product lines.

    In comparison to the other free zones in UAE, Ras Al Khaimah free zone provides a low-cost price for the company formation. Flexi facilities are shared, furnished workstations or small offices situated in Free Zone Building Number 1 and helps many start-up businesses and entrepreneurs to kick-start the operations of their dream company in UAE. Many UAE and foreign corporations and individuals looking to start their businesses in Ras Al Khaimah for this very reason. Similarly, the low cost in a flexi-desk facility and its reasonable renewal charges benefit professionals from GCC countries to obtain their consulting license and establish their presence in UAE.

    Cost effective business solution for the investors attracts many companies and individuals to the RAK free zone. Globally renowned for cost-effective company formation in RAK Free Zone, this free zone also maintains a business-friendly environment. However, the corporations relating to industrial and manufacturing enjoy incorporating in RAK free zone for the ultimate Warehouse, land facility and unique free zone parks that will suit and serve every investor according to their needs.

    On the whole, in less than ten years since its inception, the Free Zone has already developed into a world-class business hub for industrial growth and development. Business Setup in RAK free zone empowers clients and investors by offering a cost-effective and world-class economic zone with customizable packages and services along with state-of-the-art facilities.

    ]]>
    Tue, 21 Nov 2017 00:00:00 GMT
    <![CDATA[Heads of Terms]]> Heads of Terms

    "Intention is one of the most powerful forces there is. What you mean when you do a thing will always determine the outcome. The law creates the world."

     -        Brenna Yovanoff

    Overview                                                                                                                            

    Every contract is the result of an intense negotiation between the parties of the contract to settle the terms. Stemming from an oral discussion, these terms get translated onto paper and are signed by each party to record the conclusion of negotiation for the use of creating the final contract. These written provisions are called the "heads of terms." Corporate commercial transactions often begin with parties executing them. They are the first documents following non-disclosure agreements. Some of these documents are a term sheet, a Memorandum of Understanding (MOU), or a letter of intent (LOI). They predate the official final contract of a proposed transaction and are used mostly in corporate transactions: share acquisitions, loan finance, joint ventures, project financing, private equity investments, and more.

    Since they have no legal effect on each party, the UAE Courts consider heads of terms to be non-binding. The Dubai Court of Appeal states in one of their adjudicated cases that "pre-contractual negotiations are formalities with no legal effect, [because they are] preparations in anticipation of a final contract that is yet to be concluded."

    One may assume that parties will not be liable if no final agreement is ultimately reached based on the respective heads of terms. This assumption, however, is incorrect. It depends on the language used mostly. Article 257 of the UAE Civil Code[i] states that "the basic principles in contracts are the consent of the contracting party(ies) and the obligation(s) they have agreed to as set out in the contract." In the infamous case of National Bank of Umm Al Quwain (the Bank) v. Global Investment House[ii], the Dubai Courts reviewed this matter. Clause 3 of the MOU stated that the Bank and the Global Investment House (the GIH) should conclude a subscription agreement only once the Bank completes all formalities and legal matters preceding that agreement. The Court of Appeal stated that "if the wording of a contract is clear, the courts should not depart from it by way of interpretation to ascertain the intention of the parties. It is important that the negotiations produce an agreement containing the essential terms of the contract." Consequently, the Court upheld the MOU to be binding, stating that Clause 3 of the MOU contain a clear wording of the parties' intention and agreement and that they should not depart from it.

    Thus, even if heads of terms are non-binding, they often do contain legally binding provisions that are necessary for the protection of parties. The governing law, jurisdiction clauses, and confidentiality clauses still may bind parties. In a term sheet agreement, for example, a borrower will want the lender to give a binding confidentiality undertaking in respect of confidential information that the borrower provides in negotiations. In the UAE, confidentiality and exclusivity provisions are valid and enforceable only if they are clearly drafted and defined. If you breach a confidentiality undertaking, you will be liable for damages.  

    Good Faith

    UAE law also attributes great importance to the concept of good faith and the obligation of the parties to perform their contractual obligations in good faith.[iii] The existence of heads of terms gives rise to this responsibility. Depending on the provisions of these heads of terms, one may be under an obligation to keep the other party informed, cooperate with the other party in entering into a final contract, and not walk away from negotiations without good cause. Breach of the obligation to negotiate in good faith may result in payment of damages for loss suffered by the injured party and any expenses that they may have incurred in carrying on the negotiations.

    The Use of 'Subject to Contract'

    So how do we know whether the heads of terms are legally binding on the parties? It depends on all the facts of the matter and the conduct of the parties: whether we acted upon those heads of terms, how we drafted the provisions and the likes. In a recent UK case of RTS Flexible Systems v Molkerei Alois Muller GmbH, the Letter Of Intent contained no express indication of whether its terms were intended to be binding. However, it still amounted to a legally binding contract. The court held that "the comprehensive terms and the language used in the letter of intent meant that it was certain and complete to have contractual force." This Letter of Intent had contained the term "subject to contract," meaning that the Letter of Intent was intended to have been subject to a final, binding contract. The use of this phrase should create a strong presumption that parties involved in such a commercial transaction will not be bound to the LOI.[iv] However, if one begins to perform the contract as envisaged by the heads of terms, the words "subject to contract" might not be as effective as expected, as evidenced by this case. It is therefore preferable for heads of terms to spell out the parties' intention. For example, the parties may state that 'these heads of terms are not legally binding between the parties except by the provisions specifically set out in this document'; thereby, clearly stating the lack of intent of being bound to the heads of terms.

    Advantages and Disadvantages of Heads of Terms

    Disadvantages

  • Although heads of terms are not binding, one may find it difficult to maneuver a transaction if something emerges during the negotiations that had not been taken into consideration previously.
  • One may find themselves legally bound by its terms even if the parties did not have that intention.
  • Time spent arguing over the heads of terms could have been spent negotiating a definitive agreement.
  • Heads of terms will create a strong moral commitment to observe the terms agreed. Depending on the circumstances, this can be considered as an advantage or a disadvantage of heads of terms.
  • However, despite the fact that heads of terms are risky, they are helpful in many ways in corporate and commercial transactions. Some of those advantages are outlined below because of heads of terms:

    Advantages

  • Provides a framework to negotiate a final contract.
  • Initiates a moral commitment on both the parties to observe the terms agreed.
  • Provides a useful statement of major terms of the proposed deal.
  • Helps in setting out the timetable and obligations of both parties.
  • Increases efficiency.
  • Some Guidelines for Drafting Heads of Terms

    It should always be decided from the outset whether such a preliminary document should be made binding or nonbinding. If one wishes to be bound by it, it should be stated. However, if one does not desire to be bound, this may be expressly stated by using such wording as "subject to contract" or using language similar to the following:

    'The parties agree that this MOU/term sheet does not constitute a binding commitment by either party on any transaction (except the confidentiality and exclusivity sections set forth above).'

    However, one should bear in mind that the use of a precise wording or language may not alone be sufficient. One must always be careful with communication, actions, and conduct. As a general rule, one should confine the heads of terms to discussing the commercial deal only.

    Conclusion

    It is important to highlight that, before drafting heads of terms, one must have a clear understanding of what the parties wish to achieve. One should always consider issues that can be settled at the outset and which can be left on the detailed, definitive contract. If negotiations over the heads of terms stalled because of some unnecessary detail, this will delay preparation of the final agreement and increase the length and cost of the negotiations. Always remember that heads of terms can help in both defining the destination and planning a route. They should, therefore, be approached practically to avoid delay or progress in the wrong direction. 

    [i]  Federal Law Number 5 of 1987 (as amended)

    [ii] As decided on 21 May, 2012

    [iii] Article 246 of the Civil Code

    [iv]  Prudential Holborn Ltd v Fraser Williams [1993]

     

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    Mon, 20 Nov 2017 00:00:00 GMT
    <![CDATA[Mortgage of Movable Assets in Dubai and the UAE]]> Mortgage of Movable Assets

    The enactment of UAE Federal Law Number 20 of 2016 Concerning Mortgaging of Movable Properties as Security for Debts (the New Law) is a milestone towards the UAE government's initiative to bring positive changes in UAE's mortgage law. In parallel to the recent laws on commercial companies and on bankruptcy, the New Law endeavors to provide for a more certain and conducive financial regime in the UAE. The New Law bridges the gap and may result in providing business opportunity to avail of financing and lenders to safeguard their interest by a secured form of security. 

    The pivotal change that the New Law contributes to is the ability to create a pledge over moveable assets without the need to transfer the possession to the mortgagee or an alternate third party. The law preceding this one required mortgagors to transfer the possession of assets in favor of the mortgagee. The restricted the mortgagor from gaining beneficial interest from the property, consequently restricting the owner or obligor from repaying the amount of the loan. The New Law, therefore, rids of this hindrance and allows for mortgages to be created over movable property without the need to transfer possession from the mortgagor to the mortgagee.

    What constitutes assets?

    Article 3 of the New Law specifies movable assets that can be mortgaged (pledged) to include deposits in banks, raw goods and products, tools and equipment, and more. Article 2 more particularly provides that the New Law shall apply to any civil and commercial transactions that create a right of to pledge over movable assets by the provisions of the New Law.

    Security Register

    Article 10 of the New Law has laid down the conditions of registering a mortgage. A security interest by way of mortgage may only be created and affected by movable property in favor of third parties if it has been registered in the Register. Currently, the process of registration is unclear and more details on the matter is pending until the release of a Cabinet Resolution establishing the Security Registry. Further, Article 10(2) clarifies that once a mortgage right has been created on a mortgaged property and was declared according to the provisions of the New Law, no subsequent mortgage right may be created on the same mortgaged property unless through declaration thereof. This provision, along with Article 17, permits registration of ranking charges on the Security Registry. This priority in the ranking shall be determined by the date and time of registration of the pledge in the Security Registry.

    Another reason where the New Law benefits over the old regime is on account of the New Law allowing for future property to also be secured by creating mortgage over it. This move is applauded by lenders who have added comfort at the time of extending security to the obligors.

    Enforcement

    The process of registration is also a required precedent for the enforcement of the mortgage right. The provisions of the New Law have stated that the legality and application of the right specifically towards third parties must follow the Register's receipt of the registration. Following the enforcement of the rights, the mortgagee is allowed to surpass other creditors in obtaining the rights to the property.

    Process of Sale

  • There are conditions to the sale procedures of the mortgaged property that specifically Article 33 of the New Law clarifies. The provisions state that:
  • The Court may authorize the mortgagee to sell the mortgaged property after fulfilling the following conditions: (i) he obtains the issuance of the order permitting him to seize and execute against the mortgaged property and (ii) he acts with sufficient care for the sale thereof at a price not lower than the market price without following any of the sale procedures set forth in the Civil Procedure Law.
  • The Court may, if it finds it necessary to preserve the value of the mortgaged property, specify in the order permitting the mortgagee to seize and execute against the mortgaged property, the conditions of the sale method or may decide the sale method and determine a minimum limit of the sale price to be specified according to the market price.
  • The Court may rule to allow the mortgagor to sell the mortgaged property if it was proved that he could sell it at a higher price, within the period specified by the Court and under the guidance of the mortgagee or the Court.
  • If the Court allows the mortgagee to sell the mortgaged property, he shall declare the Court's decision in the Register five working days before the date specified for sale. Otherwise, it shall be considered void, provided that the declaration includes the following: -
    • Name and address of the mortgagee;
    • Names and addresses of the mortgagor and principal debtor;
    • Description of the mortgaged property to be sold;
    • Sale method;
    • Date, time and place of sale.

    Given this, the Article ends on the note that the mortgagee may be granted the permission to immediately sell a mortgaged property that has been exposed to destruction, damage or depreciation or if the mortgagor fails to provide a substitute for the great expenses that may incur.

    Conclusion

    The financial regime of a nation is vital for its growth and its economic development. The new mortgage law passed by the UAE lawmakers not only rids of the hindrance imposed on the mortgagors to deliver the possession but also places the present and future property on an equal footing.  In the wake of this new development, all the parties involved in the process of lending should be aware of the legalities surrounding mortgage and pledge of movable assets to ensure their compliance with the New Law.  

     

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    Sat, 18 Nov 2017 00:00:00 GMT
    <![CDATA[Under the Radar]]> Under the Radar

    "Real estate investing, even on a very small scale remains a tried and true means of building an individual's cash flow and wealth"

     -        Robert Kiyosaki

    It is not strange to find Dubai to be investors' favorite choice when it comes to real estate investment. Earning the name as one of the fastest developing cities in the world with limitless skyscrapers and real-estate projects announced every day, you unmistakably want to join the crowd and invest in some real estate project. However, Dubai's real estate companies are becoming more and more ambitious these days since they came out with a new trend. "Buy the house of your dreams outside Dubai"-this phrase is usually located near a picture of Eden's garden and, supposedly, the house of your dreams facing sunrise! All of this sounds tempting, and I would personally love to buy a house on top of a mountain with the perfect sunrise like from the movie 'UP'. But why would I invest in some foreign country for the house of my dreams if I am unable to place my trust in a local real-estate company to build this house right here in Dubai? Can anyone even trust such an advertisement? As outrageous as it may be: Yes! Yes, you can!

    The vision of Dubai is to create a stable city for local and foreign investors equally. To accomplish this goal, the Dubai Land Department (the Land Department) had recently issued Circular 13 of 2016 (the Circular), which has imposed serious restrictions to real estate brokers who want to advertise any property outside Dubai-even if it is on the internet. Real estate agents are not permitted to post any details of a foreign property online without being verified and approved by the Land Department. This means your house in Eden's garden does exist!

    According to the Circular 13, any real-estate company must obtain authorization from the Land Department to market properties-whether it is inside or outside the UAE. A real estate company must provide a list of documentation such as the property title deed, the marketing agreement between the broker in Dubai and property owner outside, details of the property, and whether the property is ready for purchase. Real estate brokers who intend to market foreign properties must obtain a letter from the owner of the foreign property stating the ways and terms of ownership for the likes of investors in Dubai. Further, and most importantly, the broker is not allowed to take any amount from the investor-the money is handed only to the owner of the property directly. Even the sale and purchase contract should be signed by the owner, purchaser, and broker stating the terms and conditions of the deal. When the investor and the property owner seals the deal, only then is the broker is entitled to his fees. Circular 13 has mentioned these requirements, and all real estate agents in Dubai are aware of such restrictions. Any violation by the brokers may subject him to heavy fines by the Land Department and, of course, to a Court claim by the investor.

    Therefore, the Dubai Land Department has evidently restricted the agents to facilitate the process of purchasing the property and providing all the required information related to the real estate. Other than that, investors deal with the owner of the property directly which is an accomplishment for the Land Department and a huge step towards creating transparency and a safe environment for investors.

    Why would anyone even think of buying property inside Dubai if you can get a better, cheaper deal outside? It is important to note that, even though it is safe to trust an advertisement of a foreign property in Dubai, the Circular is only protecting the investors from any false advertisements, wrong information, and fraud deals with agents listed among the Land Department. This does not mean that the Circular applies to the owners of property outside Dubai. The Circular will not protect you outside of the UAE where no one can predict what will happen. We know that, even here in Dubai, dealing with the property owners directly did not spare investors the hassle in courts or arbitration centers. From delay in the handover to vanishing from the construction site, what will prevent uncertain circumstances from happening outside Dubai? Investors cross their fingers when investing outside the region due to their lack of knowledge in the judicial system and policies of the foreign country. You can knock on that real estate door and leave no stone unturned. Knowing what is going to happen and outlining a roadmap even if you have received the worst out of your real-estate deal is better than having no roadmaps at all. Ergo, the best way to invest safely in any country-even in Dubai-is to involve your real-estate lawyer.

    ]]>
    Sat, 18 Nov 2017 00:00:00 GMT
    <![CDATA[Technical Aspects of Aircraft Lease]]> Technical Aspects of Aircraft Lease

    (Part II of II)

    In the previous issue, we discussed the various categories of aircraft lease such as a wet lease, dry lease, and damp lease. We also covered broadly the legal requirements for leasing an aircraft in the UAE and its implications. The aviation lawyers at STA continue with part II of this series and discuss the technical and legal dimensions of aircraft lease in India and Singapore.

    India

    The Director-General of Civil Aviation (the DGCA) under Government of India is the authority regulating civil aviation industry. Following are the regulations which govern the legal aspects of leasing by Indian operators of Indian or foreign registered aircraft. DGCA's authorization or permission is mandatory before leasing an aircraft in India.

    The lease to an Indian operator with or without change of aircraft registration is a "lease in" whereas "lease out" is referred to the lease of Indian registered aircraft to a foreign operator with or without change of aircraft registration. Leasing between scheduled and a non-scheduled operator is not permitted, and it should be between two scheduled or two non-scheduled operators.

    Leasing process

    The parties, to get aircraft on lease, must submit an application before DGCA (Air Transport Directorate) for approval of lease arrangement. The Indian operator or registered owner shall submit the following document(s) before forty-five (45) days of proposed commencement of operations: (a) 3 sets Aircraft Leasing Form (LF-1 - foreign registered aircraft leased to Indian operators);(LF-2 - Indian registered aircraft leased to foreign operator); (LF-3 -  leasing planes by an Indian from another Indian player to ) (b) a copy of the lease agreement and other documentation that confirms compliance with Section 3, Air Transport Series 'C' Part I - Civil Aviation Requirements (c) Consent of Foreign Civil Aviation Authority – which is required before a leasing permission.

    Requirements

    While granting permission for a lease arrangement, the DGCA (ATC) will examine fulfillment of certain requirements which are as follows:

           I.          Foreign registered aircraft can be leased by Indian operator if they are operating at least one aircraft registered in India on its Air Operator Permit (AOP). Further, the aircraft eligibility requirement is provided to be considered eligible for seeking permission:

                               i.          It must be in DGCA–type acceptance list;

                              ii.          registered with the foreign State;

                             iii.          have a valid Certificate of Airworthiness, and

                             iv.          will not be the subject of another lease in the term of the lease authorized by DGCA for that specific aircraft;

                              v.          less than 15 years of age for passenger transportation and less than 25 years of age for cargo operations;

                             vi.          Further, the aircraft should not have completed more than 45,000 pressurization cycles free from accident or seventy-five (75%) of its design economic life and have its maintenance program approved by the foreign regulatory authority.

         II.          For Indian registered aircraft leased to the foreign operator, it is required that the Indian air operator does not lease aircraft exceeding 25% of the total number of Indian aircraft registered of that operator to a foreign air operator.

        III.          The Indian operator leasing the aircraft to Indian operator shall not lease if such lease will affect disruptively the lessor's own schedule.

    General requirements include inspection of aircraft and review of maintenance records for long-term airworthiness for aircraft that are subject to Airworthiness Directive (AD) with particular attention to factors stated in Civil Aviation Requirements (CAR). If the foreign air operator maintains the aircraft, the organization that will perform and certifies the work must have a valid maintenance approval for the aircraft type which is the subject of the leasing transaction, issued by the airworthiness authority of the country of the lessee. This permission will ensure that an evaluation of the maintenance organization has been carried out by the respective foreign civil aviation regulatory authority.

    Additionally, if the Indian operator leases the aircraft to a foreign operator, the DGCA inspectors will evaluate the external air operator's ability to maintain the plane to the Indian airworthiness standards by:

    (i) investigating the suggested maintenance facility; (ii) reviewing the qualification(s) of maintenance personnel; (iii) supervising certification responsibilities; (iv) ensuring the operator is informed of and will comply with Indian standards in all respects; and (v) review foreign maintenance laws to determine their norms and whether they conflict with the Indian rules.

    Wet and damp lease requirements

    The lessor is liable for operational control of the aircraft during the term of the lease. In a damp lease, the operational monitoring and qualification(s) of crew provided by the lessee should be addressed and aligned along with the lessor's operations policies. Wet or damp lease (in) is permitted only in emergency situations by the DGCA. Situation(s) cover unexpected grounding of the aircraft holding existing AOP/AOC, aircraft(s) under scheduled maintenance or checks or in any other unforeseen circumstances.  In above cases, wet leasing is permitted only for the duration of the grounding of aircraft. Further, Wet or damp lease (In) is not entitled to capacity or route expansion purpose of an existing AOP/AOC holder. The abovementioned provisions will not apply in the case of lease executed by the government.

    Dry lease requirements

    The lessee is liable for the operational control of the aircraft under its AOP/AOC for the duration of the lease. The period is twelve (12) months, subject to one-time extension of additional twelve (12) months. All the requirements relating to foreign registered aircraft will uniformly apply to a dry or wet lease.

    Airworthiness Requirements

    The foreign aircraft must be certificated as per FAA/EASA regulations. To be imported, they shall meet the age criteria as stated above and as laid down in DGCACAR Section 2, Series F, and Part XX.

    The aircraft should have following valid certificates issued by the State of Registry at the time of import:

           i.          Certificate of Registration

          ii.          Certificate of Airworthiness

         iii.          Airworthiness Review Certificate (if applicable)

         iv.          Noise Certificate

          v.          Weight Schedule

         vi.          (LOPA) Layout Plan of Passenger Arrangement or (EELC) Emergency Equipment Location Chart

       vii.          Aero Mobile Station License

      viii.          Air Operator Certificate/Permit

    It is the responsibility of Indian operator to ensure that the above documents remain valid during the entire term of the lease. The aircraft should conform with the minimum equipment requirements specified in applicable CARs of DGCA. CAR Section 3 –Air Transport Series 'C', Part XIII, Issue I has laid down the training and operations criteria.

    The restrictions attached to wet lease makes it difficult for Indian operators to lease for short term and the dry lease has, therefore, become a more prevalent practice in India while considering leasing option. Negotiating with the understanding of regulations will provide better leasing partnership clauses.

    Singapore

    Singapore provides benefits of the Aircraft Leasing Incentive Scheme (ALS) to an approved aviation leasing companies which derive income from the onshore or offshore leasing of any aircraft or aircraft engine or any other prescribed activity.  A concessionary tax rate of 5% or 10% for five years provided to such approved aircraft leasing companies.

    An ALS approved company, on a case by case basis, may apply to a withholding tax (WHT) exemption at interest and qualifying related payment(s) from qualifying foreign loan(s) that finance the acquisition of the aircraft or aircraft engines. WHT exemption for interest and qualifying payments on loans undertaken by ALS approved companies from non-resident lenders (excluding permanent establishments in Singapore) obtained before 31 March 2017 to finance the purchase of aircraft or aircraft engines is attached to ALS.

    The Civil Aviation Authority of Singapore (the CAAS) deals with regulations on the civil aviation industry. The reference to regulatory regime discussed for this country is a reference to AC AOC-8(2) dated 11 April 2011 which is advisory circular, except provided otherwise. Under Singaporean law as well leasing in of foreign registered aircraft by a Singapore AOC holder is called "lease in" and lease (out) of Singapore registered aircraft to an international operator is called "lease out" and lease of Singapore registered aircraft between Singapore AOC holders is called "Intra-State Wet Lease."

    CAAS' leasing policy under Clause 13 lays down obligations expected from lessee and lessor in operational leases (which includes wet and dry lease).

    Wet lease

    The obligations laid down for wet lease are as follows:

           i.          The parties must hold valid air operator certificates throughout the duration of the term of the lease.

          ii.          The lessor must have operational control of the aircraft.

         iii.          For wet leasing arrangements among Singapore air operators, the lessee should assure that the lessor maintains the aircraft through the lessor's approved maintenance program.

         iv.          For wet lease in arrangements, the lessee must ensure that reportable occurrences and incidents affecting the leased aircraft are reported to CAAS.

    Duration of the wet lease in is stated to be six months, subject to a one-time extension of an additional six months. Whereas, wet lease out can be for twelve (12) months.

    Dry Lease

    For dry lease-out arrangements, the lessee should control the subject aircraft as per Singapore requirements. For dry lease in arrangements, the lessee should ensure that the plane equipment relating to flight operations meets Singapore's standards.

    Duration of a dry lease in is 12 months, and dry lease-out is also 12 months, subject to a one-time extension of an additional 12 months.

    General Requirements

    In all types of leasing arrangements, paragraph 88 of the Air Navigation Order (ANO) requires Singapore AOC holders to report to CAAS all reportable occurrences involving the leased aircraft. CAAS may, on a case by case basis, prescribe additional requirements relating to the lease arrangement. Intra-State wet lease duration is provided for 12 months, subject to a one-time extension for an additional 12 months. Singapore AOC holders that need to rent an aircraft for a period longer than the stipulated term in Table 2 i.e. as provided above for wet, dry lease and the Intra-State wet lease will need to provide justifications to CAAS for the requested extension of contract duration. CAAS' approval for lease arrangements involving Singapore AOC holders and Singapore registered aircraft is mandatory before executing the lease. 

    Maintenance Organization Approval (SAR-145)

    Any organization intending to maintain a Singapore-registered aircraft or component fitted on Singapore-registered aircraft shall hold a SAR-145 Maintenance Organization Approval.

    Singapore Airworthiness Requirements

    Various CAAS revisions issues and the latest being Revision 25 (issue 2) dated 11 January 2017 of Revisions Number 21 (Issue 2) which was valid from 9 February 2015 has laid down the airworthiness requirements of Singapore. Singapore Airworthiness Requirements (SAR) has set out the minimum requirements in respect of maintenance requirements, airworthiness of aircraft, licensing of aircraft maintenance engineers, aircraft engineering, and the approval of persons and organizations. Failing to comply with the provisions provided in SAR cause suspension of or revocation of, the license and approval and may be subject to the penalties provided under Thirteenth Schedule and the section 80 (5) and (6) of the ANO which includes fine as well as imprisonment up to 5 years.

    After submitting an application for airworthiness before DGCA, an inspection of all the relevant data and records (as stated in Appendix I of chapter 2.2 under SAR) should be produced. Under the Appendix different documents as per new aircraft, first-of-type aircraft, and used aircraft. The general requirement(s) for a new aircraft include the documents such as list of Service Bulletins (including Alert Service Bulletins on aircraft engines, propellers (as applicable) and equipment, equipment list, noise certificate, etc.), Export Certificates of Airworthiness for the aircraft, engines, and propellers (as applicable) etc.

    Conclusion

    Singapore is striving to be aircraft leasing hub of Asia by providing various incentives in the form of ALS and WHT. Further, Singapore also added explicit declaration under the Cape Town Convention for availing self-help remedies for creditors thereby facilitating creditors and insolvency administrators under Singapore Cape Town Act a better option for deregistration of the aircraft and the possession of aircraft by exporting and physical transfer of the plane from Singapore. An authorized party can exercise this through lodging of an irrevocable de-registration and export request authorization with the CAAS. Ergo, it is evident that Singapore is certainly challenging Ireland's position as leading aircraft leasing country though Ireland has retained its global clientele.

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    Wed, 15 Nov 2017 00:00:00 GMT
    <![CDATA[Claiming Demurrage for Unreturned Containers]]> CLAIMING DEMURRAGE FOR UNRETURNED CONTAINERS

    A Case Study

    Time and tide wait for none. The earliest acknowledged record of this proverb is by St. Marher in 1225; however, the actual origin of this saying cannot be certainly determined. St. Marher had stated that 'te tide and te time þat tu iboren were, schal beon iblescet'. Although the essence of this proverb is about the value of time, we have observed that it has substantial nexus with the concept of shipping and maritime activities.

    A few centuries ago, there were no flights to transport goods in a day's time. Ergo, large containers that consume substantial space, finances, and physical effort to were employed to carry and store the consignment. For instance, person A had sent a container from the United States to Dubai. However, A's associates, who were assigned to take delivery of the goods in Dubai had failed to do so. Unlike rejecting your everyday online purchases at the time of its delivery, it is pretty strenuous to send back a container that weighs over a couple of tons back to another corner of the world. Carrying cargo by sea also permits merchants to consign a larger quantity of goods with reduced freight charges and, undeniably, no retailer prefers to pay more. The aviation industry is a relatively novel compared to the shipping and maritime industry. The origin of containerization of goods dates back to the early eighteenth century used for the purpose of railways trade. However, with the surge in international trade, the need for container shipping increased, and several governments further developed the containerization system for efficient trading of supply cargos. Since then the industry has grown tremendously to the extent that each day thousands of containers arrive at seaports from various countries around the world. Globalization further supplemented to this phenomenon and succored liner shipping to emerge as one of the crucial elements of international trade and commerce. Everyone can now avail these shipping services, and therefore it resembles, in principle, a public transportation service carried out with the help of containers of various capacities.

    The nature of transaction for the supply of the container to a merchant is similar to the contract for a supply of vessel to a voyage charterer under a charter party. Accordingly, the parties may incur an extra charge for the usage of the container beyond the agreed time.

    The merchants are granted a schedule in their contract, under container demurrage clause, to unload the container and any additional usage of time beyond the given time is considered chargeable. Therefore, container demurrage is often charged by the shipping lines for not returning the containers in a reasonable period or in the agreed time.

    The demurrage is liquidated damages in western as well as common law jurisdictions. However, under UAE law, demurrage is chargeable for a fixed period beyond the agreed time and additional terms as provided under Article 231 of the Federal Law Number 26 of 1981 on Maritime Commercial Law (the Maritime Law). Over and above the stated period, demurrage is comprehended to be applied as per the customs under Article 8 (2) of the Maritime Law and therefore, considered as liquidated damages.

    Since the demurrage provisions and specifically container demurrage remains untested under UAE laws there remains a possibility for application of established international customs. Given the same, it becomes pertinent to be acquainted with the updates on international regime over the issue.

    In the case of MSC Mediterranean Shipping Company SA V Cottonex Anstalt 2016[i], the court of appeal in agreement with Justice Leggatt's judgment under MSC Mediterranean Shipping Co SA v Cottonex Anstalt 2015[ii], decided whether the obligation of the merchant to re-deliver the containers continues indefinitely and also defined the scope of their liability to pay demurrage. Further, the courts also looked into the issue of non-breaching party's exercise of the option to keep the contract active and the nature of their duty to mitigate the losses.

    Facts of the Case

    MSC Mediterranean Shipping Company SA, one of the largest carriers of shipping containers in the world was the claimant in the case mentioned above whereas Cottonex Anstalt, a cotton merchant was the defendant. In 2011, MSC contracted with the respondent, to carry raw cotton in its containers to Bangladesh. The carrier company (MSC) took 35 containers of raw cotton to Bangladesh as per five (5) bills of lading, and Cottonex was the shipper. The Shipper had agreed on the sale of such cotton to the Bangladeshi receiver company. By the time the goods arrived at the port of Chittagong, the world market for raw cotton had collapsed, and consequentially the market prices for the cotton plunged. Thus, the Bangladeshi receiver i.e. consignee of a shipment of containerized cotton refused to collect the goods and failed to take delivery at the port of discharge in Chittagong, Bangladesh.

    Consignee's bank issued a letter of credit and despite the consignee's attempt to prevent payment, the bank paid to the Cottonex. Consequently, the ownership of the goods transferred to the recipient and Cottonex was rendered incapable of unloading the goods and returned the containers to MSC. Meanwhile, the Bangladeshi customs authority disallowed anyone from emptying the containers without a court order while there was an ongoing dispute between consignee and its bank.

    Under the bill of ladings, Cottenex was obliged to return the containers within fourteen (14) days from the date of discharge. MSC sought to recover the demurrage for unreturned containers from Cottonex as per the agreed bill of ladings and began charging them demurrage after 14 days of free-time even though Cottonex had lost title over the goods and was incapable of collecting it. Therefore, Cottonex refused to pay demurrage as being devoid of claim over goods and being paid through the letter of credit, thereby having no authority to deal with cotton or container and Cottonex no longer remained a legal holder of the bills of lading. The claim of demurrage from MSC left Cottonex potentially liable for open-ended liability until the matter was under trial.  Till the time the issue reached trial proceedings, the containers remained uncollected on the port of Chittagong for almost three (3) and half years after they arrived and the total claim amount for demurrage was more than US Dollars one million which was ten times more the replacement value of the containers.

    MSC also offered Cottonex to buy the container in 2012 but the offer was refused. The case was filed by MSC in London in 2011 to recover the demurrage which runs till the time the container is returned amounting to US Dollars 1 million and kept counting.

    Court of First Instance

    The main issues raised during the trial were liquidated damages and duty to mitigate, repudiatory breach of contract and duty to act in good faith.

    Cottonex advanced the following arguments in defense against the demurrage claims:

           i.          MSC should have taken steps to mitigate the losses by unpacking and returning the containers or by buying the replacement containers.

          ii.          Cottonex conveyed their unwillingness and incapability to re-deliver the container to MSC. Hence, Cottonex had repudiated the contract and following that MSC had no "legitimate interest" in affirming the contract.

    In February 2015, Justice Leggatt held that MSC ceased to have a legitimate interest in keeping the agreement alive in expectation of future performance as Cottonex made it clear that they are neither able to nor willing to redeliver containers without excessive delay. However, there was no obligation on the MSC to mitigate losses as the demurrage provisions are considered liquidated damages clause which excludes the duty to mitigate. According to Leggatt J, MSC did not have unfettered right to avoid a repudiatory breach and claim the liquidated damages for indefinite period making the liquidated damages an unenforceable penalty. Further, there was no evidence of financial loss to MSC, and if such detention of container prevented the MSC from performing future contractual obligations, MSC would have purchased the replacement containers.

    After reviewing some case laws, the court came to the conclusion that following Cottonex's repudiation of contract MSC only had a right to affirm the contract and claim demurrage if it had a legitimate interest in it. However, in given circumstances, MSC, the Carrier, had no legitimate interest in keeping the contracts of carriage alive after that date to continue claiming demurrage for an unlimited period as such act is wholly unreasonable. Finally, the court acknowledged, but did not create any precedent regarding the increasing need for good faith in contractual dealings and for the purpose of which it stated that it should not be exercised "arbitrarily, capriciously or unreasonably."

    Court of Appeal

    Aggrieved by the judgment, MSC appealed before the Court of Appeal (CA) and persisted with the same argument as put before the court of the first instance. MSC again argued that the Cottonex was duty bound under contractual obligations to return the containers and such commitment continues indefinitely, and so continues the demurrage. The CA disagreed with MSC's argument and in consonance with Justice Leggatt's opinion on the issue of continuing liability for an indefinite period. However, the CA did not agree with Leggatt J's rationale as to when the accruing demurrage had come to an end.

    Repudiatory Breach

    The CA held that failing to return the container amounts to a breach of contract but such breach was not immediately repudiatory. Leggatt J stated that not returning the container amounts to a repudiatory breach only when the delay renders the performance of the other obligations under the contract of carriage fundamentally distinct from those which the parties had initially undertaken. Another instance of a repudiatory breach was when the delay was continuing as long as it can be comprehended by a reasonable person in the position of the parties that the delay is likely to last that long. As per Leggatt J such period was when MSC had no title to the goods or possession of the bill of ladings. However, CA disagreed with the view and adjudicated that such incident happened in 2012 when MSC offered Cottonex to buy such containers and the offer was declined which is the clearest indication that the purpose has been frustrated.

    Consequences of Repudiatory breach

    Justice Moore-Bick L. agreed on the issue of no legitimate interest to carry on with an affirmation of the breached contract and adjudicated that there was no option of affirming the contract once the performance sought becomes impossible and the adventure frustrated as if the shipper or whosoever responsible has destroyed the containers. Therefore, the innocent party has no right to affirm the contract as the operation of law will automatically discharge the contract.

    Conclusion

    This case certainly has vast implications for container trade and shipping lines. The shipping lines need to consider re-drafting their contracts as the demurrage cannot be kept open-ended as provided in the judgment which would have significant value in the UAE or case of contracts being governed by English law. STA's team of shipping lawyers in Dubai will be happy to assist you through the process of re-drafting and to advise on implications of unreturned containers in UAE and under English law.


    [i] MSC Mediterranean Shipping Company SA v. Cottonex Anstalt [2016] EWCA Civ 789

    [ii] MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2015] EWHC 283 (Comm)

     

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    Tue, 14 Nov 2017 00:00:00 GMT
    <![CDATA[The Law on Insider Trading]]> INSIDER TRADING BETWEEN FRIENDS AND FAMILY

    "The stock market is a device for transferring money from the impatient to the patient."

                                                                                                                                      - Warren Buffet

    The term insider trading has been popular amongst headlines of newspapers for a while now and has been subject to the argument of whether it's pertinence to family and friend is legal or not. Assume you are the chief executive officer of an organization that is about to report a major merger which will push up your stock costs. Through your enthusiasm, you inform a close companion of your actions, leading him to conclude that it is in his best interest to purchase shares in your organization. Through this tipping, have you broken your obligation to your organization and its shareholders by providing your friend or family the information for their profit? Would this amount to insider trading? Let's read further to find out.

    In the case of Salman v. the United States[i], the United States Supreme Court observed and ruled on whether a tip on confidential information by an insider to a friend or relative amount to insider-trading. This article sets to provide a brief analysis of the case and discuss the status quo of insider trading between friends and family in other major jurisdictions.

    Background

    In 2002, Maher Kara started working for Citigroup in its social insurance venture for managing an account group. Throughout the following couple of years, Maher looked for assistance from his sibling Michael Kara to better comprehend the science behind his work. By 2004, Maher was sharing secret data about Citigroup's practices. From 2004 to 2007, Maher intentionally uncovered data about upcoming mergers and acquisitions by Citigroup customers. Maher had confessed to providing Michael, his brother, with information and data to profit him-of which Michael denied. Maher and Michael were to a great degree. Maher affirmed that he gave Michael the data to benefit Michael. Meanwhile, Michael got engaged to Bassam Yacoub Salman's sister and started to share some of the insider information, he got from his sibling, with Salman. However, Salman did not particularly exchange through his account but rather used his brother-in-law, Karim Bayyouk's account to trade approximately USD 2.1 million. There were various events where Bayyouk and Michael Kara executed similar trades issued by Citigroup's customers. When things went bad, Salman was accused and convicted of insider trading in 2011. He filed for another trial; although, the court denied his appeal. Therefore, he filed the case with the U.S. Court of Appeals for the Ninth Circuit and contended that there was no proof indicating his knowledge that the data utilized for exchanges was obtained from insider trading. In the meanwhile, the precedent set by the Court in Dirks v. SEC[ii] elucidated that the liability of the tippee is based on whether the tipper breached a fiduciary duty by disclosing the information. The tipper discloses a fiduciary information when the disclosure of information is for a personal benefit.

    Therefore, the court looked for an explanation on two issues to determine the petitioner's liability: (1) Under Dirks case, does the individual advantage to the insider be monetary or is a familial relationship enough; and (2) Can inability to research where the tip originated from constituting resolute visual impairment? After studying the issues, the appellate court found that there was adequate proof that Salman knew he was trading on insider data, given the close family relationship.

    The Ruling of the Apex Court

    Subsequently, On January 19, 2016, a case was brought before the Supreme Court by writ of certiorari[iii] regarding the main issue. The main issue was whether the evidence of a family relationship adequate to maintain a conviction for insider trading or should there be proof that the people involved were aware of the potential monetary profit accumulated through the trading of data? The jury led by Justice Samuel A. Alito, Jr. could deduce that the tipper benefitted by providing confidential data to a relative who was interested in trading. The apex court took purview of the judgment of the appellate court and held that the family relationship was adequate proof that Salman realized that he was leaking insider confidential information. An individual is said to commit insider trading when the informant has a tip that benefits him. Here, Maher tipped off his sibling Michael, which stated that Maher profited by the divulgence and had in this manner abused his obligation to Citigroup. Further, Salman was guilty of insider trading because he realized that the data was obtained from insider trading and Maher remained to profit by its revelation. Consequently, the Court found that Salman's learning of Maher's potential for personal advantage from the tip upheld his conviction for insider trading.

    US Insider Trading Laws

    The following statues and regulations have elucidated insider trading in the US:

    • Securities Exchange Act of 1934;
    • Insider Trading Sanctions Act of 1984;
    • Insider Trading and Securities Fraud Enforcement Act of 1988; and
    • Stop Trading on Congressional Knowledge (STOCK) Act of 2012.

    Regulations promulgated under the Securities Exchange Act of 1934 are as follows:-

    10b5-1 - Trading "from Material Nonpublic Information in Insider Trading Cases,

    10b5-2 - Duties of Trust (or Confidence) against Misappropriation in Insider Trading Cases;

    14e-3 defines Transactions in Securities based on Material, Nonpublic Information in the Context of Tender Offers.

    Criminal Penalties: Section 32(a) of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002, penalizes individual(s) with up to twenty (20) years imprisonment for securities fraud and/or a fine up to USD 5 million for each willful violation of the Securities Exchange Act and the regulations under it. However, the defendant will not be criminally liable if he or she can prove that he had no knowledge of the violation of the particular rule or regulation. In such cases, the violator may only have to pay the fine prescribed. Further, corporate entities may attract a fine not more than USD 25 million in a case of insider trading.

    Civil Penalties: Parties guilty of insider trading are mandated to pay the Federal Government an amount equal (summing up) to the profit made or loss avoided. Further, Section 21A of the Securities Exchange Act of 1934 states that a convict of insider trading may also be fined with a penalty of up to three times that amount may also be barred from taking up the office of a director of a public company.

    "Insider trading tells everybody at precisely the wrong time that everything is rigged, and only people who have a billion dollars and have access to and are best friends with people who are on boards of directors of major companies they're the only ones who can make a true buck"

    -        Preet Bharara

    A Global Analysis

    The United Arab Emirates

    Article 37 and Article 39 of the Federal Law Number 4 of 2000 (the Law), established UAE Securities and Commodities Authorities (the Authority) governed by a Board of Directors prohibiting the existence of insider trading in the UAE. Article 37 of the Law has prohibited the utilization of undisclosed information that may affect the prices of securities for personal benefits.

    Further, Article 39 states that no person may deal in securities based on unannounced or undisclosed information that he or she may have obtained their position. It is also not permissible to spread rumors about the sale or purchase of shares. The chairman, management, or staff members of any company shall not use their inside information about their company to buy or sell shares in the market. The Law has also prohibited employees from trading in their company's stock, and exceptions to this rule have been laid down under Article 38 of the Law. The chairman, board members, general manager or any staff of a company listed on the stock market can do any transaction in securities of the same company in person or through others by disclosing relevant information required by the market and getting an approval of the company's board of directors for the transaction.

    India

    Insider Trading in India is an offense under section 195 of the Companies Act, 2013, and sections 12(A) and 15(G) of the Securities and Exchange Board of India Act, 1992. Insider trading happens when we enable access to the undisclosed, price sensitive information about the securities of the company subscribes, buys, sells, deals, or agrees to do so or counsels another to do as principal or agent. Punishment for insider trading is imprisonment up to five years and fine ranging from Indian rupees five lakh (INR 5,00,000) to Indian rupees twenty-five crore (INR 25,00,00,000) or three times the benefit made; whichever is higher.

    [i] 580 U.S. __ (2016)

    [ii] 463 U.S. 646

    [iii] A writ that authorizes a higher court to review a case tried in a lower court.

     

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    Sun, 12 Nov 2017 00:00:00 GMT
    <![CDATA[Piracy and its Consequences under UAE Law]]> Piracy and its Consequences

    The digital age has undeniably provided us with many benefits that we use on a daily basis. With the internet and the ability to communicate globally and share information with only a click of a button, the human reach can go beyond political borders. However, one unfortunate detriment to today's abundance of technology is that, often, the information that is being shared has been illicitly obtained by pirates. "Pirates" here is not referring to the men on ships who loot other ships for treasure, limping on wooden legs and screaming "Arrr!" at the top of their lungs. Pirates are, in fact, another term for people who illegally distribute copyrighted information and material ranging from computer software to movies. With no authorization or licenses, these pirates reproduce, use, and share these materials without the consent of the authors or copyright holders. Consumers who enjoy these pirated materials are usually unaware of the negative impact it holds. Governments around the world have been collaborating via the services of international organizations, such as the World Intellectual Property Organization (WIPO), to combat piracy and find solutions to the illegal circulation of copyrighted works.

    You may be wondering why piracy is illegal anyway, especially when pirated content is reaching a wider spectrum of audiences who are otherwise unable to enjoy it, whether the reason is due to the price of the original material or the overall availability of it. Most pirated products of large companies that receive profits so massive that a few bucks would not necessarily hurt them-or, at least, that is a common belief. However, what people fail to realize is that, behind these multi-billionaire industries, original authors are the ones who are getting damaged the most. These authors are usually under a contract or agreement that is heavily based on the sales of their work, receiving a certain percentage of the profit their work makes. A publisher, for example, may agree to help in selling the book of an author under the condition that he or she receive twenty (20) percent and they receive the remaining 80 percent. The fewer purchases of the book, the fewer profit the publishers are receiving, and the fewer money goes into the pockets of the original writer. Though the publisher loses the chance of gaining profit, the greater impact is on the author who depends on the sales of their work. This is just one micro-example of the negative connotation that piracy entails. This makes it becomes difficult for artists, programmers, and the likes to make a living out of their work if all who consume it do it through piracy.

    From UAE's Perspective

    What have governments been doing to combat this? Let's take the United Arab Emirates as an example. According to a study in 2016 by the Software Alliance (BSA), the UAE has one of the lowest rates of unlicensed software installation. In fact, despite the widespread piracy issue in the Middle East, the UAE has been active in its efforts to combat and reduce piracy within its borders. The government has implemented copyright and trademark laws that, aside from providing an umbrella of protection for original authors and their works, are hostile towards pirates who misuse the material. There is a higher risk for pirates to prosper here in the UAE. If caught, they can be jailed, face charges of vast amounts, or risk the possibility of getting deported-depending on their case and the court rulings. The UAE has been putting forth laws that are in favor of copyright holders as intellectual property is one of the priorities of the government. The primary referenced and implemented is the Federal Law Number 7 of 2002 amended by Law Number 32 of 2006 regarding Copyright & Related Rights (the Law). The law strictly protects copyright holders in the UAE. This initiative began roughly in the year 2011 after the Department of Economic Development in Dubai published a report titled 'A Small and Medium Enterprises Development Perspective of the Media Industry in Dubai'. This report included the issues of piracy found across different sectors of the media industry and emphasized the lack of strict enforcement regarding them. It was published in 2010 and, since then, the UAE has been working hard on removing the threat of piracy within its community.

    Despite the active efforts of the government, there are still pirates who distribute copyrighted material either through the internet or by selling them illegally. There is a high number of consumers in the UAE who often download movies or television shows through user-friendly torrent sites -which are illegal. While the government advises against supporting piracy, their efforts have been focused on catching the pirates themselves and not the consumers. There are very often cases of the authorities catching and charging people who contribute to the unauthorized distribution of material. For example, authorities in the UAE have seized and raided a collection of shops found across the Emirates for the unlicensed and illegal selling of services from the Orbit Showtime Network (OSN). OSN, a television satellite provider, has collaborated with the government to combat piracy of their products and help in protecting the broadcasting industry-which loses approximately 1.8 billion AED per year due to piracy. These shops undergo a process of investigation by the Criminal Investigation Department or the Department of Economic Development of the respective emirate, following by a forced shut-down and a hefty fine (up to 10,000 AED). In some cases, managers of the shops were required deported from the country. For another example, individuals have been caught uploading pirated movies online. The justification is quite simply the infringement of the copyright and trademark laws that the UAE implements. Copyright holders, such as OSN in this case, can directly report violations of their intellectual property rights-of which the government immediately begins investigating.

    OSN has also been cracking down on individual pirates, who upload their services online without a price. Back in 2016, an expat in Abu Dhabi has been sentenced to jail by the court for six months. He was ordered to pay a fine of a whopping 50,000 AED served as compensation to OSN for directly breaching their intellectual property rights. The man had been creating torrents of movies and television shows from OSN's channels and uploading them directly to a pirate website-of which the authorities have blocked indefinitely following this case. This is not the first of such a circumstance. This act of copyright infringement happened as well back in 2015, where a man was guilty of pirating an Arabic film in a movie theater at the same time. The producer of the film had contacted the authorities to seize the pirate and remove the content from the internet. This verdict was in favor of the producer, with the pirate getting arrested and his devices getting confiscated.

    There are even many more cases before this where pirates risk a penalty for their behavior. Currently, a piracy issue that is plaguing the South Asian community in the UAE is regarding the illegal selling and purchasing of unlicensed international satellites services. These receivers provide international television channels that are otherwise unavailable in this country. According to reports, authorized service providers have been losing up to 40 percent of profits due to residents choosing to subscribe to these unauthorized dishes. Subscribing to satellite providers such as Dish TV, Tata Sky, and Airtel is seen as cheaper than the legal television services in the UAE. Television broadcasters across the country have been collaborating alongside the competent authorities to fight television piracy to protect their intellectual property. Within UAE law, these satellite providers have full authority to enforce their rights regarding this matter. They had taken this matter into their own hands and hoped to win this piracy battle.

    Nexus with Intellectual Property

    Intellectual property rights, as aforementioned, is being taken more and more seriously in the UAE and any violations of such rights will be subject to legal action by the court. Pirates have been penalized for their criminal offenses regarding their actions. Whether it be multi-billionaire corporations or small underground artists, the local authorities are putting in their best efforts to protect their rights and, moreover, to maintain their reputation as the only Arab country within the list of countries with the lowest rates of piracy, according to the BSA study. Their means of fighting piracy is, as the cases given above, have been hostile towards pirates who disrespect the copyright laws of the country. Sure, these pirates get to enjoy content for a low or non-existent price-but at what cost? Is it worth having a criminal record and risking deportation?  Sometimes, unfortunately, pirates can get away with their behavior, especially through using Virtual Private Network (VPN) services that protect their identities. Still, the authorities have recently developed technology to track down the IP address of VPN users-making VPN an inadequate means for pirates to protect their identities.

    Efforts in combating piracy are also related to the UAE's efforts in becoming the hub of entrepreneurship and creativity within the Middle East. If piracy prevails and the intellectual property rights of creators are not being protected or respected, then the country risks losing the chance of hosting innovators-especially with the highly anticipated Expo 2020 in Dubai. Industries around the world are subject to losing profit due to the existing piracy within each country. The government has to continue with cracking down on these pirates to dominate internationally. Of course, the UAE is also currently concerned with cracking down on actual pirates who are terrorizing the seas and hijacking commercial ships-but that's a different story for a different day.

    Before anyone decides to download a torrent of that movie that was recently in the cinemas or that game that they have been trying to get around to, they should consider the impact that will result from their actions. Their simple act of enjoying a pirated material free of charge could be costing hard workers lots of money that they deserve. They would be risking getting those creatives out of business due to the loss of profits and risking getting caught by the authorities. Moreover, they would be supporting online pirates who act illegally in the UAE and are being currently sought out after. Better stay safe than sorry and stick to the legal alternatives!

    This Article was originally authored by Sara Al Harfan with help of STA's team of intellectual property lawyers in Dubai

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    Sat, 11 Nov 2017 13:00:00 GMT
    <![CDATA[Mining in UAE: Overview Q&A]]> Overview

    1. What are the recent developments in the exploration and extraction of mineral resources in the United Arab Emirates? 

    Response: Mineral resources in the United Arab Emirates (the UAE) are separated into three essential classifications: rocks; sands and soil; and metals. The exploration and exploitation of minerals are only confined to rocks and sands. Whereby, rocks are utilized for construction whereas, limestone, sand, marl, gypsum are utilized to manufacture cement.    The mining sector in UAE has turned out to be a standout amongst the most promising production sectors such as oil fields. It isn't surprising that in coming future minerals of the UAE will pull potential investors around the globe.    UAE has a long list of minerals ranging from copper mines, gypsum to the extraction of metals and valuable stones. The main minerals that are explored and extracted in the country are:   
    • Aluminium; 
    • ammonia; 
    • chromite;
    • gypsum; 
    • hydraulic Cement; 
    • quicklime and hydrated lime;
    • dead-burned dolomite; and
    • Raw steel. 
    The Emirate of Fujairah is bestowed with minerals and the mining business or related ventures are major wellsprings of income and are the spine of Fujairah economy. In 2014 the total production of minerals in the emirate was about 102 million Mt. tons. Out of which 80% was used in the country and rest 20% was exported to the neighboring countries such as India, Bahrain, Qatar, and Kuwait.    Organizations around the globe have effectively invested in the mining sector in UAE. Generally, Indian companies mainly invest in the exploration and exploitation of chrome and precious metals. Further, Dubai Gold center a company incorporated in Dubai Multi Commodity Centre (the DMCC) has traded more than US$70 billion of gold in 2013-14, which is almost twice the amount traded in 2011-12.    Dubai Diamond Exchange (the DDE), a subsidiary of DMCC and a leading diamond trader worldwide. In 2016, DDE imported $12.4 billion worth rough diamonds and $13.2 billion was re-exported. In 2006, DDE was made the sole gateway for imports and exports polished diamonds in the UAE.    Aluminium smelting is increasing in UAE with prospects of building up the world's biggest aluminum smelter in Abu Dhabi and Dubai. But the core of the UAE's aluminum ventures remains solely inside its own borders. Emirates Global Aluminium PJSC is the major producers of aluminum in the country. It is an aluminum conglomerate with interests in alumina/bauxite and essential aluminum smelting. The company has produced 2.5 million tonnes of hot metal in 2015. However, the most noteworthy investment is based on a Joint Development Agreement (the JDA) between Mubadala, owned by Abu Dhabi Government and DubaL with a capacity of 1.2 million tonnes a year.    In 2014, Ministry of Energy participated in the Middle East and North Africa (the MENA) mining conference, one of the largest conference in the Middle East and North Africa. The conference aimed at emphasizing the importance of mining sector in economic development and effective ways to provide sufficient investment climate in lieu of supporting the exploitation and exploration of mineral resources in the Middle East and North Africa.    On 12th April 2017, Fujairah Natural Resources Corporation representing UAE participated in the 23rd meeting of Advisory Committee of Mineral resources Sector at Arab Industrial Development and Mining Organization (the AIDMO). During the session, the participants discussed the arrangements for 5th International forum for industrial rocks and mining, organizational activities os Mineral Resources Department as a part of 14th International Arab Mineral Resources Conference held at Saudi Arabia. The participants further discussed the 15th International Arab Mineral Resources Conference to held in 2018.    2. What is the regulatory framework for the exploration and extraction of mineral resources in UAE?   Response:    Regulatory Framework for Mining Industry in UAE   UAE federal mining law is still in the planning phase. His Highness Sheikh Mohammad Al Maktoum has confirmed that the law will regulate the exploitation and exploration of minerals and the investments around the globe in the mineral industry.  However, companies incorporated in free zones are regulated by the laws and regulations promulgated by the free zone authority. For example, DMCC has framed DMCC rules for Risk-Based Due Diligence in the Gold and Precious metals supply chain (DMCC rules for RBD-GPM).    Regulatory authorities   Pursuant to Article 23 of the UAE Federal Constitution, the natural resources and wealth in each emirate are considered as a public property of the Emirate and the society should be responsible for the protection and proper exploitation of such natural resources and wealth. The ministry mainly focuses on sustainable development in petroleum and mineral resources. The Ministry was formed pursuant to Federal Decree Number 3 of 2004 (the Ministry of Energy Decree) by a merger between Ministry of Petroleum and Mineral Resources and Ministry of Electricity and Water (the FEWA)   However, at emirates level, DMCC authority being the control authority regulates the companies incorporated in DMCC and undertaking non-financial activities which include specifically jewelry, precious metals, stones, and traders.    In the Emirate of Fujairah, Fujairah National Corporation Resources (the FNRC) was established in 2009 in the emirate of Fujairah. The corporation is concerned with the policies with regards to natural resources in accordance with the requirements set out in Economic and Social Development Programs. FNRC is also concerned with national and international investments in the mining sector.    3. How are rights to the mineral resources held, and who holds those rights? Are they held by the property holder? Are mineral rights severable from the general ownership of the property? Must they be registered? Also, clarify what proportion of interests is privately owned and state-owned?   Response: The rights of mineral resources are held by the UAE government which can exploit them or assign their exploitation to third parties, subject to prior approval. Consequently, exploitation of such resources requires permits from UAE Ministry of Energy or other relevant ministries prior to exploration.    4. What are the key features of the leases, licenses or concessions that are issued under the regulatory regime? Can these rights be leased by the right-holder?   Response:    Lease/Licence/Concession Term - Is there a time limit on the permissible length of these rights? How long is a typical lease, license or concession period? How can the period be extended?   The concession agreements for exploration of minerals are private arrangements between parties and the UAE government thus, are not shared with or disclosed in the public domain.    Fees   The parties agreeing to commercial terms mentioned in the concession agreement pay a license fee or sharing bonus. Additionally, the host government also seek royalties depending upon the gross revenue generated from net income, both of which are based on the amount of production and price of goods sold.    Liability   Concession holder will be held liable if there is any deviation from what is mentioned in the concession agreement. Companies must strictly adhere to the concession terms and apart from that must adhere to the following: 
    • A company must obtain a license prior to establishing a project and must according to Article 4 of Federal Law Number 24 of 1999, obtain environmental impact assessment (the EIA).  
    • In accordance with Article 71 of Federal Law Number 24 of 1999, any person causing damage, intentionally or by way of negligence will be held liable for all the cost or any compensation thereof. 
    Restrictions - Are there any restrictions on obtaining these rights, for example relating to age, bankruptcy or on foreign applicants?   The terms of concession agreements are a private arrangement between parties thus, the restrictions are not out in the public domain. Generally, the most common restrictions are on equity participation, foreign ownership, control on the project company.    5. How are such leases, licenses or concessions awarded?   Concessions are granted by the government with bid participants upon signing a private concession agreement.    6. Environment   (A) What are the main ongoing requirements for environmental protection? Please include the principal laws, requirements, and policies with respect to mining in the UAE. Please also consider third party rights and the general requirements for closure and remediation of a mining project.   Response: The Federal Law Number 24 of 1999 for the Protection and Development of the Environment (the Environment Law) which aims at protecting and conserving the quality and natural balance of the environment. The Federal Environment Agency(the FEA) is the regulatory authority established to facilitate proper functioning of the law.    The law does not specifically mention any provision with respect to mining, however, it gives the power to FEA to overlook all the activities which contribute directly or indirectly in damaging, disturbing the natural resources or soil.    Further, the Federal Natural Resources Corporation of Fujairah (the FNRC) is committed to sustainable development of mining industry which is in line with the UAE government initiative "green growth". FNRC has recently launched 'Labaik' service which includes the country's strategic plan of 2021 and Fujairah master plan of 2040.    7. Health and Safety Factors Relevant to Mining Industry in UAE   (A) What are the main ongoing requirements for compliance with health and safety regulations? Please clarify the principal laws, requirements, and policies with respect to mining in UAE.   Response: The UAE ministry has passed several ministerial resolutions with regards to health and safety in hazardous areas as follows:    The Ministerial Resolution Number 4/1 for 1981 on defining works that are hazardous or in which it is permissible to reduce the legally decided working hours, states that workers will not be made to work for more than seven hours if they work in mines and quarries and other hazardous industries.  The Ministerial Resolution 5/1 for 1981 strictly prohibits minors under the age of seventeen to work in mines and quarries or other excavation works.  The Ministerial Resolution 6/1 for 1981 restricts to employ women to work in mines and quarries and other related industries.  The Ministerial Resolution 37/2 for 1982 regarding the level of medical attention, mandates the employer to provide proper medical facilities to employees working in hazardous industries.  The Ministerial Resolution 32 for 1982 on determining prevention means and measures to protect workers from work-related hazards, mandates the employer to provide suitable means for protection to protect workers from hazardous occupational diseases that can happen during working hours.    8. Foreign Ownership - Are there any restrictions concerning the foreign investment in and ownership of companies engaged in the exploration and extraction of mineral resources?   Response: The foreign owner can only hold 49% percent of shareholding in a mining company incorporated in the mainland, however, a company incorporated in the free zone can be held by foreign owner without any capping to the share percentage.    9. Processing and Sale of Mineral Resources in UAE - Are there any restrictions or limitations on the processing of extracted mineral resources? Please also state whether there are restrictions or limitations on the import of equipment, machinery or services required in connection with mining activities in UAE.   Response: At the national level there is no specific law which restricts the extraction of minerals resources, however, at emirates level, DMCC has issued DMCC rules for Risk-Based Due Diligence in the Gold and Precious Metals Supply Chain (the DMCC rules for RBD-GPM). The rules do not specifically impose any restrictions and limitation with regards to extraction of gold and precious metals, whereas, it forces accredited members to undertake on-site visits and to maintain proper records on mine activities.    10. Are there any restrictions or limitations on the sale, export or import of extracted or processed minerals in UAE?    Response: UAE does not impose any restrictions or limitations on the sale, export or import of extracted minerals, however, there are certain goods banned in the country such as goods from boycotted countries or goods from Israeli origin.    Further companies incorporated in DMCC must take prior permission from the regulatory authority while importing precious metals such as pearls, diamonds, or rough diamonds.   11. Taxation in UAE - What payments, such as taxes or royalties, are payable by interest holders to the government?     Response: Interest holders do not pay any taxes or royalties to the government.    12. Does the government derive any other economic benefits from the exploration and extraction of the mineral resources? Please include details on how tax issues apply to joint-venture arrangements.   Response: There are no other pertinent and/or direct economic advantages to the government from exploration and extraction of mineral resources.    13. What taxes and duties apply on the import and export of mineral resources? Please list the main taxes and duties, and state whether there are any tax advantages or incentives available to private parties engaged in mining activities.   Response: Cross-border transactions are not explicitly controlled. The Customs Bureau in each emirate (city) actualizes control as provided by Federal Customs Authority and applies customs laws mentioned under GCC customs union agreement of 2003 which provides: 
    • 5% customs in GCC for imports on CIF (Cost, Freight, and insurance);
    • free zones are exempted for import duty; 
    • no export duty in UAE;
    • single entry custom duty for items imported in UAE or any other GCC and are exported to other GCC. 
    14. Reform - Are there any plans for changes to the legal and regulatory framework?    Response: As mentioned above, the regulatory framework for the mining industry is still at a development stage, the UAE Ministry of Energy is currently drafting the first mining law. It is anticipated that this first and new mining law in UAE will increase investments within the mining sector and further ensure sustainable development in the mining industry.    Details of Regulatory Authorities   Response: Name Ministry of Energy    Address. P.O Box 59, Abu Dhabi – United Arab Emirates  Tel: +971-2-6671999 Fax:  +971 -2 -619001  Email  info@moenr.gov.ae Website  www.moenr.gov.ae   Main responsibilities.   The main responsibilities of the ministry is to establish policies and regulations with prior consultation of stakeholders in order to ensure sustainable development in the energy sector and to meet the international standards and to represent country's interests in mineral resources.    ]]>
    Sun, 05 Nov 2017 17:00:00 GMT
    <![CDATA[Company Formation in Shannon Free Zone]]> Company Formation in Shannon Free Zone

    Did you know that the concept (and architecture) of the Dubai World Trade Centre was influenced by the then, World Trade Centre in New York? After the consolidation and formation of the seven Emirates in 1971, the UAE was looking for an opportunity to facilitate economic growth and development in the midst of its deserts. Their idea was simple: to provide a platform (that was efficient enough) for the investors from around the world so that they would invest in a desert. And their motive was to take advantage of the strategic location of the country, along the Arabian Peninsula. But investors would not be incentivized by location alone. They needed something more; something that would provide domestic investors with an international infrastructure and would gain international recognition effortlessly. The World Trade Centre (in New York) was one of the most traditional symbols of Western commercial markets at the time. Ergo, they decided to construct something similar in Dubai to build the Emirate as the hub of the growing corporate trend. And the United Arab Emirates' tallest tower (the Dubai World Trade Centre) came into existence. It was a symbol that the country was aligning itself to be a recipient to the (then) growing corporate culture and had proved to the world that UAE had the means to achieve the same. Dubai only took an idea and made it better, and that is perhaps one of the reasons why investors from across the globe decided on company formation in Dubai.

     

    In a similar context, the concept of free zones was also not familiar in the Middle East; although the growing number of free zones and inflow of investors may opine otherwise. The Shannon Free Zone in Ireland was the first free zone in the world. It was established in as early as 1959. But why did they the Irish come up with such different concept this time? Believe it or not, it was to support the operations of the Shannon Airport. In the 50s, most of the activities of the Shannon Airport was relying on flights that would halt for refueling before proceeding to the United States and passengers would have transit flights to other parts of Europe. This element reduced the importance of the airport and Mr. Brendan O' Regan (the Airport Director at the time) knew the airport would soon be closed down if commercial flights would be routed elsewhere for transit and refueling.  Therefore, he came up with an ingenious idea to boost the operations of the airport: building an economic zone to attract investors by providing tax reductions and better infrastructure. Unlike today, where the proximity of airports to free zones acts as a catalyst to boost free zones' operations, Mr. Regan's idea was the opposite. This simple, but a strategic view, led to the establishment of the world's first free zone and as a source of inspiration to the hundreds of free zones that were yet to be established around the world.

    Decades later, even today, the free zone is one of the leading sources of FDI (or foreign direct investment) in the country and is the home to hundreds of companies from around the world. The free zone facilitates investment in varied sectors and employees around eight thousand employees today. Mainly, investors in the following areas set up their companies in Shannon Free Zone to take advantage of the tax incentives:

            I.          Trading (including ancillary or secondary trading); and

       II.    Aviation companies – businesses that deal in aircraft maintenance. They prefer this free zone since it reduces the need to have a separate runway for planes. The Free zone has building and land next to the Shannon Airport runways and hence, provides easy access to aviation companies);

       III.  Commercial industries – companies whose activities range from telecommunications and software development to insurance and finance.

    However, companies invested in trading activities and looking to establish themselves in the free zone should obtain approval from the Ministry of Finance that such trading activities would uplift the development of the free zone itself. The Free Zone is also one of the top choices for companies in the manufacturing industry (due to the availability of developmental buildings) and companies that wish to establish a distribution office for their European operations. The Free Zone also houses approximately 170 acres of serviced buildings and sites for investors who intend to commence their activities at the earliest without any delay of having to set up an office and setup utilities. The Shannon Free Zone is spread over six hundred acres of land and currently has over two hundred buildings that are available to investors in different types of leasing agreements. Both domestic and international companies also prefer the Shannon Free Zone to hold ownership of intellectual property considering the free zone's ease in the business formation and to separate the intellectual property from the parent company's operations. Companies in the free zone are also exempted from value-added tax on imported goods, including raw materials if seventy-five percent (75 %) of the end product (or manufactured product) is exported further. The free zone also provides an exemption for companies that ship goods from the free zone to countries outside the European Union and does not limit the duration for which the company can hold the imported goods before disposing of (or exporting) them. This provides investors in the import and export industry with much relief considering the dynamic characteristics in imports and exports. However, companies in the free zone should pay 12.5% as corporate tax. The amount of corporate tax was as low as 10 % till 2005 when the corporate (business) tax was increased and standardized for the entire country. Believe it or not, this is not it. Companies that intend to conduct research and developmental (R&D) activities prefer this free zone due to the grants (provide by the free zone management) and twenty percent (20%) tax credit eligibility. But it is pertinent to understand and analyze whether a company is eligible for these tax incentives. The free zone estimates this eligibility of a company based on the proportion of goods that are exported by the firm and the number of employees in the enterprise. STA's team of company formation associates are well-versed with the laws and eligibility criteria of the Shannon Free Zone. Further, international, as well as local, investors are advised to take the assistance of a law firm that provides bespoke legal advice before initiating the company formation process to ensure that they do not face any regulatory hurdles or compliance issues in their operations.

    The free zone's ability to provide investors with the opportunity to maintain raw materials and inventory at a substantially low rate has elevated the free zone's popularity in all the continents. American companies that wish to have a presence in Europe have rushed to this free zone ever since its establishment. The Shannon Free Zone is much similar to the Dubai Airport Free Zone in the UAE since it is adjacent to the airport and ability to cater the need of investors to numerous industries and sectors. The free also houses a business, food industry and innovation centers along with dedicated incubators units to provide specialized infrastructure to different types of companies. Please contact our lawyers in Dubai if you need any specific information pertaining to your industry requirements.

    Even after all these incentives and provisions provided to investors, the free zone's production capability has not been affected. For example, companies established in the free zone collectively produces billions of Euros in revenue at an annual rate, and their profit margin is elevated due to the tax incentives. This provides them with the opportunity to invest further in their operations, and the margin of retained earnings is higher. The Shannon Free Zone is managed, owned and developed by the Shannon Development. This authority also succors in the development and expansion of companies by providing them with the following types of grants depending upon the activities of the business: (i) capital grant, (ii) Research and development grant – as mentioned above, (iii) employment award, and (iv) training grants. The exemption on tax also incentivizes international companies that rush to the free zone to establish their presence on the European continent at the time of distributing profits (i.e., capital gains tax). Therefore, multi-national companies that operate on colossal levels save a huge chunk of money in this regard. Investors look at the free zones in different countries with a different perspective. For example, in the UAE, free zones are mainly relied upon to overcome the ownership regime that caps foreign ownership at 49% in the mainland. Whereas, in countries in such as Ireland, the primary function of the free zones is to provide investors with a tax-incentivized regime that facilitates the flow of foreign investment into the country.

    ]]>
    Tue, 31 Oct 2017 17:00:00 GMT
    <![CDATA[Demurrage Payments in Kuwait]]> Demurrage Payments in Kuwait

    What is the mindset of an entrepreneur looking to dip his toes in a new venture? Profits? Maybe, certainty? Certainty is a factor that all entrepreneurs look for in a business opportunity. However, certainty is also the factor that is least available to them; primarily, if they are dealing in a speculative industry such as share market, or perhaps, the maritime sector. When a shipowner charters his vessel out, he should consider numerous uncertain factors that may cause obstacles in the future, like when the lay days commence and end, when the bill of lading will come into effect, when freight or hire becomes due and so on. Often the underlying facts of a breach in the maritime industry do not correlate to the obligations and liabilities of the parties as set out in the governing bill of lading and this uncertainty leads to disputes.

    The Bill of Lading

    During long-distance transportation, damage to the goods is inevitable due to various factors like transit through different climate zones. And varied weather conditions at sea. Therefore, the shipper, carrier, and consignee enter into a bill of lading which lays down the description of the cargo and clarifies the obligation of the parties in case of any uncertain events. It also states the particular condition of demurrage. This requirement specifies which of the parties shall be liable in the event of fault or negligence or if the empty container does not return within the period agreed upon between the parties.

    The Role of  Bill of Lading

    Unfortunately, as mentioned above, damages and delays are likely to occur in long-distance transportation. In the case of any dispute, the settled terms and conditions of the bill of lading shall be used to clarify the obligations of the parties. In this article, we will explain the provisions regarding demurrage payments and bill of lading in Kuwait.

    The Kuwaiti Law Number 28 of 1980 enacting the Law of Merchant Shipping (the Maritime Law) has laid down the provisions surrounding shipping law in Kuwait. The Law has stated that the bill of lading shall be in writing and shall indicate the following  functions:

    the bill of lading shall act as evidence in contracts for sea transport. A clause regarding the liability of the parties in the bill of lading should state the obligation of the parties once the goods have been loaded.

    The correct and comprehensive description of the entire cargo should be mentioned in the bill of lading.

    Any evidence regarding the contract that the parties want to state in the bill of lading.

    Further, Kuwait has ratified to the Brussels Treaty of 1924 (for the Unification of Certain Special Rules of Bills of Lading) (the Hague Rule or the Haag Rules). Therefore, this Hague or Haag rules are therefore applicable under the Law of Kuwait and in common practice.

    Paying Demurrage

    Determining which party would bear the responsibility of paying the demurrage fee in case of delay of an empty container is an issue layered with uncertainty. To understand the idea of this the concept of demurrage, one has to be aware of the facts of the matter.

    At the outset, the shipper commences the transportation by providing the shipping order to the carrier for a specific agreed destination. Therefore, the shipper is defined as the initiator of the trip, the ignition plug of the transport engine of worldwide transportation. The next step, as per Article 176 of the Maritime Law, the party, named as the carrier shall issue a bill of lading with the information provided by the shipper by including any details to the consignee. The carrier is the party transporting the goods on the shipping vessel. Sometimes, even the shipper can be held liable to pay the entire demurrage fees, if the consignee will not appear at the port to pay the necessary fees. This is not a usual practice, but our team of maritime lawyers noticed this on many occasions.

    Article 179 (ii) of the Maritime Law states that 'the shipper would be responsible before the carrier for compensating for detriment resulting from the inaccuracy of the submitted information in respect of the commodities. The carrier, may not adhere to the inaccuracy of the information stated in the bill of lading before anyone other than the shipper.' Further, Article 4.3 of the Hague (Haag) Rules states that 'the shipper will not be liable for any loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault or neglect of the shipper, his agents or his servants.' Consequently, the entire process of transfer is mentioned in the shipping order.

    As a result, the shipper can be held liable to pay the damages of the carrier, which arise due to misinformation about the shipper's consignment or any fault or negligent behavior of a person, that operates under the shipper's authority. Therefore, following this principle, the shipper will also be held liable for any misinformation about the consignee at the port of destination.

    Demurrage Paid by the Consignee

    The last party named in a bill of lading is the consignee. In the chain of transport, the consignee at the port of destination will organize and fulfill the procedures to deliver the goods. Depending on the agreement between the parties, the consignee may have agreed on the delivery order from the carrier, which means that he has to return the empty containers to the carrier or keep the cargo inside the container to use it as a mobile warehouse if he has explicit consent. In both cases, the container itself will affect the other parties financially. Article 175 (ii) of the Maritime Law states that the conditions of the bill of lading become valid for the consignee, who has agreed to the terms of the bill of lading once the consignee comes in contact with the carrier.

    The consignee in contact with the carrier or the agent and receives the delivery order will, therefore, be liable fo demurrage fees in the case of delay in returning the empty containers or does not follow the agreed procedure of delivering goods transported inside the containers.

    Conclusion

    From our experience, parties in the international shipping market should not only rely on the stated article clauses but consult legal professionals to formulate contracts, which may fit the parties expectations. The dynamicity and the uncertainty of the shipping industry deem it difficult for parties to comprehend the future hindrances that may arise during the bill of lading. Further, the document(s) including the bill of lading should be read thoroughly as any minor mistake could lead to serious, expensive problems in the future.

     

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    Mon, 30 Oct 2017 00:00:00 GMT
    <![CDATA[Marketing Foreign Funds in UAE]]> Marketing Foreign Funds in the UAE

    "There are two times in a man's life when he shouldn't speculate: when he can't afford it and when he can."

    – Mark Twain

    The world of financial markets and investments often induce reserved and divergent responses from the common man. Investing options are often complex due to the regulatory ambiguities of the respective jurisdictions. Therefore, there is a constant need for imparting knowledge and advice, as well as increasing the visibility of such investment products to reduce the intricate and intimidating stigma attached to them. While markets may change for good or for worse, good investing advice will always be beneficial no matter the circumstance.

    In a bid to streamline and structure the promotion of foreign funds in UAE, the UAE securities regulator, the Securities and Commodities Authority (SCA) revised the past mutual funds regulation and amendments made thereto (Old Regulations)[i] by enacting the Board of Directors' Chairman Decision No. 9/R.M of 2016 (MF Regulations). Further, SCA enacted the Promotion and Introduction Regulations (P&I Regulations)[ii], which acts alongside with the MF Regulations to govern the management of mutual and investment funds. This article purports to highlight the pertinent revisions made to the regime of marketing and promotion of foreign funds in the UAE through the implementation of the MF Regulations. 

    Essentially, the revisions made under the MF Regulations have a substantial impact on the promotion of foreign funds that in the UAE, due to the elimination or limitation of the exclusions of such funds. Under the MF Regulations, the scope of promotion and marketing of a foreign fund has been stated in Article 35 of the said regulations and provides inter alia that no foreign mutual fund shall be promoted within the UAE unless it is registered with SCA and distributed by a locally licensed promoter.[iii] In such cases, the legal representative of the foreign fund must submit an application to the SCA to register the foreign fund on along with supporting documents and statements and enclosed with the prospectus and investment policy of the foreign fund.[iv] If approved, such registration remains valid for a year and will expire on December each year. Further, it should also be renewed before at least one month of expiry.[v]

    However, the aforesaid requirements for SCA registration of the foreign fund and contract with a license local promoter shall be exempted in the below circumstances:

    • reverse promotion or solicitation - when an investor in the UAE initiated the promotion or has offered to buy foreign funds and such promotion is not at the instance of the foreign issuer or its promoter or distributor, provided relevant documentation can substantiate this reverse promotion or solicitation.[i]
    • when the foreign fund is promoted to federal or local governmental agencies or their wholly owned companies.[ii]

    For the purpose of the MF Regulations, foreign fund means a mutual fund established out of the UAE or in a (financial or otherwise) free zone within UAE. Prudently, the foreign fund and/or its agents must maintain and retain records and documents towards substantiating reverse solicitations to show evidence that there indeed was a reverse solicitation. As a welcome change, reverse solicitation has been added as an exclusion or exemption for SCA to undertake promotion and marketing of foreign funds.

    P&I Regulation

    Further, the provisions of P&I Regulations compliment the scope of MF Regulations regarding the marketing of foreign funds within mainland UAE. The P&I Regulations follow the same premise that promotion of any foreign domiciled fund in the UAE will require registration with the SCA.

    For the purpose of this P&I Regulation, the term promotion means and includes the marketing, distributing advertising, and publication of any data, information, or promotional material related to financial products. Further, foreign securities or foreign funds mean and include stocks, bonds, Sukuk, units of investment funds, commodities, contracts, derivatives, and other securities or financial instruments issued by foreign issuers.

    However, similar to MF Regulations, the P&I Regulations contain exclusions from SCA's registration requirement, which is set out below:

  • Promoting foreign funds to Qualified Investors other than a natural person with financial solvency (Article 2(3)(c)). This means that the foreign fund would require SCA registration and license to promote and market the funds in case of individual investors only.
  • As mentioned above, in reverse promotion or solicitation, where the promotion is initiated by an investor in the UAE who is interested or has offered to buy foreign funds and such promotion is not at the instance of the foreign issuer or its promoter or distributor as long as requisite documents can substantiate the same (Article 2(3)(e))
  • In case the financial products are listed in any market (Article 2(3)(b)). However, under the P&I Regulations, a Market[i] defined as SCA licensed UAE exchange, thereby limiting the applicability of the exclusion to funds and securities listed in UAE.
  • Given the above and for the purpose of the P&I Regulations, more particularly the above exclusions, Qualified Investor[i] is:

              I.        an investor capable of managing its investments including:-

  • the federal government and local governments, governmental corporations, and authorities or their wholly owned subsidiaries;
  • international commissions and organizations;
  • persons licensed to engage in business in the UAE provided that one of the activities of the entity is investing; and
  • a natural person who is solvent with a yearly income of at least AED 1,000,000 (UAE Dirhams one million) or equity or assets, excluding the main residence, of at least AED 5,000,000 (UAE Dirham five million) and declares that he has adequate knowledge and experience to assess the prospectus and the advantages and risks associated with the investment; and
  •  

         II.        any investor represented by an investment manager licensed by the SCA.

    Further, a foreign issuer has to adhere to the provisions relating to the promotion of foreign funds set out in Article 12 of the P&I Regulations and provisions regarding both, public offers and private placements of foreign funds. The P&I Regulations has stringent stipulations regarding Public offers of foreign funds[i] that can only be made by funds established outside the UAE or in a UAE free zone (financial or otherwise). However, these funds should be regulated by a governing authority similar to the SCA and should be permitted or licensed in the home jurisdiction for making a public offer. Similarly, the P&I Regulation also sets out conditions to be met for a private placement of foreign funds exclusively made to Qualified Investors (Article 12(2)). However, as explained above, since the exclusion or exemption for registration requirement is only limited to Qualified Investors who are not natural persons, this effectively means that private placements of foreign funds to Qualified Investors as envisaged under article 12 of the P&I Regulations would be limited to individual investors. Another pertinent stipulation to be considered while promoting an SCA licensed foreign fund is that the minimum subscription by an investor in such foreign fund established in a free zone or a financial free zone must be at least of AED 500,000 or AED 1,000,000 (Article 12(14)).

    Applicability of the MF Regulations and P&I Regulations on the financial free zones

    As mentioned above, the requirements and conditions under the MF Regulations and P&I Regulations shall also apply to firms located in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global market (ADGM), if they wish to pursue investors in UAE.

    In contrast, the aspect of marketing of foreign funds within ADGM and DIFC financial free zones are subject to respective laws and regulations followed by each zone. As a result, marketing of foreign funds in the ADGM may fall under one or more of these regulated activities depending on the exact method of marketing employed.

    Conclusion

    Therefore, if a foreign issuer wishes to market the foreign fund within the UAE and does not fall under the exclusion or exemption under the MF Regulations or the P&I Regulation, then the foreign fund needs to be registered with SCA and distributed by an SCA licensed local promoter. In any event, foreign funds are free to undertake any promotion and marketing of its interest outside of UAE mainland. The new regulations have extended the legalities involved in the promotion and marketing of foreign investors to secure the interests of the parties in the transaction. Having said that, both MF Regulations and P&I Regulations are at a developing stage, and SCA may periodically issue further directives or regulations for providing clarifications to ensure ease of undertaking the promotion and marketing of foreign funds within UAE.


    [i] Article 12(1) of the P&I Regulations

    [i] Article 1 of the P&I Regulations

    [i] Article 2(3)(c) of the MF Regulations

    [ii] Article 2(3)(c) of the MF Regulations

    [i] Board of Directors Resolution No. 37 of 2012 and amended by way of the Board of Directors Resolution No. 13 of 2013

    [ii] Chairman Resolution No. 3/R.M of 2017 which came into and came into force on 1 February 2017

    [iii] Article 35(1) of the MF Regulations

    [iv] Article 35(2) of the MF Regulations

    [v] Article 35(3) & 35(4) of the MF Regulations

     

    ]]>
    Sun, 29 Oct 2017 00:00:00 GMT
    <![CDATA[Employment Regime in the DIFC]]> Employment Regime in the DIFC

    "A diploma is a piece of paper that is used to acquire another piece of paper: an employment contract."

            Mokokoma Mokhonoana

    Time and again, our team of employment lawyers in Dubai have discussed the provisions of UAE Federal Law Number 8 of 1980 on Regulation of Labour Relations to shed light on the employee and employer relations in the dynamic business environment of the United Arab Emirates (the UAE). Numerous law firms and legal pundits furthered this charade in 2016 with the enforcement of certain amendments that aimed to restructure the employment relations in the country by providing more transparency and flexibility in a growing business economy within the UAE mainland. However, one of the most important factors that played a crucial role in the country's development was left untouched: employment in the free zones, since free zones get regulated by the employment laws that are enacted by their respective authorities. In this article, we have tried to cover this void by elucidating the employment provisions of one of the principal financial free zones of the region, the Dubai International Financial Centre (the DIFC). The fundamental assertion in this regard is whether the educational level of employees is taken into consideration while appointing an employee to a particular position in a company established in the DIFC. This article will look into the overview of the DIFC employment law, its effect on growth potential, and its comparison with UAE mainland employment law.

    The DIFC is one of the most thriving free zones in UAE, and it is expected to be triple in size over the next ten years. The international standard of employment law in DIFC attracts many foreign professionals to work in the financial free zone. For that reason and the enthusiasm of employees to work under a good employment regime with full protection is the composition of the real background behind the success of DIFC.

    DIFC is the most advanced free zone in UAE due to its dedicated enactments and regulations based on the financial sector. These laws include 26 laws and 17 regulations. The recent amendment of DIFC Law Number 4 of 2005 (the DIFC Employment Law) vides DIFC Law Number 3 of 2012 (the New Law) has brought forward substantial changes in the work-force regime of the DIFC. This employment law has facilitated in the success of the DIFC due to its conformance to international standards and increased the degree of employee protection. We summarize these changes below:

                         I.          General duties of employers to their employees

    An employer must ensure, as far as is reasonably practicable, the health, safety, and welfare at work of its all employees.

                        II.          Vacation Leave

    Article 27 of the Labour Law has stated that employers should give a paid vacation leave of minimum of twenty (20) days to employees employed for at least ninety (90) days. The calculation of this vacation leave will be on pro-rata basis and employees are not permitted to carry accrued vacation leaves of more than twenty (20) days for a maximum period of twelve (12) months.

                III.          Working Hours

    An employee's maximum working hours is forty-eight (48) hours for each week. However, an employee may work for longer hours if he has given written consent to his employer under Article 21.

                IV.          Employment contract

    According to Article 13 of the Employment Law, an employee has the right to a written employment contract at the commencement of his employment. The written agreement shall set out full particulars (including without limitation the name of the parties, date of commencement of work, employee's remuneration and all other terms and conditions) regarding the employment.

                V.          Maternity Leave and Pay

    Article 37 has stated that an employee shall be entitled to a minimum maternity leave of sixty-five (65) working days. However, maternity leave is also applicable to female employees who seek to adopt a child below three (3) months of age.

    Employer's Liability and Other Provisions

    Article 51(2) has explicitly stated that an employer is liable for any act of an employee done in the course of employment. DIFC employment law provides fair and efficient procedures for resolving disputes arising from the application and interpretation of the employment law. It promotes the fair treatment of employers and employees make the condition between an employer and employee gentle. It is evident that DIFC employment law is one of the main reasons for the improvement of DIFC as it provides the best relationship between an employer and an employee.

    The DIFC draft of the employment law primarily aims at achieving international standards in employment law. The changes brought about to meet this goal is a strategic move towards better standards and compatibility with the international standards as well. However, it is not yet clear whether it is adequately abiding by the rules of International Labour Organization (the ILO). The ILO established with the aim of developing international labor standards has from time to time assigned conventions agreed with its member states including UAE. The intent of taking every member states to such a measure is, so these rules provide protection from inhuman labor and provide protection to workers for their freedom of association, collective bargaining, and many other rights. Unfortunately, the practicality of the above is still doubtful in the DIFC. For example, there is no provision mandating or allowing the establishment of a workers union. Therefore, employees are not able to negotiate improved working conditions or the right of collective bargaining.

    Comparison with the Federal Labour Regime

    Also, another disadvantage with the Labour Law is the inexistence of a minimum wage rate. Compared to the United Kingdom, the USA and most countries with developed employment regulations that have established a minimum wage rate. But DIFC has failed to accomplish this significant issue just like the Federal Law Number 8 of 1980 (as amended) (the Federal Labour Law).

    Furthermore, The Labour Law does not provide any summary dismissal for termination of an employee without notice. According to their employment law, the employer is entitled to dismiss "immediately" for "cause" where the conduct of the employee warrants termination and where a reasonable employer would have terminated the employment under Article 59(A).

    However, both, the employees and employers have both benefited from the Labour Law. For example, companies have fourteen (14) days to pay all wages owed to an employee following the termination of employment. They are also only required to provide health insurance for their employees rather than cover for health and disability loss of income. The employment law also provides an advantage to employers with the ability to dismiss an employee who takes sick leave more than their entitled limit.

    On the other hand, employees have benefitted from being able to obtain a health insurance, entitlement for the end-of-service gratuity (for the employees who completed one year or more of continuous services) and maternity leave with antenatal care.

    Moreover, many employees are becoming scared or are found to be less motivated to work in Dubai mainland throughout the past few years due to the low level of benefits and protection provided for employees who are to be serving under the Federal Labour Law.

    Therefore, another crucial question arises as to why DIFC has its separate employment regulations. Apart from all the other differences between the Federal Labour Law and the (DIFC) Employment Law, the "Discrimination Provision" for employees has become the core difference and the highest concern. It is a well-known communal fact that salaries in UAE are computed based on individual's ethnicity and nationality. This situation is a direct breach of the discrimination right in working industry. According to Startford (2009), Dr. Zumfuli, a Human resources professor at Sharjah University, "There is a lot of discrimination of nationality and religion in the labor market, and this affects the contribution of those who suffer from this situation." It is vital to mention that the Federal Labour Law does not have any provision on discrimination, but compared to that Labour Law explicitly prohibits employers discriminating against employees.

    Importantly, DIFC employment law differentiates from UAE mainland employment law in few other elements as well. The distinction matter because workers have individual rights, such as advantage on sick leave and termination notice. Employers also have additional rights, such as the right on dismissal for misconduct and overtime work of an employee. DIFC law has another significant advantage compared to the Federal Labour Law. The (DIFC) Employment Law stipulates that employers must provide and maintain a workplace that is free from harassment, safe and without risk to employee's health. Further, an employer must not threaten, intimidate or coerce an employee because of a complaint or investigation. However, UAE employment law does not have any provision on harassment.

    Conclusion

    To conclude, the primary factor behind the rapid growth of Dubai as a whole country is the workers and investors who are behind the stage developing the country landmarks and businesses in both small and large scale. The Federal Labour Law was enacted at a time when the UAE was still emerging as the world leader in commerce and trade. The corporate and commerce-related laws in the UAE have transformed to another level with the rapid development. But Federal Labour Law still lacks in many aspects. This lacking has ultimately created a negative impression about the standards of Dubai working industry and employers, among the potential personnel who are willing to work in the future. Whereas in comparison to that people are more ready to work with DIFC; since the employees are more satisfied with the international standard of labor law, benefits and labor protection provided by DIFC. Also, DIFC has become the place that could offer them the best working environment and welfare within in UAE. This fact itself proves the rapid growth of DIFC thanks to its employment law regulations.

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    Sat, 28 Oct 2017 00:00:00 GMT
    <![CDATA[Project Finance – Q&A – Practical Guide - UAE]]> Project Finance – Q&A – Practical Guide - UAE

    What are the key difference in the legislation in the UAE and other key international jurisdiction?

    In comparison with other jurisdictions, the laws regulating the project financing in UAE are not too strong. The Federal Law Number 18 of 1993 concerning the Commercial Transactions Law (the commercial law) and the Federal Law Number 5 of 1985 concerning Civil Code (the civil code) governs the project finance in the country. However, these laws are not at par and are in comparison with other major countries are not too detailed. Further, concerning the civil code and the commercial code, the following are the main transactions which are not regulated by security laws of UAE:

  • The first and the principal difference in UAE and other jurisdictions is the lack of a concept of floating charges, the security law in UAE do not recognize the creation of security interest, either by mortgage or through the pledge. The security interest can only be created for assets that can be identified and ascertained.
  • In several jurisdictions, the court or the relevant government authority of that country requires them to register a mortgage over a movable property to allow for filling financing documents. However, UAE does not need parties to record for pledges over the movable property.
  • The UAE imposes a mandatory requirement on the parties to register the mortgage at Lands Department in the relevant Emirate and depositing documents of title in the bank is not sufficient.
  • In other jurisdictions, the assignor, and assignee enters into an assignment to notify the assignment debtor, however, under UAE law debtor's consent is required for that particular assignment to be created.
  • Are there differences in the way project finance operates in the free zones and secondary jurisdictions?

    Yes,  there are variations in the operation of project financing in free zones and other jurisdiction since the free zone is in itself a separate jurisdiction in UAE. Henceforth, all the free zones have their own rules and regulations governing the project finance. The first difference that in most of the free zone the mortgages over land is not possible, however, the Jebel Ali Free Zone (JAFZA) passed Law Number 1 of 2002 concerning the lease of immovable property in JAFZA which allows for a mortgage over a building but still not over a land.

    Within UAE, different Emirates have promulgated their local laws which govern the mortgage and pledge apart from the commercial code and the civil code. The Emirate of Dubai has implemented its own real estate law, Dubai Law Number 13 of 2008 concerning the Interim Real-Estate Register, this law conforms with the UAE laws to facilitate the registration of a security interest in the land.

    It is advisable to operate in the free zones rather than the mainland because of the ownership restriction in the mainland. The foreign investors can enjoy hundred (100) percent ownership in the free zone as opposed to forty-nine (49) percent in the mainland.

     Do Islamic finance concepts impact the way the project finance is structured?

    Islamic finance concepts do not impact the way project finance is structured in the UAE. Most project financings are done through conventional financing methods and instruments, such as lending streams. On the other hand, Islamic finance techniques should comply with the prohibition of charging interest as per Shariah Law. This does not mean that Shariah prohibits making profits, but rather it promotes the idea that making profits as charging interest is harmful to borrowers. Although there is a lack of effort by the financier, they will still enjoy profits. Given that customers are looking for new funding sources, the mixture of Islamic finance concepts and conventional methods are becoming more common in the United Arab Emirates' market.

    What types of collateral can be used?

    The laws governing securities in the United Arab Emirates differ from those in Common Law jurisdictions. In the United Arab Emirates, floating charges does not exist, and there is no requirement for registration for pledges of movable property, and no mortgages can be created by mere deposit of title deeds. In the United Arab Emirates, the most common securities include assignments over contracts and receivables, property mortgages and pledges over moveables, shares and bank accounts. Assignments over contracts and receivables, which involve the transfer of rights from one person to another, are used as securities for financing agreements. As for pledges of shares and bank accounts, companies can pledge their shares with lenders by providing the shares in exchange for loans from banks. Federal Law Number 20 of 2016 has allowed product stocks to be securitized which has brought more security to financing transactions. The Central Bank of UAE and the Securities and Commodities Authority (SCA) regulate securities in the United Arab Emirates.

    How do creditors assure themselves?

    Under the United Arab Emirates' regulations, there are very few to no remedies that allow a creditor to assure themselves: creditors will have to obtain court orders to auction assets as they cannot take possession of them. Ensuring repayments can be made should be the creditor's top concern when agreeing. Federal Law Number 20 of 2016 on the pledge of movables as security for debts is bringing more security to financing transactions as credit balances, and commodity stocks can now be securitized. The law also aims to reduce the multiple undeclared pledges through an updated registration process.

    Outside bankruptcy/ insolvency procedures, how can a project lender enforce their rights as a secured creditor?

    The lender of the project is expected to be involved in the project more closely. There is one self-help through which the project lender can enforce their rights is by discussing their interest with the relevant stakeholders to ascertain the position. The lender should ensure the real value of the security, as in some cases the true value is hidden in the underlying assets that is mentioned in the concession agreement.

    Are there preferences periods or clawback rights, creditor rights which can impact collateral?

    UAE has implemented Federal Law Number 9 of 2016 concerning Bankruptcy (the Bankruptcy Law), the regime considers secured creditors as "preferred creditors," and the creditors are on the top on the list of priorities. The secured creditors can claim their amount to the extent of their security. Whereas, fees and reasonable expenses are deducted in the sale of such assets before the actual distribution.

    Bankruptcy was earlier regulated by the companies law and the commercial code. However, the UAE government introduced the new bankruptcy law where now all the matters concerning the creditors rights are dealt by this law, however there are several issues with the new bankruptcy law and in order to resolve such issues, the UAE bank Federation introduced a scheme thereby allowing debtors 15 day-period in order to agree with the restructuring scheme with creditors. The laws protecting the rights of creditors are still underdeveloped in comparison with other jurisdictions such as the United States and the United Kingdom.

    What procedures other than court procedures can be used to seize project company assets?

    Outside the court, the parties cannot use any procedures to seize the project company assets; and the standard procedure is through the court, and the secured assets will be sold at public auction to redeem the outstanding amounts.

    Is there any relevant tax, fee or foreign currency restrictions which can impact project finance?

    Though the country has implemented Value Added Tax (VAT), it is not applicable to transfer or conversion of foreign currency.

    What are the rules governing how project companies can maintain foreign currency accounts locally and outside the jurisdiction?

    UAE law does not impose any restrictions for operating or maintaining foreign currency accounts inside or outside the UAE. However, the country might oppose or impose sanctions for receiving and sending money to certain countries due to political reasons.

    How does repatriation of foreign earnings work?

    The UAE laws have not provided for any procedure with regards to the repatriation of foreign earnings, and thus, there are no restrictions for the same.  

    Does any financing and project documentation need to be registered with authorities - if so who?

    The law does not require any financing and project documentation to be registered with the authorities except in the case of registerable security such as real estate mortgages.

    Are government or government agency approvals needed for project finance transactions?

    Government agencies' approvals are required for project finance transactions in the United Arab Emirates. The relevant ministry will differ based on the type of activity concerned.

    Are any incentives provided to foreign investors?

    Incentives are provided to foreign investors in the United Arab Emirates. The United Arab Emirates' regulations offer foreign investors the right to fully own property, the right to be the partners in a company, tax-free initiatives, and investment opportunities in oil, gas and other hydrocarbons.

     

    Which jurisdiction's laws typically cover project agreements?

    Project agreements will typically be covered by the United Arab Emirates' law, the law of the Emirate in which the project is located or any foreign law with international arbitration options.

     

    Which arbitration bodies are typically cited in project agreements?

    There are various arbitration centres in the UAE such as the Dubai International Arbitration Centre (DIAC), Abu Dhabi Commercial Conciliation & Arbitration Centre (ADCCAC) and DIFC-LCIA where companies may refer their disputes.The International Chamber of Commerce (ICC) is the arbitration body typically cited in project agreements in the United Arab Emirates.

     

    What are the typical structures of project companies?

    The type of corporate structure of project companies depend upon the requirement of the parent entities and the length  (or period) of the project.  Limited liability companies and joint stock companies are the most popular forms of corporate structures in the UAE.

     

    Originally published by STA Law Firm on Lexis Middle East Law Alert

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    Sat, 21 Oct 2017 00:00:00 GMT
    <![CDATA[Speedy Criminal Justice in Dubai]]> Speedy Criminal Justice in Dubai

    William E. Gladstone once said in a public gathering that 'justice delayed is justice denied.' But neither the person nor the concept was new to the anxious crowd. Regarding the person, Mr. Gladstone has served as the Prime Minister of United Kingdom more times than any anyone else. And regarding the phrase, the cumbersome process and delay in obtaining judgments have been an age-old issue in the litigation arena. Both the former and the latter had an enduring effect on the minds of the crowd present at that gathering.

    Since we all know the reason of the former, let's try and understand the importance of the term 'justice delayed is justice denied.' It is not because courts do not provide equitable judgments or fail to exercise its authority to implement the rights of the people. But it is due to the time taken by the courts to pronounce these equitable judgments to enforce the rights of the citizens. Therefore, even a fair and just decision from the court may deny a party of his right due to the procedural delay in adjudication.

    A unique characteristic of the law is its ability to be general as well as abstract. Hence, the law applies to everyone without any discrimination and therefore, in legal proceedings that require the separation of the case there is no difference between a case and another unless within the law. However, the adverse effects of lengthy and multiple litigation proceedings on the status quo of the matter(s) in both civil and criminal cases are common knowledge to us.

    Criminal proceedings are extremely sensitive and affect the accused also since their freedom to travel is curtailed at the time of initiating the legal proceedings. This procedure is acceptable in certain crimes that require custody of the accused until the end of the trial, but in other minor offenses and fines, the effect of such action may be more significant than the punishment itself.

    In some cases, the accused confesses and does not need to undergo trial sessions, investigations, and other criminal proceedings for research and trial because of the simplicity of the act and the clarity of the case and its confirmation. Therefore, most of the legislation aimed at establishing a system of speedy trial for previous considerations and eliminate the punishment of the accused in minor crimes, by limiting their sanctions to fines.

    Such speedy trials are achieved through criminal orders which are drafted to ease the procedures and reduce the time taken for adjudication. Therefore, the accused is not mandated to be present for the investigation procedures and pleadings in front of the judiciary if they have confessed to the charge filed against them. Some of the countries that use criminal orders are France, Italy, Sweden, Germany, while Arabic nations are Egypt, Jordan, Syria, Iraq, Algeria, Morocco, and some Gulf countries such as Qatar, Kuwait, Oman, and Bahrain.

    What is a Criminal Order?

    A criminal order is a judicial order issued by the body specified under the law (Public Prosecution - Judge) to impose a penalty of fine on the accused of an offense, generally without following the standard prolonged procedures of final investigations and pleading. However, the UAE Federal Code of Criminal Procedure does not contain an explicit definition regarding the system of criminal orders. Therefore, in this article, we have tried to elucidate the provisions regarding criminal orders in the Emirate of Dubai.

    Following the above, the Emirate of Dubai issued Decree Number 1 of 2017 (the Law) on 30 January 2017 and published in the Official Gazette on 16 February 2017 to be implemented three (3) months after the date of its publication. The criminal order is defined in the Law as 'a judicial decision issued by the member of the Public Prosecution to determine the subject of the criminal case with a fine without referring it to the competent court.' This confers the office of the Public Prosecution with substantial authority since they are entitled to issue orders without the consent of the competent courts, who would otherwise adjudicate that particular matter. In Dubai, only the Public Prosecution has the authority to issue criminal orders, unlike some countries such as Egypt (where the order may be issued by the Public Prosecution or Judge) or Bahrain (where the judge issues the order at the request of the public prosecution).

     

    Objective

    The Law aims to accomplish the following objectives with the view of expediting trivial matters:-

     

  • ensure that the criminal action is expeditiously resolved, without prejudice to fair trial guarantees;
  • reduce the burden on the courts and reducing the number of criminal cases referred to it; and
  • respond to the process of simplifying litigation procedures and reduce time, effort and expenses of the parties in criminal matters.
  •  

    Scope of the Law

    The scope of the Law is limited to trivial offenses such as misdemeanors and other offenses laid down by the legislative authorities from time to time. Therefore, the degree of sanctions under this Law is also considerably minor. The Law has imposed the following penalties on convicted parties in a case:

     

  • Fine(s); and
  • 'Imprisonment and fine' that the Attorney General shall determine, in a decision to be issued in this regard, on cases of misdemeanors and other offenses under the provisions of the Law. However, the provisions of this Law does not apply to the offenses of juvenile delinquents and displaced persons.
  • Under the Law, the Public Prosecution of the Emirate of Dubai may, issue a penal order against a person guilty of committing a crime by imposing a fine prescribed by law, provided this penalty does not exceed half of the maximum limit mentioned under the respective statute. The following illustration will provide more clarity in regard to the penalties: Suppose 'A' is convicted of violating Article 378 of the Penal Code that states that, 'Whoever publish(es) news, pictures or comments related to the secrets of private (or family life) of persons even if they are true, shall be punished by detention for a period not exceeding one year and by a fine not exceeding UAE Dirhams ten thousand (AED 10,000), or by one of these two penalties.' Therefore, in this case, the Public Prosecution may impose 'A' with a fine of UAE Dirhams five thousand (AED 5,000).

    The Law states that the criminal order should contain all the relevant information regarding the case, the date when the order was issued, the name of the accused, the applicable legal text and the name of the prosecutor who issued the order and its degree. Further, the Public Prosecutor may pass the order and declare the accused even in the absence of the latter. However, in all cases, the accused must be reported by the means determined by the Attorney-General in this regard.

    Can a Party Appeal to a Criminal Order?

    Parties who are aggrieved by a criminal order may file an appeal against it. However, an appeal may not lie against a criminal order in the following cases:

     

  • If the accused has not submitted an appeal (whether in person or through his appointed criminal lawyers in Dubai) within seven (7) days from the date of issuance of the order, provided the order was passed in the presence of the accused; or from the time of declaration if the defendant was not present when the order was passed.
  • if the convict pays the penalty imposed on him.
  • However, if it the objection (or appeal) is raised by the accused, on it is considered as if it didn't happen and he will continue to face the criminal proceedings in ordinary ways.

    Acting toward preserving the rights of the victim, and the compatibility between the time of issuing the criminal order and the dismissal of the civil dispute, the law further stipulates that claiming the civil right does not prevent issuing the criminal order. The penal order shall be executed by the rules prescribed in Federal Law No. (35) of 1992, and the Attorney General of the Emirate of Dubai shall issue the necessary decisions for the implementation of the provisions of this Law.

    In our view of this Law, we find that it has come to achieve its goal which is the rapid dismissal of misdemeanors and minor offenses determined by the Attorney General, a system widely established in most countries, which we hope will become implemented throughout the UAE.

     

     

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    Thu, 19 Oct 2017 00:00:00 GMT
    <![CDATA[TECHNICAL ASPECTS OF AIRCRAFT LEASING]]> TECHNICAL ASPECTS OF AIRCRAFT LEASING

    (Part 1 of 2)

    In the first issue of this two-part series, aviation lawyers at STA discuss the types of aircraft leasing and the legal aspects therewith. Our attorneys have on many occasions advised clients on the legalities surrounding different types of aircraft leasing and their benefits.

    The diverse interest prices and the difference in legal aspects of leasing (in general) have become one of the major issues which make the aviation industry just as uncertain as the shipping industry. It thereby becomes necessary to consider different financial structures and options for maintaining business income and tax considerations of owning an aircraft has led aviation industry to consider financing structures like leasing an asset rather than purchasing. Leasing is not for everyone, and hence the purpose and utility of an asset needs to be assessed before leasing an asset like aircraft. Factors that may lead to consideration of leasing an aircraft rather than buying is to provide temporary augment in the fleet capacity of the airlines due to season or economic conditions, the cost of operating an aircraft for short-term, maintenance liabilities, anticipated revenue generation, so on and so forth. Though the process seems to be a financially convenient option for airlines, it is important to note that this process, in reality, is time consuming, cumbersome and complicated with the regulations in place to ensure technical aspects for ascertaining the safety of airlines service users.

    Complexities in lease agreements arise due to maintaining asset value (by addition of details of the value of aircraft and audit records), adding pre-mitigation clause for any adverse events, legal jurisdictions, multi-jurisdictional use of aircraft, protection in any events of default in payments, maintaining records of total operational life of the part as required by regulatory authorities, maintenance or servicing and repairs, airworthiness of the aircraft, insurance provisions, operation expenses, delivery conditions, re-delivery conditions, end of lease compensation, so on and so forth. It is therefore pertinent to understand the types of the lease as the legal aspect revolves around this technicality.

    Types of Lease

    The types of lease depend on the requirements and various considerations of tax and revenue by the lessee (airlines company). Primarily, there are three types of leases for aircraft lease: (1) wet lease; (2) damp lease; and (3) dry lease. 

     

    1. Wet Lease

    In wet leasing arrangement, the lessor company or owner, who is leasing out the aircraft to the lessee, provides ACMI (Aircraft, Crew, Maintenance, and Insurance) to the lessee. The team includes pilots, engineers and flight attendants and the lessor also pays the salaries of the crew. A wet lease is a short-term lease, and the aircraft usually operates under the lessor's Aircraft Operator's Certificate (AOC). The lessee pays fuel charges, airport fees, and other duties or fees payable. The payment in a wet lease is based on block hours operated fixed by lessor while entering into the lease agreement. Therefore, the usage of the aircraft is immaterial regarding payment. This lease is also called ad-hoc charter often used for reasons such as trying or initiating new routes for airlines, peak seasons, etc.  The lessee has financial control over the operations of the aircraft and uses its airline designator code and traffic rights while operating the plane.

     

    2. Damp lease

    A damp lease is primarily a wet lease without the provision of the crew which becomes the responsibility of the lessee. Another name for this term is AMI (Aircraft, Maintenance, and Insurance). The crew/ team provided by the lessee is sought to undergo Safety and Emergency Procedures (SEP) training for the leased aircraft to provide them with an initial training or guidance.

     

    3. Dry lease

    In dry leasing arrangements, the lessee provides for the crew, maintenance, and insurance. So, the lessor just leases the aircraft, and the lessee provides all other things. A dry lease is a long-term lease usually lasting for more than a year and extends to half of the aircraft's life, which ranges from ten to twenty years. The lessee operates the aircraft under its own AOC.

    There are two (2) types of contracts on a dry lease, i.e., operating lease and finance lease.

    Operating lease: Lease wherein the right to use the aircraft is made available for lease period which is shorter than aircraft life and the return the plane upon expiry of such period the aircraft without capitalizing the asset on lessee's financial records. Therefore, in operating lease, the lessee incurs rental expenses which are "off-balance sheet financing." The operating leases have tax incentives for lessee as they do not create an asset or liabilities on balance sheet thereby enhancing financial ratios of the lessee.

    Finance Lease: Another term for finance lease is a capital lease. In finance leases, there if a transfer of risks and rewards incidental to ownership as there is a bargain purchase option by the end of the lease period. Thus, there is capitalization of an asset. The finance lease is for a more extended period than dry operating lease as it covers more than 50% up to 75% of the aircraft life. The value of lease payments is higher than 90% of the plane's market value.

    The dry lease kind of arrangement is often entered between banks as lessor and airlines as lessee, so the carriers manage the operation of aircraft. Further, the transaction also gets established between regional and major international airlines for operating the airplane under the name of major airlines which the regional carriers (providing all the crew, maintenance, and insurance) operate.

    To discuss further on technical legal aspects of the aircraft lease which can be exhaustive, we will focus and elucidate on following country's legal requirements.

     

    The United Arab Emirates

    The Federal Law, Number 20 of 1991 (UAE Civil Aviation law), governs the civil aviation industry in UAE. Its jurisdiction extends to:- 

    (a) the civil aircraft registered in the U.A.E, wherever they may be, subject to the laws of any foreign state in which they may be operating; 

    (b) the civil airports in the U.A.E., including all technical activities such as air traffic control and the installation, operation and maintenance of communication equipment, radio equipment, navigation aids, meteorology, etc. and 

    (c) Air transport (in general). The UAE Civil Aviation Law set up the General Civil Aviation Authority (GCAA) by the issuance of General Civil Aviation Authority Law on 01 January 1996. The Civil Aviation Requirements (CAR) provides for general requirements for the industry.

    Dry and Wet lease

    CAR - PART 1 provides for definitions including dry and wet lease. The dry lease arrangement is "An agreement between undertakings under which the operation of the aircraft is operated with the air operator certificate (AOC) of the lessee." The Wet lease arrangement is defined as "An agreement between undertakings according to which the aircraft is operated with the AOC of the lessor." In CAR-OPS 1.165 (b) General requirements for leasing are provided. This regulation also adds a definition for damp lease as "Damp lease is when the airplane is operated under the AOC or authorization of the lessor with a partial crew."

    General Requirements

    The general requirements for leasing state that an applicant for an AOC or an existing operator who wishes to lease aircraft must submit lease agreement along with other relevant details such as:

     

  • aircraft type;
  • State of Registry, nationality and registration marks;
  • Statement from the registered owner and Certificate of Airworthiness that the aircraft fully complies with the airworthiness requirements of the State of Registry;
  • Details of lessee or person responsible for operational control of aircraft including statement acknowledging the knowledge of duties under UAE law; and
  • Duration of the lease, the area of operation, so on and so forth.
  • Requirements for leasing between a UAE operator and any entity

    CAR-OPS 1.165 (c) provides for requirements under leasing of aircraft between UAE operator and any company.

    For any lease in arrangement whether dry or wet, the approval of GCAA is mandatory. Further, any conditions which are part of this approval must be included in the lease agreement. 

  • The lessor holds an AOC issued by a jurisdiction which is a signatory to the Convention on International Civil Aviation;
  • Unless otherwise agreed by the authority of the lessee, the lessee audits the operations of the lessor to ensure compliance with the operating and aircrew training standards equivalent to CAR-OPS 1, maintenance standards equal to CAR 145, and aircraft certification standards as prescribed;
  • The routes intended to be flown contained within the authorized areas of operations specified in the AOC of the lessor; and
  • The flight, the duration of the lease, and duty time limitations and rest requirements used by the lessor are not more permissive than applicable in CAR-OPS.
  •  For dry lease-in arrangement, a UAE operator shall ensure that any differences from the requirements prescribed in subparts K, L, and CAR M, are notified to and are acceptable to the GCAA.

     

    About aircraft that are wet leased-in, a UAE operator shall ensure that,

     

  • The safety standards of the lessor on maintenance and operation are equivalent to CARs;
  • The lessor holds an AOC issued by a State which is a signatory to the Chicago Convention
  • The aircraft has a certificate of airworthiness issued by ICAO Annex 8.
  • Any other requirement as made applicable by the lessee's authority is complied with.
  • For dry lease-out arrangement, a UAE operator may dry lease-out an airplane for commercial or private air transportation to any operator of a State which is a signatory to the Chicago Convention only upon fulfillment of following conditions:

     

  • The GCAA has exempted the operator from the relevant provisions of CAR–OPS Part 1 and, the foreign regulatory authority has admitted responsibility in writing for monitoring the maintenance and operation of the airplane(s), has removed the aircraft from its AOC; and
  • The airplane is maintained according to an approved maintenance program.
  • For wet lease-out arrangement, a UAE operator provides an aircraft and crew to another entity and retains all the functions and responsibilities in subpart C, shall remain the operator of the aircraft.

    For damp lease-out arrangement, a UAE operator provides an aircraft and flight crew to another entity and retains all functions and duties prescribed in Subpart C shall remain the operator of the aircraft.

    Requirements for leasing at short notice

    Due to unforeseen or immediate need, if the UAE operator needs replacement of aircraft, the approval required as mandatory, as provided above, will be deemed to have been granted, provided on the fulfillment of following conditions:

     

  • The lessor is an operator holding an AOC issued by a State which is a signatory to the Chicago Convention;
  • The period of lease-in does not exceed five (5) consecutive days; and
  • The GCAA is immediately notified of the use of this provision.
  • Conclusion

    Recently, owing to the lower oil prices, extremely low-interest rates and competition from Chinese and American lessors there has been pressure on aircraft leasing rates. Further, due to growing demand by the UAE airlines for temporary fleet capacity increments during seasons, UAE is becoming a prominent market for aircraft leasing arrangements. UAE has been a leader in aircraft leasing in the Middle East. Hence, insights on UAE Aviation Law will always be handy for to venture into the market regional market.

    In the next issue, our lawyers will continue to discuss further the technical and legal aspects surrounding leasing an aircraft in India and Singapore. Keep reading!

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    Wed, 18 Oct 2017 14:00:00 GMT
    <![CDATA[Guide to Off Plan Property Laws in Abu Dhabi]]> GUIDE TO OFF-PLAN PROPERTY LAWS IN ABU DHABI

    Previously, laws concerning off-plan property sales in Abu Dhabi was a legal blind-spot that caused ambiguity and failure in securing the interests of the investors. However, the establishment of Law Number 3 of 2015 on the Regulation of Real Estate Sector in Abu Dhabi came as a relief since it had explicitly mentioned the provisions regarding off-plan sales. The salient off-plan features of this legislation include the establishment of the interim register and escrow that had already been established in Dubai a few years ago.

    This article has explained the legal status of off-plan sales, the compliance requirements of developers and the liability of the developers in case a company delayed or postponed the construction of the property after the investors depositing all their funds.

    Off-plan property sale is a well-known method for the developers in the United Arab Emirates (UAE) to secure investors in any new real estate project. This form of transaction creates a nexus amongst various parties involved in the transaction such as financiers, developers, and investors by way of entering into different agreements. In Abu Dhabi, unlike Dubai, the government had not enacted any regulations concerning off-plan sales. Therefore, the market for investors were less confident, especially before the enactment of Law Number (3) of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the Law). The government soon realized the need for precise guidance in Abu Dhabi, considering the faster pace of development and launching of several new real estate projects following the year 2010. In comparison to the regulatory framework of Dubai, Abu Dhabi had no protection regarding any delay, non-completion, or defects of the property/project. There were several risk elements involved in such investments. For example, the financier would be required to accept the credit risk of the property developer and also that of the investor for financing the purchase of an off-plan property. The financier would rely on the records of the developer as there was no interim registry to record the real estate rights in the property. 

    Under Article 1, the Law defines Off-Plan Sales as "the contract whereby the buyer obtains a grant of property rights to real estate unit(s) suggested according to the compound plan and the floor plan."  In Abu Dhabi, the Department of Municipality Affairs (the DMA) is responsible for maintaining the real estate records that have similar functions as those of Real Estate Regulatory Authority (the RERA) in Dubai. The new Law mandates the provisions discussed below regarding the registration of real estate property.

     

    Significant Features of the new Law 

     

  • Concerning Article 15 of the new Law, the developers are not allowed to sell any unit unless they fulfill the conditions as stated. The most significant feature is that the developers-apart from getting a license from Department of Economic Development-are required to obtain an NOC from the DMA that they are eligible to undertake the development of such real estate project, which ensures the qualification of the developer and its professional capacity. This requirement as to NOC is a significant aspect of curbing: (i) any mismanagement of the real estate project where the interest of the public is involved at large; and (ii) the developer breaches its obligations and misuses its position and entitlements. Earlier, the terms of the agreement signed between parties were binding on them. However, absence of regulations has departed several investors from their legitimate rights
  • Further, the initial floor plan and initial compound plan (the Development Plan) shall be submitted by the developer before the real estate registers with the DMA. This requirement, in particular, confirms and prevents any objection raised by DMA at a later stage while implementing the plan. The developer shall also obtain the approval of the DMA on the disclosure statement and shall show all the data related to the real estate unit and the development project.
  • Also, the developer would hold the interest in the land on which the project will develop or the contractual right(s) that would permit them to build the land-parcel and grant property rights to the property units constructed on the said land. One of the most notable features of the new Law the is the maintenance of an escrow account that the developer should open. The developer would deposit the investor's money in the account for construction expenses. All proceeds from off-plan sales should be placed and stored in the escrow account and shall only be taken out in stages to fund the development of the project. The developer, however, effectively has to self-fund or obtain finance for the first twenty percent (20%) of construction works, given the restrictions. Under article 18 of the new Law has laid down a separate provision for escrow accounts and the developers' obligations for managing the funds for the construction. Developers who plan to sell off-plan property units of the project should open an escrow account after submitting an application and necessary documents to the DMA. The developer should also appoint an account trustee and all the funds paid by the investors of the off-plan property units should be deposited into this escrow account as per the new Law and its Executive Regulation.
  • The developer and the account trustee should form an 'Escrow Account Agreement' in line with the standard form of the DMC to open the account for the particular real estate project. The developers should open a separate escrow account for each project and the amounts deposited in this escrow should be solely used for construction and settlement of financing payments under the provisions of the escrow account agreement and the new Law.
  • Mortgage: Article 23 of the new Law has stated that the developer can mortgage the land of the development project only for raising funds for construction after meeting the following conditions:
  •  

    The buyer of the real estate unit should get notified as to the land on which the project will be developed or the property right, and such terms should reflect in the sale and purchase contract.

    • The developer should undertake, and the funder of the developer should subsequently approve that any mortgage over the real estate unit, for which the investor has fully paid the price by depositing it in the escrow account, will be removed.
    • The bank or the financial institution will be responsible for depositing the whole amount of the funds in the respective escrow account and shall not to pay it directly to the developer.

    The developer is liable to ensure and take necessary steps to comply with the provisions of the new Law. On the other hand, the property buyer will be bound to pay the value of the (off-plan) real estate unit by the actual completion percentage of the construction works, unless otherwise agreed.

    The DMA shall issue the resolutions required for the organization of the matters related to the methods and mechanisms of off-plan sales as well as the documents that should be exchanged between the concerned parties in this regard.

     

    What would not constitute a breach by the developer?

    Article 17(2) has stated that the following acts of the developer will not be considered as a breach of the Law:

     

  • if the land on which the real estate development project is expropriated for the benefit of the public;
  • if any governmental entities freeze development of the project for re-planning;
  • if there are buildings, excavations or service lines, found at the site of the real estate development project; and
  • if the main developer has made amendments to the site of the project, and it resulted in the change of the borders and area of the project in a manner that affects the implementation of the sub developer's obligations.
  •  

    Conclusion

    The new Law has given high hopes to the real estate market in the Emirate of Abu Dhabi similar to that of Emirate of Dubai where the real estate regulations are well developed. The provisions of the new Law have regained the confidence of investors since it reassures investors' rights. Earlier, in the absence of any such regulations, it was difficult for investors to understand their legal status in the event of delay of the construction of a project. Now the position of investors is clear, as the new Law has stated the definite rights and obligations of each party and adheres to international standards of property development.

     

    ]]>
    Mon, 16 Oct 2017 12:00:00 GMT
    <![CDATA[New Copyright Laws in Kuwait]]> New Copyright Law in Kuwait

    Creativity is the work of art stimulated by the human mind. Every song ever listened to, every movie ever watched and every article ever read (irrespective of the level of creativity) is the work of art of a lyricist, screenwriter, and an author, respectively. Although intangible, creativity shares a similarity with other tangible assets due to its capacity to generate revenue. Therefore, like every asset with an underlying value, the output of a lyricist, screenwriter, and an author is also capable of being appropriated without authorization or consent from its owner. Further, the efficiency of a state's intellectual property laws also underlines the level at which they intend to promote artistic works, inventions, corporate structures, industrial designs and everything else that could create an identity while generating revenue. Hence, legislators take utmost care and exercise diligence while drafting intellectual property legislation(s).

    From a global purview regarding the copyright right law of Kuwait, the country is a member of the World Intellectual Property Organisation (WIPO), the Arab Convention for the Protection of Authors Rights and the Berne Convention for Protection of Literary and Arbitrary Works[i] (the Berne Convention). The Berne Convention was one of the first pieces of international legislation that took copyrights into account. Article 1 of the Berne Convention states that the same was ratified for a 'Union for the protection of the rights of authors in their literary and artistic works' for the countries to which it applies. Further, Article 2 elucidates the types of work that the Berne Convention seeks to protect. The Berne Convention has been considered as a primary international standard for legislators while drafting domestic copyright statutes.

    A Significant Overhaul

    Formerly, Law Number 64 of 1999 concerning Intellectual Property Rights[ii] (the Old Law) was the primary piece of legislation to govern copyrights in Kuwait. However, the ambiguities and procedural issues of the Old Law along with the economic progression of globalization gave rise to the need to implement a more structured and elaborate law to protect copyrights in Kuwait. Therefore, Law Number 22 of 2016 concerning Copyrights and Related Rights (the New Law) repealed the Old Law recently. Many suggest that this legislation is a response from Kuwait to the United States Trade Representative (USTR) concerns regarding an inefficient intellectual property law in the country. Therefore, the USTR put Kuwait on its watch list, unless the state came up with international standards and improved its enforcement mechanism of intellectual property rights.

    Hence, the New Law has extensive provisions increased the duration of protection to the author's lifespan and fifty years after their death. It is crucial to note that after this period, the work of the author will enter the public domain and its copyright protection will not be applicable after that.

    The work of an author assumes moral and economic rights under the New Law. The economic rights lead the author to benefit from the financial aspects of their work being used by others and moral rights give the authors the control to preserve their connection with their literary or artistic work. The New Law has provided for an extensive procedure beyond the requirement of any other copyright law in general. However, both, the Old Law and the New Law do not explicitly confine economic rights to particular activities as they are generic, and broadly state that the authority to give permission and prohibit the use and exploitation of their work rests with the author itself.

    The New Law

    Article 3 of the New Law states the different kinds of works that can confer protection under the statute and Article 4 laid down certain circumstances and situations where the legislation would not be applicable such as principles, intangible ideas, texts of laws, judicial decisions, court rulings, and news among other things.

    The New Law applies to both nationals of Kuwait and foreigners as well as authors who publish (or register) their works for the first time in Kuwait. The provisions of the New Law are also applicable to the citizens of WIPO member states. The legislation a vast ambit of jurisdiction as it also applies to countries who present Kuwaiti nationals with reciprocal rights.

    The New Law has also rendered that all the provisions of the Old Law that are contrary to the current legislation would be void. However, both the legislations also have substantial similarity to adhere to international intellectual property standards. For instance, article 2 of the Old Law confers protection to computer literary works such as databases and computer software. Whereas, Article 3 (11) of the New Law is a similar provision which provides that computer software(s) with copyright protection and is in conformity with the international standards of WIPO. However, certain other international conventions such as the Berne Convention has failed to provide computer programs including digital databases and software with copyright protection.

    Neighbouring and Related Rights

    Neighboring or related rights are granted to guard the legal interests of broadcasting organizations, performers, and producers. In other words, it is regarding persons and legal entities that provide the public with access to literary or artistic works.

    However, the protection of related rights to individual beneficiaries is limited by some exceptions. The New Law permits the use of content for specific purposes, such as reporting, private use or scientific research and teaching. Due to these exceptions, while protecting the creativity and idea of the authors, the general public's interest has also been addressed by the legislators. Article 16 to article 20 of the New Law details the related rights and provisions that apply to performance artists, sound record producers, and broadcasting organizations.

    Major Procedural Changes

    The New Law has provided the National Library of Kuwait (the National Library) with authority to ensure the implementation of the statute. This is a novel and different concept in the traditional intellectual property laws of Kuwait. Previously, the Ministry of Information was the competent authority to enforce such legislation in the country. However, Article 36 of the New Law has stated that after being designated by a competent minister, the staff of the National Library is granted the prerogative to monitor and inspect the enforcement of the legislation by examining and reviewing the printing press, libraries, and public houses. The provision further states that the facilities of the above entities may be temporarily or permanently (in a case of repeated violations) closed if and when any of they violate the New Law.

    Although this legislation gives substantial power and authority to the National Library, the exclusive authority for investigation on these matters rest with the Public Prosecution. In this regard, article 40 states that the public prosecution would be responsible for the prosecution of all violations of the New Law. Further, violators may also face imprisonment of six (6) months to two (2) years and a penalty ranging from Kuwaiti Dinars five hundred (KD 500) to Kuwaiti dinars fifty thousand (KD 50,000) in the case of an infringement of a financial or moral copyright. This requires the National Library staff to notify the Public Prosecution when there might be a possibility of infringement to initiate the investigation and legal proceedings in the matter.

    Conclusion

    Today, copyright legislation is of vital importance since it protects and encourages the innovative and creative works and ideas of the authors. The New Law is expected to reform the domestic copyright laws of the country to international standards laid down by various organizations such as the WIPO. Therefore, corporate entities and individual authors should ensure their compliance with the New Law while dealing with copyrighted information in Kuwait.


    [i]Signed in 1886.

    [ii] Came into effect on January 9, 2000.

     

    ]]>
    Sun, 15 Oct 2017 00:00:00 GMT
    <![CDATA[VAT Registration in the UAE]]> VAT REGISTRATION in the UAE

    'The Federal Tax Authority has announced the time-limit for companies to register for VAT in the UAE.'

    Companies should register for VAT before 31 October 2017. The Federal Tax Authority (the Authority) recently announced that companies and MNCs with a turnover exceeding UAE Dirhams one hundred and fifty million (AED 150,000,000) per annum should register under the Federal Law Number (8) of 2017 on Value-added Tax (the VAT Law) before 31 October 2017. Entities with an annual turnover of over UAE Dirhams ten million (AED 10,000,000) should register with Authority before 30 November 2017. All companies falling within the purview of the VAT Law should submit their application for registration before 4 December 2017 and have to be registered by 1 January 2018. This notification may create some chaos initially but is ultimately aimed to avoid last-minute applications. The registration will be divided into two parts – namely, mandatory registration and voluntary registration. As per authorities this system of registration will stop last-minute rush from the companies on registration for the new VAT and the online portal will ease the registration process. The Authority requires businesses to show documents that produce evidence of company's activity and analyze the transaction (this has been explained below as per article 78 of the VAT Law).

    Do companies have the time, awareness and knowledge to embrace the enactment of value added tax (the VAT) in January 2018? The compliance requirements under the VAT Law include internal changes in their system including bookkeeping and financial management, the operating system of accounts, besides charging VAT on taxable goods or services they supply. Firms in the UAE will be responsible and accountable to take these measures and understand the new VAT law and take all possible measures to comply with the VAT Law.

    In our previous article, we had explained the provisions of the VAT Law and its implications on the country's commercial and industrial sectors. In this article, we have explained the procedural aspects of the VAT Law and how companies should register themselves and comply to the provisions of the VAT Law.

    Article 65 of the VAT Law states as under:

  • companies should issue an original tax invoice in the supply of taxable goods and/ or services and deliver it to the recipient.
  • Companies should issue an original tax invoice in the deemed supply of taxable goods and/ or services and deliver it to the recipient. In case the recipient of the goods and/ or services is not available, then the company should retain the original tax invoice for their accounting records.
  • Companies making the taxable supply (of goods or services) should issue a tax invoice to the recipient within fourteen (14) days from the date of supply (article 67).
  • The Company that issues a tax invoice and receives the tax amount should pay this amount to the Authority even if the tax has not become due under the VAT Law.
  • Companies should be transparent and clear in declaring VAT paid (or payable) on every transaction. The Executive Regulation (that is yet to be published) will specify laws concerning data to be included in the tax invoice, the conditions, and procedure for issuing an electronic tax invoice, cases where the registrant does not have to issue and deliver a tax invoice to the recipient of goods or the recipient of services. The Executive Regulation is also expected to lay down the conditions when other records (or documents) could substitute the tax invoice as well as the requirements thereof and the data to be included therein.

    Some of the compliance requirements have been laid down in article 78 of the VAT Law and states that companies should maintain the following records to comply with the VAT Law:

  • Records and document(s) of import, export, and supply of goods and services;
  • tax invoices and tax credit notes received when they purchase products or obtain services of other entities;
  • tax invoices raised and tax credit notes issued;
  • detailed list of goods and services that were used outside the course of business;
  • detailed list of goods and services purchased or used - when tax was not deducted;
  • a complete list of exported products and services;
  • the valid record(s) of any amendments in the internal accounts and tax invoices;
  • a full list of taxable products and services delivered or received; and
  • a tax record (journal) including the due tax on products supplied, due tax after amendments, tax that may be recovered in case of supplies or imports and the taxes that may be recovered after alterations.
  • Firms will charge VAT to their customers at the current rate(s) and will be subject to pay the VAT on goods and services they obtain from their suppliers. The difference between these amounts is reclaimed or paid to the government. Therefore, the success of this procedure ultimately depends upon the procedural aspects that the Federal Tax Authority undertakes to implement the VAT Law - that only time can tell, certainly. However, the government is expected to have adequate methods in place to ensure that the implementation of VAT does not permit companies to unnecessarily increase the price of goods and services. Nevertheless, it is anticipated that the cost of living in the UAE may increase slightly with the implementation of the VAT Law as a majority of businesses within the UAE transacts in sales of goods or services. Tourists will also be covered under the payment of VAT and it may impact the sentiments of the tourism sector in the UAE as well. However, the ambit of this article is not restricted to this statute.

    Federal Law Number 7 of 2017 on Tax Procedures (the Tax Procedure Law) has addressed the procedural aspects of enforcing the VAT Law and collecting federal tax in the UAE. This statute has laid down regulations regarding the collection and administration of VAT (and other Federal taxes) in the UAE. Among other things, it broadly covers tax evasion compliance areas such as tax computation, filing tax returns, audits, claiming tax refunds, and obligation of taxpayers to register themselves.

    The Tax Procedure Law mandates companies to maintain accounting records and commercials of their activities – the specific list of documents have been mentioned in article 78 of the VAT Law. For instance, according to the article 5 of the Tax Procedure Law, reports such as tax return(s), and other documents and recording pertaining to tax must be submitted to the Authority in Arabic. However, this may raise a question on whether all the companies (registrants) should maintain all the internal documents in Arabic. Well, the answer is no. The Authority may accept these documents in other languages as long as they are submitted along with the Arabic translations. In line with international taxation standards, the Tax Procedure Law has also placed vital importance to the Tax Registration Number (TRN). The Authority will provide an exclusive TRN to each taxpayer and article 6 of the Tax Procedure Law states that companies should explicitly mention this TRN in all their applications and correspondence with the Authority.

    Procedure to Pay Tax

    While making a tax payment, companies should specify the TRN, relevant tax period and the type of tax to ensure that the Authority adjusts the tax to their accounts respectively. If a person pays more than the taxable amount, the authority has the right to allocate the difference the next tax period. However, taxpayers may apply for a refund of this excessive payment before the Authority adjusts the difference. But the Authority may adjust the tax amount (paid) in accordance with the Executive Regulations if a person makes a payment without specifying the type of tax or the tax period. Therefore, companies are recommended to maintain a full database of their tax liability to avoid penalties and last-second hassles. 

    Audit and Dispute Resolution

    Further, the authorities have also been conferred with the power to conduct tax audits in the offices or business premises of any person or entity after serving a five (5) days' notice to ascertain the extent of that person's compliance with the VAT Law and Tax Procedure Law. During the audit, the authorities may obtain originals or copies of the relevant documents or take samples from the stock of the taxpayers. The Executive Regulations will discuss more on the Authority's right to audit taxpayers.

    The Tax Procedural Law has also established a dedicated Tax Dispute Resolution Committee under article 28 and 29. Any party who is aggrieved by a notification or decision of the Authority may submit a request for objection within twenty (20) days from the date of the notification. However, the party should first raise the complaint with the Authority and ensure that the all the taxes and penalties that form the subject matter of the objection are paid before filing a request with the Committee. The Committee will issue its decision on the matter within twenty (20) days from the date of submission of the application, and this decision shall be considered as final if the disputed amount is less than UAE Dirhams hundred thousand (AED 100,000). Parties who are aggrieved by the conclusion of the Committee may file a case in a competent court within twenty (20) days from being informed of such decision.

    Considering the technicalities and compliance provisions, the new Tax Procedure Law permits taxpayers to appoint a tax agent to act on their behalf in tax-related matters and liaising with the Authority. Companies may consider hiring tax specialists who are registered with the Ministry of Economy and the Authority. A person can be registered as a tax agent only if he or she was never convicted of a crime, holds a degree from a recognized university or institution, and has insurance and is medically deemed fit to perform his/her duties. Corporate entities would also need to obtain counsel and advice from tax specialists from time to time to guide them on this new regulation.

    Tax rate in the UAE is considered as one of the lowest in the world and some private analysts and financial specialists argue that the VAT Law will affect the UAE's investment climate in every sector. Nevertheless, this may improve market sentiments and pave way for road development, public school, police services, waste control and much more. A final analysis of the implementation of VAT in the UAE can be explained only after the release of the Executive Regulations.

    ]]>
    Sat, 14 Oct 2017 12:00:00 GMT
    <![CDATA[Appiness]]> hAPPINESS

     'If opportunity does not knock, build a door'

    {C}-        Milton Berle

    Yes, Appiness. The time I used to spend on reading, cooking, playing sports is all a thing of past! What do I do these days, you may ask? Apps, apps and apps. They give me appiness. From technology to IT, media to print, virtually every industry in the world is becoming an App fan. Speaking of world, it means global appiness. Are you appy? Let's move on! 

    The media sector is one of the most versatile and dynamic industries on the planet. In contrast to other industries, the media industry does not owe this to the attribute to the constant change in domestic regulatory framework or the evolving faces of global financial climate. On the other hand, trend is the basis of the media industry; and this trend does not originate by itself. Trend is created by the imagination that is backed up by public demand. For instance, when Mickey Mouse first appeared to the public in 1928, there was widespread speculation about the success of an animated figure in comparison to real-life movie stars of the time. But that year marked the birth of a trend for animated movies which gained unprecedented popularity in the century to follow. Although, this article is about the opportunity to create a new trend or pattern rather than spending your valuable time on discussing about the success of trends in the past century

    Talking about the opportunity to develop new trends, the Dubai Media City (the DMC; or the Free Zone) came into existence in 2001 to foster the country's position in the global media industry by providing domestic and international players with a regional base to cultivate contemporary trends in the industry. More than a decade into the future, the Free Zone has become the home to more than 2,000 media companies that push the limits of imagination and creativity each day.

    Company Formation in Dubai Media City: The Process

    The Dubai Media City aims to provide investors in the media sector with exclusive state-of-the-art facilities to facilitate the free flow of creativity and artistry within the region's largest information and communications technology (ICT) community. The Free Zone is equipped with integrated fiber optic cables and custom-built offices and studios to meet the dynamic change in trends of the media industry.

    Investors desirous of business setup in Dubai Media City may set up a free zone limited liability company (FZ-LLC) with natural and corporate shareholders or a branch of a UAE or foreign company. Investors interested in establishing free zone limited liability company in the DMC have to adhere to minimum share capital requirements that have been laid down by the free zone authorities. Whereas, international or domestic entities that are looking to establish their presence in the region may opt to set up a branch office in the Free Zone without any minimum share capital requirements. However, these branch offices are only permitted to carry out the same activities of the parent company in the DMC. But that is not all. Individuals professionals in the media sector also have the option of registering themselves as a sole practitioner in the Free Zone by obtaining a freelance permit and conducting their professional activities under their birth name. This is a significant overhaul of the DMC as compared to other free zones in the region since they do not require a minimum required share capital or a separate legal entity to commence their operations. Due to our significant experience with the process of company incorporation in Dubai Media City, we recommend investors to compile the following documents before initiating the incorporation process in the free zone:-

    Investors may also opt from various office spaces that suit their specific activities once these documents are submitted to the free zone authorities. The Free Zone provides commercial areas, boutique villas, and business centers to facilitate the custom needs and requirements of the media industry.

    The DMC also houses a dedicated innovation platform (in5) that provides a creative and technical environment to media professionals with the view of nurturing their start-ups and students who practice in the media sector. The Free Zone is a distinct city altogether within the heart of Dubai that supports media companies and entrepreneurs with dedicated infrastructure and other miscellaneous facilities ranging from hotels and restaurants to fitness centers and retail outlets. Therefore, the DMC is the premier entrepreneurial platform for investors in the media industry looking to establish their presence in the region. Domestic investors, as well as multinational giants, have opted for this free zone due to their sector-specific requirements. However, applicants should draft the business plan and the application form with care (preferably with the assistance of a law firm that provides bespoke legal advice) to ensure that the company formation process does not face any undue delay.

     

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    Sat, 30 Sep 2017 00:00:00 GMT
    <![CDATA[Da Ta Da - Fair Dealings & Copyright Laws]]> Da Ta Da - Fair Dealings & Copyright Laws

    Have you ever bumped into someone when walking on the street because you were using your phone? Or maybe you tried to stifle your laughter when you saw someone else hit a pole or a glass window because they were so occupied staring at the screen of their phone. I have. I have run into a pole a few times too. The bump on my head proves it. Our daily dose of data has increased tremendously in the last decade, and any decline in the imminent future appears unlikely. Our demand, especially of mobile data through the use of smartphones and tablets drives our society to be online and updated at any time.

    Most of us commonly use our smartphones as the primary source of data. Others may still prefer computers. The instant our alarm wakes us up in the morning to the moment we have our lunch, and on our way back home on the bus or train from work, we satisfy our appetite for data by reading news, communicating online or by updating our social media to share our lives with our friends.

    However, using data nowadays is not only to read the breaking news or share a text online. We have developed an appetite for data increasingly due to the availability of visual content. Animated pictures attract more attention than long boring messages. Consequently, a high number of online providers now offer an online visual experience.

    Of course, it is not surprising that newspaper companies now follow this market demand as well and provide a more visual experience to present news with videos and animations. More often than not, newspapers and other providers will only have a following if they publish a certain amount of these visual experiences. Several clips are used to gather information about an interesting matter to make a short video which takes only about 20 seconds or less to satisfy the needs of their followers and readers. These clips are short extracts from films, television or other videos, compressed and cut to show notable moments, for example, a goal in a football match, a hurricane, short quotes from celebrities on the red carpet and anything in a nutshell that can yield some publicity for the provider. Usually, the clips used are from third-party footage. Providers may take the footage from news companies, such as the BBC or CNN or from sports channels. In this scenario, the news company or the sports channel still owns the copyright of the material in the video. Taking and using the clip without authorization and any legal justification would be copyright infringement.

    Nonetheless, the provider could still use this particular clip if it can trust on a so-called rule of exception to copyright. One of these exceptions is called fair dealing. In this article, attorneys of our intellectual property team would discuss the applicability of fair dealing concerning United Kingdom's Copyright Design and Patents Act of 1988 (the Act).

    Fair Dealing

    One way to define fair dealing is a defense to copyright infringement. It permits a provider to copy parts of copyright work designed and produced by third parties without the obligation to obtain prior permission from the third party for publishing purposes. For example, a provider could use a quote from a book for his online postings or the use of a short video sequence, by cutting out a movie from a third party. In these cases, the copyright owner requires neither payment nor any other service. The online provider does not need to inform the copyright owning party about what he is doing. It is irrelevant whether the provider acts commercially or not.

    The Act gives authors the ability to control the means in which their work is used. Chapter III of the Act introduces the fair dealing defense, giving numerous exceptions to whom or when copyright law cannot protect creators with the use of the defense, such as libraries and for educational purposes.

    Wider application

    However, some parts of the fair dealing defense are of a broader nature; for instance:-

         i.          Fair dealing for the intention of reporting current events defense is a particularly useful argument for media companies. It permits an extract from a copyrighted work, which is not an exact one to be used to report an event simultaneously or to report an event which took place some time ago in the past, but which remains newsworthy. An example of this would be when a provider uses a clip from TV footage to report contemporaneously terrorist attacks in the Middle East or another part of the world;

    ii.         The fair dealing for criticism or review defense permits to take and use a visual part from a copyright-protected work and offer critics or give a review of the extract itself, or a different copyright work. That sometimes occurs when a provider uses a short clip from a film to state a comment of the level of violence included in the movie itself;

    iii.           The fair dealing for a quotation defense not only permits extracts from copyright works to be used to provide a so-called "quote" in the conventional sense of the word itself but also to refer to something that has already taken place. A short example of this is when clips from several films could be used to illustrate the fact that an actor prefers roles in action movies;

     iv.          The fair dealing for caricature, parody or pastiche defence permits the provider to extract a part from any copyrighted work and build on it to create a separate so-called "mashed-up" work, usually for comedic or entertainment purposes. The comedian could use some lines from a movie or a song for a sketch. Additionally, a cartoon artist could work out a well-liked artwork or illustration for caricature purposes, or an artist shall use parts from a range of films to form a larger artwork.

    Conclusion

    The United Arab Emirates has implemented a similar copyright defense termed fair use under Articles 22 to 24 of the Federal Law Number 7 of 2002 regarding Copyrights and Related Rights. This defense can be used as long as prejudicing of the rights of the creator does not occur, and the works are already lawfully published.

    With the UK law in mind, of course, one cannot use the argument of fair dealing without any consequences or else the idea of copyright would become useless. Therefore, in any case, any utilization must be of fair dealing, in general. Accordingly, in every case, one has to act as any fair-minded and honest person in the same situation. As a result, commercial use, which would compete with the original copyright or a copy of a tremendously long part of the original, certainly seems to be unnecessary and will of course not be seen as fair dealing and must be actionable by the copyright owner.

    The utilization of the original copyright work must be performed by sufficient acknowledgment, by stating the name of the original work and author. An exception is allowed only when the reasons are practical and reasonable. To be defended by fair dealing, the provider has to focus on following the accurately described procedure so as not to be sued by the copyright owner. The fair dealing rule is vital in today's times, where the use of data becomes more and more important to people around the world. However, the current law states a too general statement about the use and its borders and should be specific with precise details, so a provider does not cross the red line of fair dealing. Nonetheless, a beginning was set, and the details shall occur rapidly.

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    Thu, 28 Sep 2017 13:00:00 GMT
    <![CDATA[Mr. DEBT’s hello to Mr. DAMAGE: Case Analysis on Freight Industry]]> Mr. DEBT's hello to Mr. DAMAGE: Case Analysis on Freight Industry

    Suppose an individual has borrowed a specific sum of money against an asset of a reciprocal value as security. However, the debtor fails to fulfill his obligation; and subsequently, the creditor exercises his lien and disposes of the former's asset to retrieve the due amount. Unfortunately, the sale proceeds of the debtor's assets were not sufficient to cover his claim. Ergo, a substantial question arises as to whether the creditor would continue to have a claim against the debtor? Better yet, could one opine that the creditor would have a valid claim if the underlying issue was outstanding freight charges and not a loan and the security sold was the cargo? Let's read further to find out.

    The graceful commercial effect of globalization paved the way for various industries that were primarily intended to facilitate the process of international trade. By then, sea cargo was already a major player in the logistics supply chain employing thousands of container ships over most of the earth's waters. However, the convoluted technicalities of the industry raised substantial ambiguity in the legal relationship between the parties in a charter party agreement. Further, the complexity of the legality surrounding the industry along with the multiplicity of jurisdictions involved in a maritime dispute has led to numerous circumstances which questioned the fundamental principles of maritime jurisprudence. One such situation arose in 2016 when the Commercial Court in Singapore had to identify the characteristics of freight in the infamous case of D'Amico Shipping Italia SPA v Endofa DMCC and Another. The primary argument before the court was if outstanding freight charges in a charter-party would amount to damages or unpaid debt. This case felt the paparazzi chills due to the undeniable universal concept that awards damages to the ship owners when the other party of a charter party agreement does not pay freight charges, or demurrage. The industry was unfamiliar with this technique due to the general perception that the concept of debt would arise only when a party undertakes a monetary loan for a security of similar value. However, this case established a nexus between outstanding freight and unpaid debt by comprehending the underlying asset in both the circumstances viz. cargo and security, respectively.

    Once Upon a Time…

    The story unfolded when Endofa DMCC (the Charterer) chartered a voyage to transport a cargo of crude oil (the Cargo). The Cargo was being shipped by a third-party shipper from Ghana to Germany through a vessel owned by D'Amico Shipping Italia SPA (the Ship Owner) vide a charter party agreement (the Agreement) between the parties. The Agreement consisted of a before breaking bulk clause and provided the Ship Owner with a lien over the Cargo until all freight and demurrage charges were paid off by the Charterer and the third-party shipper. Further, the before breaking bulk clause granted the former with a right to withhold the Cargo until the time of payment of all due amounts by the other parties.

    However, things went south due to the failure of the Charterer to meet its obligations and pay the freight charges after the vessel reached its destination in Germany. The Charterer and the third-party shipper also failed to provide necessary instructions regarding the discharge of the Cargo. Therefore, the aggrieved Ship Owner decided to exercise its lien to meet the outstanding amount that arose from the Agreement. Consecutively, the Ship Owner obtained a court order and disposed of the Cargo for USD 3.2 million after a period of five (5) months. However, the tale did not end there since the sale amount did not meet the wholesome claim amount of the Ship Owner. Therefore, a suit for summary judgment was instituted by the Ship Owner with the view to obtain the balance amount in freight and demurrage from the Charterer and the third-party shipper.

    The Undeniable Characteristics of Unpaid Freight

    In this instance, the court faced with the mammoth task of determining the characteristics of outstanding freightage amount while analyzing the provisions of the Agreement. Therefore, the court had to comprehend the precise moment when the freight became due to ascertain if the balance amount could be recoverable as the outstanding debt. One might wonder, why all this hassle over a few technical terms like unpaid debt and damages when the whole debacle surrounds a charter-party dispute. Recapping to the earlier mentioned complexity surrounding charter-party agreements, it is imperative to note that mitigation is a substantial factor that the court takes into consideration while ruling a suit for damages. That means that the court would consider the measures adopted by a party to curtail the potential losses of the other party in a suit for the award of damages arising from a tort. However, this rule does not have any standing in a suit to recover debt since the burden is generally not on the creditor to minimize the debtor's losses.

    In this case, the Charterer was placed with the burden to prove that the Ship Owner was negligent in its attempt to mitigate the losses that the other parties could incur. Therefore, the Charterer argued that the freight charges were payable as damages and further would not become due until the Cargo had been discharged or was made available to them by the Ship Owner. They also contended that freight had not accrued when the vessel had reached its destination, due to a breach of the Agreement that resulted from their failure to provide necessary instructions regarding discharge. Further, the Charterer claimed that the Ship Owner had not taken appropriate measures to mitigate the potential losses that they could incur since the former had exercised its right to lien only after (5) five months from the date of arrival of the vessel. Further, the Charterer argued that the sale receipts of the Cargo would be adequate to cover the costs of freight and minimize the claim against the third-party shipper if the Ship Owner had disposed of the Cargo earlier.

    However, the court comprehended that charter-party agreements consist of tailor-made provisions such as the before breaking bulk clause and hence, should concentrate on the specific provisions of the Agreement while analyzing the characteristics of the freight involved. However, the court also took the opinion that the provisions of general law and commercial practice should also be taken into consideration while determining the payment of freight in this case. Therefore, the Commercial Court scrutinized the provisions of the Agreement and held that shipment would be due before the Cargo is ready for discharge under the Agreement. Further, the court observed that the Agreement had granted the Ship Owner the right to withhold the discharge of the Cargo unless the Charterer paid the freight amount. The court also took the opinion that the freightage would be due from the moment the Ship Owner was ready to discharge the Cargo since the Agreement had provided that the former could retain the possession of the Cargo until the other partied cleared all payments. Therefore, in the present case, the amount of freight was payable as debt since the Charterer and the third-party shipper did not pay due amounts and provide the Ship Owner with relevant information regarding the discharge of the Cargo. Further, the court also rejected the contention of the Charterer relating to the duty of the Ship Owner to mitigate a separate loss, by stating that the alleged failure of the latter to dispose of the Cargo promptly cannot be the defense to a different suit for unpaid freight.

    Conclusion

    This case is expected to establish a global standard regarding the payment of freight as an outstanding debt. Therefore, the owner of a ship would not be under the duty to minimize the losses of the other parties as long as the freight had become due by the charter-party agreement. Further, it is imperative to note that courts interpret the relationship between the parties and the characteristics of the subject matter of a maritime dispute by analyzing the ambit of the underlying charter-party agreement. Therefore, parties in the contract should scrutinize disputes relating to charter-party agreements establish a clear nexus between rights and obligations against one another. The bespoke legal advice of an international law firm with a dedicated legal team is expected to support the cause of the parties in such an agreement.

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    Wed, 27 Sep 2017 14:00:00 GMT
    <![CDATA[Boarding Complete: An Islamic Rendering]]> Boarding Complete: An Islamic Rendering

    Part II of II

    In our previous issue, we discussed the Shariah principles of ijara, simple ijara, ijara wa iqtina, ijara mawsufa fi al dimmah, istisna'a, and how ijara and mawsufa fi al dimmah work. Our attorney's had detailed the different types of leasing provided by Shariah law. But there is more yet to come. This Part II of the article gives a detailed description of sukuk, murabaha, mudarabah, and how financial leasing applies to the leasing of aircrafts.

    What may be surprising from a Western perspective is the ingenuity and reliance on Islamic principles such as those detailed previously and below regarding financial leasing. The ban of levying interest is an intricate art of financing which questions the very business nature of forward-thinking financial institutes and other entities dealing with financial matters. So, continue reading to understand further the principles ascribed by Shariah law and their implementation.

    Sukuk

    Sukuk is a form of an asset-backed trust certificate (bond) which is issued to the investor as evidence of ownership of an asset or part ownership or its usufruct (earnings) based on the principles of Shariah. Sukuk differs from conventional bonds regarding asset ownership, investment criteria, issue price and unit, investment rewards and risks, and effects and cost. Unlike conventional bonds which can be issued without underlying assets, Sukuk is always issued upon underlying tangible asset either in ownership or an underlying master lease agreement, Sukuk Al-ijara. Accordingly, the Sukuk represents a share in an underlying asset whereas an ordinary bond accounts for a share of the debt. The conventional bondholder may get a principal amount upon bond maturity or coupon payment while Sukuk investors acquire shares of profits from an underlying asset. The Sukuk can be tradable or nontradable. The types of Sukuk certificates are based on al salam, murabaha, muskarakah, mudarabah, and ijarah.

    Typically Sukuk Al-ijara is commonly used for aircraft financing. In this type of transaction, a special purpose vehicle (SPV) will purchase the asset and lease it ultimately to end-user who wanted to use the asset under structured arrangements. An  SPV will issue Sukuk certificate under note issuance facility to entitle the holder of Sukuk an ownership and right to receive a proportion of rental payment. The particular transaction is provided below under the heading 'how does Islamic financial leasing work for aircraft leasing.

    Murabaha

    The Murabaha is simple but extensively used as a buy and sell technique also known as cost-plus financing. In a Murabaha transaction, the client seeks to finance from a financial institution. The seller in this transaction is obligated to disclose to the buyer or the client the cost price of the asset. Typically, the client approaches the financier for funding the purchase of the asset; the financier will purchase the asset and take the necessary title either directly or through an agent and may use it's own fund or fund invested by investors. The financier discloses cost as well as the profit margin for financing to its client. The financier then sells such asset to a client with a cost and a profit margin disclosed. The client can make deferred payment terms. Some schools questions this type of transaction, but it remains acceptable by most schools because by purchasing the asset the financier assumes the risk attached to the asset and therefore such a risk entitles the financier to profit while selling.  As a fixed price is typically set at the start of the transaction the client has no influences as to variations in the base lending rate and the transaction is not affected by gharar.

    The following example will make clear the process of such a transaction. The financier and bank enter into a Murabaha agreement with the client, later the client is appointed as an agent to purchase goods on the financier's behalf, and the financier will disburse such money to the client for the purchase of goods. The client takes possession in the name of the financier. Therefore, transfer of the risk to the financier as an owner takes place. Upon purchase, the client will offer to purchase and upon acceptance of such offer the sale concludes with a transfer of title.

    Mudarabah

    It is a profit sharing and trust financing technique wherein many investors pool their funds together and become shareholders in major financial projects. This transaction is a form of partnership by an equity type investment wherein one partner provides capital (rabb ul amal), one that is commonly the beneficial owner, the other party manages the investment and is responsible for operations and the management of the business (Mudarib). The financier acts as Mudarib and finances large projects on behalf of investors. The financier may put its funds or act on behalf of depositors with the financier serving as a trustee for the investors and thereby assumes fiduciary responsibilities. Alternatively, the financier can provide funds to the client who acts as Mudarib. The partners acting as investors and the one managing the business must distribute the profits by a fixed and pre-determined ratio. In case a financier acts on behalf of depositor-investors, the fixed financier's share is from the revenue generated who in turn pays its depositors all the profits received after deducting its fees.

    The losses and profits under Mudarabah are born due to an investor (rabb ul-amal). Accordingly, the loss is carried by investor unless negligence, misconduct can be attributed to, or any terms of the contract that are breached by, the Mudarib. Any assets acquired by Mudarib are in possession of investor and managed by Mudarib on behalf of investor's. Financiers utilize the Mudarabah funds for further Islamic transactions such as Murabaha, ijara'a, or Istisna'a, etc.

    How does Islamic financial leasing work for aircraft finance?

    After the global financial crisis in 2007 – 08 the use of Sukuk as alternate funding source was used by aviation sector. UAE was the largest Sukuk market in the middle east in 2011 with 69% of Sukuk issuance in logistics and real estate market which was overtaken by Kingdom of Saudi Arabia (KSA) in 2012 according to Zawya reports.  However, the International AirFinance Corp's launch of a US Dollars 5 billion Shariah-compliant aircraft leasing fund represented the first time exclusive utilization of an Islamic finance structure for their aircraft financial leasing operations. Further, Dubai Islamic Bank (DIB) and Air Arabia announced the signing of an aircraft financing deal in November 2014 to facilitate the delivery of six new Airbus A320 aircraft's in 2015. Increasingly, the Islamic aircraft lease financing is in use by international airlines including, Etihad Airlines, Saudi Arabian Airlines, Air Arabia, Emirates, Malaysian Airlines, Turkish Airlines and by some of the world's largest aircraft leasing companies. Air Arabia has received a total of 29 of the 44 A320 aircraft's it ordered from Airbus in 2007 though the use of Islamic financing arrangement with DIB.

    We will now consider the Islamic structure of ijara being used in practice. The Sukuk al-ijara is most commonly used technique for aircraft leasing. In this transaction, the owner (lessor) assigns the right to use aircraft to an airline company (lessee) for a pre-determined monthly rental payment. The operation is not simple as it seems by the statement above hence it will be explained with the examples as employed below:

    I.  The airline company wishes to purchase an aircraft and plans to raise finance through the issuance of Sukuk. Identification of the seller or supplier of the aircraft occurs, and negotiations are entered into and finalized between the seller and airline company. Next, an SPV is created by the airline company as a separate company or such structure as deemed fit, which is 100 %, i.e., entirely owned by the airline company. (The rationale behind creating an SPV to purchase the asset is that airline companies often prefer to keep their fleet new and cannot afford to continue the purchase of new aircraft as per the changes in new technologies that are entering the market due to innovations of leading aircraft manufacturers.) The SPV will then issue Sukuk certificates and receive the proceeds which are used to purchase new aircraft from the manufacturer or seller. Now the SPV will hold the aircraft as a trustee for the investors and will lease the aircraft to the airline company under the ijara arrangement. Later as per the ijara arrangement between the airline's company and SPV, the airline's company will pay rentals to SPV for tenure and amount matching the Sukuk coupon's amount and tenure. The SPV will then pay investors through a semi-annual coupon distribution of value. Airline companies may grant irrevocable purchase undertakings to buy the aircraft on the maturity of Sukuk. Upon maturity, the SPV redeems the trust certificate for investors at the dissolution of the SPV. The SPV will receive the purchase price from the airline company at dissolution. The purchase price given by the airline company will be the initial purchase price of aircraft plus service or managing fees. The aircraft is transferred to the airline company upon payment to SPV/Sukuk holder.

    II.  The other option that can be used by airline companies is that they may purchase the aircraft and sell it to SPV which will lease it back to the airline company. This transaction is called sale and leaseback.  In any of the above scenarios, the SPV will act as a trustee for Sukuk holder after issuing Sukuk certificates. SPV will hold the aircraft as an asset in its balance sheet or place the asset in trust. Again the same process of receiving proceeds from investors and paying investors proceeds from lease amount proportional to their share and ownership in the asset will follow.

    III.  Usually, in the above scenarios, the lessor, i.e., SPV under such Islamic transaction being the owner of the aircraft remains liable for ownership taxes, if any, major maintenance and hull and equipment insurance. However, in practice should neither the lessor nor airline company wish such responsibilities to be taken upon by the lessor. Therefore, the lessor will appoint the airline company as service agent and thereby repay the service agent (airline company) these costs. Ordinarily, these repayment obligations endured by the lessor will be paid pack to the lessor by the airline company in the form of extra rent to set off. Therefore, the liability passes to the lessee but in Shariah compliant ways.

    IV.  In case, the financier such as a bank or financial institute is financing the aircraft they would prefer acting as an investor (rabb ul amal) and enter into mudarabah with the SPV (mudarib) who will be an investment manager. Under this mudarabah, the financier will pass their funds to mudarib for its use in agreement with the investment strategy. The mudarib (SPV in this case) will hold a small proportional interest in profits and will not be responsible for any losses except such losses which are caused by its negligence, misconduct or fault.

    The Airfinance Journal examines the financial structures of global airlines and rewards the best financing structures in different categories. The case study of some award winning deals will make clear to the readers the practical implementation of Islamic financial leasing transactions.

    In 2008, the transaction between Etihad and Al Hilal Bank, Abu Dhabi (the Bank) won Airfinance's Award for Journal Middle East Deal of the Year in 2008 for financing structure of an Airbus A340-600 for Etihad. The transaction documents involved were ijara and mudarabah. The Islamic financier appointed a Bank as an investment agent by entering into Investment Agency Agreement. The Bank as an investment agent entered into a mudarabah agreement with the SPV. This SPV was a Cayman Islands company. The Bank was acting as an investor (on behalf of Islamic financier as investment agent) hence it was rabb ul-amal, and SPV was mudarib. Under this investment strategy, the SPV acquired the Airbus and then leased it to Etihad by use of the funds given by the Bank as an investor. The Bank as an investment agent entered into an administrative agency agreement with the SPV and SPV appointed the Bank as an agent of mudarib for performing certain actions. The proceeds received by SPV, as the mudarib, with a small deduction in a percentage of profits were payable to the Investment Agent i.e. the Bank under the mudaraba agreement. Distribution of the profits received by the Bank to the Islamic financiers will take place under the Investment Agency Agreement.

    The SPV also entered into ijara with Etihad and appointed Etihad as its service agent.  The lease payable by Etihad included fixed rents, variable rent and an extra sum to set off the reimbursements obligations owned by SPV as lessor, to Etihad as the service agent.

    Another recent example of exceptionally innovative financing structure was carried out by Emirates known as Emirates ECA Sukuk. This is first ever Export Credit Agency (ECA) backed Sukuk transaction. In this deal, the Khadrawy Limited (Cayman Islands) incorporated SPV issued certificates, which comprised US Dollars 913 million Sukuk due in 2025. The Sukuk has ten-year tenor and were listed on London Stock Exchange and NASDAQ Dubai. The proceeds of this Sukuk have used for pre-funding the aircraft financing of four Airbus A380-800 aircraft. The pre-funding issues were managed by an innovative combination of ijara and manfa'a (sale of the right to use the asset for a pre-determined period) wherein the tangibility of aircraft during the pre-funding period was overcome by usufruct represented by tone kilometers.

    Conclusion

    The deals in Islamic financial structures have not only garnered the attention of Muslim states but have also earned appreciation from Western countries, countries in Europe, Asia and other parts of the world, who are actively exploring the Shariah ways of investments and financing. The appreciation of Shariah principles has explored further ways of addressing the concerns of the conventional financing industry and sponsors. Our GCC based firms will be happy to structure and assist you with your ventures for explorations into Islamic financing transactions.

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    Mon, 25 Sep 2017 15:00:00 GMT
    <![CDATA[The Dubai International Financial Centre & Its Jurisdiction]]> DIFC: A Jurisdictional Overview

    The DIFC courts exist as a jurisdictional island within the Dubai panorama.

    The Dubai International Financial Centre (the DIFC) Courts were established back in 2004 by His Highness, Dubai's ruler at the time, Sheikh Maktoum bin Rashid Al Maktoum. Providing an independent administration of justice in the DIFC, attempting to ensure that Dubai would offer to its players the highest international standards of justice administration, and at the same time allowing them to benefit from the certainty, flexibility, and efficiency that is usually provided by the common law.

    In spite of the limitation of the resolution of civil and commercial disputes, the fact is that in an international hub such as Dubai, the DIFC Courts were and are a welcome alternative to the local jurisdiction. As DIFC Courts use English as the first language and common law rules – when the other option would be the local Courts' continental system, which litigates in Arabic.

    Thus, the importance of DIFC Courts has been growing in Dubai as a sound alternative. On the one hand, they are the exclusive jurisdiction for companies - whether individuals or multinationals - established in DIFC or for transactions finalized within its territory; further, parties to a contract may come to a written agreement to approach the DIFC Courts in the case of a dispute.

    Governing Law and Jurisdiction – Where DIFC meets English Common Law

    Nowadays and having in mind the Westernization of the Islamic culture, the majority of the contracts will establish two mandatory clauses that will decide the future of the contract in case of dispute – the governing law and the jurisdiction clause.

    And while the governing law will be of essence to decide the legal framework that will apply to and govern the contract, the jurisdiction clause will determine the place where the case will be heard, being the parties given the option to choose between Courts and Arbitration, with exclusive or non-exclusive jurisdiction. We have already mentioned that the DIFC Courts will have exclusive jurisdiction over some matters, namely over commercial or civil disputes and cases, those that involve the Centre itself or any of its Bodies or Establishments. Those that arise from or relate to an executed contract or a concluded transaction, in whole or part in the Centre, or an incident that has taken place in the Centre. Finally, any objections that are subject to objection by the Centre's Regulations and their application based on the jurisdiction such Regulations bestows upon the Centre.

    Furthermore, where the parties agree in writing, they can decide to have the DIFC Courts as jurisdiction in the case of dispute. And there we are, at the meeting point where the DIFC Courts will be able to get around the country's civil system and apply the English Law. Before proceeding, it is important to clarify that as per the Article 8 of the DIFC Law number 3 of 2004 on the application of civil and commercial laws in the DIFC, the DIFC courts shall follow a particular order when applying the law. Accordingly, DIFC law is applicable within the Dubai Financial Centre in spite of any relevant Federal Laws, and the rights and liabilities of two parties to any matter will be determined as such.

    It will always be most desirable for any disputes arising from two different agreements such as a share pledge agreement and a loan agreement to be heard and settled in the same place. The only medium that satisfies the jurisdictional requirements are the courts of Dubai. Take, for example, Ras Al Khaimah which is an Emirate within the UAE, DIFC Courts are not within the scope under the 2009 Loan Agreement, neither was it selected as an alternative for English jurisdiction by SCB under the 2010 agreement, nor was at an agreed medium under the Share Pledge Agreement. As English Law governs the 2010 Loan Agreement, it can be concluded that the DIFC Courts are better equipped to apply it than the courts in Sharjah. Further, as Sharjah courts require translation of all documents that are not in the Arabic language, all three agreements would require translation. However, this process would be both time-consuming and costly causing a rise in potential dispute. Further, the second paragraph, in agreement with the current law in force, of Article 8 continues by stating that:

    'The relevant jurisdiction is to be the one first ascertained under the following paragraphs:

    (a) so far as there is a regulatory content, the DIFC Law or any (all or) other law in force in the DIFC; failing which,

    (b) the law of any Jurisdiction other than that of the DIFC expressly chosen by any DIFC Law; failing which,

    (c) the laws of a Jurisdiction as agreed between all the relevant persons concerned in the matter; failing which,

    (d) the laws of any Jurisdiction which appear to the Court or Arbitrator to be the one most closely related to the facts of and the persons concerned in the matter; failing which,

    (e) the laws of England and Wales.'

    Accordingly, in the case of failure of any of the previous four (4) options, the laws of England and Wales will be applied by default to the matter. And this provision is a welcome exit strategy, allowing the Courts to use one of the most developed and dynamic legal systems in the world. An example of this possibility is Dutch Equity Partners Limited v Daman Real Estate Capital Partners Limited[i] (Dutch Equity), where the first instance judgment decided to apply the UK Companies Act of 2004, as there was no Companies Law in DIFC till 2006. Nowadays, the principle remains the same for the majority of cases that are blessed with international parties which prefer to rely on the well-known common law. To apply the English Law to areas not covered by the DIFC law, or even use the common-law principles and jurisprudence as an authority against the reasoning and decision of any case where DIFC did not legislate yet.

    Following this line of thought comes the second question: where the agreement doesn't provide for jurisdiction or mentioned the Courts of England non-exclusive jurisdiction, stating that the governing law will be the English Law, will the DIFC be a possible option, as it avowedly applies the English Law?

    The DIFC had the opportunity to discuss the issue in Mr. Philippe Choque v (1) Mondial (Dubai) LLC (2) FPA Lts (3) Financial Partners Holding Limited[ii] that the deed will be construed and governed by and per English Law. The assignor and the company will submit to the English Courts' non-exclusive jurisdiction. The document which is from 1996 between the second/third respondents and the claimant is not relevant and does not directly involve DIFC. Neither does it create a link to the DIFC jurisdiction allowing and inference.

    This decision leads us to assume that despite the English law being a recognized source and applicable by DIFC courts, the consent of the parties or the connection with DIFC (whether through the parties or the transaction) is a must to submit or refer a dispute to the DIFC Courts.  Resulting in considering themselves incompetent and refuse the case if this is not fulfilled.

    A second decision has also been made on this jurisdiction matter in Standard Chartered Bank v Investment Group Private Limited[iii] approached the DIFC Courts with two loan agreements. One was subject to the courts of the United Arab Emirates and the second was expressly subject to English Law in addition to a Share Pledge Agreement that must be regulated by the jurisdiction of the Dubai Courts. As the three agreements must be heard in one case only, a solution needed to be found. Each agreement would offer a different jurisdiction for resolution. However, DIFC Courts appeared as a natural choice that would fulfill the requirements of all three contracts. DIFC Courts being a UAE court, based in Dubai, that would be able to apply English Law. The DIFC Courts dismissed a jurisdictional objection and accepted the jurisdiction and the role of reviewing the matter for the following reasons:

  • the agreements were in English;
  • the convenience of the language;
  • the fact that DIFC Courts would be more qualified to apply English law than Sharjah courts;
  • the fact that the Sharjah Courts (that would be the forum under 2009 Loan Agreement) –would not fulfill the requirement of the 2010 Loan Agreement requesting for the application of the English Law and would also not comply with the Share Pledge Agreement; and
  •  
  • where the parties agreed that the forum would be a Dubai Court Dubai and Sharjah are adjacent.
  • Thus, we understand that for the Courts to consider the review of the matter when it comes to jurisdiction clauses, the Courts will require a relationship between the Courts and DIFC to accept it. It is important to note that SCB despite not having its headquarters in DIFC, has several branches registered in the UAE, some of them within DIFC. Furthermore, we also should mention that in the second case one of the agreements stated the Courts of the UAE and the other the Dubai Courts – being the DIFC Courts a UAE Court, based in Dubai.

    Enforcement Techniques

    Despite the necessity as mentioned above of a connection point between parties, agreement or transaction with DIFC for the Courts to accept the dispute, we will have a different scenario when it comes to the execution of the matter. Where a winning party attempts to execute a case that has already been adjudicated on by the English Courts before the DIFC, the DIFC Courts will be able to entertain it. Due to a Memorandum of Guidance as to Enforcement has been signed between the DIFC Courts, the Commercial Court, the Queen's Bench Division, and England and Wales, without binding legal effect. Which allows DIFC Courts to issue orders, even if interlocutory, regarding restitution, disgorgement, compensation, or damages; and to issue or direct the issuance of any writs if deemed necessary, when it has jurisdiction according to the English rules. This Memorandum signed in 2013, attempts to burst the cooperation between the parties and improve the debt recovery system. 

     


    [i] CFI 1/2006

    [ii] CFI 26/2013

    [iii] CFI 026/2014

     

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    Tue, 19 Sep 2017 14:00:00 GMT
    <![CDATA[Tackling Post Dated Cheques in Bahrain]]> Tackling Post-dated Cheques in Bahrain

    Can an instrument of payment be offered that ensures complete safety? The reality of the latter statement is an unlikely one. The law, however, does attempt to provide security where a payment transaction fails to do so. The nooks and crevices of such law must be understood to avoid any misguided reliance's on it.

    Post-dated cheques are considered to be an instrument of security to guarantee future payments. They, however, are also used as a tool of secured future payment. As can be understood, a post-dated cheque promises payment of a specific amount at a future date, and the party can only cash the said amount on the future date. In Bahrain, there are criminal implications for issuing a post-dated cheque from an account with insufficient funds. The Criminal Court of Appeal in Bahrain has issued several judgments clarifying the risks associated when doing so.

    Law-Binding Spell

    Due to both the social and legal implications of the 'bouncing' of a post-dated cheque, beneficiaries find it favorable to rely on this type of payment transaction.  Of course, one cannot automatically assume a criminal offense will arise upon the dishonoring of a cheque, but rather one can rely on court judgments for protection as the likelihood of criminal implication is high.

    The Bahraini Criminal Court of Appeal has elucidated as to the matter of intention as seen below:

     I.          Criminal Appeal Number 5 of 2005, in session dated 17 October 2005 found that regardless of whether the cheque was issued as a security measure only, it remains a transaction of certainty that the issuer must adhere to.

    II.          Criminal Appeal Number 77 of 2006, in session dated 26 July 2006 states that assuming the cheque issuance follows the legalities of doing so, the crime of issuing a bounced post-dated cheque occurs even if the issuer is aware of the insufficient funds in their account and issues the cheque as a security method only.

    Denoting that the issuer of a post-dated cheque automatically assumes a risk and an intention to provide the money promised in the cheque regardless of whether that was their real intention.

      I.     Criminal Appeal Number 5 of 2005, in session dated 17 October 2005 states if the account of the issuer does not contain sufficient funds the crime is considered to be committed regardless of the reasoning behind it.

      II.         Criminal Appeal Number 77 of 2005, in session dated 26 July 2006 follows that an issuer of a cheque automatically assumes 'bad intention' by merely knowingly or unknowingly issuing a cheque to an account with insufficient funds.

    The decisions highlighted above follow a similar pattern of automatic risk of criminal liability regardless of intention or awareness of the crime being committed. It is enough to perform the action of issuing a post-dated cheque that will not be fulfilled at a future date to acquire liability.

    The Criminal Court of Appeal has also shed light on which instances do not qualify an issuer of a post-dated cheque safety from liability:

                 I.          Criminal Appeal Number. 59 of 2005, in session dated 15 May 2010 elucidates that a crime is still committed where there are insufficient funds in the account when the beneficiary attempts to cash the post-dated cheque even if the issuer provides the beneficiary with cash of the amount prescribed in the post-dated cheque before they cash the cheque.

                  II.          Criminal Appeal Number 77 of 2006, in session dated 26 July 2006 follows the above line of reasoning stating that if the issuer does not take back the post-dated cheque after providing the beneficiary with the prescribed amount, then they are still liable for the crime if the beneficiary attempts to cash the post-dated cheque.

    As such, these judgments provide that a defendant cannot escape liability by giving the beneficiary the amount prescribed within the cheque before the promise date. To do so, they must return the post-dated cheque to avoid liability. Otherwise, the issuer takes the risk in procuring liability regardless of the fact they had fulfilled their promise in a different manner.

                 I.          Criminal Appeal Number 59 of 2005, in session dated 15 May 2010 states that even if the date of the post-dated cheque has passed and the beneficiary raises a claim to the police after the said date, the crime will still have been committed and the issuer liable.

             II.          Criminal Appeal Number 93 of 2005, in session dated 03 July 2006 lists that an account with no funds, insufficient funds, or a frozen account that does possess sufficient funds are all types of accounts that result in the crime of a 'bounced' cheque.

    Deduction of the above follows that the law offers a wider scope of protection to a beneficiary of a post-dated cheque than it does for the issuer of one. As such although a beneficiary cannot be ensured complete safety it is fair to say that they are guaranteed sufficient safety.

    The Bahraini Court of Appeal has also issued stricter judgments in comparison to those of the UAE, such as:

    Criminal Appeal Number 59 of 2005, in session dated 15 May 2010 and Criminal Appeal Number 9 of 2006, in session dated 25 December 2006 both make clear that the law does not automatically repeal liability if the issuer of the cheque pays the promised funds to the beneficiary after the claim has been raised.

    Unlike UAE law, the waiver of the criminal complaint is not offered by Bahraini law. A claimant must choose to waive their right to the criminal complaint once payment of indebted amount occurs. If they (or; their appointed lawyers) do not decide to do so, then the right to continue the criminal complaint remains within the bounds of the law. The action of issuing a post-dated cheque with the use of an account that contains insufficient funds remains an active crime.

    Once a judgment has been issued, Article 393 of the Penal Code (Decree Number 15 of 1973) mandates a fine or a prison sentence on the accused. Social stigma and punishment are also followed as per the Law of Commerce (Decree Number 7 of 1987) in Article 491, where it states that once bad faith and crime is found, the court will order the publication of the judgments summary in one of the local newspapers. The publication will include their name, occupation, and the punishment they will endure.

    Conclusion

    What can be construed from the above judgments is the reach of the Bahraini law and its intent to implicate those who issue post-dated cheques with cash consideration. Although payment transactions are tricky, the ability to prove bad faith and ill-intention require the mere existence of an account with insufficient funds and the rest of the dominoes follow.

    ]]>
    Sun, 17 Sep 2017 14:00:00 GMT
    <![CDATA[MAN, the Law, and Algorithms!]]> MAN, the Law, and Algorithms!

    "Computers will overtake humans with Artificial Intelligence within the next 100 years. When that happens, we need to make sure that computers have goals aligned with ours."

            Stephen Hawking

    A few years ago, I used to take the morning bus to reach College. During that ride, I would look at my fellow passengers, and notice a decent number of people holding books of various genres and authors. Whereas today, as I take the metro to work, I observe that most of the people are indulged in their mobile devices or e-books to read from their favorite authors. Anyone who stops for a moment to see this transition in lifestyle would be amused at the extent that technology has influenced us in our daily chores! Who would have thought that we would hold devices that can speak to us and show thousands of books and authors in just one click! Then I wondered... What if the people of tomorrow use similar devices to read novels and short stories that are authored by computers? What if tomorrow we were able to (and we will) create a technology that is progressively intelligent and can produce a novel as good as J.K Rowling, Stephen King or Charles Dickens? Should the law consider a computer, in that case, as an author and give it ownership of its copyright? Continue reading to fabricate an opinion on the subject.

    A Global KO!

    Although, in my view, all kinds of intellectual work should be conferred with legal protection to avoid any misuse by third parties, be it the work of a human or non-human (or artificial beings). However, many believe that intellectual property that is created by artificial beings should not be subject to copyright protection since humanity of the applicant is the basis of conferring these rights rather than intelligence and creativity of the work. The most suitable example in this regard is the famous 'Monkey Selfie case' that was filed by PETA[i] in a Federal Court in San Francisco in 2015. In this case, a British photographer lost his camera in the Indonesian forest when the star-studded 'Naruto' (monkey) came along, grabbed the camera and took a selfie. However, the story does not end there. Viewing this bizarre accident as a queer marketing strategy, the photographer and many other online outlets published Naruto's picture on various social media websites as a publicity stunt; leading to the filing of a suit by PETA to establish Naruto's copyright over the image.

    However, the Court issued its verdict against PETA stating that copyright protection does not extend to non-humans. The case is now on appeal. PETA's based its claim on the fact that "IP rights should be conferred depending on the originality of the work rather than the humanity of its author.

    As time is taking us towards the direction of progressive science, our future generations may witness technologies that may be able to understand human emotions, author novels, articles, or even movie scripts and music lyrics! Since the laws are still not considering any copyright protection for non-humans, it is likely to assume that any computer authored works may not be subject to copyright protection and would be open to infringement and exploitation by humans. Ergo, intellectual property rights on artificial intelligence (AI) will exist in future, not because we choose to treat a machine as a person or because a motherboard is a comparison to the human brain. But, due to the legal loophole(s) in global intellectual property laws that might not stop us from claiming copyright entitlement over the work of a computer. If not, then I will use that technology to write a novel and publish it under my name when I am not a writer. What an easy way to make some money!

    The only reason these legislations do not consider computers as authors and grant them copyright over their work is that the technology is relatively novel and we are not familiar with the outcome and effects of a verdict for a machine. On the other hand, some of us do not accept such ideas or advancements in the judiciary since we consider ourselves as superior and cannot be on the same scale with machines. But the fact is we are not the only creatures who are intelligent and creative on this planet. Only time will tell when laws could accept and extend the protection of intellectual property to artificial intelligence also. Twenty years from now, we might hear the first case of man versus machine in a copyright case, and once this happens, it will be a breaking point for humanity which will outline the next era.

    From a global perspective, the domestic laws of United States grant copyright protection to person(s) as well as legal entities such as corporate(s). However, if copyright protection onto ideas formulated by artificial intelligence, then they might receive a similar response as that in the monkey selfie case mentioned above. The US Copyright Office may also decline their application for registration since section 503.3 provides the following definition for (human) author: 'The term authorship implies that (for work to be copyrightable) it must owe its origin (originate) to a natural person. Materials produced solely by nature, by plants, or by animals are not copyrightable'. A broad reading of this definition may imply that this definition may apply to machine(s) also, and we assume that the definition does not include the word 'computer' since the technology has not yet to developed. Hence, the US Copyright Office has made it clear that any work that is produced by non-human(s) will not be subject to registration. Aforementioned comprehends that a person (natural or legal) would have the right to the copyright of the work done by him. Further, when a legal entity such as a corporation hires an employee to publish books or articles, then the former would be entitled to its copyright. It is clear that the US copyright laws still does not validate any work produced by non-humans which mean that US law does not acknowledge computer author(s) and hence, will not be subject to protection. I understand that since we did not reach that level of intelligence yet then whether to considering non-humans as authors or not does not make a difference. Further, under the French Intellectual Property Code, Article 113-1 stated: 'Authorship shall belong, unless proved otherwise, to the person(s) under whose name the work has been (published; or) disclosed.' That means the French laws also does not take computer authored works into account while conferring intellectual property rights in the country.

    In the UAE...

    The UAE is no different in this aspect. UAE's Federal Law Number (7) of 2002 (concerning Copyrights and Neighboring Rights)  (as amended by Federal Law Number 32 of 2006) (the UAE Copyright Law) defines an 'author' pursuant to Article 1 as follows: 'the author of a work whose name appears on the work or to whom the work is attributed at the time of publication (unless proven otherwise)." Further, the provision goes on to state that, 'An author shall also be a person who publishes a work anonymously or under a pseudonym or by any other means provided there is no doubt as to the identity of the author. In the case of doubt, the publisher or producer of the work, as a natural person or corporate entity, shall exercise the rights of the author on his behalf until (such time as) the identity of the author is established'.

    Hence, the UAE Copyright Law is in line with the US and French law and does not accept the works produced by non-human (or artificial intelligence). Further, similar to the scenario in the US, corporate entities may also claim for copyright of the works of its employees as long as the source of the work is a natural person. Further, the reader should also note that there has not been any case in the UAE where a non-human claimed the protection of copyright as it is limited to disputes between a natural person and legal entities.

    Who Will Survive?

    As mentioned above, it is clear that copyright laws around the globe solely favor the human race. However, we could be heading towards a direction of change regarding copyright laws (whether for good or bad). The notion of conferring computer authored works with copyright protection initiated in the US with the mind-opening case of the monkey's selfie case, which received global scrutiny. Only time will tell about the changes that in the legislative regime of intellectual property due to the common human tendency to rule over all other species (including computers - that is, if they were a species). However, in a dynamic and rapidly growing global economy, the governments are forced to adapt to the changes by implementing impartial (even to computers) laws in the light of the developing technologies. Who knows, in a few decades from now, maybe computers might be the ones who write an article on a human's efficiency in the modern world (pun intended). However, if and when that day comes, we will have to ensure that humans and computers have an aligned set of goals. Before I conclude, I don't fathom nor accept even the remote idea of Court Uncourt articles written by algorithms. Passion is, what passion was and will always be!


    [i] People for the Ethical Treatment of Animals (a non-profit organization that campaigns for animal rights and their ethical treatment).

     

    ]]>
    Sat, 16 Sep 2017 14:00:00 GMT
    <![CDATA[Diplomacy and International Court of Justice: An Analysis]]> DIPLOMACY AND INTERNATIONAL COURT OF JUSTICE: AN ANALYSIS

    (Part I of II)

    'Peace comes at a price. And that price is diplomacy. We may all know who is paying the price, but sometimes, we cannot comprehend the amplitude of the price paid.'

    {C}-        International Relations Department, STA Law Firm

    The oldest evidence of diplomatic relations dates back to 1259 BC between the Pharaohs of Egypt and the rulers of the Hittite Empire (part of present-day Turkey). The Egyptian-Hittite Peace Treaty is perceived to be the evidence to this ancient diplomatic treaty that was drafted to end the war between the two kingdoms over the jurisdiction of eastern Mediterranean. The treaty was the result of war at the city of Kadesh due to the attempted invasion by Egyptian warriors to gain control over the lands. However, the mighty Hittite army resisted the attack, and the two empires fought for the years to come. Noting that the pen is mightier than the sword, intermediaries (diplomats of today) of both the empires starting negotiating the possibility of peace between the monarchs. Hence, the world's first diplomatic treaty came into force between the empires even without a personal meeting of both the monarchs. Centuries later, nations still employ intermediaries (diplomats) to negotiate and implement treaties with the view of securing peace.

    Therefore, various nations ratified the Vienna Convention on Diplomatic Relations of 1961 (the Diplomatic Relations Treaty) and the Vienna Convention on Consular Relations of 1963 (the Consular Relations Treaty) with the view of ensuring that these intermediaries obtain a higher level of protection while negotiating with other countries. And with the same intention (of attaining peace), the United Nations established the International Court of Justice (the ICJ) in 1945 to adjudicate legal issues between nations of the modern world. But over the course of time, both, the Treaty and the ICJ, has faced uncertain predicaments regarding the validity of the former over domestic legislation and the jurisdiction of the latter.

    From Around the World

    The world wars and the subsequent cold war taught the governments around the world about war and diplomacy more than ever before. Yes, I just used war and diplomacy on the same line. Although countries have used their techniques of diplomacy as a means to end the conflict(s) from as far as 1259 BC, they tend to perceive diplomacy from other nation(s) as a weapon to obtain an advantage. But does this permit them to implement their domestic legislation on foreign diplomats? Hopefully, the reader would able to form an opinion to this rhetorical question with more than just prejudiced personal or cultural influence at the end of this article.

    In 1979, the United States (US) Embassy in Tehran, Iran was attacked by armed Iranian mob who detained the diplomats and seized the offices of the diplomatic mission. Subsequently, the US Department of State instituted legal action against the Islamic Republic of Iran at the ICJ.[i]  The primary contentions of the US, in this case, was that Iran was in violation of the Diplomatic Relations Treaty and the Consular Relations Treaty and that the Iranian Government has an obligation to secure the release of all detained US nationals, inter-alia. Further, the support provided by the Iranian Government to the accused militants was also globally scrutinized due to the former's failure to safeguard the US diplomatic mission and the diplomats.   

    Therefore, after carefully studying the issues in question, the learned court ruled that: (i) Iran is in clear violation of its obligations towards the US; (ii) Iran is responsible for these violations; (iii) the Government of Iran should release the US nationals who are detained and pass on the possession of the seized US Embassy to the protecting power; (iv) US diplomats or consular should not be subjected to any judicial proceedings in Iran; and (v) Iran should repatriate the US for all the injury and damage caused to the latter.[ii] This issue was in the global limelight primarily due to two (2) reasons: (i) over sixty (60) US diplomats were unlawfully detained for over 444 days by militants; and (ii) the Iranian government (that had the obligation to protect the embassy) did not even file their pleadings before the ICJ.

    As seen in the above case, frequently nations try to retaliate with other nation(s) regarding issues between them by imposing biased domestic legislation or by failing to protect the citizens of the latter who are assigned to diplomatic missions in the former.

    Therefore, the primary question that arises in this regard is about the validity of public international law over the domestic regime of a state. That is the extent of authority that a state can exercise over the diplomats or consular of a foreign country while on official duty of the home state. However, domestic courts have the responsibility of prosecuting those who violate these international norms. Hence, a conflict of interest may arise between the nation (that is looking to enforce their domestic laws onto the diplomat) and the international community since international customary law envisages national courts of the state(s) with the obligation to enforce these laws. Although, this platform (local courts) often neglect international laws and fail to prosecute those in violation of international laws or human rights abuse since the defendant(s) in these cases are the governments of those states themselves. Therefore, it is evident that these domestic courts may apply their local statutes to escape the jurisdictional ambit of international law by finding a loophole and rejecting the applicability of international law.

    However, official diplomatic agents are not the only parties who have this level of protection. Since, if that were the case, a government would be permitted to exercise any form of undue jurisdiction on a foreign national who is residing in their jurisdiction. To this end, the Diallo Case[iii] was a landmark ruling of the ICJ regarding the extent and ambit of diplomatic immunity that can be conferred onto non-diplomats and consular. In this case, Mr. Ahmadou Sadio Diallo was a Guinean national who was the shareholder of a limited liability company (the Company) in the Democratic Republic of Congo (Congo). Further, in the 1980s, the Company initiated legal action against various local public and private enterprises that owed substantial amounts to the Company in the course of business. However, within a few years, the Government of Zaire ordered Mr. Diallo to be deported from the country due to violation and infringement of public order in the economic, financial and monetary sectors. After that, he was arrested and detained by the authorities for sixty-six days (without due process of law) before being deported to Guinea. Further, the Government of Congo misappropriated Mr. Diallo's property and denied his future entry into the state (which is a non-appealable order by Congo's domestic statutes).

    Subsequently, the aggrieved Mr. Diallo informed of these unfortunate events to the Guinean authorities who later instituted legal action against Congo since states have the discretionary right to safeguard their citizens against undue injury from foreign countries by providing diplomatic protection to them. Therefore, the representatives of the Republic of Guinea instituted an action against the Congo in the ICJ. This globally aggravated the already existing issue of the extending the arms of diplomatic protection onto shareholders and legal entities as seen in the ruling by the ICJ in the case of Barcelona Traction[v]. Guinea contended that Mr. Diallo should be provided with diplomatic protection stating that he is: (i) an individual who was victimized by detainment and undue expulsion; (ii) a shareholder with the right to protect his interests of the companies; and (iii) a shareholder and manager who has the duty to protect the rights of the companies (by substitution). The Republic of Guinea demanded the restitution of all the damages suffered by Mr. Diallo and the Guinea. However, the defendants took the stand that the Republic of Guinea could not confer Mr. Diallo with diplomatic immunity since the companies were not established in Guinea. They also stated that Mr. Diallo had not exhausted all the remedies that were available to him in Congo itself. After comprehending the facts and disputes of the case, the ICJ stated in its preliminary judgment[vi] that the burden of proof for establishing that Mr. Diallo had not exhausted the domestic remedies available to him. However, they failed to prove the same after analyzing that the notice of expulsion given to Mr. Diallo was not appealable. Further, the ICJ also stated that the companies in question were of Congolese nationality and therefore, Guinea could not invoke diplomatic protection by substitution. However, the court upheld Guinea's claim to invoke diplomatic protection on Mr. Diallo as an individual and his direct right as a shareholder.

    In 2010, the ICJ ruled on the merits of the case and stated that Congo was in violation of the International Covenant on Civil and Political Rights (articles 9 and 13), Consular Relations Treaty and African Charter on Human and Peoples' Rights (Articles 6 and 12(4)). However, the court ruled that Congo had not directly violated Mr. Diallo's rights as a shareholder since he was entitled to attend general meetings and control the management of the companies. Further, in the judgment by the ICJ on 19 June 2012, the court observed that Guinea was not able to substantiate their claims with proof regarding the loss of tangible and intangible assets due to the expulsion. Therefore, the court awarded an amount of USD 85,000 regarding the detention and expulsion of Mr. Diallo from the country. This case is considered as a landmark judgment since it provides us with an idea about the extent of diplomatic protection that a country can provide its citizens.

    Conclusion

    The International Court of Justice has been set up to allow protection of people, whether diplomats or natural persons, in countries where they are foreigners. However, it is understandable that in the battle of national and international law the struggle to implement justly can be of issue. It is not possible to provide an equal degree of protection to the parties when a differing law is more advantageous for each. The tricky nature of the subject matter has seemingly resulted in an array of instances where international law is disregarded in a plot to protect the stronger hand. Nevertheless, our analysis does not end here; part II of this article will examine the procedural aspects of cases in the International Court of Justice and other relevant processes.


    [i] United States of America v. Iran; [1980] ICJ 1

    [ii] Reports of Judgments, Advisory Opinions and Orders, 24 May, 1980 (found at http://www.icj-cij.org/docket/files/64/6291.pdf)

    [iii] Republic of Guinea v. Democratic Republic of Congo, ICJ, 2007

    [iv] Also, known as Congo (between 1960 to 1971) and Zaire (between 1971 to 1997).

    [v] [1970] ICJ 1

    [vi] Judgment on Preliminary Objections on 24 May, 2007

     

    ]]>
    Sat, 16 Sep 2017 13:31:36 GMT
    <![CDATA[Keeping it Simple: Federal Law Number (8) of 2017 on Value Added Tax]]> Keeping it Simple: Federal Law Number (8) of 2017 on Value Added Tax

     

    The UAE governing law regarding VAT is the Federal Decree-Law Number (8) of 2017 (the Law). According to Article (1) of the Law defines Value Added Tax as 'tax levied on import and/ or supply of goods and/ or services at every stage of production and distribution, including the Deemed Supply.'

    The Law addresses the importance of understanding VAT and the impact it may have on a person, such as increase in the Value Added Tax, compulsory and voluntary registration, methods of payment, the required amount of payment, items that which is not subject to VAT, as well as many other regulations. Due to sudden transformation to the Value Added Tax system, it is essential that tax payers in the UAE review the new tax scheme in connection with their dealings. An interpretation of the Law defines a Taxable Person as an individual who is registered or should register for tax under the provisions of the Law.

    Under Article 3 of the Law, a standard tax rate of five percent (5%) on import and supply and goods and services. Supply of goods includes but is not limited to transfer of a contract for the exchange of goods and services. The article covers all possible goods transferred and traded in the UAE, including products supplied from an agent of a person.

    A government entity also falls within the ambit of law on the basis that it distributes goods or services (PROVIDED HOWEVER THAT the entity's conduct is in the non-sovereign capacity or if they are in competition with the private sector). However, a cabinet decision will be issued in the future to determine their entities, activities, and the possibility of a company falling under that expressed within article 10 of the Law.

    The VAT regulations also apply to service providers, therefore will impact and influence the interest of investors and entrepreneurs who desire to or consider future company formation in Dubai and the UAE. Authorities (such as free zones and Economic Department) in the UAE issue service licenses in several broad categories. In the past and till date, investors applied for business setup in Dubai and UAE with the ambition of servicing domestic as well as international clientele. Every person that comes under the scope mentioned above of the goods and services supply must register for the new tax system when they exceed the threshold level provided as per the Law. According to the threshold level, registration divides into two categories, namely, mandatory and voluntary registration.

    Article 13 mandates that every (natural or legal) person who resides in the UAE is required to make mandatory registration for the new tax scheme when his total value of all supply exceeds the amount of AED 375,000. Similarly, a person is obliged to take the same above action when the anticipated total value of supply exceeds the compulsory registration threshold in the next thirty (30) days.

    Payment of VAT will only arise in the above situations, however, to avoid liability of VAT from the new regulations, tax payers must calculate the tax due on their accounts up to 31st December 2017. The Executive Regulation which is to be published by the cabinet will specify the time limit that a person must inform the authority of his liability to register the tax.

    Voluntary registration applies to persons who are not mandatorily required to register for taxes under article (13). Article (19) mandates that from a previous twelve (12) months period, a person whose total value of supply exceeds AED 187,500 can voluntarily register under the new regulations. A person may also register if they anticipate that the total amount of supplies will exceed the voluntary threshold within the next thirty (30) days.

    The Law defines a set of guidelines on how to determine whether a person exceeds the mandatory or voluntary threshold. The following factors below must be taken into consideration:

           I.          The value of the taxable good(s) and service(s)

         II.          The value of Concerned Good(s) and Service(s) obtained by a person – 'Concerned Goods and Services' are those that have been imported and would not be exempt from tax if supplied within the UAE;

       III.     The gross (total) value of the whole or relevant part of taxable supplies that are owned by a person if he has wholly or partly acquired a business from another person who provided or sold those goods;

        IV.     The value of taxable supply made by Related Parties according to the cases stated in the Executive Regulation – 'Regulated Parties' two (2) or more parties that are considered as the same or not separated in an economic, financial and regulated perspective. The parties that can control the other(s) under the law of the land or through shares or voting rights.

    It is pertinent to note that the supply of transfer of capital assets should not be taken into consideration while calculating the mandatory or voluntary threshold to determine tax registration obligations of the parties.

    To register as Related Parties, each person must have fixed establishment in the UAE, and the person(s) undertaking the business in a partnership should have control over the other entities. The Executive Regulation will state the circumstances when a person may not be permitted to register under a tax group. Any person(s) undertaking business in the UAE should have one (1) tax registration number.

    Article (15) states that a taxable person could be exempted from mandatory tax registration in Article (13) if they file a request indicating that their supplies are subject to zero (0) rate, such as but not limited to international cargo or passenger transport that commence and arrive in the UAE; supply of land, sea and air transport for passengers and cargo, supply of aircraft and vessels; import of precious metals; firstly supply (sale or lease) of residential buildings in whole or part; supply of crude oil and natural gases.

    Further, one of the main raising question among the UAE people is whether these VAT apply to free zone as well. Free Zones are one of the most used or simplified company formation systems in UAE. One of the main reason is that free zone entities are Tax-free and they provide sole ownership for the Non-UAE residences. Also, the free zones are accessible for having their dedicated laws and regulations that would apply to companies and individuals within the free zone. Most scholars argue that the application of these new VAT to the free zone entities and persons will create questions on the underlying concept of free zones are free to act within their limitations. In contrast, some scholars argue that it is best for the Tax regime of the country to apply the new laws to free zone with some exemptions. However, the UAE government has taken a balanced place in this matter with the final consideration.

    Under Article 77, anyone committing Tax evasion is liable to the penalties provided under Federal Law Number 7 of 2017 on Tax Procedures. In addition to the aforementioned penalty, the person will be liable for an administrative penalty under the new Law if the person failed to display prices inclusive of Tax, if the taxable person failed to notify the authority of applying Tax, if the supply person failed to issue tax invoices or documents or tax credit note, and if a person failed to comply with the regulations related to electronic tax invoices. Moreover, it is important to understand that everything under the category of goods and services will not be taxed. Services such as education and healthcare exempted from this new law considering the value of such services to the country in general. Both the services were highly expected to be exempted before the establishment of the Law. Similarly, VAT is exempted in the supply of bare land, the supply of local passenger transport services, some of the financial services mentioned in the executive regulations, a direct or indirect export to outside implementing states, the supply of aircraft or vessels designated for rescue and assistance.

    According to Article 15, the person who falls under the category of the exemption from VAT must request the authorities stating his supply is excepted from the new tax or in other words subject to zero rates. One can understand that the intention of lawmakers was to simplify the procedure to socially valued services such as education and health services. Further, the supply of residential properties will be exempt as well. Another type of supply which has taken into consideration of exemption is the supply of bare land. Also, financial services will be subject to a narrow exemption. However, free based financial services are not categorized as an exemption in the Law and therefore will be charged under the Law.

    Praising the new Tax changes in recent years, the Deputy Ruler of Dubai said that the Tax procedure law is a significant milestone towards establishing the UAE's Tax system and diversifying the economy. Accordingly, UAE is shifting from the days where Tax laws were known as toothless laws or ineffective in practical to a strong regulation of Tax law. The FTA chairman has stated that the Law, issued by Shaikh Khalifa is an all- encompassing legislative framework which lays down the groundwork for the UAE's futuristic plan to enforce taxes as a method to ensure sustainability and diversify the government's revenue sources. The increased resources will enable the Government to maintain the momentum of its development and infrastructure for a better future." The government does not only provide legislation but also plan to provide administrative and all the required resources to increase the level of the system. The steps are taken such as a clear process for appeal when a person did not register to the Tax scheme in the first instance and providing FTA as transparent is international best practices. In overall, UAE government believe that this VAT system is designed to promote economic growth and plans for the country in a bigger picture. Now the UAE has Implemented the tax regulations, which is the most important revenue of a country. Now the government has to make sure Tax payers pay their Tax in practice. Implementing regulations and enforcement of the law is very important as well. The government will also have to focus on how to create Tax awareness among the people and what are the possible actions can be taken to get this into the practice. Once the country succeeds in making awareness of the persons on how they are part of the development of the country and how the Tax money is spent, the goal of Tax collecting will be completed. Different countries do it in different styles such as publishing magazines in newspaper, the internet or political websites and UAE has designed to promote a website to help Tax payers in every aspect as most of the UAE government departments are very successful in providing government services through online and its successfully designed websites which contain all the information, forms, and relevant Law for the user's perusal. The increase of taxes in other countries may aim at several objectives, but UAE aims at financing public expenditures. However, will these changes affect the investors of UAE and damage the long run reputation on tax related matters? Some scholars argue that new increase in tax may affect the overall business in UAE. Nevertheless, it can be analyzed to the effective date of the Law and how the suppliers of goods and services react on the matter.

    Although the Law is extensive, the application and implementation are yet to be seen in the UAE. The new VAT regulations will come into effect 1 January, 2018 and allow companies to register up to three (3) months before the implementation date.

    ]]>
    Tue, 05 Sep 2017 00:00:00 GMT
    <![CDATA[Company Formation in Dubai Airport Free Zone]]> Company Formation in Dubai Airport Free Zone

    In its early years, the renowned Emirates airlines had to lease aircraft(s) from its counterparts in Pakistan to meet the growing demand in the aviation industry in the Middle East.[i] Although, the global airline sector back then was not the same as it is today and Emirates was not the only player in the market that was looking to make a mark. A large number of investors recognized this growing demand in the airline industry and hence, set up companies in various jurisdictions with the aim of exploiting the surge in air travel due to globalization and international trade. However, with high demand, comes greater competition; and this force airline company to have at least one of the following factors in their favor to sustain the heavy competition: (i) abundance of financial resources and/or (ii) a strategic location and dynamic business environment to succor the airline's growth. Hence, the tale of Emirates varies slightly from that of the other carriers this point onwards. 

    Headquartered and operating out of Dubai, Emirates had a strategic advantage over the other airline companies due to the dynamic business environment and geographic location that Dubai offers. Therefore, thirty years hence, Emirates has established itself as one of the leading players in the global airline industry with a vast fleet of aircraft that fly to numerous destinations. But the story did not continue happily for every company in the industry. Airline companies are tied down by financial burdens that arise due to high operational costs, excessive competition, fluctuating oil prices and stringent domestic regulations. Therefore, investors looking to establish themselves in the airline industry should set up their companies in a jurisdiction that suits their business model and promotes healthy competition. In this regard, Dubai Airport Free Zone (DAFZA) is the peerless free zone that provides investors with state-of-the-art infrastructure and other dedicated facilities that are specially designed to cater the needs of the airline industry. Those considering company formation in Dubai Airport Free Zone will (we hope) find this article useful as well as resourceful.

    Incentives and Benefits

    Dubai has become home to numerous players in the shipping and airline industry due to its location in the Arabian Peninsula that provides direct connectivity to the African, Asian, European and American continents. Keeping this in mind, DAFZA opened its doors to the public in 1996 with the view of equipping the nation with a dedicated free zone that provides more than mere logistical convenience to airline companies. The DAFZA is equipped with various executive offices, suites, smart desks and light industrial units to suit the varying leasehold needs of the investors. Hence, the prestigious address at the heart of one of the world's leading business hubs is only the first in a long list of advantages that investors in the free zone enjoy.

    Establishing Your Entity

    The DAFZA does not cater to airline industry alone; the free zone is also home to numerous companies from investments, insurance, restaurants and canteens, transport, shipping & storage and other industries too. Therefore, investors prior to commencing business setup in DAFZA should exercise due diligence and obtain the appropriate license (trade license or service license) to conduct their activities in the free zone. Further, investors may opt between the following legal entities to establish their presence in the free zone: (i) free zone company (FZCO) – can have between one (1) and fifty (50) legal or natural shareholders with a minimum share capital of UAE Dirhams one thousand (AED 1,000); or (ii) branch office – no minimum share capital requirement.

    Investors should submit the following documents in respect of the type of legal entity that they intend to establish in the free zone:

     

    Document title

    Free zone company (natural shareholder)

    Free zone company (legal shareholder)

    Branch office

    Application form

    ü   

    ü   

    ü   

    Business Plan

    ü  

     

     

    Letter of Intent

    ü   

    ü   

    ü   

    Financial Report (audited)

     

    ü   

    ü   

    Company Profile

     

    ü   

    }ü   

    Bank statement (dating to six months)

    ü   

     

     

    Letter of Reference from Bank

    ü   

     

     

    Passport Copy and Resume (shareholder(s))

    ü   

     

     

    Power of Attorney, specimen signature, passport copy & resume (Manager)

    ü   

    ü   

    ü   

    NOC from Sponsor (for company established in UAE)

    ü   

    ü   

    ü   

    Registration Certificate of Parent Company

     

    ü   

    ü   

    MoU & AoA of Parent Company

     

    ü   

    ü   

    Board Resolution of Parent Company

     

    ü   

    ü   

    Appointment letter, power of attorney, specimen signature & passport copy of legal representative (if needed)

    ü   

     ü   

     

    Power of Attorney, specimen signature & passport copy (Director)

    ü   

    ü   

     

    Power of Attorney, specimen signature & passport copy (Secretary)

    ü   

    ü   

     

    Letter from bank regarding share capital (if needed)

    ü   

    ü   

     

    Investors are advised to obtain and notarize the requisite documents mentioned above before initiating the company formation application to ensure that there are no undue delays in the process. Paving the way for innovation and new opportunities investors, DAFZA provides a dynamic trade environment and state of the art facilities. Hence, with hundred per cent foreign ownership and tax exemptions on all corporate, import and export tax, DAFZA is the ideal free zone for companies invested in logistics and airline activities.

     

    [i] 'Emirates prospers despite slump', Flight International (24 October, 1998).

     

    ]]>
    Wed, 30 Aug 2017 00:00:00 GMT
    <![CDATA[Note Unnote - Recent Developments in Indian Companies Act]]> Note Unnote  - Recent Developments in Indian Companies Act

    This line was added at the last minute. Before adding this line, the title to this article was changed. Just in case you were thinking that there's no word such as 'unnote', believe me – there is. It means not noting; failing to pay attention (Source: Wiktionary).

    Prominent jurists and legal scholars agree that the dynamic change in a society generates a subsequent need for modern legislations that can promptly deal with present day issues. However, one might opine that such a transition in the law does not just involve amending a few pages in the official gazette. The lawmakers of a nation undergo tremendous pressure in the process of repealing a current statute and enforcing a novel one. Moreover, this process only gets more burdening if the repealed law is of regional importance such as a penal code; or as in our case, the Companies Act 1956 of India. This owes its tribute to the vitality and prominence of the statute since almost all the commercial transactions in the country are undertaken by entities that have been registered under the previous statute. However, one should stop to think what happens to the lawsuits and other legal procedures that are still pending in the courts under the former statute. Companies would incur enormous losses of finance and other resources if the courts decided to terminate all the pending cases under this legislation. Ergo, the lawmakers endeavor to simplify this transition in law to ensure that the commercial activities of the companies and ultimately, country's economy is not disrupted by the amendment.

    India is home to numerous multi-national corporations, domestic companies, and limited liability companies established in various sectors ranging from industry based activities such as telecom and mining to service based activities such as online cabs and ever-thriving film industry. Further, the country put its foot into global trade and commerce when it lifted all trade barriers and permitted the entry of foreign corporations. This led to the transformation of the country's steady domestic economy into a dynamic global force which necessitated the demand for a more flexible and comprehensive legislation.

    The Government of India enacted the Companies Act in 2013 (the Companies Act) with the view to meet the dynamic issues in the corporate sector of the country. The Companies Act had made numerous major and minor amendments to the then existing Companies Act, 1956 (the Old Law). The novel Companies Act provides for a more modern and flexible approach to governing companies while attempting to stabilize the economy after the economic blowbacks of the past decade. However, the implementation of this statute came in phases considering the diversity of industries and multiplicity of legal formalities that are affected by the same.

    The Transition

    Three years post its enactment, the Ministry of Corporate Affairs (the Ministry) ascertained the positive approach of the companies to adopt itself to the provisions of the Companies Act and therefore, considered the viability to enforce certain provisions of the statute that were not previously applied. Bearing this in mind, the Ministry issued a gazette notification that implemented the provisions from the following chapters in Companies Law (the Notification):

    {C}       i.          section 230 (except sub-clauses 11 and 12), sections 231 to 233 and sections 235 to 240 as provided in chapter XV, regarding compromises, arrangements and amalgamations; and

    {C}      ii.          sections 270 to 288, sections 290 to 303, as well as section 324 and sections 326 to 365 as provided in chapter XX, regarding winding up of a company.

    The Companies Law primarily aims to simplify the process required for mergers and amalgamations since the Old Law had provided for an extensive procedure and set of requirements that had to be satisfied for a merger or amalgamation to be valid in the eyes of the law. The Companies Act strives to achieve this standard by empowering the National Company Law Tribunal (the NCLT) and simultaneously, establishing a transparent procedure that is in line with modern corporate practices. The enforcement of the sections in chapter XV authorizes the NCLT to deal with compromise arrangements of companies with their creditors with the view to ensure that neither of the parties incurs any losses against the law of equity. The NCLT is also conferred with the power to govern certain aspects of arrangements and amalgamations between companies. The chapter also provides the Central Government with authority to implement a fusion process in the public interest and has further laid down a set of conditions that are a pre-requisite in a merger or amalgamation scheme. However, it is pertinent to note that the Companies Act would not govern over international mergers or amalgamations (involving a foreign company) since section 234 in chapter XV is yet to be enforced.

    Further, certain provisions in Chapter XX regarding instances when a company would be required to wind up and the NCTL's role and jurisdiction in the winding up of companies have also been enforced. The Notification has implemented those sections that have provided for the appointment, powers, duties and the legal formalities that should be followed by the company's liquidator at an unfruitful event of company's dissolution by order of the NCTL. However, these provisions do not include the ambit of a liquidator in the case of voluntary dissolution. Therefore, it is only reasonable to assume that the Old Law would govern the status of the liquidator of a company that has requested for voluntary dissolution.

    The (New) Transfer Requirement

    As discussed earlier, the implementation of a new legislation and the subsequent transfer of cases from the previous statute could cause considerable ambiguity in cases that had been registered under the latter. Therefore, the Ministry issued the Companies Transfer and Pending Proceedings Rules, 2016 (the Transfer Rules) and the Fourth Order of Companies Removal of Difficulties, 2016 (the Fourth Order) in an attempt to eliminate the issues surrounding the pending cases that were instituted under the Old Law.

    Section 434(1)(c) of the Companies Law explicitly provides for the transfer of proceeding involving arbitration, compromise, arrangement and reconstruction from the courts in the nation. These proceedings would be transferred to the NCLT who would then commence the case from the stage it was transferred from the courts instead of restarting the whole debacle from the beginning. However, voluntary winding up proceedings of a company will continue in the respective court in which it has been instituted. Further, winding up proceedings of a company due to their inability to pay debts would be transferred to the NCLT under the provisions of the Insolvency and Bankruptcy Code, 2016. However, the case would continue to be dealt by the provisions of the Old Law if the suit was initiated under the Sick Industrial Companies Act, 1985. Further, if the winding up proceedings had been initiated on any ground other than the inability of the company to pay their debts, then the suit would be transferred to the NCTL and be governed by the Companies Act.

    Conclusion

    Companies spend a mammoth amount of resources on judicial proceedings due to the enormity of the underlying issue. The number of mergers and amalgamations taking place in the nation has continuously widened given the diversity of sectors and geographical boundaries that exist within the country. Therefore, these legislations primarily aim to smoothen the transition of cases from state courts to the NCLT with the view to avoid any ambiguity or delay in proceedings that may arise in the process of transition. These novel legislations have embedded the principles of modern corporate practices to ensure that companies have substantial resources to concentrate on their commercial activities rather than domestic legal formalities. Ergo, these novel legislations have been whole-heartedly welcomed by the investors in the nation considering the clarity it has provided in the Companies Act. 

    ]]>
    Sun, 27 Aug 2017 00:00:00 GMT
    <![CDATA[Boarding Complete: An Islamic Rendering (Part 1 of 2)]]> Boarding Complete: An Islamic Rendering

    Part I of II

    Islamic Principles not only lay guidance on the relationship between man and God but also provide directives on a system of transactions for dealings between man and man to lead a life in an Islamic way. Such Islamic jurisprudence referred to as "Shariah, " and commercial or banking transaction forms a small but very crucial part of Shariah. Many financial institutions in Muslim states have Shariah boards, religious advisors or such experts to advise on the compliance of transactions with Shariah. It is pertinent to note that Shariah law is not codified law but based on interpretations of holy Quran, and therefore it can be applied differently in different states to extend the interpretations as they differ based on the four major schools[1]. However, in general, major principles such as the prohibition of riba (meaning an excess which is the ban of interest in commercial business transactions), maisir (speculation or gambling), gharar (unjust enrichment or unfair advancement based on uncertainty or upon the occurrence of events) are commonly applicable to major schools.

    Conventional financing methods and instruments are mostly based on interest structure whereas Islamic finance techniques must comply with Shariah bans levying of interest. The latter does not mean that Shariah prohibits making profits. Rather, the system scrutinizes the basis of making said profits as charging interest is harmful to borrowers. Wherein, although there is a lack of effort by the financier they will still enjoy profits. Such deliberations lead Islamic scholars to establish Islamic financial instruments and techniques to prevent the commission of sin for prohibited acts as per the Quran and Sunna

    Ijara is one such Islamic financial leasing principle gaining momentum in the UK, France, Canada and other parts of the world. The use of Islamic financial leasing has changed from an interpretation of leasing for household or daily use necessities to large construction and leasing transactions of substantial assets such as aircraft's and vessels. Before venturing further into the use of Islamic financial leasing transaction for aircraft financing, we would like to elucidate to our readers about the concepts of ijara (Islamic financial leasing) and related Islamic financial instruments that can be utilized while structuring the Islamic leasing transaction.

    Ijara

    Ijara means providing services or goods on a temporary basis for rental. Including the leasing of equipment, machinery, or other capital assets. There are three types of ijara used in Islamic contracts. They are ijara (operating lease), ijara wa iqtina or ijara muntahia bittamleek (finance lease) and ijara mawsoofa bil thimma (Forward lease).

    Simple Ijara

    In ijara, a lessee is given right to use the object leased for a specified period, and the lessor retains ownership. The Islamic financial institution/bank will purchase the asset in question and will lease or make available to its customer the use or occupation and possession of assets for a fixed period and price. The premiums will be payable by the bank regardless of their recovery through rentals. This type of leasing is called operating lease. The lessor is responsible for the insurance, registration, and maintenance of the asset leased as it is under the ownership of lessor. Federal Law Number 5 of 1985 (UAE Civil Code) defines the ijara as - "a hire (that shall be conferred) by the lessor on the lessee of the right to use (that is) intended for the thing hired for a (given) period in consideration of an ascertained rent."

    Ijara in the above form is similar to a conventional lease. Wherein, the entire cost of assets is not recovered by the lessor, and the payments are made only up to the period of lease for its use irrespective of the total value of an asset. 

    Ijara wa iqtina

    The other form of leasing under Islamic finance is ijara wa iqtina. This is a finance lease, asset finance, or hire purchase as provided under the ijara wa iqtina principle. Wherein a leasing structure is coupled with a right to buy the asset by the lessee at the end of the lease period at an agreed price. The lease fees are considered to be previously paid and constitute part of the price or consideration for the purpose of sale. The payment made by the lessee is towards the purchase of an asset with any profits as stated by the lessor. A variety of cross-border transactions often use such instruments for a range of asset categories that include aircraft, heavy equipment, vessels, and other assets.

    Under ijara, the lessor retains the right to re-negotiate the quantum of the lease amount payable at every agreed interval as that would ensure that the rental amount agrees with the market value of the asset. The uncertainty of price to be paid at the end of the lease period for purchase is not acceptable under ijara for reason of uncertainty and applicability of gharar, and hence another contract under ijara wa iqtina is to be made for the sale of the leased asset. In this form of lease, recovery of the full cost and value of the asset by the lessor from the lessee takes place, and the lessee does not have an option to cancel until the lessor receives compensation for such an asset. The option to buy is usually granted at the end of the lease contract period to make up for the lessor allowing them to recover the remainder value of the asset. 

    Ijara mawsufah fi al dimmah

    In UAE, ijara has often been linked to the real property transaction where banks enter into a forward lease agreement to finance its client's property. Ijara mawsufah fi al dimmah is a combination of a redeemable leasing agreement and construction finance (Istisna'a). In forward leasing, the lease delivers of specified items after their construction. These lease contracts buy out the construction project as a whole upon its completion or in tranches of the project.

    The forward lease entails an agreement to lease assets upon the construction, manufacturing, and availability at a future date of such assets. Since forward ijara or ijara mawsufah fi al dimmah is a combination of ijara and Istisna'a, the understanding of the term Istisna'a is essential. 

    Istisna'a

    Istisna'a means asking someone to manufacture. It is a form of sale and purchase agreement between bank as seller and customer as a purchaser. The seller can produce by itself or get its products manufactured by someone else. The financier usually acting as a seller will get it manufactured and then take over the title of the goods to sell it further to a customer. It is an exception to the general rule that the asset that is the subject matter of the contract is in existence when the parties enter into the contract.

    The financier funds the manufacturer during the construction and acquires title over such asset on completion. Because Istisna'a is a sale and purchase agreement, the purchase price must be a fixed price. The financier sells an asset to the customer for an agreed upon price and through settlement whether in advance, by installments, or by deferred payments to a specific future date or event. Since the tenure of construction completion in large projects is time-consuming taking years to complete, it becomes unattractive for financiers, and hence it is coupled with ijara. The process stated below describes what takes place once the Istisna'a is combined with ijara thereby forming ijara mawsufah fi al dimmah.

    How does ijara mawsufah fi al dimmah works?

    The asset, which does not exist at the time of signing the forward ijara contract may be acquired by the financier (F) under an Istisna'a contract between the financier and the developer/ contractors/ manufacturer (M). Upon completion and the end of the construction period, delivery of the asset to the customer (C) as per the terms of the lease agreement occurs. At the end of the lease term (i.e. on maturity) and upon meeting all obligations under the forward ijara contract, the bank under a separate sale contract will transfer to the customer the ownership of the property for a token sale price. Upon performance of the agreement of Istisna'a between F and M, a different contract of lease between F and C can be performed, that is the forward lease of goods manufactured. In ancient times such kinds of lease contracts were carried out for unripened food items however it has been transformed to suit and utilization by major construction contracts (muqawala).

    The financier's funds the manufacturer for the construction of assets, acquires title over the asset upon completion and passes title to the developer or contractor or customer on agreed deferred payment terms or may lease the asset to the developer or customer under ijara wa Iqtina. In the aircraft financing, the utilization of this method occurs in instances where the aircraft is purchased right from the manufacturer, and the financing takes place only before completion of the aircraft.

    Conclusion

    Part 2 of this article will continue to analyze Islamic finance leasing under the umbrella of aircraft finance. The topics of discussion will include, sukuk, murabaha, mudarabah, and finally with an application of the discussed principles how Islamic finance leasing works for aircraft finance.


    [1] The Quran is the primary source, and it is accompanied and interpreted by the Sunna. In addition to the secondary sources include Ijma, Qiyas, and Ijtihad represent the secondary sources

     

    ]]>
    Thu, 24 Aug 2017 00:00:00 GMT
    <![CDATA[Att(H)ack - Anti Cyber Crime Law in Saudi Arabia]]> ATT(H)ack- Anti-Cyber Crime Law in Saudi Arabia

    "Cyberterrorism could also become more attractive as the real and virtual worlds become (tightly) coupled, with automobiles, apps, and other devices attached to the Internet."

    -        Dorothy Denning

    The clandestine and privacy advantages, the information superhighway, and the possibility to buy your plane ticket last minute, comparing airfares - the certitude of Internet today has made it easier for individuals to e-socialize, access information, and conduct business.

    We Eat. Sleep. Live the World Wide Web. With spellbound raise of the technology, evil minds keep themselves updated with indefinite and unethical routes through which they can trespass the ambit of privacy of an individual or entity. With this malignant issue fast rising, the legislature across the World have codified laws to tackle the menace of cyber crimes. The international community, governments, and commercial enterprises are yet adjusting to an unprecedented array of challenges posed by hackers, cyber criminals and those who resort to cyber espionage.

    In this article, we discuss the Anti Cyber Law in Saudi Arabia with particular emphasis on criminal acts and punishments.

    Taking the dictionary reference for the term Cyber, which is a combining form meaning Computer, computer network or virtual reality used in the development of compound words (cyber talk, cyber art, cyberspace) and by extension i.e. expressing future visions.  A more precise definition is of, relating to, or involving computers or computer networks (as the Internet) and the cyber marketplace. Looking into what a cybercrime is, a crime that involves a computer and a network or when a computer used in the commission of a crime, or it may be the target, the person is said to have committed the Cybercrime. Cybercrimes are broadly categorized into three categories namely, 

    Cybercrime against Individual

    Cybercrime against Property

    Crime against Government

    Email Spoofing

    Credit Card Skimming

    Hacking

    Spamming

    Intellectual Property Crimes

    Denial of service attack (Dos)

    Phishing

    Software Piracy

    E-mail Bombing

    Cyber Stalking

    Domain name disputes

    Logic Bomb

    Cyber Defamation

    Identity Theft

    Data Diddling

    Voyeurism

     

    Sale of Illegal Articles

    Cyber Pornography

     

    Cyber terrorism

    Albeit different from the other two categories, crimes against the government get categorized as cyber terrorism. If successful, this type of the offense can wreak havoc and cause panic amongst the civilian population. In this category, criminals hack government portals, military websites or circulate propaganda. The perpetrators can be terrorist outfits, or unfriendly governments of other nations and the Kingdom of Saudi Arabia has been vulnerable to two such attacks in 2013 and 2016. According to Gulf News Journal, nearly 65 percent of the country's population already has access to the internet, and the state ranks seventh globally concerning individual social media accounts, and it has more than 40 percent of the Middle East and North Africa region's Twitter users. Saudi Arabia tops the list of countries impacted by the advanced targeted cyber attack in META (Middle East, Africa, and Turkey). It also has a significant share in computer networks, accounting for 30.1 percent of the total cyber attacks in the region during the first half of this year, said a report issued by Fire Eye, a leader in cyber security.

    'The Internet is an excellent tool, But technology is increasing faster than the safety message is'

     -        Pam Weaver                      

    The Legal System in Saudi Arabia

    Shariah principles protect individual's right to privacy and prohibit any invasions thereof. Shariah policies prohibit disclosure of secrets except in cases where the owner of the sensitive information accepts to disclosure or is a matter of public interest. The Holy Quran and the Sunnah do not stipulate a penalty for disclosure of secrets, however, as explained earlier, divulgence of sensitive information may be punishable by a fine that a judge, in his discretion, deems appropriate and equitable.  Such penalty may attract a fine, charge the offender with imprisonment or deprivation of specific rights such as suspension of a practicing license. In determining the severity of penal acts or action(s), the judge will take into consideration the damage sustained by a victim and also consider whether such loss is actual or consequential.

    Combating the Enemy: Cybercrime Law in Saudi Arabia

     Saudi Anti-Cybercrimes Law (the Law) was issued by Royal Decree Number M/17, dated 26th March 2007. This law consists of sixteen (16) provisions. Broadly, the sixteen articles set out the key definitions, scope and objective, sentences, and fines. The law aims at combating cyber crimes by identifying such crimes and determining their punishments to ensure information security, safeguard rights on the legitimate use of computers and information networks, protection of public interest, public morals, and common practices and values, protection of national economy. Additionally, Arab Cybercrime Agreement Number 126 of 2012 (the Agreement) enacted and approved in the year 2012 introduced sweeping changes. The Agreement primarily addresses the rise in electronic crime which embraces such crimes as credit card frauds, internet crimes, cyber terrorism, creation and distribution of viruses, hacking, system interference, illegal access and interception, and so on. The Agreement also aims at strengthening cooperation between Arab countries in combating cyber crimes. The Agreement further signifies the importance of enforcing the Copyrights Law. The Agreement imposes Penalties on those in violation of the Agreement terms and conditions. The proposed amendment to Article 6 of the Law that could allow offenders to be publicly named and shamed. The additional powers granted to the judiciary under the amended provision will allow the publication of a summary of the decision one or more local newspapers or any other medium deemed suitable by the court in the connection of the type of the crime, its severity, and its impact. The publication release only happens once the verdict gains the status of the final ruling and the offender may also incur the costs of publication. Cyber crime attracts severe punishment by the Saudi Ministry of Interior and the Communications and Information Technology Commission, and penalties exacted for identity theft, defamation, electronic piracy, email theft and other unlawful activities.

    Revisiting the penal features of the Royal decree on March 26, 2007

    Crime

    Fines

    Imprisonment

    §   Acquisition of moveable property or bonds for oneself or others or signing such bonds through fraud or use of false name or identity.

    Up to 2 million Riyals

    Not exceeding 3 Years

    §  illegally accessing bank or credit card data or data as to ownership of securities with the intention of obtaining data, information, the position of funds or type of services offered.    

     

     

    §  Unlawful access to computers with the intention to delete, erase, destroy, leak, damage, alter or redistribute private data.

    §  Causing the information network to halt or failure or destroying, removing, leaking, or modifying or reconstructing existing or stored programs or data.

    §  Obstruction of access to, distortion and causing interruption or cessation of any form of services and by any means. Fine of up to three (3) million Saudi Riyals

    Up to 3 million Riyals

    Not exceeding 4 years

    §  Production, preparation, transmission, or storage of material impinging on public order, religious values, public morals, and privacy, through the information network or computers,

    §  the construction or publicizing of a website on the information or data of any type), the IT system(s) or computer (in general) to promote or facilitate human trafficking.

    §  the preparation, publication, and promotion of material for pornographic or gambling sites which violates public morals.

    §  the construction or publicizing of a website on the information network(s) or computer linked data to act, deal or trade in, distribute, a demonstrated method of use or facilitate dealing in narcotic and psychotropic drugs.

    Up to 3 million riyals

    Not exceeding 5 years

     

     

    §  Spying on, interception or reception of data transmitted from an information network or a computer without lawful authorization.

    §  Unlawful access to computers with the intention to threaten or blackmailing a person to accept, or asking him/her from refraining from taking action, be it lawful or unlawful.

    §  Illegal access to a website, or hacking a website with the intention to change its design, destroy or modify it, or occupy its URL.

    §  Invasion of privacy by employing camera-equipped cellular or mobile devices and the like.

    §  Defamation and infliction of damage upon others through the use of various information technology tools and devices.

    Uo to 5 hundred thousand riyals

    Not exceeding 1 year

    §  the construction or publicizing of a website on the information network or on a computer for terrorist organizations to facilitate communication with leaders or members of such organizations, finance them, promote their ideologies, publicize methods of making incendiary devices or explosives or any other means used in terrorist activities.

    §  Unlawful access to a website or an information system directly or through the data network or any computer with the intention of obtaining data jeopardizing the internal or external security of the State or its national economy.

    Up to 5 million riyals

    Not exceeding ten years.

    §  The crime is committed through organized crime.

    §  The offender holds a public office and the crime performed relates to that facility or where the crime stems from employing one's undue influence, or authority.

    §  The luring and exploiting of minors and related offenses.

    §  The offender has a prior conviction of similar crimes within or outside the Kingdom.   

    The fine may not be less than fifty percent (50%) of the maximum if the wrong combines with one of the mentioned crimes.

    The imprisonment may not be less than half of the maximum if the offense links with one of the said crimes

     

    Further, the Saudi Anti-Cyber Crime Law aims to secure the safe exchange of data, protect the rights of users of the computers and the internet, and to protect the public interest and morals as well as people's privacy. In recognizing the position and urgency, the Saudi authorities are reviewing the Anti-Cybercrime Law to amend it so as to initiate legal proceedings against social networking sites such as Twitter for allowing accounts which aim at posting or in general dealing with adultery, and the acts of homosexuality, or atheism.

    Known Cases of Cyber Crimes And Cyber Attacks in Saudi

           i.          The unethical and illegal cyber attack on Aramco Company in August 2012 by a group calling itself "Cutting Sword of Justice" claimed responsibility.  Aramco is one of the well-known oil companies owned by the Saudi Arabian government. In a matter of hours, 30,000 computers got partially wiped or wholly destroyed by a virus resulting in the deletion of data on the company's hard-drives. Saudi Aramco's ability to supply 10% of the world's oil was suddenly at risk.

          ii.          Multiple attacks from outside the country targeted Saudi Arabia's government websites, crippling these websites for quite some time until they were disabled. These attacks were discovered to belong to hundreds of IP addresses from different parts of the world.

         iii.          In January 2012, the official Website of King Saud University (KSU) got hacked by some unknown Hacker, and a database of 812 Users got exposed included phone numbers, addresses, and passwords.

        iv.          Saudi hacker, 0XOMAR, published over 400,000 credit cards online and threatened Israel to release 1 million credit cards in the future. In response to that incident, an Israeli hacker published over 200 Saudi's credit cards online.

          v.          In December 2016, cyber criminals attacked various departments of Saudi Government. These included the Saudi's General Authority of Civil Aviation. Thousands of computers got destroyed in the Saudi air office in the so-called "digital bomb" detonation which leads systems of several agencies to wipe out at once.

    Conclusion

    The Internet has taken the world to altogether a new level. As they say, A coin has two sides! The unknown 'side advocates' threat and terror without boundaries and with no proof. The placement and recruitment of young, influenced and innocent individuals or persons by terror groups is a stance of Cyber exploitation.  The Internet can be used to make things as well as break things! It is used to address social issues while some use it as a prime platform to express freedom of Speech and religious views. With this level of cyber threat, stronger defense systems are the need of the hour.

    The only thing that can stop a bad guy on the internet is a Good chap on the Internet!

     

     

     

     

     

    ]]>
    Wed, 23 Aug 2017 00:00:00 GMT
    <![CDATA[Threat - The Role of Coercion Under UAE Law]]> ThREAT - THE ROLE OF COERCION UNDER UAE LAW

    It is almost universally accepted, both in law and with consideration of morals that agreements entered into under coercion cannot, at all, be considered binding. Thus one is not obligated to keep, and the law will not enforce, a contract you undertake to save your life at gunpoint. So, what is the theory behind the invalidation of contracts that one has been coerced into? Most explanations that follow note that coercion strips the voluntary nature of an agreement, whether that is in a more or psychological sense. These explanations conclude that an agreement which one has been coerced into does not reflect the coerced party's will. Alternatively, scholars argue that contracts with a coercive element should never be enforced as they would encourage the negative action of coercion.

    Coercion, in its general sense, can be described as the intimidation of a person in which they are compelled to perform an act against their will by the use of psychological pressure, physical force, or threats. Legitimately, from a juridical perspective, coercion can be considered as a deed against another upon which satisfaction is either denied or their choice corrupted.

    A perception of controlling or coercive behavior 

    Before probing deeper, let us understand the scenario behind the understanding of controlling or coercive behavior. Coercive behavior can be described as a method of harming, punishing, or freighting a victim, by using a pattern of continuous acts such as humiliation, threats, assault, or any other abuse. Such behavior does not necessarily have to be ascribed to a single incident. Rather, a pattern of incidents where purposeful behavior takes place by an individual over a period to exert control, coercion, or power over another person is sufficient. These types of offenses focus its responsibility and accountability on the perpetrator who has wilfully chosen to carry out these compelling behaviors.

    The Coercive Will

    It is apparent that from the beginning of time that the human mind is considered to be a great mystery and is one that intrigues men of science. It can be well argued that a human's will is unpredictable in a world that is bound by strict necessity. Humans are individualists in a systematic universe. The will cannot be quantified by physical science nor can it be managed. It may only be carefully coaxed while it is utterly impalpable, it is quite capable of managing the physical world about it.

    As such, it is not hard to fathom that the will itself, is considered as the essential and most important pillar in concluding contracts leading to the conclusion of the contract.  It is imperative in determining the legal implications upon which the contract is based. For the actions done by will to be correct, they must be done by a free will, devoid of any defects which deny, restrict or affect this will.  When it comes to a contract of law, coercion in this context can be described as a defense which comes about when one party enjoys an ascendant position opposed to the other party and abuses this position by subjecting the other party to threats.

    The law has regulated the defects of the satisfaction of the will as it is the cornerstone in contracts and legal transactions. One such defect was the defect of coercion, and this defect was tackled by the Penal Law and the Civil Transactions Law, as coercion is penalized upon by the Penal Code if it amounts to a certain degree. However, the point of discussion in this Article is the coercion in the contracting field. Satisfaction is thus considered as one of the essential pillars of the contract as without it there is no correct contract. Thus the contractor should have the will to complete the contract and by practicing the coercion upon him and his will vanishes, which result in the nullity of the contract. – Article Number 182 of Civil Transaction Law.

    Also, a divorce contract which occurs under the effect of coercion is considered null as the presence of a free will and choice is required in the imposition of a divorce. It was stated in the judgment of the Dubai Court of Cassation on 24 June 2008in the Appeal Number 2008/41 Personal Status Appeal:

    The text in the first clause of the Article 101 of Personal Status Law that "mind and choice is required in absolute terms" denotes – and as the explanatory memorandum of the law illustrated – that the mind and choice is necessary for absolute terms. Because who has no mind or choice doesn't realize the interest for which divorce was constituted therefore his divorce does not occur if he was crazy, loony or compelled.

    Personification

    There are two kinds of coercion; one kind of them denies the will of its subject and is referred to as physical coercion, and the other undermines the will and is called moral coercion.

    Physical coercion occurs when someone is compelled to conclude an action or do something using physical force which he cannot resist and has no way to repel, thus paralyzing his will and depriving him of the will of freedom of choice. Since physical coercion is considered as one of the force majeure cases which are done by human beings, it grabs the satisfaction by force and not by dread. In such case, the action done by the compelled person is void and ineffective when the coercion inflicted him is confirmed.  As for moral coercion, it can be described as a threat directed from one person to another upon which a psychological state of fear and dread compels the later to accept what he otherwise would not accept voluntarily. This is also apparent when the person forcing the other party threatens the coerced to physically or psychologically hurt them or a member of their family. Imperative to note is that for coercion to be considered as valid, the threat alone on the part of the compeller is not sufficient. The compelled must be aware that the party forcing is capable of imposing the actual threat. Also, factors such as the status, strength, weakness and position of person all play a role in the magnitude of the coercion. The threat of a small, weak child to a big strong man for example or the threat of a beating by a disabled husband to his wife, are thus not considered as coercion. 

    It can be established that the important difference between physical and moral coercion lies in the fact that the will, in the case of the physical coercion, is paralyzed or blind as if it did not exist entirely. However, the will, in the event of moral coercion, exists but is defective and corruptive as its holder has the option to choose between the lightest of the two damages or easiest of the two evils. By either accepting to conclude the action or enduring the danger of the threat which may is implemented upon himself or one of his loved ones. From this perspective, examples of moral coercion may be the action of directing a weapon towards a person, threatening a person if he doesn't sign a particular contract by threatening or abusing one of his family members. It may also be threatening a woman with assault if she doesn't acknowledge a particular commitment or threatening her by divorce if she doesn't waive her expedited dowry or decreasing her postponed dowry. Another example is a threat of financial management to a person by seizing his money if he doesn't pay a non-payable amount.

    Assessing the means of coercion

    The intent of the coercion should result in an illegal purpose; hence if it is legal, the coercion is not achieved. For example, when it comes to forcing the person to repay a debt which he owes, upon which repayment is eventually made, this does not result in legitimate coercion. Assessing, the means of coercion and the amount of its magnitude as well as its effect on the psyche of the contractor is one of the subject matter issues which the specific court is exclusive to adjudicate on when basing its judgment on the reasonable evidence. The Dubai Court of Cassation decision dated 18 April 2010 in the Appeal Number 2010/76 civil appeal stated that: it is decided by the judiciary of this court and according to what Article 176 of the Civil Transaction Law says – that "coercion is forcing a person unfairly to do something without his satisfaction. Meaning that coercion is not achieved unless the intent is for an illegal purpose. Moreover, It is required that the coercion evokes a dread in the psyche which makes the doer act unsatisfactorily. And the burden of proof is on the claimant. Also, inspecting the occurrence or non-occurrence of the coercion shall be enforced by the authority of the subject matter without being commented on by the court of cassation when its deduction is reasonable."

    Gravity

    The question arises, when does coercion become urgent?  Urgent coercion can be prevalent in cases where the coercion is a threat of a grave danger inflicted against the psyche or money of the compelled. Occurring in instances where for example, the members of a person family are threatened of being killed, or there is a threat of seizing their money/belongings, resulting in a situation where the compelled finds no other means out except to obey what is ordered upon him by the party coercing. Coercion, on the other hand, may be non-urgent in other cases. As the Dubai court of cassation dated 9 November 2003 in the Appeal Number 2003/47 appeal rights that – it is decided that "coercion, which blemishes the satisfaction, is according to the 176 and 177 of the Civil Transaction Law is compelling a person unfairly to do something without his satisfaction. Coercion becomes urgent or non-urgent as it becomes physical or moral, and coercion becomes urgent if an imminent grave danger inflicts the psyche or money, and it becomes non-urgent if it was a threat in other cases."

    Burden of Proof

    When it comes to the burden of proving the coercion, it shall rest on the compelled who receives the coercion. Hence one cannot adhere to the occurrence of the coercion unless he can prove so by all means in the provision of documents, the testimony of the witnesses and clues as well as the other evidence of proof. The subject matter Court has the right to inspect the occurrence or non-occurrence of coercion without being commented on in case that its deduction is based on reasonable reasons by the court of cassation.

    Also, Dubai Court of Cassation on 20 May 2007 in the Appeal Number 2007/66 Civil Appeal adjudicated that – it is decided – "that the burden, of proving the occurrence of coercion as one of the defects of the satisfaction, shall be the responsibility of the person claiming. And because the deduction of the occurrence or non-occurrence of coercion is the authority of subject matter court, their reasons shall be reasonable in this regard and are confirmed in the papers." 

    So if the coercion is proven, then the act which was done as a result of the coercion shall be inefficient, such as concluding a contract or concluding conciliation under the effect of coercion. However, it is not permissible for the compelled to adhere to the inefficiency of the contract or the conciliation before he proves that the coercion was done by the other contractor or he knew about that coercion. Also, Article 184 of the Civil Transaction Law states that – if the coercion was done by someone other than the contractors, the person who was compelled to contract has no right to adhere to the inefficiency of the contract. The only instance where they would be compelled do so is if it is not proven that the other contractor knew or he was supposed to know about such coercion.

    Moreover, Article 64 of the Penal Code stated as follows – whoever committed a crime necessitated by the necessity of protecting himself, his money or the self or money of others from a grave danger is about to occur, and his will has nothing to do with its occurrence, is not criminally responsible. Also, whoever had to commit a crime due to a physical or moral coercion is not criminally liable. In the two cases set out in the two clauses above it is required that the offender is not capable of preventing the danger in another way and that the crime is significant enough to repel it and that it is suitable for it. Finally, in cases providing proof of coercion and threat towards the compelled, the person coercing shall be subject to criminal prosecution. However, it is essential on the part of the compelled as well, that he/she raises a penal claim against the person coercing, thus punishing the latter for the offense committed either personally, psychologically or upon on any of the members of his family or any other accusation as set out by the Penal Code.       

    Conclusion

    It can be understood that if conditions of coercion are found, the effect would be the rescinding or cancellation of the entire contract. When a contract is rescinded, the contract and the subsequent agreement are canceled in its entirety. Thus, both parties are released from their obligations to perform any contract duties as contained in the agreement.

    From any perspective, man has to learn that he cannot command things, but rather, he can command himself; he cannot coerce others, but he can mould and be the master of his will. Ironically speaking, a man's natural duty to make all contracts that are intrinsically binding and to coerce the fulfilment of them should be considered as one of the most sacred and indispensable of all human possessions.

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    Tue, 22 Aug 2017 15:00:00 GMT
    <![CDATA[FIDIC and ENAA: Comparison (Part II of II)]]> FIDIC AND ENAA: COMPARISON

    Part II of II

    In our previous issue, we discussed FIDIC and ENAA forms which are an internationally recognized and utilized form of contracts and the general comparisons between them. Our attorneys had also detailed the requirements of data accuracy, and other conditions of companies. Although, it does not end there. This Part II of the article gives a detailed comparison of the design obligations and force majeure clause requirements provided in the FIDIC and ENAA forms.

    Rachelle Doorley once said, '(construction of) buildings require the skill of an engineer, a contractor and an artist.' So, the question that might cross your mind is how an artist could grasp their work environment once submerged into the chaos of a construction site. If so, then, you're thinking of the wrong question. A more appropriate thought may be how an artist would confine his creative and free-flowing mind to the precise and narrow rules by which an engineer and contractor must abide. Although, uniformity is not encouraged in an artist's work; that is not the case for engineers and contractors who are likely to be bound by the standard forms of contracts and practices that prevail in their line of work. The requirements found in these standard forms and the role of both contractors and employers are detailed below in this second part of the article.

    Design Obligations

    The general design obligations under sub-clause 5.1 of the Conditions of Contract for Electrical and (for) Mechanical Works including Erection on Site (Yellow Book, 1987 First Edition, revised in 1999) states that:

    "The Contractor shall carry out, and be (liable or) responsible for, the design of the Works." Further upon receiving notice of commencement of works the "Contractor shall scrutinize the Employer's Requirements (including design criteria and calculations, if any) and (must also do so for the) items of reference mentioned in Sub-Clause 4.7 [Setting Out]. The Contractor must provide notice to the Engineer of any (and all) errors, fault or other defects found in the Employer's Requirements or these items of reference". Furthermore, it also contains provisions regarding the application of variations and adjustments, subject to an experienced contractor exercising due care and consequently discovering the error, fault, or other defects upon examination of the Site and the employer's requirements before submission of the tender. Extension of the time for competition shall not occur and neither shall adjustment of the contract price.

    From the above provisions, it is evident that the contractor is responsible for identifying any errors in the design criteria submitted by an employer and any defects when examining the site or the employer's requirements. The contractor is left with little remedy even if the data provided by the employer was incorrect as there is no responsibility placed on an employer for providing correct data or design criteria based on which the contractor lays down his plans. It seems that the form relies on the general premise of ancient practices where an employer was a layman and is persistent. However, in today's modern world, participants of large projects and users of these forms are technically well equipped from both the ends of the contract whether its employer or contractor.

    Further, sub-clause 5.8 Design Error states as:

    "If mistakes, omissions, ambiguities, inconsistencies, inadequacies or other defects exist in the Contractor's Documents, then they and the Works shall be corrected at the Contractor's cost, notwithstanding any consent or approval under this Clause."

    Accordingly, even if the engineer has granted approval after a review of the "Contractor's Documents" (which may include designs submitted by the contractor) under Sub-Clause 5.2, the obligation as to costs for correction of errors or such defects falls on the contractor. Undermining the role of the engineer in bringing out any deficiency or defect before any work is implemented and thereby rendering the role of engineers in projects almost limited to a determination of contractor's and employer's claims which finally is controlled by the contractual presumptions established hostile to a contractor.

    The ENAA (Engineers Advancement Association of Japan) form of contract under general conditions of clause 20.1.1 states as:

    "C 20.1.1 - Specifications and Drawings: The Contractor shall be responsible for any (and all) discrepancies, errors or omissions in the specifications, drawings and other technical documents prepared by them; (regardless of) the approval of such specifications, drawings, and other (such) documents from the Owner. However, the contractor would not be liable if such discrepancy or error happened due to inaccurate information furnished in writing to the contractor by or on behalf of the Owner."

    The above provision is self-explanatory as to the demarcations of the liabilities between the parties as the proviso imposes liability on an employer for erroneous information and exempts contractor for errors resultant of such owner's errors.

    Force Majeure

    The force majeure clause under Clause 19 defines force majeure as an exceptional event or circumstance (that is) beyond the party's control. It is something that could not have been reasonably comprehended before entering into the contract and upon its arising the party could have reasonably avoided or overcome. Further, it is not substantially attributable to the other party, and the clause also provides a non-exhaustive list of events. Sub-clause 19.2 has stated that when one party would be provided with substantial relief when the other parties prevent them from performing their obligations. Under Sub-Clause 19.7 the party is released from the performance of its obligations if the event makes it "impossible or unlawful" to fulfill its contractual obligations.

    Though the provision somewhat covers events and circumstances in general, the ENAA force majeure clause is wider in effect. Force majeure is a predicament which is beyond the reasonable control of the affected party, which is unavoidable. The non-exhaustive list if also provided under ENAA form with an addition of a category for labor, materials and utility shortages that are caused by force majeure events. Another difference is that the relief is provided not only for prevention but also for the works "hindered or delayed" due to force majeure. A force majeure clause is believed to apply to differing types of performance rather than only for non-performance as the word hinder has a greater interpretation than just rendering contractual obligation impossible and incapable of being performed. Further, there is a difference in notice provisions as the FIDIC force majeure notice should be furnished within a period of fourteen (14) days from the date of obtaining awareness about the event; whereas, in ENAA the notice period starts from the time of occurrence of the event.

    Conclusion

    The principle difference in these forms of contract discussed at hand is employer's liability for the scope of works and design outline or the requirements provided by the owner and technical specifications provided by the contractor by such documents. In FIDIC, the contractor possesses larger risks and responsibilities than an employer; whereas, in the ENAA standard form, the obligations seem balanced as the responsibility for specifications of work provided by the owner has been placed on themselves. However, simultaneously, there is a need of giving wider authority to the employer in ENAA form. Further, the owner's constant instruction and the need for approval or authority should not extend to the limits of the FIDIC form to interfere with the engineer's performance. It will also be interesting to compare Conditions of Contract for EPC Turnkey Projects (Silver Book 1999 First Edition) or Conditions of Contract for Design, Build and Operate Projects (DBO Contract 2008 First Edition) with the ENAA's turnkey form.

    STA's team of construction lawyers in Dubai are trained with an in-depth experience in the Real Estate law and have handled several turnkey projects including advisory on man-made islands, office, retail, industrial, leisure and residential sectors including mixed use and urban regeneration projects.

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    Tue, 22 Aug 2017 13:00:00 GMT
    <![CDATA[Share Unshare – The 51:49 rule in UAE on Share Distribution in LLCs]]> Share Unshare – The 51:49 rule in UAE on Share Distribution in LLCs

    Profit is not the (only) legitimate purpose of (any) business. The legitimate purpose of business is to provide a product or service that people need and do it so well that it's profitable.

    {C}-        {C}James Rouse

    Paula J in her article suggests that the corporate law fraternity continues to debate on the imposition of fiduciary duties on shareholders who control and manage business enterprises. It is her view that fiduciary duties obligate those who have the power to operate, manage and oversee affairs of business. Referring to corporate context, she classifies directors as individuals who have the authority. In contrast, shareholders in her view may have indirect influence or role, but they certainly have no legal power over corporate property, and nor over other shareholder's property. Speaking purely in the UAE limited liability companies' context, Paula's view may call for a refined debate on the role of the majority shareholder (local partner) and minority shareholders (the expatriate shareholder(s)).

    We all know about the 51:49 ownership rule of limited liability companies in the United Arab Emirates. But, ever thought what could potentially happen if the 51% local owner sells his shares to the 49% foreign owner without registering it? Yes, that is against the law. But, still.. Imagine!

    STA's team has covered at length the implications of UAE Anti-fronting Law and the new UAE Commercial Companies Law. Law firms in UAE counsel their clients on matters involving corporate governance, corporate structures, drafting key contracts, besides general corporate law advisory.  Speaking of contracts, parties to a limited liability company may execute several agreements to protect their respective interests and to (or "intending to") ensuring that these arrangements are consistent with the laws of specific Emirate and that of the UAE. The effect of UAE Anti-Fronting Law is to ensure that parties do not resort to side agreements and avoid cases where the UAE National acts merely as a frontier. This article does not intend to review the position under Anti-Fronting Law, but the opposite. A case where local partner sells his fifty-one percent (51%) shares to the expatriate forty-nine percent (49%) shareholder. 

    The UAE courts have lately issued a landmark judgment on the distribution of profits between the local and foreign partner. The decision gets categorized as a benchmark ruling given its far-reaching implications. Traditionally, the courts in UAE examined the position differently Where the local partner acting in the capacity of a sponsor of a limited liability company claimed fifty-one percent shares despite a set (but; an arrangement contrary to the UAE Anti Fronting Law). Subsequently in  2015 Article 10 of the Federal Law Number (2) of 2015 On UAE Commercial Companies) echoed the provisions contained in UAE Anti Fronting Law. Such arrangement surely was against the laws of UAE. Article 10 reads as under:-

    {C}(1)  "With the exception of joint liability companies and simple commandite companies, where all the joint partners of any such companies shall be UAE Nationals, any company established in the State shall have one or more UAE partners holding at tleast 51% of the share capital of the company.

    {C}(2)   Notwithstanding the provisions of Clause (1) of this Article, the Cabinet may, based on the proposal made by Minister in co-ordination with the competent authorities, issue a Decision setting the class of activities to be exclusively exercised by UAE Nationals.

    {C}(3)  Any transfer of the title to any share of a partner that may affect the percentage as set out in Clause (1) and (2) of this Article shall be invalid."

    The courts in such matters ruled for the liquidation of the company on the premise that local partner not a contributing towards the share capital equated the company's status as a sole shareholding company, which is against the basic tenets of the UAE Commercial Companies Law.

    The decision is one of the welcomed rulings which also supports public policy and declared that the consent given by local partner for waving his full rights in the LLC contravenes public policy. However, it is imperative to highlight that this judgment does not validate nor favors side agreements between the local Emirati and foreign partner for waiving the rights in actual shares. In this article, I shall further discuss the court's viewpoint in detail to understand the gray area in the subject and the position established under the laws of the UAE.

    FACTS OF THE CASE:  In this case, the Company's financial status was not stable, and their financial statements reflected a negative balance sheet. The claimant (the local partner) had an apprehension to be a part of financially hurt or loss making company and proceeded to sell his shares to the defendant. The parties made the arrangement and entered into an agreement where the claimant sold his shares to the defendant in consideration for an agreed amount. The claimant subsequently novated as an inactive partner in the company. However, the defendant accepted to pay a fixed sum every year to reflect the local partner's name in the constitutive documents of the company as required under the UAE Commercial Companies' Law.  Understanding the legalities surrounding the Anti Fronting Law, the parties intentionally decided not to legalize or notarize the above arrangement. The local partner issued a power of attorney to the defendant and authorized the expatriate partner to control, operate and manage the entire affairs of business without his interference, and the parties continued their relationship. Surprisingly but true, the company's revenue stream excelled in its business in two subsequent years and reflected on now more positive looking books of accounts and improved cash flows.

    The local partner subsequently became aware of the handsome profits the company was drawing. Resulting from a difference, the claimant chose to bring an action against the expatriate partner. Amongst other contention(s), the local partner requested the courts to disregard the agreement executed towards the sale of shares. 

    Courts' overview

    The local partner moved the Courts of First Instance in Abu Dhabi claiming loss of profits from the defendant. The matter related to the term commencing signing off of the sale of shares agreement. The claim documents requested the court to invalidate the sale agreement as it is in prohibition to the provisions of laws of UAE and reinstate the respective position of each shareholder as that of 51:49 shareholding. The Courts of First Instance decided on appointing an expert in the matter, and the expert concluded that the claimant had consented to waive his rights. Consequently, the expert's findings did not find the defendant of any breach. The findings further reported that the local partner failed to prove any malice or intentional wrongdoing on the part of the defendant in executing the sale of shares agreement. The claimant however proceeded before the court of appeal and contested the decision of the Courts of First Instance.

    The Court of Appeals, however, formed a differed view on the matter and classified the sale of shares agreement as violative of the then UAE Commercial Companies Law (Federal Law Number 8 of 1984 (as amended)). The Court referred to Article 22 and 230 of the said law and declared the share sale contract as void.

    The Court of Appeal inclined towards the claimant and ordered to restore the position of local partner as a shareholder in the company and also entitled him to share in profits of the entity besides awarding compensation. I now elaborate the position under the abovementioned Article 22 of the old Commercial Companies Law (now repealed), it provides that "every LLC established in the UAE mainland shall have 51% ownership in shares by an Emirati national." Article 230 of the old law states that "the share of the partner or third parties may not be invoked unless the appointed auditor effectuates the transfer and register the sale in the company's registrar or at the commercial registrar's office.  In all cases, the waiver shall not result in a reduction in the share of the Emirati partner in capital below fifty-one percent (51%).

    To resolve the inconsistencies surrounding 51:49 shareholding distribution, the new UAE Commercial Companies Law (Federal Law Number 2 of 2015) provides for Article 10, discussed above.

    In sum, the court of appeal relied its decision on the constitutive documents, namely, the memorandum and articles (of association) signed by the parties and favored the claimant.

    The Defendant decided to challenge the decision passed by the Court of Appeals and filed an appeal before the Court of Cassation. The Cassation Court reviewed the decisions of both - the Court of First Instance as well as the Court of Appeals. The Court of Cassation rendered its decision in support of the Defendant.

    The court of cassation inferred that the court of appeal has wrongly referred to the constitutive documents signed between the parties as it was merely a formality. The actual relationship between the parties reflected in the sale of shares agreement and power given by the claimant to the defendant through the legalized power of attorney.

    The court of cassation further corroborated that the court of appeal erroneously relied on the assertions made by the claimant and ordered the defendant to pay to the local partner the profits due from 2004, that is from the time, transfer of shares became operative. In its reasoning, the Court of Cassation held that the claimant had participated in the sale of shares transaction on his free-will and account. Accordingly, the courts decided that there was no undue influence of any kind. The Court of Cassation demanded the claimant to return the monies received from defendant towards the sale of shares and fees received for serving as a local partner. 

    Conclusion

    The judgment brings positive sentiments to the business community and allows foreign investors to retain their trust in the judicial system. The sale of shares between the parties finally declared as void, but the act of claimant in claiming his share of profits and entering into an arrangement willingly in lieu of any fees is a wrongful act, carried out against the public policy. The significant part of the ruling is that the Court ordered the claimant (from the date the share sale agreement was executed) to return the amount received from the sale of shares and local partner fee received. 

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    Tue, 22 Aug 2017 12:00:00 GMT
    <![CDATA[Maritime Arbitration- Legal Perspectives]]> Maritime Arbitration- Legal Perspectives

    Courts can no longer individually address the issue of conflict resolution and as such the modern business world requires an alternative means of conflict resolution to meet its demands. A need arises for a legal mechanism through which parties can resolve their disputes quickly, fairly, efficiently, with flexibility and freedom that the court cannot provide. The reason for this is because of the continuous development of trade and services, the resulting complexity of transactions, and the subsequent need for speed and efficiency.

    This increased interest in an alternative means of conflict resolution within judicial systems that has arisen because it provides such flexibility and speed. This form of conflict resolution would ensure the participation of all parties and maintain confidentiality while finding a solution to their dispute. The fact that in the past half a century, such an alternative means of conflict resolution has earned a prominent place in the global legal and economic sector has resulted in an increased jurisprudential and legislative movement. Said action regulates the alternative means by striving to find an appropriate framework to ensure that these means are codified and applied in an efficient manner that achieves justice and maintains rights.

    The vast expansion of economic development rates and the spread of intra-state trade have led to the emergence of new and modern trade methods. As trade and economic relations, interests, and objectives diverge, many related problems have emerged. To ensure justice within this rapid movement, methods to solve these problems have developed. An arbitration system has been established to make up for the failure of national law, judicial understanding, and trade customs' inability to keep pace with the rapid changes. Such an arbitration system is used as a method of peaceful settlement of disputes and is separated from the ordinary judicial settlement.

    On-Shore Basics

    With the spread of the arbitration system as a method of peaceful settlement of disputes and with the simultaneous development of maritime transportation activities and maritime commercial transactions between various countries of the worlds, there has been an increase in maritime arbitration disputes. Arbitration process is subject to certain formal requirements. Almost all arbitration rules either of national - Spain, Italy, Belgium, the Netherlands, Germany, United States, Switzerland, England, Peru, among many others - or international origin - the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards of 1958, the original version of the UNCITRAL Model Law on International Commercial Arbitration of 1985, or the Model Law amended version of 2006 - presuppose the arbitration agreement to fulfill certain crucial formal qualifications[i].

    Maritime contracts of different types can be found amongst the international community of which require dispute settlement outside the scope of normal litigation procedures. Charter Parties for instance use variety of different forms for different trades and commercial purposes. Modern charter party forms such as BIMCO9 provide standard templates for charter parties, bills of lading, and other standard agreements. Arbitration clause by default are featured in most forms. The form and content of arbitration clauses contained in charter parties may vary from one another in terms of appointment of arbitrator, number of arbitrators, venue for arbitration, etc[ii].

    Given the commercial, economic, and global nature of these maritime contracts, maritime arbitration has been of great importance in resolving disputes between parties. Perhaps the most important characteristic of maritime arbitration from within the jurisdiction of each state is the prior consent that is required by the parties to abide any arbitral award that is issued in a dispute between them and the ease of the arbitration procedure that would occur. 

    Further, unlike ordinary judicial procedures, the lack of public participation in an arbitration dispute is beneficial. This promotes both confidentiality and efficiency in resolving a dispute. It removes the fear of competition and the speculation of third party influence. Also, the technical nature of maritime disputes are based mainly on established maritime customs and as such require the availability of arbitrators and lawyers that are highly equipped with technical expertise and knowledge of maritime issues, international conventions, treaties, customs and rules of justice and customary fairness.

    Like any case of arbitration, maritime arbitration is resorted to either by prior agreement as per the signed contract between the parties to the dispute which contains an arbitration clause or based on an arbitration agreement that occurs after the conflict between the parties. The arbitration may be freely chosen by the parties or institutionalized. If it is freely chosen it is termed as ad hoc arbitration, the parties are free to determine where the arbitration will take place, i.e. which rules and procedures will be followed whether substantive or procedural. On the other hand, if it is institutionalized this means that the arbitration will be undertaken by an international organization or body and in agreement with the rules and procedures in place and pre-defined by international conventions and resolutions.

    Arbitration centers have increased in popularity after the Second World War where their use has expanded free trade and international trade. Each arbitration center has specialties in different types of trade of which include cotton trade or grain trade. One type of specialty is for maritime, and some institutes include the Maritime Arbitration Association of New York, the Association of Maritime Arbitrators in London, the Maritime Arbitration Chamber of Paris, and the International Maritime Arbitration Organization.

    Anchoring the Technicalities

    Maritime dispute resolution can be said to be historically the oldest form of institutional arbitration. It gives individuals the freedom to choose arbitrates which they trust based on their experience in dispute resolution. The rules and procedures used to resolve disputes are seen to be more flexible and realistic than those used in other general institutional arbitration.  Another known benefit of the maritime arbitration system is the requirement of confidentiality and the ensured speed during dispute resolution. One limit, however, is that maritime arbitration can sometimes be restricted to institutional arbitration, especially in private disputes in which a country is not a party. Institutional arbitration is the basis of international trade, and a majority of parties use it for most arbitral matters to avoid the issue of inexperience when choosing arbitral rules and procedures that would follow if choosing the ad hoc arbitration system.

    Thus, it remains important to distinguish between institutional arbitration and ad hoc arbitration by examining the differences between them. There is no doubt that the procedural methods used are the most important signifiers. While parties to ad hoc arbitration choose the rules and procedures they would like applied, parties to institutional arbitration do not have that freedom. As such the distinction between institutional arbitration and ad hoc arbitration lies in the failure of ad hoc arbitration in the two most important elements found in institutional arbitration: first, a permanent arbitration center with an organizational structure, a board of directors, a list of arbitration, and arbitration regulation. The second element is that the arbitration center, through the Secretariat and the administrative bodies, must organize, manage, and supervise the arbitral process from the receipt of arbitration applications until the decision of the arbitral tribunal.

    It should be noted that the reference in the arbitration agreement to an arbitral institution should not be immediately judged as institutional arbitration. Rather, it should be examined based on whether the agreement requires the availability of the two pre-eminent elements in institutional arbitration. In summary, unless the agreement between the parties indicates the use of institutionalized arbitration, bearing in mind that the two elements referred above are required, ad hoc arbitration will be what is agreed upon.

    Based on the above discussion, institutional arbitration, by its advantages, is the best means of resolving maritime disputes. It provides the parties with confidence in the expertise and specialization of the arbitrators in the dispute and through the use of well-known permanent centers. Further, certifying the availability of competent staff that monitors the arbitration process from beginning to end.

    In essence, institutionalized arbitration centers will have jurisdiction to resolve maritime disputes between parties, appoint arbitrators, maritime experts, interpret maritime contracts, and determine the appropriate work and training required for all parties associated. These disputes will be resolved between natural persons and public, legal, or private persons. Maritime disputes may arise from all types of maritime contracts. These include insurance contracts from maritime collisions, loss settlement, and environmental disputes that result from the flow of petroleum products, pollution, or catastrophic damage that resulted from conflicts. Further, they may include disputes arising from maritime trade, traffic, rental operations under bills of lading and all other agreements that fall within the jurisdiction of maritime courts.

    Conclusion

    Due to the growing maritime activity in the region, the enthusiasm of the stakeholders and the belief in the efficiency of arbitration, the Government of Dubai has initiated the establishment of the Emirates Maritime Arbitration Center (EMAC) by Decree Number 14 of 2016 establishing the Emirates Maritime Arbitration Center, which was issued by His Highness Sheikh Mohammed Bin Rashid Al Maktoum as the Ruler of Dubai and in line with international standards and regulations. The Center aims to settle local and international maritime disputes by using efficient and effective alternative dispute resolution methods. It seeks to strengthen maritime arbitration procedures to be more fair and transparent, through flexible and neutral mechanisms, to promote awareness of the practice of maritime arbitration locally, regionally and internationally. The role of the Center also includes supervision of mediation and arbitration per the applicable regulations to provide its services with transparency and integrity.

    The uniqueness of EMAC is that it provides mediation services in addition to arbitration. Parties desiring to enter into mediation are required to pay a sum of UAE Dirhams five thousand (AED 5,000) towards administrative fees and registration fees. Fees payable to mediators are determined on hourly basis and in consultation with each of the mediators, the parties and the Centre.

    The main aim of this center is to provide the best services to the maritime sector through a specialized center to resolve all maritime disputes with the speed and efficiency required and to enhance Dubai's competitive position in this important area at both regional and international level. We look forward to the issuance of important arbitral judgments from this essential center, which will work towards the establishment of legal rules that support maritime trade.


    [i] Mota, Carlos Esplugues. "Validity and Effects of the Incorporation by Reference of Arbitration Agreements in International Maritime Arbitration: Current Situation and Future Trends." Revista de Drept Maritim 5.1 (2015): 64-94.

    [ii] Supra, note i

     

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    Tue, 22 Aug 2017 00:00:00 GMT
    <![CDATA[Are You App Safe?]]> Are You App Safe?

    "People have forgotten this truth," the fox said. "But you mustn't forget it. You become responsible forever for what you've tamed. You're responsible for your rose." 

    - Antoine de Saint-Exupéry

      It was in the land of far away, and serenity paraded green landscapes, flowers, dew, rain showers and lakes. Not long ago, far away was just an abstract thought; however, the phrase 'the world is a small place' holds more truth to it now than one could have ever anticipated. A lot of this accredits to the multitude of technological advances. While the debate revolving whether technology is an opportunity or an obstacle is endless, its influence in developing communication platforms is undisputed.   The revolution from carving pictures on stone walls to writing letters and posting them has taken its due course but with the technical advances coming into play, every other decade now brings with it a new medium of communication. Laptop, the compact version of a desktop is now considered sizeable as compared to sleek, smart phones and tablets which these days come along with the new 'in thing' – applications or as commonly referred to as apps.    Apps, by default, have become a necessary and indispensable part of every user's routine ranging from waking up to your choice of alarm tone in the morning, calculating total steps walked in a day, shopping online for groceries or spending hours crushing colorful candies. Dependency has overshadowed convenience.    Harmonizing law and technology isn't always a smooth process since new technical advances not only make the old methods obsolete but also outdate the law regulating it. Hence, it wouldn't be wrong to state that legal amendments need to be in order to be consistent with the rapid pace of the technology.     Doctrine of Caveat Emptor    The doctrine of caveat emptor is a legal maxim that clothes the warning 'Buyer Beware.' It has seeped in and permeated every legal and judicial structure acting as a guideline pointing towards the liability of a customer and reasonable use of his rationality before using a particular article or service.    The concept of Caveat Emptor has been in use over the centuries and has undergone its fair share of changes. Traditionally, courts distinguished between the sale of specific goods, capable of physical examination being by the buyer and also; sale of unascertained goods where the buyer was compelled to rely on the seller's description. While the former enquired into the purchaser's onus strictly, the latter was the exempted from it. This categorization was acceptable in an age where the commodities were relatively simple. However, over the past few decades the economic relationship of buying and selling has been reformed, and presently the strict liability of the buyers has been done away with by restricting it with the specified exceptions:   o    Implied conditions imposed on quality or fitness o    Sale of goods by description o    Usage of trade o    Consent by fraud o    Sale under a patent or trade name o    Sale by sample o    Misrepresentation   Mobile Apps and the concept of Caveat Emptor    "Do you trust this app?"   "Please permit the app to access audio and camera."   "Please enable the location services."   Homo sapiens may have invented everything required for their survival, but even they don't possess the ability to add a 25th hour in a day. There is always a shortage of time for anyone and everyone and amidst this shortage spending a few minutes to read conditions before permitting an app to use all our confidential information seems like a Herculean task.    Apps like Facebook and Snapchat are primarily based on making the location of its user's public clothed with fancy terms like status updates and check in. Moreover, the world is now inhabited by animals called pokémons; some fly in the air while some breathe fire owing to the latest vogue Pokémon go which went on to become the most popularly downloaded app in the world within a few days of its launch but at what price? It not only tracks user's location but also their email and browsing history. A person can now order anything from clothes, books, kitchen appliances to furnishings without so much as raising their head from their smart phone. Health apps are readily available not only for lifestyle tips but also to diagnose symptoms, measure heart rate, blood glucose level, sleeping pattern, etc.    With easy access to technology and rapid increase in innovations, creating apps and making them available to the masses is a bed of roses but roses are invariably accompanied by thorns. Mobile apps can be considered an extension of offered goods and services. Higher the use of apps, higher is the chance of negligence.   It's not uncommon these days to find headlines reporting delivery of faulty products bought online, thefts based on knowledge derived from check ins, wrong diagnosis and disclosing confidential information of an app user to other marketing companies which raise the question of whom would the ultimate responsibility fall upon? Are app users covered within the ambit of the doctrine of caveat emptor?   The important aspects in determining this answer lie in analyzing:   o    The purpose of the app o    The guidelines provided in the app o    The permissions granted by the user o    The nexus between cause and effect leading to negligence.   App development today is relatively easy, but a robust App platform that can keep pace with future developments, comply with international guidelines (including App Store guidelines) is imperative. App developers are also required to submit documents stating the purpose of the app, version information, and details regarding its interface along with obtaining certified permissions.    However, these regulations are not exhaustive and are completely controlled by private smart phone companies. Therefore, despite these regulations, the Apple's App Store alone boasts close to over 2 million Apps designed for the iPhone and iPad whereas Google's Google Play has nearly more than 2.2 million Apps making the app market a billion dollar industry.    In a recent case, Maynard v. McGee & Snapchat Inc. it was alleged that when a distracted driver caused an accident in order take his selfies with the speed filter, Snapchat Inc. was accountable as it encouraged its users to drive at excessive speeds. An analysis of this case suggests that Snapchat could devolve its responsibility by merely affixing a warning with the speed filter.   App creators of 'Pokémon Go' have repeatedly been blamed for the rising death toll and for placing Pokémons in dangerous milieus, and as a consequence, a warning pops up the minute a user opens the app asking them to be careful of their surroundings thereby shifting the responsibility to the players. They have publically defended themselves by comparing their application to automobiles which once transferred would abolish them of any liability in the instance of negligent driving. So, the next time a person falls off the cliff while catching a magical creature, it would be his fault.    Third party responsibility   Ordered something online and then regretted it?    Digital Platforms like Amazon and ShopStyle pride themselves in being a handy tool that enables a user to shop varied products on the go from any place at any time by putting in the effort so much as moving a few fingers. However, what one fails to realize is that in the case of a defect these apps are indifferent and the blame game swings between the third party retailers listed on the app and buyers.    These platforms ensure their safety from any liability. The terms and conditions for Apps set out precise information by providing all information, content, materials, and products (collectively the Data) available on the Apps. They further clarify that such Data is 'classified' on the basis of "as is" and "as available basis" and any material or service accessible to the user by accessing the app would expressly be at the sole risk and consequence of the user. These apps, therefore, advantage from a blanket protection while the third parties become liable.   The provision of third party responsibility has opened doors to numerous law suits regarding the extent of accountability of the retailers advertising and selling their merchandise with the help of these apps as the retailers contend that apps fail to specify the details of their products accurately consequently harming the consumers.    Guidelines and regulations   The provisions of the Universal Declaration of Human Rights have influenced various national Constitutions which have been amended to recognize the responsibility of the State in protecting and safeguarding the interests of the consumers. Different countries have established their regulatory departments like the FDA that overlook the quality and standards of the products made available to the masses.   These departments lay down the guidelines that govern health apps which diagnose symptoms of its users and provide consequent medical consultation. However everyday apps offering services like online shopping, gaming and transportation remain widely unregulated and unconfined. Hence, creators of health and fitness apps, have higher responsibility owing to the sensitive matters they deal with as compared to other apps.    Conclusion                   The modern free society is built on principles of liberty, and personal liability and every individual prefer to be accountable only for his or her action. Humankind has over the centuries struggled to gain independence but the flip side of freedom is responsibility, and such accountability in no circumstance can be eluded.    The evolution of phones from basic devices used for making and receiving calls to being 'smart' has been considerably accredited to apps which now are considered nothing short of a man's extended personality. Gone are the days when playing was used in the context of outdoor sport, people of every age today are engaged in collecting cards to clash, crushing candies or surfing the subway with the help of user interface. These apps are on their way replace local markets, dictionaries, and even the weatherman!    Since buyers and sellers are now more closely related than ever, people need to be aware of the good and services they access, and hence the doctrine of 'caveat emptor' retains significant importance.  However, a shift has been observed in the judicial thought from caveat emptor to caveat venditor which literally translates to "let the seller beware". It directs responsibility towards the sellers keeping in sync with this age of consumer protection, but it can only be justified when there is a disproportion of power between the contracting parties as it completely contradicts the principle of laissez faire.   Unfortunately, modern legislation continues to remain highly ambiguous regarding the applicability of both caveat emptor and caveat venditor in the case of apps despite them transforming us into digital denizens. As a consequence, there is no straight jacket formula or a particular platform except filing suits in a court of law for settling disputes regarding transactions between parties over these apps.   It's high time that law makers caught up with the creative heads of the world as I sit and ponder how Romeo and Juliet's fate would have turned out if they could what's app each other while dismissing another reminder on my phone to drink water.    This article was principally authored by Aashima Sawhney with help of others in STA's Technology, Media and Entertainment Team       ]]>
    Mon, 31 Jul 2017 20:00:00 GMT
    <![CDATA[Who’s Winning and Who’s Whining]]> Who's Winning and Who's Whining

    Under Saudi Arabia's New Enforcement Law

    Preface

    "The Prophet Muhammad (resorted to) arbitration to resolve disputes and (recommended) others to use it. His (involvement in) arbitration between the clans of the Quraysh tribe during the renovation of the Ka'ba is significant in the history of Islam and the development of Shari'ah. A dispute broke out between the tribes on who would reinsert the Black Stone in the Ka'ba after its renovation. No clan head wanted to relinquish this great honor of any other clan. Through his successful arbitration of that dispute, the Prophet prevented 'potential' war among the Quraysh Tribes."[i]

    Speaking specifically of Arbitration and the Kingdom of Saudi Arabia, the history and origin are both intriguing and challenging. In Saudi Arabia vs. Arabian American Oil Company,[ii] the arbitral tribunal considered and accepted governing laws of Saudi Arabia to apply to certain concession contract but was reluctant to apply Shari'ah principles in totality. The said reluctance resulted in tribunal using general customs applicable to the oil industry. In sum, the award was passed against the Kingdom and in favor of Arabian American Oil Company. Although the verdict was disappointing, the Saudi Government accepted the decision but renegotiated the concession arrangement with Arabian American Oil Company until 1980's and finally in November 1988 incorporated Saudi Aramco according to a Royal Decree, which is today one of the world's largest oil entity.

    Following the adverse verdict, Saudi Arabia enacted Resolution Number 58 which aimed at averting local government ministerial departments from engaging in arbitration.[iii] Saudi Arabia's ratification of the Riyadh Convention in 1985 resulted in the change of these sentiments.[iv]

    The Previous Regime

    Earlier, the New York Convention was the principal piece of legislation in Saudi Arabia for recognizing and enforcing foreign (international) arbitral awards; this gave rise to a lack of domestic legislation in Saudi Arabia that was in conformity with the local laws. The inadequacy of laws fuelled the need for change in recent years. Therefore, Royal Decree Number M/34 of 2012 (dated 16 April 2012 and which came into force on 9 July 2012) (the 2012 Regulations) repealed the previous Saudi Arbitration Law of 1983 (Royal Decree Number M-46 and dated 12 Rajab 1403H, corresponding to 25 April 1983) (the Old Regulations). Some of the salient features of 2012 Regulations include:

           i.          Decree M/34 introduced sweeping changes thereby removing the obstacle of local courts approving the arbitration before the actual commencement of the arbitration. This change, in turn, empowered the arbitral tribunals in Saudi Arabia to decide on its 'own' jurisdiction as provided for in the UNICITRAL Model Law.

          ii.          The 2012 Regulations for the first time, also paved the way and considered the principle of severability of arbitration clause consistent with the UNICITRAL Model Law.

         iii.          The laws before 2012 Regulations imposed a mandatory obligation requiring arbitrators to be Muslim males. This requirement witnessed a revision under 2012 Regulations and arbitrators were now required to have knowledge, experience, and expertise thereby removing any reference to gender or nationality.

        iv.          The 2012 Regulations permitted parties to agree to international arbitration before international arbitration bodies such as ICC or the International Chamber of Commerce and the London Court of International Arbitration (the LCIA), however, the essential condition was that the rules of such international arbitration bodies should not contravene Shari'a principles.

          v.          Likewise, the above Decree permitted parties to consider and agree on arbitration venues in Saudi Arabia or any other location that the arbitration tribunal may deem fit.

    An Attempt to Hold Up International Standards

    However, the arbitration regime of Saudi Arabia once again fell short of international expectations due to its entry to the New York Convention in 1994.[v] Hence, a new enforcement law came into force in February 2013 by issuing the Royal Decree Number M/53[vi]  (the New Enforcement Law) with the intention to pursue and modify the local arbitration rules. The primary objective of the New Enforcement Law is to substitute the existing 1989 Rules of Civil Procedure before the Board of Grievances by enforcing provisions that may affect all aspects of enforcing domestic and foreign arbitral awards.

    The New Enforcement Law also provided that arbitral awards that were in violation of Sharia principles or public policy were not enforceable in the kingdom. Further, the commitment to diminish the existing arbitrator's authority exhibited by Saudi court unveils that the country's arbitration regulations are moving in a favorable direction.

    Panorama of New Enforcement Law

    Article 1 of the New Enforcement Law has provided that the Enforcement Judge (the Enforcement Judge) would be 'the Chairman and Judges of the Enforcement Circuit, the Enforcement Circuit Judge, or the Judge of the Single Court'. Hence, the Enforcement Judge has a wide ambit of authority to enforce and monitor the judgments and awards in the Kingdom, after taking the exceptions into consideration. However, Article 2 stipulates that the Enforcement Judge is bound to follow the principles of Sharia law unless the law has explicitly mentioned otherwise. Before the New Enforcement Law, parties were mandated to bring the proceedings before the Board of Grievances for enforcement of foreign and domestic awards.

    The Enforcement Judge is also authorized to take the necessary steps and obtain assistance from the concerned authorities if and when a party fails to confer with the enforcement of the award under Article 7 of the New Enforcement Law. Further, Article 9 has stated that the Enforcement Judge would compulsorily enforce the award after the presentation of an executive deed. Further, the principle of reciprocity would also be applicable while enforcing a foreign arbitral award as stated in Article 11. The provision further states that the party who is seeking to enforce an arbitration award in the kingdom should keep the following points in mind while raising his contention to ensure the enforcement of the same:

           i.          The jurisdiction of the local courts regarding the dispute;

          ii.          arbitration proceedings are in compliance with the due process;

         iii.          The award is final as per the law of seat of arbitration;

        iv.          the award does not refute or contradict a judgment or order of a judicial authority with competent jurisdiction in the kingdom, and

          v.          the award is in conformance with the public policy of Saudi Arabia. 

    An Enforcement Judge will enforce an arbitration award in Saudi Arabia only if the same does not conflict with the any of the points mentioned above.

    Paradigm of the Enforcement Law

    A few years ago, a UAE subsidiary of a Greek telecommunications company obtained an ICC arbitral award totaling US Dollars eighteen million and five hundred thousand (USD 18,500,000) from a London-seated tribunal constituting of three arbitrators. The claimant succeeded in its claims against a national data communications service provider and also successfully defended its counterclaims totaling US Dollars three hundred and fifty million (USD 350,000,000). Subsequently, the Claimant sought recognition and enforcement of the award in the Saudi courts. However, the execution of the arbitration award was dicey due to the strict application of domestic laws as per the previous regime.

    However, Saudi Arabia passed the 2012 Regulations and the Enforcement Law during the pendency of the matter. The Enforcement Law affected in the case in such a manner that the claimants were required to commence proceedings before the Enforcement Courts, rather than through the Board of Grievances which had jurisdiction earlier. This amendment in the law may benefit the party in whose favor the award is granted since the decision of the Enforcement Judge is final, and an appeal does not lie thereunder. Hence, the Claimant in the above case could not appeal against the award of the Enforcement Judge. This judgment depicts momentous departure from the existing law to the New Enforcement Law and the creation of an undeniable nexus between the latter and international arbitration standards.

    All's Well That Ends Well!

    The New Enforcement Law is a significant step in a complementary direction that may elevate the use of arbitration in Saudi Arabia. However, the practical advantages of the new regime are yet to be unleashed; as only time can tell about its effectivity and reliability.


    [i] Arbitration in the Kingdom of Saudi Arabia [article]; Arbitration International, Vol. 30, Issue 2 (2014), The Journal of London Court of International Arbitration pp. 388 Al-Ammari, Saud; Martin, Timothy 30

    [ii] Saudi Arabia v. Arab Am. Oil Co. (ARAMCO), 27 ILR 117(1963); supra; note i

    [iii] supra; note i

    [iv] Saudi Arabia ratified the Riyadh Arab Agreement for Judicial Cooperation from its inception in 6 April 1983; supra; note i

    [v] UN Convention on Recognition and Enforcement of Foreign Arbitral Award dated 10 June 1958 (and came in force on 7 June 1959)

    [vi] Royal Decree Number M/53 dated 13 Sha'ban 1433H, equivalent to 3 July 2012. The Saudi official gazette published the Enforcement Law under Issue Number 4425, Year 90, 13 Shawal 1433H, corresponding to 31 August 2012. In line with provisions contained in Article 98 of this Law, the law came into force six months after being published, which was set for 16 Rabi II 1434H corresponding to 27 February 2013. The Implementing Regulation (2) on the Enforcement Law was officially issued on 17 Rabi II 1434H corresponding to 28 February 2013G; supra; note i

     

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    Sat, 29 Jul 2017 13:00:00 GMT
    <![CDATA[Court Side Justice]]> Court-Side Justice

    'You don't go on bended-knee to petition the official culture for your rights. You have to take them.'

    -Terrance McKenna

    Countries are not sustained, and their peoples are not stable where a superior judicial system is not in place. Achieving a system of justice is not possible unless there is a good judicial system that protects the weak and beats the hand of the oppressor. A political system will remain unstable without the existence of justice; as such the right to litigation should be a guaranteed right for all. One of the most important elements and bases for achieving justice is through doing justice to justice itself. This simply means maintaining a fast speed in which cases are brought before the courts until the claimant's rights are assured. Otherwise, delay in rights and litigating disputes will result in justice losing a fundamental part of its meaning and true essence.

    There is a saying which says that slow justice is an injustice, and here the legislator did its job by providing a means to meet a fixed debt which is in writing through a writ of performance and this is considered the exception to the general rule. This is because the general rule is to resort to the competent judge and proceed with the relevant procedures of the appropriate court. However, the legislator would take a different route in this matter making the process easier and smoother for the judge and the concerned parties in achieving said justice. Bearing in mind that the law has placed specific conditions that the dispute must meet for the litigants to be able to use this exceptional route. The judge of the court is afforded the discretion to decide when to award a writ of performance. How this takes place is outlined below.

    One Step at a Time

    First: A writ of performance is an exception to the general rule of raising a claim:

    As noted earlier, the write of performance orders are an exception to the general rule as the original rule requires a litigant to resort to the substantive judge of the matter. As such they are referred to as expedited or urgent cases for the speed in which they are resolved as opposed to the ordinary judicial procedures. The law has placed specific conditions that allow a litigant to use the route of a writ of performance. Of which, the creditor must have their right evidenced in writing, showing a fixed monetary amount, and the amount is due for payment (Article 143 of the Civil Procedure Code). Further, orders for writs of performance do not encompass and accept fragmentation. It is not the role of a judge to allow some part of a writ of performance claim and reject another. If it is apparent that some claims are not subject to the terms and conditions of issuing a write of performance, then the court must refuse to issue it and refer the matter to the competent court.

    Second, the order of performance is subject to a general order:

    A writ of performance is subject to the general order, meaning that upon meeting the conditions for issuing the writ, the litigants may not resort to a court other than that for such urgent cases. For example, upon raising it before a substantive court, the court may decide on its behalf not to accept the lawsuit. The claim will then be raised for review under the discretion of a competent judge of the court of first instance. Also, the rule of value to jurisdiction found in the Code of Civil Procedure does not apply to writs of performance. Litigants can raise a claim for a performance order regardless of the amount requested.

    Third: The creditor must first charge the debtor with the obligation to fulfill the debt:

    The creditor must first charge the debtor to meet his obligation within a minimum of five days (Article 144 of the Code of Civil Procedure). The debtor is first assigned to fulfill the debt using a notification of payment. If the debtor fails to pay after a minimum of five days, then the creditor may claim for a writ of performance from the judge of a court that lies within the district of the debtor. The claim will be issued through a petition submitted by the creditor which the bond of debt shall be attached to, and showing proof of the obligation to pay will. The creditor shall not ask for more than the amount mentioned in the petition which should not be more than the amount assigned to pay in obligation to fulfill the debt; both values must correlate.

    Fourth: The writ of performance must be issued within three days at most from the date of submission of the petition

    The writ of performance shall be published within three days of the time of filing of the petition. After all, this is the purpose of this legislation; to have the indebted amount returned in a quick and efficient timing. To return the obligated amount back to the creditor within three days of the submission of the claim is a testament to serving justice to justice.

    Fifth: Referring the claim to a competent court where the judge refuses to issue the writ of performance

    Under Article 145 of the Code of Civil Procedure, if a judge refrains from issuing a writ of performance for any reason, he shall be in charge of determining a hearing where the case will be heard before a competent court. The court shall then order the debtor to appear before it at the appointed session. Basing this on the fact that the measures before the substantive courts follow the usual procedures and none of the litigants may challenge the decision of the assignment.

    Sixth: The creditor must announce the performance order to the debtor:

    Article 146 of the Code of Civil Procedure stipulates that should the writ of performance be issued then the creditor shall announce the contents of the writ of performance to the debtor's person, in the debtors original country, or in his work place. In doing so, they must provide the petition and the order issued against the debtor to perform the debt. If this is not announced within six months of the issuance of the order, the petition and the writ of performance issued will be considered as if they were not. Thus, they would be void of legal effect.

    Seventh: Complaints and Appeals on a writ of performance:

    The debtor may raise a complaint as to the writ of performance within fifteen days from the date of its declaration. Upon doing so, the complaint must be causative for it to be heard before the competent court where the usual procedure shall take place for bringing the case before it. A creditor may also appeal in agreement with the rules and procedures of appealing judgments. Further, the start date of an appeal will begin from the date the complaint period has elapsed. The right to complain is waived if it is challenged directly by an appeal (Article 147 of the Civil Remuneration Act).

    Eighth: Method of executing the writ of performance:

    The performance order shall be subject to the usual procedures and the execution of the judgment provisions. With this follows the creditor's entitlement to raise a claim for execution after the period of complaint and appeal have elapsed regardless of whether it is an appeal to the Court of Appeal.

    An Overview

    Finally, we must ensure to discuss the rule included in the judgment of the Dubai Court of Cassation on 26 February 2012 in Civil Appeal No. 253 of 2011 issued in 2012. The decision highlights the right to establishing a claim for a performance order, summarizing all matters relating to the performance order and the conditions required to allow the issuance of one. The following is stated:

    As per Articles 42, 143, and 145 of the Civil Code of Civil Procedure, a plaintiff who claims a right before his adversary can appeal to the relevant court through a statement of claim. An exception to this norm would be resorting to the issuance of a writ of performance. This can be done if the creditor is claiming for a debt that is proven in writing through signature and provided that it is consistent with several other conditions. Namely that the debt's performance is not dependent on the fulfillment of any conditions and that the amount indebted is fixed. Only if all of these conditions are fulfilled can a claimant resort to a writ of performance. It is not lawful to resort to a writ of performance claim even if these circumstances are met for only a partial amount of the debt of the claimed amount. It is a method that can be resorted to only in an exception, and its boundaries should not be broadened to allow partiality. Similarly to how a judge cannot issue an order that only allows part of a claim and disallows another part only to have it referred to a competent court for adjudication. Insofar as the above-mentioned, Article 145 provides that if the judge considers that the claimant has not responded to all his requests, then it is necessary for the judge to reject the issuance of a writ of performance. This does not alter the existence of a link between the written fixed debt and the claim of another right attached to it, consequent to it, or connected to unless it is set in writing. Further, a performance order for a fixed amount can be pursued by a creditor without resorting to usual procedures for raising a claim. The legislature has also necessitated resorting to this exceptional route if the creditor is claiming for something transferred that is of a fixed type and amount, or he is indebted as per a commercial paper if his claim is addressed to the maker, drawer, and the guarantor.

    Conclusion

    Swift justice is what any legal system requires to ensure its claimants are met with the appropriate protection. The issuance of a writ of performance is one example of how a claim may be expedited and resolved within a few days. STA's team of criminal lawyers in UAE are well equipped and versed to handle matters relating to debts and collection.

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    Sat, 29 Jul 2017 00:00:00 GMT
    <![CDATA[Company Formation in Abu Dhabi Global Markets]]> Company Formation in Abu Dhabi Global Market

    The impact of globalization and elimination of trade barriers is considered to be an economic merit that consolidated the domestic markets of the world under one roof. However, there also exists an opposing view to this concept. Some financial pundits have argued that this global phenomenon may have paved the path for instability and competition hitches in domestic markets. Further, they also contend that the entry of international players into the domestic markets often leads to a misbalance in the local sectors and industries.

    Nevertheless, minimal trade restrictions and government intervention have increasingly become synonymous with the success of an entity. This requirement equally applies to modern financial centres. The Abu Dhabi Global Market (the ADGM) is currently the most prominent and subsisting example in this regard. The financial free zone became predominant in the region due to scarce trade barriers and absence of restrictions imposed on mainland companies in the United Arab Emirates. Further, the adaptation of international corporate governance techniques along with global financial norms and standards have only acted as a catalyst to this process.

    Setting up a Legal Entity in ADGM

    The ADGM offers investors with superior location and a dynamic business environment to attract investors from the global financial community. Multinational corporations approach the financial free zone with the intention of establishing themselves in the region; whereas, new investors view this as an opportunity to establish themselves at par with the former. Further, the common-law legislations and legal structure of the free zone acted a magnet to the investors who were looking to either, expand or establish their business in the region. The ADGM also covers in-house courts and dispute resolution bodies to avoid the implication of Shariah Law onto civil and commercial disputes that arise within the free zone. The free zone also offers a variety of real estate solutions to meet the high-end and dynamic needs of different types of entities established in the free zone. Customizable office spaces and retail outlets are only a new start to a long list of attractions in the ADGM.

    The robust and extensive set of ADGM company laws that largely mirror the UK Companies Act of 2006 but carefully cover requirements of the region and local regulations. The interesting feature of 'restricted scope entity' providing for minimal disclosure requirements will open doors to holding company structures where investors prefer safeguarding sensitive information and trade secrets and same time prefer a regional holding company.

    ADGM has made substantial development in collaborating with the bigwigs both - domestically as well as overseas. Collaboration with prominent authorities including the Economic Department in Abu Dhabi, the UAE's Central Bank, Insurance Authority, the Securities and Commodities Authority, Abu Dhabi Municipality, the Financial Services Commission in Jersey has set a benchmark.

    ADGM has evolved to be the pivotal point for investors who are looking to undertake financial activities in Abu Dhabi. The dedicated Financial Services Regulatory Authority (the FSRA) regulates and overlooks the licensing of all the entities that are engaged in the financial sector and are looking to establishing their presence in the free zone. The FSRA has endeavored to provide the investors with an ineffable experience by adopting international standards employed in global financial centers in Hong Kong, London, and Singapore. Ergo, the risk-based financial sector would be governed by the FSRA while conducting various activities such as banking, hedge funds, wealth and asset management and other financial services.

    Further, investors in ADGM have the option of setting up one of the following types of companies to conduct their activities in the free zone:

     

    Type of Entity

    Remarks

    Limited by Shares

    §  {C}At least two directors (minimum one should be a natural person);

    §  {C}At least one secretary.

    Limited by Shares (Limited by Guarantee, Unlimited with Shares, Unlimited without Shares, Restricted Scope, Protected Cell Company & Incorporated Cell Company)

    §  {C}At least two directors;

    §  {C}Secretary is not mandatory.

    Branch of (non-ADGM Company)

    Suitable for establishing presence or representative office.

    Partnerships (General Partnerships, Limited Partnerships & Limited Liability Partnerships)

    *depends on the type of partnership

    Branch of (a non-ADGM General Partnership, a non-ADGM Limited Partnership & Limited Liability Partnership)

    *depends on the partnership model

    Applicants looking forward to setting up a company in the ADGM must submit an application form (online) along with the following documents to expedite the application process:

    {       i.          copy of passport, visa page or immigration entry stamp and Emirates ID of director(s), authorized signatory, secretary and shareholder(s);

    {      ii.          application form for reservation of proposed name of the company;

    {     iii.          the business plan of the proposed company;

    {}    iv.          statement of capital and initial shareholding (for companies limited by share capital);

    {      v.          statement of guarantee (for companies limited by guarantee);

    {    vi.          statement of proposed officers of the entity;

    {   vii.          tradename reservation document;

    {  viii.          a statement with the intended address of the proposed company;

    {    ix.          a copy of proposed articles of association;

    {      x.          a copy of the resolution of Board of Directors;

    {    xi.          a copy of lease agreement for office space;

    {   xii.          confirmation of restricted scope of the company;

    {  xiii.          duly filled and signed data protection form (DP-01)

    { xiv.          duly filled and signed beneficial or ultimate owner form (BO-01); and

    {   xv.          any other document(s) that may be required by the authorities based on the scope of activities that the company proposes to undertake.

    However, companies looking to conduct financial activities in the free zone may have to undergo a strict company formation process since the FSRA would review their application. Further, the relevant authority (FSRA for financial services and ADGM Registration Authority for non-financial and retail services) would issue a license once the application form has been submitted and reviewed by them. Subsequently, the applicant would have to apply for the FAWRI account (e-visa online application system) and an establishment card to apply for the visas of the investors and officers who would be working in the proposed company.

    Company formation in ADGM could be an elaborate process (especially for entities undertaking financial activities) with extensive documentation and compliance procedures. Ergo, investors are advised to take assistance from a law firm that provides bespoke legal advice while setting up a company in the ADGM due to the lengthy regulatory procedures and documentary compliances that have been established by the free zone to conform to international corporate norms.

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    Fri, 28 Jul 2017 17:00:00 GMT
    <![CDATA[Special Purpose Vehicles]]>  

    Special Purpose Companies or Vehicles (the SPCs or SPVs) are temporary companies set up to achieve a precisely structured financial operation. SPCs provide an alternative mode of financing transactions. Put simply they are subsidiary companies of a parent company, whose assets are protected from the actions of the parent company. In short, they limit financial risk to the property of the SPC.    Special Purpose Vehicles have played a significant role in the seamless operation of global financial markets. Commercial objectives of corporates, multinationals and institutional, as well as non-institutional investors, could be realized by raising capital, securitizing the assets, risk sharing, tax benefits, and carrying out planned activities. These practical features of special purpose company absolve corporations from the risk element.   SPCs can choose to operate on separate balance sheets than their parent companies (called 'off-balance sheets'). SPCs provide their shareholder's limited liability. SPVs generally operate on independent balance sheets instead of recording transactions on their parent or holding companies. For this reasons, parties often consider SPVs as off balance sheet vehicles. Firms can use these entities as synthetic lease to possess assets independently and is treated as an expense in revenue statements rather than a liability on company's balance sheet. SPVS are commonly used for following transactions:-   •    Securing Projects: - SPCs can help firms secure projects from financial, commercial or operational failures of entity •    Securitizing loans and receivables. SPVs play a significant role in securitizing loans and other receivables. Governments, for instance, set up SPVs to fund their projects in particular sectors and the SPC entity acts as a catalyst to channelize funds for projects in different areas.  •    Transfer of Assets: SPCs can safeguard firms in the event of bankruptcy or liquidation given that assets once transferred to SPC they become unidentifiable. That said, courts in many countries have ruled that SPC's assets and funds should be linked to the originating firm. Likewise, assets that are difficult or impossible to transfer (for example, power projects or gas plants), parties can transfer such assets as a self-contained package and thereby avoid undergoing a multitude of compliance and permits.  •    Regulatory and Compliance: SPVs can be set up within orphan-like structures thereby preventing regulatory and compliance mandates. •    Financing and Raising Capital: SPCs can be used to finance new projects without increasing costs or altering the shareholding. This aspect makes SPVs an obvious choice to finance aircraft(s), power projects, and infrastructure projects.   The Dubai International Financial Center   In the Dubai International Financial Center (the DIFC), foreign owners are entitled to incorporate SPCs which are used to finance routine transactions. The company which establishes the SPC (the Initiator) is authorized to operate the SPC in the areas of acquisition, granting security interests over assets, financing other SPCs, as well as the parent company, or any other activity approved of in writing at the time of incorporation with the Registrar. These areas of practice are officially known as "exempt activities." Acting outside the scope of exempt activities subject the SPC to a fine of USD 5,000.    The DIFC itself provides an attractive venue for establishing one's SPC due to its separate regulatory framework, including the Dubai Financial Services Authority (DFSA) and Courts. These structures operate on a common law basis, in the English language, providing investors across the globe an easy access point to the Dubai investment market.    SPCs do not have their accounts filed nor audited annually. Also, there is no formal requirement for shareholders to be based physically within the DIFC itself. The Corporate Services Providers (CSP) can act as majority directors and company secretary of the SPC. These CSPs are entitled to receive administration services from third-party management providers and are not required to be appointed directly. However, the majority of directors of the SPC must be employees of the Corporate Service Provider.    It is possible to incorporate SPC as the person(s) (natural or legal) including a shareholder; the CSP; or through any law firm or accounting practice. Incorporation of SPCs in DIFC is carried out per the DIFC Law Number 2 of 2017 (the Companies Law), and the respective Companies Regulation. Formation of SPCs is also possible electronically, by attaching electronic documents submitted within one month of submission. Failure to provide these documents within the one-month time frame subjects the SPC to a fine of USD 2,000.   Incorporation costs are nominal, with the minimum values of shares totaling USD 100. The cost of company formation itself is a mere USD 1,000, with no requirement of obtaining a commercial license. Despite this, SPCs have a limitation in their general scope of action within the meaning of the previously outlined activities. Voluntary winding up of SPCs is possible only in the event a declaration is filed in writing that there are no outstanding liabilities, and (if accepted) the dissolution shall be published on the DIFC online site.   The Abu Dhabi Global Markets   The inflow of investments into the country plays a vital role in the elevation of its economy. Dubai plays an important part in this regard since it houses numerous free zones such as the DIFC that confers with the international corporate governance and financial sector regulation norms. Abu Dhabi, realizing this potential for investments in the financial sector, established the Abu Dhabi Global Markets (the ADGM). Since then, the ADGM has played a vital role in the attracting foreign investors into the country, especially those wishing to incorporate special purpose vehicles.    The ADGM grants investors with a comparatively lenient SPV regime than that of the DIFC since there is no explicit constraint on the number of shareholders. Investors may opt for one of the following legal structures to set up an SPV in the ADGM:   i.    RSC or Restricted Scope Company   The main advantage of an RSC is the curb on the information that should be disclosed to the public (although, investors should note that they may be required to provide all the information regarding the SPV to the registrar). This form of legal entity is used as a family office or a subsidiary of a public company.   ii.    LTD or Company Limited by Shares   Investors who wish to incorporate a holding company or intends to undertake operational activities opt for LTD. These are private limited companies and one of the most common forms of SPVs in the ADGM.  We have noticed a growing trend whereby investors around the globe prefer to establish their SPVs in the ADGM due to their (relatively) flexible regulations. Investors do not have to attest their corporate documents, and there is no minimum share capital for company formation in the ADGM. Although, SPVs in the ADGM may have to provide a registered address in the free zone at the time of company incorporation. But this rule does not necessitate them to have a physical office space. There are numerous options whereby an investor can obtain a registered office address without actually having a physical office space in the free zone (such as choosing a physical space or appointing an agent). ADGM also offers investors with the option of relocating their existing companies from certain other jurisdictions (as long as the firm is authorized to make this transfer by the domestic laws of that jurisdiction). Investors should take the advice of a law firm in Abu Dhabi that provides bespoke legal advice in company formation and is well-conversant with the regimes of the ADGM before initiating the company formation process.   The common law jurisdiction of the ADGM along with their flexible legal regime has attracted an immense number of investors in the past years. Numerous SPVs have been set up in the ADGM for investing in the real estate sector, acquiring and holding intellectual property, asset transfer, risk sharing, raising capital, etc. To know more about setting up an SPV, the documents required, procedural requirements, etc. at the DIFC or the ADGM, contact us!   ]]>
    Sat, 22 Jul 2017 00:00:00 GMT
    <![CDATA[Too Much of FATCA]]> Too Much of FATCA!

    Renowned author and entrepreneur, Mark Twain, once said, 'tax is a fine for doing well; whereas, a fine is a tax for doing wrong.' Now, the question on hand is which one of the two the Foreign Account Tax Compliance Act (the FATCA) would get unseated! Is it a tax or a fine? Let's read further to find out.

    The FATCA promulgated on March 18, 2010. It was introduced in line with the Hiring Incentives to Restore Employment (HIRE) Act, and the then President Barack Obama signed FATCA into law to help the United States Government, through the Internal Revenue Service (IRS), curb tax avoidance by US citizens and entities on assets held in offshore accounts. FATCA is a comprehensive, and complex arrangement of tenets intended to impose tax compliance upon American citizen regarding assets outside the United States and such citizens are required to report such assets to IRS. Importantly, also, foreign financial institutions are also obliged to comply with the reporting requirements under which these financial institutions have to provide information and details to IRS about the accounts held by such US citizens or non-US entities in which US citizens hold significant ownership.

    The Why

    As outlined above, the intention of the US government to enact FATCA was to increase transparency for IRS to counter tax evasion by U.S. persons holding investments in offshore accounts. FATCA is a tool to keep a check on US persons who may be investing and earning income through non-US financial entities. FATCA mandates U.S. 'persons' holding foreign financial assets with an aggregate value exceeding US$ 50,000 (US Dollars fifty thousand) to report essential information about those assets on Form 8938. This Form 8938 will be attached and annexed to the taxpayer's annual tax return.  The disclosure requirement mandates taxpayers to report assets held in taxable years commencing after 18 March 2010.  For a majority of taxpayers, this disclosure will be the year 2011 tax return which they file in the 2012 tax filing year.  Failure by taxpayers to report foreign financial assets on Form 8938 will attract a penalty of $10,000 (and this may be raised up to $50,000 for continued noncompliance after IRS issues notification to the defaulting taxpayer(s)).  In cases where IRS notices any underpayment of tax payable on non-disclosed financial assets held by taxpayer overseas, an additional penalty of 40 percent will trigger.[i]

    Importantly, the term 'U.S. Persons' is a broad category which includes citizens of United States, those residing within the US, holders of US green cards and trusts that are controlled by US Persons. IRS has also set extensive norms, and criteria for banks (domestically as well as overseas) wherein the banking machinery will be required to screen each and all client(s) to determine whether such person(s) falls within the definition of US Person. Foreign entities will get classified as either Foreign Financial Institutions (FFI) or Non-Financial Foreign Entities, and such entities will have to comply with FATCA reporting rules.[ii]

    FATCA mandates compliance by US citizens and entities in the following methods:

           i.          Direct Agreements – agreements between the parties and IRS for compliance purposes; or

          ii.          Inter-Governmental Agreements (IGAs) – agreements between various jurisdictions and the US.

    In the case of the latter, financial institutions in the jurisdictions that have an underlying IGA with the US are mandated to submit the disclosure information to the tax authorities of their respective jurisdictions. The domestic tax authorities would then send the information to the US Treasury to comply with the provisions of their IGA.

    However, it's easier said than done! The demanding role of FATCA compliance primarily revolves around the sanctions that would apply on FFIs that are in breach of compliance with the reporting requirements and disclosures of FATCA. Non-compliant FFIs would have to pay a penalty of 30% of withholding tax on all US-sourced payments.

    Further, taxpayers benefitted from IGA during the period in which their government tries to implement the same with the US government. However, this policy of the IRS got revoked on 29 July 2016 on the basis that the Department of Treasury would implement a new list of jurisdictions that had valid IGAs with the US and subsequently, discard jurisdictions that had not yet implemented the same. Therefore, governments can avoid removal from the list by submitting an explanation as to the reasons why they have not implemented the IGA along with a process detailing how the jurisdiction will enforce the IGA in this regard. Subsequently, the Department of Treasury will not strike out the name of that particular country if convinced that the particular jurisdiction has demonstrated a 'firm resolve' to implement the IGA. Although, notably, the name of the country may, later on, be removed from the list if they fail to adhere to the norms and timeline which was set out in its explanatory submission to the Treasury.[iii]

    Hence, any FFI failing to comply with the above-said provisions of the FATCA will result in FFI paying a withholding tax of 30% of its payments received from a US source. The next cardinal question that arises in this subject is regarding the ambit of the 'US-source payments.' This scope gets further elucidated with the help of the following instance: US-source payments is set to cover all payments to the non-compliant FFI from a US source such as principal amounts that mature from corporate or government bonds, dividend received from US entities and the like. This element is considered to be a bane in the financial industry since US stocks and bonds have a significant part to plan in the globe's financial sector.

    The When, Where and How

    The sanction of imposing a withholding tax amounting to 30% of all US-source payments came into effect on January 1, 2014. To the awe of global economy, gross proceeds that arose from the sale of a US security also came under the scrutiny of this worldwide tax imposition in January 2015. However, the withholding of tax on foreign pass-through payments by FFIs was delayed to 1 January 2017.[iv]

    The implementation of the FATCA has proved to be an effective method to suppress the actions of US person who yearned to evade their tax liability by transferring or using financial institutions located outside the US. However, it has also given rise to various issues regarding the implementation procedures that ought to be followed by the US.

    The primary concern with the implementation of FATCA surrounds the compliance issues of domestic financial institutions in a broad range of matters including data and consumer protection, anti-discrimination statutes and the earlier withholding tax law of the US. Numerous countries had explicitly made their concern regarding FATCA compliance to be in direct conflict with the data protection and privacy laws that are already in place either in their domestic jurisdictions or in the US itself.

    However, this is only the commencement of the large list of issues that pose to oppose the implementation of FATCA. The overall cost of implementing the law is also expected to outrun the anticipated revenue that it is likely to rise.  Further, the rationale behind compelling foreign institutions and governments to gather information regarding US citizens and entities solely to transmit them back to the US Government resulted in reactions from financial pundits, some of whom cited this as a 'decisive' action.  This rationale may also give rise to a predicament whereby foreign institutions and banks may deny US citizens and entities from opening banks accounts at their respective establishments.  Another crucial aspect of this issue is the increase in the number of US citizens who are willing to surrender their citizenship due to the mandatory compliance conferred upon them.[v]

    Further, the model IGA also mandates a mutual transfer of information from the US Government to the governments of other jurisdictions. However, the significant concern with this provision arises because there does not exist a specific US statute or regulation that permits such reciprocity. The rise in scrutiny regarding the legal validity of FATCA has also stirred controversies and questions in countries such as Canada and Israel; however, the high court of the latter jurisdiction confirmed and permitted the compliance requirements of FATCA subsequently.

    Conclusion

    The implementation of FATCA is considered to be advancing expediently, although, numerous nations have contended the global impact of the compliance requirements that arise due to FATCA. Certain jurisdictions such as the United Arab Emirates which have been generic tax havens have also conformed to the requirements of FATCA due to the financial havoc that non-compliance of the statute may create on a domestic level. This conformity is because a 30% withholding tax by the US Government is a fatal step than conforming themselves to the statute.

    The FATCA is expected to close the loopholes and tax evasion schemes used by US citizens and entities with the view of substantially increasing the tax receipts over time since; the implementation is only a one-time process; whereas, the revenue receipts may not stop flowing in!


    [i] https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions

    [ii] David Kuenzi, "What is FATCA? What do American Investors need to know?", Thun Financial Advisors, 2017.

    [iii] Ramon Camacho, Ben Wasmuth, "Intergovernmental agreements must be in force by Jan. 1, 2017", Tax Alert, August 2, 2016.

    [iv] S. Bruce Hiran, "Overview of FATCA," Tax analysts, August 29, 2016.

    [v] "5.5 Million Americans Eye Giving Up U.S. Citizenship, Survey Reveals", Wood., Forbes, October 27, 2014.

     

    ]]>
    Wed, 19 Jul 2017 19:00:00 GMT
    <![CDATA[FIDIC and the ENAA: A Careful Comparison]]> FIDIC AND ENAA COMPARISION

    In the complex and technical world of construction and large manufacturing projects, the contracts and negotiations on the terms of an agreement between the parties are a means to keep the complex relation of parties within the bounds of clear understanding by utilizing a standard form of contract. The industry has seen the development of a various standard form of contract including, FIDIC (Fédération Internationale des Ingénieurs-Conseils), JCT (Joint Contracts Tribunal), ENAA (Engineering Advancement Association of Japan), ICE (Institution of Civil Engineers), etc. This list is not exhaustive but only indicative as there are numerous standard forms. We will discuss the standard form of contract produced by FIDIC and ENAA.  

    The FIDIC standard form of contract is internationally recognized and a utilized form of contract. FIDIC, established in 1913 by three countries namely Belgium, France, and Switzerland presently covers 97 countries as its member and has created forms of contract which are used extensively throughout the world. ENAA is a non-profit organization established in 1978 with the support of the Ministry of International Trade & Industry of Japan. Members of ENAA consist of 217 Companies (as of April 2016). The aims of the above organizations, in general, are to achieve inclusive, dynamic and sustainable development while having a voice for engineering professionals and, among other things, provide integrated assistance. 

    FORMS OF CONTRACTS

    FIDIC

    FIDIC has the best-known standard contracts which are as follows:

    • The Contract for Works of Civil Engineering Construction (Red Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Electrical and (for) Mechanical Works including Erection on Site (Yellow Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Design-Build and Turnkey (Orange Book, 1995).
    • Conditions of Contract for EPC Turnkey Projects (Silver Book, 1999 First Edition).
    • Conditions for Design, Build and Operate contracts (Gold Book, 2007).
    • Conditions of Contract for Plant and Design-Build (Yellow book, 1999 First Edition).
    • Conditions of Contract for i) Design, ii) Build and iii) Operate (the DBO) Projects (DBO Contract, 2008 First Edition).

    Other FIDIC contracts which are less known are the Turquoise Book for Dredging and Reclamation Works (January 2006), and also, the White Book Model Services Agreement (October 2006)

    ENAA

    ENAA also has model forms which are increasingly used by the industry recently in the past 12 years. The forms are as follows:

    §  International Contract for Process Plant Construction (1986 – First Edition, revised in 1992 and 2010)

    §  International Contract for Power Plant Construction (Turnkey Lump-sum Basis) (1996 – Second Edition, revised in 2012)

    §  International Contract for Engineering, Procurement and Supply for Plant Construction (EPS type contract) (2007 Edition, revised in 2013) 

    General Comparisons

    The content structure of the FIDIC forms of contracts often consists of general conditions, forms of tender and contract agreement, guidance for the preparation of the particular conditions, and dispute adjudication agreements. The ENAA model forms' in its latest Process Model Form – 2010 edition consists of a form of contract, general conditions, and guide notes. Wherein Volume 2 includes a sample of an appendix, Volume 4 consist of work procedures and Volume 5 consists of the general conditions and the form of agreement (an alternative form of industrial plant – without process license). The Power Model Form - 2012 edition consists of a form of agreement, and general conditions and Volume 2 provides a sample of appendices to the agreement.

    Although the FIDIC forms seem to be very well drafted "by the engineers for the engineers," is seemingly balanced, have many provisions, and are very extensive, they bring out the fact that legal layman draft such contracts. ENAA is written well with clear, precise, and short wordings. For the purpose of this article, with consideration to its possible limitations, we shall be comparing between FIDIC's Yellow (Conditions of Contract for Plant and Design-Build, 1999 – First Edition) and ENAA's Power Plant Construction Form – 2012.  However, there can be references in general to other forms, when stated otherwise. Where the Yellow book is for Plant and Design Build, ENAA's Power Plant construction model form is a turnkey form for BOT (build-operate-transfer) projects.

    Data Accuracy Obligations

    In the yellow and silver book under Sub-Clause 4.10 Site Data, there seem to be no obligations on an employer regarding an error in data provided by him. However, the responsibility for proper interpretation of information is put on the contractor as below text interprets:

     "The Contractor shall be responsible for (and) interpreting all such data."

    Further, it states:

    "To the extent which was practicable (taking into account the cost and time), the Contractor shall be deemed to have obtained all (relevant; and) necessary information as to (inherent) risks, the contingencies and (all) the other circumstances which may influence or affect the Tender or Works. To the same extent, the Contractor shall be deemed to have inspected and examined the Site, its surroundings, the above data and other available information, and to have been satisfied before submitting the Tender as to all relevant matters,…."

    The above words clearly indicate that the responsibility is put on the contractor as the contractor is responsible for obtaining necessary information. Which includes but is not limited to the form and nature of the site, including the hydrological and climatic conditions, subsurface conditions, and the extent and nature of the work and goods that are necessary for executing and completing the works for remedying of any defects. Though the provision states that when "taking account of cost and time" it becomes highly difficult to determine such factors of time and "practicability." Thereby rendering the provisions uncertain without laying down a clear responsibility on the employer for any information provided. Thus, the above clause and in fact the entire yellow book does not foresee any obligation on an employer for inaccurate information and even fails to place responsibility on an employer for correct information.

    Whereas the ENAA provisions under General Conditions 10.1 states that:

    "The Owner(s) shall ensure (at all times) the correctness and exactitude of (each and;) all information and or data to be (provided; or) supplied by the Owner(s) as described in Appendix 9-3 (Scope of Works and Supply by the Owner(s)) except when otherwise expressly stated in the Contract,"

    As such it is clear that the ENAA form makes it the responsibility of an employer/owner to provide correct data before and during the contract.

    Accordingly, the contractor bears a heavy burden of not only accessing accurate data provided by the employer but also bears the responsibility for any physical condition[1]{C}{C} Under the definition of unforeseeable{C}{C}[2]When this occurs, foreseeability will depend again on examination by the contractor.

    Employer's Requirements

    As per Sub-Clause 1.9, an experienced contractor should give notice to the Engineer who will be entitled to the terms of Sub-Clause 20.1 [Contractor's Claims] when the contractor fails to discover errors in an employer's requirements. These errors would get overlooked while exercising due care and scrutiny of the Employer's Requirements under Sub-Clause 5.1 [General Design Obligations]. 

    Further, "the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) whether and (if so) to what extent the error could not reasonably have been so discovered."  

    The yellow book or other such forms having similar provisions place a heavy burden on the contractor to review the employer's requirements at the tender stage. Further, as per every variation[3]Bearing in mind that from time to time to examine the employer's requirements before providing a tender and examinations without emphasizing on the obligation of an employer for such errors or on the engineer while evaluating the requirements issued by the employer.  It is pertinent to note that providing the employer's need is a factor in the control of employer which is published as per his ideas and concept of the project along with all technical and quality consideration which must also be a proper valuation of the contract price. Therefore, it is the employer who must retain responsibility for the definition and description of the works. Failing such demarcation and allocation of liability creates doubts as to the practical implementation of such provisions. 

    The above provision of Sub-Clause 1.9 further seems contrary to clause 5.4 which states as:

    "5.4 Technical Standards and the Regulations: The design, the Contractor's (each and all) Documents, the execution and the completed Works shall (in totality) comply with the Country's technical standards, the building, construction and (also;) environmental Laws, Laws applicable to the product being produced from the Works, and other standards specified in the Employer's Requirements, applicable to the Works, or defined by the applicable Laws."

    The above states that the design and contractor's documents must be in accordance with employer's requirement. However, the responsibility of errors in employer's requirement is not enforceable or even actionable against the employer under this form of contract. Further, only if it is determined to be undiscoverable by the engineer the contractor will be entitled to cost and extension of time.

    The ENAA model form under General Conditions Sub-Clause 27.3 - Defect Liability states:

    "The Contractor's obligations under this GC 27 shall not apply to ..........................(3) any designs, specifications or other data designed, supplied or specified by or on behalf of the Owner, or any matters for which the Contractor has disclaimed responsibility hereunder ."

    The above clause excludes the liability of the contractor on design discrepancies, errors or omissions if such erroneous specification, drawing or such technical documents are prepared due to inaccurate information provided by or on behalf of the employer. The ENAA form also provides that the contractor shall make reasonable site examination and other data, however, puts the obligation on the employer for inaccuracy. This clause in is accordance with the principle of the risk of liability being placed on the party who can control such risk.

    Part II of this two series article will discuss Design obligations, force majeure, and other relevant provisions. 

    [1] Sub-Clause 4.12 provides. For example, "physical conditions" means natural physical conditions and those that are man-made. Further, other pollutants and physical obstructions which the Contractor may encounter at the Site while executing the Works. These include sub-surface and hydrological conditions but exclude weather.

    [2] in sub-clause 1.1.6.8 climatic conditions are not included. "Unforeseeable" is defined as unreasonably foreseeable by an experienced Contractor on the date of submission of the Tender.

    [3], 1.1.6.9 "Variation" means changes to the Employer's Requirements or the Works, which are instructed or approved as a Variation under Clause 13 [Variations and Adjustments].

     

     

    ]]>
    Fri, 14 Jul 2017 18:00:00 GMT
    <![CDATA[Palpable Payments]]> Palpable Payments

    'Oh, no. It costs a lot more than your (own) life. To murder innocent people?'

    -Suzanne Collins

    This article was authored by Reem Ali, Abdel Ghany and George SK

    Although globalization is advancing at the seams of the 21st century, it remains unclear as to when will the legal systems across the world harmonize. The differing principles, customs, and their applications are ones that scholars attempt to understand by interlacing them. But not all policies and sources can be interpreted similarly. Some systems, such as Shariah law, have legal mechanisms that diminish both consequences and responsibility if seen through a secular lens. So, would it be daring to say that man has evaded a death penalty and received a profoundly minimized consequence of a crime such as murder, after raping and killing his daughter by paying her mother SR 300,000 (USD 79,990)?

    It may quite be surprising to some that the Islamic legal framework allows diya which some refer to as blood money. The payment of diya allows an offender to compensate a victim's heirs or family for the violent and heinous crime they had committed. It also provides the offender relief from retaliation. Some legal scholars have compared diya to 'clemency' a form of pardoning that secular legal systems implement and the international law recognizes. However, for the sake of technicality and clarity, we must distinguish between what is recognized by international law as a pardoning mechanism and the reality of what Shariah law permits.

    Blood Flow - Cash Flow

    There are three differing categories of crimes that can be committed under Islamic Jurisprudence. The one to be discussed in our article is qisas. It broadly covers criminal acts such as intentional killings-murders, accidental or unintentional killings, and non-fatal bodily injuries. Shariah law punishes those who commit qisas through the death penalty or the payment of diya. In the United Arab Emirates, Federal Law No.3 of 1987 On the Promulgation of the Penal Code separates 'intentional killing' and 'unintentional killing.[i] Article 28 classifies 'intentional killing' as felonies punished by qisas of which the punishments include the death penalty, life imprisonment, or temporary imprisonment.[ii] In such a case diya can only be awarded if the family or heirs agree to grant it. However, Article 29 describes 'unintentional killing' as misdemeanors where diya is a punishment that can be awarded by the Court as per Article 29(3) (while the death penalty is a viable punishment).[iii] Other misdemeanor sentences include a fine exceeding 1,000 UAE Dirhams or temporary imprisonment. Here the law specifically mandates the application of the Shariah law.

    In an application of law discussed above, the Dubai Court of Appeal has sentenced the doctor, cook, and restaurant supervisor that caused the unintentional death of Nathan and Chelsea D'Souza by food poisoning to jointly pay UAE Dirhams 4000,000 as a diya payment. Also, each offender was fined to pay UAE Dirhams 20,000. As stated above, this offense was considered to be a misdemeanor of which the qisas punishment of a death penalty is not an option as per Article 29 of Federal Law Number 3 of 1987.

    As the decision calling for a contribution of diya payment is in the hands of the victim's family and heirs, one could perceive it as a non-judicial grant. However, as will be discussed later, this raises to question whether the practice of giving diya payments contravenes international human rights law.

    The thirteen jurisdictions that currently practice diya are Saudi Arabia, Bahrain, UAE, Kuwait, Libya, Jordan, Yemen, Iran, Sudan, Nigeria, Somalia, Afghanistan, Jordan, and Pakistan. With such practice comes the requirement of understanding not only the traditional fabric within which the Shariah law operates; but also the traditions of each country and their colonial influences. Following such, although the victim's families or heirs have the right to choose whether diya payment will be granted some governments also encourage it. The offender may also still face a prison sentence even in matters where the offender has settled diya payments.

    Pakistani application of the Shariah principle can be seen in PLD 2015 Supreme Court 77 (Criminal Appeal Number 126 of 2012) Zahid Rehman Vs State (Criminal Petition Number 568 of 2011):[iv]

    Referring to Section 302 (1), Section 304, and Section 306, to 308 of Pakistan Penal Code, the Courts held that "this intentional murder was not liable to qisas. Section 299 (K) of Pakistan Penal Code defines "qisas" as 'punishment by causing similar hurt in:-

    • the same part of the (victim's) body of the convict as he had caused to the victim or;
    •  by causing his death if he had committed intentional murder, in the exercise of the right of the victim or a wali (family or heir of the victim).

    The word qisas meant "return of evil for, evil" and it also meant "retaliation." The court further held that punishment of "qisas" left no room for 'tazir' punishment (a lesser category of a crime worthy of punishment under Shariah law) to be included and concluded that if the offender is not liable to tazir, then he would only be liable to diya. The courts also relied on Muhammad Akram vs the State (2003 SCMR 855)[v] and held that (if tazir were to be considered in deciding on qisas) such interpretation would result in granting a license to parents or guardians to kill innocent persons within their families.

    Each diya implementing state decides the amount of diya payment differently. In Saudi Arabia and Pakistan, the diya amount is determined by the Shariah Judge. While in the United Arab Emirates the government negotiates with the family or heirs on behalf of the offender. In Iran, the amount of diya gets negotiated between the family or heirs and the offender. What may surprise more, is that it is permissible for the families or heirs to decline the payment of diya in its entirety and instead grant a pardon (known as afw) as an act of compassionate religious charity allowing the offender to evade any and all punishment or only a lesser sentence. The scope of afw is, however, one separate from diya.So, if we take what has been outlined above as a basic understanding of diya, it is evident that diya does not fit neatly into the boxes of clemency as understood by secular law systems. The United States of America defines clemency as the conversion of a death sentence into a lesser order of imprisonment. However international law would find clemency synonymous to commutation. Commutation is the substitution of a court-imposed punishment to a minor correction. This rule could apply to any prison sentence and would not be limited to qisas. Further, unlike diya, clemency would be a power possessed by an executive and as such gets witnessed as a power related to the principle of sovereignty. Such an executive may be the head of state, a government minister, or a pardons board.

    Over-Empowered

    The main difference mentioned above is the crux of the inadequacy of comparison. The power held by a private citizen to decide whether an offender should receive a form of pardon such as diya is one that opposes fundamental principles of secular legal systems. As such, diya cannot get classified as a pure form of clemency. Not only does the power to grant clemency come from the executive but some Shariah implementing countries also retain the option to grant clemency and pardon in murder compensation regardless of whether diya gets refused or granted. The application of diya is also more prevalent than the claim for clemency. This aspect then boils down to where the power to award lies. As private citizens can decide to grant diya more readily than the political and legal process, an executive must adhere to reach a decision of granting clemency.

    However, it is understandable to note the similarities that allow legal scholars to combine the two principles under one umbrella. In both cases, the power lies outside the scope of the judiciary. Regardless of such, both are within the legal framework of their respective systems and are authorized by the legislative. Further, the decision regarding the guilt of an offender remains within the ambit of the court's judiciary, and both diya and clemency relate to the reduction of punishment only after this decision gets established. Finally, as the granting of both is outside the scope of the judiciary, allowing a grant raise a question as to whether in doing so the authority of the courts gets subverted when involving and imposing non-judicial decision as punishment or retribution.

    What we would like to put forward is the necessity of a new theoretical paradigm that allows legal scholars to develop their understanding of diya outside the walls of clemency. As shown above and as will be discussed below, diya is subject to its principles and legal framework that is not compliant with a secular legal system. As it resolves disputes between individuals under the territory of criminal law, it can classify as a union of criminal and civil law. This union may be the beginning of the introduction of a new theoretical paradigm.

    Also, when in association and through the interpretation of clemency, diya is given a defense regardless of the possibility of it contravening international human rights law. Article 6(4) of the International Covenant on Civil or Political Rights gives prisoners the right to seek commutation or pardon. This rule gets unjustly inhibited by the practice of diya. Those with limited financial resources, of a young age, bereft, and ordinary prisoners, foreigners, or without ties to the locals have their right to pardon diminished or stripped away. Further, the power to forgive is a substantial power and granting such power to the family or heirs of a murder victim is the issue. Families or heirs are often emotionally and financially invested in their decision to grant or refuse diya. There is an inadequate level of detachment that exists and which is necessary and gets on the surface upon implementation of clemency.

    So, should the relocation of pardoning to a private individual who lacks the level authority an executive possess be allowed?

    Conclusion

    Although the borders of both diya and clemency may appear to be similar, what covers within their substantive boxes differ. In understanding the principle of diya, legal scholars may look to clemency to provide a basic footing but will be required to delve into the technicalities of the diya principles through a different lens. Moreover, the diya principle's root of Islamic jurisprudence results in the questioning of whether it is compatible with international human rights law. Unlike clemency which is granted through political and judicial checks and applies the doctrines of sovereignty and separation of powers, diya has no legal implications.


     Federal Law No.3 of 1987 On the Promulgation of the Penal Code

     ni Article 28

     ni Article 29(3)

     PLD 2015 Supreme Court 77 (Criminal Appeal Number 126 of 2012) Zahid Rehman Vs State (Criminal Petition Number 568 of 2011):[iv]

    The courts also relied on Muhammad Akram vs the State (2003 SCMR 855)

     

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    Fri, 14 Jul 2017 18:00:00 GMT
    <![CDATA[The Evolution of Private Equity in India]]> The Evolution of Private Equity in India

    The advent of the year 2015 has seen a lot of political and economic skepticism unfolding in the form of the Brexit vote, demonetization in India, mounting Chinese debt and concerns over trade relations between the US and Asia. It, however, appears that the politico-economic uncertainty has not shown any signs of slowing down the private equity (PE) investment regime. More particularly, with 2016 marking the third year in a row that the Asia-Pacific PE industry has performed at historic levels-a sign that PE performance in the region is increasingly dependent on the sector's fundamentals. Private equity investments' value in the Asia-Pacific region crossed $92 billion in 2016; which is a pullback from the 2015 all-time high of $124 billion.[i]

    The predominant objective and purpose of the PE line of financing remain growth and profits. PE firms typically infuse substantial funds with the intention to conceptualize ideas for growth and overcoming financial disability for companies thereby playing a pivotal role in the nurturing the economic climate of a country. Notably, in comparison to a venture capital investment, a PE investment is typically for a much higher amount, and in return, the investors either opt for a buyout or expects a substantial share in the company with active participation rights in the business. These investments initiate when an entity approaches a PE firm or investor seeking investment (in some situations, even the PE firm may contact a prospective business opportunity). Upon detailed discussion and taking stock of the situation, the parties arrive at an arrangement structuring terms of the investment. Importantly, at this stage, the investor shall undertake due diligence into the affairs of the company along with better understanding of the financial situation of the shareholders of the entity. Upon satisfaction of concerns in the diligence report, if any, and if the investor agrees to proceed, the parties execute final agreements, namely, shareholders' agreement, share subscription agreement, etc. after which the investor infuse funds into the company.

    In India, PE line of financing is still in its nascent stages. While in the early 2000s, the focus of PE investments was towards the booming sector of Information Technology due to its dynamic growth opportunities. However, after the burst of the dot-com bubble, PE investors shifted focus to other commercially viable industries. Another hindrance to the rising graph of the PE investment was the economic meltdown in 2008- 2009 which substantially deflected the investment deals size. However, consequently Flipkart's USD 150 million, 4th round funding in 2012 Q1 kicked off an overall positive sentiment in funds investing in the domestic e-commerce industry.[ii]

    India witnessed an increase in the number and size of PE investments made in 2014 aggregating to around $11.5 billion, which was 17% higher than the total investment value as compared to the same period the previous year. PE investors have been steadfastly interested in certain lucrative sectors including E-commerce, financial services, power and, energy among others. Most notably, in the current economic scenario, Indian real estate industry owes its foundation to private equity. PE financing, in a broad ambit – now makes up 75 percent of the funds in India's real estate sector, compared with just about a fourth in 2010.[iii]

    As discussed herein, this two series article aims to explain the factors that drive private equity investments in India and the regulatory framework associated. The framework and the documentation of PE investments will differ (regarding the regulator and legislation) depending on the structure of the PE investment. In India, the Companies Act, 2013 (the Companies Act), the Income Tax Act, 1961, Foreign Exchange Management Act, 1999 (the FEMA) and the rules and regulations framed therein overlook the governance of PE investments. Securities and Exchange Board of India (the SEBI) regulations governing the regulates the listed companies. By this article, we shall discuss the manner of structuring the PE funds, the mode of investments and the laws which govern the PE financing mechanism in India.

    Structure and Applicability

    In India, PE funds assume the form of trusts that are registered and regulated by Securities and Exchange Board of India's 2012 Regulations regarding Alternative Investment Funds (AIF Regulations)[iv] as Alternative Investment Funds (AIF). Such AIFs can be set up only as a trust, company or a limited liability partnership (LLP). Therefore, procedurally, a PE fund may be established as a trust under the Indian Trust Act, 1882 and registered as an AIF under the AIF Regulations.  The trust deed and investment/contribution agreement would govern the terms of the arrangement between the parties and shall stipulate the details of the agreement including the amount of investment, period, the object of fund and manner of distribution of returns.

    Similarly, an AIF may be set up as a company under the provisions of the Companies Act, and the articles of association and the inter-se shareholders' agreement would govern the same.

    In the same manner, AIF funds can be set up as LLPs under the Limited Liability Partnership Act, 2008.

    However, AIF is seldom set up as a company since there are stringent compliance procedures to be followed by companies. Also, while an LLP may be an attractive choice for PE funds worldwide, it is still a relatively new structure in India.

    Significantly, registered AIFs in the country have substantially expanded over the past two (2) years and estimates to around 270 in 2016. AIFs have also been a major contributor to the overall fundraising in the Indian market and contribute to around 41% of the total funds raised in India in 2016. A majority of the funds reported greater participation from LLPs through passive co-investment rights that existed in their current portfolio. PE Funds expect LLPs to play a more dynamic role in 2017 and is likely to offer more co-investment opportunities. Further, fundraising is supposed to be a higher priority for funds in 2017.

    It is pertinent to note that before the enactment of the AIF Regulations, the registration of all domestic private equity funds was under the SEBI (Venture Capital Funds) Regulations,1996. While new AIFs can register themselves with the AIF Regulations, PE funds registered under the earlier Venture Capital Funds Regulations have two options. They can either continue under the previous venture capital regulations till the expiry of the duration of the fund or can be brought under the ambit of the AIF Regulations by re-registration therein subject to the approval of two-thirds of the fund's investors.

    Importantly, the appeal of significant growth has attracted foreign investment into India. Reserve Bank of India along with the Foreign Investment Promotion Board and the Department of Industrial Policy and Promotion have stipulated rules and regulations issued by FEMA with the view to regulate the foreign investment that flows into India. In this regard, we will discuss the foreign direct investment (FDI) policy and Foreign Exchange Management (on the Transfer or Issue of Security by a Person Resident Outside India) Regulations in detail in the second part of this Article.

    Mode of Investment

    Investors in PE may opt from one of the following instruments to effectuate their transactions:

           i.          equity shares;

          ii.          compulsorily convertible preference shares (CCP); and

         iii.          compulsorily convertible debentures (CCDs).

    Moreover, under the FDI policy, any instrument apart from the above, which are not completely and compulsorily convertible to equity shall be treated as debt and regulated by the external commercial borrowing (ECB) norms. The old company law regime (Companies Act, 1956) strives to protect the creditors of an entity by classifying the outstanding amounts as deposits. This law states that a CCD could avoid from falling under this category as long as they are convertible into equity or secured by an immovable property. However, the Companies Act amended this provision by stating that conversion of CCD into equity should take place within five (5) years or the underlying security should rank parri passu (same or equal footage) with the first charge on the asset to avoid classified as a deposit.

    The issue and transfer of these equity shares, CCPs, and CCDs are regulated by the provisions of the extant FEMA regulations, as also the Companies Act and the inter-se agreements entered into between the parties.

    So far, this Article has purported to discuss India's regulated climate on private equity investment. It is evident from the increasing graph that in spite of several regulations and restrictions prescribed by the relevant regulatory authorities and laws, India continues to be a favored jurisdiction for private investment. According to a 2017 report by Bain & Company, "to attract more investments, India may have to strive to reduce the regulatory restrictions in the country; that consists of a regulatory environment that is conducive to business growth."[v] Hence, it is prudent that the regulators reduce the level of restrictions and policies that may hinder the incoming investment opportunities.

    Further, in Part II of this article, our attorneys will discuss the provisions of Income Tax Act, 1961, FEMA regulations as well as SEBI regulations regarding the aspects of the private equity market in India. We will also discuss the applicability of PE line of financing in the current economic climate of the United Arab Emirates.


    [i] Suvir VarmaKiki Yang and Johanne Dessard, "Asia-Pacific Private Equity Report 2017", March 16, 2017-Bain & Company.

    [ii] Kalpana Jain, Vikram Mathur, Punit Gupta, Ajay Sharma, "Private Equity- Fueling India's growth," May 2012, Deloitte.

    [iii] Kailash Babar, "Private Equity now funds 75% of Indian property market as banks pull out", The Economic Times, March 20, 2017.

    [iv] Discussed at length in Part II of the Article.

    [v] http://www.bain.com/publications/articles/india-private-equity-report-2017.aspx

     

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    Fri, 14 Jul 2017 00:00:00 GMT
    <![CDATA[The New Medical Liability Law in the UAE: A New Horizon]]> The New Medical Liability Law in the UAE: A New Horizon

    "If people understood that doctors weren't divine, perhaps the odor of malpractice might diminish."

    {C}-        Richard Selzer

    People seek the assistance of professionals with the view of obtaining expert advice on matters that are beyond their proficiency or expertise. While doing so, they rely on these professionals to ensure that their concerns receive a high standard of efficiency. However, these professionals are also bound to make errors in judgment down the line. These errors are considered to constitute an act of professional negligence. But professional negligence varies substantially from carelessness in general since professionals are expected to showcase a minimum standard of expertise in their line of work. Further, the implication of professional negligence has proved to have an adverse effect in the medical sector since an error of judgment may lead to the injury of a patient. However, a doctor who has portrayed an act of negligence in his profession is bound to receive a different treatment from a defendant (criminal) who has intentionally inflicted injury onto another person.

    Recent developments in science and technology have taken us far away from where we were a decade ago and compelled the legal system to ponder over outdated provisions that initially dealt with much simpler situations. Hence, in this article, our team of medical lawyers in Abu Dhabi seeks to discuss the new ambit of liability that is likely to fall upon medical professionals in the United Arab Emirates (the UAE) who have caused injury or distress to patients due to their negligence.

    The Medical Regime

    The lawmakers of the country enacted the Federal Law Number 4 of 2016 (the New Law) with the view of enhancing the provisions relating to the liability that falls upon medical professionals who render their services in a negligent manner. The New Law has repealed Federal Law Number 10 of 2008 (the Old Law) and is expected to bring significant changes onto the existing medical and healthcare regime in the UAE. In general, doctors are supposed to meet the 'duty of care' standards while executing their professional commitments to the patients. Hence, any act of negligence may lead to the severe loss or injury to the patients, who expect this duty of care standards from their doctors.

    From a legal point of view, a patient may pursue a civil claim against practitioner or health care provider, if they have caused injury or death to a patient because of their negligence or omission. Therefore, the patient is required to prove the following to claim for damages: (i) the professional duty and responsibility of the practitioner towards the patient; (ii) the practitioner had violated the duty of care standards which was due to be performed on a patient; (iii) the injury inflicted on the patient is a compensable injury; (iv) following the duty of care standards could have avoided the severe harm to the patient.

    The Ambit of Medical Negligence

    The following illustration can help the reader to comprehend the scope of medical negligence: James Turner, a 50-year-old mechanical engineer, had undergone open heart surgery at XYZ Hospital. However, he started losing his vision the following day and had completely lost his sight in a matter of two (2) days. The medical staff at XYZ failed to notify the concerned doctor about the issue at that time and therefore, it was too late for the physician to consult with an ophthalmologist and provide appropriate medical attention. Subsequently, the doctor was held liable for erroneously diagnosing the patient and providing him with a medication that caused the unfortunate turn of events. James had suffered from an anterior ischemic stroke of the optic nerves, due to blood loss during surgery, anemia and low blood pressure. Subsequently, it came to light that XYZ Hospital could prevent the patient's blindness, had he been provided with timely medical attention. Further, the hospital was held liable for the actions of the practitioner and lack of medical care that caused his visual impairment. The above example sets a clear case of medical malpractice that and the patient was compensated with US Dollars four million and four hundred thousand (USD 4,400,000) by the hospital because of their negligence in reporting about his matter to the concerned doctor on time.

    Significant Changes

    With its growing economy, the UAE government felt the need to introduce changes in the existing medical law regime and hence, implemented the New Law in August 2016 with the view of regulating medical practice and aligning the chapters of liability. The Old Law was a result of the constant developments in the UAE healthcare industry and the rise in the medical complaints and cases in the country. However, a series of landmark changes reflecting updates in technology were yet to be acknowledged along with the recognition of new concepts such as euthanasia (mercy killing), sex reassignment surgery procedures, cloning, abortion and so on. Hence, the New Law came into force and implemented the following changes to combat with the rising number of medical negligence cases: 

  • Dispute Redressal – The primary change under the New Law is regarding the procedure for filing a dispute of medical malpractice. The Old Law did not mandate the aggrieved party to file a complaint with the relevant health authorities. Whereas, Article 18 of the New Law has established a Medical Liability Committee (the Committee) who would review cases relating to medical negligence. Under the New Law, parties should file medical negligence and malpractice cases with the health authority of the respective Emirate; who would, in turn, refer the cases to the Committee under Article 19. The Committee would issue its opinion on the matter within 30 days from the referral date to health authority after reviewing the facts of the case, medical records, investigation report, and other documents. The party, aggrieved by the report of the Committee, may file an objection before the relevant health authority within a period of 30 days from the date of receiving the notification of the decision. The health authority would then forward the matter to the Supreme Committee for Medical Liability (the Supreme Committee), whose decision would be held final and binding on the parties. In short, the practitioners and patients have the following options for instituting legal action against an alleged negligible medical professional or healthcare provider: - (a) file a complaint with local health care authority; (b) bring civil action case before relevant courts; (c) initiate a criminal action where there is a case of gross medical malpractice.
  • Settlement - Article 35 of the New Law has stated that settlement between the parties may result in the forfeiture of any criminal action and suspension of the penalty, even if reconciliation happens during the execution of the sentence. However, the settlement between the parties would not hinder the patient's right to opt for civil remedies with the view of claiming compensation. This provision has introduced a drastic change to the Old Law since the latter had not provided for any such settlement mechanism.
  • Disclosure by Healthcare Professionals – Article 5(6) of the New Law has mandated medical professionals to disclose the information regarding the patient's health to the relevant health authority with the view of protecting public health or prove their innocence in dispute. Hence, doctors are permitted to disclose the confidential medical information of patients to defend themselves before the authorities.
  • Penalties - The New Law has provided a detailed list of sanctions against physicians who commit the following offences: (a) doctors who carries out sex-change procedures on patients (other than in accordance with Article 7 which states that the concept of sex correction is permitted when the person suffers from sexual intricacy between masculinity and femininity; the person's physical features are contrary to his/her physiological, biological and genetic characteristics) will be punished with imprisonment for a minimum period of 3 years and not be exceeding ten (10) years under article 31; (b) physicians who deny to treat patients in emergency cases or interrupt their treatment will be subject to a fine of not less than AED 10,000 under Article 32. The same penalty is also applicable to doctors who conduct unnecessary medical or surgical procedures on patients without their informed consent. (c) Article 32 has provided that physicians who commit gross medical errors would face imprisonment extending up to one (1) year and (/or) a fine amounting to not more than AED 200,000. However, the doctor may face an imprisonment of not more than two years and (/or) fine amounting to not more than AED 500,000 if the gross medical error results in the death of a patient. Further, the provision also states that if the gross medical error were committed under the influence of alcohol or drugs, the practitioner would face imprisonment of not more than two (2) years and (/or) a fine amounting to not more than AED 1,000,000.
  • Other Changes - The New Law has also recognized various other techniques which that did not exist under the Old Law like euthanasia. Article 10 has explicitly stated that the doctor is not permitted to detach the life support of a patient even if the patient and his/ her family insists on doing so. Further, the provision has stated that the doctor may withdraw the life support if the heart and the breathing capacity or the brain of the patient has ceased to function. However, the practitioner is required to obtain approval from the Minister of Health before doing so. Further, Article 16 of the New Law addresses the issue of abortion and states that a doctor may perform an abortion after considering the following points: (a)  the pregnant woman's life is in danger; (b) the pregnancy does not exceed 120 days; (c) the procedure is done with the patient's consent; (d) the medical committee report is formed on the basis of medical tests and other scientific techniques; (e) the foetus is suffering from malformation and because may cause pain and suffering to the child and family in the future.
  • Conclusion

    The first step in pursuing a medical malpractice case is to retain an expert lawyer. Unlike some other areas of the law, self-representation in these cases is not feasible. However, attorneys do not accept medical malpractice cases due to the need of vast resources and litigation expertise. Hence, the complainant should seek out a reputable law firm that provides bespoke legal advice in medical malpractice.

     

     

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    Fri, 14 Jul 2017 00:00:00 GMT
    <![CDATA[The Prenup to Every Merger and Acquisition]]>  

    The word 'efficiency' may not mean much for those of you who were absent during economics class in school. It is a term around which the whole concept of economic studies in based. Investopedia[i] defines 'efficiency' as the allocation of resources in an optimal manner to serve a company or an individual in the best method by reducing waste. It is the concept of getting work done with the least amount of resources. But that comes at a cost. Many a time, companies try to reduce their costs and maximize profits by employing cheaper materials and inefficient human resources. Companies also try to maintain or increase the level or standard of their output by pooling their resources. While the former is one of the least preferred methods to obtain efficiency, the latter has gained popularity due to the enhancement of corporate structures and growing consumer demands. But efficiency is a million-dollar word.

    A similar story lies behind one of the largest mergers in history between Henry J. Heinz Company and Kraft Foods Group, Incorporation. This merger created one of the major players in the food and beverages industry. Ergo, companies should review every aspect, factor and underlying right(s) of all the parties before initiating a merger or restructuring a corporate structure. The structure and type of merger may primarily depend upon the industry and the size of the companies. For example, when the investor limits the transaction to the assets of another company; such an acquisition is an asset purchase. However, when the investors are interested in buying the shares of the other company, the structure of the merger should be remolded to that of a share acquisition. Hence, it is evident that the structure and type of merger or acquisition are decided upon after considering and understanding the factors involved, the extent of assets and liabilities of the companies and the jurisdiction of the parties. Therefore, the benefit of opting for a particular structure or type of merger may be detrimental to the other party. Therefore, this article seeks to draw a line between an asset sale and share purchase and explain about the advantages and disadvantages of both these structures from the purview of private companies in the United Arab Emirates (UAE).

    Status quo in the UAE

    The principles of contracts govern the mergers and acquisitions in the UAE. The primary piece of legislation that has laid down the provisions regarding the matter is Federal Law Number (2) of 2015 on Commercial Companies (the Companies Law). Article 22 of the Companies Law has stated that a UAE national should hold at least fifty-one (51%) shares of an onshore company in the UAE should be and branch offices of foreign entities in the UAE may appoint a local agent to conduct trade in the UAE. Therefore, transfer of shares in companies established in the UAE should adhere to this restriction on foreign ownership.

    Transaction structures for private companies

    As mentioned earlier, investors have the option of either acquiring the shares of the company (a share acquisition) or the assets of that company (an asset acquisition). The investors should conduct due diligence and agree on one of the two (2) structures depending on the factors discussed below:

    Share Sale

    In the case of a share sale, once an investor has purchased all the shares of a particular company, all the assets and liabilities of that company (known or otherwise) will be transferred to the acquirer. Therefore, the status of the target company is not affected by a share sale; however, with a new owner and the seller of the shares will lose his nexus with the entity. It is pertinent for the buyers to conduct extensive due diligence process by employing a law firm that provides bespoke legal advice before purchasing the shares of a company since the investors will assume all the obligations of the business entity. Therefore, the buyer should also negotiate the indemnity, insurance, and warranty of the exact liabilities to mitigate any issues that may arise. However, these solutions are not comprehensive since they may face problems in enforcement since their value depends on the creditworthiness of the seller. Further, an indemnity clause may also be restricted from full enforcement since it is likely to constitute unjust enrichment - prohibited by Sharia Law. Therefore, the injured party can only enforce indemnity to the extent of loss that they have suffered. Minority shareholders will be left when a buyer cannot acquire hundred percent (100%) shares in a company.

    The buyer and seller have to comply with all the restrictions on pre-emptive rights provisions in the company's constitution or the shareholders' agreement.

    However, share sale also has substantial advantages since the investors do not have to purchase every asset of the company individually. The objective of purchasing the assets is indirectly covered in the transfer of shares. This means that the investor acquires all the contracts and other third-party obligations also. However, the buyers should review change-of-control and termination clauses and may also have to obtain the approval or consent of the third parties before those contracts can be executed. Therefore, the investors should ensure that the seller provides all requisite approvals from all third-parties including regulatory approvals before the completion of the transaction. Specifically, the investors should make sure that the DED (Department of Economic Development) of the respective Emirate approves the transfer of shares and issues an amended license with the new ownership status. The target company may not be permitted to conduct its activities in the UAE without a valid license.

    Asset sale

    On the other hand, the investor will only acquire the specific assets and liabilities that are identified. This provides investors with a higher degree of certainty since the investors and handpicks the exact assets and liabilities that they want to acquire. However, buying some assets may also mean acquiring certain liabilities. For example, the investor may be liable for any environmental problem in the real estate property. When the property purchased by the investors are a part of another contract, then the buyer will also be liable for the provisions under those contracts from the date of transfer. However, unidentified assets and liabilities are not transferred to the investors.

    This method is considerably more ambiguous and complicated than share sale since every asset has to be transferred individually by delivery (for a moveable property) or by transfer of title (for real estate). Therefore, the investor should acquire every property and machinery owned by the target company. The ownership of the seller (i.e. the shares in the company) does not change at the completion of an asset sale. These shareholders will continue to be the legal owners of the company since they hold the shares. Further, if an investor who wishes to obtain the benefit of a license or contract; they will need that particular right to be transferred separately. It is pertinent for investors to note that commercial contracts generally contain a clause that restricts the right of the parties to assign the contract to any third-party. Therefore, the investor should explicitly make sure that the seller obtains all approvals required when there is a provision that restricts the novation or assignment of a particular document without the approval of the other party. Federal Law Number 18 of 1993 issuing the Commercial Transactions Law has mentioned the procedures and conditions that the parties should adhere to while transferring a company's property. Article 42 of this law has stated that any action that may deal with the transfer of ownership of a company's property should be attested and authenticated by the Notary Public and should also be registered in the Commercial Registry. Further, Article 45 (1) has also stated that the investor must publish a summary of the contract of sale in two (2) daily Arabic newspapers (between an interval of one week) with the view of providing creditors of the target company to put forward any objections or claims against such sale.

    Miscellaneous

    Transfer tax is not applicable on transfer of the share of companies in the UAE. However, a transfer fee of four percent (4%) shall apply to the transfer of shares of a company established in the UAE. Further, a transfer tax ranging from 1% to 4% is charged on the assignment of real estate right by the Policy Sale Services at the Dubai Land Department. The rate may vary with the nature of the property interest and the particular Emirate.

    On the other hand, in share sales, the employees of the target company will continue to work under the business, and the change in ownership will not change the employment relationship between the employees and the company itself. Although, this general rule does not apply to foreign employees. Federal Law Number 8 of 1980, as amended and Ministerial Order Number 13 of 1991 (collectively, the Labour Law), a foreign employee's sponsorship cannot be transferred to a new employer. However, the buyer may draft new employment contracts for foreign employees of the target company, in the prescribed forms of the Ministry of Immigration and Labor. In an asset sale, the employees of a company cannot be transferred automatically. Although, the investors have the option of revoking the present employment contracts and registering new employment contracts under the new entity. Ergo, companies have to make sure that their transactional structures are most suitable after considering all the factors to safeguard the rights of the parties.


    [i] http://www.investopedia.com/terms/e/economic_efficiency.asp

     

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    Thu, 29 Jun 2017 14:00:00 GMT
    <![CDATA[JAFZA Company Formation]]> JAFZA COMPANY FORMATION 

    Construction of the Arc De Triomphe Paris took nearly thirty years until its inauguration by the French King, Louis-Phillippe in 1836. How much time in your view would it take to construct a metropolitan city that boasts international investors into the heart of desert barren lands? From National Geographic to Discovery and from NY times to the Times, Dubai undoubtedly reached its pinnacle and became the target of global paparazzi by driving investors worldwide into the region. Dubai offered them with world-class infrastructure, zero taxation, seamless connections to major ports worldwide, state of the art road, rail and air network, and right to own 100 percent shares within free zones! One of the first free zones of UAE – the Jebel Ali Free Zone (JAFZA) gained massive success, thanks to careful and detailed planning, clear procedures, coherent regulations for which this modern and up-to-date free zone body continues to attract millions of investors every month desirous of or considering JAFZA company formation. JAFZA is today the world's largest free zone since it was established nearly two decades back.

    Being the largest and the oldest also makes this freezone a lot more experienced regarding what-to-offer. For this reason, the free zone is today home to global Fortune 200 firms, fast moving consumer goods industry, manufacturing and after sales service undertakings, as well as service-oriented businesses. Well framed laws and regulations, strategic location, largest possible seaport access, availability of land and other resources, and its proximity to the new Al Maktoum International Airport bring all the desired accolades to this modern day free zone. JAFZA has had a clear vision of growth, and its management has introduced appropriate changes in its regulations. Besides other key factors, the free zone has also taken into consideration - segregation of land parcels, identified land parcels relevant to the particular industry sector, determined the appropriate JAFZA license fee packages. JAFZA also provides pre-built warehouses including labor accommodation, cold storage facilities, enhanced and full-time security, besides other commercial and corporate services.  

    There is practically no business segment to whom JAFZA does not offer its outstanding services. JAFZA is home to world's leading pharmaceutical firms, research and development firms, importers and exporters of vegetables, fruits, and perishable commodities, e-commerce, and IT firms, companies engaged in general trading, steel suppliers, and global conglomerates.  Investors may opt for a limited liability form of entity, free zone establishment, industrial or national industrial license in addition to a service form of license.

    JAFZA has always attracted (and, continues to attract) investors from practically every part of the world. Although being the oldest and largest free zones in Dubai, JAFZA has room for millions of applications desiring to be part of the JAFZA community. Visitors are required to apply for Jebel Ali Free Zone Gate Pass, and it is important that this is availed in the first instance to avoid any delays. JAFZA also houses ready to use offices where investors can commence their operations without the hassle of setting up their furniture, equipment, and fixtures. JAFZA also provides residential facilities, labor camps, cold-storage facilities, and lands. Please visit our Free Zone page to learn more on the business setup in JAFZA, JAFZA cost of formation, JAFZA land prices, warehouse costs and related features. It is indeed safe to suggest that all that glitters is, in fact, gold when speaking of investment climate that floats over Dubai and the United Arab Emirates.

    JAFZA has served as the regional operating base to numerous companies to utilize the industrial opportunities and commercial markets of the Middle Eastern region. JAFZA has provided international entities and domestic investors with easy access to the region with their high-end infrastructure and an investor-friendly business environment. The Jebel Ali Free Zone authorities have laid down a transparent company formation process to reduce the documentation requirements and legal formalities so that investors can initiate their operations at the earliest. However, investors are advised to comprehend the particular business category and license that suits their operational needs before commencing the company formation procedures. The table below has jotted down certain procedural and legal aspects of company formation in JAFZA to provide a clear understanding of the free zone's rules and regulations:

    PARTICULARS

    DETAILS

    Different types of legal entities

           i.           FZCO - free zone company with 2 to 50 shareholders;

         ii.           FZE - free zone establishment with a single shareholder;

        iii.           PLC - public listed company with 2 to 50 shareholders; and

        iv.           Branch of a company outside the free zone.

    Different licenses available

    Trading license, service license, industrial license, national industrial license, e-commerce license, innovation license and offshore registration.

    Why choose JAFZA?

    The ideal location of the free zone, specific licenses and dynamically expanding in-house free zone market, dedicated traders' market and modern state of the art infrastructure.

    Who should choose JAFZA?

    The diversity of companies in JAFZA is one of its top attractions. JAFZA houses companies from various sectors such as light manufacturing, service providers, and agricultural sector businesses. Although, the free zone is the first choice for investors that intend to conduct import and export operations.

    Other options available to investors

    DAFZA (or Dubai Airport Free Zone) provides investors with similar facilities and business types. The location of DAFZA near to the Dubai International Airport has provided aviation and import-export companies with direct access to the global air routes. Although, JAFZA has grown to be a premier free zone due to its the state of the art infrastructure and diverse licensing options.

     

    ]]>
    Mon, 26 Jun 2017 18:00:00 GMT
    <![CDATA[Cyber Crimes & Courts]]> Cyber Crimes & Courts

    Jurisdiction (by default) is the practical and ultimate authority within the legal society to administer, review and to execute laws and regulations within a well-defined area of region and responsibility. Therefore, immediately following the commission of a crime within a particular state, the judicial body in that province would have the jurisdiction to hear the matter. However, which court will have the authority and seat to settle and listen to a crime that occurred on the web? The question we raise here is how does one determine and find the right venue and court that has the authority to adjudicate and decide on internet crimes? Now let's take this a step further. What happens in cases where a crime is committed by a corporate entity that has practically no physical office anywhere on the planet? Is a globally accepted IT Law practically possible?  

    An abundance of confidential data gets stored in a dark fluorescent room of every office. This sensitive data may be simple log files worth nothing or sensitive trade secrets worth millions. It is hence crucial for corporates and multinationals to recognize cyber crimes and identify the courts that would have the jurisdiction to settle and hear their rightful claims. The virtual world of internet seamlessly connects parties from one part of the world to the other. Someone based in remote part of Northern Asia may well be in a position to hack and gather information from a computer system owned by a multi-national in the United States.

    In general matters, court's jurisdiction depends on: i) defendant's place of residence, or ii) the states where the cause of action arose. Now, speaking specifically of cyber crimes, such crimes occur within the virtual network using electronic means. Every corporate, small or big is today prevalent with technology and deploy primary to state of the art infrastructure including servers that serve the evolving requirements for robust, agile and heavy workloads through flexibility, modularity, and ease of operation. That said, the location of the company and its server need not be within the same vicinity or for that matter - even within the same country. A company based in Singapore may deploy its servers in Romania, for instance. Also, web users do not wear an invisible cloak to conduct their activities online. Online users are subject to domestic laws of their own country of residence. However, for matters on cyber crimes, such users may be tried and sued in another country where anyone alleges the individual of having committed an internet related crime. For these reasons, jurisdictional aspect has a large role in internet related crimes. The important question about internet jurisdiction is to determine whether to regard cyberspace as a possible physical location or whether to pretend that the web is a unique world altogether! Till date, there is no unified legislation on internet accorded and accepted by countries globally. The terms and conditions for a website in one country are till date different from that of the other. 

     The American View 

    The due process clause under the Fourteenth (14th) Amendment to the US Constitution has prescribed the validity of personal jurisdiction. The US courts often resort to personal jurisdiction as a tool to determine the seat and power to adjudicate. Accordingly, action cannot be brought against someone overseas unless an underlying relation exists that would allow the defendant to expect that matter is being instituted against him in a particular forum. For instance, the US lower courts have held that an individual act of creating a hosting a domain available on world-wide-web does not by default confer internet users to general jurisdiction all across the country. That said, the US Supreme Court has held that courts can confer personal jurisdiction over non-residents where the only source of contact with the country was the internet. The Supreme Court, however, did not evaluate any technological impacts on personal jurisdictional aspects. 

    The above findings of Supreme Court elucidated in the infamous matter of Zippo Manufacturing vs. Zippo Dot Com, Inc. where the Plaintiff leveled trademark infringement violation against the Defendant on the premise that Defendant provided online services using their distinct name Zippo. The Defendant in the present case was a non-US person. The Courts while deciding on the matter had taken into consideration that Defendant had knowingly dealt with and conducted business with residents of California where Plaintiff's headquarters were based. The Court passed the decision in favor of Plaintiff. The California District Court also adopted a similar resolution in the case of Panavision International, L.P. v. Toeppen where Defendant had designed a website with the sole intention of making Plaintiff purchase the domain from Defendant. The Defendant in the present matter was based in the US state of Illinois and had no direct, or known contact with the State of California. This would mean that the District Court in California did not have a direct jurisdiction over the Defendant. Regardless, the court held that it had particular jurisdiction given the actions of Defendant which had adversely affected the rights and actions of Plaintiff regardless of physical presence within the jurisdiction of the court.

    The California (District Court) in  McDonough vs. Fallon McElligott, Inc.[i]  had a differing view. In this matter, Plaintiff brought an action against the Defendant on the grounds of copyright violation and resorting to unfair competition laws. The Defendant posted Plaintiff's photographs without consent. The Court refused Plaintiff's claim and held that residents of the State were using Defendant's website and the Internet is a gateway to unrestricted access to information and posted material.

     

    [i] 40 U.S.P.Q. (2d) 1826 (S.D. Cal. 1996).

    A Look at Europe's Legal Position

     

    The European Union Regulation 1215 introduced in 2012 (the Regulations) provides a broad framework for the jurisdiction of EU courts in civil as well as commercial claims. The Regulations spell out the golden rule that EU courts can assume jurisdiction based purely on the premise of the domicile of the defendant. However, this imposes an impediment in several matters as determining the actual domicile of a party gets complicated even in circumstances where the victim is in effect able to identify the location. That said, the domicile of the defendant does not get determined by his/her IP (internet protocol address). The internet protocol link/address or the "IP address" of a machine only points the location of the computer and the user surfing the web on that PC. The Defendant's domicile, on the other hand, is determined by his actual place where he/she conduct business. The European Commission's Directive on Electronic Commerce dealing with internet laws does not set out express provision concerning court's jurisdiction in deciding on matters related to cybercrime. Also, the United Nations Convention(the Convention) on the use of Electronic Communications in International Contracts has clarified by defining the location of party or parties (domicile) as their place of business.

    In cases where parties explicitly agree to submit their disputes to individual court, such court would inevitably assume jurisdiction in the event of any conflict. The only exception to this general rule occurs in cases where a software company is a party to claim and has executed an agreement with other. Cases where corporates, government, and individual undertakings suffer substantial damage on account of hacking or cyber-crime, malicious attack, DDOS attempt or attack due to the acts of the attacker, the state where victim entity or individual is based, the courts within such state could assume jurisdiction and decide on the matter. Likewise, consumers and online buyers also get afforded the right to sue the other in the member state of the domicile. It is fair to mention that the courts within EU have a well-regarded framework to determine the jurisdiction of courts in matters involving cybercrimes. Internet transactions may require and cross many political borders. The legalities involved in cybercrime may differ from one country to other.

    Conclusion

    The rise in cyber crimes and online attacks, phishing frauds and related criminal acts have and continue to affect individuals, corporate entities, governments, and politicians. Is a global IT law truly possible? Would it be possible to ensure enforcement, impose criminal sanctions and set out clear procedures? Would it at least be possible to identify some broad areas that could cover and address on a global scale? If so, how would the Global IT law impact other domestic legislation(s)? If such law were enacted, would it be possible to raise claims electronically and whether decisions will be rendered online? The Digital Millennium Copyright Act (the DMCA) which is a United States copyright legislation implements two (2) 1996 treaties of the World Intellectual Property Organization (the WIPO) and has made concerted efforts on global copyright violations by allowing individuals and entities to enforce website takedown using its online service. Microsoft has recently taken steps towards receiving requests for copyright violations. A concerted effort would be required to introduce a one piece legislation that could put several questions at rest.

    [i] 952 F. Supp. 1119

    [ii] 141 F.3d 1316 (1998)

    [iii] 40 U.S.P.Q. (2d) 1826 (S.D. Cal. 1996)

    Jurisdiction (by default) is the practical and ultimate authority within the legal society to administer, review and to execute laws and regulations within a well-defined area of region and responsibility. Therefore, immediately following the commission of a crime within a particular state, the judicial body in that province would have the jurisdiction to hear the matter. However, which court will have the authority and seat to settle and listen to a crime that occurred on the web? The question we raise here is how does one determine and find the right venue and court that has the authority to adjudicate and decide on internet crimes? Now let's take this a step further. What happens in cases where a crime is committed by a corporate entity that has practically no physical office anywhere on the planet?

    An abundance of confidential data gets stored in a dark fluorescent room of every office. This sensitive data may be simple log files worth nothing or sensitive trade secrets worth millions. It is hence crucial for corporates and multinationals to recognize cyber crimes and identify the courts that would have the jurisdiction to settle and hear their rightful claims. The virtual world of internet seamlessly connects parties from one part of the world to the other. Someone based in remote part of Northern Asia may well be in a position to hack and gather information from a computer system owned by a multi-national in the United States.

    In general matters, court's jurisdiction depends on: i) defendant's place of residence, or ii) the states where the cause of action arose. Now, speaking specifically of cyber crimes, such crimes occur within the virtual network using electronic means. Every corporate, small or big is today prevalent with technology and deploy primary to state of the art infrastructure including servers that serve the evolving requirements for robust, agile and heavy workloads through flexibility, modularity, and ease of operation. That said, the location of the company and its server need not be within the same vicinity or for that matter - even within the same country. A company based in Singapore may deploy its servers in Romania, for instance. Also, web users do not wear an invisible cloak to conduct their activities online. Online users are subject to domestic laws of their own country of residence. However, for matters on cyber crimes, such users may be tried and sued in another country where anyone alleges the individual of having committed an internet related crime. For these reasons, jurisdictional aspect has a large role in internet related crimes. The important question about internet jurisdiction is to determine whether to regard cyberspace as a possible physical location or whether to pretend that the web is a unique world altogether! Till date, there is no unified legislation on internet accorded and accepted by countries globally. The terms and conditions for a website in one country are till date different from that of the other. 

     The American View 

    The due process clause under the Fourteenth (14th) Amendment to the US Constitution has prescribed the validity of personal jurisdiction. The US courts often resort to personal jurisdiction as a tool to determine the seat and power to adjudicate. Accordingly, action cannot be brought against someone overseas unless an underlying relation exists that would allow the defendant to expect that matter is being instituted against him in a particular forum. For instance, the US lower courts have held that an individual act of creating a hosting a domain available on world-wide-web does not by default confer internet users to general jurisdiction all across the country. That said, the US Supreme Court has held that courts can confer personal jurisdiction over non-residents where the only source of contact with the country was the internet. The Supreme Court, however, did not evaluate any technological impacts on personal jurisdictional aspects. 

    The above findings of Supreme Court elucidated in the infamous matter of Zippo Manufacturing vs. Zippo Dot Com, Inc. where the Plaintiff leveled trademark infringement violation against the Defendant on the premise that Defendant provided online services using their distinct name Zippo. The Defendant in the present case was a non-US person. The Courts while deciding on the matter had taken into consideration that Defendant had knowingly dealt with and conducted business with residents of California where Plaintiff's headquarters were based. The Court passed the decision in favor of Plaintiff. The California District Court also adopted a similar resolution in the case of Panavision International, L.P. v. Toeppen where Defendant had designed a website with the sole intention of making Plaintiff purchase the domain from Defendant. The Defendant in the present matter was based in the US state of Illinois and had no direct, or known contact with the State of California. This would mean that the District Court in California did not have a direct jurisdiction over the Defendant. Regardless, the court held that it had particular jurisdiction given the actions of Defendant which had adversely affected the rights and actions of Plaintiff regardless of physical presence within the jurisdiction of the court.

    The California (District Court) in  McDonough vs. Fallon McElligott, Inc.[i]  had a differing view. In this matter, Plaintiff brought an action against the Defendant on the grounds of copyright violation and resorting to unfair competition laws. The Defendant posted Plaintiff's photographs without consent. The Court refused Plaintiff's claim and held that residents of the State were using Defendant's website and the Internet is a gateway to unrestricted access to information and posted material.

     

    [i] 40 U.S.P.Q. (2d) 1826 (S.D. Cal. 1996).

    A Look at Europe's Legal Position

     

    The European Union Regulation 1215 introduced in 2012 (the Regulations) provides a broad framework for the jurisdiction of EU courts in civil as well as commercial claims. The Regulations spell out the golden rule that EU courts can assume jurisdiction based purely on the premise of the domicile of the defendant. However, this imposes an impediment in several matters as determining the actual domicile of a party gets complicated even in circumstances where the victim is in effect able to identify the location. That said, the domicile of the defendant does not get determined by his/her IP (internet protocol address). The internet protocol link/address or the "IP address" of a machine only points the location of the computer and the user surfing the web on that PC. The Defendant's domicile, on the other hand, is determined by his actual place where he/she conduct business. The European Commission's Directive on Electronic Commerce dealing with internet laws does not set out express provision concerning court's jurisdiction in deciding on matters related to cybercrime. Also, the United Nations Convention(the Convention) on the use of Electronic Communications in International Contracts has clarified by defining the location of party or parties (domicile) as their place of business.

    In cases where parties explicitly agree to submit their disputes to individual court, such court would inevitably assume jurisdiction in the event of any conflict. The only exception to this general rule occurs in cases where a software company is a party to claim and has executed an agreement with other. Cases where corporates, government, and individual undertakings suffer substantial damage on account of hacking or cyber-crime, malicious attack, DDOS attempt or attack due to the acts of the attacker, the state where victim entity or individual is based, the courts within such state could assume jurisdiction and decide on the matter. Likewise, consumers and online buyers also get afforded the right to sue the other in the member state of the domicile. It is fair to mention that the courts within EU have a well-regarded framework to determine the jurisdiction of courts in matters involving cybercrimes. Internet transactions may require and cross many political borders. The legalities involved in cybercrime may differ from one country to other.

    Conclusion

    The rise in cyber crimes and online attacks, phishing frauds and related criminal acts have and continue to affect individuals, corporate entities, governments, and politicians. Is a global IT law truly possible? Would it be possible to ensure enforcement, impose criminal sanctions and set out clear procedures? Would it at least be possible to identify some broad areas that could cover and address on a global scale? If so, how would the Global IT law impact other domestic legislation(s)? If such law were enacted, would it be possible to raise claims electronically and whether decisions will be rendered online? The Digital Millennium Copyright Act (the DMCA) which is a United States copyright legislation implements two (2) 1996 treaties of the World Intellectual Property Organization (the WIPO) and has made concerted efforts on global copyright violations by allowing individuals and entities to enforce website takedown using its online service. Microsoft has recently taken steps towards receiving requests for copyright violations. A concerted effort would be required to introduce a one piece legislation that could put several questions at rest.


    [i] 952 F. Supp. 1119

    [ii] 141 F.3d 1316 (1998)

    [iii] 40 U.S.P.Q. (2d) 1826 (S.D. Cal. 1996)

     

    ]]>
    Sat, 24 Jun 2017 16:00:00 GMT
    <![CDATA[Careful Conscious - A look at Bahrain's Criminal Law]]> Careful Conscious - A look at Bahrain's Criminal Law

    It is, in fact, the ability to consciously use our brains that separate us, the human race, from other animals we term as 'wild.' This ability is perhaps celebrated, but also to be used carefully and with caution. This ability also paves the way for the law to ensure public order and efficient governance. To every action, there is an equal and opposite reaction. Likewise, for every decision made with (or without) intent, recklessness, malice, or negligence leads to an outcome and possibly makes the person(s) accountable for. From an interpretation standpoint, singular may include the plural or vice versa, but the right can certainly not include the wrong.  It is, for this reason, the consequence of any decision that adversely harms or affects others results in punishing the mens rea (guilty mind).

    A bloody murder will always remain a bloody murder, but the murderer may not always be called a cold-blooded killer. For crimes such as murder, the law measures accountability of a crime by distinguishing what frame of mind the person who made the decision was in at the time of committing the same. When mentally unstable criminals act out in public, their punishment is often limited by their lack of capability to make right decisions. Similarly, speaking of accidentally committed crimes the penalty for such accidental acts is also relative to the intention of the accused. It is with consciousness we make our decisions, however, in every situation, the degree of one's consciousness differs.

    For any person to incur liability towards the commitment of a crime or crimes, an amalgamation of the mental and physical component should be taken into consideration. The physical element, the actus reus, is the act of having committed the crime, while the mental part, the mens rea, is the particular state of mind the accused must possess when committing the offense to incur liability. The requirements that must be satisfied to incur responsibility differ for every type of crime. In the case of murder, Bahrain's Penal Code of 1976 (the Penal Code) states that the offender must possess the necessary mental state, or intention, to be held liable for murder.

    Did You Mean It?

    Mens rea encompasses those crimes that occur intentionally but also those that occur out of recklessness and negligence. As per the Bahraini Law, the crime of murder is one with great repercussions. Hence, only killings which satisfy the mental component of criminal liability get termed as murder; committing murder through recklessness or by negligence is not satisfactory in implicating an offender of murder.

    Some in Bahrain have argued that acts of negligence resulting in death should fall under the umbrella of murder and not reduced to violations of manslaughter or lesser offenses. Bahraini social activists such as Salman Nasser have begun to hold this position after the recent death of a Bahraini during an illegal car racing incident in Al Areen. However, the Penal Code does not criminalize the behavior of those who caused the death as the deaths lacked the appropriate intention or mens rea. Article 31 stipulates that those who have 'unknowingly' committed a crime shall not be held liable for their actions. This Article 31 is in stark contrast to the Law of the United States of America which earlier this year charged Alfredo Perez Davila of murder following a car crash he caused, which resulted in the death of another person.

    Given these differences between legal systems, the question arises, should the law be changed? It is argued that any action with as severe a consequence as death should hardly look at the human intent of the offender and that the loss of life can only get balanced by the loss of another (even if that is through harsh imprisonment sentences).

    The importance of the mental state of an offender during a crime gets further highlighted in Article 46 of the Penal Code, which clarifies the punishment of accomplices. It states that each party to the crime will get punished according to their 'intention or manner of his knowledge.' This Article suggests that if one did not intend to murder but took part in the crime, their punishment will vary according to how much or little they knew of the crime beforehand and their intention to partake. The issue here is again relevant to the one discussed above: is it moral for the law to soften its approach towards those who commit murder incidentally? This issue is a philosophical area of debate that has no correct answer. But let's put forward that, as a complicated species our degree of consciousness is not limited to one, we are capable of doing wrong under varying levels of consciousness. To measure punishment through the present mens rea during the act is logical as our thoughts and intentions direct out actions rather the contrary. As such, should it not be fair to limit punishment accordingly?

    Another controversial variation of the mens rea argument is murders committed while under the influence. The Bahraini Law does not provide an escape for those who murder while their consciousness is altered. Article 34 of the Penal Code explicitly provides that 'if a crime is committed with knowledge and choice [of intoxication, the criminal] shall be punished as if he has committed the act without being intoxicated or drugged.' A Bahraini man has recently been detained and is under investigation for the murder of his girlfriend during an argument over drugs. As he was intoxicated, the man is likely to be convicted of murder rather any lesser offense. Unlike the previously discussed scenarios, the intention to commit the crime of murder remains intact when an offender is voluntarily in this altered state of consciousness. The importance of the voluntary nature of an offender's actions is what allows the law to be so stringent in such a matter. To make the decision to get intoxicated follows the acceptance of decisions made while intoxicated, even if they are as extreme as murder.

    You Did Mean It

    The mental component of intention is a mandatory condition imposed by Article 14 of the Penal Code. It stipulates that it 'must necessarily be present in felonies' such as murder. With the confirmation of the existence of the necessary intention, an offender will be held liable for their crimes. An example is one of the recent murder cases. The main suspect in the Hoora murder case admitted to charges against him of killing the victim with a knife to evade debts. With his admission, he confessed to making a decision to kill the victim the day before the crime was committed. It can only be inferred from such a series of events that the intention to murder existed before the act. As such, the necessary mens rea is satisfied to convict the offender of up to life imprisonment or the death penalty as per the Bahraini Law.

    The crime does not necessarily have to be 'successful' to attract full liability of murder. The case against Abdualla Mohammed Habib saw allegations against him for attempted murder. Article 36 of the Penal Code makes clear that 'attempting to commit an offense is an act by the offender with the intention of causing the commission of such offense, even though the act is/was incomplete. The mere intention to commit acts in preparation thereof or perpetration thereof shall not be deemed as attempting.' Therefore, Habib's guilt in attempting a murder with intent will cause him to incur the liability of the crime of murder. The requirement of intention here is essential. Although the offender fails to commit the crime, the importance of intention is revealed when his punishment is equivalent to that of a successful crime.

    Again the philosophical question of equitability is raised. Is it fair to punish an offender for a crime they intended to commit but failed to do so successfully? The law, in fact, allows such punishments as it does not mandate particular sentences for those found guilty of attempted murder. It provides a minimum sentence of 3 years and allows escalation to life imprisonment or the death penalty on a case-by-case basis. Regardless, the Court always has discretion as to the punishment of an attempted murderer.

    Conclusion

    The ability to make conscious decisions is an ability of vital importance which nonetheless places the burden of precaution on each individual. Although the law punishes criminals according to the degree of their capacity to make conscious decisions, there are instances when one's liability may not decrease by altered consciousness. In cases of incidental murder, due to negligence or unintentional complicity, Bahraini Law reduces the charge and punishment of the offender. However, in cases of murder while under the influence or attempted murder Bahraini Law allows prosecution under the label of murder, and will punish accordingly. Regardless, the mandatory intention to convict an offender of murder remains.

    These issues are controversial due to the implications and consequences of the actions of said offender. It is regularly debated as to whether the degree of consciousness should be disregarded and the punishment for murder should be unified. However, this suggestion fails to take into account the complexity of human actions and the importance of consciousness. Mental decisions can only control physical actions, and each type of mental decision is case-sensitive. As such it can be argued that differing mens rea is vital in determining the relevant offense and punishment, must be given subjectively. 

    ]]>
    Sat, 24 Jun 2017 14:00:00 GMT
    <![CDATA[Cargo Claims in UAE]]> Cargo Claims in UAE

    "The good seaman weathers the storm he cannot avoid, and avoids the storm he cannot weather."

    Cargo claims are essential commercial rights. As the whole purpose of trade in maritime is to deliver cargo from point A to B, thereby promoting international trade and enhancing economies of the world, we would like to accentuate the legal implications of cargo claims in United Arab Emirates (the UAE).

    Many governing bodies around the World have enacted maritime legislation that incorporates the set of rules pertaining to carriage of goods known as the Hague-Visby Rules. Bringing an odd form of uniformity, these differing legislations all provide a similar form of protection to cargo carriers. Following suit, it is interesting to note, that although the United Arab Emirates is not a signatory or party to the Hague-Visby Rules, Federal Law No. 26 of 1981 contains provisions that reflect similar concepts. Both the exceptions to liability and the necessity to exercise due diligence provided in the UAE law mirrors Articles III and Article IV of the Hague-Visby Rules.

    In a contract of carriage, the carrier agrees to carry cargo from point A to point B and the shipper agrees to pay the carrier for the service of carriage. The bill of lading which is issued by the carrier or its agent to the shipper usually lays down the rules with respect to carriage of goods by sea. Generally, the shipper delivers the original bill of lading to the consignee i.e. buyer of the cargo. The consignee presents the original bill to the carrier, at the port of unloading, who in return issues a delivery order to enable the consignee for collecting the cargo from the port. The cargo claim arises when there is a breach of contract of carriage by the carrier to carry the cargo with reasonable and due care.

    Governing Laws

    Under UAE Maritime Commercial Law [i] (the MCL) the bill of lading (the BOL) is considered valid evidence of a contract of carriage. Article 278 provides that any condition in a bill of lading which attempts to exempt or reduce the carrier's responsibility for loss or damage, contrary to the provisions in the MCL is void. The MCL provides for the liability of the carrier stating that the carrier shall not argue contrary to terms of BOL as against consignee who must be an innocent third party and is not a party to the BOL between shipper and carrier.

    Claim time barred

    Article 365 (1) provides for a general time bar of two years from the date of arrival of the vessel at the discharge port or the port of end of the voyage. A claim with respect to a contract of carriage is time-barred after one year from the date on which goods were delivered or ought to be delivered. The passing of goods through port gates is the date in which the goods are deemed as delivered and the time that elapses until a claim is officially filed at a UAE court is what is to be counted. Further Article 365 (2) states: "in addition to any other causes for which the period of limitation for the hearing of a suit may be interrupted at law the said period shall expire upon the appointment of an average adjuster and in that event the new period shall run for the same period from the date of signing of the general average adjustment or from the date on which the average adjuster retires". MCL provides different time-bar provisions for other shipping activities, for instance, two years in pilotage and towage claims (Articles 314 and 317), etc.

    Carrier's Liability and Exemptions under UAE Law

    Article 275 provides the circumstances in which the carrier will be held liable or exempted from liability for the damages sustained during the time of delivery to the port of discharge. There is a general presumption that the carrier will be liable for damages sustained except for the circumstances provided therein.

    Fault or omission of shipper

    Pursuant to Article 275 (1) the UAE courts would generally exempt the carrier from liability which is consequent upon the fault and omission of the shipper or any third party to the contract of carriage. Usually clauses such as "Shipper's Load, Stow, and Count" or "Said to Contain" are contained in the BOL to protect the carriers. Such clauses are usually stated when there are containerized cargoes and the carrier is not privy to the packaging activity of the goods to be carried. Usually the UAE courts do not rely on such clauses in a strict sense thereby holding carrier liable to damages of the goods which was handed over sealed to the carrier albeit the seal is untouched if the clean BOL was issued by carrier which guarantees that the goods in the containers are in conformity with the description stated in the BOL. Nevertheless, UAE courts would consider the facts and where the damages are caused due to stowing and packaging where the carrier is successful in evidencing that the stowage and packaging was carried out by the shipper and the same was defective the shipper may be made liable for such damages as per Article 275 (1)(n). This is also in line with Article 259 which provides for the express mention of clauses on the BOL. Therefore, if the carrier has reasonable ground to believe the shipped goods are not in compliance with the description provided by the shipper the carrier must expressly state the clause in BOL providing its reservations and the reasons thereof.  

    Force Majeure or Act of God

    Other circumstances under which the carrier may not be considered liable is Force Majeure or "Act of God" pursuant to Article 275 (1) (d) and (e) provided the same could have been foreseen or preventable and not inevitable. If the event is foreseeable or preventable it becomes the duty of the carrier to take due care and precautions in preventing the damages presumed due to such foreseeable circumstances. The onus of proof is on the carrier to prove the assertions as stated above and to provide the evidence as to its location at the time of any dangerous weather conditions and as to weather's acuteness

    Limitation of Liability

    There are several provisions found on limiting the liability of the carrier. Albeit, according to the law, any agreement exempting the carrier from liability or negligence for damage caused to the cargo or reduces the liability for the same will be void against the endorsee/consignee who is the holder of the BOL. Article 276 (1) provides for a limitation of liability "to a sum not exceeding ten thousand dirhams for each package or unit taken as a basis in computing the freight, or a sum not exceeding thirty dirhams per kilogram per gross weight of the goods, whichever is the higher limit." It further provides under Article 276 (2) that "If packages or units are grouped in cases, boxes or other containers and the Bill of Lading states the number of packages or units contained in each container, then each one shall be deemed to be a package or unit in connection with the fixing of the upper limit of liability and if the container is not owned or provided by the carrier and it is lost or destroyed it shall of itself be deemed to be an independent package or unit." However, pursuant to 276(3) a carrier's liability is not permissible to be limited if the shipper has particulars, before the loading takes place, of the nature and value of the goods and the particular importance attached to the preservation thereof.

    Articles 138 to 142 entitle a ship owner, charterer or operator to limit liability based on the tonnage of the vessel. The limitation is as follows: "a) AED 250 per tonne where only physical damage is caused; (b) AED 500 per tonne where only bodily injury is caused; (c) AED 750 per tonne where both physical damage and bodily injury are caused". In 1997 UAE ratified the Convention on Limitation of Liability for Maritime Claims 1976 (the Convention) by Federal Decree Number 118 of 1997. The Convention under Article 4 provides that the right to limit liability is lost only when a claimant can prove willful intent or recklessness and with knowledge of damage on the part of the person seeking to limit. This provides an indisputable right to ship owners to limit their liability as observed by Justice Sheen in the "Bowbelle" [1990] 1 Lloyd's Rep 532. However, the translations in Arabic are not mandatory and appear to provide only discretionary provision. It is to be noted that Article 138 to 142 are not repealed as well. The UAE law being derived from Sharia law is based on the principle of providing damages equal to the loss sustained. This is pursuant to Article 389 and 390 of the UAE Civil Code which provide discretionary power to the judge in determining the losses sustained and providing compensation accordingly. However, Article 8 of the MCL recognizes that international conventions which have been ratified by the UAE supersede domestic legislation and consequently the Convention should override these provisions.

    Limiting liability caused by carrier/ship owner's fault is prohibited under Article 140. Additionally, both liabilities arising out of assistance and salvage, general average (GA) contributions, rights of master, crew and their heirs and claims arising from nuclear damage cannot be limited.

    The carrier can agree with the shipper and limit his liability by expressly setting out a clause in the BOL on the escalation of shipper's liability. The exception to the above clause is provided under Article 280 wherein the shipment in connection with costal or special circumstances of the carriage of a particular type of cargo justifies such an exemption. For an exemption to qualify as valid the following conditions must be satisfied: (a) The exemption must not be against the public policy (b) the agreement is in writing and on the non-negotiable receipt which clearly endorses the particulars therein. (c) The exemption must not be related to the due care supposed to be exercised by the carrier or its agent.

    Notice for Damages

    Pursuant to Article 280, the cargo will be assumed to have been delivered in the condition described in the BOL if no notice is served on the carrier. The notice must be given within seventy-two (72) hours from the delivery of cargo to the consignee as per Article 281. However, the BOL holder may seek damages without notice as per UAE Federal Law number 10 of 1992 Evidence law if they are successful in evincing the fact damages were caused by carrier or circumstances under which carrier is responsible for cargo.  No further notice is required where the joint survey was carried out. Pursuant to Article 363 the master must be notified in writing of the damages sustained to goods with the claim within 30 days of delivery of said goods. The cargo owners must be notified in writing within 30 days from the date the voyage terminated for losses sustained by the vessel in lieu of GA claim.

    Consignee's Title to sue

    Title to sue is usually proved by an endorsement on the BOL or by documents such as a bank statement stating that the BOL was endorsed by the bank where the bank is capable of making such an endorsement. The UAE Courts comprehend the fact that the BOL is either to the bearer, the order of the shipper, or in the name of the consignee. In such cases, proper endorsement of the BOL in consignee's favor is required and proves that he has title to sue.

    Claim and Joint Action against Owner and Charter

    Generally, the party who has agreed to carry the cargo/goods will be taken into consideration even if consignees bring a joint action. The party who contracted with the shipper can be an owner or charterer. The UAE courts will recognize the parties to the contract of carriage who have issued the BOL and specifically identify the carrier stated in the BOL. However, the UAE courts usually do not take the "identity of the carrier" clause on the reverse BOL into consideration against the interests of the consignee or endorsee.

    Arrest of Vessel for Cargo Claims

    The concept of maritime lien as applicable internationally is not applicable in UAE. However, Article 115 provides for the list of maritime claims under which arrest can be claimed before the UAE courts. Article 115(2) (d) and (e) provides that contracts relating to the use or exploitation of the vessel under a charter party or otherwise and contracts relating to the carriage of goods under a charter party, bill of lading, or other documents qualify as maritime debts. Thus the breach of carriage of goods will respectively qualify as maritime debts and the claimant can seek arrest by relying on the contention.

    Conclusion

    Cargo claims remain the most confused types of claims by the parties to the contract of carriage; parties are unaware of both the legal and practical reasons for claiming and the international legal implications when doing so. A failure in the cargo claims systems can prejudice economies from fulfilling their basic function of promoting trade. The STA maritime team has been advising carriers and other parties on their business activities and has expertise in assisting the marine businesses in the jurisdiction. We hope this article has been sufficiently informative.

     


    [i] UAE Federal Law number 26 of 1981 regarding the UAE maritime Commercial Law

     

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    Wed, 14 Jun 2017 00:00:00 GMT
    <![CDATA[Environmental Global Guide 2017-2018 ]]> Environmental regulatory framework

  • What are the key pieces of environmental legislation and the regulatory authorities?
  • The primary legislation for environmental protection in the UAE is Federal Law Number 24 of 1999 for the protection and development of the environment (Environmental Law).

    Other laws relevant to environmental issues are:

    • Federal Law Number 23 of 1999 regarding conservation of aquatic resources.
    • Federal Law Number 9 of 1983 regulating the hunting of birds and animals.
    • Federal Law Number 20 of 2006 regarding the use of radioactive materials (which amended Federal Law No. 1 of 2002).
    • Federal Law Number 16 of 2007 concerning animal protection.
    • Federal Law Number 11 of 2002 regarding the regulation and control of international trade in endangered species of wild flora and fauna and executive order issued by the Council of Ministers Decree No. 22 of 2003.
    • Federal Law Number 5 of 1979 concerning agricultural quarantine.
    • Federal Law Number 6 of 1979 regarding veterinary quarantine.

    The following laws been enacted by their respective emirates in relation to their local environmental strategies:

    • Abu Dhabi. Legislation includes:
      • Law Number 21 of 2005 for waste management;
      • Law Number 16 of 2005 restructuring the Environment Agency;
      • Law Number 13 of 2005 regulating grazing;
      • Law Number 5 of 2016 regulating groundwater;
      • Decree Number 42 of 2009, concerning the comprehensive environment health and safety management system (EHSMS).
    • Some of the orders and regulations relating to environmental protection are:
      • Local Order Number 61 of 1991 on the environment protection regulations;
      • Local Order Number 8 of 2002 concerning sewage, irrigation and water drainage;
      • Local Order Number 11 of 2003 regarding public health;
      • Law Number 15 for the protection of groundwater.
    • Laws include:
      • Law Number 6 of 1998 for incorporating the environment and natural resources authority;
      • Law Number 1 of 1974 for the protection of public health.
    • Ras Al Khaimah.This emirate has enacted Law Number 2 of 2007 for the environment protection and development authority.

    Regulatory authorities

    The key federal regulatory authorities for supervising environmental issues are:

    • Federal Environment Agency (FEA).This is a federal governmental body which frames policies for further protection and development of a healthy environment and oversees pollution control and environmental standards.
    • Federal Ministry of Climate Change and Environment. The Ministry manages all aspects of climate change including implementing climate change policies and initiatives.
    • Air Quality Department of the Ministry of Environment and Water. Thisregulates the air pollution in the nation by issuing decrees and air standards.
    • Ministry of Agriculture and Fisheries. This deals with marine and land environmental matters.

    Emirates have also established local regulatory agencies to supervise sector-specific environmental issues, as follows:

    • Environment Agency–Abu Dhabi (EAD) is the principal regulator for environmental matters in Abu Dhabi, while the Environmental Research and Wildlife Development Agency (ERDWA) operates research centres for marine and wildlife development.
    • Regulation and Supervision Bureau for Water, Waste Water and Electricity (Abu Dhabi).
    • Department of Tourism and Commerce Marketing in Dubai has the dual responsibilities of ensuring that safe environmental practices are followed while encouraging tourism practices. The environment department at the Dubai municipality is the strategic regulator of environment-related issues in the urban environment of the city of Dubai.
    • Department of Environment and Protected Areas for the preservation of endangered species is responsible for the conservation of endangered wildlife in the emirate of Sharjah.

    Regulatory enforcement

  • To what extent are environmental requirements enforced by regulators?
  • The Environmental Law (Federal Law Number 24 of 1999 for the protection and development of the environment) sets outs criminal and civil penalties for environmental offences, which are enforced by the relevant authority, depending on the type of offence committed.

    See Questions 67 and 11 to 13.

    Environmental NGOs

  • To what extent are environmental non-governmental organisations (NGOs) and other pressure groups active?
  • Various non-governmental organisations (NGOs) and pressure groups have been involved in a range of sector-specific initiatives including the following:

    • Emirates Natural History Group, an Abu Dhabi based organisation, is engaged in safeguarding the natural history of the UAE and Oman. It is also a member of the World Conservation Union (IUCN).
    • Environment Friends Society, also based in Abu Dhabi, works towards raising public awareness on environment-related issues.
    • Emirates Environment Group is a Dubai based organisation committed to protecting the environment through education.
    • Dubai Natural History Group conducts surveys and research into activities that are hazardous to the nation's environment.
    • Arabian Leopard Trust was established in Sharjah to promote the conservation of endangered wildlife species, specifically the Arabian Leopard.
    • Emirates Wildlife Society in association with the World Wildlife Fund (WWF) aims to protect biodiversity in key sites across the country.

    Two other major pressure groups that are active in the protection and conservation of the environment are:

    • Environment and Wildlife Management System (EWM) that is accountable for handling wildlife collections and land owned by Abu Dhabi royal family.
    • Emirates Health Club that primarily focuses on the protection and preservation of marine and coastal resources.

    Environmental permits

  • Is there an integrated permitting regime or are there separate environmental regimes for different types of emission? Can companies apply for a single environmental permit for all activities on a site or do they have to apply for separate permits?
  • Integrated/separate permitting regime

    Companies that intend to conduct business in a particular emirate are required to obtain the necessary environmental permits from the respective authorities that regulate environmental concerns in that emirate (see Question 1).

    Single/separate permits

    These permits may be either integrated or separate in nature depending on the underlying project and the ambit of environmental conditions that are affected.

  • What is the framework for the integrated permitting regime?
  • Permits and regulator

    In Abu Dhabi, Environment Agency–Abu Dhabi (EAD) is responsible for protection and enhancement of the environment by reducing pollutants in air, in the water and on land. All operators or entities must obtain an environmental permit before beginning any project (Environmental Law (Federal Law No. 24 of 1999 for the protection and development of the environment)). EAD provides permits for development and infrastructure projects, industrial facilities, and hazardous material stores.

    The EAD also has a duty to safeguard environmental and natural resources by assessing the risk of pollution involved in the project before granting permits to companies (Law No. 16 of 2005).

    The Environment Department of Dubai Municipality (see Question 1) grants permits and licences that allow companies to conduct their commercial or industrial activities in the emirate after assessing any potential environmental risks.

    Length of permit

    The permit issued by EAD is renewable every year to ensure that an operator or entity maintains compliance with the regulations and conditions and to also ensure that they conform with the most recent laws.

    Restrictions on transfer

    A permit that has been awarded to a company by the competent environmental authority cannot be transferred to a third party.

    Penalties

    Non-compliance with EAD regulations attracts a fine of at least AED5,000.

    Water pollution

  • What is the regulatory regime for water pollution (whether part of an integrated regime or separate)?
  • Permits and regulator

    The Environment Agency–Abu Dhabi (EAD), along with the Regulation and Supervision Bureau for Water, Waste Water and Electricity in Abu Dhabiis responsible for regulating the discharge of waste effluents into water resources. These authorities enforce the wastewater and marine water quality monitoring regime set out in the guidance document issued by the EAD (Technical Guidance Document for the Permitting of Marine Dredging Operations in Abu Dhabi).

    Dubai's Ports, Customs and Free Zones Corporation (Trakhees, which is part of the Dubai Department of Planning and Development) primarily oversees issues related to water pollution in that emirate. This authority prescribes standards for the discharge of water pollutants into water resources, and issues harbour discharge permits that allow companies to discharge waste pollutants as long as they do not exceed the maximum standards set by the authority.

    Prohibited activities

    The federal Ministry of Climate Change and Environment bans companies from producing, manufacturing, formulating, circulating, importing and using certain pesticides prescribed by law (Ministerial Decree 849 of 2010 on the amendment of Ministerial Decision No. 554 for 2009 concerning the prohibited and restricted use of pesticides). The Ministry also issues decrees from time to time for the protection of the country's water and other resources.

    Clean-up/compensation

    Parties violating any of the country's water pollution laws are liable to civil actions and are responsible for all costs associated with any damage to the environment caused by their actions (Article 71, Environment Law (Federal Law No. 24 of 1999 for the protection and development of the environment)). Offending parties can also be asked to compensate individuals for the losses caused by the pollution. NGOs can also institute civil suits against environmental offenders.

    Penalties

    Offences under the provisions of the Environment Law also attract stringent criminal and civil penalties. Offenders are liable to fines ranging from AED10,000 to AED1 million and to a prison sentence, depending on the gravity of the offence.

    Companies convicted of polluting water bodies with industrial or commercial waste are liable to a fine ranging from AED10,000 to AED100,000

    Air pollution

  • What is the regulatory regime for air pollution (whether part of an integrated regime or separate)?
  • Permits and regulator

    The Air Quality Department of the Ministry of Environment and Water regulates air pollution in the nation by issuing decrees and air standards.

    The Environment Agency–Abu Dhabi (EAD) is the main authority for regulating air pollution in Abu Dhabi.

    Dubai's Ports, Customs and Free Zones Corporation (Trakhees, which are part of the Dubai Department of Planning and Development) primarily supervises air pollution by companies in Dubai and sets maximum standards of discharge of air pollutants for air quality purposes.

    Prohibited activities

    The Environmental Law (see Question 1, Legislation) does not explicitly prohibit businesses from conducting activities but no operator or entity is allowed to commence activities unless it has conducted a detailed study of their effects on the environment (Article 4, Environmental Law (Federal Law No. 24 of 1999 for the protection and development of the environment)).

    Clean-up/compensation

    Parties that violate any provisions concerning air pollution in the Environmental Law are liable to a civil action and are responsible for all costs associated with any damage caused to the environment by their actions (Article 71, Environmental Law). They can also be asked to compensate individuals for any losses they incur from the polluting activities. NGOs can also institute civil litigation suits against environmental offenders.

    Penalties

    Fines ranging from AED2,000 to AED20,000 can be imposed on offenders, as well as criminal liability, depending on the nature and extent of the pollution.

    Climate change, renewable energy and energy efficiency

  • Are there any national targets or legal requirements for reducing greenhouse gas emissions, increasing the use of renewable energy (such as wind power) and/or increasing energy efficiency (for example in buildings and appliances)? Is there a national strategy on climate change, renewable energy and/or energy efficiency?
  • The UAE has initiated various environmental strategies to meet the growing population and the national goal of conserving the country's resources.

    Vision 2021 has the aim of attaining sustainable development to accompany diversification in the national economy and to increase investment in sectors such as clean energy, sustainable development, information technology and space technology.

    Abu Dhabi and Dubai have also initiated local strategies such as Abu Dhabi's Economic Vision 2030 and Dubai Plan 2021, with the primary objective of economic diversification and sustainable development.

    The recent (long-awaited) unveiling of UAE's Energy Plan 2050 aims to transform the country's energy sector into a clean energy sector by the year 2050, with the following long-term targets:

    • Clean energy: 44%.
    • Gas: 38%.
    • Clean coal: 12%.
    • Nuclear energy: 6%.

    This is a significant challenge since the economy has historically depended on the oil and gas sector.

    Federal government and the respective emirates' governments are working to achieve economic development by reducing carbon emissions and employing innovative technologies to improve industrial efficiency.

    The government has also set out a federal legislative framework for waste management, including an integrated waste management regime.

    In addition, the Blue Carbon Demonstration Project was initiated in 2013 to provide a strategic understanding of carbon sequestration (removal and storage of carbon gases) in Abu Dhabi. The scope of the initiative was expanded to cover the whole nation in 2014 due to the effectiveness of the project in Abu Dhabi.

    .

  • Is your jurisdiction party to the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol and/or the Paris Agreement? How are the requirements under those international agreements implemented or being implemented?
  • UAE ratified the United Nations Framework Convention on Climate Change (Kyoto Protocol) in 2005 and became a non-Annex 1 country, meaning it is not obliged to reduce its carbon emissions in accordance with the Protocol. However, the nation has opted to reduce its emissions by tracking the pollutants in the air and assessing policies for reducing GHG emissions. It also agreed (at the COP21 United Nations Climate Change Conference in December 2015) to generate 24% of its energy from renewable resources. Although UAE is not under any legal obligation to do so, the nation has initiated various national and local strategies to improve energy efficiency while reducing the total emissions and burning of fossilfuels (see Question 8).

  • What, if any, emissions/carbon trading schemes operate?
  • There is much potential for the increased use of carbon trading schemes, although the concept is relatively novel in the Middle East. Major free zones, such as the Dubai Multi Commodities Centre in Dubai, have entered the carbon sector and Dubai is becoming a centre for trading greenhouse gas emissions permits. The primary phase of the carbon trading scheme in the UAE was aimed at collecting about 6.5 million tonnes of carbon dioxide from industrial facilities that could later be transported and employed in oil reservoirs to enhance the process of oil recovery.

    However, the carbon trading market is still in its initial stages and the viability of this scheme can only be properly assessed once the sector has been established for longer.

    Environmental impact assessments

  • Are there any requirements to carry out environmental impact assessments (EIAs) for certain types of projects?
  • Scope

    An EIA must be undertaken for certain types of projects The Environment Agency–Abu Dhabi (EAD) has released a list of projects that may potentially require an EIA in accordance with the Environment Law, including fossil natural resources projects, non-fossil natural resources projects, industrial projects and agricultural projects among others. This list can be found in a document released by the EAD (Permitting of Development and Infrastructure in Abu Dhabi (EAD, EQ-PCE-SOP-02)) where the extent of potential environmental impacts is undetermined at the design phase. The result of the EIA will give an indication of which specific aspect(s) of the proposed project creates an impact on the environment.

    Permits and regulator

    In Abu Dhabi, the EAD grants permits to carry out projects on the basis of EIAs, while in Dubai, the Environment Planning and Studies Section (EPSS) of Environment Department in Dubai Municipality issues permits.

    The following documents must be submitted for the EIA process:

    • EIA summary.
    • EIA report.
    • EIA checklist.

    These reports and documents and any other technical report must be signed by the authorised person who prepared the report and by the project owner.

    Penalties

    Penalties for non-compliance with an EIA vary from AED1,000 to AED1 million, and a prison sentence of up to one year for criminal liability.

    Waste

  • What is the regulatory regime for waste?
  • Permits and regulator

    Abu Dhabi. The Environment Agency-Abu Dhabi (EAD) and the Centre for waste Management Abu Dhabi (CVM) issue the licences, approval and permits for waste management in that emirate. They also provide permits for (Law No. 21 of 2005 on waste management):

    • Waste management.
    •  
    •  
    •  
    • Trading of waste.

    Dubai. In Dubai, as in the other emirates, the municipality's Sustainable Waste Management department issues permits and licences to waste operators, and undertakes all responsibilities relating to waste management in the emirate.

    Prohibited activities

    The regulatory regime for waste prohibits the open burning of any waste unless that is specifically permitted by EAD and CVM. They also prohibit the open dumping of waste in desert, open area and highway verges.

    Operator criteria

    Operators of waste disposal sites must:

    • Seek preliminary approval from the competent authority.
    • Comply with the regulations laid down by the authority for storage, disposal and processing facilities.
    • Seek approval of the competent authority before storing any hazardous materials on site.
    • Seek annual approval from the competent authority for recurrent shipments of hazardous wastes.

    Special rules for certain waste

    Hazardous waste including asbestos, medical waste, waste from slaughterhouses and oil and gas waste must be disposed of in accordance with the specific legislation dealing with those materials (for example, Federal Cabinet Resolution No. 39 of 2006 on banning the import and production of asbestos (see Question 13)).

    Penalties

    Violations of the waste management provisions of the Environmental Law (Federal Law No. 24 of 1999 for the protection and development of the environment) can incur a fine of up to AED20,000 and/or a prison sentence of not less than one year.

    Asbestos

  • What is the regulatory regime for asbestos?
  • Companies and individuals dealing with asbestos must comply with the requirements of the following laws:

    • Federal Law No. 24 of 1999 for the protection and development of the environment( Environmental Law).
    • Federal Cabinet Resolution No. 39 of 2006 on banning the import and production of asbestos.
    • Federal Ministerial Decision No. 32 of 1982 on protecting employees from hazards at work.
    • Federal Ministerial Decision (4/1) of 1981 on determination of hazardous works.
    • Law No. 21 of 2005 for waste management.

    Abu Dhabi. Mandatory requirements relating to the use of asbestos in Abu Dhabi are set out in regulations issued by the emirate's Environment, Health and Safety Management System (Abu Dhabi EHS Regulatory Instrument).

    Dubai. The use of asbestos is regulated by the Public Health and Safety department of the Dubai municipality, which issues guidelines (Guidelines for Safety in Handling Asbestos).

    Others. The municipalities of the other emirates regulate the transport and disposal of asbestos in their respective jurisdictions.

    Prohibited activities

    Asbestos has been banned by the federal government (Federal Cabinet Resolution No. 39 of 2006 on banning the import and production of asbestos). Most of the activities involving asbestos relate to the transportation and disposal of the material.

    Main obligations

    Abu Dhabi. The EHS Regulatory Instrument (see above) sets out requirements for companies that deal in asbestos in the emirate, including that they must:

    • Identify potential asbestos materials by specialist consultant.
    • Develop an asbestos management plan to reduce risks.
    • Make all staff dealing with the material aware of the management plan.
    • Provide prescribed tools and equipment to staff in order to reduce the risk of exposure.
    • Dispose of the waste at the prescribed waste management site in Abu Dhabi.

    Dubai. The guidelines issued by the municipality (see above) require anyone handling asbestos to (among other requirements):

    Enclose asbestos waste in the prescribed manner.

    Provide accurate labelling of all materials containing asbestos.

    Provide prescribed safety tools and equipment to staff removing or dealing with the material.

    Dispose of the waste material at the prescribed waste management site in Dubai.

    Permits and regulator

    Abu Dhabi. Companies transporting and disposing of asbestos must obtain an official approval from the Centre of Waste Management–Abu Dhabi (Tadweer).

    Dubai. The Environmental Control Section of the Dubai municipality deals with companies that transport and dispose of asbestos and its waste materials.

    Others. The respective municipalities of the other emirates regulate activities involving asbestos.

    Penalties

    Anyone who contravenes the provisions relating to the disposal of hazardous materials can be sentenced to imprisonment of up to one year and/or a fine of between AED10,000 and AED 20,000 (Environmental Law).

    Contaminated land

  • What is the regulatory regime for contaminated land?
  • Regulator and legislation

    Abu Dhabi. The Environment Agency-Abu Dhabi (EAD) regulates the inspection and assessment of contaminated land in accordance with the:

    • Code of Practice–Contaminated Land Management.
    • Technical Guideline–Identification and Remediation of Contaminated Land.

    Dubai. The Environmental Planning and Studies section of the Environmental Department of Dubai municipality regulates and assesses contaminated land.

    Others. The municipalities of the other emirates regulate the inspection and assessment of contaminated land in their respective jurisdictions.

    The principal legislation governing soil pollution and the use of hazardous materials on the land is Federal Law No. 24 of 1999 for the protection and development of the environment (Environmental Law) Various local laws have also been enacted by emirates to combat specific issues relating to contaminated land in their respective jurisdiction.

    Investigation and clean-up

    The EAD conducts a systematic study of the land and the root cause of the contamination before evaluating the findings to identify an appropriate restoration plan.

    The Dubai municipality conducts a three-phase investigation as follows:

    • An environmental site assessment exercise identifies the environmental conditions of the site.
    • An evaluation of the findings is made and an action plan is generated for restoration.
    • Assessment of alternative clean-up methods, costs, and logistics is carried out and the remediation of the contaminated land is instigated, if appropriate.

    All the other emirates have a similar investigation and restoration process in place, ensuring that a detailed analysis of the land is conducted before clean-up works are commenced.

    The costs of the investigation process and consequent restoration are borne by the party who is responsible for the contamination.

    Penalties

    Any party who violates the provisions of the Environmental Law relating to contamination of land can incur a fine of between AED10,000 and AED100,000

  • Who is liable for the clean-up of contaminated land? Can this be excluded?
  • Liable party

    The party who is responsible for the cause of the contamination is liable for all the costs of investigation and remediation process. If more than one party is responsible for the contamination, they are jointly liable for the costs.

    There are currently no government funds available for clean-up works where the polluter is not financially solvent.

    Owner/occupier liability

    The owner of the land is responsible for engaging environmental experts to conduct a site assessment even before the formal investigation process begins.

    The owner, occupier or tenant of the land is also liable for any damage caused during the investigation and any indemnity that arises as a result of the process.

    Previous owner/occupier liability

    The regulations and guidelines issued by the relevant authorities do not specifically apportion liability to a previous owner or occupier who caused contamination to the land. Any dispute that arises between the parties over liability occurring before a transfer of ownership will be referred to a court of law in the relevant emirate.

    Limitation of liability

    The regulations of the municipalities of the various emirates and the Environment Agency-Abu Dhabi (EAD) strictly adheres to the "polluter pays" principle and does not set a limit on the extent of the polluter's liability to pay.

    Voluntary clean-up programme

    The UAE does not have specific legislation for voluntary clean-up programmes, although individual municipalities embark on clean-up campaigns from time to time to create general awareness in the society as well as restoring contaminated land.

  • Can a lender incur liability for contaminated land and is it common for a lender to incur liability? What steps do lenders commonly take to minimise liability?
  • Lender liability

    There are no specific provisions in legislation governing the liability of a lender for contamination of land and in such cases the court with the relevant jurisdiction will deal with the matter based on the particular circumstances in the case.

    The lender is generally not liable for the pollution or contamination that arises due to the past use of the land. However, the lender might have to initiate an investigation process and adhere to the guidelines of the local municipality.

    Minimising liability

    The court decides the matter depending on the underlying contract between the lender and borrower. A lender's liability can be minimised by including a provision stating that the borrower bears liability for contamination caused before the borrower's occupation or ownership.

  • Can an individual bring legal action against a polluter, owner or occupier?
  • The relevant authority generally institutes the investigation and other legal formalities against the polluter, owner or occupier. However, a third-party individual can bring a civil suit against the polluter, owner or occupier in the court if it has been affected by the contamination.

    Hydraulic fracturing

  • Is fracking being pursued or considered in your jurisdiction? If so, what is the regulatory framework that applies to manage environmental risks?
  • Consenting and environmental impact assessment

    The UAE does not have any legislation or regulation explicitly dealing with issues concerning hydraulic fracturing (fracking).

    Abu Dhabi is expected to increase its shale production capacity in the recent future in order to reduce its dependence on conventional oil.

    Other issues

    Despite fears that hydraulic fracturing creates a significant impact on water and air quality and is a great risk to human health the federal government appears to be in favour of producing shale gas as it will reduce the country's dependence on conventional gas.

    Environmental liability and asset/share transfers

  • In what circumstances can a buyer inherit pre-acquisition environmental liability in an asset sale/the sale of a company (share sale)?
  • Asset sale

    Buyers must undertake a thorough site check before completing the acquisition to verify compliance with any environmental regulations, permits or provisions.

    However, carrying out environmental due diligence in the UAE is not easy and seeking information on previous regulatory violations on a particular site can be a problematic and cumbersome process.

    Share sale

    The buyer of the shares of a company will not be liable if the sale agreement contains clauses stating that the former owner will continue to be liable for the pollution and relieving the buyer from past acts, liability, demands and claims on the company. Such a clause must not contravene the provisions of Federal Law Number 2 on Commercial Companies.

  • In what circumstances can a seller retain environmental liability after an asset sale/a share sale?
  • Asset sale

    In an asset sale process, the seller transfers the entire business with its rights and obligations and it is up to the buyer to accept the conditions of the sale. The sale and purchase of assets are generally governed by the provisions of Federal Law No. 18 of 1993.

    Share sale

    In the share sale process, the seller is at no risk of retaining the environmental liabilities after the sale as the buyer usually acquires all the liabilities attached to the sale unless there is any specific provision in the contract stating otherwise.

  • Does a seller have to disclose environmental information to the buyer in an asset sale/a share sale?
  • Asset sale

    The seller must generally disclose environmental information, especially that which relates to soil and contaminated land. If the seller fails to do so, the buyer can claim for damages.

    Share sale

    The seller must disclose known environment information in good faith.

  • Is environmental due diligence common in an asset sale/a share sale?
  • Scope

    Environment due diligence is increasing in company sales. The due diligence carried out by the seller/buyers is dependent on the type of the activity and the amount of environmental risk involved.

    Such due diligence has been a debatable issue because of significant change in climate policy after the UAE joined the Kyoto Protocol as an Annex-II country. The federal government is taking a cautious approach towards due diligence in the environmental sector.

    Types of assessment

    The types of assessment undertaken for a particular project depends on various factors including the likely extent of environmental impact, the master plan of the project and other data. Initially three types of assessment are conducted as follows:

    • Preliminary environment review (PER).
    • Strategic environment assessment (SEA).
    • Environment impact assessment (EIA) (see Question 11).

    Environmental consultants

    Environmental consultants are generally employed in the assessment process, in which the sellers in an asset or share sale hire the consultant for assessment reports and deliver the copy to the buyer.

    The consultants can be held liable for environmental reports submitted to the relevant authorities.

  • Are environmental warranties and indemnities usually given and what issues do they usually cover in an asset sale/a share sale?
  • Asset sale

    The ambit of coverage of an environmental indemnity clause depends on the provisions in the underlying contract. Parties can draft their own clauses to determine the specific limits of any environmental warranty.

    Share sale

    See above, Asset sale.

  • Are there usually limits on environmental warranties and indemnities?
  • Environmental warranties and indemnities are limited to the extent of contamination that occurred on the asset sold.

    Reporting and auditing

  • Do regulators keep public registers of environmental information? What is the procedure for a third party to search those registers?
  • The UAE Ministry of Climate Change and Environment maintains up-to-date statistics and reports on environmental issues in the UAE. This information is available at the Ministry's webpage at www.moccae.gov.ae/en/home.aspx .

  • Do companies have to carry out environmental auditing? Do companies have to report information to the regulators about environmental performance?
  • Companies are also required to carry out environmental auditing in accordance with regulations implemented by the respective emirate.

    The environmental audit report, which should include the root causes of the prior environmental issues, must be submitted to the relevant authority

  • Do companies have to report information to the regulators and the public about environmental incidents (such as water pollution and soil contamination)?
  • Companies must report all issues of environmental pollution to the relevant authority. Legal actions and environmental protection steps can then be initiated in accordance with Federal Law No. 24 of 1999 for the protection and development of the environment.

  • What powers do environmental regulators have to access a company?
  • The environmental regulators (see Question 1) are responsible for implementing regulations and conducting inspections in companies that may be responsible for environmental pollution.

  • What obligations are there on companies to report on environmental issues in their annual corporate reports?
  • Companies are required to report in the annual corporate report about any environmental damage and associated costs for which it is responsible (Federal Law No. 2 of 2015 regarding Commercial Companies).

    Environmental insurance

  • What types of insurance cover are available for environmental damage or liability, and what risks are usually covered? How easy is it to obtain environmental insurance and is it common in practice?
  • Types of insurance and risk

    There are two main types of insurance available for environmental liability:

    • Pollution Legal Liability (PLL): this policy is designed in accordance with the Environmental Damage Regulation, 2009 and includes the liability for damaging biodiversity.
    • Contractors Pollution Liability (CPL): this policy protects the contractors, developers and site owners against the pollution releases and sudden accidents caused at the sites.

    Obtaining insurance

    Environment insurance is easy to obtain and there are numerous insurance companies covering such risks.

    Environmental tax

  • What are the main environmental taxes?
  • There are no direct or indirect environmental taxes.

    Reform

  • Are there any proposals for significant reform of environmental law?
  • UAE has initiated various strategies towards protecting its environment and natural resources. The country has also been trying to structure its policies in conformity with international standards.

    The regulatory authorities

    UAE Ministry of Climate Change and Environment

    Main activities. This is a federal ministry that governs and regulates the issues surrounding the growing concern of climate change and its adverse effects on environmental conditions in UAE.

    www.moccae.gov.ae/en/home.aspx

    Environment Agency – Abu Dhabi

    Main activities. The EAD is the key authority that regulates environment related matters in the Emirate of Abu Dhabi. It is a governmental agency which drafts strategies and regulations for the protection of the environment in Abu Dhabi.

    www.ead.ae/SitePages/Home.aspx

    Dubai Municipality

    Main activities. The Dubai Municipality oversees the urban development, environmental issues, commercial practices and issuance of licences in the Emirate of Dubai.

    www.dm.gov.ae/wps/portal/home

    Online resources

    Legislation

    www.government.ae/en/laws

    Description. The official portal for UAE government legislation.

    Contributor profiles

    Sunil Thacker, Senior Partner

    STA Law Firm

    T +971 4 368 9727 F +971 3 369 5126 corporate@stalawfirm.com www.stalawfirm.com

    Non-professional qualifications. LLM; ILEC; LLB; B Com

    Languages. English, Hindi, Malayalam, Tamil, French, Arabic, Portuguese, and Spanish

    George SK, Associate

    STA Law Firm

    T +971 4 368 9727 F +971 3 369 5126 corporate@stalawfirm.com www.stalawfirm.com

    Professional qualifications. BBA; LLB (with emphasis on corporate law)

    Recent transactions

    • Assisted numerous clients in various environment-related matters including pollution, real estate development, land acquisition and environmental legislation.
    • Advising international clients on environment compliance in the Middle East.

    Publications

    • STA's publications can be found electronically here: www.stalawfirm.com/en/downloads/lists/publications.html.
    • STA publishes a monthly blog entitled 'Court Uncourt' and can be found electronically here: www.stalawfirm.com/en/blogs/lists.html

     

    ]]>
    Sat, 10 Jun 2017 00:00:00 GMT
    <![CDATA[Legal Responsibility of the New Partner in a Company]]> Legal Responsibility of the New Partner in a Company

    New and strategic partnerships can be a great way to reinvigorate a dull and lackluster business. This exercise has been carried out several times over the past few years by Fortune 200 companies choosing to partner to establish a stronghold on their market. For example, Apple and IBM, two large corporations, decided to partner in 2014. Spotify and Uber also partnered in 2014 to provide music and ride-sharing services together. Who would've thought?

    In this article, we would like to explore the inclusion of new partners in businesses and their legal responsibilities, particularly within UAE jurisdiction.

    The UAE Companies Law on Commercial Companies[i] (the Companies Law) defines a legal entity as: 

    "A contract under which two or more persons are committed to participating in an economic enterprise with the objective of profit realization by contributing a share of capital or work and dividing among themselves the profit or loss resulting from the business."

    To form a company among two or more persons, the number of persons required to incorporate and establish a company vary according to the legal form of the entity in question.

    The different legal forms that may be adopted by a company are set out according to the law, in Article 9 of the Companies Law, which states that: 

    "A company shall take one of the following forms: Joint Liability Company; Simple Commandite Company Limited Liability company; Public Joint – Stock Company; Private Joint – Stock Company."

    Legislators have removed two types of legal forms namely Joint Ventures and Company Limited by Shares. This amendment aimed primarily at introducing added transparency and clarity. Since joint ventures do not possess a separate legal personality, it is considered easy enough for partners to up and disappear, which would lead to a substantial loss for the other partners involved. Furthermore, companies limited by shares are almost entirely similar to 'simple, limited partnerships,' which makes their existence unnecessary.

    Additionally, we refer to the company de-facto, which the Cassation Judiciary has defined as:

     "...the commercial enterprise, in general, is incorporated among the partners, even if it didn't undertake one of the forms referred to in the fifth article of the commercial companies law, as an entity de facto and it shall be (as soon as incorporated) a legal personality".

    The company de facto, however, lacks the procedures and stipulations which are determined by the law, regarding the incorporation of a company. Therefore, this business entity gets formed by the will of the partners involved. The company de facto may also get established owing to circumstances other than the partners' will to form once. For example, a company de facto may result when several persons inherit an individual institution, which, therefore, turns into a company de facto.

    For instance, in a limited liability company, an activity may be commenced with two partners, while the maximum number of partners permitted is fifty (50). The number of partners in a private joint stock company shall not be less than three persons and in a public joint stock company, may not be less than ten (10) persons.

    UAE Companies Law, however, also permits the inclusion of a person in the business as a partner post incorporation. This matter, however, varies from one legal form of a company to another.

    This discussion leads to the question, what is the responsibility of the new partner who has joined a company after its incorporation?

    Joint Liability Company

    In a joint liability company, Article 30 of the Companies Law states that: "A Joint Liability Company is an entity which consists of two or more partners who are natural persons, to be jointly responsible for all their monies for the obligations of the company." In layman terms, this means that partners are jointly responsible and have unlimited liability for all the debts of their business. Creditors of the company have legal recourse to have their debts settled by the partners of the business entity. However, the law prohibits retired partners from this obligation after his withdrawal gets proclaimed.

    New partners can, of course, get added to a general partnership, and one of the ways this can effect is by transfer of shares from an old partner, who might be retiring as aforementioned, to the new. The law also states that partners cannot assign shares without the overt permission of all other partners involved in the company.

    Once the transfer of shares gets approved, the abovementioned liability due to creditors will be applied on the new partner so that the latter shall be responsible for the debts of the company which is former and uses after his joining the company.[ii]

    Simple Commandite Company

    The capacities and responsibilities of the partners in the simple-commandite company are very different from the ones in a general partnership. This legal form of a company consists of one or more joint partners with one or more silent partners. As the former is personally liable for all the commitments of the company, the latter is only responsible for these duties within the limits of his shares in the capital of the entity. The Companies' Law accentuates that any text about the difference of responsibility of the partner shall be according to partner's capacity as joint or silent (Article 62).

    The legal requirements of a share transfer that apply to general partnership companies also apply to simple-commandite companies. Therefore, transfer of shares can effect per the constitutive documents of the entity, or with the approval of all the partners involved.

    Joint Stock Company

    A partner in a joint stock company is responsible for the commitments of his entity in as much as his contribution to the share capital.

    Partners are allowed to transfer their shares. However, this transfer does not get into consideration till the date of registering this transfer in the register related to shares. Despite this snag, non-registration of a share does not hinder the new partner from claiming his right on those shares, from the date of conclusion of the sale contract. The Court of Cassation adjudicated in this regard in Appeal Number 155 of 2002 (referring to the old UAE Commercial Companies Law (Federal Law Number 8 of 1984), held that:   

    "if the text in the Article 162 of the Companies Laws provides that: 'the ownership of shares gets transferred by confirming the transfer in writing in the register of the company, and the transfer should be marked on the share …' This provision clarifies that the ownership of the shares in general of a joint stock company does not get transferred from the seller to the buyer except if same gets registered on shares register (where company records all share sale transactions). However, that said, the sale contract of those shares generates a commitment on the seller to transfer its ownership to the buyer, and it results in that its dividend shall be for the buyer from the date of concluding the sale contract, even if it is not registered unless it is agreed otherwise."

    Limited Liability Company

    A partner in a limited liability company is not responsible for the debts and commitments of this company, except to the extent of shares held by him/her. Debts which occupy the financial disclosure of this entity are related to its shares; therefore, there is no significant difference between old or new partners. They are similarly liable, whether they are founding or non-founding partners.

    As for the limited liability company, the Companies Law has constituted a distinct system for transferring the share of one partner to someone else. And it can be summarized in the following:

  • the partner who wishes to transfer his share shall notify the rest of the partners with this desire and notification shall be administered through the manager of the company.              
  • the manager shall clarify the conditions of that transfer according to the notice by the partner who is desirous of and willing to sell the shares.
  • each partner shall have the right to retrieve this share with the price agreed upon, and in the case of disagreement, one or more experts with technical and financial experience in the subject matter shall evaluate it.
  • The partner who is willing to transfer should have the right to do whatever he wants with his share if 30 days passed from the date of notifying the wish of transfer.

    Conclusion

    As we notice, there is a pattern to the legal responsibilities of a new partner. This pattern is, that every partner in a company is responsible for the debts of his entity within the limits of his share, regardless of the legal form of the business he is involved. There is no real difference, concerning legal responsibility, between founding partners, and new partners who enter the company after incorporation and commencement of the activity. And perhaps, this rule is justified, for two reasons. First being that the debt is directly related to the company's activities, and to the shares that form the capital of this business. Subsequently, it just makes sense that these debts have nothing to do with the partners themselves. Secondly, a valid assumption is made that the new partner chooses to enter a company after thoroughly acquainting himself with the financial situation of this entity. Hence, he is acutely aware of what he's getting himself into and has made this choice of his accord. The only exception to this rule is the liability of joint partners in partnership commendam companies and simple commandite companies.

    [i] Federal Law No. (2) Of 2015

     

    [ii] Article 54 - Where a partner joins the company, he shall be jointly liable with the other partners and in all his assets for all the former obligations of the company prior to his joining the company, provided that the company has already disclosed such obligations to that partner, and shall be jointly liable with the other partners for the obligations of the company after to his joining the same. Any agreement between the partners to the contrary shall not be effective as evidence against third parties.

     

     

     

     

    ]]>
    Thu, 08 Jun 2017 17:00:00 GMT
    <![CDATA[The Effect of Brexit on International Arbitration]]> The Effect of Brexit on International Arbitration

    'When life gives you orange, make orange juice'1

    Does life always give oranges, you may ask? To some, oranges are acidic but for a few a morning without orange juice is like a day without sunshine. They are packed with vitamin C and…but hang on; this was not my topic…back to business.

    Not all news is interesting and as such some news calls for rethinking. These headlines may mean more than sunshine and oranges so perhaps may leave a reader shocked, in deep thinking, or intrigued. That is exactly what happened with the Brexit.

    Britain's exit from the European Union shocked nations across the globe. The people of Britain voted for a British exit, or Brexit, from the EU in a historic referendum in June 2016. The outcome has prompted jubilant celebrations among Euro-sceptics around Europe and sent economic shockwaves around the globe. There are several concerns and issues which are unanswered and have left a lot of businesses with the impatient thought of what happens next. This article intends to present a brief on the implications surrounding international arbitration and the global importance of London as a seat of arbitration.

    Numerous jurists have expressed their views that the position post-Brexit would remain unchanged when it comes to London as a seat of arbitration. In the midst of 2016, when Britain showcased their exit from the UK, London was the seat of 4,738 international commercial arbitrations, mediations, and adjudications. The main legislation that provides the framework for arbitration in the UK, the Arbitration Act 1996, is not triggered by EU law and will continue in force following the UK's exit from the EU. The Act remains supportive and it is unlikely to impose any adverse effects. Considering the interpretation of Arbitration Act over the last two decades, the English and Welsh courts have majorly developed arbitration friendly and noninterventionist approach, which we assume uninterrupted with Brexit.

    It is imperative to consider that the UK remains a signatory to Convention on the Recognition of Enforcement of Foreign Arbitral Awards 1958 (more commonly known as the New York Convention), which provides for the enforcement of arbitral awards across currently 156 jurisdictions, including all EU Member States. When the parties choose their contracts to be governed by English or Welsh Law, the choice of London as the arbitral seat is preferred.  The popularity of English and Welsh law (and also English language) in international commercial transactions is unlikely to wane significantly post-Brexit. The most preferred for this jurisdiction is a pool of experienced arbitrators, counsel, and experts, which is also home to several popular arbitration institutions, such as the LCIA (London Court of International Arbitration) and CIArb (Chartered Institute of Arbitrators). Arbitration is likely to become a popular choice in light of Brexit, as it will provide stability and certainty. Most notably, we know that arbitration awards rendered in the UK will continue to be enforceable across the EU pursuant to the New York Convention. This contrasts with the enforcement of English and Welsh judgments, the regime for which will probably change once the UK exits the EU.

    Brexit may also improve London's attractiveness as a seat for arbitration. Not only may third parties see English and Welsh law as being more certain and neutral if it no longer binds itself to the decisions of the Court of Justice of the European Union (and thus adopt 'English law, English seat' when drafting dispute resolution provisions), but the English and Welsh courts may also be willing to re-establish the use of anti-suit injunctions, currently prohibited under EU law, in respect of EU related jurisdictional disputes, to prevent parties from commencing actions in EU courts in breach of arbitration agreements.

    Hurdles Ahead?

    A member state wishing to leave the EU must trigger the exit process by notifying the EU under Article 50 of its intention to leave. The UK decides on the timing of the notification. Once served, the notice triggers a period of up to two years during which negotiations will take place between the UK and the remaining 27 member states as to the terms of its exit. The two-year period can be extended, but that requires unanimous agreement of all EU member states.

    Further, implications on the contractual obligations and relationships would be a major concern where parties may avoid their obligations relying on force majeure clause or a material change clause or may argue that the contract is frustrated. The contractual mechanism will be considered carefully where the parties may seek to avoid any negotiations about contractual performances, once the parties assess the legal, economic and regulatory landscape of this political exit.

    Changes in the regime would also establish the scope for investors to claim against the UK under its bilateral and multilateral investment treaties, based for example, on their expectations as to the stability of the regulatory system into which they invested. The fact that there may be uncertainty as to the content of English law after a withdrawal could in itself lead to disputes, as parties seek to test the position. The situation may arise where any UK legislation would be appealed or amended and it would no longer be required to comply with an EU directive. In addition, there may be scope for argument in the context of principles established by EU case law prior to the exit should continue to influence the UK courts' interpretation of UK law, unless, where UK legislation introduced post-exit is similar to an EU Regulation.

    In regard to dispute resolution procedures, exit from the EU will mean that key EU legislation regarding jurisdiction and reciprocal enforcement of judgments (namely the Brussels Regulation) would no longer apply to the UK. It is likely that the UK would seek to reach an agreement with the EU on such matters, or seek to join existing conventions such as the 2007 Lugano Convention or 2005 Hague Convention on Choice of Court Agreements. In default of that, English law has its own domestic rules on jurisdiction and enforcement of judgments which would very likely apply in international cases in the English courts involving EU parties. Importantly such rules will respect any choice of court provision, and so in commercial cases where a choice has been exercised, there is unlikely to be any material effect on the conduct of cases.

    Overall, although there may be some instability and uncertainty, it seems unlikely that Brexit would substantially damage the UK's position as a premier dispute resolution center. Arbitration with a seat in London should not be affected by the exit from the EU because the UK will remain a party to the New York Convention 1958, along with all the remaining EU Member States.


    [i] Inspired by the original quote of Elbert Hubbard

     

    ]]>
    Sun, 04 Jun 2017 00:00:00 GMT
    <![CDATA[A Study of the Indian Tax System]]> Part 1: A Study of the Indian Tax System  

    Part 2: Taxation of E-commerce Transactions

    From the printing press to the digital revolution, humankind has been inclined to innovate first and plan later. It goes without saying that in the modern world, technology develops faster than the law. Cell- phones and high-tech computers are common examples of technologies that have grown beyond their support structure.

    Technical advances sometimes outstrip the development of legal systems and often force basic principles to be reexamined. Advances in the fields of information technology, biotechnology, e-commerce, and out- sourcing, for example, have recently created a host of celebrated legal confusions and debates. This article outlines the main issues in the international taxation of e-commerce transactions with a particular emphasis on India.

    Since nearly a decade ago, because of the diminished need for a vendor to have a physical presence in the country of the customer, a frequent consequence of electronic commerce has been to shift revenues away from source jurisdictions and toward residence jurisdictions.1 The tax authorities were faced with a challenge, and to overcome it; they continued to apply principles of traditional tax dealing essentially with the physical movement of goods and services. In their objective to implement a tax to the invisible trade, governments around the world have fine-tuned regulations to extend the scope of national tax regulations. The OECD's support and guidelines help these governments ensure that the right arm's length principle is applied. This article will examine significant tax statutes in India with a particular emphasis on the tax system and the powers of tax officers, and will explore the legalities involved in the taxation of information technology and biotech companies.

    I. Taxation in India   The world's 12th-largest economy at market exchange rates and the fourth largest in purchasing power, India has a quasi-federal form of government. India's Constitution is the longest and the most exhaustive constitution of any independent nation in the world. India has a three-tier federal structure, com- prised of the union or central government, the state governments, and the local bodies, all of which have the authority to levy taxes. Besides direct taxes such as the income tax, indirect forms of tax are collected such as the sales tax, VAT, service tax, stamp duty, customs, and excise duty.   A. Income Tax Act - Background   Historians have argued that modern ideas and institutions of law, medicine, and criminal justice were first tested in the colonies and later implemented in metropolitan areas.2 The tax system was first introduced in India during the British rule. Today,  the Income Tax  Act, 1961 (Act 43 of  1961) - the primary legislation dealing with taxability of income - is self-contained legislation. The Income Tax Act empowers the Central Board of  Direct Taxes to formulate rules for implementing the provisions of the ITA.3 Income tax is a tax payable under section 139 of the ITA by filing a return (form/declaration) of income,4 at the rate enacted by the Union Budget (Fi- nance Act) for every year on the total income earned in the previous year by every person (individual or company) who is a resident, nonresident, or resident who is not ordinarily resident. Residents are taxable for all their income, including income arising outside India.   The division of tax and expenditure powers is spelled out in the constitution. Article 366(29) defines tax on income as including tax in the nature of an excess profits tax.   Thus, the Indian Parliament has the exclusive power to levy a tax on income other than agricultural income. The Indian Parliament also has the power to make laws regarding any other matters not enumerated, including any tax not mentioned. While agriculture plays a dominant role in the economy, a government task force recommended that agricultural income be taxed.5 The share of revenue generated from agriculture has been declining while the IT and outsourcing services sector has become a major catalyst for the Indian economy given its effects on income generation and job creation.  

    Table 1. Structure of the Economy (% of GDP)

     

    1982

    1992

    2001

    2002

    2007

    Agriculture

    35.9

    30.9

    25.0

    22.7

    16.6

    Industry

    25.8

    26.7

    25.7

    26.6

    28.4

    Manufacturing

    16.2

    16.2

    15.3

    15.6

    -

    Services

    38.3

    42.3

    49.4

    50.7

    55.0

     

      Accordingly, it is Parliament and the central government that has the power to tax income, not the states. However, the state legislatures have the power to impose a tax on professions, trades, and employments.   States also have the power to tax luxuries, including entertainments, amusements, betting, and gambling.   B. Powers Vested in the Tax Department   The ITA was passed to charge income tax on the total income of a person in the previous year. Person and income have been defined in the preliminary to the ITA, which provides an exhaustive list of definitions.   The General Clauses Act and past precedents further aid in understanding the definition of terms not de- fined in the ITA. The ITA in Chapter XIV defines the procedures for assessing total income; the appointment and control of income tax authorities are in Chapter XIII, and the jurisdiction of the income tax authorities is in Chapter XIII-B. The income tax officer (known as an assessing officer, or AO) is the first officer in charge and is vested with quasi-judicial powers and duties regarding tax administration, tax assessment, and prosecution on the discovery of illegitimate inaccuracies, concealment of income, incorrect valuation, or violations.   Income tax authorities have been vested with powers that are coterminous with the powers of a court under section 75 of the Code of Civil Procedure, 1908. The ITA empowers the tax recovery officer to appoint a receiver for the management of the defaulter's movable and immovable property.6   C. Assessment Procedures   1. Investigative Powers of the Tax Officers   Chapter XIV of the Income Tax Act deals with the assessment procedure. Section 143 confers investigative powers (except the power to rectify) on the assessing officer. Under section 142, powers are conferred on the assessing officer to make relevant inquiries and obtain details or information before beginning the assessment procedure.   The Supreme Court of India and subordinate courts have in several cases ruled that the tax officers are duty bound to exercise a reasonable degree of care and caution in handling the assessment process.7 The officers do not have to assess the income of one person in the hands of another.8 If any tax or interest is found due on the basis of such return, after adjustments,9 the assessing officer will issue a notice of demand under section 156 of the ITA. Similarly, if any refund is due to the taxpayer, the money will be sent to him, but not more than one year from the end of the financial year in which the return or declaration is made.10 Under section 143(1), it is incumbent on the taxpayer to furnish the information that the assessing officer may ask for. Under section 281B, the tax officers have been conferred powers to provisionally attach properties during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income that has escaped assessment.   Through a legal fiction, section 136 of the ITA makes an assessment proceeding a judicial proceeding. The assessment proceeding, therefore, is a part of the judicial process.   2. Natural Justice   The Supreme Court has ruled that:   Assessment proceedings before the income tax officer are judicial proceedings and all the incidents of such judicial proceedings have to be ob- served before the result is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act.11   The principles of natural justice that are deeply em- bedded in the Indian Constitution apply to assessment proceedings as well.12 The elementary principle of natural justice is that the assessee should have knowledge of the material that is going to be used against him so that he may be able to meet it. The courts have held that ''when a power is given to do a certain thing in a certain manner, the same must be done in that manner alone or not at all. All other proceedings are necessarily forbidden.''13   3. The Assessment Process   Under section 143(2) the assessing officer may form an opinion that any claim of loss, exemption, deduction, allowance, or relief made in a tax return is inadmissible. If the AO considers it necessary to ensure that the assessee has not understated the income or has not computed excessive loss or underpaid the tax, he may serve the assessee a notice within the expiration of 12 months from the end of the month in which the return is furnished. This notice requires the assessee, on a date to be specified, to produce any evidence on which the assessee may rely in support of the return.   In the event the assessing officer has doubts about the income disclosed by the assessee, the AO may proceed against more than one person.14   The assessing officer, besides exercising reasonable caution in the assessment process, must under all circumstances relate his estimate or calculation to some evidence on the record. He cannot make an arbitrary addition and base his conclusion purely on guess- work.15 If the order is passed by assessing in a mechanical manner without giving any reasons in the or- der itself and without any indication as to the prior approval of the higher authority, then the order would not be valid and would be liable to be quashed.   Under section 143(3) the assessing officer, by an or- der in writing, can allow or reject the claim specified in the notice and make an assessment determining the total income or loss and the sum payable by the assessee on the basis of the assessment. The officer is duty bound to prove that the income has been concealed by the assessee or that information furnished in the declaration or return is not bona fide.   Once the assessment order under section 143 has been duly processed, the assessee cannot request any rectification,16 including rectification as to an enhanced claim in expenses or depreciation.17 Several past precedents have ruled that if an order passed by an assess- ing officer is unsigned, the order is invalid.18    4. Best Judgment Assessment     Under Section 144 of the ITA, the assessing officer is empowered to proceed with a best judgment assessment if the taxpayer fails to file a return of income or fails to comply with terms of a notice issued by the AO under Section142(1) or 143(2).   5. Income Escaping Assessment     Section 147 of the ITA confers discretionary19 powers on the assessing officer to charge tax in cases when he has reason to believe that any income charge- able to tax has escaped assessment for any assessment year. These powers extend only to the extent of income that has escaped assessment and not to revising, re- opening, or reconsidering the whole assessment. The income tax officer is required to set out clear reasons   in his notice to the taxpayer indicating the basis or the reason for coming to the conclusion that it is a fit case to issue notice under section 148. The reasons must be certain and definite, not loose or vague.20 The phrase ''reason to believe'' in section 147 of the ITA is stronger than the phrase ''is satisfied.''21 ''Reason to believe'' postulates a foundation based on information and a belief based on reasons.22 Regarding the word ''information,'' it ''must be something more than a mere rumor or a gossip or a hunch.''23 The taxpayer also has a duty to disclose all relevant primary facts. On disclosure of these facts, the taxpayer is relieved of his duty of any further disclosure in assisting the tax officer.24 The time notice under section 148 can be is- sued before the expiration of four years from the end of the relevant assessment year, irrespective of the quantum of income escaping assessment.   6. Death of a Party during the Assessment Process     Generally, the assessment process does not extend to the estate of a deceased person beyond the previous year in which the person died.25 If the legal representative, after inheriting the assets of the deceased, had converted the assets into a different form, the income tax officers are entitled to proceed against the substituted asset in the same way as they could have against the original asset of the deceased. Furthermore, it has been held that when notice was served on the assessee before his death, fresh notice to the legal representative is not necessary.26 In an assessment made on a legal representative, the name of the legal representative must be specified. It will not suffice to describe him as a successor-in-interest.27   If a person dies executing a will appointing more than one executor or dies intestate leaving behind more than one heir, the assessing officer will proceed to assess the total income of the deceased against all the executors or the legal representatives.28   However, if an assessee files a tax return, that return is not presumed to be incorrect. It was held that once an assessment is reopened, the previous under-assessment is set aside and the whole proceedings start anew.29   7. Taxability of Court Compensation     Compensation awarded by the court is taxable, but not all courts have agreed. The Punjab and Haryana Court ruled in a case in which it ultimately confirmed the decision of the tribunal that the interest awarded by the High Court to an assessee is not taxable.30   8. Tax payer's right to Appeal      Chapter XX of the ITA deals with provisions relating to appeals and revisions. Part X of the Income Tax Rules provides rules and forms in relation to appeals. The Income Tax (Appellate Tribunal) Rules, 1963, gov- ern the appellate proceedings. Section 249, together with rule 45, provides for the form of appeal and its limitations for the First appeal before the commissioner of income tax (appeals) (CIT(A)).   9. Tax Tribunals      Section 252 of the ITA provides for constitution of an appellate tribunal by the central government. Part XXIVA of the Indian Constitution empowers the government to constitute appropriate tribunals for speedy adjudication and disposal of disputes. The Income Tax Appellate Tribunal is the second-tier appellate forum under the ITA and is the final fact-finding authority.   The tribunal functions under the Ministry of Law (not the Ministry of Finance, which controls the Income Tax Department). The minister of finance has in the past controlled a few provisions relating to the tribunal.   The proceedings before the Tribunal are judicial proceedings. Section 253 of the ITA provides for the form of appeal and its limitations for the second appeal before the Tribunal. Similarly, Income Tax (Appellate Tribunal) Rules, 1963, govern proceedings before the tribunal. Section 255(5) of the ITA confers power on the tribunal to regulate its own procedure and the procedure of its benches in all matters arising out of the exercise of its powers or of the discharge of its functions.   9. Procedure to File Appeal      Rules 6 through 9 of the Appellate Tribunal Rules prescribe the actual procedure for filing an appeal before the tribunal. The form of appeal is to be signed and verified by the person who is authorized to sign the income tax return under section 140 of the ITA. In the event the appeal is defective for any reason, the appellant has the opportunity to rectify it and file it before the tribunal. Similarly, minor errors or incorrect descriptions of some terms may be rectified. Under Rule 12 of the Appellate Tribunal Rules, the Tribunal may reject or return for correction a memorandum of appeal that is not in the proper form. On proper rectification, the appellant may present the appeal again for consideration and further action.   10. Res Judicata      The principle of res judicata does not strictly apply to income tax proceedings and, therefore, an assessee can always challenge an action of the assessing officer in a particular year.   11. Condonation of Delay     In N. Balakrishnan v. M. Krishnamurthy,31 the court explained the scope of limitation and condonation of delay:   The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy.   D. Conclusion   Table 2 shows the revenue collections of the tax department. While the gross domestic product has been on a constant rise, the tax revenues collected by the income tax departments in India have also grown significantly. The next section of the article explores taxa- tion of e-commerce and considers precedents passed by the Authority for Advance Rulings and the Supreme Court of India.                         Table 2: Revenue Collection (USD in millions)  

     

    1977-

    1978

    1985-

    1986

    1993-

    1994

    1999-

    2000

    2003-

    2004

    Personal income

    208

    560

    1,698

    3,880

    5,671

    Corporate tax

    2.86

    6.71

    23.55

    71.86

    142.81

    Direct tax paid by households

    4.44

    11.65

    40.48

    91.86

    5,670.82

    Indirect tax less subsidies

    19.30

    62.99

    172.46

    387.53

    5,273.10

       

    Since nearly a decade ago, it was first predicted that because of the diminished need for a vendor to have a physical presence in the country of the customer, one of the likely effects of electronic commerce would be a shifting of revenues away from source jurisdictions and toward residence jurisdictions.32 Today, e-commerce has encouraged companies to have online presence with minimum staff and maximum impact. Products and services are rendered electronically. Tax authorities worldwide face critical issues concerning cross-border e-commerce transactions. The challenge lies in deter- mining the place where income has accrued, assessing the character of income, and ascertaining whether a permanent establishment was created in the source country. Digitized movement of content, services, or goods also raises a question as to whether a particular transaction is a service, product, or license.

    A.  Background   There are many definitions of e-commerce. The OECD defines an electronic transaction as ''the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on or off-line.''33   The OECD's definition of e-commerce is broad.   The U.S. Treasury, however, defines e-commerce as the ''use of electronic means to improve the way a company does business and to create value or competitive advantages for the company. Improvements can be in the way a company transacts business-to-business (B2B), business-to-consumer (B2C) and its intra-business transactions to provide goods and services.''34   Today there are five different segments of electronic commerce: B2B, B2C, consumer-to-consumer (C2C), business-to-government (B2G), and consumer-to- government (C2G).   1. Investigative Powers of the Tax Officers   Several international bodies have addressed the areas of e-commerce. The United Nations Commission on International Trade Law (UNCITRAL) proposed the Model Law on Electronic Commerce in 1996,35 which was followed by the proposed Model Law on Electronic Signatures 2001.36 The U.N. Conference on Trade and Development Division of Services Infrastructure for Development and Trade Efficiency has set several workshops and roundtables on electronic commerce.   The World Intellectual Property Organization has contributed to the development of e-commerce by ex- amining issues surrounding the growth and governance of the Internet Corporation for Assigned Names and Numbers. Similarly, several international bodies such as the World Customs Organization, the International Telecommunications Union, and the U.N. Economic Commission for Europe have rendered technical assistance. Finally, the OECD has made a large contribu- tion toward e-commerce. In addition to continuously organizing conferences, the OECD has played a major role in the international policy framework to foster and promote e-commerce worldwide in several areas such as taxation, international cooperation, and tax adminis- tration.   2. E-commerce in India   The Indian government had long recognized the need and importance of information technology. Be- cause of the government's strong initiative in providing the regulatory framework and requisite infrastructure, India is slowly gaining a strong position in the areas of outsourcing, B2B wholesale travel, financial and bank- ing products, and e-commerce.   3. E-commerce Regulations   The Department of Electronics was tasked with drafting laws on information and technology. The first preliminary draft of the law was ready in July 1998 and placed before the Lok Sabha for consideration on December 16, 1999.37 The IT Bill provided a basic framework for the e-commerce regime. The draft later underwent substantial amendments, and the Union Cabinet approved the bill on May 13, 2000, and both houses of Parliament passed it on May 17, 2000. The presidential assent was finally received in June 2000.38   The Information Technology Act, 2000, amended other statutory enactments and covers such things as digital signatures, electronic governance, attribution, acknowledgment, and dispatch of electronic records, secure electronic records, and secure digital signatures, and regulation of certifying authorities.  

    Table 3. E-Commerce in India (USD millions)

    Year

    Total

    E-Commerce Transactions

    B2C

    B2B

    ]]>
    Thu, 01 Jun 2017 11:00:00 GMT
    <![CDATA[Because We're Stronger Together – Nuclear Energy in India]]> Because We're Stronger Together – Nuclear Energy in India

    "I would like nuclear fusion to become a practical power source. It would provide an inexhaustible supply of energy, without pollution or global warming."                                                                                                                                                                                       -Stephen Hawking

    As an author of the article, I weigh the strength of Nuclear energy against the Country's title as a Developing Country!  India has been long in the status of developing the country for ages now. It has all the potential to be termed as a Super Nation, yet some strands are pulled back as the growing challenges do not equate the supply and the deficit.  The lack of basic livelihood and energy infrastructure down weighs the economic development. Energy is a crucial element for economic development, the growth of economic development reflects the demand for better-quality energy services. Developed nations have built up virtuous circles of improvement in energy framework and commercial development. Whereas, the procedure has scarcely got off the ground for many impoverished countries.

    Power sector satisfies the most essential and fundamental human needs: food and housing. It additionally adds to social development by enhancing education and public health. Amid the early phases of development, the supreme measure of energy utilized per capita and the share of current energy services – particularly power – are key contributors of human advancement.

    "Nuclear power is one hell of a way to boil water"

    -Albert Einstein.

    The Scientific Bit

    Nuclear plants are a similar platform as coal and hydro plants that consume coal, oil and flammable gas, and deliver power by bubbling water into steam. This steam then swings turbines to produce power. The distinction is that nuclear plants don't consume anything. Rather, they utilize uranium fuel, comprising of durable ceramic pellets, to create power through a procedure called fission.

    Nuclear power plants obtain the required temperature to facilitate steam running through a physical process. This process termed as fission involves the splitting of atoms of uranium in the core of a Nuclear reactor. The uranium fuel comprises of small, hard ceramic pellets that are fed to vertical tubes. A sizeable quantity of this fuel is embedded into the reactor.

    A Feather in the Hat:

    India has a flourishing indigenous nuclear power and hopes to have 14.6 GWe nuclear limit online by 2024 and 63 GWe by the year 2032. It means to supply 25% of power from nuclear energy by 2050. Because of prior exchange bans and absence of indigenous uranium, India has especially been building up a nuclear fuel cycle to endeavor its reserves of thorium. India has a dream of turning into a world pioneer in Nuclear innovation because of its mastery in fast reactors and thorium fuel cycle.

    The Atomic Energy (Amendment) Act, 2015 – Key Highlights:

    • The Nuclear Power Corporation of India Limited (NPCIL) is in charge of design, development, dispatching and operation of thermal Nuclear power plants. The Nuclear Energy (Amendment) Act, 2015 came into force to enable the NPCIL to enter joint ventures with other Public Sector Undertakings(PSUs). 
    • The amendment has been brought to facilitate the quick extension of Nuclear power, utility and foundation and the utilizing of nuclear energy for peaceful purposes. Under the Act, a "Government Company" is one in which the Central Government holds no less than 51 (fifty-one) percent of the paid-up share capital.
    • The 1962 Nuclear Energy Act disallows private control of Nuclear power generation, and the 2016 changes permitting public sector joint ventures do not extend to private sector companies, nor allow direct foreign investment in nuclear energy, aside from the supply chain. 
    • The primary target of empowering the JVs is to accomplish the extension of nuclear power limit in the nation. Up until this point, three joint ventures organizations – Anushakti Vidhyut Nigam Limited, Indian Oil Nuclear Energy Corporation Limited and Nalco Power Company Limited have consolidated.
    • India holds 21 working nuclear projects currently in the country, which produce an expected 5.8 GW of electricity of a sum of roughly 300 GW of installed capacity as of May 2016. This records for only 1.8 percent of total generating capacity. Five nuclear projects are targeted to finish in 2017, including a further 3.8 GW, taking the aggregate total installed capacity to 9.6 GW.
    • Some view the latest proposal by NPCIL to collaborate with the money rich PSUs namely ONGC Ltd and the Indian Railways as an alternate strategy to overcome the lack of monetary funds and increase viability for new projects using the indigenous pressurized heavy water reactor technology.
    • Apart from natural energy, talks are underway to export nuclear reactors from overseas sources. In March 2010 a proposal for building six more reactors at Kudankulam by 2017 and four more at Haripur after 2017 was planned, taking the aggregate to 12. The number will probably expand after 2017, according to India's 13th five-year plan. Russian organization Atomenergomash (AEM) has set up an office in India in this regards to access the future needs.
    • Other significant foreign collaborations are, Areva entering into an MOU with NPCIL in February 2009 to build up to four Reactors. Hitachi Nuclear Energy, Westinghouse, Atomic Energy of Canada and Korean Power Company (KEPCO) are other developments where NPCIL entered into Memorandum of Understanding to boost India's Nuclear Energy sector.
    • The Indian government ratified the Convention on Supplementary Compensation for Nuclear Damage (CSC) with the International Atomic Energy Agency on 4th of February, 2016. This is a positive move towards importing international nuclear services vendors. Earlier, Indian law held the providers of nuclear plants conceivably at risk in case of a mishap, in contrast to the international norm in which the liability falls to the power plant operator.
    • A view of the operating Nuclear reactors in India:
      Power Station State Units Total Capacity (MW) Tarapur Maharashtra 160 x 2 and 540 x 2 1,400 Rawatbhata Rajasthan 100 x 1, 200 x 1, and 220 x 4 1,180 Kundankulam Tamil Nadu 1000 x 2 2,000 Kaiga Karnataka 220 x 4 800 Kakrapur Gujarat 220 x 2 440 Kalpakkam Tamil Nadu 220 x 2 440 Narora Uttar Pradesh 220 x 2 440

    A Total of 6,780 MW; are all run by NPCIL.

    Conclusion

    Nuclear energy is a valuable source of power generation and is in constant debate for its success and safety.  The Fukushima Daiichi nuclear disaster in 2011, Chernobyl disaster of 1986, Three Mile Island accident dated 1979, and the SL-1 accident of 1961 warns us about the possible consequences. One wrong button would lead to chaos and annihilation of human survival on Planet Earth! It could result in Natural Catastrophes, Act of War, Terrorism or Super Science. It may be time to decode the recent statement made by Stephen Hawking that "Humans have 100 years left on Earth"!

     

    ]]>
    Sat, 27 May 2017 00:00:00 GMT
    <![CDATA[Labeled Liable (Part II)]]> Labeled Liable

    Part II of II

    "Surround yourself with assets, not liabilities."

    Introduction

    Liability is a billion-dollar word. Legally, socially and morally, all actions are subject to and governed by a sense of moderation. A civil liability claim and the concept of abatement go hand in hand since a claim can only sustain its validity during a particular time frame.

    While part one of this article touched on the essential aspects of both civil and criminal liability, exemptions to liability, and the fundamental pillars upon which a civil suit survives, this article goes further to describe the dynamic concept of abatement in civil suits and explicates with a brief case study.

    Despite the fact that the term abatement comes from the French word for batter, abatement doesn't usually hold a negative standing––while abatement reduces something, it doesn't necessarily beat it to a pulp. In civil suits, the focal purpose of abatement is to save time and expenses of a trial in the case where the plaintiff's suit cannot be attained in the original form in which it was presented.

    Article (111) of the Commercial Transactions Law[i] of UAE is responsible for governing the clause of abatement. It provides that in the case of a defect the purchaser shall notify the Vendor within fifteen days of the date on which the item sold is actually delivered to him, and he must file the action for rescission or reduction of the price within sixty days of such delivery date. However, if the defect is hidden and cannot be detected by a routine examination, the purchaser must then notify the vendor immediately when he discovers it, and lodge the action in warranty of the defect within six months of the date of actual delivery, unless there is an agreement to the contrary. Where the purchaser does not notify the vendor of the difference or defect, or if he does not file the action for rescission, price reduction or defect warranty within the period as the case may be, his action shall not be heard unless the purchaser proves vendor's cheating. Even so, the action shall not be heard if lodged after the lapse of one year of the delivery date.

    Case Study

    Moving further, the below-mentioned case study shall provide for an example of a civil liability claim between two parties in a commercial sale:

    The two companies (A) & (B) made a contract upon which (A) supplied (B) with cabling and steel pipes. Both parties mutually agreed on A demonstrating the way such cables and steel pipes are installed, and it would be B's role to install them under A's supervision. The cabling and pipes functioned for five years post-installation after which some faults occurred. Upon inspection of the equipment, it occurred that some damage or deterioration was found in the cables and steel piping. (B) assigned a specialist to inspect them. The latter submitted a report stating that the reason of the faults could be mal-installation, material defects or external factors; the expert did not resolve the cause of the damage. Thereafter, (B) notified (A) with a request to replace the defective goods. On signing the contract, both companies had agreed that the guarantee period shall be one year as of the date of installation and two years maximum as of the date of supplying.

    The question arises: What is the legal position of (A), if (B) filed a liability claim against (A)? And what is company (B)'s legal status in respect of this liability claim? Let's find out.

    Evidentiary Support

    The claim must be backed with evidence: all legislations, whether national legislations or comparative legislations, require the defendant to submit evidence. However, it is not sufficient that the plaintiff submits evidence upon its own findings. This means that such evidence must be reasonable and pursuant to law. It cannot be biased evidence that might be tampered with for a prejudicial reason. Judgments shall not be based on doubt but on facts. Article 1/1 of the UAE Federal Law of Evidence[ii] states that "Plaintiff shall prove his claim and the defendant shall deny thereof".

    We see that company (B) does not have conclusive evidence proving that the liability that occurred is due to the negligence of company (A)'s work since the expert did not zero in on a specific reason. Since their evidence is based on doubt, it is considered invalid and is not fit to prove the subject matter of its claim.

    It is imperative to note that doubt is always interpreted to be in favor of the debtor. It is suspicion, or a result thereof if any pre-conceived assumptions exist.

    The aforementioned expertise report has to be considered valid, and for it to be so, it must be compatible with a putative report that is to be issued by a commissioner with the relevant jurisdiction.

    Responsibility of Company A

    The following three prospects are to be taken into consideration which renders the company (A) not responsible for the claim of the company (B):

  • If the materials used to create the products are of poor or inferior quality or manufactured by a foreign cause, it precludes company (A)'s responsibility of the faulty products.
  • The focal point of the signed agreement is that company (A) is only responsible for explaining how the product must be installed by the company (B) and supervising their attempted installation. Nowhere does it state that company (A) installs the product themselves. Their company only owes education and oversight. As we notice, the company (B) did not allege that company (A) failed in their obligation to provide the appropriate scientific curricula, because they didn't. They followed their contract to the 'T' and performed their contractual obligation. In this case, the trainee failed to fulfill and receive the scientific curricula; hence, it is not the trainer's responsibility if the commodity is damaged.
  • The expert's report cited 'external factors' as a probable cause for damage of products, which would remove responsibility from company (A)'s shoulders.
  • With regard to the agreed warranty between Company (A) and Company (B), the two companies had agreed that the company (A) would ensure the safety of the goods for one year from the date of installation, with a maximum warranty of up to two years from the date of installation. Since it has been five years, and this period has been extended, it is not permissible for the company (B) to ask for any damages caused to the goods.
  • Conclusion

    Typically, product liability claims are based on state laws and brought under the theories of negligence, strict liability or breach of warranty. A set of commercial statutes in every country will contain warranty rules affecting product liability. As we notice from the aforementioned case study, liability claims are complex and subjective to each case. The signed agreement between both parties in the case study protected company (A) from a liability claim that they weren't responsible for due to previously stipulated warranty agreements. Care should be taken as regards to the laws of each country regarding liability claims and the contracts that parties have willingly agreed to so as to ensure premium protection.

     

    [i] Federal Law No. 18 of 1993

    [ii] Federal Law No. 10 of 1992

    ]]>
    Wed, 24 May 2017 16:00:00 GMT
    <![CDATA[Legalities Surrounding Deposits in the UAE]]> Whose Money is it Anyway? The Legalities Surrounding Deposits in the UAE 'Tiny details imperceptible to us decide everything! '  - W.G Sebald   Some contractors may not pay attention to the phrases, conditions, or rules within their contracts. Ultimately this leads to conflicting and inadequate interpretations of clauses. For example, the interpreting the term deposit. Some may view it as an additional price rather than part of the contract price. Others may believe it nullifies the sale contract. As such, we intend to clarify the meaning of a deposit in the law. This clarification will shed light on the role of deposit, how it differs from a penalty clause, and whether it is indeed regarded as compensation in an instance where the contract does not get fulfilled.   The essence of a contract is in the real mutuality between the parties. As such, what parties agreed upon will constitute a valid contract unless it is contrary to public order or the law. Upon an exchange of offer and acceptance the essential characteristics of a contract get confirmed, the contract forms consistent with the will and intent of parties. It also means parties to it cannot by unilaterally act in contravention of the agreed terms. Article 267 of the UAE Federal Law (5) of 1985 On the Civil Transactions Law of the United Arab Emirates  provides the following:-    'if the contract (between the parties) is valid and binding, it shall not be permissible for either of the contracting parties to resile (or; withdraw)from it, nor to vary or rescind it, save by mutual consent (of parties) or through a court order, or under a provision of the law.'   Mine to Retain or Yours to Return   Rescinding a contract can be done by one of three methods. First, the parties may mutually agree to terminate the contract. Article 268 of the Civil Transaction Act permits such action when stating 'the contracting parties may jointly revoke their mutual consent once the contract concludes.' The one condition upon doing so is the implementation of the clauses of termination included in the agreement. Parties would have previously agreed to these terms. They may involve a contract allowing one party to claim compensation upon mutual revocation. Or, as it is possible to waive your personal right to compensation, they may have agreed not to award compensation to either party even if one is rightfully entitled to damages.   The second method involves rescinding a contract as per the instructions of a court ruling, which is termed 'termination of the contract.' This event occurs where the Court finds litigants claim to terminate a contract valid due to a breach of terms caused by the other party. In such an instance, the Court holds the discretion to grant compensation or refuse it if there is no evidence for its necessity. As such in the Appeal Case Number 2048 of 2011 dated 5 June 2011 the Court of Cassation stated that:   The decision to assess the reasons for termination of a binding contract and determine the Court holds the negligent party who has failed to implement their obligations due to its ability to understand the realities of the matter as long as it has established its decision on reasonable grounds.    The final method is an agreement between the parties of the contract that permits one party to rescind the contract by individual will under specific conditions. Here lies the subject of our article, the sale contract with a deposit. One such condition is the returning or retaining of the deposit as a consequence of rescinding a contract by individual will. Understandably, a contract of sale is an exchange of non-monetary money with monetary money, and the purchaser may pay a partial price of the contract through a deposit validating the sales as this validation is its primary and original purpose. As provided in Article 148(1) of the Civil Transaction Code 'payment of earnest money shall be regarded as evidence that the contract has become final and irrevocable unless the agreement or custom are to the contrary.' The fundamental principle here is that the buyer has paid a partial amount as a deposit validating the contract and making it impermissible for either of the parties to abandon it by individual will. The law does not apply the later part of principle unless the essential elements of a contract get fulfilled. On this, the Court of Cassation has established in its ruling of Appeal Case Number 32 of 1994 dated 11 March 1995 that consensus concurs that a sale with a deposit is a sale agreement conditioned upon validation or revocation based on the intentions of the parties. The core necessities of a contract are required to determine what forms part of a sale (the product or service) and its value to allow finalization of the agreement in the circumstance where the condition of validity (the deposit) is provided.    However, the law enables contracting parties to evade the principle mentioned above. This event occurs in the instance where the law provides an opportunity to each party to rescind the contract in exchange for the deposit, allowing it to act as what may be perceived to be a penalty clause. Here, if the buyer revokes the contract, then he loses the deposit to the seller. If the seller rescinds the contract, then the deposit returns to the purchaser. Article 148(2) of the UAE Federal Law (5) of 1985 On the Civil Transactions Law of the United Arab Emirates supports this view. Article 148 (2) provides:-    'Where the parties agree that the earnest money paid is the sanction for withdrawal from the contract, either party may withdraw. If the person making the payment of the earnest money is the one who withdraws, then he shall lose the same, and if the one who is receiving it reneges, he shall pay over double that amount.'   The deposit will not possess these characteristics unless the contract of sale directly specifies it, the contract implies it, or if the custom of such a contract of sale similarly suggests it. We explain the above by way of the following example. Parties to a property sale and purchase contract reach and agreement that each of them (the buyer and seller) will deliver an amount equal to 1/8th of the contract price to a broker. The payment by the purchaser will conclude by 1 July 2015, and the seller will transfer the property on the same date. The contract further adds a stipulation that if either party is in breach of their obligations, the party in violation of contract will lose the deposit (being 1/8th of contract price) submitted. The Dubai Court of Cassation in Appeal case number 878 of 2006 and dated 18 June 2006 referred to Article 148 of the Civil Transactions Act. The court held that payment of the deposit by a party is a significant step in evidencing the act of parties to agree to the finality of the contract. The Court further held that the parties to contract cannot (in such event) rescind the same unless the conditions stipulated in the contract expressly specify otherwise. It would condition that the party that breaches the contract must return the deposit or allow it to be retained by the other party and as such the deposit will get exchanged for the right to rescind.   As such the deposit will not constitute as verification that the contract gets validated in two cases: i.    If the parties mutually agree that the deposit is a penalty that must be exchanged for the right to rescind the contract ii.    If the custom suggests so: where it is custom that the buyer will lose the deposit in a case where they do not pay the price of the contract by the agreed date    Real Characteristics   The question to be now considered is whether in such circumstance the deposit constitutes as compensation for failure to complete the contract?   We submit that the deposit in such a circumstance does not constitute compensation for one party rescinding the contract. Instead, the return or retention of a deposit is only in exchange for the right to terminate the contract. This element is because the origin and meaning of compensation are to allow redress that has been caused rather. As such the Civil Transaction Law states that: any damage caused to another necessitates compensation even if the party causing damage lacks the capability to provide so.   Which means damage to the claimant is a prerequisite to awarding compensation. The occurrence of damage should precede, which means, a party cannot raise a claim to get compensated if there was no damage in the first place.  However, if either party rescinds the contract and where neither party raises a claim for damage(s), the deposit may still be returned or retained.  As such, the law is clear when it states that if the party who paid the deposit will lose it upon rescinding the contract and the party that obtained the deposit must return it if they revoke the contract. There is no requirement for damage. Therefore the Court of Cassation has authorized the aggrieved party to claim both for compensation and the return of the deposit where such claim is applicable. The Dubai Court of Cassation has ruled similarly in Appeal Case Number 34 of 2007 dated 25 March 2007.   However, in a previous sentence, the Court of Cassation has found the deposit to be fair and suitable compensation where it has stated:    'if the damage exceeds the deposit amount then [only] is it permissible to claim for compensation per the general principles' (Dubai-Court of Cassation- Appeal Case Number 176 of 2010 dated 23 January 2011).    Nevertheless, in a more recent judgment, the Court confirmed that the return or retention of a deposit is not synonymous to awarding compensation. The Court has stated that the obligation to pay the value of the deposit by the party that rescinded the contract does not constitute compensation for the damage that has occurred to the second party. Rather, it is a result of the parties mutually agreeing that the right to rescind the contract will be awarded in exchange for the deposit.   To reconcile between the judgments, we can say that if the deposit is in exchange for the right to rescind the contract, then the parties to the contract have agreed that the adequate compensation for revoking the contract will be in light of the precise circumstances at the time. If deposit covers the damage, then the party cannot claim for compensation. If the circumstances have changed since entering the contract and the deposit does not include compensation, then it is permissible for the party to claim for compensation as per the general rules of compensation. However, the deposit recovered will get subtracted from the total compensation owed.   The final question put forward in light of the above, does the deposit constitute a penalty clause?   The Court of Cassation has previously mentioned that the deposit may establish a penalty clause.  However, in its ruling, it concluded that the requirement of a deposit in such a case is similar to that of a penalty clause except in the fact that the deposit cannot reduce or get canceled for it is warranted even if damage does not occur. On the other hand, a penalty clause may be reduced as per the discretion of the Court. Therefore, the difference that lies in the fundamentals of each means they cannot be equated.    What the Court of Cassation has settled upon, is that a penalty clause is not warranted unless damage has occurred. Further, if the value of the penalty condition exceeds the value of the damage that has occurred, the value of the penalty clause must be reduced. Finally, the deposit must be given regardless of whether damage occurs. As such, the deposit can in no way constitute a penalty clause as what one may understand from the statements of the Court of Cassation previously mentioned. This understanding is also because there is another fundamental difference between a deposit and a penalty clause. It is the fact that a penalty clause in a contract will be invalidated where a contract is terminated (mutually). As upon terminating a contract all of its clauses are invalidated. However, a deposit does not take effect except in the circumstance of exchanging it for the right to rescind a contract. As such the penalty clause and the deposit result in two differing circumstances, the deposit takes effect regardless of the termination of the contract, while the penalty provision is terminated upon the cancellation of the contract and only takes effect where the contract remains valid but yet breached.   Conclusion   Therefore sale with a deposit is either a type of sale contractors use to ensure the agreement and make it irreversible. Or it in place to be used as means of exchanging the right to rescind the contract with the return or retention of the deposit (which must be clearly stated or implied in the contract). Otherwise, the Court will have the discretion to discern the intentions of the contracting parties through assessment of the clauses dealing with it and as per the known custom. In which it can be determined whether the deposit is in place as a means to ensure the contract; or as a medium to allow its exchange for the right to rescind the contract. As such, the Court of Cassation has ruled in Appeal Case Number 103, Civilian Court 268 of 1990 dated 27 January 1991 that the purpose of the deposit is extracted through determining the intentions of the parties. If the parties of a contract want to prohibit the Court from having such power, they must clearly state within the contract the purpose of the deposit. Finally, being entitled to and obtaining the deposit does not prevent the damaged party from additionally terminating the contract and demanding compensation due to incurred damages if this is reasonable.  ]]>Tue, 23 May 2017 11:00:00 GMT<![CDATA[Guarantee - Law, and Practice in UAE]]> For a guarantee to be valid, the principal debtor must be indebted to the creditor in respect of a debt or property of a known person, and it should be well within the capacity of the guarantor to discharge the obligation;
  • Unless there is a third party claim, the principle debtor and guarantor shall be discharged of their obligations if the creditor is accepting of an alternate mode of debt satisfaction;
  • the obligation of a guarantor is secondary to the obligation and duties of the principal debtor. Any discharge (whether part or otherwise) of the principal debtor's obligations may extinguish the (part of otherwise) obligations of the guarantor;
  • if the principal debtor becomes bankrupt, the creditor must prove its debt in the bankruptcy; otherwise it will lose its right to claim or recourse against the guarantor to the extent of loss suffered or any outstanding dues, on account of not having proved its debt in the bankruptcy; 
  • upon discharge of debt, the creditor is duty bound to handover to guarantor each and all papers necessary and expedient in the interest of guarantor to exercise his/her right of recourse against principal debtor: and
  • the creditor shall be entitled to a claim, or legal recourse, against the principal debtor or the guarantor, or both.
  •   Priority of Claim   As witnessed in most regulatory financial regimes the world over, the legal regime in the UAE recognizes the priority of creditors and acknowledges that the mere execution of a guarantee does not make a bank or a financial institution a secured creditor. To establish itself as a secured creditor, and have a pari passu rank with other creditors at the time of enforcement of the claim, a creditor must back the guarantee by security. Such securities may take the form of a mortgage or pledge over assets of the guarantor.    Time Limitations for Enforcement of Guarantees   A further consideration is concerning the period of limitation within which the creditor may proceed against the guarantor for payment of debts due to it. Article 1092 of the Civil Code provides that 'the creditor should claim the debt within six (6) months from the date when the debt fell due, and otherwise the guarantor shall be deemed to have been discharged.' The Courts of UAE have however had conflicting applications of the provision mentioned above, as a matter of interpretation.    While the Dubai Court of Cassation has established that a guarantee is a civil obligation and that a claim against a guarantor must be initiated within six months from the due date of payment, the Supreme Court in Abu Dhabi has limited its interpretation of the same article in such a manner that the time limitation does not apply to guarantees in commercial transactions. As such, it is standard practice to leniently interpret the limitation provision of 6 months, in the relevant transactional documents, particularly in cases where the beneficiaries are banks and financial institutions that have extended the applicable time limitation much beyond six months. However, this practice does not ensure that the provision shall cease to have an effect, and creditors must take prudent steps to safeguard their interests. In free zones or offshore jurisdictions, these laws differ. For instance, the legislation in the Dubai International Financial Center Courts (the DIFC Courts) provides a much wider margin of time. Excluding cases of fraud, a claim cannot be commenced after a lapse of more than six years from the date which the cause of action arose.  It should be noted that where free zones' legislation is silent on such limitations, the provisions contained in the UAE Civil Code shall operate and apply.   Specific Guarantee   To establish whether a Guarantee is valid and legally enforceable, it is important to establish the nature of the Guarantee. In an 'all monies' guarantee, a guarantor guarantees any and all obligations of the principal debtor to the creditor, whether existing at the time of the guarantee or arising in the future. However, such guarantees may not be enforceable in the UAE.   Article 1061 of the Civil Code requires the issuance of guarantees subject to specified 'debt' or a thing that is certain in amount, and must, therefore, refer to the amount or facility guaranteed by the Guarantor. Further, the Dubai Court of Cassation has held that the guarantee contract shall be void unless it determines the guaranteed amount; or includes the basis on which the amount guaranteed should be calculated; or refers to the credit facility granted to the principal debtor.  While there have been judgments where the UAE Courts have recognized and enforced 'all monies' guarantees, such judgments do not set precedence.   Guarantees in Relation to Subsidiaries    In most scenarios, a parent company can guarantee a loan extended to its subsidiary (or a corporate group company subject to the parent company's constitutional documents) provided that the necessary corporate approvals are obtained, including a board resolution, and perhaps a shareholders' resolution. Likewise, a subsidiary can also grant a security in respect of a loan to its parent, subject to the aforesaid conditions.   However, there are certain reservations on guaranteeing obligations by a company. For instance, a director of an onshore company in the UAE is required to act prudently and in the company's best interests, as set out in the Federal Law No. 2 of 2015 (the Company's Law).  Articles 153 and 154 of the Company's Law impose restrictions on a company to guarantee any loan agreement entered into by the board members with a third party and also restrict a director from entering into any loan agreements which may include guarantees for a term which exceeds three years.   Similarly, free zone registered entities place comparable responsibilities on managing directors. Article 53 of the DIFC Law Number 2 of 2009 states that 'directors must, act bonafide, (in good faith) and lawfully with a view to the best interests of the Company.' In these circumstances, Directors for both onshore and offshore companies should cautiously proceed when entrusting their entity to guarantee the financial risk of another company.   Guarantee for Cross-Border Financing    The UAE legal framework does not impose any restrictions on guarantees extending from domestic parties to foreign lenders. As long as such guarantees are in compliance with the provisions of the UAE law, or the laws of the offshore jurisdiction, as the case may be. Such guarantees must be in writing and specify the amount secured by the guarantee, as previously stated.   However, in the event security is executed over immovable property, such security cannot be granted to foreign banks unless the bank has a commercial banking license in the particular Emirate where the immovable property is located. In practice, however, foreign banks lending to UAE borrowers generally appoint a local bank as its security agent to hold the UAE security.    Security over movable property may be granted to non-resident foreign banks, except if it is:   i.    If it is a business mortgage in relation to assets in the Jebel Ali Free Zone established under the Commercial Transaction Law.  In this case, it may only be extended to banks or financial institutions with a commercial banking license. ii.    a pledge of funds in a bank account. Such pledges can only be granted to the account-holding bank. However, in practice, foreign non-resident banks typically appoint a local, onshore security agent to hold the security on their behalf.   Further, a DIFC incorporated entity may provide a guarantee for the debt of a borrower, irrespective of whether the borrower is based within or outside the DIFC or for that matter - the UAE. The essential condition to be satisfied is that the granting of the guarantee is as per the company's constitutive documents (articles of association), and after obtaining the necessary approvals.    Expiry of a Guarantee   Expiration of the Guarantee is enumerated in Article 1099 of the Civil Code which provides for termination or expiry of the guarantee inter alia upon the following: i.    discharge of the debt; ii.    deterioration/loss of security in the hands of the principal debtor by a force majeure before a claim is made; iii.    the primary contract between the creditor and principal debtor terminating whereupon the creditor accrued its right against the principal debtor; iv.    the creditor discharging the guarantor of its liability or the debtor of the debt; v.    the death of the principal debtor.   Additionally, in line with provisions contained in Article 1101 of the UAE Civil Code, it is provided that if the debtor(s), creditor(s), and guarantor(s) record a settlement concerning 'part' of the total debt, then the guarantee will finally terminate, and the balance debt will be waived. That said, the settlement contract should clearly stipulate whether parties desire to waive guarantor's liability. If the settlement does so specify, the Guarantor will not be liable, and the automatic termination of the guarantee will be triggered. By virtues of the said Article, the creditor may choose to claim the debt (either partially or in full) against the principal debtor.   Enforcement of a Guarantee     A creditor, upon notifying the guarantor of the default of the principal debtor, can proceed to enforce a guarantee in court. Legal recourse by the creditor can be taken in the form of either an attachment first, and commencement of substantive legal proceedings later, or commencement of substantive legal proceedings immediately. Once the final judgment is obtained, the creditor may proceed with the execution of such a judgment by way of liquidation of the guarantor's assets, and any funds realized thereof, will be appropriated towards the outstanding dues of creditor and surplus if any would be transferred to the Guarantor.   In the event of the death of personal guarantor, a claim will need to be instituted against the deceased person's estate.  The applicable legal position relating to probate and inheritance under UAE Federal Law No. 28 of 2005 shall govern the distribution of the estate of a UAE resident or national. Under Article 275 of the law mentioned above, the creditors of the deceased person would have first priority over any other distribution except that for any burial expenses. The manner of creation of security interest and enforcement thereof is covered in detail in our previous Article.    Release of Security   Most unregistered securities, particularly movable assets, are released by way of transferring possession of the security asset back to the guarantor, but can also be released with a release and discharge letter from the creditor. For registered securities such as mortgage, it is necessary to follow the procedure of the relevant regulatory authority as outlined.   Conclusion   The UAE legal framework, including laws of offshore jurisdictions, clearly enunciates the manner in which a guarantee must be executed. Though the interpretation of limitations may be a bit of a gray area, the structure and landscape applicable to guarantee obligations are, in effect, clear. Therefore, while the guarantor should adhere to, and understand the repercussions and effect of its/his act of, guaranteeing, the creditor should ensure that any uncertainty is avoided for an impediment-free enforcement process.   As prudently explained in Shakespeare's Merchant of Venice, had Antonio realized the gravity of the situation while agreeing to guarantee Bassanio's debt to the cunning Shylock, he could have avoided coming so close to losing his 'pound of flesh'!   ]]>
    Sat, 20 May 2017 11:00:00 GMT
    <![CDATA[The New Takeover and Merger Code of Singapore]]> The new Takeover and Merger Code of Singapore   Our current capitalistic society has created an atmosphere of intense competition. Of course, competition isn't the worst thing in the world, being one of the most important reasons we get the high-quality products and services that we do. Consumerism is only enhanced and increased due to the excessive amount of choice we now grapple with on a daily basis, also brought to us, by competition.    How do businesses deal with this competition when it gets too overwhelming and threatens to take them down? Smart businesses and enterprise owners recognize the value of their opposition. They understand the demand and need for their opposition's products and find a way to provide those products to consumers who would be let down by their absence. They do this by arranging mergers or takeovers.    Google is famous for their ability to recognize the danger in a market way ahead of their competitor's sensibilities, as evidenced by their takeover of YouTube in 2006, a mere 20 months after the website had been founded (for a hefty price of $1.65bn). Despite allegations of copyright issues and lawsuit possibilities, naysayers had to eat their hats after recognizing the sheer technological and innovative power Google held with the acquisition of YouTube. YouTube posted revenue of $4 billion in 2014. This aspect, right here, is how competition gets adopted for mutual benefit.    One of the most staggering takeover bids in recent history has been Facebook's acquisition of WhatsApp for the large sum of $19.6 billion in 2014. This company only makes around $20 million a year, so why would Facebook bother acquiring this company, for that huge of a price? Two words. User growth. Only about 62% of Facebook's users are active daily, whereas WhatsApp sees activity in 70% of its users. It adds a million users per day and currently has 500 million people using its services. Despite only launching in 2009, it is predicted to reach 1 billion users soon. Facebook was launched in 2004 and only reached a billion users in December 2014.    Both these companies made intelligent and informed decisions to ensure their success while keeping a consumer's needs in mind. Takeovers like this, of course, involve a certain amount of complexity and nuance when it comes to legal issues. If clarity and simplicity slip into these legal structures, business will boom and flourish.    This article explores how Singapore has observed the need for clarity and imbibed this into its laws and codes.    Singapore is one of the most successful free-market economies in the world. It enjoys a remarkably open, corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries.    Its economy depends heavily on exports, particularly of consumer electronics, information technology products, medical and optical devices and pharmaceuticals. It also depends on its vibrant transportation systems, businesses and financial services sectors. The main selling point of this economy, however, is its clear and straightforward regulatory framework which ensures significant benefits to investors who are hence attracted to investment possibilities in this country   One of the most recent developments in Singapore's aforementioned regulatory framework is the Singapore Code on Take-overs and Mergers (Code). The Code has been revised by the Monetary Authority of Singapore (MAS) on the advice of the Securities Industry Council (SIC). The Code was amended by the MAS under Section 139 (6) of the Securities and Futures Act, with effect from 25 March 2016.    In light of recent market developments and evolving international practices, the SIC of Singapore had issued a consultation paper proposing amendments to the Code to help with:    i.    providing greater certainty on the applicable procedures and timelines for competitive takeover offer situations, ii.    providing additional guidance on board conduct during an offer and rules for timely disclosure,  iii.    codifying and streamlining existing practices.   Following feedback during the consultation, the proposed changes broadly got adopted in the form initially introduced, save for a few adjustments outlined below.   Key Changes   The Key changes to the Code include:
  • clarifying that in a competitive situation the offer timetables will be aligned to that of the latest offer;
  • prescribing a default auction procedure, if neither offeror has declared its final offer price in the later stages of the offer period;
  • extending the deadline for a potential competing offeror to clarify its intentions;
  • defining that soliciting a competing offer or running a sale process does not amount to the frustration of the existing offer, and including a statement that in cases of doubt SIC should be consulted;
  • clarifying that an offeree board may consider sharing available management projections and forecasts with its independent financial adviser;
  • changes to when no increase and no extension statements may be set aside following the release of new information by the offeree company;
  • providing for the settlement of acceptances within 7 business days (instead of 10 days);
  • requiring prompt disclosure of any material change to information previously published in an offer to ensure that shareholders and investors get apprised of material information on a timely basis; and
  • codifying and streamlining existing practices relating to pre-conditions in a pre-conditional voluntary offer, allowing the posting of offer documents by offeree companies at an earlier date in a pre-conditional offer, and calculation of the values of comparable offers for different classes of shares.
  •   The Modified Auction Procedure is an open auction system which replicates the competitive process that prevails up to Day 46 without any undue extension in time. This auction process is intended to be a robust and straightforward procedure capable of being applied universally to competing for offers involving all forms of consideration. By design, it is a transparent process that focuses on the financial terms of the offers to achieve finality.   Proposed Amendments    Based on feedback received during the consultation, adjustments were made to some of the proposed changes. These include:
  •  Paid press notice- Under Note 7 on Rules 3.1, 3.2 and 3.3, the paid advertisement may be published in the most widely-circulated leading English-language newspaper, instead of in two leading English newspapers. The SIC has also clarified that "published daily" includes, for the avoidance of doubt, "published every day except Sunday".
  • Solicitation of a competing offer - SIC has clarified that the intention is not to impose an obligation to seek a competing offer and that it believes this is sufficiently clear in the proposed amendments. It has however added a statement in Note 8 of Rule 5 that it should be consulted in cases of doubt.
  • Material changes in new or published information- Suggestions made during the consultation included aligning the Code requirements for prompt disclosure of changes to previously disclosed information or new information with the SGX rules on disclosure including the exceptions provided for in those rules. This condition was not accepted. SIC pointed out that parties may consult it if necessary and added a statement in Note 1 to Rule 8.1 to remind parties of this. SIC is also of the view that it is not practicable for the Code to set out all the circumstances in which a material change of information will require the offeree board and independent financial adviser ("IFA") to update their recommendations. Note 1 on Rule 8.1 has been amended to provide that such information should apply and where appropriate the offeree board and IFA should change their recommendation or advice, and that SIC would clarify in cases of doubt.
  • Shareholdings and dealings- Rule 24.3 is amended to make it clear that the applicable period for the dealings disclosure should be three months in the case of voluntary offers.
  • Offer timetable after the end of an auction procedure- Adjustments were made to the timeline following the end of auction proceedings. The deadline for posting of revised offer documents is now 7 days after the end of the auction. The offeree must post its circular on a revised offer no later than 7 days after the revised offer document gets published. The latest date by which a competing offer may become unconditional as to acceptance is 7 days after posting of the revised offer document.
  •   Primary Objective and Expectations from the New Code   These amendments to Code cover-   i.    clarify the standards required of pre-conditions in a pre-conditional voluntary offer, ii.    allow the offeree company to seek approval for the posting of the offer document at an earlier date in a pre-conditional offer, and iii.    clarify how the offer value for a different class of shares gets calculated.   Takeovers and mergers in Singapore are subject to non-statutory rules in the Singapore Code on Take-overs and Mergers, which is administered by the SIC. The Take-over Code seeks to ensure that takeovers and mergers get conducted per good business practice for the fair and equal treatment of all shareholders. SIC does not concern itself with the commercial merits of take-overs and mergers.   These changes that have been undertaken by Singapore set a significant precedent for the adoption of lucidity and transparency when it comes to competitive takeover bids, one most developed countries might want to look to for guidance.    ]]>
    Sat, 20 May 2017 09:00:00 GMT
    <![CDATA[All-Encompassing Protection - The New Labour Law in Bahrain]]> All-Encompassing Protection - The New Labour Law in Bahrain ' Reform will come – not as we change our moral principles but as we discern and accept the implications of principles already held.'  -Matthew Scully   It can take a simple change in wording to create catastrophic new meanings, or much required improvements. Imagine the shock HSBC Bank heads faced when they were notified of a significant 10 million dollar rebranding campaign when their catchphrase "Assume Nothing" was translated to "Do Nothing" in several countries, suggesting HSBC lacked the dedication to work. A clear lesson was learned; while organizations and governments require constant change for the better, they must always remain cautious when implementing such changes. In the context of governmental and legislative change, the delicate matter of improvement through precise wording, we highlight below.   Governments have always partaken in law reform as a necessary method of advancement. A fundamental issue in the reform of legislation, essential to all legal systems, is the protection of parties in a contract. Hence, structuring and restructuring the law must always be synonymous to improvement, which gets witnessed in a variety of legal systems on a range of diverse matters. This aspect varies from issues dealing with women's rights in the suffragette era to smaller changes in the law such as the subject of a minimum wage. The introduction of the Labor Law Number 36 of 2012 (the New Labor Law) in Bahrain repealed previous labor legislation, a classic case of new wording solely dedicated to reform. In doing so, it established new aspirations for improved working standards, wider protections, and faster dispute resolution procedures. This all-encompassing New Labor Law is an example of adequate protection for both employers and employees. Where required, employers have the option of unilateral termination. On the other hand, anti-discrimination clauses are available to protect workers from mistreatment as a result of their personal traits.   No Longer Welcome   Where the old law was silent, the new law no longer is. Speaking up on behalf of employers, the New Labor Law allows the termination of contracts under specific conditions, most pressingly an employee's lack of adequate performance or ability to fulfill their obligations.   The two methods of terminating the contract classify as one that requires notice and those that do not require notice. Article 109 permits the termination of the agreement where the employee's competence is 'limited or lacking.' However, in doing so, the employer must first provide the employee with a sixty day period of notice allowing them the opportunity to improve their work efficiency. If by the end of the sixty-day period the employee remains to be perceived as incompetent, the provisions of paragraph (a) of Article 99 must apply. As such, employers are under no obligation under a contract where an employee does not meet the basic expectations of employment. The New Labor Law provides adequate protection to a company allowing it to terminate if the circumstances are appropriate unilaterally.   Under more severe conditions, an employer gets the protection of unilateral termination of a contract without any of the above formalities. Article 107 sets out a list of circumstances where an employee's performance and output is so insufficient or unfit that their employer may dismiss them from work immediately. Examples of such events are 'if the worker fails to perform his essential obligations by the labor contract' and 'if the employee discloses the secrets related to the work without written authorization by the employer.' In allowing termination under these conditions, the New Labor Law proves its effectiveness in a range of situations likely to occur between contracting parties.   Besides, the all-encompassing nature of the New Labor Law sees that protections against unilateral termination of a contract get extended to the employee. Article 105 classifies this termination as an 'arbitrary dismissal by the employer.' Consequently, the company is entitled to compensation in the event of their arbitrary, unilateral termination. This extension of the law is a reform that gives a rigid balance of right protections to all parties of a contract.   In any situation where the parties to an agreement do not follow the provisions set out by the New Labor Law, or a dispute occurs as to the correct method of procedure, the case will move to the newly organized Labor Case Administration Office. The procedure followed by the Labor Office is set out in the New Labor Law. The Labor Office will attempt to resolve the dispute amicably allowing termination of a contract agreeable to both parties. This newly introduced regulation is likely to improve the efficiency of labor cases and increase settlements between employees and employers.   Unfounded Denial of Rights   Discrimination is an apparent aspect of human history, and some would argue that it is also an aspect innate to human nature. However, the law can govern human behavior and ensure it is within the defined bounds of what is acceptable and moral. With such limitations placed on the ability to discriminate, the morality of a society continuously improves. Law reform as previously discussed is a crucial factor to such enhancements. As would be expected, the New Labor Law of Bahrain delivers on this front of enhancement.   The explicit prohibition of discriminatory practices referred in Article 39 sets out that 'discrimination in wages based on matters involving sex, origin, language, religion or ideology shall be prohibited.' These sentiments are repeated in matters concerning the termination of a contract and also extend to issues such as the worker's color, marital status, pregnancy, and affiliation with trade unions. The reformed Labor Law grants more protections than its predecessor and is indeed a reasonable progress.    An issue of relevance is the daily rights of women. Recent articles and publications speak of the discriminate nature of the never-closing wage gap in countries considered to be 'developed.' The possibility concerning discrimination in this regard considerably minimizes under the New Labor Law. The New Law doesn't stop at merely protecting already existing rights, but furthers women's right in Bahrain; constraints on the hours in which women may work and their ability to work in certain occupations got annulled. The employment of women 'shall be subject to all of the provisions governing the employment of male workers without discrimination in similar situations' as prescribed by Article 29. These declarations are a great testimony to the improvements brought by the reform of the Labor Law.   Conclusion   Reform is a necessary measure in any society motivated to excel. In a simple manner, the appropriate steps needed to implement the changes are the introduction of new words in legislation. The above concept although regarded as delicate is yet vital. Bahrain is no exception to the necessity of reform. It has proven that upon introduction of its new Labor Law the laws governing employee and employer protection were enhanced. It is now possible to unilaterally terminate the employment contract by both parties (justifiably) where applicable. Also, anti-discrimination measures were implemented ensuring the prevention of unfounded decisions. This development witnessed further protection of women's rights and rights protection to those who might face injustice in the workplace. For more? Why not get in touch with one of STA's senior employment lawyers in Bahrain ]]>Fri, 19 May 2017 00:00:00 GMT<![CDATA[An Analysis on Trademark Dilutions in US & EU]]> An Analysis on Trademark Dilution in US and EU   'Did you sleep well?', Enquired Mr. S while sipping a steaming cup of latte in her client's office. Mr. P, the client, replied indifferently 'I don't think I would be able to rest my eyes until we get a grip over this dispute. Our trademark represents the leather goods of a well-reputed company in the US. We're as lucky as it gets in this industry! The other party is manufacturing chocolates under a similar mark; that ought to confuse the public. They're stealing our thunder, I'd say! However, I'm losing hope since their mark is not identical to ours.' Mr. S put away his cup with a slight grin and insouciantly said, 'You should try to get some rest and stop worrying about the status quo. The degree of similarity between the marks is not the sole factor that the court will consider while determining a case of trademark dilution. We will need to establish that consumers who purchase their chocolates would be misled, given the popularity of your company! However, we may also have to prove a downfall in the business's profits to win this over!'. 'Well then, this is a clear case of trademark dilution,' P diffidently murmured as he walked out onto his office corridor.   Hopefully, one might be able to anticipate the judgment of this dramatic illustration with more than just fictional creativity by the end of this article. The desideratum of companies to exhibit their stand in the industry by registering a trademark has led to numerous disputes like that of the unfortunate leather company above. Companies attempt to imitate famous marks of internationally recognized brands (such as Coca-Cola and Apple) onto different goods (like fashion goods and cars, respectively) to upset the peculiarity or mistake the popularity of the famous mark. Hence, the general concept of trademark dilution revolves around the capacity of a mark to signify a particular source or owner. However, the relative novelty of the concept and variation in law and protection that it offers raises considerable uncertainty among trademark holders in a dispute of dilution.   In Line with American Laws   Before 1996, the disputes regarding trademark dilution in the United States of America (US) operated under the Lanham (Trademark) Act of 1946 (the Lanham Act). Section 43 of this statute imposes civil liability on persons who uses a falsified term, or a represents misleading facts on any goods or concerning any services and regarding trademark dilution. However, the Lanham Act failed to address the growing issues that were surrounding dilution of trademarks. Owners of famous trademarks were more likely to face considerable losses if other companies were permitted to bask in the glory of the former's trademark. Further, globalization and escalation in the number of players in domestic markets led to a rise in many disputes concerning trademark dilution and the subsequent need for a dedicated statute that would deal in trademark dilution. Ergo, the Federal Trademark Dilution Act of 1995 came into force with the view to enhancing the protection offered to owners of famous trademarks by fabricating the much-welcomed Section 43(c) into the Lanham Act. This sub-section recognized the concept of trademark dilution and the underlying needs to protect the significance of a famous mark from being diluted. However, the courts were facing substantial inconsistency in establishing the burden to prove since the proof of actual dilution through economic injury could create certain ambiguity. The amended statute was also not comprehensive enough since it had not laid down any provisions regarding actual dilution and the likelihood of dilution. Hence, the Trademark Dilution Revision Act (the Dilution Act) was passed in 2006 with the view to provide certain and consistent provisions surrounding burden of proof in dilution cases.    The enactment of the new Dilution Act was greeted with a smile by the owners of famous trademarks as it overcomes all the legal hurdles of the past by distinctly stating that dilution of a trademark could trigger by proving a likelihood of dilution. This new Act was a huge leap in the country's trademark laws since it would confer protection against those marks that were likely to cause dilution. Ergo, plaintiffs were no longer required to go through the absolute and non-viable necessity to prove actual dilution. This succored owners of famous trademarks to preclude dilution at its inception. The Dilution Act has further distinguished between dilution by blurring and dilution by tarnishing. A famous mark is said to dilute by blurring if the use of an identical trademark impairs the distinctiveness of the former. Such a situation arises when the famous mark creates a positive response among the consumers by which they relate both the brands to a single source. On the other hand, a mark is diluted by tarnishment if the owner of a famous mark would suffer some negative associations because of the other party's use of an identical or similar trademark. However, the application of this statute ultimately depends upon the interpretation techniques employed by the courts.   The US Court of Appeals for the Second Circuit (the Second Circuit) reversed the judgment of a district court after determining the degree of the requirement of substantial similarity between a famous mark and an allegedly infringing mark. In the landmark case of Starbucks Corp. v. Wolfe's Borough Coffee, Inc., leading coffee retailer Starbucks sued the domestic coffee manufacturer Wolfe's to obtain an injunction over a claim of trademark dilution. The plaintiff alleged that the defendant's use of its marks bearing the term 'Charbucks' amounted to dilution by blurring. The district court ruled the case for Wolfe's by stating that there was no substantial similarity between the famous 'Starbucks' trademark and the defendant's trademarks. However, the Second Circuit reversed the judgment of the district court and stated that the Dilution Act did not specifically require the marks in a trademark dilution dispute to be substantially similar to each other. The appeal court also observed that the Dilution Act did not encompass any word such as 'identical,' 'nearly identical,' 'substantial' or 'very similar' and further stated that the similarity between the marks is just one of the non-exhaustive parameters in a dilution dispute. Subsequently, the case was remanded to the district court which later dismissed Starbuck's dilution claim by stating that the degree of similarity between the marks was minimal as used in commerce.   The European Style   Unlike the US, the European Union (EU) does not have a dedicated statute or directive that protects that owners of famous mark against dilution. However, Articles 4(4)(a) and 5(2) of the EU Trademark Directive have embedded a similar approach to protect the interest of the trademark that has a reputation in the concerned Member State. The clause has denied the registration of any trademark that is similar or identical to an earlier reputable national trademark that represents different goods or services and could cause the later mark to take undue advantage or be detrimental to the distinctive character or the repute of the earlier mark. However, the EU Trademark Directive has not considered terms such as 'dilution' and 'famous' to elucidate on the ambit of the clause. Ergo, the provisions regarding trademark dilution in the European Union is comparatively ambiguous as well as flexible. Therefore, the courts play a significant role in determining the authenticity of trademark dilution claims in the continent.   In the infamous case of Intel Corporation v. CPM United Kingdom Ltd., the European Court of Justice (ECJ) interpreted the ambit of Article 4(4)(a) with the view to determine the factors that are required to establish a case of trademark dilution. The plaintiff was a well-known company that produces microprocessors and owned various marks in the United Kingdom (UK) and European Union that consisted of the word 'INTEL.' Whereas, the defendant was the proprietor of the national mark of the 'INTELMARK' in the UK. Intel Corp. contended that the other party's use of its disputed trademark would take unfair advantage of or be detrimental to the distinctiveness of their trademark per UK's Trade Marks Act, 1994 which was enacted to implement the EU Trademark Directive. Initially, the plaintiff filed a complaint with the UK Trademark Registry against the use of the defendant's trademark and was unsuccessful. Subsequently, Intel Corp. submitted an appeal to the High Court of Justice of England and Wales which however the courts dismissed. The plaintiff then instituted the next appeal with the Court of Appeals; which observed the similarity between the trademark of both the parties. However, the Court of Appeals stayed the proceedings of the case pending reference to the ECJ since the court could not determine the extent of dilution and circumstances when protection could confer. Consecutively, ECJ analyzed numerous domestic and international factors to determine the link between the marks of both the parties. Further, it laid down the following factors to consider while assessing the existence of trademark dilution:   i.    the degree of similarity between the marks; ii.    nature of goods or services for the trademarks registered; iii.    the level of reputation of the earlier mark; iv.    the degree of distinctive character of the earlier mark; and v.    the probability of the existence of a likelihood of confusion among consumers.   Further, the ECJ also stated that the plaintiff was conferred with the burden to manifest the level of injury that has occurred or the risk of injury that could eventuate in the future. The owners of an earlier reputable mark would have to show the economic damage that caused due to the other party's use of a similar mark. This ruling has set as a landmark case that laid down the factors required to determine trademark dilution.   Conclusion   The concept of trademark dilution is rising with the increase in the number of companies that try to pass-off their goods or services as that of another company's which is popular among the consumers. Protection against trademark dilution primarily intends to prevent companies from exploiting the goodwill and reputation of other enterprises that conduct its activities under well-known marks. Establishing trademark dilution in the EU is more laborious compared to the US due to the underlying requirement to prove economic injury of the plaintiff vide a loss in sales or other economical margins.    The emerging concept of trademark dilution is relatively new in the United Arab Emirates (UAE). Article 4 of the Federal Law Number 37 of 1992 (as amended by Law Number 19 of 2000 and Law Number 8 of 2002) has laid down explicit provisions governing international marks with reputable goodwill. The provision stipulates that the goodwill of a trademark would be determined by the extent of the public's awareness regarding the same. However, the article does not provide any explicit protection to the proprietors of famous marks in the event of dilution. ]]>Fri, 19 May 2017 00:00:00 GMT<![CDATA[Construction Law and the Application of Time]]>Fri, 19 May 2017 00:00:00 GMT<![CDATA[Fair Share - An Overview of Insurance Web Aggregators]]>Fair Share - An Overview of Insurance Web Aggregators  "When action grows unprofitable, gather information" -Ursula K. Le Guin, The Left Hand of Darkness   From driverless cars to high-tech drones, mankind reveals an inclination to innovate first and plan later. The internet, for instance, has developed so fast making one wonder whether laws could ever keep pace with the speed with which the internet, online businesses, and new ideas formulate. Technology today clearly has grown beyond the highways built to support them. One such challenge, for example, is with the newly found distribution system of insurance-the web aggregators. The words fair share today has a completely different meaning than what it was prior to the existence of web aggregators.    India's policybazaar.com, a web-based insurance aggregator, generated a revenue of $1 million in the year of 2015, whereas it only made half that amount in the year 2014. One of the most popular websites for financial services known as Moneysupermarket.com made over £200 million in 2014. This is an incredible amount of revenue for web aggregators who don't actually sell a physical, tangible product as evidenced by Policybazaar's motto, "We don't SELL, we TELL". The web aggregator is a business in itself, facilitating the development of other businesses. The question remains, what do business aggregators do to generate revenue? They pull together information by assimilating and assembling data from various sources and providing a centralized repository or interface for users to access the information in one place. At some point, every person can attest to having used one, considering the multitude of applications available to compare prices, access social network interfaces, and financial products. One might think that web aggregators are similar to brokers, but they aren't. Brokers require a broker license from the relevant insurance authority which allows them to sell policies through their platform. Web aggregators, however, only provide information.    The instances of the aggregators are varied in many countries for various industries. One such instance in the restaurant industry is OpenTable. Insurance has now become a necessity. It is not only important to be able to live a carefree life, but is also considered a major investment prospect by people unwilling to enter ostensibly complicated security/equity financial markets.    The traditional way to acquire policy information is through agents. They usually charge a higher commission to provide information, which cannot be vouched for as accurate and is often deceptive due to non-disclosure of various provisos. However, due to a growing need for policy information, the aggregators have tapped the opportunity to provide users with an information platform.    In view of the above, we will discuss the legal aspects governing the commercials of insurance web aggregators (the WA) in India and UAE. 

    India

    In India, the Insurance Regulatory and Development Authority (the IRDA) is the regulatory body governing the licensing and other activities of the insurance WA. The regulation governing this industry is Insurance Regulatory and Development Authority (Web Aggregators) Regulations, 2013 (the Regulation, 2013). The key points to be considered are as follows:   WA is defined under the Regulation, 2013 as "a Company registered under Companies Act, 1956 (1 of 1956), approved by the Authority under this regulation, which maintains /owns a website and provides information pertaining to insurance products and price/features comparisons of products of different Insurers and offers leads to an Insurer."Further, the application procedure is provided under the Regulation, 2013 wherein the WA must fulfill the eligibility criteria.  Eligibility Criteria - To obtain a license as a WA, pursuant to Schedule 1, Form-A, the applicant must satisfy the eligibility criteria under clause 3 of Regulation, 2013. The eligibility criteria for the license of WA provided under clause 5 of the Regulation, 2013 inter alia, requires the following:   The applicant must be company formed and registered under the Companies Act 1956 and comply with Foreign Direct Investment norms in force from time to time as applicable for insurance sector at the time of submission of application and continue to comply during the period in which the license (if granted) to act as a WA is in force.   MOA main object: The Memorandum of Association of the company states web aggregation as one of its main objects.   Principal Officer Qualification: The Principal Officer shall possess the qualification as specified in Schedule V of the Regulation, 2013.   Employee training: The employee of the WA should have completed the 50 (fifty) hours of theoretical and practical training on insurance from an institution recognized by the IRDA from time to time and passed an examination, at the end of the period of training, conducted by the National Insurance Academy, Pune or any other examining body recognized by IRDA.   Personal Indemnity Insurance: WA must maintain a professional indemnity insurance coverage on a yearly basis throughout the validity of the license period.   IRDA even specifies the manner in which a WA should speak when discussing products on offer. WA's are required to provide the following:-  
    • Display of Product Comparison: Clause 13 of the Regulation, 2013 provides for the categories that can be displayed under life and non-life insurance and further provides for the displaying the basic product features. Templates of products can be mutually agreed upon with the insurers.
    • Unbiased and factual details: WA shall not display ratings, rankings, endorsements or bestsellers of insurance products on their website. The content set out on the website of aggregators shall be unbiased and factual in nature; they shall desist from commenting on insurers or their products in their editorials or at any other location on their website(s). It further sets out that product information displayed by web aggregators shall be authentic and be based solely on information received from insurers.

    The Position in the United Arab Emirates (UAE)

    Within the United Arab Emirates, insurance is largely governed WA. The nature of WA's business activity may seem more of an online e-commerce portal and such activity could be classified as e-commerce B to B or B to C model. Sweeping changes recently introduced by the Department of Health and those introduced by the Insurance Authority (the IA) may call for a careful legal review and opinion. For argument's sake, even if such activity were approved as online B to C marketplace by a free zone the stand of the Department of Health and the IA would need to be understood.    It is the author's position and views that such activity would be regulated as that of an insurance broker unless the WA signs a contract with an existing broker and such contract is approved and accepted by the relevant insuring body. Clearly, the compounding situation triggered by constantly changing regulations puts WA's at risk. It is equally vital that the authorities dealing with insurance after a careful study pave way for WA's and related determinants. If the streets of Dubai could soon have driverless cars WA's may only be a step closer.    Domain Names   The domain name of the website must be registered in line with the Telecommunications Regulatory Authority's (the TRA) Domain Name Eligibility Policy - AEDA-POL-007 (the Eligibility Rules). Since cyber squatting is becoming a common issue, similar to trademark an infringement matter, the domain name needs to be registered at the earliest. It is also registered on first filing or registration basis. In view of the growing domain name disputes, the Internet Corporation for Assigned Names and Numbers (the ICANN) adopted the Uniform Domain Name Dispute Resolution Policy (the UDRP). The UDRP went into effect on December 1, 1999, for all ICANN-accredited registrars of Internet domain names.   In UAE, there has been a rise in .ae domain name registration. TRA also established .ae Domain Administration (AEDA). The AEDA regulates, lays down and enforces policies with regard to the operation of .ae and further deals with disputes on domain names. Any deliberate or otherwise registration of a well-known domain name comes under the scrutiny of AEDA.  The AEDA dispute resolution policy (the Rules) by TRA mirrors the provisions of UDRP and provides instances of using a domain name with bad faith or of evidence of registration with bad faith. The Eligibility Rules lays down the eligibility for using domain name with suffix classified as '.ae' – restricted zone, .ae – unrestricted zone, and restricted zone for 'co.ae', 'net.ae', 'org.ae', 'sch.ae', 'ac.ae', 'gov.ae' and 'mil.ae'.  The complaint can be raised against infringer under the Rules if your domain name has been registered or is being used in bad faith.    Conclusion   The UAE has 61 national and foreign insurance players in the market at present which is a large number for a 'small in size' market like the UAE. Indian Regulation, 2013, being as restrictive as it is, has kept casual aggregators at bay and only companies with excellent competitive perseverance have been able to hold their ground. Only 10 companies being the registered WA license holder. The WA are growing despite any restrictions imposed. Not only is the entire industry benefitting from the service of WA, but tech savvy internet users are the web aggregators' actual insurance against any confines imposed by means of regulations. 

    ___________________________________________________________

    i Make application to the IRDA accompanied with a non-refundable fee of Rs. 10,000 (Indian rupees ten thousand) paid by way of a bank draft drawn in favor of 'Insurance Regulatory and Development Authority' payable at Hyderabad. The WA must also pay Rs. 5000 as an annual license fee. The validity period of license is 3 years. 1. Applicants seeking permission for Outsourcing and Telemarketing functions/facility shall mention the same specifically in the application Form. 2. If the applicant is eligible, the IRDA shall grant License to the applicant to function as a WA as shown in Schedule II Form B of this regulations. 3. One opportunity to complete the application within 30 days shall be granted by IRDA. If the application still remains incomplete it will be rejected by the IRDA.   ii  Pre-emptive registration of trademarks by third parties as domain names or acquiring a domain name similar to the domain name belonging to other parties.       ]]>
    Sun, 30 Apr 2017 17:55:24 GMT
    <![CDATA[Privacy; a Price Paid for Technology?]]>Privacy, a Price Paid for Technology?

    "The difference between Technology and Slavery is that slaves are well aware that they are not free."

    - Naseem Nicholas Taleb

     

    A study conducted in July 2016 revealed that a significant number of people agreed to the terms of service of a fake social networking site (which they believed was real) which required them to give up their first born child, and if they did not yet have one, they got until 2050 to do so. Not just that, the privacy policy of the networking site also provided for their data to be shared with the National Security Agency of the United States and its employees. What is astonishing is that most of the 543 university students involved in the study analysis did not bother to read the terms of service and the few that did, signed up anyway. The Study concluded that nobody takes the time to read the lengthy terms of service and privacy policies that bombard Internet users every day. The above summarizes that privacy policies are the biggest lie on the Internet in most cases, which anecdotally, is known as I agree to these terms and conditions.

    By this Article, the author examines the privacy concerns faced by Internet users primarily when they use their mobile applications or more commonly referred to as apps. In today's day and age, on account of the ease of using Wi-Fi and data packages, there is an increase in the availability and quantity of downloadable apps, which leads to privacy issues. People appear to be increasingly spending more time using mobile applications than they are browsing the mobile web. There are many apps available for your phone, and anyone, including kids, are rolling out apps, which has resulted in a range of free or low-priced choices.  The difficulty arises from the fact that apps can collect all sorts of data and transmit it to the app-maker and third-party advertisers. It can subsequently be shared or sold. Moreover, mobile apps may also be infected with malware thus leading to bugs in your phone.    In December 2010, the Wall Street Journal investigated 101 apps to see what data the apps were sharing with advertisers. It found that 56 apps shared the phone's unique ID number, 47 transmitted the phone's location and 5 shared the user's age and gender and other personal details (like a phone number or contacts list). The findings reveal the intrusive effort by online-tracking companies to gather personal data about people to flesh out detailed dossiers on them.    In March 2012, a lawsuit was filed against 18 of the world's largest and most influential technology and social networking companies including Facebook, Twitter, Apple, Yelp, and Path. The allegation was that these brands or entities have distributed and sold mobile apps that once installed harvest, upload and illegally steal the owner's address book data without the owner's knowledge or consent. The lawsuit followed in the wake of social networking service Path co-founder and CEO Dave Morin issuing a public apology after a Singapore-based programmer wrote a blog post describing how the company's journal application for iOS and Android-based phones was secretly collecting address book data. Path acknowledged that it had made a mistake in gathering the data but noted that the information was collected purely to improve the quality of the app.    It is not only the bigwigs like Path and Facebook that have the power of rummaging through your information. Even some offline games like Solitaire or an app as seemingly harmless as a flashlight, game or radio may have the ability to read and collect your text messages, contacts and know your location.   A July 2012 study by the mobile security company Lookout found that ads from advertising networks running on some apps might change smartphone settings and take contact information without your permission.  The study tested 384,000 apps and found that 19,200 of those apps used malicious ad networks.    The privacy concerns over mobile apps appear to be steadily rising and evidenced by the hue and cry created over the alleged privacy violations by the augmented reality gaming app Pokémon Go. Unless you have been living under a rock, you would have heard of the gaming app.  Earlier this month, the iOS version of the game causing privacy concerns over how much data it has access to, raised serious concerns in the mind of its users and non-users alike and took the world by storm. Gamers who downloaded the Pokémon Go were given a scare, after noticing that the app had apparently been granted "full access" to their Google accounts. It started with a Tumblr post by Adam Reeve, who works for a security analytics firm that raised attention to the level of account permissions the game has by default, revealing that players who sign in through Google, automatically grant Pokémon Go developer Niantic Labs, access to the entirety of their account data.  At face value, the permissions would have represented a significant security vulnerability. The discovery sparked a wave of fear that playing the game might allow its developers, Niantic Labs, to read and send email, access, edit and delete documents in Google Drive and Google Photos, and access browser and maps histories. However, independent security researchers have confirmed that the episode is a result of a mislabeling and it was only a misleading entry. The wrongful entry occurred because Niantic Labs used an unsupported, out-of-date version of the sign-on process, that permission-granting step was skipped, prompting Google to default to warning users that the app had  full access to their accounts.    It's interesting to see so many people getting hysterical about an app's overreach of permissions, and it is about time! As already established at the beginning of this article, no one seems to read or bother to understand the terms they agree to for apps and websites, even if they demand giving up your firstborn child as payment. Therefore, this apprehension shall ensure that internet users maintain a cautious approach while signing in to any mobile apps or websites.   However, apart from the technological privacy concerns, augmented reality apps are also being labeled as a disruptive technology. Either as a gamer or a mere witness of the hysteria, it is easy to see that this mobile app's impact extends beyond the digital world and affects individuals or other segments of society, who may not even want to be part of the mania. The web has also been rife with concerns on the Poké Stops and Pokémon Gyms located at properties owned by people who have no idea that they have been selected and are forced to be part of the game. Notable examples of this have come from wide-ranging landmarks such as the Holocaust Museum and Arlington National Cemetery in the United States of America or concerns of individuals subjected to trespassing without their permission, and suddenly have 50 people show up because these places have now become part of a video game. These issues raise serious questions about where to draw a line on the issue of invasion of privacy.    Conclusion   In the words of John Poindexter, "I 'really' believe that we don't have to make a trade-off between security and privacy. I think technology gives us the ability to have both."     Regardless of its outcome, because of the hue and cry created over the Pokémon Go privacy concerns or the numerous lawsuits filed, everyone's learned that signing in with your Google or Facebook account means giving some access to your personal details and information into someone else's hands. The privacy concerns get equated to situations where you just stop locking your front door and get over with it. More than before, it has now become essential that Internet users proceed with abundant caution. It is also imperative that our security's brightest minds and our government amount high level of scrutiny towards all apps and websites. In the past, the law has done a very uneven job of keeping up with the pace of change created by technology. The law needs to pull up its socks more so with the advent of augmented reality apps. It is evident that Pokémon Go or any of these augmented reality technologies would, in the coming days, have some serious legal issues and ramifications; but that discussion is for another day and time; right now, I have to rush to catch Pikachu running away from my room!  

     

     

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    Sun, 30 Apr 2017 17:29:05 GMT
    <![CDATA[Aircraft Mortgages (Part III of III)]]>Aircraft Mortgages

    Part III of III

    For those seeking adventure, the adrenaline of in-flight turbulence is boisterous whereas for most it's an ill-timed and nerve-wracking experience. Turbulence also has an effect on the aircraft itself. Apparently, science lags behind here, but then aircraft cost millions of dollars. This high price-tag also links other players including aircraft manufacturer(s), airlines as potential buyers, banks and financiers, and maintenance, repair and operation (the MRO) firms. Each of these players including passengers has a common goal – safety of the aircraft and a pleasant journey. Meanwhile, we wish you a safe and enjoyable reading.

    We have discussed in our previous issue on aircraft mortgage which accentuates how a careful, well-planned and structured framework for secured transactions is a crucial step in improving access to credit and increasing credit for financing aircraft because aircraft mortgage can be tricky. The complexity of the mortgage escalates especially when dealing with its implementation in multiple jurisdictions.

    Further to our earlier coverage on aircraft mortgages, this third installment of three paper series will deal specifically with aircraft mortgage implementation in Dubai and the United Arab Emirates (UAE). To assist our international clients to make an advised decision while considering the application in UAE we have come up with this article which specifically speaks about aircraft mortgage implementation in the UAE.

    Legal provisions

    In UAE, the definition of aircraft is  "a moveable property under states' applied laws, rules, and regulations (as per Article 5 of Civil Aviation Law[i])." The commercial pledge in respect of movable assets is recognized under UAE Commercial Code[ii] under Article 164(1)[iii].

    However, as per Article 165(1) of the Commercial Code, the commercial pledge is perfected when there is a deemed possession of the asset. Deemed possession of the asset occurs when the asset is at the pledgee's disposal or where the "pledgee" receives a deed giving him the right to take possession of the asset. Therefore, the mortgagee or person appointed by the parties, such as bailee or agent of the pledgee, shall be deemed to be having possession of mortgaged assets i.e. aircraft, if the mortgaged asset is placed at pledgee's disposal, to lead others to believe that the asset is in pledgee's custody.

    The only way for the requirements of Article 165 to be satisfied is as per Article 165 (2), which states that the mortgagee has the exclusive right to take possession of the aircraft. This requirement is an abstract form of security, requiring the cumbersome process of delivering an asset from pledger to pledgee. In the case of aircraft, the lender might not be interested in burdening itself with physical possession which will require various other expenses such as hangaring, maintaining, and warehousing. To deal with such situations a borrower's manager is appointed as bailee on the lender's behalf to hold the aircraft while the borrower retains the actual possession.

    Hence, the term 'aircraft mortgage' (as understood by other jurisdictions) is viewed as a commercial or possessory pledge under the UAE law.

    Article 4 of the Central Bank Resolution Number 58/3/96 dealing with Regulation of Finance Companies (the Central Bank Resolution) of 1996 states it is provided that:

     "No juridical person is allowed to conduct finance business in the country unless licensed to do so by the Central Bank as per a resolution from the Board of Directors". It is pertinent to note that this means a mortgage can only be created for UAE registered banks and financial institutions."

    The foreign bank would be considered "a juridical person" within the scope of Union Law Number 8 of 1984, and the term "finance business" can be interpreted to include aircraft mortgage transactions. Furthermore, as stated in Article 4, the mortgagee must be licensed by UAE. Security can be held, and a commercial mortgage can be registered (with the Department of Economic Development) by appointing a local security agent to act on the foreign lender's behalf.

    Registration

    The registration of a security interest is essential to seek priority. Failing to perfect a security interest over the aircraft would render the mortgagee to be clubbed in the list of unsecured creditors, thereby perhaps losing a potential claim.   

    The Civil Aviation Law allows for the registration of aircraft mortgage with General Civil Aviation Authority (the GCAA). The GCAA maintains a title register wherein ownership and security interest gets recorded. This recording can only happen if the aircraft ownership vests with  a UAE national, a corporation, corporate entity having its principal place of business in the UAE or a UAE government department (a Qualifying Person). The GCCA then issues a certificate of registration stating the details of the owner, the operator and the financier as mortgagee. The GCCA registers mortgages for foreign lenders as well. The registration in international registry under Cape Town Convention is affected through the GCAA as it is an authorized entry point for UAE in respect of International Registry.

    Repossession

    Unlike common law jurisdictions, the self-help remedy is not available in UAE to enforce the security interest. According to civil aviation regulations and revision of the Civil Aviation Advisory Publication No. 58, the GCAA has established a procedure for the execution of an Irrevocable De-Registration and Export Request Authorization (an IDERA) along the lines of Cape Town Convention which, apparently, does not require court approval. The IDERA gets executed in the name of the mortgagee who is the authorized party. This act allows the aircraft to be de-registered and exported to another country. Please note that the GCCA will not operate under IDERA in contentious matters without the court's order. However, this yet remains untested in the UAE.

    Nevertheless, whenever it seems like the court's intervention is needed for enforcing security interests, the court can be approached by relying on several contentions stated in the Commercial Code and Civil Transaction Law. Under Article 172 of the Civil Procedures Law, if the secured debt is not satisfied when due, the pledgee can apply to the court to sell the asset to recover their debt. This can only be done after serving a notice seven days before the application.

    The attachment procedure is also conducted by UAE courts under Civil Procedures Law without notice to the mortgagor in the event of dispute over the right to repossession of aircraft. Further, a substantive action needs to be filed after eight days of the attachment application, failing which the attachment order will be rendered void and ineffective. In the case of insolvency of the pledger, the Commercial Code regulating the bankruptcy proceedings will come into play.

    Conclusion

    We recommend that financers seek legal advice to understand the nuances of UAE laws and any international law (including English law mortgage) for implementation in UAE if they would like to take security over moveable assets such as aircraft. Clearly, the intricacy and complexity involved in this particular transaction are cumbersome and excessive. It would be, in our view, prudent to understand the importance and complications of the processes for repossession of aircraft, registration of aircraft mortgage transactions and the different flexible and case-specific scenarios that these laws can be applied to.


    [i] UAE Federal Law No. 20 of 1991

    [ii] UAE Federal Law No. 18 of 1993

    [iii] Commercial Code (Federal Law No. 18 of 1993), Article 164(1) "A commercial pledge is one contracted on a movable property in security of a commercial debt."

     

     

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    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[Be Aware, else Beware]]>Be Aware, else Beware

    Part II of II

      In the earlier issue, the author discussed forgery under UAE Criminal Laws and other related statutes. We broadly covered – the definition it's different types (material and moral), legal implications of denial and applicability of the law of evidence. We also addressed recent court precedents on the topic. Mr. Ghany continues with part 2 of this two-paper series and discusses other broader aspects relating to challenging a claim based on a forgery, procedures for the challenge, and relevant court precedents on the matter.

    Pronounced political philosopher, Thomas Hobbes once stated that ignorance of the law was not a good excuse since everyone is bound to take notice of the laws so subjected. If ignorance of law is no excuse, then is every person supposed to graduate out of law schools? No, the acuity of the principle "ignorantia juris nonexcusat "lies in the fact that the acts which constitute a crime should be known to everyone alike and should be profoundly set out in the law. Therefore, if there is no text stating a prescribed penalty for a particular act, the judge cannot consider that act as a crime.

    Exoneration

    Let's discuss the adventurous journey of the unaware Mr. X: He was traveling from Delhi to Dubai with certain medicinal products that were permitted in India but illegal in Dubai. However, Mr. X was unaware of the legal implications of traveling with those medicines into the UAE. Would he be criminally liable for sneaking banned products into the country? Hopefully, the criminal consequences on Mr. X would be lucid by the end of this article. The judiciary has established that the principle of the unacceptability of apologizing for the ignorance of law is applicable only to the punitive laws due to the widespread chaos that would be created in the society if the courts would excuse ignorance of penal laws. Ignorance of non-punitive laws such as the civil law is in general an ignorance of reality. Hence, the criminal liability of the 'doer' would nullify due to the absence of men's rea or criminal intention. Some people have perceived that this notion has substantially departed from the principle of the unacceptability of apologizing for the ignorance of law since the idea fundamentally is based on the criminal intent of the parties and not the existence of non-punitive legislations. In this scenario, criminal intent cannot get determined without comprehending the judgment of a non-criminal legal rule. In this regard, the Supreme Federal Court of Abu Dhabi has laid down a legal principal in which it emphasized on the presence of criminal intent for the ignorance of a non-punitive rule. The court cited the principle and acquitted the defendants in a forgery case since their ignorance was not towards judgments of the penal code, but rather towards their personal law about divorce. The court had observed that a husband had divorced his wife with the triple talaq. However, the parties were unaware that this mode of divorce was irrevocable. Therefore, the husband had obtained a visa and subsequently brought her back to the country after confirming to the authorities that she was still his wife. Consecutively, the parties were made liable and accused of counterfeiting an official document due to their statement to the authorities regarding the validity of their marriage. However, the court held that the couple did not have any criminal intent in their actions as they were unaware of the principles of Sharia regarding the matter of divorce. The court further observed that the parties were unaware of the personal laws of the country and had not ignored the provisions of the penal code. Therefore, the court acquitted the parties since they lacked the criminal intent which is the necessary legal element that subsists in the commission of a crime.

    However, what would be the legal implications on the parties if they had ignored a new law that was not effectively communicated to the public by the legislators? The lawmakers are obligated to announce and deliver the provisions and the ambit of all new legislations so that the public can consecutively be informed to alter their actions regarding the new legislation. Therefore, the application of the maxim ignorance of the law is no excuse would only be applicable after a new law has been informed to the public through a certified means of communication as an official newspaper due to the prevalence of a crucial link between the involvement of the statute and the likelihood of knowing about it. The validity of the excuse of ignorance of the law by the accused could be comprehended when a new legislation does not get communicated effectively or when the official newspaper does not get circulated to a particular place. This exception is relevant in circumstances where an accused was not informed about the implementation of a new law due to the occurrence of force majeure events such as floods, war and the like. Hence, the excuse of ignorance of the law would be valid when an individual gets restrained from attaining knowledge about the provisions of a new legislation due to the non-communication of the same by the legislators. The wisdom of acknowledging this exception lies in the fact that an individual should get the opportunity to attain knowledge about a new legislation before he bound by the same. The public is provided with the access to a new regulation when a newspaper elucidating the implementation of the same reaches out. Hence, the courts would not accept an apology for the public's ignorance of legal provisions. In line with this principle, one thing is clear that the exception applies only to rules where key legislation is the source. Therefore, it could conclude that precedents (in common law countries) and decisions of regulatory authorities are not subject to this notion.

    However, the US Supreme Court had considered ignorance of the law as a substantial excuse in the most fabled case of Lambert V California[i]. In this case, the appellant who got convicted of a felony in the California state. However, she was unaware that she had to register herself by the provisions of a Los Angeles city ordinance when she remains in the city for more than five (5) days. The ordinance had stipulated that she would be imposed with a fine of five hundred dollars and would be imprisoned for up to six months if she had continued her stay in the city for more than the prescribed limit. Subsequently, the state authorities convicted her with the failure to register by the ordinance. However, Lambert appealed her case and pleaded that she had no knowledge that she had to register herself and that convicting her would deprive her of due process under the Fourteenth Amendment to the US Constitution. Consecutively, the US Supreme Court held that the probability of knowledge of a statute was required to convict a person of a notice offense.

    The penal law of some nations has provided for substantial exceptions to the principle of ignorance of the law. Moreover, some laws exert temporary exceptions related to the time of issuance of the law and may concern the foreigner who recently entered the country. The Lebanese Penal Code has stated the principle in the Article 223 and provided that no person can be excused under the pretext that he/she does not know the penal sharia or for that matter - interpreting it mistakenly. Further, it has also provided for the following exceptions to the principle:

    • Lebanese Penal Ignorance in a civil Sharia whereupon the imposition and infliction of the penalty is applied.
    • The ignorance of a new Sharia by any person in cases where the crime is committed within the three days following its spread.
    • Foreigner's ignorance who came to Lebanon and engaged a crime within a maximum of three days beginning from the date of his arrival and in which the applicable laws of his home country (where he resides or is a citizen of), do no punish. 

    Similarly, Iraqi law provides for the acceptability of the excuse of the foreigner who came to the country for seven days. Article 37(2) of the Penal Code of State of Iraq, for instance, has conferred the court with authority to exempt a foreigner from the penalty for a crime which he/she committed within seven (7) days from the date of his/her arrival in the country. The exemption applies as long as his ignorance of the law is confirmed and the law of his domicile does not provide for punishment for the same crime.

    Conclusion

    Therefore, the principle of the unacceptability of apologizing for the ignorance of the law can be seen to achieve the benefit of equality among mankind, as it is to be applied to everyone, with no distinction between who may know or not know of it. Justice behooves not to reward who is unaware of the legal rule and to impose a fine on who is aware of it. Hence, it can be comprehended that this legal principle is decided in the favor of the justice system as a whole as it stems from the supposed presumption of all people alike.

    This concludes the two-part series on forgery law of UAE and the broader Middle East. STA's team of expert criminal lawyers in Abu Dhabi, Dubai, and other offices will continue to deliver engaging and relevant legal information. Court Uncourt is also available on iTunes and Android Google Play. Thankfully, Apps cannot be forged at least as of now!

     

    [i] 355 U.S. 225 (1957)

     

     

     

     

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    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[Commercial Agency Law of Oman]]>Commercial Agency Law of Oman "Nearly all men can stand adversity, but if you want to test a man's character, give him power."  - Abraham Lincoln

    The most prevalent form of doing business in the Gulf Co-operation Council countries (the GCC) for the foreign companies is to appoint a local agent (the Agent). Effectively, this means entering into a contract with the citizen (individual or corporate entity owned by citizen or citizens) of that country.   This legal relationship permits the foreign principals to distribute their products in the region where local market know-how is useful and desirable. The Agent assists the foreign principal in distribution and providing marketing, distribution and after-sales service for the imported line of products. Commercial agency business for the locals is a lucrative business, and therefore the regulation of such activity is pivotal for oil-rich monarchies, where the foreign companies can exploit the resources, and control the trade in the region. The Agent friendly regulations continue to be in force throughout the GCC, however, recent amendments in the commercial agency laws in Oman & Kuwait portrays distinct approach, and in this article, we shall discuss the Commercial Agency Law in Oman. 

    Within the Sultanate of Oman, the following laws, and regulations dictate the relationship between foreign principals and agents:-

  • The Law of Commerce (the Royal Decree 55 fo 1990);
  • The Commercial Agency Law (the Royal Decree 26 of 1977 as amended by Royal Decree 82 of 1984, Royal Decree 73 of 1996, Royal Decree 66 of 2005, and Royal Decree 34 of 2014); and
  • The Commercial Register Law (the Royal Decree 3 of 1974 as amended by Royal Decree 88 of 1986)
  • The Royal Decree Number 34 of 2014 (the Decree) came into force, which amended various provisions of the Omani Commercial Agencies Law Number 26 of 1977) (the Law) and the Decree introduced various changes to the commercial agency regime as previously applicable in Oman. 

    The previous legal system had an inclination for and favored commercial agents and therefore to have more balanced approach between the commercial agents and the foreign entity wishing to import into Oman, certain crucial amendments were brought into force by the Decree, as also to avoid market dominance by foreign entities through the use of local agents.   Let's Look at the Legal Provisions covering Commercial Agency Law of Oman    According to the Commercial Agencies Law, the commercial agency's definition is: "Any agreement through which a merchant or a commercial company in the Sultanate is assigned to promote or distribute the products or services of a foreign person or entity in consideration for profi¬t or commission."    The Agents are appointed by the foreign producers to sell their products in the local market to avail the market knowhow, and essentially cater their products to domestic market. The parties are required to register an agency agreement at the Commercial Agencies register at the Ministry of Commerce and Industry to be enforceable, and the Ministry shall issue a certi¬ficate to prove the recorder within fifteen (15_ days as from the date of application. It is important to note that in Oman the agency agreement can be for limited or unlimited terms which can also be exclusive and non-exclusive.    Significant Amendments Raised under Decree Number   The most welcoming provision for the foreign principal of this Decree is repealing Article 10 of commercial agencies law. This provision prominently relied upon by Omani agents where the agency agreements get governed by Omani Law and the foreign principals could only terminate the agency contract when there was a material by Omani agent under the contract, and the foreign 'principal' has no obligation to pay any commission to the agent. The Omani courts have taken a view on the interpretation of Article 10 that unless there is a material breach by the registered agent - any termination was unjustified, and thus the agent's Article 10 right to statutory compensation from the principal was triggered. Under this Article, the Omani courts have given the judgments where Omani agents have derived two or three years' net profit from the agency in question, plus reimbursement of any expenditure in respect of capital items which were rendered wholly redundant due to the agency termination.   The foreign principals did not appreciate this clause and  were reluctant, on account of underperforming agents who were accruing benefits and profits for doing nothing and therefore; as a result, foreign principals have preferred the applicability of non-Omani law regarding contract, coupled with an arbitration clause. 

    Other Notable Changes Raised From Omani Royal Decree 34 of 2014  

    • Ministry of Commerce and Industry no longer have the powers to ban imports of foreign supplier's products. Earlier, the Ministry of Commerce enjoyed discretionary powers to apply the prohibition in cases where principals had unjustifiably terminated the Agent;
    • Article 7 of the Oman Commercial Agency Law has been repealed. This Article previously required overseas manufacturer and distributors (exception being: those engaged in or; dealing in weapons, ammunition, and military equipment) to carry out any business in Oman only through an Agent. In author's view, this step of repealing Article 7 was to promote and encourage foreign manufacturers and distributors to exploit Oman markets more freely and set up their presence;
    • Article 14 of the Omani Commercial Agency Law has also undergone amendment. The Omani Council of Ministers is now empowered to assess and monitor the maximum number of agencies permitted for registration under an individual agent. Evidently, this step was taken to ensure they do not gain excessive benefits or advantages by attaining a dominant position which could eventually affect the demand and supply inequity, and further result in increased pricing.

    The Ministry of Commerce and Industry has notified that the new law shall become effective and will apply to existing principal-agent relationships.  

    Clearing the Confusion - How is Agency Agreement in Oman Different than Distribution Agreement?

    As mentioned before the commercial agency refers to the Commercial Law, the Commercial Agencies Law, and the Commercial Register Law, while the Distribution Agreement relates to the general rules in the Civil Law. In the commercial agency, the agent promotes and sell products for the Principal according to the direct relationship between both of them organized by the agreement. Speaking of a distribution agreement, on the other hand, the distributor can distribute di¬fferent kinds of products from di¬fferent sources under the distributor's name, and the distribution rights are obtained by the principal or the agent. In the commercial agency, the agreement shall organize all the details and shall contain sufficient information about the agent's name, nationality, products, term, and the territory while this is not mandatory in the distribution agreement. The commercial agency shall be registered in the Ministry of Trade and Industry to have legal e¬ffect, while there are no registration formalities for the Distribution Agreement and will be sufficient to be certified by the notary public. 

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    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[Liquidation of Limited Liability Companies (LLC) in UAE]]>Liquidation of Limited Liability Companies in the UAE

    Introduction:

    The dawn of 2015 showcased significant developments in the United Arab Emirates when Federal Law Number 2 of 2015 (the Companies Law). This statute amended the major portion of the law governing legal entities in the country's mainland. The Companies Law has also focused on the provisions of liquidation which we will shed light on, but first, we will demonstrate the main reasons of liquidating a company as per the said law. The lawmakers of the country have strived to simplify the process of liquidation of a company with the view to ensure that all the parties have an equitable share in the entity's assets. It is not strange to deem an organization desolated and initiate the process of liquidation if the purpose of the company has been full filled. If all or most of the company's funds are utilized or spent and; the remaining funds cannot be used for investment anymore, all partners of the business (or the quorum) agreed that the term of the company has expired or a Court has issued an order to dissolute the company.  The Court of Cassation in Commercial Cassation Case Number 381/2008 stated that 'if any of the dissolution events arises, the steps shall follow the liquidation of the company and distribution of the money among the shareholders which cannot be distributed unless and until the dissolution and liquidation process concludes.'

    Any business would undergo managerial turmoil when one of its partners passes away. However, could this be the sole reason to liquidate a company per the Companies Law? Unless mentioned in the articles of association of the limited liability company, all shares of the deceased partner shall be duly transferred to the successors only if the limited liability company consists of more than one shareholder. On the other hand, a single person company would dissolve due to the death of its only shareholder unless and until the successors declared their consent to resume the activities of the company within six months.   Although, if a company has been inactive then the competent authority may indicate that their trade name shall be crossed off the commercial register within three months unless they provide a valid reason. However, if the notified company fails to prove to the authority that it is duly active or provide good cause for being inactive, then the governing body has the right to raise the matter to the Court.   Stepping Stones:

    At the outset, the representative of the company must notify the Department of Economic Development (the DED) and all other related authorities with the reasons for dissolution and liquidation of the business. The authorities accordingly will note the 'dissolution' at the commercial register and further inform the company of any documentation or legal formalities at that stage. The dissolution should be published in two local newspapers in English and Arabic to provide an opportunity to the public to be aware of the decision and protect their personal interests if any. Further, the partners of the company should appoint a liquidator and determine the manner of liquidation notwithstanding that no partner shall be entitled to his shares from the capital of the entity until all debts get settled. 

    It is important to note that the powers of the management, board of directors who represent the company shall end from the date of appointing the liquidator(s), or to the limit where the liquidator(s) finds it necessary to keep the works of liquidation in order. The liquidator(s) can be appointed by:   A partner's resolution framed in the general assembly should mention the name(s) of the Liquidators, a method of liquidation and fees of liquidator(s); provided that they are not the current auditor of the company or has audited the company in the last five years. This element succors the principle of equity since the liquidators who are appointed would be neutral towards the company and hence ensure that all the debts paid off before the partners receive their piece of the cake. However, as mentioned earlier, the Court will also have a hand in dissolution and appointing the liquidator if has been company inactive or its activities are in violation of the law. In such a case, the Court will name the liquidator(s) and method of liquidation and liquidators fees. Further, the partners may dismiss the liquidator(s) by passing a resolution in the general assembly of the company or vide a court order. However, such decisions get registered in the commercial register in the department of economic development.

    The Process of Liquidating

    A liquidator will be the representative of the company to the public and the Court. The liquidator will bear the responsibility to settle all remaining debts of the company and sell its movable and immovable assets in auctions or; in any manner unless is it agreed in the partners' resolution or Court order to sell such assets in a set way. The process of liquidation of a company includes:-

    Inventory

    A liquidator shall make an inventory list for all, company's money, assets and liabilities and the manager or board should handover money, accounts, documents, and ledgers to the liquidator and cooperate with any information or datum related to the company. 

    Assets and Liabilities

    The liquidator has to prepare a detailed list setting out all available amounts, budget and current liabilities of the company which must be signed by the manager or board. He should also present to the partners every three months a statement of liquidation and reveal to the partners any information related to the matter. Once the process is concluded, the liquidator must submit his final report of liquidation to be approved by the partners or Court. After obtaining the approval, accordingly the liquidator will – within seven days- notify the partners by publication to receive their entitlements within 21 days. All the shares will be stored with the Cort's treasury if the partners fail to collect their shares.

    Interests of Company

    A proper liquidator will always protect the entity's assets, money and rights availed as per law and will place the money which he receives from the account of the company and most importantly duly settle its liabilities against third parties.

    Settlement of Debts

    The monies of the business shall be distributed among its partners according to the shares only after clearing all dues and debts. It is to be noted that all due dates of liabilities shall relinquish upon the dissolution of the company. With this, the liquidator shall duly notify the creditors with the commencement of liquidation in two local newspapers published in both English and Arabic. In all circumstances, the publication must include an invitation to the creditors to present their claims in a grace period of not less than 45 days. Once the creditors submit their request and if it's shown that the available amount cannot cover the entire debts then the liquidator, in this case, shall settle according to the percentage of liabilities without prejudice to the priority creditors. In the event where the creditor(s) are in dispute over the debt then the liquidator will have to put the amount of the debt in the court's treasury. Otherwise, all debts will get settled with the creditors, and such settlement gets notarized before the notary public. 

    The term of the liquidation gets determined in writing by the partner of the company or the Court. Such duration cannot extend unless with a Court order or partners resolution provided that the liquidator must explain the reasons to delay the liquidation. Further, the court would not entertain any suit against the liquidator, partners, and managers, members of the board and auditors of a liquidated company if three years has elapsed since the liquidation of the entity's business.   Conclusion   It is imperative for partners of a company to comprehend the exact time when a corporation must liquidate to avoid further costs and losses. The Court of Cassation in Commercial Cassation Number 70 of 2007 said that companies that seek liquidation should register in the commercial register. However, the process of liquidation ultimately depends upon the liquidator(s) and even the court in case the company has been deemed to be inactive. Therefore, enterprises that intend to liquidate themselves should employ a law form that houses a dedicated corporate and commercial team which provides bespoke legal advice.   Note: This article dates back before the enactment of the new UAE Bankruptcy Law (Law Number 9 of 2016). To read the developments contained in the new UAE Bankruptcy Law, please read our publication prepared jointly by STA's team of lawyers in Dubai and lawyers in Abu Dhabi here.   ]]>
    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[The World Wide War of Brands]]>The World Wide War of Brands

    Once upon a time, there were two large fast food chains X and Y, who were prominent in serving their millions of customers with gourmet burgers. However, the lively competitiveness between them turned bitter when X advertised that their gourmet burgers were fresher and tastier compared to certain other fast food joints in town. Everyone knew who were they referring to in the advertisement! The elicited chief marketing officer of Y subsequently published an advertisement in the national TV stating that their burgers contained less cholesterol than all other joints in town and explicitly compared the ingredients of their burgers to X's burgers. Consecutively, a global marketing battle commenced between the fast food giants. Both the companies invested an immense amount of finances in an attempt to degrade the other on television channels and newspaper advertisements. They were so engrossed in this feud that they forgot to improve or promote their product.

    Competitiveness supplements growth; however, rivalry degrades morals. Corporate giants spent millions of dollars in product endorsements (or rather to disgrace the competitor's goodwill). However, they forget the old proverb that money saved is money earned. A company's foremost objective is to increase its profits and elevate its goodwill and reputation in the market. Companies have taken rivalry and competition to a different level with the advancement of technology in past few decades. Every business is distinct in the products and the services they provide. Certain companies might use material 'A' in manufacturing their products, and certain companies might use material 'B' in making or building their products. Therefore, a substantial difference between the products of two different companies is inevitable. Frequently, companies smear the products of their competitors through comparatively similar advertisements in the media to establish that their products are more effective than that of their competitors. Comparative advertising, as the term suggests, refers to any form of advertising in which the owner of a brand draws a comparison between his product and that of a competitor. However, could comparative advertising damage the goodwill and brand image of a competing company? Further, would the use of a competitor's product in a similar advertisement infringe their intellectual property rights? The legalities surrounding similar looking ads vary depending on the jurisdiction and the extent to which a company has used its competitor's products in an advertisement.

    The infamous case between O2 Holdings Limited and O2 UK Limited (collectively, O2) and Hutchinson 3G Limited (Hutchinson)[i] had shed light onto the legalities of 'comparative advertisements in Europe.' The former had instituted a legal action against Hutchinson for comparing their mobile phone service to the cellular-phone service of O2. O2 uses the images of bubbles about their products and also has several registered trademarks in this regard. Further, the advertisement in question had referred to O2 and displayed pictures of bubbles; however, these particular images of bubbles were not registered by O2. Subsequently, O2 alleged that Hutchinson had infringed its registered trademarks. The primary issue in the matter was whether Hutchinson's advertisement amount to trademark infringement since they had used the O2's trademarks solely for the purpose of comparing their products with that of their competitor. Therefore, the court held that reconciliation of the Trademark Directive and the Comparative Advertising Directive was imperative. Further, the court ruled that the advertisement had not induced confusion on the consumers regarding the commercial link between the parties. However, the implications and the legalities of "comparative ads" vary depending on the jurisdiction and the domestic legislation in which the advertisements got published.

    In the West

    The Federal Trade Commission (the FTC) of the United States recognized that comparative advertising was not a thorny rose in the marketing bush. The use of comparative advertisements elevated in 1969 after the FTC had pronounced that "truthful comparative ads" were a valuable source of information for the consumers. In the US, the Federal Trade Commission Act and Section 43(a) of the Lanham Act[ii] regulate the arena of comparative advertising. The FTC does not require a high standard of proof for substantiating "comparative advertising" claims since it has explicitly permitted its usage. Therefore, advertisements that discredit or dishonor the products of another brand are permissible as long as they are fair and not impliedly deceptive. Further, the FTC has provided that an advertisement would be considered to be defective when a representation or omission is likely to mislead the consumer and consecutively, affect his judgment regarding the product or service. However, an advertiser would become liable if he had a reasonable substantiation for perceiving that the information in the advertisements was fair and honest.

    Further, Section 43(a) of the Lanham Act has prohibited any misrepresentation in the on the nature, characteristics, qualities or geographical origin of the advertiser's or his competitor's products or services. However, the ambiguity of the country's legislation lies at the crossroads where the FTC Act meets the stringent provisions of the Lanham Act. The vast ambit of the Lanham Act confers a court with authority to hold an advertiser liable if the information is likely to deceive a consumer. Therefore, it establishes that an advertiser who has specified the literal truth could also be responsible and implicated as long as the consumers get misled due to an implied message in his advertisement.

    Companies that suffer impeccable damages due to its competitor's competitive or comparative ads have multiple causes of action to recover damages from the latter. However, the financial aspect of damages that a court would award ultimately depends on the legality of the advertisement and the number of days that the advertisement got published among other things. The US courts, known for its effective and reliable tort law implementation, provides companies with huge damages especially when a party has suffered a quantifiable loss. However, companies get burdened with the mammoth task of proving their alleged loss from a competitor's advertisements. Further, companies might also have to undertake a consumer survey to establish that a "competitor's comparative advertisement" could have substantially misled a consumer even if it has merely stated that truth. Therefore, numerous companies have escorted to the shadow of alternate dispute resolution available at the National Advertising Division and the National Advertising Review Board to further their claims for damages in this regard. Companies are, hence, advised to resort to a law firm that provides bespoke legal advice to determine the legality and the validity associated with a comparatively similar advertisement.

    The UAE

    UAE has been the central hub of the Middle Eastern investors for the past few years. Therefore, it is only palpable to opine that the degree of competition has considerably elevated with the increase in the number of multinational companies that have established themselves in the country. Unlike the US, no specific legislation in the UAE has provided for explicit provisions regarding the legalities surrounding a comparative advertisement.

    The general presumption regarding these advertisements lies upon the fact that they get permitted due to the legislative vacuum in the particular sector. Therefore, one can always argue that a company would be authorized to use its competitor's trademark for just a few descriptive purposes. However, the provisions of the Federal Law Number 37 of 1992 (the Trademark Law) has prohibited a party from unlawful use of another party's trademark. Therefore, the issue of intellectual properties could rush to the frame since the primary purpose of comparative advertisements includes a comparison with a competitor's products. The first ambiguity in this matter is in regards to the ambit of the term 'unlawful use.'  Would a "comparative advertisement" amount to 'unlawful' usage of a registered trademark? The party which alleges that its competitor has deceived the public by using its trademark in an advertisement bears the burden to prove. The former party would be required to conduct a thorough evaluation of the advertisement determining the legality of the same.

    Further, the UAE courts provide a higher degree of protection to well-known trademarks since the Trademark Law has elucidated its recognition. These trademarks confer a higher level of protection since the public widely recognizes them. Therefore, the courts in the country may provide a stringent cloak of protection to these well-known trademarks since their unlawful use could provide their competitor's with unnecessary recognition and popularity.

    The ambiguity in the law has supplemented to the unprecedented growth in competitive and comparative advertisements. Companies usually compare their products to that of their competitors' with the view to induce the public into realizing the benefits of their products and services. However, companies and corporations should exercise caution before publishing an advertisement that could land them in an ocean of legal mishaps.


    [i] Case C-533/06; [2008] WLR (D) 193

    [ii] 15 USC § 1125 (a)

     

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    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[‘Alice’ Through the Looking Glass]]>'Alice' Through the Looking Glass

    "Upon filing a patent claim, your job is merely quarter done."

    -    Kalyan C. Kankanala   Try to make up your mind on the answer to one question before commencing your spell-binding read of this article. Now, the debacle that calls for a response is whether an inventor should get conferred with the right to suppress and retain his invention from the public. There could be two opposing views to that debacle. One states that such an act of retention of information could stagnate the growth of the human race (this means that we would still be in the stone age if the genius who discovered fire had not shared his technology of striking two stones together with his peers, almost around a million years ago!). Whereas, the opposing view states that it would be unfair if the inventions disclosure results in public domain since someone, somewhere had put in considerable efforts into developing it (even if it was just striking two stones together). Interestingly, governments and courts have also had an opinion in this regard over the years. Ergo, whichever be your opinion, strap onto it and let's see if it changes by the end of this article.    Down the Rabbit Hole   The US Supreme Court also thought of going down this memory lane in the case of Alice Corporation v CLS Bank International  (the Alice Case) regarding the ineligibility of computer-related inventions to be patented due to their nature as abstract ideas. This contention mainly sat on a two-step process formed by the judiciary in the Alice Case. However, little did the world know that this decision was about to be a landmark case that would decide the fate of many other matters that were yet to come.    In this case, the apex court took the view that when assessing a claim, the Court must take into consideration and discover whether the application at hand focusses an abstract idea. If yes, then the claim can be construed as eligible for patenting provided that it has an inventive concept or significantly more than an abstract idea. The latter part of assessment must take into account the claim elements both individually and in combination. Courts have addressed the issue of patent-eligibility and the abstract nature of an invention by looking at the claims as a whole. They do so by determining whether the idea or concept has material existence, is part of a particular structure, or is part of a machine (as seen in Ultramercial Inc. v Hulu LLC ). Ergo, decisions post the Alice Case show an array of examples of what types of inventions would categorize as abstract. For instance, in the case of Digitech Image Technologies LLC v Electronics for Imaging Inc, the court observed that information organized through algorithms or mathematical correlation fell under the ambit of the term abstract invention. Further, it was decided by the Court in the Alice Case that things that are not abstract outside the context of patent eligibility will still have the potential to be considered as abstract within the context of patent eligibility.    Further, once an invention gets categorized as abstract, the second step that the court laid down in the Alice would come into effect. To satisfy the requirements and to qualify for a patent, the claim must be an 'inventive concept' or must 'amount to significantly more' than an abstract idea. In the Alice Case, the judiciary considered patent-eligible inventions as those that improve another technology or the overall functioning of the computer. However, if the software to be patented just allows a computer to perform generic computer functions that are conventional and known to the industry, then the software will not be patent eligible. Unfortunately, this was the extent of guidance provided by the court in this case.   With such limited direction for a stringent two-part test, the ability to distinguish between patent-eligible and patent-ineligible claims resulted in a harsh reality for software inventions in the coming years. Hence, the post-Alice era saw a series of rejected patent claims. For example, in the case of buySAFE Inc v Google Inc, the Federal Circuit affirmed the decision in the Alice Case and observed that an application for underwriting transactions over a computer network was an uninventive abstract idea that used basic computing components. Adding fuel to the fire for software developers, the United States Patent and Trademark Office (USPTO) subsequently published a letter on 25 June 2014 to patent examiners affirming the directions established by the Alice Case in determining the eligibility of the subject matter be patented.    Alice, Grounded.   However, nothing is forever (except diamonds; however, diamonds can also be cut using a diamond cutter). Ergo, the diamond cutter in our article is the case of Enfish LLC v Microsoft Corporation (the EnfishCase) which saw the first reversal of matter, post-Alice, under section 101 of Title 35 of the United States Code. The software-related claim presented in this case was found to be patent eligible as per the fundamental requirements that were laid down by the Court in the Alice Case.   While using the Alice test, the Federal Circuit in the Enfish Case changed the perception of the requirements, most specifically the question of "abstract" nature. Software-related claims did not inherently present themselves as abstract. The Federal Circuit emphasized the oversimplification of the 'abstract analysis' and its improper use that downplayed the benefits of software inventions in the past years. Consequently, the court concluded on the matter with the following observations:      1.  the fact that software could run on a general-purpose computer could not be the sole reason for the rejecting a patent application;    2.  by its very nature, software is not physical and is unlikely to portray physical features; however, the development of computer technology owes its basics to the existence of software that can run on them; and    3.  obtaining the solution to problem vide a computer software is not an abstract idea, and hence, software patents are not inherently abstract.   Therefore, the defendants in the Enfish Case established the patent-eligibility of the software claim through the first step of the rule that got set in the Alice Case, by contending that the software in question was not abstract. Following this decision, the USPTO posted another letter on 4 May 2016 which provided a more detailed patent-eligibility guidance to examiners. In comparison to the previous, the subsequent letter by the USPTO stated that the second part of Alice Case test is simply a tool to filter the claims. Further, the significant update is that the USPTO confirms that an invention's ability to run on the general-purpose computer does not mean it is inherently abstract and patent-ineligible. In application, this means that if the first part of the test is satisfied, as software is no longer inherently abstract, the second part need not be examined. Hence, this gave rise to a wider margin for software claims to get accepted as patent-eligible.    Conclusion   In light of Alice Case, Enfish, and the USPTO updates, the rollercoaster of computer-related patent-eligibility has not been a smooth one. Although the initial rise was difficult for inventions directed to software, Enfish allowed a steady decline into a safe area of potential eligibility. Applicants seeking to patent their software will find it beneficial to include in their patent application about the development that the software in question possesses to offer in the field of computer technology to escape the entrapment of categorizing it as abstract.   _______________________________________________________________    i.  573 U.S. _, 1134 S. Ct. 2347 (2014)  ii.  772 F.3d 709 (Fed. Cir. 2014)  iii.  Appeal Number 2013-1600-1618 (Fed. Cir. July 11, 2014)  iv.  765 F.3d 1350 (2014)

     

     

     

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    Sun, 30 Apr 2017 00:00:00 GMT
    <![CDATA[FIDIC in the Middle East - The Must Knows for Industry Players]]>FIDIC in the Middle East - The Must Knows for Industry Players   The UAE industry has seldom been ignorant to internationally set standards- that in more than one ways.    Originally established as an organization by three founding countries Belgium, France, and Switzerland- today FIDIC, which is an abbreviation for the French acronym  "Federation Internationale Des Ingeniuss Conseils" meaning the International Federation of Consulting Engineers represents an international standard for the construction and consulting industry.     FIDIC is well known for drafting standard form of Conditions of Contract for the worldwide construction industry, particularly in the context of higher value international construction projects, and endorsed by many multilateral development banks ("MDBs").    The Rainbow Forms:   Until 1999, FIDIC was synonymous with the Red Book (Conditions of Contract for Building and Civil Engineering) and the Yellow Book (Conditions of Contract for Plant and Design-Build- for the electrical and mechanical plant). With complexities surrounding the particular industries, soon FIDIC revised its old model templates and published the 'Rainbow Suite' in 1999, which. The Red, Pink, Yellow, Silver, Orange, Gold, White, Green and Blue books are exhaustive and industry specific.   The FIDIC forms apply to a wide range of differing engineering and construction projects; from traditional civil engineering to hi-tech windmills and heavy duty oil and gas process plants.    There are 20 clauses in the revised FIDIC form of contracts. In keeping with the desire for standardization, each of the new books includes General Conditions together with guidance for the preparation of the Particular Conditions, and a Letter of Tender, Contract Agreement, and Dispute Adjudication Agreements.   FIDIC in the UAE:   The FIDIC family of contract templates have gained wider acceptance amongst the UAE construction and consulting industry key players. The Government of Abu Dhabi passed Law Number 21 of 2006 which provides for the standardization of the construction contracts for the projects initiated by the government entities. Accordingly, in 2007, the Abu Dhabi Government under the license from FIDIC prepared two versions of FIDIC contracts-  i) The build only contracts; and ii) The design contract.   Both the above form were specially modified forms of FIDIC municipality construction contract.    The UAE industry has been slow in accepting the FIDIC 1999 forms, and most contractors continue to use the 1987 forms. The primary reason behind this practice is the misconception that FIDIC contracts do not require inputs from a local lawyer.  Reduced liability of engineer in the new contracts, for instance, is a key point substantiated in a ruling of Dubai Courts.    Acceptance of FIDIC module by UAE Courts   Clause 20 of the FIDIC form of contracts deals with claims, disputes, and arbitration. Clause 20.4 notably provides that a conflict between the contracting parties shall first be submitted to a Dispute Adjudication Board (DAB). Subsequently, the dispute is subject to the jurisdiction of the arbitration center.   In a case before the Dubai Courts for ratification of an arbitral award, questions were raised about the enforceability of an FIDIC form of contract and the agreement to arbitrate under the contract because: i.    contract was not executed by the respondent in the case but through an engineer of the respondent ii.   no special power of attorney was issued in favor of the engineer; and iii.  no consent to arbitration was therefore given by respondent and award should be declared null.   In reversing the judgment of the appeal court, the Dubai Court of Cassation (Supreme Court) held that no doubt the contract was executed through an engineer, he was acting in the capacity of respondent's employee. The court further applied Article 203 of the UAE Civil Procedure Law and stated that parties agreed to arbitration under clause 67 (1) of the general conditions. In this case, the performance of the contract was concluded as the consent to arbitration.   Conclusion:   The new form of FIDIC contract rules out situations like above case study to a greater extent as the role of the engineer is now limited, and more liability has been shifted on the employer. The introduction of the DAB also comes as a ray of hope for distressed parties.   Keynote- However frequently used in practice, the necessity of a contract to be tailor made for a particular region, cannot be ruled out.    Provisions of Law You Should Know!     Article 880 of the UAE Civil Code imposes a joint liability on the contractor and the designer for ten years for the total or partial collapse of a building or for a defect which threatens the stability of the building.     Under Article 473 of the UAE Civil Code, the limitation period for contractual claims in civil matters in the UAE is 15 years from the date the cause of action arises     In Sub-Clauses 9.4(b) and 11.4(c) of both FIDIC Contracts, the Employer has the right to terminate the Contract or reject the Works, if the defect or failure to pass the test deprives the Employer "of substantially the whole benefit of the Works."   ]]>Wed, 29 Mar 2017 14:49:00 GMT<![CDATA[Golden Visa to Europe]]>Golden Visa to Europe The Golden Visa is otherwise known as the "Golden Door" to Europe.   For some, the "Golden Door" is a marriage of convenience to gain easy access to Europe.   As the economic crisis spreads all over the world, Europe is introducing new laws, which facilitate foreign investment in its territory.   Likewise, citizens of non-European countries with a wealthy bank account are invited to invest in Europe. By purchasing properties, and transferring capital or by creating jobs, the investors (in exchange) qualify for a "Golden Visa," which entitles free movement of people, goods and capital within the Schengen Area as a European citizen.   Countries like Portugal, Spain or Cyprus already have enacted their laws; other countries are to follow, as this is an excellent opportunity to gain extra investment with foreign money.   Due to the crisis all over Europe, it's a fine time to invest, as prices have reached an all-time low in several years, companies have no money and need liquid investment to prevent unemployment from rising. Nowadays, mainly real-estate is the perfect investment; the truth is you can buy two properties, or even three, paying the price of one property some years ago.   There are other benefits to having a "Golden Visa." For instance, the investors do not necessarily need to obtain permanent residency. The term of residence can be as low as one week per year. However, if they decide to relocate to Europe, they will have the right to family regrouping, and after spending sizeable time (several years), they may qualify for permanent residency, as well as receive a European citizenship/passport.    Thus, the old continent intends to – in a smooth operation – attract foreign investment, which would certainly improve the economy and keep unemployment to a minimum.   For so many years Europe tried to avoid allowing this to happen but...    After all……   Isn't the 'golden visa' a marriage of convenience between Europe and wealthy foreign investors? ]]>Wed, 29 Mar 2017 00:00:00 GMT<![CDATA[Tax Global Guide 2016-2017 Volume II: Tax on Finance Transactions: United Arab Emirates]]> Tax Global Guide 2016-2017 Volume II: Tax on Finance Transactions: United Arab Emirates

    Tax on Corporate Lending and Bond Issues in the United Arab Emirates: Overview

    Tax Authorities

    1. What are the main authorities responsible for enforcing taxes on finance transactions in your jurisdiction?

    Financial transactions are not subject to tax under any federal or local decree in the United Arab Emirates (UAE). These includes financial transactions involving a change in the value or title of an asset and liability and financial services rendered by banks and other financial institutions. The UAE federal government does not impose any national tax on the income earned by companies in the UAE. However, there are a few local decrees and ordinances that require payment of certain direct and indirect taxes by specific categories of companies. For instance, a 'transfer tax' is payable upon transfer of title of a real estate property.    Corporate income tax applies to companies under local decrees issued by individual Emirates. The Emirate of Abu and Dubai has Taxation Decree Number 4 of 1972 and Dubai Income Tax Ordinance of 1969 (as amended), which require companies to pay taxes depending on their activity and income. In practice, this tax applies only to oil and gas producing companies and branches of foreign banks within the relevant Emirate. Entities that are engaged in upstream petroleum activities must pay taxes under the applicable concession contract, along with royalties on oil and gas production. Branches of foreign companies must pay 20% of their annual income as a corporate income tax under local decrees of the individual Emirates. This tax is payable to the Department of Finance of the Emirate where the company is established.   The customs department of every Emirate charges a customs duty on all goods that are imported, exported, in transit, transferred or temporarily admitted into their jurisdiction.    Pre-completion Tax Clearances

    2. Is it possible or necessary to apply for tax clearances or obtain guidance from tax authorities before completion of a finance transaction?

    There is no specific authority responsible for levying taxes on financial transactions. Therefore, corporate firms are not required to apply for tax clearances or obtain guidance before finalizing transactions. However, companies are required to analyze the implications of certain corporate transactions (such as mergers and acquisitions) under Federal Law Number 4 of 2012 Concerning Regulation of Competition. 

      The customs department of each Emirate can levy customs duty on goods imported into that Emirate by any company or individual. A 5% duty is charged on the cost insurance freight (CIF) of the imported goods. However, alcoholic products and tobacco are subject to 50% and 100% duty respectively. Companies may also require a customs clearance to import goods into the country. The customs department of individual Emirates (state) issue these approvals. For instance, the Dubai Customs has implemented an e-clearance system for facilitating the process of obtaining customs clearance for imports, exports, transits, transfers and temporary admissions in the Emirate of Dubai.   Circumstances for getting clearance   Companies or individuals have to obtain a customs clearance from the customs department upon importing goods in the territory, and, at the time of export, in-transit, transferred or temporarily admitted in or into an individual Emirate.    Mandatory or optional approval?   Customs duty applies to all goods imported into the country.    Procedure for obtaining clearance   To obtain permission for import of goods, exports, in-transit, products  being transferred or temporarily admitted, companies must provide to the customs department of an Emirate a list of documents, including:   i.   Delivery order; ii   Bill of Lading; and iii. Copy of Trade License   The General Directorate of Customs in Abu Dhabi has a e-services platform through which all the required documents can be uploaded to obtain a customs bill.    Dubai and the other Emirates also have similar online systems. In Dubai, companies can apply for customs clearance through e-clearance services. The following documents must be submitted to the Dubai Customs to obtain a customs clearance:   i.     Invoice of purchase of goods. ii.    Packaging list. iii.   Certificate of origin of goods. iv.   Delivery order. v.   Airway bill or bill of lading. vi.  Any other document that the customs department may require, depending on the regime type and cargo channel.     Pre-completion Tax Clearances

    3. Is it necessary to disclose the existence of any finance transaction to the tax authorities?

    Companies incorporated in the United Arab Emirates are currently not required to divulge any current financial transaction(s) to the tax authorities since no specific statutes or provisions are imposing a tax on financial transactions. However, Federal Law Number 2 of 2015 concerning the Commercial Companies Law (the Companies Law ) imposes an obligation on public joint stock companies (the PJSC ) to submit a copy of balance sheet. Additionally, PJSCs are also required to publish their balance-sheets in two local newspapers. This act of providing the balance sheets should not, however, be construed as compliance with any tax statute. 

    Circumstances where disclosure is required   Public joint stock companies must comply to conform with international corporate governance standards.   Manner and timing of disclosure   Public joint stock companies must publish their balance sheet within 15 days of their approval by the company's general assembly.    Taxes on Corporate Lending/Borrowing   Taxes potentially chargeable on amounts receivable   4. What are the main corporate taxes imposed on interest and other amounts receivable under a loan?

    There are no corporate taxes that are chargeable on interest or any amounts receivable under a loan.

    Tax Reliefs available for Borrowing Costs

    5. What are corporate tax reliefs available for borrowing costs (including interest and other amounts payable under a loan)?

    Please refer Question 5 and response to that Question above.There are no tax reliefs available for borrowing costs because the UAE does not levy any federal or local taxes on loans or corporate borrowings.

    Tax Payable on Transfer of Debt

    6. What corporate, transfer, stamp or other taxes are payable on the transfer of a debt under a loan?

    Transfer fee

    Key characteristics. Companies and individuals in the UAE are not liable to pay any corporate, stamp or other taxes on the transfer of a debt under a loan. However, the local authorities of each Emirate can require the payment of a transfer fee that can apply to companies in certain circumstances. For instance, the Dubai Land Department levies a transfer fee on a transfer of a debt or mortgage of a property registered with the Dubai Land Department (Dubai Law Number 7 of 2013).   Calculation of tax. The fee is calculated based on the total value of debt that is transferred from one party to another.   Triggering event. These taxes are levied when a debt or mortgage that has underlying real estate property in the Emirate of Dubai is transferred.   Liable party/parties. The party in whose name the right or title of a property is being transferred must pay the fee to Dubai Land Department.   Applicable rate(s). The liable party must pay a fee of 0.25% of the value of debt on the transfer of a debt or mortgage over an underlying real estate property in Dubai.

    Withholding Tax

    7. Is there a withholding tax or any other payment under a loan?

    When Withholding Tax applies

    Withholding taxes are not (in general) applicable in the UAE. However, foreign financial institutions (as defined) that do not comply with US Foreign Account Tax Compliance Act (FATCA) must pay withholding tax on US-source payments and gross proceeds paid to them by US taxpayers (see Question 20). No other form of withholding tax is applicable to companies or financial institutions in the UAE.   Applicable rates of withholding   Foreign financial institutions are liable to pay 30% of US-source payments and gross proceeds paid to them by US taxpayers if the financial institution fails to disclose information relating to US taxpayers in conformance with FATCA guidelines.   Exemptions from withholding tax   These provisions only apply to the foreign financial institution(s) that hold investments from US taxpayers. All other entities within the UAE are exempt from complying with FATCA guidelines and therefore from paying any withholding tax.   Guarantees   8. Do any particular tax issues arise on the provision of a guarantee?

    Taxes do not apply to the provision of guarantees in the UAE. Guarantees are generally governed by Federal Law Number 5 of 1985 (Civil Code). However, the Civil Code is silent on the application of taxes to guarantees. The Emirates hasve also not enforced any specific local legislation or decree requiring the payment of tax on the issuance or effect of guarantees. However, banks may levy a varying nominal commission on the issuance of a bank guarantee, depending on the bank and the Emirate. The banks in the UAE generally charge a commission of AED200, along with other surcharges and variances, depending on the specific bank and type of guarantee that is being issued.

    Bond issues   9. For Corporate Taxation Purposes, are bonds treated any differently from standard corporate loans

    There is no difference in the treatment of corporate bonds and standard corporate loans as no taxes are applicable.

    Taxes Payable upon issue or transfer of Bonds

    10. What stamp duties, transfer, or similar taxes are payable on the issue and/or transfer of Bonds?

    Not applicable.

    Exemptions

    11. Are any exemptions available?

    Not applicable (Refer Question 10 above).

    Plant and Machinery Leasing   Claiming Capital Allowances, tax depreciation   12. What are the basic rules enabling the lessor or lessee of plant and machinery to claim capital allowances or tax depreciation?

    Claiming capital allowances is a process whereby entities that pay tax, write off their capital expenditure on plant and machinery against their net profits, thereby reducing the amount of tax payable. However, no capital allowances or tax depreciation are available to the lessor and/or lessee of plant and machinery in the UAE as both parties are not liable to pay tax on a lease.

    Rate of Capital Allowances, tax depreciation   13. What is the rate of capital allowances or tax depreciation? Does it depend on type of assets

    Not Applicable (Refer, Question 12)

    Lessees not carrying  on business in the jurisdiction   14. Are there any special rules or regulations for leasing to lesses that are not carrying on any business in the jurisdiction?

    No federal or local legislation has been issued in relation to leasing to lessees that do not carry on business in the same jurisdiction.

    Taxation of Rentals   15. How are rentals taxed?

    In each Emirate, taxes are levied by the local municipality on all companies receiving income from renting office spaces or warehouses, at a rate of 10% of annual rent collected. Companies that provide accommodation to their employees are also liable to pay tax at 5% of the rent. However, in Abu Dhabi, landlords must pay an annual license renewal fee instead of a direct tax on the rental income.

    16. Is a ruling or clearance necessary or common?

    Not applicable

    Restructuring Debt   Unpaid or deferred interest or rental   17. What is the tax treatment of the borrower and the lender if interest or capital is unpaid or deferred?

    Not applicable.

    Debt write-off/release and debt for equity swap   18. What is the tax treatment of the borrower and the lender if the loan is: a. Written off or released (wholly or partly); b. replaced by shares in the borrower (debt for equity swap)?   There is no difference in the tax liability of a borrower or lender where a loan is written off or released or replaced by shares on a debt for equity swap.   Securitisation   Unpaid or deferred interest or rental   19. Briefly explain the key features of the tax regime applicable to securitisations, including details of any specific tax rules that apply or issues concerning securitisations 

    A securitisation is a tool employed by many institutions to generate long-term funds at a relatively cheaper rate. However, there are no explicit provisions regulating taxation of securitisation in the UAE. Therefore, companies initiating their IPOs are not subject to pay any specific taxes on to this.

    The Foreign Account Tax Compliance Act (the FATCA)   20. Has the United Arab Emirates entered into an intergovernmental agreement (the IGA) to implement the FATCA or does it intend to enter into an IGA to implement FATCA?    The Foreign Account Tax Compliance Act (FATCA) was introduced by the US to improve income tax reporting by US citizens and non-US entities with US owners on money invested offshore (outside the US). FATCA requires foreign financial institutions such as banks, investments management firms, insurance companies and so on to disclose information on accounts held by US investors.   The UAE is party to an IGA with the US to enhance international tax compliance and to enforce FATCA in the UAE. Therefore, all financial institutions operating in the UAE must disclose information on accounts held by US taxpayers in the UAE, depending upon their classification per the IGA. Financial institutions in the UAE must undertake an enhanced due diligence process to determine the accounts held by US taxpayers. UAE has adopted the Model 1 IGA to implement these steps in the country. Financial institutions that fail to provide such information are subject to a 30% withholding tax on US-source payments and gross proceeds paid to them by US taxpayers.   21. Have there been any particular difficulties in light of your jurisdiction's domestic legislation with implementing the FATCA regulations? 

    The UAE has signed an IGA with the US to implement FATCA to monitor the bank accounts of US citizens with financial institutions located outside the US. However, FATCA implementation procedures have given rise to numerous issues whereby UAE financial institutions may not be able to adhere to some aspects of FATCA due to the lack of stringent domestic legal restraints. The convoluted guidelines and limited time available for financial institutions to comprehend and adhere to the established international standards is a major concern.

    22. Are there any provisions of your jurisdiction's IGA and domestic implementing legislation, if any, that are more onerous than the US FATCA requirements? 

    The UAE does not have any domestic legislation or international agreement that obligates financial institutions to disclose citizen's account information. Therefore, the implementation of FATCA guidelines is the only onerous legislation dealing with international tax compliance. 

    Bank Levies   23. Are there any bank levies or similar taxes imposed specifically on the financial institutions? 

    Banks and other financial institutions in the UAE are not subject to any sector-specific tax. However, branches of foreign banks in the country must pay a mandatory corporate income tax.

    24. On what are such levies or taxes charged? 

    Branches of foreign banks must pay corporate income tax on their annual income.

    25. At what rates are such levies or taxes charged? 

    Branches of foreign banks in the UAE are subject to corporate income tax at a flat rate of twenty percent (20%).

    26. Are there any thresholds or exemptions? 

    There are no limits or exemptions since all the branches of foreign banks within the UAE must pay corporate income tax on their annual income at a flat rate.

    Reform   27. Please summarize any proposals for reform that will impact on the taxation of finance transactions in the United Arab Emirates 

    The UAE is known for its low tax environment, which has lured investors from various sectors. However, the Minister of State of Financial Affairs of UAE has recently announced that a Value Added Tax (VAT) will be implemented from 1 January 2018. The VAT is a major tax reform since residents would for the first time become liable to pay 3% to 5% VAT in the country. However, since it is expected to affect the retail sector the authorities have remained silent on the ambit and application of this tax, and there is no information on whether it would apply to financial transactions. It will be necessary to provide the UAE corporate environment with a clear set of guidelines to enable them to understand the applicability of upcoming tax reforms. The establishment of a dedicated department for dealing with tax-related issues will also be necessary for the speedy disposal of tax cases.

    Online Resources   UAE Ministry of Finance   W www.mof.gov.ae   Description. This is a governmental website maintained and updated by the UAE Ministry of Finance. Although the UAE has not yet imposed any federal tax, this website is updated with the legalities and applicability of the proposed VAT, which is due to take effect from 1 January 2018.    Central Bank of the UAE   W www.centralbank.ae   Description. The Central Bank of the UAE is responsible for monetary and banking policies. The website includes guidelines for compliance with FATCA provisions in the UAE.   Central Bank of the US   W www.treasury.gov/resource-center/tax-policy/treaties/Documents   Description. This website is updated by the US Treasury Department. It contains the original copy of the agreement between the US and UAE on international tax compliance and FATCA implementation.   Withholding tax requirement on interest on corporate debt, and key exemptions   Jurisdiction What is the withholding tax requirement on interest on corporate debt? What are the key exemptions (ignoring double tax treaties) What is the tax rate applicable?         UAE There is no withholding tax requirement on interest on corporate debt Not applicable. Not applicable. What is the withholding tax requirement on interest on corporate debt? ]]>
    Tue, 28 Mar 2017 00:00:00 GMT
    <![CDATA[Patent Registration in the UAE]]> Registration of Patents in the UAE

    Frequently Asked Questions

    Preventing others from unjustly, and without a warrant, commercializing that which you have poured your blood, sweat, and tears into, is one of the functions patents serve to protect innovators from and thereby to open doors to endless opportunities. Patents are one of the various mechanisms by which corporations or individuals may use to protect their efforts from personal or commercial exploitation. Patents seek to provide one exclusive right to their innovations for a limited period, however, navigating the process of obtaining a "patent" is both a lengthy and cumbersome process. Other distinguishable methods of protecting one's intellectual property include copyright and trademarking. Patents provide innovators a legal recourse for any infringement of their rights.    

     

    1. I wish to protect my patent in the UAE, what are the laws governing patents in the UAE?   Federal Law Number 17 of 2002 (as amended by Federal Law Number 31 of 2006) (the Patent Law) regulates patent protection in the UAE.   2. How can I Protect my patent in the UAE?   Registration with the UAE Ministry of Economy (the MOE) Intellectual Property Protection Department (the IPPD) will allow you to protect your patent in the UAE.    3. What are the legal requirements for patent registration in Dubai or the UAE?   You can obtain a patent for an invention which is:   - Novel globally; - Inventive, not obvious to another person skilled in the field of technology to which the invention belongs; and  - capable of industrial application (i.e. the invention shall be used and produced).    Further, your patent cannot be registered if it is one of the followings per article 6 (1) of the Patent Law:   - A variety of plant, animal species, or biological method of producing plants or animals (Exceptions shall be allowed for the microbiological methods and their products);   - A diagnostic method, treatment, or surgical operation required by humans and animals; - a scientific or mathematical principle, discovery, or method; - a guide, rule or method followed to conduct business, perform mental activities, or play games; or - an invention that may lead to violations of public order or morals.   4. Where can I obtain information on registered patent rights in UAE?   While a Patent Office exists, it is not possible to execute an official search of its patent records. However, STA's team would be able to assist you in conducting searches of published rights through the official intellectual property-related journals. Alternatively, you may seek assistance from any patent agents in the country.   5. So, what are the procedures for filing a patent application in the UAE?   Patent applications in the UAE should be made through the MOE, and be submitted in both the Arabic and English languages. Along with the submitted application, the following documents should be attached:
  • If the applicant is a corporate body, an extract from the Commercial Register, or a certified copy of the Articles of Association or Incorporation, duly legalized at the UAE Embassy;
  • A Deed of Assignment from the inventor(s), or a certified copy of the original assignment, duly legalized at the UAE Embassy;
  • Specifications of the invention, including title, abstract, description, drawings, if any, and claims, in both Arabic and English.
  • If the application will be filed on a priority basis, a certified copy of the priority document by a Notary Public.
  • All these documents shall be submitted to the MOE within ninety (90) days from the date of filing the patent application.    6. What follows after submission of my application?   The next step in the submission process is an examination of the application by the UAE Patent Office. Once you are notified of your application's readiness for examination, a substantive examination fee must be paid. This takes up to two (2) years. The application will be considered regarding its novelty, inventiveness and industrial application. The application's priority will be considered upon the applications examination. The examiner may not reject the application but may request amendments be made to the application. All amendments shall be made in both Arabic and English. Your application will be accepted or rejected once this examination procedure has been completed.    7. Under what circumstances can my application be rejected?   The application may be refused in the following circumstances:-
  • Non-compliance with formalities; 
  • lack of novelty;
  • obviousness; 
  • lack of industrial applicability; 
  • subject matter which is not patentable.
  • 8. What if my application is rejected?   If your application is rejected for one of the above reasons, you may request a second examination of the application, with an attached argument to justify the reason for re-examination. Any such appeal should be made within sixty (60) days from the date of the first decision of the MOE.   9. What is the next step if my application is accepted?   Once your application is accepted, the next step will be to prepare for publication, for which publication fees will need to be paid. Upon payment, the decision to grant a patent will be published by the MOE in the Official Gazette of the UAE. If there is no opposition to the decision of MOE to grant the patent within sixty (60) days, the patent will be granted to you. The Patent Office will issue a Certificate for the Registration of the patent. The Certificate excludes others in the UAE from using your invention without prior authorization from you. Note that the entire process of obtaining a patent will take approximately eight (8) years.     10. Do I need to be in the UAE to file a patent application?   There is no requirement to be in the UAE in order to file a patent application. You can provide our professional intellectual property team with a Power of Attorney, duly legalized at the UAE Embassy, and we may file the application on your behalf   11. Can a patent application in the UAE give me protection for my patent in other countries?   Filing a patent application in the UAE will only provide protection within the UAE. If you want to protect your patent in other countries, it is required that you file the application in that particular country. However, as UAE is a signatory to the Patent Cooperation Treaty of 1970 (the PCT) and the WIPO Paris Convention for the Protection of Industrial Property of 1883 (the Paris Convention), you may file a patent application in numerous countries. The PCT allows you to make the application in your home country first, then, within a year you can file the application by using the PCT mechanism in another country. Hence, an application filed in the UAE can be used as the basis for a PCT application and vice versa.    As the UAE is also a member of GCC, a single application can also include patent rights for other GCC members. However, it should be noted that specialist advice is recommended whenever and wherever you wish to file a patent application.   12. How long does the registration of patents last?   Once a patent has been granted, it will be valid for twenty (20) years from the date of filing, with a non-extendable term of protection. In order for the patent to be valid, annuity fees shall be paid each year starting from the date the application has been filed. The annuity fees are to be paid from the period of the 1 January to the 31 March of each year. Further, there is a grace period of three (3) months for annuity payment, with surcharge. However, if these fees are not paid within with aforementioned period, the patent application will have lapsed, with no exceptions. Further, please note that if the invention is not used by you within three (3) years from the date the patent has been granted, you must assign or license the right in favor of a third party. 

     

    ]]>
    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[Piercing the Corporate Veil]]> Piercing the Corporate Veil

    "Nothing can be so unjust as for a few persons abounding in wealth, to offer a portion of their excess for the formation of a company, to play with that excess-to lend the importance of their whole name and credit to the society, and then, should the funds of the incorporated body prove insufficient to answer all demands, to retire into the security of their un-hazarded fortune, and leave the bait to be devoured by the poor deceived fish." - The editorial from 'The Times of London' dated 25 May 1824   Introduction   The principle of limited liability has come under the scanner to meet the ends of justice. The general rule of a corporation being a separate legal entity and distinct from its shareholders has proved fatal while administering justice. The corporate veil enables the companies to maintain separate corporate personalities from the shareholders and bear limited liability to protect the shareholders from being personally liable for the company's debts and other obligations.   The courts have however unveiled the corporate structures. Piercing the corporate veil of the aforementioned separate legal entity is an open-ended concept and flexible, based on the specific facts concerning the relevant case.    This is a very well-established principle in common law as evidenced by the plethora of judgments being referred to as precedents. The predictability of the doctrine of corporate veil remains to be challenged, however, hence we attempt to augment the predictability of the subject in view of UAE law. We also seek to illustrate the circumstances in which the corporate veil may be lifted by UAE courts. The scope of this article is limited to the personal liability of shareholders and directors against third party.    The UAE Federal Law Number 2 of 2015 concerning Commercial Companies Law (the CCL) provides for the principle of establishment of corporate personality distinct from its shareholders under article    Corporate Personality Ensuring Limited Liability to the Shareholder   Various articles in CCL endorse the principle that the company is considered a distinct corporate personality. The following are the instances of the same:   The CCL under article 21 states that 'The Company shall, from the date of entry in the Commercial Register with the competent authority, acquire a corporate personality'.   Liability limited to share capital (LLC): Article 71(1) under chapter 1 of title 3 for incorporation of Limited Liability Company (the LLC) provides definition of company and further provides that 'a partner shall be liable only to the extent of its share in the capital'. This article goes on to provide for the establishment of sole proprietorship with limited liability.    Sole Proprietorship (LLC): Article 71(2) provides that a single natural or corporate person may incorporate and hold a LLC. It further states that 'The holder of the capital of the company shall not be liable for the obligations of the company other than to the extent of the capital as set out in its Memorandum of Association. The provisions of the Limited Liability Company contained in this Law shall apply to such person to the extent not in conflict with the nature of the company'.   Liability limited to share capital (PJSC): Article 105 under title 4 of the CCL states similar provision in respect of public joint stock company which states 'A shareholder shall be liable only to the extent of his share in the capital of the company.'   Sole Proprietorship (PJSC): Article 255 (3) of the CCL provides that the single legal person may incorporate and hold a Private Joint Stock Company. It limits the liability of corporate entity up to the extent of the capital as set out in its Memorandum of Association.    Personal Liability of Shareholders   The shareholders can be held personally liable most often on the basis of personal guarantees granted by them. However, the CCL provides for the articles which seek to render the shareholders or company representatives personally liable for their acts. The instances of the same are set out below:   Exceeding Statutory Number of Partners: The number of partners must be limited to 50 pursuant to article 71(1). However, if number of partners exceed the statutory limit of 50, such situation must be rectified in three months from the date of notice send by manager of company to the competent authority. The company shall rectify and comply with the limitation on partner's number within six months as extended by authority failing which the company shall be deemed terminated and the partners shall be personally and jointly liable from their assets for the debts and obligations of the company from the date the statutory limit of partners was exceeded.   Valuation of Contributions in Kind: Article 78 provides that partner may agree on the value of share in kind and if a partner of LLC presents a share in kind, such partner shall be liable to third parties for the evaluation of its value and accuracy of the estimated value of such share in kind. If it is established that the share was evaluated above their true value, the partner providing such contributions shall pay the difference in cash to the company and are personally liable for such contribution. Foreign Company's Activities: Article 328 restrains foreign companies or its branch offices from conducting activities in UAE mainland prior to the completion of required process of law for carrying out branch activities. Article 328(2) states that the persons acting in contravention of above shall be held personally and jointly liable for the acts.   Invitation to Public Subscription: Article 121 holds the parties involved in the incorporation procedures and their representatives jointly and personally liable for the validity of the information set out in prospectus.  Providing False Statements or Statements in Violation of the Law: A person shall be punished by imprisonment for a period between six months and three years and/ or have a fine imposed on them between AED 200,000 (two hundred thousand) and AED 1,000,000 (one million) under article 361 if any false statements or such statements are made in constitutive documents of the company including Memorandum of Association/Articles of Association/the prospectuses of shares or bonds or in any other documents of the company, in violation of the provisions of the CCL. The above provision also any penalizes any other person that may, knowingly, signs or distributes such documents.   Overvaluation of the Contributions in Kind: Article 362 provides penalty for any person assesses the contributions in kind provided by the founders or shareholders in excess of their actual value in bad faith, shall be punished by imprisonment for a period between six months and three years and/ or a fine between AED 500,000 (five hundred thousand) and AED 1,000,000 (one million).   Personal Liability of Directors/Managers   Fraudulent Acts: The manager/director of the company is liable for the losses incurred to the company, partners and the third parties for any fraudulent acts, misuse of authority, contravention of any applicable law or the memorandum of association (the MOA), the contract appointing the manager and any mismanagement by the manager under article 51 and 84(3). The provision in MOA contracting out of this statutory liability will be void. The equivalent provision is available for the PJSC wherein the directors are liable for the fraudulent acts under article 162. It is not uncommon for the partner of the LLCs in UAE to assume the managerial position. The manager is usually held liable to company and third party for his acts in contravention of law. The Dubai Court of Cassation in case number 69/2007 held that 'where a shareholder has exploited the principle of the independent liability of the company as a means to conceal fraudulent acts or misappropriation of the funds of the company in order to cause harm to his partners or creditors, the protection bestowed by law for a shareholder in an LLC will not be upheld. In these circumstances, it may be possible for a shareholder to be held liable in their personal capacity for such dispositions, and such liability will extend to their personal assets'. Further, article 6(2) states that the Board of Directors of a company or its managers, depending on the circumstance, shall be responsible for the application of the rules and criteria of governance. The precedents have been scanty in the matter.     The principles of sharia law such as unjust enrichment and using the company as facade for carrying out fraudulent acts along with the civil and commercial code governing the contractual relations between the parties pursuant to the commercial and civil transactions laws also plays important role while adjudicating the contention of whether the corporate veil must be pierced or not.   Conclusion   The legislative chronicle on the issue is at juvenile stage considering the date of amendments and hence the interpretation of the articles remains scantily tested by the UAE courts. Further, due to the absence of binding precedence, any future cases will be decided on facts of the case to meet the ends of the justice in consideration of sharia law from which all the UAE laws are said to be derived.   ]]>
    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[The Essence of Financial Crimes]]> The Essence of Financial Crimes

    'Rather fail with honor than succeed by fraud."

    Sophocles

    On a bright morning in March 2009, Bernard Mardoff pleaded guilty to defrauding his clients of sixty-five (65) billion dollars in one of the largest Ponzi schemes the world has witnessed. The former chairman of Bernard L. Mardoff Investment Securities LLC is now serving a 150-year imprisonment after he was demanded to forfeit more than 17 billion dollars to reinstate his clients. Moving on, the coverage page of most business magazines and newspaper has the smiling face of Vijay Mallya, the millionaire who owes his millions to various banks in India. Media have published his defaults like a fairy tale of the twenty-first century. The commercial and financial industry is the backbone of any economy. Over the last thirty (30) years financial and business crimes have increasingly become a concern for governments throughout the World. This concern arises from a variety of issues as the impact of these crimes varies in the different contexts. Today, the prevalence of economically motivated crime in many societies serves as a substantial threat to the development and stability of their economies. The recent global financial crisis unveiled several fictitious projects from companies that exploit and degrade the financial system. Therefore, it is imperative for governments to find different legislations to curb the rise of future Mardoffs and Mallyas. 

    Frequently, crimes committed by companies are considered more serious than the crimes perpetrated by individuals due to a surfeit of finances involved and prescribed limitations as to the extent of penalties. Such acts encourage companies' executives to hide behind the protection of the corporate veil to 'act' under the latter's name.

    Taxation

    When does a legal, financial activity of an individual turn into an illegal muddle? The moment he decides to attain benefits by evading or defaulting the provisions of the law of the land. Governments of different countries have varying regimes regarding taxation. However, all these systems are equally stringent. Hence, corporate giants attempt to illegally elevate their profits by their non-compliance to the tax legislations of the country by:-

    • refraining from acknowledging the actual revenues;
    • submitting incomplete and untrue financial statements; and
    • preparing fake records and entries.

    Individuals and corporations also often take advantage of legal provisions to refrain from higher tax liabilities. However, the predominant reasons of tax-evasion are a lack of cultural awareness of the importance of tax economy, shortage of income, the absence of parity and social justice, non-transparency of procedures, and the like.

    Hence, governments should endeavor to unify in the battle against tax evaders who create a disturbed sense of financial imbalance in the society. Various countries have instituted double tax avoidance agreements (the DTAAs ) to ensure that individuals and corporations are unhindered due to the payment of tax over the same subject matter in two different countries. Therefore, corresponding tax authorities could enforce a similar legislation or treaty to clinch the increasing amount of evaded tax. The predicament of tax-evasion has to be effectively curbed by the administration as the crime also leads to execution of other criminal acts such as fraud and money laundering. Tax evaders succor to the aid of money laundering to transfer the tax money to other countries through illegal means. However, tax-evasion is likely to land one behind bars considering the story of millionaire Jack Abramoff who was fined 24.7 million dollars and sentenced to 70 months of imprisonment after pleading guilty to tax evasion in the United States.

    Stealing Finances

    Money has its value only when it is available at the right place, at the right time. Further, individuals and corporations are subject to tax in the event of transferring finances from one country to other. That said, the tax is an expensive matter to law-evading, white-collar criminals. The crime of money laundering is a process that aims at legalizing and relocating finances that get acquired from illegal sources such as drugs, smuggling, tax evasion, fraud, weapons trade, corrupt practices, and other unfair activities. This process leads to an indirect growth in the foreign direct investment through which the finances get accumulated in the advanced and developed countries. However, money laundering is not an overnight process. The illegality of money laundering travels through many stages - the first stage involving extraction of money into the financial system. After that, the money is transaction is cleansed or purified and given legal form in the financial system with (or "intending to") invest or spend the same. 

    The need for this illegal practice arises when an individual acquires liquid finances which are unaccounted by the authorities. Funds deposited with a bank get accounted for by the concerned authorities or central bank of a country. However, monies illegally attained are not accounted in any of the official statements of accounts. Therefore, the illegality of money laundering initiates when illegally obtained liquid finances are invested in purchases or bank deposits with the view to transfer or encash it elsewhere illegally. Subsequently, money is transferred, scattered and concealed in other different accounts as the financial-segments through multiple local and global electronic transfers. The money may be moved back and forth via a network of multiple accounts, companies and countries to hide their origins. Further, the money is illegally hidden in foreign accounts or other legal entities under the cloak of commercial profits to legitimize the funds.

    Meanwhile in Dubai

    The judgment of the Dubai Court of Cassation in Appeal number 75 of 2008 had provided for the extent of liability of the shareholders of a limited liability company in financial crimes. Article 218 of Federal Law, Number 8 of 1984 concerning Commercial Companies (the Old Law), had provided that the limited liability company was a separate entity. Accordingly, the partners of the entity would be liable for the latter's actions or debts only to the extent of their share in the capital of the organization. However, the court held that the partner of a limited liability company would be personally liable when he has fraudulently acted in contrast to the company's memorandum. However, the Old Law has been repealed by the legislators. The new Federal Law Number 2 of 2015 regarding Commercial Companies (the New Law) has provided for stringent penalties on the company and its management in the event of fraud or default in adhering to the law. Further, Article 84 and 162 has also provided that the managers or partners shall be liable against the company if they have fraudulently acted in contravention to their powers or the provisions of the New Law. 

    Further, Article 65 of Federal Law Number 3 of 1987 on the Issuance of Penal Code (the Penal Code) has provided for the penal liabilities of a company. The provisions of the Penal Code have stated that the 'liability of the companies would lie only to the extent of a fine.' However, the accused of a case could be held personally liable per the provisions of the Penal Code. This outline implies that an executive in a company who has committed a fraudulent act would be responsible for that act in his personal capacity and cannot hide under the armor of the corporate veil. The Dubai Court of Cassation interpreted this provision in Appeal number 49 of 2003 and held that the manager of a company would be criminally liable if he has committed fraud by imitating the trademark of another company. 

    Conclusion

    Various countries have enacted legislations and other treaties due to the peril that money laundering possess to the domestic and global economy. Further, multiple international agreements have been entered into to fight those crimes and further undermine its prevalence. Therefore, financial crimes adversely affect the domestic economy and foreign investment of every nation as it leads to a decrease in the value of the local currency which ultimately culminates in the obstruction of economic growth and the prevalence of unemployment.

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    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[The Fine(d) Blend of Bitcoins and Multi-Level Marketing (MLM)]]> The Fine(d) Blend of Bitcoins and Multi-Level Marketing (MLM)

    'There are three eras of currency: commodity based, politically based, and now, math based.'

    Let's keep it simple! Cadberry sells chocolates to its distributors worldwide in accordance with a distribution contract signed between Cadberry and its agents. In turn, distributors fulfill their payment obligations by transferring 'money' to Cadberry. Now, let's make it complicated! 'So very soon?', one might ask. Yes, that is what this article demands! Cadberry makes fundamental changes to its business by deciding to allocate zero revenues towards advertising and marketing. Now one might ask why on earth Cadberry would resort to such an act. Let's keep reading. Cadberry appoints a new CEO who has proven expertise in selling products through human assets. He convinces the Cadberry top brass that he will hold a mega event inviting nearly thirty thousand people who will be persuaded to follow every word of Mr. CEO. He will request each of the attendees to become an active participant of a network that will deal exclusively in Cadberry products. The idea is simple – they sell Cadberry to people (including retailers) they know and earn commissions and in the process the buyers of those products inherently also become part of the network whereby any sale by those buyers to other persons they know makes the original buyer eligible for kickbacks. By doing so, Mr. CEO expects to generate five times more business than with the application of traditional marketing. Wait! There's nothing to invest in other than the first event. Forgive us, but this gets more complicated now! Mr. CEO now wants to implement bitcoins and do away with traditional currency. So, he imposes a condition on the network that every retailer who buys Cadberrys should accept bitcoins. To convince these retailers, he tells them that the processing fee per transaction will be only 0.23% as against the standard 2% for credit cards. To this, he also adds that there will be no contracts whatsoever, and offers free software, packages and Apps that will help retailers grow and promote their business more effectively.  At this point, one might wonder how they could become a part of this network, and we would simply request them to get in touch with Mr. CEO.

    Introduction

    The economic pitfalls of the past decade have proved that the financial sector is an ideal platform for the implementation of anomalous concepts like collateral debt obligations (CDOs) and bitcoins. The bitcoin industry has been ushering in the recent years with one foot in the regulated financial piazza and the other in the global information technology (IT) emporium. However, the bankruptcy application of Mt. Gox in 2014 had jolted the fundamental pillars of the crypto currency industry due to the loss of credence of its investors worldwide. Mt. Gox was a prominent bitcoin exchange in Tokyo which conducted over seventy percent (70%) of the global bitcoin transactions by 2013. However, the turbulences of the bitcoin airplane eventually passed through the gloomy clouds of the financial sector after major governments of decided to leave the bitcoin industry unregulated. Therefore, the existing players in the bitcoin industry are necessitated to turn to various forms of marketing in order to cajole the investors about the veracity of this peculiar form of currency.   It is common knowledge that investors are not attracted to experimental business ideas due to the uncertainty involved. Hence, entrepreneurs strive to efficiently promote their novel products and services in order to enlighten the buyers of its different advantages, despite the aforementioned uncertainty. The novelty and the uncertainty of the bitcoin industry has forced a few players in the market to follow various untraditional marketing techniques such as multi-level marketing (MLM) in order to lure new investors. MLM is a dynamic marketing strategy by which the distributors are remunerated for the sales generated by them. It was first introduced in the mid twentieth century by a company named Nutrilite in order to educate potential buyers about the importance of vitamins in their daily life. However, MLM has come a long way from then. It has transformed into a dynamic and modern marketing practice by which businessmen enhance the demand of their products and services by providing the distributors with attractive incentives for their performance. This article aims to discuss the nexus fabricated between the novel bitcoin industry and the century old MLM strategy.    The Bitcoin Identity   Who gives the value to the currency in our wallets? What makes a hundred dollar bill worth a hundred dollars? The currency of a state derives its value from the monetary authorities of that particular state and its subsequent demand variations. Therefore, we understand that the demand of a product is the basic tool which estimates the value of the same. However, could an individual produce a currency and assign it with a certain value? Yes, as evidenced by bitcoins which are produced or mined by people themselves through computers which run software that solve mathematical problems. The bitcoin industry is perceived to be a revolution in the financial sector due to the fact that they remain unregulated by the various monetary and financial authorities of the world economy, affording anonymity and speed to it's users. The crypto currency industry runs parallel to the actual financial sector including the banks and financial authorities. Therefore, the value of crypto currencies such as bitcoins ultimately rests upon its demand and supply due to the absence of any particular authority to regulate the same.   The concept of crypto currencies such as bitcoins aims at instituting financial liberty by providing a platform for a currency that is not governed by any authority. Therefore, the control on the production of bitcoins would depend on the demand of the same. The economic predicaments of the global financial crisis of 2008 have brought light on the ponzi schemes that develop in the financial sector. Therefore, investors now exercise a higher degree of caution before pouring their resources into a single novel financial commodity. However, over the past few years an unprecedented expansion of the bitcoin industry has been witnessed due to the security and tranquility in the transactions. Bitcoin transactions provide a high degree of transparency and security due to the existence of a global ledger known as the blockchain. Every bitcoin transaction is confirmed only once it has been recorded onto another ledger of the bitcoin network. Therefore, it is difficult for the players of the industry to manipulate the market due to the authenticity of the transactions and the transparency of the records.    In the present day scenario, the value of bitcoins is largely based on speculation rather than actual payment volume. However, the bitcoin currency should have a certain value before it could bear any amount of real world payment volume. Therefore, the rise in the value of bitcoins due to the increase in its speculative demand has been proving the worth of bitcoins in virtual transactions around the globe. However, the usage of bitcoins has been limited to very few merchants and customers due to its volatility and uncertainty. Million dollar companies such as Microsoft, Dell and Zynga have modernized their financial policies in order to accept payments in bitcoin currencies. The success of bitcoins can only be established when its popularity extends to one's neighborhood stalls. Hence, bitcoin miners and traders are placed with the mammoth task of elevating the demand of bitcoins in the domestic marketplace in order to increase the value of the same. Nonetheless, the demand of a commodity would only increase when the consumers identify the needs and benefits of the same. This is where the notion of bitcoins overtakes the dynamics of the MLM strategy.  

    The MLM-Bitcoin Alliance

    The popular MLM strategy has been used by various companies and organizations with the view to coax people into purchasing their unpopular products. MLM is generally practiced by companies that produce specific novel products and services that require a certain amount of persuasive marketing in order to entice potential buyers. The buyers would not usually invest their resources into a product or commodity that has no value in the marketplace. Therefore, it could primarily be comprehended that intricate contemporary commodities, such as bitcoins, which involves substantial financing would require adequate marketing at a global platform in order to grab the attention of the merchants.   Bitcoin traders provide various MLM propositions with the view to attract merchants with different incentives to use the new crypto currency technology at their work place. A currency would have no value if it is not accepted by merchants in their daily transactions. Hence, the general MLM model would not suffice the requirement of the bitcoin promoters due to its complexity and the fact that the merchants or businesses are the primary users of their commodity. The colossal duty of the bitcoin promoters is to elevate the demand of the same by luring the local merchants to accept bitcoins as a currency at their outlets. This can be elucidated with the help of the following illustration: Bitcoin promoters attract and engage marketing distributors in different countries with the view to promote the usage of bitcoins at the domestic markets of those countries. Subsequently, these distributors would approach local merchants with various packages including the know-how of bitcoin transactions, mining equipment and membership to the promoter's organization in return for accepting the promoter's bitcoins as a means of currency at their outlet. The merchants would only be charged with a negligible transactional fee when their customers use bitcoins to pay for their expenses at the outlet. Therefore, the merchants who accept these bitcoins at their outlets would have the opportunity to scrimp the ancillary commission costs that they would generally incur when their customers pay with credit or debit cards. Further, the distributors would also receive a percentage of their sales as a commission in exchange for the sales generated by them. This MLM strategy would substantially elevate the usage of the promoter's bitcoins at the domestic marketplace of the distributors.    The customers at these local shops and outlets would have no value for bitcoins unless they are domestically accepted as a means of payment. Therefore, bitcoin promoters indulge in these convoluted schemes in order to foster the use of bitcoins at the local shops and outlets as they are the ultimate end users of these commodities. Only time will tell the enormity of the issues associated with the fusion of the bitcoin industry and the MLM strategy.

    The Compendium

    The bitcoin-MLM duo is a dynamic element that is expected to take over the financial sector in the coming years. However, the legalities that are involved in the bitcoin industry due to the use of the MLM strategy could vary in different jurisdictions. MLM is a highly criticized form of marketing because of the scanty regulations surrounding the same. Both the bitcoin industry and the MLM scheme are major controversial global sectors that remain unregulated by their independent regulatory authorities. Many financial authorities have publicly advised their citizens to avoid indulging in bitcoin transactions due to its vulnerability to money laundering and terrorist financing risks. Further, the legality of the MLM structure is also closely scrutinized by the governments because of its legitimacy issues in the trade industry. In 1979, the United States Federal Trade Commission had indicated that the MLM was not illegal per se in the US. However, individuals and organizations promoting their bitcoins through MLM schemes should exercise utmost caution and engage a law firm that provides bespoke legal advice to guide them through the related legal issues.  

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[UAE's Outbound Investment in India]]> UAE's Outbound Investment in India

    'Foreign Investment is what keeps the whole show going.'

    - Patrick Barkey

    Think about a predicament in which a bank would charge its customers a fee amounting to two-thirds of your deposits for the purpose of handling the finances. Bizarre, some might say! However, this may not sound so odd in the oil industry. UAE has never failed to top the international headlines with its glamor and records. However, they stunned the planet by striking a one-of-a-kind deal with India whereby the Abu Dhabi National Oil Company (ADNOC) agreed to store about 5.33 million tons of crude oil in India's strategic storage. However, the catch lies in the fact that the UAE would provide two-thirds of the crude oil stored to India as a consideration for storing its oil. India, which is 79% dependent on imports to meet crude oil needs, welcomed this agreement with open arms and had since then commenced the building of the underground storages in Andhra Pradesh and Karnataka to store crude oil.   The cultural, traditional and economic ties between India and UAE are centuries old. The expatriate Indian community constitutes the largest migrant group in the UAE. Therefore, it is no surprise that the UAE-India relations go beyond economic, trade and investment platform, primarily due to an overwhelming population of expatriate Indians in UAE, ensuring a steady inflow of remittances from the UAE into India. Further, to cater to the large Indian diaspora within the UAE, there are over 950 direct weekly flights between the UAE and India, a number that evidences the nexus and economic ties between the two countries. Further, and to benefit and capitalize from such nexus, in 2013, Jet Airways and Etihad Airways signed an eight billion dollar (USD 8 billion) agreement, under which Etihad Airways invested USD 379 million in Jet Airways for a 24% stake in its shareholding.   The above clearly evidences that the two countries are making constant endeavors to take their investment, trade, and commerce understanding to new heights. The total UAE investments in India approximates to USD 8 billion, including USD 2.89 billion in the form of foreign direct investments (FDI). UAE investments in India primarily concentrate in five sectors: construction (16%), energy (14%), metallurgy (10%), services sector (10%), computer software and hardware (5%). The other areas include petroleum products, precious metals, gems and jewelry, minerals, chemicals, wood and wood products.    The Indian Government has been making herculean efforts, to promote ease of doing business in India and facilitating investment, by making the regulatory and operational landscape of India lucrative and attractive to foreign investors. Further, the Indian government launched the 'Make in India'  initiative under which FDI policy for 25 sectors was liberalized, and foreign equity caps in various sectors along with other norms and procedures were relaxed.    Wisely, Indian states have launched their respective conferences to attract investments from foreign as well as domestic investors. Vibrant Gujarat Investors' Summit in the state of Gujarat, Resurgent Rajasthan in the state of Rajasthan and Invest Madhya Pradesh in the state of Madhya Pradesh substantiate that these 'states' are leaving no stone unturned to entice investors in the Indian market. Further, Indian states also compete with one another by giving tax incentives, single-window clearances, and better infrastructure to attract investors.   Impediments in FDI Growth Plans   While the Indian government has made several endeavors to increase the inflow of investments in India, it is also taking prudent steps to eliminate any concerns and reservations regarding the manner, route, and treatment of foreign inflow of investment in India. Accordingly, India and Mauritius signed a protocol (Protocol) in 2016 to amend their tax treaty which took the tax world by storm. The Protocol gives India the right to tax capital gains on transfer of Indian shares acquired on or after 1 April 2017. Existing investments will stand exempted from the amendment. Investment through such countries has come under scrutiny in India amidst concerns about round tripping, whereby Indian investors and companies have routed their money through countries such as Mauritius to reduce tax liabilities.     This amendment to the tax loophole could hit UAE firms planning to invest in India through Mauritius. However, India needs to be cautious of the impact of this development on foreign inflows, at least in the near term, due to the surfeit of companies that has invested in India through Mauritius. Therefore, policy makers will need to assess the competitiveness of India's taxation system vis-à-vis other competitive economies, so no one is getting the undue benefit and also since India-Mauritius tax treaty will no longer be beneficial for capital gains on the sale of shares, will the UAE companies start investing from their home country. Another matter of concern, which needs to be addressed at the earliest, is the unresolved tax issue before ADNOC can begin storing oil at India's strategic storage. Karnataka government has not yet agreed on waiving value added tax on the crude oil imported for the strategic storage, which UAE wants to use to stock oil when prices are low and thereby supply to its customers, when the rates are good.   Regulatory Framework in UAE and India   To facilitate an unhindered exchange of investment and capital, the UAE and India signed the Bilateral Investment Promotion and Protection Agreement (BIPPA) in 2013, the agreement on reciprocal tax exemption for national carriers in 1989, Double Taxation Avoidance Agreement (DTAA) on income and capital for sovereign funds in 1993, as amended in 2007. It appears that the essential reason for executing a number of agreements between the two countries was to promote cooperation in key sectors and extend mutual assistance in a number of sectors including civil and commercial matters, trade and economy.   Moreover, investments by UAE nationals and entities, including sovereign wealth funds, are protected under international law as a result of such bilateral and multilateral treaties entered into by the UAE. UAE bilateral treaties ensures that; (a) UAE nationals; (b) companies or enterprises constituted or organized under UAE law; and (c) the UAE Government, are adequately protected and their rights are given effect when they have made an investment in another country.    At present in India, the FDI framework is governed by the Foreign Exchange Management Act (FEMA), the extant FDI Policy, effective from 7 June 2016 and Press Notes released by the Department of Industrial Policy and Promotion (DIPP) (collectively referred to as the Legal Framework). Foreign investment is considered as FDI only if the investment is made in equity shares, fully and mandatorily convertible preference shares and debentures. Further, Indian companies may receive FDI under (i) the automatic route - where FDI is allowed without prior approval from the Government or the Reserve Bank of India (the RBI); or (ii) the government route or approval route - where FDI would require a prior approval of the Government. In accordance with the Legal Framework, the types of investors who can invest in Indian companies by way of FDI are individuals, foreign venture capital investors, pension or provident fund, financial institutions, foreign trust, sovereign wealth funds, NRIs or PIOs, foreign, private equity funds and partnership or proprietorship firms. Further, the entities that may be engaged for investments are Indian company, partnership firms or proprietary concerns, venture capital funds, limited liability partnerships and also liaison office, branch office or project office. These offices can undertake only the activities specified by the RBI. Approvals are granted under the government and RBI route. Automatic route is also available to branch offices or project offices that satisfies certain conditions.   It is imperative to note that the Government of India has constantly revised the FDI policy with the view to adopt a pro-investment approach in a phased manner. 100% FDI under the automatic route has been permitted in sectors including but not limited to construction and development projects, more particularly, norms pertaining to minimum area, minimum capitalization and repatriation of funds or exit from the project have been relaxed. However, FDI is prohibited under the government route as well as the Automatic Route in lottery, gambling, betting, business of chit fund, nidhi companies , real estate business (except development of townships, construction of residen¬tial or commercial premises, roads or bridges), trading in Transferable Development Rights (TDRs), manufacture of cigars, cheroots, cigarillos and cigarettes of tobacco or its substitutes and other activities that are not open to private sector investment like atomic energy.   Exit Options and Repatriation of Funds   Repatriating earnings or funds out of India can be done in numerous ways, but it is essential to consider the tax and regulatory issues around each exit. The earnings can be classified in the following manner:-   I. Dividends – Dividends that are paid by the companies in India to their shareholders' on the shares held by them. Payment of dividend on equity shares is a straightforward way of extracting earnings for a foreign investor holding an equity interest. However, the dividend distribution tax borne by the company distributing such dividend may not necessarily receive credit against any direct tax payable by the foreign investor who receives such dividend in its home jurisdiction.    II. Buyback - Buyback of securities provides an investor the ability to extract earnings as capital gains and consequently take advantage of tax treaty benefits. However, buybacks in India have certain restrictions and thus need to be strategically planned. For instance, a company may not buy back more than 25% of its outstanding shares in a year.    III. Redemption - Preference shares and debentures can both be redeemed for cash. While redemption is perhaps the most convenient exit option for investors, optionally convertible securities, which are effectively redeemable, have been classified as ECB. However, this entails greater restrictions.    IV. Initial Public Offer (IPO) - An IPO is the first offer for sale of the shares of a company to the public at large via listing the company's stock on a stock exchange. While an initial public offering may usually be regarded as a long term exit option, it is also usually included as an exit option in transaction documents as it may provide investors with large returns.   V. Sale proceeds - AD Category-I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and a non objection certificate or tax clearance certificate from the Income Tax Department has been produced.   VI. Interest - Interest on fully, mandatorily & compulsorily convertible debentures are also freely repatriable without any restrictions (net of applicable taxes).   VII. Investments - Investments in the construction development sector are subject to lock-in period of 3 years.   Conclusion    India has already marked its presence as one of the fastest growing economies of the world.  Consequently, major UAE companies have made investments in, and undertaken projects jointly with, Indian companies with the aim to capitalize on the Indian market's economic and foreign trade growth of recent years. Moreover, the economic relationship is further strengthened, given the fact that UAE is believed to be one of the most preferred investment locations for Indians, both individuals as well as corporates. Indians are the biggest investors in the resurging real estate sector of Dubai, accounting for a total investment of around UAE Dirhams 18 billion (USD 4.9 billion) in 2013.    In these circumstances it appears that UAE-India relations continue to grow, and the achievements made as a result have helped the two countries gain advanced cooperation status, in terms of regional and international relationships, especially since the UAE's policy, is based upon strong foundations, such as respect for international laws and cooperation at the global level, which principles have always been reciprocated by India.    ]]>
    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[US Sanctions (Part II of II)]]> US Sanctions - An Overview

    Part II of II

    STA has been one of the few Middle East law firms that have been advising clients on compliance with OFAC regime, the direct and indirect applicability of various OFAC sanctions besides other bodies such as United Nations, to name a few. In this article, we provide further insight on clarifications issued by OFAC on 8 June 2016 (Guidance) about the Islamic Republic of Iran. Ms. Zisha Rizvi will discuss the ambit and obliteration of sanctions against Iran.

    A few decades ago, the 'quote' money is power had immense value. However, today, one could opine that influence is power. Dominant countries have the capability to affect the global economic market and the domestic markets of foreign countries. The ability of a country to conduct its commercial affairs gets drastically hindered when it is isolated from the global markets.    Following the Joint Comprehensive Plan of Action (the JCPOA) and the implementation day, secondary sanctions against Iran were uplifted by the Office of Foreign Assets Control (the OFAC) to some extent. While the UN sanctions followed a less exhaustive upliftment schedule, OFAC primary sanctions continue to be in place until further notification from OFAC. Iran agreed to eliminate its stockpile of medium-enriched uranium and reduce the research on nuclear-related programs. Further, Iran also provided International Atomic Energy Agency with regular access to all Iranian nuclear facilities to reassure the global community of their intentions to develop world peace by reducing their nuclear enhancement programs.    For one to understand the list of revoked sanctions and further to list out which sanctions remain in force, guidance has been forthcoming by OFAC. While the sanctions regime has eased with various provisioning, more than 200 names remain on the SDN List. The Guidance further clarifies that the Executive Orders passed per the national emergency declared on Iran continue to remain in force.    Following the Implementation Day   Implementation Day which fell on 26 January 2016 led to following changes to the OFAC administered sanctions on Iran:   i. The Unites States lifted the nuclear-related 'secondary sanctions' described in sections 4.1-4.7 of Annex II and 17.1-17.2 of Annex V of the JCPOA. Secondary sanctions directed toward non-U.S. persons for specified conduct involving Iran that occurs entirely outside of U.S. jurisdiction. These secondary sanctions include the following:   a. Financial and banking-related sanctions;   b. Sanctions on the provision of underwriting services, insurance, or reinsurance in connection with activities that are consistent with the JCPOA;   c. Sanctions on Iran's energy and petrochemical sectors;    d. Sanctions on transactions with Iran's shipping and shipbuilding sectors and port operators;    e. Sanctions on Iran's trade in gold and other precious metals;    f. Sanctions on trade with Iran in graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes, in connection with activities that are consistent with the JCPOA;   g. Sanctions on the sale, supply, or transfer of goods and services used in connection with Iran's automotive sector; and   h. Sanctions on associated services for each of the categories above.    ii. Over 400 individuals and entities from OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List), the Foreign Sanctions Evaders List (FSE List), and the Non-SDN Iran Sanctions Act List (NS-ISA List) were removed as appropriate, pursuant the JCPOA.   iii. This also led to the United States terminating the Executive Orders 13574, 13590, 13622, and 13645, and sections 5-7 and 15 of Executive Order 13628.   iv. The specific licensing of three categories of activity that would otherwise be prohibited under the ITSR was permitted, provided that the transactions do not involve individuals and entities on the SDN List and are otherwise consistent with the JCPOA and applicable U.S. law.    Sanctions that Remain in Place   I. Primary U.S. Sanctions.    The U.S. domestic trade embargo on Iran remains in place. Even after Implementation Day, with limited exceptions, U.S. persons including U.S. companies – continue to be broadly prohibited from engaging in transactions or dealings with Iran or its government.    An important clarification provided by the circular of June 8, 2016, is the definition of the US Persons. US persons are not defined consistently with the 31 CFR and for the purpose of OFAC guidance, US persons shall mean 'any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States' .   The Government of Iran and Iranian financial institutions remain persons whose property and interests in property are blocked under Executive Order 13599 and section 560.211 of the ITSR, and U.S. persons continue to be broadly prohibited from engaging in transactions or dealings with the Government of Iran and Iranian financial institutions.   II. Secondary Sanctions    After Implementation Day, secondary sanctions continue to attach to significant restrictions for transactions with (1) Iranian persons that are on the SDN List; (2) the Islamic Revolutionary Guard Corps (IRGC) and its designated agents or affiliates; and (3) any other person on the SDN List designated under Executive Order 13224 or Executive Order 13382 in connection with Iran's proliferation of weapons of mass destruction (WMD), their means of delivery or Iran's support for international terrorism.    Additionally, sanctions targeting certain activities related to trade in materials described in section 1245(d) of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) that are outside the scope of the JCPOA and related waivers remain in place.   Continuing obligations on US Persons and conduct of Non-US Persons   Transactions may be exempt from regulation or may be authorized by OFAC. Unless an exemption or express OFAC authorization applies, U.S. persons continue to have an obligation to block the property and interests in property of all individuals and entities that meet the definition of the Government of Iran or an Iranian financial institution, regardless of whether or not the individual or entity has been identified by OFAC on the E.O. 13599 List.    Also, non-U.S. persons continue to be prohibited from knowingly engaging in conduct that seeks to evade U.S. restrictions on transactions or dealings with Iran or that causes the export of goods or services from the United States to Iran.   It is also clarified that restrictions on trade relating to 'oil' will be significantly relaxed by the US for all non-U.S. persons. These restrictions will, however, continue to apply for U.S. persons. After Implementation Day, foreign financial institutions need to continue to ensure they do not clear U.S. dollar-denominated transactions involving Iran through U.S. financial institutions, given that U.S. persons continue to be prohibited from exporting goods, services, or technology directly or indirectly to Iran, including financial services, with the exception of transactions that are exempt or authorized by a general or specific license   Following Implementation Day, the restrictions on 'non-U.S Persons' have been relaxed for banking and financial transactions. It is also clarified that U.S. financial institutions can transact with-including by opening or maintaining correspondent accounts for non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships with Iranian financial institutions that are not on the Specially Designated Nationals List and Blocked Persons List (SDN List). However, non-U.S. financial institutions are not permitted to route Iranian-related transactions through U.S. financial institutions or involve U.S. persons in such transactions, unless the transactions are exempt from regulation or authorized by OFAC.   ____________________________________________________________________________________   i.   https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf ii.  Defined further under the Guidance Note     ]]>
    Mon, 27 Mar 2017 00:00:00 GMT
    <![CDATA[Asset Securitization in the UAE]]> Asset Securitization in the UAE 

    (Part II of II)

    In part one of our series on Asset Securitization, we defined asset securitization, reinforced its importance and illustrated the ways in which it useful for financing purposes. In fact, asset securitization transactions had evolved centuries back and were also, incredibly pervasive during the late seventeenth and the early eighteenth centuries.

    Anyone from the Republic of India would easily be able to recognize the name 'East India Company.' This company, a mercantilist corporation of Britain, and South Sea Company, jointly held nearly eighty percent (80%) of the British Crown's national debt by 1729 through the process of asset securitization. They essentially became 'Special Purpose Vehicles' (the SPV) for the British Treasury. Clearly, this process has been pervasive and prevalent for much longer. This part two explores and discusses the concept of securitization within the UAE Regulatory Framework and further highlights the manner of enforcement of security created to secure the rights of creditors.

    Regulatory Framework in the United Arab Emirates

    The securitization market in the United Arab Emirates (the UAE) is at a nascent stage. Hence there is no proper law from which securitization could derive its regulatory framework. However, since its emergence as a leading financial center, the Dubai International Financial Centre (the DIFC ) has been a robust platform for undertaking asset securitization in the country. DIFC has a sound legal structure to facilitate securitization transactions in the country, within conventional and Islamic structures alike. Moreover, in 2008, the DIFC passed the DIFC Special Purpose Company Regulations, which eased the securitization framework within the DIFC for foreign investors and the local businesses. DIFC legal framework comprises of the Law of Security, the Real Property Law, and also the DIFC Security Regulations, which categorically safeguard security created over assets within the DIFC, and by entities based and operating from within the DIFC. Notably, there are several free zones in the UAE, and each such free zone has its regulations for creating security interests by entities licensed within that zone and over assets located therein.

    Any financial transaction is effected and perfected by executing documentation governing the terms of understanding and intent of parties. These documents include the financing documents, which cover the terms and structure of proposed transaction, including security documents, and creating a right over assets of the obligor for its creditors. These documents are a mechanism which ensures a lender's ability to enforce their rights, including taking possession of the property/assets secured, selling it and appropriating the proceeds to repay their debt, in the event obligor, fails to perform. Importantly, the laws applicable to documenting, registering and enforcing security interest created (either in the form of a mortgage or pledge) over assets in the financial transaction are governed by the UAE Commercial Transaction Law (the Commercial Code) and the UAE Civil Transactions Law (the Civil Code).

    In the absence of a separate legal framework for securitization of assets under Dubai law (or; UAE law), the agreements executed between the parties evidencing an Islamic securitization shall be Sharia compliant and adhere to the terms of Civil Code and Commercial Code, both.

    Mortgage

    Article 1399 of the Civil Code defines a mortgage contract to mean "a contract by which a creditor acquires, over an immovable property allocated for the payment of his debt, a real right by which he obtains preference over creditors and creditors following him in rank, for the repayment of his claim out of the price of such property, no matter into whose hands it has passed."

    Article 101 of the Civil Code defines Immovable Property (Real Property) as "anything of permanently fixed nature which cannot separate without damaging or altering its surrounding."

    The Civil Code and Commercial Code (read with Law number 14 of 2008, in cases where the real property located within the Emirate of Dubai) cover the mortgage of 'real-estate' upon terms that are recorded by way of a mortgage deed, by and between the parties. The only way to create a valid and enforceable mortgage is to register the mortgage deed with the appropriate authority (where the immovable property locates). For instance, a mortgage deed gets recorded with the Dubai Land Department and the local Municipality in the Emirate of Abu Dhabi is responsible for registration of mortgages.

    We now examine mortgages created over a 'Musataha' right. Musataha is a form of long-term lease which allows the holder (the Musatahee) the right to use and exploit (including development) the land belong to the land owner for a term of fifty (50) years. The lease is renewable by mutual consent (or; as agreed contractually) for a further period of up to fifty (50) years. Once vested with musataha rights, the musatahee may dispose of such rights in any manner he deems fit. For musataha rights to become active, the musataha agreement granting those rights must be registered either with the Land Department or, the Municipality, as the case may be.

    Similarly, the usufruct is also a form of long-term lease for ninety-nine (99) years. However, usufruct form of 'lease-contract' varies from 'Musataha' as it does not entitle the leaseholder to develop the property.

    It is essential to highlight here that both - Musataha and usufruct can potentially apply to underlying assets for ijara based Sukuk (the Sukuk Al Ijara).

    For safeguarding the interest of the party in whose favor the security creation take place, it is vital to execute and register the security document in the jurisdiction where the property locates, even if the laws of another jurisdiction apply to the financing document.

    Pledge

    • Movable Assets

    Article 1448 of the Civil Code defines pledge to mean "a contract giving rise to a right to retain a property in the hands of an obligee, or a stakeholder by way of security for a right which may be required, in whole or in part, giving such obligee priority over other obligees.

    The Civil Code further provides that it is essential that a pledge must be capable of delivery and auctioned. A 'pledge' must be provided in consideration of an ascertained debt specified at the time of creation of a pledge and created over the movable property. An essential requisite of a perfect pledge is that the creditor must take possession of the movable asset. The asset to be pledged must be in existence at th time of creation of pledge.

    The parties must also record the terms and conditions of the pledge by way of an agreement, which must either be in Arabic or have Arabic translation. There is no formal registration process for pledges created in the UAE and therefor as a prudent step, the document should be executed before the Notary Public to create a record of such security creation, and registered with the local traffic police with a notation of charge on the vehicle's title.

    • Shares

    Creating a pledge on shares involves a written agreement in which all the details of the pledge are set out. Such particulars include the amount, period, event of default, and the terms and conditions pertaining the share pledge.

    Pledging of Shares in joint stock companies and Free Zone companies can effect by delivering the share certificates to the pledgee (mortgagee) as provided for under the UAE Commercial Companies Law (Federal Law Number 2 of 2015, as amended). To effect a valid and enforceable pledge, the 'pledger' should undertake to request the company to register the pledge in the register of shares of the company to secure the full payment of the facility or loan. The pledger shall have the right to receive the dividends and utilize the rights related to the shares unless otherwise agreed in the pledge agreement.

    The Council of Ministers' Decision Number 12 of 2000, shares of a public joint stock company, subject to certain exceptions, must be listed on one of the stock exchanges in the UAE. A pledge over the shares of a listed company is recorded in the share register maintained by the relevant stock exchange where such shares pledged are listed.

    In light of recently amended position about the pledge of shares of a limited liability company (the LLC), Article 79 of the UAE Commercial Companies Law permits shareholders in LLCs to pledge their shares. Any such pledge must be per the company's memorandum and articles of association, under and agreement notarized before the notary public and entered into the Commercial Register maintained by the Department of Economic Development in the relevant Emirate.

    Article 81 of the UAE Commercial Companies Law further provides for a mechanism of enforcement against a defaulting shareholder or partner's pledged shares in the LLC. The creditor enforcing his rights over the shares may agree with the shareholder or the partner and the LLC on the method and terms of sale, by way of private arrangement. Otherwise, the pledged shares shall be offered for sale at court controlled public auction. The shareholder or partner will have the right to buy back the shares from the winning bidder in the auction within fifteen (15) days of such 'auction' on the same terms and conditions.

    For the purpose of enforcement of security, the UAE courts have a vital role in enforcing any security upon a claim being filed by security holder for the realization of debt for the security created. The asset so created shall be realized upon an order passed to that effect. However, since there are no blanket regulations for the enforcement of securities and each case gets decided at the sole discretion of the court, it may sometimes raise uncertainty in the minds of parties.

    An essential factor where UAE scores over other financial markets undertaking securitization transactions are the zero tax regime and non-payment of any stamp duty. The UAE Ministry of Economic Development does not prescribe payment of any amount of stamp duty on any securitization transaction transaction, which otherwise is quite high in other countries, including India. However, withholding tax may have to be paid on remittance of receivables from an entity in the UAE to another outside the UAE.

    Conclusion

    UAE Economy is still emerging in the field of securitization but it has to act swiftly in order to reap the benefits of risk management and liquidity associated with securitiation activity. Though Islamic securitization like conventional structured finance purports to generate equal financial opportunities for the originating entity, each transaction of Islamic securitization may invite different interpretations of Sharia law. This may adversely affect the growth of this activity in comparison to conventional securitization. At the same time, the DIFC legislative framework has extended a great support to the UAE economy to jump start financial activities, including Islamic finance. DIFC has set regulations in place to streamline Sharia compliant financial frameworks. It is extremely promising that DIFC has already become the largest global platform for the Sukuk market. Additionally, with the emergence of the Abu Dhabi Global Markets (the ADGM) in the Emirate of Abu Dhabi, there is a scope for infrastructural development in the country which may make securitization a viable source of financing. There is enough scope for development of the securitization on a viable source of financing. There is enough scope for development of the securitization market in the UAE. It is imperative, however, for the Government to push the envelope and develop laws and regulations to facilitiate securitization activity with ease.

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    Sun, 26 Mar 2017 00:00:00 GMT
    <![CDATA[Tax Global Guide 2016-17 Volume 1: Tax on Corporate Transactions in the United Arab Emirates]]> Tax Global Guide 2016-17 Volume 1: Tax on Corporate Transactions: Country Q&A

    "Tax on corporate transactions in the United Arab Emirates: overview"

    The United Arab Emirates

    STA Law firm

    Tax authorities
    • What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

    The Federal Government of the United Arab Emirates (UAE) does not levy any corporate income tax or other personal taxes on its residents. However, most of the Emirates have imposed a corporate tax on companies vide their respective local income tax decrees. The Department of Finance of each Emirate is the authority responsible for enforcing corporate taxes in their respective jurisdictions.

    Pre-completion clearances and guidance

    • Is it possible or necessary to apply for tax clearances or obtain guidance from the tax authorities before completing a corporate transaction?

    Within the United Arab Emirates, a company is not under any obligation to apply for tax clearances or obtain guidance from tax authorities prior to finalizing corporate transactions.

    Disclosure of corporate transactions

    • Is it necessary to disclose the existence of any corporate transactions to the tax authorities?

    Circumstances where disclosure is required

    Presently, companies in UAE are not required to divulge any corporate transactions to tax authorities. However, UAE Cabinet in accordance with the rules set out by G20 and Foreign Account Tax Act (FATCA) will enforce standards for disclosure of certain corporate transactions such as joint disclosures and exchange information to tax authorities next financial year.

    Manner and timing of disclosure

    The manner and timing of disclosure of corporate transactions will be in accordance with the guidelines laid down by the UAE Cabinet. Further, an automated system for the exchange of information by establishing the technological infrastructure has been initiated in the country.

    Main taxes on corporate transactions

    Transfer taxes and notaries' fees

    • What are the main transfer taxes and/or notaries' fees potentially payable on corporate transactions?

    Transfer Tax

    Key characteristics.

    Generally, companies are not liable to pay transfer taxes on the purchase of an asset (physical asset or share). However, transfer taxes are levied in the form of registration fees on transferring the title of a real estate property. These taxes are payable to the respective local land department of an emirate depending upon the jurisdiction in which the property is located. Further, the transfer tax is also imposed on the transfer of shares of a company that is established in Jebel Ali Free Zone (JAFZA) and holds real estate property in the emirate of Dubai even though they benefit from the all the other benefits that free zones in the country enjoy.

    Triggering event.

    Transfer of property taxes is ordinarily payable at the time of sale or purchase of real estate, leasing of property and mortgage. Although, a company established in JAFZA and holds real estate property in Dubai would also be liable to pay transfer tax on the event of a transfer of shares of that particular company.

    Liable party/parties.

    Transfer fees are typically divided equally between the parties or can solely be paid by the purchaser, subject to any agreement between the parties.

    Applicable rate(s).

    The real estate property tax rate in Abu Dhabi and Dubai is 2% and 4%, respectively. Further, companies that are established in JAFZA and hold real estate property in Dubai are liable to pay 4% transfer tax in the event of a transfer of shares.

    Notary fees

    Key characteristics.

    Notary fee is payable to the Notary Public for getting corporate documents attested for legal purposes in all the emirates.

    Triggering event.

    Notary fees are paid by corporates and individuals to the Notary Public of the respective emirate for notarization of corporate documents such as articles of association, sale contracts, power of attorney, wills, declarations or the like.

    Liable party/parties.

    In accordance with the various local income tax decrees of each emirate, notaries are paid by the person possessing the document(s).

    Applicable rate(s).

    Notary fees in Abu Dhabi and Dubai may range from AED 100 to AED 500.

    Corporate and capital gains taxes

    • What are the main corporate and/or capital gains taxes potentially payable on corporate transactions?

    Corporate Income Tax

    Key characteristics.

    The Federal Government of UAE has not implemented any federal corporate income taxes or other taxes on corporate transactions. However, most of the emirates have imposed taxes on corporate income through local decrees. In Abu Dhabi, the Income Tax Decree Number 4 of 1972 has imposed a 'chargeable person' holding trade or business with a corporate income tax on their annual earnings. Similarly, in Dubai, in accordance with Dubai Income Tax Decree 1970 and Dubai Income Tax Ordinance 1969, every organization conducting trade or business activities in Dubai is liable to pay corporate income tax. Further, Sharjah Income Tax Decree 1968 (and subsequent amendments) has imposed corporate entities with an income tax on their annual earnings. Although, in practice, corporate taxes are generally only imposed on the annual income of branches of foreign banks and companies engaged in upstream petroleum activities.

    Further, companies are not liable to pay taxes on capital gains in the UAE.

    Triggering event

    According to the respective decrees regarding corporate income tax of each emirate, a corporate person is liable to pay tax on its annual earnings as soon as it falls under the purview of the term 'chargeable person'. Further, a chargeable person is a body corporate that conducts trade or business activities in the specific Emirate through a permanent establishment in the same.

    Liable party/parties.

    Any party that falls under the ambit of the term 'chargeable party' for purposes of the local tax decrees of each emirate is liable to pay corporate income tax.

    Applicable rate(s)

    Companies are liable to pay taxes depending upon their income as elucidated below:

    Taxable Income Slabs

    Rate (in %)

    Slab Lower Limit (AED)

    Slab Upper Limit (AED)

    0

    1,000,000

    0

    1,000,000

    2,000,000

    10

    2,000,000

    3,000,000

    20

    3,000,000

    4,000,000

    30

    4,000,000

    5,000,000

    40

    5,000,000

    onwards

    55

    However, branches of foreign banks are liable to paytax of 20% on their yearly income irrespective of the particular income tax slab they fall in. Whereas, foreign companies that are engaged in the production of oil and natural gas are also liable to pay corporate income tax and royalties based on the relevant concession agreement in place.

    Value added and sales taxes

    • What are the main value added and/or sales taxes potentially payable on corporate transactions?

    Value Added Tax

    Key characteristics.

    Currently, no value-added tax (VAT) is levied in the UAE. However, the UAE Ministry of State for Financial Affairs has confirmed that VAT will be introduced by 2018.

    Triggering event.

    The UAE Minister of State for Financial Affairs agreed on introducing VAT. Whereas they have stated that 100 food items, education, health, social services, bicycles will be exempted from the purview of VAT. Further, no specific events have been disclosed by the ministry that will trigger VAT.

    Liable party/parties.

    Parties liable to pay VAT will generally be the consumers. However, VAT liability may be affected by the businesses by passing the tax either up or down the supply chain.  

    Applicable rate(s).

    Although no VAT is payable at present, the UAE Ministry of State for Financial Affairs have disclosed the rate varying from 3% to 5%.

    Other taxes on corporate transactions

    • Are any other taxes potentially payable on corporate transactions?

    Tax on rental income

    Key characteristics.

    In each emirate, tax on rental income is deducted by the municipality for all the companies receiving income by subletting property in their jurisdiction.

    Triggering event

    Duty on rental income is accrued during the renewal of trade license of the company receiving the rental income.

    Liable party/parties.

    All the companies subletting their offices and warehouses or other real estate property in UAE are liable to pay rental income to their local municipality.

    Applicable rate(s).

    10% of the annual rent received by the company is payable as a tax on rental income. Further, all the companies that have provided accommodation for their employees are also obligated to pay 5% of their rent as a tax.

    Taxes applicable to foreign companies

    • In what circumstances will the taxes identified in Questions 4 to 7 be applicable to foreign companies (in other words, what "presence" is required to give rise to tax liability)?

    Corporate Income Tax

    Branches and representative offices of foreign companies would be liable to pay taxes since they would fall under the ambit of 'chargeable person' in accordance with the local tax legislations. However, this tax is generally only levied from branches of foreign banks and companies indulged in upstream petroleum activities (such as production). As mentioned earlier, branches of foreign banks are liable to pay a tax of 20% of their annual income and foreign companies engaged in the production of oil, gas and natural resources should pay corporate income tax in accordance with the relevant concession agreement that is in effect.

    Further, a branch of a foreign company would be said to have a presence in the respective emirate is it falls under the ambit of the term 'chargeable person' for purposes of the relevant local tax legislation (see Question 5).

    Dividends
    • Is there a requirement to withhold tax on dividends or other distributions?

    Companies are not required to withhold tax on dividends and other distributions due to the lack of a federal or local legislation requiring the payment of tax on dividends. Dividends and other distributions paid to stakeholders of the company would be considered as personal income of that natural or legal person and such income is not taxable in the UAE.

    Share acquisitions and disposals

    Taxes potentially payable

    • What taxes are potentially payable on a share acquisition/share disposal?

    In UAE, taxes are not payable on share acquisition or share disposal and hence, acquisition of companies are subject to Federal Law Number 2 of 2015 regarding Commercial Companies (the Companies Law) and corporate tax laws of the emirates. However, companies in JAFZA that hold real estate property in Dubai is liable to pay 4% transfer tax in the event of a sale of shares of the company (see Question 4).

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    No exemptions or reliefs are available since there are no explicit legislations or decrees mandating tax levy during share acquisition or disposal.

    Tax advantages/disadvantages for the buyer

    • Please set out the tax advantages and disadvantages of a share acquisition for the buyer.

    Advantages

    Buyers have the advantage of exploiting the lack of tax liability during the purchase of shares since no federal or local decree mandates the payment of taxes during the same.

    Disadvantages

    However, the buyer would subsequently be liable to pay corporate income tax depending on the activity and annual income of his business.

    Tax advantages/disadvantages for the seller

    • Please set out the tax advantages and disadvantages of a share disposal for the seller.

    Advantages

    There is no explicit provision governing share disposal and therefore, the seller does not obtain any tax advantage on the sale of equity.

    Disadvantages

    Similarly, the seller does not face any disadvantage regarding tax liability in the event of a sale of shares since there are no explicit legislations relating to the same.

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    The UAE is known for its tax-friendly legislations and dynamic corporate environment. The local tax laws imposed by each emirate are nominal in comparison to other jurisdictions. Therefore, the federal and local governments have not provided for any transaction structures to minimize the tax burden of a chargeable person. However, as mentioned in Question 6, VAT is set to be imposed in the UAE in 2018 and the ambit and technicalities of its liability are yet to be seen.

    Asset acquisitions and disposals

    Taxes potentially payable

    • What taxes are potentially payable on an asset acquisition/asset disposal?

    There is no explicit provision governing asset purchases, neither in federal law nor in a local income tax decree. Therefore, a company would not be required to pay transfer tax on the acquisition of assets. However, companies are liable to pay a transfer tax in the event of a transfer of title of a real estate property (see Question 4).

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    No exemptions or reliefs are available to companies that transfer real estate property in the UAE.

    Tax advantages/disadvantages for the buyer

    • Please set out the tax advantages and disadvantages of an asset acquisition for the buyer.

    Advantages

    Buyers are liable to undertake half of the transfer tax that accrues in the event of the purchase of a real estate property, subject to any agreements between the buyer and seller.

    Disadvantages

    The buyer does not face any undue disadvantage since both, the buyer and the seller is liable to pay the exact amount of transfer tax,

    Tax advantages/disadvantages for the seller

    • Please set out the tax advantages and disadvantages of an asset disposal for the seller.

    Advantages

    The seller does not enjoy any specific benefit in tax liability since the buyer is also liable to pay an equal amount as a transfer tax.

    Disadvantages

    The seller is not at any kind of disadvantage regarding tax liability during the sale of an asset.

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    There are no specific transaction structures to minimize tax burden of the parties since the tax liability that has been imposed by the local decrees are already considered minimal in relation to other jurisdictions.

    Legal mergers

    Taxes potentially payable

    • What taxes are potentially payable on a legal merger?

    UAE has not enforced any explicit taxes on mergers and acquisitions. However, in theory, mergers that involve an establishment in JAFZA which holds real estate property in UAE would be liable to pay 4% transfer tax (see Question 4).

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    Not applicable (see Question 20).

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    Not applicable (see Question 20)

    Joint ventures

    Taxes potentially payable

    • What taxes are potentially payable on establishing a joint venture company (JVC)?

    No federal or local taxes have been imposed on the establishment of a joint venture. Although, Companies Law does not explicitly provide for a legal entity by the term 'joint venture company', companies generally form or setup a third-party entity (such as limited liability company) to achieve the goals of a joint venture agreement. Therefore, no explicit taxes are liable to paid by the parties entering into a joint venture. However, the parties are liable to bear all the registration and licensing costs and fees of the Department of Economic Development in the respective emirate during the incorporation of the resulting joint vehicle (such as a limited liability company). Further, the resulting joint venture vehicle would be liable to pay corporate income tax in that emirate (see Question 5).

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    Not applicable (see Question 23)

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    Not applicable (see Question 23)

    Company reorganisations

    Taxes potentially payable

    • What taxes are potentially payable on a company reorganization?

    Companies in UAE are not liable to pay taxes during its reorganization since there are no explicit federal or local laws that give rise to tax liability when companies initiate their reorganization process.

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    Not applicable (see Question 26)

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    Not applicable (see Question 26)

    Restructuring and insolvency
    • What are the key tax implications of the business insolvency and restructuring procedures in your jurisdiction?

    Companies are liable to pay off all corporate income taxes and rent due before the company's assets are employed to pay off the creditors. After the local corporate income tax have been paid out of the liquidated assets, the creditors would take precedence in clearing their debts prior to distributing the assets between the shareholders of the company.

     Exemptions and reliefs

    Private equity financed transactions: MBOs

    Taxes potentially payable

    • What taxes are potentially payable on a management buyout (MBO)?

    Management buyout (MBO) involves process of acquiring assets and operations of the business by its existing management with the aid of private equity financing. There are no explicit statutes governing the taxes payable on MBOs, although UAE companies are provided with this recourse. Therefore, parties are not effected by tax liability in the event of an MBO.

    Exemptions and reliefs

    • Are any exemptions or reliefs available to the liable party?

    There are no exemptions and reliefs accessible due to the lack of tax liability in an MBO.

    Transaction structures to minimize the tax burden

    • What transaction structures (if any) are commonly used to minimize the tax burden?

    Not applicable (see Question 33).

    Reform
    •  Please summarize any proposals for reform that will impact on the taxation of corporate transactions.

    The UAE was long known to be a comparative safe tax haven in the Middle East due to the lack of direct taxes (such as personal income tax) and indirect taxes (such as VAT). However, the country's recent step towards the implementation is expected to rise the cost of living and impact the dynamic corporate environment in UAE. The void in tax laws has been one of the foremost incentives for foreign investors to establish themselves in the country. Therefore, the government should yearn to reduce the burden placed on the residents and corporate entities in the UAE by carefully implementing VAT in limited sectors and goods and/or services. Further, establishing a dedicated federal and local tax departments to ensure compliance may aid in the effective implementation of VAT in the country.

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    Sun, 19 Feb 2017 15:00:00 GMT
    <![CDATA[Environment Global Guide 2017-18 - UAE Q&A (Part 1 of 2)]]> Environment Global Guide - UAE

    1. Environmental Regulatory Framework

  • What are the key pieces of environmental legislation and the regulatory authorities?
  • Numerous federal and local laws have been enacted in the UAE to protect the integrity of the country's environmental laws and regulations. Federal Law Number 24 of 1999 for the Protection and Development of Environment (the Environmental Law) is the primary legislation for environmental protection in the UAE. Further, the following legislations have been enacted in pursuant to environment related issues:
  • Federal Law Number 23 of 1999 regarding Conservation of Aquatic Resources;
  • Federal Law Number 9 of 1983 regulating the Hunting of Birds and Animals;
  • Federal Law Number 20 of 2006 (which amended Federal Law Number 1 of 2002) regarding the use of radioactive materials;
  • Federal Law Number 16 of 2007 concerning animal protection; 
  • Federal Law Number 11 of 2002 regarding the Regulation and Control of International Trade in Endangered Species of Wild Flora and Fauna and Executive Order issued by Council of Ministers Decree Number 22 of 2003;
  • Federal Law Number 5 of 1979 concerning Agricultural Quarantine; and  
  • Federal Law Number 6 of 1979 regarding Veterinary Quarantine.
  •   Further, the following legislations have been enacted by their respective Emirates in pursuant to their local environmental strategies:
  • The Emirate of Abu Dhabi has implemented Law Number 21 of 2005 for Waste Management and Law Number 16 of 2005 Restructuring the Environment Agency, Law Number 13 of 2005 regulating Grazing, Law Number 5 of 2016 regulating the Ground Water. Besides, the Emirate of Abu Dhabi have also enacted the ingenious Decree Number 42 of 2009, concerning the Comprehensive Environment Health and Safety Management System (EHSMS) which aims at accomplishing the protection of Healthy and safe environment;
  • The Emirate of Dubai have issued numerous orders and regulations for protection of health and environment just as, Local Order Number 61 of 1991 on the Environment Protection Regulations, Local Order Number 8 of 2002 concerning the Sewage, Irrigation and Water Drainage, Local Order Number 11 of 2003 regarding the Public Health Safety of Society and Law Number 15 for the safeguarding the Groundwater; 
  • The Emirate of Sharjah have enacted Law Number 6 of 1998 for incorporating Environment and Natural Resources Authority, similarly, they have Law Number 1 of 1974 for the Protection of Public Health; and
  • The Emirate of Ras Al Khaimah has implemented Law Number 2 of 2007 for Environment Protection and Development Authority. 
  •   The organizations enumerated below are the key regulatory authorities for supervising environment-related issues in the United Arab Emirates: 
  • Emirates have also established the following local regulatory agencies in order to look into sector-specific environmental issues:
  • The Ministry of Agriculture and Fisheries deals with environment related issues regarding marine and terrestrial matters. 
  • The Federal Environment Agency (the FEA) is a federal governmental body which frames policies for further protection and development of healthy environment while overlooking into the issues of pollution control and environmental standards. 
    • The Environment Agency – Abu Dhabi (the EAD) is the principle regulator of the environmental issue in Abu Dhabi. Further, Environmental Research and Wildlife Development Agency (the ERDWA) operates various research centers that deal with both marine and wildlife development. 
    • Department of Tourism and Commerce Marketing is the principle authority that is responsible for the development and marketing of tourism in the Dubai. This agency also ensures that safe environmental practices are followed while encouraging tourism practices in the Emirate. The Environment Department at the Dubai Municipality is the strategic regulator of environment-related issues in the urban city.
    • The Department of Environment and Protected Areas for the preservation of endangered species is conferred with the duty to mandate the conservation of endangered wildlife in the Emirate of Sharjah.

    The UAE has endeavored to safeguard the integrity of its geological environment by enforcing numerous legislations and regulations that impact the country's domestic and international goals. The Industrial Emissions Directive directly has not had any direct or indirect impact on the United Arab Emirates since it mainly concentrates on the environmental issues that surround the European Continent. Whereas, the countries in the Middle East face a varied condition of environmental issue due to the surfeit of population that flows into the region every year and the region's abundance of oil and natural gas exploration projects. However, the United Arab Emirates has strived to achieve their domestic environmental strategies by enforcing stringent legislations regarding the matter.

    2. Regulatory Enforcement

    To what extent are environmental requirements enforced by regulators?

    The United Arab Emirates has initiated various environmental strategies with the view to meet the growing population and the national mandate of conserving the country's resources. Vision 2021 has been initiated by the government in order to attain sustainable development vide diversification in national economy and increase in investments in sectors that include clean energy, sustainable development, information technology, space technology and the like. Further, Abu Dhabi and Dubai has also initiated local strategies such as Abu Dhabi's Economic Vision 2030 and Dubai Plan 2021 with the primary objective of economic diversification and sustainable development. The recent unveil of UAE's Energy Plan 2050 announcement has been much awaited due to its significance in transforming the country's energy sector into a clean energy sector by the year 2050. The project was primarily intended to access the feasibility of making a transition to the nation's energy sector into 70% - 100% renewable resources. The importance of this project lies in the underlying fact that a major portion of the country's economy is derived from the oil and gas sector.   UAE is the home to one of the most sector specific economies on the globe with major interests in the oil and gas industry. Therefore, the federal government and the respective governments of the Emirates has strived to achieve economic development by reducing carbon emissions and employing innovative technologies to improve industrial efficiency.    Further, the government has laid down a federal legislative framework for waste management that has defined a national roadmap for integrated waste management. The Blue Carbon Demonstration Project was also initiated in 2013 with the view to provide a strategic understanding of the carbon sequestration in Abu Dhabi. However, the jurisdiction of the initiative was expanded to cover the whole nation in the subsequent year due to the effectiveness of the project in the capital Emirate.  

    3. Environmental Non-Governmental Organizations (NGOs)

    To what extent are environmental non-governmental organizations (NGOs) and other groups active?   

    Various non-governmental organizations (NGOs) and pressure groups have undertaken varied sector specific initiatives in the UAE. NGOs working towards the fulfillment of environment-related goals in the country plays a pivotal role in adjusting the void in the society by educating them about the sustainable lifestyle practices. A few major NGOs in the UAE which are engaged in safeguarding the various aspects of environmental protection laws in the country have been mentioned below:
    • Emirates Natural History Group is an Abu-Dhabi based organization which is engaged in safeguarding the natural history of UAE and Oman. This organization is also a member of the World Conservation Union (the IUCN);
    • Environment Friends Society is an Abu-Dhabi based organization which works towards creating a public awareness regarding environment-related predicaments;
    • Emirates Environment Group is a Dubai-based organization that is devoted to protecting the environment by educating the society about the need of the hour to protect the environment;
    • Dubai Natural History Group is a Dubai-based organization that conducts surveys and research regarding issues that are hazardous to the nation's environment; 
    • Arabian Leopard Trust was established in Sharjah to promote the conservation of endangered wildlife species, specifically the Arabian Leopard; 
    • Emirates Wildlife Society in association with World Wild Fund for Nature (the WWF) has been established due to a rising need to protect biodiversity at key sites across the country.
    Further, two other major pressure groups that are active and involved in the protection and conservation of the environment in UAE are:
  • Environment and Wildlife Management System(EWM) that is accountable for handling wildlife collections and land owned by Abu Dhabi royal family; and
  • Emirates Health Club that primarily focuses on the protection and preservation of marine and coastal resources. 
  • 4. Environmental Permits

    Is there an integrated permitting regime or are there separate environmental regimes for different types of emission? Can companies apply for a single environmental permit for all activities on a site or do they have to apply for separate permits?    

    Integrated/separate permitting regime   The Department of Economic Development of the respective Emirate is responsible for the licensing and registration of the companies that intend to conduct business within the political borders of the Emirate. However, the companies are also mandated to obtain necessary permits regarding the safety of the environment from the respective authorities that regulate environmental concerns in the respective Emirate.  Single/separate permits   These permits may be either integrated or separate in nature depending upon the underlying project and the ambit of environmental conditions that are affected.

    5. Permits and Regulator

    What is the framework for the integrated permitting regime?     

    In Abu Dhabi, EAD is accountable for protection and enhancement of the environment by reducing pollutants in air, water, and land. in pursuant to the Environment Law, all the projects and establishments are under an obligation to procure an environmental permit prior to initiating any project. EAD provides permits for development and infrastructure projects, industrial facilities, and hazardous material stores.     Further, in accordance with the provisions of Law Number 16 of 2005, EAD is the competent authority to safeguard the environmental and natural resources of Abu Dhabi by providing necessary permits to companies after assessing the risk of pollution involved in the project.  The Environment Department in Dubai Municipality provides permits and licenses that succor companies to conduct their commercial or industrial activities in the Emirate after assessing the harm that the project may pose to the environment.   Length of permit The permit issued by EAD is renewable every year in order to assure the compliance of the regulations and conditions and for the up gradation.   Restrictions on transfer A permit that has been awarded to a company by the competent environmental authority may not be transferred to a third-party.   Penalties Non-compliance of EAD regulations will attract penalties amounting to minimum AED 5,000.  

    6. Water Pollution

    What is the regulatory regime for water pollution (whether part of an integrated regime or separate)?   

    Permits and regulatory   The EAD along with the Regulation and Supervision Bureau for Water, Waste Water and Electricity in Abu Dhabi is responsible for regulating the discharge of waste effluents into the Emirate's water resources. They mandate the wastewater and marine water quality monitoring that arises from 'Technical Guidance Document for the Permitting of Marine Dredging Operations in Abu Dhabi'.   Further, Trakhees of the Department of Planning and Development under the Ports, Customs and Free Zones Corporation of the Government of Dubai primarily overlooks the issues related to water pollution by companies in the Emirate of Dubai. This authority has laid down a standard of discharge of water pollutants into the water resources of the Emirate. They also issue 'Harbour Discharge Permit' that enables companies to discharge waste pollutants that do not exceed the general standard that has been set by the authority.    Prohibited activities   The United Arab Emirates Ministry of Climate Change and Environment has banned companies from the production, manufacture, formulation, circulation, import and use of certain pesticides that has been elucidated vide Ministerial Decree 849 of 2010 on the amendment of Ministerial Decision Number 554 for 2009 concerning the prohibited and restricted use of pesticides in the UAE. Further, this Ministry issues such decrees from time to time in order to protect the country's water and other resources. Clean-up/compensation Parties that violate the provisions of the legislations that have been instituted to safeguard UAE's water resources would be liable to any civil action that arises out of such violations. Article 71 of the Environment Law has clearly laid down that parties would be responsible for bearing all costs associated with any damage that has been caused to the environment. Further, the violating parties may also be asked to compensate individuals for the losses they incurred due to the pollution caused by the former. Organizations that succor the national cause of environmental protection may also institute civil litigation suits against the offenders.    Penalties   The Environmental Law has imposed stringent criminal and civil penalties onto offenders of the provisions of the Environment Law. The offenders may be liable to pay heavy fines ranging from AED 10,000 to AED 1,000,000 and imprisonment depending upon the gravity of the issue. However, companies that dump their industrial or commercial waste into water bodies, which in turn pollutes the same would be imposed with a fine ranging from AED 10,000 to AED 100,000.  

    7. Air Pollution

    What is the regulatory regime for air pollution (whether part of an integrated regime or separate)? 

    The Air Quality Department of the Ministry of Environment and Water regulates the pollution of air in the nation by issues a number of decrees and air standards in the nation. The EAD is the key authority regarding issues surrounding air pollution within the Emirate of Abu Dhabi.   Further, Trakhees of the Department of Planning and Development under the Ports, Customs and Free Zones Corporation of the Government of Dubai primarily overlooks the issues related to air pollution by companies in the Emirate of Dubai. This authority has laid down a standard of discharge of air pollutants with the view to maintain ambient air quality in Dubai. Prohibited activities   The Environmental Law has not explicitly stated about any specific commercial or industrial business that is prohibited from conducting its activities in the country due to its concerns over the air pollution. However, Article 4 of the Environmental Law has stated that no project or establishment could commence its activity unless it has conducted a detailed study of its effects on the environment.    Clean-up/compensation   Parties that violate the provisions of the legislations that have been instituted to safeguard UAE's water resources would be liable to any civil action that arises out of such violations. Article 71 of the Environment Law has clearly laid down that parties would be responsible for bearing all costs associated with any damage that has been caused to the environment. Further, the violating parties may also be asked to compensate individuals for the losses they incurred due to the pollution caused by the former. Organizations that succor the national cause of environmental protection may also institute civil litigation suits against the offenders.    Penalties   The Environmental Law has imposed offenders with fines ranging from AED 2,000 to AED 20,000. Further, the statute has also imposed any criminal liability on an offender depending upon the nature and extent of pollution.  

    8. Climate Change, Renewable Energy, and Energy Efficiency 

    Are there any national targets or legal requirements for reducing greenhouse gas emissions, increasing the use of renewable energy (such as wind power) and/or increasing energy efficiency (for example in buildings and appliances)? Is there a national strategy on climate change, renewable energy and/or energy efficiency?  

    Companies in the United Arab Emirates are mandated to follow the guidelines and monitoring systems that have been established by the competent authorities regarding the disposal of effluents into the nation's resources. Therefore, legislations (including the Environmental Law) has imposed a legal responsibility to the residents of the nation.    Further, the UAE has initiated various environmental strategies with the view to meet the growing population and the national mandate of conserving the country's resources. Vision 2021 has been initiated by the government in order to attain sustainable development vide diversification in national economy and increase in investments in sectors that include clean energy, sustainable development, information technology, space technology and the like. Further, Abu Dhabi and Dubai has also initiated local strategies such as Abu Dhabi's Economic Vision 2030 and Dubai Plan 2021 with the primary objective of economic diversification and sustainable development. The recent unveil of UAE's Energy Plan 2050 announcement has been much awaited due to its significance in transforming the country's energy sector into a clean energy sector by the year 2050. The project was primarily intended to access the feasibility of making a transition to the nation's energy sector into 70% - 100% renewable resources. The importance of this project lies in the underlying fact that a major portion of the country's economy is derived from the oil and gas sector.  

    9. Treaty Framework 

    Is your jurisdiction party to the United Nations Framework Convention on Climate Change (UNFCCC) and/or the Kyoto Protocol? How have the requirements under those international agreements been implemented?  

    UAE ratified the United Nations Framework Convention on Climate Change (Kyoto Protocol) in 2005 and became a non-Annex 1 country. Therefore, the UAE is not obligated to reduce its carbon emissions in accordance with the Kyoto Protocol. However, the nation has opted to reduce its emissions by tracking the pollutants in the air and assessing policies for reducing GHG emissions. Further, UAE agreed to generate 24% of its energy from renewable resources at the COP21 United Nations Climate Change Conference in December 2015. Although UAE is not under any legal obligation to do so, the nation has initiated various national and local strategies in order to attain a higher level of energy efficiency while reducing the total emissions and burning of fuel in the country.   

    10. Carbon Emissions and Carbon Trading 

    What, if any, emissions/carbon trading schemes operate in your jurisdiction?  

    UAE has exhibited high potential for increased use of carbon trading schemes, although the concept is relatively novel in the Middle East. Major free zones such as the Dubai Multi Commodities Centre in Dubai has entered the carbon sector since Dubai has been transforming into a centre for trading of greenhouse gas emissions permits. The primary phase of the carbon trading scheme in the UAE was aimed at collecting approximately 6.5 million tonnes of carbon dioxide from industrial facilities that could later be transported and employed in oil reservoirs in order to enhance the process of oil recovery. However, the carbon trading market of the nation is still in its initial stages and the viability of this scheme could only be comprehended once the sector has established itself in the UAE.

    11. Environmental Impact Assessments 

    Are there any requirements to carry out environmental impact assessments (EIAs) for certain types of projects?  

    Scope Environmental Impact Assessment (EIA) is a process that has been used to identify, evaluate and predict the social, ecological and related biological effects of the proposed policy or a project on the environment. Requirements for carrying out the EIA are compulsory for certain types of projects where the extent of potential environmental impacts is undetermined at the design phase. Further, the result of the project will provide an indication of which environmental aspect of the proposed project creates an impact on the environment.   Permits and regulator In the emirate of Abu Dhabi, the EAD is the regulator to provide permits to carry out EIAs; whereas, the Environment Planning and Studies Section (EPSS) of Environment Department in Dubai Municipality issues permits in Dubai.  Further, the project owner should submit the following documents that are required for EIA process:
    • EIA summary 
    • EIA report
    • EIA checklist
    These reports and documents and any other technical report should bear the signature of the authorized person who prepared the report and must bear the signature of the project owner.    Penalties Penalties for non-compliance of EIA may vary from AED 1,000 to AED 10,00,000 along with criminal liability that may amount to imprisonment for up to one year.  

    12. Waste 

    What is the Regulatory Regime for Waste?  

    Permits and regulator In the Emirate of Abu-Dhabi, the regulatory authority EAD and the Centre for waste Management- Abu-Dhabi (CVM), that issues the license, approval and permit for waste management. Further, they provide permits for waste management, transportation, recycling, storage and trading of waste. (Law Number 21 of 2005 on waste management) In the Emirate of Dubai, Sustainable Waste Management (DMSWM) of the Dubai Municipality issues the permits and licenses to the waste operators in the Emirate. Similarly, the respective municipalities of the other Emirates undertake all responsibilities regarding waste management in their respective Emirate.   Prohibited activities The regulatory regime for waste prohibits the open burning of any waste unless that is specifically permitted by EAD and CVM. Further, they also prohibit the open dumping of waste in desert, open area and highway sides.    Operator criteria Operators must follow the enumerated criteria to operate the waste disposal sites:
    • Seek preliminary approval from the competent authority.
    • Storage, disposal and processing facilities must comply with the regulations laid down by the authority.
    • Operators must not obtain any hazardous materials unless they seek approval of competent authority on site. 
    • Operators must seek for annual approval from the competent authority for recurrent shipments for hazardous wastes. 
    Special rules for certain waste Hazardous waste including asbestos, medical waste, slaughterhouses, fallen stocks and oil and gas waste are mandated to be disposed of in accordance with the respective legislation dealing with those materials (Federal Cabinet Resolution Number 39 of 2006 on banning the import and production of asbestos).   Penalties Parties who violate the provisions of the Environmental Law regarding waste management will be slapped with a fine that may extend up to AED 20,000 and/or imprisonment of not less than one year.    (Contributed to Thompson Reuters Questionnaire (Environment Guide 2017-2018) ]]>
    Wed, 01 Feb 2017 00:00:00 GMT
    <![CDATA[Post-Closing Transactional vs Ongoing Enterprise Due-Diligence]]>  Post-Closing Transactional vs Ongoing Enterprise Due-Diligence

    "Diligence is the mother of good fortune."

     -        Miguel de Cervantes Saavedra

    Introduction

    In July 2016, the Australian Securities and Investments Commission (ASIC) stated that it's review of 12 initial public offerings (10 of which were small and mid-sized companies), found incredibly poor due diligence processes. These companies often seem to lack documentation to back up the claims they make in their prospectus. This is a very worrying sign for investors and tells us of the immediate need to promote better due diligence practices.

    With the surge in an ever growing landscape of corporate litigation, shareholder activism and a number of disclosure obligations, smaller and mid-sized companies are now seeking the smartest route forward in their growth strategies.  In such situations, companies cannot afford to make a mistake in acquisitions and assume unanticipated liabilities. At the same time, companies do not want to overburden the targeted acquisitions with diligence requests that might disrupt the deal.  Hence, to succeed amidst these competitive conditions a professional process of critical analysis is vital for positive acquisitions or partnerships. It prepares buyers as well as investment partners and lenders with a clear understanding of the story. This needs to be executed by a due diligence process that is planned and implemented in a systematic manner so that there is no space for an unnecessary intrusion.

    The notion of due diligence is often misconstrued to apply solely to mega-deals between large companies. Small and mid-sized companies generally have less sophisticated financial reporting, which could be a prerequisite when a company is trying to secure sources of funding for a transaction. Clearly, due diligence is a necessity in all matters.

    In order to clarify the aforementioned misconception, it is important to define the term. Due diligence is a program of critical analysis that organizations undertake prior to making business decisions in areas, such as corporate mergers and acquisitions, or major product purchases and sales. This process analyzes an organization's previous financial performance records and other necessary reports that help provide business owners and managers with authentic background information on the planned business deal. This, in turn, helps them make cognizant decisions on whether they must carry on.

    Types of Due Diligence

    Commencing the process of due diligence appropriately is of paramount importance. Appointing skilled members to the team is, hence, critical to ensure the information gathered is understood and evaluated precisely. The identification of these team members takes time and money. Buyers must keep an open mind in order to not misjudge the risks and liabilities involved in the transaction.

    After the due diligence investigation has been completed, there are two important steps that must be followed. The first is to create a detailed written report of the investigation conducted. The results obtained must be analyzed thoroughly. This will be important for both parties to develop a plan incorporating the information into the transaction agreement. The second step is as important as the first one but is often disregarded. This step deals with analyzing the information and determining any impacts on the proposed transaction. One must be cautious while dealing with such circumstances. For these purposes, an action plan must be developed to manage the information disclosed. If any buyer determines that information disclosed by the seller is not substantial, he may be precluded from a subsequent claim for recovery based on those liabilities.

    There are two main due diligence processes that need to be considered by organizations: post-closing transactional due diligence and ongoing enterprise due diligence. An organization's post-closing transactional due diligence is designed to check whether key assumptions used to rationalize the transaction are being comprehended. If they are not, the management can be informed and steps for redemption can be taken as soon as possible. It also makes sure that the target company is being integrated into the organization competently.

    Several factors lead to discontent in an acquisition and one of the major factors is the lack of due diligence. In recent years the importance of ongoing due diligence has escalated to a new level by new legislations such as the Sarbanes-Oxley Act of 2002. Ongoing enterprise due diligence is mainly focused on to meet the needs of an organization. It must be viewed as a dynamic process that changes depending on the circumstance of the organization.  An organization's ongoing enterprise due diligence must be structured in such a way that it ensures the organization avoids redundant losses and expenses. The organization's governing body, including the board of directors, trustees or governors must be able to exhibit that it is involved in effective oversight and that job-and-bonus- threatening hostile events are actively being avoided. Ongoing monitoring of the organization's operations and plans is very important while dealing with customers and suppliers.

    Importance of Due Diligence

    This process is crucial to the ongoing success of an organization. This also makes sure activities within the organization are all in compliance with the corresponding law. The due diligence team should keep in mind that apart from taking necessary steps in helping the organization, it must also take steps to keep up with the current trends in new legislation and take proactive action to work on recommendations.

    Hence, organizations that are planning an acquisition or merger should plan to assign sufficient time and resources to discover potential problems with the seller. A failure in reviewing the documents carefully might result in a clash of agreements between the buyers and the sellers. Further, if any action of fraud is discovered after the sale is completed the buyer might be prohibited from bringing an action to court.

    If a serious problem has arisen in an organization, the senior officials are usually the ones who suffer the repercussions. Due-diligence, however, could have furrowed out the problem and the individuals involved could have been terminated. For many senior officials meeting the financial goals is the most important test. It could be very exasperating to motivate the junior workers to achieve high performance and yet suffer due to unexpected liabilities that could have been avoided by due diligence.

    Even after the due diligence processes have been conducted, in order to make sure that none of the provided financial information changes negatively and affects the ongoing relationships of a transaction, Investors, and business partners have to initiate constant monitoring to ensure everything is functioning in order.

    Monitoring is also a useful way for investors and business partners to stay conversant of the current status of litigation or negative events established during the course of initial due diligence processes. If an organization is found to be involved in litigation matters, investors and business partners should consider monitoring these issues until they are resolved. This monitoring can be useful in determining any financial responsibility ordered to be paid by the organization. This is also a method to determine whether the decision-makers of an organization remain the same as when post-transactional enterprise due diligence process was being conducted.  

    Conclusion

    In conclusion, in the midst of the current economic crisis, increasing regulatory and media scrutiny, post-closing transactional and operative ongoing due diligence processes remain as valuable tools to ensure that business transactions, relationships, or investments are not jeopardized. These are not only in the best interest of the organizations as a whole but, also in the rational self-interest of senior management. Both these processes require effort and operational discipline to plan and implement. Monitoring these processes also provides an insight and indications of the current standing of a potential business partner. This up-to-date insight attained through monitoring provides the investors and business partners with the knowledge they need to make decisions that will help in the growth of the business and minimize the potential risks.

    ]]>
    Sun, 08 Jan 2017 14:00:00 GMT
    <![CDATA[Delay Penalty in Construction Contracts]]> Delay Penalty in Construction Contracts

    "No construction project is risk-free. Risk can be managed, minimized, shared, transferred or accepted. It cannot be ignored"

    -Michael Latham

    Scope and usage of back-to-back contracts

    Back-to-back contracts are becoming an increasingly common feature of construction projects. Construction projects typically involve the collaboration of three parties at different levels: employer, main contractor and subcontractor. The employer prefers to enter into only one contract with a single party (the main contractor) which will act as a single point of responsibility regarding the project. However, in order to complete the project effectively and on time, the main contractor hires a number of subcontractors to perform specific tasks as part of the overall project. Subcontracting is permissible under the UAE Civil Code [i] unless the contract between the employer and the contractor prohibits so [ii]. Accordingly, the main contractor concludes separate contracts with subcontractors who carry out the work according to the specifications indicated in the main contract.

    Although there is no direct contractual link between the employer and the subcontractor, the main contractor, having assumed responsibility for all aspects of the project vis-à-vis the employer, will pass on its obligations and liabilities to its subcontractors through a contractual arrangement known as a back-to-back agreement. Note that even though the main contractor may have entrusted the performance of the whole or part of the work to a subcontractor, he remains responsible towards the employer for the whole of the work [iii]. This responsibility is reinforced by clause 4.4 of Fédération Internationale des Ingénieurs-Conseils (the FIDIC) Red book 1999 which stipulates that "the Contractor shall be responsible for the acts or defaults of any Subcontractor, his agents or employees as if they were the acts or defaults of the Contractor".

    So what are back-to-back agreements? Back-to-back agreements refer to the duplication of terms and conditions in a contract at different levels of the project.

    While back-to-back agreements are said to be very convenient and time efficient, they can create complex issues at a later stage as a result of poor drafting. Poorly drafted contracts can be difficult to interpret and can give rise to time-consuming, expensive disputes [iv]. This article seeks to discuss the different approaches that one can adopt while drafting a back-to-back agreement and will throw light upon some clauses which require careful consideration and appropriate drafting.

    Structuring Back-to-Back Contracts

    Drafting a back-to-back contract is not an easy task. It requires careful consideration as to which specific terms shall be passed down the chain as part of this arrangement. There are two ways of structuring a back-to-back contract:

    Incorporation by Reference  

    Incorporating particular terms of the main contract by reference and expressly excluding or varying other terms (e.g. those relating to price). In other words, the main contractor simply mentions in the subcontract that the terms of the main contract are applicable to him and the subcontractor. However, in some jurisdictions, simple references are not recognized by courts. In a Scottish case of Watson Building Services Ltd v Harrison, the court refused to apply a condition laid out by the main contractor for making simple references to the terms of the main contract clauses.

    Although the approach incorporation by reference might seem very convenient to the parties as it saves time and is cost-effective, all that glitter is not gold. Such an approach can result in ambiguity and limit the main contractor's attempts to pass down risks to the subcontractor. For instance, a provision stating that "all references in the main contract to the 'Employer' and 'Main Contractor' are to be read in the subcontract as being references to the 'Main Contractor' and 'Subcontractor' respectively", may not be appropriate for every obligation. The clause is unclear as to what terms of the main contract which have or have not been incorporated in the subcontract. This could result in rendering an essential term of the contract either ineffective or subject to an interpretation that was never intended by the parties.

    In the above Scottish case, the subcontract provided that "this sub-contract is placed with your subject by and large to the same terms and conditions as the main contract". The respective judge held that the wording "'by and large' is anybody's guess and anybody's guess is likely to be wrong and it is not for me to guess which clauses of the main contract are to be 'by and large' incorporated [in the subcontract]". Accordingly, such provisions may not achieve the intended purposes of a back to back agreement.  

    Adopting this approach without enough care and caution can create greater problems than originally thought. The drafters should be very careful, as it can be very complicated to identify every single clause in the main contract that is relevant for the subcontract. This eventually calls for cross-referencing between the main contract and subcontract. Similarly, where there are long and detailed main contract specifications, it can be very complicated for the subcontractors to separate the relevant clauses from the irrelevant ones. The subcontractors can be subject to risk by taking on matters that are inappropriate given the size and scope of their particular subcontract.

    Hence, it is very important that the clauses to be adopted in the subcontract from the main contract are clear in demonstrating that the parties meant to incorporate the particular clause/(s). An example can be "the following [clauses of the main contract] shall be deemed to form and be read and construed as part of the subcontract". Further, these issues can also be managed to a certain extent by drafting a stand-alone contract discussed below.

    Stand-alone contracts

    A stand-alone contract is achieved by drafting independent terms specifically tailored for the subcontract. The benefit of this approach is that while executing subcontracts the parties need not cross-refer the main contracts for every clause and clarification. They only need to adhere to the provisions of the main contract defining the relationships of actual parties to the project.

    On the other hand, drafting a standalone agreement is not an easier task. Considerable care should be taken while drafting so that only the correct terms are passed on to the subcontract and they shall be phrased accordingly. Drafters shall also make sure that the provisions especially relating to timings, payment terms, exclusion of liabilities on subcontractors, termination, and compensation are properly coordinated between the contracts at different levels.

    Common Drafting Issues

    Irrespective of the type of drafting method that drafters opt for, there are several issues that require our attention:-

    Terms of Payment

    Care needs to be taken when drafting a general back-to-back clause with respect to payment terms. Consider a situation where a back-to-back provision provides terms of payment as mentioned in the main contract. Now, that can be read as Pay when paid and/or Pay if paid. In many jurisdictions, such as England and Wales, conditional payment provisions are not enforceable in construction contracts [v].

    In our view, it is unfair for a subcontractor to not get paid for completed work due to the main contractor not being paid by the original employer. In the UAE, conditional payment clauses are valid and enforceable, whenever there are such agreements between the parties. However, in many UAE court judgments, it is provided that the main contractor shall be responsible for the act of the subcontractor; and that the subcontractor shall be paid by the main contractor once he finishes his work. This is irrespective of whether the main contractor has finished his work or not, or received his payment from the employer or not.

    In the Court of Cassation Case Number 281/95, the subcontractor had finished his work and the contract stated that "any payment to the subcontractor would only be due and payable at the time that the payment is received by the main contractor from its client". The Dubai Court of Cassation held that "the sub-contractor will only be entitled to a proportional payment during the performance period from any payment received by the main contractor from its client, the same does not apply when a sub-contractor has completed all his work and delivered the project to the main contractor. A sub-contractor has no obligation to wait for payment until such time as the main contractor has been paid".

    Moreover, subcontractors generally do not wish to get into such clauses, as they expect payment as soon as they have completed the work as per the subcontract. It is also not advisable for subcontractors to accept back-to-back payment terms because they contain a high risk of the subcontractor not being paid. Very often main contractors are not paid by the employer. Sometimes employers face financial issues leading lack of payment to the main contractor. A subcontractor should, therefore, attempt to negotiate the removal of back-to-back payment terms under a proposed agreement. If this is not possible, the subcontractor should negotiate a modification of such back-to-back payment terms or provide for some exceptions. For instance, a subcontractor could accept back-to-back payment terms with the following exceptions:

    i.              When the main contractor breaches its obligations towards the employer and the subcontractor had no association with the breach;

    ii.          Where the employer was refusing payment to the main contractor for no apparent reason, such as if there were no legitimate force majeure events preventing the employer from making payment to the main contractor

    Contractual deadlines

    It is essential to make sure all deadlines in subcontracts are coordinated with deadlines of the main contract. This may include, but is not limited to, the material and shop drawings submittal dates, claims notification periods, completion dates, notices, and delivery. Clause 20.1 of FIDIC provides that a contractor must give notice within 28 days of an event if he considers himself entitled for extra cost or money.

    The drafters should ensure that the deadlines in the subcontract are shorter in duration than in the main contract. The subcontractor must, in turn, allow his subcontractors (if any) an even shorter period. This is to allow the main contractor time for inspection and corrections before the original deadline reaches under the main contract.

    Also, the provisions of notice of default will require a thorough review. Gaps in the claims procedures across the two contracts are risky to main contractors. This is because in main contracts the main contractor's right to claim in full against the employer will be subject to complying with the main contract notice requirements. Those notice requirements should be adequately reflected in the subcontract.

    Termination

    The termination of the main contract for any reason shall terminate the subcontract as well. The drafters shall clearly provide that in the event of a suspension or termination of the main contract, the subcontracted work will be suspended or terminated similarly.

    Clause 15.5 of FIDIC introduces termination by employer for convenience, which enables the employer to terminate the main contractor agreement at any time. If the subcontract does not incorporate such a clause, the main contractor will find himself liable to the subcontractor. Similarly, the subcontract shall provide that "in the event of termination, the subcontractor should have no claim against the main contractor except where the breach on the part of the main contractor gave rise to the suspension or termination". However, any such termination should be performed in good faith as per Article 246 of the UAE Civil Code, i.e. without prejudicing the rights and entitlements of the subcontractor. The drafters shall provide, in particular, that "subcontractors shall be entitled to certain compensation for loss and damages if the termination of the main contract came as a direct result of the main contractor".  

    In a back-to-back arrangement, any dispute arising between the employer and the main contractor is consequently reflected in the relationship between the main contractor and subcontractor and vice versa. Depending on the nature of the subcontract, claims that usually go up and down the chain relate to defects, performance, failures, variations, and delays.

    In all cases, the main contractor would like to make sure that he is not exposed to a liability regarding matters which are outside of his control, which, in turn, cannot be passed on to the subcontractor. The major concern for the main contractor will be to ensure that he is not subject to different judgments by different tribunals constituted under two different contracts with the employer and subcontractor at various levels in a project.

    To avoid this, drafters should make sure to incorporate such terms in the subcontract like: "the parties agree to cooperate with each other to resolve the main contract dispute first; and that the subcontractor shall stay the dispute with the main contractor under the subcontract until the main contract dispute is resolved". Such a provision may help in better dispute resolution.

    Furthermore, dispute resolution terms cannot be incorporated by reference to the main contract conditions [vi]. The arbitration clause shall be in writing [vii] and cannot be back-to-back.

    Conclusion

    To conclude, back-to-back contracts can be effective in construction projects, provided they are handled and drafted with care. It is important to be aware of the risks associated with the use of this technique. There is no one-stop shop solution for various drawbacks associated with back-to-back arrangements. However, whatever approach to drafting a back-to-back contract is taken, the parties should ensure that the subcontract is properly drafted. Drafters should, in turn, make sure that each term incorporated into the subcontract by way of back-to-back arrangement has the result intended by the parties. In any case prices, deadlines, termination and dispute resolution must be agreed separately for each case, and drafters should pay special attention to circumstances related to these issues.


    i. All references to articles are references to the UAE Federal Law No.5 of 1985 (the Civil Code), unless provided otherwise. ii. Article 890 (1), UAE Civil Code iii. Article 890 (2), UAE Civil Code iv. Bringtin Engineering Ltd. v Cheerise Asia Ltd. v.  Section 113 of the UK Housing Grants, Construction and Regeneration Act 1996 vi.  Roche Products Ltd v Freeman Process System Ltd vii. Article 203 of the UAE Civil Procedure Code  

     

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    Sun, 08 Jan 2017 12:00:00 GMT
    <![CDATA[Keys to your Indian Home]]> Keys to your Indian Home

    'The best investment on earth is earth'

      Louis Glickman

    By now we all understand the aftermath of the recession, its effect on the economy, banks and financial institutions besides individuals and society at large. Speaking of a comparative jurisdictional approach, the effect of aftermath may be same on macro levels but what happens on micro-level can only be understood by being an active participant or perhaps by way of research. While the United States was grappling with foreclosures where filing spiked by more than 81% in the year 2008, the weakening economy in Europe and Japan affected Asian countries including the likes of Singapore and Hong Kong. The story albeit was different when it came to India. Economic growth in India during 2008 stood at 6.7% and industrial production was growing. By the second quarter of 2009, Indian economy grew by almost 8%. While these factors contributed to a more stable economy, the author humbly believes that demand supply inequity and the dire need for development can also have an overriding effect.

    Keeping politics, red tapism and the likes aside, one aspect of real property that clearly requires no debate is the never ending appetite for housing and commercial developments. Now, bringing politics, red tapism and the likes in – the equilibrium between demand and supply of real estate could only match if real property regulations served best interests of buyers and developers, paved way for transparency and had there been effective norms, mechanisms and controls to curb delays, defaults, and breaches.

    Let's also not forget that several middle and higher middle class investors from within India had already found their dream homes in Dubai, Singapore and other jurisdictions. These investors were now aware of the legal system, the ease with which property could be purchased, maintained and sold and above all – the peace of mind one has when dealing in real estate transactions abroad. Bearing this in mind, the Government of India decided to take a step forward in protecting rights and interests of real estate investors in India. Let's discuss an analyze the developments in greater detail..

    Ascendancy

    The real estate sector in India was formerly governed by the Real Estate Act of 2013 (the Old Act). However, the Old Act proved to be a thorny rose due to the surfeit delay in completing real estate projects and the bare regulation of the industry. Further, the Old Act had not provided for substantial provisions that would regard the interests of the purchasers. Hence, the Indian residents were a dilemma due to the insufficiency of regulation in the dying real estate industry. Consecutively, the Indian Parliament recognized the need of a stringent legislation with a view to elevate the accountability and liability of the real estate promoters.

    However, the Real Estate (Regulation and Development) Act, 2016 of India (the Act) is anticipated to balloon the investments in the industry with the establishment of the Real Estate Regulatory Authority (the Authority). Section 3 (1) of the Act has provided that the Authority is a special forum through which the real estate promoters would be required to register their projects before advertising, offering or selling the apartments or units in the same. Further, the Act has stated that each phase of a real estate project would be considered as a standalone project. This contemplates that each phase of the project would be required to be registered separately. Further, the Act does not only govern the real estate projects which are yet to commence, but also the ongoing real estate projects. The promoters of ongoing projects are mandated to register their projects with the Authority within three (3) months from the date of commencement of the Act. Further, the Act has mandated the promoters to publicly disclose information regarding themselves and their projects. They also have to furnish the Authority with a timeline of the different phases of construction of the property along with an affidavit stating their legal title to the same. This degree of regulation by the Authority would facilitate in the timely completion of the project. Further, the Authority has to accept or reject the application for registration of a project within a period of thirty (30) days. However, Section 7 (1) of the Act has conferred them with the power to revoke a granted registration suo moto or on the receipt of a complaint, if the promoter has i) defaulted any provision of the Act; or ii) violated any condition of the granted registration; or iii) is involved in any kind of malpractice.

    However, the Act has excluded certain types of properties from the ambit of the Authority. The promoters of the following properties do not have to register with the Authority:

           i.         properties which does not exceed a total area of 500 square meters or eight apartments or units;

         ii.          properties in which the completion certificate has been obtained prior to the enforcement of the Act; and

        iii.          properties which are being renovated and would not be advertised or offered for sale.

    Further, the Act has also mandated that the advertisements and the prospectuses which are published by the promoters should mention the website of the Authority where all the details regarding the project are mentioned. The real estate promoter would be liable to compensate a purchaser in the event that the latter sustains damages due to false information which had been furnished by the promoter. Further, the promoter is also restricted from transferring the majority of his stake in the project to any third party without the written consent from the Authority and two-thirds of the allotted purchasers.

    The Act has instituted a Real Estate Appellate Tribunal (the Tribunal) with the view to ensure that the Authority does not arbitrarily pass any implausible decisions on the parties. The Tribunal would succor in the expeditious dispute redressal of aggrieved parties in a real estate conflict. Section 43 (5) of the Act has conferred the parties with the right to institute an appeal before the Tribunal if they are discontented with a direction or decision of the Authority. However, the appeal has to be filed within sixty (60) days from the date of receipt of the Authority's order.

    Alignment with International Standards

    The Act has also endeavored to minimize the gratuitous delay in completion of projects due to irregular finances by mandating the institution of an escrow account by the promoters. The promoters are required to deposit seventy percent (70%) of the amount paid by the purchasers into a separate account in a scheduled bank. The funds which are deposited in this account could be withdrawn by the promoters only for the purpose of covering the costs of the project. However, the promoters would be entitled to withdraw the funds in proportion to the completion of the project after it has been certified by an engineer, architect and chartered accountant. This implies that the promoters are barred from withdrawing the funds for any other purpose in order to ensure that completion of the project is not delayed due to the insufficiency of funds.

    Further, the Act has provided for standardized terms such as carpet area. Section 2 (k) of the Act has defined carpet area as the net usable floor area of an apartment excluding the area covered by the external walls, service shafts and other common areas. This would enable a purchaser to buy an apartment after perceiving the exact usable area that he would acquire.

    Retribution

    The parliament intends to administer and implement the Act by imposing austere penalties on the parties who default any of the provisions of the same. Section 59 of the Act has inflicted the promoters who does not register their projects with the Authority with a fine of up to ten percent (10%) of the estimated costs of the project. Consecutively, a promoter who does not comply with the orders or directions of the Authority would be punishable with imprisonment up to three (3) years and fine up to ten percent (10%) of the estimated cost of the project or both. Further, promoters who provide false information to the Authority or contravenes other provisions of the Act would be subjected to a fine of up to five percent (5%) of the estimated cost of the project.

    The Act has provided for stringent retribution for the parties who do not adhere to the provisions of the same. Purchasers of a property would be subjected to a fine of up to five percent (5%) of the cost of the apartment in an event that they have failed to comply with the orders or directions of the Authority. Further, Section 68 of the Act has provided that the purchasers who fail to comply with the orders of the Tribunal would be punishable with imprisonment up to one (1) year and or a daily fine which may cumulate up to ten percent (10%) of the cost of the unit or apartment.

    Conclusion

    The cost of the land and properties is a vital factor which supplements the economic growth of a nation. The Indian lawmakers have passed the Act in order to align the domestic industry regulations with the international real estate standards. Ergo, the Act has explicitly laid down a mechanism with the view to facilitate and regulate the transactions in the real estate industry. Therefore, this legislation has provided substantial consolation to the investors as their rights have been reinforced.

    ]]>
    Sat, 07 Jan 2017 00:00:00 GMT
    <![CDATA[Who is Liable to Pay when Circumstances for Construction Change?]]> Who is Liable to Pay when Circumstances for Construction Change?

    Construction has been one of the most dynamic industrial sectors in the Middle East due to the increase in need of palatial residential and office spaces that arise from the surfeit of expatriates that flock into the region every year. Therefore, construction contractors and building owners often find it necessary to support their colossal investments in the business with exhaustive and scrupulous contracts in order to eliminate any future uncertainties. However, parties frequently fail to comprehend the legal complications that are involved in these contracts due to the undeniable need to foresee the future conditions of the construction sites. Some say the best things in life happen unexpectedly, but what happens in peculiar cases where a construction site contract does not turn out to be entirely static? No party involved could have readily anticipated such a pleasant surprise!

    It doesn't take a wise man to fathom that the desert locality of the UAE is subject to a huge international spotlight prevailing from construction specialists participating in mega-development projects throughout the country. It remains imperative for international practitioners to fully grasp the geotechnical problems and soil conditions of this region, which enables them to anticipate any unforeseen features of construction techniques by evaluating adverse physical conditions which may cause an imposition in the implementation of their construction plans.

    One may argue that the peculiarity of a construction contract in the UAE, at least to some extent, is that site conditions are not entirely static. Since site conditions may alternate, one might wonder about the status of the mutual obligations of the parties within the contract. This is where the unforeseen physical conditions clause comes into play and forms an imperative standard provision apparent in construction contracts in several mature jurisdictions.  Since unforeseen physical conditions between two parties may result in steaming contested and exorbitant disputes, the manner in which the risk of encountering physical conditions is allocated serves as a vital step before the signing or tender of a contract.  Under the UAE law, construction contracts are governed by the Commercial Transactions Law [i], Commercial Customs[ii], and the Civil Transactions Law[iii] (the Civil Code) – specifically provisions relating to the so-called Muqawala contracts.  The notion of unforeseen physical changes under UAE contracts should thus be incorporated as part of the provisions of the UAE Civil Code that deals with construction works.

     

    Putting the contractor to the test

    Most standard forms of construction contracts contain a site investigation clause, which entails the experienced contractor to exercise due diligence in noticing sensibly foreseeable physical conditions and disclaiming any warranty about the unforeseen physical conditions encountered at the site. Unforeseen physical conditions normally arise in two situations:

  • Type I differing site condition - referred to as a prerequisite that materially differs from the prerequisites specified in the information about the job provided.
  •  Type II differing site condition –referred to as an unforeseen or unusual condition that materially differs from what is usually and normally encountered on the specific type of work in the particular locality.  
  • The Dubai Municipality Conditions of Contract for Works of Civil Engineering Construction (the DMCC) places an imperative stance on the concept of foreseeability of physical conditions, and whether they were of such a nature that they could have been readily anticipated. Closely linked to the notion of foreseeability is the assessment of site information which can be derived through an examination of relevant documents and physical investigations as per the standard conditions.

    Further, the DMCC has conferred the contractor with the duty to conduct a reasonable inspection of the site under the stipulated constraints of costs and time. Reasonableness in this context is envisaged by determining what a rational or well-skilled contractor in the same field of work would be able to discover under the given circumstances. However, the owner does not have any responsibility to share any information regarding the conditions of the site.

    An Owner's Claim

    Generally, the owner does not prefer the contractor bearing all of the risks of unforeseen physical conditions since this might invite the opportunity for the contractor to inflate his bid or include unforeseen events in his price to account for the probability of physical conditions that may not actually occur.  The case, however, may arise if the contractor alleges that he was forced to, for instance, excavate addition rock due to unforeseen ground conditions.  

    Clause 11.1 of the DMCC provides that the contractor shall be deemed to have inspected and examined the site and its surroundings and to have satisfied himself as to the nature of, amongst other things, the subsurface conditions. This clause further provides that the contractor would be deemed to have obtained all necessary information as to all circumstances that may affect his tender. Therefore, the owner cannot be held liable for the contractor's failure to obtain the information necessary to correctly calculate the applicable rates since the contract places the burden of investigation and pricing on the claimants. However, the contractor is relieved from bearing the burden of the risk, when the risk:- 

     i.          arises due to the fault or responsibility of the owner, in which case the "prevention principle" will usually inhibit the owner from insisting on adhering to a time or budget that he himself has disrupted; or

     

    ii.          was not anticipated by either party (such as force majeure or imprevision)

    An Act of God

    Article 273 of the UAE Civil Code provides that in contracts which bind both parties if force majeure were to supervene, allocating the performance of the contract impossible, the corresponding obligation would cease and the contract would automatically be canceled. Moreover, in the case of partial impossibility, the impossible aspect of the contract would be extinguished. The same is applicable for the case of temporary impossibility in continuing contracts where, in both cases, it shall be permissible for the obligor to cancel the contract provided that it is done so in the light of the obligee's attention.  In this regard, the Dubai Court of Cassation examined the impact of the force majeure event on the obligations of the parties and held that the event must be of such a nature that its consequences are incapable of being prevented, thus rendering performance of the obligation impossible in its entirety. The Court of Cassation also declared that the party seeking the benefit of force majeure doctrine should not have contributed to its occurrence. [iv]

    The concept of imprevision has been recognized under Article 249 of the UAE Civil Code as an emergency circumstance. Imprevision is based on the notion of rebus sic standibus, which limits the sanctity of a contract (pacta sunt servanda) when there is a change of circumstances. It provides that if exceptional circumstances of a public unforeseen nature occur as a result of which performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor, it would be permissible for the judge to reduce the oppressive obligation to a legitimate level if justice so requires. Any agreement to the contrary will be rendered void.

    The Dubai Court of Cassation further held that the concept of imprevision applies to any performance in a contract that has not been completed by the time of the occurrence of the supervening event.[v] In another example, the Dubai Court of Cassation held that imprevision is applicable not only to fixed-term contracts but also to any contract in which the related performance has been suspended due to an emergency event. It is left to the discretion of the judge to balance the burdensome obligations to a reasonable extent.[vi]

     

    Usually, in construction contracts, the employer has no duty to provide the contractor with information concerning known or expected site conditions. However, what happens in the case where the owner willingly holds back or conceals information relating to site conditions which differ from those originally stipulated at the time of execution of the contract? The position in the UAE with regard to misrepresentation is addressed under Article 185 of the UAE Civil Code, which defines misrepresentation as when one of the two contracting parties deceive the other through fraudulent means by actions or words resulting in the other consenting to what he would have otherwise not consented to. The UAE legislation construes misrepresentation and gross unfairness conjunctively, rather than separately. The Dubai Court of Cassation reinforced this rule and held that in order to assess gross unfairness, it should emerge as a result of an extreme imbalance between the actual value of the agreement subject and the price paid for it by the buyer.[vii]

    Dusty Announcements

    Each differing site conditions clause requires the contractor to give the owner notice of the claim before

    the condition is disturbed, regardless of whether it is a type 1 or type 2 differing site condition, each differing site conditions clause requires the contractor to give the owner notice of the claim before the condition is disturbed.  That, in turn, enables the owner to determine whether a differing site condition exists and, if so, how to handle such a condition.

    In a standard formatted construction contract, the contractor is required to promptly submit a notice within a specified number of days in the event of unexpected physical conditions which might cause any obstruction in the execution of the work. Ultimately, the discovery of such obstruction is likely to result in a claim for an extension of time and/or additional cost. Failure to do so may prevent the contractor from conducting future claims and may even expose him to a claim for liquidated damages.

    Clause 12.3 of the DMCC provides that the contractor shall specify the exact nature of the physical obstructions of physical conditions encountered in any notice given under Sub-Clause 12.2. The contractor shall also with the notice or as soon as possible thereafter, give:

    i.                 details of the anticipated effects thereof

    ii.                the measures he is taking or proposing to take, and;

    iii.         the extent of the anticipated delay in or interference with the execution of the works.

    With regards to the notice to be given to the contractor, Clause 68.1 further states that all certificates, notices or instructions to be given to the contractor by the employer or the engineer under the terms of the contract shall be sent by post, cable, telex or facsimile transmission or must be left at the contractor's principal place of business or such other address as the contractor shall nominate for the purpose. The contractor shall, within 7 days of the acceptance of his tender by the employer, notify the employer and the engineer of the registered address of his office in Dubai to which he may require notices to be served. Clause 68.2 further highlights the conditions of rendering a notice to employer and engineer and further states that any notice to be given to the employer or to the engineer under the terms of the contract shall be served by delivering the same to the respective addresses nominated for as per the relevant conditions.

    Conclusion

    Most importantly, and as far as possible, the pillar of good faith creates an obligation upon parties to cooperate in achieving a sense of contractual objectives on standards of integrity and honesty in conduct. Article 246 of the Civil Code stated in this regard that a contract must be in a manner consistent with good faith. In addition, it stipulates that the contractor's commitment is not limited to what is stated in the contract, but also includes all other requirements according to the law and custom, and the nature of the act.  The Dubai Court of Cassation confirmed the above and further stipulated that in the case of any delay in execution, the court has the right to determine whether or not the delay would serve as a valid means for termination depending on the facts of the matter. The court may further make use of an expert report in determining the same.[viii] While the success of a differing site conditions claim may greatly rely on specific facts and prevailing circumstances, by carefully stipulating a bid review and site inspection upfront and providing timely notice in compliance with the contract, both parties will be best positioned to successfully navigate the challenging circumstance that may arise in an altered condition. Therefore, construction contractors and owners should always take bay at the shade of the bespoke legal advice provided by a law firm that specializes in the sector in order to eliminate any ambiguity that might arise in regard to construction contracts.


    [i] Federal Law no. 18 of 1993

    [ii] Common Customs Law of the GCC States

    [iii] Federal Law No. (5) of 1985

    [iv] Case 268/2009 -290(215) dated 15 November 2009

    [v] 71 Dubai Court of Cassation 346/2009: 7 February 2010

    [vi] Dubai Court of Cassation Civil 346/2009: 7 February 2010

    [vii] Dubai Court of Cassation petition No. 201/2004–15/01/2005.

    [viii] The Court of Cassation appeal No. 2011/119 -18-09-2011.

     

     

     

    ]]>
    Thu, 05 Jan 2017 00:00:00 GMT
    <![CDATA[Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview (Part II of II)]]> Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview (Part II of II)

    In Part I, we discussed technical aspects pertaining to Pharmaceutical Product Regulations applicable in Dubai and the United Arab Emirates. Part I explored varied areas including regulatory bodies and applicable law, regulation of biological and combination products in Dubai and the UAE, law surrounding registration and compliance by pharmaceutical establishments, regulation applicable to medical devices and diagnostics, pricing, funding and reimbursement process involved within Dubai and UAE's national healthcare system, pricing of medicinal products, insurance obligations to be observed by healthcare providers, pharmaceutical companies, pharmacies, law pertaining to clinical trials, and other key factors. This Part II covers detailed areas covering product liability, parallel importation in Dubai and the UAE, applicability of US Sunshine Act or similar regulation, advertising, sales and marketing of pharmaceutical products, medicines, medical devices, diagnostics besides other key and relevant questions. 

    13.   What commitments and pharmacovigilance obligations apply after a company has obtained marketing authorization?

    Response:

    Healthcare providers are under a duty (overseen by the UAE Ministry of Health (MOH), Health Authority-Abu Dhabi (HAAD) or the Dubai Health Authority (DHA)) to promptly report any suspected adverse reaction from a medical product even if they are not certain that a particular medical product is a cause. 

    An advisory committee made up of representatives from a wide variety of medical disciplines provides expert opinion and recommendations on reported cases, including on: 

    ·     Maintaining quality standards in data collection and assessment procedures.

    ·     Data interpretation.

    ·     Publication of information.

    ·     Follow-up action required. 

    Based on the advisory committee's recommendation, the MOH will decide whether action needs to be taken against the particular entity that manufactured and sold the medicine in the light of the information obtained, by changing product safety information, for instance, or adding a new adverse event, interaction, warning or contraindication notice.

    Are there further conditions concerning how the drug is distributed and accessible to patients?

    Controlled and semi-controlled drugs are distributed to patients only after a prescription from a physician registered and licensed by a health authority in the UAE has been produced by the patients.

    Are foreign marketing authorizations recognized in your jurisdiction? 

    Foreign marketing authorizations are not recognized in the jurisdiction. A supplier or distributor which has been authorized for marketing outside the UAE still has to go through the licensing process even if the marketing entity is a shareholder in a UAE company.

    Alternatively, the foreign company can engage a distributor or agent which is already licensed through the ministry of health.

    Foreign authorizations are strictly prohibited in the healthcare sector in UAE. Therefore, all the entities wishing to sell their medicinal products in UAE must obtain a license from the MOH.

    14.         Parallel Importation in Dubai and/or the UAE

    Are parallel imports of medicinal products into Abu Dhabi, Dubai or within the United Arab Emirates allowed? 

    Response:

    Parallel imports of medicinal products are not allowed into any Emirate and/or the UAE. 

    15. Marketing – US Sunshine Act or similar Legislation Applicability

    What are the restrictions on marketing practices such as gifts, sponsoring, consultancy agreements or incentive schemes for healthcare establishments or individual medical practitioners? Is there any anti-bribery legislation and has it affected the life sciences industry? Are national restrictions intended to apply outside your jurisdiction? Are there any actual or proposed US "Sunshine Act" style registration requirements?

     Response:

    The UAE does not have a dedicated anti-corruption or anti-bribery legislation in place. However, provisions of the UAE Penal Code (Federal Law No. 3 of 1987) and the Federal Human Resources Law (Federal Law No. 11 of 2008) helps in tackling corruption in the country. The UAE Penal Code imposes criminal liability on an individual that offers a gift or the like to a public official. However, the anti-corruption provisions in this legislation apply to non-public official also. These legislations have a very wide ambit and therefore applies to corruption and bribery offenses in the life sciences industry also.

                   Marketing practices are regulated by the:

    • Pharmaceuticals Law 1983.

    • Ministerial Resolution No. 171 of 2011 (2011 Resolution). 

    • Health Insurance Law No. 23 of 2005 (Law No. 23).

    • Federal Law No. 10 of 2208 (Law No. 10).

    • HAAD Circular (DG 16/14): Kickbacks in Medical Laboratory Services (HAAD circular).

    Insurance companies, third party administers and health service providers have to comply with provisions of Law No. 23 and Law No. 10, which prohibit the payment and receipt of commissions, financial incentives or making illegal profits when referring patients for medical tests.

    Measures involving federal laws, local laws and the health policy of each Emirate are helping to curb the unfair practice of paying commissions and the aim is to stop these practices throughout the UAE.

    The GCC countries are signatories to the United Nations Convention against Corruption (UNCAC). Federal Decree No. 8 of 2006 implements UNCAC in the UAE. 

    16.            Sales and Marketing

    What are the restrictions on selling medicinal products? Are there specific regulations for the sale of medicinal products on the internet, by e-mail and by mail order?

     Response:

    The UAE Ministry of Health (MOH), the Health Authority-Abu Dhabi and Dubai Health Authority require that prescription medication is sold in accordance with an appropriate prescription form completed by a qualified and registered medical practitioner or another authorized health professional. 

    Although federal law does not allow for internet-based selling, an applicant can seek prior approval from the MOH and the relevant local regulatory authority to be allowed to sell medicines online.

    What is the scope of this approval and how is it obtained?

    Since the MOH is the primary authority that deals with medicinal and other healthcare related products and its advertising, this approval could enable its applicant to advertise the particular product within the scope of the regulations that are prescribed by MOH from time to time.

    Can pharmacy medicines and prescription only medicines only be sold from premises that are a registered pharmacy, and by a person who is lawfully conducting a retail pharmacy business?

    Pharmacy medicines and medicines given on prescription can only be sold by a registered pharmacy or through a person who is lawfully allowed to conduct the pharmacy business. In accordance with the Article 2 of Pharmacy Law, no person is permitted to practice pharmaceuticals profession without obtaining a pre-hand license from the MOH. Also, an assistant pharmacist is required to obtain a license from the authority in accordance with the Article 3 of the said law. Article 18 of the said law strictly prohibit a person to open a pharmacy without obtaining a license from MOH

    17.            Advertising

    What are the restrictions on advertising medicinal products? 

    Legislation and regulatory authority

    Advertising of medicinal products is governed by the Pharmaceuticals Law 1983 and by regulatory authorities such as the UAE Ministry of Health (MOH), the Health Authority-Abu Dhabi and Dubai Health Authority.

    Publication of printed or broadcast advertising material for any medicine or pharmaceutical preparation must be approved by the Minister of Health or the relevant authority (section 83, Pharmaceuticals Law 1983). 

                    What restrictions apply to advertising medicinal products?

    Regulation 430 of 2007 on Health Advertisement Regulation is the primary piece of legislation in regards to an advertisement in the medical field. Further, Article 83, of Federal Law no. 15 of 1980 on Printed Matters and Publications strictly prohibit the entities from publishing any advertisements regarding medicinal products without the prior approval of MOH

    Article 4 of the abovementioned regulation has stated a few restrictions, in the field of advertisements relating to medicinal products, such as:

    ·                  should not breach country laws and regulations;

    ·                  must not contradict with UAE customs and Islamic traditions;

    ·                  text must not be misleading;.

    ·                  should not cause harm to public decency;

    ·                  not to encourage excessive or unsuitable consumption; and

    ·                  samples should not be presented in advertisements  

    Internet advertising 

    Internet advertising of medicines or pharmaceutical products may not be shown without special permission from the relevant authority. 

    Federal Law No. 15 of 1980 (governing Printed Matters and Publications) deals with advertising standards and penalties to be imposed in case of non-compliance (Sections 86 to 103).

    Penalties include jail sentences of between one and six months and fines of between AED 100 and AED 5,000

    18.          Data Protection

    Do data protection laws impact on pharmaceutical regulation in your jurisdiction?

    Data protection law in the UAE is based on the guidelines of Directive 95/46/EC on data protection (Data Protection Directive) and the UK Data Protection Act 1998. The Dubai International Financial Centre (DIFC) has formulated its own data protection law, DIFC law No.1 of 2007 which is broadly consistent with the Data Protection Directive (which is broadly consistent with the Data Protection Directive.) 

    Under the good practice code, healthcare providers' reporting of data and results of clinical trials are subject to compliance monitoring, through inspection visits and regular audits (see Question 7). 

    The healthcare providers are under an obligation to maintain timely records and documents in order to present to the inspectors at the time of inspections. The data of clinical trials should be maintained from time to time and the same should also be conveyed to the MOH, as and when required.

    The National Pharmacovigilance Program was launched in 2008 in the UAE. HAAD encouraged pharmacovigilance to vide the development of a Unified Prescription Form in order to enhance pharmaceutical care and quash the errors in medical practice.

    19.          Packaging and Labeling

    Outline the regulation of the packaging and labeling of medicinal products.

    Legislation and regulatory authority

    Packaging and labeling of medicinal products are governed by the Pharmaceuticals Law 1983 and overseen by the relevant health authorities (see Question 1, Regulatory authorities).

    Information requirements

    The following information and data must be written in both Arabic and English on leaflets and containers of medicines and other pharmaceutical preparations (Article 67, Pharmaceuticals Law 1983):

    ·        Name of the medicine or pharmaceutical preparation, and the registration number.

    ·        Compounds of the medicine and their amounts.

    ·        Date of expiry.

    ·        Name of the factory producing the medicine or pharmaceutical preparation.

    ·        Directions for use and cautionary warnings.

    20.          Product Liability

    Outline the key regulators and their powers in relation to medicinal product liability.

    The key regulators are listed in Question 1.The Health Minister can recall any medicinal product which is found to pose danger to the public (Article 64, Pharmaceuticals Law 1983). Under Article 64(2), the Minister can:

    ·        Ban the substance from circulation.

    ·        Delete the substance from the Ministry's records if it is registered.

    ·        Order all quantities of the substance to be confiscated and destroyed.

    Are there any mandatory requirements relating to medicinal product safety?

    The entities that deal in the sale and distribution of medicinal products have to maintain distribution records and other records and documents relating to complaint handling. Complaints have to be handled diligently and should also be reported to the authorities as and when required. The registration guidelines that have been issued by the MOH has conferred entities with the obligation to monitor and handle safety issues that could take place. The entities should also have a procedure that states the process in case of a defect or a safety issue. They should also endeavor to ensure that this procedure will allow complainants to easily file complaints in order to conduct effective investigations on the matter.

    Outline the key areas of law applicable to medicinal product liability, including key Legislation and recent case law. 

    Federal Law No. 24 of 2006 deals with Consumer Protection in the UAE. This law aims to protect the interests of the consumers and it addresses two critical issues relating to the supplier of goods:

    ·     Liability to consumers as a result of defects in the nature of the products sold. 

    ·     Obligations relating to labeling requirements, warranties and after sales service, among other things. 

    The law protects consumers against harm caused by a defective commodity, which is defined as an industrial, agricultural, animal or transformational product including the primary elements of materials and internal components of the product. The wide ambit of the provision of this legislation could also bring medicinal products under it. However, this ultimately depends upon the interpretation that would be given by the courts

    A medicinal manufacturer can be criminally liable for causing harm to consumers.

    Who is potentially liable for defective medicinal products? 

    Licensed pharmacists and licensed medical manufacturing units (see Question 8) are potentially liable for defective medicinal products under the various controls set out in the UAE Pharmaceuticals Law 1983.

    Both the suppliers and the distributors are usually placed with product liability. However, the liability of defective medical products falls under the jurisdiction of the MOH. Therefore, the liability of suppliers and distributors of medical products may vary from case to case depending upon the circumstances.

    What defenses are available to product liability claims? Is it possible to limit liability for defective medicinal products? 

    Supplier of a defective product has the inherent responsibility to submit to any regulatory investigation. The supplier is also offered the opportunity to explain his case in order to contend that his product is not defective. The supplier may also recall the products at this stage if he deems it necessary.

    How can a product liability claim be brought?

    As product liability claims can be categorized as torts, the limitation period for bringing a claim is three years from the date on which the victim became aware of the occurrence of the harm and the identity of the other party. (Article 298, Civil Code). 

    Class Actions

    Class actions suits are not permitted under the UAE law. Therefore, when circumstances arise in which multiple causes of action arises against the same party, then multiple suits must be filed separately in the respective courts that have jurisdiction in the matter.

    What remedies are available to the claimant? Are punitive damages allowed for product liability claims?

    Monetary remedies and compensation are available to the claimant. If there is any bodily harm, the liable medicinal products company bears the costs of corrective or medical treatment.

    How are damages calculated? Can a claimant claim for loss of earnings? Are punitive damages awarded?

    Articles 283 to article 302 of Federal Law No. 8 of 1985 on UAE Civil Transactions Law deal with damages that are generally granted to parties who suffer in a civil transaction. However, the damage that was caused should be certain, sustained and directly or occurred by causation. The extent of damages mainly depends upon the loss that is suffered by the party and the contractual obligations between the parties in case of a defect. In certain cases, the underlying contract between the parties may have specified the accurate amount of damages that would be payable in the event of default of the product.

    21.          Are there proposals for reform and when are they likely to come into force? Are there any reforms pending in the area of medicinal product regulation in general, including product liability? For example, in the areas of regulation, reimbursement and access to medical products in the UAE and in clinical research.

    There have been explicit regulations issued by the MOH and other healthcare authorities regarding the industry. However, the government has observed various gray areas in the regulation of medical product and healthcare industry. One of the primary issues is that continue to startle the industry is the lack of coordination between federal and local health institutions. Further, the rapid changes in the healthcare industry made it necessary for the authorities to prescribe regulations from time to time to keep up with the modern day healthcare industry.

    22.          What about evolving procedures and treatments such as gene therapy?

    UAE does not have a separate legislation in order to govern gene therapy and other genetic procedures. However, UAE's bio-genetic sector has been flourishing recently with the formation of Dubai Biotechnology and Research Park (DuBioTech).

    ]]>
    Mon, 02 Jan 2017 00:00:00 GMT
    <![CDATA[Different Strokes for Different Courts]]> Different Strokes for Different Courts

    In January of 2012, Macy's, a renowned retail store, decided to sue Martha Stewart for entering into a contract with a rival retail store J.C. Penney, which they claimed breached their own contract with Martha Stewart for exclusive products in 2006. This led to a bitter war against J.C. Penney and Martha Stewart, leading to a settlement in 2014, and a revival of Macy's claims against J.C. Penney in 2015.

    This is an example of contracts gone sour. In a typical legal scenario, such as the aforementioned example, when a contract is drafted, an essential point of consideration for parties is the eventuality of a breach of contract and a remedy thereof. In layman's terms, determination of monetary sum to be paid by the defaulting party committing breach to the aggrieved party sustaining a loss because of such a breach. The amount of compensation so determined for the breach is termed as liquidated damages.

    Liquidated damages and its implications under different legal systems

    The claim amount as to liquidated damages is determined at the time of preparation of a contract to compensate towards any delay in delivery or completion of a particular service, or where a service fails to meet a certain specified target. It is, however, imperative to understand that the payment of liquidated damages shall be triggered only upon breach of the stipulated contractual obligation upon a party under the contract and the aggrieved party has consequently sustained losses thereof. The main purpose of awarding liquidated damages to an aggrieved party is to make good the losses and restore such party to its economic position it would have been in, had it not been negatively affected by a breach of contract. Consider the situation where a contract provides for payment of liquidated damages by party A to party B in the event the contractual obligation by party A to complete the work assigned to it under the contract within the stipulated timeline is not met.  Therefore, party A will be liable to make payment of the pre-estimated liquidated damages provided for in the contract only upon its breach of obligation whereupon party B has sustained an actual loss.

    Now, there are numerous cases where the actual loss sustained by the aggrieved party will be less than the amount of compensation provided as liquidated damages under the contract. This disparity in amount will not in itself invalidate the contractual provision since the parties cannot be expected to be able to envisage every such scenario and estimate the losses for each. However, at the same time, if, the stipulated compensation as liquidated damages is significantly higher than the amount required to compensate the aggrieved party for its loss, this stipulation may be construed to be a deterrent of breach of performance, added to compel performance of the contract rather than making good the losses incurred on account of such breach. This stipulation may be characterized by the courts as provision for a penalty.

    The problem often faced by parties while finalizing terms of a contract is determining the losses likely to cause in the event of a breach and therefore end up negotiating a ballpark figure commercially viable and acceptable to both parties, which may be higher than the actual loss suffered at the time of the breach. Therefore, in such scenarios, it may be difficult for the courts to distinguish between a penalty and a genuine pre-estimate of loss.

    This article discusses the varied treatment of liquidated damages vis-à-vis penalty amongst different jurisdictions.

    Legal framework under the English Law

    Under English law, the traditional starting point has always been that a liquidated damages clause will not be enforceable where it constitutes a penalty.  English law does not recognize penalty clauses i.e. provisions which are (as objectively interpreted) penal in nature, in the sense that the detriment (such as liquidated damages) imposed by the relevant provisions is disproportionately excessive in comparison with the legitimate interest of the innocent party (such as its monetary loss and, where applicable, any wider legitimate interest) in enforcing those provisions. The aforesaid rule has been set in stone on the basis of the key decision of the House of Lords' in Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd [i]. which stated that in order for a liquidated damages clause to be enforceable, rather than being a penalty, the amount of compensation payable upon breach must be a genuine pre-estimate of the loss the innocent party would suffer in respect of that breach. If the intention of the liquidated damages clause is to threaten the guilty party into performance rather than to compensate the innocent party, it will likely be seen as a penalty. This means that the clause will be enforceable if the sum was considered by the parties at the time of entering into the contract to be a genuine pre-estimate of the loss that might be incurred as a result of the breach in question. The principle ruled in Dunlop Pneumatic Tyre matter has been relied upon in a number of cases since its decision a century ago.

    Another important question was considered in the case of Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [ii], where it was held that as long as the amount of compensation is not extravagant; it does not mean that it has to be very similar in amount to the actual losses. Further, the point in time for the assessment of whether a stipulated figure is a genuine pre-estimate or a penalty is when the contract is entered into, not when the delay occurs.

    In consideration of the above, in situations where a party faces a high amount of liquidated damages imposed upon it under a contract on a delay in completion of a project, it is likely that Such party may challenge the liquidated damages on the ground that the claim amount of liquidated damages constitutes a penalty rather than a genuine pre-estimate of loss and therefore is unenforceable. However, the court in such situations would require the party making such allegations to establish that the essential reason for the inclusion of such penalty clause was to deter the party from breaking the contract, rather than to compensate the innocent party for the breach.  The proportionality of the damages to the losses anticipated to be incurred is a vital element in maintaining a valid liquidated damages claim. 

    It is imperative to note that the traditional position ascribed by Dunlop Pneumatic Tyre Co. Ltd has now changed in terms of the widely publicized UK Supreme Court judgment of Cavendish Square Holdings BV v Tatal El Makdessi. [iii] The basic principle that a penalty is unenforceable remains unchanged. The real question when a contractual provision is challenged as a penalty is whether it is penal and not whether it is a genuine pre-estimate of loss. The fact that a clause is not a genuine pre-estimate of loss does not necessarily mean that it is penal. What this means is that a penalty clause whose purpose is to punish the contract-breaker is likely to be an unenforceable penalty clause, whereas a clause that is intended to deter a breach of contract is less likely to be a penalty clause, even if it does not represent a genuine pre-estimate of loss. It is important to remember both that the principle behind the new rule is intended to deter a breach of contract and also that this means that the rate of liquidated damages does not necessarily have to be representative of any actual financial loss the aggrieved party may have suffered.

    Legal framework under the UAE Laws

    The principle of liquidated damages under the UAE legal framework is provided under article 390 of the Civil Transactions law [iv] (the Civil Code), which states that:

    "1- The contracting parties may fix the amount of compensation in advance by making a provision therefor in the contract or in a subsequent agreement, subject to the provisions of the law.

    2- The court may, on the application of either party, vary such agreement so as to make the compensation equal to the loss and any agreement to the contrary shall be void."

    For the purpose of interpreting the liquidated damages in terms of the aforesaid provision of the Civil Code, the UAE Court held that "delay fine clauses contained in construction contracts are, in substance, no more than an agreed estimate of compensation that would become due in case of the contractor's failure or delay to perform its contractual obligations. According to article 390 of the Civil Code, it is not sufficient -for the agreed compensation to become due - to establish the element of fault alone. In addition, the element of loss which is suffered by the other party should be established. If the contractor succeeds in establishing the absence of loss, the agreed compensation should be repudiated." [v]

    The UAE high courts have taken a similar view in a number of cases which in essence mean that the court has the power to set aside entirely the liquidated damage, in the event of the party suffers no loss from the breach for which liquidated damages were provided. Further, the court may also revise the amount of liquidated damage in order to mirror the actual loss. In both scenarios, the burden of proof is placed squarely on the defaulting party. Similarly, where the employer contends that his actual loss suffered exceeds the liquidated damages, the burden of proof shall be on him to prove the claim. However, in reality, the court may consider the parties' agreement and may be reluctant to vary the liquidated damages clause unless it is evident that the liquidated damages considerably differ from the actual loss. 

    Another important aspect that differentiates the UAE Law from the English Law is that the Arabic term used, mostly by state courts, for 'liquidated damages' can be translated to mean 'delay fines' or 'penalty clause'. This highlights that the nomenclature of the clause is not a matter of determination before the courts for establishing the veracity of liquidated damages; which has so far been the situation under the common law jurisdictions where the penal nature of liquidated damages has been a ground to refuse their enforceability.  Having said that, the term liquidated damages is also commonly used in the United Arab Emirates, given the widespread use of English language in the UAE.

    Furthermore, under the Civil Code, liquidated damages is a pre-agreed assessment of the loss, thus, it concerns the quantification of damages as opposed to the liability for damages. The liability for damages shall be triggered upon the breach of the primary obligation under the contract. Hence, the aggrieved party's obligation to pay liquidated damages is an ancillary obligation, which will arise when the party defaults in its primary obligation.

    Consequently, if a construction contract is terminated, the liquidated damages clause automatically becomes valueless; however, the defaulting party may still be vulnerable towards a claim for unliquidated (general) damages.

    The aforesaid principle is established by the Dubai Court of Cassation, "delay fines contained in contracts are deemed to be a penalty clause which is a secondary obligation correlated to the primary obligation, and it is a forfeit to the breach of the latter. The ineffectiveness of the primary obligation – as a result of the contract termination – leads to the ineffectiveness of the penalty clause. It follows that the court should not take account of the agreed damages stated in the delay fines clause; the judge may award general damages subject to proof of fault and loss according to the general rules." [vi]

    In view of the above, under the UAE legal framework, despite what the parties may have agreed to the contract, the court or even an arbitrator, as the case may be, is entitled to pass an order changing the terms of the contract to ensure that the damages are in fact equal to the loss that has been suffered by the aggrieved parties. 

    Legal framework under the Indian Law

    Although the Indian law is modeled on the English Law and earlier differentiating the penalty and liquidated damages was also based on English Law, the introduction of the word penalty to the provision of liquidated damages within the Indian Contract Act, 1872 (the Indian Contract Act) by way of an amendment in the year 1899 has revised the interpretation of liquidated damages under the Indian Contract Act.

    Sections 73 and 74 of the Indian Contract Act deal with the provision of liquidated damages. Section 73 states "when a contract has been broken, the aggrieved party is entitled to get compensation or any loss or damages which have been inflicted on him/her naturally during the usual course of breach of contract or about which the parties to the contract has prior knowledge when they entered the contract".

    Further, section 74 further states "when a contract has been broken, and if a sum is named in the contract as the amount to be paid for such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." A bare perusal of the aforementioned provision evidences that the Indian Law does not distinguish between liquidated damages and penalty. As discussed hereinabove, before the amendment of 1899, all Indian cases followed the common law perspective, but the amendment broadened the purview of section 74 of the Indian Contract Act.

    Hence, in view of the provisions of the Indian Contract Act and the interpretation of the courts, it is understood that liquidated damages under the Indian legal system are based on the genuine pre-estimate of the loss, whereas a penalty is based on the doctrine of reasonable compensation. Section 73 also lays down the principles for damages pertaining to the difference between the cost and price of the goods and services at the time of the contract and the time when the contract was breached. It is therefore upon the courts in India to determine on the basis of the facts before it, whether the case involves liquidated damages or penalty. Also, since under the Indian Law, there is no difference in relation to liquidated damages and penalty, penalty provisions can also be upheld or imposed in certain situations like delay in completion of the work or delay in supply of goods.

    Conclusion

    In today's economic world where cross-border transactions and multi-jurisdiction contracts are a norm, it is essential to understand the interpretation of legal provisions under the relevant jurisdictions which may affect a contract. On an overall assessment of laws under different jurisdictions, it can be seen that liquidated damages provisions can be a powerful tool to help you assert rights and bring a greater degree of certainty under a contract. The parties, however, have to be careful not to be too aggressive when determining the amount of the damages, as the courts will not enforce such excessive clauses. It is therefore much more important for parties to a contract to have a clear understanding of how the penalty rule works and how to word the relevant clause so as to mitigate the adverse consequences that might arise from accepting the proposed amount of liquidated damages. As a result, in order to avoid any complications, any prudent person seeking to include a liquidated damages provision in a contract may want to keep an explanation of the amount of the liquidated damages and why it represents a reasonable and proportionate protection of a legitimate commercial interest.


    [i] [1915] AC 79

    [ii] [2005] EWHC 281 (TCC)

    [iii] [2015] UKSC 67

    [iv] Federal No. 5 of 1985

    [v] Federal Court, Civil Case 25/24. Order passed on 1 June 2004.

    [vi] Dubai Court of Cassation, case 302/21, order passed on 17 June 2001.

     

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    Sun, 01 Jan 2017 19:00:00 GMT
    <![CDATA[Be Aware, else Beware (Part I of II)]]> Be Aware, else Beware

    (Part I of II)

    'Ignorance of the law excuses no man; not that all men know the law, but because it's an excuse every man will plead, and no man can tell how to refute him'

    -        John Seldon

    The law has provided that an ignorance of a fact would be excused. But can a person be excused for his ignorance of the law? In 1974, a tenant had damaged the wall panels and floor boards of his rented apartment. He thought that he had damaged his own property since he had installed the fittings himself. Evidently, he was ignorant of the fact that the ownership of the fittings had transferred to the owner of the house. However, the British Court of Appeals acquitted the defendant and excused his ignorance of law due to the lack of mens rea or guilty intention in conducting his actions. [i]

    Ignorance and mistake are terms of ancient coinage. However, a precise distinction has to be made in order to determine the mistakes which could be excused by law and which cannot be. Judiciaries around the world have laid down impeccable guidelines and principles regarding the extent of ignorance which could be acknowledged by the law. The ambiguity of the different statutes pertaining to 'ignorance of law' has further extended the plight. However, ignorance is a voluntary misfortune. Further, the term ignorance of law is best known as a component of the maxim ignorance of the law is no excuse, which was derived from ancient Latin maxim ignorantia juris non excusat. This phrase captures an imperative concept about the culpability of a crime as it stems from a time when criminal law was grounded in morality along with a shared understanding of wrongfulness which has been referred to by the law as wrong in their essence. This legal principle holds that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its contents.  The essential public character of a law requires that a legal provision, once properly promulgated, must apply to everyone in the jurisdiction alike,  thus excluding the possibility to justify one's conduct on the grounds that he was simply not aware of the law!

    The Jurisprudence

    Is it necessary for courts to always go back to the ancient Latin periods in order to perceive the existence of modern country and its control over the judiciary arena resulted in the existence of many principles to ensure that authorities will refrain from arbitrarily taking over an individual's rights and emphasizing the fundamental principles of legitimacy and justice. The essence of these principles set out that no act of a person would be considered as a crime unless the law has explicitly forbidden the same and has consecutively prescribed for a penalty. This implies that the law will be the fundamental source which describes the illegal capacity of an act. Federal Law Number 3 of 1987 on the Issuance of the Penal Code (the Penal Code) and Federal Law Number 5 of 1985 on the UAE Civil Code (the Civil Code) has embedded the provisions for 'ignorance of law'. Article 42 of the Penal Code and article 29 of the Civil Code has provided that 'ignorance of law' would not be excused in regard to the criminal and civil offenses respectively. Therefore, a person cannot claim the defense that he did not have any knowledge about the law of the land.

    The wisdom of this principle lies in the fact that the action which constitutes a crime should be known to everyone alike and should be profoundly set out in the law and no punishment may be applied on any doing whatsoever unless there is a text that states that such doing constitutes a crime and raises prescribed penalties. Thus if there is no text stating a prescribed penalty for a particular doing, the judge cannot consider such a doing as a crime even if he is convinced that such and act contradicts the concepts of justice, morals or religion. Moreover, the judge may only impose the penalty which is set out in the law, after taking into consideration the overall mitigating and aggravating circumstances of the case. What is stipulated is that the law should be known to everyone alike so people can be prompted to comply with it and to avoid any actions which may be considered as a crime. Once the above-mentioned provisions are complied with and come into existence, they should be made applicable, without exception to all people alike, regardless of the fact that they did or did not know converse themselves with the relevant provisions. It is thus unacceptable for anyone to claim ignorance of the law or a lack of understanding in a provision or claim, nor claim a misunderstanding of the law, thereby referred to b the term unacceptability of apologizing for 'ignorance of law'

    While some may deny the notion of this principle, it is imperative to note that its consideration falls much in line and in balance with legalities of a society. If people will be excused for their ignorance of law, chaos will prevail everywhere as everyone will be entitled to claim so in defense of their crimes. The above mentioned law therefore does not in any way come in conflict or contradiction to the principle of justice and equality before the law. Legal awareness is a supposed presumption and hence no person is liable to argue an ignorance of the law as a result of his/her personal sickness, illiteracy, or being absent in a country during the formation of the legal ruling.  The questions arise- is this principle applicable on all branches of legal rulings or is it restricted only upon the legislation alone? Are there any room for the acceptance of misunderstandings of this principle and if so what may be applicable? With regard to the scope of applying this principle, there is no dispute that the principle is applied on all legal rules whatever the source of the legal rules may be. Whether it is legislation, religion, tradition or the principles of Islamic Sharia, all principles are applied in fairness regarding whether these rules are imperative, supplementary or explanatory. The dispute however, arose about application of this ruling, on the concept of apologizing for the ignorance of law and the idea on the possibility of annulling a contract as a result of what occurs to one of the contract's party when misunderstanding the law. The supporters of this view thought that the act forms a departure from the principle (prohibiting the apologizing for the ignorance of law) and this apology would be accepted in a case of misunderstanding the law. However, there should exist a clear differentiation between the idea of apologizing for the ignorance of law and the idea of misunderstanding the law in this regard.

    The idea of misunderstanding of the law is different from the idea of the ignorance of the judgment of the law mainly because to undertake it, we should exclude the judgment of the law and put it aside. Therefore if a person claims that is unaware of the judgment of the law, the likely result would be a disposition of the application of the judgment of the law upon him. This is in opposition in the case of misunderstanding the law because if the person misunderstood the law and adhered to this misunderstanding, this does not necessarily imply that he/ she did not adhere to the legal rule in which the misunderstanding occurred and subsequently does not wish it to be implemented upon him. In fact he adheres to the application of the rule in which the mistake occurred and thus the rule remains valid for him despite his ignorance of it. Such is applicable in the case of the heir who sold his share in the estate with the impression that he is inheriting a quarter of the share, when in actual terms it was actually only half. In this case it is considered that the heir misunderstood the law thus allowing him the opportunity to cancel the sale. Therefore, if the seller adheres to cancel the sale based on his misunderstanding of the law, then he adheres to apply the legal rule which he was unaware about and the exclusion of its judgment on him will not be required as in the case regarding the principle of apologizing for the ignorance of law.

    Conclusion

    The maxim which states that ignorance of law is no excuse is generally applied in the criminal cases due to the existence of a criminal intent in the mind of the accused. Every person is presumed to have knowledge about the law of the land. Therefore, the public should ensure that they have an understanding of the various laws in the country in order to conduct their actions without any legal predicaments.

    In order to paint a clearer picture for the reader, Part II of this Article shall further elaborate on the application of the maxim 'ignorance of law is no excuse' and the techniques which have been used by the judiciary in interpreting the same.


     [i] [1974] All Eng. Rep. 632 (CA)

     

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    Sun, 01 Jan 2017 18:00:00 GMT
    <![CDATA[Aircraft Mortgages (Part II of III)]]> Aircraft Mortgages

    (Part II of III)

    "99% of everything done in the world, good or bad, is done to pay a mortgage. Perhaps the world would be a better place if everyone rented."

    Thank You for Smoking (2005) - Nick Naylor (Aaron Eckhart)

    Due to the primarily finance driven world we live in, debt is an inevitability of our economic system. There are several reasons for it, forms of it, and methods to pay it off or capitalize on it. Everything is connected to debt in some form or another. Credit cards are based on the objective of paying off the debt we owe to credit card companies after we're done swiping. Jobs of any kind are accepted to be able to pay off our student loans. Houses are bought on a mortgage basis. Another form of debt or debt repayment is an aircraft mortgage transaction. Perhaps not the most common or well-known form of mortgage, nonetheless, it consists of its own complexities and intricacies when it comes to the legal framework surrounding it.

    In the previous issue of Court Uncourt, we discussed the considerations that aircraft financiers [i] must deliberate upon while structuring an aircraft mortgage transaction, including ownership provisions, security package, choice of law, place of registration and legal implications. In the present issue, we detail the implications of aircraft mortgage within the context of English law.

    The English Mortgage Law

    Considering the application of the principle pacta sunt servanda (latin for agreements must be kept) in English law, the general rule in respect of contracts is that the parties involved are free to choose the law that governs their contract. Accordingly, the proper law of contract would be as per the law stated in their contract. There, however, exists an exception in the validity concerning a transfer of tangible assets. This is governed by lex situs (where the asset is situated at the time of the transfer). How the lex situs rule is applied is manifest in the Blue Sky case. [ii]

    Despite the confusion created by the outcome of the aforementioned Blue Sky case(due to the English high court's decision to consider lex situs while simultaneously refusing to apply renvoi, [iii] English law continues to remain the leading choice of law for governing aircraft financial transactions.

    The implication of the Blue Sky case is that for any English law mortgage to be considered valid, it must be effective under lex situs. For instance, where the lex situs is Dutch domestic law, English law mortgage is considered valid. However, since the English courts would apply Dutch domestic law, they will find English law mortgage invalid as it doesn't meet the requirements of a Dutch law pledge. A pledge is the only proper way to create security over an aircraft under Dutch domestic law. Therefore, we recommend, as we did in our previous issue, that if one wishes for the English law mortgage to be effective and recognized by the English court, the aircraft must either be located in the UK, or in a jurisdiction where the English mortgage law is recognized and effective.

    Registration and Repossession

    A search of the UK Register of aircraft mortgages (held with the UK Civil Authority Aviation (CAA)) must be done before one buys an aircraft, or finances a loan against one. Searches are carried out by the CAA on payment of fees prescribed. The search shows entries where the aircraft in question has been used for a mortgage or loan as a security. The legislation that must be referred to while registering a UK aircraft is named Mortgaging of Aircraft Order 1972.

    To enforce the security over an aircraft registered under English law, it is important to evaluate whether an event of default or termination event has actually occurred. The documentation of a loan agreement or aircraft mortgage states the events constituting the default in the case of insolvency of a borrower. Failure to comply with the terms and circumstances constituting an event of default will entitle financier to call in the aircraft for repossession. Secondly, it is necessary to consider the place of registration. The next step includes notice of default to the defaulter. To take repossession over the aircraft locating the aircraft is important. If the aircraft is within EUROCONTROL (the European Organization for the Safety of Air Navigation) area in Europe, one can find out the location by contacting the Central Flow Management Unit. Some countries such as the United States of America have their own navigational services which are believed to be confined to the country's jurisdiction. If such means are not available to uncover the location of aircraft, services of certain specialized companies providing aviation repossession services can be availed.

    Under the English law, it is not necessary to have a formal repossession procedure. One can carry out a self-help process or obtain a court order. It only becomes necessary to obtain a court order if the borrower is not co-operative. The financier has the option of choosing the preferred repossession location. Whether an operator will agree to fly the aircraft to lender friendly jurisdiction, or as instructed by the financier, depends on what has been agreed to in the tri-partite agreement. The tri-partite agreement should clearly set out the aforementioned requirements. Further, the tri-partite agreement relies on an operating agreement. There must be right of prior notice to the financier by the operator in case of cancellation or termination of operating agreement to give the financier an opportunity to establish an alternative arrangement. Therefore, the contracts between the parties will determine whether self help will suffice or a court order would be needed.

    Self Help Repossession

    The tri-partite agreement requires operator to deliver the aircraft in an agreed condition. When the financier is a bank, he/she usually appoints a receiver under the Law of Property Act to act on behalf of the bank. In this manner, the process can be carried out without court intervention. However, if the borrower has turned insolvent, different proceedings will be applied, such as liquidation and administration. Nevertheless, secured creditors will remain free to enforce their security and retain the proceeds based on priority or a moratorium.

    Court Repossession

    Court intervention (by way of an injunction) can be obtained when there is a risk that the aircraft will be moved out of the English court's jurisdiction, disposed of or a similar act might be committed to prejudice the lender. Under English law, there is no general right to attach an asset such as an aircraft prior to hearing the application for an injunction. An injunction is discretionary remedy by a court and the bank must satisfy the court that it runs the risk of losing adequate remedy by means of damages. An interim injunction freezing the aircraft movement will only be granted by a court if it is part of other proceedings wherein it will be necessary for the bank to issue a claim. The bank will require an undertaking to hold the bank responsible for any damages if the injunction is found unjustified.

    There can also be a pre-judgment court sale if the court is convinced that the sale is vital. The bank is also entitled to claim a writ of fieri facias for enforcement of judgment debt which empowers an officer of court to seize and sell the defaulter's assets necessary to recover the debt amount.

    Conclusion

    The English mortgage law continues to be preferred foreign law mortgage option. However, it is prudent to understand the nuances of the implementation of English law mortgage in any other jurisdictions where the mortgage is sought to be implemented by the financiers. We have discussed in our next newsletter issue the implications of UAE laws and English law mortgage on the implementation of such mortgage in UAE while taking security over the aircraft.

     

     [1] Please note that the term financier in this article will be interchangeably used with mortgagee, pledgee, lender and bank.

    1]The complexity or loophole in the English law was highlighted in Blue Sky One Ltd & ors v Mahan Air and another (the "Blue Sky case"). The Blue Sky case involved lender's - PK Air Finance US Inc.'s (PK)- attempts to repossess two of the six Boeings it had been leasing to Balli Group PLC (international commodity trading group, controlled by three English SPVs). The factual background is as follows:

    One of the aircrafts was owned by an English SPV. It was leased to an Armenian company (Blue Airways LLC) registered with the Armenian Civil Aviation Authority, and then chartered to Mahan Air, an Iranian company. The SPV subsequently mortgaged the aircraft in favor of PK at a time when the aircraft was physically situated in the Netherlands. The English mortgage law was expressly the choice of law of the mortgage. The English SPV and PK sought to repossess the aircraft to recover their debt before the English high court but were unable to do so. The English High Court found that the mortgage was invalid since one of the aircrafts had been located in Netherlands when the relevant transaction was executed. In this case lex situs was applied and the principle of renvoi was rejected. The decision creates confusion as the result is that English court would not use renvoi to apply the Dutch conflicts rule.

    [1]French term "renvoi" means the process by which a court adopts the rules of a foreign jurisdiction with respect to any conflict of laws that arises.

     

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    Sun, 01 Jan 2017 17:00:00 GMT
    <![CDATA[Electronic Registration of Cases- Advantages and Legal Problems]]> Electronic Registration of Cases- Advantages and Legal Problems

    "The Internet is becoming the town square for the global village of tomorrow."

    -Bill Gates

    Introduction

    Dubai has evolved to become the marketing and commercial hub of the Middle Eastern region. A surfeit of investors, traders and tourists flock into the Emirate on a daily or rather an hourly basis. All of Dubai's biggest and most commendable feats have been due to its ability to take calculated risks and introduce the novel, bespoke and contemporary ideas. However, one could believe that disputes and legal matters within the region would eventually increase given the voluminous domestic and cross-border trade, an influx of investors and with the entry of diverse workforce. Therefore, this has simultaneously aided in the elevation of the number of lawsuits in the Emirate.

    To overcome these hurdles resulting from increased law suits the Dubai Courts recently launched an innovative service named Al Salfa which allowed parties to register their cases online and thereby removing the barrier as to physically submitting claims before the court. This is the first program of its kind in the Emirate, and is currently the basis on which cases are currently registered in Dubai. This new program promotes efficiency, speed, and ease, allowing users to register their cases at their convenience. In the first instance, this program was introduced in the year 2010 and was available only to registered law firms and lawyers in Dubai. Soon enough, however, this E-service became available to all clients, enabling them to register all types of cases, orders on petitions, provisional attachments and summary actions electronically. Virtually every matter including real estate disputes, commercial, labor, civil and personal affairs could be instituted under this new online system. Further, the authorities have also permitted orders upon petitions of all kinds, precautionary attachments, and other urgent matters to be instituted electronically.

    The governmental authorities, on the other hand, began to make use of Al Salfa by registering legal delegations, such as delegations in execution or notification. In fact, this service was embraced by the Free Zone Authority in Jebel Ali as well to register all it's labor cases through Al Salfa, thereby saving workers the time and effort it would cost them if they were sent straight to Dubai Courts.

    On their website, the Dubai Courts clarify that the method of online registration, uploading of the statement of claims, and the documents attached thereto shall be reviewed by specialists at the E-services section. The competent authorities, then, would review the details of the case and the papers attached thereto to ensure the validity of the claims and electronically communicate with the suitor to update him on the status of his application.

    Need for Intervention

    As advantageous and easy to use this new service is, legal problems do arise on its application, which we will further explicate in this article. We will review these problems and propose solutions that may be contributed towards the resolving of these problems, hoping that these problems will gather enough attention to lead to registration of cases in all courts, free of any legal problems that may affect the rights of the litigant.

    The positive characteristics of electronic registration of cases via the Al Salfa program are numerous. Cases can be registered at any time and from any place in addition to the smoothness and rapidity of obtaining files and information, saving time, environmentally conscious reduction of paper waste, avoiding overstocked lawsuit files and reducing crowding in court buildings. Furthermore, this service is even available to specialists, judges, executives, bailiffs, secretaries and litigants. In the manual registration of claims, we see problems arising with names of companies that do not actually exist due to its legal form or a change in its name. Electronic registration removes this hindrance as well, as names and addresses are audited in order to establish the actual existence of natural and legal persons before judgment is passed.

    Despite the clear upsides to the usage of this service, the legal problems that arise from the application of this program might affect the validity of claims and procedures, leading to a judgment that doesn't accept a lawsuit or challenge.

    According to the laws stipulated by the Dubai Courts, there is a specific time period during which filing of lawsuits or registration of appeals is permitted and valid. The problem arises when we realize that electronic registration of cases is not technically done on the same day since it is subject to aforementioned reviewing and auditing, which could take months depending on the type of case that is filed.

    The dilemma here is to figure out if the date of electronic submission is to be considered as the date of registration of a case or not.

    Fortunately, however, the Court of Cassation resolved this dilemma by deciding that the date of submission of an electronic application should be taken into consideration [i]. Furthermore, Federal Law No. 10 of 2014 (the Amendment), states in Article 162(1)"The appeal shall be filed by virtue of a memorandum submitted to the Case Management Office at the competent court of appeal. The memorandum shall be immediately registered either in the relevant register or electronically…" Thus, in accordance with the aforementioned law, the date of submission is formally considered the date of filing the appeal, thereby conforming to the time period restrictions on cases, as stipulated by the law.

    In order to file a challenge before the Court of Cassation or Court of Appeals, one must deposit a security with the treasury in order to ensure the validity of the deposit and for orderly compliance.

    Under Article 37, the Law of Civil Procedure, it is stated that [ii]:

    {i.         - The claimant, upon submitting the challenge by appeal in the lawsuits relating to rights, should deposit a security amounted to (AED 1000) in the court treasury.

    {.          - The claimant, upon submitting the challenge by cassation in the lawsuits relating to rights, should deposit a security amounted to (AED 3000) in the court treasury.

    Given that matters were manually registered prior to thelaunch of Al Salfa, there were no problems depositing a security in person. The Court of Cassation has decided in several judgments that in cases where a petition was challenged before the Court of Cassation and where such petition did not carry a proof as tothe payment of fees, such petition would not be accepted as a challenge by the court [iii]. (unless the claimant is not exempted from paying the fee as decided as per the provisions of the law.) However, the aforementioned article 162 of the Amendment doesn't mention the deposit form of security required for an appeal when matters are registered electronically, nor makes any reference as to any such requirement. This legal conundrum, to us, is one of the most concerning contradictions that arise due to the application of the Al Salfa E-service.

    Conclusion

    As we see, the creation of an E-service like Al Salfa has definitely eradicated several cumbersome problems when it comes to registering cases manually and has proven incredibly advantageous to it's users. It is a fascinating and commendable service that does its users a whole lot of good. However, there are some legal complexities that might complicate the usage of this service and encumber it with a sense of powerlessness.

    As a solution, our proposal to a concerned legislator would be the amend the law relevant to the judicial fees of Dubai Court in order to not contradict the Law of Civil Procedures [iv], or perhaps, to cancel the condition of depositing a security upon submitting the statement of appeal. This would be a good way to avoid any doubt regarding the acceptance of appeals that are registered electronically.


    [i] Judgment issued by the Court of Cassation in Dubai on 7/2/2016 in challenge number 709/2015-comemracil.

    [ii] Federal Law no. 11 of 1992

    [iii] Judgment issued by the Court of Cassation Dubai on 15/6/2010 in the challenge No. 144/2010- commercial.

    [iv] supra

     

     

    ]]>
    Sun, 01 Jan 2017 00:00:00 GMT
    <![CDATA[Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview]]>

    Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview

    What are the main legislation and regulatory authorities for pharmaceuticals in your jurisdiction?   Response:   Applicable Legislation

    Federal Law No. 4 of 1983 (Pharmaceuticals Law 1983) governs and applies to:

    ·        Pharmacists.

    ·        Pharmaceutical establishments.

    ·        Import, manufacture, and distribution of pharmaceutical products.

     

    Federal Law No. 14 of 1995 (Counter Measures against Narcotic Drugs and Psychotropic substances) regulates the import of medicines into the UAE.

    Federal Law No. 5 of 1984 deals with regulating the licensing and registration of physicians, pharmacists and other healthcare specialists within both public and private healthcare establishments.

    Federal Laws No. 7 of 1975 and No. 2 of 1996 define the specific requirements for the establishment and licensing of public and private medical laboratories, clinics and hospitals in the UAE.

    Regulatory authorities

    The regulatory authorities for pharmaceuticals in UAE are the:

    ·        UAE Ministry of Health (MOH).

    ·        Health Authority-Abu Dhabi (HAAD).

    ·        Dubai Health Authority (DHA).

    ·        Emirates Health Authority (EHA).

    These authorities monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for drugs.

    The MOH formulates nationwide health policies and regulates the healthcare market in the Northern Emirates. The healthcare system of the country's two largest Emirates, Dubai and Abu Dhabi, are governed by DHA and HAAD respectively.

    There did not exist a separate entity to regulate the healthcare system in the Northern Emirates prior to 2009. Therefore, the healthcare system of these Emirates fell under the ambit of the MOH before the formation of the Emirates Health Authority vide the Federal Law Number 13 of 2009. This institution was primarily organized with the view to facilitate inter-departmental co-operation between the authorities. EHA is based in Sharjah.

    2. Briefly, outline how biologicals and combination products are regulated in your jurisdiction.

    All biological and combination products (therapeutic and diagnostic products that combine drugs, devices, and/or biological products) are heavily regulated by the UAE Ministry of Health (MOH).

    Drug registration

    A drug must be registered by the Ministry of Health before importing the same within the UAE market (Pharmaceuticals Law 1983).

    Pharmacists

    The Pharmaceuticals Law 1983 also prohibits anyone from engaging in the pharmaceutical profession without a valid license. "Pharmaceutical profession" is defined as the preparation, composition, separation, manufacturing, packaging, selling or distribution of any medicine or pharmaceutical preparation for the prevention or cure of illnesses in human beings or animals (Article 1, Pharmaceuticals Law 1983).

    Pharmacists who practice without a valid license or in breach of its conditions face disciplinary measures (Refer Question 8).

    Imprisonment of up to one year and/or a fine may be imposed on anyone submitting false documents or data to gain a license; or otherwise practicing as a pharmacist illegally (Articles 83 and 84, Pharmaceuticals Law 1983).

    Other offence(s) including adulterating or imitating substances attract imprisonment of up to three years and/or fines of up to AED10,000 (Article 86, Pharmaceuticals Law 1983).

    Pharmaceutical establishments

    Pharmacies, medical store(s) and pharmaceuticals factories require registration and a valid license issued by the Ministry of Health (the MOH).

    Only licensed medical stores and pharmacies are permitted to import and distribute pharmaceutical products. Applicants for a pharmacy or a medical store licence must be UAE nationals.

    The Pharmaceuticals law requires any medical company planning to market its products in the UAE to register with the MOH on the recommendation of the Medicine Companies and Pricing Committee. (see Question 9).

    Registration requirements vary based on the types of products being marketed; and are determined by the classification committee of the MOH on the basis of the information submitted by the applicant.

    See Question 8 for compliance powers in relation to all types of pharmaceutical establishments as well as the penalties for non-compliance. 

    3. Briefly, outline how medical devices and diagnostics are regulated in your jurisdiction. Is there any specific regulation of health IT issues and mobile medical applications?   All medical devices and diagnostics need approval from the UAE Ministry of Health (MOH).

    Medical devices

    The Registration Guidelines issued by the MOH govern the registration and regulation of medical devices. The Registration Guidelines are modelled on international standards for rules and regulations, in particular, those issued by the US Food and Drug Administration and contained in the EU Medical Device Directive (Directive 93/42/EEC concerning medical devices).

    Medical device companies intending to export their products into the UAE must appoint a local representative or distributor who has a licensed medical store.

    The Registration Guidelines provide for four different classes of medical device for the purposes of registration, based on risk factors including, for example, how long the device is intended to be used for and how invasive it will be.

    The appointed local representative or distributor must submit a medical device registration application form to the MOH's drug control department along with the prescribed documents, including ,(http://www.cpd-pharma.ae/downloads/4-Medical%20Device/check.pdf) :

    • Regulatory Approval (certificates of regulatory approval and clearance to manufacture, import or export the device from the export country);
    • risk assessment reports;
    • regulatory status of the device in other countries;
    • details of the device including instructions, warnings, and contraindications;
    • labeling information;
    • declaration of conformity to safety standards and other data on safety and clinical studies;
    • manufacturing process; and
    • other miscellaneous requirements

    If the application is approved, a registration number authorising the import and sale of the device is given, which is valid for five years.

    Diagnostics

    Diagnostics services must submit an application to the Health Regulation Department (HRD) for a licence to establish a new diagnostic centre.

    There is currently no specific regulation of health IT issues and mobile medical applications.

    4. Pricing, Funding and Reimbursement - What is the structure of the national healthcare system, and how is it funded?

    The national healthcare system in the UAE is divided into public and private healthcare providers.

    Public healthcare

    Public healthcare services are operated and regulated by government regulatory authorities such as the:

    • Ministry of Health (MOH).
    • Dubai Health Authority.
    • Health Authority Abu Dhabi.
    • Abu Dhabi Health Services Company (SEHA).

    These authorities work in partnership with foreign healthcare organisations for the day to day running of hospitals and clinics throughout the UAE.

    Private healthcare

    Private healthcare providers are non-government run hospitals and clinics providing specialty or multi-speciality healthcare.

    Funding

    A mandatory health insurance model funds the national healthcare system in the UAE.

    The main sources of funding in Abu Dhabi are:

    ·        Employers or sponsors: employers are responsible for insuring their staff. Those who are not in employment must be funded by a sponsor.

    ·        Government: the single-payer health insurance scheme for nationals is funded by the government, administered by the national health insurance company and regulated by the MOH.

    ·        Individuals: individuals pay out-of-pocket payments and insurance premiums.

    5. How are the prices of medicinal products regulated?   Article 64 of the UAE Pharmaceuticals Law 1983 governs the regulation and fixing of prices for drugs in the UAE.    The medicine pricing and companies committee, established under Article 63, is responsible for registering new medicines and regulating the price of medicinal products.    Profit margins of distributors and pharmacies are fixed by law (Ministry Resolution No. 171 for 2011) which means that pharmacies cannot offer discounts to patients above the permitted margins.   6. When is the cost of a medicinal product funded by the state or reimbursed? How is the pharmacist compensated for his dispensing services?    Private healthcare:   The UAE government can reimburse private health providers for treating government-funded or insured patients.    The patient should submit the reimbursement claim within one month of filing of the original claim. The patient and the doctor must fill the claim form along with the policy number, card number, break-up of expenses and bank details. The patient is also under the obligation to provide other information such as - name of the hospital, date of treatment, amounts claimed and the like. Further, the consulting doctor must provide treatment details to the patient. Subsequent to this, the claim will be assessed by the health providers/insurers within a specific period and in addition to a claim report.    Any person meeting the following criteria would be eligible for health and medical claim in the UAE:
    • Persons under 65 years of age;
    • UAE Nationals;
    • UAE Residents;
    • Direct family members who are listed as the dependants;
    • Unmarried children under 18 years of age and children under 23 years of age who are on a student visa.
    Pharmacies and insurance companies come into contract with a discount percentage ranging from 5% to 10%, in order to ensure that the claims for the products are efficiently dealt with.    The increase in the need for better healthcare and high medical costs led to a public-private partnership by the government. In this partnership, the health institutions are publicly and managed by private parties with the view of improving facilities and infrastructure. Governmental funding primarily depends upon the annual budget that is formulated by the government. However, there is no specific legislative provision which provides that a specific amount should be disbursed into the healthcare industry.

     7. What is the process for this? How do the health providers/insurers claim back the costs? Is there a maximum cost which will be reimbursed? Is it limited to citizens or available to any user? Is there an equivalent to the prescription charge?

    In what circumstances will medical products/medicines be reimbursed eg means tests/types of medical conditions? What kinds of products will be paid for/are there any which will not be paid for?   Does funding have legislative authority? How is the annual health budget/medicines cost calculated by the state?    The Ministry of Health administers all the governmental spending in the healthcare sector. This budget is formed and is administered after taking into consideration the growing need for healthcare reforms and technology in the sector.

    Public healthcare

    The cost of a medical product may be funded by the state in public healthcare facilities or on grounds of charity. 

    Process and Procedures followed by Health Providers and Insurers, Maximum Costs that can be Reimbursed, Circumstances where such costs can be reimbursed, Products that will be paid and allowable v/s products that will not be allowed

    The process and procedures followed by health providers/insurers in claiming back the costs are same as that of the private sector. Also, in response to maximum costs that can be reimbursed and persons entitled to it (citizen, residents, etc) is also similar to that of private sector as clarified in Question 7 above.   Additional question: how does the funding of medical products for public health-care differ from that in private healthcare?   Healthcare sector of UAE is segregated into the private and public sector. Public health service providers are regulated and managed by the MOH, DHA, HAAD and SEHA. Whereas on the other hand, private healthcare service providers are those institutions which are not managed by the government.   What are the legal requirements of providers/pharmacies/responsibilities of government?   The International Pharmacy Federation and WHO with a combined effort have published Good Pharmacy Practice guidelines in order to maintain a minimum standard in pharmacies worldwide.The inspectors in the Ministry of Health follow these guidelines while inspecting the pharmacies. 
    • Legal and ethical requirement: pharmacies must adhere to Pharmacies Law 1983 and MOH code of conduct. 
    • Guidelines on Personnel: 
    • Guidelines on Environment and Equipment 
    • Documents Required
    • Dispensary requirements
    8. Please explain standardized coding systems recently adopted by, for example, Dubai and Abu Dhabi to improve the accuracy of the system of reimbursement from payers to providers and insurance payments system. ? Are there similar schemes planned for the other Emirates?   A comparable standardized coding system of reimbursement have been prescribed in UAE by various health care authorities such as DHA and HAAD. Further, DHA has adopted a US-style coding system including ICD 10 (diagnosis), CPT 4 (medical, surgical, diagnosis procedures) and the Healthcare Common Procedure Coding System (HCPCS). Moreover, the other Emirates such as Abu Dhabi, Sharjah and AL Ain, have a similar standardized coding system in place.   9. Clinical Trials: An outline on Regulations Pertaining Clinical Trials   Legislation and regulatory authorities:   The regulatory authorities for clinical trials in UAE are the:   • UAE Ministry of Health (MOH). • Health Authority-Abu Dhabi (HAAD).  • Dubai Health Authority (DHA).   Guidance on the conduct of clinical trials involving human subjects is based on good clinical practice rules formulated by international bodies including the:   • World Health Organization (WHO).  • US Food & Drug Administration (FDA).  • European Agency for the Evaluation of Medicinal Products (EMEA).  • International Conference of Technical Requirements for the Registration of Pharmaceuticals for Human Use (ICH).    All clinical trials carried out in the UAE must follow the ethical principles set down by the Declaration of Helsinki, which aims to protect the individual rights of human subjects.   Authorisations   For MOH areas (including Dubai, Sharjah, Fujairah and Ras AL Khaimah) the study proposal must be submitted to the ethics committee together with the fees.  The application form can be found here   For hospitals covered by the DHA, submission of the study must be made to the medical research committee (MRC) along with the fee by the closing date and decided by the committee at its regular meetings which are held every six weeks or so.    The primary goals of the MRC are to:   • Protect the mental and physical welfare, rights, dignity and safety of participants in research. • Facilitate ethical research through efficient and effective review processes, to promote ethical standards of human research.  • Review research in accordance with the DHA code of ethics and the ICHGCP guidelines, ensuring that all investigations conform to ethical principles.   HAAD covers hospitals in Abu Dhabi and Al Ain, with research proposals submitted to the ethics committee of the authorised research facility in question. To conduct human clinical research, the facilities themselves need to be licensed and authorised.   HAAD's Medical Research Section aims to:   • Develop the Health Research Strategy. • Define research ethics policies and standards. • Create research funding/grant administration procedures. • Apply evaluation methods and measure key performance indicators of Abu Dhabi's progress in health research.   Decisions on authorisation of trials must be made within 60 days of the committee meeting.    Review   Clinical trials authorised by the MOH are reviewed by the MOH's drug control department, which also issues guidelines based on internationally accepted standards.   Trial protocols must follow the principles of good clinical practice standards relating to:   • Monitoring. • Designing. • Conducting. • Recording, analysing and reporting data and results.   Consent   Freely given, informed consent should be obtained from every subject before clinical trial participation. A written agreement to participate in the trial should also be obtained from the trial subjects or their legal representatives.   Trial pre-conditions The sponsor must provide adequate insurance to the patients or healthy volunteers participating in the trial to cover any potential treatment-related injuries during the course of the trial.   Procedural requirements Trials must be conducted in compliance with approved protocols and all clinical trial information must be recorded, handled and stored accurately and transparently.   Requirements in the good practice code include:   • All clinical trial information should be recorded, handled, and stored in a way that allows its accurate reporting, interpretation and verification. • The confidentially of records that could identify subjects should be protected respecting the privacy and confidentiality rules in accordance with regulatory requirements. • Investigational products, should be manufactured, handled, and stored in accordance with applicable good manufacturing practice used in accordance with the approved protocol. • Quality assurance of each stage the trial should be built in into the system used.]   10. Manufacturing: Regulatory, Compliance and Authorization Process involved in Manufacturing Medicinal Products in Dubai and UAE   Application

    The Pharmaceuticals Law 1983 sets out the requirements for establishing factories for the manufacture of medicines. No-one is allowed to open such a factory a without obtaining a licence.

    Applications for a medical products factory licence must be made to the licensing committee of the UAE Ministry of Health (MOH) along with (www.haad.ae/HAAD/LinkClick.aspx?fileticket=SDq8N_2802s%3D&tabid=1159):

    ·        The memorandum or articles of association of the factory including names of the shareholders.

    ·        Details of the factory manager's licence to practise as a pharmacist and of all the licensed pharmacists who will work at the factory.

    ·        Other documents as determined by the MOH.

    Conditions imposed on licences include those relating to (Articles 47 to 57, Pharmaceuticals Law 1983):

    ·        Site location and premises.

    ·        Mandatory requirements and maintenance.

    ·        Supervision of the factory and laboratories.

    ·        Storage of raw or dangerous materials and manufactured preparations.

    Restrictions on foreign applicants

    Foreign applicants can have a maximum shareholding of 49% in a medical products factory.

    Fees

    The MOH can collect the fees for licences and registration made on condition that the fees collected do not exceed AED10,000 for the factory licence and AED 2,000 for other licences and records.

    The level of fees is determined by the MOH at the recommendation of the licensing committee.

    Monitoring compliance and imposing penalties

    Articles 77 to 88 of the Pharmaceuticals Law 1983 govern compliance powers in relation to all types of pharmaceutical establishments including medical products factories.

    Inspections

    Inspectors are appointed by the Minister of Justice, Islamic Affairs and Awqaf  in consultation with the Minister of Health and Prevention, MOH (Article 77, Pharmaceuticals Law 1983), to monitor pharmaceutical establishments that are suspected of operating without a valid licence or in breach of any other rules.

    Penalties.

    Inspectors can confiscate any substances found on the premises and refer the case to the competent authority (in this case, the licensing committee of the MOH) to investigate suspected violations of the Pharmaceuticals Law 1983 or other relevant rules.

    A hearing is held and the case decided by the committee whether or not the alleged offender turns up. The licensing committee then decides on the penalty, with the approval of the UAE Ministry of Health (MOH).

    Disciplinary measures

    The Licensing Committee of the MOH can impose disciplinary measures  on licensed pharmacists who commit offences as follows (Article 79, Pharmaceuticals Law 1983):

    ·        Warning.

    ·        Suspension for up to one year.

    ·        Withdrawal of the licence.

    The Licensing Committee can impose similar measures on owners  (Article 79, Pharmaceuticals Law 1983):

    ·        Closure of the pharmaceutical establishment for up to 60 days.

    ·        If the offence is repeated, the establishment can be closed for several periods not exceeding six months in total in the same year.

    ·        The licence can be withdrawn.

    Appeal procedure

    The offender can appeal the decision within 15 days from notification to the Minister of Health and Prevention, who must decide on the appeal within 30 days. In all cases, punishments involving suspension from work, withdrawal of a licence or closure of a facility cannot be imposed before the expiry of the period prescribed for submitting the appeal or deciding on it.

    Criminal liability

    Further punishments of fines or imprisonment can be imposed on factory managers, owners or practitioners (Articles 83 to 87, Pharmaceuticals Law 1983) (see Question 2).]

    11. Marketing: Regulatory, Compliance and Authorization Process involved in Marketing of Medicinal Products in Dubai and UAE

    Application

    Any medical company planning to market its products in the UAE must be registered by the UAE Ministry of Health (MOH). The process is covered in Chapter 10 of the Pharmaceuticals Law 1983. Both, the company and the drug must be authorised. Only entities that are themselves registered with the Ministry of Health can apply for product registration.

    Article 1 (9) of the Pharmaceuticals Law 1983 defines 'medicine' as 'any medicine that contains one or more element for treatment or protection of human beings and animals.

    Authorisation conditions

    Authorisation conditions are governed by Chapter 6 of the Pharmaceutical Law 1983.

    To register a medical store or pharmacy with the MOH, the following must be submitted online at the MOH website:

    ·        A valid copy of the commercial licence and/or tenancy agreement.

    ·        Details of all commercial and medical pharmacies owned by the marketing group and a table showing the entire group structure.

    ·        Licence of the pharmacist who would manage the pharmacy with their issue and expiry dates, and contact details of the marketing group.

    ·        Owner's passport/other ID.

    ·        Internal layout of the proposed location.

    ·        Initial inspection fees of AED 100.

    ·        Engineering drawing of the location.

    ·        Planning map for the pharmacy location approved by the municipality plus photos.

    ·        Details of the pharmacist appointed or transferred from another firm to be in-charge of the pharmacy.

    ·        Licensing fees of AED 7500.

    Key stages and timing

    The key stages and timing are:

    ·        Submission of the application online with the required documents.

    ·        Inspection of the composition and ingredients of drugs to be marketed.

    ·        Compliance checking.

    The MOH generally conducts inspections in pharmacies. However, the DHA and HAAD also has the jurisdiction to conduct such inspections in the Emirate of Dubai and Abu Dhabi, respectively.

    The initial response time for licence applications is about one week. 

    Fees

    Fees depend on the type and composition of the medicine to be marketed, advertising guidelines and media type.

    Period of authorisation and renewals

    The authorisation is valid for one year and must be renewed 90 days before expiry.

    The licence is renewed for a period of one year after fulfilling the renewal requirements for the re-licensing assessment

    The licence is automatically cancelled in these circumstances (Article 25):

    ·        Transfer of the ownership of the pharmacy to another person.

    ·        Closure of the pharmacy for six consecutive months without excuse acceptable to the Licensing Committee.

    ·        Failure to commence work in the pharmacy within six months from the date of issue of licence.

    Monitoring compliance and imposing penalties

    Imported medicines and pharmaceutical products cannot be put into circulation without being registered by the MOH (Article 65, Pharmaceuticals law 1983).

    In order for a company to import pharmaceuticals and medical devices into the UAE, a company must:

    ·        Both incorporate in the UAE and obtain a medical importation and distribution licence from the Ministry.

    ·        Engage a local agent or distributor, who is already registered with the Ministry, to import the pharmaceuticals and medical devices on their behalf.

    Any medicine or pharmaceutical preparation which undergoes a change to its constituents must be re-registered (Article 66, Pharmaceuticals law 1983).

    Medical products must also comply with strict packaging requirements  (see Question 18).

    Inspectors appointed by the MOH to the Medical Empowerment and Compliance Department are authorized to inspect any pharmaceutical establishment or store suspected to be dealing in drugs, medicines, and poisons without a ]]>Sat, 10 Dec 2016 17:14:51 GMT<![CDATA[Company Formation in Sharjah International Airport Free Zone : FAQ]]> Company Formation in Sharjah International Airport Free Zone (SAIF Zone)

    1. What law established this Free Zone?

    Sharjah Emiri Decree Number 2 of 1995 established both the Free zone at Sharjah International Airport and the Sharjah Airport International Free Zone Authority.

    2. What are the main internal regulations governing this Free Zone?

    Rules and regulations are issued by Sharjah Airport International Free Zone (SAIF) for internal management of the free zone. Any specific regulations governing the governance of company or it's activities are not published on the SAIF website or stated to be applied specifically by the SAIF Authority. Accordingly it can be implied that the Federal UAE laws shall regulate the activities of the companies unlike some Free Zones where internal regulations applies along with UAE laws.

    3. Does this Free Zone have any reciprocal arrangements with other Free Zones?

    SAIF has not publicized any reciprocal arrangements that it could have entered into with other Free Zones in the UAE.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this Free Zone must still comply with? What are the most important examples of how this impacts operations?

    Businesses operating in this Free Zone must comply with several areas of UAE and Sharjah legislations. In general, UAE and Sharjah legislations remains applicable in any area of law such as employment laws, competition laws, intellectual property laws, etc.

    5. What are the key UAE and Emirate onshore agencies a business operating in this Free Zone would need to register or comply with?

    The Ministry of Interiors or the UAE Directorate General office guidelines need to be complied with. These relate to admissible nationalities, profile checks, etc.

    6. How does a company set up in this Free Zone?

    SAIF provides a three-step process of incorporation through the Commercial Department, Leasing, licensing and Legal affairs and the Client and Investor Services Department.

    The first step includes an application for license, project provisional approval and document presentation concerning the company's formation, ownership, and management. The second step includes receiving a license, lease agreement and supply of the keys of an office, warehouse, etc. The third step includes receiving a visa, ID card and other such documents required for entry and working in this Free Zone.

    7. What features do companies set up in this Free Zone have?

    Companies within the SAIF zone are one hundred percent exempt from all commercial levies in addition to 100% import and export tax exemption, 100% corporate and income tax exemption. The companies can be 100% foreign-owned along with 100% repatriation of capital and profits.

    8. What can companies set up in this Free Zone do?

    The companies set up in this Free Zone can carry out activities based on the type of licenses obtained by the company (See Question 16 for type of License issued by SAIF). Accordingly, any medium or light industry can obtain license in this Free Zone. By light and medium industry the emphasis is not on size of business but on type of business activity. The company's business activities may include logistics, general trading and such other manufacturing activities..

    10. What types of business are allowed to operate in this Free Zone?

    SAIF allows a broad spectrum of business sectors to operate in its Free Zone. Business sectors include services such as business consultancy, management consultancy, IT consultancy, selective industrial businesses such as trading in oil and gas products, import and export, technical equipment, logistics, warehouse distribution and storage, etc.

    Business set-ups in SAIF are varied in their nature, type and scope of work. However, due to its close proximity to Sharjah International Airport this Free Zone is one of  the largest air cargo hub in the Middle East and North Africa and it therefore attracts trading companies in a large scale.

    11. What inheritance laws apply in this Free Zone?

    Like any other Sharjah Free Zones, matters of inheritance are governed by Federal Law No. 5/1985 that is Civil Transactions Law (the UAE Civil Code) and by Federal Law No. 28/2005 that is UAE Personal Affairs Law. As a general rule, inheritance issues for Muslims are dealt in accordance with Sharia law, whereas for non-Muslims, the law of the deceased's home country can apply in  case a will. Succession under Sharia law principally operates by a system of reserved shares under which shares of inheritance are pre-determined depending on whom the deceased is survived by. As per the Personal Affairs Law No. 28/2005, a non-Muslim expatriate who is resident in the UAE can opt for the law of their home country to be applied to the distributions of its UAE assets through will. However, the option to choose the personal law of home country is not available to Muslim expats as the sharia law will apply to them.

    12. What taxation applies?

    SAIF exempts the companies established in the free zone from all commercial taxes. However as certain activities are allowed only in the Free Zone, customs duty applies when a Free Zone entity wishes to sell their product onshore UAE.

    13. What accounting and auditing rules apply to businesses operating in this Free Zone?

    The general rules of UAE Commercial Transactions Law Federal Law No. 18 of 1993 (the Commercial Laws and UAE Commercial Companies law Federal Law No. 2 of 2015 (the federal Commercial Companies Law) for accounting and auditing would apply for companies incorporated in SAIF, as no specific body or authority is stated to be authorized to look into the matter. Further, there is no requirement to file accounts within the free zone if that is not provided by the Freezone authority. However, as a matter of practice, companies are required to provide audited account statements for trade license renewal.

    14. Where do businesses operating in this Free Zone generally locate their bank accounts?

    There is no specific provision governing the location of bank accounts in the SAIF Companies Registration Regulation, therefore, the federal Commercial Companies Law applies.

    15. Are there any specific rules governing when movable property in removed from the Free Zone area or transferred into the Free Zone area from another jurisdiction?

    Generally, a Free Zone company may only operate within the Free Zone boundaries and is not allowed to trade directly with the UAE market. However, SAIF Companies and Establishments can sell their products onshore in the UAE subject to the payment of relevant customs duties; hence the same rules may apply for movable property being sold outside.

    16. Are any specific licenses required to operate as a specific type of company in this Free Zone?

    Three different types of licenses are issued in the SAIF - Industrial licenses, Service licenses, and Trade licenses. The Trade license is further sub-divided into Commercial Licences and General Trading Licences).

    The types of legal entities are Free Zone Establishment (FZE), Free Zone Company (FZC) and branches of local or foreign companies. An FZE would be a single shareholder limited liability company and an FZC would be a multi Shareholder limited liability Company with 2 to 5 shareholders.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this Free Zone authority?

    There is no regulation or monitoring of firms/companies by this Free Zone authority, hence general Commercial and Federal Commercial Company Laws would apply. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

    18. How are disputes settled with companies in this Free Zone?

     

    Since this Free Zone do not have separate dispute redressal forum or authority the disputes are settled through the general course of judicial redressal system such as courts, Ministry of labour, etc as they are available for other civil disputes. The exception is when another forum such as arbitration or another original court jurisdiction is agreed upon by the parties in the contract. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

    19. How are disputes between onshore companies and companies in this Free Zone settled?

    A case would be filed with the courts of the Emirate of Sharjah provided no other forum has been agreed upon between the parties to the dispute. If the parties sign an agreement with an express clause on arbitration in Dubai or the DIFC or any other international arbitration centre, the matter shall be referred to that particular forum. However, in case of jurisdictional issues courts of Sharjah will always have discretionary power to adjudicate upon their own jurisdiction if the case if filled with the courts.

    20. What are the main rights and duties of an employer and employee working in this Free Zone?

    The Free Zones may have their own labour law regulations. However, the UAE Labour Law - Federal Law No. 8/1980 (the UAE Labour Law) still applies and governs the rights and duties of an employer and employee working in the free zones. The Labour Law imposes minimum requirements or provisions applicable, inter alia,  on termination of employment, working hours, annual vacation time and safety standards, which applies to the parties even if contracted otherwise as they are mandatory and cannot be contracted out of it. It is provided that an employee should work only for their employer inside the free zone. Accordingly wages can be paid on a monthly, weekly, daily, or by piece basis in any currency with no minimum wage prescribed.

    Employees are entitled to annual leave of two days per month if their service lasts more than six months but less than one year, and a minimum of 30 days paid leave annually if their service exceeds one year. Employees are also entitled to leave with a full wage on all official UAE public holidays, maternity leave of 45 days with full wage and an additional 10 days unpaid, sick leave of 15 days full wage and an additional 30 days at half wage.

    21. How are employment disputes between employers and employees working in this Free Zone settled?

    The role of SAIF is more of a reconciliatory body in nature. It has no judicial or quasi-judicial authority. A complaint can be made by the aggrieved party to the SAIF Authority, however an application is required to be made to the Ministry of Labour office in Sharjah where the parties must then state their issues and arguments before a Ministry representative. After assessing the matter, a representative makes a recommendation. If the parties fail to resolve the dispute as recommended by the Ministry, the matter is referred to the labour court for litigation and a decision is made on the merits of the case as contended before the judge by the parties to the suit.

    22. What entry qualifications and permits are required for staff working in this Free Zone?

    The investing company and its employees working at SAIF are assisted with their application and in receiving a visa for working in SAIF. The requirements are:

    • The minimum age limit for applying for an employment visa is 18 years and the maximum is less than 60. However special approval can be obtained for the shareholder/managers. The manager of the company's SAIF's operations whose name is mentioned in Trade license.
    • The owner, shareholder and the manager whose names are mentioned in the Trade license, are exempted from the Bank Guarantee. For other employees it is mandatory to deposit with SAIF Authority's Visa & Residence Department Bank Guarantee/Cash Deposit equivalent to one month's salary and a return ticket fare to the country of origin..
    •  The investing company should acquire a Health Card issued by the UAE Ministry of Health for its employees. This requires a medical check-up, obtaining an Emirates ID card, and enrolling in suitable medical insurance. The entire process is facilitated by SAIF
    •  After entering the country, a medical check-up should be done and a report is submitted along with a residence application, within 14 days from the date of arrival to avoid the penalty.
    • SAIF sponsored employees shall work only inside its boundaries.

    23. How are staffs working within this Free Zone registered with the authorities?

    Staffs are registered with the authorities through the guidance of the departments of SAIF in various matters differently.

    24. What rules govern the remuneration and minimum benefits of staff working in this Free Zone?

    The UAE Labour Law governs the remuneration and minimum benefits of staff working in SAIF. (See Question 20 and 25)

    25. What rules govern the working time and leave of staff working in this Free Zone?

    The UAE Labour Law governs the working time and leave of staff working in SAIF. The maximum allowable working hours for an adult employee is eight hours a day or forty eight hours per week, and is allowed to be increased or decreased depending on the profession and working conditions. However, working hours for the employees of commercial establishments, hotels, restaurants, watchmen and similar operations may be increased to nine hours per day as determined by the Minister of Labour. Likewise, working hours per day in respect of hazardous work or work detrimental to health, may be decreased by decision of the Minister of Labour and Social Affairs. During the month of Ramadan, normal working hours shall be reduced by two hours. Employees may not work for more than five consecutive hours per day without breaks. Every employee is entitled to at least one rest day a week. If employees work on a Friday, they are entitled to an additional 50% of their wage; employees cannot be asked to work two consecutive Fridays except for labourers on daily wage.

    26. What are the main features of a property lease in this Free Zone?

    There are various zones hence SAIF provides various options depending on the license of company and its business activities. The property and its lease features are:  

    • Offices: office areas start from 24 square meters.
    • Land plots can be taken on a 25 year lease with a minimum plot size of 2500 square meters. Grace period for construction is 6 months.
    • The Industrial Park provides a minimum plot size of 2500 square meter with a grace period of 6 months for construction.
    • The Prebuilt Warehouse is available in four different sizes of 125, 250, 400 and 600 square meters, including an office.
    • A Temporary Warehouse of 600 square meters is available with additional annual charges.
    • SAIF Zone's Labour Accommodation complex includes 82 buildings to accommodate junior staffs.
    • Terms of lease are usually annual with an option to renew for one year.
    • The leased property may not be used except for the permitted use stated in the lease agreement.
    • SAIF also offers the Business Desk Scheme where a company can have a dedicated desk instead of an office for a cheaper annual lease rate compared to that of an office.

     

    27. Is it possible to apply for a building permit in this Free Zone? How is this done and what steps are required?

    A company wanting a building permit can acquire it through application to the Sharjah municipality, and by following its rules and regulation. This permit is issued for six months for any construction and modification to an existing facility. The permit is issued against approval of drawings, including an approved and valid site plan, the appointment of a Consultant and Contractor, a Building Completion Certificate, and the application of a Building Permit along with valid licenses of Contractor and Consultant, contracting agreement, , and original receipt of security deposits. The Responsible department in Sharjah Municipality is Building permit section -  Al Nasiriya. Further information about this process can be obtained on the website of the Sharjah Municipality.

     

    28. What environmental requirements must construction companies building in this Free Zone consider, e.g. form of building, landscaping or building height?

    Construction companies building in this free zone must comply with all health and environmental standards as set out by the Sharjah Department of Town Planning and Survey (DTPS) as per the Environment regulations. Companies must also comply with the Sharjah Building Code in the construction of their facilities. DTPS advise builders on the use of land, height of buildings, parking areas, loading and unloading points in industrial areas, and locations of petrol stations, commercial centres and other projects. Sharjah Municipality looks into the requirements regarding the number of storeys in a building, minimum space inside rooms, ventilation, lighting, exit and entrance points, passages, elevators and allied aspects.

    29. What are the key restrictions when leasing a property in this Free Zone?

    Only companies incorporated in this Free Zone are allocated land or other property on a lease.

    30. What are the rules governing the use of utilities in this Free Zone?

    The standard terms and conditions of the use of utilities are included in the lease agreement with the rental charges including any utility charges which are usually standard however may differ from party to party on the basis of the type of property leased such as warehouse or office, etc

    31. How do retail premises establish themselves in this Free Zone?

    The rules and regulations specifically governing retail premises are not set out on the website or on any form. However, the brochure specifies restaurants as business activity under any of three license hence it is implied that there is no restriction or any rule specifically relating to retail establishments operating in this Free Zone. Therefore, the same procedure for establishing or incorporating would apply as any other type of business activity.

    32. Is it possible for hotels to operate in this Free Zone - how do they establish themselves?

    There are no specific rules regulating hotels operating in this Free Zone. Hence it would seem that no restriction is imposed on hotel operations. Therefore, the same procedure for establishing or incorporating a company would apply as any other type of business activity.

    ]]>
    Thu, 10 Nov 2016 00:00:00 GMT
    <![CDATA[A COMPETITIVE EQUILIBRIUM BETWEEN DOMESTIC AIRLINES AND EXPORTS: ANALYSIS OF US CASE LAW]]> 'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices .'

    The aviation industry is a highly dynamic sector dueto the surfeit of fiancial resources and capital thatare involved in it. Deregulation and liberalization of the industry has minimized the barriers of entry and simultaneously facilitates in the entry of new players into the market. This, in turn, has given rise to intense competition among the various airline operators.

    A sine qua non of an operator in the airline industry is the extensive fiancial capital requirements to operate and compete with its counterparts. Hence, governmental agencies and institutions provide various forms of fiancial aid to airline operators in order to fabricate a balanced and healthy competitive environment within the industry. However, they should also take into consideration, the status quo of the domestic airline operators before authorizing colossal amounts of fiancial aid to overseas airline operators, in order to avoid a predicament of irregular competition. The case of Delta Airlines Inc. v. Export-Import Bank of the United States attained widespread prominence in this aspect as it determined the outcome of providing extensive fiancial loans and guarantees to airline operators outside the United States. The paramount issue in this case was, whether the interests of the domestic airline operators would be adversely affcted if a domestic agency or institution provides fiancial aid to a foreign airline operator.

    The Financer

    Aircraft manufacturers in the US depend profoundly on the Export-Import Bank of the United States (the Bank) to provide loans and loan guarantees to their foreign customers at competitive interest rates. However, the Bank only provides fiancial aid to foreign customers who purchase US manufactured goods or commodities. Hence, domestic airline operators in the US contend that these foreign airline operators receive an unfair advantage due to the exclusive fiancial aid provided to them by the Bank. In this scenario, foreign airline operators are provided with an additional source of fiance to fund their purchase of US manufactured planes and other aeronautical equipment, which in turn, facilitates their operations.

    The Bank is governed by the provisions of the ExportImport Bank Act of 1945 (the Bank Act) which has expressly laid down that the Bank can authorize loans, guarantees, insurance and credit with the objective of increasing employment of US workers. The Bank is also placed with the responsibility to process loan applications with flxibility and effiency so that US exporters do not lose an opportunity to export their goods or commodities. However, the Bank cannot issue a fiancial guarantee for the production of any commodity for export by any other country, if:

  • that commodity is available in surplus in the world markets; or
  • the future production capacity of that country is expected to compete with the US' production of the same, similar or competing commodity.
  •  

    The Bank Act has further provided that the Bank has to conduct a detailed economic analysis of any loan application in order to determine the potential effcts of that proposed fiancial transaction on the respective domestic industry. Therefore, the Bank has implemented certain economic impact procedures [EIPs] to meet the statutory obligations that have been laid down in the Bank Act. These EIPs help in determining the negative economic impact that any proposed fiancial transaction could have on the US domestic market. Financial transactions that do not pass any one of these EIPs would be subject to an extensive review process. A Chronicle of the American Airline Industry The complications with regard to providing fiancial aid to foreign airline operators commenced when the Bank had approved Air India's application for loan guarantees for the purchase of particular Boeing aircrafts. The domestic airline operators of US saw this as a substantial disadvantage as they were not eligible to obtain any fiancial aid from the Bank. Subsequently, the aggrieved Air Transport Association and Delta Air Lines sued the Bank on the grounds that the Bank had not complied with the statutory requirements of the Bank Act before authorizing the loan guarantees. They contended that the capability of domestic airline operators to compete with their foreign counterparts would be hindered if the Bank provided the latter with considerable fiancial support at competitive interest rates. They further claimed that the Bank had neglected to consider the competitive status of the domestic airline operators of US, as their comparatively weaker position would cause them to incur substantial damages.

    Passenger Seats in an Aircraft: Exportable Good or Exportable Service?

    The Bank had brought about certain amendments to its EIPs in 2001 in order to exclude transactions involving 'exportable services' from the extensive review process. Therefore, the Bank's fiancing of foreign airline operators was excluded from the economic impact analysis or any extensive review process as it resulted in the production of an exportable service and not an exportable good or commodity.

    Delta Air Lines argued that the Bank had failed to adhere to the statutory obligations under the Bank Act as the seat capacity that they produced was a commodity and not a service. Therefore, the Bank had assisted in the increase in production of seat capacity by fiancially aiding Air India. This would directly lead to an oversupply of aircrafts and seat capacity in the international markets. They further contended that they had to cancel their non-stop passenger service from New York to Mumbai as Air India had floded the international markets with an over-supply of seat capacity. The wrangle in this dispute was with regard to the nature of seat capacity that was provided by the airline operators. Delta Air Lines claimed that the foremost misconception by the Bank was with regard to the extent of the ambit of the terms 'exportable goods' and 'exportable services'. They contended that the seat capacity that an airline operator produces is an exportable good. Therefore, the seat capacity of a foreign airline operator would considerably increase if the Bank fiancially supports them for purchasing aircrafts from a US aircraft manufacturer.

    After examining the contentions of the learned counsels of both sides, the US District Court for the District of Columbia took the view that the seat capacity of an airline operator is an exportable service and not an exportable good. The court further held that the Bank Act has conferred the Bank with the authority to decide on the EIPs that it should follow, in order to ensure that the domestic markets are not affcted by any transactions. Subsequently, Delta Air Lines fied an appeal at the US Court of Appeals. This court authorized the Bank to proceed with the fiancial aid that was being provided to Air India. However, the Bank was asked to provide an explanation regarding the impact of the transaction on the domestic airline industry of US. The court further upheld the view of the District Court in regard that the seat capacity which an airline operator produces does not fall under the domain of the terms, 'good' or 'commodity' with regard to the Bank Act.

    Since seat capacity was acknowledged as a service, the US Congress passed the Export-Import Bank Reauthorization Act of 2012 which directed the Bank to make necessary amendments in its EIPs. Subsequently, the Bank made certain amendments in its EIPs and included additional guidelines for the review of potential economic impact on exportable services. Therefore, the Bank will now have to conduct a review of a potential economic impact on the domestic airline industry before authorizing a transaction regarding the sale of aircrafts to an overseas customer. This amendment in the Bank's EIPs provides signifiant relief to the domestic airline operators in the US as the Bank will also have to consider the economic impact on the domestic airline operators and not just the domestic aircraft manufacturers.

    ]]>
    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[An Insight into the Sports Industry]]> Court UnCourt July 2015 edition debated the need for specialized sports regulation in the MENA region. In this article, Zisha Rizvi discusses the types of property right and role of pirates, property rights of sports' clubs, type of claims broadcasters would have, global framework of copyright laws, claims that players may have, inter-club claims, royalty aspects, anti-siphoning laws and more. 

    Sports from couch has undeniably entered every possible household through television, YouTube, Periscope and apps. The sports industry spends millions of dollars in the hope that viewers will not simply watch sports from home but even pay for same in some form.

    Internet has crossed boundaries and with exception of few infringers (including online copyright violators) sports industry today is one of the highest fee earning industry. If you are remotely social, you would be aware of the ongoing interest UEFA 2016 championship has garnered amongst masses. Football is considered to be the most global sport. In England, a specialized act of the Parliament- the Football Spectator Act of 1989 (with its corresponding amendments of 1999 and 2000) governs many aspects of the sport. The sport of football itself has evolved in terms of the many serious business opportunities it offers other than just entertainment. Last year, in an independent survey by Repucom it was reported that 20 of the largest European clubs are now sponsored by Middle East airlines making UAE the biggest single investor in the sponsorship of European team football shirts.

    The High Court of Justice in London had shed light on this regard in the infamous case between England and Wales Cricket Board Limited and Sky UK Limited (collectively, the Claimants) and Tixdaq Limited and Fanatix Limited (collectively, the Defendants)[i], the Claimants contended that the defendant's had infringed their copyrights by uploading a considerable number of video clips of cricket broadcasts onto the Defendant's mobile app. The former owned the copyrights in television broadcasts of majority of the matches played by England's men's and women's cricket teams in England and Wales. Further, the Defendants operated the website www.fanatix.com and its mobile apps. However, the Defendants contented on the defense of fair dealing and also claimed immunity for acting as a mere conduit or hosting. Therefore, the court looked into the ambit of the words 'fair dealing' and 'mere conduit or hosting' in order to determine the issue of copyright infringement. Consecutively, the court observed that the reproduction of the Claimant's broadcasts into the app of the Defendant could not be protected by the defence of fair dealing and therefore they had infringed the Claimant's copyright.

    Sports rights can be categorized as those relating to (i) sponsorship rights; and (ii) broadcasting and media rights.

    Sponsorship Rights: UAE based Emirates acquired sponsorship rights for Arsenal in exchange for a deal of 900M as per reports. A single multi million acquisition of such rights is required to follow a thorough process of legal compliance while being mindful of the details that go in between the blue ink making the acquisition a worthwhile or disastrous resolution.

    Broadcasting rights: they are one of the most lucrative means of earnings from sports, so much so that the revenues surpass ticket sales profits. In terms of these rights, the challenge really is on negotiating the single bundle of right per territory or segmentation of rights as per media like internet, mobile and TV. Broadly speaking, these rights would be sub divided as under:

    i Live broadcasting on TV channels;

    ii. internet live streaming;

    iii. offline streaming;

    iv. highlights bundle.

    As a contracting party and the one which would potentially be shelling out fortunes on the deal, the following contractual provisions need to be carefully looked at:

    i. Assignment of rights

    ii. Right of extension or first refusal

    iii. Exclusivity

    iv. Dispute resolution provisions

    v. Territorial restraints

    vi. Transparency and clarity of objectives in drafting

    vii. Compliance with regional (as well as international) regulations including byelaws and guidelines

    One of the challenges that the industry faces relates to lack of compliance with the guidelines and rules of the foreign jurisdiction. While sponsorship opportunities may sound lucrative, things could fall to the bad soup if due care is not taken in terms of compliance. Each of the regional sports host country may have certain guidelines you must refer to. For instance, the Rio Olympics of 2016 will be governed by the Brazilian Olympic Act (Law Number 12035 of 2009).

    Another example of such compliance would be that of the Etihad Manchester City sponsorship deal which was negotiated for a period of 10 years for GBP400M. The deal needed to comply with financial fair play (FFP) rules of the European football regime. FFP stated that that teams participating in the Champions or Europa Leagues must balance their football-related expenditure over a three-year period. However, in terms of loss it will be permissible for the clubs to report UAE Dh237.5M over the three years, falling to Dh158m from 2015/16 and then to Dh52.5M by 2018.

    Broadcasting rights are largely protected by the Rome Convention of 1961, where broadcasters have exclusive rights for 20 years to authorize rebroadcasting. Several other considerations like recordings, fixation and communication have been addressed under the Convention. This does not mean that the Convention automatically governs all forms of broadcasting. Many nations may not be signatory to the Convention and will have specialized internal laws. 

    UAE

    Within the United Arab Emirates, TRA and National Media Council govern broadcasting licenses in addition to relevant free zones.  Broadcasting is largely governed by the UAE Federal Law No. (7) of 2002 Concerning Copyrights and Neighbouring Rights (the Law). Article 19(1) grants broadcasting organisations the right to grant licenses for the exploitation of their recordings and broadcasting programmes, and Article 19(2) empowers broadcasters with the right to prohibit unauthorised communication of their programmes or recordings to the public. 

    Piracy Legislation

    There is no doubt that national legislation may be equipped to handle issues relating to piracy. However, the scale of digital media footprint is so vast that specialized legislation to combat digital piracy will be required if the nations are desirous of promoting themselves in the competitive sports market industry.

    'Unicast transmitting' which involves the storage of information on internal servers and transmitting individually to consumers is increasing at alarming rate. In similar fashion, the P2P (peer to peer network) where information is exchanged or retransmitted between internet users and the quality increased based on higher number of users is another threat. WIPO reports more than 18,000 cases of digital piracy during the 2010 FIFA World Cup.

    Digital content broadcasting and regulation is governed by the UAE Penal Code, the Federal Law Number 15 of 1980 Concerning Printing and Publishing (Publications Law), which in its broad applicability covers television broadcasting, and Federal Law Number 5 of 2012 on Combating Cyber Crimes (Cyber-Crimes Law), which specifically addresses content distribution via the internet.

    A New Dawn?

    Last year, the Rulers of Dubai passed the Cabinet Resolution (31) of 2015 the Executive Regulations of Federal Law Number 8 of 2014 concerning the Security of Sports Facilities and Events that provides guidance around the scope of new legal obligations affecting those involved in the organization and hosting of sports events. The scope of the Resolution is limited to venue organization, fan conduct and to some extent on anti-corruption with negligible commentary on digital piracy.

    In the wake of new developments, growing facilities, opportunities at the Arabian Peninsula, the enactment of a modern intellectual property legislation aiming to combat piracy will be a welcome step, if all in the pipeline.

    ]]>
    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[JUDICIAL COOPERATION BETWEEN ADGM AND ABU DHABI JUDICIARY]]> "If you want to make peace with your enemy, you have to work with your enemy. Then he becomes your partner."

    -Nelson Mandela

    Free zones in the country have always experienced salient growth due to the flexible and international standards that are exhibited by the concerned authorities. The Abu Dhabi Global Market (ADGM) is an international financial centre, a free zone within the Emirate of Abu Dhabi. It has its own civil and commercial laws, and aims to offer market participants a world-class legal system and regulatory regime. The Application of English Law Regulations 2015 provides for the application of English common law in the ADGM. It is intended that, over time, the ADGM will become a recognised international financial centre alongside the Dubai International Financial Centre (DIFC) in Dubai and other regional financial centres. The ADGM Courts support the free zone with an independent common law framework in order to adjudicate civil and commercial disputes. The ADGM Courts are modelled on the English judicial system, and comprise a Court of First Instance and a Court of Appeal. The ADGM Courts will have jurisdiction over civil or commercial disputes involving companies registered in the ADGM and also contracts or transactions conducted in the ADGM.

    Over the past few years, an important development which has taken place in the dynamics of the country is the emergence of a new financial center in the capital of the Arab nation. The United Arab Emirates Ministry of Justice (the Ministry) and Abu Dhabi Global Market Courts (ADGM Courts) signed a Memorandum of Understanding (MoU) on May 16, 2016, concerning a wide range of legal and judicial matters. In particular, they have agreed to take all necessary measures to ensure the enforcement of ADGM Courts' judgments and ADGM arbitral awards before the Federal Courts in the UAE without examining the substance of the dispute. The main idea behind this MoU is to increase and improve the decision making capacity of the courts in the Abu Dhabi free zone region, so that people can have more faith, trust and confidence in the judicial system of the free zone. 

    The initiative is expected to elevate the ADGM courts in par with the DIFC courts in order to improve quality of services and to expand the area of services. The Abu Dhabi Judicial Department was established on June 15, 2007 under Law No. 23 of 2006 to ensure the delivery and administration of justice and equality to all citizens and residents throughout the Emirate of Abu Dhabi. The Department supervises and coordinates the primary legal and judicial mechanisms and processes that protect individual rights and safeguards the rule of law through a tri-tiered court system which includes the court of cassation, court of appeals and courts of first instance.

    The MoU is an important step which would foster and develop the relationship between the Ministry and ADGM Courts. The collaboration will continue to maintain the integrity whilst increasing the confidence in the judicial systems of the UAE. The MoU also covers areas such as exchanging information and research in the fields of electronic services and information technology in order to enhance the efficiency of the respective judicial systems; and developing program initiatives for community awareness and education regarding legal and judicial concepts, particularly in relation to transparency and integrity of the systems.

    The relationship that has been formed with the ministry through this MoU is of tremendous significance. It records the strong and enduring commitment to work together to strengthen the community's confidence in the UAE judicial system, particularly by providing accessible and outstanding service to all litigants and by bolstering judicial cooperation at local, federal, regional and international levels.

    A Homogeneous Platform

    The memorandum of understanding between Dubai Courts and DIFC Courts was signed in the year 2009. The memorandum consists of three (3) parts and has been drafted in a simply manner. The first part is the introduction part which details about the functioning, duties and powers of Dubai courts and the Dubai International Financial Centre (DIFC).

    Dubai Courts ensure the administration and delivery of justice and equality for all citizens and residents throughout the Emirate. This has been done through precision and promptness in adjudicating lawsuits, executing judgments, decisions, judicial orders, contract and document authentication, and by relying on qualified national cadres and regulations, procedures, and new developed technology. Dubai Courts also supervise and coordinate the primary legal and judicial mechanisms and processes that protect individual rights and safeguard the rule of law.

    Dubai Courts play a vital role in ensuring the supremacy of law and protecting national achievements by embracing values such as justice, equality, ingenuity, excellence, teamwork and independence. The Dubai Courts has incorporated state-of-the-art information technology capabilities in pursuit of modernization and the achievements of its strategic plan's objectives for the development of Dubai's judicial and administrative system. Such technologies play a pivotal role in nurturing judges' staffs' capabilities, performance improvements, increasing efficiency, simplifying procedures and strengthening the lines of communication among our different strategic stakeholders.

    The DIFC Courts were established under Dubai Law No. 9 of 2004 and are the independent and limited judicial system within the DIFC, a financial free zone which was established by Federal Decree No. 35 of 2004 in furtherance to Article 2 of Federal Law No. 8 of 2004. It guarantees the highest standards of legal performance, flexibility and efficiency expected by global institutions. Headed by eminent judges who have varied and extensive experience in different jurisdictions around the world, the DIFC Courts can handle all disputes within its limited jurisdiction. However, this MoU is a statement of intent and does not modify or supersede any laws or regulatory requirements in force in the UAE or any of the concerned free zones. Further, the Memorandum consists of the purpose and principle which portrays that the parties desire and believe that the cooperation facilitated by this MoU will further enhance their mutual goals, vision and mission. Further, the MoU aids in:

     

    • promoting a mutual understanding of the founding laws, procedures, rules, policies and ambitions;
    • enabling the parties to more effectively discharge their responsibilities in order to provide efficient and independent judicial systems based on excellence that provides a world class judicial service;
    • developing closer ties between the parties;
    • encouraging closer collaboration regarding the questions of jurisdiction, service and execution of mutual judgements;
    • facilitating the development of protocols about all important judicial areas such as the protocol already developed regarding enforcement;
    • facilitating discussions regarding the development of fees for civil and commercial disputes, and reducing double charging for cross-jurisdictional disputes;
    • facilitating discussion about judicial supervision and best practice internationally;
    • identifying areas to collaborate for judicial training, both in the UAE and internationally, including the use of study trips and job shadowing;
    • allowing for the sharing of experiences with regard to the establishment and operation of small claims in a cost effective and efficient manner;

    The third and last part of the memorandum talks about commencement and termination of the MoU. This MOU takes effect from the date it is signed by both parties and will continue to have effect until terminated by either of them giving at least 30 days advance written notice to the other with reserving both parties' rights. It may be amended by written and signed agreement. Neither party will make any public disclosure or issue any press releases pertaining to the existence of this MOU or to the proposed collaboration without the written consent of the other party, such consent to include consent of the content of any such release. Termination of this MOU does not affect obligations under this MOU concerning confidentiality of information, which shall continue to have effect.

    The MoU is expected to substantially elevate the efficiency of the Abu Dhabi judicial system and the ADGM Courts.

    ]]>
    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[Key Decisions on Dubai Property Laws between 2009 and 2013 by Dubai Court of Cassation (Part II)]]> The global economic meltdown had an adverse effect on the real estate industry of the Middle East. However, the Dubai real estate sector has been flourishing post its emergence from the unfavorable market environment of the global recession. The multitude of the different types of properties available has been attracting serious investors from different parts of the planet. The real estate industry of the Emirate has witnessed unprecedented development in the past few years. This calls for the need of a robust judicial system in order to secure the concerns of the developers and the investors. The enactment of various real estate laws and regulations has supplemented to the anomalous growth of the real estate industry in the country. However, the enforcement of these laws and regulations is subject to its interpretation by the judiciary. Therefore, it is essential to review and scrutinize the past judgments of the Dubai Court of Cassation (the Court) in order to comprehend the application of the laws and regulations in the multi-billion real estate industry of the Emirate.

    Sequel to the Arbitration Clause

    Most of the developers and investors in the 21st century insist on including an arbitration clause to their sale-purchase agreements (the Agreement) in order to avoid the impediments of the courts. However, would an arbitration clause be valid when the Agreement itself has not been registered with the authorities? Further, would a dispute regarding the validity of an Agreement be referred to arbitration solely due to the existence of an arbitration clause? The Dubai First Instance Court has taken the view that a dispute between the parties would be governed by the terms of the arbitration clause despite the non-registration of the Agreement. Hence, the lower court held that cases could be referred to arbitration even when the parties dispute the validity of an unregistered Agreement. However, the apex Court of the Emirate had a different opinion in this regard. The Court held that a claim of invalidity of an Agreement due to its non-registration cannot be referred to an arbitral tribunal as its subject matter contradicts the public order of the Emirate. Article 3 of Law Number 13 of 2008 (the Law) has provided that the sale of a real estate property would be void if it has not been entered in the interim real estate register of the Dubai Land Department (the Department). This contemplates that the sale of a real estate unit would be against public policy if it is not recorded in the interim real estate register of the authorities. Further, article 203 of Federal Law Number 11 of 1992 regarding the civil procedure code has provided that arbitration is not allowed in matters in which reconciliation is not allowed.

    Therefore, the judgment of the Cassation Court in appeal number 249 of 2010 stated that a real estate issue cannot be the subject matter of arbitration when the agreement has not been registered in accordance with article 3 of the Law. Further, the doctrine of separability provides that arbitration clauses are separate agreements and would survive even if the underlying contract is held void. However, arbitrations and reconciliations can only be exercised if the subject matter of the issue does not contradict the public order to the Emirate. Long story short, an issue regarding the validity of an Agreement cannot be referred to arbitration if the same has not been registered in the interim real estate register as per provisions of the Law.

    No Date? Please Wait!

    The prolonged delay by real estate developers to deliver the properties had led to a profuse of lawsuits in the wake of the global recession. Most of the Agreements did not include a precise date for the delivery of the property and consecutively, the developers relied on this as an excuse to postpone the construction of the properties. However, the Court successfully sheltered the interests of the aggrieved investors in this aspect with the pronouncement of twain 2011 judgments in appeal numbers 197 and 600.

    An investor had approached the Court in order to terminate an Agreement due to the failure of the developer to commence the construction of the project. Further, the developer contended that the provisions of the Agreement did not comprise of any explicit delivery date and therefore, the investor did not have a substantial claim. However, in accordance with articles 246, 247 and 272 of Federal Law Number 5 of 1985, the developer of a real estate has the obligation to commence the construction of a project within a period of six (6) months from the date of obtaining the approval for sale from the relevant authorities. Further, an investor is provided with the right to terminate the Agreement and claim for past payments when the developer has failed to commence the construction of the project within the specified period. Therefore, the Court held that the absence of a provision regarding the date of commencement of construction or delivery of the property was not a considerable justification for the failure of the developers to initiate the construction process. Further, the apex court observed that a default by the main developer would not exempt the sub developer from executing its obligations towards the investors. This judgment provided eminent relief to the investors and aided in strengthening the credence of potential real estate investors.

    A Developer's Recourse

    An investor is not always the aggrieved party in a real estate dispute. Consider a situation in which the developer has commenced the construction of a building but is restrained due to the non-payment of the investor. Therefore, article 11 of the Law has provided for the following procedure in the event that an investor fails to meet his obligations pursuant to the terms of the Agreement:

    • the developer should inform the Department regarding any default by the investor;
    • subsequently, the Department would furnish a thirty (30) days' notice to the investor for fulfilling his contractual obligations;
    • the developer can exercise any recourse only when an investor has failed to perform his obligations within the specified notice period.

    The judgments of the Cassation Court in appeals 105 of 2011 and 106 of 2011 have substantially elucidated the interpretation of article 11. The Court observed that a developer did not have the exclusive right to terminate an Agreement without the consent of the Department or the other party. Further, a developer is required to intimate the Department when an investor is in default of the Agreement. Generally, this scenario arises when an investor delays in making his periodical payments to the developer. Ergo, developers are entitled to terminate the Agreements only after providing the investors with considerable opportunities to fulfill their obligations of making payments within the notice period.

    Further, the developer may retain a proportion of the payment by the investor in the event that the latter has failed to fulfill his obligations within the specified notice period. Article 11 of the Law as amended by Law Number 9 of 2009, has provided that the developer is permitted to retain the proportion of the payment subject to the extent of the completion of the project. The amended article states that a developer may terminate the Agreement and retain the following amounts when the investor has not met his contractual obligations within the notice period:-

  • When at least eighty percent (80%) of the project is completed – the developer may retain all the payments and claim for the balance value from the investor. Further, the developer may auction the property if the investor fails to pay the outstanding amount.
  • When more than sixty percent (60%) of the project is completed – the developer may retain a maximum of forty percent (40%) of the value of the property.
  • When below sixty percent (60%) of the project is completed – the developer may retain a maximum of twenty five percent (25%) of the value of the property.
  • When the construction work of the project has not commenced – the developer may retain a maximum of thirty percent (30%) of the payment which has been made by the investor.
  • However, the developer has to return the balance amount to the investor within a period of one (1) year from the date of termination or sixty (60) days from the date of resale of the property, whichever is earlier.

    The Backbone of a Flourishing Industry

    The legislators have endeavored to safeguard the interests of both the parties as the Law has explicitly prohibited the developers from retaining any illicit amounts of the investors' payments. Further, the Court has strived to stabilize the real estate industry by maintaining a justifiable balance in the interpretation of the laws and regulations in the emirate. This approach of the Court has incidentally aided in the development of the real estate industry. However, one must never hesitate to contact a law firm that provides bespoke legal advice in the event of a real estate dispute in the country.

    ]]>
    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[Labelled Liable (Part I)]]> What do fairy-tales, horror movies and sermons have in common? They all acknowledge the presence of evil in the world as well as the human beings' disturbing capacity for destructive force. But how do we account for the existence and persistence of this human weakness? This century had embarked with a multitude of corporate scams in which the rich got richer; and the poor were eventually hurled down the street. Therefore, legislations around the world have endeavoured to indict commercial offenses with criminal liability in order to curtail the rising number of fraudulent acts in commercial transactions. Consider a situation in which a person had deceived and caused colossal losses to the investors of his company by portraying illusionary finances in the books of accounts of the same. Would justice be served if he was free to walk the streets after paying a months' salary as fine?

    Criminal Liability

    Although criminal liability is not the principal subject matter of this article, it is imperative to note that it holds a significant standing in scrutinizing the actions of a defendant. Further, the distinctive character of criminal liability is characterized by both, intrinsic and extrinsic features. Therefore, criminal liability can be divided into two dimensions: i) a pre-action phase (also referred to as the abstract criminal liability); and ii) a post-action phase (also known as the actual criminal liability). The first phase concerns itself with the individual's liability to bear the consequences of his behaviour or action thus revealing the personality of an individual. Therefore, crimes can result from abnormal, dysfunctional or inappropriate mental processes within the individual's personality. However, the second phase is concerned with attributing that particular individual to the result and consequence of his criminal action. Therefore, liability in this instance is the responsibility and penalty of a crime rather than a personal attribution or description of the individual's character.

    Federal Law Number 3 of 1987 on the Issuance of the Penal Code (the Penal Code) has provided for the crimes and their respective liabilities in the UAE. However, is it possible to indict a corporation with criminal liability? Article 65 of the Penal Code has provided that companies or corporations can be held criminally liable for the crimes that are committed by its representatives, directors or agents. However, the members of a company could be held liable personally liable of for their actions. Federal Law Number 2 of 2015 on commercial companies has provided that the members of a company can also be held criminally liable for the acts that have been committed by them. This implies that a person would be personally held liable for his actions even when he has acted on behalf of a legal entity.  Fraud, breach of trust, forgery, dishonour of cheques, money laundering etc. induces criminal liability up on the convicted party. 

    Article 399 of the Penal Code has imposed criminal liability on a person who has deceived someone in order to obtain a property, document or a signature on a document. An elucidation of this article would imply that a person who has manipulated or deceived someone by a fraudulent act would be indicted with criminal liability. However, fraud can be successfully proved only when substantial damage has been suffered by the victim. Further, article 404 has provided that a person would be imposed with criminal liability if he has embezzled or deployed the funds of another party with an intention to detriment the owner's interests. Ergo, it can be comprehended that the following factors have to be satisfied in a lawsuit in order to convict a person of a criminal offence: i) criminal act or actus reus; ii) the victim should have suffered damage; and iii) existence of criminal intention by the accused or mens rea. Therefore, it can be surmised that a party is generally not indicted to criminal conviction solely due to his or her presence in a criminal offense. It is evident that the Penal Code has placed significance on the existence of a criminal intention in the mind of the accused. A person is held liable for a crime only when he or she has acted with a criminal intention, as opposed to acting accidentally or lacking the ability to act deliberately.

    Civil Liability

    As opposed to criminal liability which does not provide any specific relief to the victim, civil liability is intended to compensate the victim for the losses or damages that he has incurred due to the actions of the accused. The following are the cardinal elements of a civil liability suit: i) the tort; ii) the damage; and iii) the causal rapport between the tort and the damage. Therefore, the liability of a party would be trivial if any of these elements have not been satisfied in a lawsuit. Therefore, it can be comprehended that a civil liability would lie only when a party has sustained damages due to the breach of contract by the other party.

    Further, it is also note is that the contractual liability is established when there is a breach to any contractual obligation in a contract. The Court of Cassation in civil appeal number 294 of 2011 has carefully implemented and heed to these elements by stating that 'the contractual liability is founded by the establishment of three aspects; a tort, that is presented in a party's failure to abide to their obligation, a certainty of the tort and the formation of a rapport between the tort and the damage, clearing that if an aspect of such pattern came to an end, liability would follow. It's the role of the creditor to prove the tort of the debtor related to the latter's failure to abide by his obligations and to prove the damage befallen, as for the causal rapport, it is to terminate once the debtor manages to prove the credit or the other's tort upon which damage took place'. Therefore, it can be comprehended that in a contractual liability, the debtor holds the burden of proving that he met his contractual obligations after proving the validity of the contract.  The creditor on the other hand, bears the responsibility to verify the above mentioned elements carefully in conducting his claim; and a failure to do so can result in his claim being considered null and void.

    Even though a commercial liability may take the form of a contractual obligation or an omission, they do not occur within the same circumstance. Where there is a contract between the parties of a liability claim, an omission cannot result in a liability as long as the same has not been stated in the contract. However, if the tort is a representation of a crime, an excessive error or a fraud, then the creditor has the options of filling on the grounds of the omission or the contractual claim. It is quite apparent that both, the person claiming the damages and the one against whom the damage is claimed must be liable in respect of the same damage.  Further, the court would not grant damages if either of the parties had not liability towards the inducement of the same. 

    Conclusion

    Therefore, a successful suit for claiming a commercial liability would lie only when all the elements of the suit have been satisfied by the parties and the underlying issue. However, it is not always easy to identify the damage for which the parties are liable. Therefore, a suit for commercial liability should be drafted with the help of a law firm that provides bespoke legal advice in the commercial matters.

    In order to paint a clearer picture for the reader, Part II of this Article shall further elaborate on the concept of abatement in civil suits as well provide for an illustration to explain the aforesaid, in the form of a concise case study.

    ]]>
    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[Survival Of The Fittest - Asset Securitization in the UAE]]> The global financial market has been constantly remodeling itself, more so in the wake of the global economic meltdown which tainted asset securitization activity. One can often draw parallels between the ever-changing economy and the manner in which securitization activity is fast becoming a desired source of diversified finance enabling credit risk transfer. In securitization, a company partly deconstructs itself by separating certain types of highly liquid assets from the risks generally associated with the company. The company can then utilise these assets to raise funds in the capital markets at a lower cost than if the company, with its associated risks, could have raised the funds directly by issuing more debt or equity. In turn, the company retains the savings generated by these lower costs, while investors in the securitized assets benefit by holding investments with lower risk. While Section one of this article deals with the captivating topic of asset securitization in the UAE as well as how companies may benefit from asset securitization, it further contemplates and examines the emergence of the  asset securitization market in the GCC and more particularly the UAE financial market, where Islamic finance foothold is considered as supreme. Section two, shall entail the concept of securitization within the UAE legal framework as well as the manner in which methods of security offered to the creditor through the concepts of pledge and mortgages and their enforcement thereof.

    Not only is asset securitization one of the most important financing mechanisms today, but its use is rapidly expanding worldwide. Securitization can be defined as the process of transforming individual illiquid and non-tradable loans or mortgages into marketable securities. This is performed by transferring these loans to a specially created entity or trust called a special purpose vehicle (SPV). This SPV would then issue securities backed by the asset pool to the financial markets.[i]

    An effective illustration is when a bank or a financial institution being an originator of mortgage backed loans, gathers hundreds or thousands of mortgages of the borrowers and repackages them into a pool of assets and transfers it to an SPV, a company or trust formed for the specific purpose of funding the assets. The SPV shall finance the acquisition of the pooled assets by issuing interest bearing securities to the investors. Accordingly, the investors of these securities shall be entitled to collect mortgage payments from the borrowers whose mortgages have been pooled.

    Assets that may be securitized include residential mortgages, auto loans, credit card receivables, leases and utility payments and are demarcated into separate classes of assets to include and mean asset backed securities and mortgage backed securities. While mortgage backed securities are securities created from the pooling of mortgages, asset backed securities are created from the pooling of non-mortgage assets including but not limited to, credit card receivables, student loans, auto loans. However, with the change in financial markets, the types of assets that can be securitized are also expanding. That is to say any asset with the potential of future receivables may be securitized upon adhering to the true sale and bankruptcy remote criteria.

    Another important aspect to consider for the purpose of understanding the securitization structure is the concept of credit enhancement. Credit enhancement is the manner or method to improve the credit rating of a securitization transaction, as prescribed by a credit rating agency in order to attract investors into investing into such assets. To establish a method of credit enhancement, transactions are often structured to include credit enhancement by way of tranching, wherein the securities are allocated or structured in different priorities or classes of varying seniorities. The structure thus consists of several tranches, from the most senior to the most subordinated and the tranche with the highest seniority has the first right on cash flow.

    The very distinction that separates securitization from collateralized or traditional asset base lending is fulfillment of true sale criteria, where the assets of the SPV or the issuer to whom the pool of loans are sold are legally segregated from the originator's credit condition and marketable securities are created out of the assets' cash flows. In asset securitization, meeting the true sale criteria is the foundation of concluding a securitization activity transaction. True sale criteria shall be considered met when there is no recourse available to the originator with respect to the pool of loans securitized. The SPV/issuer is bankruptcy remote, meaning that if the originator goes into bankruptcy, the assets of the SPV/issuer will not be distributed to the creditors of the originator and the investors shall have an unqualified right over the assets of the SPV. While several countries have stipulated conditions in its legal framework for parties entering into a securitization activity to establish a true sale, certain regulatory authorities like In India, have necessitated legal counsels facilitating securitization transaction to issue a legal opinion confirming the transaction to meet the true sale criteria and being bankruptcy remote.

    Such prudent steps are necessary in wake of the global meltdown which has stigmatized the asset securitization market. Though securitization has picked up momentum since then, it has not been so without some necessary tweaking to the regulatory and legal framework by certain countries to ensure the situation does not arise again. India, for instance, ensured that the regulations applicable to the securitization and direct assignment transactions were revised to be watertight, with obligations upon the originator to service the loans for a minimum duration before passing it onto the issuer/SPV.

    Islamic Securitization

    The term Al-Taskik and Tawriq are terms used for securitization under Islamic law and is the process of issuing certificates that represent debts and loans (generally any type of obligations). Islamic securitization is defined as a legal structure which satisfies requirements of Islamic finance and replicates the economic purpose of a traditional asset backed securitization structure, whereby, the right over receivables is transferred from the originator to an SPV/Issuer which in turn issues notes that are sold to investors.

    It is interesting to note that Islamic securitization fits with the notion of Islamic finance. Since most Islamic financial products are based on the concept of asset backing, the economic concept of asset securitization is particularly amenable to the basic tenets of Islamic finance[ii].

    Essentially conventional securitization, which originated in non-Islamic economies, invariably involves interest-bearing debt. Investors would typically hold (secured) contingent claims on the performance of securitized assets, which entitle them to receive both pre-determined interest and the repayment of the principal amount. However, the issuance of interest-bearing debt securities with a secured redemption cannot be reconciled with Islamic financing principles due to the prohibition of profit from debt and speculation. Securitization under Islamic law bars interest income and must be structured in a way that rewards investors for their direct exposure to business risk, i.e., investors receive a share of profits commensurate to the risk they take on in lieu of pre-determined interest.

    Therefore, adapting the basic principles of conventional securitization for Islamic purposes requires compliance with the following conditions: (i) there should be a real purpose behind raising -funds via securitization, and the type of collateral assets realizing the securitized revenues must be clearly identified (or be capable of identification) and cannot be consumed; (ii) each transaction participant should share in both the risk and return, and investor should receive positive pay-off from profitable ventures only; (iii) collateral assets must not be debt, cash or prohibited as haram (sinful activity) and must not be associated in any way with unethical or exploitative operations or with speculation and uncertainty (gharar) from non-productive investment; (iv) the structure should provide investor compensation for business risk from direct participation in securitized assets and should not imply an exchange of debt for interest generating investment return (unless those securitized assets are interest free and sold at face value); (v) investors should hold an unconditional and unsecured payment obligation and not a guaranteed promissory note; (vi) a sufficient element of ownership must be conveyed to investors; (vii) the contribution from investors in the form of proceeds from issued notes (and any returns generated by the issuing agent from managing collateral assets) cannot be reinvested in short-term cash instruments or interest-bearing debt; (viii) the underlying assets and securitized obligations must not be employed for speculative purposes, and turnover should be kept low; (ix) because conventional insurance violates Sharia provisions, takaful (Islamic insurance, based on co-operation and mutual help) should be employed instead; and (x) any form of credit enhancement and/or liquidity support and limitations of prepayment risk must be in a permissible form.[iii]

    In view of opinion of Islamic Scholars as seen above on the nature of permissible Sharia compliant structures and instruments, let us now draw parallels in the conventional securitization structure and the Islamic securitization structure. In order to present a securitization structure that is Sharia compliant, let us begin by examining the structure of the SPV that may need to be established. The SPV in Islamic securitization could take the form of a mudaraba comprising investors and the securitizing company as the mudarib. The mudarib may legitimately claim its share in the surplus. Alternatively, the securitizing company may act as an agent or wakil of all the investors, when organized as a musharaka[iv] company.

    Now let us proceed to understand the nature of assets that may be securitized under Islamic finance. Islamic financial institutions have an asset structure that is primarily trade-based, such as murabaha (cost-plus or mark-up), bai-bi-thamin ajil (murabaha with deferred payment facility) and leasing-based financing such as ijara.  Murabaha or bai-bi-thamin ajil results in a transfer of ownership of the physical commodity to the buyer and the financial institution's assets comprise the receivables that are a form of debt. Such assets, therefore, can only be transferred to the SPV at par. Where the SPV is a musharaka company of investors, the musharaka securities would represent part ownership of the pool of assets. And since each security now represents a debt, it can only be transferred at par. Thus a secondary market in such Islamic debt securities is completely ruled out.[v]         

    It appears that modeling conventional securitization within the structure Islamic finance exhibits some issues. The above problem, however, has taken care of the problem by way of ijara-based securitization. Ijara or Islamic leasing, though less popular as an asset than murabaha, offers much greater flexibility. Ijara-based securitization involves securitization of physical assets and not of financial claims. It involves transfer of ownership of physical assets and, consequently, all risks and rewards of ownership of existing assets of the company to the SPV representing investors and ownership of SPV is now made equivalent to ownership of the physical assets that are given on lease against rental income. Each investor shares in the rental income on a pro rata basis. Each security called sukuk[vi]-al-ijara represents a pro rata ownership of physical assets as against a pro rata share in financial claim or debt in the case of sukuk-al murabaha. While debt can only be transferred at par, ownership in physical assets can always be transferred at a mutually negotiated price. Thus sukuk-al-ijara allows for creation of a vibrant secondary market.

    The originator sells the assets to an SPV à the SPV raises finance to purchase the assets by issuing Ijara Sukuk, which represent an equity interest in SPV and thus in the assetsà SPV leases the assets back to originator à Originator makes periodic lease payments to the SPV i.e. the cash flow for SPV's obligation to the investors à At maturity SPV sells the assets back to the originator, which shall cover all liabilities of SPV.

    The view of Islamic Scholars can be summed up to mean that securitization activity can be concluded only if it adheres to the Islamic financing principles, in as much as, underlying assets which do not comply with Sharia principals, cannot be securitized. The relationship between a borrower and the originator should fall under the Sharia compliant structures of murabaha, mudaraba, ijara etc. Also to comply with Sharia principals for sukuk issuance, it must be borne in mind that the structure must transfer a minimal level of ownership in the assets to the investors.

    Apart from the above, we also have to examine the concept of credit enhancement vis-a-vis Islamic Financing. Credit enhancement is an integral part of the securitization process and when credit enhancement is for a fee that is related to the quantum of facility, it comes dangerously close to riba[vii] and is rightly frowned upon by Sharia scholars. In the alternate, it is perhaps possible to use the musharaka mechanism to introduce a credit enhancer in a profit-sharing and takaful[viii] role. The SPV would be a musharaka with a credit enhancer as one of the partners or musharik, and the partners would mutually guarantee one another.

    Case Study – Sharia Compliant Securitization Executed in the UAE Financial Market

    Sun Finance-Sorouh Real Estate PJSC:

    Facts: The purpose of the Sun Finance Limited (incorporated in Jersey, the Channel Islands, with limited liability)(Issuer) securitization was to allow Sorouh Real Estate PJSC (Sorouh) to monetize future cash flows from the sale of real estate plots to property developers. Sorouh applied the proceeds of the monetization toward funding the utility infrastructure for two of its flagship real estate developments in Abu Dhabi, UAE. In essence, there are three principle parties involved in this transaction: (a) Sorouh, the project developer who developed and sold the plots; (b) Sorouh Abu Dhabi Real Estate LLC (SPV), set up as a distinct entity from Sorouh, that purchased the plots and, in turn, sold them to individual developers; and (c) Sun Finance i.e. the Issuer, who issued sukuk-al Mudaraba certificates (Sukuk) to investors.

    Working: The proceeds of the Sukuk were used to fund the mudaraba and which proceeds were used by the mudarib, the SPV, to purchase the full title to the underlying plots from Sorouh. The SPV provided the Sukuk holders with a beneficial ownership of the plots, while the SPV executed a true sale of the assets from Sorouh. A portion of the Sukuk proceeds were placed in various reserve accounts to make up any shortfall in profit payments, to fund expenses of the SPV and to finance the construction of infrastructure on the plots. The profit sharing ratio between the mudarib i.e. the SPV and rabb ul-mal i.e the Sukuk certificate holders or the investors were 1% and 99% respectively.  

    The receivables from the sub-developers (all 109 plots were sold by Sorouh to sub-developers before the Sukuk was issued) were to be paid to the SPV, who in turn, made periodic payments on the Sukuk to the investors. The remainder was to be paid to the mudarib (the SPV) as an incentive payment. This amount was then used to repurchase a portion of the beneficial interest held by the Sukuk holders. The unique feature of this Sukuk was that it offered three different rated tranches, each with different priority rights and coupon amounts. The three tranches (A, B and C) had successively higher return. The three tranches were also accorded different priority for periodic payments with the A tranche senior to the B tranche which was senior to the C tranche. The way the seniority over periodic and principal payments was structured was using a musawama structure (cost-plus sale where only the final amount is agreed between the parties). At each periodic payment date, each class was paid 2.5 percent of the rabb ul-mal's profit allocation and the remainder of both profit and amortization payments are made according to seniority with a musawama between the tranches used to create a non-pari passu payment outcome.  The Sukuk had performed well with payments passed on from sub-developers to the SPV and was used to redeem the Sukuk.  

    When the sukuk is viewed in more detail, the structure was clearly made to mirror a multi-tranche securitization deal and the fact that it is Sharia-compliant had limited impact on its performance. The use of a non-recourse securitization removed the issuer's financial strength from the picture so long as it is able to continue servicing the receivables. The Sukuk certificates which are asset backed by installment sales receivables from the sale by Sorouh of plots of land on the developments in Abu Dhabi have been awarded the highest credit rating to date for a non-sovereign instrument issued in the MENA (Middle East & North Africa) region. The transaction is also unique in many other ways, but notably, apart from being the first ever securitization of this asset class, marks the first asset-backed securitization out of Abu Dhabi. It is also Abu Dhabi's first ever local currency securitization deal. The transaction is also one of the world's largest Sharia compliant securitization.

     Conclusion

     It can thus be justly comprehended that Islamic securitizations cannot be separated from developments in the securitization market in general terms. There is certainly a huge potential for both conventional and Sharia compliant transactions in the region. Despite this, there have only been a small number of Sharia compliant securitizations to date. This has largely been due to the global economic slowdown which has adversely affected global Sukuk issuance and securitizations in general.

    Furthermore, delay on the part of Nakheel PJSC (the development arm of Dubai World) in payment of sukuk obligations in the year 2009 also impacted investors' confidence in the Middle Eastern debt market for a period in 2009- 2010.  However, recent reports suggest that the Nakheel PJSC, which recovered strongly on the back of rising property prices in 2013 and 2014 has paid off its debts worth AED 7.9 billion and is continuing to make payments on its AED 4.4 billion sukuk, which is due to mature in August 2016.

    As Herbert Spencer drew parallels between economic theories and Charles Darwin's biological ones, it is essential for UAE to formulate a robust securitization landscape, both in conventional and Islamic structure, to survive and rise up to the challenge posed by economies having dominance in the structured finance market!

    In order to paint a clearer picture for the reader, Part II of this Article shall further elaborate on the concept of securitization under the UAE legal framework.


    [i] Dr. Nasser Saidi, Chief Economist , Dubai International Financial Centre- A Mortgage Market for UAE, March 2007

    [ii] Mohamad Saad Lahlou & Joseph Tanega, Islamic Securitization: Part-I- Accommodating the Disingenuous Narrative, Journal of International Banking Law and Regulation, Sweet & Maxwell, Vol.22, Issue 6, May 2007.

    [iii] Andreas A. Jobst, the Economics of Islamic Finance and Securitization, supra

    [iv] Musharaka is a joint enterprise or partnership structure with profit/loss sharing implications that is used in Islamic finance instead of interest-bearing loans.

    [v] Mohammed Obaidullah- Securitization in Islam: Handbook of Islamic banking,2007

    [vi] Sukuk are Sharia compliant bonds

    [vii] Riba means excessive interest

    [viii] Type of insurance system, under Sharia principles, wherein money is pooled and invested.

     

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    Tue, 18 Oct 2016 00:00:00 GMT
    <![CDATA[Need for Speed: Summary Proceedings under UAE Law]]> Need for Speed: Summary Proceedings under UAE Law

    The judicial system of a country is the pivotal recourse that is available to the public in order to resolve their disputes without taking law and order in one's hands. However, the courts consume time to analyze and conclude on an issue in order to provide unerring justice to the parties that appear before it. Further, the connotation of justice differs in various lawsuits due to need for speedy remedy. The delay in the judicial system might restrict some parties from obtaining an adequate recourse in order to protect their underlying rights. Hence the maxim justice delayed is justice denied became a part of Magna Carta of 1215[1] and till date holds ground. Therefore, it is necessary to provide the parties with a temporary panacea in order to ensure that the subject matter of their claim is not affected by the delay in obtaining a judgment from the court. The need for the effective summary jurisdiction of the courts arises at this juncture. The necessity for an expeditious judicial interference in order to preserve the subject matter of an issue has led to the establishment of the principle behind summary proceedings give rise to summary jurisdiction to courts.

    In order to avail the benefits of the summary provisions it is necessary to understand different aspects of summary proceedings before approaching a court to obtain a temporary relief in a matter.

    The Legislation

    The statutes have not provided for an explicit definition for the term 'summary jurisdiction'. However, in the light of the settled cases, summary jurisdiction can be said to be an instrument which provides a temporary adjudication in a dispute in which the parties anticipate that their interests would be adversely affected by the prolonged period required to obtain a judgment. The UAE Civil Procedures Code, Law Number 11 of 1992 (the CPC) has provided a claimant with the right to initiate summary legal proceedings before a summary court in order to temporarily stabilize the rights of the former. These proceedings are intended to provide the claimant with a temporary order so as to preserve an existing situation. This can be elucidated with the help of the following illustration: Suppose an individual 'X' owes money to a bank 'Y' in the UAE. Further, X has failed to meet his due dates for payments and intends to flee the country without meeting his obligations with the bank Y. In this scenario, bank Y may initiate proceedings in a summary court in order to impose a travel ban on 'X' so that the latter is restrained from fleeing the country without repaying his debts.

    Further, article 28 of the CPC has conferred a judge of the court of first instance with the authority to issue temporary adjudication in a dispute in which the court anticipates that the claimant's interests would be insecure due to the delay in procuring a final judgment. Therefore, the legislation has intended to induce a special category of judges within the court of first instance in order to adjudicate the summary proceedings which are instituted before it.

    The Nucleus – Subject Matter of Summary Proceedings

    The legislation has not explicitly provided for the nature or type of issues which summary proceedings could be instituted. However, the following conditions have to be fulfilled in order for a court to assume summary jurisdiction of a dispute:

           i.          The recourse sought by the claimant should temporary in nature as the jurisdiction of a summary court is limited to providing a temporary relief to the claimant.

          ii.          The issue of a summary judgment on the dispute should not adversely affect the rights of any of the concerned parties. In civil appeal number 307 of 2008, the Court of Cassation took the view that the judge of a summary court is conferred with a qualitative jurisdiction to execute a temporary procedure which is non-prejudice to the rights of the parties. In essence, a judge of the summary court is restricted from deciding on the legal reasoning pertaining to the rights and obligations of the parties. Ergo, he does not have the jurisdiction to decide on the subject matter of an issue which would detriment the rights of either of the parties.

         iii.          Further, the court assuming the summary jurisdiction of a dispute should be convinced that the matter requires an immediate relief. In appeal number 131 of 2009, the Cassation Court held that the summary court should be satisfied that the subject matter of the issue requires immediate attention. The court has to assess the urgency and the seriousness of the matter before assuming the jurisdiction on the same.

    However, the statutes have not prescribed any modus operandi to identify if a dispute could be referred to a summary proceeding. Therefore, a court may assume summary jurisdiction if a dispute satisfies all of the conditions which have been mentioned above. However, the facts of certain cases are surfaced during the pendency of the investigation by the court. The subject matter of the dispute might fail to satisfy any of the conditions after the claim has been instituted in the summary court. This scenario primarily arises in two circumstances:-

           i.          When the pre-requisite regarding the urgency of the subject matter ceases to exist during the investigation of the court – This ensues when there is a change in the relative urgency of the matter during the investigation of the facts of the lawsuit. In this situation, the court would adjourn the matter and not assume summary jurisdiction in the same.

          ii.          When a serious dispute arises between the parties during the pendency of the investigation by the court – This scenario occurs when a serious dispute befalls between the parties and it becomes impossible for the court to adjudicate the summary procedure before resolving the serious dispute.

    Long story short, the court would adjourn the summary proceeding before the courts if the subject matter of the same has not satisfied any of the three pre-requisite conditions.

    Determination of an Effective Judicial System

    Considering the generality of the forgoing provisions which gives rise to summary jurisdiction, it can be concluded that summary jurisdiction can be invoked in numerous cases. However, the essence of the subject matter of a summary proceeding varies from case to case. The 2010 appeal number 222 of the Cassation Court of Dubai saw the termination of a construction contract between the employer and the contractor of a real estate project. The primary issue in this lawsuit was in regard to the urgency of the subject matter of the underlying contract. The employer intended to continue the construction of the property and therefore, it was necessary for both the parties to analyze the status or condition of the project before it could be handed over to another contractor. The court observed that the status of project should be confirmed by analyzing the quality and the quantity of work that the contractor had implemented on the project. Further, the court held that the features of the project might be affected or impaired if the issue would be referred to regular litigation due to the gross loss of time that would be incurred in the process. Subsequently, the apex court instructed the summary court to assume jurisdiction in the matter after examining if the subject matter of the lawsuit had fulfilled the pre-requisites regarding the urgency of the matter and the non-prejudice to the rights of the parties. The court further stated that the case would be transferred to a court of first instance if either of the conditions had not been satisfied.

    Further, in the infamous appeal number 274 of 1993, the Court Of Cassation adjudicated a claim regarding the safety of the custody of a fund under its trustee. The claim was brought about in order to safeguard the fund from the damages or the jeopardy that could if it continued to exist under the custody of its trustee. In this case, the apex court said that the judge of a summary court should not exercise an action which would prejudice the rights of either of the parties. However, the concerned judge should ensure that a precautionary step is executed in order to secure the disputed fund from being utilized or disposed by the trustee. Article 997 of Federal Law Number 5 of 1985 regarding civil transactions has provided that custodianship is a contract whereby two parties entrust a disputed property with a third party in order to safeguard it during the period of the dispute. Subsequently, the third party is required to return the property to the party whose right has been established in the future. Further, article 29 of the CPC confers a court with the authority to assume summary jurisdiction in a dispute regarding the ownership of a movable property or fund. However, the party to the dispute should have a substantial reason to believe that the holder of the property would jeopardize the same before the settlement of the dispute. The apex court while exercising its appellate jurisdiction has observed that summary proceeding should be initiated only when a substantial reason exists for the claimant to believe that the funds are unsafe in the possession of its holder. The apex court further held that a summary court should scrutinize the seriousness and urgency of the issue before disposing a matter regarding the custodianship of a movable property or a fund. Simultaneously, the court should also corroborate that the rights of either of the parties have not been affected due to the precautionary step which has been instituted under the ambit of summary proceedings.

    Further, courts are conferred with the jurisdiction to initiate summary proceeding against persons who plunders the property of another. The court may assume summary jurisdiction and evict the former as long as the documents and title of the property is in the name of the other party. Summary jurisdiction is not instrument intended to exclusively safeguard the interests of a claimant with regard to his assets or properties. The court may invoke summary jurisdiction and summon a witness in a dispute who is anticipated to travel to another country or pass away due to his critical medical condition.

    Conclusion

    The need for summary proceedings is augmenting with the unprecedented expansion of the economy in the Middle East. Further, the increase in daily commercial transactions between individuals and corporations has supplemented in the development of imperative laws in the Arab nation.


    [1] Magna Carta, 1215, Clause 40 of which reads, "To no one will we sell, to no one will we refuse or delay, right or justice".

     

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    Thu, 28 Jul 2016 18:00:00 GMT
    <![CDATA[Clash of Jurisdictions: Applicability of Islamic Finance Principles under English Law]]> Clash of Jurisdictions

    Applicability of Islamic Finance Principles under English Law

    As in any religion, one may argue, there exists a spectrum of devout belief spanning from those who strictly follow the teachings of the Qur'an, to those that rarely feel the impact of their faith on a daily basis. In countries where there are both conventional and Sharia complaint banks, there are options for every investor, devout or not, Muslim or secular. The last decade has witnessed the rapid growth of Islamic finance on both an international and domestic platform. Accompanying that growth is a rise in the number of disputes that implicate Islamic law. This fact remains constant even when the primary law of the contract is that of a common law or civil law country. If judges and law makers fail to comprehend the reasoning of Islamic finance professionals in incorporating Sharia law, the result could be precedents and codes that may hamper the growth of a multi-trillion dollar industry!

    Lord Asquith had refused to apply the provisions of the Sharia Law in the case of Petroleum Development (Trucial Coasts) Ltd. v. Sheikh of Abu Dhabi[1]. He further quoted, "it would be fanciful to suggest that in this very primitive region there is any settled body of legal principles applicable to the construction of modern commercial instruments". However, if Lord Asquith could foresee the future, he would have chosen his words wisely before delivering the far reaching judgment about the inadequacies of Sharia Law. Little did he know that, years later, the United Kingdom would rank ninth in the world in holdings of Sharia-compliant assets and would become the first western country to issue sovereign sukuk. Islamic Finance is gaining a foothold in the global financial market as a commercially viable alternative to conventional financing. Remarkably, transactions undertaken in the Islamic financial sector are no longer confined to countries whose legal systems are based on Sharia principles.

    However, the Sharia compliant structures of the Islamic finance instruments face a serious impediment when it has to be implemented in a non-Islamic legal framework.  Most of the countries do not have a legal mechanism to grasp and implement Sharia law in financial structures. Moreover, the western courts do not have the necessary expertise or resources in order to interpret and enforce the Islamic finance transactions and the documents which are based on principles of Sharia law.

    In the first 500 years or so after the Hijrah, Islamic law developed rapidly to accommodate the legal needs of an Islamic Empire and its increasingly complex commercial transactions. However with the passage of time, more emphasis was given to jurists and less scope was left for original thinking based on direct reference to the Quran. This is referred to as the closure of the gate of Ijtihad. The resultant outcome was a stagnation of legal thinking by the leading intellectual Muslim scholars. Thus we find that cross border Islamic Finance contracts are usually written under English law. The prime reason proved that English law provides a greater level of certainty to the contracting parties than attempting to write a contract under the rules of Islamic Law.  The Global Islamic Finance Magazine recently held an interview allowing people to explain concisely why English law is the commonly preferred law for cross border financial Islamic transactions.

    Enforcement

    The Medjella is considered the first attempt to codify Islamic law and represents the endeavour of the Ottoman Empire. The Medjella dedicated an entire chapter to arbitration, stating within it that 'a decision validly given by the arbitrators in accordance with the rules of law is binding on all parties'. Decisions by arbitrators were not enforceable except upon confirmation by the judge, and then only if made in accordance with law. In the world of Sharia compliant finance, there has never been more of an openness to settle disputes through arbitration. In previous times, and to some extent today, scholars of Islamic law considered the enforcement of the award of an arbitrator to be purely discretionary by the judge.

    At the outset, however, it is paramount to understand why excessive focus has been put on examining enforceability issues. Generally, parties to a transaction scrutinize the law governing the same in order to determine whether their rights and obligations would be enforced in a consistent and transparent manner. A primary function of law in any commercial and financial transaction is to provide a considerable degree of certainty and to enforce the determinations of the parties in respect to their obligations. The choice of law in regard to Islamic finance transactions is more delicate as the parties would naturally want to opt for Islamic law as the governing law of the finance documents. However, parties cannot merely adopt Islamic law as the governing law without reference to the law of a particular jurisdiction since Sharia law is not a standard codified law. Therefore, a codified legal system which exercises the principles of Sharia law is often used as the governing law in an instrument in order to provide more certainty on the rights and obligations of the transacting parties.

    This embedded in the landmark case of Shamil Bank of Bahrain EC v. Beximco Pharmaceuticals Ltd (the Shamil Bank Case)[2], which discussed the scope and interpretation of Sharia law in relation to the English law. In this case, defendants failed to make payments under the murabaha agreement (the Agreement) entered into with plaintiff and consecutively, the latter claimed the amount outstanding under the provisions of the Agreement. The governing clause in the Agreement stated that "subject to the principles of the glorious Sharia, the agreement would be governed by and construed in accordance with the laws of England". The defendants argued that the Agreement contained a hidden form of riba which was contrary to the principles of Sharia and was hence, unenforceable. Therefore, the foremost issue of debate at the appellate court was whether the governing law clause in the Agreement required the consideration of the Sharia law.

    The Shamil Bank has been positively accepted by commentators in its two main propositions concerning Shariah as a choice of law, namely: i) the Rome Convention which requires that the law of a contract be that of a country; and ii) there can be only one law which governs a contract. The probability of this conclusion being the same for other common law jurisdictions is very likely in addition. When the topic regarding governing the law of the Agreement arises the court held that the provisions of a contract could only be governed by a single law. Therefore, in the present case, the Agreement could not be subject to both, the English law and the Sharia law. Further, the court held that the parties were permitted to choose the governing law of a contract in accordance with the Rome Convention[3]. However, the latter convention has provided that the parties were only entitled to choose the law of a country. Further, the judge held that the general reference to the Sharia law in the Agreement did not explicitly relate to the intention of the parties to incorporate the same as the exclusive governing law. In the light of this judgment, it is implied the moral burden of structuring Sharia compliant contracts has been placed on the contracting parties due to the reluctance of English courts to permit Sharia law to be chosen as the governing law of contracts.

    Structuring an Instrument in Compliance with Sharia

    Apparent from the Islamic economics literature, is that interest-free instruments must guide the raising and mobilization of financial resources in an Islamic economy. This is a requirement that stems from the moral injunctions well rooted in the Qur'an and the Sunna, which form the epistemological sources of the Sharia. The Sharia invokes an extensively participatory form of profit-sharing system that can replace interest-based financial instruments. Such instruments are traditionally termed profit sharing, or mudāraba, and an Islamic term for a sale where the buyer and seller agree on the mark-up for the item(s) being sold better known as murabaha. The modern murabaḥa is considered as a crucial instrument for facilitating short-term finance for consumer and business requirements. It is used to finance household items, cars or business equipment and/or supplies. It is often used to replicate a conventional trade financing agreement. With the rise of Islamic banking since 1975, murabahah has become "the most prevalent" Islamic financing mechanism. This contract illustrates several methods that are used widely in the formulation of Islamic financial transactions. This includes the conglomeration of nominate contracts, the binding promise and the application of takhayyur which initially wasput to systematic use in the compilation of the Majalla, completed in 1876. The principle of takhayyur has expanded extensively in its scope, and has proven to be the major expedient in the modernising legislative reforms throughout the Muslim world. These tools and legal stratagems are pivotal to the industry's gamut of financial structures. However, some of the indemnities comprised in murabaḥa transactions may fall foul under the English statutory law, in particular the Sale of Goods Act, 1979 and the Unfair Contract Terms Act, 1977. These laws prevent the contracting parties from incorporating such indemnities into their contracts depending on the circumstances of the particular transaction. Further, the English domestic industry has faced several regulatory difficulties due to the hybrid legal structure of the Islamic financial contracts. However, the Shamil Bank Case infers that the choice of governing law which would apply to financial documents and the extent of the applicability of Sharia law principles are bound to arise in cases where an Islamic finance transaction is concluded between parties from multiple jurisdictions (both secular and Sharia jurisdictions).

    Consonance between Jurisdictions

    Currently, English law is the most common choice of law for the governing of disputes arising under agreements purporting to adhere to Islamic principles. Some of these contracts contain no references to Islamic law and may even include a waiver of Shariah defense, implying that in case of a dispute the parties agree to waive any argument that the agreement is invalid under Shariah law. Such stipulations attempt to rectify the Sharia risk, which is a term that became known in the industry as the term associated with the risk that one party will fail under its contact obligations and then state the entire agreement is void for being invalid under Islamic law. This risk exists despite the fact that multinational law firms have created entire divisions dedicated to Shariah-compliant financial transactions. However, the current culture of Islamic finance is liberal, with parties beginning with the assumption that a deal is Shariah-compliant, and contracting parties are not necessarily knowledgeable of Islamic law.

    Hence, the principles of Islamic finance have to be synchronized within the macro-structure of the English Law in order to maintain concord between the jurisdictions. Further, it can be perceived that financial services environment of the United Kingdom does not prevent the Islamic financial industry from simultaneously developing an alternative financial market. For instance, the government's abolition of double stamp duty in 2003 had ushered in a range of new Islamic financial activity like permitting financial institutions to offer home ownership plans based on a murabaḥa contract. Earlier, these transactions had incurred double stamp duty; first when the property was purchased by the bank and then when the property was subsequently sold to the client with a profit.

    The English government also facilitated the operation of mudāraba partnerships and profit & loss investment partnerships. An important feature for the Mudaraba contract lies in the fact that it places equal importance on both financial and knowledge-based investment.  In these partnerships, the parties providing the ideas and ongoing training for the business venture are viewed as equally important to the venture. The profit share arising from these transactions would normally not be tax deductible by the Islamic Financial Institutions as the dividends were subject to a disadvantageous tax treatment. The government resolved this issue by authorizing mudāraba dividends to be treated as interest paid on loans by validating tax-deductibility on these dividends through an amendment of the Finance Act of 2005.[4]

    Further, the legal systems can be reconciled by standardizing the Islamic financial contracts. However, the issue of standardization is closely related to the controversial debate concerning the codification of the Sharia in any nation state. A partial solution to this problem can be achieved by encouraging the industry to incorporate specific provisions, such as the Auditing and Accounting Organization for Islamic Financial Institutions (AAOIFI) sharia standards into Islamic finance contracts. As long as these provisions are sufficiently specific, they can be construed to operate as a set of contractual terms agreed upon between the parties. Further, the English courts will refer to incorporated standards in their interpretation of English law contracts so that the legal substance of contracting parties' objectives is achieved. Therefore, the determinacy of such norms and standards would permit for a serene judicial interpretation.

    Conclusion

    The Sharia is a mechanism which governs every aspect of a Muslim's life. A practising Muslim is required to lead a just and pure life to achieve piety. In this endeavour, his/her income and expenditure must remain free of impurities (such as the receipt or payment of interest). To do otherwise would be to commit a sin. The need for Islamic finance can therefore be seen as a spiritual necessity rather than an economic convenience.

    As it is apparent from the above, many cross-border Islamic finance transactions, contracts are often governed by English law with the English courts expressly having the jurisdiction to decide on the necessary disputes. The stagnating fact that an Islamic finance contract, although governed by English law, must still comply with the regulations and reformations of the principles of the Sharia in order to be rightfully enforced in order to provide for the just equilibrium of balance and correlation existing between the two systems alike. 

    Sharia Law must develop a distinctive corporate culture, the main purpose of which is to create a collective morality and spirituality which, when combined with the production of goods and services sustains the growth and advancement of the Islamic way of life as quoted in The Pak Banker.


    [1] Arbitration Between Petroleum Dev. (Trucial Coast) Ltd. v. Sheikh of Abu Dhabi, 1 INT'L & COM P. L. Q. 247, 250–51 (Sept.1951).

    [2] 1 WLR 1784 (CA 2004) (UK)

    [3] European Convention 80/934/ECC on the Law Applicable to Contractual Obligations (Rome Convention) [1980]

    [4] Jonathan G. Ercanbrack- The Law Of Islamic Finance In the United Kingdom (supra)

     

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    Thu, 28 Jul 2016 17:00:00 GMT
    <![CDATA[Commercial Agency Law in Kuwait]]> Commercial Agency Law in Kuwait

    "Without local guides, your enemy employs the land as a weapon against you."

    -Sun Tzu, The Art of War

    Little did the great Chinese military general, Sun Tzu, know that his guidance on how to wage a war would draw similarities in the today's commerce and trade economies! Agency law establishes the framework which covers the relationship between a principal and an agent. The principal is generally desirous of establishing a foothold in a new market and hence requires assistance in maneuvering his way forward with the local rules and regulations. This is where the agent comes into the picture. The main obligation of the agent is to augment the business opportunities for the benefit of the principal. Further, an agency is primarily set up by the principal with the intent to tap into a foreign market without having to establish a physical presence in the country. However, it is essential that an agent is appointed upon much deliberation by the principal since the success or failure of an agency relationship often depends on the personal relationship between the principal and his agent.

    The Virtue of an Agency

    Wealthy investors and multinational giants have always had a soft corner about investing in the Middle East. Generally, agents are appointed and engaged by the principals in order to solicit sales and distribute the goods or services on behalf of the principal. The agent would receive a commission or fixed remuneration for performing his duties on behalf of the principal. However, the principal and the agent is required to adhere to the provisions of Commercial Law Number 13 of 2016 (the Commercial Agency Law) and the Kuwaiti Commercial Code[1] and must be registered in the commercial agencies register of the Ministry of Commerce and Industry (the MCI). Until recently, Law Number 36 of 1964 (the Old Law) was in force and had been applicable to commercial agencies in Kuwait for over 50 years. However, the Kuwaiti National Assembly has observed the necessity of the hour and enacted the Commercial Agency Law in order to overcome the ambiguities regarding the rights of the parties in the Old Law.

    Kuwaiti nationals and companies incorporated in the country are the sole entities who are entitled to act as agents in the country.  Further, these agents should also be registered and licensed under the commercial agencies register of the MCI. An agent under the Kuwaiti commercial agency structure is entitled to remuneration or commission from the principal for the scope of work executed by him. Moreover, the Commercial Agency Law goes a step further and grants the agent the right to demand remuneration for those transactions which are concluded or even facilitated directly by the principal, or through others in the agent's territory. Therefore, it could be concluded from these provisions that the agent enjoys better entitlement and protection by the law, as is the case in general with commercial agency laws in most of the GCC countries.

    A Consolation to the Principal 

    Until recently, one could consider the answer in affirmative but the enactment of the Commercial Agency Law while purporting to remain the same in essence, imposes certain stringent obligations upon agents. Article 6 of the Commercial Agency Law stipulates that the courts of the country would only hear and adjudicate commercial agencies which are registered with the MCI. Agents will no longer be permitted to bring compensation cases to the Kuwaiti courts if their agency agreement is not registered and upon doing so; their claims will be dismissed by the Kuwaiti courts. It is imperative to understand that Old Law also provided for mandatory registration of the agency agreement, despite which the Kuwaiti Court of Cassation had ruled that registration was not a condition to a commercial agent's entitlements under Kuwaiti law including a commercial agent's claim for compensation upon the principal's termination or non renewal of the arrangement without just cause. However, it appears that the legislature, in terms of the new provision, wants to impose a strict regime to ensure the conditions are met effectively.

    While the Old Law allowed exclusive agencies to be established in Kuwait, article 4 of the Commercial Agency Law has curtailed this privilege granted to agents by disallowing exclusive agencies and permitting principals to have more than one agent and/or distributor in the same territory. The final blow under article 4 comes for the agents in form of a condition which categorically disallows local Kuwaiti agents to be the exclusive agents or distributors of the Principal's products or services. Moreover, article 4 now allows principals to freely trade with third parties, where the principal can import goods and services in a territory from such third party, regardless of a registered agent appointed for such goods and services.

    A bare perusal of the above provisions leads us to the inference that the Commercial Agency Law while protecting the agent also ensures enough safeguard to the principal. However, the real test of a legislature is not when the situation is smooth and the relationship between the parties is copacetic but when the agreement takes a downturn and either party wants to wriggle out of the arrangement.

    Survival of the Agents

    Kuwaiti law protects an agent with respect to an unfair termination of their services by the principal. The principal is not entitled to terminate the contract, without a material breach on part of the agent. However, the principal would be liable to pay substantial compensation to the agent in the event that the former has exclusively terminated the agency agreement. Moreover, the New Law has also provided that when an agency contract would automatically be renewed if the parties to the contract have not explicitly terminated the same. Further, the agent is entitled to seek a fair compensation if the principal has denied renewing an agency contract at the end of its term. However, the court shall approve the compensation only if the agent is not negligent in the performance of his duties under the agency agreement.

    Further, it is imperative to note that the Commercial Agency Law also entitles the principal to receive compensation from the agent for any damages in the event that the latter abandons the agency at an unsuitable time and without any reasonable excuse.

    However, the Commercial Agency Law also obligates agents and distributors to continue their duties of supplying, maintaining and repairing the goods of the principal for a period of six months after their agency agreement expires or until a new agent or distributor is appointed, whichever is earlier. The new law has also specified the terms franchisee and licensee under the ambit of the definition of commercial agency. Ergo, franchisees and licensees are also treated as commercial agents and are expressly subject to the obligations and entitlements under the Kuwaiti law.

    Greetings to the New Law!

    Moving away from the well protected framework the agent was sheltered under the Commercial Agency Law now imposes certain stringent conditions upon the agent. Though the local agents may be dissatisfied by the newly enacted Commercial Agency Law, it is surely welcomed by the foreign investors in the region. Nevertheless, the agencies undertaking activities pertaining to licensing and franchising must notice and adhere to the new obligations that are imposed thereon. However, the commercial market of the country will have to wait for the proposed ancillary regulations in order to ascertain the ambit of the recently enacted Commercial Agency Law.

    [1] Commercial Agency Law and Kuwaiti Commercial Law are collectively and individually referred to as Kuwaiti Law

     

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    Thu, 28 Jul 2016 16:00:00 GMT
    <![CDATA[Life of Debt: India's SARFAESI Act on Non Performing Assets]]> Life of Debt

    'If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours!'

    -John Maynard Keynes

    Graffiti had set its tone loud and clear; just no one acknowledged it. The bad loan episode that recently gripped India's banking sector certainly did not trigger overnight. The timing of this article also could not be better – the recent Vijay Mallya (now a proclaimed offender) fallout and its aftermath is one story that has been hitting the news headlines on one hand and Subrata Roy of Sahara Group who is out on interim bail (but; not released) also happens to be in news. So, why is the timing perfect, you may ask? In the former case, Mallya managed to escape prosecution in India by evading his homeland whilst the latter was arrested and this resulted in (and; continues to) disposal of his assets domestically within India as well as overseas. 

    Banks after all play a fiduciary role in acting as trustees or custodians in distribution of domestic currency. Mobilizing deposits is crucial and vital for any developing country. Domestic funds on one hand promote the economic growth by controlling flow of currency and paves way for development on the other. Banking institutions employ a great deal of infrastructure, man-power, time and strategies in mobilizing the deposits. Banks' lend and invest based on deposits, reserves and borrowings.

    The asset quality held by banks reflects the quantity of existing and potential credit risk associated with the loan and investment portfolios, other real properties owned, and other fixed or current assets, as well as off-balance sheet transactions. Critically deficient asset quality or credit administration process can be detrimental to banking business and can result in a severe negative effect on bank, its business, its performance indicators such as credit rating, liquidity, revenue generation, and operation and control of bank. Critically deficient asset quality results in accumulation of non-performing assets (the NPAs)

    So, what are Non-Performing Assets really?

    In a bank's purview, all loans and advances that it issues to its borrowers are considered as assets as it results in revenue generation for bank by collecting interest. However, these institutions do not undertake a coherent due diligence and investigations to scrutinize the authenticity of the underlying collateral or the capability of the borrowers to repay their debts. In essence, the bank's revenue stream, its standing and credit worthiness will be in jeopardy; should the debtors default in their payments.

    The Indian parliament realizing that turning a blind eye won't help decided and passed the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) with a view to safeguard the interests of the secured creditors against defaulting debtors. Section 2(1) (o) of the SARFAESI Act dealing with non-performing assets (an NPA) provides that 'NPA is a loan which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset'. Further, a circular released by the Reserve Bank of India (the RBI) in 2014 states that a loan can be classified as sub-standard, doubtful or loss asset if the debtor has not paid its interest within 90 (ninety) days from the due date. This means that a loan account would be categorized as an NPA if its interest remains due for more than 90 days.

    Earlier, a secured creditor's sole recourse to realize an unpaid loan was to initiate a suit in a court of law to execute the underlying collateral property. The creditors were at a comparatively weaker position in this scenario as the judicial process was lengthy and exorbitant. Therefore, the main objective of the SARFAESI Act was to curtail the delay in the process of adjudication by empowering secured creditors to realize the underlying collateral without instituting a suit. Section 13 of the SARFAESI Act provides that the secured creditor of an NPA could send a written notice to the borrower requiring him to repay all his liabilities. Subsequently, the secured creditor would be authorized to undertake any of the following measures without the intervention of the court if the borrower has failed to repay his liabilities within 60 (sixty) days from the date of notice:

    ·        to acquire the possession and the right to transfer the secured asset of the borrower;

    ·        to take over the management of the borrower's business which is the underlying collateral of the secured loan;

    ·        to appoint a person to manage the secured asset of the borrower;

    ·        to send a written notice to any person who has acquired the secured asset from the borrower or from whom any money in due to the borrower.

    The Muddle in the Financial Industry

    The SARFAESI Act has provided for lucid provisions regarding the power of a secured creditor to acquire the collateral of an NPA. However, the detrimental competition in the financial sector has adversely transformed the de rigueur of banks in order to increase the net value of their assets. Hence, they provide loans and other credit facilities without conducting an efficacious due diligence process regarding the borrower and their secured assets. Banks and financial institutions line up in order to provide large corporations with immense amounts of loans as this would substantially increase the asset value of the former. These institutions issue immense amount of loans to corporate giants without conducting thorough appraisals on the authenticity of the borrower. Further, these institutions are forced to reduce the minimum collateral required for corporate debts due to the goodwill of the large corporations and the enormity of the value of these debts. Therefore, banks are lured into issuing loans without obtaining adequate tangible collateral securities on the same.

    Further, banks and financial institutions do not inquire on the corporations' strategy to administer and discharge the loans. This implies that the banks do not exercise any kind of control over the debts once they have been issued. Therefore, top executives of the borrowing corporations are at the liberty of diverting these loans to other unrelated businesses or for their personal benefits. The borrower corporations cite a lack in profits or unfriendly governmental policies when they fail to meet the due dates of payments. The infamous case of the forlorn Kingfisher Airlines manifested this drawback in the financial system of the country when its CMD, Vijay Mallya, used the finances of United Breweries Limited in order to fund the working of the airline company. Further, the corporate governance standards of the country are also defeated when top executives of corporate giants exercise ultra vires acts to appropriate the company's debts in order to meet their own whims and fancies. This substantially increases the possibility of borrowing corporations to manipulate the loan amounts in order to finance other entities without the bank's knowledge. However, banks do not have the necessary framework to scrutinize the loan applications based on the authenticity of the borrower and the underlying secured collateral. Hence, the borrowing corporations take undue advantage of the bank's failure to effectively monitor the appropriation of the loan amounts before and after its disbursement.

    Securitization: The Antidote?

    Earlier, banks were the primary intermediaries of the financial sector of the country. However, other types of financial intermediaries came into existence with the introduction of various financial products that aided in stabilizing the financial industry. Banks and other financial institutions require excessive amounts of liquid cash in order facilitate their daily operations. However, the assets of these institutions are blocked in various assets such as loans, advances, overdrafts etc. Therefore, their debt equity ratio and capital requirement are adversely affected due to this blockage of funds. This impediment is eliminated by the application of financial products such as securitization which succours the financial institutions in obtaining funds by the sale of existing financial assets. In the primary stage, the financial assets of banks and other financial institutions are combined and transformed into marketable securities. Subsequently, these marketable securities are sold to third party investors in the form of bonds or collateralized debt obligations (CDOs). Therefore, securitization is the financial practice of converting the financial assets of banks and other financial institutions, into marketable securities in order to sell them to third party investors.

    A major drawback in the Indian securitization market is the lack of a substantial legislation to exercise and administer the transactions regarding securitization as the country is a relatively new player the market. However, the RBI has issued guidelines regarding the governance of securitization since the banks and financial institutions are the key participants in this market. Further, the parliament introduced the Finance Act of 2016 with the primary objective of amending the taxation laws relating to the securitization market in order to strengthen and expand the same.

    The SARFAESI Act has provided for the institution of securitization companies and asset reconstruction companies in order to facilitate the process of securitization in the country. These companies are permitted to acquire the right arising from loan assets of banks and other financial institutions for the purpose of selling them to other investors. Section 5 of the SARFAESI Act provides that securitization and reconstruction companies can acquire the financial assets of banks and other financial institutions by entering into an agreement with the latter or by issuing debentures, bonds or securities.

    Prevention is Better than Cure

    Banks and financial institutions in the country have been tormented due to the pressure of the amplifying number of loan defaults affecting their credibility and overall financial condition. Hence, these financial institutions should strive to develop an effective monitoring process in order to determine the actual credibility of the borrowers prior to issuing loans and advances. Banks should conduct scrupulous periodic surveys on its debtors in order to defeat plight of the dying banking industry in the country. Frequently, the borrowers provide the banks with unidentified and marginalized collaterals in order to obtain high value loans. Therefore, the risk of nonpayment by the borrowers could be narrowed by scrutinizing the veracity of the collaterals which are provided by the borrowers. The financial institutions should also overview the application of the funds post disbursement of the loans in order to corroborate that the funds are not utilized by the borrowers for any fraudulent or illegal purposes. In essence, these financial institutions should implement a streamlined appraisal process to contemplate the meticulous employment of the loan amounts. Spasmodic internal and external audits by banks and the RBI could aid in identifying the obscure NPAs in the books of accounts.

    Banks and financial institutions should be urged to disclose their NPAs on a regular basis to ensure that the deliberate defaulters are not issued loans elsewhere. Substantial legislations to counter red-tapism in the industry should be enacted by the parliament as quintessential financial industry is the principal catalyst of a rapidly developing country. Therefore, it is essential to maintain utmost transparency to apprehend any corrupt or fraudulent activities in the industry.

    Further, the RBI should endeavor to enforce effective regulations in order to elevate the transparency in the financial sector. The latter should take necessary precautionary measures to avoid another recession as it is the central regulator of the country's financial and banking sector. A recent report that the RBI had submitted to the Supreme Court of India has caused widespread panic in the financial sector as it revealed the details regarding the extent of bad debts that were borne by the banks in the country. Further, the inefficiency of the authorities to curb the issue of the NPAs could result in a serious impediment in the banking sector. The sour truth is that such impediments are the cardinal reasons that crash the economy of a rapidly developing country.

     

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    Thu, 28 Jul 2016 15:00:00 GMT
    <![CDATA[Aircraft Mortgages]]>  

    Aircraft Mortgages

    Sunil Thacker and Rekha Panchal discuss the technical aspects surrounding aircraft financing, mortgages, governing law and few court precedents under UAE, UK and US Context.

     

    An economy's financial markets are critical to its overall development. Banking systems and stock markets enhance growth and development, the main factor in poverty reduction. A well-developed and sustained financial system should improve the efficiency of financing decisions, favoring a better allocation of resources and thereby economic growth. Likewise, careful and planned legal reforms play a pivotal role in overall development of financial markets. Economic growth in other words is effectively linked to i) cost reduction; ii) increasing availability of finance; and iii) promoting economic restructuring[i]. This effect is greater for those players who rely heavily on external financing as against resorting to retained earnings[ii]. Aviation sector is a perfect example of this kind of industry players. Aircraft financing has evolved (especially) over the last decade. What used to be gasconade of super wealthy in past is today no longer deemed alluring extravagance.

    A careful, well-planned and structured framework for secured transactions reflects a crucial step in improving access to credit and increasing credit for financing equipment. Aircraft financing can be complex on account of varied reasons including i) the fact that aviation industry is heavily regulated; ii) conflict or incompatibility of laws in foreign countries compared to domestic regulations thereby creating enforcement problems for secured creditors; iii) ownership and registration provisions (see below); and iv) operating restrictions to name a few.  The Blue sky case and issues raised due to choice of law is only a tip of ice berg and there are various other aspects that a lender must consider while entering into aircraft mortgage. To repossess the aircraft on default of payment by preventing de-registration from the jurisdiction where the aircraft operates is the key function of the Mortgage. Despite the fact that attempts have been made to protect the rights of financiers at international level by Cape Town Convention; there still exists - a lacuna due to the contradictory lex registri or differences in local law mortgages.

    The Chicago Convention of 1944 on International Civil Aviation (the Convention) deals with registration of civil aircrafts (and; not state aircrafts). United Arab Emirates accessed the Convention on 25 April 1972 and South Sudan is the latest entrant as of 11 October 2011. In 2013, the President of the ICAO Council invited Taiwan to participate in the 38th ICAO Assembly but Taiwan has not yet formally accessed the Convention. Article 18 of the Convention proscribes aircrafts from registering in more than one state and further Article 19 sets out that registration of aircraft in any state shall be in accordance with such state's laws and regulations. In the United Arab Emirates, the UAE General Civil Aviation Authority (the GCCA) issues timely 'Civil Aviation Advisory Publication' (the CAAP) outlining Guidance on Aircraft Registry Requirements. The CAAP applies to all UAE operators and persons or entities holding legal interests in registering or de-registering civil aircraft in the UAE Civil Aircraft Registry, as well as entities that require registering interests on International Registry in Mobile Assets for which the UAE is the State of Registry. In contrast, in the UK an aircraft register is maintained to record names of operator or charterer by demise (for instance, lessee of aircraft) and the United States maintains registration of owners which is limited to US Persons or entity. The Convention has had a bearing on Blue Sky One Ltd & ors v Mahan Air and another[iii] (the "Blue Sky case").

    This article is structured to reflect the considerations that aircraft financier must deliberate on and consider while structuring the aircraft mortgage transaction:

    1. Ownership Provisions

    Adequate planning and initial diligence is important in establishing and determining aircraft ownership. Private jets and charter flights are generally registered in individual names or under the name of a special purpose vehicle (the SPV) or free zones. The laws vary significantly in different jurisdictions when it comes to ownership as discussed above. In India for instance, registration of such aircraft under an off-balance sheet vehicle such as overseas SPV is unlikely to be accepted. Likewise, the Federal Aviation Administration in the United States registers and hangars aircrafts in name of US Persons or US entities. Non-US owners are required to appoint a trust company and such trust will hold the title to and in the aircraft on behalf of such foreign owners. In case of true lease form of arrangements, the lessor must be identified and registered as the owner on FAA's register.

    In the event where lease does not constitute a true-lease, the registered owner shall be the lessee. This gets more complex when dealing with mixed-use leases as FAA may raise a concern and treat such mixed-use as conditional sale. In case of mixed-use and based purely on author's experience, it is advisable to obtain a written opinion from FAA's legal division prior to closing.

    In cases where aircrafts are registered under an SPV, the SPV will enter into the security financing documentation which typically includes an aircraft sale and purchase agreement, a loan facility agreement and security documentations. The security package must include:

    • An aircraft mortgage which shall give the financier inter alia the right to sell the aircraft on default by way of security over the aircraft. As mentioned above, it may not be possible to take local law mortgage over an aircraft as the same is not recognized in any form as valid type of security in some jurisdictions such as Belgium. In such countries, financier must consider other form of security interest and effectiveness of such arrangement to protect its rights. Failing to locate some arrangement protecting the enforcement of security interest, one must refrain from financing for transaction involving countries having ambiguity over the enforcement right of security interest;
    • Loan agreement with SPV guarantee from parent company or beneficial owner as guarantor is prudent. Such guarantee is to ensure remedy against the ultimate beneficial owner of the SPV which is usually a limited liability entity or high net worth individual. This will ensure SPV's co-operation to realize financier's security over aircraft. Further agreements includes multi-party agreements or security assignments of the SPV's and/ or operator's rights under the various contracts relating to the maintenance and operation of the aircraft, for instance, the operating or management agreement, maintenance arrangements and insurance policies over the aircraft and assignments of manufacturers' warranties.
    • Other means to ensure security is to have charge over shares in the mortgagor which is usually SPV or even taking charge over share of company acting as guarantor i.e. parent company. The entity or person giving charge may not be borrower but must be owner of the shares in the borrower. The legal advice on laws of jurisdiction of the borrower for rights over the charge on registered shares as contrary to bearer shares must be obtained.
    • Multi party agreement must be drafted if the aircraft is registered in jurisdiction which is usually not considered creditor friendly jurisdiction. The multi-party or tri-party agreements can aid financier to ensure that operator undertake to act on financier's instruction. The agreement between financier, operator and borrower is to ensure that the operator shall fly the aircraft to lender friendly jurisdiction as per the instruction of financier to make security interest easily enforceable in case of default. 

    2. Place of Registration

    • Careful consideration should be given to registration of the aircraft (that is, to be financed) must be made. Additionally, one must examine whether the financier can record its interest in the aircraft as mortgagee in the state of registration. This is to confirm if the state of registration recognizes the form of mortgage. It is relevant to note that some countries do not even consider aircraft mortgage as valid type of security in any form and hence pledge or such other forms needs to be considered for effectiveness of the arrangement.  For instance, in the United Arab Emirates, it is possible for parties to register the mortgage with the GCAA. It is also possible to form a commercial pledge over the aircraft and subsequently register the pledge with GCAA.
    • The Convention deals with the registration of aircraft. As discussed above, the Convention provides that aircraft may only be registered in one jurisdiction at a time. However, the registration of an aircraft may be changed from the register of one contracting state to another. This will govern whether law of registration or lex situs will apply while enforcing the mortgage. Lex situs means when the title is transferred from an aircraft, the validity of the mortgage or transfer of moveable asset is determined by the laws of the place where that asset is physically situated at the time of transfer i.e. t the time of execution of mortgage.

    3. Choice of Law and Laws Governing the Aircraft Mortgage:

    • Aircraft mortgage rights can pave way for complexities when dealing with varied jurisdictions. Some jurisdictions may require mandatory registration of mortgages in order for mortgage rights to be effective. Accordingly, place of registration is considered valid conflict of law applicable which is called lex registri; some states considers lex loci actus (the law of the country of the instrument of transfer) whereas some consider lex situs such as England. Some jurisdictions apply laws of the place where the debtor is incorporated or where the mortgage is executed and delivered i.e. the proper law of the transfer.
    • Usually, English law and New York laws are common choice of law for foreign law mortgages as they are perceived as creditor- friendly. Choosing the laws other than the laws of registration (foreign law mortgages) which is called local law mortgage needs contemplation on the issue of the enforcement of security interest. Hence, aircraft financier as a mortgagee should seek local legal advice to ensure that the aircraft mortgage is valid and enforceable in jurisdiction where it is likely to be enforced. For instance under English law the concept of lex situs is applicable. Accordingly if one wishes that the English law must be applicable to the mortgage transaction then as a matter of prudence the aircraft must:

    i.            be situated in UK; or

    ii.           be in international airspace during the execution of the mortgage or when the transaction closes; or

    iii.          if this is not practical to be performed, the financier must obtain an opinion from lawyers of lex situs where the aircraft if located during the transaction closure to confirm whether such jurisdiction recognizes the validity of English law mortgage. It is pertinent to note that some jurisdictions do not recognize English law mortgage. For instance, France and Switzerland are some of the jurisdictions which do not accept English law mortgage.

    iv.          In view of the above deliberations the aircraft financier must obtain legally enforceable and effective security over the aircraft in every relevant jurisdiction.

    Conclusion

    Considering the above contemplations it is suggested that the security must be taken under Cape Town Convention however the borrower must be located in the contracting state. Otherwise, it is recommended to mortgage under the laws of registration specifically when aircraft is physically situated in that jurisdiction. Other means to protect security is to take foreign law mortgage under English or New York law if the same is recognized in other qualified jurisdictions or to depend on the shares of the SPV borrower company on which the financier have security to repossess the aircraft on default. This way the lender can seek the sale of aircraft by instructing the borrower to enter into sale agreement with third party which provides for payment of sale proceeds directly to the lender. The suggestions needs to be considered on cases to case basis with jurisdictional laws considering the factors stated in the article.   

     


    [i] See A. Saunders & I. Walter, Proposed Unidroit Convention on International lnterests in Mobile Equipments Applicable to Aircraft Equipment through the Aircraft Equipment Protocol - Economic Impact Assessment, (A Study prepared under the Auspices of MSEAD and the New York University Salomon Center, September 1998)](1998) 23:6 Air & Space Law 339-416

    [ii] See Evolution of Aircraft Finance Law - Considerations of the UNIDROIT Reform Project Relating to Aircraft Equipment, Yan Wang; page 1

    [iii] [2009] EWHC 3314 (Comm) and [2010] EWHC 631 (Comm) – the case was heard in two phases.

     

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    Thu, 28 Jul 2016 14:00:00 GMT
    <![CDATA[Spotting the Fake: Forgery Under UAE Law (Part 2 of 2)]]> Spotting the Fake: Forgery Under UAE Law 

    Part 2 of 2

    In the previous issue we discussed material aspects relating to forgery under UAE Criminal Laws and other statutes. We discussed broadly – the definition of forgery, types of forgery (material and moral), legal implications of denial in light of law of evidence and finally we referred to some relevant court decisions on the matter. Mr. Ghany continues with part 2 of this two paper series and discusses other broader aspects relating to challenging a claim based on forgery, procedures for challenge, and relevant court precedents on the matter.

    Everyone should have enjoyed the thrill in forging their parent's signature on a sick-leave note for school or in watching the tales of the celebrated forger, Frank Abagnale, in the 2002 thriller 'Catch Me If You Can'. However, what if someone forges your signature on a cheque amounting to millions? Or in a document relating to the fraudulent sale of your apartment? Yes, doomed is the right word! It is, therefore, significant to envisage about the procedures that have to be followed in a predicament of forgery. Federal Law No. 10 of 1992 regarding the Evidence in Civil and Commercial Transactions (the Law) deals with the provisions that govern the hornet's nest of forgery in the Arab nation.

    The 'curtain-raiser'

    The provisions of the Law and the pronouncements of the courts in the country has manifested that a defendant cannot dispute the authenticity of an official document by his mere denial. Rather, the defendant is required to challenge the document on the grounds of forgery which was attributed to him by his handwriting or signature, stamp or finger-print. Similarly, a party will have to challenge the document on the grounds of forgery if he has admitted the validity of the stamp but has denied the impressions or the particulars contained the same document. This can be elucidated with the help of the following illustration: Suppose, the director D of company A has disputed the authenticity of the particulars of a document after accepting that the stamp on the letterhead of a document belongs to company A. In this instance, D would be required to challenge the document rather than simply denying its authenticity.

    Help Yourself!

    The Law has provided that a party who challenges the authenticity of a document is placed with the burden to prove the subject matter of his challenge and supplement the same with a memorandum. The judgments of the court have also aided in providing an undisputed interpretation of articles 23 of the Law regarding the subject matter of a party's challenge of a document. However, the court does not have the obligation to verify the document if the party claiming the forgery has not provided any substantial evidence or if he has not requested for an investigation of the same. Further, the authenticity of a document can be challenged on the grounds of forgery at any stage of an ongoing litigation. Provisions from articles 28 to 32 of the Law has provided for the procedures to be followed in an event of forgery. The Law provides that a memorandum, challenging an allegedly forged document, should be submitted to the court with following particulars:

    ·        the points of the alleged forgery;

    ·        his evidence; and

    ·        the process of investigation which should be followed in order to prove the forgery.

    However, it is not necessary for a party to defer until a forged document has been brought against him as the nation believes in the policy 'prevention is better than cure'. Hence, article 33 of the Law entitles a party in an informal document to institute a suit in order to pursue the other party to admit that the underlying document has been imprinted in the handwriting, signature, seal or fingerprint of the latter party. Further, the document would be considered to have been imprinted by the defendant if he does not deny it. However, an investigation would be initiated if the defendant has denied his role in the execution of the document in question. The 2010 judgment[1] of the Dubai Court of Cassation had relied on this provision and provided that any party who apprehends the future use of a document has the right to challenge the same on the grounds of forgery.

    In cases where Mr. A submits a document (say, a receipt) before the court against Mr. B and upon review of the receipt, Mr. B invokes a claim for forgery, in such cases – Mr. A can request the court to suspend and cancel the proceedings on the premise that he will not rely on the said receipt. The courts in such instance demand custody of the receipt (and; other documents if any) if Mr. B requests the courts to do so to maintain B's interest. That said, it is imperative to mention that the courts in their absolute discretion may reject Mr. A's request if in the opinion of the court – the receipt is in fact forged.

    Furthermore, a party who apprehends to be confronted with a forged document is also entitled to institute a suit against the holder of that document under article 34 of the Law. The Dubai Court of Cassation has taken the view that the scope of article 34 is to be provided for those who fear or apprehend the use of a forged document. Furthermore, the court has stated that the authenticity of a document cannot be challenged if it has been used or relied upon by the parties. Therefore, it is imperative to percept that a suit for forgery must be instituted immediately after the forgery has been apprehended by the party. A separate suit, however, need not be filed by a party if the forger of a document has relied on the same for instituting an existing suit.

    Further, in an infamous case that was disputed before the Dubai Court of Cassation, a person disputed his signature on a guarantee and consecutively, the court ordered in its remitting judgment that the document be passed to the criminal laboratory for a comparison to be made between the true signature of the person alleging the forgery and the signature appearing on the document, in order to establish whether he was in fact the guarantor of the debt the subject matter of the action.  Instead of sending the document to the criminal laboratory, the appeal court to which the case was remitted instructed an expert to express an opinion on whether the genuine handwriting and the handwriting in the document were the same, and to state whether writing had been subsequently placed on a document signed in blank.  The expert was not able to express a conclusive opinion as to whether the signatures were the same; however, he did express the view that the document was signed in blank and that the terms of the document were filled in later. Further, the court of appeal took the view that this invalidated the document.  However, this judgment was wrong at law, as there is nothing to prevent a document being signed in blank and then becoming a valid document when further particulars are filled in, provided that the person who has signed in blank has authorized this to be done, and there is no fraud involved.  Further, the Court of Cassation had specifically ordered that the document be sent to a criminal laboratory for a comparison between the true signature and the allegedly forged signature.  The court of appeal did not abide by that order, whereby the judgment of the court of appeal was deemed defective and was consequently set aside.

    In another case, the Cassation Court of Dubai observed that the ratification of a document does not prevent a challenge for forgery as the same can be made against any documents whether formal or customary or issued outside the country[2]. The suit for forgery would be maintainable even if the document has been attested by the official authorities of the country in which the documents were issued.

    The Judiciary

    The Law has conferred the court with the authority to order for an investigation if the same is not convinced with the facts and evidences regarding the veracity of a document; or if the court deems that the investigation requested by the party could produce a justifiable outcome. Such an investigation would be carried out by verifying the documents or obtaining testimonies of witnesses or both. Further, the investigation process would stand suspended if the party challenging the authenticity of the document relinquishes his claim. However, the court would subsequently seize the document if the challenging party has abandoned his claim at any stage of the investigation. The Law has also conferred the courts with the authority to reject a document on the grounds of forgery, even if the parties have not challenged the authenticity of the same. However, the court is required to explicitly state the circumstances and the evidence which proved the fraudulent fabrication of the document. Further, the courts can order for an investigation into the issue of forgery if the appointed forensic laboratory is not convinced with the scope of evidence that has been provided to it[3]. Therefore, it is evident that the Law has provided for effectual provisions regarding the protection against forgeries in the nation. However, one should invariably conduct due diligence about legally binding documents before authorizing or signing them.

    This concludes the two part series on forgery law. STA's team of criminal lawyers in Dubai and other offices will continue to deliver bespoke legal information that will lay your curiosity to rest. Court Uncourt is now available on Apple iOS and Google Play. Thankfully, Apps cannot be forged at least as of now!


    [1] Commercial Appeal No. 260 of 2010

    [2] Ruling of the Dubai Court of Cassation in the Civil Appeal No. 228 of 2009

    [3] Ruling of the Dubai Court of Cassation in Commercial Appeal No. 3 of 2010

     

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    Thu, 28 Jul 2016 13:15:00 GMT
    <![CDATA[The New Abu Dhabi Strata Law]]> The New Abu Dhabi Strata Law

    Nothing sets my teeth on edge like a real estate hoarding screaming 'Buy Now, Pay Later'. If one were to apply such signs in actual terms, I wonder whether the next hoarding that will knock my teeth off will read 'Buy One, Get One Free'. One of the key issues faced by investors in sale and purchase of off-plan properties is that buyers are not entirely sure if the apartment or unit purchased will in fact turn out to what was exactly agreed.

    Speaking purely and entirely on concerns, one of the key issues that home owners generally face is in the area of i) management and operation of property upon handover, ii) maintenance fee and service charges that will have to be paid and rights and; iii) interests of owners, and occupiers in the common areas. The concept of strata is where an individual or entity has the right and interest in the ownership of cubic air space within an allocated area. 

    In other words, strata law means subdivision of a developed building property or gated community in to different layers. Each layer is then subdivided into one or more units along with common areas which form the part of the property.

    The real estate industry been expecting new property laws in the Emirate of Abu Dhabi in order to expand growth and expecting a measured response over the impact of the potential oil output freeze. Further, every law enacted gives hope to people that it would bring a positive change in safeguarding their rights. Real estate industry involves a comparatively higher stake and one clearly cannot assume that he/she is fully aware of the regulatory landscape. The Emirate of Abu Dhabi recently enacted Law Number (3) of 2015 concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the New Law). This was a long-awaited legislation which primarily aimed at regulating the real estate industry in the Emirate of Abu Dhabi. It is expected that it will give impetus to real estate industry as the provisions under the New Law provides additional clarity and legal certainty. The enactment of the Real Estate Law represents a watershed in the Abu Dhabi real estate industry, particularly in the investment areas where the absence of a real estate law has been keenly felt.

    Demand and supply inequity can have significant repercussions on real estate industry and new law aims at addressing this concern by placing a higher degree of responsibility on property developers in Abu Dhabi. Expat residents are more likely to invest long-term in the market and non-resident customers are expected to buy peace of mind from the New Law. The New Law will also lessen the impact of potential cyclical economic factors such as the effect of oil price movements on the real estate prices which would create a less volatile environment in order to enhance the investment and growth in the sector.

    The New Law has elevated the level of consistency in the disclosure statements and consumer protections in the Emirates of Abu Dhabi and Dubai. Further, there is no substantial difference in the matters which are mandated to be disclosed by the parties. Therefore, the developer is liable to pay damages regarding any irregularity in the contents of the disclosure statement for a period of two years from the date the unit is transferred to a purchaser.

    Further, the New Law has considerably aligned the developer's liability for defects in both the emirates of Dubai and Abu Dhabi. Therefore, the developer would be liable for structural defects in the building for 10 years from the date of receiving a completion certificate.  For defective building installations, the liability period of the developer for replacing or repairing the defect is for a period of one year. Whilst the requirements to constitute an owners' association between the two jurisdictions is very similar, Abu Dhabi has gone a step further with the inception and implementation creation of a new concept.  The New Law has provided that the administrator of the owners' association is the developer or another person who is appointed by the Chairman of the Department of Municipal Affairs (the Department) to carry out the owners' association's operations.  Further, the administrator would bear the responsibility for the affairs of the owners' association including the responsibility for its management and operation of the common areas, public services and service facilities.

    The New Law has also implemented another provision which has no direct nexus to the strata law in Dubai[i]. Although we don't yet have any clear guidance as to its intention or implementation, we do think there are potential opportunities for creative developers. In Abu Dhabi the owners' association has the right to own stocks and shares in service companies related to their own strata plan and to grant exclusive rights over common areas.  The New Law has explicitly conferred the not-for-profit owners' association of a property with the right to own shares in a profit company.

    Key Features of the New Law 

    The new Strata Law introduces a number of key new features to the laws regulating multiple-owned developments, including:

    • The determination of surveyors' directions to standardise the area measurement methodology used by developers;
    • Provisions for the formation of owners associations which can hold title to common property within multiply owned developments and be responsible for its repair and maintenance. In Dubai, each owners association have a prescribed form of constitution, and an owners association may itself be a member of a higher owners association, thereby permitting the registration of layered strata schemes;
    • Provisions for sub-division of the title into units and common areas. In Dubai, the Strata Law contemplates the 'volumetric' subdivision of a building into designated components. This is particularly important for mixed-use developments that include a hotel as hotel operators wish to avoid being part of an owner's association structure;
    • new requirements for the sale and marketing of off-plan units, including the developer's ownership and development rights over the project land, establishment of an escrow account, registration and approval of the key development plans from the Department. Given the restrictions on withdrawals from escrow, the developer will effectively have to self-fund (or obtain loan finance) to enable the project to reach 20% completion of construction works;
    • providing off-plan purchasers with express termination rights in cases of 'substantial prejudice to their rights'. Although certain examples have been provided as to what constitutes 'substantial prejudice', this list is not exhaustive. We, therefore, recommend the developers to provide maximum disclosure to the purchasers in order to avoid any potential claims by the latter as to any substantial prejudice;
    • similar to the position in Dubai, there will be a general requirement for a 'disclosure statement' to be attached to the sale and purchase agreement which provides the prescribed information. The form of this disclosure statement will be set out in the regulations although it is expected that this will be similar to the form prescribed in Dubai; 
    • provisions for the automatic imposition of a lien to be placed on a real estate unit in the case of unpaid service charges. Dubai has a similar lien although the enforcement of this lien has proved to be difficult, so it will be interesting to see whether the same develops in Abu Dhabi; and
    • the developer now has an express decennial (10-year) liability for the structural integrity of the building, with a one-year defect liability period. This is similar to the position in Dubai.

    Conclusion

    In Abu Dhabi, the owners' association has been conferred with the right to own stocks and shares in service companies related to their own strata plan and to grant exclusive rights over common areas. This law explicitly allows the not-for-profit owners' association to own shares in a for-profit company. We can imagine situations where developers could use this provision to create a point of difference for sales by offering an opportunity to eliminate or reduce service charges for unit owners by deriving profits elsewhere.

    Time will tell how developers use this opportunity and how the New Law is administered. There will be some compliance issues where lawyers and property professionals will need to be careful to comply with the differing detail. Abu Dhabi strata law provides scope for the exercise of discretions in some areas that will be important to follow.


    [i] Please refer Court Uncourt, March 2015  for Dubai Strata Law available online at http://www.stalawfirm.com/en/blogs/view/dubai-property-law-strata-law-explained.html

     

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    Thu, 28 Jul 2016 10:00:00 GMT
    <![CDATA[The Fueling Of MLM through Bitcoins]]> The Fueling of MLM through Bitcoin Pragya Gianani; Shahed; and Faraz Salat discuss the legal aspects surrounding multi-level marketing and usage of bitcoins.  

    Any entrepreneur will tell you that the success or failure of a startup, business idea, or product depends on demand. Supply and demand are the basic driving forces of economies. But, when we think of a successful start-up idea, we recognize that success is almost entirely due to an entrepreneur's initiative in fulfilling a demand that they recognized, closing the gap between consumers who require this service, and the aforementioned demand.

    But what about successful business models that didn't depend on demand generation, but demand creation?

    Demand creation is the concept of 'creating what people love before they know they want it.' Essentially, drumming up excitement for a product or service people didn't even know they wanted, and capitalizing off the buzz and magnetism which has been created from thin air.

    Is that even possible? The CEOs of Netflix, Uber and Kindle would respond in the affirmative.

    The founder of Netflix, Reed Hastings, found himself irritated by the late fees associated with renting DVDs from Blockbuster. He created a demand for DVD-by-mail that eradicated the need to travel to a physical shop in order to rent DVDs, and introduced a single-pay subscription system and CineMatch, an algorithm that recommended movies based on the consumer's taste in television. Eventually, it became what we know as Netflix, as we know it today; a purely streaming website for an affordable price, with thousands upon thousands of TV and movie options. Did we need this? No. Was there an extensive demand for this commodity? No. Yet, here we are.

    Bitcoins

    We've seen the rise of Bitcoin over the past few years. In layman terms, Bitcoin is an electronic currency, not regulated by any authorities, providing users with perfect anonymity. Seems too good to be true, and yet, Satoshi Nakamoto single-handedly created this cryptocurrency. It is unnervingly easy to use, requiring only an internet connection and the software associated with Bitcoin mining. A person holds their Bitcoins in what is called an eWallet and exists solely on the internet. Essentially, any transaction involving Bitcoin would require absolutely no middlemen.

    New Bitcoins are created in a process called 'mining,' which involves Bitcoin users' computers attempting to solve a complex mathematical puzzle related to the current number of Bitcoins. Reuben Grinberg of Davis Polk compares it to finding the missing piece of a puzzle. Whomever finds the puzzle piece wins a certain number of Bitcoins, and the process starts all over again. Finding the Bitcoin solution involves an incredible amount of processing power, and so users often band together in 'pools' in order to find the solution and to earn Bitcoins more regularly.

    Why would anybody be interested in this currency? What might have driven Satoshi Nakamoto to spend as much time as he did to develop it? Perhaps it was suspicions in regards to financial institutions and central banks like the US Federal Reserve. Perhaps people seeking privacy might find comfort in the anonymity afforded by Bitcoin transactions. As with gold, the idea is that the value of Bitcoin could survive some sort of cataclysm.

    However Bitcoin is primarily unregulated in most jurisdictions, despite the volume of Bitcoin transactions taking place. It might be prudent to discover the possibility of potential regulation in the following important areas:

    United States of America

    Federal Tax Law

    • The IRS has decided to treat Bitcoins as property for taxation purposes.

    Federal Anti-Money Laundering Laws

    • Because money laundering crimes often involve transactions processed by banks, the Bank Secrecy Act (BSA) has imposed many record-keeping requirements on banks and other financial institutions. Currently, Bitcoin exchanges and individuals and businesses that change Bitcoin into U.S. Dollars, or other foreign currency, must register with the Department of Treasury and comply with Bank Secrecy Act requirements.

    Canada

    In January 2014, the Department of Finance stated that Canada does not consider Bitcoin to be legal tender. Further, the Canadian Revenue Agency has announced that Bitcoin will be taxed in two ways:

    • Transactions for goods and services will be treated as a barter and taxed accordingly;
    • The profit made from buying or selling Bitcoin for speculative purposes could be considered income or capital and taxed as a security.

    European Union

    In early 2014 the EBA sent the European Commission and European Parliament guidelines for the regulation of digital currencies. The EBA instructed financial institutions to refrain from buying, holding, or selling digital currencies until these new rules are in place.

    India

    In December 2013 the Reserve Bank of India issued a warning about Bitcoin. This led to virtually all Bitcoin exchanges in the country choosing to suspend operations. One Bitcoin exchange reported having been raided by government officials, while another exchange said tax officials visited their premises to investigate how digital currencies could be managed and taxed.

    Israel

    In February 2014 the Bank of Israel issued a generic warning about the investment risks and dangers of fraud, money laundering, and terror financing that come with Bitcoin usage.

    Australia

    The Australian Tax Office (ATO) has stated that income and profits derived from Bitcoin transactions are taxable.

    Let us look at the risks that a cryptocurrency carries, by using the legal framework of India specifically.

    Statutory provisions in India that regulate the issuance, utilization and disposal of currencies (and money) are The Foreign Exchange Management Act, 1999, The Reserve Bank of India Act, 1934 and The Coinage Act, 1906.

    Despite the fact that the terms 'legal tender' and 'bank notes' have not been clearly defined, the nature and characteristics of the terms have been determined according to the aforementioned statutes. Does Bitcoin, a virtual currency, come under the purview of the defined currency? If we apply the principle of express um facit cessare tacitum, virtual currency does not have any place in the ambit of the label 'currency.'

    Bitcoin transactions have been prone to security threats and hacks in the recent past; one instance being in early 2014 when hackers reportedly stole more than USD 5 million in virtual currency from Bitstamp, a major Bitcoin exchange. Cyber-thievery has increased gradually and significantly, with Bitcoins being a frequent target. Since the transactions are contained in the cyber environment, cyber security will be a long-standing concern. Due to a lack of confidence and insurance in Bitcoin, there is no sign of consumer protection in the Bitcoin community.  However, if Bitcoin exchanges and the use of Bitcoin were as widespread in the securities market, such security breaches may be construed as acts of cyber terrorism.

    There are also several political and economic implications in the use of Bitcoin,ranging from government policies, to economic upturns and downturns, as well as illicit activities.

    As most jurisdictions have not made any decision with regard the status and treatment of Bitcoin in the economy, one of the major dangers is that any government might declare it illegal, leaving the investors helpless without remedy. Further, there are very few nations which have passed legislation on the taxation of Bitcoin, however, it must be kept in mind that since Bitcoin is not a centralized currency, people are not likely to comply with regulations which require them to disclose their Bitcoin transactions.

    Further, anonymous cryptocurrencies such as Bitcoin may be used to engage in illicit activities, not the least of which is drug trafficking. Silk Road was a website launched in June 2011 which sold illicit goods and services. An estimated of $1.9 million dollars' worth of Bitcoin transactions per month were conducted, confirming that Bitcoin is fast becoming the first choice for those conducting illicit activities to shelter themselves from the scrutiny of the law.

    Multi-level Marketing

    Multi-level marketing (MLM) schemes are a form of network marketing characterized participants paying the company in return for:

    1.      the right to sell a product, and

    2.      the right to receive commissions in return for recruiting other participants into the program.

    Perhaps the most renowned and long lasting MLM is the 1886 established California Perfume Company, renamed to 'Avon Products' in 1939. Avon made massive headway in yielding legitimacy to MLMs. It created demand women did not know they wanted yet - word-of-mouth business. In a time where women were increasingly entering the labor force, Avon used that to their advantage. Women were able to work and market according to their needs and schedules, allowing them time to look after their families while earning a commission.

    The MLM industry was proceeding on a legitimate legal course until a proliferation of pyramid programs appeared on the scene in the 1970s. A promotion called 'Dare To Be Great' promoted by Glen W. Turner was one example. Like other pyramid schemes, the only 'commodity' that moved through this program was money. No viable goods or services, sold at fair market value, accompanied the recruiting activities. Virtually every state had residents who were impacted by this and other programs which officials successfully argued were mere 'headhunting' schemes.

    The Federal Trade Commission (FTC) established the earliest guidelines regulating pyramids and other entrepreneurial chains and was highly critical of:

    ●       large membership fees;

    ●       programs in which distributors were misled as to the amount of commission they might reasonably earn; and

    ●       programs in which commissions were not based on the sale of product to the end consumer.

    No legal ruling has had more impact on the direct sales industry than the landmark FTC v. Amway decision. (In the Matter of Amway.) In 1975, the FTC accused Amway of operating as an illegal pyramid. After four years of litigation, in 1979, Amway prevailed. An administrative law judge ruled that Amway's multi-level marketing program was a legitimate business opportunity as opposed to a pyramid scheme.

    Where Bitcoin and MLM meet

    The sale of Bitcoin in and of itself is no more a vehicle for MLM than the sale of any currency, stand alone. Bitcoin MLMs work like other MLMs of a similar nature. For example, one Bitcoin MLM may be one which sells Bitcoin mining hardware and additional educational materials to consumers for a price, from which they may earn a commission by selling Bitcoin mining hardware and educational materials to others. Given the online nature of Bitcoin, it is not even required that one have the hardware they own in their physical possession. Companies can and have providing cloud/remote Bitcoin mining services.

    The most notable case of Bitcoin used in an MLM scheme is that of GAW Miner/Zenminer, who are currently being sued by Securities and Exchange Commission (SEC) on account of their fraudulent conduct in selling hardware to mine Bitcoin.

    The scheme first began with Mr. Garza's business which purchased virtual currency mining equipment from overseas manufacturers and resold them to customers. Later, he began to offer a service known as 'Hardware Hosted Mining.' In short this process consisted of GAW Minder would host the computer hardware in their own data centers, for a fee, as opposed to shipping out the equipment, but allowed users direct and complete access over their equipment remotely, over the internet. This sort of trade between the seller of the scheme, and the user later became known as 'Cloud Hosted Mining'.

    From August 2014 until the end of that same year, Zenminers LLC, under GAW Miners LLC, sold contracts to over 10,000 investors. These contracts, they claimed, represented a share in the profit from using computer power to mine virtual currency. The returns cloud miners received of these shares were in the form of 'Hashlets,' a system the corporation claimed would earn a reward based on the number of virtual currency units one had mined.

    Eventually, the company sold more Hashlets worth of computing power than had existed in their computer centers. The computer equipment they claimed to be selling often did not exist in their data centers, or did not back up the number of Hashlets the company claimed had been sold. The company earned approximately $19 million in this way.

    This, the suit claims, misrepresented the amount of computer power associated with the packages investors had purchased, and were hence fraudulent. Further it is claimed that the company did not provide adequate information to the customers as to the sustainability of the Hashlets they mined, nor the basis by which Hashlets were derived.

    Customers' computing power was being neglected, and any choice they believed they were given through the ZenCloud interface was not accurate. Customers became disgruntled as they realize the options they were being sold had no effect.

    Implications

    Despite the risks involved with Bitcoin MLMs, there are perceived perks to such affairs. One of the reasons there has been a surge in Bitcoin exchange is that the practice is not regulated by any body; there is no centralization of this currency which is so easily exchanged. However, the demand creation for Bitcoin using Multi-Level Marketing may influence banks into treating Bitcoin as a currency which can be exchanged for physical money. This would allow for Bitcoin to be more easily regulated, defeating several features of the currency, though this is not a likely outcome.

    Another perk of Bitcoin is the anonymity it affords its users. Any centralization, or even the use of cloud-hosted Bitcoin MLM, negates either the initial anonymity of an individual, or the entire concept in itself. Regardless, Grinberg claims that anonymity is not complete in Bitcoin transactions as they are at present: 'It's possible that using statistical techniques and information that's publicly available [on the blockchain] you could find out a great deal about Bitcoin users.' Further, bitcoin users who reveal information to third parties, either a Bitcoin eWallet provider, or through joining pools to mine Bitcoins, are compromising their identities.

    Conclusion

    Engaging in Bitcoin may be risky in itself, but its marriage with Multi-Level Marketing could potentially prove disastrous if misapplied. The regulatory concerns are paramount. The possibilities for exploitation of security flaws, crime opportunities, and of potential customers are numerous. The aforementioned positive implications are not minute, but, it still seems like regulation is a necessary concern of all jurisdictions if the rise of Bitcoin MLMs continues. The legal complexity of the creation of such businesses has led to a scramble for a legitimate solution.

    Perhaps the most important consideration is one of accountability. The product involved in this process is a purely economical one, there is nothing tangible to it. As has been presented in the case law, the merging of Bitcoins in MLM companies has led to the lessening of accountability, especially in regards to cloud hosted Bitcoin mining schemes. It is difficult to hold companies accountable for the acts they commit, because there seems to be very little legal precedence for situations that require justice. The most fundamental problem is the lack of confidence that the public entrusts to virtual currencies. Modern states need to found trust in its market should it introduce a formal regulation for virtual currency.

    Technology is a double-edged sword. While the law on Bitcoin in various jurisdiction is the need of the hour, it's also important to note that needless laws will merely serve to complicate business transactions and restrict opportunities. The government must critically engage with the Bitcoin community. Eminent economists such as George Stigler and Avinash Dixit have emphasized the need for intelligent and dynamic regulations rather than a 'one-size-fits-all' measure. 

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    Sat, 16 Jul 2016 19:00:00 GMT
    <![CDATA[Trademark Infringements in India]]> Trademark Infringements in India

    Think about a company. It has spent a lot of money. First, in making a one-of-a kind product, and then in advertising it to the world. The product becomes a hit, taking the company to greater and greater heights. It spreads like wildfire. But one day, the company realizes that another company is using a deceptively similar name and logo to advertise their own products. That company is basking in the other's glory. It is, therefore, essential to prevent the unauthorized use of any brand logo or any sign in order to protect the underlying interests of its proprietor.

    India is home to numerous domestic corporations and has continued to be a haven for investors and foreign companies due to its large consumer market. The status quo of the intellectual property law of a country is a crucial factor that motivates foreign companies to invest in domestic markets. The law governing trademarks in India has developed at a rapid pace in the past few decades. The registration, enforcement and infringement of trademarks in India is governed by the Trade Marks Act, 1999 [the Act]. Section 2 (zb) of the Act has defined trademark as a mark which can be represented graphically and can distinguish the goods and services of one person from that of another and can include the shape of goods, their packaging and any combination of colours.

    Evolution of Trademark Law in India

    Earlier, the difficulties faced by entrepreneurs in India ranged from filing of an application for the registration of a trademark, to the obtaining of an injunction in case of an infringement. At the beginning of the twentieth century, trademarks were registered by obtaining a declaration of ownership of the mark under the Indian Registration Act 1908. This was done due to the lack of a specific statute to govern the matters regarding trademarks. These shortcomings were overcome with the enforcement of the Trademark Act 1940, which corresponded with the English trademark law. India saw a tremendous growth in trade and commerce post-independence. The demand for a more effective statute to respond to the increased use of deceitful marks on merchandise paved way for the Trademark and Merchandise Act, 1958. This statute provided for the registration of trademarks and established a higher degree of protection against trademark infringement. Under this act, registration of a trademark gave proprietors the legal right over the trademark.

    In the early 1990s, an economic liberation was initiated in India with the objective of transforming the economy into a market-oriented economy by expanding the role of private and foreign investors. Reduction in import tariffs and the deregulation of markets, gave rise to higher foreign investment. Names and insignia of brands gained colossal value with the globalization of trade and the entry of foreign companies. Subsequently, India joined the World Trade Organisation and became a member state to the Agreement on Trade-Related Aspects of Intellectual Property Rights [TRIPS]. Thereafter, the government identified the need for a trademark law which would be in compliance with the provisions of TRIPS. Hence, the Trade Marks Act 1999 was enacted. All trademark related issues in India are presently governed by the Act and the Trademark Rules, 2002.

    The fruit of one's labour shall not be enjoyed by another

    Proprietors, who have registered their trademarks under the Act, are given with the exclusive right to use their trademarks in relation to the goods or services for which it has been registered. Suppose company 'A' launched electronic goods under the registered brand name and logo 'X' and subsequently company 'B' launched a range of kitchen appliances under the same brand name and logo 'X'. Company 'B' has used the trademark without the authorization of its registered proprietor. Therefore, trademark rights of company 'A' would be said to have been infringed by company 'B' in accordance with sections 29 and 30 of the Act.

    But what if the brand name and logo 'X' of company A was not registered? Then company 'A' would not be permitted to file a suit for trademark infringement under the Act. However, a common law suit of tort may be instituted against company 'B' for passing off their goods as the goods of company 'A'.

    The infringing mark should be identical or deceptively similar to the registered trademark in order to establish a trademark infringement suit. The Act provides civil and criminal remedies against the parties who use their trademark without authorization. According to section 134(2) of the Act, the proprietor of the trademark can file a trademark infringement suit in a court of competent jurisdiction, at his place of residence or business. The suit would have to be instituted within three (3) years from the time of gaining knowledge about the infringement. However, infringement cases usually consist of a series of acts and transactions. For example, each sale of an infringed product by a company would be considered as a separate transaction. Therefore, the courts have taken the view that a suit can be filed within three (3) years of each act of infringement.

    Benefits of an Effective Judicial System

    The case of Cadbury India Limited and Ors. V Neeraj Food Products [142 (2007) DLT 724], gave the Indian courts an opportunity to look into circumstances when the trademark of a party is deceptively similar to that of another. The plaintiff was into the business of production and manufacture of confectionary and chocolate products and they were the registered proprietor of the trademark 'Gems' among various other trademarks. The plaintiff claimed that the chocolate products introduced by the defendant under the trademark 'JAMES BOND' was similar in shape, size and packaging, to their own chocolate products. Hence, the plaintiff filed an application under order 39 rule 1 and 2 of the Civil Procedure Code, 1908, to restrain the defendant company from using the trademarks 'JAMES' or 'JAMES BOND', or any other trademark which was deceptively similar to 'Gems'. The court observed that the packaging of the defendant's products were so similar to the packaging of the plaintiff's products that they were likely to deceive unaware purchasers. The court took the view that the trademark of the defendant was deceptively or confusingly similar to the plaintiff's registered trademark. The court allowed the application of the plaintiff and restrained the defendant from using their trademarks or any other trademarks that would be deceptively similar to the plaintiff's trademark. The court took a steady view on the situations in which products or marks of one proprietor were deceptively similar to that of another. This case helped in strengthening the reliance placed on Indian courts by the registered proprietors of trademarks.

    The 2009 judgment of the Delhi High Court in the case of Clinique Laboratories LLC and Anr. V Gufic Limited and Anr. [I.A. No. 15425/2008, I.A. No. 217/2009 and I.A. No. 2769/2009 in CS (OS) No. 2607/2008] further cemented the rights of the proprietors of registered trademarks. The plaintiff was the registered proprietor of the trademark 'CLINIQUE', whereas the defendant was the registered proprietor of the trademark 'CLINIQ'. The plaintiff filed a rectification application to the Registrar of Trademarks in order to cancel the trademark of the defendant. Subsequently, the plaintiff filed for an injunction to restrain the defendants from passing off their goods as the goods of the plaintiff. The plaintiff contented that their goods were superior and more expensive than that of the defendant and even cited advertisements of their product in leading magazines. The contentions of the defendants regarding the incapability of a person to sue the proprietor of a registered trademark, and the large number of people who use the word 'clinique', did not impress the court. The court observed that a suit for trademark infringement is maintainable even if the defendant is also the proprietor of a registered trademark. Therefore, the court granted an interim injunction in favour of the plaintiff until the rectification application was disposed of by the Registrar of Trademarks.

    In the infamous case of The Coca Cola Company V Bisleri International Private Limited and Ors. [I.A. No. 2861/2009, I.A. No. 12490/2008, I.A. No. 13904/2008 and I.A. No. 13905/2008 in CS (OS) No. 2166/2008], an issue arose as to whether the plaintiff had the right to register the trademark 'MAAZA' outside India. The defendants had sold their trademark rights, formulation rights, know-how and goodwill of some of their soft drink products, including 'MAAZA', to the plaintiff through an agreement. In 2008, the defendants learned that the plaintiff had filed for the registration of the trademark 'MAAZA' in Turkey. Subsequently, they sent a legal notice to the plaintiff repudiating the agreement between the parties which ceased the plaintiff from manufacturing the soft drink or using its trademarks. The defendants had also stated about their intention to use the trademark and the product in India. Thereafter, the plaintiff claimed for permanent injunction and damages against the infringement of its trademark. The defendants contended that 'MAAZA' was sold to the plaintiff for distribution and sale within India. Whereas, the plaintiff claimed that they were the absolute owners of the formulation and know-how. After hearing the detailed contentions and arguments of the parties, the High Court of Delhi held that the plaintiff was the registered owner of the trademark 'MAAZA' and granted an injunction in favour of the plaintiff. This judgment gained fame in the public eye due to the prompt and precise judgment by the Indian judiciary.

    Amelioration

    The Act has provided for various civil and criminal remedies to relieve a registered proprietor from the loss incurred due to trademark infringement. Under section 135 of the Act, the court may grant any of the following relief to the party whose trademark rights have been infringed:

    • damages or an account of profits together;
    • delivery of infringing labels or marks for destruction;
    • Injunction- ex parte or interlocutory injunction for discovering documents, preserving the infringed goods or restraining the defendant from disposing of his assets in a manner which would adversely affect the plaintiff in recovering damages from the defendant.

    Whereas, sections 103 and 104 of the Act state that, a person who infringes a trademark, would be punishable with imprisonment for a minimum term of six (6) months but may be extended up to three (3) years. A fine ranging from INR 50,000 to INR 200,000 shall also be imposed on the infringing party.

    Conclusion

    Proprietors should be well aware of their rights in order to safeguard their trademarks. With the modern day globalization, it has become essential for entrepreneurs to protect the goodwill of their brands. The Act provides high degree of protection against infringement of a registered trademark. Hence, proprietors are advised to register their trademarks so as to avail the remedies that have been laid down in the Act.

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    Mon, 20 Jun 2016 18:00:00 GMT
    <![CDATA[The Agency Law of Russia]]> Agency Law of Russian Federation - FAQs

     

    STA continues to be in the vanguard of trade and commerce across national boundaries. As we continue to advice clients on matters of franchise and agency law within the Russian marketplace, in this issue we take a close look at the Russian law provisions relating to agency.

    Generally speaking the law of agency deals with situations where one person enters into legal relationship with another person by acting not personally but through an intermediary. Agency law is important, since it gives the possibility of entering into business transactions when due to various circumstances a person is unable to participate personally. Agency law also provides a fierce market for competitive business practices which allows expansion without physical presence in turn allowing ideas to flourish. It is therefore rightly said that a possibility to participate in business transactions through an agent is a guarantee for implementing the right of a person to freedom and initiative of business activity. Talking of the investments by state players wide the Russian Direct Invest Fund or indirect investment by smaller players- the underlying fact remains that the interests in Russian Economy from the Middle East investors are on the rise. Earlier the trade between countries was restricted to outward investments in oil, a trend which is seemingly evolving.

     What is the law governing agency relationships in Russian Federation?

     The Russian Federation Civil Code (the Civil Code) regulates and governs the appointment of agents in Russia. In addition, commercial agency services are regulated by means of international agreements and/or conventions, namely:

  • Hague Convention 1978 on the Law applicable to agency;
  • Rome Convention 1980 on law applicable to contractual obligations;
  • Geneva Convention of 1983 on International Sale of Goods;
  • Types of Commercial Contracts of International Chamber of Commerce (ICC) (Publication No.496);
  • Guide on Compilation of Commercial Agency Contracts (ICC Publication number 410); and
  • ICC Commentary on Commercial Agency Contracts (ICC Publication number 512). 
  • How is the agency relationship defined under Civil Code?

    Pursuant to Article 1005 of the Civil Code 'under an agency agreement [when one person (the agent) in the name of another person (the principal)] for remuneration takes legal or other actions in his own name, but at the expense of the principal, or in the name and at the expense of the principal'.

     Article 1007 of the Code has provided that a principal and an agent may include an exclusivity provision which would refrain the principal from executing similar agency agreements with different agents in the same territory. The concept of exclusivity has substantial connection with the territory in which the agency agreement would be executed. A principal would be refrained from making similar agreements with other agents in the territory defined in the agency agreement as long as an exclusivity provision exists in the agency agreement.

     The agency effectively comprises of two types of relationships:

    • When the agent performs actions in his own name, but at the expense of the principal; and
    • When the agent performs actions in the name and at the expense of the principal.

     A commercial agent is a person who has a direct authority to act on behalf of the principal. A commercial agent can not only conclude transactions or sales of foreign goods, but also conduct an advertising campaign at the same time.

     

    A principal is a person who gives a commercial agent authorization to perform legal and other actions on his own behalf or on behalf of the principal.

     What is the scope of authority that can be delegated to an agent? How does than the agent bind the principal by his acts?

     The principal should provide the agent with lawful, practicable and concrete instructions about how he should execute the subject matter of the agency agreement. Occasionally, situations arise where the agent faces a dilemma in executing the instructions that were conveyed to him. Item 2 of article 973 of the Code has provided agents the authority to deviate from the principal's instructions if it is necessary under the prevailing circumstances and it is in the interest of the principal. However, the agent should have been in a situation where he was unable to obtain the principal's permission for the deviation from the principal's instruction. The agent is also obliged to communicate the details of the deviation to the principal at the earliest period.

     If the agent entered into a transaction with a third party on his behalf and at the expense of the principal, the agent will be liable to the third party, even if the principal was named in the transaction or entered into with a third party in a direct relationship to execute the transaction. However, in a transaction made ​​by the agent with a third party on behalf of and at the expense of the principal, the rights and duties arise directly with the principal (Article 1005 (1) of the Civil Code).

     What if the agent exceeds the authority granted under the agency agreement?

     As per Article 183 of the Civil Code, if the agent exceeded the power granted to him and enters into a specific transaction, such a transaction will be considered as concluded by the agent not by the principal, unless the principal approves such a transaction.

     Okay, are there any formalities to follow for appointing an agent?

    No. There are no formalities as such under the Civil Code for the principal to comply with when appointing an agent. The agency relationship may be established either by a written contract or an oral agreement. However, commercial agency contracts on foreign trade transactions must be concluded in writing.  In addition, to the agency agreement the principal may also issue a power of attorney (POA) to the agent, empowering him to act on behalf of the principal.

    What types of agency relationship do exist or are recognized within the Russian Federation?

    • A simple agency agreement – is an agreement by which the principal has the right to sell goods via several sales agents in Russia.
    • An agency agreement with the exclusive right of sale – is an agreement by which the principal is obliged to sell the goods only through the commercial agent appointed and is not be able to offer the same product to other commercial agents during the term of this agreement.
    • An agency agreement with a preferential right to sell – is an agreement by which the principal is obliged to offer the goods in the first place to the agent and if the agent refuses to accept the goods, the principal has the right to offer it to other commercial agents. 

    Okay, what are the agent's duty under Civil Code?

    According to article 974 of the Code, an agent shall have the duty to:

    • personally perform the duties assigned to him under the agency agreement;
    • communicate information regarding the progress of the execution of the agency agreement at the principal's request;
    • convey to the principal, all information regarding the items which have been received in pursuance of the execution of the agency;
    • return the power of attorney which is valid even after the execution of the agency.

    What are the obligations of the principal?

     Article 975 of the Code states the following as the duties of a principal:

    • to furnish the agent with a power of attorney for the performance of legal actions;
    • to compensate the agent for his expenses;
    • to provide the agent with the means required for the execution of the agency;
    • to accept the performance of the agency; and
    • to remunerate the agent.

    How is the remuneration or consideration decided or agreed?

     The amount and details of payment of the agent's remuneration depend on how the parties have agreed in the agency agreement. If the agency agreement does not provide for payment mechanism, the remuneration shall be equivalent to such type of services in comparable circumstances (Article 424 (3) of the Civil Code).

    Are there any restrictions on not to compete during the agency agreement?

     As per Article 1007 of the Civil Code, an agency agreement may provide for restrictions on the part of both the principal and agent. The agency agreement can impose an obligation on the principal not to conclude similar agency agreements with other agents acting on the territory defined in the agreement; or to refrain from the independent activity on this territory, which is analogous to the activity which is the basis of the agency agreement.

    The agency agreement may provide for an obligation of the agent not to make with other principals analogous agency agreements that must be performed on a territory coinciding in full or in part with the territory indicated in the agency agreement. It must however be noted that restriction on competition shall not affect customers. The principal is not allowed to restrict the agent in selling goods or rendering services for an exclusively definite category of customers or exclusively for buyers, who have their place of residence in the territory defined by the contract. Such terms and conditions under the agency contract will be void (Article 1007 (3) of the Civil Code).

     Can the above restrictions apply once the agency agreement is terminated?

    The Civil Code does not provide for a continuation of the restrictions after the agency agreement has expired or sooner terminated. However, the parties to an agency agreement can set out some restrictions on competition for a certain period after the expiry of the agreement.

    But what if the agent registers the trademark of the principal in Russia and/or counterfeiting the goods of the principal without disclosing the same to the principal?

    The Civil Code stipulates that the rights holder shall have the exclusive right to use its registered trademark for 'goods, labels and packaging which are manufactured, offered for sale, sold, displayed at exhibitions and fairs or used commercially in Russia, or stored and transported or imported into Russia for this purpose; while performing jobs and providing services on documents introducing the goods in commerce'.

     

    So any unauthorized use of a protected trademark is considered infringing. Also goods, labels and packaging on which the trademark is unlawfully placed will be regarded as counterfeit.

     

    What remedies the principal has under Russian laws?

    Four types of legal action may be taken against trademark infringers and/or agents infringing the trademarks.

    • Administrative proceedings

    The illegal use of a trademark entails administrative penalties, which are seizure of counterfeit goods and a fine as follows:

     

    ·      For individuals – twice the cost of the counterfeit goods, but no less than Rb10, 000;

    ·      For legal entities – five times the cost of the counterfeit goods, but no less than Rb100, 000; and

    ·      For officers – triple the cost of the counterfeit goods, but no less than Rb50, 000.

     

    • Civil proceedings

    The principal may claim the following civil remedies in civil claims:

    ·        cessation of the authorized use of the trademark;

    ·        reimbursement of damages;

    ·        removal of all counterfeit goods from the market and their destruction;

    ·        compensation instead of damages between Rb10, 000 and Rb5 million.

     

    Preliminary injunctions are available. The court may order injunctive relief preventing the agent from performing actions related to the subject matter of the proceedings or ordering the seizure of his property.

    • Criminal proceedings

    The principal can bring criminal case, but only if the infringement occurs repeatedly or if the damage exceeds Rb250, 000. Criminal penalties include:

     

    ·        a fine of Rb100,000 to Rb300,000 or up to two years' salary or other income of the convicted person;

    ·        compulsory community service for up to 480 hours;

    ·        corrective or disciplinary work for up to two years; and

    ·        imprisonment for up to two years with a fine of up to Rb80, 000 or up to six months' salary or other income of the convicted person.

     

    Note that the principal may the reimbursement of damages from the agent. It may initiate civil claim within the ambit of criminal proceedings.

     

     So, how about terms and termination of the agency agreement?  

    An agency agreement can be entered into for either a defined term, or indefinitely (Article 1005 (3) of the Civil Code). Therefore, the parties are free to decide on the term of the agreement. In practice, agency agreements are often concluded for an indefinite period and the parties have the right to unilaterally terminate the agreement.

    A notice period for termination of the agency shall not be less than 30 calendar days (Article 977 (3) and Article 1004 (1) of the Civil Code).

    Now, once the agency is terminated, will the agent have any right of compensation or indemnity?  

    No. Russian law does not set out any compensation or indemnity on termination of an agency agreement.

      


    [1]{C}{C}{C} http://legislationline.org/documents/section/criminal-codes/country/7


    [i]{C}{C} The Civil Coe of the Russian Federation; Russia (Federation), Peter B. Maggs, Aleksei Nikolaevich Zhiltsov, First Part, page 74-77

     

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    Mon, 20 Jun 2016 14:00:00 GMT
    <![CDATA[Private Secondary Buyouts]]> PRIVATE EQUITY SECONDARY BUYOUTS

    Private Equity (PE) secondary buyouts are often used as exiting strategy for investment besides initial public offerings (IPOs) or acquisitions and also considered as panic sales. In Secondary buy-outs (SBO) a Target which is owned by a PE provider and management is acquired by another PE provider. There has been marked increase in SBOs globally since 2009 as they have become second most prevalent technique of equity firms to sell in order to re-invest or deploy capital which is on the brink of expiry. The maturing of SBOs activities has also improved PE market. This can be evidenced by the fact that there were 291 secondary buyouts globally in 2006, valued at an aggregate USD 72 billion (bn), while in 2014 there were 501 secondary buyouts, the highest number on record, valued at USD 93bn.

    The total value of SBO transactions has been 15% of the value of all buyout deals, contributing a total of USD 27bn since the start of 2015. The aggregate deal value is chiefly from investments in portfolio companies operating within the consumer & retail sectors which accounts for the major ratio of total value i.e. 31%.

    European SBO transactions have been ahead of US PE market in such transactions. There is continued upward momentum even in 2014's robust PE climate as there were 252 secondary buyouts valued at Euro 34.4 bn, a 3% increase in volume and 10% increase in value, respectively, compared with the previous year. In 2015, there were 285 secondary buyouts worth Euro 56.7bn; an increase of 5% in volume and 45% in value. There is 5% increase in SBO in 2016 in European market. The historical view of SBO being last resort technique is becoming untenable as perceivable from recent trends.

    The largest secondary buyout of 2015 was Active Topco (Active Virgin), a health club operator incorporated in the British Virgin Islands, being sold by CVC Capital Partners and Virgin Group for USD 1 bn (£682m). It was sold to South Africa's Brait.

    IPOs remain first exit strategy globally however its viability depends on the market sentiments and hence sale, acquisitions or secondary buyouts are options considered in recent years.

    The exit strategies in Middle East region have been predominantly trade sales partly due to the fact that regional IPOs have been mostly of large state enterprises. IPOs as possible exit option is reduced in region due to public subscription through large flotations which indicates the emerging nature of regional market IPOs legislations. 

    The sophistication and extend of the regulations in the Middle East is varied. Many regions do not have separate fund management activity and require banking license unlike in UAE where Central Bank regulates investment and fund management activities and issued investment company licences to entities. Since 2014 new regulations require Securities and Commodities Authority (SCA) to issue such license from 28 February 2015. UAE has seen competitive growth in PE firms or financial companies providing SBO services.

    There is positive trend in SBOs since 2011 tempered due to the fact that dry powder was targeted for SBOs as pressured capital (committed capital with powerful incentives to return profits to limited partners) which may lead some PE firms to overstretch their deal making endeavors resulting in high deal prices.

    The example of large SBOs in UAE specifically Dubai can be witnessed from transactions by Dubai International Capital (DIC) which brought Travelodge (UK), a leading budget hotel chain which operates 291 hotels in the UK, Ireland and Spain was sold by its PE owner Permira through secondary buyout in year 2006 for Euro1.02 bn deal. DIC PE invests mainly in developed market as it backs strong existing management team through secondary buyouts. DIC PE has acquired businesses in a range of sectors in Europe and North America including the following:

    • UK leisure company Tussauds Group for GBP 800 m (later merged with Merlin Entertainment Group to create the world's second largest visitor attractions; DIC retains a 20% stake)
    • UK engineering company Doncasters for GBP 700 m
    • US engineering company FastenTech for USD 492m (later merged Doncasters with Fastentech creating world leader in turbine manufacture)
    • UK healthcare company Alliance Medical for GBP 600 m
    • German producer of specialty alumina Almatis for USD 1.2 billion

    The drivers of the SBOs and renewed popularity of SBOs is linked to releasing up capital (liquidity). Debt markets were buoyant, and post-crisis volatility of equity markets made them a less feasible exit option. This type of activity does not necessarily mean that the PE climate overall is struggling as uneasiness around IPOs persists. Accordingly, SBO transactions are increasing among the 2015's biggest deals such as the Euro 3.6 bn deal wherein consortium of buyers, including Canada's Public Sector Pension Investment Board and Arcus Infrastructure Partners, announced plans to acquire TDF (France-based operator of telecommunications masts) from another consortium led by Australian telecommunications firm TPG and UK-based PE house Charterhouse Capital Partners. This will help TDF pay off nearly €4bn debt. 

    These trends contradict the fact that debt market was highly active last year and shows increased viability of leveraged buyouts. Like acquisitions, SBOs provide lump sum liquidity to the PE firm sellers and their limited partners as opposed to staggered drawn out exits via IPOs.

    Another driving factor for increased momentum includes friendly accommodative lending terms. The lower interest rates have enabled PE firms and companies to leverage transaction in lower transactional cost as well. This provides impetus to PE firms for bidding higher purchase price and benefits the seller as well as they receive higher profits while selling off the shares which is usually not possible in IPOs if the market condition is not favourable.  It is implicit that in most markets SBOs are preferred when market condition is not favourable and there is less success anticipated in IPOs.  The complications surrounding the IPOs have turned people toward trade sale rather than preferring PE solutions. Although the number of stock exchange in the region are increasing particularly in the MENA region, IPOS remain difficult option for PE firms as IPOs are generally a low liquidity option with years of lock up period for shareholders to redeem their investment with no secondary listings make regional IPOs unattractive proposition.

    As far as utilization of assets purchased through SBOs is concerned, it requires case to case study and the results may vary accordingly however in case of DIC SBO of Travelodge as stated above have demonstrated instance of efficient management as employment in UK hotelier Travelodge has risen sharply since DIC bought the chain which countered the criticism that PE firms slash jobs to increase profits post-buyout. Such buyouts have improved outlook towards SBOs as not being a sign of unhealthy market but as a sign of efficient planning by PE firms for well-organized exit and investment strategy.

    There is anticipation of changes in laws for creating environment favourable for PE investments and transactions. However currently there is no regulation on PE transactions in sectors which do not have any specialized regulation for SBOs. The UAE Securities and Commodities Authority ('ESCA') oversees functions in relation to listed securities. UAE Central Bank or ESCA licence/approval is required prior to establishing or marketing a PE fund in UAE based on the activities carried out. A PE fund can be set up in the UAE by either a licensed investment company or a bank licensed to operate in the UAE. As stated above special approval is required to establish or manage investment funds from the Central Bank on case to case basis.

    It is undeniable that there has been growing PE deals as the above data on deals suggest with ones such as Gulf Capital deal selling portfolio company Maritime Industrial Services to regional trade buyer Lamprell in 2011 for USD 336 million. However, the challenges remain from regulatory point of view and UAE market is not completely developed in terms of PE transactions regulations thereby encouraging more trade sales. In such circumstances the legal advice of the professional investment lawyers to understand the local market is indispensable while implementing such ambitious plans.

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    Mon, 20 Jun 2016 12:00:00 GMT
    <![CDATA[Re-Media-Ble]]> Re-MEDIA-ble – A discussion on contracts relevant to Media and Entertainment Industry

    In this Article, Zisha Rizvi discusses the ongoing trends in the Media and Entertainment Industry within the United Arab Emirates, the status of free zone media houses and a brief on the compliance requirements.

    "I holly- wood". On his honeymoon in 1886, when H.J. Whitley met a Chinese man who said he was 'hollying' (hauling) wood, a little town in Los Angeles California was named as the Hollywood by real estate entrepreneur Whitley.

    By 1920s, Hollywood became the fifth largest industry in the nation with the set-up of major film companies like Paramount, Warner Bros, Columbia and RKO. Today, the media and entertainment industry of the United States is the largest in the world, valued at a whopping USD 598 Billion in 2014. By 2018, this industry is set to generate USD 723 Billion in revenues. The US happens to be a larger market place than other regions and has rightly tapped onto its benefits. Bollywood Parks in Dubai – the first theme park dedicated to all things Bollywood and regular news featuring wax statutes of Bollywood personalities at Madame Tussauds is no surprise to ever-growing Bollywood media industry as well.

    The burgeon nature of the media and entertainment industry indicates Asia and MENA combined have the potential to provide stiff competition to the US Media and Entertainment industry. With the fair share of challenges that each of these regions have to face, the odds-on have been less fathomed yet.

    UAE becoming the hub for international events

    Speaking truly in terms of the United Arab Emirates, Dubai is fast moving on to become a major hub for media and entertainment players. In 2004, Dubai set up a specialized zone for catering to 'media' companies. Following closely in the footprints are the neighboring Emirates with the Abu Dhabi TwoFour54 and Fujairah Media free zone as emerging platforms. Many factors have contributed to the growth of UAE including the general stability that the region provides amidst growing instability in the Arab countries. For the Asian industry, UAE happens to be a preferred base due to its geographical proximity with Asia besides being a nonpartisan foreign terminus with an avant-garde infrastructure.

    A variety of events take place in the region, with popular ones being the IPL, PPL, awards ceremonies and celebrity shows. The usual question which arises then is the nature of contracts and laws governing such contracts in the region. Before we come to that question, let us understand the general market trends in the region. Most audiences in the region are expats, as such there is a vacuum in the types of content available locally and that in turn is bound to invite international players to provide services within the region. Although smaller in terms of the land size, there is a conjecture that the land of sand is becoming the entertainment hub for MENA region.

    Contractual Must Haves

    When entering into a media contract, most parties rely on set international covenants. Often the parties agree to such conditions which will either be unenforceable in the civil law jurisdiction or would be capable of rendering the primary contract voidable. More often than not, the parties fail to understand jurisdictional restrictions and often set clauses which become a bane in the post execution period. The most commonly used agreements in the industry are the sponsorship agreement, stadium or venue leasing contract, shareholders agreement, agreement concerning broadcasting rights, event support services, licensing agreement and more. When entering into a typical media contract, one must understand the following key issues:

    • Capacity to contract

    Unlike general trading activities, the entertainment industry is regulated by the Department of Tourism and Commerce Marketing (the DTCM) in Dubai and the Tourism and Cultural Authority (the TCA) in Abu Dhabi. In most cases, the activities are also supervised by the respective municipalities in the Emirate. In such a case, one must understand whether or not it has the capacity to enter into an M&E related contractual relationship which relates specifically to the UAE. The fulfilment of necessary approval criteria for a particular activity should be fulfilled if such activity may be regulated by the aforesaid bodies.

    • Contract and Commercial Terms

    Depending broadly on nature of contract/event, parties would need to ensure that contracts per se are consistent in nature. For instance, if Grammy or GiMA were to hold music awards in Dubai, it is likely that they will be dealing with a broad range of operators and service providers and enter into venue or stadium agreement, ticketing agreement(s), dealing with external advertising agencies, entering in to television, radio and/or internet broadcasting rights, security arrangements, food and beverage arrangements, to name a few. Planning is the key and adequate safeguarding provisions should be embedded within these contracts to buy peace of mind. Due diligence is required to ensure third party operators have proper license, no-objection certificates and corporate documentation in place (regard and caution should be had in dealing with free-zone companies if event is to be held within mainland). The applicability and impact of UAE competition law on exclusive deals, competition among broadcasters, and expensive access to viewers (thereby eliminating clubs or other channels) will raise pertinent questions. Choice of jurisdiction should also be consistent within contracts to avoid multiplicity of courts and arbitration tribunals. Likewise, licensing of intellectual property (if any), and advertising and signage, upsell provisions in ticketing contracts, and other commercial terms require careful consideration.

    • Restrictive covenants

    An important caveat in M&E contracts is the restrictive covenant. A standard restrictive covenant in most contracts would be refraining a party to the contract from entering into competitive practices. The scope of such restrictive covenant should be widened to encompass requirements of Federal Law Number 15 of 1980 concerning the Publications and Publishing which governs all content- digital or print. The restrictive covenants under the aforesaid law are applicable to television broadcasting and include religion, politics, national security and public morals.

    • Intellectual property rights

    When structuring an IPR clause where any and every intellectual property is protected, it is worthwhile to note that IPR rights will be governed pursuant to the Federal Law Number 37 of 1992 and Federal Law number 40 of 1992. Intellectual property is regulated directly by the Ministry of Economy as against any specialized enforcement. Parties tend to have clauses on protection of IP which is unregistered. Such clauses raise a concern particularly because a party cannot be restrained from registering a trademark if there has been no prior registration. A more subjective discussion on this subject is the courts outlook for a claim on infringement and the possible remedies. While there are possible remedies available, one view holds that the IP registration need not be withdrawn only on the grounds that there has been an IP clause without prior registration. To circumvent the possible issues arising out of exploitation of IP rights, clear covenants need to be undertaken on present and future license to use a trademark. Ownership of customer data, data protection policies and rights attached therewith are some other aspects that call for attention. 

    • Royalty, license, assignment and public use of copyrighted material.

    The use of copyrighted material by an unrelated third party for the purpose of acquiring direct or indirect commercial revenue is prohibited under the Federal Law Number 7 of 2002 (the Copyright Law). The absence of a collection agency imposes a challenge where a royalty clause has been agreed and to some extent a carefully drafted clause would come to the rescue of the holder of rights.

    • Jurisdiction

    Dispute resolution for a contract always needs to be carefully chosen. Conflicting jurisdictional clauses vulnerable and the degree of vulnerability increases when the dispute resolution process agreed between the parties in not in compliance with the mandatory provisions of the prevailing laws. The choice of arbitration or courts, the signatories, seat of arbitration and several other factors should be discussed before a boiler plate is agreed for.

    Are free zone media houses considered to be 'offshore' for the purpose of Federal Laws governing conduct of media?

    Most of these companies were clouded by the fact that the old Commercial Companies Law (Federal Law Number 8 of 1984) did not apply to the free zones. This position was further strengthened by enactment of the new Commercial Companies Law (Federal Law Number 2 of 2015), Article 5 of which confirms the exclusion of free zone from the purview of CCL. In reality, there has been a misconception on the status of a media or entertainment service provide which is registered with a free zone in UAE.

    Free zones are governed by their respective regulations and codes. Taking into consideration the example of TwoFour54 or the Dubai Creative Clusters (an arm of the TECOM investment authority), each of the licensed companies are governed by the regulations. In accordance with the National Media Council, all media companies are governed by the Federal Law on publications cited in this article. The content code or codes of guidance for the above free zones have drawn inspiration from the British Standards Commission, British Broadcasting Corporation and UK Independent Television Commission. Yet, the codes specifically provide for the licenses companies to take into account the prevailing social and religious beliefs of UAE and Islamic religion in general. There is then little doubt that the free zone company can be held liable for violation of the federal laws on media and entertainment.

    The recipe for a perfect contract is the inclusion of local flavor. True, most international players rely heavily on more commonly accepted forms of contract. Whether these contracts remain binding or not remains a clear point of contention. 

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    Mon, 20 Jun 2016 06:00:00 GMT
    <![CDATA[Tenancy Law of Abu Dhabi and its Amendments]]> TENANCY LAW OF ABU DHABI AND ITS AMENDMENTS

    Tenancy Law is one of the most important aspects of societies' life by means of which individuals' rights and duties are determined. Besides, it also sets guiding principle for interactions among individuals in general and for resolving disputes thereof in particular. Tenancy law is considered to be the backbone of every individual's daily life as it is a tool regulating tenants' and landlords' (collectively referred as Parties) transactions through tenancy executed contract. Further, tenancy law has been amended from time to time to bring it in line with current circumstances in addition to the market and social demands thereof.

    In this article we seek to accentuate the tenancy law of Abu Dhabi; its latest amendments and further regulations setting out the obligations of the landlords and tenants in accordance with terms of law.

    Tenancy law was not exclusively set out in single legislation or act in the emirate of Abu Dhabi. However, we may say that it is a group of laws regulating the rental relation between the Parties either for residential, commercial or industrial purposes by means of establishing certain mechanisms. It also outlines all procedural steps surrounding these collaborations between the contractual parties as well as setting out the penalty of going against the rules already laid down.

    In 2006, Abu Dhabi Law Number 20 was issued to regulate the relation between landlord and tenant on matters such as increasing rental prices and evicting the tenant from property. Before the amended Law Number 4 of 2010, landlords could not demand tenants to vacate the rented property upon expiration of their tenancy contract. However, circumstances have changed after the below amendments.

    The main amendments to the law number 20 of 2006 (the Tenancy Law) include the following:

    • Abu Dhabi law number 4 of 2010:

    This law entitled the landlord to seek eviction of tenant from the property upon expiration of their tenancy contract and further the landlord may also refuse renewal of contract. A rent cap of 5% was applicable; however tenants were subject to 5% increase in rent upon renewal of the contract without previous intimation to tenant. This 5% cap is removed due to further amendments.

    • Abu Dhabi Executive Council Decision issued law number 32 issued in 2012:

    This Executive Council Decision removed the rent cap of 5% and grants landlords the liberty to raise the price as per the market rates for their interest. However, the Tenancy Law also provides for rules concerning notice periods required in case the landlord seeks to evict the tenant or seeks to raise rental amount or any modifications in the contract. The landlords must notify the tenant by giving two months notice by issuing an evacuation/eviction Notice or a prior note stating the proposed modification in the contract and indicating the specific alteration the landlord desires to apply. For commercial properties the notice period is deemed to be of minimum 3 months. It is pertinent to note that in case the landlord does not serve an eviction or rent increment notice during the above course of time before renewal, the contract shall be deemed to be automatically renewed with same price and same terms.

    • Abu Dhabi Executive Council number 4 of 2011 on rules and procedures of registration of tenancy contracts in the emirate of Abu Dhabi:

    Abu Dhabi Executive Council number 4 of 2011 introduced rules and procedures for landlords to register their tenancy contracts at the Abu Dhabi Municipality (ADM).  The resolution introduced a system upon which the ADM establishes and keeps a registry of tenancy contracts including all data related to the leased property which is known as the ADM's tawtheeq system. In addition, all tenancy contracts existing or entered between the parties after the implementation of this resolution shall be registered at the ADM. The tenancy contracts must be in English and Arabic or only Arabic language while registering it with the Tawtheeq registry system of the ADM.

    Considering the above provisions, the ADM, shall only consider tenancy contracts registered under the provisions of this resolution, any transaction requiring a tenancy contract shall not be accepted and shall be dismissed if the contract is not registered in the tawtheeq registry system of the ADM. The resolution is applicable to all residential, commercial units and industrial units.

    Key Notes:

    1.      Tenancy Period:

    •  There is no fixed tenancy period as per the law. This provision is subject to the contract made between the Parties. The custom practiced for the tenancy period of the residential properties has always been for one year and it would be renewed for the same period automatically. However, the terms specifically prescribed in the contract providing term of tenancy between the Parties shall be considered. For instance, the landlord may clearly specify in the contract that by the end of the tenancy he desires the tenant to vacate the property.
    • The period may not be automatically extended if the landlord or the tenant has defaulted in performing their responsibilities under Tenancy Law. For instance, the tenant's failure to pay the rent due or the landlord's failure to hand over the property in good or in working condition.
    • The landlord must send a notice for eviction to the tenant two months prior to the date of the tenancy expiry period in the case of residential properties; and three months prior to the to the date of the tenancy expiry period in the case of commercial, industrial or professional properties as per article 20(3) of the tenancy law.

    2.      The following procedures must be adhered to:

    •          Ensure that the landlord has registered his property at ADM by reviewing the registration certificate.
    •          Seek the tenancy contract for your review. Examine all terms and conditions specially those pertaining to tenancy period, rental amount, maintenance and other fees.  

    Eventually, it should be noted that in case a dispute occurs between the landlord i.e. owner or real estate/property management company and the tenant, it would not be possible to submit dispute application to the Rent Dispute Settlement Committee unless the tenancy contract is registered with ADM tawtheeq system. Accordingly it is advisable to make sure that the tenancy contract is signed and registered. To state in précis, the Tenancy Law is a security for the rights of both the parties whether the party is the landlord (owner/ property management company) or the tenant. 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Sun, 05 Jun 2016 17:00:00 GMT
    <![CDATA[Dry Cleaning Your Genes - A Comparative Analysis on Biotechnology Law(s)]]>  

    Since the early eighties, the member states of European Union (the "Union") had realized that Biotechnology was emerging as one of the most innovative and promising technologies1. It was also realized that the United States was dominating the biotechnology market2. Member states had also recognised that importance of protection of biotechnological inventions was significant for European Community's industrial growth, and that harmonization of European patent law can improve legal certainty, improve research and development investment and improve job spin-off

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Dry Cleaning Your Genes

    'The good thing about science is that it's true whether or not you believe in it'

    -        Dr. Neil deGrasse Tyson

    During the early eighties, the member states of European Union recognized the importance of Biotechnology. Whilst the United States had long held a dominating position, the European Members States decided to strenghten the European Community's industrial growth by harmonizing their patent law thereby paving way for development and investment in the Biotechnology sector. Shruti Tiwari, Giulia Sibilla, George SK, Ridwana Ahmed collectively present this interesting article on Biotechnology Laws with special emphasis on United States, European Union, Dubai (covering Dubiotech and other recent initiatives) and the law in UAE.

    While human nature is steered towards fretting about daily challenges, what we actually fail to comprehend is the variety of solutions that biotechnology offers to mankind. Since the birth of Louise Brown, the first test tube baby in 1991, we have witnessed remarkable advances in the field of Biotechnology. However, such breakthroughs have raised significant questions on moral and ethical grounds. Ethicists, like John Harris, have pointed out numerous concerns on the imbalance that biotechnology causes on the nature. Think about a scenario where superheroes like Spiderman and Wonder-woman would be seen walking around in the streets of Dubai! This is most likely to cause large scale chaos and mayhem as they need not always be the good guys who fight the evil in the world.

    Why hassle over the 'tiny' things?

    The concept of 'stem cells' were first coined by renowned scientists, McCulloch and Till, in 1961. Presently, it is one of the most popular concepts in the field of biotechnology due to its potential applications and the legal and ethical issues that are associated with its usage. The evolution of the extensively funded industry of biotechnology has manifested itself to become one of the most dynamic branches of present day science and technology. Therefore, law regarding the patentability of stem cells mainly revolves around jurisprudence, biotechnology and regional moral or ethical standards. Morals are values that act as a guiding compass in our daily life as we face the complexities of the world around us. Law, on the other hand, is considered to be a vital instrument in regulating human conduct in the society. It is paramount to analyse how scientists, media and lawmakers have hyped the concept of stem-cells in order to understand the application of law and ethics in the field.

    Stem cells have the capability of dividing and renewing themselves. However, the cardinal importance of stem cells lies in its ability to produce specialized custom cells as it helps in treating lethal diseases such as Parkinson's, Diabetes, Arthritis and Cancer by using the specialized cells to revamp the affected tissues. Thus the progress in the field of stem cells has been stupendous, but the question is, if the progress is good enough for it to be made patentable? As biological advancement begin to take prominence, investors and innovators are compelled to turn to intellectual property rights with the objective of ensuring their exclusive rights over their investments. These rights work in unison with World Intellectual Property Organization (the WIPO). The patent system provides exclusive rights to inventors and innovators for a designated period of time In exchange for public disclosure of their inventions.

    Patent Compatibility – A European View

    European Patent Convention (the EPC) is a multilateral treaty which has laid down the legislations regarding patents in the European Union. The EU Biotech Directives (the Directives), issued by the European Commission, had been enacted for the purpose of protecting and promoting biotechnological inventions. Subsequently, the Directives were incorporated by EPC under its legislation. Thus the scheme for patentability of stem cells in Europe should be studied with the clauses under EPC simultaneously with the provisions of the Directives. Article 52 (1) of the EPC states that patentable inventions should:

    ·        be novel;

    ·        include an inventive step; and

    ·        be capable of industrial use.

    However, article 52 (2) of the EPC provides for an exclusion which states that discoveries, scientific theories and mathematical methods cannot be a subject matter of patent. It further states that inventions whose publication or exploitation is opposed to 'ordre public' or 'morality' cannot be patented. Therefore, one may argue on the basis of morality that the European Patent Office refrains from permitting patents for stem cells which are obtained though the destruction of human embryos. However, article 53 (a) explicitly states that the exploitation of an invention would not be deemed to be contrary merely because it is protected by the laws of any of the contracting states of the EU. This succours in blending the differences in moral beliefs that could be inspired by the domestic religion and traditions of the countries. This can be explained with the help of the following illustration: suppose a country has a law, 'X', which limits use of stem cells. It is not upon the law 'X' to determine if stem cells or invention made by the use of stem cells are patentable or not. Hence, a patent could be granted to an invention when it is capable of being exploited in the industry. Thus it is an attempt of harmonizing the patentability of inventions among various countries.

    However, rule 23 (d) of the EPC specifically excludes the cloning of human beings, modifying germ line genetic identity of human beings, using of human embryos for industrial or commercial purposes and lastly modifying genetic identity of animals. This can be apprehended as an explicit exclusion to the patentability of biotechnological inventions as the inventions which result from the destruction or modification of human embryos cannot be patented in the EU. The infamous dispute in the patent application of Technion Research and Development Foundation Ltd. provides considerable insight on the position of the EU with regard to the patentability of human foreskin cells suitable for culturing stem cells. This dispute aided in explaining the status of patentability of 'HES' cells, as it was laid down that inventions which relied on commercially available 'HES' cells are excluded from patentability. The judges rejected the appellant's claim that the inventions using commercially or publically available HES cells can be patented as it was obtained without the prior destruction of human embryos. Further, it was ruled that the appellant's invention cannot be patented as the commercially available HES cell lines were also developed with the destruction of the human embryo.

    Further, the judgment by the High Court of Justice (England and Wales) in the case of International Stem Cells vs. Comptroller General of Patents, Designs and Trademarks provides a substantial insight on the scope of term 'human embryo'. The court held that an unfertilized human ovum does not fall under the ambit of the term 'human embryo' if it does not have the inherent capacity of developing itself into a human being. This means that a stem cell could be patentable if it has been developed from a cell which does not have the capability to transform itself into a human being over a period of time. In the light of these cases, it can be comprehended that an invention involving the use of stem cells can be protected by the European Patent Office only if the cells used for inventing them are obtained without destructing or modifying a human embryo.

    The American Approach

    The patentability scheme in the United States is relaxed, compared to that of Europe. Title 35 of the United States Code (the Code) has laid down the provisions regarding the patentability of inventions in the US. The Code has explicitly provided for the eligibility of the inventions or discoveries that could be protected under the jurisdiction of the United States Patent and Trademark Office. An invention or a discovery would be eligible to be patented only if:

    ·        it is a new and useful process, machine, manufacture, composition of matter or any improvement thereof (article 101);

    ·        it is novel (article 102); and

    ·        it is non-obvious (article 103).

    Politics has broadly affected the patentability in the industry of biotechnology as there are no specific regulations in the US that deals with the patentability of stem cells. However, the US has emerged as a global leader in its spending towards research and development in the biotechnological industry. The decision of the US Supreme Court decided the celebrated case of Diamond vs. Chakrabarty has helped in determining the patentability of stem cells in the US. A living micro organism was modified by the defendant in order to develop a bacterium that had wide usage in treating oil spills. Subsequently, the employer of the defendant applied for the patent of:

    1.      bacteria;

    2.      the process/ method of producing the bacteria; and

    3.      claims for an inoculum which comprised of a carrier material floating on water.

    Subsequently, the patent examiner granted patents for items 2 and 3 but rejected the application for patenting the bacteria. He contended that living micro organisms which were found in the nature could not be attended under the Code. However, the defendant claimed that the genetic engineering which he performed on the micro organism was a manufacturing process and it had covered the objects of patentability of the Code. The apex court took the view that a human-made micro organism is patentable under the Code. Further, the court also stated that the genetic engineering which the defendant had performed on the micro organism would constitute the 'manufacture' and the bacterium would fall under the ambit of the term 'composition of matter' for the purpose of interpretation.

    Whereas, the landmark case of Association for Molecular Pathology vs. Myriad Genetics aided in further establishing the patentability of stem cells in the US. The main issue in this case was whether the genes of DNA and CDNA were eligible for patent protection? Myriad Genetics, a foremost player in the biotechnology industry, had found the precise sequence and location of genome genes called BRCAI 1 and BRCAI 2. A detailed study on these genes proved that it increased the risk of breast and ovarian cancer. They subsequently obtained patents on these genes. The validity of these patents was challenged by the plaintiff on the ground that genes were naturally occurring components in human body and the mere discovery of their location cannot be a subject matter of patent. Therefore, the court held that DNA was not admissible to be patented. However, the court observed that CDNA was eligible for patent protection as it was not a product of nature completely.

    Peroration

    The regulations on legality and patentability of stem cells in Europe are highly influenced by socio-ethical factors. While USA has a laid back policy and does not exclude the patentability of stem cells exclusively while it also provides federal funding. Although members of EU are gaining pace in the industry, it continues to struggle in harmonizing the regulations governing stem cells among the various contracting states.

    With advances in Biotechnology taking its stand on the platform of many international pedestals today, it is an honour to note that the UAE is regarded as the leading stand of the Arab world in Biotechnology. Recently, UAE has witnessed tremendous growth in the industry as it has been included in the Scientific American Worldview Report and the Bio Innovation Scorecard. UAE has also successfully incorporated the Khalifa Center for Biotechnology and Genetic Engineering (KCBGE) at the UAE University in Al Ain which aims at increasing agricultural production by developing genetic fertilization of plants., This centre facilitates in dealing with the issue of healthier food consumption, sustainability and food security as the growing number of food disorders amongst the youth today has an adverse effect on the society.

    The commencement of operations at the Dubai Biotechnology and Research Park (DuBiotech) provides the Arab nation with substantial investment into the development of biotechnological industry. The park includes a bio headquarter towers, a nucleotide lab complex and warehousing facilities to support a growing body of research, development, manufacturing, distribution and services amongst others.

    If we ought not to fear mortal truth, still less should we dread scientific truth. In the first place it cannot conflict with ethics? But if science is feared, it is above all because it can give no happiness? Man, then, cannot be happy through science but today he can much less be happy without it- Henri Poincare!

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Sun, 05 Jun 2016 15:47:57 GMT
    <![CDATA[Spotting the Fake: Forgery Under UAE Law]]> Spotting the Fake: Forgery under UAE Law  (Part 1 of 2)

    The creation of an idea, a work of art involves persistence and a visionary acumen to say the least. Such is the allurement surrounding element of individuality that it has continued to lure the less privileged into forgery from time immemorial. Economies have implemented sophisticated legislations to counter forgery and have been retorted with more sophisticated means of forgery time and again. Abdel Ghany from STA's litigation team discusses the legal implication on forgery in the context of UAE Law. Part 2 of this article will be published in the next issue.

    According to the Law of Evidence in Civil and Commercial Transactions Federal Law No. 10 of 1992 (the Law) the burden of proof is on the claimant which is an established principle and also stated under Article 1 of the Law. The law provides that the claimant or person claiming the fact is duty bound to prove his claim and the defendant shall have the right of denial.

    The first proofs of evidence to substantiate the facts are the official and / or customary documents. It is also established in law that official or public documents, being created by public official are deemed to be a proof against all litigants, including what is proved unless falsified by methods stipulated by law. Customary document, being document created by parties, is a proof among the parties only, but for others it shall not be deemed evidence, except for certain conditions. For instance, official document may create right in rem and customary document may create only right in personam.

    The basic principle of evidence is that the customary document shall be deemed to be issued by those who signed the same, unless the person expressly denies his/her handwriting, signature, stamp or finger-print. However, if the person cites the document in court or replies to it without any objection or relies on such document in court, he will be considered to have acknowledged the authenticity of document and cannot deny the admissibility of the document per se. Further, in the event the document is forged, such person must challenge the document. Similarly, if opponent declared authenticity of the stamp used in the customary document but denied impress, he shall have the right to challenge for forgery.

    It is imperative to note that customary document's origin being general and not official it is sufficient to just deny for excluding the effect of customary document, but it may not be sufficient in all or certain cases. In such cases, the challenge for forgery to deny such forged document is essential and one must prove forgery in the documents.

    First - The Definition of Forgery in Documents

    Forgery is defined under Article 216 of the Federal Penal Code:

    "The forgery of a written instrument is to alter its reality in one of the manners described herein below,     so as to cause prejudice, with the intention of substituting the false for the genuine instrument."  The seven methods stated to be considered as committing the crime of forgery are:

    1.      "To alter a genuine instrument, whether by adding, or removing or changing any of its written parts, numbers, marks or pictures.

    2.      To falsely sign or place a forged seal, or to alter a genuine signature, seal or imprint.

    3.      To obtain by surprise or by fraud the signature, seal or imprint of a person who ignores the contents of the instrument or who has not validly given his consent thereon.

    4.      To make falsely or imitate an instrument and attribute it to another person.

    5.      To fill a blank paper which is signed, sealed or imprinted, without the approval of the person who has signed, sealed or imprinted it.

    6.      To assume the name of another person or to substitute it in a document which has been prepared specifically to prove the identity of such other person.

    7.      A material alteration of writing with a deceitful and fraudulent intent, preventing therefore the genuine intent of the instrument from being achieved."

    In the above context it can be concluded that there are two types of forgery namely material forgery and moral forgery which are explained below:

    Material forgeryA material forgery takes effect when a material change in the document is made by the forger that can be comprehended by sense such as eyes, whether by way of addition, deletion or modification in the existing original document or by way of crating new document(s).

    Moral forgery: A moral forgery is said to be conducted when a forger creates a change in the meaning, content and circumstances at time of editing but not in material or form as editing articles or statements other than those made by the contractual parties. For instance, someone impersonating someone else in the contract or employee makes statements about a person in a document contrary to what he said or, stating that he took bribes or money while he has not received any money.

    Let us consider this example: To prove false statements as true or to say that person knows about the facts which are not recognized or with which he is not acquainted with. For instance: A woman (Fatima) declares falsely that she is a real person i.e. a person she claims (Afreen) before official bailiff or a notary public and her statement is registered and the transaction is made on that factual basis, however in real circumstances she is pretending to be (Afreen) another women. Further, while pretending to be another women (Afreen) Fatima says that I am Afreen and receives an amount and signs as if she is Afreen. If Fatima says she is Afreen it will be oral forgery but if she also signs pretending she is Afreen it will oral as well as material forgery.

    Material forgery can be easily exposed and proven as contrary to the moral forgery, which may be tricky to perceive and at the same time difficult to prove.

    Any material and moral forgery made by the forger whether used or not used by forger can be attributed to the person who created the document. To exclude the impact of such document, several methods can be employed including denial which is sufficient in certain cases to exclude the impact of forged document, but in other cases denial may not be completely useful unless challenge for forgery is also filed. The Courts have held that 'the criminal intent in the forgery offence is realized by the intention to change the truth in a document.[i]'

    This article now proceeds to discuss matters involving denial in forgery claims and challenging claims based on forgery.

    Denial

    Pursuant to Article 11 and 23 (1) of the Law of Evidence, mere denial of a person is enough in case of the customary document which may be challenged for forgery, while contesting the writing, seal, signature or fingerprint. Hence, it is for the other party relying on the document to prove its authenticity and thereby the onus of proof shifts on the person relying on the document.

    The Court of Cassation in Dubai adjudicated the following in this regard: It is established in the judgment of this court that Article 11 and 23 (1) of the law of evidence that mere denial by a person is enough and the official or customary document, may both be challenged for forgery, while contesting the writing, seal, signature or fingerprint which applies only to informal documents until proven by opponent who holds onto its authenticity of signing the document. As the opponent is the one who is responsible for the burden of proof in this case and there is no necessity to take the person who denies to challenge for forgery on what was attributed to him as his signature[ii].

    On 19 November 2012, in Appeal Number 93 of 2012 of the Court of Cassation ruled that a person who denies what is attributed to him by signing forfeit authentic document then the other party has to prove the signed document that  is - the party who seeks to rely on such document must prove its authenticity.

    The second sequence of this two part article will focus on matters involving Challenging Claim for Forgery, Procedures for Challenging Forgery under UAE Law, and some interesting court precedents passed on forgery laws by Dubai Courts of Cassation, Abu Dhabi courts, and the Union Supreme Court.


    [i] Union Supreme Court - Case 409 of 2007 decided on 16 July 2007

    [ii] See also, Union Supreme Court in Case Number 633 of 2005 heard on 14 November 2005 where it was held  "It is settled law pursuant to article 11 of the Law of Proof that a customary document will be deemed to have been issued by the person signing it, unless he expressly denies the handwriting or signature or seal or thumbprint ascribed to him.  As for an heir or successor, a denial will not be required of him.  It is enough for him to deny his knowledge of the handwriting or signature or seal or thumbprint as being that of the person from whom he derives his right.  Nevertheless, it is not open to a person who disputes the contents of a document to deny the handwriting or signature or seal or thumbprint ascribed to him, or to rely on his lack of knowledge of it, on the grounds that any of the above have been issued by a person deriving his right from him".

     

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    Sun, 05 Jun 2016 14:30:00 GMT
    <![CDATA[Joint Ventures in Singapore ]]> Joint Venture in Singapore

    "If you do not seek out allies and helpers, then you will be isolated and weak."

    Sun Tzu, Art of War

     

    More than 10,000 JVs and many more contractual alliances have been launched in the last few years. Based on reports, the largest JVs represent more than 900billion dollars in combined revenues. Joint Ventures (commonly referred as JV) play a pivotal role when a company or an organization intends to expand its business operation and requires e support in terms of resources, expertise or capital influx.  

    In terms of the benefits, each - an equity form of JV where the partners contribute resources to create a new company and simpler contractual alliances where the partners collaborate without creating a new company work a great deal in terms of mitigating risk in uncertain markets, sharing the cost of large-scale capital investments and injecting newfound entrepreneurial spirit into maturing businesses. A JV in host countries with local residents is often referred as a business marriage of convenience in the legal jargon. This combination of resources and efforts binds the parties in a more or less tight legal relationship with attendant rights against and duties to each other.

    New York based consulting firm McKinsey conducted a survey on the subject of JV where 68 percent of respondents expect their companies' joint-venture activity to increase over the next five years and 59 percent expect an increase in M&A. Not surprisingly, the more experience companies have with joint ventures, the more likely they are to use them.

    JV Trends in Singapore

    Singapore is a thriving business space, particularly encouraging of new JVs and alternate business structures to promote trade and commerce. A few notable JV transactions that gained much attention from regulatory point of view are discussed below.

    Inflight catering service provider SATS is launching a new travel retail joint venture even as it is setting up a new venture with Wilmar International in the food supply space. Wilmar International's unit, Yihai Kerry Investments, has entered into two conditional joint venture agreements (the JVAs) with Singapore Food Industries (the SFI) to supply food to the Chinese market. SFI is a unit of ground-handling and in-flight catering service provider SATS, which is listed on the Singapore bourse. Before this SATS had entered into another JV with a global food giant. Together, these JVs have provided both an international exposure, capital influx, know-how and flexibility to the competitive F&B Industry thus narrowing down the outsourcing requirements in the long run.

    In the aviation sector, the Singapore Airlines has entered into a JV with Lufthansa in order to provide Singapore Airlines passengers with access to and from points in Austria, Belgium, Germany and Switzerland via Frankfurt, Munich and Zurich. Lufthansa and SWISS will codeshare on Singapore Airlines and Silk Air services to destinations in Southeast Asia and the Southwest Pacific. The carriers' codeshare cooperation is expected to be expanded to additional destinations.

    Singapore - foreign ownership and control

    The examples set out above detail how the Singapore economy is keen on furthering its present business interests and breaking through the restraints wherever possible. There are generally no restrictions on the level of foreign ownership of Singapore companies or businesses (whether listed or unlisted). Restrictions on foreign ownership exist only in very few business sectors. For example, foreigners cannot own certain classes of residential property (such as landed property in the form of detached houses, semidetached houses and terrace houses) and there is a 49 per cent cap on foreign ownership of a broadcasting company. Singapore has signed several bilateral investment treaties and bilateral Free Trade Agreements (FTAs) with 24 trading partners, which have been instrumental in easing investment rules. Bilateral FTAs include the 2008 China-Singapore Free Trade Agreement, the 2005 India-Singapore Comprehensive Economic Cooperation Agreement (CECA), the 2003 Singapore-Australia Free Trade Agreement (which was reviewed in 2011), the 2003 US-Singapore Free Trade Agreement (USSFTA) and the 2002 Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership Agreement.

    KEY CONSIDERATIONS

    A.     Protection to minority

    One form of statutory protection accorded to minority shareholders in Singapore is reflected in the need for shareholder special resolutions (i.e., passed by a 75 per cent majority) for certain corporate actions such as the alteration of the company's constitution, a reduction of share capital and winding-up.

    Other forms of minority protection are the oppression remedy provided by section 216 of the Singapore Companies Act and the Court's ability to order a company to be wound up where it is "just and equitable" to do so, under section 254 of the Singapore Companies Act. Under section 216(1), any member of a company (whether listed or unlisted) may apply to court for an order on the grounds that: (a) the affairs of the company are being conducted, or the powers of the directors are being exercised, in a manner oppressive to one or more of the members (including himself) or in disregard of his or their interests as members of the company; or (b) some act of the company has been done or is threatened, or some resolution of the members has been passed or is proposed, which unfairly discriminates against or is otherwise prejudicial to one or more of the members (including himself).

    B.     Competition law and merger control

    Singapore's Competition Act 2004 prohibits anti-competitive agreements, abuses of a dominant market position, as well as mergers leading to a substantial lessening of competition within any market in Singapore. The creation of a joint venture which is to perform on a lasting basis all the functions of an autonomous economic entity will qualify as a "merger" where joint control among shareholders can be

    established based on the nature and scope of the minority protections obtained. Despite the general prohibition of anti-competitive mergers, there is no mandatory merger notification requirement in Singapore. Parties are free to perform their own assessment, or voluntarily notify their merger for review and approval by the Competition Commission of Singapore (the CCS) before or after completion.

    C.      Offshore structures

    Singapore's taxation and investment environment is an attractive feature for foreign investors. The Offshore structures are permitted in Singapore and indeed that allows them to access the market conveniently and avoid any tax hurdles unlike other jurisdictions.

    CHALLENGES

    On the contrary there are numerous challenges in general which the companies fail to overcome in implementing the JVs as they overlook a critical piece of any alliance or JV effort – the launch planning and execution. Although most companies are highly disciplined about integrating acquisitions, they rarely commit sufficient resources to launching similarly sized joint ventures or alliances. Mistakes made during the launch phase often erode up to half the potential value creation of a venture. When the JV is launched, the signing of a memorandum of understanding and continuing through the first 100 days of operation is usually not managed closely enough. This lack of attention can result in strategic conflicts between the allied companies, governance gridlock, and missed operational synergies.

    CONCLUSION

    A basic takeaway from the Singapore model is the growing reliance on JV forms of business existence. The relationship between JV partners is governed by the text in black and all that is said between the lines.

    It is therefore important for investors to understand the significance of a well drafted JV agreement. Earlier this year, STA announced its presence to be formed in Singapore amidst growing interest from our existing clients. We look forward to advising on Singapore laws. We and our dynamic team of lawyers in Singapore look forward to serving you soon! 

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    Sun, 05 Jun 2016 00:00:00 GMT
    <![CDATA[Unmanned Aerial Vehicles - Dealing with Drones]]> Unmanned Aerial Vehicles – Dealing with Drones

    From the printing press to the atomic bomb, humankind reveals an inclination to innovate first and plan later. It is a simple truth that technology develops faster and further than law. Cars and hi-tech smart phones are everyday examples of technologies that have grown beyond the highways and by-ways built to support them.

    Innovators and planners are, by nature, opposites. Innovators tend to defy against society to renew it. Planners, on the other hand try to relate the novel to the normal so as to provide continuity and growth. A brief examination of history of the development of technology shows that technical advances sometimes outstrip the development of legal systems. This often forces the basic principles to be re-examined in light of new developments. Advances in field of unmanned aerial vehicles (UAVs), for example, have created a host of noted legal confusions and debates in recent months.

    As at the time of writing this article, a Virgin America pilot reported seeing a quadcopter drone ascend above him while approaching to Dallas Love Field Airport. The news story further reported that there have been several high profile examples of commercial pilots coming in to close contact with UAVs in protected airspace. In absence of planned implementation of rules and regulations, the effects and consequences of such UAVs getting into contact with flights could be seriously catastrophic.

    UAV are usually deployed for military and special operation applications, but the use of UAVs has also been growing in other areas such as use by police and law enforcement officials, firefighting, and other security work to maintain public order and peace. Besides serving military and law enforcement application, drones have been developed and used to serve several other purposes such as in rescue operations, mob monitoring, fire detection, border patrolling, illegal hunting and several other such uses.

    Recreational and private use drones have gained prominence recently and is widely being used by individuals including aspiring aviation students, corporate  retailers, and media agencies to name a few. The Department of Transportation's Federal Aviation Administration (the FAA) has recently proposed a framework of regulations[i] that would allow routine use of certain small unmanned aircraft systems in today's aviation system, while maintaining flexibility to accommodate future technological innovations. The regulations are currently in drafting stage and FAA has called for comments from public on the regulations.

    Singapore has recently introduced bill covering drone usage and the new law will allow any use of recreational or private use of drones if[ii] such drones i) do not weigh more than prescribed limit of 7 kg (without its fuel); ii) do not interfere (directly or indirectly) with any designated flight zones (flying of drones within five kilometres of an aerodrome, or at an altitude higher than 200 feet above the mean sea level when outside five kilometres of an aerodrome[iii]); iii) is in compliance with the regulations.

    The Civil Aviation Department (CAD) of Hong Kong has set out general parameters for safe operations of non-recreational UAVs. The rules proposed by CAD are more or less similar to that of Singapore (except for varying fines and criterions).CAD's guidelines set out other limits including altitude of operations (altitude of UAVs should not exceed 300 feet above ground level), time of operations (daylight only), one UAV at a time per block of designated airspace and weather criteria (ground visibility of not less than 5 kilometres) amidst a few other criterias.

    Perhaps the most complex UAV laws in the entire world exist just north of United States borders. Transport Canada is the agency that regulates Canadian air space, and it sets a clear line between "unmanned aerial vehicles" (commercial use) and "model aircraft" (recreational use). The definition of a model aircraft: less than 77.2 pounds, individually owned (no companies allowed) and not profit-seeking. If an aircraft meets these conditions, it is considered a recreational vehicle, making it subject to lower scrutiny. Aircraft that don't meet these criteria are officially "unmanned aerial vehicles" and require Special Flight Operations certificates. Attaining these certificates can be quite tedious. For example: a UAV can meet the three model aircraft standards listed above, but if has also got a small camera, then the UAV automatically becomes an "unmanned aerial vehicle" under the law.

    Much of mainland Europe operates under the jurisdiction of the European Aviation Safety Agency (EASA), a European Union group. EASA is simple when it comes to UAVs: you're going to need certification in any situation, whatsoever. Such certification is only granted on a case-by-case basis under the EASA's rules. The EASA also has shown that it does not operate under much precedent in these cases, despite UAV technology growing more and more every day. 

    In UAE, a law for the use of unmanned aircraft in the country, in cooperation with the Civil Aviation Authority, is in its final stages.The law will determine uses, which include height and places permitted for use. It will also determine recreational, commercial and scientific licenses for the use of unmanned aircraft. The acceptance of UAVs is gaining momentum in the country in order to harness drone technology to facilitate people's lives, whether in the country or in the world.

    Dubai has introduced more restrictions on the use of drones. The main objective behind this restriction is to enhance airspace safety and security. The law No 7 of 2015 on aviation safety authorizes the Dubai civil aviation authority (DCCA) to specify the airspace for general aviation and the rules governing the use of fireworks, light beams and drones. The law regulates the activities of the civil aviation industry. It applies best practices to ensure the optimum use of Dubai's airspace and prohibit all acts that may endanger aircraft, airport or aviation service facilities. The law includes new allowance for the DCCA to inspect all aviation towers and helipads to ensure their security and it also comply with security standards. The legislation also allows increased inspection and monitoring of workers and activities in the industry. Law No (7) of 2015 concerning airspace safety and security in the emirate of Dubai issued by his Highness Sheikh Mohammed Bin Rashid Al Maktoum stipulates that any person who wishes to practice the civil aviation profession in the emirate of Dubai must first obtain an authorization from the DCCA. Authorization will be issued in accordance with the requirements and procedures determined by a resolution of the director general of DCAA and will be valid for a period of one year renewable for the same period. A person who practice the civil aviation profession and wants to renew his authorization must submit a renewal application to the DCAA 30 days prior to expiry of the authorization. The law stipulates that no natural person or legal person may breach any legal duty which may compromise airspace safety in the emirate in any manner whatsoever. The law also stipulates that any affected party may submit a written grievance to the director general of the DCAA against, any decision, procedure or measure taken against him under the law and the resolutions issued in pursuance within 30 days of being notified of the contested decision, procedure or measure. The grievance will be determined within 30 days from the date of its submission by a committee formed by the director general for this purpose and the decision on grievance will be final.

    The new law on unmanned aircrafts signed by the Russian president Vladimir Putin impels the private owners of the unmanned aircrafts (weighing over 250gms) to be registered with the Federal Air Transport Agency. This act is expected to come in force by the end of March, 2016. Pre-requisites like submission of a written fight plan to the regional body, and its strict adherence once agreed upon along with a mandatory registration of drones ensures congenial public safety.

    The rules on use of drones in Scandinavian countries like Sweden, Denmark and Norway are classified on the basis of its size & their use i.e private/commercial. In Sweden small sized drones weighing below 7 kilograms are allowed to be flown, at least 50 meters from the houses and roads requiring the private users to have a permit & liability insurance. Whereas Denmark does not require a permit for private use of a small drones but its use is only allowed in the countryside- 150 meters from houses and roads. Norway does not maintain private use of small drones. All these countries mandate the private use of small drones to be operated within a visual line of sight that is maximum 300 meters. However it is pertinent to note that conditions for obtaining permissions remain different in every country with respect to small drones (below 7 kilograms) for commercial use. A predetermined criterion in Norway is for the permit requestor to submit a written handbook stating the operations, security and the flight procedures. These rules are to ensure a good regulation of drones addressing aspects like security procedures, assessment of Pilots etc.

    This short general roundup only attempts to scratch the surface of the UAV regulation situation as it unfolds across the globe. Every year, as remote controlled aerial vehicles get more and more popular and their uses grow, they get more and more attention from both the media as well as the regulators. Even though popular media may refer to any UAV as a drone, one must always remember that it can mean anything from a small quadcopter flown as a hobby to an advanced military weapon. Although drones have an immense application in vivid areas, it also attracts various risks to person and property. Understanding the local legislation is a key to understanding efficient and legally permissible use of drones.

    Technology and safety improvements are likely to have a significant effect on how stringent the regulations need to be, as the drone owners may not live up to the pre-requisites set by regulations, thus under-writing and drafting of rules for this area continues to remain a challenge.

    [i]See Federal Register, Vol. 80, No. 35 - Monday, February 23, 2015 dealing with Proposed Rules

    [ii]  Singapore Air Navigation Order (the AN Order)

    [iii]Ibid., Section 64 B and Section 64 C of the AN Order

    iv Canadian Aviation Regulations (CARs) made under the Aeronautics Act. 

    v RIGA declaration on remotely piloted aircraft (drones)on  "framing the future of aviation"- March 6, 2015

     

     

     

     

     

     

     

     

     

     

     

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    Thu, 02 Jun 2016 19:03:15 GMT
    <![CDATA[OW Bunker Dilemma]]> OW Bunker Dilemma

    Who to pay when the bunker supplier becomes insolvent

    1.   Introduction

    The collapse of OW Bunker group (the OW) has been extensively reported worldwide. OW has been one of the world's largest bunker suppliers filed for bankruptcy in 2014. The financial collapse of OW has far reaching consequences on ship owners. This is because in the bunker market, a ship owner usually enters into a sale contract with a supplier for the supply of bunkers. The supplier then contracts out the obligation to a third party supplier. A chain of contracts will form, with no contractual relationship between the ship owner and the party at the end of the chain (who physically supplies/delivers the fuels to the vessel). The contracts in the chain usually contain retention of title clause (the ROT), favoring suppliers. All the parties in the chain know in advance that the bunkers will be used by the ship owner prior to the payment being made to the supplier.

    What will happen if the supplier/contractual counterparty (with whom the ship owner has originally entered into a supply contract) has become insolvent? In October 2014, the owner of the Res Cogitans [2015] EWHC 2022 contracted with OW Bunkers for the supply of USD 443,800 worth of bunkers to the vessel. In turn OW Bunkers purchased the bunkers from Rosneft Ltd. When OW Bunkers was collapsed, the vessel owners had received competing claims from ING Bank and Rosneft Ltd (physical supplier).

    The question that arises is whom the ship owner shall pay when the contractual counterparty has been collapsed? To the contractual counterparty (the CC) or physical supplier (the PS)? If the payment has not passed to the PSs, can the PSs arrest the vessel?

    The aim of this article is to answer these questions under UK and UAE maritime laws and provide some suggestions.

    2.   Who to pay

    If a ship owner makes payment to its CC, there is a risk that the fund will be retained by liquidators and will not pass to the PS (the entity at the end of the chain). On the other hand, if a ship owner pays to the PS, this will not release him from the claim by the CC (to whom the ship owner should pay under the supply contract). The CC and its liquidators may also enforce a lien over the vessel. The liquidators of the CC have certain duties of recovering sums, including fund due to the PS.

    So the ship owner can be subject to competing claims by both the CC and PS. If PSs do not receive their payment for the bunkers (they delivered to the vessel), they may look to the ship interests for the payment.

    3.   Can PSs arrest the ship?

    As per English maritime law, there are two types of maritime claims which give rise to the ship being arrested.

    1.      A Maritime Lien - this includes "damage done by a ship; salvage; seaman's and master's lien for wages; and Master's disbursements"; and

    2.      Statutory maritime claims – this includes "any claim in respect of goods or materials supplied to a ship for her operation or maintenance" and which will include the supply of bunkers (s. 20 (2) para (a) to (s) of the Senior Court Act).

    However, as per s. 21 (4) of the Senior Court Act, before an action in rem can arise and/or the PSs apply for arresting the ship, the following conditions shall be satisfied:    

    a.       the claim shall be in connection to a ship, and

    b.       the person who should be liable for the claim, at the time of arising the claim, was the owner of or in possession of the vessel.

    So, PSs can have a statutory claim and apply for a ship arrest, only if the ship owner is liable in personam to the bunker supplier. As a ship owner has no contractual relationship with the PS, therefore no in personam liability to the PS. Hence, there is no right to arrest a ship in England.

    Although some PSs may argue that the ship owner is a party to the contract by virtue of the invoice being addressed to the ship owner. However, it is unlikely to give rise to a contractual relationship between the two, given that there is no evidence of contractual relationship. As per s. 19 of the UK Sales of Goods Act 1979 (the SOGA), a PS may also argue that by virtue of the ROT clause in the contract the title to the bunkers has not been passed to the ship owner. However, a ROT clause is difficult to enforce when the bunkers are used by a ship owner.

    4.          The position in the UAE

    Article 115 (1), and (2) (i) of the UAE Federal Law Number 26 of 1981 on the Commercial Maritime Law ("CML") states:

    1.       "A sequestration may be levied against a vessel by an order of the competent civil court. Such shall be made only for the satisfaction of a maritime debt.

    2.       The expression "maritime debt" shall mean a claim in respect of a right arising from any of the following causes:

                                         i.          Supplies of products or equipment necessary for the use or maintenance of the vessel, in any location of supply whatsoever".

    As per Article 115 above, PSs are in a strong position to arrest the subject vessel to enforce their claims. Chartered vessels are also subject to arrest under the provisions of CML, if a charterer ordered bunkers for the vessel.

    In OW Bunker Middle East DMCC ("OWBME"), ship owners were subject to double demand for payment by both PSs and the OWBME liquidators. In addition, the ING Bank N.V. came into picture by virtue of a Security Agreement (the SA) entered between the ING and OWBME; and thus claiming priority creditor status over OWBME receivables. The ship owner and the charterer of the vessel argued that they are not responsible for the payment to the PSs, as there is no contractual link between the parties. Accordingly, they asked the Court to reject the arrest of the vessel submitted by the PSs.

    The Khorfakkan Federal Appeal Court found for the PSs, on the basis of Article 115 (i), and the appeal of the ING Bank was accordingly dismissed.

    The judgment clearly strengthens the position of PSs of bunkers in the UAE, regarding the lawfulness arrest of the ship. It may also provide some indications to ship owners whom to pay. However, it is worth noting that in the UAE, by contrast to the common law jurisdictions, the judgement of the Court of Appeal is non-binding. So what the ship owners shall do, when facing double claims for payment by both the CC and PS, when the CC has been collapsed.

    5.   Solutions and suggestions

    It is clear that the collapse of OW Bunkers has had a huge impact on ship owners across the globe. It is also obvious that time is of essence in the shipping business. Every hour of arrest of a ship in a port can be very costly.

    To avoid the risk of the ship being arrested for non-payment of bunkers, the ship owners in Singapore have deposited funds into court Precious Shipping Ltd v. OW Bunker (Singapore) and others [2015] SGHC 187. To prevent the arrest of the container vessel "Cosco Piraeus", the New Jersey Court asked the ship owner to deposit USD 938,607 into a law firm to cover bunker supply arrears.  

    In principle, a ship owner and a supplier can agree to deposit the funds into an escrow account, until the court decides who the payment shall be made. Although depositing funds into an escrow account may seem fair, there is no incentive for the supplier to agree to the same. This is because under the UAE CML, a supplier is in a good position to bring a claim for non-payment and arrest the ship. Hence, for a supplier to agree to the proposal, will mean to wait long time for a court's decision.    

    Furthermore, in the UAE, only bank guarantees, cheques or cash are used as collateral to debtors. So when a ship is arrested by a PS, it may only accept a bank guarantee, cheque or cash. The ship owner as such may be under commercial pressure to settle the supplier's claim, because arranging bank guarantees can be very expensive.  

    So it may be beneficial for a ship owner to reach a settlement prior to the vessel being arrested. In such a way, the ship owner will avoid the ship being arrested and will thus meet its commercial obligations. The ship owner may also request the supplier for an indemnity to safeguard itself from a third party claim. For the suppliers the arrangement seems also beneficial, as they will receive the payment due without delay.

     

     

     

     

     

     

     

     

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    Thu, 02 Jun 2016 18:43:51 GMT
    <![CDATA[The ICC International Court of Arbitration]]> The ICC International Court of Arbitration

    Introduction:

    International Chamber of Commerce (ICC) plays prominent role at international level by promoting investment and trade of goods and services. It is not merely a private organization though it was created by handful of entrepreneurs as group of industrialists, financiers and traders were determined to bring economic prosperity to a world that was still reeling from the devastation of World War I and called themselves merchants of peace. The organization expanded from five countries to become a world business organization with member companies in more than 120 countries.

    The International Court of Arbitration (ICC Arbitration Court) was founded in 1923 which added impetus to the ICC as it has provided a distinctive functionality to the organization. The ICC Courts provides dispute resolution mechanisms in line with international business requirements considering the need of resolution which do not have state interference and provides juridical supervisions. ICC Arbitration Court is the most preferred and widely used arbitration institution with 50% of research respondents preferring ICC as per 2010 research survey.[1]

    The ICC Arbitration Court has developed dispute resolution mechanisms specifically for international business disputes as such disputes pose unique challenges, usually because the parties will be of different nationalities, implying varied linguistic, distance between nations, legal and cultural backgrounds. ICC arbitration is preferred to resolve issues of perceived or actual inequality for one party to submit to the courts of another party's home ground.

    What is ICC Arbitration Court?

    ICC Arbitration Court is defined under Annexure I of the ICC Statute as an autonomous body; it carries out these functions in complete independence from the ICC and its organs. The function of the ICC Arbitration Court is to ensure the application of the Rules of Arbitration of the ICC (the ICC Rules), and it has all the necessary powers for that purpose. Accordingly, though it is called International Court of Arbitration of ICC it is an administrative body and does not adjudicate upon cases, but exercise judicial supervision on the arbitration proceedings and ensures the implementation of ICC Rules [Article 1(2)]. The awards are rendered by independent arbitrators appointed by the parties to the dispute. 

    What are the Rules governing ICC Arbitration Court and what aspect of arbitration they govern?

    The ICC's first rules of Arbitration were published in English and French in 1922. The ICC Rules are amended several times and there have been ten revisions, the recent one being made in 2011 and implemented on 1 January 2012. The ICC Rules govern the conduct of proceedings before ICC Arbitration Court from initiation till award is passed. ICC Rules regulate the filing of claims, the constitution of arbitral tribunals, the conduct of proceedings, the rendering of award and the determination of costs. The ICC Rules allow parties flexibility in terms of preferences of parties to dispute with respect to certain aspects of the proceedings such as the choice of arbitrators, the place and the language of arbitration.

    How does one refer the dispute to ICC Arbitration Court?

    The Parties can refer to any dispute if they have stated the ICC standard clause or such other clause in the arbitration or dispute resolution clause in the contract agreed between the Parties. The standard clause in various languages is available on this link.[1] It is not mandatory for party seeking arbitration under ICC Rules to be ICC member or to have any other affiliation with ICC. The requirement is that the parties to a contract, treaty, or separate arbitration agreement have agreed on ICC Arbitration. The party can be a company, state, state entity, international organization or individual.

    How is the request for arbitration filed?

    The Request for Arbitration must be filed with the ICC Secretariat for the ICC Arbitration Court at ICC Headquarters. The request must include (a) name, description and address of each of the parties; (b) a description of the nature and circumstances of the dispute giving rise to claims; (c) a statement of the relief sought including any compensation claimed, if required ; (d) the copy of relevant contract and arbitration agreement; (e) all relevant particulars concerning the constitution of the Arbitral Tribunal; (f) any preference for place of arbitration, the applicable rules of law and the language of the arbitration. The Request must be filed with enough copies for each respondent party, each arbitrator and the Secretariat. The Request must also be accompanied by some fees as an advance payment on administrative costs.

    Which sectors or disputes can be referred for arbitration under ICC Rules to ICC Arbitration Court?

    ICC Rules have been formed to be used in all sectors and for all types of disputes and hence there is no limitation on which type of industry or business sector can seek arbitration under ICC Arbitration Court. 

    What is the language of proceedings under ICC Arbitration Court?

    There is no language limitation. The proceedings can be conducted in any language that the parties may agree to in their respective contract. As per Article 20 of ICC Rules, the arbitral tribunal shall determine the language/s of the arbitration in the absence of an agreement by the parties and all relevant circumstances including the language of the contract shall be given consideration while deciding the language of proceedings.

    Where is the arbitration proceedings conducted under ICC Rules?

    Article 18 states that the seat of arbitration and place of hearing can be anywhere as agreed between the parties. If it is not agreed between the parties, the arbitral tribunal may, after consultation with the parties, conduct hearings and meetings at any location it considers appropriate, unless otherwise agreed by the parties. However, ICC Hearing Centre, Arbitration Place[1] and Seoul International Dispute Resolution Center are recommended for hearings and meetings because of their state-of-the-art hearing facilities and all-encompassing service.

    Which rules applies while adjudicating the dispute?

    The rules of proper law of contract can be national law of the country of one party or of other party to contract or it can be international or general principles of law. As per Article 21 of ICC Rules in the absence of any such agreement arbitral tribunal shall apply the rules of law which it deems to be appropriate.

    What are the applicable rules to the proceedings of arbitration?

    As per article 19, ICC Rules shall govern the proceedings and if the same is silent on any issue, the rules which the parties agree on and failing which the rules that is agreed by arbitral tribunal shall apply, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.

    What is the procedure for appointing arbitrator as per the ICC Rules?

    The ICC Rules provides for arbitral tribunal provisions under Article 11 to 15. The section provides for general provisions laying down the requirements for appointment of arbitrator. As per Article 11, any person can be appointed as arbitrator based on his expertise in specific field of work, nationality, and language, so on and so forth as agreed by the parties to the dispute. However, the arbitrator must be independent and impartial. The Court's role is to ensure that prospective arbitrator shall sign a statement of acceptance, availability, impartiality and independence. The prospective arbitrator shall disclose in writing to the Secretariat any facts or circumstances which might be of such a nature as to raise doubt on the arbitrator's independence in the eyes of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator's impartiality.

    If the Parties have not provided otherwise in contract, the arbitral tribunal shall be appointed under article 12 and 13 which states about constitution of the arbitral tribunal and appointment and confirmation of the arbitrators.

    Can the appointment of arbitrator be challenged?

    The appointment can be challenged as per article 14 for an alleged lack of impartiality or independence, or otherwise, shall be made by the submission to the Secretariat of a written statement specifying the facts and circumstances on which the challenge is based.

    The challenge is admissible only if it is made within 30 days from receipt by that party of the notification of the appointment or confirmation of the arbitrator, or within 30 days from the date when the party was informed of the facts and circumstances on which the challenge is based, if such date is subsequent to the receipt of such notification.

    The Arbitrator can be replaced under article 15 of the ICC Rules upon death, upon acceptance by the ICC Arbitration Court of the arbitrator's resignation, upon acceptance by the court of a challenge, or upon acceptance of a request of all the parties. The ICC Arbitration Court can also replace the arbitrator on its own initiative when it decides that the arbitrator is prevented de jure or de facto from fulfilling the arbitrator's functions, or that the arbitrator is not fulfilling those functions in accordance with the ICC Rules or within the prescribed time limits.

    What is the time limit for rendering final award?

    Article 30 directs that the award must be passed in six months from the date of last signature by the arbitral tribunal or by the parties of the Terms of Reference or, in the case of application of Article 23(3)[1], the date of the notification to the arbitral tribunal by the Secretariat of the approval of the terms of reference by the court. The court may fix a different time limit based upon the procedural timetable established pursuant to Article 24(2)[2].

    The Court may extend the time limit pursuant to a reasoned request from the arbitral tribunal or on its own initiative if it decides it is necessary to do so. [Article 30(1)]

    Whether awards granted by arbitral tribunal binding on parties and enforceable?

    Article 34 (6) of ICC Rules provides that the award shall be binding on the parties as by submitting to the arbitration under the ICC Rules the parties waive their right to any form of recourse insofar as the waiver can be validly made.

    However, the enforceability of the awards remains to be major concern and many courts around the world have cast doubts about its enforceability.[1] The matter of enforceability is decided on case to case basis by the state/national courts and the practice defers based on the considerations in each case and country. The enforcement is not automatic and depends on the legal system wherein the parties seek to enforce the judgment.  The UK's Court of Appeal in Dallah Estate and Tourism Holding Co. v. The Ministry of Religious Affairs, Government of Pakistan [2009] EWCA Civil 755 highlighted the limitations of tribunal's authority to rule on its own jurisdiction (kompetenz-kompetenz). It upheld the view that courts enforcing the awards have final word on the issue of tribunal's jurisdiction to grant award. It further emphasizes that the consideration on contracting party being state entity can change the approach of the judiciary.

    Considering the doubts on enforceability of awards granted by arbitral tribunals under ICC clause under supervision of ICC Arbitration Court, ICC has released a new edition of its guide[2] to national procedures for recognition and enforcement of awards under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

    For advice on international arbitration matters, get in touch with STA's Dispute Resolution Team on corporate@stalawfirm.com


    [1] For instance: Z v A and others [2015] HKEC 289, HKCFI 228; [2015] 2 HKC 272; HCCT 8/2013 (30 January 2015)

    [2] The guide is available for purchase on the following link:

    http://store.iccwbo.org/icc-guide-to-national-procedures-for-recognition-and-enforcement-of-awards-under-the-new-york-convention

     

    [1] Article 23(3) of ICC Rules states as: "If any of the parties refuses to take part in the drawing up of the Terms of Reference or to sign the same, they shall be submitted to the Court for approval. When the Terms of Reference have been signed in accordance with Article 23(2) or approved by the Court, the arbitration shall proceed."

    [2] Article 24(2) of ICC Rules states as: "the arbitral tribunal shall establish the procedural timetable that it intends to follow for the conduct of the arbitration. The procedural timetable and any modifications thereto shall be communicated to the Court and the parties."

     

    [1] As provided in the link: http://www.arbitrationplace.com/

     

     

     

     

     

     

     

     

     

     

    [1]http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/standard-icc-arbitration-clauses/standard-icc-arbitration-clauses-in-several-languages/

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     


    [1] Conclusion of 2010 research survey undertaken by the School of International Arbitration at Queen Mary University, London

     

     

     

    ]]>
    Thu, 02 Jun 2016 17:47:05 GMT
    <![CDATA[Abu Dhabi Global Markets: Rising to the Challenge]]>  Abu Dhabi Global Markets: Rising to the challenge

    Historically, finance has always been 'international' in character; capital has rarely been mobile. Money has moved freely across borders for all of civilisation with gold and silver being global currencies for millenia. With passage of time, money has been reverting to its natural state with removal of capital controls and the gradual integration of national capital and banking markets but now on a global scale1.

     

    Rapid advancements in field of technology, free movement of capital globally, and need to service an increasingly global clientele are creating opportunities that call for establishment of new world class financial centres. Any new development in the financial market piques the interest of people globally. London may have edged ahead of New York and Singapore may have become more competitive financial centre compared to Hong Kong. These big financial centres now face competition from several new and ambitious challengers and one of them being the Abu Dhabi Global Markets in Abu Dhabi, United Arab Emirates.

     

    The establishment of a financial free zone in Abu Dhabi has been generating buzz since the time of its inception. The establishment of Abu Dhabi Global Markets (the ADGM) under the Federal No. 4 of 2013 came at a time when Abu Dhabi had begun facing the heat of a volatile oil market and needed to broaden its horizons from the oil and gas economy. Upon its commencement of operations in the year 2015, the financial market has been keenly following the progress of this latest entrée in the financial free zone arena. Investors have been speculating whether ADGM can offer similar lucrative options for investment and unparalleled infrastructure as its neighbour, Dubai International Financial Center (the DIFC).

     

    This Article examines the regulatory and legal landscape of ADGM to determine the ease by which businesses may be set up in ADGM.

     

    Regulatory Framework

     

    In order to ensure that ADGM maneuvers its operation efficiently, the regulatory framework is hinged upon its three independent authorities; Regulatory Authority, Financial Services Regulatory Authority (the FSRA) and ADGM Courts.

     

    ADGM has demarcated the manner of regulation of registration of companies undertaking financial and non-financial business activities including retail activities. Financial activities are regulated and supervised by FSRA while non-financial activities and retail organization shall be registered with the Registration Authority. To obtain a license from ADGM to commence operations, an applicant has to first identify the category of business activities and the type of company desired to be registered with ADGM. ADGM establishments are allowed to be registered as public company limited by shares, private company limited by guarantee, private company limited by shares, private company unlimited without shares, restricted scope company, private company unlimited with shares and branch of a foreign company.

    The applicant company desirous of obtaining a license to undertake non-financial activities will have to submit an application form and supporting documents alongwith the business plan outlining the activities to the business development team of Registration Authority of ADGM with an initial fee. Consequently, if the Regulatory Authority concurs that the activities desired to be undertaken are permissible and the supporting document are found to be in order, the applicant company may then proceed to apply for name reservation with the online registry. Upon successful completion of reserving a name for the company, a license to the applicant company for carrying out the activities will be issued. The operational framework of ADGM has been discussed at length in one of our other articles.

     

    In an effort to streamline the process of setting up business in ADGM and for the ease of the investors registering under ADGM, Mubadala Development Company has taken charge of all leasing activities pertaining to office premises within ADGM. Investors, now have to only approach Mubadala for the purpose of leading office space. Similarly, companies desirous of being registered as a financial services provider are regulated by the FSRA and FSRA derives its powers under the Financial Services & Markets Regulations 2015 (FSRA Regulations) enacted on 4 October 2015. FSRA Regulations provide for the list of regulated activities permissible to be carried out. The applicant company is required to have an initial meeting with the Authorization team of the FSRA wherein the applicant company must have a regulatory plan setting out the activities proposed to be undertaken, internal controls and resources to address the related risks. The applicant company is also required to complete an application form by the name of 'General Information for Regulated Activities (GIRA)", alongwith supplementary forms in relation to activities and make payment of the initial fee.

     

    An essential distinction between ADGM and DIFC's permitted business is that ADGM allows grant of license for business of commodities related activities, which so far has not been allowed under DIFC.

     

    Legal Framework

     

    In a bid to provide a transparent and robust system of laws with a well established legal framework, the ADGM legislature has incorporated the English Common law as its keystone and enacted the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 and rules thereto, independent of the UAE legal framework. ADGM Courts comprise, a Court of First Instance and a Court of Appeal as modeled on the English Common Law structure. The ADGM can confer its jurisdiction on all civil and commercial matters except matter pertaining to criminal cases, divorce, and inheritance.

     

    Conclusion

     

    While DIFC has had a head start of a decade, ADGM has swiftly risen to the opportunity. The regulatory framework has been in line with the digital age and for the ease of the investors, the registration process can be undertaken online without any difficulty. If ADGM continues to achieve the objects for which it was established, it shall soon be leading financial hub offering an array of services. Inspite of the presence of DIFC, which is still a popular platform for investment, Abu Dhabi's rich oil reserves and one of the leading sovereign wealth assets shall ensure investors areattracted to this upcoming financial center.

     

    _______________________________________________________

    1 The Dubai International Financial Centre, Information Pack - Publication, STA Law Firm available online

     

    Note: This article was originally published on Lexology

    ]]>
    Fri, 27 May 2016 15:00:00 GMT
    <![CDATA[Unmanned Aerial Vehicles – Dealing with Drones]]> From the printing press to the atomic bomb, humankind reveals an inclination to innovate first and plan later. It is a simple truth that technology develops faster and further than law. Cars and hi-tech smart phones are everyday examples of technologies that have grown beyond the highways and by-ways built to support them.

    ]]>
    Wed, 18 May 2016 16:41:45 GMT
    <![CDATA[CORPORATE LIABILITY: UK BRIBERY ACT]]> which plays the most crucial role to neck this are the Corporate Manslaughter and Corporate Homicide Act 2007 (CMCHA) and the Bribery Act 2010 (Bribery Act) - both of which focus attention on the management systems and controls of a corporate entity.

    It has been said by one of the jurists that "It doesn't matter who you are, what you do, if you break the law there will be consequences."

    ]]>
    Wed, 18 May 2016 00:00:00 GMT
    <![CDATA[Brainstorming: Before Buying a Property in Abu Dhabi ]]> The Abu Dhabi Government has implemented numerous laws and regulations regarding the real estate sector lately. The Emirate of Abu Dhabi has experienced an exponential growth in the past few years. The new real estate law – Number 3 of 2015 Regulating Real Estate Sector in the Emirate of Abu Dhabi – has now been published, and is effective from January 2016. The disputes affecting real property and home owners will continue to be an important factor for the potential homeowners to throw the towel in. Introduction of a Land Department and a regulatory authority in Abu Dhabi (similar to the Dubai Land Department and Real Estate Regulatory Authority in Dubai) would be a step forward to ceasing this hesitation by the investors. With the implementation of such a dedicated department and machinery set up solely for the purpose of dealing with property registration and impediments would certainly enhance and safeguard the rights of the investors and homeowners at large. Real estate is, and has always been, a sector that has stability and high potential for growth. By the establishment of the land department and enactment of the regulatory authority, such stability and potential would be unassailable and resistant up to a level from economic and market variations.

    The new property laws in Abu Dhabi mainly aim at securing and enhancing transparency in the transactions of the real estate sector. The new law also mandates that a register shall be maintained to record all the documents and transactions relating to real estate development. The administration of such a register would safeguard the rights of the buyers. The commission of the register would enable the authorities to track all the transactions of real estate units sold off-plan. This would focus and deal with issues such as failure of developers to implement the project and sale purchase contracts. The primary intention of these regulations is to protect the rights of developers and investors. The law also explains the rights and duties of the different people involved in the real estate sector such as the developer, mediator, appraiser etc.

    FACTORS TO BE CONSIDERED – WHILE BUYING PROPERTY

    Investing in off-plan properties is on the rise in the Emirate of Abu Dhabi. Buying off-plan properties would enable homebuyers to acquire units at affordable price and it is also a way to get a set of features or a particular location as the choice would be limited once the construction commences.  Therefore, it is easy to conceive that the risk rate involved in purchasing such off-plan properties would eventually be higher than purchasing a unit from a developed project. Due diligence should be conducted about the details of the developer. The construction process and the developer's ability to complete such process should be taken into account. Before purchasing off-plan properties, the buyer should look into:

  • Commercial License: The buyer should make sure that the developer of the off-plan property is an entity that has been registered with the Abu Dhabi Department of Economic Development (DED).
  • Purchase Agreement: The buyer should also note the completion date of the project and the compensation that would be awarded in the event of non-completion of the project on such mentioned date.  The new law also addresses escrow law requirements (discussed below)and buyers should ensure that project has an escrow account.
  • When you are buying furnished property, make sure that a schedule describing the furniture and fittings of the property are drawn and an appropriate deadline for furnishing has also been decided by the parties.  
  • Not all places in Abu Dhabi provide expatriates with the option of purchasing freehold properties. Abu Dhabi property laws permit expats to buy properties in specific areas of the Emirate known as 'Investment Zones' (eg: Yas Island, Saadiyat Island, Raha Beach etc.). Hence, firstly, it is necessary for the expat buyers to determine whether the property they intend to buy is in one of the investment zones. If the property is not in one of the investment zones, then an expat would not be able to acquire freehold rights. Secondly, the buyers should ensure that the seller has ownership over the property and also has an undisputed right to sell such property as ownership in the title can only transfer from a rightful seller. Thirdly, the buyer should carry out detailed inspection and verify the size and particulars of the property and make sure that he is not being defrauded or misled in any manner. Buyer should exercise a reasonable degree of caution to determine whether there are any liens or mortgage on property being acquired. If so, whether such mortgage will effectively be settled prior to transfer of title from seller to buyer. The buyer should also see to the current tenancy of the property as the sale would then be subject to the tenancy rights. The due diligence on part of the buyer is very important in order to avoid any future tribulation.

    LEASING RIGHTS

    Freehold property implies that the party owns both the structure and the land in perpetuity. This means that the ownership lasts forever and is absolute. The name of such owner would be registered as the 'land owner' in the registry. Freehold owners have the right to sell, lease and inherit the property upon the death of the owner whereas, leasehold is when a party takes interest in a property for a period of upto 99 years. Basically, it is buying the right to occupy a property for a long period of time. Upon completion of such period, the property would revert back to the owner of the land. The leaseholder has the option of renewing the contract at the end of the tenure.

    Right of Usufruct: Usufruct Rights are defined under Article 1333 of the UAE Civil Code. A tenant can be said to have usufruct rights over a property, when the owner of such property has entered into a usufruct agreement with the tenant wherein the tenant is allowed to use the property provided such property remains in its original state/ condition. But fair and reasonable wear and tear of the property would be exempted. A usufruct agreement is generally for a period of 50 years unless mentioned otherwise. A usufruct agreement would be terminated due to destruction of the leased property or waiver by the usufructuary or purchase of the leased land by the usufructuary or even by a court order.

    Right of Musataha: Musataha rights are defined under Article 1353 of the UAE Civil Code. A musataha right is granted to the UAE nationals where the right to build a building or to plant on the land of another is being given for 50 years. The musataha holder, basically, gets a right to exploit and develop such property. A musataha agreement is for a maximum period of 50 years and can be terminated by either of the parties with a two years prior notice, unless otherwise agreed upon. The musataha agreement would be considered as terminated upon expiry of the musataha period or purchase of the leased property by the musataha holder. Both, usufruct and musataha agreement, should be registered. In the event of the agreement not being registered, third parties would not be bound by the agreement and would only bind the parties to the contract on a pure contractual basis.

    PROJECT GUARANTEE ACCOUNT

    The new law mandates the setting up of a 'project guarantee account' in an accredited bank. Such an account should be opened by the developers for each project after obtaining approval from the Abu Dhabi Department of Municipal Affairs. The funds paid by the buyers of off-plan properties towards payment for the units in the project would be deposited in the project guarantee account. The project guarantee account cannot be used for any purpose other than for deposits by the buyers and the amounts in this account would be released to the developers only if the property is developing as per the schedule. The set-up of this account will ensure that the property is completed on time without troubling the buyers. Its main purposes are to make sure that the interests of the buyers of off-plan properties are met and to prevent failure of completion of projects by the developers. An escrow account is not the same as a project guarantee account but both have undeniable similarities as they are both created by the developers for protecting the interests of the buyers of off-plan properties.

    CONCLUSION

    The new law provides much clarity on the provisions in relation to seller, buyer and even financers. It is likely that this step would encourage the investors prominently and real estate market seems to be promising in coming years.

    STA's property lawyers in Abu Dhabi will continue to share more insights and updates on Abu Dhabi property laws in the coming issues of Court Uncourt.

    ]]>
    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Dubai Data Law: Let’s share!]]> In October last year, Dubai introduced the new 'data law' which will allow the sharing of information between public sectors and for the benefit of the private sector. This Article aims to understand the concomitants of such a move.

    Remember that time when a dial up icon popped up on your screen at the time you logged into internet connection and had to wait for the system to be connected to LAN? In contrast, all you need to do today is switch on your computer and it is automatically connected to the internet. In the coming years, technology is anticipated to be more intelligently integrated in our lives than it is today. Specialized software and sensors will be used to track resources, respond to crime or take constant vital signs.  In the words of technology maker Vint Cerf, 'it is almost as everything will be connected to everything.' The inherent risks that such wide exposure will pose to the public in general cannot be denied. But when the risk is compared to the magnitude of benefit the economy will have, it appears that the decision makers will be willing to take the plunge.

    In 2013, Obama's 'open' data policy saw a major breakthrough as the White House issued the Executive Order for open and machine readable government data thereby instilling a sense of transparency in government actions. In 2014, the President's assent was concluded for the enactment of Digital Accountability and Transparency Act 2014 (US Data Law). 

    The general principles under Section 1 of the Executive Order provides germane frame of reference for implementation of the Executive Order. It states as under:

    "Decades ago, the U.S. Government made both weather data and the Global Positioning System freely available. Since that time, American entrepreneurs and innovators have utilized these resources to create navigation systems, weather newscasts and warning systems, location-based applications, precision farming tools, and much more, improving Americans' lives in countless ways and leading to economic growth and job creation. In recent years, thousands of Government data resources across fields such as health and medicine, education, energy, public safety, global development, and finance have been posted in machine-readable form for free public use on Data.gov. Entrepreneurs and innovators have continued to develop a vast range of useful new products and businesses using these public information resources, creating good jobs in the process." 

    'Open data' and need for its encouragement in the wider context

    Open data means such information which may be available in a defined format for the use, re-use and benefit of the people. An understanding of the US concept of which data will be open data, required fulfilment of the following:

    i. The data should be PUBLIC. This means that subject to applicable and legislative restrictions the data should be available publicly on a platform.

    ii. The data should be RESUSABLE which means that there will be an 'open license' on the data with no restriction on the use and should be non-proprietary. 

    iii. The date should be ACCESSIBLE which means that the format in which data is provided or published should be retrievable, downloadable and capable of being searched appropriately. To the extent possible, the resources                  should use granular metadata, data dictionaries, and characteristics of data.

    As economies are getting more technologically adept, the concept of open data is expected to promote efficiency, interoperability, accessibility, accuracy and economic development wherever legally permissible.

    Imagine the use of such data for monitoring public utilities, understanding the trends relating to utility consumption, managing traffic issues. Open data can provide deeper significance in understanding healthcare innovations, markets trends on commodity consumptions, education trends for starters. Advancements in the field of science, healthcare and education are more palpable when inferred from an inspiration. Relying on Wikipedia, the idea of software giant Microsoft was born when Paul Allen showed Bill Gates a publication on Altair 8800- a super computer.  This concept of 'open date' has gained much acceptance for innovators in technology, as there has to be reasoning for Facebook and Google to provide 'open source' for its artificial intelligence (AI)  hardware computing design.  These companies do not procure hardware from suppliers like Dell or HP but have inspired themselves to be self-efficient for their  

    ]]>
    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Insurance]]> INTRODUCTION:

     

    The Insurance Third Party Administrators have become vital section of insurance industry and changing the facade of insurance sector all around the world. Third party administrators are neither insurance providers nor insured. They are the service providers bridging the gap between the two and serves the insurer and insured during processing of applications and claims, adjudication, and negotiation of claims including keeping records or maintenance of plan. The sector needs to be regulated as being in-severable to the process during this era. This article will also briefly accentuate the insurance law under DIFC regime.

     

    Instructions for Regulation of HITPA

     

    Board Resolution No. 9 of 2011 Concerning the Instructions for Licensing Health Insurance Third Party Administrators and Regulation and Control of their Business was passed pursuant to the provisions of Article 7 (9) of the Law, recommendations of the Director General of the IA and the approval of the IA board of directors. The resolution sets out several key terms requiring insurance companies to adopt and practice in operation of their business in the region, a brief overview of which is appended below:

     

    i. Article 2 comprises of definitions which are consistent with the Law except for the 'Register' which means the "Register of Health Insurance Third Party Administrators at the IA. The revised definitions of Pertinent Authority and other important terms such as Beneficiary, Health insurance third party Administrator, Medical Service Providers, Excess, Fraud and Abuse are added.

    ii. Article 3 states that health insurance third party administration may only be performed by a company specialized in this kind of business and registered in the register. Further, such companies need to adhere to regulations and instructions issued by the medical authorities of that Emirate.

    iii. Article 4 provides scope of business and provides that the business of Health Insurance Third Party Administrators shall be limited to:

    • Settlement of claims arising from health insurance.
    • Payment of health insurance claims on behalf of the Insurers.
    • Management of health insurance programs approved by the Insurers.
    • Conclusion of agreements with medical service providers on behalf of the Insurers.
    • Development of health insurance programs provided that they may not market or sell them.
    • Establishment of a network for service providers.
    • Provision of consultancy services in underwriting (reports on the analysis of claim expenses and recommendations for effective underwriting policies.)

     

    iv. Article 5 provides for 'eligibility' to operate as Health Insurance Third Party Administrators (HITPA):

     

    a. Private or public joint stock company/LLC incorporated under the laws of UAE/ branch of foreign company and has been practicing the business for a period of not less than two years.

    b. Obtain license from insurance authority in respect of present resolution in addition to license from competent authority in emirate.

    c. Minimum paid up capital of UAE Dirham five million.

    d. Objectives limited to the health insurance third party administration

    e. Conclude an insurance policy covering professional liability risks, provided that the sum insured thereof may not be less than AED 3,000,000 (UAE Dirham Three Million) and the excess amount may not be more                 than AED 100,000 (UAE Dirham One Hundred Thousand).

    f. Adhere to international standards in such practice

     

    v. Article 6 provides for the limitation and restrains on activities of the HITPA:

     

    1. Neither sell nor market the health insurance policies

    2. HITPA not to possess or share in the capital or management of any medical facility or health insurers.

    3. The TPA shall separate its accounts from the accounts of funds generated from its activities in the health insurance claims.

    4. HITPA should not provide services to insurance companies not licensed to provide service in state.

    Cabinet Resolution

    Cabinet Resolution No. 42 of 2009 concerning Insurance Companies Minimum Capital Regulations was issued on 27 December 2009. This resolution applies to all companies, excluding companies operating in free zones in the State.

    Article 3 states that the minimum capital of the company –'the subscribed and paid up capital' of a company may not be less than AED 100,000,000 (UAE Dirham One Hundred Million).

    The subscribed and paid up capital of a reinsurers may not be less than AED 250,000,000 (UAE Dirham Two Hundred and Fifty Million).

    Article 4 states that at least 75% (seventy five percent) of the capital of a company incorporated in the State must be owned by natural persons of the UAE or GCC nationals or by corporate persons wholly owned by citizens holding UAE or GCC nationality.

    Pursuant to provisions of Article 6, if the company intends to increase the capital of the company it could be done under a decision of the IA based on an application submitted by the company. For the reduction of capital of the company same rule would follow. The board has discretion to approve or reject such reduction application in public interest. Article 7 lays responsibility on the companies to comply with the rules stated in this resolution within 3 years from the date of taking effect of the resolution.

    Broker Regulation

    Board of Directors Resolution No. 15 of 2013 is concerning Insurance Brokers concerning the regulation of the profession of insurance brokers sets out the requirements for obtaining and maintaining a brokerage license, including an obligation for a broker to maintain paid-up capital of AED3 million (for UAE companies) and AED10 million (for branches of brokers established in a Free Zone or branches of a foreign company). Further, insurance brokers are prohibited from dealing with insurance companies not licensed by the IA. Vide Circular No. (5) of 2014 issued on 16 January 2014, the Ministry of Economy Resolution No. (543) of 2006 was repealed.

    The Health Insurance law number 11 of 2013 (the Health Insurance Law) came into effect on 1 January 2014 which makes health insurance cover mandatory in Emirate of Dubai including freezones. The companies with different number of employees were granted different deadlines. The employers failing to cover employees as required by law will incur fines ranging between AED 500 and AED 150,000.

    The Standard notice number 2 of 2015 (SN 02/2015) pursuant to Health Insurance law was issued by the Dubai Health Authority in respect of Emirate of Dubai. The SN 02/2015 provides guidelines for minimum standards in respect of following:

    1. Training and competence schemes.

    2. Complaint handling procedure and complaint logs

    3. Code of Conduct for Permitted Health Insurance Representatives (PHIRs)

    4. Data protection and client personal data confidentiality policies.

    The SN 02/2015 applies to all the health insurance intermediaries marketing within or into the Emirate of Dubai. The SN 02/2015 sought the submission of documents in respect of the above mentioned items by the intermediaries registered for the health Insurance intermediary permit (HIIP) since 1 December to receive "unconditional compliance" status from the "conditional compliance" status. The policy document submitted must meet the standards/guidelines stated in the SN 02/2015 to receive unconditional compliance status and sought the submission before 31 August 2015. This date was further extended till December 2015.

    Dubai International Financial Centre (DIFC):

    Insurers and Reinsurers operating within DIFC have to obtain Dubai Financial Services Authority's (DFSA) approval before they can carry out insurance business in DIFC.

    In essence, DFSA regulated insurers are not authorized to under direct risk outside the DIFC for individuals or companies based in mainland UAE. The DFSA authorized firms are free to underwrite direct and indirect risks anywhere in the world. However, the authorized firms can act as reinsurers for mainland UAE indirect risks. Therefore, DIFC provides for a wholesale regime instead of a retail platform for insurance within the UAE mainland market. Rule 7 of Conduct of Business Rulebook.

    The DSFA rule book Prudential – Insurance Business Module which applies more specifically to insurers. The rule book does not define insurance contract and is a guideline for insurers and reinsurers. It elaborates on management and control of risk, long term insurance business, capital adequacy, measurement of assets and liabilities of insurers, financial and other reportings by insurers, actuaries, consolidated supervision, insurers in run-off and other guidelines.

    Although there is no general rule or market practice as to the content or form of reinsurance contracts issued by DFSA – authorized reinsurers, the terms of such insurance contract will generally dictate commercial arrangements agreed by and between the insurer and the insured including commercial terms, nature and terms of policy, conditions precedents and special conditions if any. The contract will also dictate the terms of dispute resolution before the DIFC court.

    The DIFC Insurance Association has been incorporated as non-profit body in the DIFC on 29 March 2015. It comprises professional association of insurance entities at the DIFC.

    Conclusion:

    The regulations are further expected in the sphere of minimum coverage provided by employers, prices of health insurance service products and premiums rates charges by the insurers.

    Originally published on www.complinet.com Complinet Group Ltd (Thomson Reuters) by STA Law Firm

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    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Musataha ]]> There are across the world, varied different institutions of property, radically different ways of separating the land space, and developing rights in consonance with other legal, economic and social institutions. These differences get in to limelight when one pays attention to the sometimes subtle differences in policies and regulations that govern them. The near collapse of major financial markets around the world in 2008; has clearly left a lasting legacy on many. Investors, property developers, banks, insurers and companies must exercise higher degree of caution to protect their legal rights and interests in relation to their real estate portfolios. Real estate is indisputably a major asset for any business and the ever changing political and legislative landscape across GCC calls for a careful due diligence. We have covered property laws of Dubai, Abu Dhabi, Qatar and other parts of GCC extensively within previous issues of Court Uncourt.

    Within the GCC (Gulf Co-operation Council), the United Arab Emirates is the second largest economy. The real estate industry in the UAE witnessed a change in the year 2002 when the Dubai government permitted foreign nationals to own freehold properties in Dubai. Other Emirates within the UAE soon followed Dubai's footsteps and Abu Dhabi promulgated its first property legislation (Law number 19 of 2005 concerning Real Estate Ownership) in August 2005 with the announcement of 99 year land ownership and renewable fifty (50) years surface ownership to foreign nationals within investment zones of Abu Dhabi. The first piece of this two part series aims at discussing the musataha form of contracts wherein the holder (also, musatahee) is conferred with the right to use, develop and gain benefits from land for a set period. Property interests within GCC can broadly be categorized as i) short term lease contracts; ii) long term lease; iii) freehold title which permits the title owner to use, and occupy the property in perpetuity. Musataha form of development is more common in the Emirate of Abu Dhabi. In the second part of this series, we will be discussing the rapidly growing Islamic capital market securities and particularly the sukuks Islamic bonds.

    Generally speaking, musataha is a form of long-term lease limited for a term of fifty (50) years (renewable) and imposes mandatory development obligations on a party whereas the musatahee enjoys the right to own and occupy the property for the agreed term. In contrast to musataha, usufruct is a long term lease limited to a term of ninety nine (99) years but imposes development restriction. Article 1353 covered under Chapter II, Section 3 of the UAE Civil Code (Law number 5 of 1985, as amended) defines musataha as 'A right of musataha is a right in rem conferring upon the owner thereof the right to build a building or to plan on the land of another'. Usufruct on the other hand is defined under Article 1333 as 'usufructuary right to use property of another and to exploit the same as long as the property is retained in its original condition'. From contractual point of view, it may be possible for parties to cement musataha and usufruct interest whereby the musatahee can legally buy a property and subsequently carry out development works under musataha and hold the property for an extended term of 99 years under a usufruct title. Both musataha and usufruct may be used as asset forming base for ijara based sukuk. In essence, musataha is a diluted version of freehold form of ownership given that it provides a less degree of interest in title as compared to freehold or absolute ownership. That said, contract's title does not effectively determine the nature and effect of interest parties intend to create. For instance, lease and management agreement or lease and joint venture agreement may not necessarily be a lease or management or joint venture agreement and local courts can very much construe such contract as musataha if the agreement in question contains building obligations and satisfies the conditions set out under Article 1353 of the UAE Civil Code.

    Under the musataha form of arrangement, the rights of musatahee can be limited to buildings built on the land whereby freehold land is kept independent from any mortgage. This can be beneficial and useful to both – the grantor as well as the beneficiary of musataha rights and parties can agree to key terms governing their relationship, rights and obligations. Musataha structures are also often adopted in the context of BOT (build, operate and transfer) projects. Accordingly, if ABC the owner of land and JKL the musatahee can agree to principle terms of musataha including termination rights, mortgage, insurance, grant of development rights, and other related key terms. Musataha

    In the Emirate of Dubai, the Dubai Land Department recognizes musataha form of arrangement and permits musatahee to mortgage developments built on the land (land per se cannot be mortgaged unless parties have mutually consented and agreed upon).

    The Abu Dhabi Municipality (Land Department) did not maintain a register allowing musatahee's to register their interest until recently. Registration of interest brings certainty to parties and secures their respective legal rights and position. More importantly, registration of musataha agreement is also important in order for musataha rights to become binding and effective. The Abu Dhabi Executive Council has also introduced specimen form of musataha agreements to be adopted by government entities (with the exception of federal UAE government and entities of federal government) in matters involving transaction between two or more government entities and/or transaction between government entities and third parties.

    Abu Dhabi's real estate market is continuously evolving and musataha form of arrangement is widely practiced in the Emirate. Clearly, use of musataha rights acts in best interest of both the parties in light of the fact that such structures can attract financing much easily and helps parties in defining and protecting their respective rights and interests. In the current investment climate, parties are recommended to seek professional legal advice to ensure that they buy peace of mind and further ensure that their project is structured in the most efficient manner. Prior to this, parties should also adopt reasonable safeguards in terms of determining whether musataha form of arrangement is best suited to a particular project, carrying out necessary due diligence, and defining and determining key legal documentation that will govern their respective rights and interests.

     

     

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    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Project Financing -a Primer ]]> Project Finance as the technique of financing any development idea is rapidly increasing in developing countries due to their drive to gain industrial development and improve infrastructural amenities. The infrastructural projects or projects relating to energy industry are usually funded by government through public funds since historical times due to the mammoth size of initial capital investment required. The governments introduce private parties into big infrastructural projects by public private partnership (PPP) arrangements considering long run maintenance of the projects and investing the public funds into other projects. Other incentives for government can be inter alia to introduce new technology, privatization of some sectors for policy reasons and efficiency in operations of the infrastructural systems.

    The project finance is a complex process involving various parties, stages, process and legal and financial implications involved in the process. Further, considering the bounds of current publication we will outline the other aspects of this work in subsequent volumes of our publication. This article will accentuate the brief account of what is public finance and understanding of the parties involved.

    The project finance is defined as "the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project."

    The project financing is called limited recourse or non-recourse as the major volume of financing is derived predominantly out of revenues generated by the project itself not from any form of share capital. The viability of project are deliberated upon in pre-development stage which includes concerns such as title of ownerships of assets, revenue generation estimates, profit generation and utility, etc during planning and financial due diligence. However the concerns in project financing starts with reconciling the interest of various parties involved in the financing. The parties to the project financing are varied and independent having different interests in the project. In pre-development phase parties need to evaluate the financial viability and technical feasibility. General understanding of each party's objective behind engaging into such financing is pertinent to establish prudent negotiations. The parties and their general role along with the some probable objective are listed below:

    1. Host government

    The government of country where project proposed is planned to be based and which will be issuing all the relevant permits, authorization, licenses and subsidies, if any, for the project. The host government is usually contracting authority by entering into project agreement and /or carries out bidding process to allocate the project to private party and thereafter may either handover the project for development as well as later maintenance. The host government may allow private party to develop the project, either conjunctively or otherwise, or take under public ownership after the development of project once the return on its investment has been received by the private party or decide to regain ownership in case of failure by the private sector to deliver the project. The host government's involvement in the project may also be limited to granting consents for project, to granting various tax concessions and / or being partner in the project. The private party financing the project allows host government to allocate resources in other areas of expenditures. The host government can be party to various agreements for the project concerning supply of electricity, water or any other raw materials and imports required.

    2. Project Company

    This is also called special purpose vehicle (hereinafter referred to as SPV). This company is created with sole purpose of project. It can be corporation established for this purpose or limited partnership usually a PPP. This company is often created in host country where project is intended to be carried out. SPV is the centre of all agreement and project financing. SPV is owned and managed by its sponsors/shareholders. The SPV is used to finance large project without putting a corporation at risk or isolate parent company from project related risk by shifting it on other investors. SPV in project financing allows shareholders to keep project liabilities "off-balance sheet". Such off-balance sheet structure needs review of applicable laws to understand its applicability in host country of project and incorporation of SPV. The host government and SPV enter into project agreement to defining degree of participation by host government and further laying down rights and obligations during the term of the agreement for concession agreement. The host government and SPV may enter into different agreements for different phases. The host government would enter into property purchase or product purchase agreements with SPV after the project completion.

    3.Sponsors

    The sponsors are equity shareholders and /or owners of the project. The main objective is to earn profits either by simple high investment returns called as financial sponsors or by selling the products of parent company usually falling under the category of industrial sponsors as the project is associated to their business activity. However there can be different factors based on which the sponsors enter into project financing which includes to share the risk in undertaking the project and carry out project off-balance sheet, enter into new activity by means of diversification and such other corporate strategic plans. The sponsors may be single party or consortium. There can be public sponsors such as municipalities, agencies or corporations whose objective is public welfare or utility. Since sponsors are equity holders they bear the maximum risk of the project they also earn the huge share of the profits is the project is successful. Sponsors enter into management and shareholders agreements or service agreements with the SPV.

    4. Lenders

    The lenders are primarily large commercial banks, national or international. Considering the large scale of investments there is often a syndicate formed of group of lenders. This includes investment banks, bondholders or multilateral agencies. The lenders in the project financing only have recourse to the assets of the project at hand. The nature of security depends on the negotiations and loan agreements signed between SPV and lenders. The lenders may also create right against parties other than SPV and sponsors such as off-take purchasers for assurance of purchase of agreed quantity of purchase, construction companies/contractors to complete the construction as per required standards and performance criteria by giving completion guarantees as agreed. These rights must be expressly stated in agreements between the parties directly. Comprehensive security structure needs to be planned based on the review of laws such as ownership of real property laws as project property are the only assets available, bankruptcy laws and any other financial laws as they may hamper the enforceability of security rights of lenders. Further lenders must note that there are often reversion rights available with the host government to prevent wearing down and suspending of any public utility services thereby giving host government right to regain ownership over the project works or developments of the project. Since the lenders are in syndicate the lenders may appoint an agent to represent their interests.

    Multilateral credit agencies such as World Bank, Asian Development Bank, International Finance Corporation, so on and so forth can ensure protection against regional risks to commercial banks such as political risks. Export credit agencies may also lend money to promote that industry.

    Other parties

    Purchasers: As per the off-take agreement the purchaser will be obligated to purchase the products of the project in advance usually found in energy industry products.

    Contractors: The projects will require contractors for various purposes and thereby enter into various different agreements with parties as contractors for construction works vide construction agreements ensuring timely completion and liabilities in terms of liquidated damages for delay. Construction contractors enter into design and perform operations and maintenance (P&M) vide P&M agreement between SPV and operators and engineering, procurement and construction (EPC) contracts for designated works.

    Suppliers: The supplier is important party to project in terms of technical support and financial estimates as price implications impact entire project works. The supply agreement can be for any requirements during the project such as raw materials. The agreement may be, in a sense, off-take purchase agreement for the SPV. The supply agreements need various price considerations bearing implications on project revenue at different phases. The agreements relating to oil and gas sales usually called gas sales agreement are also supply agreements from SPV point of view. The factual analysis of depletion of such natural resources needs scrutiny while negotiating the agreement. The practice of selling of portfolio of reserves is also undertaken in UK however a lesser followed practice in developing countries.

    The SPV along with other parties needs legal and financial advisors for reconciliation of interest of parties and negotiations with several parties by keeping in mind the main objective of the SPV while taking up the project whether it is simply financial investment to earn profit or to work in line with corporate strategic plans of business development and associations. The stages in the project financing and risk factors in projects financing from the standpoint of different parties needs elaborate assessment and will be addressed in subsequent publication.

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    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Trade Finance]]> A documentary credit or a letter of credit is usually used to finance international trade. Judges have referred to documentary credits as the "life blood" of international commerce. Most documentary credits in international transactions are governed by the International Chamber of Commerce (ICC) Uniform Custom and Practice for Documentary Credit 500 and 600. In the United Arab Emirates (UAE), documentary credits are governed by Federal Law No. 18 of 1993, the Commercial Transactions Law. The provisions relating to documentary credit are contained in section 4 of chapter 3 of the Federal Law number 18 of 1993 Commercial Transactions Law and are not mandatory rules but rather complementary to the parties' intentions. As per the Court parties to a documentary credit are free to choose the ICC Uniform Rules and Practices for documentary credits instead of the Commercial Transactions Law rules.

    Before understanding the legal obligations of the parties involved in documentary credit transactions it is better to comprehend the terminologies associated with the transaction. A documentary credits is a contract whereby the bank (the Issuing Bank) undertakes to open a credit at the request of one of its customer (the applicant/buyer), for a certain amount and for a specified period, in favor of another person (the beneficiary/seller), secured by documents which represent the goods that is shipped or being prepared for shipment (Article 428).

    Usually four parties are involved in the context of documentary credits transactions, namely: the buyer-applicant, the Issuing Bank, the seller-beneficiary, and the Correspondent Bank (confirming / advising and / or negotiating the Letter of Credit) (the Correspondent Bank). The credit must be in compliance with the sales contract signed between the buyer and seller prior to the opening of the documentary credit, otherwise the seller may be entitled to reject it.

    After opening the credit, the Issuing Bank informs the beneficiary directly or through a Correspondent Bank in the country of the beneficiary. The Issuing Bank may ask the Correspondent Bank to either advise the beneficiary (in this case correspondent bank may not be obliged to make any payment to the beneficiary) (Advising bank); or advise and add its confirmation to it (in this case the correspondent bank can be held responsible for making payment to the beneficiary and called Confirming bank). Once the advising bank has confirmed the documentary credit, it will refuse to accept any instructions to the contrary from the buyer.  In Hamzeh Malas and Sons v. British Imex Industries Ltd 1958 2Q.B. 127, the buyer sought an injunction against the seller to restrain the later from withdrawing the purchase price on a confirmed letter of credit. The English Court of Appeal held that "a vendor of goods selling against a confirmed letter of credit is selling under the assurance that nothing will prevent him from receiving the price".

    TYPES 

    The documentary credits are of several types bearing different legal implications, however, in this article we will address the types specifically mentioned in Commercial Transactions law i.e. revocable or irrevocable.

    Revocable

    In revocable documentary credit, the bank can, at any time, amend or cancel the documentary credit on its own initiative or at the request of the buyer and shall not involve any liability by the bank towards the beneficiary (Article 431 (2)). In absence of any clear indication, the documentary credit would be irrevocable (Article 431). Thus the assumption of irrevocable documentary credit in UAE is in contrast to the applicable laws in the Gulf and internationally which expressly state the stipulating type as revocable in absence of any express mention about irrevocability.

    It is worth mentioning that Article 431 (2) may be disadvantageous to the buyer and the banks in the UAE as the bank is responsible to pay the beneficiary-seller even if the fraud is committed by the seller on buyer as the parties under letter of credit do not physically verify the contents of goods and have no such right thereby relying completely on documentary transactions. The obligation of bank under the irrevocable documentary credit is elaborated below. Moreover, if the documentary credit is confirmed by the bank in the country of the beneficiary, it will enable the beneficiary to deal exclusively with a local bank, known to the beneficiary. It is therefore recommended to amend the law and bring it in line with the applicable laws in the Gulf and other international trade laws. 

    Irrevocable  

    An irrevocable documentary credit constitutes a definite undertaking by the bank which is conclusive and direct towards the beneficiary, provided the conditions therein are complied with (Article 433 (1)). As per Article 434 (1), the liability of the bank shall continue notwithstanding the instructions by the buyer to cancel the documentary credit. The bank therefore cannot amend and withdraw the irrevocable documentary credit under any circumstances (Article 433 (2)). It thus represents a direct relationship between the beneficiary and the bank and the right of the beneficiary against the bank is not harmed by any dispute between the buyer and seller to the contract of sale. Irrevocable documentary credit is therefore more advantageous to the seller as it gives more security in terms of payment.

    PRINCIPLE OF AUTONOMY

    Documentary credit is considered a separate contract than the underlying sales contract under the principle of Autonomy. It is the key principle governing documentary credits thereby assuring commercial utility of documentary credits since centuries. Accordingly, documentary credit is considered as an independent transaction from the contract for which it is opened and the bank shall remain independent of such contract (Article 428). The Issuing Bank undertakes the liability of the buyer towards beneficiary without involving itself in the underlying transaction between the buyer and the seller. The Issuing Bank will pay to the benficiary without condition if the beneficiary fulfils the documentary obligations based on terms mentioned under the documentary credit, regardless of the disputes, if any, connected to the underlying contract between the buyer and seller. The specific claim under the underlying sale contract is considered separately. The seller's breach of the terms and condition (i.e., with respect to quantity, quality, delivery, date, etc.) of sale contract does not entitle the buyer to instruct the Issuing Bank to stop payment under the credit or does not grant authority to issuer and / or Correspondent Bank (the paying bank) to withold payment.

    Courts are quite reluctant to grant injunctions ordering a bank to withhold payment, unless there is a clear indication of fraud, it was held that documentary credit was aimed at providing security to both the seller and buyer in international business transactions. The bank therefore cannot cancel the credit without taking into consideration the parties' interests.

    The autonomy of the documentary credit can therefore be considered as an advantage in international sales as it serves as a commercial assurance to parties in international trade based in different countries. If banks were allowed to refuse to pay under a documentary credit, whenever trading parties had a dispute, the vital flow of international trade would have been blocked.

    THE DOCTRINE OF STRICT COMPLIANCE

    The second fundamental principle of documentary credit practice is the requirement that documents are strictly complied with the terms and condictions of the documentary credit (Article 430). Documents are considered compliant to the terms if they are complete as described in credit and are devoid of obvious defects.

    Seller's obligations

    The obligation of the seller or beneficiary is to tender the stipulated documents in accordance with the terms of the documentary credit usually to the issuing/Correspondent Bank. These documents are evidence of the fact that the goods have been shipped and dispatched. As per Article 433, the Issuing Bank assumes liability to pay at the time the seller delivers the documents to the bank before the expiry of the documentary credit. The documents submitted after the expiry period grants the bank authority to reject them unless the buyer requests his or her acceptance and the bank approves such request (Article 435).

    Bank's obligations

    Once the documents are tendered, as per Article 435, the bank is under an obligation to insure that the required documents are exactly in accordance with the terms and conditions of the documentary credit, and that they correspond with each other. Once the bank is assured, it shall make the payment (Article 430 (2)).

    If the documents do not comply with the documentary credit, the Issuing Bank shall reject them. It may also send them to the buyer for approval as soon as possible. Otherwise, the issuing/Correspondent Bank (referred to as Paying Bank, wherever applicable) will be deemed to have accepted the documents and will be liable to pay. Further, the Paying Bank will not be able to recover the amount paid to the beneficiary towards the documentary credit. The Paying Bank will be responsible to the buyer for deductions from the buyer's account and entitle for damages. Once the bank accepts the documents, it shall urgently transfer them to the buyer and pay to the beneficiary; and if the bank rejects them, it shall immediately notify the beneficiary and the buyer. The bank must provide reasons for such rejection (Article 437). 

    However, banks are not under any obligation to check whether such documents represent the goods in question. The bank's obligation is restricted to examining that the presented documents are the exact documents required under the documentary credit. The rationale behind this strict, uncompromising, doctrine is the notion that banks are financiers and not traders. They are not – and cannot be expected to be – familiar with the commercial elements of their customers' business activities. Accordingly, banks should not be dragged into disputes respecting the conformity of goods supplied. As long as the Paying Bank adheres to strict compliance principle when it examines the documents tendered under the documentary credit, it remains within the ambit of its contract with the applicant for the credit.

    However, the seller may send defective goods (so long as this does not amount to a clear fraud) and yet present conforming documents. A rigid application of the doctrine of strict compliance may therefore lead to results that would, on many occasions, be regarded as both unfair and unsound by the business world in general.

    Buyer's obligations

    The buyer's obligation is to refund to the bank the amount paid to the beneficiary within the limits of the opened credit along with the expenses, which the Issuing Bank has incurred in this respect. If the buyer fails to pay the value of the documentary credit to the bank within one (1) month from the date of being notified of the arrival of such documents, the bank has the right to have a lien on the goods represented by the documents and can sell the goods. If the goods are destroyed or become damaged, the right of mortgage/lien shall pass to the insurance amount (Article 439).

    Conclusion

    In view of the above, documentary credit transactions demand trust towards banks by both the buyer and seller to remain confident that Issuing or Correspondent Banks will respect their payment commitments. Documentary credit could not function if the buyer and seller lacked confidence that the banks would honour their obligations irrespective of their instructions thereby making prinicple of autonomy the most significant practice serving as lifeblood for international trade and to some extent brigding the gap of trust and knowledge between the two trading partners unknown to each other at initial risk taking phase.

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    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Environment: A Bane in Vain]]>

    'We have not inherited the planet from our fathers, we have borrowed it from our children'

    The only probable reason that could bring together and unite the leaders of the world is: Environmental Pollution and Global warming.These predicaments have been long discussed and debated subjects of the 21st Century. Pollution, in the disguise of development, has brought our planet on to a brink of destruction. Activists and organizations from different corners of the world have been fighting the long lost battle of sustainable development and a pollution free environment. But in the past few decades, governments and legal systems of different nations have also joined in this battle to ensure that the world of tomorrow is not a lost cause.   Domestic statutes and international conventions are being enacted in order to minimize the lethal effects of our past delinquencies towards the environment, which has presented itself in the form of Global Warming. The new 'odd-even cars formula' of the Delhi Government and the UN Climate Change Conference of 2015 [theConference] in Paris, held from November 30th, 2015 to December 12th, 2015 clearly unveils the exigency and seriousness of the situation. According to the World Health Organization (WHO), around 7 million people died in 2012 due to exposure from air pollution. Such statistics can only be decreased by imposing strict and stringent laws for both the public and the governments. The 'odd-even cars formula' in Delhi is focused on reducing air pollution at the public level in the National Capital Region of India, while the Conference is leveled to impact the decisions and legislations of all the various governments in the globe.   The Infamous Odd-Even Formula A judicial tornado of Public Interest Litigations (PILs) flocked the Courts of Delhi after the State Government publicized its intentions of implementing a rule that focuses on cutting down air pollution in the city, just a day after the Delhi High Court compared the city to a 'gas chamber'. The courts in the capital city has seen countless petitions and litigations aimed at revoking the disturbance in the lifestyle of Delhi-ites due to its smoky streets. The deterioration of Monuments and widespread diseasesdue to pollutants is affecting daily lives of residents.Delhi has been victim of air pollution due to industrialization as well as increasing motor vehicles leading to noise pollution.   The Delhi State Government aims at bringing down the levels of pollutants in the atmosphere by allowing private vehicles with odd and even registration numbers to be on the roads only on alternative days from January 1st, 2016. This means that private vehicles which have an even registration number would be allowed to be on the roads on a particular day, while those vehicles with an odd registration number would be permitted on the roads the next day. The Government expects to reduce the number of vehicles on the roads of the city, which would in turn reduce the per day carbon emissions into the atmosphere. It is set to come into effect on a 15-day trial basis starting from the first day of the year.  

    A number of vehicles such as two-wheelers (bikes, scooters etc.), CNG or hybrid vehicles, women-only cars, VIPs cars, police and army vehicles are exempted from the plan so as to ensure the keen performance of the functions of the executive, legislative and judicial functions of the National Capital Region. With the powers conferred upon the State Government under Section 200 of the Motor Vehicles Act, 1988 (Law No. 59 of 1988), a fine of INR 2,000/- [AED 110/-] would be levied from the defaulters of the new rule. The rule would be implemented only on weekdays from 8am – 8pm. Heavy and light vehicles that run on diesel are the intrinsic factors that raise the alarm of pollution in the city. Therefore, the applicability of the rule, in such a crammed city, is subject to multiple determinants.   The Delhi Government has acted in pursuance of Part IV (Directive Principles of State Policy) of the Indian Constitution which has laid down some of the fundamental principles that are to be followed by the State in the implementation of laws and governance of the country. Article 48A of the Constitution, as brought about by the Forty Second Amendment, enunciates that the State shall strive to protect and improve the environment. Reducing the pollution levels in the National Capital of the country could come under the ambit of the principle. Governments and authorities of the developing countries should take more effort to ensure a clean and pollution-free environment for its citizens. Precise and uncompromising legislations regarding environmental protection and sustenance is the only recourse that is left for trial to bring awareness to the public as ultimately we are responsible for the damages that has occurred to our surroundings.   Metropolis, such as Beijing (China) and Bogota (Columbia), have already implemented similar pollution-control rules, to tackle the advancing population of cars in the streets of these overcrowded cities, in the past. Beijing had imposed its alternative-day driving ban just ahead of the 2008 Summer Olympics to take grip of the ballooning pollution in the city. This had helped in a pollution-rate drop by up to twenty percent. India hopes to achieve corresponding results in curbing pollution.   

    The world meets in Paris The government delegates of over 190 countries sat together in Paris and discussed the possibilities of tying down the annual rise in global temperature due to the emission of greenhouse gases that rises from the increased dependency on fossil fuels.It was the 21st session of the Conference of Parties [the COP] to the United Nations Framework Convention on Climate Change [the UNFCCC] and the 11th session of the COP to the Kyoto Protocol of 1997. Global warming and its effects on general population have now come under the eye of the law-makers of many nations.  The existing international treaties that impose obligations on various countries will terminate in 2020. Hence, the Conferenceaims at regulating the greenhouse gas emissions for another decade, after the current obligations runs out. The Conference negotiated the Paris Agreement [the Agreement], a global agreement between the attending parties to strive to reduce the pace at which the climate is changing. The Agreement seeks to oppress the rate of increase in global temperature to less than 2°C and would be legally binding only if joined by at least 55 countries that are responsible fora minimum of 55% of the world's greenhouse gas emissions. Such interested party countries would have to sign the agreement between April 22nd, 2016 and April 21st, 2017 and adopt it within their own legal system through ratification, acceptance, approval or accession.   What is the prime factor in the implementation of any project? Finance! Developed countries have already exploited the environment to its optimum limit in order to achieve the advancement of technology and economy. But the case is different with developing countries and least developed countries; they neither have the required technology nor the financial capabilities to cap the pollution that they cause on a daily basis. Most countries lack the domestic resources that is sine qua non to support the innovations which would help in adopting practices that would minimize the emission of greenhouse gases and therefore, their capacity to react to the change in global climate is very limited. A control can be brought over the emissions of greenhouse gases only if the nations are funded and regularized with the necessary technology that is required to put these global agreements into effect. Article 15 of the Agreement reiterates the developed country parties and other organizations and institutionsto make contributions to country parties, which does not have the appropriate resources, for easing their transition to a clean energy economy.The countries would be required to make amendments to their domestic ecological, economic and social systems so as to retaliate to the expected change in climatic stimuli within their domestic jurisdictions. But the sanctions for violations of International Agreements under International Law are not appalling and therefore the liability of the nations to strictly adhere to the provisions of the Agreement is limited.   Effect on the Middle East Most of the countries in the Middle East like Saudi Arabia, Qatar, Kuwait, Sudan, Somalia, and UAE are Non-Annex 1 Parties to the UNFCCC. Many of these countries are developing countries who are directly vulnerable to the adverse impacts of climate change and are, hence, more prone to desertification and drought. The average temperature in this region is already considerably high and a further increase could have catastrophic results. Low income countries such as Sudan and Somalia have lesser resources to engage in this fight against the pollution and global warming. Therefore, their position is comparatively weaker to that of the well-developed Western countries.   Other countries, such as Saudi Arabia, Kuwait, and UAE, which has enormous resources of fossil fuels are more vulnerable to the responsive measures that could be taken to cut down the rate of greenhouse emissions. With a decline in the imports and consumption of fossil fuels by other countries, these Gulf countries that heavily depend on the income from fossil fuels, could be skeptically affected.  The counter measures by importing countries to curb greenhouse gas emissions will certainly have economic impact on the Gulf countries. The UNFCCC has emphasized on activities that would answer the concerns of the vulnerable countries regarding insurance, investments and technology sharing. Environmental pollution and global warming not only affects the atmosphere and surroundings but also the economic stability of these countries, which makes the issue far more serious to them. With a rising trend in the use of renewable sources of energy, the proceeds from oil exports of the Gulf countries could considerably reduce. Due to the intense pressure from oil exporting countries, it was necessary for the negotiators of the Agreement to consider the concerns of these countries who would now have to set carbon-reduction targets and allot major finances in order to facilitate the transition.   Conclusion: The mammoth task of environment protection along with sustainable economic development needs support both financial and legislative to insure and lure governments of various types of economies. It will be interesting to witness the implementation of the formulas would affect economies and attain development simultaneously. ]]>
    Sun, 06 Mar 2016 12:17:42 GMT
    <![CDATA[Foreign direct investment in india]]>

    Once an entrepôt  facilitating trade between the Asian subcontinent and the Middle East, today the United Arab Emirates is home to more than 2 Million Indians together with foreign residents, this expat population accounts for more than eighty percent of UAE's total population . Inevitably the successful completion of many ambitious projects in the region is indirectly attributed to the swaps of workers in their striking safety gears, often descried redirecting roads near construction sites, the majority of whom belong to the Asian sub-continent. A large number of advisory firms on these projects are controlled and operated by foreign companies that possess international expertise in the business.    In a similar maneuver, the Indian sub-continent has garnered positive responses to investments with a diversified pattern. In 2012, one of the leading ports company from Dubai was awarded the bid to build and operate single berth terminal facility at Nhava Sheva Mumbai which is valued at USD 200 Million while another real estate conglomerate joined hands with MGF Developments in India to develop state of the art real estate infrastructure projects. Yet another example of such investments is that of the largest vitrified tiles manufacturing plant in Samalkot Andhra Pradesh operated by Ras Al Khaimah based tile manufacturing giant.     A perceptible nexus therefore exists between these two territories. Why then inward investments from United Arab Emirates to India has been at the nib of much dissension. Such investment climate bears a larger impact where a number of international firms that have set up base in UAE are keen to invest but restricted by several factors. A 2014 cumulative analysis of the FDI in India from international countries places UAE on the eleventh place. Mauritius is ranked at number one with 36% share, followed by Singapore's 11.9% share.  The tax regulations in India, Reserve Bank guidelines followed by several court decisions have played a major role in the establishment of the above predicament for investment flow from UAE.    This brief FAQ will focus on the regulations relating to inward investment where consultancy or technical services are concerned.   

    1.Benefits- UAE vis a vis Mauritian SPV There are significant tax benefits of investing through Mauritian route such as following: a. exemption of capital gains on exit b. the absence of Article on Fees for Technical Services c. Service PE clause in India - Mauritius DTAA.   However, unless there is substance in the Mauritius entity, the Double Taxation Avoidance Agreement benefits may be denied due to non-grant of Tax Residence Certificate (TRC) by Mauritian Revenue Authority and / or treaty may be overridden by invoking General Anti Avoidance Rules (GAAR) provisions under Indian taxation law (which is applicable from financial year 2017-18). This will pose significant questions as to benefits for a Mauritian set up.   Since the DTAA between UAE and India is in place, the tax authorities seek to recover the tax on income earned by considering the earning of intermediate parties or shareholding and corporate structures of the companies to understand if the intermediate holding company is created to evade taxes. For instance, in Tvm Ltd. vs Commissioner Of Income-Tax (1999 237 ITR 230 AAR) the issue was raised relating to tax applicable on profits earned by Mauritius based company TVM (Applicant). Applicant was engaged, inter alia, in the business of development, operation, marketing, sale and distribution of television programmes and broadcasting of a television channel. T. V. India Limited (TVI) is Indian company. It had same group of shareholders however the Directors and their nationality was different in composition further the management was independent to that of Indian company. The issues relating to the business profits earned by the Applicant from sale of air-time on the television channel broadcast in India, inter alia, would be liable to tax in India was raised by Applicant in view of tax levied on them. The issue was further raised whether the agent appointed by the Applicant to solicit orders from the purchasers of air-time and to pass on those orders to the Applicant for acceptance, could be construed as a permanent establishment of the applicant in India. However the Tribunal adjudicated in favour of applicant stating Dependant Agent Permanent Establishment was not established as per the contract, arm's length payments and considering income share out of total income of the Agents.    

    2.Overview- UAE and India DTAA provisions on technical services  There is no provision under DTAA signed between India and UAE for tax on fees for technical services. Moreover, unless the threshold limit under DTAA signed between India and UAE for Service Permanent Establishment (PE) is surpassed (viz. 9 months in any 12 month period), the services provided by a pure consultancy firm to a local partner would not be taxable in India even if investment is directly made by the UAE entity. Therefore, parity may be achieved under India-Mauritius DTAA and India-UAE DTAA as far as taxation of fees for services for technical services is concerned. However the contractual relations between the parties, payment transaction and management of the companies should reflect the independence in the working of the entities.   3.Legal requirements for equity investment by UAE service or consultancy provider to local partner. The investment of part equity in the Indian SPV is allowed under Automatic Route for certain categorical services wherein government permission is not required under Foreign Exchange Regulatory laws in India (assuming that "control" and "management" of the Indian JV would rest with the Indian JV partner). However, security clearances will be required, for instance in case of aviation services such clearance will be sought from Bureau of Civil Aviation Security, Ministry of Civil Aviation, such investigation being carried out by Intelligence Bureau and police. Moreover, valuation norms have to be adhered to for making investments (initial as well as subsequent) into an Indian company under Indian Foreign Exchange Regulatory laws. Otherwise, primary compliances are required to be made by Indian JV and UAE company for such investment. Such compliances are Inward remittance intimation (within 30 days); issuance of shares within time limit (within 180 days) and filing Form FC-GPR (within 30 days of allotment) is required under Indian Foreign Exchange Regulatory laws by the Indian JV.   4.Structuring of business transaction envisaged to ensure smooth funds remittance on both the revenue and Ebit element Remittance modes from India by the Indian Joint Venture (JV) are largely restricted to dividend, interest, and royalties/FTS. Since UAE company would in any case provide technical services to Indian SPV, the fees for such services could be aligned to revenue share and EBIT share. Also such FTS payments would have to be benchmarked under Indian Transfer Pricing regulations. The type of transactions are stated in the Indian Transfer Pricing regulations code and specifically laid down in the Financial Act 2012 which specifically covers definition of 'international transaction' by the Finance Act 2012, to specifically cover certain transactions/ arrangements such as purchase, sale, transfer, lease or use of intangible property, provision of guarantees, deferred payments or receivables, business restructuring or re-organization, so on and so forth.    5.Authorities view in terms of further registrations, creating permanent establishments, tax status, etc: Once security clearance is completed, such investment should not be viewed adversely as far as the apprehension of direct investment from UAE (vis-à-vis Mauritian route) is concerned. From the tax angle, Indian SPV may not be construed as constituting PE of UAE company since UAE company would conduct its own business in India while providing service to Indian JV. Further, UAE company may not be construed to have a PE in India or an dependant agency PE in India. The Service PE threshold should be borne in mind when providing technical services to the Indian JV.    6.The factors to consider and write into agreements to ensure a fluid exit strategy, if required: A guaranteed return by way of an assured exit price is prohibited under Indian Foreign Exchange Regulatory laws. Further, the exit price to be paid to the UAE company would have to adhere to the valuation norms under Indian Foreign Exchange Regulatory laws as well as under Indian taxation laws. From the taxation point of view, capital gains earned by UAE company would be chargeable to tax if investment is made directly but would be exempt under India-Mauritius as well as India-Singapore DTAA (as discussed in point 1) provided the transaction is other than a share buyback by the Indian JV. ]]>
    Sun, 06 Mar 2016 12:09:53 GMT
    <![CDATA[UAE Insurance Law – Detailed Overview]]>

    Federal Overview Within the United Arab Emirates, insurance is largely governed at a Federal level by the Insurance Authority (IA) which was established pursuant to Federal law Number 6 of 2007 (the Insurance Law). The law replaced the previous enactment being Federal Law No.9 of 1984 on Insurance Companies and Agents and the amending laws. The law applies to insurance companies incorporated on shore that are licensed to perform operation of cooperative insurance, takaful insurance, reinsurance and insurance in general. The IA regulates both conventional insurance and shariah compliant insurance- Takaful.  Article 7 of the Insurance Law provides for duties and responsibilities and duties of the IA, Article 8 provides for composition of IA to include a board, director general and executive body. Article 12 provides for duties and authorities of the Board. Article 7 and Article 12 broadly cover the following:  
    • Protecting rights of insured and beneficiaries of insurance operations, monitoring solvency of insurance companies (Article 7 (i));
    • Devise code and rule of conduct to enhance capabilities of insurance companies (Article 7 (ii));
    • Manage administrative areas, formulate programs and plans for overall development of insurance sector, identify risks, and approve incorporation of insurance companies; 
    • Devising laws (include draft laws and regulations), regulations and directives relevant to insurance industry and implement the same (Article 12 (1) to Article 12(3));
    • Approve annual budget, annual accounts, and appointment of an auditor (Article 12(4) to Article 12(6)); and
    • Acknowledge grants, donations, and aids; and to settle objections received from insurance companies; and executing other duties of Insurance Authority's affairs (Article 12 (7) to Article 12 (9).
      Article 24 of the Law addresses the different form of companies that are eligible to carry out insurance and reinsurance operations in the UAE. These include a Public Joint Stock Company (PJSC), a branch of foreign insurance company; and insurance agents. Article 64 of the UAE Commercial Companies Law defines a Public Joint Stock Company (PJSC) as "Any company whose capital is divided into equal value negotiable shares shall be considered a public joint stock company and a partner therein shall only be liable to the extent of his share in the capital" Article 26 of the Law imposes restrictions on insurance companies.   In that, the provision seeks to prevent properties existing within UAE (or liabilities resulting therefrom) from being insured outside UAE (this applies also to branch of foreign companies operating within UAE).   Article 119 of the Law empowers the UAE Cabinet with an exclusive power to issue regulations needed to implement provisions of Law number 6 and this includes issuing regulations relating to fees, minimum share capital of insurance companies, and other aspects necessary for insurance industry. In line with provisions of Article 119, the UAE Cabinet issued a resolution (Cabinet Resolution 42 of 2009) raising minimum statutory paid up share capital for insurance and reinsurance companies to UAE Dirham 100 million and UAE Dirham 250 million respectively; and further states that insurance companies must comply with terms of the said resolution on or prior to January 31, 2013. The resolution also sets out that minimum seventy five percent of the share capital must be owned by a UAE citizen or; a GCC citizen.  

    Resolutions and Developments IA Code of Conduct   The IA issued board of directors' Resolution Number 3 of 2010 on Directives of Professional Practice and Code of Conduct for Insurance Companies Operating in the UAE. The resolution sets out several important key terms requiring insurance companies to adopt and practice in operation of their business in the region. Below is a brief overview of the Resolution:  

    Serial

    Article reference

    Particulars

    1

    Article 1

    Definitions. Most of the definitions are already covered under the Law except that it provides for a new definition of Minister to mean Ministry of Economy

    2

    Article 2

    Scope and Applicability. The Resolution applies to all insurance companies registered with the Insurance Authority operating in the UAE.

    3

    Article 3

    General Provisions. This article imposes obligations on insurance companies requiring them to conduct their operations transparently, in good faith, and in accordance with best practices. The article requires insurance companies to adopt necessary mechanisms with regards to anti-money laundering (AML) and provides that insurance policies and other documents must be in Arabic along with an accurate translation copy of the same (In event of conflict, Arabic text supersede). The Insurance authority has also issued a board resolution (Board Resolution Number 1 of 2009 – "Directives on Procedures for Anti-Money Laundering (AML) and Combating Terrorism Financing through Insurance Activities"). The resolution came in to effect from February 2010 and criminalizes money laundering activities. The resolution mandates every insurance company to establish strong AML procedures, know your client disclosures, and is subject to inspection of Insurance Authority inspectors.

    4

    Article 4

    Offering Insurance Services and Products. Insurance companies are required to service their clients in a timely and professional manner, insurance companies must make insured aware of means to prevent accidents, provide necessary documents and technical statistics to the insured.

    5

    Article 5

    Pricing. The Directive requires insurance companies to abide by fair pricing practices, and not to charge premiums with inflated amounts, nor reduce the premiums rates, provide a detailed statement of rates to client, adhere to insurance pricing practices, and notify the Insurance Authority of rates the insurance company intends to apply or modify provided however that such notification is made at least thirty days prior to putting them to use.

    6

    Article 6

    Insurance Application. In preparing the specimen for insurance application, insurance companies must ensure that the questions raised therein are clear and comprehendible, spell out clearly terms and conditions related to coverage of insurance policy, provide warnings on consequences of not giving information or giving incomplete or inaccurate information, and further the information must be submitted by authorized representative of client and not by its employees. The specimen application must include an advise note informing clients to keep the documents in a safer place and insurance company must provide the client with a copy of his insurance application.

    7

    Article 7

    Insurance Policy. The terms and conditions set out in the insurance policy must be certain and definite and not loose or vague so as to avoid any misunderstanding. The contents of the insurance policy should be clear, and easily readable. Arbitration clause must be printed in form of a separate agreement by way of accompanying annexure. The insurance policy must clearly describe and indicate the subject matter of insurance, procedures to be followed by insured upon occurrence of insured risk, along with insertion of a special clause on arbitration as a mean to settle dispute between the parties. The insurance policy must further set out that any amendment to policy shall not be valid unless expressly agreed by parties in writing.

    8

    Article 8

    Policy Renewal. The Directive requires insurance companies to inform their clients on renewal terms, inform that the insurance policy will not automatically renew (unless agreed otherwise). In the event, insurance policy is nearing end of term, the insurance company must inform clients of the same. Policy renewal notice should also clearly set out additional information or documentation required from client.

    9

    Article 9

    Claim Procedure .This article sets out the claims procedure. This article requires insurance companies to adopt suitable procedures, specimen forms, specify documentation, and determine suitable term required to deal with claims. The insurance company must notify the client of progress and upon arriving at a decision – notify the client of same within fifteen days from date of receiving the full claim. Reasons for rejection of claim should not be ambiguous. The company should maintain a separate file for each individual claim received.

    10

    Article 10

    Complaints Register. The insurance company must maintain individual records for every client and register complaints submitted by clients to establish particulars of information such as date of complaint, name of complainant, and related details. The inspectors of Insurance Authority shall have the right to examine complaints' register to verify the information state therein.

    11

    Article 11

    Publicity and Advertisement. Article 11 requires insurance companies to provide draft specimen of insurance policies, samples of advertisement or media to Insurance Authority prior to releasing the same or broadcasting it to the public. In cases where information being presented involves statistical figures, such figures should be precise and presented in accurate technical form. Article bars insurance companies from making any false or misleading disclosures and further provides that insurance company should not include incorrect information in respect of financial situation of company thereby giving an inaccurate impression to the public.

    12

    Article 12

    Advertising of Life and Capital Formation Insurance Policies. This Article requires insurance companies to exercise a higher degree of caution when releasing any information to public in relation to insurance of individuals and fund operations.

    13

    Article 13

    Dealing with Insurance Authorities and Other Official Bodies. In dealing with Insurance Authority and other bodies, the insurance company must at all times transact in transparent and professional manner. The insurance company must also provide data or information requested by the Director General of Insurance Authority for insurance applications that are rejected by the company.

    14

    Article 14

    Settlement of Disputes Between Insurance Companies and Payment of Balances. This Article sets out that insurance companies shall settle their balances and accounts to ensure smooth operation and with the aim of avoiding any disputes. The Article also encourages insurance companies to resolve their disputes amicably or through Emirates Insurance Association before seeking judicial involvement.

    15

    Article 15

    This Article replaces the Rules Organizing Dealings of the Insurance Companies in UAE Insurance Market implemented by the Ministerial Decree No.296 of 2004 issued by the Minister of Economy.

    16

    Article 16

    The Directive shall be published in the Official Gazette and put into effect following expiry of three month as from date of its publication, which is March 21, 2010.

    In the next feature, we will be covering more on insurance law including regulatory updates, Licensing Health Insurance Third Party Administrators and Regulation and Control of their Business, Insurance Brokers Regulations, and the DIFC/DFSA framework.

    ]]>
    Sun, 06 Mar 2016 11:58:55 GMT
    <![CDATA[Travel ban vs. Deportation order]]>

    "Walk where your heart leads you, there are no restrictions and no burdens."
    Howsoever good you might find the above quote, the truth is that such a thing is not always a reality in this world. But international conventions, rules and regulations such as The Universal Declaration of Human Rights and International Constitutions somehow manage to guarantee the individuals, the right to have some freedom of movement. Article 29 of the Constitution of United Arab Emirates, says that the people have the freedom of movement within and outside the country, provided the freedom is exercised by the people in such a way that it remains within the force of law. The constitution says that no person can be banned or exempted from travelling within or outside UAE, and no person can be forced to reside within a specified limited area, unless such a ban is permitted or is done in accordance with the law.   The law of the land says, that a person may be banned from travelling within or outside UAE, as long as the official authorities have the right to impose such a ban, and their actions are in accordance with some statutory law. An important point which needs to be mentioned, is that the travel ban not only includes cases of criminal investigation against a person, but also includes cases where the person being banned is a debtor, and his creditor has places a request before the court to issue a travel ban against him.   It may be noted is that the creditor can submit an application before the judge or the head of competent authority, requesting for issuance a travel ban against the debtor, and this right has been given to the creditor under Article 329 of Civil Procedure Code (as amended by Federal Law Number 30 of 2005). The Penal Laws of UAE on the other hand contain specially laid down procedures for deportation of foreign nationals, in case they pose a threat to the national security and domestic peace of the country. However, foreign nationals may also be deported from the country, in case they commit a crime which is related to drugs, immigration or crimes of moral turpitude. For other crimes however, the courts may have alternate options. It seems very important to note that according to the Emirati constitution, only foreign nationals can be deported and the citizens of UAE cannot be deported or banished from the union.   UAE has separate laws for travel ban and deportation and therefore, there may be a case where travel ban and deportation order is given against the same foreigner. A travel ban is basically an executive order or a written order given by the judge due to certain reasons, and the travel ban is lifted only when such reasons ceases to exist. There can be many reasons for which a judge may impose a travel ban on a person, including the requests made by custodian, guardian or creditors.   Travel bans can arise from a variety of claims and causes. For instance, it may be enforced pursuant to the law, by way of claim filed by creditor(s) or based on a request made by parent or guardian claiming custody of children. Some of these causes may arise out of legal implications and some may not. This article aims at discussing the cause and effect of deportation orders, execution of such orders, and the conflict(s) that may arise when a deportation order or travel ban are issued against an individual at the same time.   In this article, we shall try to understand and discuss the ways in which a conflict between the travel ban and deportation order may be solved.  

    1. Travel ban with the force of law
    A travel ban is automatically instituted against a person the moment any criminal report is being filed against him/her. The travel ban is being executed by the competent authorities, by issuing the notice of such an order of the court to all the state ports. The travel ban remains in force until the penal claim is being settled and the final order is executed. In case the person being issued a travel ban order, needs to travel, he/she may submit a bail application to the judge, requesting for a bail order.   2. Travel ban by a creditor Article 329 and 330 of federal civil procedure confers upon a creditor, the right to apply for issuing a travel ban against the debtor. The application can be made by a creditor only when the amount of debt is more than AED 10,000/- and when the creditor has a sufficient reason to believe that the debtor might flee from the country without paying the dues. The fact that the debts are due and that the debtor is a foreign national are not the sufficient grounds to submit an application before the competent authority. The law says that the debts should be definite, payable and clearly defined.   The application for travel ban must be made in written by the creditor, specifying the exact amount of debts. On the other hand, the debtor is supposed to submit a bond before the court, stating the possible losses which he might incur, in case he is not allowed to travel because of the travel ban order. In a situation where the case goes in the favour of debtor, the creditor can be asked to compensate the debtor for all the losses that might have been caused to him. Such a rule helps in avoiding malicious claims that might be placed before the court by the creditors. In case a travel ban is ordered, the debtor's passport is deposited in the court's treasury and a circular regarding the same is issued at all state ports. The debtor can file for an appeal before the higher court if he feels that a wrong decision has been given by the court.   Although the travel ban is issued by the judge without hearing the debtor, the creditor is supposed to file a subjective lawsuit within eight days from the date of travel ban and also, the law requires the creditor to execute the ban order within thirty days from the date of order, or else the ban shall be lifted. Article 330 governs the lifting and ending of bans and the ban stays in force until the dues are being paid back by the debtor. However, a judge can lift the travel ban order under following situations.   a.If a required condition for the travel ban abates b. If the creditor agrees in writing to set aside the judgement c. If the debtor deposits sufficient bond, or assign a well-off sponsor agreed upon by the judge d. If the debtor deposits to the court treasury a sum equal to the debt and expenditure allocated for the fulfilment of the creditor's right upon which the ban was issued. This sum is retained with the force of law for the benefit of the creditor.   3.Travel ban by a parent or guardian The mother does not have the right to take a child outside the father's country without getting a written agreement signed by the guardian of child, which in accordance with Article 149 of personal affairs law. The law says that a parent can withhold the passports of their children. A conflict can arise if the mother belongs to a foreign nationality and wants to take her child for travelling without father's permission. In such cases, the father can submit an application before the court to put a travel ban on his children in their personal interest.   Article 149 of personal affairs law and the explanatory memorandum thereof states that a custodian may not travel with the child outside the country without a written agreement of the guardian, as this prevents the guardian caretaking of their child. Hence, legislators required the guardian's written agreement. In case the guardian disagrees, a claim may be submitted to be settled by a judge. The judge will issue a final judgement in light of justifications given by both the custodian and guardian. Travel of the custodian does not abate their right in custody as long as the child is not lost. Therefore, we can summarize that the purpose is not to abate the custodian's right to travel, it is actually to avoid any conflict with the interests of the child.   4. Illegal travel ban This kind of travel ban does not find any place under the provisions of any statutory law and hence, it has been banned. The illegal travel ban takes place when the creditor or the employer simply withholds the passport, which indirectly leads to banning from travel. Such kind of a ban is simply illegal and unacceptable, and this is in accordance with the judgement of the cassation court of Dubai, which said that a sponsor cannot withhold the passport of the sponsored, irrespective of the kind of relationship that might exist between the parties, and this rotates around Article 329 of Civil Procedure Code, which states the cases in which a travel ban may be imposed by the competent judge in accordance to the law.   The law also says that the creditor cannot withhold the passport of the debtor even if the debtor gives his consent to do so, and such agreements are null and void according to the law, as they violate rights and freedoms. Article 26 and 29 of the Constitution of UAE refer to the liberty and freedom of movement, which have been guaranteed to an individual by the law.  

    Deportation Order vs. Travel Ban Travel bans protect the individual interests of the people, they are issued on the request of the creditors and such a ban can be abated or lifted by means of appeal. Deportations on the other hand protect the public interest, they are mandated by law and such orders are final and cannot be abated. There is a separate provision which states that a deportation order cannot be ended by a judgement and this forms the central idea of Article 131 of the penal code. But on the contrary, Article 132 states that the court order of deportation can be annulled if the court receives any request from the concerned authority or from the public prosecution to put an end to the court order.   Earlier, the cassation court used the old provisions as the ground for its decision to deny the creditor, the right to issue a travel ban in accordance with Article 329, as it used to conflict with the power of deportation orders, which used to cause huge losses to creditors. This phenomenon did not last very long as the Article 329 was amended by Federal Law Number 30 of 2005 amending certain provisions of Federal Law No. (11) of 1992 concerning the Civil Procedures Law, which said that a travel ban order should not interfere with the final deportation order. The new provision says that final judgement issued against a debtor does not conflict with the creditor's right to apply for travel ban against the debtor which acts as a precautionary measure for the creditors to guarantee its debt fulfilment.   The new law says that in case there is a deportation order and travel ban order against the same person, an adhoc committee is being formed and chaired by a judge to decide which order is to be executed. The law says that an adhoc committee shall order the execution of deportation order in case the creditor did not submit a subjective claim or failed to execute the judgement issued thereof. If sufficient evidence is found on debtor owing considerable amount of money, deportation can be delayed. Similarly, if a person is suffering from some contagious disease, deportation may be preferred over travel ban. Further, it is to be submitted that the above stated laws cannot prevent a competent judge from issuing a travel ban, regardless of the fact that a final deportation has already been given against the same person. ]]>
    Sun, 06 Mar 2016 11:43:45 GMT
    <![CDATA[Key Decisions on Dubai Property Laws between 2009 and 2013 by Dubai Court of Cassation]]>Dubai Court of Cassation on Law 13

      Article 3 of Law 13 reads out as under:- (1)Any disposition that occurs in respect of any Real Property Unit sold off-plan will be entered in the Interim Property Register, and any sale or any other legal disposition that transfers or restricts ownership or any ancillary rights will be void unless entered in that Register. (2)Any developer, who disposed of a Real Property Unit by way of sale or any other disposition that transferred or encumbered a Real Property Unit before this Law came into force, must apply to the Department to enter such disposition or encumbrance in the Property Register or in the Interim Property Register, as the case may be, within sixty (60) days from the date on which this Law comes into force.   The Dubai Court of Cassation has decided on Article 3 (1) in Case 279 of 2011 (dated 27 November 2011). In this matter, the parties to dispute had signed certain reservation agreement under the date of 22 January 2008. The sale was carried out by an agent holding power of attorney from the developer entrusting the agent to enter in to the agreement, sign the same and carry out the sale process. The Court also reviewed a letter dated 6 January 2010 issued by Dubai Land Department evidencing that the developer in the present case had failed to meet requirements imposed under Article 3 (1) being registration of units in the interim register.   The court considered the interpretation and application of Law 13 and held as under:- 1.The effect of the provisions of article 3 and 5 of Law No. 13 of 2008 regulating the interim register in the emirate of Dubai as amended by Law No. 9 of 2009, is that all real property dispositions by way of a contract for the sale of real estatemust be registered on the interim register with the Dubai Lands Department. 2.Failure (or; refusal) by developer to register the units in accordance with principles set out in Law 13 shall be violation of obligations imposed on developer under Law 13and the courts shall in such event treat unregistered contracts as void.   The Dubai Court of Cassation based on above refused developer's appeal on the grounds that it was devoid of any merits.   Dubai Court of Cassation in Case 33 of 2009 decided on 17 January 2010 has echoed the above decision and held as under: "The provisions of article 3 of law No. 13 of 2008 regulating the preliminary real estate register in the emirate of Dubai show the requirement to register all dispositions over real estate units sold on the plan. The person who is required to submit the application to the Department is the developer. His role is restricted to submitting the application, whether the disposition took place before or after the law was promulgated and the provisions thereof came into effect. It requires the developer, within a period not exceeding 60 days from the date the provisions thereof came into effect, to submit an application to the Lands and Property Department for registration of the units sold before the provisions thereof came into effect, on the land register if they have been built, or on the preliminary land register if the construction thereof has not yet been completed. His failure to take that step, as provided for in article 3(2) of the law, will not result in the disposition being void. It will result only in the developer being referred to the competent investigatory authorities after preparation of the report in that respect by the Director General of the Lands and Property Department, pursuant to the provisions of article 13 of that law. That is because the legislature renders the disposition void only in the event that it is not registered."   In dealing with Article 3 (2) of Law 13, the Dubai Court of Cassation in Appeal number 4 of 2011 and dated 19 June 2011held as under:-   1.The sixty (60) days' time limit imposed by Article 3(2) of Law 13 is the legal time limit set out under the law where the invalidity (of unregistered contracts) will be decided only if registration was not carried out at all or if it was impossible to carry out the registration. 2.It is the responsibility of developer to submit the application form along with all information and details before the Dubai Land Department in line with its applicable procedure. Acceptance and processing of registration is the role and responsibility of Dubai Land Department. 3.The objective underlying Article 3 (2) of Law 13 is for Dubai Land Department to monitor and supervise real property transactions in the Emirate of Dubai to safeguard rights and interests of propertyowners.   The court held and decided that failure to register within sixty (60) days per Article 3 (2) of Law 13 shall not invalidate the contract between developer and buyer.   There are set precedents recognizing developer's legal right to terminate the contract such as in case 43 of 2009 (decided on 11 April 2010) by Dubai Court of Cassation wherein it was held and stated:- "The basic rule in determining the time for payment of the price is the agreement between the developer and the buyer. If there is no agreement between them in that regard, the buyer will be obliged to pay the price upon making the contract and before requiring registration of the unit sold in his name in thepreliminary register. That is to say, the obligation of the buyer is a contractual obligation to pay the price and precedes the obligation of the developer to take steps for registration in the preliminary register, in the absence of a contrary agreement. Consequently, the developer may refuse to perform his obligation to take the necessary steps to register ownership of the unit of real estate sold in the name of the selleron the preliminary register if the buyer has not performed his obligation to pay the price, unless there has been an agreement to defer payment of the price. In such event, the developer will not be regarded as being in breach of his obligation in such a way as to justify rescission of the contract."
      In the next feature will, we will continue to look at several other precedents passed by Dubai courts on Dubai property laws and laws affecting the real estate.

     

    ]]>Sun, 06 Mar 2016 10:49:26 GMT<![CDATA[UAE Labour Law 2016: Update]]>The New Approved Standard Employment Contracts
      The amendments brought into effect by Ministerial Decree (764) of 2015 on Ministry of Labourapproved a standard employment contract wherein employers can no longer continue to give preposterous offers to employees as a signed employment offer would now have to fall in line with the standard employment contract that has been issued by the Ministry. These standard employment contracts should be signed by the employee before it is presented to the Ministry for its registration. The tentative approval of the foreign workers employment will not be granted if it is not in conformity with the standard contract terms which means that the prospective employees cannot be lured by bogus offers which are later not laid down in the contract. The employers are generally not allowed to change any of the terms of the standard employment contracts. However if the proposed alteration or change is in the favour of the employee, then such an alteration or change can be brought about after an approval has been obtained from the worker and the Ministry.    New clauses can be added to the standard employment contract only if they are in compliance with the law and do not contradict any of the other provisions set outwithin the contract. Then what about the existing employment contracts which are already in force but not in conformity with the new standard employment contract? Such contracts would continue to be effective until the term of the contract expires, and then the renewal of the old employment contracts must be made in accordance with the standard employment contract as per Article 3. In essence, this means that the standard employment contract would not affect any existing employment contract instead aims at reforming the employment contracts that are yet to come into force.   We have an example, Mr. T, a Chinese national who was approached by a company in the UAE that promised him a certain salary plus a benefits package. Tempted by this offer, Mr. Tdecided to resign from his job in Singapore, and travel to the UAE. Upon reaching UAE, Mr. T was shocked to hear that the employer in the UAE had changed its mind and unilaterally decided to change the offer previously communicated to Mr. T. Although shocked, Mr. T saddened by the entire saga felt helpless in the situation and decided to accept employment under the notion that he will spend his few years in the UAE. The new Law aims at preventing situations such as one faced by Mr. T and now requires employers to submit a copy of the contract signed by employee while applying for an employment visa.    New Rules for Termination There are multitude of reasons that could affect the ongoing relationship between employer and employee during the course of employment. The nature of employment contract (limited or unlimited), conditions of circumstances whereby either party may invoke termination are some of the key considerations. For instance, employerscan terminate an employee without notice who commits any of the offences described under Article 120 of the UAE Labour Law (Federal Law No. 8 of 1980) such as failure of the employee to perform his basic duties mentioned in his employment contract, disclosure of the trade secrets of the employer, etc. Article 1 of Ministerial Decree 765 of 2015 has laid down various contexts under which an employer and an employee could part ways when the underlying employment contract is either a Limited Term Employment Contract (Limited Contract) or an Unlimited Term Employment Contract (Unlimited Contract).   Limited Term and Unlimited Term Employment Contracts   It is palpable to say that a Limited employment contract would stand to be terminated when the period of the employment specified in the employment contract has expired and the contract has not been renewed. But what about an employee who is working under an Unlimited Contract?   An important overhaul in the New Law is that both the employer and the employee can now mutually consent to terminate the contract during its period and such a termination would stand to be valid.Mutual consent of both the parties to the employment contract is of essence in termination of the employment contract. The burden of legal obligations would only tumble upon a party who terminates the employment contract without the prior consent of the other party.   Though, this does not forbid a person from unilaterally terminating an employment contract, be it a new contract or a renewed contract (in case of Limited Contracts). Mandatory procedure set out below as stated under Ministerial Decree (765) of 2015 as also reiterated under Ministerial Decree (766) of 2015 will have to be followed by the party who wishes to terminate the employment contract without the consent of the other party.    An employment contract would be considered to have been de facto terminated when an employer neglects and does not fulfil his obligations towards the employee. The New Law also goes on to pronounce that an employment contract would have ended when if an employee has lodged a complaint against his employer due to the closing down of the business for more than two months and a court has ruled that an employee is entitled to more than two months wages or damages for irrational dismissal of the employee.   But what would happen if an employee 'X' terminates his employment contract with his employer 'Y' without following the above mentioned procedure? Obvious! 'X' would be liable towards all the legal repercussions and might even have to indemnify 'Y' for his losses, and therefore, would have to hire a law firm that provides bespoke legal advice in employment matters.   Permitted or Banned?   According to the old legislation in place not all employees who quit their previous job would be eligible for a new work permit. Now, under Ministerial Decree (766) of 2015, there are several circumstances in which an employee can get a new work permit. Though these circumstances could vary depending upon the type of employment contract that exists between the parties.   The biggest twist to the old panorama are the new rules set for the issuance of a new employment permit to all the employees that qualify for skill levels 1, 2 and 3 as per the ministry's classification, which refers to any employee who hold a university degree, postsecondary diploma or high school diploma, respectively, waiving off the six months rule. Accordingly, either for term fixed and unlimited contracts on the situations described on article 1 of the decree, the employee having skill levels 1, 2 and 3, upon the termination of the employment contract will be granted with a new working permit, if he had not complete six months with the former employer.    Limited Term Employment Contracts   A new work permit can be issued to an employee whose contract has expired and has not been renewed thereafter. A new work permit can also be issued to an employee when either the employer or the employee has independently terminated the renewed contract on the condition that he:
    • Provided the other party with a written notice in accordance with the subsisting agreed notice period which should be between one and three months. If a subsisting period does not exist, then a minimum notice period of three months should be given;
    • Continues to heed to his obligations during the notice period;
    • Indemnifies the other party to the amount that was concurred between the parties and this indemnification amount should not exceed the limit of three months gross wages of the employee. In case the parties had not decided on an amount beforehand, then he would be liable to pay three months gross wages.
      Unlimited Term Employment Contracts   A new work permit cannot be denied if the party intending to cancel the employment contract has informed the other party and given a notice in advance and continues to fulfil all his obligations under his employment contract. This permit would only be provided to an employee who has worked for at least six months with his previous employer, unless the employee has 1, 2 and 3 skill levels of the Ministry's classification.    Conclusion: Despite appointment and termination being a regular feature for employers, labour matters are often a bit more complicated than they seem. What may seem as getting settled (or; perhaps easier to settle) could often reach out to lawyers or even courts! Obtaining right advice from your counsel is the key. Litigation can be cumbersome and expensive and settlement avenues should not be undermined by either party. The New Law is expected to facilitate free flow of labour withinthe UAE– a country that has witnessed unprecedented growth in employment and continues to attract people from across the globe.   ]]>Sun, 06 Mar 2016 10:12:57 GMT<![CDATA[TRADEMARK REGISTRATION - MIDDLE EAST]]> Iraq

    Law Number 21 of 1957 being the Iraq Trademark and Geographical Indications Law . Iraq has sought permanent membership in the world trade organisation (the WTO ) and is currently holding observer status

    10 The Iraq Trademark Law defines trademarks to include any sign, or any combination of signs, capable of distinguishing the goods of one undertaking from those of other undertakings, shall be capable of constituting a trademark. Such signs, in particular words including personal names, letters, numerals, figurative elements and colours as well as any combination of such signs, shall be eligible for registration as trademarks. Where signs are not inherently capable of distinguishing the relevant goods or services, registrability will depend on distinctiveness acquired through use. Signs need not be visually perceptible in order to be eligible for protection as trademarks. Any person desirous of using a mark for distinguishing goods of his own production, manufacture, trade (including intention to trade) or making an offer to sell. Note: Trademark applications filed in Iraq (Baghdad) extend to whole region including Erbil. Erbil however maintains a separate trademark office. Trademark owners cannot validate trademarks that were registered in Baghdad with the trademark office in Erbil. Applicants desirous of additional protection locally within Erbil must make a separate/new application in Erbil before Ministry of Industry and Trade (Trademark Division), Erbil, the capital of Kurdistan, Iraq. The term or duration of registration is 10 years. Iraq protect swell-known trademarks irrespective of whether such marks are registered domestically within Iraq. 1. Priority Document; 2. Trademark Logo or specimen documents (5 x 6 cm or 6 x 7 cm in print form) and (4 x 4 cm or 315 px by 315 px); 3. Trade license Copy for national companies only with a signature delegation from applicant if the application is filed through third party ; 4. Power of Attorney maybe given to lawyers, or IP Agents ; 5. Passport Copy and personal details of applicant; and 6. Additional Attachments, if any. Note: International applicants who doe not have Iraq consulate in their home country can legalise the power of attorney before any other GCC (or; Arab) country. Accordingly, the legalisation of power of attorney should first happen before the Ministry of Foreign Affairs (or; related Ministry) in the GCC or Arab country followed by legalisation before the consulate of GCC/Arab country in Iraq followed by Ministry of Foreign Affairs in Iraq. 1. Trademark application , power of attorney, and supporting documents including trademark specimen must be submitted in Arabic language. 2. The Registrar of trademarks accepts applications that are in compliance with law and procedures. Once accepted, the grant of marks is printed and published in the official gazette of Iraq thrice. Opposition claims are open for a term of three (3) months. If the Registrar does not receive any claim as to opposition of trademarks, the trademark is deemed as final and trademark certificate is issued to the applicant . 1. Singapore Treaty on Law of Trademarks; 2. Paris Convention for the Protection of Industrial Property; 3. Convention establishing the WIPO; 4. World Trade Organisation - Observer Status ( refer , column one on left) The Singapore Treaty on Law of Trademarks dated 16 March 2009 is primarily aimed at harmonising procedures of contracting parties intending to file national or regional trademark or service mark applications. The treaty comprises of 32 articles and contracting parties have the discretion to receive applications (whether in hard copy formation, electronic copies or otherwise) as per their choice. The treaty currently (as of February 2015 - source: wipo.int) comprises of 42 contracting parties

    Yemen

    Law Number 23 of 2010 being Yemen Trademarks and geographical Indications Law

    10 Article 3 of the Yemen Trademark Law defines Trademark as 'a trademark is anything of distinctive form which is visible to the eye, including names, words, letters, numbers, signatures, drawings, symbols, seals, pictures or embossment , or a particular arrangement of colour or set of colours, or any group of these features, if used or intended to be used to distinguish the products or services of a commercial, industrial, agricultural , professional or service enterprise. There is a six month term commencing from the date of publication date up to the date of registration of a trademark Article 53 of Yemen Trademark Law sets out that following persons may apply for trademark(s):- 1. Every (natural or juridicial person who is) a Yemeni who chooses to base their effective activities in Yemen; 2. every (natural or juridicial person who is) a foreigner who chooses to base his effective activities in Yemen; 3. public sector bodies and institutions; and 4. States or entities that are linked to Yemen or where Yemen has relations of reciprocity and/or has the right to request for registration of trademark in accordance with the Trademark Law of Yemen. 1. Power of Attorney certified by a competent authority if the application is made through an agent or representative of applicant;. 2. A copy of a valid certificate of incorporation or commercial register (duly legalized), providing clearly - name of entity, name of managing director, registered place of business, and related; 3. Image matching the mark to be registered so that they are clear and free from any promotional or descriptive phrases (14 copies); 4. Passport copy and personal details of applicant; 5. copy of priority document if priority is being claimed; and 6. additional attachments, if an 1. Translation in Arabic issued by the Office of certified documents and data written in a foreign language. 2. In the event applicant is claiming priority, the applicant should attach the date and number of prior application along with the name of country and authority where such prior application was made. The Law also requires applicants to submit certified photo copy of prior application within three (3) months the date priority application has been filed. 1. Paris Convention for the Protection of Industrial Property ; 2. Convention Establishing the World Intellectual Property Organization ; 3. Paris Convention for the Protection of Industrial Property ; 4. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)  

    Jordan

    Law Number 34 of 1999 Issued Pursuant to official gazette number 4389 of 1999 dated 1 November 1999

    10 Article 2 of Jordanian Trademark Law defines Trademark as "any visually perceptible sign used or to be used by any person for distinguishing his goods or services from those of others." Opposition claims can be filed within a three month term from date of publication as per Article 14 of the Law. A notice of opposition must be given in writing in the prescribed manner and should inculde a statement of the grounds for the opposition. Article 11 of Jordan's Trademark Law sets out that "any person claiming to be the proprietor of a used or proposed to be used trademark who is desirous of registering such trademark shall apply in writing to the registrar in the prescribed manner." 1. power of attorney duly signed, notarised, and legalised before Consular of Jordan; 2. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 3. applicant's company details including trade name, nationality, address, business activity, name of managing director where applicant is a corporate entity; 4. itemised list of products forming part of trademark application; 5. meaning and/or origin of the mark being registered; and 6. priority documents in the event priority is being claimed and has been certified before the competent authority 1. The forms and other supporting documents to be submitted (including power of attorney) must be in Arabic . . 1. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks ; 2. Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks ; 3. Paris Convention for the Protection of Industrial Property ; 4. Convention Establishing the World Intellectual Property Organization ;and 5. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement ordan has been considering accession to Madrid Protocol for over an decade which (if acceded) would make Jordan compliant in trading with United States and European Union. In this regard, Jordan passed an amendments to its trademark law in the year 2007 (through Law number 29 of 2007) to access the Protocol. The Protocol has however not been implemented till date

    Algeria

    Order Number 3-6 dated 19 July 2003 dealing with Trademarks. Executive Decree Number 5 - 277 of 2005 laying down the Procedures for Filing and Issuance of Trademarks. Executive Decree Number 8-346 o f 2008 supplementing Decree 5-277 of 2005

    10 Article 2 of Algerian Trademark Law defines Trademark as "all symbols representable in writing, especially words including persons' names, letters and numbers , drawings , pictures, forms distinguishing goods or packages thereof, and colours or combination there of used to distinguish goods or services of a natural or nominal person from the goods and services of someone else." 1. Natives of natural or legal entity, practicing any of the commercial , industrial, professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney duly signed (in French language); 2. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 3. applicant's company details including trade name, nationality, address, business activity, name of managing director where applicant is a corporate entity; 4. itemised list of products forming part of trademark application (2 prints of trademark to be included); 5. meaning and/or origin of the mark being registered; and 6. priority documents (with verified French translation) in the event priority is being claimed and has been certified before the competent authority 1. The power of attorney, application form (3 print sets) and priority documents (if applicable) must be submitted in French language 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks ; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; and 4. Paris Convention for the Protection of Industrial Property The Madrid System makes it possible for an applicant to apply for a trademark in a large number of countries by filing a single international application at a national or regional IP office of a country/region that is party to the system. It simplifies the process of multinational trademark registration by reducing the requirement to file an application at the intellectual property office in each country in which protection is sought. The system also simplifies the subsequent management of the mark, since it is possible to record further changes or to renew the registration through a single procedural step.

    Egypt

    Law Number 82 of 2002 on the protection of Intellectual property Rights 10 Article 63 of the Egyptian Trademark Law defines trademark as "A trademark is any sign distinguishing goods, whether products or services, and include in particular names represented in a distinctive manner, signatures, words, letters, numerals, designs, symbols, signposts, stamps, seals , drawings , engravings , a combination of distinctly formed colours and any other combination of these elements if used, or meant to be used, to distinguish the products of a particular industry, agricultural, forest or mining venture or any goods, or to indicate the origin of products or goods, or their quality, category, guarantee, preparation process, or to indicate the provision of any service. In all cases, a trademark shall be a sign that is recognizable by sight. " Article 66 of the Law clarifies "Without prejudice to the provisions of international conventions in force in Egypt, any natural person or legal entity, Egyptian or foreign, belonging to or having the center of his or its effective activity in a country or entity member in the World Trade Organization or who applies reciprocity to Egypt, shall have the right to apply for the registration of a trademark with the Department of Trade Registry in Egypt, with all attendant rights in conformity with the provisions of this Law. 1. power of attorney (Arabic) duly signed, notarised, and legalised before Consular of Egypt; 2. twelve (12) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register legalised before the Egyptian Consulate (duly translated into Arabic), address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; 6. meaning and/or origin of the mark being registered; and 7. priority documents in the event priority is being claimed and has been certified before the competent authority all documents (including form , incorporation documents, power of attorney and other attachments) must be submitted in Arabic language. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 4. Paris Convention for the Protection of Industrial Property ; 5. Trademark Law Treaty ; 6. Convention Establishing the World Intellectual Property Organization ; 7. Paris Convention for the Protection of Industrial Property ; 8. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) International applicants can benefit under the Madrid System by filing a single application and getting protection in multiple countries (covered under Madrid System). Under the Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

    Morocco

    Law number 23-13 amending and supplementing Law No. 17-97 on the Protection of Industrial Property (21 November 2014) 10 Article 133 of Moroccan Trademark Law defines Trademark as "For the purposes of this Law, a trademark or a service mark means a sign capable of graphic representation which serves to distinguish the goods or services of a natural or legal person. The following, in particular, may constitute such a sign: a. Denominations in all forms, such as: words, combinations of words, surnames and geographical names, pseudonyms, letters, numerals, abbreviations; b. figurative signs such as: devices, labels, seals, selvedges, reliefs, holograms, logos, synthesized images; shapes, particularly those of a product or its packaging or those that identify a service; arrangements, combinations or shades of color. c. sound signs such as : sounds, musical pieces; d. olfactory marks. 1. Natives of natural or legal entity, practicing any of the commercial , industrial , professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney (Arabic) duly signed, notarised, and legalised before Consular of Morocco to be submitted through local agent; 2. fifteen (15) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register legalised before the Morocco Consulate (duly translated into Arabic), address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; 6. meaning and/or origin of the mark being registered; and 7. priority documents in the event priority is being claimed and has been certified before the competent authority Note: a. For sound marks - applicants must submit musical notations (musical notes); and b. For smell marks - applicants must submit explanatory legend as to essence. The application form is submitted in French language. Once the marks have been published in the Official Gazette, there is a set term of sixty (60) post publication date to file for opposition claims relating to domestic registrations. In case of international applications, the term is set for two (2) months from the date mark is published in Gazette. opposition term cannot be extended. 1. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 2. Madrid Agreement Concerning the International Registration of Marks; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks; 4. Paris Convention for the Protection of Industrial Property ; 5. Trademark Law Treaty ; 6. Convention Establishing the World Intellectual Property Organization ; 7. Paris Convention for the Protection of Industrial Property ; 8. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) Morocco is a member of the Paris Convention. An applicant who has applied for a trade mark in another convention country is entitled to a priority right to be accorded the same date as the first filed application, provided the Moroccan application is filed within six months of such earlier filing date. Morocco is also a member of the Madrid Agreement and Protocol, so that registration of a trade mark may be obtained by way of an international application designating Morocco. Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

    Tunisia

    Law Number 36 of 2001

    10 A trademark or a service mark is an apparent sign, which makes it possible to distinguish the goods presented or the services provided by a natural or a juridical person. In particular this sign may consists of: a. All forms of designations such as: words , groups of words , surnames, geographical names, pseudonyms, letters, numbers and symbols. b. graphic signs such as: drawings, holograms and shapes in particular those related to the p r o d u c t , its method of presentation, or those which distinguish the services , the arrangements of colors, the mixings of colors or the separation of the grades ofcolors. c. Phonic signs such as musical tunes and sentences. 1. Natives of natural or legal entity, practicing any of the commercial , industrial, professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. power of attorney duly signed; 2. six (6) prints of trademark; 3. applicant's personal details including name, nationality, address, and occupation where applicant is an individual; 4. applicant's company details including trade name, nationality, copy of the company's article of incorporation or commercial register, address, business activity, name of managing director where applicant is a corporate entity; 5. itemised list of products forming part of trademark application; and 6. meaning and/or origin of the mark being registered. The application form can be submitted in English or French. 1. Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks ; 2. Convention Establishing the World Intellectual Property Organization ; 3. Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks ; 4. Hague Agreement Concerning the International Registration of Industrial Design ; 5. Paris Convention for the Protection of Industrial Property ; 6. Agreement establishing the world trade Organization (WTO) ; 7. World Trade Organization (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) ; 8. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs)

     

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    Wed, 02 Mar 2016 11:19:00 GMT
    <![CDATA[TRADEMARK REGISTRATION GCC COUNTRIES]]>
    The UAE Trademark Law Number 37 of 1992 was amended by Law number 19 of 2000 followed by Law Number 8 of 2002 10 An applicant can file or register a trademark under Federal law no. No. 37 of 1992 on Trademarks amended by Law No. 19 of 2000 and Law No. 8 of 2002 which sets out the definition of trademark and covers names, words, signatures, letters, figures, drawings, symbols, titles, tax stamps, seals, pictures, inscriptions, advertisements or packs or any other mark or combination thereof.

    Sound is considered a part of the trademark if it accompanies thereto 1. Natives of natural or legal entity, practicing any of the commercial , industrial , professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. Priority Document; 2. Trademark Logo or specimen documents (5 x 6 cm or 6 x 7 cm in print form) and (4 x 4 cm or 315 px by 315 px); 3. Trade license Copy for national companies only with a signature delegation from applicant if the application is filed through third party ; 4. Power of Attorney maybe given to lawyers, or IP Agents ; 5. Passport Copy with personal details of applicant; and 6. Additional Attachments, if any. Note: International applicants who doe not have UAE consulate in their home country can legalise the power of attorney before any other GCC (or; Arab) country. Accordingly, the legalisation of power of attorney should first happen before the Ministry of Foreign Affairs (or; related Ministry) in the GCC or Arab country followed by legalisation before the consulate of GCC/Arab country in UAE followed by Ministry of Foreign Affairs in UAE Application must be submitted in Arabic. The Ministry of Economy is responsible for registration (including preliminary search) in the UAE . 2. Once the application is filed, it is queued to be examined for review by Registrar. Applications accepted by Registrar are published in the Trademark Journal and two local Arabic Newspapers. There is 30 days period for filling an opposition by any interested party. The decision of the Registrar on claim for opposition of marks may be appealed to the Committee in the Trademark Office, and the Committee's decision may be appealed to the competent court.. Please visit http://bit.ly/uae-ip for more Paris Convention for the Protection of Industrial Property ; 2. Nice Classification; 3. Convention Establishing the World Intellectual Property Organisation (the WIPO ) ; 4. The economic agreement between gulf Cooperation Council States (the GCC ) and the Unified Economic Agreement Between GCC States (Article 20, Chapter VI); and 5. World Trade Organisation (the WTO ) - Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) (1994) (April 10, 1996) Note: UAE is not a member of the Madrid Convention or the Madrid Protocol. Note: UAE is not a member of the Nice Agreement 1957 but has adopted Nice Classification (10th Edition). The UAE recognises and protects trademarks registered internationally even if such trademarks have not been registered within the UAE. (refer, Article 4 (1) of the UAE Trademark Law) and Article 6 bis of the Paris Convention. Recognition, reputation and popularity of mark shall however be considered by the Registrar in such matters . 2. Whilst GCC Treaty is not a party to any international treaty, it does encourage growth and development of intellectual property across GCC member states.

    kingdom of Saudi Arabia (the KSA ).

    Saudi Arabia's Law of Trademarks (promulgated by Royal Decree No. M/21 of 28 Jumada I 1423 (August 7, 2002)) governs the trademark registration in KSA .

    10 A trademark , according to the provisions of this law includes i) names of distinct shapes, ii) signatures, words, letters, numbers, drawings, symbols, stamps, and prominent inscriptions; or iii) any other sign or combination thereof that are suitable to distinguish industrial, commercial, vocational or agricultural products; or iv) projects aimed at exploitation of forests or natural resources; or vi) to indicate that the product or item on which the mark is applied belongs to the owner of the mark on the grounds o f manufacture, selection and invention thereof or trading therewith or; vii) to indicate the rendering of a certain service

      1. Natural or juristic persons of Saudi nationality ; 2. persons regularly residing in the Kingdom of Saudi Arabia and are permitted to engage in commercial or vocational activities; 3. foreigners who are nationals of countries that extend reciprocal treatment to the Kingdom; 4. nationals of a country which is a member to an international multi-lateral treaty in which the Kingdom is party to or persons who reside in that country; and 5. Public agencies. and owners of well-known marks . Note: The Ministry of Commerce and Industry accepts trademark registration applications online on its website http://mci.gov.sa 1. A photo of the trademark (not exceeding 10 x 10 cm); 2. name of the applicant, his family name, his address, and his commercial name, if any ; 3. legal representative: his name, address of his main headquarters and his nationality; 4. requests by proxy: name, his family name, and his address ; 5. description of the trademark sought to be registered ; 6. the products and the services for which application is being made along-with their category ; 7. signature of the applicant or his proxy, and in case of corporate entity - the authorised signatory ; 8. ten (10) photos of the trademark compatible to the trademark model of the registration request; 9. in case of proxy, a copy of the proxy shall be enclosed with the original for compatibility; and 10. payment receipt of request-submitting fees pursuant to Article 41 of the Law 1. Applications are currently accepted in Arabic language only . 2. Opposition of trademarks can be made within ninety (90) days from the date of notice being published in official gazette. Claims must be filed before the board of grievance 1. Paris Convention for the Protection of Industrial Property; 2. Nice Classification; 3. Convention Establishing the World Intellectual Property Organisation (the WIPO ) ; 4. The economic agreement between gulf Cooperation Council (the GCC ) States (Article 20, Chapter VI) and the Unified Economic Agreement Between GCC States ; and 5. World Trade Organisation (the WTO ) - Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) (1994) (April 10, 1996) 1. The KSA recognises and protects trademarks registered internationally even if such trademarks have not been registered within the region. The Law however is silent on establishing a time-frame within which well-known marks can be recognised and registered.

    Kuwait

    The law providing for trademark registration is Decree-Law Number 68 of 1980 (Trademarks), as amended by Decree-Law Number 10 of 1987 and Law Number 1 of 2001. The law also provides for temporary registration of trademarks for applicants interested in displaying their products at domestic or international exhibitions or events.

    10 Article 61 of the Kuwait Trademark Law defines trademarks to include distinctive form of words, letters, signs, images or inscriptions, figurative elements (pictorial elements), colour combinations, any signs perceivable by sight, audio signs, olfactory marks or any combination thereof when used or intended to be used or applied in distinguishing goods and thereby enable the owners of such mark or marks to manufacture, trade or offer to sell. Note: Although this guide does not set out fees and costs associated with registration, Kuwait has recently passed a decree (Decree 1268 of 2015) which comes in to effect from January 2016 . Consequently application fee is now set at approximately USD 155 and trademark registration fee at USD 799) 1. Natural or juristic persons of Saudi nationality ; 2. persons regularly residing in the Kingdom of Saudi Arabia and are permitted to engage in commercial or vocational activities; 3. foreigners who are nationals of countries that extend reciprocal treatment to the Kingdom; 4. nationals of a country which is a member to an international multi-lateral treaty in which the Kingdom is party to or persons who reside in that country ; 5. public agencies ; and 6. o wners of well-known marks. 1. Trademark Application form duly filled along with copy of logo or specimen draft (5 x 5 cm); 2. If the application is filed by an agent or attorney, a copy (and; one original) of the power of attorney in Arabic from principal/client must be submitted; 3. copy of applicant's trade license; 4. provide (12) copies of the trade mark; 5. trade mark registration certificate from the original country (for registering foreign marks); 6. an authorised contract for the trade mark registration, translated and certified by the authorities in home country (for foreign trademark) along with Arabic translations and duly attested by Embassy of Kuwait (or; any Arab embassy in absence of Embassy of Kuwait in home country) and legalisation before Ministry of Justice and Ministry of Foreign Affairs in Kuwait; 7. the trade mark priority documents (attached with all needed documents), Attached with all the above documents (Image in jpg format) ; and 8. sound marks to be provided in musical note or written description; 9. olfactory marks or scent marks must be provided in form of a written description; and 10. proof of payment 1. Applications are currently accepted in Arabic language only . 2. Opposition of trademarks can be made within thirty (30) days from the date of notice being published for third time in the official bulletin. Claims must be filed before the board of grievances. 1. Paris Convention for the Protection of Industrial Property; 2. Nice Classification; 3. Convention Establishing the WIPO; and 4. World Trade Organis ation (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) (April 10, 1996) 1. Kuwait's Ministry of Commerce and Industry (Trademark office) now accepts trademark applications based on priority claims . Required documents include certified copy of the priority document duly attested and legalised before the Consulate of Kuwait. 2. The Law confers protection to owners of well known trademarks that are not registered before Ministry of Commerce and Industry in Kuwait.

    Oman

    Industrial Property Rights Law (promulgated by the Royal Decree Number 133 of 2008) amending Royal Decree Number 67 of 2008 and repealing Decree 38 of 2000. Oman accessed the Geneva Act of the Hague Agreement Concerning the international Registration of Industrial Designs on 4 March 2009

    10 Article 1 of the Oman Trademark Law defines trademark as 'a n y s i g n susceptible of being specifically represented graphically that is capable of distinguishing goods ("trademark") or services ("service mark") of one undertaking from those of other undertakings. A mark may, in particular, consist of words (including personal names), designs, letters, colours or combinations of colors, numerals or the shape of goods or their packaging , holograms , geographical indications, sounds, scents and tastes. 1. Natives of natural or legal entity, practicing any of the commercial , industrial , professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. Applicants are required to fill in the trademark application form (Form/Model number 1 duly signed ; 2. copies of logo or specimen (6x6 cm) (Form number duly signed and must be affixed with an adhesive; For corporate entities: 1. copy of commercial registration; 2. certificates and extracts of logo image; 3. signature of the authorised signatory; 4. copy of power of attorney (if obtained through trademark agency in Oman or trademark attorney) For Foreign companies:- 1. power of attorney duly legalised, attested and authenticated before Embassy of Oman (except if company is party to Apostle Treaty - please look at the last column); 2. authentication before Ministry of Justice and Ministry of Foreign Affairs in Oman; 3. certificate of incorporation; 4. copy of logo along with Form 1 and 2 1. The forms and other supporting documents to be submitted (including power of attorney) must be in Arabic; 2. The Oman Ministry of Commerce and Industry releases a publication inviting members of public to peruse the information and oppose grant of trademark that may prejudice the commercial and business interest of any person. Claims for opposition must be made within ninety (90) days from the date of publication in Oman's official gazette. 1. Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs ; 2. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 3. Trademark Law Treaty; 4. Paris Convention for the Protection of Industrial Property; 5. Convention Establishing the WIPO; 6. World Trade Organis ation (WTO) - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) (April 10, 1996) 7. The economic agreement between gulf Cooperation Council (the GCC ) States (Article 20, Chapter VI) and the Unified Economic Agreement Between GCC States; 8. Free Trade Agreement between Oman and United States of America ; and 9. Agreement between the Government of the Sultanate of Oman and the Government of the French Republic on the Reciprocal Promotion and Protection of Investments. 1. Oman recognises and protects trademarks registered internationally even if such trademarks have not been registered within the region. The Law however is silent on establishing a time-frame within which well-known marks can be recognised and registered. 2. Oman is a 'Connected State' under the (Hague) Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents from January 2012. Accordingly, documents duly notarised and apostilled by a foreign State, (which is a member of the Apostille Treaty), may be used in Oman without the need for legalisation from the Consulate or Embassy of Oman in that foreign country . 3. Under the WIPO-administered Madrid system, a trademark owner may protect a mark in up to 90 countries plus the European Union with its Community Trade Mark (CTM) by filing one application, in one language (English, French or Spanish), with one set of fees, in one currency (Swiss Francs).

    Qatar

    Law Number 9 of 2002 on Trademarks, Trade Names, Geographical Indications and Industrial Designs . Application for each class of goods or services is required to be submitted individually before the intellectual property Department of Ministry of Economy and Commerce

    10 Article 1 of Qatar Trademark Law defines Trademark as 'Trademark" means any clear visible sign that can distinguish the goods of a specific enterprise of a trader, manufacturer or service provider.' "Service Mark" means any clearsign that can distinguish the services of on enterprise from another. "Collective Mark" means a mark used or intended to be used by different enterprises for their goods or services under the control or the inspection of the owner of the mark, who may be a private or public legal person. 1. Natives of natural or legal entity, practicing any of the ecommercial , industrial , professional, or service business ; 2. foreigners of natural or legal entity, practicing any of the commercial, industrial, professional, or service business in the State. 3. foreigners of natural or legal entity practicing any of the commercial, industrial, vocational or service business in any state having reciprocity of treatment with the State; 4. public legal persons ; and 5. owners of well-known marks. 1. Applicants are required to fill in the trademark application form ; 2. five (5) copies of logo or specimen (6x6 cm) (Form number duly signed and must be affixed with an adhesive; For corporate entities: 1. copy of commercial registration; 2. certificates and extracts of logo image; 3. signature of the authorised signatory; and 4. copy of power of attorney. For Foreign companies:- 1. power of attorney duly legalised, attested and authenticated before Embassy of Qatar; 2. authentication before Ministry of Justice and Ministry of Foreign Affairs in Qatar; 3. certificate of incorporation; and 4. copy of logo along with Form 1. Applications are currently accepted in Arabic language only . 2. Opposition of trademarks can be made within one hundred twenty (120) days from the date of notice being published in the official bulletin. Claims must be filed before the board of grievances. The Civil Court of Qatar has the jurisdiction to hear and settle opposition claims in events where matters have not been resolved by the Registrar. 1. Paris Convention for the Protection of Industrial Property; 2. Nice Classification; 3. Convention Establishing the World Intellectual Property Organisation (the WIPO ) ; 4. The economic agreement between gulf Cooperation Council (the GCC ) States (Article 20, Chapter VI) and the Unified Economic Agreement Between GCC States ; and 5. World Trade Organisation (the WTO ) - Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) (1994) (April 10, 1996) Article 2 of the Law recognises and protects trademarks registered internationally. Article 2 reads as follows: 'Without prejudice to the provisions of international or bilateral treaties and conventions effective in Qatar, foreigners shall have the same rights under this Law as nationals of the State of Qatar, provided that they are nationals of or residents in states that grant the nationals of and residents in Qatar reciprocal treatment.

    Bahrain

    Legislative Decree Number 11 of 2006 in Respect of Trade Marks

    10 Article 2 of the Bahrain Trademark Law sets out that 'a Trademark shall mean everything that takes a distinctive form such as names, words, signatures, characters, codes, numbers, signposts, seals,drawings, sounds, smells, pictures, inscriptions, packaging, figurative elements, figures, colours, combinations of colours, or any combination thereof or any other sign or a group of signs if used or intended to be used in distinguishing goods or services of an establishment from goods or services of another establishment , or to indicate the performance of certain services, or to distinguish goods or services as regards their source, ingredients, method of manufacture, quality, identity, or any other characteristics. Article 4 of the Law provides 'Without prejudice to the provisions of article (34) of this Law, any natural person or legal entity shall have the right to file an application for the registration of a trademark at the Competent authority, and shall be conferred the rights provided for in this Law, provided that the applicant is a citizen of the Kingdom or a national of a country member in the Paris Union or a country whose nationals enjoy national treatment under bilateral or international agreements adopted by the Kingdom , or if the person has real and effective industrial or commercial establishments in the territory of such country. 1. Applicants are required to fill in the trademark application form (Form/Model number 1 duly signed ; 2. copies of logo or specimen (6x6 cm) (Form number duly signed and must be affixed with an adhesive; For corporate entities: 1. copy of commercial registration; 2. certificates and extracts of logo image; 3. signature of the authorised signatory; and 4. copy of power of attorney (if obtained through trademark agency in Bahrain or trademark attorney). For Foreign companies:- 1. power of attorney duly legalised, attested and authenticated before Embassy of Oman; 2. authentication before Ministry of Justice and Ministry of Foreign Affairs in Bahrain; 3. certificate of incorporation; and 4. copy of logo along with Form 1 and 2 . Every interested party may submit the competent authority a written opposition to the procedures of the registration of the trademark within ninety days from the date of the application approval , provided that the opposition is reasoned. For Sound Marks: Applicants must submit:- a. musical composition (or; musical note) composing of sound mark; and b. compact-disc (CD) with musical note attached in mp3 format For Smell Marks: Applicants must submit:- a. explanatory legend as to essence of smell; b. labels printed with legend source and essence details. 1. Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs ; 2. Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks ; 3. Trademark Law Treaty; 4. Paris Convention for the Protection of Industrial Property; 5. Convention Establishing the WIPO; 6. World Trade Organis ation (WTO) - Agreement on
    Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (1994) (April 10, 1996) 7. The economic agreement between gulf Cooperation Council (the GCC ) States (Article 20, Chapter VI) and the Unified Economic Agreement Between GCC States; 8. Free Trade Agreement between Oman and United States of America ; and 9. Agreement between the Government of the Sultanate of Oman and the Government of the French Republic on the Reciprocal Promotion and Protection of Investments Per Article 5 - If an application for the registration of a trademark is filed in any country of the Paris Union or in a country whose nationals enjoy national treatment under bilateral or international agreements adopted by the Kingdom , the applicant or the assignee may ,within six months from the filing date of the application, file an identical application at the Competent authority concerning the same mark and same goods or services contained in the previous application that is in accordance with the terms and conditions provided for in this Law and its implementing regulations and the Orders for the implementation thereof. In this case, the applicant or the assignee may enjoy the right of priority in accordance with the provisions of Paris Convention for the protection of industrial property subject to the provisions of Article (4) Section (D) of that convention. Bahrain is a 'Connected State' under the (Hague) Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents from January 2012. Accordingly, documents duly notarised and apostilled by a foreign State, (which is a member of the Apostille Treaty), may be used in Oman without the need for legalisation from the Consulate or Embassy of Oman in that foreign country.

     

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    Wed, 02 Mar 2016 11:08:00 GMT
    <![CDATA[US Sanctions-an Overview ]]>

    If you do not buy the coffee I sell, I shall forbid you from buying coffee anywhere else… 

      Many years ago, a superman flick had the bad guy delineating monopoly in trade as coffee mafia. Today, sophisticated legal developments recognize these practices as unfair trade practices. But the watchdogs of global law making agencies have refrained from commenting on the criticisms arising out of the concept of economic sanctions. Historically, sanctions have evolved from the times of Ancient Greeks. Sanctions came into existence when the state of Megara, a trade port, was subject to sanction from placing its goods on the Athenian market place and denied access to harbor. Targeted sanction programs encourage isolation of recalcitrant countries by imposing strict compliance measures.    In 2006, the UN Security Council imposed the first sanctions on Iran which followed a series of sanctions against the nation. With the historic July 2015 accord between the P5+1 at Vienna and Resolution Number 2231 passed by the United Nations Security Council for suspension and ultimately uplifting of the sanctions against Iran in accordance with the Joint Comprehensive Plan of Action (JCPOA)-  the global pundits now anticipate a sooner 'implementation day' which would lead to relaxation of major embargoes or trade sanctions against Iran- notably the world's fourth largest oil reserve which currently witnesses a crippled economy due to trade restrictions.    For US operations, the restrictions imposed on Iran are largely governed by the US Treasury Office of Foreign Security and Assets Control (OFAC). The nation faces EU sanctions on oil trade pursuant the United National Council's Resolution Number 1696 and series of resolutions passed by the Council thereafter. Collectively, these trade sanctions on the Persian Gulf resulted in a global economic slowdown with rising oil prices which inevitably are linked to the reduced pumping of oil in the economy.    Sanctions are defined as the measures taken by a state to coerce another to conform to an international agreement or norms of conduct. While 'sanction' is a blanket term that can include diplomatic, economic, military and sport sanctions- 'embargoes' relate to ban on trade and commerce and imposed against specific state or group of nations. In that sense, embargoes are another name for economic sanctions.   This article provide limited overview on compliance with OFAC sanctions. United States is the world's largest economy representing 17% of the World's GDP. Inevitably, decisions by the US Treasury have a larger impact on the companies doing business with targeted nations.   US Sanctions applicability and scope   While suspension of sanctions against Iran will be welcome news, many trade sanctions remain in place against countries like Syria, Cuba and recently Russia which are regulated by the OFAC.   Businesses across Asian and Middle East countries have continued to express interest in dealing with restricted countries despite the sanctions. The notion behind continued dealings with these countries is an ingenious comprehension about the non applicability of the sanctions due to territorial restraints. In addition to this, economists around the world have often discussed the ineffectiveness of sanctions in achieving the envisaged goals.   That said, the scope of OFAC sanctions is exhaustive and does not negate by jurisdictional presence per se. OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals against  targeted  foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.1 All US Persons are required to comply with the compliance procedures set out by the OFAC. The definition of US Persons in accordance with the IRC Sec 7701 (a) (30) includes –   1. a citizen or resident of the United States, 2. a domestic partnership, 3. a domestic corporation, 4. any estate (other than a foreign estate, within the meaning of paragraph (31)), and 5. any trust if- 1. a court within the United States is able to exercise primary   supervision over the administration of the trust, and 2. one or more United States persons have the authority to control  all substantial  decisions of the trust. 6. Holders of US residence visa "Green Card" (until cancelled with the Internal Revenue Service)   In view of above, US Persons shall not indulge in directly or indirectly promoting dealings with sanctioned countries particularly with Special Designated Nationals and Blocked Persons List (the SDN list) published by the OFAC. The SDN List includes more than 6000 individuals and firms connected with the sanctions program.  OFAC guidelines as to determining whether or not an entity is an SDN by operation of law have been altered after the Russian sanctions came into existence, the last of such update relating to aggregate ownership published on August 13, 2014. Broadly, if an entity is owned in excess of 50 percent in aggregate by an SDN, such entity shall itself be considered an SDN whether or not it is in the SDN list.    OFAC sanctions against Iran, Syria and Russia    The requirements for compliance with OFAC regulations are broad and their applicability is defined per transaction.    Broadly speaking Iranian sanctions extend to investment into energy sector, petroleum resources including import and exports, financial investments in the form of JVs, trade in coal, metals, software for ownership, control or insuring of vessels bearing Iranian flags and underwriting services to SDN list members in particular the National Iranian Oil Company and Iranian Tanker Company.   Article 219 of the Iran Threat Reduction and Syria Human Rights Act 2012 requires all companies whose stock (including American Depository Receipts) is traded on US stock exchanges to disclose whether they or their affiliates have 'knowingly' engaged in certain activities involving Iran, Syria or SDNs identified in connection with terrorism or the proliferation of weapons of mass destruction. Section 219 also mandates the public disclosure of any such information by the US Securities and Exchange Commission (SEC), such provisions being effective from 2013, meaning that all annual or quarterly reports filed with the SEC on or after that date are subject to Section 219's reporting requirements.   Under the provisions of the Iranian Transactions and Sanctions Regulations (ITSR) OFAC prohibitions become applicable to non US entities that are owned or controlled by a US entity by virtue of Section 218 of ITRSHRA and Executive Order 13628. Among the new provisions added to the ITSR are (1) expanded blocking provisions on the government of Iran and Iranian financial institutions that were previously in place only by executive order and statute, as well as (2) a new general license that authorize the export or re-export of "medicine" and "basic medical supplies".   E.O. 13582 relating to sanctions against Syria prohibits the following: 1. any new investment in Syria by a US  person, wherever located; 2. The direct or indirect exportation, re exportation, sale, or supply of any services to Syria from the United States or by a US person, wherever located; 3. The importation into the United States of petroleum or petroleum products of Syrian origin; 4. Any transaction or dealing by a US person, wherever located, in or related to petroleum or petroleum products of Syrian origin; 5. Any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited if performed by a US  person or within the United States.   Executive Order 13660 authorizes sanctions on individuals and entities responsible for violating the sovereignty and territorial integrity of Ukraine or for stealing assets of the Ukrainian people. Subsequently, the scope was extended by E.O 13661 for Blocking Property of Additional Persons Contributing to Situation in Ukraine on 17 March 2014. As part of subsequent developments, OFAC has published the Sectoral Sanctions Identification List (SSI) for identifying persons operating in Russian Economy that are subject to OFAC sanctions. Companies are required to carefully screen their Russian and Ukrainian business partners and not conduct any transactions against applicable directives.    a. Directive 1, issued on July 16, 2014, prohibits transacting in, providing financing for, or otherwise dealing in debt with a maturity of longer than 90 days or equity if that debt or equity is issued on or after the sanctions effective date ("new debt" or "new equity") by, on behalf of, or for the benefit of the persons operating in Russia's financial sector named under Directive 1, their property, or their interests in property. On September 12, 2014, OFAC amended Directive 1, reducing the tenor of prohibited debt from longer than 90 days to longer than 30 days.    b. Directive 2 separately prohibits transacting in, providing financing for, or otherwise dealing in new debt of greater than 90 days maturity if that debt is issued on or after the sanctions effective date by, on behalf of, or for the benefit of the persons operating in Russia's energy sector named under the Directive 2, their property, or their interests in property.    c. Directive 3 prohibits US persons from transacting in, providing financing for, or otherwise dealing in new debt of longer than 30 days maturity of persons listed on the SSI List under Directive 3 (such as Rostec State Corporation).   d. Directive 4 prohibits the provision, exportation, or re-exportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deep-water, Arctic offshore, or shale projects that have the potential to produce oil in Russia, or in maritime areas claimed by Russia and extending from its territory, and that involve any person listed on the SSI List under Directive 4 (such as Gazprom, Lukoil).   On July 30 2015, US updated the Russian and Ukranian Sanctions list. Among the newly included firms are affiliate companies of Russian oil giant Rosneft, as well as several organizations linked to one of the country's major banks – Vnesheconombank, which were already subject to sectoral sanctions under the 50% rule.   Compliance and Due Diligence    OFAC compliance programs are required to be carefully designed and implemented. A list of activities prohibited under the sanctions program have been set out by OFAC vide several guidelines and executive orders. OFAC also publishes FAQs on its sanctions regime.    OFAC permits 'General Licenses' in specific cases for authorization of certain transactions which may otherwise be prohibited by virtue of the SDN list of the SSI list. In view of the updates and developments for regulation of sanctions and frequently updates SDN, SSI and Foreign Sanctions Evaders (FSE) List, companies are required to implement a due diligence procedure to circumvent the risk of being in non-compliance with the US Sanctions.  While EU sanctions will be completing uplifted against Iran following the reports from the IAEA, primary sanctions by OFAC will continue to operate until such time as the State confirms. In particular, US will maintain sanctions on Iran for terrorism, human rights abuses, missile proliferation and the destabilization of countries such as Syria and other reasons.   This means that companies who choose to open business doors with Iran need to undertake stringent compliance measures. Secondary sanctions will continue to operate against major Iranian entities, those linked to the Iranian Revolutionary Guards Corps directly or indirectly. The burden of compliance including 'know your client' policies will be a major challenge for corporates entering the Iranian markets.  Furthermore, following the JCPOA, not all financial institutions will be exempted from US sanctions. While most banks will be removed from SDN list in case of successful implementation, the sanctions will remain in place under the ITSR regime. Payment transfers to by US depository institutions may be authorized in cases where approvals or license have been issued by OFAC pursuant to ITSR and does not involve debiting or crediting an Iranian account. Previously compliant companies may have to update their internal audits relating to sanctions and implement sophisticated screening measures.   Conclusion    On November 4 2015, the Deutsche Bank has been asked to pay USD 258 M by the New York Department of Financial Services2  for violation of OFAC sanction regime and processing payments against sanctioned countries. Although recent, this is not a standalone incident where a bank has been fined for violations of sanctions regime.  In wake of the new developments in diplomatic corridors, the changes in business practices relating to transactions transcending national boundaries will be an interesting monitor. In all cases, such transactions will remain a source of careful compliance and due diligence until the final report from the International Atomic Energy Agency with as far as dealing relating to Iran are concerned.  STA attorneys offer compliance advisory on matters related to sanctions. For more information you may get in touch with Zisha@stalawfirm.com       ]]>
    Wed, 10 Feb 2016 12:00:00 GMT
    <![CDATA[Due diligence in mining industry ]]>The due diligence is sin qua non for the purposes of investments, acquisitions, joint ventures, partnerships or such other essential investment ventures. It provides rational assurance on the investment related to assessment, financing and purchase of assets. The mining companies, by its nature of exploration and mining launch itself or try to get into joint venture or other kind of co-operations with countries throughout world. These countries include not only developed nations but also diverse developing nations with political instability. Therefore companies interested in such financial ventures must only have their own legal team but hire local or international legal experts in mining industry. The local corporate and mining law scenario of the region is must to be complied with to start with the due diligence.   The investment in several countries and even regions in mining is very individualistic which differs from region to region. In view of the fact, this article recapitulates the due diligence for investments in mining sector and/or companies by way of essential legal safeguards which are generally considered and needs to be considered by investor and banker. The laws that play key role in the industry are foreign investment laws, mining laws, land and ownership laws including intellectual property, land development laws, corporate laws, trade laws, competition laws, taxation, employment laws, environment protection laws, consumer protection laws and most importantly administrative laws for curing the improper decision of government bodies who regulate all the activities.    A. Preliminary legal checks:  1. Title: The license term and security of tenure of such titles needs to be ensured. Another factor is right to assign, pledge, transfer such license/title and finally alienate it. Further, reliability of title, lease term and control are the pertinent aspect which requires deliberation. The state may retain ownership of certain minerals irrespective of ownership of the land. Surface estates are severed from mineral estates in certain circumstances by conveyance or reservation of these rights including royalties, leases, bonus or rents. The consideration of mineral estate rights needs to be contemplated. Usually the essential elements includes right to use, to convey rights, lease bonus or consideration, to receive delay rentals and royalties.   Some countries offer split estate which means mineral and surface ownership is different. Due to this provision the explorer need not invest in surface land and only pay for mineral rights and estate. These laws are considered pro-mining as most of the time mineral rights are only leased and not owned. The split ownership is financially efficient way for miner as they can move on to next location without any lockage of capital in non viable region.  Government lands are leased by some governments on the basis of proof of exploration activity by mining companies. Further exploration activity proof or report is sought by government to maintain the mineral license.  Consequently, legal structure must be made to ensure that the mining companies are not left with permits and licences that are open to questioning and at mercy of government or local companies who desire to claim ownership over successful exploration project.   2. Corporate concerns:    Inaugural corporate structural concerns, authorization and permits required are major concerns. Insurance criteria and tax regime of the country and region are important factors. The checklist includes the rights of foreigner individually or as body corporate to establish new company and to acquire, alienate or pledge property. The corporate structure may also include assets owned or operated by decisive individual and hence requirement of any separate management or relationship agreement with that individual to clarify management issues. In some regions, Joint ventures are only means of accessing the market, production facilities, ownership of material including raw materials, so on and so forth.   3. Environmental laws:    It requires standards to be followed with respect to explorations permits, waste disposal, and methodology to reduce risk of pollution. Regulatory checks by environment departments and penalties for non compliance are unavoidable aspects of mining ventures. Further extension of permits plays vital role in continued viability of project. The exemplary example on it is Fraser Island case wherein the export permit was cancelled due to raising environmental concerns and thereby destroyed the investments rendering the project non viable.   4. Dispute resolution:    Dispute resolution forums available in the region and the laws governing investment and other agreements allow or deny access for forum shopping or neutral forum to resolve issue. In this area the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention), 1965, can be called upon as it capacitate for conciliation and arbitration of investment disputes between a contracting State and nationals of other contracting States. However, the State must be party to it. The local remedies must be exhausted before submitting to ICSID jurisdiction. The substantive law can be chosen in terms of governing law of the contract and recourse to the procedural rules of ICSID Convention and arbitration rules is standard measure.    In other instances where the parties are private individuals or companies the options of dispute resolution are (i) judicial system of state wherein the mining operations are carried out; (ii) international arbitration disputes resolution forums such as ICC International Centre for ADR (iii) other alternate dispute resolution forums such as Chamber of Commerce and Industry of various countries which provide for arbitration forums, Arbitration forums such as Dubai International Arbitration Centre (DIAC), Abu Dhabi Commercial, Conciliation and Arbitration Centre ("ADCCAC") so on and so forth. It needs to be considered that following aspects of arbitration must be taken into account by parties such:    i. Proper law of contract between the parties (substantive law i.e. lex contractus); ii. law of arbitration agreement and the execution of that agreement (lex arbitri); iii. seat of arbitration (as that have impact on procedural laws of arbitration also called as lex  loci arbitri); iv. law governing the recognition and enforcement of arbitral award.   5. Intellectual property:    Intellectual property right may also have impact on title/license and/or mine development. The mining industry being highly competitive any idea of changes in efficiency through new process which results in time efficiency, energy efficient, larger output, so on and so forth is worth protecting as competitors may adopt it and gain edge over the creator. The patents are highly used for revenue purpose for granting license and generating revenue. Thus intellectual property can be considered as good revenue generator and protecting interests.   6. Trade Laws:    Under trade laws it is imperative to note whether export and / or import requires specific approvals and the duties applicable on such trade. The "Fraser Island Case" reported as Murphyores v Commonwealth of Australia (1976) 136 CLR 1 is an example of how trading permits, change in environmental laws and change in political as well as social scenarios can impact the mining industry. In this case the two mining companies carried on mining of rutile from Fraser Island which had no market and hence depended on shipping the same to export markets. The mining operations were carried on pursuant to a valid mining concession issued by the State of Queensland in compliance with all the laws applicable. Due to raising environmental concerns the company's further export permit was withhold by administrative order. The case was finally decided in Australian Supreme court by rejecting the company's argument of environmental considerations being relating to mining of a commodity could not be properly taken into account by the Federal Government, as a matter of administrative law, in deciding whether to grant export permits for that commodity even though export was exclusive federal power. The companies owned their mining concessions and production facilities which could be operated and carry out mining operations however their access to export market was blocked which hampered their investment. The conflict mineral trade laws are being introduced and a consideration being made by many states to introduce such laws needs to be reflected upon as it will impact imports of conflict minerals in various nations. Further the government would identify those commercial goods that could contain conflict minerals, approve a list of independent monitoring groups qualified to audit the worldwide processing facilities for these minerals, and eventually restrict the importation of minerals to those from audited facilities. The customs declarations by the importers must certify that the goods "contain conflict minerals" or are "conflict mineral free" based upon this audit system.    B. Financial Considerations:  1. Cost and general Analysis:    The Cost analysis includes estimation of annual production capacity of company, cash flows in terms of working capital requirements and attributes of such capital, capital expenditures, mine supply cost, equipments cost, license/lease cost, off site transport cost, market accessibility and transportation cost. Construction time costs are essential financial evaluation. Ongoing cost of replacing worn out equipments throughout the productive life of mining operations should be assessed as the equipments though considered assets are worn out and depreciation is considered. The metal classification stating type of metal or ores such as precious, base or minor section is considered to estimate the cost recoverable on the market value of such minerals as the viability of project depends on it. For instance gold mines shares are valued on the basis of their anticipated profits through the life of the mine and these depend on the reserves, and on the relationship between gold mining production costs and the anticipated value of the gold extracted. Income statement will probably display expenditure  under the headings of exploration expenses and administrative expenses. Statement of Financial Position i.e. balance sheet detailing the assets and liabilities of the company at the end of the year is studied to see financial condition of the company.    2. Taxation laws:  This needs apparent consideration in any investment. It is indispensible in any investment consideration and mining sector is not an exception to it. Study of taxation on ownership and transfers of various assets is essential in terms of final profits receivable.    3. Other factors:  Securities with special rights shares issued by earlier company must be considered as key factor. Economies of the metal market, their forecast behavior and transportation cost to the export markets is one risk factor to be scrutinized.   C. Geological factors:  The mining operations are depended on the resources available. Though historically it is proved that geology is not only enough however it is undisputedly one of the aspect majorly considered and hence geological due diligence is conducted in mining sector.   All mining activity takes places within the Earth's crust. The distribution of metals within the crust can be seen by the differences in the types of material. The concentrations of such material are mined and sold at profit which is the basic purpose of mining operations. Therefore the concentration factor of material should not be undervalued as it determines the value of mining company. The company with lower grade of ore will possibly incur greater cost in order to obtain the given amount of economically valuable material whereas on same cost the company working on precious metal mine field recovers cost more quickly due to high market value of explored material.    D. Reporting: Various countries have annual reporting or on demand report requirements: 1. UK / Western Europe: The 'Reporting Code – Institute of Materials, Minerals and Mining (IOM) 2. Canada: Canadian Institute of Mining, Metallurgy and Petroleum - CIM Guidelines (National Instrument 43-101) 3. USA: Society for Mining, Metallurgy and Exploration - SME GUIDE 4. Australia and New Zealand: Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ('the JORC Code')- Joint Ore Reserve Committee 5. South Africa: SAMREC Code - South African Mineral Committee - Reporting Standard And Format Of Mineral Resources And Mineral Reserves 6. Chile: Certification Code 7. Philippines: Geological Society of the Philippines   Such reporting obligations usually lay down standard recommendations and guidelines for public reporting of mineral exploration results, mineral resources and reserves. Public report may vary as per the Countries reporting standards however it may often include company's annual financial report, quarterly reports, reports to stock exchange as required by law, expert reports or all publically released information.   The list is not exhaustive as the sector is extensive covering technical and critical considerations of finance. The risk factors which add to the substance of the due diligence such as employment laws, governmental risks including above factors are further exhaustive. The large sectors like mining needs larger scope of due diligence than general financial due diligence as stated in above fields.       ]]>Wed, 20 Jan 2016 12:00:00 GMT<![CDATA[Letters of intent in the UAE: ]]>The term "Letter of Intent" (LOI) is recognized by all commercial and construction professionals, yet not all practitioners are fully aware of the potential risks associated with such letters if poorly drafted. Generally LOIs are used to provide a framework for the parties to negotiate a final contract or to record an agreement on key commercial terms in order to reduce the risk of the transaction before the parties incur any further expenses. Traditionally, the courts have been reluctant to enforce LOIs or "agreements to agree" due to the inherent uncertainty of the agreed terms. However, it is now generally accepted that a LOI can be binding even though not all terms relating to the subject matter have been agreed, provided there is a sufficient degree of clarity as to the key terms and the parties intended to be immediately bound by the LOI rather than merely using it as a basis for further negotiations. A LOI can therefore be expressed as being legally binding or non-binding, depending on how well it is drafted.    Hence, poor drafting of a LOI or lack of understanding thereof may force the parties into an arrangement that was not contemplated. For instance, the parties may have intended to be bound by a LOI, but the court may find the LOI to be non-binding or vice versa. This is especially the case in construction contracts, for instance, where parties are under intense pressure and often sign a LOI without considering its key terms. Though the binding or non-binding nature of LOIs has not been fully explored under the United Arab Emirates' (UAE) jurisdiction, the relevant laws and case laws may be interpreted so as to consider when a LOI  can be binding and when non-binding. This article will briefly examine how drafting of a LOI may impact its enforceability, and provide guidance on how to make a LOI binding to avoid the types of liability that it can attract.    What is a LOI?    A LOI is a document outlining certain basic terms between two or more parties before the agreement is finalized. Essentially it expresses the current intention of the parties to enter into a contract in the future but creates no liability with regard to that future contract. For this reason very often LOIs are called "if" contracts. A LOI is usually used for securing the early engagement of a contractor. The reasons for issuing a LOI may include:   • The need for early commencement of works; • Anticipated delay in reaching agreement of all contract terms; • To complete project funding arrangements; and • To obtain necessary approvals and permissions.   LOIs are thus helpful when parties are genuinely interested in seeing a deal concluded. In addition, it may be a useful tool for securing the early engagement of a contractor where commencement of work prior to signing of the formal contract is necessary. Yet, proceeding under a LOI may give rise to specific risks for both the employer and the contractor. For instance, where the LOI will expire on a certain date and the parties continue carrying out work without putting a new LOI or a formal contract in place. In such a situation, if work that is not contemplated by the    LOI is carried out under it, there will be greater uncertainty than would be the case under a formal contract. This is because LOIs do not usually contain key terms, such as managing variations, day works and extensions of time. There is also the possibility that a dispute will arise whether the parties intended to be legally binding by the LOI in the first place. Now the question is how a LOI shall be drafted to express what the parties have intended and the legal outcome they have expected. To answer our question, we will look at the legal position of LOIs under the UAE laws.        LOIs as per UAE (Binding v. Non-Binding)    Federal Law No. 5 of 1985 (Civil Code/Law) contains express provisions concerning the preparation and formation of a contract. Article 141 of the Civil Code provides that a contract is concluded when parties are agreed upon the essential elements of the obligation, but have left matters of detail to be agreed upon afterwards. "If the parties agree on the essential elements of the obligation and the remainder of the other lawful conditions which both parties regard as essential and they leave matters of detail to be agreed upon afterwards but they do not stipulate that the contract has not been regarded as made in the event of absence of agreement upon such matters, the contract shall be deemed to have been made [...]". Article 258 (1) states that the criterion in the construction of contracts is intentions and meanings and not words and forms. To reinforce the point, the Civil Code includes two other provisions of particular importance which are relevant to the subject of LOIs: Article 259 states that "[t]here shall be no scope for implications in the face of clear words". Article 260 provides that "[w]ords should be given effect to rather than ignored, but if it is impossible to give effect to the words, they shall be ignored" (Article 260). Furthermore, the Civil Code requires certain formalities to be in place to form a contract. These formalities include an offer and acceptance and consensus ad idem (i.e. there should be "meeting of the minds") (see Union Supreme Court, 797/ Judicial Year 23). Article 130 provides that "[a] contract shall be made by virtue solely of the coming together of offer and acceptance". Article 131 mentions that "both offer and acceptance are any expression of intention used to create a contract". In addition, Article 132 states that "the expression of intention may be made orally or in writing, and may be expressed in the past or present tense […], or by an interchange of acts demonstrating the mutual consent".    Considering the legal provisions stated above it can be inferred that the main criteria for a binding contract as per UAE Civil Law are intention and meaning of an agreement and not the form. If the intention to be bound by a contract is clear, the implication of no intention may not be accepted by UAE courts. Furthermore, while the Civil Code does describe how a contract is formed, it is silent on what is an "essential" element of the contract, in the case of LOIs. Without any clear statement of law as to the essential ingredients of a binding LOI, there is the possibility that a dispute will arise as to its binding nature.  An ambiguous LOI is not the best foundation for the final formal contract.   So what should a LOI contain to be considered binding?   By its very nature, a LOI is not intended to contain all the terms which a complete contract will contain. It is therefore important that a LOI shall often set forth the following to be considered as binding:  •Certainty of rights and obligations;  •Scope of the work;  •Confirmation of price;  •A clear allocation of risk;  •A clear dispute resolution process;  •Insurance obligations of the parties;  •A well-defined termination rights;  •Intellectual property licenses or rights; •Governing law;  •Expiry date and how do all these parameters sit within the final contract which is to be subsequently signed. Also if the parties intend to incorporate some terms of a standard form contract (e.g. FIDIC) into the LOI, this should be clearly expressed. The above list however is non-exhaustive. It should be borne in mind that whether a LOI is binding or non-binding, will depend on the specific project it relates to, the exact scope of works, and the agreed terms between the parties. Yet certainty of key terms and intention of the parties are essential to achieve the intended legal outcome and for a LOI to be binding.  In commercial case no 240/2006, the Dubai Court of Cassation upheld the LOI valid and the payment clause ("the payment shall be made after seven days from the receipt of the corresponding amounts from the customer in commensurate with the works done by the subcontractors") contained in the LOI binding. Based on Articles 130 & 131 of the Civil Code, the respected Court held that the LOI was clearly drafted to render the parties' intention to be bound by it. The Court also stated that "the main elements of a binding contract, offer, acceptance and party's intention are present in the LOI to make it a binding contract".     It is worth noting that similar principles apply to a LOI in many common law jurisdictions, such as UK, USA and Australia. For instance, in the UK land mark case of RTS Flexible Systems v Molkerei Alois Muller GmbH [2010] UKSC 14, despite the fact that no formal contract had been ever signed, the Court found that the comprehensive terms included and the language used meant that the LOI was sufficiently certain and complete to be given contractual force.   Accordingly, if a LOI is ambiguous and the terms are uncertain, the courts may find the letter unenforceable and thus non-binding, even if the parties have intended to be bound by its terms. In British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1981] 24 BLR 94, both parties expected a formal contract to be concluded in the future. As no formal contract was ever entered into, performance of the work under the LOI was not referable to any contract of which the terms can be ascertained, the court held the terms of the LOI are too uncertain for it to be binding).     CONCLUSION  It remains to be witnessed how UAE courts would explore in detail the nature of a LOI in respect of its enforceability. However, the relevant law and the analysis of the case laws demonstrate that for a LOI to be binding, it should clearly reflect the agreement of the parties to enter into a binding agreement by incorporating all essential rights and obligations. A carefully worded LOI is the key to better chances of success of LOI's enforceability.   ]]>Wed, 20 Jan 2016 12:00:00 GMT<![CDATA[Vessel Arrest ]]>Maritime trade has been carried out since ages and it remains to be backbone of world economy by hauling around 80 to 90% of world trade. UAE being the place in between Asia and Europe has been natural port. UAE is bordering the Gulf of Oman and the Persian(Arabic) Gulf, between Oman and Saudi Arabia where it joins the Arabian Sea.; it is in a strategic location along southern approaches to the Strait of Hormuz which is a vital transit point for world crude oil. UAE is growingly becoming centre for imports and re-exports. There is a surge in international trade giving rise to extensive global commercial transactions resulting into rise in general commercial and shipping disputes. This article accentuates the vessel arrest regime in UAE for securing debts as shipping companies deal with various claims which are often against vessel.   1. What is the Law governing Vessel Arrest in UAE?   The Vessel arrest is the way of security under maritime transactions. It is also a statutory right of a claimant under the UAE Commercial Maritime Code No. 26 of 1981, as amended by law No. 11 of 1988 (the 'Maritime Code') (hereinafter referred to as the "Law"). It provides and regulates the arrest of vessels. In UAE, distinction is made between 'provisional' arrest and 'executory' arrests. The regulations relating to the former are contained in Articles 115 - 122 of the law, while the latter are regulated by Articles 123 - 134.    The UAE Courts may apply maritime customs and general principles of justice, provided these customs  and principles do not conflict with the provisions of the Shari'ah as stated under Article 8 of the Law in the absence of any law pertaining to the subject matter of dispute. UAE is currently not signatory to any International Conventions pertaining to Vessel Arrest however various provisions of Hague-Visby rules are imbibed in the Law. UAE is also not signatory to Hamburg Rules and Rotterdam Rules. However International Conventions expressly incorporated into bills of lading or contracts will be given the force of law in UAE Courts provided the costly process of translated and certified copy of the convention is provided to the Court.   2. What are the legal provisions for Vessel arrest?   The only ground for Arresting Vessel is Maritime debt as stated under Article 115 of the Law. A maritime debt is defined as a claim in respect of a right arising in the following circumstances: a) Damage suffered by the vessel by reason of collision or otherwise. b) Loss of life or personal injury occasioned by the vessel and arising out of the use thereof c) Assistance and salvage d) Contracts relating to the use or operation of the vessel under a charter party or other contract e) Contracts relating to the carriage of goods under a charter party, bill of lading or other document f) Loss of or damage to goods or chattels carried on board the vessel g) General average h) Towage or pilotage of the vessel i) Supplies of products or equipment necessary for the maintenance or operation of the vessel, wherever the supply is effected j) Construction, repair of equipment of the vessel, dock charges and dues k) Disbursements made by the master, shippers, charterers or agents on account of the owner thereof l) Wages of the master, officers and crew, and other persons working on board the vessel under a contract of maritime employment m) Dispute as to ownership of the vessel n) Dispute in connection with the joint ownership of the vessel, or with the possession or use thereof, or with the right to the profits arising out of the use thereof o) Maritime mortgages   Arrest of Sister Vessel:   Article 116(1) permits the arrest of a sister vessel owned by the debtor at the time when debt arose. However the courts do not have tendency of lifting corporate veil. There is no right to arrest other vessels owned by a defendant in the circumstances stated in Articles 116.2. Therefore, the sister vessel cannot be arrested where the claim concerns disputes over ownership, joint ownership and mortgages and the arresting party is only entitled to arrest the vessel to which the debt refers. However as per Article 117, the creditor can arrest vessel not owned by the debtor who is also a charterer and is granted navigational administration rights, he shall be solely responsible for any maritime debt on it and the creditor can arrest this vessel or any other vessel owned by the charterer and cannot arrest any other vessel owned by the disponent owner.   Therefore, contrary to English law there is no difference between Maritime Claims and Liens under UAE Law. It can be Maritime lien but creditor may not be entitled to vessel arrest if it does not fall in above stated categories of maritime debt as per the Law.   3. Which courts have competency to deal with vessel Arrest?   The competency of court is stated under Article 122 of the Law stating that the civil court in whose jurisdiction the arrest took place shall be entitled to decide on the subject matter of the claim in any of the following circumstances, even if the vessel is not UAE flagged, which are in addition to those set out in the procedural laws of the UAE: 1. If the plaintiff has a regular place of residence or main office in the state. 2. If the maritime debt arose in UAE. 3. If the debt arose on a voyage during which the vessel was arrested. 4. If the debt arose from a collision or an act of assistance over which the court has jurisdiction; and 5. If the debt is guaranteed by a maritime mortgage on the arrested vessel. However in practice the courts have often granted provisional arrest orders merely because of the vessel's presence in UAE territorial waters. This can be inferred from Article 21(2) of the CPC which states that the courts of the UAE shall be competent to hear a suit against a foreign defendant who has no domicile or residence in the UAE, if the case concerns property located in the state.    4. What is the procedure for vessel arrest?    A written application must be made to the civil court accompanied by copies of all relevant documents relating to the claim which may form prima facie evidence of existence of maritime debt. The court will briefly examine such documents and decide often without hearing counsel whether or not to grant a provisional remedy. In some Emirates, as a condition of granting an arrest, the court may require the arresting party to provide counter security as bank guarantee equivalent to claim amount and to undertake to indemnify the respondent for any loss or damage, within the claim amount, and to pay compensation if a final judgment determines that the arrest was wrongful. In addition to the indemnity undertaking the claimant must also, in certain Emirates, undertake to be responsible to the court for the costs and expenses of maintaining the vessel while it is under arrest. Under some circumstances such as where claimant is UAE national written undertaking may be sufficient. Further, in the cases of claims by crew members for their wages, the courts will not insist upon countersecurity being provided.   Further to arrest any vessel in UAE, the claimant needs to provide a notarized, attested and authenticated Power of Attorney (POA) to counsel having right to audience in UAE and if the said POA is executed abroad, it shall be notarized and regularized by the relevant Ministry of Foreign Affairs of the Country of execution and authenticated by the UAE Embassy in that Country. Further, upon its arrival in the UAE, the POA shall be further authenticated into Arabic. These lengthy processes have often turned out to be an impediment in the urgent situations of arrest. Moreover, the documents supporting the claimant's entitlement to arrest the vessel must be translated into Arabic by an official court approved translator. This makes it unfeasible to obtain arrest of vessel in short notice. Hence the lawyer needs to be advised in advance of vessel arrival at port whenever possible.   Special Procedures:   As maritime claims are often treated on urgent basis by various jurisdictions all around the world for obvious reasons similarly UAE has separate rule embodied in Civil Procedures Code for the date of the hearing if it relates to a maritime claim which can be even an hour following the time of notification to defendant with no further requirement to prove any urgency and necessity for such short term notice unlike other civil cases.   5. What are the other matters to be considered in respect of the arrest?   a. Suit: The substantive suit is required to be filed within eight days from the date on which the attachment was effected as per Article 285 of the Civil Procedure Code. b. Court fees: The value of the claim determines the Court fees payable for instituting an action before the Court of First Instance in specific Emirate with maximum payable court fee of AED 30,000/- in UAE. c. Service of order: The order for the vessel arrest is served by the court bailiff and police officers, with the assistance of the port authority and served on the master of the vessel or his deputy, and on the port authority at the place where the vessel is arrested. Upon the service of order the usual procedure of the port authorities taking possession of the vessel's documents and the seamen's books or the passport of the master and the crew follows. d. Appeal: Since the time taken for interlocutory appeal and decision for release is lengthy it is advisable to provide security in order to obtain the release of the vessel. e. Maintenance of vessel: Usually the party seeking arrest has to account for the costs of maintaining the vessel whilst it is under arrest. Indeed, an undertaking to be responsible for the costs of maintaining the vessel is to be attached to its arrest application. This includes all port fees, towage and amounts due to the crew. f. Bail: Bail provision for arrested vessel is stated under Article 118 of the law wherein the competent civil court shall order lifting of arrest order on providing security or other surety which is sufficient to meet the claim. However it also states that a vessel will not be automatically released from arrest if the arrest has been effected in connection with either of the matters concerning: 1. a dispute as to the ownership of the vessel; 2. a dispute in connection with the co-ownership of the vessel, or 3. with the possession or use thereof, or 4. with the right to the profits arising out of the use thereof. In such cases, the court may permit the person in possession of the vessel to provide sufficient security and use it, and may pass discretionary order to charge a person with the management of the vessel during the period of the arrest. g. Release order: As per Article 118.3 of the law any release of vessel under above provision is not considered admission or acknowledgment of claim. h. Limitation period: Time limit is different for different types of claims for which arrest is sought. Such as claim for personal injury or death has time bar of 2 years as per Article 299 and claims concerning collisions have time bar of 2 years from date of collision as per Article 326.    6. How are the vessels sold after arrest order is final?   Once the final judgment is rendered against vessel the court orders the sale of arrested vessel. The sale is advertised as stated in Article 126 of the law requiring publication of a notice by the Creditor within 90 days in one of the widely circulated local newspapers, usually an Arabic daily. The reserve price and condition of sale is fixed by court. If the creditor fails to complete the publication formality within time frame the court may order arrest order to be discharged. The sale takes place after fifteen days from the date of publication of the notice and not later than 30 days. In all, three sessions of auctions are held at intervals of seven days. The highest bid in previous auction is taken as reserve price in next auction and in third session the highest bidder secures the vessel.    Concluding Remark    The legal process may become time consuming and lengthy due to translation and attestation requirement but being influenced by the international laws, maritime customs followed commonly and increasing trade, the courts may consider the arrest by claimants on prima facie evidence of debt in favour of claimant and security being provided. The most important concerning zone is guiding lawyers in advance to finish the process and to pull off arrest as required.  ]]>Wed, 20 Jan 2016 12:00:00 GMT<![CDATA[Challenging Arbitrator’s Appointment Under Dubai International Arbitration Centre (The DIAC) And Abu Dhabi Commercial Conciliation And Arbitration Centre (The ADCCAC) Law ]]>  '' It is of fundamental importance that justice not only be done, but should manifestly and undoubtedly  be seen to be done''.

                                                                                                                                                           Lord Hewart CJ    The above statement as used almost eighty five years ago in the case R v Sussex1 and it is often remains a standard in many judicial decision-making, both in the courts and in arbitration proceedings. There are common tests which are applied when the challenge relates to the arbitrator's performance in conducting the arbitration proceedings under the rules of different arbitration institutions. It has been set out under the rules of the majority of institutions that the duty of an arbitrator is to act "fairly and impartially" between the parties giving each of them a reasonable opportunity of presenting its case. In this article we will discuss about the independence and impartiality in the appointment of arbitrators under Dubai International Arbitration Centre (the DIAC) and Abu Dhabi Commercial Conciliation and Arbitration center (the ADCCAC) Law. Specifically, this article will discuss grounds available for parties to challenge arbitrator's appointment under both – DIAC and ADCCAC Law. In general in arbitrations proceedings, there will be a three person arbitral tribunal comprised of one arbitrator selected by each of the parties and a third usually the chairman, selected independently. In others there will be a single arbitrator appointed by the arbitration center.   GROUNDS FOR CHALLENGING THE APPOINTMENT   There are few qualifications which are considered for determining whether the appointment of the arbitrator can be challenged:   (i) Relationship between the arbitrator and the parties: In a relationships where one of the parties to an arbitration has business or financial relations with an arbitrator in such cases there is an apparent possibility that the arbitration proceedings shall be impacted and it is less likely that the arbitrator would not give bias decision. Someone who was employed for a long period of time by one of the parties may well be unable to act impartially, even if he believes himself to be able to do so. It is important to consider that the arbitrator may have sufficient level of information about that party, which could lead him to come to a decision at variance and it could have been different decision if he had not possess such information. It is possible (if unlikely) that an arbitrator may not be entirely independent of both parties as a result of a relationship with one or the other or a connected third party, but may be able to set aside that relationship and come to a decision entirely impartially, based on the facts and the relevant law alone.   (ii) Relationship between the arbitrator and the parties' lawyers: One of the basis for challenging the appointment of an arbitrator on the grounds of lack of independence or impartiality is the relationship between the arbitrator's law firm and the party2 . It is notable that where the arbitrator's spouse or other close relative is acting for one of the parties, or is a partner in the law firm that represents that party challenges may also upheld the decision.   (iii) Related proceedings: This is something critical where it is difficult to establish where a party is involved in two or more arbitrations on similar facts/circumstances however with different parties. In such instances to make sure that the results should be the same, the other party may stress to appoint same arbitral tribunal in order to avoid inconsistencies that could arise as a result from differently constituted tribunals. On the contrary, it is not necessarily fatal to an arbitrator's independence and impartiality, when pre-existing information becomes pre-conceived beliefs about the merits of a particular party's case then the grounds for challenge become strong.    (iv) Arbitrator's behavior: As to the disqualifications relating to arbitrator behavior, these tended to be based on the subjective question of impartiality, that is, the real possibility of bias by the arbitrator. In one matter the arbitrator was disqualified for responding intemperately to a challenge that would not have otherwise succeeded. In addressing the grounds of the claimant's challenge, the arbitrator characterized the claimant's submissions as fictitious, false and malevolent, and stated that certain statements were viciously attributed by claimant's counsel. Although the Division that was considering the challenge did not think the basic claims alleged by the claimant sufficed to remove the arbitrator, it considered that the self-evident tension and ill feeling that had arisen as a result of the challenge had created justifiable doubts as to the arbitrator's impartiality.   (v) Other Reasons for disqualification: Other instances in which arbitrators were disqualified concerned ex parte contact between an arbitrator and a party. In one challenge, an arbitrator had given a party advance notice about the content of an award before it was published. In the other challenge, the arbitrator met privately with one party twice, behind closed doors, and the other party was neither invited nor informed. In addition, the arbitrator accused the challenging party of entering his private break-out room and stealing grapes, and then lying about it. The same arbitrator also unilaterally ordered the deletion of certain passages from the transcript, over objection of the respondent's counsel. It is inferred that the arbitrator had a manifest lack of high moral character, or a manifest lack of independent judgment. This presents a very high bar to disqualification. Arguably, this standard is higher than under most commercial arbitration rules, where arbitrators can be disqualified if there is a reasonable or justifiable doubt about their independence or impartiality. Commercial arbitrators have held that the test of independence was a test for appearance of bias, while the test of impartiality was a test for the actual presence of bias. However, when disqualification requires that the arbitrator demonstrate a manifest lack of the required qualities to be an arbitrator, there is no basis for removal if there is only an appearance of bias.   In Dubai Court of Casastion (75 of 2007 heard and decided on 7 April 2008) the court discussed the aspect relating to nullity of arbitrator's award. The court referring to Article 39 of the earlier arbitration law of Dubai being Decree 2 of 1994 ratifying the Rules for Commercial Conciliation and Arbitration of the Dubai Chambers of Commerce and Industry noted that the arbitration proceedings could be stayed if there is an obstacle of law or of fact precluding a continuation of the proceedings, until such time as the obstacle is removed. It further noted that the proceedings should in particular be stayed in the cases enumerated in (a)-(f) of that article, but those circumstances do not constitute an exhaustive list.  The Court held as under:-    "Consequently, resort may be had to other provisions of the law and to general rules in order to ascertain whether or not there is any legal obstacle barring a continuation of the arbitration proceedings, and whether they should be stayed until the obstacle is removed, irrespective of the circumstances enumerated in that article in particular."    The Court further held that an "application for the recusal of an arbitrator is a legal circumstance resulting in the stay of the litigation before the court before which the application for recusal is made, until such time as a determination is made on the application by the competent authority, and the other party may not insist that the arbitration proceedings continue, notwithstanding that the facts alleged are untrue, because the court before which the application for recusal is made is not the tribunal that is competent to try the truth or otherwise of the facts alleged.  If an arbitrator insists on proceeding with a hearing of the arbitration despite his knowledge that there is an application for recusal, any steps that he takes will be void, and this will affect any award issued, under article 216 of the Law of Civil Procedures, so long as the law does not permit him to proceed with the hearing of the case, pending an application for recusal, which is pending before the court, and has not yet been decided on."   The Abu Dhabi Court of Cassation in Case 447 of 2010 (decided on 30 September 2010) has summarized the position as to invalidity of arbitration award and held that a claim for invalidity of arbitration award may be accepted in the cases where:- (i) an arbitration award is made in absence of agreement to arbitration between the two litigating parties; (ii) arbitration award is based on an instrument which is invalid; (iii) arbitration agreement or instrument which lapsed due to the passage of the legal time limit; (iv) the arbitrator went beyond the instrument limits or breached one of the public order rule; (v) the award was rendered by arbitrators who were not appointed according to the law; (vi) the award was rendered by persons who were not authorized to render the award in the absence of the other arbitrators; (vii) the principle claim in the dispute was not decided on; (viii) due to the breach of right of defense; or (ix) defenses for invalidity in the award or in the procedures that had effect in the judgment.   PROCEDURES FOR CHALLENGING UNDER DIAC AND ADCCAC RULES    Arbitration proceedings in the UAE are governed by Federal Law No.11 of 1992 (Art 203–218), as amended by Federal Law No.30 of 2005 (the Civil Procedure Code or CPC), which is not based on the UNCITRAL Model Law (although the DIFC Arbitration Law is based on UNCITRAL Law).  In DIAC Arbitration rules, Article 9 states that all arbitrators shall be appointed by the Centre, according due regard to any method of appointment agreed upon in writing by the parties. The Centre has a discretion to decline such appointment where any nominee proposed by a party if it considers the nominee to be lacking independence, impartiality or otherwise unsuitable. In such case, the Centre can request from that party a new nomination within 21 days from the date of receiving notification of the Centre's decision. If that party failed to nominate an arbitrator or if the Centre refused to appoint the nominated arbitrator, the Centre shall appoint the arbitrator. Article 13 clearly states that if any arbitrator acts in deliberate violation of the Arbitration Agreement (including these Rules) or does not act fairly and impartially as between the parties or does not conduct or participate in the arbitration with reasonable diligence, avoiding unnecessary delay or expense the Centre may deem that the arbitrator is unfit to serve. An arbitrator may be challenged by any party if circumstances exist that give rise to justifiable doubts as to his impartiality or independence. A party may challenge an arbitrator it has nominated, or in whose appointment procedures it has participated, only for reasons of which it becomes aware after the appointment has been made.  Requirement: A party who intends to challenge an arbitrator shall, within 15 days of the formation of the Tribunal or (if later) within 15 days of becoming aware of any circumstances referred to in paragraphs 2 and 3 above send a written statement of the reasons for its challenge to the Centre, the Tribunal and all other parties. Unless the challenged arbitrator withdraws or all other parties agree to the challenge within 15 days of receipt of the written statement, the Centre shall decide on the challenge.   Similarly under ADCCAC Rules the Article 11 Challenge and Objection to Arbitrators where the arbitrator shall not be challenged unless circumstances arise raising justifiable doubts over his neutrality or independence or if the arbitrator proves to be lacking in qualifications required and which the parties have jointly agreed upon beforehand.  The Party can challenge the appointment, unless the reason for such challenge became known after the appointment.  Requirement: A challenge request shall be submitted to the Director stating the reasons for it and accompanied by supporting documents and evidence, within a period of fourteen (14) days from the date of the challenging Party being advised of the arbitrator's appointment or from the date the applicant for the challenge becoming aware of the circumstances justifying its request.  The Abu Dhabi Court of Cassation in Case 58 of 2007 (decided on 30 October 2007) referring to Article 209 of the Law of Civil Procedures has held as under:   "It is settled law that if the original contract containing an arbitration clause is void, then the arbitration clause itself will consequently be void, and jurisdiction will thus vest in the ordinary judiciary having general authority over the determination of the dispute.  It is also settled law pursuant to article 209(2) of the Law of Civil Procedures that if during the course of the arbitration a preliminary question arises that is outside the authority of the arbitrator, the arbitrator must stay the proceedings until a final ruling on that point is made by the courts."   Conclusion: In light of the above discussions it is important to note that parties should know the reasons why their challenges to an arbitrator have succeeded or failed. This knowledge can be useful to parties in determining their future actions both with regard to selecting arbitrators and deciding whether to challenge an arbitrator. It can also be useful to arbitrators in knowing when they should refuse to accept an appointment, what kind of information they should disclose, and what kind of conduct is expected from them while serving as an arbitrator. As a result, arbitrators may be less likely to accept appointments when they might be challenged, and more likely to step down voluntarily if they are challenged on a ground that raises reasonable issues about independence or impartiality.  To learn more about STA's domestic and international arbitration practice, please do visit our website www.stalawfirm.com or visit our blog https://www.uaelawblog.com to read other interesting articles on arbitration and mediation in Dubai, the United Arab Emirates and the GCC.  

     

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    Wed, 13 Jan 2016 12:00:00 GMT
    <![CDATA[The Law Surrounding Eavesdropping, and Privacy ]]>

    Margarida Narciso discusses the legal implications of violating private or family life of individuals under the UAE Law. Advancement in field of technology, social media and phone apps may lead younger generation to eavesdrop, resort to clicking images or videos and post them on social media. This however may affect personal or private matters of others. Continue reading this interesting article to understand the nuances and legal effects… 

      S-. told her boss that she was stealing funds from the company and he recorded the confession with his mobile phone. L-suspected that his wife was having an affair with a work colleague and asked a private detective to take pictures of them together at his villa. J-recorded with his web camera a conversation in which his gardener threatened and sworn at him.   These three stories despite being fictitious have something in common with many cases. S., L. and J. recorded or captured through electronic devices private conversations or scenes, without the consent of the interlocutor and accordingly, committed even without their knowledge in a criminal offense that might lead into their criminal prosecution.  Article 378 of Federal Law No. 3 of 1987, concerning the United Arab Emirates Penal Code as amended by the Federal Law No. 34 of 2005, reads as under:   "A person shall be punished by detention and the fine if he prejudices the privacy of the individual or family life by committing any of the following acts other than in the events as permitted by law or without the consent of the victim: a. to eavesdrop, record or transmit by any device of any kind whatsoever conversations in a private place or by way of telephone or any other device. b. to take or transmit by any device of any kind whatsoever a photo of a person in a private place…" If such acts as set forth in the preceding cases during a meeting in front of those present at the meeting, the consent of such persons shall be presumed. The same penalty shall apply if a person publishes by any means of publicity news, photos or comments related to the private life or family life secrets of individuals, even if they are true.   The increase and trivialization of devices, models and means of recording, capturing or retaining private moments or familiar scenes has originated, to the same extent, an increase of violations of this article of the penal code. And it should be noted that most of the times the person who commits the crime does not know that he is participating in a criminal offense that can lead to detention and fine in addition to the ever-present possibility of a civil action for damages and compensation. In fact, and being something that can be considered an evidence against another crime perpetrated by the interlocutor, the holder of the recording or photography will try to use it to his favor, unaware of the possible consequences.   From the layman's point of view, it might be difficult to explain two key points related to this topic: the first question would be why is eavesdropping, recording or transmitting not permitted or why is it considered a crime; and the second would be the reason why the recording can't constitute an appropriate mean of proof.   The first question regarding the prohibition contained in Article 378 of the Penal Code and the penalties stated is explained essentially by the need of protection of the right of private intimacy of each person. Back in 2014, a worker was arrested for having recorded a video with his mobile phone a traffic accident that killed 13 people involving a bus. Although it was recorded in a public place, the bodies of the victims were shown as well as the wreckage of the vehicle, a clear disregard for the privacy of those involved. In this case it is easily understandable why the worker was arrested and it is important to note that he breached the privacy of those involved in the accident by recording the movie, hence the crime was committed at that point, although he was caught only when he decided to disclose it to the public.    The second question the non-acceptance of these recordings as a legal mean of evidence - can be a little harder to understand, especially when the file would likely evidence the commission of a crime.   If we look into a 2011 decision issued by the Ras Al Khaima's Court, we will verify that a woman has been sentenced to one month in jail – that has been suspended – and a fine of AED 200/- (UAE Dirhams two hundred), for having revealed and given to police that she has recorded a telephone conversation in which a man who she had hired and paid to provide her a service confessed he didn't do so, despite having received the full payment. By doing so – recording the call without the other party's consent or legal authorization (that has to be given by Public Prosecution, in advance, which in most cases is not easy to obtain), incurred the crime of breach of private life and was, eventually, convicted for the same.   In 2013 a similar case was reported by the media: a situation where the physical attack of a driver by a government official was filmed by another driver, whom later uploaded the video on Youtube. The latter was detained by police and charged with violation of privacy.  It is important to note that, in fact, in both cases recordings would not be admissible as evidence against the offender in court - it should be stated that the law prohibits the record of sound or image of a person without his consent or without legal authorization. Furthermore, it is interesting to highlight that in the second case, the video became public because of its public disclosure and hence the violation of the privacy is more obvious, however, even if it had been only shown to the police - as in the first case, both will be considered crimes.   UAE Law No. 35 of 1992, concerning the Criminal Procedural Law, in its article 221, clearly states: "The procedure is void if the law expressly provides for its voidance or if defective to the extent that the procedure did not reach its objective." This means that if we use something illegal to proof a fact, the evidence itself will be illegal, and accordingly, it won't be considered by the Courts.    The Dubai Court of Cassation in Case 67 of 2007 (decided on 20 May 2007) has held that "Under article 269 of the Law of Criminal Procedures, a conclusive judgment passed on the merits of a criminal action (whether relating to acquitting or convicting), will have probative (to seek proof or evidence) force or effect by which the criminal courts are bound. Such probative effect is restricted to the facts necessarily determined for the purposes of passing judgment therein, with regard to the occurrence of the physical act forming the basis of criminal liability, its legal description, and the attribution thereof to the doer."1    Hence, in the first case by recording the conversation, or in the second by recording the video,  and even if they evidence crimes, those who made it used illegal and unlawful means, and therefore, should not constitute or be accepted as a legal mean of proof in one hand, and in the other should originate a criminal action against them.   The United Arab Emirates, although is relatively newly regulated legal market, has witnessed a considerable number of violations of this penal code article – the huge amount of available technological devices leads to an obvious increase of situations in which private intimacy is breached, through recorded telephone calls, in-person conversations recorded by video capturing sound and image, that later will be used or published without consent of the victim. And, despite this trivialization being in most of the cases useful, the fact is that might be cases that it became a problem for the person who shot them.   We can't forget that the law - and specifically this article 378 of the Penal Code over all exists to protect people and their privacy. This prohibition will avoid, in most of the cases, public judgments: the video, photography or recording, decontextualized, will probably transmit a wrong or different overview of the facts and of the situation itself. It must be borne in mind that the statement of witnesses is accepted in court and is one of the most used legal means of evidence in court, opposite to what happens with these recordings.   It is also important to refer that, in its last paragraph, the article 378 of the Penal Code also states that "the devices and other objects that may have been used in perpetrating the crime shall, in all cases, be confiscated and an order shall be given to erase all relative recordings and destroy the same." So if you have recorded, have been the victim, witnessed and filmed or by any means captured some act or fact, whether it constitutes a crime or not, and you are not too sure whether you should use it or not, do not hesitate ... consult your lawyer!  

     

    ]]>
    Tue, 12 Jan 2016 12:00:00 GMT
    <![CDATA[Extension of Time ]]> The construction contracts are generally prepared as per Fédération Internationale des Ingénieurs-Conseils (the FIDIC) red books 1987 and 1999, yellow book and silver book contract forms specifically in UAE to deliver projects. The legal provisions applying to such contracts are UAE Civil Code, Federal Law No. 5 of 1985 as amended. The construction contracts are governed inter alia by Articles 872 to 896 and contractual provisions depending on its consonance with laws.

      This Article accentuates the entitlement of the contractor/sub contractor to "Extension of Time" (the EOT) under construction contracts. Just as liquidated damages are meant to discourage contractors from undue delay in completion of projects and entitle the employer (which is a misnomer for owner) for compensation, Extension of time can be considered an encouraging clause to claim for any undue delay caused in the completion of construction due to events which are not attributable to the contractor. In sum, EOT clauses are embedded in to contracts on the notion that no party should gain from its own breach or default.   The important clauses and/ or principles to be considered when dealing with this subject are completion time, preventive principle, time bar clause, time at large, extension of time clause and liquidated damages clause. For the sake of commercial certainty completion date is usually found in contracts and these are effectively based on practical considerations of the project. Accordingly the contractor is under the legal obligation to comply with the agreed time- limit and handover the project. Time being of essence in contract, failure by contractor to handover within the agreed time-frame could trigger a claim for liquidated damages from the employer.  However, wide range of activities and circumstances may lead to uncertainty of completion of project as it is difficult to be accurate about completion in mammoth projects  due  to reasons ranging from force majeure, variations, supply of labour, delay in procuring materials etc. by a party or parties to contract. Preventive principle is common law principle applied to protect contractors (from potential claims involving liquidated damages against them) from delay caused by act of employers who prevent (deliberately or otherwise) timely   completion of project work(s). . The result of such principle is to have an extension of time clause so as to prevent the employer from being incapacitated to extend completion time and potentially to enable the contractor to establish that the completion time has become at large. Hence it is in the interest of not only contractor but also of employer to have an EOT clause. As "Time at Large" means the contractor escapes the liquidated damages clause and his obligation is now to complete within reasonable time.   Generally speaking, construction contracts provide for a clause whereby contractors may be allowed to extend the date of completion in the event that a notice is served to the employer consistent with the provisions of the contract. Failure by contractor to meet notice requirement could entail a claim against contractor for liquidated damages. The construction contract providing for a clause on extension discussed above is also referred to as "Time Bar clause". These notices become the condition precedents to the claim of EOT.    The circumstances giving rise to entitlement of EOT are as follows:    1. Employer's Acts of delay: Preventive principle aim at safeguarding contractors from potential claims for liquidated damages for the delay caused on account of acts of employer. In context of the United Arab Emirates, the corresponding provisions for safeguarding contractors can be found under Article 247 of the UAE Civil Code which reads as under:-    "In contracts binding upon both parties, if the mutual obligations are due for performance, each of the parties may refuse to perform his obligation if the other contracting party does not perform that which he is obliged to do."1    This Article works against the employer and entitles the contractor for EOT against the acts of delay attributable to employer for breach of its obligation to work in good faith while performing his contractual obligation. Another provision of the UAE Civil Code which has the effect of preventive principle is Article 287 which reads out as under:-   "If a person proves that the loss arose out of an extraneous cause in which he played no part such as a natural disaster, unavoidable accident, force majeure, act of a third party, or act of the person suffering loss, he shall not be bound to make it good in the absence of a legal provision or agreement to the contrary."   In the context of above Article 287, we can note that the limitation imposed by this Article has the legal effect only and only in cases where parties have no agreement to the contrary. F  This covers all external reasons that are not caused by contractor subject to contrary being agreed in the contract terms.   2. Payment   Payment mechanisms in construction contracts are regulated by and based on generally accepted business customs. These may include – bank guarantee(s), bonds, or payments by employers on instalment basis. These payments may effectively be linked to construction milestones requiring contractors and qualified engineers to submit their timesheets in an agreed form and timeline. To protect larger interests of employers, contracts also have defects liability clauses in construction contracts. The defects liability clause has the legal effect of employers retaining an agreed percentage of contract consideration.   Speaking of payments and accepted business customs, contractors and sub-contractors may also be paid on 'pay when paid' basis which is generally referred to as a "back to back" contract arrangement . Under this scheme, the contracts between contractors and sub-contractors mirrors the clauses found in contract signed between employers and contractors. In the United Arab Emirates, the Muqawala form of contracts fall under the above scheme.   In absence of any such provision, the law lays down under Article 885 and Article 891 of the UAE Civil Code to this effect as following:-   "The employer shall be obliged to pay the consideration upon delivery of the property contracted for, unless there is an agreement or a custom to the contrary." "A sub-contractor shall have no claim against the employer for anything due to him from the first contractor unless he has made an assignment to him against the employer."   Back to back payment terms provide advantages to main contractor. For instance, the entitlement of sub contractor for EOT may not provide EOT to main contractor from employer thereby exposing main contractor to double liability in absence of back to back payment term. The double liability includes granting EOT to sub contractor and paying liquidated damages to employer at the same time. In view of the judgment  the lumpsum contracts has to be executed as per the agreed plan and is not subject to variation as the intention of the law is to protect employer who is a person with little technical experience. However the court held that the same does not apply between contractor and sub contractor as they both have equal technical aptitude and know-how.   Article 247 of the Civil Code is also relevant when speaking of payments. Thus unpaid contractor can slow down or even suspend the work lawfully with maintaining entitlement to EOT as delayed payment leads to delayed completion and does not renders the contractor liable.   3. Variations/ Additional work in scope and nature of work   Variations are common to construction industry. FIDIC based contracts also provide for broad variation clauses to accommodate rights and interests of parties concerned. Whilst FIDIC form of contracts are generally relied upon as templates by construction professionals, parties are at absolute discretion to amend and modify these clauses to best fit and suit the requirements of project and/or the parties. The effect of variation clause may impact several considerations but it certainly has an impact on pricing in most cases. Under the fabric of Islamic sharia, emphasis is placed on the term 'gharar' which prohibits loss to one of the parties and unjust enrichment to other thereby giving rise to 'extension of time' to recover additional charges.  The variations have several impacts on the EOT. The variations which may lead to uncertainty and loss to other party and unjust enrichment of other can be considered to be prohibited as per Islamic principle of "gharar" and hence entitling EOT for recovering additional charges. Article 887 of the Civil Code dealing with lumpsum muqawala contracts provides as under:-   "(1) If a muqawala contract is made on the basis of an agreed plan in consideration of a lump sum payment, the contractor may not demand any increase over the lump sum as may arise out of the execution of such plan. (2) If any variation or addition is made to the plan with the consent of the employer, the existing agreement with the contractor must be observed in connection with such variation or addition."    The condition imposed in Article 887 implies amending the remuneration and the completion time as per the variation and observing the terms of contract in relation with the variation. If the variation has caused critical delay in its work schedule the contractor may be entitled to EOT provided it is notified in timely manner. The contractor can also raise dispute in the manner stated in the contract for dissatisfaction on engineer's assessment of invoice raised, quality and quantity or reasonable rates of such variation.   4. Actual loss    The contracts may have pre-determined value for damages however as the court has right under Article 360 part 2 to adjust the compensation to be equal to actual loss the contractor can be impliedly said to have been granted EOT for the delay which did not cause any loss to the employer.   5. Other reasons entitling EOT    The various other reasons that are considered by the courts for granting EOT are stated as follows: Article 249 of the Civil Code considers unforeseeable exceptional events that have public nature occur and renders performance of the obligation arduous although being possible but in away threatening the obligor with severe loss. In such event, the judge may reduce the oppressive obligation to a reasonable level if justice so requires, and any agreement to the contrary shall be void.. This prevents contractor from unreasonable events or factors that may affect its performance or completion of project. This effectively saves the contractor from to weighing each party's interest, as a rule of public policy. It is pertinent to note that this is different from the case of force majeure. In fact, this Article defines a borderline between force majeure and unforeseen contingencies.  Consequences following force majeure are stated under Article 273 of UCC. The Article has two parts one automatically cancels the contract in case of force majeure rendering the performance impossible. Second part of the Article states that in case of partial impossibility or temporary impossibility that part of contract shall be extinguished and obligator has right to cancel the contract on informing the oblige. In case of defaults of subcontractor the contractors are acquitted of their liability in delays. Though it is not specifically laid down in provisions, the judges (Dubai Court of Cassation, 266 of2008 decided on 17 March 2009) consider the fact on case to case basis as relieving from delay liabilities attributable to a subcontractor as preferred by the Engineer or the Employer.    FIDIC form entitling EOT for cause of delays    The FIDIC forms considers various factors such as Change in the amount or nature of extra or additional work, any cause of delay referred to in the FIDIC Red book 1999 conditions such as stated under (i) clause 4.7 - Delays that result from inaccurate plot reference point and levels; (ii) 8.4(d) - unpredictable shortage of material and manpower caused by epidemic or actions of government (iii) 8.5 - unpredictable Delays caused by Authorities provided that the Contractor has diligently abided by its procedures (iv) 10.3 - Employer's Prevention of the Contractor's to conduct the Completion Test (v) 13.7 - Modification for any increase or decrease in cost resulting from changes in Laws (vi) 17.4 Employer's risks' consequences (that cause loss or damage to the documents of the contractor or his works or goods) (vii) 19.4 - Force Majeure.  The other causes of delay considered for entitling EOT under FIDIC 1999 red book inter alia are exceptionally adverse climatic conditions, any delay, impediment or prevention by the employer and other special circumstances which may occur, other than through a default of or breach of contract by the contractor or for which he is responsible. The specific provisions provided under FIDIC are under sub clauses such as 6.4 for delayed drawings, 12.2 for unforeseen conditions or physical obstructions, 36.5 for delay in certain tests requested by engineer, 69.4 which entitled EOT for delays which are resultants of reduced speed of works or suspension due to non payments, 40.2 for delays due to suspension instructed by engineer and 42.2 delays in giving possession of the site. It is pertinent to note that the condition stated in the contract such as written notice, instructions in writing, procedural requirements stated in contract and so on needs to be complied with for claiming EOT. The judgments passed on this subject are uncertain, wide-ranging and diverse as the facts of the case and judge's discretion are of enormous consideration.   Conclusion:    General clauses which are rendered vague and ambiguous due to poor drafting provide room for interpretation. This principle is clearly laid down in Article 265 of the Civil Transactions Code:   "(1) if the wording of a contract is clear, it may not be departed from by way of interpretation to ascertain the intention of the parties.  (2) If there is scope for interpretation of the contract, an enquiry shall be made into the mutual intention of the parties without stopping at the literal meaning of the words, and guidance may be sought in so doing from the nature of the transaction, and the trust and confidence which should exist between the parties in accordance with the custom current in dealings"   In view of the fact that most of the construction contract disputes are predominantly due to payments resulting from EOT or liquidated damages. Express terms needs meticulous drafting expressing clear intentions of parties.   ]]>
    Mon, 04 Jan 2016 12:00:00 GMT
    <![CDATA[Dubai Design District (D3) ]]> "We'll build a city dedicated to support entrepreneurs in Dubai. I invite the Arab youth to join the march of innovation and entrepreneurship," his Highness Sheikh Mohammed bin Rashid al Maktoum, Vice President of the United Arab Emirates (UAE), Prime Minister and Ruler of Dubai asserted. Just when you think Dubai had reached its optimum position in the Middle East and the world by - and amongst its many impressive achievements - building the world's tallest skyscraper and having the world's number 1 airport… it enters the world of art and design. According to architectural designer Mark W. Perrett, "doctors save lives by constructing a healthy life [and] designers save lives by constructing a life worth living." What better way to nail this ever true statement than by dedicating over 25 million square feet to a purpose-built community aimed at endorsing and fostering the local, regional, and global, growing art, fashion, and design arena? Welcome to the Dubai Design District, better known as d3.

      Located in the vibrant heart of Dubai and minutes away from Dubai's Business Bay, Downtown Dubai, Dubai International Financial Centre (DIFC), and Dubai International Airport, d3 seeks to unite the world's most creative minds in a world class community dedicated to many aspects of art and design, from architecture to fashion to film; becoming the region's beating heart of design.    Upon the announcement of d3, the Prime Minister and Ruler of Dubai issued Decree No. 23 of 2013, forming the Dubai Design and Fashion Council that is supported by the Dubai Technology and Media Free Zone Authority (DTMFZA). Article No. 3 of the decree outlines the objectives of the Executive Council which include promoting Dubai as a central hub for fashion and design, stimulating tourism and commerce in the emirate, and fostering local talents.    Considered to be the first green city in the Gulf and the second in the world, d3 is composed of a wide mixture of office spaces, boutiques, and ateliers, including - and not limited to - a Museum Institute, hotels and residential areas, and an amphitheatre.   We present to you a brief outline regarding setting-up in d3.    Set-up Benefits 1:    - Dubai's retail sector is the second most important retail market in the world. - The Dubai 2021 Plan and EXPO 2020 will stimulate growth in Dubai including its fashion, design, and luxury sector. - Setting up a Freezone Limited Liability Company (FZ LLC) includes 100% foreign ownership, 100% repatriation of profits and capital, and zero tax. - Simple legal framework. - Ideal location in Dubai with flexible access to the Middle East North Africa (MENA) region.   Licensing 2: d3 offers the opportunity to operate as a Freezone entity or as an on-shore company and also provides freelance permits to individuals. The different types of Freezone licenses are: 1. FZ LLC, 2. Branch of a UAE Company, 3. Branch of a foreign company, and 4. Freelance permit.   Specifics regarding license categories for d3 are outlined in Decision No. 2 of 2013, noting that commercial licensing affairs are regulated by the Department of Economic Development (DED). Setting up in d3 may carry several advantages. For instance, if your company was set up in free zones administered by TECOM or DIFC, you are permitted to move into d3. Additionally, d3 offers a dual license system where bodies set up in d3 have the opportunity to apply for two licenses, permitting them to operate from within d3 and in mainland Dubai.   The d3 team has simplified and eased the process of applying for a license. Beginning with an online application (www.dubaidesigndistrict.com) followed by interacting with account mangers and legal advisors that aid you through the process, licenses can be completed within a couple of weeks.    Notable Set-up Costs:                       Setting up a FZ LLC or a Branch Establishment      Type                                                        Fee(s)   Commercial License    AED 15,000    Registration   AED 3,510      MinimumCapitalRequirements  

      - FZ LLC: AED 50,000

      - Branch Establishment: None 

      Office Space(s) (Prices include a  service        charge but exclude DEWA    and A/C    charges which are paid        separately) 

      - Courtyard View: AED 100/sq. ft.

     - Standard View:  AED 130/sq. ft.

     - Burj View: 165/sq. ft. (Office deposit      equates to a three months' that will be    adjusted to the  rental of the office) 

    Dubai Design District appears to be a promised dream, especially for local talents and future generations in the MENA region. Dubai has outdone itself in many aspects and we look forward to the ultimate completion of this project that will nurture the creative and cultural portions of the emirate, country, and region. 

                                                                                                                                                                                                                                                                                                                                     Mennat K. Khalil 

    ]]>
    Wed, 30 Dec 2015 12:00:00 GMT
    <![CDATA[Enforcing Foreign Judgments in UAE- Part II ]]>

    INTERNATIONAL AGREEMENTS GOVERNING THE ENFORCEMENT OF FOREIGN JUDGMENTS IN THE UAE 

      To continue from our previous article, the second party deals with the various agreements in place between the United Arab Emirates and various countries and how they are enforced. We have looked at multilateral and bilateral agreements separately for ease of reference.   Multilateral Agreements   1) Agreement on the Enforcement of Sanctions between the UAE and other Arab league countries (1952) such as, Kingdom of Jordan, Iraq, Lebanon, Yemen, Syria, KSA, and Egypt (the 'Agreement'). Federal Decree No 93 of 1972, summarizes the most important provisions on final judgments for civil or commercial cases; provision of compensation  for criminal courts or relates to civil status issued by a judicial authority in one of the Arab League countries, shall be enforceable in all member states in accordance with the provisions of such Agreement.  A competent UAE court where the foreign judgment is required to be enforced shall reject the enforcement of the foreign judgment in the following cases:    a. if the foreign court, which rendered the judgment was lacking absolute competence or due to the international rules of jurisdiction, it was not competent to consider the matter. b. if the parties to the proceedings were not duly informed. c. if the foreign judgment was contrary to the public order or public morality in the state, where the judgment is required to be applied; or it was contrary to  international public laws.  d. if the foreign judgment was rendered between the same parties to the proceedings, on the same civil or criminal matter from one of the competent courts in the state; or if such courts have another lawsuit being considered for the    same adversaries concerning the same subject which were filed before submitting the lawsuit to the court that issued the judgment required to be enforced.   With regard to foreign arbitration decisions, the Agreement states that the competent authority who shall enforce the foreign arbitration decision, issued in one of the Arab League States, shall not have the power to re-examine the subject of the lawsuit, for which the judgment of arbitrators was issued, but can reject the request for enforcing such a judgment in the following cases:   i. if the law of the state requiring the enforcement of the arbitration decision does not permit the subject of the lawsuit to be settled by arbitration. ii. if the judgment of arbitrators was not rendered in accordance to the arbitration rules and regulations of that state. iii. if the arbitrator was not competent under the arbitration rules, or pursuant to the law upon which the judgment of the arbitrator was rendered.  iv. if the parties to the proceedings were not duly informed for attendance to the relevant tribunal. v. if the judgment rendered by the arbitrator violates moral codes or public laws of the state, requesting enforcement of the arbitration decision. The UAE competent authority has to determine the existence of such violation and shall not enforce the part which is contrary to public orders or public morals. vi. if the arbitration decision was not final in the state where the judgment was rendered.   The Agreement will not apply on any foreign judgments rendered against the government of that state who requested to enforce the judgment; as well as on the foreign judgments that are incompatible with international treaties and Agreements that are in full force in the foreign country requested to enforce such a judgment.    Article 5 of this Agreement deals with the enforcement procedure. It stipulates a list of documents that shall be attached to the request of enforcement: • An original copy of the judgment, written in an executive format, approved by the competent authority of the foreign state.    • An original copy of the judgment or official certificate indicating that the judgment was duly rendered.  • A Certificate issued by a competent authority, indicating that the judgment is irrevocable and enforceable. • A Certificate indicating that the litigants were duly summoned to appear before the competent court or jury.     2) The 1995 Protocol on the Enforcement of Judgments, Letters Rogatory, and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council ('GCC Protocol') has provided similar conditions as per the above Agreement. The GCC Protocol states that foreign judgments shall not be wholly or partially enforced in the following cases: a) If the foreign judgment to be enforced conflicts with the provisions of the Islamic Sharia, constitution or regulations applicable in the UAE. b) If the judgment was issued in the absence of the defendant to the proceeding and he/she was not duly notified of the lawsuit or judgment. c) If a dispute has risen for which the judgment has been issued is the subject matter of previous judgment issued in dispute between the same litigants with the same right in terms of place and reason having the powers of judged matters with the court where the judgment is to be enforced or any other member country in this agreement.  d) If the dispute for which the foreign judgment has been rendered is the subject matter of the proceeding considered already before any court of the country where the judgment is to be enforced. Having the same right in terms of place and reason and such lawsuit was filed before offering the dispute to the court of the country where the judgment has been issued. e) If the enforcement of the foreign judgment conflicts with the International treaties and Agreements applicable in the country, where it is to be enforced.   Bilateral Agreements    It is imperative to note that the provisions of any Bilateral Agreements will not enforce foreign judgments that conflict with the provisions of Islamic Sharia or the general system of laws in the UAE.   II.  Courts' decisions regarding the execution of foreign judgments   The Dubai Court of Cassation has concluded to separate between executing a foreign judgment rendered by a country involved in a bilateral or multilateral Agreement with the UAE; and a foreign judgment rendered by a country that is not involved in the same. This is to make sure that the conditions provided for in Article 235 of the Civil Procedures Law are met and that the law of the foreign country, where the judgment has been rendered, is considered by the Court of Merit.    Hence, where there is a cooperation agreement in place between the UAE and a foreign state, the provisions of Article 238 of the Civil Procedures Law shall stipulate as per the resolution of such court that the provisions of treaties concluded by and between the UAE and the other foreign states or International treaties approved by the UAE shall be applied regarding the enforcement of foreign judgments, even if the conditions contained in chapter four of the Federal Code of Civil Procedure No. 11, as discussed above.   In addition, the Abu Dhabi Court of Cassation has issued several principles regarding the enforcement of foreign judgments. Among the principles is the principle that the subject matter of foreign judgments issued in foreign states shall not be considered according to the Civil Procedures Law, instead they should be considered in form and the parties to the proceedings should duly appear before the relevant Court. In addition, the Abu Dhabi Court has confirmed in its decision that a foreign judgment shall not be enforced if such a judgment conflicts with the previous UAE Court judgments or Islamic Sharia or general laws of the UAE.   For example, a plaintiff has filed a lawsuit before the Abu Dhabi Court of First Instance in relation to her divorce, requesting the Court to enforce the judgment rendered by the London Court, which provided for a monthly support payment of GBP 1, 712 (equivalent to about AED10, 500) to her from the date of rendering the said judgment, until she gets married or the issuance of another judgment by the same Court.     The Court of First Instance has rejected the case and supported the appealed judgment which led the plaintiff to challenge the rendered judgment by the London Court before the Court of Cassation (which rejected the submitted case as the appellant was divorced from the defendant by virtue of a previous judgment issued by the Abu Dhabi Sharia Court of Appeal, and which led to the divorcing of the plaintiff from the defendant for damages, taken into consideration that it was not proven that the defendant has returned to the plaintiff which means that the judgment for the divorce was still valid.) Although the plaintiff has obtained a foreign judgment after her divorce, enforcing that foreign judgment (support for life) was incompatible with the provisions of Islamic Sharia and the UAE law on divorce (that binds the husband to spend on his woman during the period of  her waiting period (Iddah)). Thus, the Court of Appeal refused to enforce the London judgment   so that it complies with both the Sharia and the UAE applicable laws.   Based on the above, it becomes clear that the enforcement of foreign judgments inside the country does not prejudice the principle of state sovereignty. A foreign judgment shall be enforced only when it has been duly rendered as per the applicable procedures provided and duly notifying the parties to the proceedings. In addition, such a judgment shall not be in conflict with the Islamic Sharia or general system of the UAE laws; and shall be irrevocable. Recognizing and enforcing foreign judgments in this way by the UAE courts  shows a sign of respect to litigation procedures in general, the doctrine of judicial supremacy and thus establishing justice internationally and achieveing international judicial cooperation.    ]]>
    Tue, 29 Dec 2015 12:00:00 GMT
    <![CDATA[Disputes under Commercial Agency Law ]]>

    We have already highlighted in a previous article1  the fact that the Federal Law no. 18 of 19812 , also known as UAE Commercial Agency Law (the Law), has a protectionist approach favoring the Agent, defined therein as "A natural person holding the nationality of the state, or a juridical person owned fully by national natural persons, entering into contract of commercial agency for representation of the Principal in the distribution, sale, display or offer of a merchandise or service inside the state in return for a commission or profit", and further more imposing on its article no. 2 that "Carrying out the activities of commercial agency in the State shall be restricted to nationals or individuals or companies wholly owned by national physical persons". Therefore spreading awareness amongst foreign individuals or companies about certain important legal provisions before entering into an agency agreement is of major importance. 

      According to its protectionist approach, the Law reserves one hundred percent of the pursuit of the activity for the national citizens or companies of the United Arab Emirates. However, and being that the country's populations is constituted of 80% of expats it is important to state that articles 3 and 4 of the Law try to attribute some security to the Principal by providing that "the activities of the commercial agency in the State shall only be performed by persons whose names are inscribed in the commercial agents register (...), any commercial agency not registered in this register shall not be considered (...)" and "for the validity of the agency at the time of registration. The agent must be directly bound to the original Principal by a written and ratified contract".   In practice, the majority of the disputes arise due to the fact that the Principal decides not to seek legal advisory from an expert and prepares the agency agreements by himself in order to save money and time. To the extent that the international commercial principles are inspired by common law, and that the Principal is a foreign entity often unaware of the legislation applicable within the United Arab Emirates, the result is that a great number of agency agreements forwarded by clients to our office lack essential conditions, are not properly registered or simply provide that "should any conflict arise the parties agree that it should be referred to arbitration" when the agency law specifically mentions that in case of dispute the lawsuits should be addressed to the Courts.  However all those questions have already been largely studied and discussed, they are regulated by the applicable law and even the service court has already replied to the same questions in different occasions.    Nowadays, when it comes to agency agreements and disputes under the agency law, considering the economical crisis that the world is going through, the liquidation of the Principal can turn into a major issue since this event is not directly regulated by the law. Accordingly, what happens if the Principal goes into liquidation? What will be the consequences to the Agent and the agency agreement?   We will have to start by looking into the available legislation - the Federal Agency Law No.18/1981, the Civil Transactions Law (Articles 954-960); and the Federal Law No.8 of 1984 as amended by Federal Law No. 13 of 1988, the Commercial Companies Law.    Beginning with the Agency Law, it is important to mention that it is silent regarding the regulation, procedure, or consequences when the Principal in an agency agreement goes into liquidation. Under Article 8 of the said law, "the principal may not terminate the agency contract or refrain from the renewal thereof if there is no fundamental reason behind the termination or the refrain from the renewal" further stating that the agency contract cannot be re-registered before the Registry under the name of another agent, "even if the previous agency's contract was of definite term, unless the said agency has been rescinded upon the mutual consent of the parties, or should there be fundamental reasons behind(…)". We shall also mention that there is no definition under the law of what the fundamental reasons that might allow the Principal to terminate the agency contract or refrain from its renewal are, clearly leaving it to the discretion of courts and their judges to interpret the rule and to apply it to the facts in order to decide whether we are facing a fundamental reason or not.     Furthermore, the same article states that even if the agency's contract has a definite term, it demands mutual consent of the parties to rescind the agency. The legal obligation of compulsory mutual consent or the existence of a fundamental reason for the expiry of the agreement upon the end of the definite term, as well as the attribution of the settlement of any disputes to the courts are undoubtedly exceptions that demonstrate the perception of the legislator regarding the importance of these agreements for the economy and prosperity of trade and his intention to keep the pursuance of agency activities for nationals,  protecting  the agents, through the above referred legal mechanisms. However, the main question remains, could the liquidation of the Principal be valid reason for the termination of the agency agreement?   Before proceeding, there is also another article in the agency law that should be mentioned. As per article 9, termination may result in significant compensation awards in favour of the local agent. The stated article governs the payment of compensation to the agent upon termination or non-renewal of an agency agreement. As with termination under Article 8, the exact calculation of a compensation payment is not set out in the Agency Law (case law needs to be considered). This means that in case of liquidation of the Principal, the Agent will be entitled to any compensation?    The Civil Transactions Law also has an article regarding the termination of the agency agreement. Article 954 states that the agency agreement can only be terminated upon completion of what is delegated; upon the expiration of the fixed time; or upon the death of the Principal or the agent or their ceasing to have legal capacity.    Once again, despite having an extra article on agency agreements, the law is completely silent when it comes to liquidation of the Principal.   Finally, in 2008, the UAE Supreme Court's decision No.232 issued by its Commercial Section provided some guidance regarding the liquidation of the Principal. Accordingly, the Supreme Court decided that if a principal in an agency agreement goes into liquidation, the agency contract will come to an end and won't be valid anymore. During the liquidation period, under Article 294 of the Commercial and Companies Law, the Court will appoint a liquidator who will audit the company's accounts. The agent shall also submit all the invoices to the liquidator, after which the termination agreement can be signed between the Agent and the liquidator on behalf of the Principal. Afterwards, an application should be submitted to the Ministry of Economy to terminate the agency agreement.   Regarding the compensation of the Agent by the Principal, we are of the opinion that it should be awarded by the liquidator to the Agent if the liquidation was in any way the Principal's fault, however the credit should be considered as a common credit and be settled only after the payment of the privileged credits.    Thus, no mechanism of unilateral termination is established – even in case of liquidation. Accordingly, and having in mind the way the agency law has been designed, before signing an agency agreement we strongly recommend both the Agent and the Principal to consult a legal expert, as we are before an agreement whose exit can become very difficult, time consuming and the probability of not achieving a favorable decision in court regarding the termination or non- renewal of the agency agreement is high, given the existence of indeterminate concepts which must be interpreted and applied by the judge under his discretion power.   ]]>
    Fri, 25 Dec 2015 12:00:00 GMT
    <![CDATA[Non Compete ]]>Mon, 14 Dec 2015 12:00:00 GMT<![CDATA[Upsurge of IPOs in the UAE: Legal Involutions ]]>"In a world that's changing so quickly, you are guaranteed to fail, if you do not take any risks"                                                                              Mark Zuckerburg (before facebook IPO)   Introduction   The transitions to a public company is a very important development in the history of companies and the next major step in the evolution of any private company, not to mention its role in the deepening of capital markets. The Initial public offering (IPO) launches an immense growth for any company. However, the procedures involved are rigid and require strict due diligence pre IPO and post IPO. Materialization of new listings in the United Arab Emirates (UAE) is however not that efficacious despite the country's market rallying at or near the fastest pace in the world. According to the latest survey , the Dubai Financial Market General Index is up 126.8 per cent in the past year, with Abu Dhabi Securities Exchange Index rising 69.7 percent. The IPO extends substantive capabilities to the public company in terms of growth and development, or in terms of dedicating the concepts of transparency governance and effective management.   Experts are saying that long awaited changes in commercial laws of UAE are boon to the UAE market. UAE economy aims to compete with global standards and ensures transparency in the system with a view to sustain a global economy in this competitive world. To attract more foreign investment in the country this was a need of an hour. The commercial companies law (Federal Law No 2 of 2015) has diversified the avenues.    The main aim for passing UAE Federal Law No (2) of 2015 is to enrich and diversify the UAE economy in order to compete on a regional and global  level, and to enhance the way in which commercial companies operate in the UAE. The idea is that greater transparency and clarity in the system will naturally result in an increase in investor confidence in the UAE market, the ultimate objective of which is to attract a larger volume of foreign investment into the UAE.   The recent proposed change to the UAE companies law will penetrate the IPO market. Under the new companies law, the percentage of ownership that must be sold in an IPO will be cut to 30 per cent from 55 per cent. This is a hindrance for companies going public in the UAE and companies which are looking for massive expansion of their activities are opting for other exchanges in the world, for instance London stock exchange being the most preferred option for the companies in UAE. Recently the big names have come up with their IPOs like Damac holding, a top developer in the UAE which listed their shares on London Stock Exchange. Even Emaar is considering its first issue in the near future. One Abu Dhabi based company has also planned to sell shares on the London Stock Exchange to feed its expansion.     Another constraint under the local listing is regarding the pricing of shares. There is a lack of flexibility for owners in structuring sales as shares are to be priced at a par value of Dirham 1. As per Emirates Securities and Commodities Authority (ESCA) guidelines 2, 45 percent of the shares need to be subscribed by founders before the remaining 55 percent of the shares are offered to the general public via IPO.   Regulatory framework of IPOs - local listings   In the UAE, there are three stock exchanges. Abu Dhabi Securities Exchange (ADX) lists mostly local UAE companies and NASDAQ Dubai deals in the trading of international stocks. The two stock exchanges namely DFM and ADX fall under the regulation of Securities and Commodities Authority (SCA) which is a governing body and both stock exchangs have to comply with the standards of SCA. SCA is a watchdog authority to protect investors', brokers' and listed companies' rights.      Similarly, Dubai Financial Services Authority (DFSA) is the governing authority of NASDAQ Dubai which follows the international standards of listing on the similar lines as of EU norms. In line with the international regulatory framework, a listing on NASDAQ requires certain formalities, however the rules and regulations purported are to be favorable and intuitive and close to the DFSA objectives. The Markets Law 2012 3  and the Market Rules came into force in 2012 after a public consultation process and based on the rules published by Financial Regulation Authority, United Kingdom. A company formulating an IPO would require establishing a concurrent dialogue with both the DFSA and NASDAQ Dubai. The most essential document which sets out all the details and terms of offerings is the Company's prospectus. A requirement that the company must have a market capitalisation of at least USD 10 million and that it must normally list at least 25% of its shares 4 .   Conclusion   In the view of above, the UAE is expected to be a very strong market for IPOs this year. The policy makers are keeping a liberal view and expecting the positive growth of the market. According to a new report from Ernst & Young, capital raised in the country and the wider MENA region saw their highest levels since 2008. 23 IPOs in the region raised USD 3 billion last year marking a 64% increase in terms of volume when compared to 2012 5 . Three IPOs from the UAE, including Al Noor Hospital, DAMAC Real Estate Development and Action Hotel, secured over USD 740 million from foreign listings on the London Stock Exchange .6  ]]>Wed, 09 Dec 2015 12:00:00 GMT<![CDATA[Share Pledge for Commercial Facilities ]]>

    Diageo, a company more commonly associated with alcoholic beverages Smirnoff, Guinness and Johnnie Walker in the United Kingdom- held almost 27.8 percent stakes in a company called United Spirits Limited, one of the leading spirits company in the Indian market by volume.  A series of share pledges by United Spirits Limited in favor of banks for raising capital later resulted in the stake of Diageo being raised to be more than 57 percent. 

      A fierce and debatable subject which can be an interesting case study on the subject of share pledge is the story behind United Spirits. United Holdings pledged shares of the company United Spirits to raise funds for a distressed business. As it now holds, the bank decided to recall the loans given to Kingfisher Airlines by selling part of the collateral - the shares in United Spirits.    In a more structurally advanced legal system, share pledges have evolved as means of fund raising for businesses. In the United Kingdom for instance, a 'floating charge' can be created over the assets or shares of a company. Such a form of security is created in assets which are not constant. The security interest therefore floats over funds. Commercial companies or limited liability partnerships agree for events that trigger crystallization of 'floating charge'. Once the floating charge has crystallized due to occurrence of event of default, the owner can exercise his rights over the assets.   Countries like the United Arab Emirates are one of the most sophisticated economies in terms of the transactions they witness between the fine print.    Legally speaking, the region has evolved from the stages of infancy to that of toddlerhood. As such, it would be interesting to understand whether the United Arab Emirates in fact recognizes the concept of share pledges as collateral security for fund raising or not.    Within the UAE, there are at least six different types of mortgages or securities depending on the nature of collateral, pledge being one of the kinds. Before discussing the effectiveness of pledges, let us understand what kind of assets qualify as security and could create on what is known as 'charge'.   UAE Civil Code defines immovable property as something which has a permanent fixed nature and may not be removed without damaging or altering its structure. Movable property is therefore anything but immovable property. In terms of movable property, a further sub classification exists, i.e., tangible and intangible. Goods, cash, machines and related are tangible. Intellectual property, capacity to contract, debts, licenses and shares are intangible.1    Let us now take into consideration the concept of share pledge. Shares are part of a commercial business and covered under Article 39 of the Commercial Transactions Law. The general rules relating to a 'movable' property by definition are not necessarily applicable to 'commercial businesses' although it is classified as movable. Pledge by definition means the actual parting away of or delivering of possession from the pledgor (mortgagor) to the pledge (mortgagee). However, pledge within commercial businesses does not follow this rule. In commercial businesses, the mortgagor may continue to enjoy possession of the commercial business.    Article 49 of the Commercial Transaction Law states that pledges in commercial businesses can only be created in favor of banks and not other lenders. In order for a pledge to be valid or effective against third parties, it must be recorded in writing at a registry along with particulars of the pledge to be well specified in such recording documents- the deed of pledge.    Based on the definition of pledge, lenders have been careful in creating share pledges in the UAE especially given the fact the most common form of company- an LLC does not involve issuance of nominal or bearer forms of shares. A nominal share is one where the name of the registered shareholder appears on the share certificate, while bearer form of shares do not have a name appearing on the share certificate. Therefore the transfer of rights or shares for nominal shares is effected by a share transfer deed. In case of the bearer form of shares, such transfer can be effected by physically handing over the share certificate custody to the pledgor.    With the amendment to the Commercial Companies Law, the complexities surrounding the aforesaid have been resolved to great extent. Article 79 of the amended law provides that: 'a partner may transfer or pledge its shares  in the company to another party or third party. Such transfer shall be made in accordance with the terms of the MOA of the company under an official document in accordance with the provisions of this law. Such transfer or pledge shall not be valid against the company or third parties until the date of its entry in the commercial register with the competent authority' In light of above, it is inferred that as long as the pledge can be registered on a commercial register- maintained by the regulating authority of a free zone, the economic department or the stock exchange regulators- the pledge will be considered valid and enforceable.

     

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    Thu, 03 Dec 2015 12:00:00 GMT
    <![CDATA[Joint Ventures in Real Estate ]]> Joint venture is an agreement between two or more parties wherein they principally agree on developing a new asset or entity by infusing equity for a term. In a joint venture transaction, parties agree to co-operate with each other and term of joint venture may be defined or open. Parties to a joint venture agreement generally agree to certain timelines and milestones and subject to milestones being achieved, the agreement will result in to a new transaction or result in completion of joint venture. 

      Clearly, joint venture is today one of the most preferred choice globally given the flexibility offered by the mechanism. Joint ventures in UAE are recognized and regulated pursuant to UAE Commercial Companies Law (Federal Law number 8 of 1984). There is a rise in joint venture transactions in real estate within the UAE. To illustrate, owners of land parcels who do not have knowledge, acumen or experience in construction and development of properties may find joint venture proposal from experienced property developer appealing and comforting. But don't think joint venture marriages are made in heaven. If the parties to joint venture transaction are unclear about their respective roles or if the joint venture contract is not certain and definite or parties' choice of JV vehicle (Wholly owned, branch, partnership, consortium or contractual joint venture) is not the correct form of entity, the purpose and objective of such joint venture is likely to fail. The complexities surrounding construction business in terms of process, environment and entity structures exposes participants to a certain degree of risk. Accordingly, risk identification is important in construction projects and careful planning would ensure that project is successfully delivered. The risks of failure of real estate joint ventures can be high and the financial consequences may be expensive. Parties should carry out detailed due diligence. This aspect has been discussed thoroughly in our previous issue.    The joint venture partnership that is effectively successful in achieving its commercial and business objectives within resources contributed by each joint venture party will satisfy the definition of a successful JV. Such successful JV besides achieving its objectives also brings trust, confidence and opportunities to parties. Domestic or international joint ventures are however subject to risks as discussed above.   In real estate transactions, for instance, parties may be subject to one or more of the following:- 1. Financial risks that may arise on account of inflation, cost of borrowing, bankruptcy of either party, interest rate fluctuations, complex exchange controls or related financial difficulties; 2. change in statutory regulation, increased compliance, increase in transfer fees, imposition of new taxes or stamp duties, imposition of unfavorable conditions, or difficulties in withdrawing capital; 3. increased cost of construction, failure to achieve projections, delayed approvals, disputes from contractor or third parties, availability of labor; 4. other restrictions including price controls, conflict of interest issues, etc.   Almost all real estate and construction projects require third party financing. Assets are often financed through non-recourse loans and these loans are subject to bonds and guarantees in favor of lenders. Parties should carefully examine and review guarantor obligations. Likewise management responsibilities needs to be clearly defined. Real estate developments are also generally in need of more capital than is initially budgeted. Urgent capital requirements coupled with lack of clear contractual provisions can often put JV parties in a dispute. Parties to JV agreement should identify the party that is entitled to call for additional capital and consequences for failure of party that fails to provide such additional required capital. The joint venture agreement should also provide for a clear exit mechanism allowing a party to exit the joint venture. Joint venture is a great structure which combines strengths of property developer and equity partner but a strong joint venture agreement, sound underwriting and careful planning are keys to govern relationship of parties and conclude a successful joint venture transaction.   ]]>
    Tue, 01 Dec 2015 12:00:00 GMT
    <![CDATA[Enforcing Foreign Judgments in the United Arab Emirates (UAE)]]> Introduction

    With the spread of globalization, technical and technological evolution, changes in communication means and transportations, economic freedom and free trade around the world have reinforced the idea that businesses and/or commercial dealings need protection. 

    Hence, as there is an international cooperation among countries to follow an international criminal worldwide, there should be an international cooperation in civil and commercial matters as well. For instance, a creditor, who has obtained a foreign judgment to recover against a debtor in the UAE, shall be able to enforce that judgment in the UAE and vice versa.   

      This means that the civil protection provided to an individual or an entity through the issuance of a foreign judgment shall not be confined to the borders of that state, where the judgment was issued, especially now, when we live in a world in which persons and assets can easily be moved across borders. The recognition of foreign judgments makes it harder for losing defendants to avoid liability. The issuance of these judicial rulings shall be recognized by the UAE; otherwise they will be of no use to that individual or entity.   Enforcing a foreign judgment may conflict with the principle of state sovereignty; however, the fact that we live today in such a globalized world has reinforced the world to agree on principle of reciprocity in that matter, which means that states will and would grant others recognition of judicial decisions only if, and to the extent that, their own decisions would be recognized. In response to this growing importance, the number of  bilateral and multilateral treaties has grown quickly.   Recognizing and enforcing foreign judgments in the UAE have several advantages: Namely, it will preclude re- litigation, save litigation costs, achieve justice for an individual or an entity at an international level, prevent the defendant from transferring his or her assets/money outside the country where the judgment was rendered, promote confidence in international commercial transactions, encourage foreign investment in the UAE and trade among nations worldwide. In this two part article we will be discussing the legal provisions within the legal framework of the UAE and the co-operation agreements that affect the enforcement of foreign judgments.   n the UAE, foreign judgments are enforced under Federal Law of Civil Procedure No. 11 of 1992 (Articles 235-238). Moreover, UAE has signed several multilateral and bilateral agreements with other countries. This is in addition to the jurisprudence of the highest courts in the state (Federal Supreme Court and Court of Cassation in Dubai) for the interpretation and application of such legal Articles and Agreements. These principles are applied in accordance with the fact if there is a cooperation agreement in place with the country in question or not.   Accordingly, we will discuss the enforcement of foreign judgments in the UAE in line with the legal texts, International  Agreements, and judicial decisions and/or rules. In the first part of our article, we will touch upon the legal provisions of the Federal Code of Civil Procedure No. 11 which govern the enforcement of foreign judgments. In the second part, we will be discussing multilateral and bilateral Agreements which the UAE has concluded with other states on judicial cooperation between the states. Finally, we will examine the UAE Courts' decisions and/or principles related to the enforcement of foreign judgments and will make a brief conclusion on our findings.    I. UAE legal provisions governing the enforcement of foreign judgments    Chapter IV of Part 1 of the 3rd book of Federal Code of Civil Procedure No. 11 (1992) governs the execution of foreign judgments, orders and documents as follows:    Article 235  i. Judgments and orders issued in a foreign country may be ordered for execution and implementation within UAE under the same conditions provided for the execution of judgments and orders in the law of that foreign state. ii. Petition for execution of orders shall be filed before the Court of First Instance, where the execution for the jurisdiction is sought. Execution shall be ordered only if: a) the UAE courts have jurisdiction over the dispute and the rendering foreign court had such jurisdiction under its own law and international laws. b) the foreign judgment or order was rendered by a competent court in that state and in accordance with its law. c) the parties to the proceedings on which the foreign judgment was rendered were duly summoned and represented.  d) the judgment or order have obtained an absolute degree in accordance with law of the rendering court. e) the foreign judgment does not conflict or contradict with any judgment or an order previously rendered by a court in the UAE and does not violate any moral code or public order.    Article 236  Provisions of Article 235 shall apply to the arbitration decisions passed in a foreign state. Foreign arbitration decisions must be on a matter which are decided by the arbitration tribunal according to the law of that state, and which must be enforceable in that state.    Article 237  i.  Attested documents and conciliation reports authenticated by courts of foreign states shall be executed in the UAE under the same conditions provided for the execution of similar orders and reports passed in the UAE. ii. Execution of foreign orders as referred to above shall be requested through filing a petition with the judge for execution of the order. An execution order shall not be issued unless such an order, documents or reports once verified are in accordance to the laws of the country in which they were attested or authenticated and shall not violate moral codes or public order.    Article 238  Rules provided for in Articles 235, 236, 237 shall not prejudice the rules and regulations provided for in treaties and Agreements signed by the UAE with other countries. In the next article we will discuss the various multilateral and bilateral agreements between UAE and various nations and how they are implemented.    Conculation : Although there are laws, judicial rules, multilateral and bilateral agreements (which will be discussed in the next issue) that are in place between the UAE and other countries, enforcing a foreign judgment in the UAE could prove to be problematic. There is less cooperation among nations in civil and commercial matters as opposed to criminal activities. As we have seen there are many advantages in recognizing and enforcing foreign judgments in the UAE, which not only encourages an influx of foreign investment, but also reinforces faith in litigation and thus respect to the principle of judicial supremacy. It is therefore advisable that the law in this regard requires an overhaul and it should be made simple to ensure the recognition and enforcement of foreign judgments.    ]]>
    Thu, 26 Nov 2015 12:00:00 GMT
    <![CDATA[Limited Liability Companies: ]]>the implications of the new Commercial Companies Law   Although the primary objective of companies law is to safeguard interests of shareholders, modern/current day investment climate dictates that the legislation dealing with companies should i) serve the interests of business at large; ii) provide for simple and easy regulatory and compliance procedures; iii) keep pace with complexities of traditional and modern commercial dealings; iv) address issues governing insolvency, bankruptcy, securities and other key elements; and v) provide continuity, certainty and stability to business community.   Dubai has been at the forefront of adapting to the economic demands of the United Arab Emirates and has continually shaped the laws accordingly. The Commercial Companies Law no. 2 of 2015(the CCL) was published in the official gazette in the March 2015 edition and is to be implemented from July 1, 2015.   The main objective of the CCL is to keep pace with the tremendous development in trade relations, economic openness and global variables as Article 2 of the law aims to contribute to the development of the business environment. The law endeavors to organize the capabilities and economic status of the companies in line with global variables particularly in relation to corporate governance rules, protection of rights of shareholders and partners to ensure an influx of foreign investment in the region and promote social responsibility. The remainder of the law outlines the implementation of the law and the achievement of these objectives. This first article of three part series discusses each of these key provisions with a particular focus on Limited Liability Companies- the effect and implication of the new law on both – existing as well as future entities and.   Scope & Exclusions   The scope of the application of the CCL applies to all commercial companies that are incorporated within the UAE, foreign companies including branch of foreign  companies and representative office(s). The new CCL sets out a clear explanation to its applicability and explicitly lists the kind of companies that are covered within its scope. While the old law did provide for the companies that were excluded from its scope the new law to some extent adds further explanation to the companies that qualify for these exemptions. For instance, the old law provided that all companies owned by federal or local governments or that are subsidiaries of government entities were exempt from the scope of the law.   The new law retains this provision but makes a sector wise sub-division as follows:    'in the event a company is involved in oil exploration, water desalination, transmission and distribution of energy as set out in their constituent documents, such companies should at least have 25% capital contribution by federal government, local government or any of its subsidiaries or organs in order to qualify for such exemption.' In addition to the aforesaid, following companies are also exempted from the scope of the CCL: a. companies in relation to which a Ministerial Order or   Cabinet Resolution has been passed are exempt. b. companies which are exempt by virtue of special Federal Laws; c. free zone companies. However, if such companies are permitted to conduct business activities outside such free zone; the new CCL will be applicable suo motu.    Definitions Interpretation of the law impinges on clearly defined terms that result in its ad rem applicability. The previous law only contained very few definitions of key words in the legislation. The new law includes extensive definitions and expressions for instance a definition of a careful person which is defined as "a person who has sufficient experience and commitment to duty in the performance of his work."   Careful man  The law defines careful man in Article 1 as a person who has the adequate experience and commitment required in his work.   Governance The law defines governance under Article 1 as a set of criteria and procedures which allow for the achievement of corporate governance in accordance with the international standards and practices, by determining the duties and responsibilities of the Directors and the executive management of the company, taking into account the protection of the rights of the shareholders and the concerned parties.   Strategic Partner   The law defines strategic partner in Article 1 as a partner whose contribution provides for technical, operational or marketing support to the company, for the good of the company   Price Construction The law defines construction price under Article 80 as a price assessed by one or more experts with technical and financial experience in the subject matter of the share, as nominated by the competent authority on demand by the applicant for preemption and at his cost.   Limited Liability Companies The law defines a company in Article 8 as a contract through which two or more people participate in an economic project with the aim to make a profit, by providing a certain share of money or expertise; and sharing any profits and losses that arise from this  project. Article 71 defines a limited liability company as a company that has not less than two partners and not more than fifty. However, the new law has provided for an exception which allows a UAE national or juridical person to incorporate a single person limited liability company. The liability of this company will be limited to the capital contribution.  This addition will present itself as a negation to the concept of a company.  The law has retained the requirement of 51% shareholding to be held by a local in a limited liability company, there have been significant and fundamental changes that have been incorporated pertaining to certain issues relating to establishing a limited liability company. The law has now requested The Council of Ministers to issue a decree to determine the minimum share capital of the company which was not a requirement under the old law. We must note that the scope and concept behind the draft Anti Fronting Law has been impressed upon in the new CCL under Article 10(iii) which classify any waivers of shareholding from the UAE national to other shareholders as a breach of the law and it will stand null and void.  The law has integrated this within its scope to extend the UAE nationals' shareholding rights. In the past, the Dubai Court of Cassation has ruled that by virtue of shareholders' agreeing to an assignment of the shareholding percentage, such assignment if being contradictory to the mandatory percentage of the shareholding under CCL; would deem the company illegal.  However, the court held that although the form of the company was illegal due to it being in contravention of CCL guidelines, the actual dealing between the partners were real and the foreign shareholder had the right to claim any loss or profit on account of above decision from the local partner- who had in fact agreed to sign such assignment willingly. Any claims against the company would be unjustified.  It would have been a welcome step if the amended law would have taken into consideration the above decision instead of allowing the local shareholder a statutory right to claim shares in a company that he is not involved in.    Share Transfer Article 80 of the CCL deals with the shareholders' rights relating to the transfer of shares. It also stipulates that if one of the partners desires to waive its share of people from non-partners in the company - with or without compensation - it shall notify the other partners through the company's director along with the details of the assignee or buyer and the conditions of the sale. The director must notify the partners as soon as he receives the notification.  Although the regulating provisions remain the same, a distinct hiatus from this has been that if one or more shareholder's wish to exercise their pre-emption rights, and the valuation of the shares is in dispute, the disposer shall appoint a technical expert or competent authority for the valuation of these shares as opposed to the previous requirement of employing the services of the company's auditor. The regulating provisions remain the same as per the above save that if a shareholder or a partner desires to dispose of his shares to people who are not shareholders and/or partners in the company-with or without compensation; the partner who is withdrawing out of the partnership has the right to choose a competent authority at the request of the applicant at his/her own expense. subject of share choose the competent authority at the request of the recovery by the applicant  at his own expense, and that if used right of redemption more than one partner split shares or share sold them by the share of each of them in the capital, and that if the elapsed period referred to without using One of the partners the right of redemption, the partner will be free to dispose of his share.     Share Pledge Since the shares of the company are considered to be its fortune, the law authorizes the disposal of the shares as the company deems fit and involving itself in actions such as assignment, mortgage as long as it is done in accordance with the Memorandum of Association. The pledge of the shares should be recorded in official documents, notarized and registered with the authorities. Such a pledge only becomes enforceable against third parties after the date of the pledge being registered. The shareholders have rights over the pledging of their percentage of shares and this right is unrestricted as long as it is compliant with the company's constitutive documents or against the provisions of the CCL.  The new Law allows the creation a pledge over the shares of a Limited Liability Company and also allows for the pledge to be registered in the Commercial Register. This will facilitate a company to avail better financing options such as mortgages. The old law was silent on the concept of Limited Liability Companies' pledging shares though it was a possibility; there was a considerable risk involved.    Rights and Removal of the Manager The CCL stipulates that a company can have more than one manager . The appointment of the manager can be done from within the shareholders or from outside the scope of the shareholding structure. If the Memorandum of Association does not specify the appointment of the manager, the shareholders have the right to appoint someone via a separate agreement. If the Memorandum of Association and the shareholders are quiet on the appointment of the manager, the General Assembly has the right to appoint the same Pursuant to the old law, the manager of the company remains liable for any company's actions against any third parties. The rights of the manager remain the same as the old law.   Article 85 of the CCL deals with the removal of the manager. The manager may be removed in the following ways: i) by decision of the General Assembly; ii) by an order of the Court upon request for the shareholder/s upon production of a legitimate reason for the removal;   The new CCL also provides for a manager to submit his resignation to the General Assembly that must advise the relevant authority. It is required that the General Assembly submit its decision for the acceptance of resignation within 30 days of receiving the notification from the manager. If no decision is reached upon after the expiration of the thirty days, the resignation is deemed accepted   General Assembly Article 92 of the New CCL retains provisions for the annual General Assembly Meeting, to be held at the invitation of the Director or the Board of Directors- at least once a year- within a period of four months immediately following the last fiscal year. The extra-ordinary general meeting can be called by the any of the partners representing at least 25 percent of the capital.      The matters for consideration in the annual General Assembly Meeting are set out under Article 94 of the New CCL and stated below:   1. Manager's report on the company's financial position during the financial year, auditor's report and the report of   the Supervisory Board. 2. Balance sheet, profit and loss account and ratification.   3. Profits that are distributed to the partners. 4. Hiring managers and determine their remuneration.   5. The appointment of members of the Board of Directors (if any).     6. Appointment of members of the Supervisory Board (if any).   7. Appointment of members of the supervisory committee and non executive members if the company operates in   accordance with the provisions of Islamic Sharia. 8. The appointment of one or more accounts auditor and determine their remuneration. 9. Other matters that fall within its jurisdiction under the provisions of this Act or the provisions of the Memorandum of Association.    In Article 93, the new law has retained the key provisions with regards to General Assembly and Annual General Assembly meetings. The new law has paved the way for employing different methods of communiqué in relation to the method employed for the same. In the past, it was essential to use registered mail to send invitations for meetings, communication and such twenty one (21) days prior to a meeting. The new CCL allows for the use of modern technology and permits the shareholders to decide the mode of communication for invites to meetings. The use of modern technology means that the notification period has been reduced to fifteen (15) days.   The new CCL in Article 96 has changed the quorum requirements for the shareholders' meetings. In the old law, it was required that shareholders holding fifty percent (50%) of the share capital had to be present for the meeting to reach a quorum; the new CCL has raised this to seventy five percent (75%). If a quorum cannot be reached in the first meeting, the next meeting is to be scheduled within fourteen days and should be attended by shareholders with a stake of at least fifty percent (50%); the third meeting should be scheduled within thirty days of the second meeting and should be attended by at least one shareholder.   The New CCL is only one of several significant legislative changes that have been eagerly awaited by the UAE business and professional community in recent years. There are no major changes that current operating companies need to comply with or any deadlines to be met. It is hoped that efforts to diversify the UAE economy by encouraging increased entrepreneurship and foreign investment.     ]]>Tue, 24 Nov 2015 12:00:00 GMT<![CDATA[Role of Intellectual Property in Food & Beverage Industry ]]>

    "I hate the notion of a secret recipe. Recipes are by nature derivative and meant to be shared - that is how they improve, are changed, how new ideas are formed. To stop a recipe in it's tracks, to label it "secret" just seems mean."- Molly Wizenberg, Food blogger 

      One cannot imagine a life without food. The need to eat is as natural as breathing so it must not come as a revelation that food plays a significant role in the legal scheme of things. I am sure you are wondering what we are talking about here. The food and beverage industry surprisingly involves several aspects of intellectual property law. Be it the widely recognized red logo of the coca cola bottle, the secret behind the KFC chicken recipe or the ta da da music of the McDonald's advertisement, the food and beverage industry employs it all-patents, trademarks and copyrights. It is absolutely crucial to protect one's intellectual property in the highly competitive food and beverage industry. It costs a significant sum to launch a product in the market and with the industry becoming more and more focused on using technology for processing, production, packing designs, it is imperative for any company to look after its creation by employing intellectual property law to its advantage. We are creatures of habit and as consumers we turn to products that are recognizable because of their brand so after doing all that, It is necessary to protect one's creation, it would seem worthless if someone was counterfeiting your brand to sell an inferior product.    The scope of intellectual property law in the food and beverage industry is immense and we will discuss this in detail in a series of articles in our newsletters. In this article, we are going to discuss the possibility of being able to copyright recipes. Can one claim creative rights over a recipe they created? Chefs and restaurateurs are artists that use the medium of food to express their creativity. A simple dish like a burger can be tweaked in several different ways to create new dishes. Can adding crushed black pepper to a dish that calls for black peppercorns make it into a new dish or would it be infringing upon the intellectual property rights of the original chef?    To answer such a question, one must first examine what is the purpose of a copyright. Is copyright a way to defend one's creative work to as to forbid someone copying or counterfeiting it. We must note that in the food and beverage industry, being granted copyright to a recipe can be extremely convoluted.    In the United Kingdom, copyright is an automatic  right and does not require registration as long as the product is published in a perceptible form. That being said, this basically implies that a copyright could be granted to cooking and recipe books but not to recipes in those books as this would mean that anyone employing the books to recreate the recipes published would be infringing on the author's copyright. At the same time, someone who may publish or reproduce recipes from another and present them as their own is certainly breaking the law.   On the other side of the Atlantic, the United States Copyright Office asserts that the law does not protect recipes that are listings of ingredients but the scope of the law could extend to a detailed depiction of the recipe which would include but not be limited to the cooking method, a description, explanation, or illustration, such as that found in a cookbook. The year 1996 saw the case of Publications International, Ltd. v. Meredith Corp where the US Court of Appeals vacated an injunction granted by a district court by stating that recipes generally fall under the purview of patent law and not that of copyright. The court held that in essence, recipes are to be considered procedures and processes which are to be secured by a patent and not copyright. In the year 1998, the US circuit court relied on the decision made in the Meredith case when they were presented with the case of Lambing v. Godiva where Lambing, a pastry chef, filed a case against the popular Godiva chocolatier for copying the recipe, design and development of chocolate truffle. The court adjudicated against Lambing stating that it was not possible to copyright recipes and since her instructions of the recipe had not been specific but rather vague, it was considered to be a statement of facts but not directions that were unique enough to be granted a copyright.    It must be kept in mind that creative works are the most difficult kinds of property to protect. A work of art that is not tangible and cannot be held or explained without the help of formulae or drawings can be difficult to copyright. It is opined by several legal and culinary experts that this industry is largely self regulating as the chefs involved are rather proud and would never blatantly copy recipes. The experts also believe that though recipes cannot be protected, there are several aspects of their business that require protection such as their logos and menus or even the general layout of their restaurant.   To conclude, we must notice that recipes and adapting them to one's taste and eccentricity have been the custom since the beginning of time. Cooking is an art though there are several individuals who would disagree with that statement. But when we consider the likes of Wolfgang Puck, Julia Child or Mario Batali, would you consider them anything less than artists? In recent times, attempting to copyright one's recipe is not so much about protecting the economic enrichment of a chef but rather protecting their right to be considered a creator of a certain dish. It is a detriment in the application of the law when we consider that it is impossible to protect a novel culinary idea in a dish. In the next article we will examine the role of patents and the concept of trade secrets in the ever dynamic food and beverage industry.  ]]>
    Tue, 24 Nov 2015 12:00:00 GMT
    <![CDATA[DIFC Wills]]>Lord Krishna was asked by one of his disciples what was the most astounding thing in the Universe. His answer was that a man wakes up each morning and believes that he will live forever despite knowing that he will not. Death is a morbid subject and that is probably the number one reason why individuals do not like discussing the idea of creating a will as it inevitably brings up the topic of mortality. United Arab Emirates- a country where eighty percent of the population is made up of expatriates and is under the aegis of Shariah or Islamic law, it becomes all the more imperative to have a will in place. Court Uncourt has impressed upon the importance of having a will on several occasions.    To reiterate, in the event of death without a Will, one's assets will be distributed in accordance with Shariah law, regardless of the deceased's nationality or religion. Shariah law is the law as dictated by the Islamic Holy book, the Quran which specifically dictates conditions of inheritance. Generally speaking female heirs of the deceased are entitled to half the entitlement endowed upon the male heirs. The custody of children is not automatically granted to the mother but preference is given to the male descendant from the father's family. The deceased's bank accounts and assets are frozen and the matter has to be heard by Dubai Courts before a judgment can be pronounced. All in all, the matter of inheritance where a will is not present only adds to the woes of the members of the family that have just dealt with a grave loss.    It is a fact that UAE succession law can be complicated, difficult to get accustomed to and sometimes contradictory. For example the Civil Transactions Law in article 17 no.1 states that "Heritage shall be governed by the law of the testator upon the death thereof" but contradicting the same is article 17 section 5 where it is stated that "the law of the United Arab Emirates prevails regarding the will issued by a foreigner about the real-estates thereof in the State". Therefore, the first and second instance courts will preferably choose to apply the rules and principles of Shariah to inheritance cases relating to real estate. As these principles differ from what is written in the will and from what would be the wish of the testator, the case will have to reach the Cassation stage for the testator's law to be applied. In practice only the Supreme Court can decide the fulfillment of the will as per testator's wish and as per the rules suggested and provided by the will, if solutions that are not in accordance with the Shariah Law have been chosen by the testator. It is also important to note that during the time that the courts take to reach a final decision, the assets will be frozen, which means that the heirs won't have any possibility of economic exploitation. To overcome the complication related to the same, the government of Dubai relied upon the Dubai International Financial Center to draft and execute the new law on wills that would meet the expectations of the residents and foreign investors alike. The law comes into effect on April 30, 2015 and has been described as "The first Common Law, English wills and probate service for non-Muslims in the Middle-East."    The UAE has continually evolved within the legal gambit and imbibed the best from existing legal systems from across the globe.   Thus, in an innovative action in the region and following the example of existing systems in Malaysia, Singapore and Hong Kong, for the first time in the Middle East it will be possible to register wills in accordance with international principles of Common Law before the authority that will be known by DIFC Wills and Probate Registry. The establishment of this new service is an attempt of DIFC to encourage the investment in Dubai by residing expats, providing legal certainty for the inheritance, by the existence of a simple and efficient mechanism for non-Muslims to pass on their assets after their death.   In line with the Memorandum of Understanding on this matter that has been signed by the DIFC and the Dubai Courts, the matters of succession will now be expedited and taken care of by the DIFC Courts.   These new types of will be available to anyone above the age of maturity, non Muslim, whether a resident of Dubai or not, and it will regulate the succession of any property of the testator, provided that the testator has assets in Dubai. It is essential to point out that any movable asset of the testator including but not limited to shares in a business, personal property such as gold or jewelry, gifts that the testator would like to bestow upon his relatives and/or family upon his death. Stocks, bonds, bank accounts will all be regulated by this new system. Regarding the estate, the draft of the new law clearly states that "a Will may give or dispose of Real Estate or Personal Estate situated in the Emirate of Dubai, to which the Testator is entitled at the time of his death, whether the Testator became entitled to it before or after the registration of his Will, and shall not govern succession to any other Property", which means that it is assigned to DIFC Wills and Probate Registry regulative competence not only for property situated on the DIFC, but for those located in any area of Dubai. On the other hand, if the testator has real estate in any of the other Emirates, for now, the common procedure in court will have to be followed, to the extent that this new DIFC system only have power to regulate estate in Dubai.   Another situation that has been foreseen by the new DIFC law is the appointment of an interim Guardian for a Minor who is habitually a resident with the Testator in the Emirate of Dubai. At the outset, it is important to highlight that the Western and the Sharia concept of guardian are different: if to any Western the Guardian will be someone in whom the parents will trust in case of their death to take care of their child(ren), that person could a friend, a family member or someone that the parents trust. According to with Shariah Law the Guardian will always be a member of the family. Thus, keeping this in mind and the high number of expats in Dubai; it is essential for the parents to choose someone they trust and they find suitable for the mission and appoint a Guardian. The new Rules state that the Testator who has "parental responsibility for a child who ordinarily resides with the Testator in Dubai may appoint in accordance with the applicable law of the child a Guardian or Guardians of the child" . This parental responsibilities are also defined by the DIFC as "all the rights, duties, powers, responsibilities and authority which under the law of the UAE a father has in relation to the child and his property and includes the right to remove the child from the UAE and the DIFC".    Finally, the system to register and probate the will is simple and straightforward. The interested has to make an appointment through the DIFC website. Along with the appointment confirmation, information on the requirements, the documents needed and the template for the Will would be sent forth by DIFC. Using a template is another step in the right direction as it will make the process less cumbersome. On the appointment date the testator needs to bring his/her documents, one witness, and the appointed guardian (if applicable), along with identification documents for each. The Will shall be reviewed by the DIFC and signed in their presence. A hard copy of the signed Will shall be provided to the Testator, if requested, while the original will remain under DIFC's custody to be scanned and turned into an electronic document. The same will be stored for 120 years from the date of birth of the Testator .   From a legal perspective and constant liaison with expats who reside and/or have invested in Dubai, this new system is a welcome change for those that have always been concerned about safeguarding their inheritance. It is always recommended that when partaking in succession and inheritance matters, it is highly advisable to consult legal representatives to ensure that all regulations and requirements are complied with to ensure that the Will remains valid and effective. Yes, the matter of Wills brings with it a thought of gloom but as rightly said by Benjamin Franklin that there is nothing in this world that is certain, except death and taxes.    ]]>Fri, 20 Nov 2015 12:00:00 GMT<![CDATA[Abu Dhabi Commercial Conciliation and Arbitration Center ]]>

    Evolution has created several ways of defying the unsettling consequences of disputes. In the animal kingdom, where survival is dependent on mutual respect, harmony and assistance, there is a need to maintain beneficial relationships. For example, chimps kiss and embrace after fights. As we have evolved, so have our dispute resolution methods. Arbitration is a significant development in the way trade disputes are settled between two parties. In this article, we will discuss the evolution of the Abu Dhabi Commercial Conciliation and Arbitration Centre (the ADCCAC) and its policies and procedures.

    We must take note that parties that are desirous of employing arbitration as a preferred choice of dispute resolution mechanism must incorporate a model clause into their contracts and agreements. This clause in the agreement must state specifically that in case of any dispute that is a result of the execution, interpretation or termination of the contract, the parties will attempt to resolve the dispute in accordance with the Rules of the ADCCAC.

    The first step for the either party is to file a request for arbitration to the ADCCAC with details such as names, addresses, means of communication for the parties to the dispute along with several copies of documents and relevant supporting materials. The ADCCAC collects a fee of one thousand dirhams at the time of the request for arbitration. This fee is non refundable even if the request is withdrawn or not pursued.The respondent is granted twenty one (21) days from the date of receiving the request with his preliminary defence along with relevant supporting evidence or any objection concerning the validity or applicability of the arbitration agreement. The respondent also has the right to include any remarks or comments he may have regarding the number and choice of arbitrators in case these issues have not been already agreed upon by the parties. The respondent also submits his appointed arbitrator's details, any comments regarding the venue and language of arbitration along with any counterclaims or any opposing demands that are associated with the dispute. It is imperative to note that at this stage, the failure of the respondent to reply to the arbitration request or designate its own arbitrator within the designated 21 days shall not prevent the ADCCAC from commencing the arbitration proceedings and appointing a panel in case the arbitration agreement provides for the parties to designate its own arbitrators and the respondent has failed to do the same. It shall be deemed that the respondent has waived the right prescribed for the respondent to designate its said arbitrator. The director of ADCCAC may grant the respondent an additional fourteen (14) days to submit his response at his discretion.

    If the agreement between the parties specifies the number of arbitrators, the centre will allow for the same number but in case this has not been agreed to, the default is the appointment of a single arbitrator. The individual/s nominated as arbitrator must indicate in writing his/her acceptance or state any facts such as conflict of interest which may prevent their neutrality to the matter at hand. In the course of the arbitration proceedings, if there exist new circumstances that may affect his/her impartiality or independence, the arbitrator must state the same at the earliest available opportunity. We must take note that post the appointment and acceptance of the arbitrator, the arbitrator cannot be challenged unless there seem to be specific circumstances that arise which raise justifiable doubts over the arbitrator's neutrality or independence. A challenge request must be then submitted to the director of the ADCCAC stating the reasons for the challenge along with supporting documents and evidence within a period of fourteen (14) days from the date of the challenge party being advised of the arbitrator's appointment. If the concerned arbitrator does not step down he shall submit his observation to the director within a period of ten (10) days from the date on which he receives the challenge notice.

    An arbitrator shall be replaced by another in the course of arbitration proceeding in the event of death, renunciation or upon the party's agreement to dismiss him or upon the committee's acceptance of his challenge in accordance with the previous article, or upon terminating his task pursuant to the following paragraph.

    According the revised rules which were issued in the year 2013 by the ADCCAC, the language of arbitration should be Arabic unless the parties have agreed otherwise. If the disputing parties have previously agreed to the application of law of a particular country, the substantive rules of that country shall be applied provided they do not conflict with the laws of the country. In all cases, the arbitrator decides the disputes in line with the terms of the contract and takes into consideration the related applicable commercial laws and customs.

    If the parties have not previously agreed upon a place where the arbitration shall be conducted the place of arbitration shall be Emirate of Abu Dhabi unless another venue has been specified by the committee taking into consideration all arbitration related issue and circumstances including the observation of the parties. In all cases the arbitral award shall be deemed issued at the venue of arbitration.

    The centre shall in return for services rendered by it collect a proportional fee of 15% calculated on the fees of the arbitration panel's specified in article 43 or article 44 as applicable.

    In the course of the arbitration proceedings, if the parties reach a settlement, the terms of the settlement should be submitted to the panel. In such cases, the panel issues an award on the mutually agreed terms of the amicable terms of the settlement thus bring the arbitration proceedings to a close. The consensual award has the same binding force as that of awards that are adjudicated in the process of arbitration.

    We must understand that alternative dispute resolution mechanisms such as arbitration have gained momentum in all jurisdictions not only because they are deemed cost effective but also because these methods seem to provide better opportunities for the parties to come to a mutually beneficial settlement. ADCCAC since its inception has revised its rules which saw a particular increase in the number of cases being registered at the centre especially those related to real estate and construction disputes. As the methods of dispute resolution have evolved so has the ADCCAC. In our experience with the centre, it allows a streamlined and effective approach which will continually contribute to its success. 

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    Wed, 11 Nov 2015 12:00:00 GMT
    <![CDATA[Till Breach do us apart - The Law Surrounding Prepayment Premiums ]]>

    There is a rigorous need for consistency in the market dealing with publicly traded securities as rapid advancements in the legal diaspora can add unwitting complexity to the requirements of the debtors. If the contracts between borrowers and lenders do not outline distinct covenants which comply with the local laws and precedents of the court, it can result in inadvertent and protracted litigation which can be detrimental to both parties.

      The language of a contract is inadvertently the bone of contention between the contracting parties when it presents itself as a dispute that results in or sets a tone of litigation. Here, it is imperative to note that when two parties agree to be bound by contractual obligations, it is usually the result of several hours or even months of negotiation. On the other hand, a trustee that agrees to the terms and conditions of a debt security is not necessarily a party to the negotiation or the drafting of the terms of the security but frequently finds himself wedged between the terms of the agreement and in the face of litigation. This two part series paper seeks to explore and discuss the legal effect of prepayment premiums charged by banks. The First part deals with acceleration clauses found in debt instruments and the second part with the make whole premiums which has effect of offsetting the downside risk when the borrower, after enjoying a favorable interest rate on loan during the periods of rising interest rates, unilaterally opts to prepay the loan The concept and use of make whole premiums has been used widely in variety of debt instruments and permits the borrower to redeem the debt prior to its maturity but    subject to the condition that premium is paid.  In other words, borrowers pay a charge in form of premium for prepaying the debt. One interpretation of such premium is that these charges are nothing but liquidated damages for loss of business (or; loss of revenue) to lender resulting from borrower's early settlement.    Debt instruments also provide for acceleration clauses whereby borrower's performance matures fully upon his/her breach of contract. A question that however arises is whether courts would allow and accept enforceability of contract whereby borrower upon default is required to pay:-   i) acceleration of payment of principal loan amounts; ii) accrued interest; and iii) other outstanding and charges arising from or agreed under the loan agreement.   A question therefore arises is whether liquidated damages are enforceable and whether such clauses are in fact penal and fair in nature. Liquidated damages covenants serve multiple purposes including certainty, cost and expenses incidental to proving losses and in a broad sense - serve public interest. It has also been argued that 'clauses which simply accelerate liability cannot be considered to be penalties.. the courts have usually enforced such clauses on the ground that they do not increase the contract breaker's overall obligations.'i  The other view holds that imposition of such high penalties ii are unreasonable, against the public order as well as against national interest iii.    Under what events or circumstances would courts come to rescue of borrowers and rule in their favor and treat lender's acceleration fee as unreasonable or unenforceable? This questions and other aspects relating to enforceability of such clauses as penalties under the English law were discussed and summarized in Edgeworth v Ramblas Investments . In September 2008, in the week leading up Lehman Brothers fallout, the acquisition of the Madrid headquarters of Banco Santander which was given the elucidatory name of Ciudad Financiera (Finance City) and considered the largest real estate asset in Europe; also made the headlines. Marme Inversiones paid for the acquisition by partly using financing where Royal Bank of Scotland agreed to inject Euro 1.6 billion into Marme as a syndicated loan; the remaining sum as junior debt to Marme's parent- Ramblas, a Dutch company; and other loans such as a personal loan from RBS to the two owners of Marme and Ramblas (the Ramblas).   By an Upside Fee Agreement (the Agreement) relating to the junior debt, RBS would be entitled to a significant sum as fee if certain events such as nonpayment of personal loan triggered. Royal Bank of Scotland had transferred their rights and obligations under the Agreement in favor of Edgeworth Capital. With the financial crash affecting one and all across the globe, the breach of the personal loan by Ramblas resulted and like a domino set off an event of default under the junior loan which was accelerated Capital in 2010. Upon default, Edgeworth Capital instituted an action claiming payments under the Agreement and junior loans. Ramblas conteualy / asserts that a bare reading of the Agreement suggested that no fees became due or payable under the Agreement and further that Edgeworth's claim was in form of a penalty and consequently inadmissible and unenforceable under English law. The Court held as under:- Edgeworth became entitled to claim the fee when Ramblas defaulted. The court noted that although the commercial circumstances in which the financing contracts were executed were challenging and the fact that the junior loan was essentially a bridging loan, there was a clear commercial justification for Edgeworth to charge a large fee. In deciding whether a clause should be construed as penalty or not, the court held:-   (a) a clause will be a penalty where it is "extravagant and unconscionable with a predominant function of deterrence". (b)  a clause will not be a penalty if it is a genuine pre-estimate of loss. (c) Even if it is not a genuine pre-estimate of loss it will not be a penalty where it is commercially justifiable and it can be shown that its predominant function is not deterrence.   This brings us back to the question as to whether pre-payment premiums are liquidated damages or not v .  An analysis of Edgeworth v Ramblas suggests that clauses such as acceleration clause setting out that monies must be settled upon triggering of one or series of defaults by one of the parties will be enforceable as liquidated damages as long as such claims are genuine pre-estimate of damages and are  not    not designed to pressurize or succumb a defaulting party to any pressure to perform or settle. The courts have also in other matters rejected arguments based on the premise that if contract provision includes a penalty element that also invalidates provision accelerating the payment of outstanding loan citing that the doctrine relating to penalties is not a rule of illegality but that of public policy vi vii.      Security creation in the United Arab Emirates is categorized by distinct jurisdictions developed and existing under the realm of the federal on-shore legal systems namely - i) the mainland legal system that is a civil law jurisdiction where the law is based broadly on sharia principles and French legal system; and ii) the jurisdiction of the Dubai International Financial Centre that was established in the year 2004 which is subject to its own laws and court modeled closely on international standards and principles of common law.   The DIFC Courts recognize and accept liquidated damages clauses in the agreements viii. Pursuant to Article 21 of DIFC Law number 7 of 2005 on Law of Damages and Remedies allows an aggrieved party to claim from defaulting party - the specified sum agreed under the contract irrespective of its actual loss.  Article 21 (2) of the same law provides that the amount by way of liquidated damages agreed under the contract may be reduced to a reasonable amount where it is 'manifestly disproportionate' to the loss envisaged as capable of resulting in relation to the loss resulting from the non-performance and to the other circumstances. Article 40 (2) of Law 7 of 2005 also allows DIFC Courts to award punitive damages.    Article 40 (2) reads as under:- "40 (2) The Court may in its discretion on application of a claimant, and where warranted in the circumstances, award damages to an aggrieved party in an amount no greater than three times the actual damages where it appears to the Court that the defendant's conduct producing actual damages was deliberate and particularly egregious and offensive."   Article 122 of the DIFC Law number 6 of 2004 (the DIFC Contract Law) also dealing with non- performance provisions allows an aggrieved party to claim from defaulting party - the specified sum agreed under the contract. Interestingly however, part (2) of the same article provides that the amount by way of liquidated damages agreed under the contract may be reduced to a reasonable amount where it is grossly excessive in relation to the harm resulting from the non-performance and to the other circumstances. We will examine and discuss Article 122 (2) in greater detail in part 2 of the series dealing with make whole premiums as this clause ix  forms the basis to decide whether that form of prepayment would be consistent and valid. DIFC is a relatively new jurisdiction and till date there are no DIFC court precedents that elaborately discuss the legal implications of liquidated damages causes in greater detail x .    Revisiting Edgeworth v Ramblas at this point would suggest that the provisions contained within the DIFC Contract Law as well as the DIFC Law of Damages and Remedies are consistent with commercial justification offered in the above precedent and DIFC courts would take in to account factors such as whether a clause is a genuine pre-estimate of loss, whether such clause qualifies as liquidated damages. Interestingly however DIFC Courts (pursuant to Article 40 (2) of Law number 7 of 2005) can also award punitive damages, something that will not be enforced by English Courts. Most foreign countries may also refuse to enforce Article 40 (2) on policy grounds  xi .     i) Richard Hooley, Penalty Clauses, Lecture notes dated 31 October 2008 referring to Protector Endowment Loan Co v Grice (1880) 5 QBD 592 and the Angelic Star [1988] 1 Llyod's Rep 122. ii) A penalty is in the form and nature of a punishment for non-observance of a contractual provision; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation. An award of damages on the other hand serves as compensation to claimant. iii) See Mohamed Aziz v Caixa d'Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaisa)  (2013) Case C-415/11, [2013] 3 CMLR , The national court must in particular compare that rate with the statutory interest rate, and determine whether it is appropriate for securing the attainment of the objectives pursued in Spain and does not go beyond what is necessary to achieve them. iv) Edgeworth Capital (Luxembourg) S.A.R.L and another v Ramblas Investments B.V; [2015] EWHC 150 (Comm) v) See for instance, Bank of New York Mellon v. GC Merchandise Mart, L.L.C., et al. (In re Denver Merchandise Mart,. Inc.), No. 13-10461 (5th Cir. Jan. 27, 2014) where the courts referring to Colarado law and section 506(b) of the Bankruptcy Code held 'a prepayment premium is not a remedy for breach of contract, but rather is consideration for a borrower's right or privilege to prepay (p. 5). Accordingly, a prepayment premiums is not liquidated damages and is not subject to the reasonableness for liquidated damages.' vi) Oresundsvarvet Aktiebolag v. Marcos Diamantis Lemos (The "Angelic Star")[1988] 1 Lloyd's Rep 122, Sir John Donaldson MR  said "Clearly a clause which provided that in the event of any breach of contract a long term loan would immediately become payable and that interest thereon for the full term would not only be payable but would be payable at once would constitute a penalty as being "a payment of money stipulated as in terrorem of the offending party". vii) For instance in South Africa, the Western Cape High Court of Cape Town placed reliance on borrower's argument citing that acceleration clause was abuse of lender's position and consequently against the public policy. The court relying on Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (3) BCLR 219 (CC), Paragraph 22 said 'Many people enter into contracts daily and every contract has the potential not to be performed in good faith. The issue of good faith in contract touches the lives of many ordinary people in our country' and held that email demand made by lender cannot be applied by lender to gain massive commercial advantage to the significant disadvantage of the debtor and further that acceleration clause in the present matter had draconian implications. viii) Pursuant to Article 390 of the UAE Federal Law Number 5 of 1985 (the Civil Transactions Law), parties may fix the amount of compensation in advance by making a provisions in the contract or by a subsequent agreement. This would mean that parties under UAE law are not under the legal obligation to pay liquidated damages. Further Article 390 (2) permits the courts to vary the contract executed between the parties to reflect the actual loss. ix) In addition to other laws including Article 17 of the DIFC Law of Damages and Remedies. x) The DIFC courts in (CFI 004 of 2007 between Arabtec Construction LLC v Ultra Fuji International LLC) enforced liquidated damages clause in favor of claimant. Also, in CFI 034 of 2012 Amit Dattani and Others v. Damac Park Towers Company Limited, the DIFC courts of First Instance dealing with liquidated damages held xi) Refer DIFC Guide to Enforcement - Open for Consultation dated 25 April 2012 available on difcourts.ae. 'Few courts will enforce judgments for the recovery of taxation. Many courts in the Arab world will refuse to enforce a judgment which is contrary to the principles of Sharia.'       ]]>
    Tue, 10 Nov 2015 12:00:00 GMT
    <![CDATA[ Prolongation Claim in Arbitration]]>Construction Insight:     The sight of a rainbow in the middle of a desert is a rather recherché glimpse. United Arab Emirates however, is not a conventional desert panorama come true.   Take for example the construction industry in the region. There is an interesting mix of cultures and backgrounds within the construction sector, for which UAE is often referred to as the boiling pot of nationalities. The variety of joint ventures and presence of conglomerates with diverse international backgrounds stands as a testament to above. Majority of players in this industry are world renowned and it therefore infers that the prevalence of the FIDIC 'Rainbow Suite' is not something new to this region.    Much ink has been spilled on the use of FIDIC contracts in UAE. Legal experts have dismayed the fact that UAE industry's reliance on FIDIC 1987 version of the Red Book has as a matter of fact has become a loyalty factor. The use of latest edition of the Red Book is less commonly seen. What has also been debated is the paradoxical use of an internationally standardized template in a civil law jurisdiction.  All that said, as experts in the field STA attorneys continue to witness the execution of multi million contracts in the region which are commonly inspired from the FIDIC Red and Yellow Books, and the disputes culminating from them. In this article, we will examine the extension of time (EOT) clause, compensation for it and its acceptability before UAE arbitral bodies.   FIDIC is the French acronym for International Federation of Consulting Engineer.  It is the mostly commonly used form of contract in the construction industry. Established in 1913 and since then amending and adding to the templates of construction contracts, FIDIC now constitutes a 'rainbow suite', of which includes the following (i) the Red Book (ii) the Yellow Book (iii) the Orange Book (iv) the Green book (v) the Silver Book (vi) the Blue Book (vii) White Book (viii) Gold Book. The most commonly used FIDIC templates in UAE are the Red and Yellow Books. Pursuant to Law Number 21 of 2006, the Emirate of Abu Dhabi mandated the use of 'build only contract' and 'design contract' templates in construction field for the projects initiated by the government entities.   Dispute Resolution Under FIDIC   With the customary usage of 1987 and 1999 versions of FIDIC contracts, one question that arises is the interpretation of these contracts when a dispute arises in relation to a claim for the extension of time. In line with the dispute resolution clause of fifth edition of the Red book, when a dispute arises the parties must notify the other of such dispute and refer the same to the Dispute Adjudication Board (DAB). DAB must make a decision with the specified time limit of 84 days. In the event any of the parties is not satisfied with the decision, it must send a notice of dissatisfaction within 28 days following which the dispute can be referred to International Arbitration after 56 days have elapsed and no resolution is achieved. In practice, within UAE, the Common Law qualified attorneys have advocated strict adherence to these timelines while the courts have been lenient about the time limits. The courts place reliance on facts of each dispute and the intention of the parties.    Before a matter can be referred to a court, it must be subject to the jurisdiction of ADCCAC or the DIAC if the dispute resolution mechanism is vested with the arbitration- as is the case with most standard forms of construction contracts. The governing law clause is subject to the prevailing regulations of the United Arab Emirates. Therefore, the interpretation of the contractual relationship is largely inspired by the UAE Civil Code. While the parties are free to choose an arbitrator of their choice, any decision which is in contravention of the UAE Civil Code can be challenged and no longer remains binding.    The condition precedent for a compensation claim   Construction projects are subject to risk of prolongation on account of different reasons- a force majeure event, late mobilization of plant, amendment to scope of work, so on and so forth. Clause 20.1. of the Yellow Book sets out a 'condition precedent' for a claim of EOT. The clause states that:   "If the Contractor considers himself to be entitled to any extension of the Time for completion and/or additional payment, the contractor shall give notice to the Engineer, describing the event or circumstances giving rise to the claim. The Notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, or should have become aware, of the event or circumstance.   f the Contractor fails to give notice of a claim within such period the Time of Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. "   The above clause read in conjunction with another clause 8.4 sets out a clear mandate that the contractor must set out his concern when an event of delay has been triggered.      The cause and effect link   When assessing the compensation for extension of time or project prolongation costs, the burden of proof lies on the claimant to prove that a 'delay event' occurred and that it suffered a loss due to the same. However, FIDIC templates do not provide for calculation of compensation in the event an extension of time is invoked. This leads to several interpretations of the FIDIC templates. Internationally, the Delay and Disruption Protocol published by the Society of Construction Law (SCL) has been accepted in assessing the EOT claim. Several guideline notes form part of the protocol. The protocol covers important concepts relating to 'global claims', 'float', 'concurrent delays', role of the contractors administrator and disruption.    The SCL protocol identifies the need for recording a project's report through a specialist. It lays emphasis on the actual expenses and actual overhead during a disruption or prolongation period.   When a party brings a claim for EOT and aims to claim compensation towards the same, it must realize the significance of identifying the 'delay event'. Most contractors rely on the fact that the project was delayed and bring in claims for compensation. Primarily, delay claims fail due to the lack of supportive documents to establish that the delay was not concurrent. In other cases, parties are able to access the losses incurred by them including overhead expenses but fail to establish that such loss was due to a delay event on party of the other party. This vacuum between the loss incurred and reason by virtue of which the loss accumulated is seldom identified by parties in the dispute.   Key Point    Generally speaking, the reason behind a rather naïve understanding of above concerns is that most contracting parties assume a contract template to be enough for protecting their interests. Contrary to the aforesaid, it is the continued legal support for a project and inclusion of local laws that forms a deciding factor in assessment of prolongation compensation.   Claims subject to the jurisdiction of ADCCAC and DIAC are governed by the UAE legislation. In this regard UAE Civil Code has a dedicated chapter 'Muqawala' which addresses the relationship between the parties.  The arbitral bodies in such cases are required to rely heavily on UAE Civil Code provisions rather than internally set guidelines.    STA has a specialized Construction and Real Estate practice that works closely with the Arbitration practice. The above article is a general overview - if you have any specific queries you may contact us on the details overleaf.  

     

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    Mon, 27 Jul 2015 12:00:00 GMT
    <![CDATA[Copyright Infringements ]]>

    I'm sure someone has told you, "I have an idea"! And when someone has an idea that is (or is believed to be) great' the question is - how can they protect it? But did you know that an idea cannot be protected under the copyright law? 

      Or did you know that in the United Arab Emirates the financial rights of the author are protected all through the lifetime of the author and fifty years thereafter, commencing as of the beginning of the calendar year subsequent to the author's death? In fact, what do we know about intellectual property? The truth is that this is definitely a "new area", unfamiliar to most of the people - but is one which moves millions of dollars every year all around the world. Everything from the paintings we know, the books we read, the music we listen to (and the so-called plagiarism associated therewith) is all covered broadly by the practice area of intellectual property, and specifically by copyright law.   But let's start from the beginning - what work  is protected by copyrights?   Within the United Arab Emirates, copyright matters are regulated by the Federal Law Number 7 of 2002 concerning copyrights and related rights (the Law). Article 1, concerning the definitions, defines work as "Any innovated work, in literary, artistic or scientific domain, of whatever type, manner of expression, significance or purpose", and the author as being "the person who creates the work, any person whose name is mentioned thereon or if, upon publication, the work is attributed to him as being the author thereof". The Law also considers author "whoever publishes anonymous or pseudonymous work, or in any other manner, provided that there is no doubt as to the true identity of the author".   The Law is very specific with regards to the scope of its protection, defining which works are protected by copyright (Article 2) and which works fall outside of its remit (Article 3). Accordingly, books, computer programs, musical compositions with or without words, architectural works, speeches, illustrations, or photographic and analogous works shall be afforded the protection of copyright, whereas ideas, procedures, work methods, mathematical concepts, abstract principles and facts shall not. But let's focus on the work itself - for the most part, Article 2 appears clear when listing the type of works subject to protection. However, it lists as item 12 "derivative works", stating that these should be "subject of protection without prejudice to the protection prescribed for the works from which it has been derived". "Derivative works" appear much harder to conceptualize, and even to distinguish from plagiarism. In order to explore the concept of "derivative work", we should therefore start with the work itself.   So how is a "work" born? When an author creates a work, usually he will have in mind his collective heritage, and will base his creation on the world around him. Therefore the work will always be influenced by whatever the author absorbs, from howsoever he perceives the world, either through his senses or through his intuition. Ultimately the author ends up reflecting on his work a hint of his personality beyond that which he felt about what he perceived – the work will therefore be unique because of the creative process involved.   However, instead of the collective heritage, the author may also base his new work on a previous work. He can use pre-existing work as inspiration - a concept known as creative essence - and by printing his personal touch and reflecting his personality in it, he will create a new work. This will be a "derivative work". Thus, while maintaining the spiritual connection between the two works – which means that the first work is still recognizable within the second - the creativity that the author prints to the second is the "key" for it to be autonomous and independent of the former.   It may sound complex, but it is important to note that the concept of derivative work covers everyday examples as common as translations, music remixes or cinematographic sequels wherein the characters we know are re-utilized for a new work (either by the same author as the first work or by a different one).   As in any matter involving intellectual property rights, this distinction is not easy. In order to assess whether we are still before the first work or before a derivative work it must be taken into consideration whether the derivative work is the result of a transformation of a pre-existing work. This will involve three essential elements: the existence of an earlier work, an additional effort of creativity on this earlier work and the fact that this new work, due to the creativity applied to the pre-existing work, became an autonomous work, and as such likely to be covered (either fully or in part) by copyrights.  Here, the author of the derivative work will be afforded exactly the same rights as the author of the original work has on that pre-existing work.   It seems important to note that it is not mandatory that the pre-existing work is protected under the copyright law. Derivative work can also be inspired by works that have already fallen into the public domain, and this will not prevent them from being susceptible of protection for all its content – for example, the translation of a classical work that has already fallen in public domain. In this case there will be no need to obtain permission from the author of the pre-existing work prior to translating the same, as it has already fallen into the public domain. The derivative work will be protected like any other derivative work nonetheless. It is also relevant to state that there may be variations of derivative works – in other words, it is not required that the pre-existing work was an original work. There are not only first-degree transformation but also, second, third, and so on – that is to say, derivative works inspired by derivative works.   It is of further significance that the Law establishes that the derivative work enjoys its protection "without prejudice to the protection prescribed for the works from which it has been derived". In other words, it means that a derivative work must always be authorized by the author of the pre-existing work . Article 7 of the Law states that "the author alone and his successors, or the owner of the author's right, may authorize the exploitation of the work in any manner whatsoever", listing some of the different ways in which this may be achieved. If the author grants this right, it is important to clarify that the author is not selling his right or allowing plagiarism, he is simply allowing someone to create something new, with his original work as starting point.   However Article 21 grants an exception to this right of the author, stating that "any person may request from the Ministry to be granted a compulsory license for reproducing and/or translating any work protected (…)". Those "licenses shall be issued, pursuant to a justified decision, in which is specified the scope of time and place of its exploitation as well as the fair consideration due to the author, provided however that the objective of issuing such license shall always be restricted to the fulfillment of the requirements, of all kinds and on all levels, of education; or the requirements of public libraries and archives".   Another exception is the fair use. This doctrine defends the possibility of using the original work without permission in some special cases, most of the time as defined by Law. The UAE copyrights law contemplates this possibility as Article 22, stating "without prejudice to the moral rights of the author provided for in this law, the author may not prevent third parties, after the publication of his work, from performing any of the following acts", going on to list circumstances which shall not be considered as infringement of the copyright of the author. The most well-known examples are the use of the work in a study or research, education or citations within the customary limits of the work for the purpose of criticism, discussion or information, where the source and name of the author are cited. It is of extreme importance to stress that minor changes without authorization from the author will be considered as plagiarism, even where a new work derived from or based on a pre-existing work is concerned. Any lack of authorization or license from its author it will be considered a copyright infringement.    Let us consider works of fiction. If I make a sequel of a movie or a book, with the same characters as the original, how will copyrights apply to the old characters? Will they be considered as part of the derivative work and accordingly be granted new protection? Unfortunately not. In this case all the new elements will be granted new protection, but the original protection granted to the first author with regards to the old elements will apply during his lifetime and fifty years commencing as of the beginning of the calendar year subsequent to the his death. The same will apply for a remix of a song or piece of music - the old elements will keep the originally-afforded protection, whereas new protection will apply to any original additions thereto.    So what if I am the author of the first work? Will any derivative work (inspired by my original work) produced by me be granted protection? It depends. Obviously, as it is my work I won't need any special license or authorization to use it, however to be considered as a "new work" my creation will have to contain a "new" element in order to render it a derivative work. Minor changes won't be enough for its recognition as a derivative work - I will have to innovate and present a work different from the first work in order for new protection to apply.   Thus, in a world in which sequels, remakes, translations and remixes are part of everybody's life, copyright protection is a subject that we should all consider in order to avoid trouble.  We have to bear in mind the topic involves many grey areas, where plagiarism, old work and derivative works often appear indistinguishable. The best approach in order to avoid problems would therefore be to consult a specialized lawyer before using any pre-existing work.     ]]>
    Thu, 23 Jul 2015 12:00:00 GMT
    <![CDATA[Arbitration in Qatar ]]>

    Having discussed Arbitration in the UAE in Court Uncourt Volume I, we shall now turn to Arbitration procedures in other GCC countries. 

      Nonchalant observation of creatures such as birds, cats, dogs and primates distinctly characterizes the fact that dispute and dispute resolution are not concepts confined to the human race. All animals settle dispute by resorting to conflict – but whereas gorillas may beat their chests, skunks may emit scent and cats may sink their teeth into one another, human beings have developed somewhat more sophisticated dispute resolution mechanisms (thankfully – otherwise many lawyers may have reconsidered their career choices). Traditionally, the most commonly-utilized process among such methods was litigation – a mechanism which may involve not only the immense expenditure of time (months, or even years), but also mounds of paperwork (or nowadays- billions of bytes of digital information), and equally large costs. In modern times, however, contracting parties have begun to pay greater attention to other dispute resolution forums – most notably, arbitration.   Historically, GCC countries were wary of commercial arbitration owing to the way in which western law appeared to have been applied in lieu of Arabic law during oil concession disputes in the early 1950s.  Following its loss in the Aramco arbitration, the Council of Ministers in Saudi Arabia issued a decree generally prohibiting arbitration in any dispute to which the government or any ministry or government agency was a party1  unless in "exceptional cases".   Yet despite its historical unpopularity, international arbitration has become a dominant mechanism in the resolution of commercial disputes involving GCC- based entities.   As an emerging player in the GCC's fields of investment, development and commerce, Qatar has, in turn, established its own mainland arbitration centre in order to cater for parties wishing to utilize arbitration as their dispute resolution mechanism. And just as Dubai's independent international financial centre (DIFC) hosts its own centre of arbitration, so Qatar's newly established jurisdiction, Qatar Finance Center (QFC) has established its own alternative arbitration tribunal to which disputes may be referred., the state still requires a lot of improvements to stand out as a world class arbitration hub such as London, Paris, and Singapore. Lot more areas to be worked upon are its court system other areas like corruption and rule of law.    Regulatory bodies for Arbitration within the jurisdiction: There are therefore two legal arbitration jurisdictions in Qatar: the State of Qatar and QFC.  The State of Qatar, being a member of the GCC, is a signatory to the rules and procedures of the GCC Commercial Arbitration Centre (GCAC).This has its seat in Bahrain, but the awards rendered thereby are recognized in Qatar. In addition, the Qatar Chamber of Commerce and Industry established the Qatar International Center for Commercial Arbitration (QICCA) in 2006.  As a free zone, QFC has its own jurisdiction and consequently its own individual regulations..    Requirements for Arbitration in Qatar:  To date, there is no independent national arbitration law in Qatar. Instead, arbitration is incorporated into Qatar's other legislation - specifically within Law Number 13 of 1990 entitled The Civil and Commercial Code of Procedure (the Civil Procedure Code) at Articles 190 – 210. The provisions deal with: (i) The formalities required for a binding arbitration agreement; (ii) The appointment and dismissal of arbitrators; (iii) The right of a party to apply for a stay of court proceedings given the existence of an arbitration clause; (iv) Timing; (v) The granting of an award; (vi) Challenge of the award; and (vii) arbitrator's costs.   As an emerging global presence, Qatar has an avid desire to be internationally recognized for more than just its successful world cup bid and the wealth it has amassed from its lucrative oil and gas reserves. While addressing a symposium on "Arbitration and Alternative Dispute Resolution in Banking and Finance," Sheikh Khalifa2 , expressed:      "Arbitration as a dispute resolution process has tremendously boosted foreign investor's confidence in Qatar and the region. We have learned from history that conflict exists wherever humans exist. However, in Qatar we strongly believe in the power of sincere arbitration whether it is in the political domain or business and finance sectors. Qatar's efforts to arbitrate go beyond the finance and business sectors. We remain the biggest proponent that conflict can be resolved through dialogue and harmony. This constant struggle to be a just arbitrator has made Qatar a preferred mediator for conflicting parties from Lebanon to Darfur to the Philippines"3.     Appointment of Arbitrators:  The appointment of arbitrators is governed by the Procedural Code. The appointment has to be agreed in writing by the arbitrator, unless they have been appointed by the court. Minors, people in custody, and certain other categories of people are prohibited from being appointed as arbitrators under Articles 193 and 194 of the Procedural Code.   A party may make requests to the original court of jurisdiction if: (i) it seeks to challenge the appointment of an arbitrator (Article 194); (ii) it seeks a court appointment of arbitrators (Article 195); (iii) it wishes to extend the time period for the proceedings (Article 197); and/or (iv) it wishes to compel a witness to attend proceedings or a third party to produce documents in evidence (Article 200).   Once an award has been made by the tribunal, it must be filed with the court that originally had jurisdiction - the successful party must then apply to the court for leave to enforce the award.  This is in contrast to arbitration procedures in Dubai, whereby the case is only referred for enforcement at the discretion of the successful party when the unsuccessful party is unforthcoming with regards to payment. Awards may be challenged and are subject to review by the original courts of jurisdiction as per Articles 205 and 206.      Challenge the appointment of an arbitrator:  The appointment of arbitrators must be challenged within five days of notification of the appointment (Article 194 of the Procedural Code). Arbitrators may also be dismissed by the mutual consent of both parties. If there is disagreement between the parties, then, in the absence of any specific procedure set out in the arbitration agreement, the tribunal may be appointed by the court. The court's decision is not subject to appeal, although a decision refusing to appoint arbitrators may be subject to appeal within 15 days as per Article 195.   Provisions for appeal of arbitrator's decision and time limits:  The Procedural Code provides that leave for appeal is subject to the same rules as an appeal against a court decision. Any appeal must be lodged at the competent court of appeal within 15 days from the date the award was made, pursuant to Article 205 of the Procedural Code. Arbitral awards may also be subject to a request for review by the court that would otherwise have had jurisdiction in the matter, again subject to the rules applicable to court decisions as provided in Article 206. If a request to set aside the award is submitted, the enforcement of the award can only be suspended, unless the court makes a decision under the purview of Article 208. The arbitration award can be set aside according to the rules of the court of original jurisdiction IF:(i) the award was made in the absence of a valid agreement to arbitrate; (ii) the award breaches the scope of the arbitration agreement, or the rules of public order or good morals in Qatar; (iii) the arbitration agreement is not made in accordance with the rules set out in the Procedural Code; (iv) the arbitrators who made the award were not correctly appointed; and/or (v) the award was void or there were procedural flaws in the arbitration. If the award is set aside (either entirely or partially), the courts may refer the dispute back to the tribunal, or may themselves decide on the merits of the case if they have jurisdiction to do so as per Article 209.   Conclusion:  Despite the arbitrational provisions already in place, it may be argued that the State of Qatar should now consider developing a separate commercial Arbitration Law in order to remain prevalent within the modern field of international arbitration.  The nation may be well-advised to heed the approach taken by Egypt in this regard – namely, to adopt the UNCITRAL Model Law along with relevant amendments. However, regardless of the format that any new arbitration law may take, it is agreed amongst practitioners and commentators that reforms are needed in order to ensure that arbitration in Qatar keeps pace with arbitration as practiced in neighbouring GCC countries.         ]]>
    Tue, 14 Jul 2015 12:00:00 GMT
    <![CDATA[Cross-Border Crime and Extradition ]]>FCPA) in 1977, was considered as a global authority in anti-bribery legislation, it is now acknowledged that bribery as an offence is not confined to dealings with public officials exclusively. The fact that individuals (natural and juridical persons) are equally as culpable in involvement in bribery as commercial organizations and foreign public officials are is therefore paid due consideration in more recent legislation, and particularly in the UK Bribery Act 2010 (UKBA). Effective as of July 2011, the UKBA is now considered by many as being the most rigorous anti-corruption legislation in the world, superseding the FCPA and its various contemporaries. Unlike most pieces of legislation in force in the UK, the UKBA is applicable across all three jurisdictions therein, namely Scotland, Northern Ireland and England/ Wales. However it additionally has such international trans-jurisdictional enforceability that those charged with acts criminalized thereunder may be prosecuted by the specified authorities no matter where in the world the crime was actually committed, so long as they are connected to the UK in any manner outlined by UKBA Section 12 As previously discussed, the UKBA has extensive scope not only in terms of jurisdiction, but also by way of the variety of offences incorporated. Whereas the FCPA focusses primarily on the bribery of foreign officials, the UKBA establishes the far more basic offences of 1) bribery and 2) accepting a bribe. Pursuant to Section 1, the straightforward premise is that a person  shall  be guilty of an offence if he offers a financial (or alternative) advantage to another with the intention of inducing or rewarding him for improperly performing a relevant function or activity, with the offence of receiving a bribe defined at Section 2 as being the receiving or requesting of the same. Under Section 3, a "relevant function or activity" may be:   (a) Any function of a public nature;  (b) Any activity connected with a business; (c) Any activity performed in the course of a person's employment; or (d) Any activity performed by or on behalf of a body of persons   (whether corporate or unincorporate),     if the person performing the function or activity is expected to perform it in good faith; the person performing the function or activity is expected to perform it impartially; and/or the person performing the function or activity is in a position of trust by virtue of performing it. It seems reasonable to assert, then, that although the act of the aforementioned mischievous teenager looking to pay for his brother's silence does not fall within the remit of the UKBA, the "ordinary man" is far more likely to run afoul of these provisions than those contained within the FCPA. Yet in addition to introducing every-day bribery offences, the UKPA has preserved the principle function of the FCPA by also considering the bribery of a public foreign official. In simple terms and pursuant to Section 6(5), a "public foreign official" may be defined as a person holding a legislative, administrative or judicial position of any kind, (either appointed or elected), in a country or territory outside of the UK, or acting as an official or agent of a public international organization. Of course, such a definition is plagued with ambiguity, with "administrative position" in particular having an unidentifiably large scope. What would happen, then, if there is irrefutable evidence to suggest that a person has committed an offence in bribing or attempting to bribe a public foreign official, where the "public foreign official's" role may be defined in such a way that it falls outside the remit of section 6(5)? Fortunately, the Act pays due consideration to this potential scenario, and would allow for prosecution under Section 1 PROVIDED THAT the element of "improper performance" by the official can be demonstrated.   The three provisions discussed thus far create the impression that the perpetrators of bribery offences are rogue individuals acting of their own volition. Although it does not go so far as to introduce a separate provision under which a commercial entity may be prosecuted for actively pursuing acts of corruption, the Bribery Act does create criminal liability for entities failing to implement measures to prevent bribery amongst its members. Under Section 7, a commercial organization may be found guilty of such an offence if an associated person bribes a third party with the intention of procuring or retaining business or advantage for the said organization. Pursuant to Section 8(3), an "associated person" may be an employee, subsidiary or agent of the commercial entity in question, although Section 8(1) provides that such definitions are without limitation, and any person performing services for the entity in any respect may be considered as "associated". In order for the entity to be prosecuted, there must be sufficient evidence to suggest that the associated person would themselves be convicted under Section 1 (bribing) or Section 6 (bribing a public foreign official), however there is no requirement necessitating that the associated person must be subject to prosecution or readily-convicted in order for the entity to become liable to proceedings. That said, the two different parties to the instance of bribery (namely the associated person and the entity) may each be prosecuted simultaneously – the associated person for the bribery, and the entity for failing to prevent it. Moreover if there is evidence to suggest that a person representing the corporate 'directing mind' bribes/encourages or assists someone in giving or receiving a bribe, then the company may also be charged with a Section 1 or Section 6 offence in addition to that provided under Section 7. It is also worth noting that Section 7 does not require the associated person to have any connection to the UK whatsoever (as per Section 7(3)(b)) – the entity will still be liable so long as it was incorporated in the UK, or carries out any of its business therein. It therefore seems reasonable to assert that the UKBA has placed commercial organizations under a tremendous amount of pressure to implement stringent procedures to control corruption.   Generally speaking, a person suspected of an offence within a UK jurisdiction will be investigated by the relevant police force and, further to permission from the relevant charging authority (usually either the CPS or the police via an Evidential Review Officer), will be charged and committed to the criminal court under the prosecuting authority of the Crown Prosecution Service (CPS). For those suspected of offences under the UKBA, however, the process is somewhat more complex. In the first instance, the allocation of investigative responsibility will be dependent on the location in which the offence was committed. As we have discussed, an offence occurring overseas may be prosecuted under the UKBA, so long as the perpetrator is connected to the UK in any manner prescribed by Section 12 – however the responsibility for investigating such an offence will fall upon the Serious Fraud Office (SFO), as opposed to any UK police force (although the police may assist). If the SFO has investigated a case and permission to prosecute is awarded pursuant to the foregoing, then it shall also be responsible for prosecuting the same – in other words, a matter will not be referred to the CPS. Accordingly, the CPS shall prosecute any matters investigated by the police, whether within the UK or overseas. Yet it is a distinguishing feature of the UKBA that, as per Section 10, the initiation of proceedings thereunder requires the personal express consent of the respective authority (namely the Director of Public Prosecutions (DPP) for offences prosecuted by the CPS or the Director of the SFO)2 . This differs greatly from the prosecution of the very vast majority of offences under UK law, whereby consent may be delegated to a Crown Prosecutor. Each case is therefore afforded a significant amount of individual attention, and the various considerations of UK prosecutions (such as the sufficiency of evidence and whether prosecution of the matter at hand is in the interests of the general public) are considered fully.   As "either-way" offences, individuals charged pursuant to Sections 1, 2 and/or 6 may be dealt with in either the Magistrates' or the Crown Courts, with the range of penalties varying accordingly. It is of note that the UKBA is one of the very few statues enforceable in England/Wales which specifically provides for a 12 month custodial sentence for an either-way offence on summary conviction, with the majority of criminal laws capping summary sentence at 6 months (despite the 12 month allowance prescribed by the Criminal Justice Act 2003). On indictment a custodial sentence may extend as far as 10 years, subject to the discretion of the presiding judge and in keeping with Sentencing Guidelines. Individuals are also liable to fines, with the mode of trial/venue of sentence determining the upper limit. Of course, companies, commercial organizations and other entities convicted of such offences may not be sentenced to terms of imprisonment, therefore fines are the only available option in the event that the convicted party is anything but an individual. Likewise, commercial organizations convicted under Section 7 are liable to a fine, BUT such matters are indictable only and are therefore reserved to the Crown Court exclusively. Notwithstanding the imposition of any financial penalty upon an individual, commercial entity or organization, the proceeds of any alleged incident of bribery may additionally be subject to confiscation and eventual forfeiture under the Proceeds of Crime Act 2002.   It is undeniable that the UKBA is an internal triumph when considering the UK's own jurisdictions, as it supersedes dated and inadequate statutes whilst leaving the common law offence of bribery in force. In doing this it provides an instrument via which significant offences of bribery – particularly those committed at the expense of corporate, commercial or public justice – may be given due weight (it is of note that the first person prosecuted under the UKBA was a Magistrates' Court clerk). But what of its international effects? Although acknowledged as a rigorous and thorough law, the UKBA's reputation is not necessarily advantageous. The absence of the element of "dishonesty" in any UKBA offence, for example, has the effect that acts which are acceptable elsewhere in the world become criminalized thereunder. It has been argued that this places the UK at a competitive disadvantage, as it acts as a deterrent to investors who would have to alter their otherwise-acceptable practices in order to avoid criminal liability. Yet returning to the words of Mr Clarke, any investor will surely acknowledge that bribery is an offence which causes repercussions on a global scale, with individuals, companies and societies as eventual victims. Despite the fact that various practices may need amending to ensure compliance, it is undoubtedly the case that tough legislation such as the UKBA is, overall, in the best interests of all parties. Unless you are a "Crown body" of course. In which case, you're exempt…  

     

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    Fri, 10 Jul 2015 12:00:00 GMT
    <![CDATA[HOTEL MANAGEMENT AGREEMENTS]]> Agreeing with your spouse to reimburse him or her after a shopping trip? A contract. Buying a plane ticket? A contract. Signing an offer letter from an employer who has offered you a job? A contract. A multi-page complex document laying out the terms and conditions of a high-value corporate deal? A contract. 

    Does contract law really serve any purpose? If so, why do businessmen often resort to and rely on 'a man's word' knowing that a transaction may involve inherent risks?i  Even in the current investment climate, are contracting parties now employing more sophisticated or advanced risk planning and management policies or pleasantries and ambiguity in contracts still continue to operate?  If the objective of contractual clauses is to cement the relationship between the parties then why is such binding effect often flexible and informal? Would imposition of strict legal sanctions disrupt the relationship of two contracting parties? The term contract as per standard contract law textbook theory is nothing but meeting of 'wills' or 'minds'. If the will is really free, why can it not change its mind? ii Will holding parties strictly to their promises, ' operate harshly and unfairly in many instances?'ii

    By way of example, in the infancy stage of a transaction the parties are willing to accommodate the needs and demands of the other. But as with all infants, they grow up to be toddlers who now demand more and eventually into teenagers who cannot agree on anything. This is where future planning and drafting of agreements that relies on contract law plays an important role. Contract law indisputably forms the nucleus of most arrangements as it dictates, supports and controls the millions of agreements that collectively make up our economic nexus. Commercial transactions require parties to assure each other of certain rights and obligationns. This is where Contract law comes into play- both when drafting the terms sufficiently so as to ensure that the contract will be upheld in a court of law and in case where either party defaults on its obligations.

    In order to understand how different a real deal is from a paper deal, sophisticated investors who have clear requirements often engage seasoned counsels and financial advisers in the planning process. When speaking of sophisticated and complex investments, the hospitality industry becomes a dire favorite discussion, primarily because the complexities and stakes involved in building, operating and managing a hotel property are intricate.
    law comes into play- both when drafting the terms sufficiently so as to ensure that the contract will be upheld in a court of law and in case where either party defaults on its obligations.   Dubai's thriving hotel industry recorded an average occupancy of approximately 85 percent in 2014. The statistics suggest that Dubai's, and on a broader note UAE's, hospitality landscape presents a significantly healthy prevalence of hotel operation and hotel management agreements therein.  
     

    As the Middle East began to develop in the 1970s and 1980s and the subsequent need for hotel accommodation arose, the large international chains were first on the scene. Given the open and predominantly empty market such chains were free to enter into management contracts on their own terms. Yet as development continued and the tourist industry flourished in the 1990s, competition increased and owners began to insist on retaining more control over their properties in order to maximize their operating profits in the booming market. Predictably, the growing  market attracted further investment, thus having the effect that the number of operators in the Middle East increased. Strong competition within the industry has consequently resulted in incentive fees, shorter contract periods, fewer renewal options and strict performance clauses. The dynamics of hotel industry and hotel management contracts have clearly witnessed a dramatic change in recent years. The first installment of this two part series aims at covering some of these changes along with the broad areas of hotel management agreements in the UAE. In Part II (to be covered under Court Uncourt Volume II, Issue III) we will be looking at the different forms of hotel management arrangement in UAE and Qatar.

    Unlike in the past, where American and European hotel operators predominantly had a fair share of footprint in managing hotel industry across the World, today developments in the field of science and aviation have increased opportunity for travelers globally, thereby increasing demand for hotels and a subsequent dilution in the once prevalent dominance. Although the power of international brand name continues to enjoy its privileges, competition in the hotel management industry has evidently resulted in the entry of new players, new ways and productive means of negotiating the hotel management contract with the owners. This competition is indeed healthy and allows operators and owners to fully determine the synergies and prospects before executing the deal. Based on experience, let's take the case of a hotel management contract that is due for renewal.

    ABC is the owner of a plot and appointed JKL as their hotel operator almost fifteen years back. The term of the hotel management contract was limited to fifteen years, and ABC and JKL will now need to sit and re-negotiate the terms of renewal. Emphasis here is on the 'renewal' process and technicalities surrounding therewith. Prior to or during the course of renewal, each party is likely to have thought over the renewal process and those terms of negotiating the contract that will serve theirbest interest. During the process, each party is advised by their counsel on conditions precedent for renewal under the present contract. One of such conditions agreed mutually by owner and operator is refurbishment of the hotel property. The Parties are now posed with some serious questions including but not limited to the following:-

    1-Treatment of employees during the refurbishment – whether the employees must be terminated from the existing pay roll, be retained or whether only key employees must be retained;

    2- Role of operator during the refurbishment process and payment of management fees if the contract is silent in this regard;

    3- Possibility of operator entering in to a non-disturbance agreement with owner for smooth operation of the hotel property and to ensure revenue generation is not hampered;

    4- and Provisions relating to sale of hotel by owners and valuation of hotel property

    The hotel management agreement, considered by many as cliché, is infact one of the key documents that acts as a moderator in defining the ownership and operation roles. Regardless of ABC and JKL's respective positions, both are subject to the effects of the way in which the hotel is managed, and thus would mutually benefit from a contract structured in such a way so as to include the following provisions:-

    -Term of appointment;

    – Operator's fees; 

    -Operator's obligations and guarantees;

    – Owner's obligations;

    – Reserve Fund – Furniture, Fixtures and Equipment;

    – Capital expenditure and insurance;

    – Termination and events of default;

    -and – Dispute resolution procedures

    There is no denying that Dubai is set to see rigorous growth in the hospitality sector by 2020. The year 2014 saw positive amendments for the licensing of hotels in the region. Dubai Department of Tourism and Commerce Marketing (DTCM) formed a specialized office to oversee the licensing and approval procedure for hotels, and at the same time the period for preliminary consent was reduced to two months, as opposed to the earlier six months period. The Government now aims to provide land for development of three and four star hotels on favorable terms. It also aims to waive off the ten percent Municipality tax for hotels that are due to be operational by 2017. As such, foreign investors have varied options ranging from choosing a joint venture partner or owning and managing properties in designated areas.
     

    While the options seem too many and too lucrative, a prudent party to such contract would not ignore the conservative nature and the infancy stage of legislative reforms within the hospitality domain in this part of the world. As the introduction to this article suggests- it is never the 'getting in' of a contract which causes trouble, but the 'getting out'. Dubai has and continues to witness its fair share of court battles between parties that were once allies in hotel operations. Regardless of internationally acknowledged boiler plates, the need to intrigue local and legal customary usage remains a driving force for successful ventures in the UAE.

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    Fri, 10 Jul 2015 12:00:00 GMT
    <![CDATA[Can You Choose Your Judge? ]]>  

    For a variety of reasons, it is highly likely that most people's instincts would incite them to answer "no"! However if we peruse UAE legal texts we will find that actually, in most cases, the answer will be "yes"! 

      Litigation is one of the basic rights guaranteed by most world constitutions, as well as the Universal Declaration of Human Rights. In fact, a state of institutions and laws cannot be achieved unless it gives the right of litigation to all citizens and residents living upon its land. Laws merely organize how to litigate and outline the procedures which should be followed, and courts are formed and judges are appointed based on these laws.   When a person resorts to litigation, he or she submits a statement of claim that is reviewed by a judge or a bench of judges. To this extent, the litigant in question will usually have no input in choosing the judge or judges. However, in the event that a person desires to choose a certain court or judge to adjudicate his case for any reason, is he allowed to do so or not?    Based on a study of the judicial system, it is clear that a person may choose his judge and/or the court in which his case is heard. In some cases if the law does not grant the right to choose any judge or tribunal, but the right to choose the same from a given list. An example of such would be a case in which multiple courts had jurisdiction over a certain dispute, and the claimant may therefore choose the court that it desires. The law also allows people to agree that a certain court shall have the jurisdiction to consider any disputes that may arise. However a case may be filed in an alternate court rather than the one considering the case, and then be transferred. It is worth noting that there is a clear provision in place allowing for the nomination of  an arbitrator in cases whereby arbitration is the agreed dispute resolution forum. Consideration should also be given to cases whereby a party finds out that the judge considering his case has made a fatal error or cheat in his work – here, he shall have the right of adversarial against the judge in question pursuant to the procedures set by law. This is eventually a choice of judge.    Based on the foregoing, then, it appears that the following are all areas of consideration when answering the question posed by this article:   1. Agreement on the jurisdiction of a certain court 2. Choosing from among many specialized courts 3. Transfer among courts  4. Choice of the arbitrator  5. Disqualifying judges and arbitrators   1. Agreement on the jurisdiction of a certain court    When agreeing a contract, the parties to the same may nominate the jurisdiction for the governing of any dispute that may arise concerning the contract's interpretation or execution. This agreement will confirm assent to the court competent for considering the dispute. For example, if both parties to a commercial contract are headquartered in Dubai and the contract is signed in Dubai, it is likely that the agreement will state that the Dubai Courts shall have the jurisdiction to settle any disputes. In this situation there are no obvious problems. However, an agreement may also defer jurisdiction to a court other than the one holding clear geographical jurisdiction. For example, the parties may agree to submit to the jurisdiction of the courts where the claimant's headquarters is located. This is so as to ensure that the rules of local jurisdiction are set in favor of the opponents and have no relevance to the public system. Therefore, parties may agree on contradicting such rules. However according to Dubai Court of Cassation the jurisdiction in Dubai is a judicial entity that is independent from any federal judiciary, and that Dubai courts shall have jurisdiction over all disputes except for the disputes specified by article (102) of the constitution. Such courts shall be limited to their competences without negative or positive contradiction, meaning that they shall not waive their competences and shall not take on competences of other national courts. Jurisdiction in this way is a public system and parties may not agree on contradicting it - but based on the foregoing this is not relevant to local jurisdictions that are considered between courts of the same judicial department.     It is important to note that no agreement between parties may breach procedural jurisdictional laws at state level. An example here would be the way in which parties to a leasehold contract cannot contractually vest the jurisdiction of any disputes in the courts, when state law requires that all rental disputes must be referred to and considered by the rents committee or rental dispute resolution center. Likewise, parties may not agree on the jurisdiction of the plenary court (consisting of three judges) to consider a case within the jurisdiction of the partial court that is composed of a single judge, and may not agree that the Dubai Court shall have consideration of any dispute concerned by the Abu Dhabi Court.   2. Choosing from among many specialized courts    Law may provide for the jurisdiction of several courts at the same time, thus meaning that a claimant may choose from amongst the same. For example, the Personal Status Law provides that jurisdiction in expenses claims matters is vested in the court of the Emirate in which the plaintiff or defendant is resident, whereas the Civil Procedure Law states that the competent court shall be the court in any Emirate where any of the defendants, if they are many, is resident. The fact that a party has to choose a court from amongst a selection has the effect that the party is, to some extent, going some way towards choosing the judge who will adjudicate in his lawsuit. However in the case of multiple defendants, it is required that such diversity is real. A diversity is not real if the intention is simply to submit to the jurisdiction of the court before which the lawsuit is raised, whether or not its existence is known by the trial court with authority to collect and understand the reality of the case as it pleases, without forcing him to resort to a particular court.   3. Transfer among courts   If the legislator is bringing a series of associated cases, it may be the case that he is desirous of having such matters considered by a single judge or a single court in order to avoid conflict of judgments. The UAE law therefore provides for the referral of cases to the court before which the last conflict is raised. The referred court is committed to the consideration of the matters. Legislation also provides that in the event that a case is filed before a court other than that which has been specified in a lawful agreement between the parties, then the court may order transferring the case to the forum agreed upon. The referred court is, again, committed to its consideration, unless deemed incompetent to consider the matter locally or qualitatively. This additionally infers the possibility of choosing a judge, but with the qualification that the agreed tribunal must be competent to consider the case. It is also of relevance that matters may not be referred from the courts to arbitration as a result of conflict, because the rule is that referral is only allowed between courts within the same judicial department. The best example is that referral from the Dubai courts to the federal courts is not permitted, as the judiciary in Dubai is a judicial entity independent from the federal judiciary. Such referral is limited to cases in which the court holds that it is not qualified due to the type of lawsuit or local jurisdiction.   4. Choice of arbitrator    Arbitration is a good example for the selection of judge that separates the rivalry between parties to a dispute, especially as arbitration is regarded as the first form of judiciary in many early communities. However, with the increase in the number of lawsuits filed worldwide and slow litigation procedures, the need for urgent arbitration arises. Arbitration allows a party not only to select their judge, but also to elect the legal rules applied by the arbitrator in the specific case (within the limits this does not violated public order).  The arbitration clause contained in the contract or in a subsequent agreement between the parties, which may include agreement on the number of arbitrators. This number may either be one, three or five, but the number must be odd otherwise the arbitration agreement is null and void. This is so that an individual arbitrator may be chosen by one party and approved by the other, or so that each party may choose one or two arbitrators, and then the arbitrators selected may appoint the remaining member of the panel. If no agreement is reached with regards to the choice of arbitrator, the choice shall be vested in an independent entity such as the arbitration center, a body such as the lawyers bar, or even the courts.   5. Disqualifying judges and arbitrators   The law may provide for circumstances in which the litigant may choose a judge as explained above - however, these cases are not considered as the general rule. More often than not, a judge will be appointed by the courts and the parties to a case will have no input in the decision. Yet in such cases, it may be that a litigant considers a judge invalid to consider his claim either for personal or technical reasons. When this occurs, should the litigant stay silent, or does the law provide a way in which the parties may challenge the same in order to ensure satisfaction and total conviction in the justice of the resulting judgment?    The cases in which the judge may be disqualified are outlined in the UAE Civil Procedure Law, and include (but are not limited) to feuds between the judge (and/or his wife and/or relatives) and the litigants, prior friendships (specified as "habitual dining" or having lived together) between the judge and any of the litigants, the judge's receiving of a gift given by one of the litigants, the appointment of the judge as an arbitrator in a previous matter between the parties, and any other friendship/enmity between the judge and one of the litigants which may result in impartiality.   A judge will also be invalid to consider in the following cases:   -  If he is a spouse of one of the litigants; -  If he or his wife has an existing dispute with a litigant or his wife; -  If he is an agent for one of the litigants in his private works,  or a trustee or custodian, or a      presumptive heir of a litigant or the spouse of the guardian of a litigant or the custodian,      or is related by blood or affinity to the fourth degree with the such guardian, or one of the      members of the board and a manager in the competent company where such a member or      director has a personal interest in the case; -   If he or his wife or one of his relatives or in-laws of descent or for those whom he is an agent,      trustee or guardian, has an interest in the existing case; -   If there is between him and one of the judges' circuit a kinship or affinity to the fourth      degree, and in this case the latest judge is to step down; -   If there is between him and the representative of the public prosecutor or defender of an      opponent a kinship by blood or affinity to the second degree; -   If he had decreed or pleaded for a litigant in the case, or wrote about it even before he joined      the judiciary, or had earlier considered as a judge or arbitrator or expert and had been a      witness in it; and/or -   If he has previously filed a lawsuit against the respondent or submitted a report against him      to a competent authority.    The law states that the work of the judge and his judgments are invalid where the judge meets one of the above criteria, even if it was made under the agreement of the litigants. Finally, the judge may, even if valid for consideration of the case, let the President of the Court consider the approval on the decision of stepping down.         ]]>
    Wed, 08 Jul 2015 12:00:00 GMT
    <![CDATA[Healthy Competition ]]>

    In his book "An Inquiry into the Nature and causes of the Wealth of the Nations", economist and philosopher Adam Smith conceptualizes the idea that thriving economies are the consequence of competitive markets. He discusses how competition advances innovation, product efficiency and encourages lower prices, and contends that there must be a set of rules that protects the competitive nature within markets. Competition in the market is essentially an economic concept - when the European Union was formed, one of its principal objectives included the building of a border-free internal market, where trade amongst member states could occur efficiently. Competition policies were integral in the creation of such a market, and it therefore follows that lawyers practicing competition law must be well-versed with economic concepts. 

      Competition Law ("The good, the bad and the ugly"1 ) is discussed in detail in UAE Federal Law Number 4 of 2012 (the Law). The Law governs market behavior and ensures that dominant market positions are not abused, specifically by prohibiting the use of a dominant position in a market to restrict competition. Actions that can constitute an abuse of dominance include but are not limited to: imposing resale price terms, predatory pricing, discriminatory pricing, refusing to deal, compelling others not to deal, restricting supply, conditioning the sale of a good or service on the purchase of another good or service, and/or disseminating false information about products or prices, as well as artificially increasing or decreasing quantities in a market.2 Yet although such provisions are clear and unambiguous, legal professionals in the UAE will unanimously agree that confusion arises concerning the implementation and effect of the Law. The terms of the same did not clarify how the provisions therein should be implemented, which invariably caused uncertainty with regards to the scope of the Law. Further guidance was therefore required.   Consequently, on 27 October 2014 the UAE Cabinet issued Cabinet Decision Number 37 of 2014 (the Regulations). The Regulations go some way towards clarifying various aspects left uncertain by the Law, with the effect that the combined provisions are now widely considered as successfully implementing the intended purpose of the legislation.   As discussed in our aforementioned article, the Law requires that certain acquisitions and mergers are granted merger control clearance by the Ministry of Economy. This rule was applied to ensure that certain acquisitions with the potential to exceed market share thresholds within the "relevant market" were kept under check so as not to affect competition. The Regulations define the process for the application of the merger control clearance. Essentially, the applicants must submit a completed application which is then examined by the Ministry of Economy and submittedto the Minister of Economy. The Minister then has the authority to approve or reject the application within 90 days of receipt, and will notify the relevant parties. It is imperative to note that the approval from the Minister may or may not be accompanied by various conditions. The Minister can discretionally extend his decision making period by a further 45 days.    The Regulations also lay out the process for filing a complaint in the event of any violations of the Law. The process requires the complainant to submit a complaint and certain documents substantiating the complaint. The Ministry of Economy will then either accept the complaint and investigate it further or reject the complaint. If the complaint is accepted, the Ministry of Economy will notify the concerned parties and invite them to defend the contentions. The Ministry will review the complaint, the allegations and the defense before they issue a report and their recommendation to the Minister who will deliver a decision within 30 days from the receipt of the report.    It is noteworthy that any state owned establishments are exempt from the application of the Law. This exception also has the effect that any entities owned or controlled by local and/or federal government are additionally exempt from the scope of the Law. However it is imperative to note that the Law does not expressly state the amount of control the local and/or federal government must have within the entity in order for this exemption to apply. The Law also excludes "Small and Medium Enterprises" from its remit, but fails to define "Small and Medium Enterprises" thus creating further ambiguity with regards to scope. Interestingly, the remit is narrowed further by the exclusion of number of highly regulated sectors of industry, such as pharmaceuticals, transportation, oil and gas, and telecommunications.   Despite the clarification provided by way of the Regulations, legal professionals have identified further areas of uncertainty. The Regulations have not established any threshold defining the market share which may require the parties to file for a merger approval. The Regulations have also failed to explain or define the terms "dominant position" and "relevant market". This essentially means that there is no way to determine if a party has breached the relevant market share provisions, as the market share threshold trigger has not been stipulated. In light of this uncertainty, the current approach requires all transactions to obtain merger control clearances and undergo the scrutiny of the Ministry of Economy, which seems cumbersome and contrary to the aim of facilitating trade. Furthermore, the Regulations are silent on how the Ministry or the parties involved in the merger will be able to substantiate the impact of the competition at the time of the filing. This is a result of there being no definition of the term "relevant market."   The UAE has always embraced the incorporation of best practices from across the globe. The curbing of market dominance has therefore been a paramount concern, and the implementation of the Law may be acknowledged as a positive step towards achieving universal standards. Further to the Law, the execution of the Regulations has undoubtedly been an affirmative stride towards achieving the overriding objective, but a number of further clarifications are required in order to implement the international standard of competition legislation as is in place elsewhere in the world. Until such time, it is not possible to determine the scope of the Law and its effectiveness. Further guidance concerning the full effect of the Law is awaited – watch this space!        ]]>
    Fri, 03 Jul 2015 12:00:00 GMT
    <![CDATA[KIZAD THE GATEWAY TO ABU DHABI VISION]]>

    Abu Dhabi, the capital of UAE is the striking example of change and exemplary growth. The visionary thinking and the aim to diversify its oil based economy has led the Abu Dhabi government to conceive Vision 2030. Abu Dhabi's Vision 2030 is a comprehensive plan to optimize the development of the Emirate through a program promoting urban evolution with the aim of promoting its long term economic viability. Khalifa Industrial Zone Abu Dhabi or better known as KIZAD is the new industrial zone operating under a framework of regulations created by the Abu Dhabi Ports Company. KIZAD was established after a careful study of existing industrial zones within the UAE and the Gulf region which means that KIZAD has already had the helping hand of other regions' mistakes. One of the prime questions that one has when establishing or expanding a business is the location of the business in line with the world markets. KIZAD was established in a location which is halfway from the major economies of Dubai and Abu Dhabi with close proximity to three major airports in the region. It was conceived keeping in line with the demands of the industrial development and has an extensive rail and port network incorporated within the plans. The expansion within KIZAD will also be strategic as it is the first industrial zone in the region that gives the investors the option of free zone ownership as well as non free zone. The companies established outside the free zone will be regulated by the relevant laws of Abu Dhabi while the companies established as free zone entities within KIZAD will be governed by the rules and regulations of Abu Dhabi Free Zone Authority (ADFZA). It must be kept in mind that both forms of companies  have the same process when it comes to land registration however the industrial licenses are obtained from different regulatory bodies. In case of a non-free zone entity, the industrial license will be issued by Zones Corp whilst the issuing authority for free zone licenses will be ADFZA. KIZAD and its officials continue to work single handedly to ensure that there is a streamlined process to obtain permits, clearances and licenses. The officials aim to ensure that each business in KIZAD is allocated to a dedicated relationship manager who will be based in the industrial zone and will have the necessary skills and knowledge to assist the businesses.

    The officials in KIZAD are also ensuring that each investor and their business are allocated a plot of land according to their needs and requirements for example a manufacturer or heavy goods is given access to the modular path that runs directly to the port. The KIZAD officers have simplified the application and set up process. The applicants are requested to fill out an initial application form and submit a fee to KIZAD. This form is then forwarded to the plot allocation committee that reviews the application and the requirements for the industrial project and offers the most appropriate and available land parcel to the applicant. The applicant has forty five (45) days to agree to the offer or request the committee to consider revising the allocation of the plot if not suitable. Upon signing of the offer, KIZAD officials prepare the preliminary agreement which allows the applicant six months time to allow them to qualify any pre requisites for the industrial license such as conducting environmental studies. Following this the final  .

    Agreement is signed and the applicant can apply for a preliminary industrial license. Once all the licensing stages are concluded, the applicant is then to sign a Musataha agreement. This agreement gives the applicant a long term right in the property and the land can be registered at the Land Registry Department in the name of the applicant. This agreement also ensures that the investor has all legal rights over any assets developed on the land within KIZAD. Each company that enters into a Musataha agreement are subject to KIZAD's rules and regulations. Once this agreement is signed, the applicant can begin construction and its operations. Once the construction is completed, the applicant can apply for a permanent industrial license

    KIZAD is the perfect symbol of Abu Dhabi Vision 2030 being applied. It is set to become the foremost industrial zone of the region and has managed to attract industries that have the foresight to be a part of the tremendous growth it promises. The development of KIZAD has paved the way for investors who will be at the forefront of long term growth and sustainable government investment. KIZAD also offers the foreign investor to have extended property rights in the region which is another advantage. It is expected that KIZAD will be the industrial powerhouse that is needed by the Emirate of Abu Dhabi to turn their dream of diversified economy into a reality.

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    Thu, 28 May 2015 12:00:00 GMT
    <![CDATA[RE-MEDIA-L?]]> Control of the Media in UAE Law

    If the head of STA was to look at the internet tabs open on our computers right now he'd wonder if we had done any work today, with Facebook, BBC News, The National, Buzz feed, the Financial Times and various national publications from around the world all featuring on our title bars. Fortunately (and for once) I have an excuse – each and every one of these websites falls within the category of "media", which is the focus of this article. Well, "media law" specifically, but I'm hoping he won't probe in too much detail.

    So, where should we start? As we have discussed in previous articles, there are several limbs to every legal practice area, niche or otherwise, and each area may be governed by its own separate set of rules and regulations. Therefore in the interests of saving both paper (see our recent piece on the environment and construction waste) and your time we shall concentrate our attention on one specific area – namely "how is the media controlled by law in the UAE"? Yet in order to do this we should first consider the basic definition of media in accordance with the law. In the USA, the First Amendment to the Constitution refers to the media as the "gathering, publishing and distributing of information and ideas". In Europe, the European Convention on Human Rights cites the "receiving and imparting of information and ideas", and goes so far as to specify the inclusion of broadcasting, television and cinema. In the UAE… And this is the problem. In the UAE there appears to be an inherent lack of law pertaining to the media. Or no up-to-date law, at least – which is a glaring omission in a global society which is creating so many new media platforms on a daily basis that our brains and electronic devices often struggle to process them all. The fact that revisions to the existing legislation were suggested in 2009 and again in 2013 implies a national acceptance of the inadequacy of the current provisions, but no proposed drafts have as yet been incorporated into law.
    So
    what of the current position – how is the media controlled by law at present, and what reforms do the 2009 and 2013 propositions and subsequent debates suggest are needed? Perhaps the most obvious element of discussion that will come to mind when combining the terms "media" and "control" in a sentence is freedom of press – namely, the freedom to publish information, ideas or opinions without suffering repercussions. This is by no means a new area of discussion, with international phenomenon's such as the British privacy injunctions controversy of 2011 still fresh in the minds of many. Cases such as that of ex-F1 boss Max Mosely and News of the World before the European Court of Human Rights characterize the nature of the long-standing deliberation: which should prevail – the right to privacy,

    Or the right to free speech? Of course, our avid readers will be aware that Volume I Issue VI of Court Uncourt included an article on defamation, which carried a full analysis of the UAE's position with regards to this debate and outlined the fact that the publication of potentially defamatory material can result in severe consequences, particularly if the means of publication is via the press. In pursuit of avoiding repetition we won't go into too much detail here, save for to say that Articles 372 and 373 of Federal Law 3 of 1987 (the Penal Code) respectively provide that "whoever attributes to another person, by any means of publicity, an incident which makes him liable to punishment or contempt shall be punished by detention for a period not exceeding two years or by a fine not exceeding twenty thousand dirhams" and "detention for a period not exceeding one year or a fine not exceeding ten thousand Dirhams shall be imposed upon anyone who, by any means of publicity, disgraces the honor or the modesty of another person without attributing any particular act to the defamed party", with the additional clarification that "if libel is committed by means of a publication in any of the newspapers or other printed media, it shall be considered an aggravating circumstance."But what other legislation provides any rights or restrictions with regards to the media's freedom of speech? There is a plethora of guidance on the "media" in general, with Federal Law Number 7 of 2002 dealing with copyright, Council Decision Number 35 of 2012 regulating advertising and Cabinet Decision 14 of 2006 controlling the National Media Council – but the law appears to remain silent on actual media content. The only provisions of strict relevance, then, seem to be those of the Penal Code. It therefore seems reasonable to assert that the current law does not promote freedom of press insomuch as it highlights restrictions of press. As UAE media law expert Dr Matt J. Duffy suggests in an article published by Gulf News on 23 March 20121 , it would appear that the present law restricts what the press can do, rather than offer any protection over what it may do.
    In an amalgamation of the foregoing, head of the National Media Council Sheikh Abdullah bin Zayed announced in 2013that in a poll analyzing the freedom of expression afforded to media and the consequential punishments, the UAE ranked 158th out of 196 countries. Evidently this is an exceptionally poor placement, especially when considering the fact that the UAE is accustomed to topping the league table in the majority of positive surveys in which it takes part. However, Sheikh Abdullah qualified his announcement with the explanation that the poll considered only the legislative position – not the actual practice of a country. Therefore the fact that journalists and other media professionals are not expressly protected in law does not automatically mean that the UAE deals out harsh punishments to any such person exercising his right to free speech. Still, the point remains that in order to both improve its ranking and provide clearer guidance to the press, the UAE must establish a definitive and up-to-date law with regards to the media.

    It is worth noting here that almost every law in every jurisdiction is developed in accordance with the country's culture, history and values, often in accordance with precedent emphasizing the need for such legislation. Accordingly, any media (or indeed, any other) law implemented in the UAE would need to bare such factors in mind. As Dr Duffy states in his aforementioned article, we could not simply lift one country's media laws and bring them into force in the UAE – any law introduced here would need to pay respect to the presiding social and cultural customs. A good starting point may therefore be the Content Code (the Code) of Abu Dhabi's Media Zone Authority (MZA) as issued in 2011. On acknowledging the influential capacity of the media, the Code emphasizes that caution should be exercised (an industry-specific application of the wise words of Spiderman's Uncle Ben – "with great power comes great responsibility") and outlines the importance of preserving the nation's ethos by stating as a Key Principle that "The Code recognizes the importance of balancing freedom of expression with a duty to take account of the cultural and social expectations of society".


    An initial understanding would therefore give the impression that the Code strikes a reasonable balance between the UAE's constitutionally- enshrined right to free speech and its national values, such as privacy. Yet in reality it is likely to be the case that many matters fall into the grey area between the two principles, whereby publication of the story would breach the privacy of the protagonist, but prohibition of publication would be inconsistent with the publisher's right to free speech. As discussed in our article on defamation, in these circumstances many European courts have applied the test of public interest – namely, is it in the interest of the public to know the cited information? In light of the UAE law's silence on the issue, the Code requires that the publication of controversial material meets its standards of "Editorial Justification". Outlined in the "Definitions" section, Editorial Justification is "the reason the licensee has made and disseminated the content". The Code goes so far as to specify that anyone considering the justification of releasing information into the public domain should consider factors including the artistic and creative merit of the contents, whether the information is beneficial to the public (for example, whether it is in the interests of public safety or exposes injustice) and whether the information can be proven as factually accurate.

    Of
    course, this guidance is without limitation, and there are no cast-iron rules or examples in place controlling the content of published or broadcasted material. The Code's Editorial Justification therefore leaves scope for the application of the publisher's discretion. Yet it goes without saying that certain considerations are mandatory, and the Code therefore lays down express rules with regards to aspects which must be taken into account. For example, Rule 2 regulates content which has the potential to cause harm or offense, with material such as that which is violent, sexual, discriminatory, distressing or inclusive of explicit language confined to instances whereby it is contextually

    justified. Moreover the Code requires that clear warnings precede any potentially harmful or offensive content. The protection of children from any age-inappropriate material is also paramount pursuant to Rule 1, as is the insurance that crime, public disorder or anti-social behavior are not expressly or inadvertently encouraged (Rule 3).

    In addition to regulating content, the Code goes so far as to offer guidance on the conduct of media-based entities. Rule 5 requires that the dissemination of all forms of news are reported impartially and with factual accuracy, with Rule 6.1 clarifying that editorial bodies have the responsibility of ensuring that material facts are not presented, edited or omitted in such a way that is adversely unfair on any party. In addition to paying respect to the aforementioned provisions of the Penal Code, Rule 7 (pertaining to privacy) introduces provisions prohibiting the intrusion of any electronic devise, such as email or mobile phone communications (Rules 7.2 and 7.4). Although such guidance must be read in conjunction with the applicable legislation, these rules go some way towards demonstrating the way in which the Code would provide a strong foundation for an up-to-date media law consistent with the requirements and risks of modern society.

    In the same way that this is by no means an all-inclusive summary of the Code, the topic of the freedom of press is not the full extent of "media control" in the UAE. It is not only the publication and/or broadcasting of media content that is subject to regulation, but also the governing and ownership of the media entities themselves. Pursuant to Article 2 of Federal Law Number 15 of 1980 (the Publishing Law) the owner of a printing press must be a qualified UAE national without any criminal convictions. Likewise, as per Article 25, the owner of a newspaper must also be a qualified UAE national in excess of 25 years of age, free from convictions and not under the employment of any public service or foreign agency. Evidently separate provisions are in place with regards to entities established in free zones, and locations such as Dubai's Media City, Internet City and Knowledge Village would be viable options to any foreign investor wishing to partake in the media spectrum. Here, and in accordance with Council Decision Number 1 of 2006, licenses are available not only in the publishing segment, but also in the TV and radio broadcasting industries.

    Yet regardless of the field, licensing type, current law and location within the UAE, the fundamental principles of the media industry remain the same. Any players within the media and broadcasting game should therefore proceed with caution when balancing their rights alongside the underlying values of the nation. As philosopher John Stuart Mill observed, "the individual does have the right of expressing himself. So long as he does not harm others".

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    Wed, 27 May 2015 12:00:00 GMT
    <![CDATA[Bail Fail?]]> Liabilities of the Bail Guarantor

    we've all seen the images of prisoners arriving at court for their hearings, seated in high-security vehicles with small circular windows, with photographers clamouring for a prime position in order to take photographs through the glass. However not all defendants are required to arrive at court in such a manner. Although several are held in custody during proceedings and are transported to court as and when required, others are granted bail and are not confined, often subject to conditions set by the judge or public prosecution. As approximately ninety (90) percent of the UAE's population consists of expatriates and due to the additional fact that the UAE enjoys an unprecedented level of tourism, it follows that a major concern of the courts when considering whether to grant a defendant bail is the risk that the defendant may abscond – in other words, that he may leave the UAE in order to avoid facing the justice system. This is obviously a far greater risk when a defendant is a foreign national, as he is less likely to have any community ties discouraging him from leaving the UAE for long-term. In such cases, one condition that the judge may consider imposing in order to alleviate risk is the appointment of a Guarantor.

    A Guarantor is the person who guarantees the conduct of the defendant upon being released by the public prosecution or the judge. The obligations of a Guarantor are entirely different to those of a work sponsor or residence sponsor, and regularly give rise to complicated issues that may have severe consequences.This is often due to Guarantor's ignorance of his liabilities, and may lead to a situation whereby Guarantor finds himself in a worse position than the defendant should the defendant abscond. In this article we shall discuss most significant liabilities of the Guarantor, and consider the factors a person may wish to contemplate before taking on such a role.

    When may a defendant require a Guarantor?

    in reality the UAE law appears to provide relatively little guidance on the subject of bail, with a defendant's status and any conditions of bail being at the discretion of the presiding judge. However it is often the case that bail is awarded in instances where there seems to be a lack of sufficient evidence against the defendant. Pursuant to Article 106 of Federal Law Number 3 of 1987 (the Penal Code) a person's previous criminal convictions (where the convicted crime or felony was punished by any measure other than a financial penalty) must be also be taken into consideration. The public prosecution, either voluntarily or upon the application of the defendant, may release the latter on bail if the prescribed penalty for the crime of which he is accused is neither the death penalty nor life imprisonment. In most cases the defendant's remand status will be re-assessed on the expiry of the preventative detention period set by the public prosecution, which shall usually be either 21 days, or upon consideration by the court.   Further to the provisions of Article 122 of the Penal Code, one condition of bail commonly utilised in the UAE is the submission of a personal or financial guarantee as determined by the public prosecutor or the judge, on the specific terms set forth by the same.

    What are Personal Guarantees and Financial Guarantees?

    UAE law does not define the concrete meaning of Personal Guarantee, and as such the terms of the definition are subject to the discretion of the bail order. The concept allows for the defendant to issue guarantee on his own behalf, or to be guaranteed by a third party, by surrendering the relevant passport to the court (this will be the defendant's passport where he is acting as a self-guarantor, and both the third party's and the defendant's passport when a third party is the guarantor). In rare cases and under certain conditions the guarantor may be an entity or legal person, for example a company or the defendant's consulate. A Financial Guarantee is, as the name suggests, monetary funds paid into the court, to be returned to the guarantor on the issuing of the judgement in the defendant's case, or forfeited in the event that the defendant fails abide by his bail conditions. A Financial Guarantee can be paid in three ways: it may be deposited in cash in the court treasury, submitted vide a bank guarantee pursuant to conditions determined in the release order, or to be retained by the guarantor, on the condition that it is surrendered to the court through one of the aforementioned methods in the event that the defendant breaches bail.

    Can the courts request both a Personal Guarantee and a Financial Guarantee?

    Dubai prosecution and the courts regularly set both Personal Guarantees and Financial Guarantees as joint conditions of bail. Almost without exception, in cases in which the defendant is a foreign national the surrender of his own passport will be an inevitable prerequisite of his release, with the presiding authorities often requesting an additional Personal Guarantee and Financial Guarantee of an amount set at the tribunal's discretion. The reasoning behind this may well be that although the seizure of the defendant's passport may prevent him from leaving the UAE, it cannot ensure that he will attend court as directed or be of good behaviour in the interim. Ordering a third party Personal Guarantee and a Financial Guarantee in addition to this may therefore create incentive for the defendant to remain compliant throughout proceedings.

    What is a Guarantee (bail) Bond?

    The Guarantee/Bail Bond is the form issued by the court and signed by the Guarantor under which the Guarantor guarantees that the defendant will act in accordance with the terms of bail set forth by the court. There is no precedent form that the Guarantee Bond must take, but it is likely to include (without limitation) the defendant's charge, personal details of both the defendant and the Guarantor, the undertaking content, and the penalty due in the event of violation. As per Article 113 of the Penal Code the Guarantee Bond may be deemed as an executive deed and any monies due there under may be perused through the civil courts in keeping with the Civil Procedures Law.

    What does being a Guarantor involve?

    On signing the Guarantee Bond the Guarantor becomes liable for attendance of the defendant upon being summoned by the investigative body or the court, and for the execution the judgment issued against the defendant. The Guarantor's liability ends only on the execution of the determined sentence as passed by the court, Orin the event that the defendant is irrevocably exonerated. In the majority of cases the Guarantee Bond will include an undertaking by the Guarantor to accept liability with regards to the aggrieved party, including any penalties, compensations, or subsequent civil action.

    To what extent is the Guarantor liable?

    The liability of the Guarantor may not appear to be excessively extensive when considering that the defendant might breach bail by failing to attend an investigative or court session, as the likely consequence is that the Guarantor will forfeit all or some of the Financial Guarantee. However a Guarantor should also consider the consequences in the event that the defendant does not comply with the requirements of any judgement issued against him. In such an instance, the Guarantor must be aware that he personally shall fall financially liable for any fines or cost orders made against the defendant up to any amount as is prescribed by law. In some cases, this may amount to hundreds and thousands of dirhams.

    Problems will inevitably rise if the Guarantor is unable to meet the financial liabilities he has incurred under the Guarantee Bond. In such cases the Personal Guarantee (namely the passport) of the Guarantor may remain under seizure for years on account of his failure to ensure the compliance of the defendant and / or pay such funds so as to allow for the execution of judgement. Therefore anyone considering acting as Guarantor should be fully aware with the content of the Guarantee Bond and the extent of any financial fine available in law for the relevant offence. In addition to this the prospective Guarantor should have sufficient confidence that the defendant will attend court as required and not abscond whilst on bail.

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    Thu, 21 May 2015 12:00:00 GMT
    <![CDATA[CHECKING CHEQUES]]> Reforms in Police Cases against UAE Nationals and Foreigners

    If  you think about it, "bounced" is a strange choice of word to apply to a failed cheque. "Bounce" implies lively, rejuvenated, excitable, energetic – a collection of adjectives which certainly wouldn't fit your mood in the instance of a bounced cheque, whether you are the issuer or the recipient. Having a cheque bounce is undoubtedly frustrating and concerning in any jurisdiction – but perhaps more so in the UAE, where issuing a cheque which bounces on account of insufficient funds is an offence under the applicable law. I Issuing a cheque which subsequently bounces is criminalized under Article 401 of the Federal Law Number 3 of 1987 (the Penal Code), reads as under:

    "Detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed. The same penalty shall apply to any one who endorses a cheque in favor of another or gives him a bearer draft, knowing that there is no sufficient balance to honor the cheque or that it is not drawable".
     

    Accepted, that's a lot of information to absorb from one clause, and questions will inevitably be raised with regards to the issuer's knowledge of balance and so on. But for the purpose of this discussion only a couple of key points are relevant: 1. If a cheque bounces, the issuer is liable to criminal prosecution, and 2. The issuer of a bounced cheque is liable for a fine or a term of  According to the recent directives and circulars issued by the state presidency, public prosecution and police, the provisions stipulated in Article 401 of the Penal Codehave been amended in practice in cases whereby the perpetrator is a UAE national citizen. Henceforth, in cases where it has been proved that the cheque was issued as a guarantee to pay off a financial obligation in favor of the financial facility at which the debt was incurred (for example, a bank), there shall be no prejudice or influence on the cheque's authenticity in proving the debt. It shall be considered as a commercial paper which proves the liability and accordingly gives all rights to the UAE National to claim in a civil litigation procedure.
     

    Let's break this down. We often think of cheques as simply being payment instruments, so what is meant by the term "guarantee cheque"? Those of us in the UAE may find it useful to consider our rental cheques, which are issued to the landlord at the start of the tenancy, but are post-dated in keeping with the required installment dates. Or security deposit cheques, on which we write a cheque amount, but do not date (as the cheque will not be cashed unless damage is caused). Guarantee cheques should therefore be considered as cheques issued in guarantee of a payment due at a later date, rather than a cheque issued in payment of an immediate financial obligation. Therefore the circulars have the effect that when a guarantee cheque has been issued by a UAE national, the sole fact that the cheque was issued cannot be used as evidence that the issuer was ever liable for the cheque amount. However  circulars have allowed the judicial authorities of the courts, public prosecution and police to search for the purpose behind the issuing of a cheque in order to ascertain whether or not it was a guarantee from the UAE national towards settling his financial obligations.

    In cases whereby it is proven that the cheque has been issued as a guarantee instrument, anycriminal complaint filed by the bank(as opposed to the recipient of the cheque) shall be stayed until such a time that it is established whether or not there has already been a parallel case filed or presented to the court against the UAE nationalby the recipient of the bounced cheque. In this instance the case may be terminated. Additionally, if it is proven that the cheque was issued as a guarantee only, the public prosecution may release any UAE national who is detained or under investigation for such an offence, regardless of whether the offence occurred prior to the issuance of the said directives and circulars.
     

    Practically speaking, the police should question the complainant bank with regards to the reason behind the issuing of the cheque by the UAE national, with a view to establishing whether the national has issued the cheque as a guarantee instrument. Pursuant to the aforementioned circulars, the police should additionally take a copy of the cheque in question and return the original to the complainant bank after marking it with an official stamp, register the complaint under a crime number and present the file to the public prosecution. It is worth mentioning that the police procedure of registering the complaint under a crime number is a preamble to retaining the complaint at the public prosecution level, in case the cheque is a guarantee instrument issued by a UAE national.
     

    So what   consequences will the new practices have for expatriates? At present there is no stable principle, but nothing suggests that the normal practice (namely that the criminal complaint shall be referred from the police to the public prosecution in order to investigate the facts, and thereafter the matter is referred to the criminal court) shall differ. In such situations precedent would suggest that the court is generally lenient with regards to sentences of imprisonment against foreigners, despite such a sanction being available under the Penal Code, and instead will order them to pay fines without needing to serve any period of incarceration.
     

    We have  established that, in cases whereby cheques have been issued as a guarantee instrument by a UAE national, a certain degree of protection from criminal prosecution under the Penal Code shall henceforth be afforded. Although this is not the case where the issuer of the cheque is a foreign national, it is often the case that the criminal courts will not apply the full force of the law. We must also take into consideration the fact that the criminal courts have limited power with regards to ordering that the financial obligation demonstrated by the cheque is fulfilled – although they may issue judgment in favor of the recipient and order that the issuer pays a fine or serves a period of imprisonment, they cannot order that the issuer makes payment via an alternative means to the recipient. The debt created by the bounced cheque may only be enforced via the civil courts. It therefore may initially appear that the practical approach taken in cases of bounced cheques is to the detriment of the intended beneficiary and/or the bank. However, regardless of the circumstances or the protagonists involved, thebank shall have the option of pursuing a civil case against the defaulting party. A ruling in favor of thebank in the civil courts will prove to be of greater benefit than in the criminal courts, because whereas the criminal courts may fine or imprison the defaulting party, the civil courts may order that the actual debt amount is repaid. Additionally, any judgment issued by the civil courts may attach without limitation the debtor's financial accounts, cash funds, gratuity from their work place, stocks in the UAE stock market and/or vehicles, not to mention assets such as real estate.
     

    If the   litigating party is not aware of the full extent of a debtor's assets, then an application can be presented to the judge to investigate. In the interim a provisional attachment application may be made with regards to the existing assists whilst the investigation takes place.
     

    It seems   reasonable to conclude, then, that despite the fact that national citizens are now provided with certain sanctuaries with regards to bounced cheques and precedent suggests that foreign citizens may not be punished to the full extent permitted by law, the remedies claimable under civil law (including the full debt amount, plus interest, damages and compensation) remain vast. And given that this list of potential claim elements is without limitation, any respondent partaking in civil proceedings further to a cheque bouncing may well feel even less lively, energetic, excitable etc. than if he found himself subject to criminal prosecution.

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    Thu, 21 May 2015 12:00:00 GMT
    <![CDATA[Registration and Importation of Pharmaceuticals in UAE]]> Headache? Perhaps you'd take a paracetamol. Upset stomach? Maybe an indigestion pill. Cold or flu? You might consider anti-congestant medication. In the United Arab Emirates, such pharmaceuticals are easy to come by, with the majority of people likely to have a supply already to hand in their purses or bathroom cabinets. Yet although these common medications are not controlled in the same manner as prescription drugs, various approvals are required with regards to the importation, sale and marketing of such produce in order to ensure that the drugs we buy over the counter are compliant with UAE standards, thus ensuring our safe consumption.

    So is the registration of over the counter drugs as simple as the process of procuring and consuming them? Pursuant to Federal Law Number 4 of 1983 (the Pharmacy Law), all drugs must be registered with the Ministry of Health in order to be lawfully sold within the UAE. Article 65 goes so far as to specify that this includes imported pharmaceuticals, whether or not they have been approved and registered in their country of origin. The decision as to whether to register such products shall be at the discretion of the Ministry of Health following application – and as the criteria on which such a decision will be made is unavailable to the public it appears as though any entity applying for the registration of a product shall have very little guidance to follow in order to increase the likelihood of success. The fact that only Articles 63-67 of the Pharmacy Law deal with the actual registration of pharmaceuticals further supports the view that manufacturers are largely unguided in their pursuit of registration, with supplementary regulations (such as the Dubai Health Authority's Community Pharmacy Licensure and Pharmaceutical Practices Guide of February 2013) (the Pharmacy Guide) focusing primarily on the licensing and protocol of institutions and professionals as opposed to the industry's products.


    A reading of the applicable section of the Pharmacy Law would give the understanding that Ministry of Health registration is a strict condition to which all pharmaceutical products sold within the UAE must adhere without exception. Yet owing to the degree of discretion afforded to the Ministry of Health, certain hospitals operated in conjunction with the Health Authorities of Dubai and Abu Dhabi are able to apply for permission to import unregistered drugs in prescribed circumstances. These include emergency medicines used for the immediate preservation of life, drugs which are currently unavailable in hospitals (such as specific medicines used in the treatment of cancer) and those which have not yet been awarded Ministry approval, and specialist narcotic and psychotropic substances. However any approval granted with regards to an unregistered drug will be qualified with the condition that the product is not distributed outside of the institution in question, and will be quantified proportionally to the hospital capacity. The authority of the Ministry in this regards is such that permission may be withdrawn immediately in the event of a breach of any of the case-specific regulations and conditions by the licensed institute.


    We have considered that there is little guidance available with regards to the content and scientific criteria a product must meet in order to effect successful registration. This, it would seem, gives rise to another question: what is a "medicine" within the meaning of the applicable law? How is a potential importer supposed to know whether or not his product will require registering pursuant to Article 65? The Pharmacy Law defines medicine as being "any medicine that contains one or more element for treatment or protection of human beings and animals", with the Pharmacy Guide going further to specify "Medicine/medication/pharmaceutical drug shall mean or can be loosely defined as any chemical substance intended for use in the medical diagnosis, cure, treatment, or prevention of disease". But as any person who has spent considerable time browsing the drug store shelves for a specific product will attest, today's market consists of a huge variety of healthcare products – not just the common medicines discussed earlier and prescription drugs, but various supplements, nutritional enhancements, and cosmetics which may not come under the definition of "medicine" per se. Do such items fall within the remit of the Pharmacy Law and its requirements?

    To this effect the Ministry of Health produced Circular Number 20 of 2001 (the Circular), as issued by the Director of the Drug Control Department. Herein it is specified that the General Sale List (the list consisting of all registered pharmaceutical substances in the UAE) includes "Dietary supplements, medicated cosmetics, antiseptic and disinfectants and miscellaneous products which contains pharmaceutical ingredients and / or a medical claim and cannot be classified as medicines". And despite the fact that it still does not suggest any composition criteria, the Circular goes some way towards laying out the various administrative requirements that a product should meet in order to obtain a successfully registered status. Most importantly, it is specified that the application form (available from the Technical Affairs Section or downloaded from the Ministry of Health website, in either the Arabic or English language) must be accompanied by the relevant Certificate of Pharmaceutical Product (CPP) as per the World Heath Organization Certification Scheme, or a Free Sale Certificate (FSC). This must have been issued by competent lawful authorities in the product's country of origin, it must additionally have been authenticated by the Foreign Affairs section of the UAE or any GCC embassy in the country of origin. Moreover a successful application must be accompanied by 3 (three) samples of the pharmaceutical in its final packaging, along with a certificate of analysis for the given batch of samples

    Further to this the application for registration will require the submission of various supporting documentation on the letterhead of the company requesting the registration of the product (complete with the company logo, stamp and authorized signature), which includes but is not limited to:

    –A statement from the company declaring that the product is free from any hormones, heavy metals, antibiotics, steroids, derivatives of pork and any natural and  chemical ingredients with the potential to cause harmful effects to humans. When submitting a product containing an ingredient derived from animal source the    company must go so far as to specify the kind of animal and specifications of the part extracted from it, and must additionally clearly note the percentage of alcohol (if       any), together with an explanation as to why such ingredients were incorporated;

    • Halal certificate issued by recognizable organizations and authorities;
    • Details of a medical storage facility licensed by the Ministry of Health (as per the Circular Number 1 of 2006);
    • Samples of the outer label, inner label and insert of the product;
    • and CD containing artwork (outer, inner label and insert) of the product.
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    Thu, 21 May 2015 12:00:00 GMT
    <![CDATA[SAFEGUARDING UNPAID CREDIT LOAN]]> The payment of debts is necessary for social order. The non-payment is quite equally necessary for social order. for centuries humanity has oscillated, serenely unaware, between these contradictory necessities.

    Simone Weil

    The need to restore capital buffers in the wake of 'bad debts' forced more than one British bank (s) in the United Arab Emirates to wind up their partial operations. On similar notes, the acquisition of subsidiaries of internationally stable investment banks within this region on account of dwindling profits can be again attributed to 'bad debts'. The investment climate in Dubai has always been inviting yet seldom predictable.

    As a layman, the sight of abandoned fancy cars at reserve car parks and tales of unpaid credit card dues of colleagues' friends do not appear alien to those who have been part of this robust economy in any way. While the United Arab Emirates has enjoyed an image of being a safe haven, it has often been slammed with comparisons to a cab where you enjoy the ride until you pay as per the meter.   Perhaps a sharp comparison to the above idiom would be the times before the global economic crisis, when things were right and the jaunt was continuing. Banks granted credit cards without the need of exhaustive preventive sureties. Personal loans and investment offers were on a rise. While the rationalists enjoyed the privileges of multiple credit card deadlines as means of managing personal finances, these multiple credit lines for defaulter led to registration of absconding cases and non-traceability even before an alarm could be raised.

    One would question the know-your-client capabilities of the lender and debate how a defaulter from one bank in UAE was able to obtain another facility from a different lender. In the respect, the challenges faced by the banks have been many. Primarily, there was a lack of legislative provisions for KYC guidelines and secondarily a centralized credit control board never existed. The modus operandi was based on 'profits maximization module' rather than a 'pre-emptive module' arising out of streamlined nexus between the lenders.

    Unlike the United States or the United Kingdom, the concept of 'credit history' has been quite restricted in UAE. In US, every time you apply for a loan or accepted credit from a bank, your bank would pass on details of your accountability in paying back credit to a central board which will then create your credit history. So when you apply for a credit facility with another lender, he is able to access your credit history for your past transactions. In UAE, the only concept of credit history has been a salary certificate confirmation as most of the banking information is not shared within the public domain. The effects of bad debts and piling loans on banks therefore became detrimental for UAE's financial sector.

    In a move to regulate the credit environment and overcome the above challenges, the United Arab Emirates issued Cabinet Resolution No. 16 of 2014 Concerning the Executive Regulation of the Federal Decree Number 6 of 2010 in regards to credit information (the Law); establishing the Al Etihad credit Bureau (AECB).

    AECB, the first nationwide credit control agency in UAE has become operational in the last quarter of the year 2014. It has collated 24 months of data from almost 70 banks as well as other credit data providers like telecommunication agencies and other government bodies across the UAE. Initially the byelaws for the AECB provided that only federal and local entities, investment companies, financial institutions, leasing companies, professional establishments, cooperative societies and branched of foreign companies registered in UAE may obtain the credit information from AECB by making an application. Later, provision was made for individuals to obtain their credit report by payment of a nominal fee of AED 110. Therefore, all the entities named above will be in a position to benefit from the database of the AECB.

    The concept of control bureaus or credit control agencies, although new to UAE, has been a long awaited step by lenders and borrowers alike. The report provided by AECB will include information regarding defaults in payments, refusal or any decisions issued against the person. The report will not issue information on mortgaged assets value, investments value or any other such information that is not requested by the applicant. AECB operations are specific to providing details of the credit community for individuals. However, this will extend in due time to provide information and credit history of local companies, cheques bounced by these companies and so on.

    Without doubt, the establishment of the credit control bureau will be a blessing for the banking sector enabling them to analyze the burden of over lending and the same time minimize the risk associated with lending.

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    Wed, 13 May 2015 12:00:00 GMT
    <![CDATA[Volume II – Issue – II 2015]]> Regardless of its size, a piece of paper can only be folded in half a maximum of six times. Sure, there's a scientific explanation for this (with every fold the paper becomes twice as thick, with the thickness becoming disproportionate to the other dimensions by the sixth fold) – but telling a person that they will not be able to achieve a particular task is a guaranteed way to ensure that they will try. And if the obvious method looks set to fail, maybe a creative alternative is the best route to success. The paper may not fold any smaller if you use the obvious method, BUT what if you try with tissue paper or kitchen foil? Or make parallel folds along the same axis? We at STA pride ourselves on our bespoke, fresh and innovative approach to each and every situation – both with paper, on paper and in law.
    Welcome back to Court Uncourt! Our latest issue once again discusses a variety of prevalent legal topics, both in the UAE and further afield, from a unique and imaginative perspective. Enjoy your read – and fold carefully afterwards!

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    Mon, 11 May 2015 12:00:00 GMT
    <![CDATA[Hotel management agreements ]]>

    While driving back from work yesterday I noticed a renowned hotel brand had popped up in my community out of nowhere. A few days back that same building was supposedly a mixed use development, but it now boasts the logo of a luxury hotel chain. As discussed in the first installment of this series, statistics show that Dubai hotels welcomed 11.6 million guests in 2014 alone – in addition to this the global economy is recovering, and the recent development in my neighbourhood therefore shouldn't come as such a surprise. 

      When driving past the hotel in question, it is abundantly clear that it has some way to go before it is ready to open its doors for business. Scaffolding is still in place, there are no glass panes in the windows and the surrounding areas are yet to be landscaped. Yet although the work of the various hotel employees may not start until the first rooms are occupied, other professionals have their work cut out before the construction boundaries have even been set up. This includes the lawyers, whose involvement in hospitality projects starts from the very scratch. Almost without exception, hotel projects will require lawyers to negotiate and draft any agreements for the sale and purchase of the hotel plot, joint ventures between the land owners and developers, franchising arrangements, construction contracts and so on. As a consequence of this, lawyers are often witness to the complexities surrounding the regulatory requirements of the hospitality industry which can lead to legal hassles. In our last issue of Court Uncourt we examined hotel management agreements (HMAs), focusing particularly on cases of hotel renovation processes. In this article  we shall discuss the essential elements of a well-drafted HMA, and additionally address the procedure for converting an existing property in a hotel property.   In terms of governing bodies, the UAE hospitality industry is largely governed by the Abu Dhabi Tourism Authority (ADTA) and Department of Tourism and Commerce Marketing, Dubai (DTCM) in Abu Dhabi and Dubai respectively. In response to the question of whether a residential or commercial building can be converted into a holiday home or hotel, yes - this is possible, subject to the approval of the governing body. A number of compliance procedures need to be followed if your project involves this scope of work. For instance, if you have agreed with a building owner to long lease the property and operate the same as hotel, you will be  poised with questions relating to:    (i) the treatment of tenants;  (ii) type of rights granted (whether in rem, in personam or quasi rem rights); and  (iii) due procedures to be followed for issuance of the approval   Each of the above questions are answered in a legal due-diligence which precedes the process of application to the authorities and grant of related approvals. Both ADTA and DTCM have set out a list of general information along with respective application forms for such an approval which have to be duly provided. As with any commercial unit, the process involves fresh approvals from a health and safety point of view.    i. Business tenancy    One of the most imperative conditions for a well drafted HMA is a clear demarcation between management and leasing rights. To put it simply, tenancy rights are restored in a person by signing an agreement for uninterrupted use of a property for a defined term. Management agreements on the other hand are an assignment of rights to manage on the terms and conditions set out by the owner. When negotiating an HMA one must exercise due care to understand if any indirect tenancy rights have been vested with the operator.  The considerations in this regard evolve due to the fact that several legal implications arise when an indirect tenancy is created.  Firstly, if the operator is able to prove that your HMA is in fact a long term lease agreement instead of an HMA the nature of your contract is heavily affected. The contractual terms may therefore be subject to provisions of prevailing tenancy laws instead of the Federal Commercial Transactions Law. Secondly, the direct effect of the former would have a knock-on  effect on the dispute resolution clause. Tenancy disputes are not within the ambit of arbitration and must be submitted to the rent committee, who by law have exclusive jurisdiction over any rental disputes. Naturally the rent committee (s) have limited exposure in interpretation of contracts as against the courts or arbitral bodies. Thirdly, an owner who may be holding a leasehold title for the land cannot legally enter into a tenancy agreement without a prior approval for sub-letting the land. In the absence of such clear sub-let provisions in the principle tenancy contract, the owner may face legal implications for assigning a title not owned by him.    ii. Exclusivity and division  Negotiation of HMAs reaches dead ends where operators and owners argue on exclusivity of management rights. Most contracts restore unfettered management rights on the operators while financial rights are restricted. Such provisions create a general imbalance between the rights and liabilities of the parties. An HMA is required to make  provisions relating to financial activities based on the feasibility study of the hotel project. In the event of a dispute between the parties, death of a party or any such unforeseen event, the cash flow for hotel operations must not be affected. That said, key considerations including capital and reserve funds should be addressed in an HMA.    It is therefore imperative to exercise caution and consult seasoned attorneys when negotiating and drafting an HMA. There are several aspects of the agreement that can have a significant impact on the operational and financial functions of a hotel. We at STA will continue to bring forth aspects of the burgeoning hotel industry – just think of us as the legal chocolate on your hotel pillow.     ]]>
    Fri, 08 May 2015 12:00:00 GMT
    <![CDATA[Zooming In On Public Health Institutions]]> Corporate Governance In The UAE

    "When it comes to health, your zip code matters more than your genetic code.

    &Dr. Tony Iton 

    when one thinks of a hospital, the image that pops up in one's head is that of doctors, emergency rooms, operating theatres and ambulances. What we fail to recognize is that for all of these elements to come together and provide effective medical treatment, it is imperative that the hospital is properly managed. A hospital is not just a medical institution but also a business and it will or should have a corporate structure in place. Hospitals and health systems across the world are constantly struggling with issues of governance, especially in the aspects of standardization and quality improvement. It has been difficult to establish clear channels of communication and clear lines of accountability for the innumerable committees, departments and business functions in a healthcare environment. This can certainly result in poor standards of care towards patients. What is compulsory for the efficient governance of hospitals? It is necessary for there to be an effective use of funds, professional and competent management and streamlined governing and reporting structures. By establishing and maintaining the public's trust, being good stewards of the community's resources, and ensuring high quality care Hospital Administrators can be an important asset on the governing board in fulfilling those duties.

    Administrators add the perspective of the patient care process as well as a unique understanding of family issues; they grapple with overall health care concerns such as staff shortages, patient safety and quality of care; and they are the most knowledgeable about diseases and new treatment modalities, as well as
    being aware of the ethical dilemmas posed by new technologies. His Excellency Sultan Bin Saeed Al Mansoori, the UAE Minister of Economy, has called for institutions to embrace corporate governance as "an institutional capacity, rather than a regulatory requirement".

    Let's take a look at a few example of countries where such principles have been embraced in the systems of governance in medical institutions. The Healthcare Governance & Transparency Association (HeGTA) is an Egyptian non-governmental, non-profit organization founded in 2012 with the vision of promoting governance and transparency in the healthcare sector, in order to enable healthcare reform and to create investment opportunities. HeGTA aims to contribute to a healthcare system which is based on accountability, equality, fairness, efficiency and quality by the creation, pooling and dissemination of knowledge. Similarly in the United States, the U.S. Agency for International Development (USAID) is an independent federal government agency that receives overall foreign policy guidance from the Secretary of State. Its work supports long-term and equitable economic growth and advances U.S. foreign policy objectives by supporting agriculture and trade, global health, democracy, conflict prevention and humanitarian assistance.

    Governance is important work, and how well it is done has significant consequences for health care organizations, the communities they serve, their patients, medical staff and employees. A technology is a set of principles for solving problems and seizing

    opportunities. A key element of the public sector is that services are provided for the public good, suggesting that the public sector may have a higher sense of purpose in what it does than the private sector. Another difference lies in the fact that people who use public services may not be 'willing customers' – as may be the case with health care. Hospital governance is based on the two pillars of accountability and transparency. As the provision of health care is a 'social good' each group of stakeholders merit recognition. Resources are one of the most pressing issues in hospitals. Issues such as value for money, the reorganization of the health service and patient satisfaction has served to drive the governance process forward. International organizations like Joint Commission International, which is a US-based body, are now in place to award accreditation to institutions based on their compliance with various international standards. However these not only assess elements such as patient care and medical standards, but also consider systems of corporate governance and management.. Therefore such schemes would appear to have put governance on the agenda of the health service and hospitals in particular across the world.

    Currently the prevailing conditions in so many hospitals in the UAE are the subject of discussion in terms of the management and facilities being provided. This may well be as a result of the fact that there is as such no regulatory framework available for the governance of public health institutions. However health institutions are supervised by the health authorities and there are provisions for internal committees, such as committees for ethics and compliance, wherein an employee can lodge his complaints against the management or report any mishaps in the system as a whistleblower. Moreover in a region with a low percentage of listed companies and a high percentage of family businesses, a lack of regulation cannot be seen as an excuse not to adopt a formal corporate governance framework.

    In order to reach this level of integrity and reform, some structural solutions need to be taken into consideration. Research and interviews reassured the idea that the most promising way to solve current grievances is the implementation of governance. If leveraged upon, the efforts for a promising solution to do this have the potential to create unparalleled success in hospitals. It also bridges the gap between the social and humanitarian mission of the hospital on one side, and its organizational nature on the other.

    According to the Millennium Development Goals access to basic health care is central to the poverty reduction worldwide. Hospitals constitute a very significant part of the overall health care sector and they provide essential services to the public.

    ]]>
    Mon, 04 May 2015 12:00:00 GMT
    <![CDATA[The UAE Anti Fronting Law]]>Investors interested in forming their companies are required to comply with the provisions of the UAE Commercial Companies Law of 1984, as amended (the Law).The Law regulates and provides for different forms of commercial entities investors can choose from. Although expatriate investors can own one hundred percent shares in free zone companies, the Law stipulates that certain entities require shareholding to be held by UAE nationals.   A sole establishment for instance may only be held by a UAE national and a in case of a limited liability company in Dubai or UAE, minimum 51% shares must be held by UAE national (exception applies to shareholding held by nationals of GCC member states).   Foreign investors have in past attempted to prevent or circumvent the mandatory requirement relating to minimum shareholding distribution to UAE nationals by entering in to contracts whereby the management, ownership, profit entitlement and control vests exclusively with the non-UAE or foreign national(s). Majority of these contracts were signed between the parties under the notion that parties could avoid possible contentious shareholder dispute in future and maintain their respective position with regards to ownership and profit and loss distribution. Although courts in the UAE have taken cognizance of these contracts, recent steps taken by legislature clearly seek to prohibit use of such contracts between foreign nationals and UAE nationals.   The UAE's Federal National Council (the Council) promulgated Federal Law Number 17 in the year 2004 (the Law 17) concerning Anti Fronting Law which aims at prohibiting use of side contracts or nominee agreements with the UAE nationals .The Law 17 briefly states that "fronting" is prohibited and fronting is defined as 'enabling a foreigner – whether a natural or artificial person – to undertake any economic or professional activity, which he is not permitted to carry out as per laws of the UAE'.  The Council subsequently issued a cabinet resolution in the year 2007 delayed the effective enforcement of the law until 2009. In absence of any further announcements from the Council, it remains unclear whether the provisions of Law 17 are effective and apply as of date.   Failure to comply with provisions of the UAE Anti Fronting Law 17 attracts penalty and also bears a criminal overtone for repeated offences. Importantly, the sanctions imposed under Law 17 apply to all persons who are parties to such side contracts or nominee arrangements. In past, these side contracts and nominee arrangements were titled differently as – agreement, loan agreement, loan and management agreement, nominee shareholder agreement, and memorandum of understanding but in essence these agreements had a similar purpose and are in contravention of Law 17.   It is important that investors obtain legal advice from their attorneys to ensure that the arrangement entered or agreed between them is not in violation of Law 17. ]]>Sat, 25 Apr 2015 00:00:00 GMT<![CDATA[Introduction]]> Despite the fact that the Arabic world marks Al-Hijra at the start of Muharram (the first month in the lunar Islamic calendar) and the Chinese community celebrate the "Spring Festival" at the turn of the Chinese lunisolar year in late January/early February, the Gregorian calendar's New Year marks a new beginning for millions of individuals across the globe. The way in which we celebrate this varies from place to place – in parts of South America, the colour of one's clothing is said to symbolize hopes and desires for the year to come (red for love, yellow for wealth), whereas in Spain it is believed that consumption of grapes on the strike of midnight will bring prosperity over the coming twelve month. The same may be said of wearing polka dots in the Philippines, and burning torches and fireballs are believed to drive out the impurities of the dying year at the Scottish festival Hogmanay. However the underlying principle is the same – it's out with the old and in with the new.

    Yet some things never change. Like your trusty, innovative and high-quality legal publication, Court Uncourt. Marking the New Year with a new volume, we at STA promise to continue in our efforts to bring you the latest legal news with our trademark bespoke twist.

    We wish you a blessed New Year and an enjoyable read.

    ]]>
    Fri, 27 Mar 2015 12:00:00 GMT
    <![CDATA[What a Load of Rubbish]]> Environmental Law and the Disposal of Construction Waste in the UAE

    Have you  ever read  through the small print that follows  your office email signature?  The chances are that it will contain a phrase similar to the above. Yet ironically, in general we have a globally cavalier attitude towards conservation. Yes, we are aware that natural resources will eventually deplete, the ice caps are melting and global warming may one day result in a dramatic over-hall in the environment as we know it – but still, so unlikely are such factors to occur within our lifetimes that conservation becomes a secondary concern. After all, despite the typed warning, a polar bear won't suddenly become homeless just because we have printed this one little email…

    Born and raised in England, I am familiar with strict policies and law relating to recycling, refuse and littering. Failure to adhere to the relevant provisions can escalate to the point of imprisonment – a threat which makes us think twice before discarding a cigarette butt on the street as opposed to locating the appropriate disposal receptacle. But what is the position here in the UAE? The lack of itemized recycling bins outside of every residence may lead us to assume that environmental protection and conservation are not major concerns, yet we would be very wrong in thinking this. Under  Federal Law Number 24 of 1999 (the Environmental Protection Law), contravention of certain provisions implemented with a view to protecting the environment can incur the death penalty. Extreme perhaps – but it certainly grabs our attention!
     

    Environmental law becomes an interesting concept when we consider the way in which the UAE is a major hub for development. Readers in Dubai, take a look out of your window right now – the chances are that there will be one or two cranes on the horizon. Of course, the largest increase in environmental pollution in history occurred alongside the Industrial Revolution of the late 1700s, but the fact that the UAE has been undergoing such a construction boom cannot be overlooked as having a detrimental effecton our present-day environment. The harvesting of resources and preparation of sites destroys habitats, factory production creates air pollution, and heavy plant machinery causes noise, and along with development comes construction waste of which we need to dispose.

    The disposal of construction waste has become a major factor in influencing the various environmental policies in the UAE. In 2008 Abdulla Rafea, assistant director general of health an environmental services at Dubai Municipality, announced that Dubai was producing approximately 30,000 tonnes of construction and demolition waste on a daily basis. For reference, this would be the equivalent of 150 fully-grown blue whales or roughly half the weight of the ill-fated cruise liner Titanic. Daily. This pushed Dubai (along with other GCC nations) into the league of the world's top 10 waste producers, with the collective total of waste and refuse materials predicted to reach 350,000 tonnes per day by the end of this year. With the Environmental Protection Law offering no guidance on the most appropriate method of disposal, the vast majority of this rubbish was deposited in landfill sites. Given this overwhelming volume, the increasing rate of construction and the predicted inflated statistics alternative solutions were clearly needed. This, coupled with the Dubai Municipality's announcement that the Emirate would be the most sustainable city in the world by the time the 2020 World Expo comes around, has paved the way for change.

      So how have these changes affected the disposal of construction waste across Dubai and the UAE? Dubai Municipality's Green Building Regulations and Specifications in cooperation with Dubai Electricity and Water Authority (DEWA) of 2012 (the Green Building Regulations) have gone some way towards reducing the amount of construction waste produced by implementing strict conditions on the usage of building materials and requiring under section 701.06 that recycled content must account for a minimum of 5 percent of the total construction materials used. Moreover section 702.01 places developers under obligation to dispose of at least 50 percent of the waste generated via means other than depositing the same in landfill sites. Suggestions contained within the regulations include the recycling of woods, plastics and metals, the diversion of concrete waste to the Construction Waste Treatment plant and the clearance of excavated soil to a site nominated by the Dubai Municipality.
     

    Although domestic waste contributes to such a situation, the fact remains that landfill sites within Dubai are under huge pressure to accommodate the waste produced by the Emirate, and in addition to that are obviously hazardous and unpleasant. In fact, in 2012 Al Qusais landfill (one of only two sites in existence at the time) was dubbed by The National UAE's Mohammed N Al Khan as being "a two kilometer-square, 20 meter-high layer cake of rubbish1 ". Yet in April 2014 the site was awarded an environmental prize in recognition for the initiative implemented by Dubai Municipality whereby the plant converts gases produced by the waste and uses the same to meet 100 percent of the site's power requirements. This in turn also reduces greenhouse gas emissions.
     

    This demonstrates that alternative methods of construction waste disposal not only make for a healthier, happier, more sustainable environment, but also create economic benefits. And Dubai is not the only Emirate to realize this, with Abu Dhabi's Al Dhafra Construction and Demolition Recycling Facility operating on the same principles. Having opened in May 2010, the plant now processes between 5,000 and 8,000 tonnes of construction waste on a daily basis.
     

    As well as separating out materials such as timber, which are suitable for recycling, the plant converts waste into new materials suitable for re-sale back into the construction industry, such as road base, trench bedding and structural fill. Not only does this reduce the amount of waste deposited in landfills, but also decreases the need to harvest naturally-occurring materials, thus protecting the wider landscape. In keeping with Abu Dhabi's Economic Vision 2030 the Government has announced its intention to place a mandatory 40 percent minimum requirement on the inclusion of such materials in all new developments. A similar initiative is also in place in Sharjah under the supervision of environment and waste management company Bee'ah. Having already successfully diverted 60 percent of the Emirate's waste away from landfills over the past 5 years, Sharjah aims to dispose of 100 percent of its waste via other means by 2015.
     

    It may have come to your attention whilst reading the above that although the schemes, initiatives, practices and systems discussed are evidently effective ways of meeting the various green objectives in place across the UAE, they are not law, and as such there is a limited amount of power vested in the authorities to enforce the relevant provisions. Although the Green Building Regulations impose obligations upon developers regarding the usage of construction materials and the depositing of waste, the rules do not go so far as to outline the liability of those failing to meet requirements. However, as a federal law, the Environmental Protection Law differs greatly, and provides for a range of monetary fines or periods of imprisonment depending on the nature of a breach. Yet the problem seems to be this – despite taking steps to prevent pollution, protect natural resources and enhance the environment, the Environmental Protection Law came into force 15 years ago, and is therefore exclusive of any of the more recent issues posed by the construction boom.
     

    Fortunately, new draft laws presented to the Federal National Council in 2014 look to regulate construction waste far more strictly, implementing separate disposal systems for solid, liquid, medical and hazardous waste. In addition to this local authorities and the Ministry of Environment and Water shall be given greater authority to deal with perpetrators accordingly, with a more severe range of penalties to be introduced. It therefore seems reasonable to conclude that the holes that development has torn in the Environmental Protection Law will soon be plugged by way of new legislation.
     

    And as for the fact which inevitably helped to keep you reading – under Article 73 of the Environmental Protection Law, the death penalty (or a one to ten million dirham fine) may be incurred by anyone failing to adhere to the prohibitions regarding the importation, storage or disposal of nuclear substances within the UAE. Evidently this is not a provision of which many of us are likely to fall foul – nonetheless, it goes some way towards emphasizing the seriousness with which offences against the environment are treated. Of course, our readers will be archiving this newsletter along with previous editions for later reference, but we conclude in the hope that other paperwork that has served its purpose will henceforth be disposed of in the appropriate, environmentally-friendly manner…

    ]]>
    Fri, 27 Mar 2015 12:00:00 GMT
    <![CDATA[Dubai Property Law - Strata Law Explained]]> If I purchase an apartment in a communal building, what exactly do I own? Am I entitled to a section of the pool, a corner of the gym and rights over a particular elevator? Or do I only have rights over anything within the boundaries of my specific plot? Read further on Dubai Property Law in this article which discusses Dubai Strata Law

    Dennis Palvich in his book 'The Strata Titles Act, Condominium Law in British Columbia' suggests that disposition of parts of residential buildings first took place during the Bablonian, Egyptian, Greek and Venetian times.  In 'History of Condominiums', Rudd and Gardener emphasize that condominiums were introduced by Romans as early as the 6th century B.C. and the concept has been prevalent in South America for at least two centuries.  The concept of 'flat ownership' or 'apartment ownership' has gained and continues to gain prominence. Many jurisdictions across the world refer to condominiums today as 'strata title' while some nations term it as 'flat ownership' (for instance, United Kingdom and India).

    The concept of strata law in simplest terms means subdivision of a developed building property or gated community into layers. Each such layer then gets subdivided into one or more units along with common areas forming part of such property. The law regulating division of property in to privately owned units as well as common areas was introduced in the Emirate of Dubai pursuant to law number 27 of 2007 concerning Ownership of Jointly Owned Property Laws (the Strata Law) to be effective from 1 April 2008. Prior to the issuance of Strata Law, the Federal Law No.5 of 1985 (as amended) in respect of Civil Transactions for the United Arab Emirates (the UAE Civil Code) recognized and provided for some rights in relation to co-ownership of buildings and units but the provisions contained in the UAE Civil Code cannot effectively address technical matters one faces in Dubai's ever evolving property sector. Article 32 of the Strata Law conferred powers upon the Chairman of Dubai Land Department to issue further regulations and decisions required to enforce the provisions contained therein.
     

    The law passed in 2007 laid out the basic scheme of subdivision and covered clauses dealing with formation and recognition of owners' association. This law was however silent on several key issues such as i) method of sub-division of buildings or gated communities with multiple ownership; ii) compliance and procedural matters associated with operation of owners association; iii) type of documentation required for formation of association; iv) implication of the Strata Law on hotel apartments and serviced hotel units; v) provisions in regard to the powers, duties and licensing of association's manager; vi) the tacit role of owners in managing their properties, to name a few. Accordingly, there was a clear need for further regulations to fully serve the operational requirements of the owners' association. Consequently in April 2010, the Dubai Land Department issued directions on Strata Law providing more clarity for both property developers and owners in complying with the provisions of the Strata Law (the Directions). The Directions required developers to register their jointly owned property declaration within six months.

    These directions are intended to serve as guidance notes and till date it is unclear as to whether these directions constitute regulations as intended under Article 32 of the Strata Law or will be part of regulations to be issued in the future.The Directions broadly encompass the following: i) Directions for jointly owned property declarations, ii) general regulations; and iii) directions for association constitution.These directions are closely related to content of the principal documents that outline all operational and management relating to a development, what are the licensing obligations of the surveyors, consumer protection, role and obligations of the Owners Association Board- it's procedures such as meetings, appointments of Board Members and other administrative directions.
    Although significant steps and measures have been implemented by Dubai Land Department in regulating strata titles in Dubai, there are yet few hurdles that call for detailed and in-depth regulations that will help and resolve ambiguities surrounding implantation of Strata Law. These ambiguities have resulted in failure on part of several owners' associations to function fully, freely and effectively in interest of its members. High service charges and maintenance costs continue to be the prime concern of members whilst disputing the association's control and autonomy.  Whilst the Strata Law was introduced in 2007, it is  pertinent to state that most of  these associations have been granted preliminary registration status which makes them bereft of legal powers to act fairly and independently.


    Article 18 (1) of the Strata Law sets out that the owners' association is a not for profit legal entity, has a separate legal existence from its members, and has the right to sue in its capacity and to own movable assets. Article 10 of RERA circular number 1 of 2010 and dated 5 September 2010 (the Circular)with regards to Service Charge for Jointly Owned Property provides that Owners Association has the sole right and privilege to take action against Unit Owners in respect of unpaid service charges, and this right remains in force even if an owner attempts to transfer ownership of the unit to another person.

    Although the legal status of such associations is clarified under the Strata Law and the Circular confers rights in favor of owners' association, such status and rights cannot be optimally exercised. For instance, homeowners' association cannot set up bank accounts, enter in to contracts with third parties, bring an action against defaulting members, enter in to contracts for insurance, obtain court orders or appoint auditors and/or attorneys to carry out affairs of association's management given that homeowners' associations have not yet been fully licensed   For better and efficient coverage of property developers are required to maintain an emergency fund also known as the sinking fund. Investors have long complained of discrepancies in maintaining such fund. Developers are under the legal obligation to remedy material defects in the property prior to passing over the property to owners' association. It is expected that Dubai Land Department and/or RERA will issue further regulations in this regard and provide for a detailed audit of each property (to ascertain latent defects in property) prior to same being handed over by developer to owners' association.


    The Directions provide that an entitlement for each owner's lot determined as under:-
     

    1–  Calculating the common areas of the building that can be attributable to owner's unit based on area and the extent that the unit draws on the resources of the association: From a practical standpoint, mutual agreement as to creating borderlines for a mixed use development comprising of commercial, retail and residential units often raises concerns as to sharing of service fees and maintenance charges as clear delineations may not necessarily always result in clear cost sharing. To illustrate, if a mixed use development comprises eighty percent residential units and twenty percent retail units, the retail unit owners are likely to dispute inclusion of cost of service or services that are not in fact consumed or utilized by them.

    2– On just and equitable basis wherein entitlement for each lot is derived by calculating total liabilities created by specific unit.
    Whilst Dubai awaits further regulations in regards to strata law, property developers in Abu Dhabi have started implementing strata style governance structures in place. The Emirate is likely to introduce strata law to ensure transparent and fair arrangements for property owners and developers.
    In matters involving small claims and disputes, the dust might settle and both developers and owners today realize their long term objectives, but it seems reasonable to conclude that there remains a need for clear and detailed strata regulations.

    ]]>
    Tue, 24 Mar 2015 12:00:00 GMT
    <![CDATA[What a Difference a Euro Makes]]> €1 Company Formation in Portugal

    Since 2005 Portugal has been focused on increasing its competitive presence. The implementation of this so-called "technological plan" has consisted of the modernization of national laws, the improvement of efficiency in the public sector by the reducing of bureaucracy and the optimization of resource allocation. In this context a new model of company set-up has been created: the On the Spot Firm, nationally known as the Empresana Hora.

    The 'On the Spot Firm' is an innovative procedure that facilitates the incorporation of a company in a quick, cheap and effective way.An investor is able to set up a civil or commercial company (which in Portugal may take the form of a sole proprietorship company, a private limited company or public limited company)at any On the Spot Firm service desk, which is known as a "one stop office", without needing to disclose the location of the company' intended registered office. The incorporation is effective immediately and the total cost of the same, including the mandatory publications, will amount to €360 (equal to approximately AED 1625). Should the chosen principle activity of the company be related to technology or research and development, and the cost of incorporation will be reduced to €60 (approximately AED 270).
     

    The truth is that the set-up of the On the Spot Firm is a simple and effective procedure – the main qualifying requirement is that all the future partners must be present or be represented by proxy at incorporation, and must be in physical possession of their identification and tax payer number documents.
     

    In order to further simplify the process, the authorities have made available both at each service desk and online pre-approved models of company statutes, which can be chosen by the shareholders when incorporating the company. The same applies to the trade name – representatives of the company may select a name from a list of pre-approved names provided both online and at the service desk, however this will only be definitely assigned at the point of incorporation–in other words, it is not possible to reserve the name in advance. It is also noteworthy that the list of pre-approved trade names does not in any way limit the choice available, nor does it restrict the activity of the company as per its generality. If in any case the partners wish to use a specific name, they must first obtain prior approval – a Certificate of Eligibility – to be provided to the National Register of Companies(the RNPC). Either individuals or corporate entities can set up this type of company. Foreign legal persons are subject to the additional requirement that they submit corporate documents, including a document proving the legal existence of the entity in the country of origin, its articles of association, the board resolution or minutes of the meeting at which the incorporation of the new entity was approved, and identification of the legal representatives of the company. It is also necessary to request in advance before the RNPC the ID number of a legal person that will make identification of the company possible in Portugal. These documents must all be duly translated, unless the originals have been prepared in the French, Spanish or English languages (where the desk employee knows the language) . Thus, nothing prevents a foreign individual or entity from incorporating a company in Portugal, with the only requirement being the possession of a tax identification number.

    Currently, and since 2011, one of the most intriguing aspects of starting a business in Portugal is the minimum share capital requirement in the event that the entity is a sole proprietorship or a private limited company. In order to boost small businesses the Portuguese Government decided to go so far as to change the prevailing companies law in order to provide that these types of company could be established with a minimum capital of €1 (less than AED 5) per partner instead of the€5,000 (approximatelyAED 22,500) hitherto required. This measureavoids the mandatory initial investment requirement and allows micro-enterprises to be created without the significant capital necessitated by law – an amount which was controversialat the time of its implementation and remains so today. The main reason for this legislative amendment is stated within the preamble of the law decree: the high social capital of a company does not necessarily ensure a good financial situation, as often such capital is fully utilized to cover initial costs. The Government also stated that creditors of the companies should focuson the turnover and sustainability of the company to determine its viability, instead of taking the capital as a guarantee of such factors.
     

    At the time of setting up the On the Spot Firm, the share capital should already be deposited in a financial account opened in the name of the company, or must be deposited within 5 (five) working days thereafter, as the money should be withdrawable at any time following the set-up of the company.
     

    It is remarkable to consider that this procedure can be completed in less than an hour, and that when incorporating the company the partners will be immediately given the access code to the company's e-card and the Social Security identification number. The registration of the company's statutes is immediately published on the website of the Ministry of Justice, whose access is public and free. Finally, also included within the price of the incorporation isthe assignment of a domain name registration taken from the company's trade name, which is free of charge for thecompany's first year.
     

    So rather than frantically spending all of our small change at the airport on the way home from vacations in Europe in future, perhaps we could instead consider the incorporation of an On the Spot Firm?

    ]]>
    Mon, 23 Mar 2015 12:00:00 GMT
    <![CDATA[Legal Protection of Software - An Overview]]>

    Legal Protection of Software - A Detailed Overview

    Intellectual property is an intrinsic part of the modern economy. We have discussed trademarks in all forms be it colour or smell, discussed copyright and its infringements; and highlighted the importance of having a claim over one's work product or invention. This article discusses patents with a focus on software patents. No matter where you look, there is a computer performing an activity, yet we observers rarely pay due attention to the actual technology that makes this machine work. In the dynamic world of regular upgrades to make machines faster, more efficient and quicker at their functions, international software patent laws have become more pertinent.

    With the technology boom, every economy established its own patent offices and governing laws. A software developer who had created new software would have to apply for a patent to protect his invention and comply with local laws. Simply put, patents are supposed to give an inventor an exclusive license for his idea. As the industry evolved and globalized, several agreements were drafted and ratified to resolve regional differences and make the process of protection more uniform. The World Intellectual Property Organization (the WIPO) is a specialized agency of the United Nations that was established in the year 1967. Its primary function is to promote the protection of intellectual property globally. The WIPO currently oversees 26 international treaties which pertain to its core function. The year 1995 saw the advent of the Agreement on Trade-Related Aspects of Intellectual Property Rights, better known as TRIPS, to bring together the patent laws across the world to limit the barriers in trade. It is interesting to note that despite this action for uniformity, each nation retains a different take on technology that can or cannot be patented and this is highlighted specifically in relation to software patenting.

    The United States has a liberal perspective when it comes to software patents while Europe has continued its conformist view. The European Patent Office issues the European patents which are inadvertently binding on all member nations though it is interesting to note that each country continues to maintain its own patent office that complies with its local laws. With the inception of the European Patent Office, experts are of the opinion that the local laws of member nations are continually becoming irrelevant.

    The initial step in getting a patent is to file an application to the relevant authority. In the United States, the person filing a patent must be the inventor. In contrast, their European counterparts consider the applicant to be the inventor. The European system believes that this would encourage inventors to share their inventions at the earliest. In the United States, the patent office is the main challenger of all applications and will oppose any contradictions themselves. On the other side of the pond, any person or organization can oppose a patent application. These oppositions are handled by a special office within the Patent Office. In essence this implies that since everyone is given an opportunity to invalidate or question a patent claim, a patent granted by the European Patent Office generally carries a higher level of validation. It is interesting to note that application of a patent in the European Union automatically ensures the publication of the invention. The Paris Convention expressly states that any person who has filed a patent application in any country will enjoy a first right of priority when making an application in any other countries for the first twelve months since the initial application. If the patent is granted and the twelve months have elapsed, the patent is then barred in the United States until a further application is made to the United States Patent Office. This can cause specific hindrances for an inventor as once the patent is applied for in Europe, the invention has been published and therefore the inventor only has a period of twelve months to file an application in the United States Patent office without certainty as it is likely that the publication of the invention has deemed it evident.

    With the advent of the TRIPS agreement, the term of the patent was adjusted from its initial seventeen years to twenty years in the United States. The term is valid from the date of filing of the application. This is consistent between the United States and Europe with some countries in Europe having to adjust their terms in accordance with the TRIPS agreement and the terms of the European Union. It is imperative to note that a patent in the European Union is more like a bundle of patents for each member country rather than one. The applicant is required to file applications with patent offices of each member country where the patent is being sought but a member country's patent office cannot deny an application once the inventor has received a patent from the European Patent Office.

    Not so long ago, the United States' Supreme Court was of the opinion that software was mathematical formulae which deemed it non-patentable. This view was reversed in 1981 in the landmark case of Diamond v Diehr, where the Supreme Court held that a patent could not be withheld just because it contained mathematical formulae and that the invention should be considered as complete work product. In the 1998 matter of State Street Bank and Trust Company v. Signature Financial Group, the United States Court of Appeals held that it is essential to determine the practical usability of an invention. In the following year, the court held that software algorithms could be patented as they were specifically created for a specific purpose and for definite tasks for a computer to perform. In Europe, the Patent Office Appeal Board in a matter filed by Vicom (a California-based entity) ruled that if the fundamental idea behind an invention or software is a mathematical formulae or algorithm; the invention is not seeking protection of the mathematical formulae but essentially its function.

    In Europe, there has been an ongoing debate regarding computer software and whether they are considered patentable due to Section 52 of the European Patent Convention. This states that having a technical character is an absolute necessity which must be met by an invention to deem it patentable. The Convention states that methods only involving economic ideas or employing economic ideas cannot be considered to be inventions and thus cannot be granted a patent. In recent times, the European Patent Office has expanded the analysis of section 52 and thus there has been a number of softwares that have been granted patent by the office. Several decisions of the European Patent Office such as T 769/92 ("Sohei case") show that software and software-related inventions are not excluded from patent protection merely because they do not sufficiently fulfill the requirements of Section 52. It is worth mentioning that a vast preponderance of software patents at the outset were not granted to companies based in Europe but majority to companies from United States or Japan.

    To conclude, it would be essential to notice that whilst some differences remain, such as the application procedure, most of the decisions and consideration behind the patentability of software in the United States and in Europe is fairly consistent. One must understand that software and software-related technology is being advanced so frequently that it may take some time for either of the two regions  to catch up.

     

    ]]>
    Mon, 23 Mar 2015 00:00:00 GMT
    <![CDATA[The Legalities of Bank Transfers Under UAE Law]]> Imagine that X transfers some money to Y online. After a couple of months, X approaches Y and asks him to repay the debt. However Y refuses, alleging that the money had been a gift and he was under no obligation to repay it. Neither X or Y are able to provide any evidence proving that his understanding of the transfer is the correct one – therefore how do the courts decide whether Y must repay the money or not? Understand the nuances of UAE Banking Law in this article written by STA's Banking Lawyers in Dubai 

    The reason this question has been asked is obvious – throughout the world thousands of people have been subject to fraud. Despite the oral and undocumented agreement that may have been reached between parties, if funds are transferred from one party to another there is often no way of proving the intention of the proceeds of the transfer. What happens in the following scenario: –

     

    a– An act of someone transferring money to other in a case where no contract exists between the sender and receiver;

    b– or case where someone transfers monies towards investment in a project and no contract exists between the sender of monies and the beneficiary thereof ; and

    c– can the sender claim refund of monies once the transfer has been effected?

    The objective of this article is to answer questions posed above and other technical matters surrounding bank transfers, indebtedness, and related aspects.
    At the outset the matter relates to law of evidence in the first place as it is required that the transferor asks the beneficiary to confirm the value or amount that may need to be transferred. If transaction relates to loan or investment in project or; a case where payment is a consideration towards sale of goods or services, the burden of proof shall be on the transferor, who should provide evidence to confirm his claim is bonafide. To this effect, one must place reliance on Article 1 (1) of the Federal Law number 10 of 1992 on the Issuance of the Evidence Act for Civil and Commercial Transactions which sets out that any personintending to bring an action against another shall be responsible and must prove his claim with satisfactory evidence.

    Article 1 (1) – reads as "The plaintiff shall prove his claim and the defendant shall rebut it."

    The plaintiff here is not only any natural or moral person bringing the claim, but it is any person making a legal allegation, either plaintiff or defendant. The court of cassation rules in this regard:

    "The court has ruled that the plaintiff is obliged to present an evidence for its claim either as an original plaintiff or a defendant in the claim".

    Clearly, evidence must be provided in any claim failing which recipient of money does not acquire status of debtor. To this effect, one may place reliance to Article 37 of the UAE Civil Transactions Law (Federal Law number 5 of 1985) (or; the UAE Civil Code) stipulates:

    "There is a presumption that an obligation has been discharged."

    Of course, pursuant to the rules of evidence X shall not only need to prove that he is owed a debt by Y, but shall additionally need to evidence the value of the debt. Traditionally bank transfers are not a method of signifying indebtedness, because they are payment instruments, rather than indebtedness bonds. However nowadays people pay their debts via bank transfer instead of giving cash money. Article 380 (1)  of UAE Federal Law Number 18 of 1993(the Commercial ….. "operation pursuant to which the bank enters a specified sum in the debit side of the account of the person who has ordered the transfer following a written order from such person, and in the credit side of another account."

    The Commercial Transactions Law has caused bank transfers to be regarded as a payment method and not an indebtedness bond under more than one provision, including:

    1) Article 380 (3) …. the transfer of a specified sum from the account of one person to another person's account, each of whom having an account with the same bank or in two different banks"

    2) Article 384 (1)…. which sets out that, "The beneficiary shall acquire ownership of the bank transfer value as of the time it is entered in the debit side of the account of the person ordering the transfer; the latter may countermand the transfer order until the foregoing entry is made."

    Accordingly, the law considers bank transfers as means to pay and is not in effect an indebtedness bond. To this effect, it must be highlighted that the transfer order may be cancelled by the transferor at any time prior to the debit being made. And although the beneficiary will assume ownership of the funds at the point of transfer (not receipt),

    Article 385  states that " if the transfer has been arranged in pursuance of settlement of a debt, the debt shall remain outstanding (with all securities and supplements) until such a time that the funds are received in the account of the beneficiary."

    The Court of Cassation in case number 254 of 2012 and dated 6 March 2013 has held as under:

    'the fact that a bank transfer is originally made through the transferor in fulfillment of its obligation towards the beneficiary does not fit just upon proving the indebtedness of the beneficiary in its value paid to the transferor.' In other words, if the sender transfers monies to the account of recipient, the general presumption would be that such payment by sender is towards settlement of debts owed to recipient or in return for goods or services provided by recipient to sender.

    Pursuant to the foregoing, we may conclude that in cases whereby X makes a pure bank transfer without giving reasons, X may not seek a refund of the same on the grounds that the bank transfer originally pays the debt. The payment transfers from the debtor to the transferor to creditor to the beneficiary.

    The question posed now is"Is this provision absolute,with no exceptions"?

    The answer is no, as the previous rule may establish the opposite, namely the proof that a bank transfer is made for other purposes or reasons save for the payment of a debt. Accordingly, the previously referenced award concluded the rule stating: "…. And it [the transfer] does notprove the indebtedness of the beneficiary,unless the transferor presents an evidence for that".

    The Court of Cassation has also affirmed that the previous order in its award issued on 25 June 2007 same for in case 63, 75, and 86 of 2007 stipulates "it is stated that the bank transfer shall originally pay the obligation of the beneficiary by the transferor, and it does not fit for the proof of the indebtedness of the beneficiary for the value to the transferor unless the transferor provided a proof for that".

    In the event the transferor desires to demand the amounts transferred by proving that the receiver did not fulfill his part of the obligations, the transferor is legally bound to prove that he did not 'owe' any monies to the receiver for funds transferred. In other words, the transfer was effected by way of consideration and in return for goods or services promised by the receiver which receiver failed to provide.

    In the light of such reason, if funds are transferred as sale consideration towards a particular item, service or real estate, the burden of proof shall be on the transferor to demonstrate that the specific funds in question were transferred in payment for that particular item in cases whereby ownership was not transferred in keeping with the terms of the sale. If the transferor is able to do this then the balance must be refunded.

    The rule that can be concluded is that the transferor, if able to prove that he  is not paying a debt may claim a refund where he can additionally prove that the transferred funds have not been used for the agreed purpose by the beneficiary (where he has evidence of the said agreed purpose). In other words, if X makes a bank transfer to Y for investing such funds in a certain project, and X can prove that the bank transfer is made for the sake of investment, the Court may order Y to refund the value of the bank transfer if Y has not invested the funds as agreed. Such refund is subject to the terms and conditions of this investment.

    If the agreement states that X incurs the loss and gain, namely if the investment brings profits, Y will refund the value of the bank transfer in addition the share of X in the profit. But if the investment incurs loss, the loss portion of X is deducted from the returned bank transferthereof. Each case will have its own facts and circumstances.

    ]]>
    Tue, 10 Mar 2015 12:00:00 GMT
    <![CDATA[Aviation Laws of the United Arab Emirates]]>

    Aviation and Aerospace Laws of the UAE

    On 17 July 2014 Malaysia Airways flight MH17 was shot down over Ukraine during a flight from Amsterdam to Kuala Lumpur in an act of suspected terrorism. On 5 December 2014 executive Heather Cho forced a Seoul-bound Korean Air plane to taxi back to gate at New York's JFK airport to unload the chief steward in the infamous "nut rage" incident, which has since resulted in a custodial sentence. On 28 December 2014 AirAsia flight QZ8501 crashed into the Java Sea in poor weather conditions whilst midway through an unlicensed flight from Indonesia to Singapore. On 27 January 2015 Dubai International Airport was officially declared the world's busiest international airport, overtaking London's Heathrow for the first time in the history of commercial air travel. It appears, then, that 2014-2015 has already proven to be an eventful period for the aviation industry. The above examples alone accentuate that aviation and its associated incidents engage a variety of legal concepts, thus rendering aviation law a prevalent topic of discussion.

    The problem with aviation law is that airplanes rarely stay in one place for long. Whereas their constant transience is clearly a requirement for the holiday-maker (I for one wouldn't be very happy if I got on a plane and it didn't go anywhere), it causes complications for lawyers. The fact that airplanes are constantly moving between jurisdictions makes the applicable law at any given time difficult to ascertain – for example, a flight from Dubai International airport to London's Heathrow will cross the airspace of approximately 13 different jurisdictions, whilst additionally flying over international waters. So which law will apply to the vehicle and its passengers? That of the country of origin, the country of destination or the country directly beneath the aircraft at any given time?

    Whilst all of these are pertinent questions, it is perhaps diligent to walk before we run – or taxi before we fly, as the case may be. That is to say, before examining the technicalities of international aviation law, we should first understand the legislation in place within our own jurisdiction. The UAE's principle provisions on such matters may be found in Federal Law Number 20 of 1991 (the Civil Aviation Law), Federal Law Number 4 of 1996 (the Aviation Authority Law) and Federal Law Number 20 of 2001 (amending the Aviation Authority Law). Ranging in scope and covering a plethora of areas of law (including but not limiting to jurisdiction, licensing requirements and conditions of carriage), the Civil Aviation Law applies to aircraft operating or registered in the UAE, air traffic control, communications and civil airports. The Aviation Authority Law establishes the General Civil Aviation Authority (GCAA), designated to oversee compliance with the Civil Aviation Law whilst accentuating concepts of safety and security. With exclusive authority over the UAE's aviation industry, the GCAA was formed in order to advance and strengthen the same in the modern era of commercial air travel.

    Yet it is clear from the name of the statutes alone that such provisions pertain to CIVIL aviation – that is to say, aviation within the remit and control of the state. It therefore does not go so far as to provide answers to our earlier question with regards to jurisdiction during international transit. Such queries with regards to sea transport are easily answered, with the basic provisions of shipping law stating that the laws of the territory in whose water the ship is located at any given time will apply, with the jurisdiction being that of the ship's country of registration when in international waters. But shipping law has developed over a period of centuries, with the seas open to less ambiguity than the skies. So to which law should we turn in terms of aviation? It is a globally-acknowledged principle of aviation law that aircraft, like ships, are subject to the jurisdiction of the nation in which they are registered. Therefore although there is no specific law which states "our laws apply on our aircrafts when they are in the air", UAE-registered carriers are considered as UAE soil when in flight, and as such the UAE law will apply thereon. Let us consider the following examples:

    1.      In June 2014 a British man was jailed in Dubai for sexually assaulting an air hostess on an Emirates Airline flight from Bangkok to Dubai; and

    2.      In January 2010 three men were arrested at London Heathrow Airport on suspicion of terror-related offences whilst on board a Dubai-bound Emirates flight which was prepared for take-off.

    In the first example, there appears to be little to no controversy. Although the vast majority of countries uphold a provision similar to that of Article 2 of the Civil Aviation Law, namely that "The State exercises complete and absolute sovereignty over the aerial space above its territory" (thus having the effect that UAE law applies in the airspace above the UAE), it is highly unlikely that the state within whose airspace an offence occurs will have any knowledge of the same, and even less likely that the nation would consider investigation and prosecution of the same within its best interests (some countries even decline jurisdiction over matters occurring on foreign aircraft in their airspace. This includes the UAE - Article 18 of the Federal Law Number 3 of 1987 (the Penal Code) specifically provides that "this law shall not apply to crimes committed on board foreign aircraft in the State's air space"). As the Emirates aircraft in this example was registered in the UAE, and the UAE was the first jurisdiction in which it touched down after the commission of the offence, it followed that the UAE law was applicable in the circumstances. Although the plane had taken off from Bangkok, the fact that the craft was in the air at the time of the offence and its country of registration were the only relevant factors when determining jurisdiction. Any Thai law on the matter was therefore inapplicable.

    But at what point during the journey did the Thai law give way to the UAE law? At what point was the passenger in question no longer subject to the jurisdiction of Thailand, but to the jurisdiction of the UAE? Was it when he stepped onto the aircraft? Was it when the aircraft doors closed? When the plane was disconnected from the terminal? As it taxied down the runway? When its wheels left the ground? How about when it was a certain distance above sea level? Or when it cleared Thailand's airspace? In our second example the aircraft in question was, again, an Emirates Airline plane registered in the UAE. Although ready to depart, it had not yet begun to taxi or take off, and the passengers thereon were as such still considered to be subject to the jurisdiction of the UK (specifically, England and Wales).

    Of course, given the nature of the suspected offences in this example, emergency intervention was required and the ambiguity surrounding jurisdiction was not called into question. However in general the UK has clear legislation regarding the scope of its jurisdiction with regards to aircraft, with section 92(2C)(4) of the Civil Aviation Act 1982 (as amended)[1] (CAA) stating that "the period during which an aircraft is in flight shall be deemed to include any period from the moment when power is applied for the purpose of the aircraft taking off on a flight until the moment when the landing run (if any) at the termination of that flight ends" - likewise, Article 56 of the Civil Aviation Law provides that "The plane is considered in flight at any time beginning with the moment its outside doors are closed after all the passengers have boarded until the moment any of its outside doors is opened in order that the passengers get off it". Jurisdiction was, therefore, technically ambiguous and unclear in our example – yet in all cases safety and security are overriding interests, and thus international cooperation is strongly relied upon. Yet it is of note that in other incidents, the overlap in definition is such that the UAE and UK could both claim (or both denounce) jurisdiction in a particular case. What would happen, for example, if an offence occurred whilst an Emirates plane taxied towards Heathrow's runway? The plane would clearly still be on UK soil – yet as the doors would be closed, the UAE definition of "in flight" would be satisfied, thus meaning that the UAE could technically claim jurisdiction. However according to the UK law the craft would not yet be in flight. And what if an offence occurred on board a UK-registered British Airways flight as it taxied towards a terminal at Dubai International airport after landing? As it would have finished its landing run, it would no longer be classed as "in flight" according to the CAA, and thus the UK no longer has jurisdiction – however as the doors would not yet be open, the UAE has no jurisdiction as per the Civil Aviation Law. In such a case the burden of proving that a particular state has no jurisdiction over a matter would fall upon the suspect's defence team.

    In our above examples, both of the aircraft in question were registered in the UAE, were under the operation of Emirates Airlines (the UAE's national carrier) and were travelling to the UAE. Our jurisdictional debate so far, then, has only considered two factors in an international voyage – the country of departure and the country of origin. But what if an airline is in fact operating a craft registered in another nation? Or what if a flight is in transit, touching down temporarily in a foreign jurisdiction? This latter question will depend entirely upon the laws of the foreign jurisdiction at hand. Passengers on a plane stopping temporarily in the UAE, for example, will be subject to UAE law from the moment the doors are opened to allow them to disembark, pursuant to Article 56 of the Civil Aviation Law. However in the UK the national law will apply from the time that the plane reaches the end of its landing run. With regards to the operation of a foreign carrier by a national airline, the UAE law remains conspicuously silent. On the contrary the CAA specifically confers to the UK rights of jurisdiction over "British-controlled" aircraft, with Section 92(2C)(5) defining the same (somewhat convolutedly) as being any aircraft which is:

    a)      for the time being registered in the United Kingdom; or

    b)      not, for the time being, registered in any country but in the case of which either the operator of the aircraft or each person entitled as owner to any legal or beneficial interest in it satisfies the following requirements, namely-

    1)      that he is a person qualified to be the owner of a legal or beneficial interest in an aircraft registered in the United Kingdom; and

    2)      that he resides or has his principal place of business in the United Kingdom; or

    c)      for the time being registered in some other country, and is for the time being chartered by demise to a person who, or to persons each of whom, satisfies the requirements aforesaid.

    And paying further consideration to stop-overs (for example, long-haul flights which involve touch-downs) or connecting flights, both the UK and UAE laws afford jurisdiction over matters which have occurred in transit on foreign carriers over any airspace when the UK/UAE is the first country in which the plane lands thereafter.

    As discussed earlier, the international dimension of modern commercial air travel is such that international cooperation must be relied upon in order to ensure smooth operation of the industry as a whole. To this effect, several international treaties are in place so as to assist in the various complications which may arise with regards to incompatible national laws. For example the Tokyo Convention, a treaty effective as of December 1969 with 185 signatory nations to date, confers powers and responsibilities in matters of "Offences and Certain Other Acts Committed On Board Aircraft", whereas the Montreal Convention (effective since 2003 with 111 signatory nations at present, including the UAE) considers the apportioning of damages payments with regards to injury to passengers and loss of or damage to luggage and cargo. But whilst taking measures towards the adaptation of a singular international approach, the signing of such treaties is voluntary. Therefore in addition to the aforementioned considerations concerning the applicable jurisdiction on board an aircraft, we must also consider whether the jurisdictional nation is a member of any convention which will dictate its approach in the specific circumstances.

    It therefore seems reasonable to conclude that "it's complicated", with national laws, international treaties and jurisdictional ambiguities all aspects of consideration. The operational carrier, country of registration and jurisdictional location of the aircraft at the time of any given incident may all be relevant – consider the baby born on a Northwest Airlines flight from Amsterdam to New York to a Ugandan mother over Canadian airspace on 1 January 2009! Given the complexity and wide scope of factors at hand, the overriding approach adopted by all competent authorities internationally seems to be the same as that employed by baggage handlers. Case by case…

     


    [1] This article pays full consideration to the Civil Aviation (Amendment) Act 1996 and incorporates the provisions thereof.

     

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    Tue, 10 Mar 2015 00:00:00 GMT
    <![CDATA[Cross Border Crime and Extradition]]> Cooperation in International Financial Investigations

    Apparently "money talks" but "crime doesn't pay".

    It  therefore follows that financial crime is rife, yet the methods in place to control and reduce it are effective.  The evolution of banking means that there are now more ways than ever conduct financial activity, with online systems, payment technologies and bitcoins all assisting us in our transactions. But along with new methods come new offences, with money laundering, tax evasion, online fraud and the funding of terrorism featuring regularly on court lists across the continents. And given that global communication and transport have had the effect that the world is now a relatively small place, it is of no great surprise that these crimes have taken on an international dimension.
     

    So what systems are in place to police transnational financial crime and bring any perpetrators to justice? In this second installment of our international criminal law series we shall discuss the ways in which the UAE cooperates with nations requesting assistance in conducting financial investigations.

    1–  Is Dubai party to any international agreements regarding the exchange of information in cases of tax and criminal investigation?

    As we are all aware, one of the major benefits of living in the UAE is that our UAE-generated income is not taxed. However it is not unusual for expats to have an additional source of income in their home countries, which may well be subject to tax in accordance to the local law. And elsewhere in the world, an expat may find that not only must they pay tax on their income at home, but they may also have to declare this income in their country of residence,

    where it could again be subject to taxes or charges. This has the effect that the same income is taxed twice – once in the home jurisdiction and once in the country of residence. In order to avoid this, many nations enter into double tax avoidance agreements (DTAAs). DTAAs aim at taxing revenue earned from sale of shares, dividends, royalty payments and fees in the state where income is earned, subject to terms mutually agreed between two member countries.


    Taxation law is jurisdictionally-specific – that is to say, it is not international. The taxation law of a country is applicable to citizens and residents of that country alone, and cannot be extended to other jurisdictions.Yet a similar feature in the majority of national tax law is the way in which avoidance is criminalized, with persons convicted of tax evasion often liable to fines and/or imprisonment.

    It is worth noting that DTAAs are not considered as tax avoidance – the obvious reason being because they are not a method through which an individual or corporation may avoid tax, but merely a sanctuary under which the entity may seek relief from making two payments in relation to the same asset. DTAA participation therefore does not incur any criminal liability, and the main objective is to foster economic growth between the parties who have signed the same.


    UAE Federal Law Number 39 of 2006, which relates to International Judicial Cooperation on Criminal Matters (Law 39), provides for the extradition of criminal suspects in cases where the individual in question is subject to criminal investigation overseas. As we discussed in Part I of this series, the UAE has signed extradition treaties with several countries, and these  treaties impose additional requirements on respective member states. It is possible for foreign countries (including countries that have not signed a criminal treaty) to request extradition of a person residing in the UAE for interrogation, prosecution or enforcement of criminal awards, although it is of note that the police, prosecution authorities and courts in the UAE have absolute discretion to refuse extradition on certain grounds. Additionally, in relation to awards or judgments from countries with which the UAE does not have a bilateral treaty, the provisions of the UAE Civil Procedure Code must be satisfied.

    2– When and how is Dubai required to disclose such information?

    UAE follows internal procedures and acts in accordance with the requirements of UAE Civil Code, UAE Commercial Transaction Law and the UAE Penal Code.


    As the UAE is party to several international conventions and bilateral treaties, acting in conformity with several DTAAs and Mutual Legal Assistance Treaties (MLAs) the UAE Government can cooperate with foreign authorities in the process of investigation and prosecution of criminal offences. Although tax evasion is not specifically addressed in most MLAs, the treaties refer to assistance being provided "for the purpose of proceedings". This implies that the exchange of confidential bank information may be permissible under the provisions of an MLA, particularly where a criminal tax implication has arisen in the foreign country.


    No bank account can be frozen unless by an order of the court or in accordance with the anti-money laundering law and the law pertaining to the financing of terrorism, namely UAE Federal Law Number 1 of 2004. The UAE permanent mission at the United Nations sends a list of 'suspected' individuals to the National Committee for Combating Terrorism (NCFCT) which then send this list to the Central Bank. From the Central Bank, orders for the necessary information are served on the list of 'suspected' individuals.
     

    3–What is meant by "bank secrecy" under the law of Dubai? In what cases is the bank obliged to disclose information? If there are such cases, what is the nature of the disclosure procedure: criminal or administrative? Is the right to receive such information limited to the police, prosecutors and the criminal courts, or are the tax authorities and municipality also entitled? Is any special order required for disclosure?

    The term 'bank secrecy' per se is acknowledged generally under the prevailing laws of the UAE. For the purpose of this article, we limit the scope of our response to wider UAE and exclude the DIFC legislation, details whereof can be obtained from STA's website (www.stalawfirm.com). All bankers, traders and other professionals who are in a position to collect and store data from the public are bound by the duty of confidentiality – the breach of which is an offence under Article 379 of UAE Penal Code (Federal Law number 3 of 1987, as amended). Article 379 reads as under:-
     

    "Punishment by detention for a period of not less than one year and by a fine of not less than twenty thousand Dirhams or by either of these two penalties, shall apply to any one who is entrusted with a secret by virtue of his profession, trade, position, or art and who discloses it in cases other than those lawfully permitted, or if he uses such a secret for his own private benefit or for the benefit of another person, unless the person concerned permits the disclosure or use of such a secret. A penalty of imprisonment for a period not exceeding five years shall apply to a culprit who is a public official or in charge of a public service, and has been entrusted with the secret during, because of or one the occasion of the performance of his duty or service."


     Further, Article 106 of the Union Law (Law number 10 of 1980 concerning the Central Bank, the Monetary System and Organization of Banking) also provides for the obligation to keep confidential all banking data submitted to the Central Bank.
    In a criminal matters (whether pertaining to an international or a domestic offence), information must be disclosed to the investigating authority. While the banks can be required to make statements before prosecution, in practice material and formal disclosure can be ordered by the court.

    4– Under what circumstances may my Dubai bank account be blocked/frozen? What authority is able to block it?
     

    In international matters, the freezing of a UAE-based financial account would largely depend whether a treaty was in place between UAE and the country making the request. In any event, the power to make any decision with regards to freezing a bank account is vested in the public prosecution and/or court authorities. In instances of suspected money laundering or the financing of terrorism the Governor of Central Bank has the power to order the freezing of a bank account. Dubai Prosecution is vested with powers of investigation, and is able to bring an action against the accused and forward the matt er to court for trial in domestic cases.
     

    5 –For how long will my account remain blocked?

    Time scales are entirely dependenton the nature and level of the charge, and may be set by the prosecution or the court.


    In cases pertaining to money laundering and in accordance with Law No. 1 of 2004, the Governor of Central Bank can issue a notice for the freezing of a bank account for a period of seven (7) days. For the purpose of investigation, the Governor and/or the Attorney General may extend this period for as long as it may take to complete the investigatory process.

    6–If my account has been frozen, may I appeal? To which court?

     In criminal matters the hierarchy (lower to highest) is as follows: (a)  Police; (b) Prosecution; (c) Court of First Instance; (d) Court of Appeal; (e) Court of Cassation. If account is frozen then an appeal is heard by the higher court.

    7– Is the tax evasion a crime in Dubai? What are the tax laws of UAE?

    The UAE is, in general, a tax-free country. There are a few exceptions which apply to the oil and gas companies, branches of foreign banks. In the Emirate of Abu Dhabi, taxation principles are governed pursuant to Abu Dhabi Income Tax Decree of 1965 (and amendments thereto). Taxation in Dubai is covered under the statute being 'The Dubai Income Ordinance of 1969' (and amendments thereto) whereas Sharjah's tax system is controlled in line with the provisions contained in 'The Sharjah Income Tax Decree of 1968'.

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    Mon, 09 Mar 2015 12:00:00 GMT
    <![CDATA[IN IT TOGETHER]]> COLLECTIVE INVESTMENT SCHEMES:

    SKYLINING DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC) LAW

    "The first step towards getting somewhere is to decide that you are not going to stay where you are."

    Investments require one to take a risk and it is often advised that this risk should be a calculated one. According to K Geert Rouwenhorst in The Origins of Value, the concept of an investment company dates back late 1700th century Europe, when a Dutch merchant and a broker invited subscriptions from investors to form a trust, thus providing small investors with limited means an opportunity to diversify1 . With the pace of economic transitions worldwide, the approach of investors has also varied enormously. The availability of different opportunities to make money and the competition in the market inevitably have the scope to create confusion. However, there are many options which allow a person to make comfortable investments in anticipation of easier returns. In the UAE, the Dubai International Financial Centre (the DIFC) offers an optimal environment for making investments and has been regarded as one of the most developed frameworks in the world. It is based upon the principles of common law and tailored to the region's specific need. Economists expect the investment market in the UAE to remain steady and thrive. This should encourage investors who are looking to add risk to their portfolios at present, ahead of the lean summer period. In this article shall discuss the flexibility and operations of Collective Investment Schemes (the CIS) which can be established in the DIFC – an onshore financial and business hub connecting the region to the world, and the world to the region.

    The DIFC was established by Federal Law and is regarded as an autonomous jurisdiction within the UAE. Funds are regulated by the Dubai Financial Services Authority (the DFSA) which is an independent authority responsible for managing and distributing the funds. As the name itself denotes with regards to the concept, CIS are the collection of money from different investors, pooled to create an investment fund. The concept of CIS is considered as a secured investment opportunity because each scheme will have a specific objective, projected target return and risk profile which is generally set out in the proposition document. CIS are more or less similar to mutual fund type of investments, insofar as that they provide absolute control over the investment from the company pooling to the investing the money. The recent economic downturn around the world has made this need more pressing. One of the considerable advantages of investing in a CIS is that it is a type of passive investment, and one does not have to actively watch every financial transaction that takes place. You can simply opt for a good scheme and let the fund manager take care of the rest. If you choose an effective scheme in which to invest your money, you can be sure to look forward to some potential and consistent returns. Although a CIS can be very profitable in certain situations there are a few elements of which a potential investor should be cautious. One of the potential drawbacks of this type of investment is that there is certain fees payable in order to subscribe, in addition to the fund, a management fee other variable hidden charges. Such fees can significantly eat into the returns that are generated by the investments. Therefore an investor should pay careful attention to the performance of the fund and make sure that it justifies the fees necessitated. If the fees get too high, a fixed-rate investment with a low interest rate pay be a more suitable option2 .

    REGULATORY ASPECTS OF CIS IN DIFC The DFSA introduced the first Collective Investment Fund regime (the Fund Regime) in the year 2006. This was designed to provide adequate investor protection, meeting international standards for regulation. However in 20103  certain remarkable changes were implemented into the Fund Regime in order to make it more accessible and market-friendly, and moreover to ensure that greater respect was paid to the principles of the International Organization of Securities Commissions (the IOSCO) for regulating the CIS. The Fund Regime focuses on disclosure, corporate governance, valuations and service providers. The DFSA takes into account a range of matters when licensing and supervising firms that manage and market funds in or from the DIFC.
    The DFSA also regulates the key players in the funds management service sector, such as fund administrators, asset managers, custody providers and trustees, in order to ensure adequate investor protection by promoting high industry standards that meet international best practice. The investments of funds is made by specialized management (directors or the managers) and can consist of securities, bonds, and other financial instruments. It accumulates funds of high net worth in a collective scheme, which is flexible, with minimum regulatory supervision. CIS may be used as investment vehicle for property investments.

    KEY FEATURES OF THE FUND REGIME

    1. Objective

    The Fund is the collection with respect to property of any description, including money, and enables those taking part in the arrangements (the Unit Holders) (whether by becoming owners of the property or any part of it, or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property, or sums paid out of such profits or income. However the arrangements is such that the Unit Holders do not have day-to-day control over the management of the property irrespective of their rights to be consulted or to give directions.

    2. Requirement of Funds

    A fund can be established in the DIFC either by becoming: (a) a DFSA licensed Fund Manager; or (b) an External Fund Manager.

    3. Types of Funds

    There are two types of Funds that can be established in the DIFC, and be managed by either a DFSA-licensed Fund Manager or an External Fund Manager (DFSA licensed fund managers being able to establish and manage funds in the DIFC, as well as in jurisdictions outside the DIFC)5 :

    Public Funds:   These funds are open to retail investors, and can be marketed by way of public offer. As Public Funds are open to retail investors they must abide by stricter regulatory requirements so as ensure the greater protection and transparency to the retail investors. The requirements honor the principles of IOSCO and meet international standards for retail protection. Detailed disclosure is included in the fund's prospectus to enable retail investors to make an informed investment decision relating to the fund, and an independent oversight of the fund management is provided either by a member oversight committee or by the Trustee or Eligible Custodian of the Fund.  

    Exempt Funds:   Exempt Funds replaced the existing Private funds regime, and are open to professional clients who make at least a minimum subscription of $50,000 (US Dollars fifty thousand) each. Such Funds can only have 100 or fewer Unit Holders and cannot be offered to the public, with distribution being only by way of private placement. They are subject to lenient regulatory requirements

    4. Fees of Funds

    In the recent regime the range for marketing of Foreign Funds in or from the DIFC has been expanded. The Fee structure has been made more competitive as the fund manager application fee reduced from $40,000 (US Dollars forty thousand) to $10,000 (US Dollars ten thousand).

    5. Other Requirements

    For obtaining a DFSA license, the fund manager has to demonstrate the adequate systems and controls necessary for the management of the type of proposed fund. The individuals performing certain functions within the Firm, such as its Board Members, senior management and key control functions (for example, the compliance and anti-money laundering officers) meet the relevant suitability and integrity criteria. Once the license has been granted, the DFSA supervises the fund manager's activities on an ongoing basis. In order to comply with the best international practices the funds must have a registered auditor who is required to prepare a report on the financial accounts of the Fund on an annual basis. A Fund Manager is obliged to provide interim and annual reports to Unit Holders and the DFSA. The annual reports must include a valuation of the fund assets which is acceptable to the Fund's registered auditor.

    CONCLUSION

    Investment in CIS is voluntary and requires for there to be a sufficient number of citizens with surplus savings to support the same in order for them to remain viable and effective. Additionally, because of the requirements for diversification and the need for liquidity to accommodate regular injections and outflows of money, CIS require relatively highly developed stock, bond and money markets to provide an adequate range of investable securities. Therefore such schemes are more common in developed African countries, where higher levels of disposable income for discretionary savings are available. Nonetheless, the introduction of new structure in DIFC fund regime is a fair indication of Dubai's inclination to emulate with major global fund domiciles such as Luxembourg and the Cayman Islands, and of the DIFC's commitment to adapting to market demand. The regime is sufficiently light to be attractive to fund managers from various aspects, but simultaneously ensures that investors are being given greater protection through a robust regulatory framework.

    Coming Soon…

    Like what you've seen? Then come and meet the team!
    Are you a company or an individual looking for assistance in corporate, commercial or litigation matters? Do you enjoy STA's newsletter updates? If so then STA may well be the firm for you. Still looking for that extra little bit of reassurance…?
    Over the past year STA has gone from strength to strength, and has enjoyed a period of unprecedented growth. New and widely-publicized office openings in Doha and Bahrain added pins to the map, whilst the growth of our team in the UAE has allowed us to extend our expertise across a wider range of practice areas.
    As well as expanding as a firm STA has also grown as a brand. Your trusty legal publication Court Uncourt is now circulated more widely than ever before, and we were delighted to appear on renowned television series Property scape. With our associates featuring regularly on weekly radio show Josh Magazine to discuss a variety of pressing legal issues, it is no wonder that an increasing number of people are associating the name "STA" with high-quality legal advice and seamless counsel.
    Yet STA is proud of its growth beyond that in the physical sense. Our careful yet open and organic expansion has resulted in a larger client base, and our increasing capabilities are such that we are now able to go further towards fulfilling our clients' specific needs. Our bespoke service and core strengths now extend to over thirty varied practice areas, each being specially structured in order to meet your current legal needs, whilst at the same time preparing for the future by taking into consideration your commercial objectives and long-term business plans. However we understand that the needs of a company extend far beyond the legal, and appreciate the way in which entering into suitable synergies and commercial relationships may take a business to new heights. With this in mind, why not combine the opportunity to meet STA with the chance to interact with other companies and corporate bodies?
    In the interests of introducing ourselves properly and presenting our existing and prospective clients with the opportunity to network so as to expand their business portfolios, STA shall be hosting its first corporate event in 2015. Scheduled to take place in Abu Dhabi, STA will host representatives of commercial entities from across the globe. The evening shall include presentations on prevalent legal topics with STA's trademark unique twist, along with further information about the firm, thus allowing you to make an informed decision as to your next legal representatives.
    Still not sure? How about this: we'll provide appetizers.

    ]]>
    Fri, 06 Mar 2015 12:00:00 GMT
    <![CDATA[Legal Functions and Framework in ADGM]]>

    LEGAL FUNCTION AND FRAMEWORK IN ADGM

    What a year to be investing in the United Arab Emirates! According to statistics published by the International Monetary Fund (IMF) the nation's GDP hit USD 419,000,000,000 (US Dollars four hundred and nineteen billion) in December 2014 – a 4.8 percent increase on the preceding year. The IMF has predicted a four to five percent growth rate over the next seven years, thus indicating that our economy is forecast to go from strength to strength. And this is something of an achievement, given the continuing recession and economical collapses occurring elsewhere in the world at present, particularly in Europe. The advantages of investing in the UAE are, it seems, increasing, with previously-perceived deterrents, such as the lack of an exhaustive and comprehensive insolvency law, soon to be eradicated by the implementation of new laws and procedures.

    Yet the UAE is rife with investment opportunities – with an infinite number of ventures available across a huge expanse of market sectors spread throughout seven Emirates, identifying the most appropriate area in which to invest is by no means a small task. Obviously the final decision will complement the nature of the activity at hand, but a commercially-astute and competitive investor in the financial market will no doubt want to establish himself in a world-renowned financial centre. Until now his choices within the UAE and indeed throughout the Middle East would have been somewhat limited, with the Dubai International Financial Centre (DIFC) dominating the market. But the emphasis here in on the "until now"…

    Established pursuant to Federal Law Number 4 of 2013, Federal Decree Number 8 of 2004, Abu Dhabi Federal Decree Number 15 of 2013 and Cabinet Resolution Number 4 of 2013, the Abu Dhabi Global Market (ADGM) is almost ready to open its doors to investors. As a financial free zone governed by three independent regulatory bodies (namely The Financial Services Regulator, The Registration Bureau and The Courts) the ADGM has the ambition of becoming one of the world's leading financial centres. Despite it's close proximity to the DIFC the ADGM looks set to thrive on account of Abu Dhabi's strong and constant financial position, as supported by natural resources. Such factors promise to encourage financiers to seriously consider their options when selecting a Middle Eastern financial centre henceforth.

    When considering a forum, however, an additional consideration will inevitably be the various rights and restrictions afforded therein. Promising potentials and returns are a strong attraction, but the rules and regulations observed by a centre may also play a part in an investor's decision-making. In due consideration of such a factor, the ADGM states on its website that "In collaboration with other International Financial Centres, global institutions and regulators, Abu Dhabi Global Market will develop and support member institutions with the regulatory framework, legal jurisdiction and attractive business environment they need for sustainable business growth."

    So what is the regulatory framework and legal jurisdiction of the ADGM? Until very recently the legislative system has been uncertain, but the latest announcements have confirmed that the underlying law of the ADGM will be that of the common law jurisdiction of England and Wales. For clarity, it seems prudent to note here that "common law" is a legal system in which the prevailing rules and regulations have been established as a result of court/tribunal decisions in previous cases. However in the majority of jurisdictions operating such a system (for example Singapore, Australia and England/Wales) the common law glues together a framework of statutes and statutory instruments. In other words, the prevailing law consists of a mixture of statute and common law, with the provisions of common law often created in order to fill gaps in the legislative framework where specific cases raise awareness of the fact that the law is lacking. For the most part, case law does not actually give rise to new legislation – more guides the courts to interpret certain laws in a specific way, owing to the way in which they were applied in the precedent case.

    Having two methods in place via which laws are created in the same jurisdiction can inevitably lead to complications, such as case law conflicting with statute. Yet it is a clear feature of the English legal system in particular that where such provisions conflict, the statutory law will prevail. This is a principle which the ADGM will also adopt, which in turn shall help to solve another obvious problem in application of English/Welsh common law therein – namely, what if certain principles of common law developed by the jurisdiction of England/Wales in keeping with its own needs are contradictory to purpose in the ADGM? For example, what if a particular provision of employment law in force in English/Welsh common law opposes the approach that the ADGM wishes to take with regards to employment? Despite adopting the English/Welsh common law as the basis of its legislative framework, the ADGM shall additionally deploy its own set of rules and regulations in certain areas (which may be either drafted afresh, imported from other foreign legal systems, or both). And, just as statute prevails over case law in England/Wales, so the ADGM regulations will prevail over the common law provisions adopted therein. Of course, just as new laws are introduced from time to time in every jurisdiction across the globe, both the common law of England/Wales AND the ADGM will develop new principles in keeping with requirements. New common law provisions of England/Wales shall have immediate effect in ADGM, yet these may be superseded by new ADGM regulations overruling the same.

    It therefore appears as though English/Welsh law is applicable in ADGM, but is not binding. If ADGM authorities (namely, the Board) consider a particular piece of common law to be contrary to requirements, they may simply draft a regulation deeming it as inapplicable. However under Section 2(2) of the draft regulations currently proposed by ADGM, decisions made by the UK Supreme Court will have a binding effect on the ADGM courts. Given the fact that the ADGM courts shall neither have official links to any UK courts, nor have any right to appeal to them or to challenge their decisions, questions have been raised as to whether compelling the ADGM courts to abide by rulings of the Supreme Court is in the ADGM's best interests. Yet given that any civil case escalated to the Supreme Court will have been considered by the UK County Court, High Court and Court of Appeal before reaching such a stage, it seems reasonable to assert that, at some point, a final presiding authority should close the matter. Allowing it's courts to divert from the decisions of the highest judicial authority within its legislative template would leave the ADGM's legal system without boundaries, and may discourage participation by investors wary of the fact that the ADGM courts could, in theory, act contrarily to reasoned decisions or fail to establish a clear and precise legal position in relation to any particular matter. It goes without saying that a lack of confidence in a financial centre's rules and laws will act as a huge deterrent, and nominating a final and presiding external authority guaranteeing regulation of the court system will go some way towards alleviating such a risk.

    Given that the legal architects developing the framework of ADGM law started with a blank canvas and were free to adopt any provisions that they considered to be appropriate, the decision to apply English/Welsh common law as a live instrument (as opposed to taking the principles thereof and writing them into ADGM law as specific regulations) has been called into question. Why not just "codify" the current common law, thus making the current provisions constantly applicable and more easily accessible? Given its capacity to fluctuate and divert from statute, common law is often considered as hard to follow – yet despite this, the ADGM Board have decided not to adopt the "hybrid" approach. Although perhaps contrary to the wider UAE's efforts to implement simple and accessible laws, the ADGM's proposed approach pays consideration to the fact that the law is a living organism, and will grow and adapt in order to fulfill the needs of its jurisdiction. And just as a common law provision may rapidly be established when a case demonstrates a particular need for the said provision, a second case may just a quickly call for the implementation of an opposing law (such as the Hookway law, which was implemented in England and Wales in 2011 as case law, but superseded by further law introduced within weeks). Codifying case law would cement the law of a jurisdiction into one particular era, which may quickly render its provisions dated and inapplicable in new situations.  

    We have considered the way in which the ADGM will draft its own unique rules and regulations to operate in conjunction with English/Welsh case law, and have just referenced the codification of common law. But what of the implementation of English/Welsh law (whether common law or statute), amended to suit the requirements of the ADGM? The authorities thereof have recently released a list of UK statutes which shall have effect in the ADGM jurisdiction, many of which are qualified with commentary citing the adaptation or removal of various clauses. Whereas such an approach may defy the point of adopting English/Welsh law (why take the law of a different jurisdiction and amend it to fit? If it doesn't fit, why not disregard it all together and draft appropriate legislation from scratch?) it pays respect to an underlying principle of common law – namely, that there will always be exceptions, and no one law could possibly extend so far as to cover each and every applicable circumstance. Taking the existing law and adapting the same in keeping with current requirements is, by definition, within the spirit of common law. Prohibiting the adaptation of statute would be contrary to the purpose of adopting a common law system, which by its very nature allows for change as needs arise.

    The list of applicable UK statues is lengthy, and the scope of considering each in turn enormous. Yet a scan of the titles of the various provisions alone will inevitably alert the reader to the fact that some of the laws included were implemented a very long time ago, with the most historic being the Statutes of Fraud Act of 1677. (Here's a random point of interest – the Statutes of Fraud Act actually has very little to do with fraud, but instead provides certain guidance with regards to the form that various contracts, such as wills and land-related deeds, should take. Fraud is dealt with under the Fraud Act 2006, which applicable in both the civil and the criminal courts). Although the current English/Welsh legal framework is vested in and built upon such historic provisions, the actual law in practice has been adapted and developed in accordance with the specific nation's needs. It consequently has regards to the history, culture and legal ethos of England and Wales specifically. Simply identifying the said law and transplanting it so as to apply in a foreign jurisdiction may therefore be a move that is subject to criticism. Although the law suits the needs of England/Wales, what evidence is there to suggest that it will suit the needs of the ADGM, which, despite being a free zone, will inevitably be influenced by the culture, religion and social customs of the United Arab Emirates? The legal system of the UAE is founded upon the principles of Sharia Law, and it is therefore likely that incompatibilities will arise between UAE practice and English/Welsh law. This is particularly the case when considering the fact that some of the statutes which the ADGM intends to adopt make specific reference to women (for example, the Law Reform (Married Women and Tortfeasors) Act 1935 and the Law Reform (Husband and Wife) Act 1962). It will be important for the ADGM to preserve the overriding cultural principles of the UAE, despite being legally independent, so as not to deter regional investors.

    It seems appropriate here to pay additional consideration to the fact that case law is not always easily accessible. Even when the adaptation of a particular statute meets no opposition, the fact that the provisions of the same may have been amended by case law in practice is not always obvious. This is the case with several of the statutes on the list proposed by ADGM. For instance, the list shows that various sections of the Law of Property Act 1925, including section 53 thereof, will apply in the ADGM. However this specific provision (namely section 53(1)(c)) is subject to strict qualification owing to the case law of Saunders v Vautier and later Vandervell v Inland Revenue Commissioners. The decisions of the House of Lords in these matters have binding authority in the courts of England and Wales, and therefore will preside in the AGDM courts as well. However it is not clear to the layman that such provisions are in effect, and the inaccessibility of the law may discourage investors, particularly those accustomed to operating in civil law jurisdictions.

    The ADGM is currently welcoming commentary on its proposed legislative system, thus implying that amendments to the projected framework are still possible. It may therefore be the case that the present list of applicable statutes is amended. The addition of extra statutes seems particularly likely given the fact that more recent laws of corporate significance are notably absent, such as the Bribery Act 2010. Given its wide-reaching juridical scope and provisions tailored towards combatting offences which are particularly prevalent in the international finance market, the omission of the Bribery Act is a little confusing, and it's inclusion in the list of statutes at a later stage would be far from surprising (albeit amended so as to provide for penalties enforceable in the ADGM jurisdiction). Although specific regulations pertaining to matters such as employment and real estate have been disclosed, the criminal law of the ADGM remains unclear, yet it is widely anticipated that UAE Federal Law Number 3 of 1987 (the Penal Code) will apply. This follows the position in DIFC and all other free zones throughout the UAE, on account of the fact that the respective Boards do not have the power to criminalize and de-criminalize acts.

    Despite being far from mutually exclusive of one another, the legal system and the court system are two separate areas of discussion. We have thus far concentrated on the way in which the ADGM law will be structured – but what of how it will be implemented? In other words, how will its courts be organized? How will they operate? The DIFC notably operates a two-tier system, with a Court of First Instance and a Court of Appeal, thus allowing parties to a matter to challenge the decision of the Court of First Instance in the permitted circumstances. Although the ADGM have revealed that there will be no right to appeal to any UK court, it is not yet clear as to whether an internal court hierarchy will provide any scope for challenging an initial ADGM court judgement. Moreover there is at present no information available with regards to enforceability of awards secured outside of the jurisdiction. For example, at present arbitration awards made in the Dubai International Arbitration Centre (DIAC) may be enforced via the DIFC courts as per section 42(1) of DIFC Law Number 1 of 2008. This extends so far as to cover the enforcement of awards made by arbitration tribunals outside of the UAE, particularly where the UAE has entered into a treaty regarding the mutual enforcement of judgements such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) . However it was suggested in the case of Meydan Group LLC v Banyan Tree Corporate PTE LTD that the execution of a judgement pertaining to assets held outside of the DIFC will be exceptionally difficult to conduct, as the cooperation of external authorities such as the police may be required. As yet there has been no announcement regarding the ADGM's powers to enforce awards made in the courts of Abu Dhabi or further afield and, more pressingly, no indication has been given as to any cooperation between the ADGM and other local authorities. Relationships with the Abu Dhabi police force and other significant authorities may therefore be an area on which the ADGM should concentrate prior to commencing operations, as this would permit a wider executional capacity.

    Just as the DIFC's common law basis incites many entities to nominate DIFC as its dispute resolution forum of choice, so it is expected that the ADGM will be a popular forum for those familiar with such a system. However as with any free zone, ADGM will take time to develop and grow, and although companies may begin to incorporate therein as soon as the doors are open for business, it will inevitably take some time for commerce to mature and disputes to arise accordingly. It is therefore likely that the ADGM courts will remain relatively quiet initially – unless, of course, the jurisdiction is opened up to entities operating outside of the ADGM. This is a realistic possibility given the fact that, pursuant to Law Number 16 of 2011, the DIFC jurisdiction became accessible to ANY party wishing to refer a dispute as of 31 October 2011, providing that both parties to the dispute had mutually agreed to submit to the jurisdictional authority of the DIFC in writing. When considering the benefits that this has afforded DIFC (in terms of both financial income and the weight carried by judgements issued therein) the ADGM may wish to implement such a strategy with immediate effect. This may be further encouraged by the way in which the DIFC courts are often favoured above the Dubai Courts due to the approach they take with regards to awarding legal expenses. Although the UAE Civil Procedures Code allows a successful party to claim legal expenses from the other party this is rarely put into practice in the Dubai Courts, whereas the DIFC courts are proving themselves more likely to apportion expenses in favour of the successful litigant.

    Regardless of the scope of the jurisdiction of the ADGM courts, the tribunal shall be a "court' in the tradition sense – namely a forum in which disputes are heard by a judge or panel of judges, and an executable judgement handed down. The details of any presiding judges are yet to be released, but it is of note that DIFC seats a number of internationally-acclaimed judges, qualified in a number of jurisdictions including the UAE. However despite the prevalence of traditional litigation as a common dispute resolution mechanism, agreements between parties to refer disputes to arbitration have increased dramatically (particularly in joint venture agreements, given that arbitration is the dispute resolution mechanism favoured by parties to construction contracts using FIDIC models). The inclination towards arbitration incentivized DIAC to establish its own arbitration centre, the DIFC LCIA Arbitration Centre, founded as a strategic partnership between DIFC and LCIA and operating under the rules of the latter. However in May 2014 Law Number 7 of 2014 announced the establishment of a central Dispute Resolution Authority within DIFC – namely, a singular body creating a "one-stop shop" for dispute resolution by uniting the three independent centres (the DIFC courts, DIFC LCIA Arbitration Centre and Dubai World Tribunal), presided over by the current president of the DIFC courts. No timeline for this unification has been announced, but it remains to be seen what position the ADGM will take with regards to arbitration. Although it may do well to heed to approach soon to be adopted by DIFC, it may be that the mergence of centres therein leaves space in the market for an independent arbitration centre within a financial centre.

    Despite the fact that the ADGM's proposed legal system differs greatly from that of the UAE it bares striking similarities to that of DIFC in many respects. Given DIFC's high ranking in the world league of financial centres, it seems reasonable to assert that the ADGM is on the right path not only to ensuring its own success, but also to assisting the Emirate of Abu Dhabi in achieving the Abu Dhabi Economic Vision 2030.

     

    ]]>
    Thu, 05 Feb 2015 00:00:00 GMT
    <![CDATA[Cross-Border Crime and Extradition (Part I)]]>

    They say that crime doesn't pay. But whether it pays or not it certainly sells, at least with Hollywood movies, computer games, fictitious novels all reaping the benefits of the public's general fascination with the subject. Generally, the term "crime" may cover anything from a road traffic offence to a mass murder. Yet countries across the world regularly increase the range of offences   to regulate and maintain public order in keeping with developments in society. For example, advancements in the fields of technology and finance have tempted criminals to resort to newer forms of crimes, and adopt alternate forms of currencies such as bitcoins.   

    As any industry is a continuously fluctuating, changing concept, the law must constantly and correspondingly evolve in order to remain effective. However it isn't just the evolution of crimes themselves that renders new legislation necessary – the vast improvement in international transportation is such that a person could theoretically now commit a crime on one side of the globe in the morning but be safely on the other side of the world by supper time. This concept is prevalent in the media, with the faces of accused such as Shrien Dewani, Julian Assange and Amanda Knox fronting our screens almost daily. The internationalization of crime has therefore forced domestic criminal law in several jurisdictions to rely on international co-operation.

    International crime may be categorized under four broad headings, namely money laundering and financial crime, drug trafficking, heinous crimes and the war against terror. Offenders operating in any one or more of these areas have the potential to exercise great influence on authorities, states and society in general through open or hidden channels. Therefore ensuring that such characters are appropriately investigated, tried and thereafter dealt with is not merely the responsibility of the country where the crime may have occurred, but is a concern on global level. Such cooperation will in turn assist in upholding national security, and further ensure that domestic peace is maintained and bilateral trade and commerce is not subject to crime, corruption and unlawful control.

    So what effects does this international co-operation have in practice? If an offender has committed a crime in country ABC but is now in country JKL, country JKL will presumably have no jurisdiction to try him. Is country JKL under any obligation to deliver him into the custody of country ABC? Or is he entitled to any protection afforded by country JKL? How do governments expedite any hand-over of suspects? Additionally what if the crime takes place across multiple jurisdictions, or an in area in which the governing law is difficult to determine? In what circumstances may jurisdiction be afforded to an international tribunal?

    "Extradition" in its broadest context means and results from cooperation between one or more nations and arising from a formal request by one state (generally, pursuant to a treaty or a special request) to surrender a person accused and/or convicted of a crime necessitating extradition/investigation. This general definition is largely understood and encompasses the basic principle, but evidently an extradition process is much more complex. As such a far more specific understanding is necessary in order to effectively achieve the desired objective to the mutual satisfaction of all states involved. The problem here is that no universally-acknowledged specification of "extradition" exists. Whereas the law of the USA considers extradition to be the request for handing over a suspect (by a state with the competency – not necessarily the intention – to follow through with the consequential punishment of the suspect on conviction), alternative schools of thought consider extradition as being handing over the physical custody of the suspect and/or his eventual prosecution. The mechanics of extradition are therefore far more complex and governed by individual treaties or special case-by-case arrangements between nations.

    The United Nations General Assembly vide its resolution dated 14 December 1990 urged its member states to strengthen international co-operation in criminal justice. To this effect, the United Nations issued the Model Treaty on Extradition which is consistent with principle 37 of its 'Guiding Principles for Crime Prevention and Criminal Justice in the Context of Development and a New International Economic Order'. The Model Treaty serves as a guide and further places an obligation on member states to extradite 'any person who is wanted in the requesting State for prosecution for an extraditable offence or for the imposition or enforcement of a sentence in respect of such an offence'. This obligation to extradite however exists only between two or more member states and in absence of the treaty, no such requirement would apply.

    International criminal law is, it seems, a vast and complex subject. This series of articles will guide you through some basic principles in order to answer the aforementioned questions.  Not only will we examine international principles and treaties currently in place to govern such situations, but we shall also explore the domestic legislation which often causes cases to take on an international dimension and necessitates these processes. In the next article, we will discuss one of the four main areas of international crime – namely, money laundering and Issue 7 will address specific terms of international treaties.

    ]]>
    Wed, 17 Dec 2014 12:00:00 GMT
    <![CDATA[Defamation-Hold your Tongue!]]> "Don't interrupt when someone else is speaking". "Don't talk whilst your mouth is full". "Don't bite your nails".

                                                                                                                                                 - Mothers of the STA Law Firm (various)

    Wherever we grow up and whatever language we speak at home, all of us are undoubtedly subject to an in-house set of behavioral customs and guidelines imposed by our parents and elders. Every family will additionally have in place its own disciplinary procedure and retributions for flouting the rules. And whatever the consequences and whether deliberate or accidental, it is inevitable that at one point or another we all fall short of our family's customary expectations. Would we take more care to abide by the rules if the punishments were more severe? What if our actions were not simply breaching family convention, but actually breaking the law? Let us take another stereotypical gem of parental wisdom – "if you can't say anything nice, don't say anything at all". If we breached this rule – namely, if we were to say something that isn't "nice" about somebody – we would be chastised accordingly by our family. But depending on exactly what we had said, we might have broken federal law and be liable for a punishment far greater than being expelled from the room.

    To put this into context, saying something controversial about another person may be considered as defamation – an act which is criminalized under UAE law. Pursuant to Federal Law Number 3 of 1987 (the Penal Code) the law on defamation provides that a person may not make a statement by any means if it has the potential to have detrimental effect upon the person to whom the statement refers. In any allegation of defamation it shall be for the prosecution to prove beyond all reasonable doubt that all three of the elements of the offence have been fulfilled.

    To some extent the written law (namely Articles 371 – 371 of the Penal Code) is very clear. For example, a "detrimental effect" is deemed to have occurred if a victim of a statement has become consequently susceptible to punishment, or exposed to public hatred or contempt (regardless of whether any such punishment, hatred or contempt has actually transpired) under Article 372. The same may be said of a false accusation which publically dishonors or discredits the victim, whether or not a specific event is referenced by the discrediting party, as per Article 373. However "making a statement" is not defined with such clarity, thus allowing for a wide interpretation. What is a statement, and how do we determine whether or not such a statement has been made?

    Chapter 6 of the Penal Code is entitled "Defamatory Crimes – Libel, Slander and Violation of Secrets". This diction in its very basic sense gives us some guidance with regards to the constitution of a statement, with libel being the written word and slander the spoken. Furthermore the law gives specific examples, citing newspaper print in Article 372 and over the telephone, in the presence of a third party or by letter in Article 374. However the statute is without limitation and the definition of a statement is left ambiguous.

    Evidently, a written statement may be made via a wide variety of mediums other than in print. This is a fact which has become increasingly prominent in the context of defamation when considering the increased use of communication-based technology and social networking. Surely if we posted a comment on Facebook or Twitter which exposed someone to the risk of public contempt or otherwise jeopardized his honor we have breached the defamation law – especially as a social networking site may be considered as "any means of publicity" as per Articles 372 and 373. And although posting offensive comments about our peers is perhaps an activity confined to younger generations, the law also goes so far as to also protect the reputation of commercial entities. Consequently venting our frustrations with regards to a substandard product or a disappointing level of customer service to our friends online may render us liable to prosecution owing to a breach of the defamation provisions.

    The solution to this problem is simple – we need to take care and be mindful of the law when publishing any comment into the public domain. We should also remember that the fact that the general public may not have access to our respective web pages is not necessarily a defence, as the law does not specify a target audience. But what are the rules regarding communications which may be considered private? Will a person be in breach of defamation law further to a statement made via a medium which pinpoints a very specific recipient – a statement sent to another via our mobile telephones, for example? We have already noted the rapid development of communication-based technologies, with applications such as Blackberry Instant Messenger, WhatsApp and Snapchat being amongst recent popular advances. Such programmes facilitate constant, unrestricted and private contact with acquaintances – but does the law of defamation still apply? Further to a public warning issued by the Abu Dhabi police department Gulf News published an article on 26 July 2011 citing that the misuse of instant messaging services is punishable by up to three years imprisonment[1]. The author, quoting the manager of the UAE's Telecommunications Regulation Authority, alludes to the way in which information and rumor can spread at a tremendous speed due to modern devices, and specifies that the defamation laws cover the use of such technology in communicating detrimental statements and materials. It therefore seems as though we should exercise equal diligence when communicating through private channels.

    So we have established that a statement may be made via a plethora of methods. But what of the definition of "statement" itself? Most of us would agree that making a statement means to convey an expression – but is this description restricted to conveyance in words, whether spoken or written? They say that a picture paints a thousand words - could a photograph constitute a statement? Or what about a video clip? Given that either of these examples have the potential to tarnish the reputation of the subject it follows that defamation provisions would apply to any individual disclosing the contents of the same. Furthermore Article 371 of the Penal Code criminalizes any breach of the sanctity of a person's privacy. Under this law it is an offence to publicize any information pertaining to an individual obtained without his consent, including but not limited to images. In September 2013 UAE headlines reported an incident in which a third party captured on film a physical dispute between a local citizen and a foreign truck driver and posted the video on the website YouTube – although the driver was arguably the victim of an assault, both parties were considered victims of the violation of secrets provisions of defamation law, as the captor of the footage had not sought permission from either before publicizing it online. Again, in the current age of technology capturing images and videos on mobile phones and posting them to social networking sites is common practice – would it ever occur to us to approach each friend present in a group shot and obtain their consent before sharing the image on Facebook? Failing to take this step not only breaches defamation law, but also falls foul of Federal Law Number 5 of 2012 (the Cyber Crime Law), which forbids any breach of a person's privacy via technology.

    So what are the penalties risked by anyone (perhaps understandably) neglecting to exercise such diligence? Making an allegation with the potential to effect a person's public reputation may incur a fine of up to AED 20,000 or a period of up to two years' imprisonment (Article 372). Making any sort of statement which discredits a person could attract a fine of AED 10,000 or one years' imprisonment (Article 373), and a fine of AED 5,000 or six months in custody is risked by anyone making such a statement by telephone or in the presence of both the victim and a witness (limited to a fine only should the statement be made by letter or in the presence of the victim alone) (Article 374). The conveyance of any such material via newspaper will aggravate the offence, as will the victimization of a public officer.

    The premise of this article is by now (hopefully!) very clear – if you make a defamatory statement about another via any means, you are likely to face legal consequences. But before we conclude (and because we here at STA are fair and just lawyers) let us pay due consideration to a conflicting perspective – namely, what if a statement made has the potential to risk the public reputation of another, yet is also true? Is our right to free expression quashed by a wrong-doers' right to protection from a tainted public image? Several national constitutions across the globe strive to protect the reputation of individuals, yet human rights instruments take great efforts to promote our right to free speech – the issue at the heart of the debate therefore seems to be "how do we balance the two sets of provisions"?  Without taking our discussion in the direction of media "gagging orders", which are increasingly prevalent in this era of advanced media technology, several high-profile cases (such as that of former FIA president Max Mosley) appear to be turning on one key fact – protecting a person's reputation is not the same as protecting his privacy. In addition to this the element of public interest has also been considered – does the story or statement in question consist of something the public need to know? Precedent suggests that if the answer is "yes", no breach of defamation or privacy provisions will have occurred.

    But bearing in mind the severe consequences of failing to take the necessary precautions, then whether a statement is true or not, perhaps we should henceforth consider another piece of parentally-imparted wisdom and "think before we speak".

    Or, in this age of technology - speak, Tweet, Facebook, Instagram, email, SMS, picture message, WhatsApp, BBM, Snapchat, YouTube, Pinterest, Ello and so on…

    ]]>
    Wed, 17 Dec 2014 12:00:00 GMT
    <![CDATA[UAE Free Zone Guide 2014-2015 ]]>

    Particulars JEBEL ALI FREE ZONE- DUBAI DUBAI AIRPORT FREE ZONE DUBAI MEDIA CITY DUBAI INTERNET CITY DUBAI GOLD & DIAMOND PARK Dubai Health Care City Dubai Multi Commodities Centre SHARJAH AIRPORT INTERN'L FREE ZONE HAMRIYA FREE ZONE -SHARJAH AJMAN FREE ZONE RAS AL KHAIMAH FREE  ZONE Location Dubai Dubai Dubai Dubai Dubai Dubai Dubai Sharjah Sharjah Ajman Ras Al Khaimah Contact 800-JAFZA +971 4 299 5555 +971 4 391 4555 +971 4 391 1111 +971 4 362 7777 +971 4 324 5555 +971 4 424 9600 +971 6 5178231 +971 6 5263333 +971 6 7011555 800 7111 Infrastructure and Service Rating (1 - 5)  4.5 4.6 4.7 4.7 4.5 4.7 4.5 4 4.3 4 4                         Nature of licences- investor can obtain 1 or more licence Trading Trading Media & Marketing Software, Internet and Multimedia Manufacturing Health care Trading  and repairing Commercial  (limited to 3 products) Commercial Trading Commercial   Service Service Event Management Telecommunications and Network Office Education Construction, Real Estate and Business Services Service  Service Service/ Professional Consultancy and Service   Industrial Industrial Service Providers (includes freelance permits) Service Providers Retail Service Providers Hotels and Restaurants Industrial  Industrial  Industrial Industrial   National industrial   Hotels & Property Management Hotels & Property Management   Hotels & Property Management Mining, Transportation, Financial intermediation and several others - - National Industrial                           General trading Allows the holder to import, distribute and store all items as per Jafza rules and regulations Allowed in accordance with the rules and regulations of Dubai Airport Free Zone As per regulations of DMC As per regulations of DIC Allowed Not Allowed Allowed Allowed Allowed  Allowed Allowed                         Types of ownership FZE (Free Zone Establishment)- single shareholder FZE - single shareholder FZC-LLC, FZE, Freelancer Branch of a foreign or UAE based company FZE Free Zone Limited Liability Company Limitied Liability Company FZE - single shareholder FZE - single shareholder fze - single shareholder fze - single shareholder   FZCO (Free Zone Company)- multiple shareholding FZCO - multiple shareholding maximum of 50. Branch of a foreign or UAE based company New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with individuals as shareholders FZCO Branch of a foreign Company Branch company of foreign as well as local FZCO - multiple shareholding. Max 5 shareholders. In certain cases may extend to 7 shareholders FZCO - 2 to 5 shareholders. fzc - multiple shareholders fzco - multiple shareholding   Branch of a foreign company  Branch of a foreign company  New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with corporate entity/entities as shareholders New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with corporate entity/entities as shareholders Branch of a foreign Company Branch of a UAE Company  Subsidary company of foreign as well as local Branch of a foreign company  Branch of a foreign company  Branch of a foreign company  Branch of foreign company   Branch of a local UAE company Branch of a local UAE company New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with individuals as shareholders - Branch of a local UAE Company - - Branch of a local UAE company Branch of a local UAE company Branch of a local UAE company Branch of a local UAE company                         Minimum capital required  An FZE registration requires UAE Dirhams 1,000,000/- or USD 272109. Capital for incorporating an FZE is AED 1000 or USD 273 For LLC minimum paid up capital is AED 50000 (USD 13606) except
    Broadcasting TV segment and Broadcasting Radio Segment where minimum paid up capital is AED 2,500,000 (USD 680273) New Incorporation of a FZ - LLC requires to show a proof of minimum capital of Dhs. 50,000/- or USD 13606. New Incorporation of a FZE and FZC requires to show a proof of minimum capital of Dhs. 100,000/- FZ-LLCs incorporated in Dubai Healthcare City are required to have minimum paid up capital of AED 50,000 for Commercial and AED 300,000 for Clinical Minimum share capital of a company is AED 50000 or USD 13606 per shareholder. FZE requires  AED  150,000/-(min ) or USD 40,817 FZE requires AED 150,000 or USD 40817. FZE requires min capital of AED 185,000 or USD 50,000/-.   FZE requires  AED 100,000/- or usd 27,247   Capital for FZCO license is UAE Dirhams 500,000/- or USD 136055  FZCO  requires  AED 1000 or USD 273 per shareholder. (Maximum limit is 50. Each share should be in the denomination of AED 1000.  There are around 140 different types of licenses available and all have different minimum capital requirement.  Branch establishments have no formal capital requirements Capital requirement for each partner in case of partnership is AED 50,000/- Branch establishments have no minimum capital requirements. Different minimum issued share capital requirement can be changed for General Trading, Business Centre leases, Insurance Companies, Hotel Licenses or any other activity which authority may deem fit.  FZCO  requires AED 150,000/( min ) or USD 40,817 FZCO requires AED 150,000 or USD 40817. FZCO requires min capital of AED 500,000 or USD 136055   FZCO  requires AED 100,000/- or USD 27,247                          Offices  Annual rent cost USD 14629 for 26.88 sqm in 1 story building. The annual rent cost from USD 517 - 681 per sqm in multi storey building. Insurance for single floor building is USD 28 while for others it is 1.10 per sqm.  Minimum space of 25 sqm is necesssary to obtain a license and four employee visas are granted with every 50 sqm of rented office space.   Investors have the option to lease commercial offices, executive office, executive desk, furnished office, and retail units. Details made available upon application. Investors have the option to lease commercial offices, executive office, executive desk, furnished office, and retail units. Details made available upon application. Investors have the option to lease office units on a flexible lease option ranging between 1 and 5 years. Spaces range from 310 square feet upto 14,000 square feet. Units are provided on shell and core or fully fitted offices options. A company can sponsor one employee per 80 sq. ft. of space leased. Land sales and leasing options are available in or next to the current developed zones. Lease and sale price vary based on size of office units/land parcels and these details are made available upon application.  Commercial properties available for freehold purchase or lease. Minimum office requirement for obtaining a trade license is 540 sq ft.  1. from 21 sqm - AED 34500 or USD 9388
    2. from 24 sqm - AED 39600 or USD 10776  Size from 15 sqm to 42 sqm Annual Rent of old building is USD 6806 or AED 25000.
    Area is 16 sqm. The rent is new building is AED 1,500 per sq m Offices - USD 4087 - 8719 from 17 sqm to 45sqm Warehouses Warehouse Units available in different sizes varying between 313 Sqm to 1,110 sq m Light Industrial Units admeasuring 350 sqm and land sites admeasuring 2500 sq m available Land space available for hotels, property management and facilities management companies. Details made available upon application. Land space available for hotels, property management and facilities management companies. Details made available upon application. Investors have the option to lease manufacturing units on a flexible lease option ranging between 1 and 5 years. Spaces range from 310 square feet upto 14,000 square feet. Units are provided on shell and core or fully fitted offices options. N/A DMCC Tradeflow is a dedicated online platform for registering possession and ownership of commodities stored in UAE-based storage facilities. Please visit http://www.dmcc.ae/tradeflow to read more Land admeasuring 2500 sqm (minimum area)
    From Dh.35 per sqm, US$ 9.35/sqm (rent)
    Dh. 5 per sqm, US$ 1.36/sqm building permit. Warehouse admeasuring 125 sq m for AED 63,000/-;  250 sq m at AED 100,000/- and 400 sqm at AED 120,000/- Prebuild warehouses admeasuring 276 sq m, 416 sq m and 276 sq m available on a twenty five year lease term renewable for further term of 25 years. Lease rates can be fixed for the first five years with a rent review at the end of this period.  Warehouse rent for 100 sqm warehouse is AED 350 per sq m and 500 sqm warehouse is available at AED 300 per sq m Different sizes between 1600 sq ft and 4500 sq ft. Standard size of 2200 sq ft with storage space, office, toilet and pantry                         Other Packages - Executive Suite - AED 12,000 per month includes manager desk, 4 workstations, 1 meeting table, furnitures and cabinets, 5 car pass - - - - Virtual office (e-Package) available for AED 13,000/- per month. - Two Packages available for investors. Package 1 priced at AED 25,000/- covers office rent for 10 sq m office, 1 year license (commercial or service license) fee, service charges, P O Box, telephone line charge and allottment of 4 resident visas (visa charges not excluded). Package 2 priced at AED 35,000/- covers all of Package 1 but allows investors to carry out general trading activity.  Pakcages range from AED 21,950. Package includes one license. General Trading License priced at AED 27,150. E-commerce license priced at AED 28,050. Capital requirement for above packages is set at AED 185,000/-                           Refundable deposit Office, warehouse and showroom - 10% of annual rent payable once Security Deposit Depends on the activity.
    Entity operating in Media Business centre Executive office - USD 2722 (AED 10,000) Depends on the activity 15% of yearly unit rent is refundable security deposit.  Subject to application. Visa Deposit USD 953 or AED 3500 USD 953 (AED 3500) USD 1361 or AED 5000 Visa Deposit   - - Freelancer using "Hot Desk" facility of media business centre - USD 1361 (AED 5000) - 15% of yearly rent for fit out deposit which is also refundable.  - - - - - - Licence fees per annum  Trading license (7 Products) - USD 1497 (AED 5500) Trade  - USD 2722 (AED 10000) As per the activity As per the activity AED 5500 or USD 1497 As per the activity As per the activity General Trading  = USD 4082 or AED 15000 Commercial license (5 items)  = AED 2750 or USD 749 General trading licence - AED 9100 or USD 2477 General Trading - USD 4082 or AED 15000   Trading license (12 Products) -USD 2449 (AED 9000) Services - USD 2722 (AED 10000) Freelancer (upto 3 activity) - USD 2041 (AED 7500) Upto 5 activities within the segment -  USD 4082 (AED 15000) - - - Commercial   = USD 2041 or AED 7500 General Trading License (more than 5 items)   = AED 12000 or USD 3266   trading -
    1 activity - AED 3900 or USD 1062
    2 activity - AED 5200 or USD 1415
    3 activity - AED 6500 or USD 1769 Commercial - USD 994 or AED 3650   Industrial License between USD 1497 (7 poducts) and USD 2449 (12 products) Industrial - USD 2722 (AED 10000) - Additional segments within Business Unit - USD 2722 (AED 10000)  - - - Industrial = USD 2041 or AED 7500 Industrial license - AED 2750 or USD 749 Service License -  AED 6500 or USD 1769 Industrial - USD 1361 or AED 5000    Service License fee  is USD 2177 (Branch of UAE based company). Logistics license (Branch of UAE based company)is USD 8164 per year. - - Additional segments from other Business Unit(s) except Broadcasting, Publishing and Manufacturing - USD 2722 (AED 10000) - - - Service = USD 2041 or AED 7500  Service  license -  AED 2750 or USD 749 Industrial License - AED 9100 or USD 2477 Consultancy/ Service - USD 2041 or AED 7500   General Trading License - USD 8164 (AED 30000) - - - - - - Others types of licenses offered-

    Aviation - USD 4082 or AED 15000
    Real Estate - USD 4082 or AED 15000
    Freight Forwarding - USD 2313 or AED 8500 - National Industrial License - AED 9100 or USD 2477 - Registration of FZE USD 2722 (AED 10000)
    1. Along with MoA and AoA attestation of 3 copies each - USD 55 each copy
    2. Specimen signature - USD 14 per person
    3. Board Resolution - USD 55 per person  USD 2722 (Dhs. 10,000/-) Not Applicable Not Applicable Controlled by JAFZA Not applicable Depends on the activity USD 2,722 or AED 10000 AED 9000 or USD 2449 AED 100 or 28 USD 1905 or AED 7000 Registration of FZCO USD 4082 (AED 15000)

    1. Along with MoA and AoA attestation of 3 copies each - USD 55 each copy
    2. Specimen signature - USD 14 per person
    3. Board Resolution - USD 55 per person USD 4082 or AED 15000 AED 3500 or USD 953 AED 3500 or USD 953 Controlled by JAFZA FZLLC - AED 3500 or USD 953 Depends on the activity USD 2,722 or AED 10000 AED 9000 or USD 2449 AED 100 or 28 USD 1905 or AED 7000                                                 Distance from Dubai airport - by car 40 minutes  10 minutes 30 minutes 30 Minutes 20 minutes 10 minutes 25 Minutes 50 minutes   40 minutes  45 minutes  2 hours                          Type of port  JAFZA is a sea port  it is an air port Based in city limits Based in city limits Based in city limits Based in city limits Based in city limits it is adjacent to  sharjah airport  it is a sea port  it is a sea port near air and sea port                          Sales in UAE  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Dubai Media City offers licenses for entties engaged in services, broadcasting, hotels and leisure.  Dubai Internet City offers licenses for Software, Internet and Multimedia, Telecommunication and Network and IT services.  Dubai Gold & Diamond Park is a part of JAFZA.  Dubai Health Care City offers licenses for health care services, consultancy, regional head quarters, hotels and leisure services and property management services.  Free Zone Company can do business in UAE through an LLC incorporated in mainland with import/export license.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed. ]]>
    Wed, 17 Dec 2014 12:00:00 GMT
    <![CDATA[Family Matters-An Overview of Divorce and Child Custody in UAE]]>

    In the present day and age we can all agree that there is no such thing as a typical family tableaux. Although time, culture and location have always flavoured the "traditional" concept, nowadays we can no longer use such factors to predict the identity of the protagonists sat around the dinner table in any given family home. Regardless of location or culture there is a likely prospect that a residential unit may include a step-parent, siblings of different parentage, grandparents, cousins or a group of friends simply sharing a tenancy. This change may be attributed to a variety of factors, but it is undeniable that the increase in the number of divorces worldwide plays a part. In some areas (such as Las Vegas, where one can instantaneously marry for $60 and divorce for $109) the institution of marriage has never been afforded the respect it deserves, but the fact of the matter is that regardless of culture, religion, social practice, custom and timely values, divorce is a common and accepted reality of our era.

    The United Arab Emirates (UAE) is no exception, yet the nation is somewhat unusual in the sense that it houses a disproportionately large expatriate population. It therefore follows that the courts of the UAE see a large number of matters pertaining to foreign family issues. Consequently, when dealing with cases such as divorce, the courts are accustomed to hearing a plethora of beliefs, attitudes and expectations. Any person residing in a given jurisdiction will be bound by the governing law therein, and as such a thorough understanding of the UAE's marital and family laws, procedures and consequences is necessary for anyone considering the termination of their marriage through the nation's courts. However the UAE law also allows foreign nationals to divorce under the law of their homeland. This article is therefore designed to provide a comprehensive outline of the options available to those considering divorce, and to additionally consider various family rights with which we may be unfamiliar.

    Divorce under the UAE law is primarily dealt by Federal Law Number 28 of 2005 (the Personal Status Law - PSL). Certain provisions of Federal Law No.5 of 1985 (the Civil Code) also deliberate the issue. Originally under Shari'ah law six types of divorce were recognized, but modern family legislation recognizes only the following three types of divorce:

    a)      Talaq - Divorce by husband

    In talaq there are four stages including initiation, reconciliation, completion and the aftermath. The initiation stage commences immediately on the husband pronouncing the phrase "I divorce you". For the divorce to be official, three months have to elapse (without intercourse between the couple). This is known as the reconciliation stage whereby the couple have the opportunity to reconcile and, if they do not, may attend court. The completion phase begins thereafter - the wife becomes "non-mahram" to the husband and the pair must observe hijab rules. The aftermath is the final stage, which includes the husband caring for and supporting any children born of the union.

    b)     Khula- Redemptive divorce or divorce by mutual agreement

    In Khula the wife has the right to seek a divorce from her husband through the mutual consent of the husband or a judicial decree. It involves a woman paying her husband to gain his permission to allow her out of the marriage. Payment can be monetary or through some service provided to him. Her family might return his dowry - the goods or payment they received in exchange for their daughter as his wife. If he accepts, the divorce can move on to court for the tafriq process as defined below.

     

    c)      Tafriq - Divorce by judicial order

    Tafriq is a form of divorce in which the court intervenes. There are five grounds for valid tafriq applications: physical or emotional injury, irreconcilable differences, discovery after marriage that the husband has an incurable physical defect (i.e. impotence), failure to pay maintenance to the wife, or imprisonment or absence without reason by the husband for over one year.

    The law also lays down certain provisions whereby both spouses may ask for separation if this has been mutually agreed. We have already established that expatriates and Non-Muslims seeking divorce have the option to opt for divorce under the applied law of their homeland whilst remaining in the UAE – but how does this work in practice?

    The initial step is to approach the Moral and Family Guidance Section at the court. This will result in a "counselling session" involving a counsellor and both the husband and wife. The session shall be focused on discussing whether or not reconciliation will be possible, and after the meeting the counsellor will report to the Judge. It is important to note that the judge must be absolutely convinced that the marriage is irreparable in order to further divorce proceedings. Further to the session a couple will be offered a three-month period to reconsider their decision, and if they insist on proceeding thereafter their papers will be forwarded to the court. It is inevitably simpler if the divorce is uncontested with a mutual agreement already in place between the husband and the wife, thus negating the need for the court to impose a settlement arrangement.

    If no prejudice is proved but disagreement continues between the spouses without the family guidance committee or the judge being able to propose a resolution, the judge shall appoint two arbitrators (from their respective families if possible) by no later than the following session. When appointing the arbitrators the judge shall also issue a timeline which shall not exceed 90 days, and shall lay out the date by which the task must be completed. This period may later be extended by a court decision. The two arbitrators shall investigate the causes of dissension and exert their efforts to conciliate the spouses. The arbitrators shall submit a report to the judge and the judge may, if he so desires, base his judgment on the arbitrators' decision. However it is highly likely that if the arbitrators have failed to conciliate the spouses, the divorce shall be granted. It is therefore evident that regardless of the legislative system applied, the emphasis of divorce proceedings in the UAE is on the encouragement of reconciliation.

    The UAE law additionally contains provisions to ensure that a wife retains entitlement to financial support from her husband if she is/was lawfully married to him. It shall not matter if she is from a different religion or is technically financially independent. The maintenance amount is calculated in accordance with the husband's financial stability and status. If the husband divorces his wife at his exclusive wish, she shall be entitled to enjoyment maintenance plus the waiting period maintenance depending on the husband's condition and subject to a maximum of the maintenance of her equals. The judge may allow the payment in installments depending on the husband's financial capacity, however he shall also consider the way in which any payment schedule would impact on the wife.

    Any discussion on the subject of divorce will inevitably combine a collection of contrasting views and opinions. And in the midst of the debate, it is possible that crucial connected issues, such as child custody, maintenance and the assigning of assets may fall by the wayside. A parental dispute in relation to custody and maintenance of the child is likely to be covered under the PSL. The basic principle underlying the laws on the guardianship of a child is based on the question "what is the child's best interest?" – a concept commonly known in law as the Welfare Principle.

    Under UAE law a father is regarded as the natural guardian of a child. A distinction is made between a "custodian" and "guardian"– a guardian is bound by the duties of financially maintaining a child and making any decision with regards to his or her education and upbringing.[1]A custodian, as the word suggests, has the actual custody of the child and is obliged to raise him or her whilst ensuring all day to day needs are met.[2]

    In deciding on such matters the courts of the UAE will primarily consider the age of the child and the mental state of the parents. The law nonetheless lays down certain conditions to be fulfilled by either of the spouses in order to be granted child custody. The law requires the person to be a mature adult of sound mind, honest, capable of raising, caring for and attending to the child, free of serious infectious disease, and free from criminal convictions.[3]Further, there are additional guidelines to be satisfied according to gender of the person seeking custody.

    With regards women the guidelines stipulate that she should not be remarried and must have the same religion as that of the child - unless the court rules otherwise in the best interests of the child, on a condition that custody period shall not exceed 5 years, whether the child is male or female. Occasionally, the mother is granted custody of children up to a certain age, whereas the father is always considered the guardian. The mother may be awarded custody of girls under the age of 13 and boys under the age of 11.[4]Later, when the child is of the requisite age, the custody of the child may be transferred to the father should he so desire. However if the court rules the mother to be incompetent, custody of a child (regardless of age) can be given to the father or to the child's grandmother on the father's side.

    As for men, the law requires that the household must encompass a woman (such as a grandmother or aunt) fit to be custodian of the child, to be "Muhrem" if the child is female. This woman must be of the same religion as the child.[5]

    Even in cases whereby two parents are married to each other, in the event of death of the husband the custody of the child becomes a subject of concern. Following the death, the child shall be taken into institutional care until the court hears the matter and (most likely) passes guardianship to the mother. In order to avoid the removal of the child from the mother's care in such situations the assigning of an interim guardian is crucial. Therefore it is vital that a father includes in his will (or in a separate, endorsed and legally-binding document) an interim child custody agreement, affirming that the child shall be under the guardianship of the surviving parent or any other family member nominated in the agreement until the formal guardianship order is passed by the court.

    Whether contested or agreed by mutual consent, matters such as divorce and child custody are universally acknowledged as being delicate issues. Indeed, the Holmes and Rahe "Stress Scale" specifies divorce as being one of the most stressful life events a person can go through. It is therefore essential that the practical steps are handled in an efficient, sensitive and case-appropriate manner in order to ensure a smooth and effective resolution for all parties involved. STA welcomes all enquiries pertaining to family matters, and ensures to afford every enquiry the respect and sensitivity that each family deserves.

    ]]>
    Wed, 10 Dec 2014 12:00:00 GMT
    <![CDATA[Sharjah Rental Law ]]> To change or not to change?

    "Dubai rents have started to fall for the first time in three years"

     

    As I turned on the radio and drove to the office this morning the first news item I heard was about the 1% dip in rentals in Dubai this quarter. It is therefore ironic that the first call I received when I arrived in office was from a tenant desperately asking for help having receiving his landlord's notice informing that the renewal of his tenancy contract would be subject to a rent increase of 67%..

    In a country wherein expats make up 90% of the population one of the areas that naturally assisted growth and development was the real estate sector. And whereas investment and acquisition of property are an option for part of the population, most of the expats have no option but to lease their home.

    In recent years the return of growth and economic development has turned the real estate sector into one of the main engines of the economy. However the growth and development of a sector does not always mean improvements in the quality of life of the inhabitants of a country. On the contrary it has been proven to lead to a period of unprecedented inflation in residential rent, with thousands of tenants moving to smaller apartments or even to other Emirates in order to afford accomodation.

    Accordingly, many Dubai residents, despite working in the Emirate, had to reconsider their finances and find cheaper housing alternatives. Thus, for those thousands of expats who decided to move out of Dubai, Sharjah became a desirable and affordable solution.

    Therefore, the question is - from a legal point of view and in a short or medium term – is it worth the change?Is Sharjah the housing paradise where rents cannot be increased within the first three years of tenancy that it is made out to be, or there is something else that we should know before making the move and regretting it forever?

    Sharjah's cheap rates are the token, and many families choose to change their residence only because of the appealing prices practiced in Sharjah. There it is possible to rent a 2 bedroomed apartment for the same price as a studio in Dubai. However, many families are unaware of the tenancy laws in Sharjah and the dream may suddenly become a nightmare. This article aims to demystify Sharjah's tenancy law secrets, and help you to decide whether it is worth the move.

    It is true that during the first three years all tenants benefit from a so-called "protection period" in which the rent cannot be increased. As per Sharjah's 2007 law, the landlords can increase the rents after three years from the commencement of the tenancy contract, and there is no cap imposed upon that increase. Following this first increase the rent can be increased every two years thereafter.

    The lack of a cap can be taken by some landlords as a green light to unreasonably hike the rent. Actually as most tenants are unaware of their rights it is not uncommon for landlords to increase the rent by more than 70%, forcing the tenants to agree and pay through illegal means such as threatening them with eviction or simply disconnecting water and electricity supply.

    For most tenants the protection period of 3 years upon the commencement of the tenancy contract is also unknown. Accordingly, landlords exploit their tenants' ignorance of the law and increase the rents yearly, randomly and arbitrarily.

    Despite persistent calls from tenants for the imposition of a rental cap, which would arguably be the only suitable protection for Sharjah's tenants, the authorities continue to defend the current position. If the landlord tries to abuse position, either by increasing the rent within three years of the commencement of the agreement, or increase it by an unreasonable amount, the tenants are welcome to lodge a complaint before the police (when compelled to accept it by illegal means) or approach the Rent Dispute Committee (RDC) and file a complaint based on the "similarity law". The RDC encourages the landlord to increase the rent in keeping with the prevailing rent rates applicable in that area and having in mind the place, the status of the building and its maintenance, the level of services available, its age and the existence of parking spaces, gardens, swimming pool or gym. However approaching the RDC involves costs. Even though it is alleged that the tenant can simply visit the RDC and submit the available form or submit his own memorandum, experience tells me that the appointment of a lawyer is a key factor in winning case.

    Even if rents are starting to dip in Dubai, Sharjah's prices are still undeniably much more affordable. And even though the lack of rental caps has already been demonstrated to be an issue requiring the urgent attention of the authorities, raising awareness of the applicable law and encouraging tenants to consult a lawyer immediately after receiving any controversial notices from the landlord may be beneficial to the disgruntled residents of Sharjah.

    To know more on Sharjah Rent Laws, contact one of our lawyers in Sharjah today!

    ]]>
    Tue, 09 Dec 2014 12:00:00 GMT
    <![CDATA[Food Poisoning FAQ]]>

    Q1. I went to a restaurant last week with my family. Post our meal, we suffered from a terrible bout of food poisoning. Can you please advise me on what we can do? I want to ensure that no one else suffers the way we did.

    A1.   It is essential that you seek medical advice which I am certain you did. Upon your recovery it is imperative that you reach out to your medical practitioner and find out the reason for your ill health. It is important to ascertain that you and your family's ill health was a result of consuming contaminated food. Post the confirmation; the individual should file a complaint against the restaurant before the Food Control Department at the local municipality along with the doctor's medical report, copy of restaurant receipts if available and other documents necessary to support the claim. A medical opinion should be obtained for matters where the health was significantly affected. The individual should also request the Food Control Department to procure and forward sample of restaurant's food to Food and Environment Laboratory Section at the Dubai Central Laboratory or the laboratory in the Emirate he is living in.

    Q2. Is there a particular law in UAE that relates to food poisoning?

    A2.   The UAE Federal Law number 24 of 2006 on Consumer Protection and the Decision of the Council of Ministers number 12 regarding the implementation of the above law was enacted to protect consumers from products, production processes and services that may cause harm to health and safety of the people.

    In Abu Dhabi there is also Law number 2 of 2008 which regulates the food production and its handling in the food chains across the Emirate. This Law also outlines penalties in the form of fines for non compliance. There are multiple regulations issues by the authorities that ensure the hygienic handling of food.

    In the Emirate of Dubai, there is a Food Control Department established by Dubai Municipality that oversees all regulations and matters that are related to food control and all related aspects.

    At the same time, the individual has rights under the UAE Civil Code and specifically Article 282 to 298 which deal with "acts causing harm" and imposes strict liability on person causing the harm. Article 342 and 343 of the UAE Penal Code apply to cases where the harmed individual/individuals have died from a violation of the regulations.

    Q3. I am a visitor in Dubai and contracted food poisoning from eating at a restaurant. I underwent medical treatment which my travel insurance did not cover. I decided to make a complaint to the Municipality to investigated and determined that the restaurant's food was responsible. I believe they also fined the restaurant. My question is that I ended up spending a significant sum of money out of my own pocket as my insurance did not cover the medical expenses. Can I claim this from the restaurant?

    A3.   You took the correct steps in contacting the Dubai Municipality. To claim the monies for your medical expenses from the restaurant, you will need to file a civil claim against the restaurant. In matters as such, it is likely that the court will appoint an expert who will carry out a review and investigate the matter and then turn over his/her findings to the court. Alternatively, you can attempt to reach out to the Dubai Municipality and request them to supply you with their findings which resulted in the restaurant being fined. Either way, the court will award you with compensation if it is established that the cause for your ill health was in fact the food at the restaurant.

    Q4. I went to the hospital after contracting a stomach bug. They treated me and a few days later I got a call from the Food Control Authority in Dubai to come and meet them. I am yet to go and meet them. Please advise why they have called me.

    A4.   When you went to the hospital, they must have inquired into the foods you had eaten over the past few days. Medical institutions have a responsibility of conducting tests on any suspected cases of food poisoning. If they establish that the food you ate at a restaurant was the reason for your stomach bug, it is their responsibility to report this to the Food Control Authority at the Dubai Municipality. Dubai Municipality has requested you to come in as it is possible that they have conducted an investigation at the restaurant. It is advised that you go and meet with them to clarify the cause for your condition. 

    ]]>
    Thu, 04 Dec 2014 12:00:00 GMT
    <![CDATA[IVF- Maybe Baby]]> "And the question is always "When are you going to have kids?" Rather than "Do you want to have kids?" 

    The World Health Organization (WHO) defines infertility as the inability to conceive a child. It should not come as a surprise that owing to lifestyle changes, food habits and the societal encumbrances in general, it is now indicated that one in every six couples experiences some degree of difficulty when attempting to have a child. As natural as a phenomenon it may be, the conception and delivery of a child has been a medical challenge for many years.

     On July 25, 1978, a young couple Lesley and John Brown who had to bear the brunt of media attention amidst controversy and accusations of encouraging the creation of "frankenbabies," had their dream of becoming parents come true when Lesley gave birth to a baby girl who remains known as the world's first test tube baby in the United Kingdom. Over the years, with medical technology grown leaps and bounds, in vitro fertilization (IVF) has become a conventional medical treatment. In vitro fertilisation (IVF) is a process where an egg is fertilised by sperm outside the body. The technique involves monitoring and stimulating a woman's ovulatory process, removing eggs from the ovaries and letting sperm fertilise them in a laboratory. 

     Yes, the treatment still remains reserved by those who can afford the costly technology and has also been a topic of discussion relating to legal implications it gives rise to. This article discusses the approach of the UAE legal regulators and policy makers to this medical treatment.

    When a woman undergoes IVF treatment, she may end up with multiple fertilized eggs which are better known as embryos. Upon testing, the best one or two are implanted into the woman and the other embryos are frozen in case the treatment fails or if the couple wishes to have another child in the future. Federal Law no.11 of 2008 outlawed the process of freezing and storing eggs which resulted in innumerable embryos having to be destroyed. The medical experts believed that this increased the cost of the treatment and was also counterproductive in terms of treatment that had to be administered to the woman. The treatment is a complex one as it employs stimulating a woman's ovaries to produce more eggs than normal which is arduous for the body. The hormones that are administered have been linked with causing significant harm which have resulted in death. A number of studies conducted in the United Kingdom and other European countries have linked an increase in female mortality where the women have undergone or are undergoing IVF treatment. There is no known biological limit for how long the frozen embryos are viable but a number of countries have set limits of 10 (ten) years.

    United Arab Emirates has been at the forefront of driving medical tourism towards the region. In the year 2012, the number of medical tourists that visited Dubai was over 100,000 and the revenue generated was over 600 million Dirhams. The Dubai Health Authority has armed itself with a striving strategy which they hope will attract more than 500,000 medical tourists a year. Reproductive assistance is the most sought after and traveled for treatment in UAE. The reasons for the rise in its popularity has been significant since the implementation of the Cabinet Resolution no.36 of 2009 which changed the law and allowed for medical centers to preserve and freeze the excess embryos. This resolution also allowed private clinics and specialists to be granted licences for this treatment. Prior to this resolution's implementation, only government hospitals and clinics could administer this treatment.

    The treatment is not new but all across the world there are different regulations that govern this practice. In some countries, there is strict legislation regarding who can have IVF treatment. In Turkey the legislation insists that only married couple have access to IVF. In New Zealand, there is a requirement of being a nuclear family to raise the child. The United States of America has a much more lax approach and they permit single people and people in same sex relationships to have access to IVF and surrogacy. There are also religious restrictions placed on this treatment. A Catholic and Sunni muslims are not permitted to consider this form of treatment for infertility problems. It must be noted that most of the legislation focuses on prohibiting negative practices and places a moral bandwidth to the treatment.

    In the case of Evans v United Kingdom which was a landmark case at the European Court of Human Rights had a significant impact on fertility law not only in the United Kingdom but also on other European Union nations. In this case, Ms. Evans and her fiancé separated after the eggs had been fertilized. The man in question decided to approach the medical facility and have them destroy the eggs as he wished to withdraw consent. In the UK and other EU nations, the legislation states that both parties must provide consent. Ms. Evans went to the High Court to pursue the treatment and to request the court to dismiss her ex-fiancé's wishes. The High Court and then House of Lords both ruled against Ms. Evans. She approached the European Court of Human Rights where the ruling of the UK courts was upheld. It is essential to note that this case was one of the many that have raised unprecedented issues for a number of legal regulators.

    It is imperative that policy makers, government bodies and medical experts come together to understand that the value and significance of any embryo is relational, personal and thus infinitely variable. An embryo cannot be granted a moral or legal significance as distinct entities. 

    ]]>
    Thu, 04 Dec 2014 12:00:00 GMT
    <![CDATA[Cancelled Construction Projects in Dubai]]> Decree Number 21 of 2013 – One Year Later

    We're all familiar with the story. Mr A buys property off-plan. Developer advises property will be completed by 201X. Mr A awaits handover with anticipation. 201X comes and goes, with no news on the property. Developer or sales agent contact Mr A to advise that construction has been delayed. Some years pass and Mr A sees no further development. Developer and sales agent are unforthcoming. Mr A decides to take legal action. Mr A contacts one international law firm, famed for providing bespoke legal advice and seemless, high-quality counsel…

    Incomplete construction projects are by no means a new phenomenon in Dubai. Indeed, one year ago our legal newsstands were heavy with articles relating to this topic owing to Decree 21 of 2013 (the Decree). Issued on 23 July 2013, the Decree proposed a system for the management of litigation cases filed as a result of cancelled construction projects. In summary it provided for the formation of a special judicial committee (the Committee) to rule on cases in which the developer of an officially-cancelled construction project has failed to refund the purchasers' money. Although Article 11(5) of Law Number 13 of 2008 (Law 13) gave the Real Estate Regulatory Authority (RERA) the authority to annul delayed construction projects, and Executive Council Resolution 6 of 2010 (the Council Resolution) laid out the circumstances, conditions and procedures for such cancellation, further attention was needed to ensure the streamline settlement of all outstanding dues and enforcement of the parties' rights. Article 27 of the Council Resolution states that should a developer fail to reimburse a purchaser within a timeframe established pursuant to the same Resolution then RERA shall take all measures to ensure that the rights of the purchaser are upheld – an obligation which may necessitate RERA referring the matter to the "competent judicial authorities". The Decree goes further to name the "competent judicial authority" as the Committee.

    We know what you're thinking –"this is a news letter, not a history letter". So why are we writing an article on an arguably stale, old topic? The reason is this: although July – September 2013 brought to us the promise of a reformed litigation system for the relevant cases and a plethora of publications on the subject, we have seen no practical changes to date. Article 9 of the Decree makes clear that the provisions shall have effect from the date of publication in the Official Gazette, which occurred on 10 September 2013. Clear guidelines were in place regarding the constitution of the Committee – namely that each panel should consist of at least 3 judges from the Dubai Courts pursuant to Article 1 – and Articles 3 and 5 take measures to ensure that the Committee has exclusive and undisputable jurisdiction over the specified matters. Yet although such concise provisions govern the actual working of the Decree, no date has been set for the diversion of cases into the new system. This is despite the fact that Article 3 states that all judgements issued prior to the commencement of the Committee's work must (not "may") be referred to the Committee for consideration nonetheless.

    It may therefore seem as though the workload of the Committee is already building up and, as we are all aware, the cancellation of construction projects is no rare occurrence in Dubai. However purchasers wishing to refer their relevant disputes to the appropriate authority remain without the guidance of precedent or knowledge of the way in which decisions will be made by the Committee, and several questions remain unanswered. What would happen, for example, if a developer claims that it intends to re-commence works on a project? Or what if the developer wishes to sell the land?

    In answering these questions we should remember the purpose of the Committee. As per Article 2A of the Decree, this is "to consider and decide such issues, demands and claims that may arise between real estate developers and purchasers, whose subject matter or cause is CANCELLED real estate projects". Cancelled. Not delayed, stalled or suffering setback, but officially and permanently cancelled. And the authority to enforce cancellation is not the power of the Committee but the power of RERA as per Law 13 and the Council Resolution. If cancellation is imposed by RERA pursuant to the conditions prescribed by Article 23 of the Council Resolution then under Article 24 the developer shall have 7 days to appeal against the decision to RERA. RERA shall then have a further 7 days to consider the same and deliver a final verdict. If the decision remains the same and the project is cancelled RERA must meet the provisions of Article 25 – namely appoint an auditor (and the cost of the developer) and ensure that any monies in the escrow account are refunded to purchasers within 14 days. If the account contains insufficient funds to fully reimburse a purchaser the developer shall be afforded 60 days (and any such extension permitted by RERA) to provide purchasers with their money.

    We have already established that Article 27 of the Council Resolution provides that should a developer fail to reimburse a purchaser then RERA must refer the case to the appropriate judicial authorities (namely the Committee) for the enforcement of the same. We have further clarified that, under Article 2A of the Decree, the Committee's field of focus shall be disputes arising between the developer and purchaser as a result of the cancelled project. It therefore follows that the Committee has no jurisdiction in cases whereby the developer is challenging the cancellation of the project. These are matters for RERA, who have exclusive authority over whether or not a project is to be cancelled. So to revert to our earlier questions – what would happen if a developer wished to re-commence development on a project or wanted to sell the land? If the escrow account proved to be sufficient to reimburse purchasers and other outstanding dues can be settled without the sale of the land, then post-settlement the developer shall surely be free to dispose of the land however he so choses. And if RERA have ruled that a project is to be cancelled the developer has no other authority to whom to appeal. His only other option regarding re-commencement of the project shall be to apply afresh to RERA at a later date.

    So if RERA are the sole body with the power to cancel a project and the Committee shall not have the authority to overturn the decision, what are the duties of the Committee? Article 2A of the Decree further clarifies that the Committee shall have the power to liquidate projects cancelled by RERA. Therefore if a purchaser approaches the Committee with the grievance that the developer has not refunded his money in accordance with Articles 25 and 26 of the Council Resolution the Committee may consider the following: should liquidation be effected and, if so, how should the funds be allocated? In addition to taking into consideration the purchaser's right to a refund the Committee shall also need to consider contractors, sub-contractors, suppliers, service providers and any other party with a claim to interest.

    Let us revisit Mr A. In the instance that the construction of his property has been cancelled by RERA and the developer has not refunded his money, what will happen? When the Committee becomes operational it shall have the authority to order the developer to reimburse him. And if the developer isn't sufficiently solvent to do so, it may order liquidation and allocate the resulting funds in the appropriate proportions – which may or may not involve the payment of Mr A. The obvious question here is "but what if Mr A receives nothing"? Unfortunately for Mr A he will have no further options. Pursuant to Article 5 of the Decree the Committee's decision is final and binding there shall be no further right to appeal.

    So what are the advantages of this new system? In the happier circumstance that the Committee is able to allocate Mr A his dues then under Article 5 the decision may be enforced by the Execution Section of the Dubai Courts, and to Mr A's relief Article 9 states that any matters handled by the Committee shall be exempt from any court fee.

    Of course, Mr A will still need to pay his representatives' professional fees – but fortunately for him, the aforementioned international law firm approached offer excellent competitive rates…

    ]]>
    Thu, 20 Nov 2014 12:00:00 GMT
    <![CDATA[Abu Dhabi Global Markets]]>

    The financial sector has always been volatile. Yet, the increasing interest it has drawn from public sector initiatives across the globe remain noteworthy. In 2013, the Chinese government introduced the China Pilot Free Trade Zone which was speculated to provide a blueprint for reforming the financial sector. This free zone was a testing ground for the convertibility of Yuan and China plans to accelerate the process of making the Yuan convertible on the capital account allowing foreign investors to use it to invest in Chinese financial institutions. In the same year the Government of Abu Dhabi also passed the Federal Law Number 4 of 2013 establishing a financial free zone in Abu Dhabi (the Decree). Many of the efforts within the GCC region in establishing financial centers are inspired from the success story of the Dubai International Financial Centre.  The introduction of the Dubai International Financial Centre (DIFC) in 2004 marked the beginning of a well-structured business environment for the financial services domain and sizable investment firms chose DIFC to set up their base in Middle East. Later, the Qatar Financial Centre was set up in the GCC region however its ten percent corporate tax policy barred it to qualify to the definition of a 'free zone' and restrained its success in terms of captivating interests of international investors. As such, the DIFC enjoyed unparalleled investor support owing to its world-class infrastructure, tax free regime and an independent legal framework.

    With the announcement for introduction of Abu Dhabi Global Market (ADGM) - a financial free zone in the Emirate of Abu Dhabi pursuant to the Decree - comparisons between DIFC and ADGM are bound to take interesting leaps and bounds. Abu Dhabi is one of the most stable economies with rich oil reserves to boast of. However, it faces challenges in terms of attracting foreign direct investment in other sectors particularly banking and finance; and also those pertaining to increasing exports and making Abu Dhabi lucrative to the larger international market players. The laying down of the foundation of ADGM is a conscious decision by the law makers and is no doubt a milestone in meeting these challenges.

    The Operations

    ADGM is expected to be operational in the year 2015.  In terms of Article 2 of the Decree, the objective for the formation of ADGM is the promotion of Emirate as a financial center, the development of the economy of the Emirate and the presentation of the same as both an attractive environment for financial investments and an effective contributor to the international service industry.' The Decree further lays down the core constitutive ingredients for the setting up of the ADGM. It states that ADGM will be operated by and between three autonomous bodies, namely (i) the Global Market's Registration Bureau (ii) The Financial Services Regulations Bureau and (iii) the Global Market's Courts; each of which shall have different regulatory, compliance and legal functions.

    Article 14 of the Decree provides that licensed ADGM establishments can carry out the following activities:

    (a)    Banking and financial services activities including funding services;

    (b)   Investment business, commercial and private banking, wholesale trading and electronic banking, managing, dealing and         arranging investments;

    (c)    Accepting deposits (excluding deposits taken from the state's market or dealing in UAE Dirham), opening and maintain bank         accounts of all types for third parties;

    (d)   Trading in and dealing with all types of financial instruments, currencies, commodities, metals and derivatives of all types  (including trading and dealing on margin with spot and forward contracts or through the offering,                             buying and selling of financial           futures and options of all types) and short selling as permitted by Financial Services Regulation Bureau;

    (e)   Storage, processing and delivery of all types of commodities and metals whether through actual delivery or the delivery of         instruments representing such commodities and metals and related complimentary services;

    (f)    Financial and monetary brokerage including prime brokerage activities;

    (g)    Providing Islamic financing and Islamic banking;

    (h)   Establishment and management of assets and funds, trust and fiduciary services;

    (i)     Custody, settlement, clearing and deposit activities;

    (j)     Transportation and shipping including sea, air and rail shipping;

    (k)    Selling, buying and issuing of shares, bonds, sukuk and other financial instruments;

    (l)      Providing insurance, re-insurance and brokerage services in line with Federal law Number 8 of 2004;

    (m)   Auditing, accounting, legal and other ancillary services; and

    (n)   Support and assisting works for financial and banking activities.

    The Global Market will not just provide tax free and internationally recognized legal jurisdiction but will also help in training and educating young Emirati.

    The Legal Framework

    Article 14 of the Decree provides for the establishment of two tier hierarchical system of courts within the ADGM- the Court of First Instance and the Appeal Court. A chief justice would preside in the ADGM courts whose remuneration shall be fixed by the government. 

    While the Decree goes on to provide clear indications on appointment, duties and tenure of the judges it leaves much to apprehension in terms of the law governing operations within ADGM. Specialists debate that with DIFC providing a Common Law inspired legal framework, ADGM shall follow similar footprints. It is however clear that being a free zone, ADGM will be subject to the federal law governing the free zones in UAE.

    In Essence

    Government and administrative efforts are being streamlined to make ADGM operative by 2015 as planned. Whether this proposed new financial free zone which is in close proximity to DIFC will have an adverse effect on the growth of DIFC cannot be commented upon. What remains to be seen is whether this free zone, to be located on Al Maryah Island, will add any feathers to the cap of the financially stable Abu Dhabi economy or not.  Without doubt, if ADGM is able to achieve the objectives enshrined in its preamble, the Emirate of Abu Dhabi will be a major commercial hub to look out for. In sharp contrast to the competitive side which is speculated, ADGM may in fact serve as an extended platform for DIFC in the long run should there be cooperation between the two bodies.

    ]]>
    Wed, 19 Nov 2014 12:00:00 GMT
    <![CDATA[Animal Rights ]]> "The greatness of a nation and its moral progress can be judged by the way its animals are treated."

                                                                                                                            - Mahatma Gandhi

    Tilikum – the giant whale at Sea World, Florida - created a splash in global news calling for urgent attention to animal rights and welfare. Whether considered as labour, food or friends it goes without saying that the most basic of civic duties is animal protection. Tilikum's plight hit the headlines as a result of one film maker's interest in the subject but there are innumerable events and instances that go unreported. The prevalence of animal cruelty in modern society has necessitated the establishment of organizations such as PETA and many others – however the work of such welfare groups generally commences once harm has occurred. It is inevitably the case that preventative measures – namely preventing the harm before it actually happens – would be preferable. Educating the public as to their legal responsibilities towards animal welfare is therefore essential.    

    The UAE's Federal Law number 16 concerning animal protection was enacted on 4 September 2007 (the Law). This legislation goes some way towards realizing the benefits animals can bring to our society. This enactment is undoubtedly a positive step towards educating the public on a subject that may otherwise have been ignored. Article 1 of the Law clarifies the scope by defining animals to include "poultries, reptiles, amphibians, fish, mammals, wild animals strayed and locked."

    The Law

    The owners or custodians of the animals have a duty of prevention as per the law, "in order to keep them away from any harm", in addition to those special duties of care specifically listed. These take into account the species of the animal, its development rate, adaptability, domestication and  needs, according to the experience or scientific knowledge. The Law  provides that animals should not be left alone or abandoned; that they should be taken care and supervised by enough - not suitable –  people with knowledge, skills and qualifications. Both the animal and its living conditions must be checked least once per day.

    In addition to noting the duty of care required of animal owners, the law also establishes  a system of control not only by the Ministry of Environment and Water, but also by the municipalities and local authorities concerned with animal issues, veterinarians and specialists. These bodies are vested with powers of supervision, and are permitted to enter into a facility "if they think that the animals in it are subject to sufferance, harassment and sickness or are bred in a way contradicting the provisions of the Law". It is worth noting that the law does not require prior proof or evidence – mere suspicion alone will suffice. In case of private houses the power remains valid, but there will be a need for prior approval by the Public Prosecution. In such  cases,  the owner or  person responsible for  the animal has an obligatory duty to  offer assistance to the relevant body, "including helping them to tie the animals to examine them when possible, and taking samples and submitting any required document regarding the animals".

    Under the Law animals are entitled to some rights, such as the right to have enough space enabling them to move freely, accordingly to their needs; to be fed and watered adequately according to their age and species, to be transported in a way that their security is at all times ensured; that the buildings with which they are in contact are not "harmful, but free from any source of pollution, easy to clean and to disinfect completely". One of the most  important rights assigned to animals is one stating that they shall be provided with shelter to protect them from weather conditions, predators, any danger to their health and that they shall have access to suitable sleeping place and an adequate system of waste disposal.

    Regarding medical treatment, the law stipulates that the animals shall be anesthetized locally or generally when they go under surgery, and the place where the same occur shall be appropriately equipped for it.

    Pertaining to abandoned animals, the Law affords the competent administration or authority the right to confine an animal if it constitutes a danger or if it is suffering from any pain or annoyance. In these cases a veterinarian must be consulted if it is not possible to find or communicate with the animal's owner. All the costs incurred by the treatment of the animal shall be allocated to its owner, should he be reached.

    In order to further protect the animals the Law expressly prohibits their sexual abuse, condemning the abuser to a term of imprisonment of not less than one month and a fine of not less than AED 5,000/-(UAE Dirhams five thousand). The same Law stipulates the prohibition of mingling species of animals during exhibitions or fairs, and forbids exposing, selling or marketing them when they are sick, injured or weak. The same law also prohibits the use of animals for scientific purposes or the organization of fairs, competitions and events– not only for trade purposes but for any other reason, unless expressly authorized in writing by the competent administration or authority.

    If someone knowing that an animal is infected decides to release it into the wild he will be sentenced to a term of imprisonment not exceeding one year and/or a fine not less than AED 5,000/- (UAE Dirhams five thousand). Other violations of this Law, as well as those set in its implementing regulations and decisions, may incur a fine not exceeding 20,000/-(UAE Dirhams twenty thousand).

    Modern society has seen the introduction of a number of amenities geared towards animals, including specialized hotels, hairdressers and  blood banks. Yet the truth is that across the country – depending on the emirate – the actual Law and its provisions continue to be ignored by most of the population. A quick internet search[1] would be enough to realize that animal rights are still not respected, and that often those who should be vigilant and report such situations allege not to see or have knowledge of them. The monthly inspection at pet stores and the fact that resulting  complaints to the  Municipality must be forwarded no later than 48 hours upon completion  do not seem to be sufficient measures to prevent atrocities against animals to being committed. In an article of The National[2], Dr. Abdulrahman Loai - veterinarian and leader of the inspection unit of the Al Ain public health department - admitted that "We ask people to help us with that because we cannot inspect each pet shop daily, most of the people who work in these shops are not well trained and they do make some mistakes" Dr. Loai also believes that people may still feel uncomfortable making this type of complaint, however he notes its importance, as it "is a matter of life for these animals" adding "We are very happy when we see some people are worried about animals because they help us to do our job".

    Our duty is therefore clear – if we witness or acquire knowledge of an instance of animal abuse we must not hesitate to submit a complaint to the Municipality. In Dubai, the complaint can be made over telephone or online on the Municipality website. Dr. Mohammed Yusef, the head of the veterinary patrol unit in the Dubai Municipality's Veterinary Services department, on an interview to Time Out,[3] states that upon submission of the complaint the same will be investigated within three working days by the veterinary department. He explained that later, the Municipality "can make - the perpetrator - sign an undertaking not to do it again" in addition to the penalties provided by law. The perpetrator can even be put "on the "black list" that prevents them from owning any more animals". However, Dubai's pet shops have no access to this black list, which demonstrates that additional measures and improvements in communication between the relevant entities is still required in order to achieve a strong protection network..

    Whether compliance with the aforementioned requirements is the result of our legal obligation or sense of stewardship and civic duty, in most cases the situation is a matter of life or death for the animal. Therefore, regardless of our motivation, perhaps we should all bear in mind the words of Ghandi when considering how we treat our nation's animals.

     

     

                                                                                                                  

    [1] http://gulfnews.com/news/gulf/uae/community-reports/exposing-animal-cruelty-in-uae-1.801373

      http://monstoner.wordpress.com/2011/04/27/animal-abuse-in-the-united-arab-emirates/

    [2] http://www.thenational.ae/news/uae-news/uae-inspectors-in-appeal-to-protect-neglected-pets#ixzz2yMLiDVBT

    [3] http://www.timeoutdubai.com/community/features/11751-pet-hate

     

     

     

    ]]>
    Tue, 18 Nov 2014 12:00:00 GMT
    <![CDATA[Whistle-Blowing - A Silent Noise ]]> Should I not hear, as I lie down in dust, The horns of glory blowing above my burial?

                                                                                                                                                 Conrad Aiken

    Vuvuzelas, firealarms and whistleblowing-sounds that can result in bleeding ears. The legal maxim Quis custodiet ipsos custodes or who will police the police is why whistleblowing, as annoying as it may be is an essential element to counteract corporate corruption. It is an alarming fact that corporate wrongdoing has become a routine occurrence. It makes one question if corporations have lost track of their ethical compass or is it that we are paying more attention to their activities?

    There has been a significant increase in the number of international legislations to combat corruption in organizations. As a result of this, a number of employers have adopted these legislations in the form of employee codes of conduct, whistle blowing policies, anti-fraud and misconduct policies.

    The accounting scandals of Enron and Worldcom dominated news headlines for months and it seemed that the concept of business ethics would become archaic, two whistleblowers emerged assymbols of integrity to the American public. Indeed, Sherron Watkins and Cynthia Cooper were among "The Whistleblowers" named as Time magazine's "Persons of the Year" in the year 2002. At a significant risk to their careers, financial stability and mental weel being, the two alerted high  level executives at their respective companies to accounting fraud. Unfortunately, most whistleblowers take all these risks when they report illegal activities occurring within their organizations. The magnitude of these frauds is startling and, unfortunately appears to be indicative of a widespread problem.

    Protection for whistleblowers

    In the United States, the Sarbanes Oxley Act of 2002 provides financial rewards to the whistle-blowers who bring these wrong doings/misconducts of fellow employees or about the organization to the forefront.  In order to enhance anti-bribery and corruption law practice and to avoid such bad practices many countries in the world have promoted such things as important part of employer and employer relationship andencouraging them to sign these policies at the time of joining the organization. Many jurisdictions have provided protection for employees who highlight wrong doing in the workplace. Also employees who are involved in wrong doing at the workplace can be sent behind bars or risk seeing their careers annihilate in front of them. Similarly in the United Kingdom, the Employment Rights Act 1996 provides protection to the employees who disclose wrong doings and mismanagement, which is considered a part of public interest. It is also possible that an employee can seek benefits if he blows the whistle being a part of offshore company irrespective of its presence in the US or UK.

     In the UAE, there are no regulations in relation to employees' protection for any whistle blowing actions if taken by them. However, many companies have started enacting and adopting such policies to address accountability and candor at work place. The UAE's sole anti-corruption authority, the state audit institution provides a mechanism on its website through which wrongdoing within state-owned entities and central government departments can be reported. Complaints can be made anonymously, which may encourage reporting without fear of retaliation. There are no blanket protection mechanisms for employees in the private sector in UAE.  To this effect, the Dubai Financial Service Authority (DFSA) which is an independent authority  has taken certain initiatives to address such corporate misdemeanors and to disclose information to DFSA authority about the issues involving market misconduct, financial crime or money laundering.

    In June 2013, UAE legislators put forward a bill to create a new anti-corruption authority named "The Federal Authority for Combating Corruption" (the FACC). This new legislation under discussion shall derive its structure from the United Nations Convention against Corruption and the definition of corruption includes money laundering; embezzlement; bribery; breach of trust; abuse of public functions or authorities; damage to public property; or the concealment of the proceeds of any of these crimes. The legislation would empower the FACC to issue regulations to protect whistleblowers from being prosecuted criminally, civilly or administratively. This protection will extend to whistleblowers who report information in relation to corruption in good faith. Whistleblowers will be presumed to act in good faith & public interest and enough evidence exists to justify their initiative. 

    Conclusion

    It can be understood that the position in relation to whistle-blowing legislations is still its infancy. A number of countries across the globe are attempting to combat the effect of corporate scams with the help of key personnel within organizations. There is now considerable international pressure for countries to adopt standard laws and practices on whistle-blowing, but if these laws are adopted in a vacuum, it is unlikely that they will succeed. It is imperative that laws and policies are enacted and it is understood that perpetrators and fradusters do their best to hide their dirty deeds from the public. This makes it close to impossible to process its effect on the common man as fraud and corruption cannot be measured. 

    ]]>
    Tue, 18 Nov 2014 12:00:00 GMT
    <![CDATA[Medical Negligence - Frequently asked Questions]]> Q1. What exactly do you mean by medical malpractice?

    Ans.      All doctors and medical practitioners have an obligation to their patients to ensure that they are providing a certain standard of care. When a doctor or medical practitioners fails to meet this standard, it can come to be known as medical malpractice.

     

    2. Is there a particular law in the UAE about medical negligence and malpractice?

    Ans.      Yes, The Government of UAE enacted Federal Law number 10 of 2008 which governs specific aspects of doctor and patient relationship. Article 3 and Article 4 of this particular law outline in great detail the duties and obligations of a doctor or medical practitioner towards his/her patients. It is important to understand that the law does not wish to make it difficult for the doctors to treat their patients but to ensure that they are practicing this noble profession with accuracy, honesty and in accordance with recognized scientific and technical principles.

    3. I recently had an outpatient treatment for psoriasis which is a skin condition. This treatment entails being exposed to radiation for treatment. I am certain that I was exposed to radiation for longer than I should have. This resulted in me fainting and suffering from second degree burns on some part of my body. What do you suggest I do?

    Ans.      I am sorry to hear about your condition. Legally speaking, you should obtain an opinion from another doctor at the earliest. It is important to understand and determine that the cause for the burns and your fainting can be directly attributed to the negligent treatment you received. If it is proven that the treatment caused second degree burns, then you can file a complaint at the Ministry of Health and/or bring a civil action against the medical institution. The procedures for filing a complaint at the Ministry of Health in Dubai and at the Health Authority in Abu Dhabi vary slightly.

     

    4. Are there any criterias which have to be met with in order for a case to fall within the purview of a Medical Malpractice?

    Ans.      The law on medical malpractice is liable to be misused leading to serious implications being drawn on either party. In order to safeguard the interest of both the patient and the doctor, certain conditions must be established. At a preliminary stage, the court shall examine the duty of care cast upon the doctor towards his patient. Subsequently, the court must also ascertain that the standard of care expected to be exhibited by the medical practitioner was in fact lacking and that it was consequent to the doctor's negligence that the patient suffered injury and damages.

    5. What is the procedure that one must follow to file a case of medical malpractice in Dubai?

    Ans.      The aggrieved party alleging the medical malpractice has the option of following any one of the following procedures:

      (a) By filing a civil case in the Dubai Court; or

      (b) Report the malpractice to the Dubai Police or Public Prosecutor, which shall result in initiation of a criminal case against the           physician involved; or

      (c) By filing a complaint with the Dubai Health Authority.

     

    6. What are the remedies available to the victim of medical malpractice?

    Ans.      The decision of the court pertaining to cases dealing with the subject matter shall vary according to different facts of the case. If the charges against the medical practitioner are proved and he is convicted, he is liable for punishment of imprisonment of minimum two years but not exceeding five years or be also liable for payment of compensation ranging between AED 200,000 and AED 500,000.

     

    7. What is a "Medical Error" as per law?

    Ans.      Article 14 of the Medical Liability Law defines the term 'Medical Error'. It refers to 'Medical Error' as an error occurring due to lack of knowledge in the technical matters which is expected in the profession or due to negligence or not paying due attention. In general terms, it refers to a deviation from the normal course of action which a medical practitioner would have adopted in similar circumstances.

     

    8. Does disclosing the medical condition of the patient to another doctor or a family member without his consent and knowledge, amount to a medical malpractice?

    Ans.      The Medical Liability Law explicitly prohibits a doctor from disclosing any confidential information of the patient which he was entrusted with during the course of practice. The exception to the above law being, if the disclosure was made upon the patient's request or for the best interest of the spouse by informing them in person about the disease. The doctor may also report the matter in order to prevent a criminal act or if he assigned by a judicial authority or an official investigation authority in the State.

     

    9. Will a wrong diagnosis fall within the ambit of medical negligence?

    Ans.      In the event where the diagnosis of a patient is wrong, the Ministry of Health holds the authority to cancel the license on grounds of negligence and misconduct.

     

    10. I am an expatriate and prior to arriving at UAE, I was diagnosed for a stomach ailment and prescribed medication by my home country doctor. After five months of stay in the UAE, I suffered a relapse and was clinically examined by a UAE doctor to whom I showed the medical prescription of my home country doctor. The UAE doctor diagnosed me for a different ailment and prescribed medication but did not inform me of the change in diagnosis. Presuming I was suffering from the same ailment, I continued with the medication prescribed earlier by my home country doctor but my health deteriorated.  Please advise whether the UAE doctor should have informed me of the change in my diagnosis thereby advising me against following the prescription of my home country doctor?

    Ans.      In such circumstances, the case can be decided for either of the parties. In your defense, the law provides that the physician must inform the patient about his illness and must instruct to strictly adhere to the physician's prescription and course of treatment. But however, if the patient refuses for any reason whatsoever or fails to follow the medical treatment, the physician shall not be liable for the same.

    11. I recently read about a case where the hospital couldn't diagnose the disease suffered by a child leading to his death. In such circumstances, what is the remedy available to the aggrieved party?

    Ans.      After filing the complaint with the relevant authorities, the committee shall review the matter. It shall examine the sequence of events and the child's previous medical records. After hearing both the parties and evaluating the evidence, the committee shall give its judgment. As the laws relating to medical negligence are vague and liable to be misused, leading to serious implications, the judge must look into the facts of the case in its totality and arrive at his findings of whether or not adequate standard of care was exhibited by the medical practitioner.

     

    12. Would it amount to negligence on part of the hospital if it denies medical treatment to a person on grounds of insufficient funds?

    Ans.      Individuals practicing medicine in the UAE shall perform their duties accurately, honesty and in accordance with the recognized scientific and technical principles to provide the necessary care for patients, in addition they shall not make use of the patients' needs for illegal benefit to themselves or others and without discrimination between patients. (Article 3)

     

    13. I was diagnosed for an infection and was assigned a lady gynecologist. On the day of my follow up, the lady doctor wasn't available and I was instructed to see another doctor. I resented this due to the fact that he was a male physician and I felt uncomfortable the whole time. My question to you is, whether I had a right to object to being examined by a doctor of an opposite gender?

    Ans.      Yes, you have the right under the Medical Liability Law to ask for a doctor of the same gender. It has been elaborated under Article 5 (clause 6) which affirms that the patient shall not be examined by a doctor from an opposite gender, without the presence of a third person and without attaining a prior consent of the patient.

     

    14. What are the provisions governing emergency surgeries? I have a close friend whose fetus was aborted without her consent when she came in as an accident case?

    Ans.      In emergency situations, the doctor has to first try and obtain the consent of the patient or her husband. But if it is impossible in the given situation, the physicians are instructed to prepare a report stating the abortion justifications. This report has to be signed by the patient and her husband or her guardian. The concerned parties shall also be given the copy of the report. However, the consent of the husband is not necessary in emergency cases where an immediate surgery is required.

    ]]>
    Mon, 10 Nov 2014 12:00:00 GMT
    <![CDATA[From Beach to Business]]> Company Formation in Bahrain – the Options of a Foreign Investor

    The geography alone paints the picture of a holiday-maker's paradise. As an island located off the western shores of the Persian Gulf, the mere mention of Bahrain puts us in mind of white-sand beaches, calm azure seas, palm trees and pina coladas. Yet anyone arriving in the country in pursuit of such a vision is likely to be disappointed – for the past 20 years only 5% of the beaches adorning the 175km of coastline are publically accessible. So how else could a disheartened beach-enthusiast spend their time in Bahrain? Perhaps they could visit one of the many art and culture centers for which the area is famed? Or make a trip the Formula One racing track? Or possibly incorporate a company?

    Accepted, corporate activity is maybe not the best substitute for sun bathing. Yet operating out of such an appealing setting, conveniently located between Asia and Europe, in a GCC country that prides itself on being a little more relaxed than its neighbours are all factors which are drawing investors to Bahrain on account of the commercial landscape as opposed to the physical. This article is therefore intended to provide a brief overview of the laws and procedures applicable to any foreign national wishing to incorporate an entity in Bahrain.

    It is of note that the general premises of the law are similar throughout the GCC. Dubai has long since enticed investors from across the globe, and the universal interest in setting up corporate entities here has resulted in numerous publications, articles and guides to company formation. Why then, given the general similarities in law across the GCC, does company formation in Bahrain warrant specific attention? The justification is routed within one fundamental distinction between the commercial laws of Bahrain and the UAE in particular, namely in the provisions relating to the compulsory involvement of a local shareholder. Here, Bahraini law adopts a unique and industry-specific approach, which we shall examine in greater detail hereafter.

    As in the majority of countries across the globe, the law of the Kingdom of Bahrain distinguishes between a number of forms that a company may take. Article 2(a) of the Legislative Decree 21 of 2001 (the Commercial Companies Law) provides that a commercial entity must take the form of a general partnership company, limited partnership company, association in participation, joint stock company, limited partnership by shares , limited liability company , single person company or holding company. Any entity failing to take one of these recognized forms shall be annulled, with the partners, shareholders and any other individual who has signed any paperwork pertaining to the same incurring joint and unlimited liability for the non-compliant company. Despite the number of models available our focus here is on foreign nationals considering incorporation. Certain forms (for example limited partnership companies) will require the cooperation of a Bahraini national – we shall therefore concentrate only on the company types available to entities registering under 100% foreign ownership.

    Perhaps the most familiar of these models is the limited liability company (nationally known as a WLL – a company "with limited liability"), which is defined under Part VII of the Commercial Companies Law. In general such an entity is characterized in the same way as under the law of the UAE and in a multitude of other jurisdictions – namely that the liability of each shareholder is limited to the amount of the capital which he has invested. However here the aforementioned distinction comes into play – under the law of Bahrain 100% of a WLL may be owned by foreign nationals. The reasons for such commercial liberty can only be speculative, yet the fact that local citizens make up a greater percentage of both the national population and workforce than in many other GCC countries may be a contributory factor.

    So pursuant to the law, Mr X and Mr Y (both foreign nationals) are able to incorporate a WLL company in Bahrain. What requirements must they meet? For starters they must ensure that they have a minimum share capital of BD 20,000 (Bahraini Dinars twenty thousand – the equivalent of USD 53042 and AED 194,854) as per Article 264 of the Commercial Companies Law. This capital may be divided into a number of equal shares of the duo's choosing, providing that the value of each share is at least BD 50 (Bahraini Dinars fifty). They must also observe the requirements of Article 265 when drafting the Memorandum of Association (MOA) taking care not only to include the listed information (such as their names, titles and nationalities, the company headquarters, company objectives and conditions applicable to share assignment) but to also ensure that an Arabic language version of the document is notarized in accordance with Article 6. Failing to take this step will result in the invalidity of the company. Moreover, having selected a company name (ensuring that the same includes the prefix "with Limited Liability"), Messrs X and Y must remember to use the same in any contract, invoice, publication, paper or advertisement pertaining to the company. Should they neglect to do so each shall fall liable to the extent of his personal wealth, rather than the individual portion of share capital invested.

    Once the constitutive documents have been prepared and the lease of a premises to serve as the company's office has been secured Messrs X and Y may approach the Bahrain Investment Centre (BIC) to submit the documents required in order to obtain the approval of the Ministry of Commerce (MoC). Without the MoC's consent the company cannot be incorporated. In addition to the draft MOA the pair should also present their completed company registration application form, relevant identification and the lease agreement relating to the company's premises. Furthermore they shall require their respective CVs and proof of qualification.

    The specifics of the latter requirement, namely the proof of qualification, will vary depending on the principle activity of the intended company. If Messrs X and Y intended to incorporate a company dealing in contracting they would require only proof that they had completed their secondary school education, yet the desire to provide business consultancy services would render proof of a master's degree or 5 years of relevant experience necessary. However when considering the activities of the company the team have a much more important factor to take into consideration – under the Commercial Companies Law and directions of the Ministry of Industry and Commerce some commercial activities, such as any service relating to gambling, the manufacturing of alcoholic beverages, cigarettes and narcotics and the importation or industrial use of restricted chemicals, are completely prohibited. Others are reserved for Bahraini national citizens (for example the supply of foreign manpower, car and motorcycle rental, the supply of oil products and commercial agencies) and the provision of further services are restricted to Bahraini and/or GCC citizens (fishing, accounting and book keeping services and cargo clearing). Additionally, despite the country's seemingly liberal approach to expats' commercial activities, even greater limitations apply. A Bahraini partner is required for any entity operating in the field of travel and tourism, licenses for medical centres and clinics (save for hospitals) are awarded only to GCC nationals with medical degrees and residing in Bahrain, and the requirement of a 51% minimum local shareholding applies to any company operating in the trade or retail sector. Given that trade and retail is probably the most common principle activity of a foreign WLL the latter regulation alone imposes a huge restriction on foreign investors. Article 262 of the Commercial Companies Law narrows the window of opportunity further still by prohibiting a WLL from undertaking insurance, banking or fund investment related activities.

    Let us imagine that Mssrs X and Y are performing an activity that did not fall foul of the above restrictions. They have successfully incorporated their WLL (the process of which, according to the MoC, would have taken approximately 2 weeks) and are respecting the provisions of Article 286 regarding the annual submission of audited financial statements. The business (named Z WLL) is operating at a profit and is not subject to any legal proceedings. However on account of commitments in his home country Mr X decides that he wishes to dispose of his interests in Z WLL and leave Bahrain. In keeping with Article 270 shares in the company may be transferred via procedures similar to those in the UAE – namely that Mr X must first notify Mr Y and any other shareholders as to the availability of his shares and, after a time lapse of 2 weeks, may transfer the shares to a third party should none of the existing shareholders choose to redeem them. In this instance Mr Y informs Mr X that he would like to purchase the shares. The transfer takes place in keeping with the Commercial Companies Law, and is registered in the Commercial Register and publicized in the Official Gazette as per Article 271.

    This has the effect that Mr Y becomes the sole shareholder of Z WLL. As the number of shareholders has fallen below 2 the provisions of Article 261 shall apply, thus effecting the transformation of Z WLL into a single person company by force of law. As per Article 2(a) a single person company is a separate type of entity, and such a transformation will require Mr Y to examine the relevant provisions of the Commercial Companies Law to ensure Z WLL remains compliant. In order to maintain the existing company model Mr Y will have 30 days in which to transfer some of the shares to at least one other third party – the minimum number of shareholders (namely 2) will then have been achieved, and Z WLL will retain its status.

    The transformation of Z WLL into a different category of entity and the responsibility of ensuring that the single person company complies with a different set of provisions may be cumbersome to Mr Y. However the capacity to amend the company's structure in Bahrain affords benefits which are not available in the UAE, where the right to operate a sole establishment outside of a free zone is afforded only to local citizens. Despite the fact that he will have to exercise diligence in researching the relevant applicable law Mr Y may continue to operate the company without much inconvenience.

    So were we justified in our earlier assumption that Bahrain has adopted a more relaxed approach to foreign investment and company incorporation? Although the prima facie provision that foreigners may own 100% of a company without the involvement of an obligatory local partner or sponsor makes the establishment and operation of a WLL somewhat easier than in the UAE, the less-obvious restrictions on various business activities go some way to cancelling out the benefits. But for any foreign investors (jointly or separately) wishing to own 100% of a WLL or single person company which will perform a permitted activity, the provisions in place in Bahrain are no doubt appealing.

    Perhaps more appealing than the country's beach scene…

    ]]>
    Thu, 06 Nov 2014 12:00:00 GMT
    <![CDATA[SUCCESSION LAW FAQ]]> WHERE THERE'S A WILL, THERE'S A WAY: FAQs ON SUCCESSION LAW

    "We should not forget that it will be just as important to our descendants to be prosperous in their time as it is to us to be prosperous in our time."

              Theodore Roosevelt

     

    The Islamic laws of inheritance that have been discussed here can be legitimately accommodated and practically implemented within many existing western legislation systems by way of a valid will. In fact for those Muslims living in the west a will becomes an essential necessity to prevent intestate succession law of the land being applied to their estate after they die. The will should comply with the law of the land so that it can be executed after a person's death without any unnecessary legal problems. It is important to note that if the will is desired to be made (in case of expatriates) according to the local laws of UAE then it should be made in accordance to Sharia law and should not be contradictory to any of the principles of Sharia.

    Inheritance Planning is a term used for planning the distribution of your worldly possessions after you leave this life behind.. When a person passes away without leaving a will or dies "intestate" as legally mentioned, the property of the deceased is distributed according to the law of the land on personal affairs. In other words, if you do not have a will, you do not have a documented account regulating the distribution of your estate. An "Estate" applies not just to your real estate, but anything of value like money, bank accounts, cars, furniture, books, bonds, investments, jewellery, family inheritances, etc. Your "Last Will & Testament" is a document that details exactly what you would like to do with your estate in the event of your death. The document can cover all aspects of your life, from physical assets such as property, investments or cash to your last wishes.

    Q.1   Why make a will? What is the necessity and expected risks if there is no will?

    A will is always important in order to secure the rights over the property by the owner in favour of his/her kith or kins in the event of death. It determines the subsequent owner of your assets and after you – the specified person will take care or become an owner of your assets in the event of your death. It is important to write a will and eliminate all risks of future dispute or there may be a possibility that the property may confiscate by the government in case of no will. When an expatriate dies in the United Arab Emirates (UAE), banks are instructed by the courts to freeze all transactions on the accounts of the deceased, including joint accounts. Even assets shared between a husband and wife will be frozen until the inheritance is sorted out. However Sharia law gives preference to settling the liabilities of the deceased prior to distribution of assets, so unfreezing the account & assets can only be carried out by the order of a Sharia Court if it has an attested will. This process aims to safeguard any payments that need to be made after an expatriate dies, such as outstanding loans and debt payments. It is pertinent to note in the absence of will, UAE being a Muslim country, there is a possibility that the property may not go to the person you wished for. The Sharia Law automatically applies to both Muslim and non-Muslim estate holders when they pass away in the UAE.

    Q.2  Will the inheritance and intestacy laws of my home country (in case of expats)prevail over the UAE's local processes, which follow the principles of Sharia?

    In case a person of any religion dies intestate , the courts may adhere to Sharia laws in regard to inheritance of assets and custody of children. Inheritance matters in the UAE are government principally by two Federal Laws: The Personal Affairs Law of No.28 of 2005  allows non-Muslim expats living in the UAE to opt to use the law of their own countries to distribute their assets are in the UAE. This is irrespective of the fact whether or not the non-Muslim expatriate has a legally recognized Will in his/her home country. In other words, the descendants can apply for probate in the home country upon the demise of a family member, which will allow them to distribute the UAE assets in the manner that the deceased person would have wished.

    Q.3 Is U.A.E law applicable only to UAE nationals, or to all Muslims, or even to all expatriates irrespective of nationality and religion? 

    In the absence of will, UAE being a Muslim country, the Sharia Law automatically applies to both Muslim and non-Muslim estate holders when they pass away in the UAE. 

    Q.4  I am doing business in a partnership in Dubai. I own most of the business save for the amount which must be owned by a local partner as per the provisions of the applicable lawThe distribution of profits is provided for in a side agreement. I pay  the local partner an annual/lump sum fee  – is he a sleeping partner?  If I die who will be entitled for all my assets and profit sharing in the company?

    Business owners have it worse. SME owners and owners of large conglomerates have much more to lose since running a business requires a  substantial base of assets to be built locally and internationally. The absence of proper inheritance planning can bring a family used to a millionaire's lifestyle to  its knees in a matter of days. The distribution of assets and profit shares in any business following the demise of a member may well be provided for in side agreement, but the fact remains that the death of a partner is likely to raise questions and potentially dispute with regards to business funds. As an expatriate, whether you are employed or a business owner, please take some time off to focus on your own inheritance planning and save your family from the financial grief that is sure to follow should something happen to you in the UAE.

    Q.5  What type of Will shall I draft and does it need to be notarised and legalised?

    The Personal Status Law does not contemplate that a will citing  foreign law or provisions contrary to Sharia could be issued.  Reference is made to Article 1 (2) and Article 424. Therefore there is no such thing as a UAE will.  A will should be drafted in accordance to the law of country of expatriate by the experts, having regard to the gifting problems, tax and other issues. If the writer's jurisdiction of choice requires the will to be notarized or legalized then it is recommended that the writer upholds this provision in the UAE. 

    ]]>
    Thu, 25 Sep 2014 12:00:00 GMT
    <![CDATA[Arbitration in the UAE]]> Any discussion on recent developments in the field of civil litigation must address the virtual revolution that has taken place with regards to alternative dispute resolution. Needless to say that the legal system has witnessed a steady growth in litigants' recourse to Alternative dispute resolution (the ADR). ADR has undergone significant growth and is increasingly being incorporated into the litigation process. Such alternatives are now viewed as modes to help alleviate the strain on judicial legal system and to assist the parties in resolving their disputes faster, at less cost and with satisfactory results.

    In my previous two articles I discussed at length matters pertaining to arbitration in the United Arab Emirates. The first article discussed the legislature's intention to introduce arbitration as alternative form of dispute resolution between two or more disputing parties. The second article addressed implications of arbitration award, the binding nature of such awards, grounds available to challenge arbitral award and claims to set aside arbitration award based on - a) arbitration agreements; and b) arbitration proceedings.

    In the present article we continue to explore arbitration under the context of doctrine of separability and invalidity of contracts. The subsequent series will cover other forms of dispute resolution that emanate from within the frame work of arbitration, and understand the difference between arbitration, conciliation and other forms of dispute resolutions.

    As ADR has gained prominence in judicial, academic and commercial circles it also attracts attention of critics. For instance some critics may argue that ADR fails to address real problems of legal system. They challenge the notion that such alternatives are more efficient than litigation, questioning whether it really saves time and disputing the asserted judicial overload itself. Some assert that ADR creates ethical concerns for legal practitioners while others fear that such process may be biased and  not neutral.

    To begin with, we discuss the precedent rules set by Court of Cassation on deciding whether invalidity of a contract entails ispo jure invalidity of arbitration. The Court of Cassation recognized the doctrine of separability (the Doctrine) in the present case and ruled that an arbitration clause in a contract is separate from the main contract itself (except if the award results in the violation of public order). The Civil Procedure Code of the United Arab Emirates does not expressly refer to the Doctrine, but the same has been recognized by Dubai International Arbitration Centre's Arbitration Rules of 2007 pursuant to clause 6.1 of the above Rules providing as under:-

    "Unless otherwise agreed by the parties, an Arbitration Agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and the Arbitration Agreement shall for that purpose be treated as a distinct agreement."

    In a matter placed before Dubai's Court of Cassation (Appeal number 164 of 2008 and dated 12 October 2008), a subcontracting agreement dated 23 December 2004 provided for arbitration. Pursuant to clause 13 of the said agreement it was provided that any dispute or difference that may arise between parties should be resolved amicably, and if amicable resolution cannot be reached such dispute or difference should be referred to arbitration.

    The court in the present case had to decide on validity of the arbitration clause by considering whether the managing director of a limited liability company had the authority to bind a company to arbitration. In sum, the court confirmed that company's manager does have the authority to bind a company to arbitration. To this effect, the court stated that if the company's constitutive document (namely the memorandum and articles of association) afford broad powers and authorities to a company's manager, this manager has the legal right to take any action and carry out all such acts as he may deem expedient or best in the interest of the company. In presence of broad powers vested in company's managing director under company's constitutive documents, the formal requirement to obtain a special power of attorney to initiate arbitration proceedings is absolved.

    In addition, taking into consideration the concept of breach, the argument that invalidity of contract does not affect the arbitration clause is in contrast to another rule decided by Court of Cassation (Appeal number 61 of 2009 dated 11 April 2010; Real Estate) which sets out that invalidity of contract renders all the clauses invalid (including the penalty and compensation provisions, since the annulment or dissolution of a contract leads to demise of contract including the penalty provisions). The courts ruled that in cases where contract is annulled by agreement or court, then the contract is no longer enforceable and the parties are restored to their respective position as prior to entering in to the demised agreement. As a consequence, everything forming part of contract ceases to exist, including without limitation all obligation set out under the contract, penalties and agreed compensation. The courts placed reliance on Article 274 of the Civil Code which reads out as under:-

    "If the contract is cancelled automatically or by the act of the parties, the two contracting parties shall be restored to the position they were in before the contract was made, and if that is not possible, compensation shall be ordered."

    A review of the above two decisions suggests that there is contradicting view expressed in two previous decisions passed by Court of Cassation. The decision adopted in penalty and compensation matter suggests that if a contract becomes dissolute the creditor earns specific rights against the debtor who is in breach of contract, whereas an arbitration clause does not have such independence. Additionally the doctrine of separability adopted in the arbitration ruling was not adopted in the above matter. The difference in the above two decisions calls for further clarification.

    Although corporate, commercial, financial and other matters may be referred to arbitration, parties cannot resort to arbitration to resolve their disputes and these include:-

    Criminal matters and matters affecting public order: criminal matters cannot be subject of an arbitration dispute.  Accordingly, if during the course of arbitration proceedings a party to arbitration raises an objection citing forgery of paper or criminal action being lodged in respect of forgery or some other acts, the arbitrator must suspend the proceedings until a final judgment on such criminal matters has been pronounced.

    Matters wherein reconciliation is not possible: Arbitration of matters that are irreconcilable are inadmissible. Accordingly, personal status matters such as marriage and divorce, matters where person or persons wish to acquire nationality, matters concerning rights of minors, matters that are against the public order and urgent matters cannot be subject to arbitration.

    The next series will focus on other forms of dispute resolution including mediation and conciliation, and will compare these alternative forms with arbitration under the context of UAE law taking into consideration precedents passed by courts.

    ]]>
    Wed, 24 Sep 2014 12:00:00 GMT
    <![CDATA[QATAR REAL ESTATE]]> Buildings versus "Builts"

    The acquisition of land and off-plan purchases in Qatar

    It's fascinating to see that in this age of consumerism people are so eager to keep abreast of the latest products that they are willing to pay for an item before so much as a picture or description have even been released. The obvious risks, such as the product being substandard, poorly functioning, insufficient for purpose or just plain ugly, are often only secondary concerns. The phrase "try before you buy" (or at least "view and read performance reviews before making a well-informed decision") surely makes sense, and reduces the possibility that the product won't meet the purchaser's expectations when the concept becomes a reality.

    As per the above title, this article is not about consumerism. Or technology. Or even consumer's rights. It's about property law in Qatar. But the point is this – making a purchase without first inspecting the physical object of the transaction carries obvious risks. And if there is a potential risk in the minor task of buying a smart phone or tablet that does not yet exist, imagine that involved in purchasing real estate that is not yet constructed.

    The technical term for this is buying "off-plan". In Qatar this is particularly prevalent – the area is enjoying a construction boom and there is a significant demand for property. But why would a purchaser take such a risk as opposed to buying a pre-constructed unit? The advantages are obvious – an off-plan purchase is likely to be cheaper than a completed property, the facility is sure to be cutting edge with the latest mod cons, and it creates an opportunity for investors to consolidate their interests (for example, a landlord wishing to purchase a portfolio of properties with a view to leasing them may find it difficult to find an apartment building or area containing a sufficient number of available units in a pre-constructed development owing to competition). However the potential hazards are numerous – what if the developer enters into liquidation before construction is complete? What if the development company doesn't actually exist, and the project is a fraudulent scam? What if the company simply decided not to proceed with the planned project after all? The purchaser may be left with no property and no means to recover any monies already paid. The increase of such problems in the Qatari real estate market has resulted in some drastic changes in the region's property laws, and has consequently balanced the risk in the buildings versus "builts" debate.

    The acquisition of land in Qatar has never been a simple process for foreign nationals. In 2002 the country implemented legislation which superseded the prevalent provision contained within Law Number 5 of 1963 – namely that only Qatari nationals had the right to own land. Originally the relaxation in this law only extended so far as to other GCC nationals, limiting their ownership to a maximum of three properties provided that they did not exceed a prescribed square footage. Further revisions permitting ownership and usufruct rights to non-GCC nationals came later, although these rights are limited to designated zones (such as the Pearl) and are applicable only to residential property.

    Despite having the right to acquire land in Qatar any foreign national wishing to do so should prepare himself for a convoluted process. The procedure differs depending on whether the purchaser is a Qatari, GCC or foreign national, and whether the transaction involves registration of title or usufruct rights only. In any event registration will require correspondence with numerous governmental departments, including the Ministry of Justice, Department of Land Registration and the Real Estate Registration and Authentication Department. In addition to this the transaction will be peppered with minor fees beyond the obvious, such as an authentication fee of QAR 5 per document and a QAR 10 charge for the paper on which the new title will be printed!

    It appears as though we can safely acknowledge that any real estate transaction in Qatar is likely to be complicated. So why would a purchaser wish to add extreme risk to the intricate process by purchasing a property off-plan? Enter Qatari Law Number 6 of 2014 (the New Law), which shall have effect from October…

    In the first instance, the New Law shall require all developers to apply for a license from the Ministry of Economics and Commerce. The granting of a license will be subject to evidence of the developer's incorporation (with additional requirements if the developer is a company incorporated overseas) and proven solvency, and shall also necessitate a minimum of three years' experience in the industry. Operating without a license is an offence criminalized by the legislation, punishable by one years' imprisonment, a QAR 50,000 fine or both – sanctions also available in the case of a developer misrepresenting a construction project in any plans and drawings, using funds deposited in the escrow account for unauthorized purposes or failing to hand over the project on the contractually agreed date without a reasonable excuse. A greater fine – namely QAR 200,000 – is risked by a developer that fails to commence a construction project within six months of obtaining all necessary permissions and approvals without an acceptable reason. Such penalties go some way towards ensuring that the purchaser receives the advertised product within the agreed time frame.

    An obvious concern of any off-plan purchaser is the evidencing of ownership prior to completion. An incomplete, unregistered property will not yet have a title deed, and a lack of any formal documentation pertaining to the ownership of a unit which does not yet technically exist is bound to create difficulties should any dispute arise between the purchaser and the developer. The New Law deals with this basic omission by way of the implementation of interim strata-title deeds – deeds issued by the Ministry of Justice prior to the completion of the project and availability of a full title deed. In order to allow for the issuance of the interim deed developers must submit to the Ministry of Justice detailed plans and all relevant information pertaining to any sales made off-plan. Failing to do so will render the developer liable to a fine of up to QAR 100,000.

    Precedent suggests that, despite the safeguards provided by the use of escrow accounts, payments made towards real estate transactions can be misused or withdrawn unlawfully. However the New Law takes steps to address these problems by providing that no withdrawal from an escrow account will be made by a developer until the relevant project is at least twenty percent complete in keeping with a schedule approved by the Ministry of Municipality and Urban Planning. There is therefore little prospect of a purchaser's money being released towards a fraudulent, non-existent development. On the withdrawal of said funds the New Law further guarantees that the monies shall be used only for covering costs directly associated with the construction project itself, and that at all times prior to completion the escrow account shall maintain a minimum balance equal to ten percent of the total value of the same.

    So, let us return to our original concerns regarding off-plan purchases - what if the development company never actually existed? Under the New Law this isn't a possibility. The company will need to evidence that it has been incorporated and operational within the industry for a least three years, otherwise it is ineligible for licensing. What if the company decides to abandon the project?  Accurate plans will need to be submitted to the appropriate authorities, construction must commence within six months of approval and interim title deeds will be allocated to the purchaser, alleviating the risk that the project may not be genuine and creating the opportunity for remedy if it is left incomplete. And what if the developer isn't in a position to refund a purchaser's money? Regulations on the withdrawal of funds in the escrow account will ensure that a substantial chunk of the deposited funds remains untouched by the developer until the appropriate time, thus protecting the purchaser's investment.

    We can therefore reasonably conclude that, despite still complex due to the rules and regulations involving land ownership in Qatar, the risks involved in off-plan purchases may be significantly reduced.

    It appears as though STA's new Doha office isn't the only insightful development on the 2014 Qatari legal scene…

    ]]>
    Wed, 24 Sep 2014 12:00:00 GMT
    <![CDATA[INDIA UAE Extradition Treaty]]>

    INDIA UAE Extradition Treaty

    When former Central Intelligence Agency employee and National Security Agency contractor Edward Snowden blew the whistle on the details of the secret surveillance program of the United States he had to flee the United States under charges of espionage. But can fleeing to another country prevent arrest by the home country? Not if the two countries, i.e. the home country of the offender and the country to which he is fleeing, have an agreement whereby they decide to handover the offender to the home country for prosecution. And when the accused in the Bangalore (India) serial blasts case was absconding, a team of the Research and Analysis Wing had to track him in Muscat and sneak him out of Oman, since India doesn't have an extradition treaty with Oman whereby they should have returned him to India.

    Edward Snowden is currently hiding out in Russia and the Russian government does not plan to extradite or hand over Snowden - even though the US Prosecutor General's office asked them to do so - as the United States does not have extradition treaties with Russia. Moreover, as a Russian lawyer pointed out, Snowden hasn't committed any crime and faces no charges in Russia.

    Such events necessitate the need for an agreement between countries to send back the offender to his or her home country.

    What is an extradition agreement or treaty?

    Under international law, as there is no obligation for one country to surrender a criminal to another, nations have entered into agreements to help bring to book the fugitives who flee abroad.

    Essentially, extradition treaty allows either of the signatory countries to the treaty to handover to the other signatory country the accused who has committed an offence in that other country.

    In this article we will discuss the main features of the India and UAE treaty on criminal matters.

    The Government of the United Arab Emirates and the Government of the Republic of India entered into an agreement in 1999 on mutual legal assistance in criminal matters subsequent to which an extradition treaty was entered into by the two countries in 2000. Under the treaty, both the countries are required to handover the accused to the other country, the person to be extradited where such person is accused of an offence in the country requesting extradition. Further such an offence must be punishable under the laws of both India and UAE with at least imprisonment for one year or the person has been sentenced by the court of the other country for at least six months.

    The treaty is entered into by the two countries to strengthen bilateral co-operation and take concrete steps to combat terrorism and other crimes.

    The extradition will be possible irrespective of whether the crime was committed before or after the entry into force of the treaty.

    CONDITIONS FOR EXTRADITION:

    -        The person to be extradited must only be tried or punished in the requesting country for:

          · -         the offence for which his extradition is sought or for offences connected therewith, or

            -         offences committed after his extradition.

    -        The signatory country to which the person is extradited must not extradite him to a third state, without the consent of the other signatory country.

    -        If the person to be extradited is already under investigation or trial or is convicted in the requested state for an offence other than that for which his extradition is requested, then the requested state must decide on the request and communicate its decision to the requesting state. If the request for extradition is accepted, then the           surrender of the person concerned must be postponed until his trial in the requested state is completed and the punishment passed is executed.

    -        If the person extradited had the freedom and means to leave the territory of the state to which he was extradited, and he did not leave within thirty days of his final release or left during that period, but returned on his own will, he may be tried for the other offences.

    -      The two signatory countries may refuse to extradite the accused if the offence for which he is required to be extradited is a political offence.

    -      When a number of requests from contracting countries for extradition are received for the same offence then the contracting party whose security or interest or interests of its nationals are affected by the offence is given priority for extradition. Second priority is given to that party in whose territory the offence was committed and           lastly to the party of which the accused is a national.

    OTHER FACTORS FOR SIGNING A TREATY:

    When governments decide to sign a treaty, they should feel certain that those extradited, will receive a satisfactory level of care. This should amongst other things, include the right to a fair trial, reasonable sentencing and guarantees that human rights will be upheld.

    Many western countries already have extradition treaties with the United Arab Emirates (UAE). Australia and India have recently signed a treaty.  The UK has safeguards written into law to prevent extraditions where human rights may be breached whereas Australia is yet to pass the same safeguards to protect its citizens.

    Extradition treaties make it clear to criminals that there is no haven in the UAE. The extradition treaty provides a legal framework for seeking extradition of terrorists, economic offenders and other criminals from the UAE.

    Extradition for offences in connection with taxes, fiscal charges and customs duties will be in accordance with the provisions of this Treaty only if the said offence corresponds to an offence of a similar nature under the law of the requested State.

    Further the actual carrying out of the offence is not the only precondition for extradition and even if a person attempts or plans to commit or is involved in such an offence he is eligible to be extradited.

    Extradition is also available for an extraditable offence if it is committed in a third state by a national of the requesting state who is present in the requested state and if it would be an extraditable offence under the laws of the requested state.

     

    TRANSFER OF SENTENCED PRISONERS AGREEMENT:

    Transfer of sentenced prisoners' agreement was signed between India and the UAE in New Delhi on November 23, 2011 to facilitate the social rehabilitation of persons convicted in their countries. It will provide convicted citizens of both countries who have been sentenced for their crimes "the opportunity to spend the duration of their sentences within their communities". Inmates serving sentences for murder, drug offences and financial crimes are not eligible.

    The transfer pact applies to those who have already been convicted. Under-trials will not be eligible for this benefit. The crime should be punishable in both the countries. A prisoner who wishes to be transferred must have a minimum of six (6) months of jail term left and there should not be any pending case against him or her. Both the governments of the host and receiving countries have the right to accept or reject the requests of the prisoners.

    CONCLUSION:

    It is important that both sides honour these agreements, as even when treaties were in place extradition did not always take place. Many nations refuse extradition if the accused is likely to face the death penalty, others will not extradite their own citizens. In a recent example an Indian who was facing legal action in the UAE for allegedly fleeing to India after issuing a dud cheque to his fellow countryman could not be extradited from India to the UAE. India and the UAE have signed an extradition treaty in 1999 but a country cannot extradite its own nationals under the extradition treaty. However, the accused can be tried in India based on the same case initiated in the UAE under the Agreement on Juridical and Judicial Cooperation in Civil and Commercial Matters signed by the two nations in 1999.

    Although such extradition agreements do not necessarily need to be in place for a wanted criminal to be handed over to a foreign government, they simplify the process and most importantly send the right message to such criminals who think they can escape the law.

     

     

    ]]>
    Tue, 23 Sep 2014 17:00:00 GMT
    <![CDATA[Due Diligence in Real Estate]]>

    Obvious, really, yet "performing due diligence" is a phrase readily associated with the legal industry. Reminding ourselves of the basic definition realizes that we each "perform due diligence" hundreds of times per day. We might check the weather forecast or traffic reports before leaving the house, read reviews before selecting a film to watch, research a company before applying for a job. It is unlikely that we would enter a car showroom on a whim and select a vehicle based on aesthetics, or turn up at the airport and pick our holiday destination at random. The fact that these relatively minor tasks require the application of such due diligence goes some way towards emphasizing the caution that should be exercised before entering into a major project.

    A major project involving construction and real estate, for example. Or entering into a joint venture. Or, on an even greater level, both.

    Let us imagine that Company A (a developer) wants to build and sell a hotel. Before any construction could even be considered Company A would need to find a suitable plot of land and secure the appropriate permissions, consents and NOCs, not just for the sale and purchase of the land but also for the construction and operation of a hotel thereon. These tasks alone would be subject to thorough checks and analysis before the project could go any further. If Company A was to source a plot and entered into a provisional sale and purchase agreement with the seller then it would need to ascertain certain information before any definitive agreement could be executed, namely:

    - Are there any issues with the title? Is it restricted in any way? Does the seller have the sole and absolute right to sell   the land and transfer the title?

    - For what uses has the land been approved? Are there any restrictions or approvals in place effecting the intended use   of the land as a hotel?

    - Is access to utilities such as water, sewage, electricity etc available?

    - Is access to the land restricted in any way? Do access routes already exist? Does the title include any responsibility   towards maintaining existing access routes?

    As the definition suggests due diligence requires a great degree of care and attention, meaning that Company A will have to do more than simply ask the seller to confirm the above. In order to be thoroughly conscientious Company A's lawyers should correspond with the seller on its behalf, request all and any documentation pertaining to the ownership, title, use and history of the land and thoroughly study the same so as to ascertain whether or not there are any issues which may affect the purchase of the land or Company A's intended usage. However, in order to minimize the risk of issues and complications arising during the project, Company A and its lawyers would be sensible to summarize the entire scope of work from purchase to construction to completion, and request all relevant information required for due diligence at the outset and before the signing of any definitive agreement. In doing this Company A's lawyers would be in a position to advise against the transaction should any issue seem to counter Company A's interests.

    Now let us imagine that Company A decides that it wants to develop a bigger, more structurally complex hotel in Dubai. After considering their finances and resources, Company A decides that achieving this objective would be far more realistic if it joined forces with Company B, another developer also desirous of building and selling a large state-of-the-art hotel in Company A's country of choice. Company B additionally has finances and resources which, when combined with those of Company A, would be sufficient to allow for the successful completion of the project. Company A and Company B therefore agree to enter into a joint venture.

    Clearly, the practicalities of the purchase of land, construction of the hotel and sale of the same would be little different to those involved in Company A developing its original hotel as above, and thorough due diligence would still be required to this effect. However Company A now has the additional task of considering all factors relating to Company B which may affect the venture, such as:

    - Is Company B sufficiently financially secure? Is it likely to encounter financial problems which would affect the venture?   Past liabilities of Company B and disclosures on such Past liabilities.

    - Is Company B already involved in any joint ventures with other companies and, if so, what are the details of these? Are   there any conflicting business issues?

    How verifiable are the resources that Company B is proposing that it brings to the project?

    - What is the structure of Company B? How is it managed?

    - Who are Company B's customers, suppliers, clients and trading partners? Are they able to verify that Company B is   capable of maintaining a sound working relationship?

    - Is Company B involved in any legal or public issues which may affect the venture, or have any detrimental effect on   Company A by association?

    - How successful are any previous or ongoing development projects in which Company B has been/is currently    involved?

    This is by no means an exhaustive list, and requesting documentation pertaining to Company B's past and present state is by no means the full extent of due diligence. Throughout their working relationship Company A and Company B are likely to encounter each other's trade secrets and intellectual property – provisions will therefore need to be agreed in advance so as to ensure the protection of each company after the venture has ended, and series of contracts and agreements will inevitably be needed in order to govern each company's rights, obligations, liabilities and duties throughout the venture and thereafter.

    From a professional standpoint, it has been observed in many instances that parties to a joint venture agreement tend not to adhere to joint-venture terms. For instance - Company A in present case owns a piece of land and Company B has the technical know, means and experience to develop, construct and market the property – a joint venture would naturally result from the synergies existing between Company A and Company B whereby Company B saves in terms of investing financial resources to develop the property on Company A's land and Company A saves itself from time and labor to construct a property. It is important to state here that although joint venture contract can regulate the relationship between Company A and Company B in this case, Company B enjoys a dominant position once it has assumed possession of land. Briefly, the joint-venture agreement between the parties provided:-

    a. Company B shall be solely responsible towards construction, completion and handover of project;

    b. Company B shall set up joint escrow account in name of Company A and Company B with JKL Bank and all sale consideration    shall be credited in to the escrow account;

    c. 60% percent of saleable area to be owned by Company B and 40% to be retained by Company A;

    d. Marketing and pricing decisions to be agreed mutually by both the parties.

    Cursory reading of above terms may suggest that these terms are fair and adequate to regulate the relationship of respective parties. However, once Company B assumes occupation of the project site and commences actual construction, Company A i) cannot consider termination of joint venture agreement as it may be subject to penalties and damages towards losses sustained by Company B towards construction works; ii) has no control over construction, contracting or building works; iii) is responsible towards terms, liabilities and obligations imposed under joint venture agreement. Interestingly, Company A's dominant position will affect Company B to a much more significant level. Say for instance, Company A fails to open a joint escrow account for any reason or; delays construction of property on account of some dispute with contractor or project manager, or is subject to court proceedings thereby affecting joint venture agreement, or unilaterally engages in sale and marketing of units developed. Although Company A may have the option to bring an action against Company B for its breaches, the cost, expense and length of proceedings will run against the interest of Company A and its management. To this extent if parties have agreed to be governed pursuant to DIFC Law, Company A may get some relief as DIFC Courts have wide powers to pass necessary orders including injunction under clause 22, Chapter 5 of the DIFC Court Law (Law number 10 of 2004).

    The benefits of entering into this joint venture may well be remarkable and far beyond those attained by Company A's sole venture, but it is only through thorough due diligence that Company A will be able to sensibly ascertain that entering into the relationship is in its best interests. And given the wide scope of work of both the desired project and the defining of the relationship between the entities it is inevitable the completion of due diligence will in itself be an enormous task.

    Proceed, Company A, but proceed with caution.

    ]]>
    Tue, 23 Sep 2014 12:00:00 GMT
    <![CDATA[Let's Spin it off? ]]>The term 'change' in simplest form means going from one state to a new state. Although the word 'change' is broad enough to connote positive as well as negative change, the likelihood of 'change' unfold- ing positive or welcoming outcome cannot always be pre-determined. A well-conceived and planned change could however result in positive if everything related with the plan goes right   In corporate law, a company witnesses change in its constitution if there is addition or removal in its share- holding composition. From a commercial standpoint, companies change their business models or undergo internal restructuring to achieve desired objectives. One aspect of such corporate restructuring is spin-off which is gaining momentum within the UAE and rest of the GCC. Firms have understood and realize the core idea of the spin off – separating a business unit of a larger corpo- rate entity and establishing it as a separate business. Firms carry out mergers and acquisitions under the notion that the merged entities will result in formation of a new entity whose valuation will be greater than the sum of the parts. Likewise, spin-offs are generally associ- ated with overall value improvements such as surge in stock prices, improved financial performance, etc. In corporate law, a company witnesses change in its constitution if there is addition or removal in its share- holding composition. From a commercial standpoint, companies change their business models or undergo internal restructuring to achieve desired objectives. One aspect of such corporate restructuring is spin-off which is gaining momentum within the UAE and rest of the GCC. Firms have understood and realize the core idea of the spin off – separating a business unit of a larger corpo- rate entity and establishing it as a separate business. Firms carry out mergers and acquisitions under the notion that the merged entities will result in formation of a new entity whose valuation will be greater than the sum of the parts. Likewise, spin-offs are generally associ- ated with overall value improvements such as surge in stock prices, improved financial performance, etc.    To illustrate, Company ABC is a company engaged in business of process equipment manufacturing whereby company caters to oil and gas industry in areas of constructing tank farms, pressurized vessels, pipelines, heat exchangers and other specialized equipment.   Over the years ABC developed a business unit that carried out maintenance and repairs of oil rigs that has witnessed unprecedented growth in revenues for ABC. ABC's management team during one of the annual general meetings decided unanimously to spin off the rig maintenance division in to a new entity JKL. This decision was a result of several key matters including future sale of business, effective management, and independent valuation of a business unit as new entity.   Carve-out transactions such as Spin-offs are often a result of the beguiling math of diverse expansion. Although there may be empirical evidence suggesting multiple advantages of spin-offs and is conceptually precise, it is the implementation and execution of spin-off that can be challenging. In most jurisdictions, spin-off options would first pass through tax advisors, attorneys, operation team and finally approvals from authorities.   Spin-offs in UAE however call for a detailed planning and companies should exercise a higher degree of caution prior to actually implementing the spin-off. The UAE Commercial Companies Law (Federal Law number 8 of 1984, as amended) regulates operations of foreign businesses onshore in the UAE and free zones are governed pursuant to their internal regulations. Although company formation in Dubai or UAE may be one of the most simplest and attractive option to investors, spin-off involves several key considerations for company's management on matters involving transfer of land parcels or properties, administration and assignment of lease, assignment of know-how, shareholding composition, appointment of key management personnel, regulatory approvals, transfer of employees, transfer of intellectual property, to name a few.   In a recent case, a limited liability company engaged in fast moving consumer goods in Dubai decided to spin off its garment division in to a new entity. Initial due diligence suggested that spin-off of the garment division may be practi- cally easier. However, during the course of due diligence, questions were raised in regards to assignment of franchise, setting up the carved out unit as a free zone entity, treatment of contingent liabilities related directly to garment division and transfer of nearly 7000 employees from the current undertaking to new entity. Spin-offs can have effect on Company's rating and can also impact stock prices if a company intends to spin-off its core business unit which may raise question as to what the parent entity will be worth post such spin-off. Although a comprehensive legal and financial due diligence may save entities from unwanted surprises, due regard must be placed on management informa- tion systems and    A company in the United Arab Emirates may be required to spin-off its share capital in matters involving invitation for public subscription (IPO). For instance, the Dubai Financial Markets (the DFM) that operates pursuant to trading rules and regulations of DFM and Securities and Commodities Authority (the SCA) requires firms interested in an IPO to offer a minimum fifty five percent (55%) of its shares to public.   Recently in March 2014, Dubai's flagship real estate developer also decided to spin off its shopping mall business and raised upto $2.5 billion.   With the changing times, spin off has started taking pace in recent times with a lot of companies trying to spin off their non- core activities to not just focus on core activity but also to find correct worth of their non- core activities. Spin off also provides immunity from toxic assets and helps in making other companies immune to each other's debts and liabilities within the group.   It is essential while spinning off, entities must chalk out an honest plan which will not just be clear about the revenues and expenditures of the spin- off company but will also have an action plan for the future of that company otherwise spin off can end up in a disaster.     Spin off is a way to enhance the value of the company but if not used properly can turn out to be a mass destructor instead of a gold mine

     

    ]]>
    Mon, 22 Sep 2014 12:00:00 GMT
    <![CDATA[Buildings Versus ]]>  

    The acquisition of land and off-plan purchases in Qatar

    It's fascinating to see that in this age of consumerism people are so eager to keep abreast of the latest products that they are willing to pay for an item before so much as a picture or description have even been released. The obvious risks, such as the product being substandard, poorly functioning, insufficient for purpose or just plain ugly, are often only secondary concerns. The phrase "try before you buy" (or at least "view and read performance reviews before making a well-informed decision") surely makes sense, and reduces the possibility that the product won't meet the purchaser's expectations when the concept becomes a reality.   As per the above title, this article is not about consumerism. Or technology. Or even consumer's rights. It's about property law in Qatar. But the point is this – making a purchase without first inspecting the physical object of the transac- tion carries obvious risks. And if there is a potential risk in the minor task of buying a smart phone or tablet that does not yet exist, imagine that involved in purchasing real estate that is not yet constructed.    The technical term for this is buying "off-plan". In Qatar this is particularly prevalent – the area is enjoying a construction boom and there is a significant demand for property. But why would a purchaser take such a risk as opposed to buying a pre-constructed unit? The advantages are obvious – an off-plan purchase is likely to be cheaper than a completed property, the facility is sure to be cutting edge with the latest mod cons, and it creates an opportunity for investors to consolidate their interests (for example, a landlord wishing to purchase a portfolio of properties with a view to leasing them may find it difficult to find an apartment building or area containing a sufficient number of available units in a pre-constructed development owing to competition). However the potential hazards are numerous – what if the devel- oper enters into liquidation before construction is complete? What if the development company doesn't actually exist, and the project is a fraudulent scam? What if the company simply decided not to proceed with the planned project after all? The purchaser may be left with no property and no means to recover any monies already paid. The increase of such problems in the Qatari real estate market has resulted in some drastic changes in the region's property laws, and has consequently balanced the risk in the buildings versus "builts" debate.   The acquisition of land in Qatar has never been a simple process for foreign nationals. In 2002 the country implemented legislation which superseded the prevalent provision contained within Law Number 5 of 1963 – namely that only Qatari nationals had the right to own land. Originally the relaxation in this law only extended so far as to other GCC nationals, limiting their ownership to a maximum of three properties provided that they did not exceed a prescribed square footage. Further revisions permitting ownership and usufruct rights to non-GCC nationals came  later, although these rights are limited to designated zones (such as the Pearl) and are applicable only to residential property.   Despite having the right to acquire land in Qatar any foreign national wishing to do so should prepare himself for a convoluted process. The procedure differs depending on whether the purchaser is a Qatari, GCC or foreign national, and whether the transaction involves registration of title or usufruct rights only. In any event registration will require correspondence with numerous governmental departments, including the Ministry of Justice, Department of Land Registration and the Real Estate Registration and Authentication Department. In addition to this the transaction will be peppered with minor fees beyond the obvious, such as an authentication fee of QAR 5 per document and a QAR 10 charge for the paper on which the new title will be printed!   It appears as though we can safely acknowledge that any real estate transaction in Qatar is likely to be complicated. So why would a purchaser wish to add extreme risk to the intricate process by purchasing a property off-plan? Enter Qatari Law Number 6 of 2014 (the New Law), which shall have effect from October…   In the first instance, the New Law shall require all developers to apply for a license from the Ministry of Economics and Commerce. The granting of a license will be subject to evidence of the developer's incorporation (with additional requirements if the developer is a company incorporated overseas) and proven solvency, and shall also necessitate a minimum of three years' experience in the industry. Operating without a license is an offence criminalized by the legisla- tion, punishable by one years' imprisonment, a QAR 50,000 fine or both – sanctions also available in the case of a devel- oper misrepresenting a construction project in any plans and drawings, using funds deposited in the escrow account for unauthorized purposes or failing to hand over the project on the contractually agreed date without a reasonable excuse. A greater fine – namely QAR 200,000 – is risked by a developer that fails to commence a construction project within six months of obtaining all necessary permissions and approvals without an acceptable reason. Such penalties go some way towards ensuring that the purchaser receives the advertised product within the agreed time frame.    An obvious concern of any off-plan purchaser is the evidencing of ownership prior to completion. An incomplete, unregistered property will not yet have a title deed, and a lack of any formal documentation pertaining to the owner- ship of a unit which does not yet technically exist is bound to create difficulties should any dispute arise between the purchaser and the developer. The New Law deals with this basic omission by way of the implementation of interim strata-title deeds – deeds issued by the Ministry of Justice prior to the completion of the project and availability of a full title deed. In order to allow for the issuance of the interim deed developers must submit to the Ministry of Justice detailed plans and all relevant information pertaining to any sales made off-plan. Failing to do so will render the devel- oper liable to a fine of up to QAR 100,000.   Precedent suggests that, despite the safeguards provided by the use of escrow accounts, payments made towards real estate transactions can be misused or withdrawn unlawfully. However the New Law takes steps to address these problems by providing that no withdrawal from an escrow account will be made by a developer until the relevant project is at least twenty percent complete in keeping with a schedule approved by the Ministry of Municipality and Urban Planning. There is therefore little prospect of a purchaser's money being released towards a fraudulent, non-existent development. On the withdrawal of said funds the New Law further guarantees that the monies shall be used only for covering costs directly associated with the construction project itself, and that at all times prior to comple- tion the escrow account shall maintain a minimum balance equal to ten percent of the total value of the same.   So, let us return to our original concerns regarding off-plan purchases - what if the development company never actually existed? Under the New Law this isn't a possibility. The company will need to evidence that it has been incorpo- rated and operational within the industry for a least three years, otherwise it is ineligible for licensing. What if the company decides to abandon the project?  Accurate plans will need to be submitted to the appropriate authorities, construction must commence within six months of approval and interim title deeds will be allocated to the purchaser, alleviating the risk that the project may not be genuine and creating the opportunity for remedy if it is left incomplete. And what if the developer isn't in a position to refund a purchaser's money? Regulations on the withdrawal of funds in the escrow account will ensure that a substantial chunk of the deposited funds remains untouched by the developer until the appropriate time, thus protecting the purchaser's investment.  We can therefore reasonably conclude that, despite still complex due to the rules and regulations involving land owner- ship in Qatar, the risks involved in off-plan purchases may be significantly reduced. It appears as though STA's new Doha office isn't the only insightful development on the 2014 Qatari legal scene…   ]]>
    Wed, 17 Sep 2014 12:00:00 GMT
    <![CDATA[Exploring Africa]]>A LOOK AT EMERGING OPPURTUNITIES IN ETHIOPIA   Barren landscapes. Desert like conditions. Extreme poverty. Owing to extensive media coverage such terms are universally called upon in the characterization of Ethiopia. But pause for one moment here and search online for images of capital city Addis Ababa   Was this what you were expecting? The global revival of the financial market, demand for new investment prospects and the strengthening of the country's economy have, it seems, tipped Ethiopia as an attractive opportunity for foreign investors, and the effects of this have started to become evident. Currently ranking as Africa's ninth largest economy Ethiopia can also consider itself as the continent's fastest-growing, with figures from the IMF and the nation's govern- ment suggesting a growth in GDP of between 5 and 10 percent over the past seven years.   So who are these new investors, and what is it about Ethiopia that has caused it to be highlighted as such a potentially rich market? Heineken, US retailor Brown Shoes and British beverage producers Diageo are amongst the list of commer- cial giants newly established in the region – but why here and why now? Precedents suggest that a country's natural resources, geographical location and state of political and economic security all play a part. Despite the vast size and large population of their mother continent, African nations play a very small part in international trade. There is therefore an obvious physical gap in the market, and the need for a bridge between South America and Europe and Asia. Situated on the eastern Horn of Africa Ethiopia would therefore appear to be an ideal location for an international investor to establish a base. The country is also rich in natural resources, exporting livestock, coffee and gold. Although it may be argued that current provisions are insufficient to sustain a market-dominating industry the development of Dubai has demonstrated that a country's natural resources do not necessarily need to be so extensive as to support the economy  –they simply render the region as an attractive opportunity and highlight its potential. And despite its turbulent political history, when considering the current state of affairs in other African nations, Ethiopia may now be described as comparatively stable. The basic requirements of a sensible location for investment are therefore all present.    Given that the nation is a relatively blank business canvas at present any investor interested in partaking would have a variety of options. The government is actively promoting investment in agriculture – a sensible suggestion when consid- ering that the agricultural industry accounts for 42 percent of Ethiopia's exports and employs 80 percent of its workforce. The obvious risk here is that the nation has found infamy owing to persistent droughts, which dramatically decrease farm production resulting in a significantly reduced GPD and a famished population. Yet securing investment in the agricultural sector may well be a solution with recurring benefits. Despite its reputation for drought Ethiopia is actually known as the "water tower of east Africa" – it has the largest natural water reserves on the continent and is dissected by no less than 14 rivers, including the Nile. A lack of water is not the root issue – the problem is that the country lacks the technology and requisite knowledge that developing an irrigation system would require. Securing investment would allow for such development meaning that the industry could grow to realize its full potential. Indus- tries utilizing the by-products of agriculture, such as leather and textiles, are also tipped for growth. A country expand- ing in terms of economy and commerce will in turn attract further business, and such development will require various infrastructures to cater to demand thus enhancing the construction industry. As commercial activity increases an influx of expats is inevitable. This creates the need for services such as hospitals, educational facilities and general amenities. The tourist industry also looks set to boom, with increased investment in the hospitality sector enticing travelers to the region and boosting the country to the top of the Rough Guide's "must see" list. The options, it seems, are therefore unlimited.   But potential investors, be aware. Entering into any form of business may not be as easy as the simple incorporation process implies. Information suggests that successful investments are usually the projects of the well-connected and well-established within the region, with the descendants of state officials and families held in high regard by society controlling the major entities. Additionally, further to Proclamation number 769 of 2012, investment in some areas – including telecoms, weapon production, large-scale commercial aviation and certain banking ventures - is reserved for state nationals and the government. Before any non-national can even think about investing an investment license from the Ethiopian Investment Agency is required, which must be renewed annually until operations have started, and an updated status report should be submitted every 6 months. Factor in the strict state regulations regarding land ownership and it is perhaps easy to understand why international investors may be deterred.    Despite the fact that convention and practice (rather than law) create awkward hurdles for foreign investors the incorpo- ration process will not be entirely unfamiliar to anyone who has obtained the necessary approvals. Pursuant to the Commercial Code of Ethiopia 1960 and the Ethiopian Investment Laws there are 6 choices of entity - sole proprietor- ships, partnership, general partnerships, limited partnerships, share companies, private limited companies and joint ventures. Obviously the specific registration requirements will depend upon the type of company or investment desired, but in general the relevant application form, copies of the constitutive documents and passport copies will be needed. It is highly recommended that investors appoint a local agent equipped with a power of attorney to assist – sound inside knowledge is invaluable to the process.   Okay, so the preamble might not be as hassle-free as we would like, but that aside let us sum up – here we have a conveniently-located country, rich in natural resources, with a strengthening economy and the potential for incredible growth. The commercial giants have already taken notice – why not join them, investors?   ]]>Tue, 09 Sep 2014 12:00:00 GMT<![CDATA[Private Joint Stock Companies and UAE Law]]>

    Private Joint Stock Companies and UAE Law

    When the weather changes, nobody believes the laws of physics have changed. Similarly, I don't believe that when the stock market goes into terrible gyrations its rules have changed.- Benoit Mandelbrot

    The UAE economy in the wake of the financial crisis continues to inspire positive sentiments amongst investors, entrepreneurs and the residents. It is constantly fuelled by low-interest rates and lucrative investment opportunities which when combined with the willingness of local and international companies to test the waters in the Middle East by establishing in UAE stands testament to its unprecedented growth. The winning bid for Expo 2020 is another witness to the UAE being slated as the desired international business nucleus. In recent years, UAE has observed a rapid appreciation in the real estate sector, locally owned companies being listed on the world's stock exchanges and record breaking deals in retail, investment and banking sector.

     

    In a historic move, equity index compiler Morgan Stanley Capital International upgraded UAE to an emerging market. This move is expected to attract a large institutional portfolio investment in the UAE. A successful privately owned business deems floating shares on the stock market as the most natural way of progression. A number of concerns that surround the process of being listed include but are not limited to the expansive process relating to the Initial Public Offering (IPO) which is followed by a thorough scrutiny of the disclosures and an extensive list of requirements by regulating authorities for each of the exchanges. In the UAE, the current Commercial Companies Law (being Federal Law Number 8 of 1984) the CCL lays down certain precise requirements that have previously deterred investors and their interest in listing their company on a UAE stock exchange.

     

    The year 2013 saw UAE's federal government passing a new draft for the Commercial Companies Law with certain clemencies being awarded towards the requirements for a public joint stock company. The draft of the new law spells out welcome additions to the existing law as it introduces the provision for sale of pre-emptive rights to a third party or an existing shareholder. The new draft also provides for share capital to be in form of authorized and issued share capital. A notable feature of the new draft is the provision of an employee incentive scheme allowing the employees to subscribe to shares of the company. The draft reduced the number of founding partners to five (5) instead of the previously required ten (10). In the same draft though, the minimum capital requirement for a public joint stock company was increased to AED 30 million. That being said, the draft law has not been enacted and remains under consideration.

    In an initiative to relax the present regulations surrounding the Initial Public Offering and listing of companies on the UAE stock exchanges, the regulatory body for Dubai Financial Market and Abu Dhabi, the Securities and Commodities Authority (SCA) has introduced SCA Board of Directors Decree No. 10 of 2014 Concerning the Regulation of Listing and Trading of Shares of Private Joint Stock Companies (the Decision). The Decision is aimed at encouraging Private Shareholding Companies to be list their shares and increase capital injection and shareholder liquidity.

    Pursuant to the Decision, Private Joint Stock Companies can now be listed on a UAE stock exchange subject to fulfillment of the requirements specified under the Decision. A private shareholding company (as defined under the CCL), can now list its shares on the stock market once the board of directors approve the same and the following requirements are met:

    i)                 the share capital of the company is fully paid up;

         ii)                 the company submits audited budget for the last two financial years as per the prescribed international standards;

    iii)               there are at least 30 shareholders at the time of listing; and

    iv)               the shareholder equity is not less than the capital equity.

     

    A Private Joint Stock Company fulfilling the above requirements needs to pay consideration to the legal requirements involved in the listing process. The Decision provides greater flexibility by doing away completely with the IPO process for a Private Joint Stock Company and therefore allowing the shareholders to sell their shares soon after the listing process. However, the legal requirements for listing process need to be met and have not been done away with. These include approval of the SCA, company's constitutive documents to be submitted with an exhaustive detail of company's background and finally with the submission of the prospectus. The disclosure requirements have remained similar with not much altercations.

    The UAE capital markets have recovered marvelously from the dry spell it was experiencing. The onslaught of the third quarter of 2013 saw the markets gain significant momentum. If a report published by an international audit firm is to be believed, the capital raised in the country and the wider MENA region saw the highest levels in 2013 since 2008. With the SCA's Decision to open gates of capital market for private joint stock companies, activities on the UAE stock exchange will captivate interests of locally held private joint stock companies. The further onset of Expo2020 has instilled hopes in many international businesses for further relaxations from the SCA to enable them to list their shares on UAE stock markets, however this remains a point of speculation. 

    ]]>
    Fri, 05 Sep 2014 13:00:00 GMT
    <![CDATA[Fraud and Deceit under the UAE law]]> "Fraud and deceit abound in these days more than in former times"1 

      Lord Coke could have been talking just as easily about the modern day. Hundreds of thousands of people fall victim to fraudulent activities each year. A number of these crimes go unpunished as the brains behind these operations are that of professionals. These crimes are committed with the intention of deceiving another for monetary or personal gain. This article examines the crime of forgery and its implications in our lives.   Forgery is a process of making, changing, or imitating objects, documents, statistics or money with the objective to deceive. Copies and reproduc- tions of products are not considered forgeries. The process of repro- ducing currency is known as counterfeiting. Consumer products are also considered counterfeit when they are not manufactured or produced by the original manufacturer and stamped with the logo of the manufacturer.    According to the UAE Federal Criminal Code, forgery is changing the truth in any original document, logo, stamp, trademark, money, cheque and signature, in civil and commercial transactions. The law stipulates that there are two different types of fraud- criminal and civil. There must be a criminal intention on the part of the person committing the fraud and is punishable by way of fines or imprisonment. On the other hand, civil fraud is most accurately applicable to instances of bad faith and the penalties do not only encompass the punishment of the perpetrator but also to ensure that the victim and his circumstances are restored to the original state before the forgery took place.    UAE Trademarks Law (Federal Law No 37 of 1992 in relation to trademarks); the UAE Commercial Fraud Law (Federal Law No 4 of 1979 preventing fraud and deceit in commercial dealings) and its Executive Regulations (set out in Ministerial Decision No 26 of 1984); and the UAE Civil Code (Federal Law No 5 of 1985 Civil Code of the UAE as amended by Federal Law No 1 of 1987) are legislations under which the aggrieved can seek recourse to rectify the wrongdoings against them. Although forgery and counter- feit are considered offences similar in nature, the laws relating to each are different. Forgery is most commonly prosecuted at the state level though certain types of forgery are deemed felonies under the Federal law.   Some examples of this are identity theft, a form of forgery where a person forges signatures or documents in order to assume the identity of another. This is a felony under Federal law  and is punishable by a fine and up to fifteen years imprisonment. Federal law prohibits other types of forgery, such as counterfeiting money; forging federal documents such as; immigration documents or certificates; or forgery intended to defraud the government. Forgery automatically becomes a federal offence if a forged document is carried or mailed across borders, or if the forgery has been carried out in multiple states.    Forgery and counterfeiting carry similar penalties as the two often cross paths. The penalty for aforementioned crime is dependent on the severity of the crime. A draft law that is yet to be implemented shows the positive steps being taken by the UAE authorities to combat the issues of counterfeiting. This draft law hopes to replace Federal Law. No. 4 of 1979 and aims to protect the consumers and regulate the market in the UAE. A notable facet of the law is that it will align the domestic legislation with that of standards and obligations set out by international treaties. The new law is deemed to complement the existing impositions related to intellectual property rights and particu- larly those related to trademarks. The innumerable international brands with their presence in the UAE are eagerly awaiting the execution of the new law and measure its worth against the current remedies available to them. The UAE awaits the execution of this law with bated breath to determine its immense capability.  ]]>
    Fri, 05 Sep 2014 12:00:00 GMT
    <![CDATA[FAQs on Succession Law ]]> Where There's A Will, There's A Way: 

      "We should not forget that it will be just as important to our descendants to be prosper- ous in their time as it is to us to be prosperous in our time."                                                                                                                                                                                                                                                                                                                                                            Theodore Roosevelt The Islamic laws of inheritance that have been discussed here can be legitimately accommodated and practically implemented within many existing western legislation systems by way of a valid will. In fact for those Muslims living in the west a will becomes an essential necessity to prevent intestate succession law of the land being applied to their estate after they die. The will should comply with the law of the land so that it can be executed after a person's death without any unnecessary legal problems. It is important to note that if the will is desired to be made (in case of expatriates) according to the local laws of UAE then it should be made in accordance to Sharia law and should not be contradictory to any of the principles of Sharia.    Inheritance Planning is a term used for planning the distribution of your worldly possessions after you leave this life behind.. When a person passes away without leaving a will or dies "intestate" as legally mentioned, the property of the deceased is distributed according to the law of the land on personal affairs. In other words, if you do not have a will, you do not have a documented account regulating the distribution of your estate. An "Estate" applies not just to your real estate, but anything of value like money, bank accounts, cars, furniture, books, bonds, investments, jewellery, family inheritances, etc. Your "Last Will & Testament" is a document that details exactly what you would like to do with your estate in the event of your death. The document can cover all aspects of your life, from physical assets such as property, investments or cash to your last wishes.   FAQs   Q.1. Why make a will? What is the necessity and expected risks if there is no will? A will is always important in order to secure the rights over the property by the owner in favour of his/her kith or kins in the event of death. It determines the subsequent owner of your assets and after you – the specified person will take care or become an owner of your assets in the event of your death. It is impor- tant to write a will and eliminate all risks of future dispute or there may be a possibility that the property may confiscate by the government in case of no will. When an expatriate dies in the United Arab Emirates (UAE), banks are instructed by the courts to freeze all transactions on the accounts of the deceased, including joint accounts. Even assets shared between a husband and wife will be frozen until the inheritance is sorted out.  However Sharia law gives preference to settling the liabilities of the deceased prior to distribu- tion of assets, so unfreezing the account & assets can only be carried out by the order of a Sharia Court if it has an attested will. This process aims to safeguard any payments that need to be made after an expatriate dies, such as outstanding loans and debt payments. It is pertinent to note in the absence of will, UAE being a Muslim country, there is a possibility that the property may not go to the person you wished for. The Sharia Law automatically applies to both Muslim and non-Muslim estate holders when they pass away in the UAE.    Q.2. Will the inheritance and intestacy laws of my home country (in case of expats), prevail over the UAE's local processes, which follow the principles of Sharia?   In case a person of any religion dies intestate , the courts may adhere to Sharia laws in regard to inherit- ance of assets and custody of children. Inheritance matters in the UAE are government principally by two Federal Laws: The Personal Affairs Law of No.28 of 2005  allows non-Muslim expats living in the UAE to opt to use the law of their own countries to distribute their assets are in the UAE. This is irrespec- tive of the fact whether or not the non-Muslim expatriate has a legally recognized Will in his/her home country. In other words, the descendants can apply for probate in the home country upon the demise of a family member, which will allow them to distribute the UAE assets in the manner that the deceased person would have wished.    Q.3. Is U.A.E law applicable only to UAE nationals, or to all Muslims, or even to all expatriates irrespec- tive of nationality and religion?    In the absence of will, UAE being a Muslim country, the Sharia Law automatically applies to both Muslim and non-Muslim estate holders when they pass away in the UAE.     Q.4. I am doing business in a partnership in Dubai. I own most of the business save for the amount which must be owned by a local partner as per the provisions of the applicable law. The distribu- tion of profits is provided for in a side agree- ment. I pay  the local partner an annual/lump sum fee  – is he a sleeping partner?  If I die who will be entitled for all my assets and profit sharing in the company?   Business owners have it worse. SME owners and owners of large conglomerates have much more to lose since running a business requires a  substantial base of assets to be built locally and internationally. The absence of proper inheritance planning can bring a family used to a millionaire's lifestyle to  its knees in a matter of days. The distribution of assets and profit shares in  any business following the demise of a member may well be provided for in side agreement, but the fact remains that the death of a partner is likely to raise questions and potentially dispute with regards to business funds. As an expatriate, whether you are employed or a business owner, please take some time off to focus on your own inheritance planning and save your family from the financial grief that is sure to follow should something happen to you in the UAE   Q.5. What type of Will shall I draft and does it need to be notarised and legalised?   The Personal Status Law does not contemplate that a will citing  foreign law or provisions contrary to Sharia could be issued.  Reference is made to Article 1 (2) and Article 424. Therefore there is no such thing as a UAE will.  A will should be drafted in accordance to the law of country of expatriate by the experts, having regard to the gifting problems, tax and other issues. If the writer's jurisdiction of choice requires the will to be notarized or legalized then it is recommended that the writer upholds this provision in the UAE.         ]]>
    Tue, 02 Sep 2014 12:00:00 GMT
    <![CDATA[Arbitration in the UAE Continuing series]]> Throughout the series of Volume I, I have attempted to discuss arbitration at length. The first article gave a broad understanding of arbitration under UAE's legal system and second article explored technical issues relating to nullification of arbitration award and grounds available to challenge the same. In the third article, we examined and discussed the doctrine of separability at length and relied on key precedents passed by courts in the UAE.

      Having discussed arbitration at length, we now examine other forms of dispute resolution. To start with we differentiate between arbitration and reconciliation in the context of UAE law. The primary difference between arbitration and reconciliation is that in case of former, the process is a 'judicial' process where parties to a contract agree to resolve their differences by agree- ment through arbitration. In case of later, the parties agree to resolve their differences through a neutral mediator (and not through arbitrator(s). Reconciliation therefore precedes arbitra- tion and if parties fail to achieve desired outcome, they eventu- ally resort to arbitration.   Speaking of arbitration, parties may choose to approach the courts prior to commencement of arbitration proceedings. In other event parties may directly institute arbitration proceed- ings. In the event where parties refer the dispute to courts prior to commencement of arbitration, Article 213 (1) and Article 213 (2) of the UAE Civil Procedure Code (Federal Law number 11 of 1992, as amended) shall decide on organization of arbitral tribunal and ratification of award. Article 213 (1) and (2) read as under:-   1. "In matters where arbitration is conducted through court, the arbitrator(s) shall, within fifteen (15) days follow- ing the issue of their award, file with the competent court the award together with the original terms of reference, minutes of sessions and documents. They shall also file with the court a copy of the award to be delivered to each of the parties within five days from the date of filing of the original copy thereof. The court clerk shall prepare a report on the said filing to be submitted to the judge or the head of the department, as the case may be, so as a hearing may be convened within fifteen days for the purpose of approving the award. The parties of the dispute shall be notified of the date fixed for the hearing as aforesaid.   2. Where the arbitration is conducted in connection with an appeal suit, the filing shall be made with the court, which has jurisdiction to consider the appeal.   The Dubai Court of Cassation in Appeal (Civil) number 67/2009 and dated 24 May 2009 has held that: "It is a well-known fact that arbitration can be through courts or without court's interference as in case of private and institutional arbitration. In cases where parties choose to approach the courts, arbitration is based on decision of the court and subject to agreement executed by and between the parties. In such event the court will have to take in to consideration Article 213 (1) and Article 213 (2) of the UAE Civil Procedure Code. In cases where parties choose arbitration without interfering the courts, parties must satisfy the conditions set out under Article 213 (3) of the Civil Procedure Code". Article 213 (3) reads as under:-   3. Where arbitration is conducted between the parties to a dispute outside the court, the arbitrators shall provide each party with a copy of their award within five days from the date of the issue of the same. The court shall, at the request of one of the parties filed within the normal course of filing the suit, consider whether the award shall be approved or nullified.   In the previous article, I have clarified the position as to authority of general manager of a company to commence arbitration proceedings. Arbitration must be commenced by persons who are legally entitled and authorized to whether by way of express provision under company's constitutive documents, majority resolution passed in favor of a person in company's general assembly or by a special power of attorney nominating a person and entitling him/her to commence arbitration proceedings. Likewise, the position of arbitrator, his qualifications and experience are equally important.    The Dubai Court of Cassation (Commercial Appeal number 207 of 2009 and dated 19 April 2010) has ruled that arbitra- tor does not gain authority merely because he is appointed pursuant to terms agreed under the arbitration agreement. It is important that arbitrator's appointment must result from true will of parties to agree to arbitration, appointment of arbitration and to abide by arbitration proceedings. In citing the decision, the courts placed reliance on Article 217 of the Civil Procedure Code and ruled that mere appointment of arbitrator pursuant to arbitration clause and /or agreeing to make arbitrator's award final and binding so as to exempt arbitrator from observance of his/her obligations under Civil Procedure Code does not serve the very purpose of arbitration and such awards cannot be deemed valid.    The Dubai Court of Cassation (Commercial Appeal number 180 of 2006) referring to Article 217 (3) of the Civil Procedure Code held that the above article provides that arbitration award of the arbitrators may not be contested by any manner of appeal. It further sets out that if the arbitrators were authorized to reconcile the dispute or if the parties have expressly waived their rights to file an appeal. A bare reading of above Article clearly suggests that if arbitrators have been authorized to effect reconciliation and decide the dispute, the subject matter cannot be appealed. The Courts dismissed the appeal filed on the ground that the appointed arbitrator had necessary powers to effect arbitration and pass an award.   Reconciliation committees formed by federal courts and Chamber of Commerce aim at resolving disputes informally through mediation. These committees attempt to resolve dispute between two or more parties prior to litigation. The objective behind formation of such committees is also to reduce the number of litigation matters and lower the burden of courts. 

     

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    Wed, 23 Jul 2014 12:00:00 GMT
    <![CDATA[Bit Coin Decrypting the Currency]]> In this interesting Article Surbhi questions the legal standing of the cryptocurrency Bitcoin and the challenges it has posed-for both financial institutions and regulators at large.

    Historically, finance has always been international in character; capital has rarely been mobile. Money has moved freely across borders for all of civilization with gold and silver being global currencies for millennia. With passage of time, money has been reverting to its natural state with removal of capital controls and the gradual re-integration of national capital and banking markets but-now on a global scale.

    Rapid advancements in the field of technology, free movement of capital globally, and need to service an increasingly global clientele have created the opportunity for money to have a virtual form. The Bitcoin was introduced in the year 2009 and is the first widely recognized currency that is not issued by a government. Although Bitcoin and other cryptocurrencies represent a future for currency and payments, it has taken time to get integrated within commercial transactions as there are a number of concerns that have been raised about this new form of currency. What is a cryptocurrency has been discussed in greater detail here. In this article, we are going to examine the legal status of this currency and the concerns surrounding its regulation which have prevented it from becoming the currency of the future.

    For the purposes of this article, we will discuss the legal standing of the Bitcoin as it is the center of attention and contention and being the first and largest cryptocurrency.  The government, the tax authorities and legal regulators across the world are attempting to understand the implications of this 'currency' and how it fits within the existing legal and regulatory frameworks. The Bitcoin is legal but its legality depends upon where you live and what you are doing with the Bitcoin.

    A number of countries have restricted the use of Bitcoin and considered it an illegal currency or have taken reasonable steps towards controlling its usage by taxing it as foreign income. Several other sovereign nations have allowed the use of Bitcoin's within their borders as they do not consider it to be legal tender.

    In a recent judgment in the United States, the Internal Revenue Service (IRS) ruled that Bitcoin would attract capital gains tax and would be considered as property for tax purposes as opposed to it being currency. This has clarified the legal standing for the Bitcoin in the US and has given investors peace of mind when investing and reaping profits from Bitcoin as they can now be reported to the IRS for tax purposes. In China the handling of Bitcoin has been banned. Despite cryptocurrencies being legal, it is illegal to purchase goods with any other currency than in Russian ruble in Russia. In Australia, buying or mining Bitcoins is not illegal and the Australian government has welcomed Bitcoin usage and has also released tax guidelines for this currency. There are several countries who have clarified by various legislations the legal standing of the Bitcoin within their jurisdictions. Countries like Brazil, Norway, Finland and Germany have followed the direction taken by the United States and attached capital gains and wealth tax to the Bitcoin again establishing it as an asset or a commodity rather than currency. In Bulgaria it is considered a financial instrument and taxed as thus. The Canadian government has determined that Bitcoin will be heavily regulated by anti-money laundering and counter terrorist financing legislation. Her Majesty's Revenue and Customs (HMRC), UK does not explicitly denounce recognition to Bitcoin as currency but its tax approach treats it as any other form of payment. In the United Kingdom, VAT is due from suppliers of any goods or services who accept Bitcoin for remuneration. In Singapore, Bitcoin is treated not as a currency, but as either a good or asset. When traded for goods, it attracts VAT or Sales tax. If the Bitcoin is being used as an investment asset, there is no tax levied as Singapore does not have capital gains tax.

    Some nations that do not recognize Bitcoin have quoted several reasons for their stand. Most of these relate to tax evasion, unregulated currency, money laundering. The Reserve Bank of India has cited legal, regulatory and operational concerns and maintains that it violates the Foreign Exchange Management Act and restricts the use of Bitcoin as currency. Other Asian countries like Malaysia, Indonesia, Japan, Lebanon and Jordan consider trading and mining of Bitcoin illegal. In UAE, the country's first Bitcoin ATM was established in Dubai. The advocates of the currency in the UAE say that this virtual currency has the potential to enable the city's large migrant population to transfer money home at significantly lower rates than those offered by exchange houses.

    The company that set up this Bitcoin ATM has had no communication from the Central Bank in relation to the regulation of this ATM. It would be interesting to see how the legal regulators will resolve this and the legality of the Bitcoin in the UAE. It is imperative to note that the UAE has no taxation and its financial industry is still in its youth when it comes to regulation of financial transactions.

    The concerns raised by these nations are legitimate and well founded. Silk Road, an anonymous online marketplace which was a platform for nefarious activities and allowing sale of goods and contraband that was illegal in many countries was accepting only one form of currency, Bitcoin. The anonymous nature of Bitcoin means that it is an unregulated potentially dangerous instrument for money laundering. The decentralized nature of the 'currency' means that though governments may regulate its use within its borders, a criminal could advantage from the anonymity of unregulated markets.

    Every great change is preceded by chaos.  The Bitcoin has indeed created a chaos for the financial institutions and its regulators. A few decades ago, when millions of people went online, it was predicted that the internet would collapse. As the regulators and financial pundits unravel the predicaments revolving around the Bitcoin, even if it were to break down, it would not be long till another similar system would come forward.

    ]]>
    Wed, 23 Jul 2014 12:00:00 GMT
    <![CDATA[Crash and Splash]]> 1. What is maritime collision?

    A maritime collision is when there is physical contact between two vessels. This can be classified as one of three categories: i) fault of one vessel, ii) fault of both vessels, and iii) force majeure (event that cannot be controlled by the parties). The Law expressly states that, if a collision arises due to the error of one vessel the same will be solely liable for all and including all damages of cargo, belongings, monies or personal injury. If the collision has been cause by simultaneous negligence of both parties, where they failed to divert their course in due time, it will be considered as a both to blame collision. As a result both parties will be blamed and the liability will be assessed in proportion to the degree of error of each party.

    2. If at the last minute we manage to avoid physical contact but some damages were caused to another vessel?

    The Law states that where there is no collision, however the disrespect for the rules of navigation has been ignored by one or both vessels cause damage to another vessel, the collision rules and regulations shall apply to assess the negligence degree, the fault towards the other vessel. This means that per the Law the collision concept covers not only direct but also indirect collisions.

     

    3. How will the court assess my fault?

    The Maritime Code only imposes liability when there has been fault. It is therefore imperative to investigate whether there has been negligent conduct by one or both vessels and, if fault on both sides is found, the degree of blame will be between the vessels.

     

    4. In case of collision before which court shall I file my claim?

    It depends, as per the maritime code the claimant may file the action before the court where the defendant resides, where the vessel of the defendant is registered or located, where the sister vessel is sequestrated, where security has been offered or in the jurisdiction of the place where the collision occurred, if it took place within the ports, docks, or other domestic waters. However, please be advised that in the absence of any lawful excuse, the claim for compensation shall be filed within two years from the date of the incident collision.

     

    5. Do I as a witness have duty of care towards the vessels involved in the incident?

    Yes, the law states that every master must provide assistance and salvage to the other vessel, its crew/passengers as much as possible to the extent that they do not endanger or expose his own vessel or crew/passengers. If the master of the vessel abstains from providing assistance he can be charged with a sentence of imprisonment for a period not exceeding two years and a fine not exceeding AED 10,000. The operator or the owner of the vessel will be liable for the breach of this duty if the master is acting as per their express orders.

     

    6. Will I be eligible for any compensation for the assistance and salvage?

    Yes. You will have the right to claim for remuneration if you manage to achieve a satisfactory result with your actions, in any case the remuneration may not exceed the value of the salvaged goods. You will not  be entitled to remuneration for the rescue of crew/passengers, however if you do rescue other lives you may have a share of the remuneration granted to the one whom in the same incident assisted the vessel and mange to salvage the vessel; its goods, and or crew/passengers.

     

    7. What is categorized as loss?

    The UAE does not have their own rules to estimate the total value of losses or damages arising from a collision. However, according to international maritime rules and practice, losses sustained by the colliding vessels, damage to cargo or freight, costs and expenses associated with the collision, and their interest should be taken into account for the purpose of compensation.

     

    8. Who evaluates the extent of the collision?

    The provisions of the Maritime Code provide very little guidance concerning the evaluation of fault. However, as a collision is often caused by a vessel violating navigation rules, therefore, the evaluation of fault should be approached in the light of the Regulations for Preventing of Collisions at Sea (the Collision Regulations), adopted by the International Maritime Organization (IMO) in 1972. The Collision Regulations are in place not only to prevent a collision but also to prevent the risk of collision. They regulations were introduced into the national law of all shipping communities in the world and are applicable to all vessels upon the high sea and all waters connected therewith.  In UAE, all vessels, whom navigate in UAE water, must comply with the Collision Regulations. In any case where a master does not comply with the Collision Regulations, the master is liable to pay fine AED 1000.

     

    9. If I dry-dock my vessel who is liable to pay?

    The cost of dry-docking a vessel will be allowed as an element of collision damages, provided that the cause of damage for which the vessel is dry-docked and reasonable necessity of dry-docking is to make the vessel seaworthy proven by evidence. If the collision renders the vessel unseaworthy and requires a dry-docking to restore it back to seaworthiness the expenses and loss of time and loss of opportunity is allocated to the owner and the subsequent parties involved.

     

    10. During the collision there is personal injury to member on the boat, who is liable to pay?

    In the UAE the personal injury or death in a collision case will receive full verifiable damages. Assuming that the incident is both -to-blame collision, each vessel is jointly liable to the claimant. The amount that a vessel owner is obligated to pay death and personal injury claimant is included in the claim against the other vessel. If the amount the claimant receives is reduced because of the claimant's contributory fault, the ship-owner who pays the claim can include only that reduced amount in his claim against the other vessel.

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    Mon, 21 Jul 2014 12:00:00 GMT
    <![CDATA[Color, My Color!]]>

    Tippy tippy tap…what colour are you?

    Feeling blue or are you seeing red because you are turning green with jealousy at the neighbour's new car? Colours are not only used to describe emotions we are feeling but they are imperative in the world we live in. Colours have been known to soothe or irritate, raise blood pressure or even suppress one's appetite. Colours are a compelling form of communication. Universally red means 'stop' and green means 'go' and traffic lights all over the world send this message. We are constantly influenced by colours and it is a fact that they invoke some reaction in our essence and make us like or dislike something or buy or not buy a certain product. It should come as no surprise that colours hold a great importance and have been increasingly used as trademarks in the marketplace.

    The color depletion doctrine- the theory that there are a limited number of colors in the color palette has been used to bar protection of colors. The purpose was to protect against ownership of various colors, that when monopolized, would hinder competition. In 1949, the US court refused to protect the red and white colours of the Campbell Soup's labels stating that it would mean monopolization of the color red. As discussed in our previous issue, colors like smells are not the most simple when it comes to trademarks.

    Historically it has been a complex procedure to protect colours through trademark registration as a colour was not considered to be distinguishing enough but this was rectified in 1994 when an international agreement managed by the World Trade Organisation which set out minimum standards for a number of intellectual property regulation was brought into effect. This agreement is commonly known as the TRIPS agreement (Trade Related Aspects of Intellectual Property Rights) is the most comprehensive international agreement on intellectual property. In recent years every country has delivered its own view and understanding of this international agreement and considered applications for registration of colour trademarks on an individual basis.

    Several considerations are required to be fulfilled before a colour can be registered as a trademark. Some of these are discussed in detail below. Registration of a colour trademark requires a literal description of the colour in a mark unless it is not possible to adequately describe the colour particularly. References to accepted colour definition standards such as the Pantone system are accepted and may be required by a trademark office. In order for it to qualify as a trademark, a colour or the combination of colours must be able to accomplish the goods of the applicant, and must be perceived by the general public as identifying the colour with the goods it is being used on. A single colour will typically lack sufficient uniqueness to be considered registerable but it is possible that it has acquired the distinctiveness through past use. It is simpler for colour combinations as they are likely to be distinctive.  Another consideration that a trademark office will determine is the functionality of the colour. It is essential that the applicant satisfies that condition that the colour being registered as a trademark is not functional or generic for the goods and/or services being provided by the applicant. The applicant must be able to prove that the colour being registered is not needed by competitors who are providing the same goods and services as those of the applicant.

    Determining if sufficient distinctiveness exists for registration will depend on the appearance of a mark, including color.  Let us illustrate this with an example, a square divided into four and coloured with different colours may possess sufficient distinctiveness without a reason to show acquired distinctiveness. On the other hand, the same four colors individually, apart from the square design, would not have the same trademark impact, and would need support from the past use to be registerable.

    In Australia, a specific shade of colour can function as a trademark; however, the process of registration is not easy. You must show that you have used the colour as a trade mark and that the public have come to identify that colour with your particular goods or services. Trade marks for combinations of colours can be easier to register as there may be a less common need for their use.

    In the European Union, it has been stated in the Council regulation's article 4 that a sign capable of being represented graphically, provided that such signs are capable of distinguishing goods or services of one undertaking from those of other undertakings. In 2003, the ECJ repeats the criteria from Sieckmann v German Patent Office (case C-273/00)[3] that graphical representation, preferably means by images, lines or characters, and that the representation must be clear, precise, self-contained, easily accessible, intelligible, durable and objective. This definition generally encompasses colour marks, and therefore an applicant for a CTM or a national trademark in the EC may define their colour trademark using an international colour code such as RAL or Pantone. In most cases, a colour trademark will be registered only after an enhanced distinctiveness through use in the EC has been proved.

    In the United Kingdom, the year 2012 was one of intrinsic value, the High Court of Justice, Court of Chancery held that a colour could be trademarked. Cadbury had applied to register the colour purple which is synonymous with its chocolate in the year 2004. Nestle had objected to this application and the two giants had both taken off their gloves to battle it out in the court. In a historic loss, the Court of Appeal in 2013 refused the registration of the colour purple on the grounds that Nestle had objected to.  Nestle did not challenge the registration;in relation to distinctiveness but contended that, in principle, Cadbury's mark was not a sign capable of being represented graphically, and was therefore not registrable under s 3(1)(a) of the Trade Marks Act 1994. The requirement for graphical representation is to ensure that marks are defined with clarity, precision and objectivity. Moreover, it was Nestle's argument that the uncertainty of the trademark application by Cadbury could lead to market abuse and anti-competitive effects.

    In the United States, the United States Supreme Court held that a colour could be used as a trademark in the case of Qualitex v. Jacobson Products Co. The trademark owner must show that the trademark colour has acquired substantial distinctiveness, and the colour indicates source of the goods to which it is applied. It must be kept in mind that along with proving distinctiveness, graphical representation, the United States Patent Office also requires to prove lack of functionality before considering registration of a color as a trademark. For further information about trademark registration you can visit us at: http://www.stalawfirm.com/public/uploads/downloads/UAE-Intellectual-Property-Law.pdf

    The UAE Trademarks Office accepted and registered for the first time a single colour trademark in the year 2007 for a particular shade of orange used by Mars Incorporated for its Uncle Ben's range of Rice Products. The UAE Federal Trademarks Law defines a 'trademark' as "anything which takes a distinctive form, whether names, words, signatures, letters, figures, drawings, symbols, titles, tax stamps, seals, pictures, inscriptions, advertisements or packs or any other mark or combination thereof." Based on this definition of 'trademarks' and considering that Mars secured trademark registration for the Uncle Ben's orange colour in a number of other jurisdictions, the UAE trademark office followed suit and registered the colour. This made Uncle Ben's orange, UAE's first single colour trademark.

    In Brazil, South Korea, China, Taiwan, Japan and Mexico, the domestic legislation does not allow for single colours to be registered as trademarks.

    Colours are vested in our lives and of inherent value. Scientific research has proven that colours change our temperament. The manufacturers worldwide are huddled to ensure that they can safeguard and protect the colours that the general public has come to identify with their products. There are a number of policy oppositions to the trademark of colours but this is possible.

    ]]>
    Wed, 16 Jul 2014 12:00:00 GMT
    <![CDATA[Sports Law in the UAE]]> What is Sports Law? How does one become a specialist? Jennifer and Rini take us through some interesting aspects relevant to sporting sector.

     

    The dismay of some and relief of others the World Cup 2014 is over, but even though the decorative flags have not yet been taken down and the team kits not yet laundered, preparations for Qatar 2022 are already well underway.

    The decision to award the World Cup to the Gulf state was taken in part as an attempt to develop football and other sports in new areas, on the understanding that none of the 22 Arabic countries had ever hosted the tournament. This is just one example of the way in which the UAE and the wider Gulf region are becoming increasingly popular as sporting venues, with the Abu Dhabi Grand Prix, Dubai Duty Free Tennis Championship and DP World Tour Golf Champion-ship having also been added to the area's sporting calendar over recent years.

    Any emerging industry will, in turn, create a corresponding niche legal practice area, with the sporting sector is proving to be no exception. Both the Court of Arbitration for Sport and Emirates Sports Arbitration Centre (soon to be established) suggest the need for a parallel legal industry to manage the issues which arise within. And, just as we wouldn't necessarily want a professor of nuclear physics to teach us art or have a dentist perform our abdominal surgery, why would we want anyone other than a specialist sports law attorney handling our sporting legal matters?

    This leads to obvious questions – what IS sports law? How do we become specialists? What matters could arise within such a practice area? What makes these issues so niche? Let's break it down:

    1.       First of all, most sporting events require some sort of venue – whether over a huge area such as the Tour de France or within the confines of an arena, every event will have to take place at some physical geographic location. Let's say we are establishing a sports team of some description - our base will need designing, building and maintaining – all of which would surely fit within the remit of construction law. The 2014 Sochi Winter Olympics hit headlines not only for becoming the most expensive Olympic Games in history, but also because of the numerous legal issues encountered during construction of the athletes' village. The complications of obtaining permissions to build on environmentally-rich marshlands, the illegality of the disposal of construction waste in the area and the failure to have works completed by contractual deadlines all required legal attention – but are such matters best dealt with by sports law specialists or by construction and environmental attorneys?

    2.       So our venue has been completed and now requires adequate staying. Despite best intentions every employer will inevitably encounter difficulties in maintaining legal harmony between himself, the company and an employee from time to time. Whether involving a team member or ground staff, it is as likely that employment issues will arise in the sporting industry as in any other business.

    3.       For example, footballer Luis Suarez reportedly threatened legal action when Liverpool FC refused to sell him to Arsenal, despite the fact that a GBP 40 million release clause in his contract had been triggered by way of Arsenal's bid. The most obvious starting point for any resolution would be to refer to the relevant employment contract and the governing law – again, do we need to be industry-specific specialists in order to do this? Or would a diligent and experienced employment lawyer provide an equally effective service?

    4.       Our venue is complete and fully-staffed, and our team is ready to play. Already we are attracting a fan base, and people want to see our team in action. Although we can easily sell tickets we must remember that the sale and purchase of any item, tangible or otherwise, by definition forms a contract between the seller and the buyer. What if any disputes arise here? What if a buyer feels as though the seller has fallen short and not provided the advertised product? What if the seller considers the buyer to have breached the terms and conditions of the sale? Breach of contract is a matter in which we are all well-practiced – we wouldn't look to appoint a maritime expert just because we were arrested for unacceptable behavior in a dock yard, so why would we need a specialist sports lawyer just because the breach of contract occurred in relation to match tickets?

    5.       Not everyone can make it to the game, so in the interests of our fans at home and in attempt to increase revenue we choose to air our event on television. This paves the way to a multitude of complications. For example, European rugby encountered difficulties earlier this year when English and French clubs threatened to withdraw from the Heineken Cup competition owing the way in which broadcasting rights were distributed. Although such a dispute is arguably specialist, it would seem as though a knowledge of media law would be more relevant than sporting law here.

    6.       Our team are playing fantastically and are attracting the attention of the media, a wider fan base is forming and our business strategies have been effective. The team and club are no longer just sporting entities - they have become a brand, and we therefore need to take legal steps to protect our intellectual property and trademarks. The nature of the client's business is surely irrelevant – a good IP lawyer will be able to safeguard our rights regardless of the industry.

    7.       So now we have become firmly established and our team and associated business look set to thrive indefinitely. However, as in any environment, any number of things could still go wrong and we could find ourselves involved in litigation. Even then, would we require the services of a sports attorney? When footballer John Terry found himself subject to criminal prosecution in 2012 he was represented not by a sports lawyer, but by criminal defence specialist George Carter-Stephenson QC. Likewise the legal team dealing with the continuing repercussions of the 1989 Hillsborough disaster consists of lawyers and experts from a variety of legal backgrounds, with the very vast majority having little to no previous dealings with sporting matters.

    It therefore appears as though a large amount of the legal work generated by the sporting industry is already catered for – a reputable full-service law firm could arguably deal with any matters which may arise regarding construction, employment, general contract, IP and resulting litigation. So with that in mind, does the region really need to develop a niche practice area in order to maintain the growing industry? Or can we conclude that we are reasonably well-equipped to support it already?

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    Wed, 16 Jul 2014 12:00:00 GMT
    <![CDATA[Agency Law in Qatar]]>

    As STA continues to explore and diversify its presence in newer juris-dictions, our attorneys continue to be committed in providing bespoke legal advice. Jennifer Leader discusses the Agency Law of Qatar and provides significant insights for both - agents, and investors

    Fortunately, STA Law Firm is home to creative, forward-thinking lawyers able to produce insightful and imaginative articles on a variety of current legal issues. If this was not the case then the task of producing this newsletter would perhaps be outsourced to an agent. If this agent (writing under the name of STA) reproduced copyrighted material and the owner of the copyright came to realize this, who would be a party to any consequential litigation? STA, the agent or both? If the owner litigated against STA, could STA commence parallel proceedings against the agent? The term agent in this paragraph bears a broader connotation compared to term agent under agency law which is explained in the ensuing paragraph(s).

    Let us place this into the specific commercial framework of agency law itself. In this context an agent is an entity approved and authorized to market and/or distribute goods or services in name of and on behalf of another in return for commission, as agreed under an agency agreement. For instance, Company X, a reputed group in the state of Qatar, may be appointed as agent to sell cars produced by a German car manufacturer, Company Y. The relationship between Company X and Company Y will be governed under an agency agreement providing for the rights and obligations of each of the parties, and will also specify the jurisdiction for the settlement of disputes or differences that may arise (by default the jurisdiction will be the Qatari courts, unless the parties to the agreement have specifically agreed otherwise as per Article 23 of Federal Law number 8 of 2002).

    In Qatar any commercial agency agreement is subject to Qatari Federal Laws number 8 of 2002 (the Commercial Agents Law), 27 of 2006 (the Commercial Law) and Civil Law Number 22 of 2004. Unlike in many other jurisdictions, the legislation and codes of Qatar allocate rights to both the agent and the principal company. An agency agreement – specifically, an agreement that Company X (an Agent) provides goods or services on behalf of Company Y (a Principal) - must be formally registered with the Ministry of Business and Trade and renewed every 2 years thereafter. On registration the agreement has the effect that Company X appropriates exclusive rights over the goods or services specified therein. In addition to this, Company X is automatically granted a legal right to 5% commission of the total value of the goods or service received as per Article 5 of the Commercial Agents Law.

    Evidently, such a provision is advantageous to Company X as it demands a statutory minimum payment guaranteeing at least some recourse in the event that the Company Y fails to make any payments specified in the agency agreement. However the Qatari law – specifically the Commercial Agents Law - goes even further and allows for Company X to claim additional compensation under Article 9(c) should the agency relationship be terminated. This applies in all circumstances in which the Agent is able to evidence that it has played a significant role in promoting the Principal's goods or services and in expanding its client base, and shall be subject to the provision that the Principal was the terminating party and the absence of any other compensation paid by the Principal to the Agent.

    It seems then as though the Agent may enjoy a relatively well-protected position. However the law imposes several obligations upon an Agent, some of which result in criminal sanctions should the Agent not comply. For example, it is the responsibility of the Agent to apply to deregister his name at the Ministry of Business and Trade upon the termination of the agreement – an obligation which must be fulfilled within 30 days of termination regardless of any outstanding issues or pending claims against the Principal as per Article 20 of the Commercial Agents Law. Article 21 imposes a penalty of a QAR 10,000 fine, six months imprisonment or both in the event of non-compliance. Moreover it is the responsibility of the Agent to ensure that it is solely licensed to distribute the goods or service in question in Qatar for any consideration. This includes the registration of a commercial presence within the region and the maintenance of the appropriate customs license (or the retaining of a party who meets these requirements).

    So how does the law effect Company Y? Agency law by no means requires that the provision of goods and services is channeled through agents only, and Company Y is free to trade directly in the market should it so choose. However the option of trading directly in addition to via an Agent shall be limited depending on the type of agency agreement registered – different rules apply to the various categories, which are contract agencies, distribution contract agencies, commission agents, and commercial/sales representatives. A Principal wishing to conduct direct trade AND appoint an agent would therefore need to check the restrictions before selecting the category of agency agreement.

    The combination of provisions discussed so far leads to an obvious question – what if Company Y wishes to enlist the services of an Agent, but does not want to limit the distribution of its products or services to Company X alone? Again, this is an objective which is catered for by Qatar's distinction between different categories of agency agreements. Although it is a necessary criteria for some categories that the Agent is exclusively appointed, the employment of a commercial/sales representative will grant Company Y exemption from not only the exclusivity requirement but also from provisions of the Commercial Law in general. However in seeking immunity Company Y should proceed with caution – avoiding exclusivity alone is not a sufficient ground for exemption.

    Despite a ruling from the Court of Cassation in 2009 holding that an agreement must contain three main elements in order to be considered as a valid commercial agency agreement (namely the scope of the agency, exclusivity and remuneration), a further Court of Cassation decision from 2013 contrarily rules that an agency agreement may still be deemed to exist regardless of the absence of one of these characteristics, consequently rendering it susceptible to the Commercial Law.

    Despite the remedies available to an Agent further to termination the law does allow the Principal to end the agreement when the objectives contained within the same have been fulfilled. However the fact that the Principal is provided with no grounds on which to terminate following default on non-performance by the Agent again tilts the scale in favour of the Agent. Moreover, the de-registration of the Agent by the Principal ventures into extremely difficult territory. The contractual condition that the Agent provides the Principal with a notarized power of attorney specifically for this purpose at the time of execution will not overcome this problem as the Ministry is unlikely to accept it in anticipation of the deregistration of non-consenting Agents.

    The benefits of an agency agreement to the Principal hardly need emphasizing: the utilization of a wider distribution network, enhanced marketing and the outsourcing of time-consuming sales responsibilities to name a few. However, it appears as though Qatar in particular takes measures to ensure that rights and protection are also afforded to the Agent. Agency agreements may therefore present as an attractive option to a foreign company wishing to increase its revenue and enrich its commercial presence in the region, safe in the knowledge that its rights shall be safeguarded by law.

    But here's the final blow, dealt by legislators anticipating a loss of commerce to local citizens under Article 11(1) of the Commercial Agents Law only a Qatari national or company owned 100% by the same may register as an Agent.

    The aforementioned legislation may therefore take steps to address the imbalance between the interests of contractual parties, but it seems as though there is still some way to go before the same can be said of national and foreigner's rights.

    Maybe one day, foreign investors!

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    Wed, 09 Jul 2014 12:00:00 GMT
    <![CDATA[SHERLOCK HOLMES OF TODAY]]> Role of Forensics In Criminal Investigation in the UAE

    "Fingerprints cannot lie, but liars can make fingerprints. Jekyll's finger patterns remain the same when he transforms himself into Hyde."

                                                                                                                                                                                    Henry Faulds

    The unconscious human will step, touch and leave a witness behind. This is the evidence that cannot be dismissed, cannot perjure itself or be swayed by emotions. Changes in forensic science have impacted not only the way forensic science results affect case resolution, but what type of evidence can be analyzed from crime scene. For example, changes in DNA technology have allowed analysis of smaller samples and degraded samples i.e., cigarette butts or sweat from a tee-shirt that otherwise might have been ignored. Because of the increased sensitivity of DNA analysis, Police Officer and Crime Scene Investigators must be aware of the potential for cross contamination adopt clean techniques when collecting and handling evidence.

    Forensic science is a union of principles of science and those of law. Forensic professionals employ the strength of their scientific backgrounds to enable law enforcement to solve crimes. In the year 2012, the Department of Criminal Evidence and Criminology, United Arab Emirates had delved into 8,817 cases of the highest importance and collected the tiniest clues that could make or break a case when it lands in the court. In the United Arab Emirates department has grown leaps and bounds and now is of intrinsic value for achieving justice.

    In comparison to physical evidence forensic science is almost never wrong and will always stand strong in the face of a perpetrator. It is factual evidence that cannot be refuted and only diminishes in value at a human failure of discovering, studying and understanding it. The forensic evidence is one of the departments of scientific importance in achieving justice through the establishment of physical evidence that raise from the scene as tracers that are dealt with in the laboratory to convert it to physical evidence of benefit in denial or proof considering that criminal evidence is the main fundamental proof for issues at the police or the Bureau of Investigation and Prosecution public and judicial authorities and the courts according to the crime scene. In addition all competent authorities benefit from the expertise of forensic science to clarify the facts as well as its role in the registration criminal records on its committers.

    Forensic linguistics, legal linguistics is the application of linguistic knowledge, methods and insights to the forecnsic law, language, crime investigation, trial and judicial procedure. There are three areas of application for linguists working in forensic contexts. They are as follows:

    1)      Understanding language of the written law;

    2)      Understanding language used in forensic and judicial processes; and

    3)      The provision of linguistic evidence.

    The area of forensic linguistics involves a wide range of experts and researches in different parts of the field. Forensic linguistics is diverse and occurs in the following areas: emergency calls, ransom demands or other threat communications, suicide letters and death row statements.

    One of the principles that governs criminal proof in the UAE is that the Criminal judge has full freedom in considering any evidence it deems appropriate as per the principle of "freedom of the judge's criminal conviction," the court can mull over all perspectives that lead to convicting a criminal.  In addition, the Code of the Federal Criminal Procedure confirmed the previous principle by stating that: "The court may order on its own during the hearing of the case to request or demand any evidence that it deems necessary to establish the truth."

    In a recent case before the Dubai prosecution, forensics played a significant role in attaining a guilty conviction for a stepmother who was accused of assaulting her four year old stepdaughter and causing her death. The stepmother told the court that the girl had fallen off her bicycle which had resulted in her death but forensics told a different story. The verdict is up for an appeal but the court of first instance has found the woman guilty and sentenced her to ten years in prison followed by deportation.

    Furthermore the experienced scientific discoveries continue to serve as a revolution in the field of criminal investigation, including the division of forensic evidence and denials. This division is important for forensic specialist, as well as the investigator and they are divided into two parts in this account evidence to prove and evidence to deny.  For the purposes of evidence of Proof, it has to be a strong and conclusive and one of its characteristics is that they need to be direct evidence, it is their strength that proves the responsibility of the accused for the crime in crime cases, for instance, if we found a weapon, which proved to be the murder weapon (DNA) samples in the possession of the accused, it is the evidence of his conviction. Likewise in exculpatory evidences, it proves denial of the conviction of the accused, and may be used in mitigating the sentence if the evidences weren't that strong. One of the clearest examples is the blood type, and is more than the former evidence as an evidence of denial however not suitable to become the evidence of proof.

    The rapid advancement in technology has left no stone unturned, however there are limitations. The forensic science also needs appropriate strategies to manage the workloads and the probity and analyses of the evidences to the satisfaction of the public. In the most situations investigative question have a direct impact regarding which evidence is analyzed and in what priority. Therefore it can be concluded that in addition to increase resources, such technological advancements are needed before the role of forensic science can be effectively moved from the "end" to the "front" of the investigative process in the criminal justice system.

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    Tue, 08 Jul 2014 12:00:00 GMT
    <![CDATA[Offenses Against the Family]]> The enactment of penal laws requires an initial policy determination as to (1) those social and individual interests which should be protected by the criminal processes and (2) the kinds of conduct that should be proscribed

    [i]. In determining whether criminal sanction should be imposed on accused, the courts take in to account several factors including the intention of the accused, willfulness, circumstantial evidence, and witness testimony to name a few. My research on prevailing criminal laws of both – developing as well as developed nations seems to suggest that new forms of crime are on the rise and the courts continue to apply the guilty mind (or, mens rea) test to establish the criminal intent. Whilst crimes such as white collar crimes, information technology related crimes are on rise, one area of criminal law that has failed to gain the much needed importance is the offenses against the family.

    In the present article, I discuss the law relating to family offenses in the United Arab Emirates. It was the intention of UAE's legislature to protect interests of family from crimes affecting the families given that these crimes have a long-bearing effect on families in general and communities at large. The above assertion is based on the fact that although a crime may be committed against victim, it is essentially a crime against the community whose law is violated. Part 6 (Article 327 to Article 330) of the UAE Penal Code (Federal Law Number (3) of 1987, as amended) (the Law) dealing with family related offenses is discussed below:-

    Article 327 of the Law aims at protecting interests of families as well legal guardians of a newborn child. It is provided that i) abduction of newborn children from his or her legitimate guardian; ii) concealing a newborn from his/her legitimate guardian; iii) substituting a newborn child with other; or iv) falsely handing over a newborn to persons other than newborn's legitimate parents will result in imprisonment. Accordingly, the above Article requires involvement of two physical acts – a) it involves a newborn; and b) taking the newborn away from legal custody of its parents or legal guardian making it difficult to recognize the newborn in future.  In the event there is evidence to prove that the said child was born dead, the offender will be subject to a two months imprisonment or a fine of up to 1000 Dirhams, or both.

    Cases where guardian of a child abstains or refuses to deliver the child to persons legally entitled to the child's custody pursuant to a court order is discussed under Article 328 of the Law. Guardian's failure to restore custody to persons legally entitled may result in such guardian's imprisonment or fine. The degree of punishment falls in the present case and the main reason underlying lower punishment appears to result from the fact that a guardian has fiduciary duty towards the child and in his capacity the guardian has the choice to raise the child as long as the guardian agrees to handover child's custody to his legitimate parent or guardian as per court order or certificate from relevant authority.

    Disputes relating to child custody generally fall within the jurisdiction of the personal affairs court, but matters bearing criminal overtone may be referred to the court of misdemeanors provided however that the claimant holds an enforceable judgment to claim legal custody of the child.

    Abduction of minors by parents or grandparents with or without deceptive intent or coercion will result in imprisonment or fine per provisions of Article 329 of the law. In other words, if a parent or grand-parent abducts child or grandchild personally or through others from persons legally entitled to be guardian of the child pursuant to a court order or by a competent authority, such parent or grand-parent will be subject to above punishment. This means that the intention of kidnapper is to bring an end to the legal relationship existing between the child and his/her legal guardian.

    Finally, Article 330 deals with situations where persons against whom a judgment towards payment of maintenance or alimony has been pronounced and such persons fail to comply with the terms of said judgment within three months from the date of notice being served. This Article punishes the offender with imprisonment not exceeding one year or fine of AED 1000/- or; both. In the event the offender settles the amount due against him or produces guarantee that is satisfactory to the complainant, the penalty provisions shall not apply to the offender.

    An analysis of Article 330 suggests that these four elements must be involved to constitute a crime:-

    a.   The complainant must have an enforceable judgment for alimony or maintenance;
    b.   The offender must refuse payment to complainant after a three month warning/notice;
    c.   Victim must register a complaint; and
    d.  The parties must have submitted a claim before personal status court and exhausted all procedures set forth        by the law.

    Before I conclude, it is worth mentioning that except for provisions contained in Article 327, the complainants must register a complaint consistent with Article 10 of the UAE Criminal Procedures Code (35 of 1992) which sets out that criminal action must be based on an written or oral complaint by the victim or his/her legal representative and within three months from the date of event in matters relating to a) refusal to handover the custody of children to their legally entitled guardians; and b) refusal of payment of alimony, maintenance, or housing allowance to wife  or person named under court order.

     

    ]]>
    Mon, 26 May 2014 12:00:00 GMT
    <![CDATA[Shipping and Maritime Laws (Part 1)]]>

    Introduction

    Travel and transport by the sea is the earliest recorded channels of commerce. Dispute resolution that involved maritime trade was developed much earlier in history than any other. Maritime law has undergone significant transformations since then. Though each nation has its own legislation governing maritime matters, it is imperative to note that a considerable part of this field of law is influenced by international law which includes multiparty international treaties.

    I intend to start a maritime business venture and plan on buying new ships. How do I go about the registration process?

    The UAE Maritime Trade Law (Federal Law Number 26 of 1981, as amended) (the Law) regulates all shipping practices within the United Arab Emirates. The Law prohibits ships to fly the flag of the UAE unless such ship satisfies the conditions imposed under Article 18 to Article 37. That said, certain categories of ships are exempted from registration procedures. Pursuant to Ministry of Communications Decree number 110 of 1998, foreign vessels that are more than 20 years old from date of construction are prohibited to operate on UAE territorial waters. Both national and foreign vessels must have a general and valid insurance policy to classify for operation in UAE. The Marine Affairs Department at Ministry of Communication oversees the registration process and affairs related to maritime industry. Fishing ships, pleasure liners, or commercial ships that weigh less than 10 tons are exempted from register. Also, vessels, barges, lighters, tugs, boats, cranes, diver's boats, freighters and other floating installations within UAE's ports are also exempt from registration. Tankers that are over ten years old cannot be registered.

    Article 27 of the Law sets out the registration procedure and requires every applicant to submit a)name of the ship; b) former names of ship (if any); c) date and place of building, name and address of factory or shipyard where the ship was built; type of ship, loading capacity and related measurements, d) names of owners, their occupation, religion, nationality, and address, e) name of owning company, company's business activity, its headquarters, details of management, f) name of ship master, his nationality, residence and qualifications, g) name of carrier and related details, h) mortgage details, etc.

    In a recent decision by the executive council resolution number 11 of 2013 issuing the implementing bylaw of law number 11 of 2010 concerning the licensing of vessels in the Emirate of Dubai, the role of Dubai Maritime City Authority has been strengthened, allowing it to set out licensing framework for vessels operating within the territorial waters of Emirate of Dubai. The decision also encompasses matters relating to transfer of vessel ownership, amendment of license, license cancellation, loss or damage, etc.

    And will my vessel automatically acquire UAE nationality?

    In line with provisions contained in Article 14 of the Law, a ship acquires UAE nationality if it is registered within UAE's ports or is owned by individuals or a company possessing the said nationality. As long as corporate entities maintain the respective shareholding structure set out under UAE Commercial Companies Law (Federal Law number 8 of 1984, as amended), ships registered under such entities can acquire UAE nationality. In cases where ship is owned by a body corporate wherein more than one state has shares in company's capital, the ship in such event acquires nationality of partner states in accordance with the international treaties. Ships that have been confiscated for breach of law and stray ships will automatically acquire nationality.

    What employment laws will regulate my crew?

    Article 165 of the Law sets out that "the rights and obligations of the crew shall be defined in the bylaws in force on the vessel, in such a manner as is not contradictory with the contracts of employment made therewith". With the exception of overtime provisions, UAE Labour Law (Federal Law number 8 of 1980) governs employment aspects.

    And the master? Who can appoint and dismiss him? What are his powers and obligations?

    The master shall be appointed or dismissed by the operator. The Law sets out that the master shall be solely in command of the vessel comply with the directions of the operator, and direct the sea voyage. When in command of the vessel the law provides that the master shall take into account technical principles accepted in navigation by sea and international conventions, and the provisions in force in the State in whose waters the vessel is located. The master also must maintain the vessel in seaworthy condition and ensure that there are sufficient supplies for the voyage. The master must personally take over the direction of the sailing of the vessel upon the entry or exit of ports, anchorages or rivers, and generally in all circumstances where navigation is subject to particular difficulties, even where he is required to seek the assistance of a pilot. The master also shall have the power of authentication of documents and carry out all the administrative questions on board the vessel and is also entitled to impose disciplinary penalties in accordance with the rules and conditions set forth by ministerial resolution.

    What are my rights and duties if I sign a maritime transport contract?

    A contract of maritime transport is a contract whereby the carrier undertakes to carry goods from one port to another for consideration agreed between the carrier and the shipper. The same must be evidenced by a bill of lading and the carrier of his representative must issue a bill of lading upon the request of the shipper. The bill of lading must set out relevant details as to the contract including but not limited to the name and address of the carrier, the shipper and consigner, port of loading and port of arrival, place of issue and date of the bill.

    What happens in case of accidents or collision?

    Article 318 to Article 326 of the Law regulate and cover aspect pertaining to accidents or collisions. The UAE Civil Code also covers matters relating to collision. This question however will be discussed in a greater detail in my next article.

    The UAE Maritime Code provides that in case of collision between maritime vessels, or between such vessels and boats navigating in the domestic waters, compensation due for damages incurred shall be settled in accordance with the provisions set in the same Code, without regard to the legal system of the water where the collision occurs. 

    What happens if one of my sailors get injured during the course of the voyage?

    If one sailor is injured or contracts any illness while in service, the operator must provide treatment, free of charge, and will be entitled to his full wage during the voyage, being the Labour laws on the matter applicable after its end.

    Even if he was drunk and entered into a fight with another sailor during the voyage?

    If the sailor got injured because of the fight, the operator must provide treatment, having the latter the right to deduct the costs of the treatment from the wages owed to the sailor. If he doesn't get better, he won't be entitled to any other wages but the days already worked. If he dies, the operator must pay his funeral costs regardless of the cause of death.

    And which criminal law will be applicable?

    The UAE Penal Code, as per its article 17, second paragraph, states that it shall apply also to the commercial ships and aircrafts bearing the state flag.

    Is there in UAE any special maritime court? To which Court shall I apply if I have any problem?

    No, there is no Maritime Court in UAE. Actually the Courts are handling all the maritime cases. Generally the Courts ask assistance from experts in maritime disputes.

    ]]>
    Thu, 22 May 2014 12:00:00 GMT
    <![CDATA[Don’t Steal my Smell]]> What's in a smell? Smell is one of the five senses. Human mind reacts differently to smells. Smell is abstract and is often linked to abstract events such as smell of success or smelling a rat. 'Would a rose by any other name really smell as sweet?' - Shakespeare's Romeo & Juliet (2:2)

    Speaking of smells, a new invention surrounding smell was announced very recently. Developed by a team from University of Bristol's Department of Computer Science, a multi-sensory display system called 'SensaBubble' has been invented that generates scented bubbles to deliver information to different people using different senses. A new patent by PepsiCo (Publication number WO2013032631 A1, March 7 2013) cites a capsule encapsulating aroma to make Pepsi product smell as invigorating as drinking it.

    The continued development in field of science and bio-technology will unveil more inventions involving smell in the near future but a question that arises is whether smells can be protected. In other words, will laws and regulations keep pace with continuing development in the field of science and technology?

    Intellectual property laws aim at dealing with technological innovations and to try and protect as much as possible the creation and the economic interests that are usually raised with such inventions. Accordingly, intellectual property laws offer three principle protections – patents for inventions, trademarks for signs that are capable of being represented graphically, and copyrights – for protection of literary, artistic and scientific works. The UAE law covers protection of sound and motion pictures under the copyright law (Law number 7 of 2002, as amended) but it is not currently possible to register smell under UAE's intellectual property law. A unified GCC trademark law is on its way and Bahrain has recently approved and adopted the same in February 2014. Further regulations are awaited and although UAE has approved the unified GCC law, this law is yet to be implemented. That said, UAE is house to thousands of five star hotel properties, home to world's best brands and an increasing number of firms in perfume and fragrance industry that cater to local as well as international markets. Although the current position under UAE law is clear from above, these firms may be interested in registering their perfumes or fragrances in overseas markets and if so, a question arises as to whether these perfumes or fragrances can be registered as trademark, patent or copyright and secondly jurisdictions that afford such a protection.

    Starting on with trademarks, lets understand whether and which jurisdictions consider a) smells to be registered as trademarks; and b) precise requirements imposed under laws of respective countries. In essence, conventional trademarks provide protection to logos, words, or graphical designs applied to goods or packages. However, non-conventional trademarks may consist of color, scents, sounds, tastes, touch, or motion to name a few. Smell marks are often referred to as olfactory marks.

    The term 'olfactory' traces its origin from medical science. Roof of each nostril is termed as nasal mucosa, a region that contains sensory epithelium called olfactory epithelium. The epithelium houses epithelial cell in form of pigment that absorbs radiations such as infrared and receptor cells that possess a knob above epithelial surface, from which extend 8-20 olfactory cilia. These cilia contain smell receptors.

    Contrary to what would be expected, the registration of olfactory mark has not really achieved the desired success. One argument that can be levelled against smell marks is that temperature, humidity levels, and wind conditions can greatly affect both potency of a scent and the scent itself. Several attempts have been made in past to record these marks at international level but the success rate has been relatively low. In the United Kingdom, the paradigmatic examples are "floral fragrance/smell reminiscent of roses as applied to tyres (no. 2001416) and the strong smell of bitter beer applied to flights for darts (no. 2000234). "Both registrations were applied for on 31 October 1994 (the first day of the coming into force of the 1994 Trade Marks Act), and as such, would possibly have been the first marks of this type encountered by the Registrar ", these marks remained active at least until 2012.

    Australia's trademark law defines trademark as 'A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person ...' Section 6 of the law clarifies that sign includes the following or any combination of the following, namely, any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, color, sound or scent. Accordingly, Mr. Cee of JKL Perfumes in UAE can in fact register a scent mark in Australia. The trademark application must include a graphical representation of the scent mark. This could be by way of a verbal description of the scent such as "the scent of pine". Mr. Cee in the present case however cannot register these scents if they are i) natural scents; ii) masking scents; iii) scents which are common to trade; etc. Examples include vanilla, chocolate, eucalyptus, and scent of lemon.

    Canada's Federal Government recently introduced Bill C-31 cited as Economic Action Plan Act 2014 on 28 March 2014. Bill C-31 seeks to amend nearly 40 different statutes. Prior to Bill C-31, Canada had proposed Bill-8 and Bill-56 on 1 March 2013 'Combating Counterfeit Products Act'. Bill C-31 amends definitions of trademark to now include scent, sound, taste and texture. Mr. Cee just got lucky!

    Interestingly, the word Hong Kong means 'fragrant harbor'. Hong Kong Trademark Ordinance (Chapter 559) allows registration of smell marks. In fact, the Intellectual Property Department of Hong Kong has on numerous instances encouraged firms to register smell marks. Smell marks may be described in the form "the scent of newly mown grass".

    South Africa's Companies and Intellectual Property Registration Office (the CIPRO) in 2009 issued guidelines with regard to registration of non-traditional trademarks (Patent Journal number 2, Volume 42, February 2009). These guidelines provide clarity on procedures to be followed in registration of non-traditional trademarks. Although, South African Trademark Act (Law 194 of 1993) can be interpreted to be somewhat restrictive when considering registration of these marks, it does not prohibit their registration.

    Morocco's trademark law permits registration of smell marks pursuant to Article 133 contained in Title V of Industrial Property Law number 17-97 of 2000. It is likely that Thailand may consider registration of smell marks however further regulations are awaited in this regard.

    Other jurisdictions where registration of smell marks is possible under the respective jurisdiction's trademark law include New Zealand (section 5 (1) of Trademarks Act of 2002, see smells) although registration of smell marks poses practical problems due to the graphical representation requirement, Singapore (the Singapore Trademarks Act 1998 does not define what is a registrable trademark but instead sets out situations in which application will be refused), Korea (Article 2 (1) (C) of the Trademarks Act makes reference to odor as eligible mark for registration), Taiwan (Article 18, Section I, Chapter 2). Decision 486 of the Common Intellectual Property Regime (the Communitarian Law) is applicable to Andean Communities that include Peru, Columbia, Ecuador and Bolivia. Article 134 (c) recognizes smells and sounds as registrable trademarks. Pepsico's example above confirms registration of smell marks in the United States. Part II of this article will explore other interesting aspects surrounding intellectual property. Until then, Mr. Cee can start on building his smell mark portfolio across the globe.

    ]]>
    Wed, 21 May 2014 12:00:00 GMT
    <![CDATA[Malta Individual Investor Programme]]>

    The new Malta Individual Investor Programme is an attractive proposition for wealthy non-EU citizens who wish to benefit from citizenship in Malta, a highly respected, stable and neutral EU Member State. EU citizenship confers a number of important rights, including the right to move freely in all 28 EU countries.

    The Individual Investor Programme provides for the granting of citizenship of Malta by a certificate of naturalisation to foreign individuals and their families who contribute to the economic development of Malta. Applicants must make a significant contribution to the National Development and Social Fund established by the Government and hold residence status in Malta for a period of twelve months immediately prior to the issuing of the certificate of naturalisation. There is also a strict due diligence process to ensure that only highly reputable applicants are admitted.

    The minimum contribution levels that must be met to qualify under the Programme have been set as follows:

    • Contribution to National Development and Social Fund of €650,000 for the main applicant
    • Contribution for spouse and minor children (if applicable): €25,000 each
    • Contribution for dependent children 18 to 26 years or dependent parents over 55 years (if applicable): €50,000    each

    The applicant must also commit to retain a residential property in Malta for a period of at least 5 years, either through the purchase of property, for which the minimum value must be at least €350,000 or through leasing a property for which the minimum annual rent must be at least €16,000.

    There is also a requirement to invest a minimum of €150,000 in Government approved financial instruments, which must also be maintained for a minimum period of 5 years.

    For further information about Malta's Individual Investor Programme and how we can be of assistance to you through contact our Immigration Practice Group today.

     

    ]]>
    Wed, 21 May 2014 12:00:00 GMT
    <![CDATA[Ijarah and Arbitration]]>

    Questions that are generally debated these days within business and legal diasporas pertain to the recession aftermath. These questions seek to inquire matters such as i) what led to the recession, ii) could it have been prevented and; iii) what do we learn from this precedent? For instance, let us consider the case of Royal Bank of Scotland. The bank's market valuations soared to extreme high levels until 2008 making it a global banking powerhouse. The 2008 crisis however changed the bank's financial position leading it to collapse in the arms of the British state for a high price of USD 32 billion. Economists and experts speculated and continue to comment that this event has marked the biggest failure in UK's banking sector.

    Many of the property investors in today's market turn to a bank to avail mortgage facility. The cumbersome administrative policies of banks backed with detailed AML and KYC policies leave investors with very little time to carefully read through the fine print in mortgage contracts and understand the implications that may arise. In this article we examine the implications arising out of a commonly used financing module referred to as 'ijara' within the Islamic finance domain.

    The banking sector operates across several verticals, one such vertical being Islamic finance. The products offered under Islamic finance are designed or structured under the fabric of Sharia Law. Sharia is not a codified law but inspired by religious teachings and the holy book, the Quran.

     On a more specific note, ijara by way of an explanation means lease, rent or wage. The concept of ijara refers to selling the benefit of use or service for a fixed price or wage. Pursuant to this form of an arrangement, bank makes available to its customer the use or occupation of assets (purchased by customer and financed by bank) for a fixed period and price.

    Within the United Arab Emirates, 'ijara' has been linked to real property transactions whereby banks enter into a forward lease agreement to finance its clients' property. Under this arrangement, property is financed by the bank on long term basis and the borrower pays fixed monthly rentals. The lease rentals are structured in a manner that upon conclusion of the lease term, the bank recovers purchasing cost and profits. In return, the borrower gains title to the property by way of a gift or related disposition.

    To illustrate a case study, a property investor invoked arbitration clause to claim compensation worth AED 12million against a property developer for delaying handover of a commercial property by more than five years. The claim for compensation included borrowing costs incurred by the investor towards ijara form of mortgage availed from one of the local banks. In the present case, the developer challenged the legal capacity of the investor. The developer relied upon the sale and purchase agreement (the SPA) and cited that the mortgaging bank was named as the purchaser under the SPA. Accordingly, the investor had no valid agreement with the developer and consequently it had no power to bring proceedings based on arbitration clause under the SPA. The legal question that arises from above case study is whether the investor infact has any legal right to bring an action on his own?

    Article 258 (1) of the UAE Civil Code states – "The criterion in (the construction of) contracts is intention and meanings and not words and form'. Bank's principle business is that of accepting deposits and granting loans. Under an ijara agreement, bank does not intend to assume ownership rights in the property purchased but instead acts as a financer to facilitate the transaction on behalf of its borrower.  Article 245 of the UAE Civil Code sets out "In the case of commutative contracts to derive benefits from the property, provided the conditions for validity thereof are satisfied, the person dealing in the property shall have the obligation to deliver it to the usufructuary, and the usufructuary shall have the obligation to deliver considerations for the benefit of the owner of the property'.

    A Dubai court recently voided an ijara agreement on the grounds that it represented not a lease, but a sale contract and the asset being sold was not completed at the time developer started collecting payments. A similar decision was passed by Dubai courts in 2010. In appeal number 268, 290/2209, the Dubai Court of Cassation has held that 'relationship between parties extends to more than what is written on paper, it is at the discretion of the judge to consider the relationship between the parties and determine the rights of each party.' Article 248 of the Civil Code permits a judge to treat a contract void if such contract is made by way of adhesion or contains unfair provisions.

    In terms of the SPA, it may be argued that both bank and investor share similar set of obligations. Whilst bank continues to fulfill payment obligations to developer, the investor continues to pay consideration to bank in addition to service charges and maintenance fees. Importantly, investor has 'inherent interest' in the property, whereas bank does not. The investor is in fact the successor in title and it can be argued that an assignment exists by virtue of Article 1109 of the UAE Civil Code. The successors and assigns provision is part and parcel of commercial contracts and inserted in almost every agreement. An assignment is effected once a party transfers its right to a third party allowing third party to accept other party's performance. To this effect, Article 251 of the UAE Civil Code states that "If the contract gives rise to personal rights connected with a thing transferred thereafter to a special successor, such rights shall be transferred to such successor at the time at which the thing is transferred if it is one of the appurtenances thereof and the special successor was aware of those rights at the time of transfer of the thing to him."

    Article 254 of the UAE Civil Code reads: "

    (1) It shall be permissible for a person to contract in his own name imposing a condition that rights are to enure to     the benefit of a third party if he has a personal interest, whether material or moral, in the performance thereof.

    (2) Such a condition shall confer upon third party, a direct right against the undertaker for the performance of those     conditions in the contract enabling him to demand performance thereof unless there is a contrary agreement, and     such undertaker may rely as against the beneficiary on any defences arising out of the contract'

    (3)The person making the condition may also demand the performance of the condition in favour of the     beneficiary, unless it appears from the contract that the beneficiary alone has such a right."

    The Dubai Court of Cassation delivered a landmark decision in 2000 (Contract of Supply and Installation of Mechanical, Electrical and Sanitary works, between the Main Contractor and a Subcontractor) whereby it ruled that if the arbitration agreement is incorporated in the main contract, and one of the parties to the main contract assigns its rights and obligations under such contract to a third party who consents to the assignment, whether in an express or implicit manner, the assignee will replace the assignor in his commitment to the arbitration clause. (Dubai Court of Cassation – Cassation Appeal No. 537 year 1999 – 23/04/2000).

    Litigation involving banking and financial claims may sound stressful to some but the courts in UAE have restored investor's sentiments by applying the letter of law.

    ]]>
    Fri, 16 May 2014 12:00:00 GMT
    <![CDATA[Arbitration in the Federal Code]]> In our previous newsletter issue we addressed the legal aspects of arbitration under the UAE Civil Code and further understanding legislature's intention in developing arbitration as alternative means of resolving disputes. The article clarified that parties choosing to opt for arbitration would avoid the lengthy court procedures in addition to long-drawn appeal procedures adopted by courts across the United Arab Emirates. The earlier article also aimed at examining the role of national judiciary in certifying an arbitration award and instances where courts may consider applications as to invalidity of arbitration claims.

    The legislature has and continues to promote, foster and develop arbitration system to lower the burden of courts. To this effect, Article 3 (d) of the DIAC Statute Rules (as amended) impose  an obligation on Dubai International Arbitration Centre to promote awareness of methods of alternative dispute resolution through conferences, symposia, workshops, training courses, specialist publications as well as printed materials. Arbitration continues to develop and apply to commercial and civil matters except for certain matters that may be referred exclusively to state courts.

    In deciding validity of an arbitration award, a judge cannot in any manner discuss arbitrator's understanding of the facts and laws. This precedent rule however is not absolute since the legislature allows judge while considering the aspect related to nullification of arbitration award to reasons provided under Article 216 (1) of UAE Civil Procedure Code, Federal Law No. (11) Of 1992.

    Article (216/1) states: "The parties to a dispute may, at the time of consideration of the arbitrator's award, request the nullification of the same in the following events:

    a. If the award was issued without, or was based on invalid terms of reference or an agreement which has  expired by time prescription, or if the arbitrator has exceeded his limits under the terms of reference.

    b. If the award was issued by arbitrators who were not appointed in accordance with the law, or by only a number  of the arbitrators who were not authorized to issue the award in the absence of the others, or if it  was based on terms of reference in which the dispute was not specified, or if it was issued by a person  who is not competent to act as an arbitrator or by an arbitrator who does not satisfy the legal requirements.

    c. If the award of the arbitrators or the arbitration proceedings become void and such voidness affected the  award."

     

    The Dubai court of Cassation (case 32 of 2009 and dated 29 March 2009) has held that

    "The UAE Civil Procedure Code contains limited articles that define the scope and extent to which the judge can discuss the nullification of an arbitration award. The basis and limit to which parties may dispute or challenge nullification of arbitral award are contained in Article 216 of the Civil Procedure Code".

    This Article now considers two main issues that one must consider prior to challenging nullification of arbitration award.

    Issue I: Arbitration awards are final and binding and consequently cannot be challenged.

     

    The prevailing judicial system in the United Arab Emirates follows a federal court structure with a final court (Court of Cassation in Abu Dhabi) with the exception of Dubai and Ras Al Khaimah that do not form part of the federal judicial system. The court structure in Dubai is comprised of Court of First Instance, the Court of Appeal and the Court of Cassation.

    With regards to arbitration, the UAE currently does not have a formal legislation dealing with Arbitration. Accordingly, the UAE Civil Procedures Code governs arbitration.  Article 217 of the Civil Procedures Code confirms that 'the award of arbitrators may not be contested by any manner of appeal'. That said, it is pertinent to clarify that an application for nullification of arbitration award is not considered as an appeal and this has been upheld by the apex court citing Article 213 (3), Article 216 (1) and Article 217 (1) of the Civil Procedures Code clearly citing that 'arbitration award may not be contested in any manner of appeal decided by law.' (Case 387 of 2007 and Case 414 of 2001 dated 17 February 2001).

     It is clear from above that legislature's intention was to ensure timely enforcement of arbitration award in light of very objectives of arbitration system that aims at quicker means of dispute resolution.

    Issue II:  When can a Party claim nullification of arbitral award?

    The legislature's decision under Article 216 of the Civil Procedure Code suggests that a party to arbitration dispute may at time of consideration of arbitration award request the nullification of the award. This means that a party can request nullification of arbitral award during the course of ratification. Perhaps the reason behind binding the ratification demand and the nullification of award request together is because the need to nullify an award does not usually arise unless a request for ratification and execution is demanded.  However there is nothing that prevents a party from challenging nullification without or prior to award being ratified. This has been confirmed by Court of Cassation (Case 387 of 2001 and 404 of 2001 dated 17 February 2002) which sets out "Application for nullification of arbitration award could be either by filing a claim for nullification, or by and opposition filed against the original request for ratification."

      

    This article now examines situations where arbitral awards can be set aside. Consistent with the provisions contained in the civil law, a claim for nullification of arbitration award can be based on two aspects – a) the arbitration agreement itself and; b) claim based on arbitration proceedings.

     

    A.      Claim to set aside arbitration award based on arbitration agreement: Such claim generally arises:-  

    i.     If the award was issued without a valid arbitration agreement between the parties;

    ii.  The award is based on arbitration agreement that is invalid-for instance, contract that has not  been   signed or cases where contract does not refer to arbitration;

    iii.   If the award is based on agreement that is no longer valid on account of lapse of time or is ultra vires;

    iv. If the arbitrator exceeded its authority in addressing or deciding matters that were outside  arbitrator's  scope; or

    v.    Award violates public order.

     

    B.      Claim to set aside arbitration award based on arbitration proceedings: Such claim generally arises:-  

     

    1-  If the award results from irregular composition of arbitral tribunal or cases where arbitrators are not appointed in accordance with the law, for instance act of arbitrator to unilaterally proceed with arbitration proceeding with arbitration despite an objection being filed against his appointment.

    2-     If the award was issued by one arbitrator in the absence of the other(s) without having any authorization to decide solely.

    3-     If the awards fails to define terms of dispute.

    4-     If the award issued by a person who is not competent to act as an arbitrator.

    5-     Failure by arbitrator to afford opportunity of being heard to a party to arbitration claim.

    6-     Lack of capacity to enter in to arbitration agreement.

    7-   If the arbitration proceedings become void or cases where failure by arbitrator to adopt correct procedures affects the award.

    To conclude, arbitral awards can only be challenged on grounds discussed above.

    The next article will address number of key issues that are beyond the scope of arbitration and in specific, I will discuss mediation and conciliation.

    ]]>
    Wed, 14 May 2014 12:00:00 GMT
    <![CDATA[Even CO2 sells! ]]>

    It is the striking imagery of global warming that opens our eyes to the idea of climate change. The melting snow caps, the stranded polar bears, declining air quality and the rising ocean temperatures are images that have had a searing effect on the human mind and encouraged dialogues about the changing face of our planet.

    The US government is divided when it comes to acknowledging the climate change or the effects of global warming.. On the other hand, the EU nations are already in a two year trial phase of the European Trading Schemes, a scheme aimed at minimizing the carbon dioxide and related emissions. The rising prices of energy are having a global impact and people are concerned if not frightened, about their own carbon productions.

    The United Nations Framework Convention on Climate Change (UNFCC), an international treaty with 192 parties introduced the Kyoto Protocol (the Protocol) that came in force in the year 2005. This treaty imposes binding obligations on developed nations to reduce release of greenhouse gases such as Co2, hydro fluorocarbons (HFCs), and perfluorocarbons (PFCs). The Protocol acknowledged that the developed countries are principally responsible for the significant levels of greenhouse gas releases in the atmosphere. Historically and statistically, US is the highest emitter of greenhouse gases and although it is a signatory to the Protocol, it has not ratified the same till date. Consistent with the Protocol's objectives, a number of developed states committed to reducing Co2 and related emissions. These commitments are legally binding. Developing economies do not have binding targets under the Protocol but have committed  to significantly reduce their carbon creation. After much debate and consideration, it was accepted by member nations that Carbon trading was the preferred method of regulating carbon emissions rather than carbon taxation.

    Carbon trading is the name given to a system to control carbon dioxide emissions. This system is based on the premise where a limit is set on carbon dioxide emissions by governments or international organizations. Carbon trading allows developed nations to trade their commitments under the Kyoto Protocol. They are permitted to trade their carbon emission quotas among themselves and also receive carbon credits for financing projects in developing countries that are aimed at reducing carbon emissions.

    The countries that are legally bound by the limits set and agreed to by the Protocol are referred to as compliance markets. Within the compliance markets, the responsibility to reduce carbon emissions falls on individual industries and companies to emit less carbon into the atmosphere. Let us illustrate this with an example:

    Company A and Company B are both allocated 100 carbon credits which permits them to emit 100 tons of carbon dioxide. Company A invests in environment friendly machinery and installs upgrades to ensure that it only emits 90 tons. Company B has not implemented either of the options as they cannot afford a refurbishment of their machinery. They are emitting 110 tons of carbon dioxide which is 10 tons above their allowance. Now in order to comply with the Protocol and to ensure that it satisfies the rules governing carbon emissions, Company B can buy carbon emissions allowance (in cash) from Company A. And this in turn helps Company A recover some of the monies spend on the upgrade of their machines.

    Carbon credits have thus created a market by giving a monetary value to the cost of polluting the air. There are a significant number of national and regional carbon markets that are currently in the process of being developed.

    In addition to the above example, individuals, groups and organizations can also trade in carbon credits. The markets that cater to conscientious citizens and organizations that are looking to be carbon responsible can trade within the voluntary carbon markets (i.e. markets other than compliance markets that are not legally bound to adhere to a set limit on emission.

    All said these carbon credit transactions have raised alarms in the global trade community. It has been argued by economists that if the carbon market is left unregulated and allowed to operate freely, there will be no significant decrease in carbon emissions. They believe that there are not adequate incentives for companies to reduce emissions under the principle of carbon trading. It is a difficult concept to implement and regulate the voluntary carbon market. Lack of coherent regulations, absence of unified authority to monitor and control the carbon trade may become a boon for a few such as bankers and traders but leave a far more damaging effect on many in the global community.

    Clearly, unlike traditional commodities, carbon emissions are not very well understood by buyers and even some sellers. This lack of knowledge and understanding makes carbon emission trading highly vulnerable to fraud. This form of trading is still in its infancy  and it is certain that as this market develops so will the complexity of trading. The carbon trading market can be fraudulently manipulated by claiming more carbon credits from certain projects that were actually obtained. There have been a number of instances where carbon credits have been sold to people with good intentions, but in essence, they never existed or belonged to someone else entirely (and not the person who posed as the seller). The complexity of the carbon markets has been taken advantage of by  companies that have made false claims about the financial and environmental benefits of investing in carbon emissions to make such investments look attractive. An Australian company in the year 2009 ran a telemarketing campaign, claiming that carbon credits were the future and offering high returns on their investments. The company was prosecuted for having defrauded investors of over 3.2 million USD. [1]

     It has been reported that the weak regulations in this trading sector have been taken advantage of to carry out money laundering, tax fraud and securities fraud. In Regina v Dosanjh and others, the Southwark Crown Court in London found three defendants who had established dummy companies that were seemingly importing carbon credits into the UK, guilty of defrauding the UK government of 39 million pounds of VAT (Value Added Tax) in just 69 days of trading. The stolen VAT was then transferred to bank accounts in the UAE to launder and legitimize.[2]

    The complex nature of the carbon credit market makes it easier to manipulate. It is critical that legal regulation is more stringent when it comes to the regulators and traders being permitted to trade in this commodity. This market is bound to get more multifaceted in the near future and there is a need for rigorous domestic and international legal review to protect the companies and individuals who are looking to be environmentally conscious. Today Co2 sells but what do can we expect the future to emit?

    ]]>
    Mon, 05 May 2014 12:00:00 GMT
    <![CDATA[Medical Malpractice]]> "The malpractice is an error occurs due to the unfamiliarity of a practitioner with the technical aspects which each practitioner is assumed to be familiar with, due to negligence or paying insufficient efforts."

    On its way upward when the United Arab Emirates was well transformed into a country of ravishing skyscrapers, diverse business opportunities and world-class infrastructure facilities the Government of the United Arab Emirates realized that its own elite class of local Arabs were turning to the West for medical treatments and therefore a business opportunity was being missed. For a country that has developed and transformed at a lightning fast speed, this was a wake-up call. Besides developing sophisticated medical infrastructure to advance medical tourism, the need for a conclusive legislation was felt.

    In light of the aforesaid, the Federal Law 10 of 2008 (Medical Liability Law) was enacted in the UAE which governs the specific aspects of the medical profession and the relationship between doctors and patients. Before 2008, medical malpractice claims could be based on the provisions of the UAE Civil Code (Federal Law No. 5 of 1985) or on the Penal Code (Federal Law No.3 of 1987). A request could be made before the Dubai Health Authority (DHA) to identify and appoint an expert medical practitioner to assess a case of medical negligence. In civil claims, reliance was placed on the UAE Civil Code and likewise a criminal claim would involve provisions of the UAE Penal Code in relation to performance of a duty. However, discrepancies were resulting in application of different principles by the Courts either on a civil or criminal level, and therefore the new law has become essential for the intended development of the medical sector and more so from a legal point of view. The law provides for imprisonment up to  at least two years and not exceeding five years or a fine between AED 200,000  and AED 500,000.

    The present Medical Liability Law does not intent that medical practitioners would provide some kind of panacea to their patients. What the law does provide is that they would observe care in treatment of patients and be professionals in their respective field. This law recognizes the existence of the duty to care for a patient by each physician and penalizing the latter when due to his negligence or lack of professionalism the patient suffers injury or damage. The Law clearly states that such lesions (for which claims are being made) must be derived solely and exclusively from medical negligence or in other words, determining whether any other doctor of same repute, similar degree of technical and scientific competence  and with the same case study would have acted in a different manner.

    Like many of its counterparts, the Medical Liability Law faces certain challenges. The law itself being federal in nature faces a major problem in that the medical malpractice complaint may be filed before different authorities depending on the local laws of the Emirate where a complaint is being filed.  Within the Emirate of Dubai, for instance, a person can file a complaint before the DHA; register a criminal complaint in police station or prosecution; register a civil suit before Dubai Courts.

    DHA is a regulatory and administrative entity regulating the healthcare practice in Dubai and has a established administrative system with sanctions to the physicians who are guilty of medical malpractice. For example, in July 2010 a doctor was sacked and also banned from practicing in the UAE after being proved that she was responsible for a death of a child .However, it needs to be noted that although registering a complaint with DHA is free of cost, yet DHA is only a regulatory body which is not empowered to sustain a legal proceeding. Therefore interpretation of the Medical Liability Law by DHA can differ from that of a court's interpretation.

    In essence, the numerous interpretations of the same law by different entities leave little room for the coherence and consistency of decisions –much needed when it comes to a matter so sensitive. 

    A major problem faced by patients is the lack of statutory provision for a medical practitioner to confirm that his patient was subject to a wrong treatment by the earlier doctor. Some people also argue that this law is too advanced, for the UAE culture. "Their system is very advanced and the society is very educated. Here, they have implemented all the rules and regulations without thinking of social changes. That is creating a lot of problems, especially for surgeons" a doctor whose name is not revealed quotes this in an interview to The National. In a recent Abu Dhabi case, a woman suffered second-degree burns on her thighs during laser hair-removal treatment and as the burn marks turned black, she decided to sue the hospital demanding AED 60,000 as compensation for physical and psychological harm and AED 25,000 as a refund the cost of the treatment. Despite the fact that the hospital argued that it wasn't a medical error, defending itself explaining the court as such kind of damage can occur to people with sensitive skin and how they warned the claimant about that eventuality, the court refused all such arguments and condemned it to pay AED 100,000 to the claimant which was AED 30,000 more than the claim made. 

    Therefore, while applauding the initiative, the law must be carefully examined given the fact that the misuse of this law can bring serious implications from the reluctance of experts in medical field to choose UAE for practicing their profession, the abuse of rights, and even the ruin ab initio of the whole idea and investment made by the country in medical tourism. 

    ]]>
    Mon, 31 Mar 2014 12:00:00 GMT
    <![CDATA[Corporate Governance]]> An ounce of prevention is worth a pound of care.

    The old adage holds true when principles of corporate governance and their implementation in the GCC are discussed. Implementation of good corporate governance practice perhaps is worth a battle of ownership dispute, succession issues and stakeholder disputes.

    In a survey published by the DIFC, the Chairmen and CEOs of key institutions believed that the governance of their companies is well established. In the same survey however, the views from other family members of the same company who were involved at different positions, were divergent. Whilst many companies, particularly the listed ones claim to be part of the UAE Government's initiative to streamline and strengthen internal corporate governance code, small and medium size enterprises (SMEs) and family owned enterprises (FOEs) are yet to follow the norm.

    Corporate governance is defined as "a set of rules, standards and procedures that aim at achieving corporate discipline in the management of the company in accordance with international standards and approaches through determination of responsibilities and duties of members of boards of directors and the executive management of the company, taking into consideration protection of shareholders' and stakeholder' equity"

    UAE has set out a positive notion for implementation of corporate governance policy as it introduced stringent legislation through the Securities and Commodities Authority (SCA) Decision No. R/32 of 2007 as amended by the Ministerial Resolution Number 518 of 2009 Concerning Governance Rules and Corporate Discipline Standards as further amended by the Ministerial Resolution Number 84 of 2010 (the Code) and Federal Resolution Number 17 of 2010 establishing the Abu Dhabi Centre for Corporate Governance.  In this article we examine the existing corporate governance policies and the need for adopting such practices by unlisted firms.

    Governance Norms on Federal Level

    Companies which are listed either on the NASDAQ in Dubai International Financial Centre, Abu Dhabi Exchange (ADX) and Dubai Financial Market (DFM) are required to compulsorily adhere to the regulations set forth by the regulating authority of the relevant exchange. While NASDAQ is regulated by the Dubai Financial Services Authority (DFSA) and is subject to the regulations of the DIFC, which will be discussed in a subsequent issue, ADX and DFM are regulated by the SCA and are governed by the Code.

    The industry players governed by the SCA corporate governance Code include non-financial institutions and public joint stock companies and are required under the code to adhere to the following standards:

    a. Separation of authority and defining obligations- The Code provides a clear indication for separation of authority, differentiation between management and ownership issues. It states that each company listed on a market must be managed by a board which is to be elected by the shareholders. At least one third of the members of the board should be independent and non-executive members. The position of chairman and managing director must be held by different individuals.  The Code states that board meeting must be held twice a month. The Code further provides for appointment of audit, remuneration and nomination committees  as well as compliance officer.

    b. Internal Control and disclosures- Provisions of the Code have received appreciation and to some extent a little criticism for the outlines pertaining to internal control and disclosure by the members of the board. The outlines for disclosure set out under the Code and the disclosure statements requested by SCA are often speculated to be dissenting. It is required by the listed companies to implement and exercise strict internal control  policies and practice consulting and advisory within the board. In addition to this, members of the board have to make detailed disclosures to the SCA with relation to company's activities, risks and steps taken by the board.

    c. Annual report- The SCA requires companies to submit an annual report which amongst other things also includes the disclosures required by Article 8 of the Code. The report also explains decisions of the board and compliance (as well as non-compliance issues with the Code). 

    Corporate Governance for Financial Institutions

    Financial institutions regulated by the UAE Central Bank are governed by the Circular Number 23/00 of the Central Bank which provides mandatory recommendations for corporate governance structures. In addition to this, the Central Bank has issued guidelines which are not mandate by law. The Chairman of UAE banks, Directors and CEO have been provided with relevant formal guidelines in order to avoid misuse of authority and prevent embezzlement of monies has been witnessed by the UAE in high drama court cases.

    Why the need for Corporate Governance in Family Owned Enterprises (FOEs) and SMEs

    UAE houses several local family businesses which have branched out in multiple business dimensions. In a working paper by Dubai Chamber of Commerce and Industry published in 2005 a family business is defined as "a business which is fully owned by UAE nationals." In practical terms this definition will include companies where 51 percent of the ownership is retained by the UAE national. 

    Small and Medium Size Enterprises on the other hand are defined as those companies which have an annual turnover of less than AED 250million and less than 250 employees .  Dubai SME published its report examining the need for corporate governance structures within the FOEs and SMEs which is elaborative and illustrative.

    Debating on the need for corporate governance, people in positions of authority often argue that family businesses and SMEs are smaller units and hence thorough corporate governance may not be the need of the hour. In response, lesson needs to be taken from software giant Intel, 90% of whose sale in January 2013 came from the products which had not even been finalized in December 2012 . The example of Intel highlights one important facet of all economies and each business- change. Developing economies, revenue boosts, mergers and amalgation- all bring out 'the change' in a business. As published in a DIFC survey referred in this article, the former director of DIFC has quoted that "nearly 95 percent of the family businesses do not survive the third generation of ownership due to lack of planning in successions". In such a competitive and changing market, the cost of not working out corporate governance could mean risking more than loss of just a few stakeholders.

    SMEs and FOEs each need to understand the process of corporate governance and the key issues it addresses which include but are not limited to:

    • Succession planning;
    • Separation of ownership and management roles;
    • Maintaining stakeholder relationships
    • Avoiding conflicts of interest;
    • Defining executive roles;
    • Encouraging non-executive participation to promote no-bias concept;
    • Increasing internal control; and
    • Harnessing positive work environment.

    Conclusion

    Regardless of being a listed company, a FOE or an SME- corporate governance policy needs to be embedded within the framework of a company in order to ensure sustainability in the long run. External regulations alone cannot help businesses sustain and flourish without the existence of internal control and governance. To conclude, it would be best for companies to recognize that 'management' of a company differs in several aspects from the 'governance' of a company. 

    ]]>
    Fri, 21 Mar 2014 12:00:00 GMT
    <![CDATA[DIFC Property Laws]]> The current global investment climate is a 'mixed bag' of healthy, stable and crippling economies. The dollar continued to be the global currency for millennia but with countries deciding to introduce their local currencies to mainstream – such news have led to a plethora of questions and debates. Introduction of Euro and announcement by State Council of China allowing free flow of Yuan in global markets had shaken the financial markets in their way and government policies such as recent announcement by Government of India preventing Indian citizens from investing abroad have had their fair share on international property markets. Amongst several other economies, the economy of United Arab Emirates has emerged and continues to be one of the healthiest economies in current times.

    The International Monetary Fund has estimated that Dubai's economic recovery is going from strength to strength and this is being reflected in the return of the Emirate's real estate market. The number of transactions in real property by domestic as well as foregin investors including influx of  foreign direct investments in the year 2013 continues to gain momentum. The political and financial turmoil in other nations such as Greece, Syria and Egypt emphasized by the Cyprus banking crisis has had investors turn their eyes towards other safer economies. Investors from Europe, the GCC, and Asia continue to invest sizably in the region as UAE continues to remain politically, economically and financially stable. This article overviews the recent regulatory developments in the real property sector within the Dubai International Financial Centre (the DIFC).

    DIFC is an independent jurisdiction within Dubai, United Arab Emirates. Established in the year 2004,DIFC was built with the vision of promoting economic growth and development of Dubai. DIFC was built upon the premises of modern regulatory, legal and physical infrastructure imbibing the best from the most advanced systems in the world. This onshore free zone is a city within a city, has its own courts based on common law system where commercial and civil disputes are adjudicated and has its very own independent financial regulatory body, the Dubai Financial Services Authority, commonly known as DFSA. DFSA is empowered to grants licenses and regulate financial transactions that are conducted within the  DIFC. It is no surprise that the DIFC is today, one of the most modern, efficient and systematic property registration systems in the world.

    The year 2007 saw the implementation of DIFC Law number 4 (the Law) which governs the ownership of freehold land and buildings within the DIFC. The Law was enacted after careful contemplation and consultation with various interested parties. Members of the public were invited to provide their inputs and the initial consultation period was subsequently extended for an additional thirty day term. This new Law is a contemporary piece of legislation that derives its strength from the foundations of English Common Law and the more modern Torrens system. The Torrens system was formulated to make the process of land registration a simple affair and to certify to the ownership of an absolute title to property. The process being easy and clear-cut has become insidious around the world. 

    The Torrens system works on the doctrine of "title by registration" rather than "registration of title." In essence, this means is that there is no need to trace the title through a long drawn out procedure through a series of documents. The authorities responsible for title registration guarantee its indefeasibility and have compensatory actions in place in case of there being an error. This Law is applicable exclusively in the DIFC and is unique compared to any other free zones within the United Arab Emirates or anywhere in the GCC.

    1. Key Features of the Property Registration System in the DIFC

    a) Indefeasibility of title- This is an important aspect of the new Law. In other words, once a property has been registered by the DIFC's Registrar of Real Property, it is backed by security of ownership by the Law. Land parcels are registered and allotted a distinct number known as the folio and is noted in the central system with the name of the registered owner and its key features. A change of ownership in case of a sale or death of registered owner comes about by changing the record with the Registrar.

    b) Caveats- This is one of the exclusive features of the Law. The Registration of Property or change of ownership requires the concerned parties to fill two forms, namely Caveat Form No.42 which is completed by the buyer; and Withdrawal of Caveat Form No. 43 which is completed by the seller. Filing of these forms warrants that the claimant's right in a developer's property is legally recognised. An important facet of this fact is that all parties that claim an interest in a land parcel must register a caveat and file the Freehold Transaction Return Form number 46 within 30 days of commencement of the transaction which is considered to be the day of signing the 'Memorandum of Understanding.' If the said Memorandum of Understanding is binding and not contentious, the commencement is said to have occurred by signing of this written agreement.

    c) Guarantee -The DIFC Registrar guarantees the accuracy of the Central Register which has been defined as the central record of all property transactions within the DIFC. It is also empowered to order compensation to any party that is adversely affected by a clerical error. This enables a prospective buyer to rest assured that he/she does not need to verify information beyond the scope of the Central Registry.  This has simplified the process of property ownership much to the relief of many.

    d) Registration Fees - Also particular to the DIFC is the transfer fees at 3.5% of the market value of the property compared to the other Free Zones and mainland fees of 2%. The market value of the property is determined by DIFC approved surveyors. The higher fees have resulted in criticism from many concerned parties but the DIFC has maintained its stand on this issue by stating that the system enables a quick and effortless transfer which justifies the fees. The transfer fee needs to be paid within 30 days from the effective date of the transaction which is the date of signing the memorandum of understanding between the two parties; with an interest being payable at the rate of 5% per annum for any delay in payment. There are however certain circumstances which exempt a freehold transaction from payment of this fee. These are: 

    i) A party enters into an Islamic financing agreement

    ii) A transfer is taking place to amend slight change in interest. For example, where a person is attempting to transfer his interest to or from a company where he is the sole shareholder

    iii) In case the transfer is taking place due to buying or selling of shares of a publicly listed company through the stock markets

    iv) A person comes into the estate by the terms of a will

    v) A person comes into the estate of another by an order of law

    Another exclusive feature of DIFC when it comes to property is the ability of real estate investment trusts (REITs) to purchase property within the DIFC. In contrast this is an exclusive system which is not observed elsewhere in Dubai. A REIT has been defined as an entity that invests in multiple real estate developments and projects such as shopping centers, hotels etc.  What is interesting about a REIT is that it allows an individual to have a stake in profit making ventures that otherwise it may not have access to. The REIT legislation was introduced by DIFC to promote its functions by enacting the Investment Trust Law Number 5, 2006.

    DIFC has taken the lead when it comes to property law in the UAE. The system of registration, the encouragement to REITS and the ease and transparency of transaction has made DIFC a favorite domicile for investment by domestic as well as foreign investors who have previously been hesitant to invest in the Emirate. Law number 4 is a thoroughly researched and scrutinized piece of legislation which has further established the DIFC's leadership in encouraging investment into Dubai. With this advanced property registration system the DIFC has expanded the horizons of not only the property law within the free zone but also beyond.

    ]]>
    Thu, 13 Mar 2014 12:00:00 GMT
    <![CDATA[UAE LABOUR LAWS]]>  

    Employee Confidentiality FAQs

     

    Whether you have just recently joined or have been working for your employer for a while, it is important that you understand a few important matters relating to your work place, your rights and obligations to information you receive, use and share.

    At your workplace, you tend to receive, use and share information on a day-to day basis. This information maybe generic, a gossip over lunch, or overheard in elevator cabin. However when information that is private, and confidential and shared without permission, it may affect the person disclosing the information, person receiving the same and the person or entity to whom such information relates. Such private or confidential information may involve disclosure of financial, personal or general business information and records such as customer or client database.

    Some may argue that signing confidentiality agreements does not prevent employees from doing anything the law does not already restrict them from doing. While this may be true to some extent, to ensure that confidential information does not get compromised confidentiality agreements play a major role in protecting proprietary and privileged information.

    This FAQ has been written to serve as the guide for employers and employees to help them understand key issues surrounding confidentiality aspects they are bound by, legal terminologies, implications in the event of a breach, and the term for which such confidentiality applies.

    1. What is intellectual Property? What does it mean?

    Simply put, intellectual property is imagination made real. Intellectual property (also generally referred as IP) allows people own the work they create. It is a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights and for which one may apply for patents, trademark, copyrights, trade secrets, etc. IP is an asset just like property, car, gold, etc.

    2. Okay.. I get that, now what are patents, trademarks and copyrights?

    A patent is a form of IP. It consists of a set of exclusive rights granted by a government to an inventor for a certain period of time, in exchange for the public disclosure of the invention. Patents are only issued for inventions where the inventor creates a unique or novel device, method composition or process.

    A trademark is a brand name. It is the distinctive sign or indicator used by companies to help customers identify a product or service. A company's logo for instance is a trademark.

    Copyrights – In simplest terms, whenever you write a poem or story or even a paper for your class, or a drawing or other artwork, you automatically own the copyright to it.

    Trade secrets – secrets or confidentiality aspects of any business are trade secrets.

    3. Wait.. Why am I being made to read all this?

    During your tenure with the company, you may have had the opportunity to gain access to material documents, software, brochures, databases, images, media, information relating to company's customers, suppliers, service providers, ideas, technical information such as know-how, models, drawings, manuals, techniques and so on. These works were originated in and for the employer. Your employer is the owner of all IP and confidential information. These IP and confidential information is a valuable, special and unique asset of your employer and access to this information and knowledge thereof was shared with you so that you could perform your work. Just like you cannot use someone else's asset, you cannot use employer's asset upon termination.

    4. Is it My Employer's Policy or the UAE's law that requires me to observe this confidentiality?

    Every business makes investment in its IP and in gathering all the confidential information. Your employer may have a policy in place requiring every employee to observe the confidentiality provisions in strict conformity.

    Speaking of the law of the United Arab Emirates please be advised that provision (v) to Article 905 of the UAE Civil Transactions Law sets out that every employee must "refrain from disclosing the industrial and trade secrets of the employer even after expiry of the contract as required by the agreement or custom."

    Article 379 of the UAE Penal Code criminalizes the act of disclosing the trade secrets. It is stated "Punishment by detention for a period of not less than one year and by a fine of not less than twenty thousand Dirhams or by either of these two penalties, shall apply to any one who is entrusted with a secret by virtue of his profession, trade, position, or art and who discloses it in cases other than those lawfully permitted, or if he uses such a secret for his own private benefit or for the benefit of another person, unless the person concerned permits the disclosure or use of such a secret."

    Article 120 of the UAE Labour Law (Part 6) allows employers to terminate services of employees if the employee reveals and secrets of the establishment in which he was employed.

    5. Okay, so what's best for me to do if I'm leaving my current employment?

    To buy peace of mind, you should not disclose any information, secret, customer or supplier list, databases, know-how, models, drawings, techniques with any third party. You should not copy, disseminate, forward, store (physically or on any media) any information pertaining to company or any models, prototypes, patterns, samples, schematics, experimental or test data, reports, drawings, plans, specifications, photographs, collections of information, manuals and any other documents. You should sign a non-disclosure agreement to protect your interests.

     

    6. Wait…What if I'm joining a competitor..?

     

    If your employer has allowed you to work for a competitor, you carry a risk of divulging confidential information. You have to exercise a higher degree of care and caution and at all times ensure that you do not in any manner whatsoever disclose any information pertaining to your employer. This is important.

    Your employer may (in its discretion and/or in interest of its management) refuse you to work for a competitor.

     

    ]]>
    Thu, 13 Mar 2014 12:00:00 GMT
    <![CDATA[Agency Agreements]]> An agency agreement is a legal contract which creates a fiduciary relationship between two parties, whereby the first party (the Principal) agrees that the actions of the second party (the Agent) binds the Principal to later agreements made by the Agent, as if the Principal himself, had personally  created the agreements.

    Federal Law Number 5 of 1985 of the United Arab Emirates (the Civil Code) and specifically Article 149 of the Civil Code determine part of the legislation in regards to agency contracts. Article 149 states that 'a contract may be made by a principal and it may also be made by an agent unless the law stipulates otherwise.'

    Foreign parties who wish to take part and conduct business within the UAE but want to do so with a minimal investment, often turn to commercial agents to sell their goods. The prominent and customary piece of legislation that governs agency agreements is Federal Law No.18 of 1981 commonly referred to as the Agency Law. Law No.13 of 2006 drastically amended the 1981 legislation but was repealed again in 2010 whereby the provisions in Law No.18 of 1981 were reinstated. Arguably, this legislation is generic and somewhat abstract in nature and whilst capturing all forms of agreements for sale through third parties, this law can be blurry and ambiguous in form. A commercial agency is defined as 'representation of a principal by an agent for distribution, sale, display or provision of a commodity or service in the state in return of commission or profit.' The Agency law tends to remain conserved and biased in some areas and therefore it is a prerequisite that any foreign principal looking to begin or expand in the UAE market, should obtain legal advice before making any concrete commitments regarding an arrangement with a prospective agent. A foreign individual should be made aware of certain important factors before entering into or terminating agency agreements and it is without confusion we note that, like the majority of countries, the UAE also has a protectionist approach towards its citizens.  Federal Law No.2 of 2010 was introduced to make amendments to the provisions of Federal Law No.18 of 1998 and this serves an accurate example in respect of the rights of commercial agents.

    The Principal-Agent Relationship and its Termination

    It must be understood that only UAE nationals or companies owned by UAE nationals are able to act as commercial agents within the UAE. This is an absolute provision of the UAE Agency Law. An agency agreement must be exclusive to a territory within the UAE, namely one of the Emirates, although exclusivity can apply to multiple Emirates or the UAE as a whole. The commercial agent must be registered in the Commercial Agencies Register which is to be maintained by the Ministry of Economy in the respective Emirate. If the agency agreement is registered, the agent is provided with protections and privileges such as to claim damages on behalf of the Principal.

    Termination of an agency agreement can be extremely burdensome and once the agency agreement is granted and registered with the Ministry of Economy, the termination of an agency relationship by a Principal can be very difficult to effect. In most cases when a Principal attempts to terminate a relationship with an agent or to abandon an agency agreement, in most cases such terminations usually result in significant compensation being awarded to the local agent. Agents are entitled to statutory compensation as a result of termination of the agency agreement. Compensation considered by the courts will be substantial and furthermore, be in addition to any contractual rights. That said, the specific calculation of compensation has been set out in the Agency Law and several factors will be taken into consideration by the courts. The duration of the agency agreement and the efforts of the agent in the promotion of goods and net profit generated by the agent will be deliberated upon. For this reason, the law can be advantageous for the Principal and offer a degree of equality and fairness. If the agent has fulfilled his role as an agent acceptably and without amble, there would seemingly be no need for the Principal to initiate the termination of the agency agreement.

    The law surrounding agency agreements has undergone several amendments in order to address particular issues and to prevent the swinging of a pendulum between the rights of the Principal and the Agent from time to time. Prior to the amendments made to the law in 2006, the termination of an agency agreement or the refusal to renew the agency agreement could only be successfully effectuated provided there was a 'valid reason' for the termination and what would amount to a 'valid reason' was for the Commercial Agencies Committee within the Ministry of Economy to decide. Following 2006, the law was amended and relaxed slightly, which no doubt made the prospect less unattractive for foreign Principals who wished to penetrate the UAE market without feeling exposed and unprotected. The advancement provided leeway for Principals in that they were able to terminate agency agreements on a fixed date indicated within the agency agreement. Furthermore, the law incorporated the legal right for either party to the agreement to seek compensation in the event of any breach and or default to the law.

    In order to establish business within the UAE, the appointment of an agent remains an attractive way to enter however it is paramount to conduct thorough due diligence on prospective commercial agents and to have your lawyer examine or draft over agreements carefully. The use of a lawyer will also ensure that you have correctly complied with the provisions of the 'Agency Law.'

    ]]>
    Wed, 12 Mar 2014 12:00:00 GMT
    <![CDATA[Computers]]> From coding a logic bomb to malicious hacking and from formation of ransomware gangs to spear phishing, no computer in the cyber world is today immune from an electronic misdeed that continues to grow and develop and at the same time survive criminal prosecution in many instances. The year 2013 witnessed a new trend of cyber-attacks ranging from blackhole web malware, TDOS (telephony denial of service) and bad DDOS (distributed denial of service) attacks, advanced banking Trojans, proliferation of PUAs (potentially unwanted applications), invention of Tor network designed to hide user identity, advanced botnets, exploit kitsandcrypters. Cyber criminals recently went as far as setting up open market-place to sell drugs, illegal goods and harmful substances misusing the Tor network.

    Cyber threat laboratories around the world treat blackhole exploit kits (the Blackhole)amongst the top 50 malwares in the world. A Blackhole is a bundle of maliciously coded software that permits its creator to create security risks, manage networks, obtaining analytical information of victim such as victim's location information, operating system, running applications and system related information. The creators of such malware generally use a polymorphic engine (or; mutation engine) that converts software in to various other versions with different code but are still capable of operating with the same functionality as original software. For this reason, anti-virus softwares generally cannot detect a Blackhole at early stage.

    Banks are being targeted almost every minute of the day and it is anticipated that very soon, mobile services could be the next wave of cybercrimes. Cyber criminals resort to a range of cyber-attacks to target banks and financial institutions. One such attack is a denial of service (DOS) attack whereby overwhelming requests are made to bank's serverleading to temporary or indefinite interruption or suspension of services. Similarly, a bank's security may be compromised by adopting telephone denial of service (TDOS) attacks. Scammers make use of caller ID spoofing whereby the number appearing on recipient's caller id or phone screen is not the same as of the person making the call. For instance, scammer may contact a bank representing itself as bank's customer and request for a wire transfer. In return, the bank attempts to reach its customer for verification purposes but fails to reach as customer's lines are being flooded with fake calls. A recent trend of such frauds and bad practices is ransomware. Ransomware gangs work in union to create a 'fix' or malware that freezes victim's computer making it impossible for victim to access any part of his computer. The victim is only displayed a message demanding ransom to be paid to ransomware gang to remove the restrictions placed on victim's computer.

    Growing use of interconnected network systems has heightened criminal opportunities and expert computer criminals pose a threat to law enforcement. Although new techniques and malwares are being developed rapidly, legal development has not been able to maintain the pace. Computer or internet crimes are generally very complex and it is difficult to prove and/or nab the criminals. Unless incriminating evidence exists, it is generally difficult to provei) that the computer was in fact compromised or hacked; ii) difficult to prove the creator or the hacker; iii)issues such as access, intent and jurisdictional difficulties. For instance person possessing hacked information and person hacking the computer may be two different people. Document management in today's global economy is much different than earlier when we had record trails. It is practically possible to commit a crime and destroy all the evidences.

    Computer forensic experts however play a major role in technical matters involving cyber-crime. Forensics is a scientific method of examining questions of interest to a judge. Computer forensic experts employ advanced scientific techniques and tools that detect steganography (steganography is science of encoding hidden messages), cryptographic messages, concealment, read slack area, detect encryption, remote attacks, and using advanced tools such as Nmap, Nessus, and computer online forensic evidence extractor. 

    In the United Arab Emirates, the Federal Law number 5 of 2012 (the UAECyber Crimes Law)combating cyber-crimes aims at preventing cyber-crimes. The UAE Cyber Crimes Law replaces and repeals its predecessor Federal Law number 2 of 2006 and dated 1 March 2006.The UAE Cyber Crimes Law is perhaps the most recent and advanced piece of legislation. A wide range of offences that may be committed using the World Wide Web have been codified under the UAE Cyber Crimes Law. The law aims at criminalizing persons who gain unlawful access (the Access)to a website, electronic information system, computer network, or information technology (the System and collectively, the Systems) and also those who indulge in deleting, omitting, destructing, modifying deteriorating, altering, copying, publishing or republishing any data of information (the Violation).The basic features of the UAE Cyber Crimes Law can briefly be summarized as under:-

    Article 1 to Article 11 – Persons posing threat to security of any Systems, Phishing and Forgery

    Article 12 to Article 27 – aim at punishing offenders involved in more serious cybercrimes such as gaining access to bank accounts, credit cards, extortion, slander, eaves dropping, etc.

    Article 28 and remaining articles – cover matters relating to public order, state security and other provisions.

    Article

    Particulars

    Comments

    2

    criminalizes persons who gain unlawful Access to System and this includes persons who abuse their position and act in excess of their permitted authorizations. Persons who indulge in Violation (this includes corporate as well as personal data) shall face criminal prosecution.

  • Imprisonment and/or a fine between AED 1,000 to 3,000/- for unlawful Access (term of imprisonment has not been provided);
  • Imprisonment for at least six months and/or fine between AED 100,000/- to AED 750,000/- to persons engaging in any Violation; and
  • Imprisonment for at least one year and/or fine between AED 250,000/- to AED 1 million if the individual's Violation relates to personal data.
  • 3

    Punishes persons who engage in both – gaining unlawful Access to System and indulges in Violation.

  • Imprisonment for a term of one year and/or fine between AED 250,000/- to AED 1 million. This clearly suggests that the Law aims at punishing offender violating personal data with same punishment as person committing gaining access to a system and disabling, copying or publishing it.
  • 4

    Seeks to punish persons who gain unlawful Access to System with the intention of gaining government data, or confidential information relating to financial, economic or commercial facility.

  • Imprisonment for a term of five years and a fine between AED 500,000/- to AED 2 million towards the Violation.
  • 5

    Offends persons who participate in any Violation and consequently gaining access to a website

  • Imprisonment and/or a fine between AED 100,000 to 300,000/- (term of imprisonment has not been provided).
  •  

    6.

  • Persons committing forgery of any electronic document of the federal or local government or authorities or federal or local public establishments
  • Persons committing forgery of any electronic document of authorities other than those mentioned in part (A) above
  • Persons knowingly using forged documents
  • Temporary imprisonment and/or a fine between AED 100,000 to 300,000/-
  • imprisonment and/or a fine between AED 100,000 to 300,000/-
  • imprisonment and/or a fine between AED 100,000 to 300,000/-
  •  

    7 to 11

  • Persons engaging in Violation of any data or information relating to medical examinations, medical diagnosis, medical treatment or care or medical records;
  • persons who hinders or obstructs access to any System;
  • whoever uses a fraudulent computer network protocol address by using a false address or a third-party address by any other means for the purpose of committing a crime or preventing its discovery;
  • whoever runs a malicious software that renders and system inoperable;
  • Persons without legal right or those who fraudulently misrepresent themselves and steal personal information, property or deed for itself or others.
  • Temporary imprisonment;
  • Imprisonment and/or a fine between AED 1,000 to 3,000/- for unlawful Access (term of imprisonment has not been provided);
  • Imprisonment and/or a fine between AED 150,000 to 500,000/- for unlawful Access (term of imprisonment has not been provided);
  • Imprisonment for a term of five years and/or a fine between AED 500,000/- to AED 3 million towards the Violation if System becomes inoperable and imprisonment and/or fine of AED 500,000/- if the System survives and is operable;
  • Imprisonment for a term of one years and/or a fine between AED 250,000/- to AED 1 million.
  • Article 12 to Article 16 cover a wide range of serious offences including unlawful access by persons to bank accounts, credit or electronic card numbers, persons resorting to counterfeiting or reproducing credit cards, persons attempting to hack Systems to obtain codes or passwords, intercepting communications through computer network, and resorting to extortion. Article 17 and 27 punishes offenders who establish, manage or run pornographic or gambling activities on website or those who deliberately acquire pornographic material involving juveniles using any System. Article 19 to Article 30 cover crimes relating to morality and public order and these include provisions criminalizing persons who establish, manage or run prostitution or lewdness, engaging in crime of slander as determined by Islamic Sharia, acts of eavesdropping, photographing others, or illegally disclosing any confidential information, prompt riot, hatred, racism, sectarianism, or damage, trading or promoting fire weapons, ammunitions, or persons accepting donations without license.
    Article 28 to Article [ ] aim at maintaining security of the UAE, public order and peace. These provisions prohibit persons who engage in inciting acts, publishing or transmitting information, drawings or pictures that may endanger national security and higher interests of the State or afflict its public order, operating a website providing information on or relating to any terrorist group or any unauthorized group, information, news or rumours with intent of sarcasm to damage reputation and prestige of State, any of its institutions or rulers, whoever runs website aiming or calling to overthrow, change the ruling system of the State, or seize it or to disrupt the provisions of the constitution, persons planning, organizing, promoting or calling for demonstrations or protests, persons running a website dealing in trafficking of antiquities or archeologicalartifacts, any conduct or act that is disrespectful to Islam, resorts to money laundering, and persons who save or makes available any illicit content available on their website.

    Conclusion

    The UAE Cyber Crimes Law addresses dominant areas of paramount concern. Any activity on the cyber space which poses a threat to the state security and political stability, disturbs the Islamic principles of social and moral behavior or is financial criminal activity is punishable under the said law. Persons so acquitted are liable to pay penalties as specified under the law. While acting in conformity with the law, a court can pass a custodial sentence or deportation of the accused. The authorities have been provided the right to seize and destroy the equipments used in the process of such crime.

    With Saudi Arabian oil giant Aramco's claim of cyber attack the UAE Government's activity to combat cyber crimes has gained momentum. Experts argue that with the roll out of new projects and massive economic growth, the increase in sophisticated cyber crimes in the Middle East will be witnessed. In light of recent legislation in place and active involvement by authorities, UAE seems to be geared up for the challenge. 

    ]]>
    Wed, 12 Mar 2014 12:00:00 GMT
    <![CDATA[Competition Law]]> "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices."

    I. INTRODUCTION

    In the business jargon, no term is more appraised, more condemned, more desired, and at the same time, less understood than "competition". This simple word also forms the basis of this article. Yet, "competition" has a different meaning for the lawyers, the economists and the business community. These real and theoretical differences stand in the way of the development of an extensive and rational policy for the control of business. The United Arab Emirates (UAE) has recognized and taken effective steps to merge these differences by introducing the new competition law in the country being Federal Law number 4 of 2012 that came in to force on 23 February 2013.

    With the enforcement of competition law the Government of UAE has aimed to  provide a framework for international traders in matters relating to sale and resale, pricing, conspiracy, abuse of market position, restriction on predatory and resale pricing, and interestingly enough the toughest penalties for breach of confidentiality.

    II. THE GROWING ECONOMY 

    UAE has emerged as a significant commercial hub and an admissible place for people from across the world to do business. UAE has transformed from an oil and gas dependent state to an economy which has invited a lot of foreign investors providing space for diversified economy.  From strengthening real estate market to increasing presence of international brands, from high volume oil and gas trade to housing one of the World's best financial centre, Dubai and the UAE is indeed a land of opportunities to many. This sustained growth is a result of careful, planned, and commitment to deliver the best to all. With growth comes risk.

    III. COMPETITION – THE GOOD, THE BAD AND THE UGLY

    An attempt to equal or surpass another, or who pursues an object similar as another is an age old practice adopted by tradesmen and business community. On one hand, the term 'competition' connotes a positive meaning because it encourages and motivates people to do better. On the other hand, competition to some would simply mean dominance. Recent trends in the world of business notably globalization and advanced technology have had significant effects on most companies. Companies are adopting global strategies entering into strategic alliances through joint ventures, mergers etc. with a view to strengthen their market base. A major consequence of these trends is increasing competition which essentially raises important competition issues leading to market dominance.

    IV. ILLUSTRATIVE CASE STUDY

    Mr. Cee, the owner for ABC supermarkets decided to marry his only daughter to a rice baron in India, Mr. Mee. Besides other talks, Mr. Cee and Mr. Mee discussed their businesses and potential transactions they could generate between them. Mr. Mee as a heartfelt gesture decided to gift 5 containers of rice to Mr. Cee at a price seventy percent lower than the market price. Benefitting from the newly found relationship, Mr. Cee's management in turn now decided to offer 1 kilo rice free to every customer making a purchase above AED 500/-. Whilst the merriment was ongoing, the management team of one JKL hypermarkets, a large chain of hypermarkets got concerned and felt that their business was in jeopardy.

    After several internal consultations and brainstorming, JKL hypermarket's marketing team proposed to its management that JKL could source a large quantity of rice from ABC supermarkets. Following the advice, JKL sourced twenty containers of rice from ABC supermarkets. Mr. Cee in turn requested his in-law, Mr. Mee to supply the rice. Excited that he had best of both the worlds and consistent to his promise, Mr. Cee supplied the rice to JKL hypermarkets. 

    Immediately upon receiving the delivery of rice, JKL management decided to start a promotion inviting  customers to get 1 kilo free rice for every purchase worth AED 500/-. Little did Mr. Ceerealize that he had been tricked by a now healthier competitor who had a large stock of rice which unfortunately ABC did not! Mr. Cee felt JKL management had abused its dominant position causing losses in form of loss of business, loss of opportunity etc. In sum, the consumers benefitted from the competition whereas ABC got affected by 'competition'.

    Abuse  of dominant position could also mean refusal by a party to provide goods, essential facilities or services to other. The European Court of Justice has defined 'dominance ' as:

    "Undertakings are in a dominant position when they `have the power to behave independently, which puts them in a position to act without taking into account their competitors, purchasers or suppliers…. they have the power to determine prices or to control production or distribution for a significant part of the products in question…"

    V. DOMINANT POSITION UNDER UAE LAW

    Although no direct legislation aimed at preventing dominant position or competition practices prevailed in the UAE, inferences can however be drawn from different laws which broadly covered areas dealing with abuse of position, monopoly and unfair trade practices. Federal Law Number (4) of 1979 promulgated for Suppression of Fraud and Deceit in the Commercial Transactions. 

    Federal Law Number (24) of 2006 relating to Consumer Protection was yet another legislation aimed at safeguarding rights and interests of consumers at large.

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    Tue, 11 Mar 2014 12:00:00 GMT
    <![CDATA[The Role of National Judiciary In Arbitrator's Award]]> The Role of National Judiciary In Arbitrator's Award - United Arab Emirates

    The UAE legislator identified Arbitration as a way to settle disagreements between the disputing parties, under the Federal Civil & Commercial Transactions Procedures Laws, Articles 203 to 218. The Law did not stipulate any certain conditions precedent on the parties to resort to Arbitration. However, the legislator stipulated that there should be an express mutual agreement among them to resort to Arbitration. For instance, in case of a dispute between two parties to a sub-contract, in order for them to resort to Arbitration, the contract should expressly and specifically provides for the Arbitration or they may subsequently agree when the dispute arises to resort to the Arbitration as a way to settle the dispute. Article 203 of the aforesaid law stipulated that the Agreement on the Arbitration should be reduced to writing. The Agreement on Arbitration shall be between those having the capacity to decide on the right, subject matter of dispute. The said law has excluded the matters in which no conciliation shall be reached, from the Arbitration and obviously in addition to the criminal cases. We would also add the matters related to the Public Order.

    The aim of the Legislator from the Arbitration as a way for disputes settlement is that the people may find a quick way for settling their disputes to avoid the slow legal proceedings. This aim has a big note in identifying the jurisdiction of the National Judiciary as to the Arbitration rules. The U.A.E. national law allows the enforcement of the Arbitration award only after being certified. In this respect Article 215 of the aforesaid law stated as follows: "The Arbitrator's award may only be enforced after being certified by the court where the award has been submitted to its clerical office, after seeing the award and the arbitration deed".

    The court may not examine the subject matter of dispute which has already been settled through arbitration, under any justification, when certifying the award. If the arbitration award omitted any requests by the arbitration parties, the court who examine the certification may return the same to the single arbitrator or to the arbitration panel, who issued the award, which Article 214 of the same law stipulated. Moreover, the last Article also stated that the court may return the award to the originator for explanation and interpretation, if it is not specific and unenforceable in its present form, without any interpretation. Obviously the Legislator has blocked any justifications for the court considering the certification, to interfere with the award to be certified.

    When the arbitration award is rendered, it shall be certified by national courts, which should not interfere with such award. It is legally established that the court, examining the certification case, may not question the arbitrator judgment. All that is related to the arbitrator judgment in the dispute, whether factually or legally is beyond the court control. Dubai Court of Cassation, in this respect, stated as follows: "According to Articles 212 and 216 of the Civil Procedures Code, the court, while considering the certification case, may not address the merit aspect and the extend of consistency with the law or facts. So, any dispute raised by an opponent to challenge the award and related to the judgment of the arbitrator in the dispute or the invalidity or adequacy of the ground upon which he established his award, shall be unacceptable". (Challenge No. 95/2008 Civil, Session of 25/05/2008).

    Now the question to be raised is: If the national courts may not question the arbitrator's awards even if they are not consistent with the law or facts, then what is their role in certifying the arbitration award?

    The role of the national judiciary is limited to certifying the arbitrator's award by merely examine the award and the arbitration deed and ensure that nothing prevents the enforcement of such award. They may correct any material errors in the arbitration award. The court examining the certification case may not consider any matters that question the arbitration award, unless such matters are related to the Public Order issues, such as the subject of dispute may not be examined through arbitration.

    However, the court examining the certification of the arbitration award may consider its invalidity based on a petition of course submitted by the Respondent i.e. Defendant in the certification case. Nevertheless, the latter may not rely in case for the award invalidity, on the arbitrator judgment from the legal and merit viewpoint. We may address the reasons upon which the Respondent can rely upon when requesting to invalidate such award in the next article. 

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    Wed, 05 Mar 2014 17:00:00 GMT
    <![CDATA[Labor Law]]>

    With the treatment of migrant workers in Qatar hitting the headlines on a regular basis at present, labor laws throughout the Middle East have been placed under the microscope. The subject of "labor law" in the UAE alone is itself a vast topic, as the relevant legislation is not contained within one statute but a collection of applicable laws, provisions and amendments. In later issues Court Uncourt we shall explore a selection of rights and duties afforded to employers and employees, but for the purpose of this article we shall focus on one particular area – namely the end of an employee's employment.

    In the fast-paced commercial environment of Dubai and in the wider world of employment opportunities it is a fact of modern life that people move to new jobs more frequently than ever before. Whether we leave in pursuit of a more suitable employment opportunity or are shown the door due to "fatal incompatibility" with our company, the professional climate is such that we would be wise to take note of our legal rights and obligations upon vacating a position.

    Evidently the constitutive document governing our employment will be our labor contract. This may contain a variety of terms and conditions as collaborated by our employer. However the diligent employee will bear in mind that the provisions of his labor contract cannot override the law, and will therefore take care to ensure that each provision is compliant with the relevant legislation before signing the document. If the law is silent with regards to any specific point then the terms of the labor contract shall prevail, thus an employer and employee should make sure that they negotiate any such specifics so as to protect their respective positions in the event of any future disputes.

    The legal provisions relevant to an employee leaving his position can be found in Federal Law number 8 of 1980 (the Labor Code). Article 113 outlines the various circumstances under which an employer and employee may part company – namely on the expiration of the contractual period, on mutual consent of both parties (provided that the employee's consent is given in writing) or, if the contract is unlimited, at the option of either party so long as the provisions of the Labor Code are upheld. Article 114 goes on to specify that a labor contract will not terminate on the death of the employer unless the subject of the contract is related to him in person. However the contact shall terminate immediately upon the death of the employee - perhaps an unnecessary provision, as even the most unreasonable of employers would surely not insist on specific performance should the employee have passed away! If an employee was to become incapacitated to the extent that he was completely incapable of performing his duties as confirmed by a report from the State Medical Authority the contract shall also terminate, however partial incapacitation shall necessitate the employer moving the employee to a position suited to his capabilities.

    It may initially seem as though the employee enjoys a relatively well-protected position. Article 113 would imply that an employee on a limited contract cannot be removed from his position during the contractual period by the exclusive option of the employer, and would need to give written consent should the premature termination of the contract be agreed. So what is to stop such an employee from turning up late to work every day, neglecting his duties and sleeping at his desk, given the protection afforded to him by law? Article 120 prescribes 10 circumstances under which an employer may dismiss an employee immediately and without notice, including an event in which the employee persistently fails to perform his basic contractual duties. A thorough analysis of this Article may leave the reader with the opinion that the circumstances are somewhat ambiguous, thus meaning that the worker is not as well-protected as we initially thought. However an employee on a limited contract can at least rest assured that as per Article 115 he is entitled to compensation should the contract terminate early through mutual agreement and for reasons other than those stipulated in Article 120.

    We have established that the Labor Code facilitates the removal of an employee without notice in certain situations. But is the employee also afforded the right of immediate departure should he be the victim of circumstances? Like the employee, the employer is also a party to the employment contract, and as such has duties and obligations which he is bound to meet. Article 121 provides that the employee may vacate his position without notice in the event that the employer fails to meet his obligations under the contract and law, and may do the same should he be the victim of an assault at the hands of his employer. Yet just as the employee is entitled to compensation should the contract terminate prematurely for reasons other than those outlined in Article 120, Article 116 states that the employer shall also have the right to compensation should the employee terminate the contract for any reason other than the 2 laid out in Article 121.

    Other than in the scenarios as outlined above an employee will generally be obliged to serve a notice period before vacating his position. This is the case whether his departure is voluntary or further to his compulsory dismissal. The amount of notice required shall depend upon the type of contract and length of service, as per Article 117 and 118. Any form of animosity between the parties may result in the notice period being an uncomfortable time, yet the worker's spirits will undoubtedly be lifted by the fact that he is likely to be entitled to end of service gratuity pay on his final departure.

    In accordance with  Article 132 of the Labor Code each worker who has completed one or more years  of continuous service shall be entitled to end of service gratuity, although it should be noted that any day on which the worker was absent from work will not be included in the calculation of the service period. The payment awarded to the worker shall depend upon the length of his service, with the entitlement being 21 days of salary for each year served up to a period of 5 years, and 30 days annual salary for each year served thereafter. However this is qualified by the restriction that the total payment does not exceed an amount equivalent to two years of his salary. The worker shall be entitled to this remuneration in respect of fractions of the year payable pro rata for the time actually worked. The worker's basic salary entitlement is therefore an obvious starting point in the calculation of end of service gratuity. The figure used shall be his last basic wage – namely his salary less any allowances or benefits in kind such as housing, overtime, child education, transport or travel – as per Article 134.

    The fact that a worker is entitled to gratuitous payments on leaving his position simply as recognition for his services puts employees in the UAE in a favourable position. However the turnover of staff in Dubai in particular is high and the guarantee of end of service gratuity may therefore be considered to dissuade workers from remaining loyal to their employer. The commitment of employees is therefore often an issue, and as such the Labor Code makes provisions to discourage workers on unlimited employment contracts from leaving a position after only a short period of service, and limits their end of service gratuity accordingly. Again, a worker on an unlimited contract is required to complete one year of continuous service before his entitlement to any gratuity kicks in, but Article 137 provides that full entitlement will only commence after the worker has retained his position for five years. Any period of service ranging from three to five years will afford him two thirds of the entitlement defined under Article 132, with one third being payable if he has served one to three years.

    It should also be noted that under Article 138 any worker on a fixed-term contract leaving his employment of his own volition before the contractual period expires shall forgo all entitlement to end of service gratuity unless his period of service exceeds five years.

    The deductions discussed thus far have one major factor in common, namely that they are all a direct result of the worker's voluntary and liability-free departure. However provisions giving the employer the right to deduct or even deny the employee end of gratuity service in certain circumstances are also in place. Article 135 provides that an employer has the right to deduct from an employee's end of service gratuity any amount due to him, however the Labor Code does not go so far as to specify qualifying debts or entitlements. Although we may reasonably consider any loans or advance salary payments afforded to the employee as permissible subtractions, most employees questioning the validity of such deductions will have no option other than to seek recourse via the Labor Courts.

    The Labor Code additionally takes into account circumstances in which the worker's resignation from his position is voluntary, but is due to the fact that his termination was inevitable had he not resigned. If an employee is found to have breached the law by falling foul of any of the provisions laid out in Article 120, realizes that his termination is therefore imminent and resigns accordingly he shall not be entitled to any end of service gratuity pay, regardless of his length of service at the time of the violation. Evidently he shall also forgo entitlement should his employment be terminated pursuant to the same Article. Gratuity may also be withheld in the event that the worker resigns from his position and leaves without serving the required notice period, save for if his departure is the result of any occasion outlines in Article 121.

    This Article has thus far presumed that an out-going employee is in such a situation that he will be taking up alternative employment. Yet what if a worker is resigning from his position because he is of retirement age? In the UAE there is no mandatory provision requiring an employer to establish a pension, security or retirement scheme, yet several employers will entitle employees to such an option. In the event that the employee is entitled to a like benefit he shall have a choice upon leaving his position: he can either accept his gratuity pay or withdraw the funds accrued in the relevant benefit scheme in keeping with Article 141. The Labor Code does not offer any opportunity for the employee to claim both.

    It would seem thus far that in reality the employer and employee enjoy a reasonable balance of rights and entitlements, at least where the end of employment is concerned. Despite the current media-fuelled controversy surrounding the rights of expat workers in the Middle East the Labor Code takes care to ensure that employees in the UAE are generally well-protected so long as they abide by the law and perform their contractual duties accordingly. Likewise the employer may rest assured that the law does not afford the employee any unreasonable advantages to the detriment of the company. Of course, the Labor Code is probably not the most comforting of thoughts after a long and stressful week in the office, but perhaps our favourable position is something we should take into consideration before complaining…

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    Mon, 03 Mar 2014 12:00:00 GMT